Seeing that a lot is made of Business Modelling and applying a Business Model Canvas (BMC), let us take  a closer look at what it is exactly and why it is such a useful tool for companies.

What is the Business Model Canvas?

Alexander Osterwalder developed the BMC model as a tool for entrepreneurs to create a clear and simple business plan. On the basis of his nine defined building blocks, a company can clearly map – in one single sheet of paper – how it can create, deliver and retain value or, better still, how it can make money. The BMC model results in a blueprint of your corporate strategy.

Why is it useful?

The strength of the model lies in its simplicity and in the fact that it can be applied to any company. Whether your organisation is large or small, whether you are starting something new or have been around for a long time, drawing up the model canvas is a moment of reflection on your company. Why do you do the things you do? Are they still profitable enough? Do you still offer customers the added value you had in mind when you started off? And more than anything, are they still willing to pay for it? Do you keep doing everything yourself or should you bring in partners who can take off some of the load?

The structure of the BMC

The model consists of nine building blocks, made up of a central value proposition and three main parts:

  • The central value proposition: what is your added value, what sets your company apart?
  • Right side canvas: whom are you creating value for?
  • Left side canvas: how do you create value?
  • At the bottom: how is it financially feasible?

Below is an overview of the nine different building blocks, together with a few questions that can help you to fill in the building blocks for your company.

VALUE PROPOSITION

What is your company’s distinctiveness or added value?

This is the most crucial question in drawing up the blueprint. All too often, entrepreneurs mention their range of products or services. But here you should really make it clear what actually distinguishes you from the competition.

For example, you may distinguish yourself in areas such as better service, more competitive prices, innovation …

To shape this building block, ask yourself these questions:

  • Why do customers choose you?
  • What problem do you help them solve?
  • Why is your customer willing to pay for your product?
  • It may also be useful to ask your customers for their feedback and testimonials.

CUSTOMER SEGMENTS

Whom are you creating value for?

Mapping your target audience is the next essential step. Who are the customers you want to serve? What are their needs? Try to define different target groups (or segments) as narrowly as possible, for example on the basis of gender, age, available budget, location … Extensive market research will shed more light on this building block.

To shape this building block, ask yourself these questions:

  • Who is your most important customer?
  • Who are your customer’s customers?

CUSTOMER RELATIONSHIPS

How would you define the relationship with your customer?

The way in which you interact with your customer may differ from segment to segment. Therefore, you should consider the relationship for each segment separately. For example, do you reach out personally or from a distance, by phone or digitally, and if digital by mail, Skype, chat, an online platform or something else still?

To shape this building block, ask yourself these questions:

  • What is the relationship you aim for?
  • How do you want to keep up the relationship?
  • What kind of relationship does the customer expect from you?
  • How will you make sure your customers return?
  • Take the time to invest in your customers in order to create a long-term, sustainable relationship.

CHANNELS

How and where does your customer find your product or service?

How do you want to reach your customers and how do they get in touch? These decisive questions will help you shape your marketing and distribution strategy. Do you sell in a brick-and-mortar store or through online channels? Think about your website too, and social media channels, word of mouth publicity, advertising, local newspapers and initiatives …

To shape this building block, ask yourself these questions:

  • Which are the best channels for each separate customer segment?
  • How will you offer aftersales support?
  • How will you inform customers of promotions and new products?

REVENUE STREAMS

How does your distinctiveness create effective revenue streams?

In other words: where do you generate income, where do you make money? Do not just examine your present-day income but think ahead too. For example: what are customers paying for now and what (for what values) will they want to pay in the future? Ask yourself how they pay now and how they would really like to pay? And do not forget about revenue streams from licenses, advertisements, registration fees … either.

KEY ACTIVITIES

What do you offer to make the business model work?

In other words, which products or services make you stand out? In this block, list your various business activities and list who is responsible for what within your company. Make it clear how you add value to the quality of your product or service, to maintaining customer relationships and to finding new customers.

To shape this building block, ask yourself these questions:

  • Which activities do you need to be able to create added value?
  • Which activities do you need to reach your customers and maintain a good relationship with them?
  • Which activities do you need to allow channels to function properly?

KEY RESOURCES

What do you have at your disposal to allow the model to function properly?

Which resources do you need to deliver added value to your customer? This block enlists the people and tools you can use and may include physical resources (buildings, machines, car fleet …), intellectual resources (brands, trademarks, data …), people (staff with well-defined competences) and financial resources.

By filling in this building block, you may come to the conclusion that you lack certain expertise or knowledge. This information is useful for the next building block.

KEY PARTNERS

Who is helping you to create value?

United we stand! In order for the business model to be successful, it may prove useful to set up strategic partnerships. List here for which activities you engage with which partners to make your business model work. Please only note down key partners who truly provide added value. If not, they qualify as simple suppliers that can be easily replaced.

COST STRUCTURE

What are the biggest inherent costs in your business model?

How are costs structured? This may include:

  • Fixed costs: staff, marketing, transport, financial …
  • Variable costs: for example raw materials
  • Which key resources are the most expensive?
  • Which key activities are the most expensive?
  • What can you still save on?
  • Where can economies of scale still be made?

Ready, set, go!

Once you have completed the nine building blocks, you have a clear blueprint of your company’s strategy. It will serve as the ideal starting point for drawing up your business plan. And if you already have a business plan, you can use this model to quickly evaluate whether your strategy is still on target and finetune it if needed. As such, you can rest assured that you will continue to stand out from any possible competitor.

If you would like help with setting up your Business Model Canvas, get in touch with our expert brand strategists at comma!