The Business Model Canvas (BMC) tool which helps to map existing business models, improve them and invent new ones. It has 9 building blocks, each of which is described in detail and using real life examples:

  • Customer segments

The BMC itself has two stages – the front stage and the back stage. The front stage is the part of the business that is directly facing the customer. The back stage is everything that the company needs to have or do in order to provide the right half.

  • Value propositions

The main purpose of value proposition is to solve a customer problem or satisfy a need. It is a bundle of benefits that a company offers customers.

  • Customer relationships

It describes the types of relationships a company establishes with specific customer segments.

  • Channels

It describes how the company communicates with and reaches its Customer Segments to deliver a Value proposition. The main question to answer when filling out this building block is: „Through which Channels do our Customer Segments want to be reached?“

  • Key resources

It describes the most important assets required to make a business model work. The main questions to answer when writing this building block are: „What Key resources do our Value Propositions require?”

  • Key activities

It describes the most important things a company must do to make its business model work. In this building block, the main questions to answer are: „What Key Activities do our Value Propositions require?“

  • Key partnerships

It describes the network of suppliers and partners that make the business model work. The main questions to be answered are: „Who are our Key Partners?“,

  • Cost structure

It describes all costs incurred to operate a business model. The questions to be answered in this building block include: „What are the most important costs inherent in our business model?“

  • Revenue streams

It represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings). Main questions to answer include: „For what value are our customers really willing to pay?“

After taking a brief look at the 9 blocks that make the Business Model Canvas, here below you can find a description of what you need this for.

A business model describes the rationale of how an organization creates, delivers and captures value. A Business Model Canvas (BMC) is a tool to help map existing business models, improve them and invent new ones. It will lead to insights about the customers the entrepreneur plans on serving, what value propositions are offered through what channels and how the company makes money. It gathers all necessary information about the product and business and conveniently puts it on one page.

The BMC leads to insights about the customers a company serves, what value propositions are offered through what channels and how your company makes money. The key benefits that a BMC brings to its users are:

  • It is focused. Enterprises need a definition of how to get their products to their customers and the business model canvas helps you define them. It also gives you the competitive edge to launch a profitable business not only through product innovation but also through designing your business correctly.
  • BMC is clear and concise. It helps you document your startup journey so you can easily modify it as you go along. The business model is a blueprint that defines your business initially and you later expand on it. It is useful for easy communication with your team, investors, partners as well as employees to come on board with your vision.
  • It targets customers’ needs. The biggest reason for startup failure is “Product/Market fit” and not the product itself. Too often we forget this and direct our energy on building an awesome product. “Build and they will come” is a dying mantra. The business model canvas forces you to think beyond your product. When you envision how you will sell your product, what type of resources you need the different customer segments as well you can serve, the business becomes lucid. Documenting it gives you the clarity when you talk to your customers.
  • It reduces the risk of failure. The business model canvas helps you with the execution steps requirement to take your idea to market. Connecting the dots between your value proposition +  customer segments + revenue streams, is a good input to your marketing strategy, positioning statement as well as your Sales strategy. You have the edge over your competitors who are immersed in the lengthy pages of the business plan.
  • It is a scientific framework that works. Business model canvas is a tried and tested methodology not only for startups but also for innovating in large enterprises. Nespresso, a fully owned daughter company of Nestl., is a great example of a powerful business model. It changed the face of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels).

The BMC itself has two stages – the front stage and the back stage. The front stage is the part of the business that is directly facing the customer. The back stage is everything that the company needs to have or do in order to provide the right half.