What if you could show new and innovative ideas reduced to the most important factors. What if you could show the key factors of a whole business model at a glance? This is possible with the Business Model Canvas (BMC) method. Some experts even say that Business Model Canvas has replaced the classic business plan in some aspects.
But how does this work?
In its original form, only a large sheet of paper is required for a BMC (DINA2 or larger). The paper shows the most important key factors for a successful business model, which must be observed at all times. In these categories, ideas for a business model can be easily entered in a construction-kit related manner, usually in the form of small post-it’s and notes. This makes it possible to try out different variations for a potential project. This approach is particularly popular with start-ups, where the business model is not fully developed or clearly defined yet. But even existing companies with a ready-to-use business model, can easily try out an innovative idea with Business Model Canvas. The great advantage of this method is the high flexibility. Instead of writing down a potential idea in the form of a business plan with great effort, it can be tested with a BMC within a very short time, taking into account all important factors. Particularly in a time with shorter product life cycles and increasing competition, it is important to have an agile and flexible business model.
In order to achieve an optimal result, this method is extremely useful when many people from different departments make the BMC. This provides a versatile view of problems, relationships among each other, etc.
The developer of this concept is the Swiss entrepreneur and author Alexander Osterwalder, who presents his method in the book “Business Model Generation”. The book is steadily gaining in popularity and has reached more than 5,000,000 customers who successfully implement its methods. Its customers see the work as a guide for innovation and breaking up old structures. In the following presentation, Alexander Osterwalder shows how the Business Model Canvas is used.
9 key factors of Business Model Canvas
For a more detailed view of BMC, the Business Model Canvas Sheet can be downloaded here. At this point we would like to thank Alexander Osterwalder, who provides the template under BusinessModelGeneration.com.
As already mentioned, the BMC consists of nine fields, to which key factors are assigned. These must be filled with a potential business idea. We explain the most important to each key factor:
Key Partners: The aim of almost every business model is to create synergies through strategic partners, to achieve a know-how exchange and to spread the risks through a partnership. Question: Who are my most important partners?
Key activities: In order to provide a service or to create a product, activities are necessary. Question: What are the most important steps and activities for my business model to work?
Value propositions: A product or service always fulfils a very specific purpose: to meet a specific need of a customer. The factors can be of a very different nature: new, better, cheaper, etc. Question: What is the benefit for customers when they buy my product or use my service?
Customer relationship: The customer is the most important person for a company. This is the reason why it is important to define the handling and service to be offered to these customers. In some industries, it is important to maintain personal contact; in others, automated interaction is sufficient. Once you have reached a customer, you want to keep him as long as possible! The customer relationship is therefore extremely important. Question: How do I gain new customers and how do I tie them to my company?
Customer segment: Every company always addresses a selected target group with its product or service. The target group can be found in various market segments, e.g. the mass market or even a niche. Question: What is my customer segment?
Key Resources: In order to create or offer something, resources are needed. These may be of financial, human or physical nature. Question: What are the most important resources that I need, in order to offer my product?
Channels: Customers can only buy what is accessible to them. Question: How do customers get to know about my product and how do they get it?
Cost Structure: Looking at the key resources you can see: this is not for nothing. Creating a product is always associated with costs. Question: What are the costs incurred by the company?
Revenue streams: In the end, most companies are concerned about monetizing the performance. This can happen in very different ways: one-off payments, subscriptions, and participations. Question: How and where does the money come from?
The physical Canvas Board
Now it is clear what Business Model Canvas is all about and what benefits BMC brings with it. Originally, this method was a physical task for the fast visualization of business models. There were and there are countless workshops in which the method is taught and mediated. And there are also different suppliers who market blank whiteboards or posters. The canvas board promotes communication in the office because the team has to deal with it physically and get together. Perfect for any company to share innovative ideas. With the knowledge from the workshops and the new canvas board in the office you can start!
Canvas in a digital world
But what if interdisciplinary or distributed teams want to cooperate at the canvas from different locations? To take photos would be a solution but not the purpose of canvas in our eyes. Recently, the call for digital canvas boards has become louder. This is precisely because the collaboration between different teams does not always take place at the same location. To mention a few examples: the collaboration between accelerators and start-ups, between incubators and start-ups, agile coaches and companies. All parties that are involved in the development of a business model are not necessarily in the same place. But in many cases this is wanted. Everyone with an innovation for the business model can actively participate in it. This demand is a companion to the ever-advancing digital transformation in the companies of the world. With regard to Business Model Canvas, digitalization occurs in so-called digital labs. Digital labs are real or virtual spaces in which innovative ideas are developed and experimentally tested. From this point of view, they are a breeding ground for innovation in which a wide variety of designs are rapidly growing. Successes are pursued; failures are not condemned but evaluated as experience. These digital labs are perfectly suited for the cooperation between the accelerators, incubators and start-ups already mentioned above. A canvas board meets the requirements of a digital lab. A digital solution offers far more efficient options.
Benefits of a digital Business Model Canvas
As already mentioned in the previous section, no matter where the participating teams are, everyone can work in the form of a digital lab on the canvas board independent from the location.
The canvas board is a living document. In real-time, employees are kept informed about the current status without losing old statuses, because these can be easily stored and archived. This allows for an active change without losing sight of the entire process. Comments can be used to alert team members about possible weaknesses. Besides, additions and improvements can be added to ideas. The result is a holistic collaboration that allows the entire team to work together to find a solution. With a suitable tool, certain key factors can be prioritized and measures derived from the BMC’s information. This creates a clear assignment of tasks and a structured approach if the business model is to be pursued further.
A digital solution also proves that the company is in some ways up-to-date and acts in the style of digital transformation.
Just try out with our web-based tool!