The Easy Guide to the Business Model Canvas
Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.
In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.
What is a Business Model Canvas
A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.
The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.
The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.
The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.
The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.
Why You Need a Business Model Canvas
- The BMC provides a quick overview of the business model and is devoid of the unnecessary details compared to the traditional business plan.
- The visual nature of the business model canvas makes it easier to refer to and understand by anyone.
- It’s easier to edit and it can be easily shared with employees and stakeholders.
- The business model canvas can be used by large corporations as well as startups with just a few employees.
- It clarifies how different aspects of the business are related to each other.
- You can use a BMC template to guide a brainstorming session on defining your business model effectively.
How to Make a Business Model Canvas
There are nine building blocks in the business model canvas and they are customer value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key partners, key activities, and cost structure.
When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.
What are the 9 Components of the Business Model Canvas?
- Customer Segments
- Customer Relationships
- Revenue Streams
Key Activities
Key resources, key partners.
- Cost Structure
- Value Proposition
Let’s look into what the 9 components of the BMC are in more detail.
Customer segments
These are the groups of people or companies that you are trying to target and sell your product or service to.
Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.
After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.
There are different customer segments a business model can target and they are;
- Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.
- Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
- Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
- Diversified: A diversified market segment includes customers with very different needs.
- Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.
Use STP Model templates for segmenting your market and developing ideal marketing campaigns
Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.
Customer relationships
In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.
There are several types of customer relationships
- Personal assistance: you interact with the customer in person or by email, through phone call or other means.
- Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.
- Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
- Automated services: this includes automated processes or machinery that helps customers perform services themselves.
- Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
- Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.
You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.
This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.
Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.
There are two types of channels
- Owned channels: company website, social media sites, in-house sales, etc.
- Partner channels: partner-owned websites, wholesale distribution, retail, etc.
Revenue streams
Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.
A revenue stream can belong to one of the following revenue models,
- Transaction-based revenue: made from customers who make a one-time payment
- Recurring revenue: made from ongoing payments for continuing services or post-sale services
There are several ways you can generate revenue from
- Asset sales: by selling the rights of ownership for a product to a buyer
- Usage fee: by charging the customer for the use of its product or service
- Subscription fee: by charging the customer for using its product regularly and consistently
- Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
- Licensing: customer pays to get permission to use the company’s intellectual property
- Brokerage fees: revenue generated by acting as an intermediary between two or more parties
- Advertising: by charging the customer to advertise a product, service or brand using company platforms
What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.
These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.
There are 3 categories of key activities;
- Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
- Problem-solving: finding new solutions to individual problems faced by customers.
- Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.
This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.
There are several types of key resources and they are
- Human (employees)
- Financial (cash, lines of credit, etc.)
- Intellectual (brand, patents, IP, copyright)
- Physical (equipment, inventory, buildings)
Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.
Types of partnerships are
- Strategic alliance: partnership between non-competitors
- Coopetition: strategic partnership between partners
- Joint ventures: partners developing a new business
- Buyer-supplier relationships: ensure reliable supplies
Cost structure
In this block, you identify all the costs associated with operating your business model.
You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.
Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).
Value propositions
This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.
A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.
Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).
What Are Your Thoughts on the Business Model Canvas?
Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.
What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.
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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.
The Business Model Canvas: A Quick How-To Guide
Every company is a story. Anyone looking to invest in a company will need to know this story. The Business Model Canvas is one popular format for presenting your company’s story. Let’s take a look.
A canvas for your business model
Your company story isn’t a marketing ploy: it does not need to be new, innovative, or made-up. In fact, you already have your company story—it’s your business model. The business model canvas is one framework for sharing your story, or business model, with potential investors.
This strategic management framework was first developed by Alexander Osterwalder in the mid-2000s. While the original canvas is applicable to any business, regardless of size, history, or budget, additional canvases have popped up in various niches.
The simplicity of the business model canvas is what makes it so successful. The canvas is plain, looking much like a billboard or whiteboard. It’s comprised of nine criteria that express the important character traits for your business’ story, ranging from who you know to how you make money to what you have. The canvas acts as an advertisement to attract business investors or other founders.
There are several benefits of using this framework:
- Simplicity. This single, straightforward sheet means there’s no filler. Your canvas highlights the basics of your business, so you should already know the answers to most of these. The compiling of information might be overwhelming, but the business model canvas ensures a simple process.
- Customer focused. Your canvas shows how you think about and interact with your customer, and it can help expose any weaknesses.
- For any company. Whether you’re a one-person start up or part of a multi-national company, the business model canvas works.
Know your audience: 3 tips
Before we explore the nine criterion of your canvas, it’s important to consider your audience when creating a canvas. Your audience is potential investors, and these three tips will help strengthen your business model canvas.
When creating a canvas, you should assume these things about your audience:
- They are smarter than you. Be clear, be concise. There is no reason for great exposition. This is a place to create a bullet point list for the reasons why you’ll succeed. Let the audience see the data and piece it together.
- They see through your mask. There is a little room for embellishment—after all, you want to stand out. But too much embellishing can kill a project because your audience can see it. There is a fine line between confidence and foolishness, and if you can’t tell the difference, stick to talking straight.
- They hope you are The One. Your audience wants, more than anything, for you to succeed. They want to find a good match. They do not take the time to listen and read these just because they enjoy critiquing everything that passes over their desk. They enjoy the thrill of finding The One.
9 criteria of the business model canvas
The nine criteria are subsets of four major categories in the business model canvas:
Infrastructure
Each major category is comprised of one or a few criterion.
This section is all about the things you need— people, processes, technology, and partners —to run your business.
- Key activities. What does your business do? Are you managing large software teams? Do you have to manage a large supply chain? These are activities essential to the business. If your business is a salon, for examples, your key activities might be hiring and training staff, cutting and styling hair, opening and closing the shop, sending emails and offers, and making thank you cards to improve customer relations.
- Key resources. These are the things you need to perform your key activities, in order to create value . The key resources of a salon are staff, a physical location, marketing, and customers. Which resources do you have that are unique to you and give you an advantage? It might be an excellent 3-year contract on a prime downtown property because its owner had to sell quickly. It could be that you get discounted hair products from the manufacturer because you worked there for 15 years or negotiated a deal.
- Partner network. These are people in your network who can help you. People reading your business model canvas like to see that you are not a lone wolf, starting from scratch. They want to see you have support. They want to see that they are not the only ones who are signing up to help your business succeed. The partner network is the place to brag about who you know. These can be team members, suppliers, marketing avenues, etc. Anyone who is on board to contribute to the business.
This section explores the value you offer.
- Value proposition. Your value proposition is the most important component of any business. Why are you valuable? If the business provides no value, then, why? Why should anyone buy into it? Why should anyone support it? Why does anyone need it? This value needs to be directed at who your business serves in the marketplace. The proposition is not why you are valuable to the readers and the investors. The value needs to be directed at who your business targets. Google helps people find things they wish to know. Apple makes elegant, simple products designed to work out of the box. Your salon cuts and styles people’s hair.
This section is all about your customers: whether, where, and how you talk to them and they buy from you.
- Customer segments. These are the people to purchase your product. It is helpful to think of your first customer. In the end, you may want everyone to be a customer, but, right now, who will be the first person to buy your product? Customer segmentation can be categorized by demographic, geography, social class, financial class, personalities, etc.
- Channels. How do you meet your customers? Do you go to them? Do they come to you? Channels could be Twitch.tv for a media platform. It could be a writing contest for a Hack-A-Thon. It could be the business location for a coffee shop. It could be a website for a microservice. It could be engineers’ Twitter accounts for any software company. The channel is a pathway of communication that links a community to the business.
- Customer relationships. What kind of relationship do you want to have with your customer? What is the relationship’s nature? Transactional, personal, automated, self-service, community oriented. A vending machine is self-service. Major cloud providers are mostly self-service. They lack in support so much that other companies can be built entirely around providing customer service for their platform. Other cloud providers are popping up, too, whose business’ value proposition is that they have phone-call customer service—a unique value for certain categories of customers.
The finances section really wants to know your income statement. What are your costs and how do you bring in money?
- Cost structure. What are your company’s costs? Income statements do a good job of putting expenses into operating expenses and capital expenses , and that can serve as a good model for this part of the canvas. Operating expenses are the day-to-day costs of doing business. At the salon, it would be largely labor costs for hiring stylists to cut hair. Capital expenditures would be costs associated with stocking shelves with hair products, rent costs, and electricity costs.
- Revenue streams. Finally, how does your company make money? The salon makes money by cutting and styling hair. They maintain a register to sell hair products. Maybe they create distinctions in their stylist offerings and do normal cuts, styled cuts, perms, colorings, and events like weddings or model shoots.
Spend some time on the canvas: make it flow, edit each section, and present your company with a complete story.
Additional resources
For more on strategic business planning and aligning technology to your business, browse our BMC Business of IT Blog or check out these articles:
- What Is “IT-Business Alignment”?
- Introduction to Business Process Management (BPM)
- Why Business Value is Key to IT Success
- What is Technology Business Management? TBM Explained
How to evolve IT to drive digital business success
When IT and the business are on the same page, digital transformation flows more easily. In this e-book, you’ll learn how IT can meet business needs more effectively while maintaining priorities for cost and security.
These postings are my own and do not necessarily represent BMC's position, strategies, or opinion.
See an error or have a suggestion? Please let us know by emailing [email protected] .
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How to Create a Business Model Canvas (With Template)
Do you want to create a simple business plan? Something comprehensive, flexible, and easy to scribble on a napkin? You can do that with a business model canvas.
Every business has ever-changing, diverse interests. Illustrating all of this on a single sheet of paper may sound challenging — but by using a business model canvas template, your team can focus on the key elements of your business to ensure nothing slips through the cracks.
Business model canvas explained
"Lengthy business plans often increase the risk of failure," wrote Alex Osterwalder in his 2008 book “Business Model Generation.”
The business model canvas offers a way to avoid this, providing a simplified version of a business plan. A business model canvas is a simple, visual framework that helps teams outline the most fundamental elements of a business.
As a handy business tool, teams can use a business model canvas to map the nine core areas of a business, such as customer needs, value proposition, and platforms for customer acquisition.
This article will explain the business model canvas, its benefits, and how it can help your team develop a successful high-level business strategy and actionable roadmap .
How can a business model canvas help your business?
Many teams are so overwhelmed with operational issues that they don’t have time to focus on the core business strategy .
Utilizing the business model canvas helps create a unified framework that depicts this strategy alongside an action plan that teams can follow.
But how do you know if you need a business model canvas? If you are starting a business or even toying with an idea, a BMC can create a powerful visual representation of your concept. A business model canvas can also be a handy reference for your team as they move towards successful business outcomes. Here are five more ways in which a business model canvas can help your company.
It’s simple and easy to follow
Whether you have a business idea or are managing a large enterprise, having an easy-to-follow business plan can be immensely helpful. As a precise one-page document, teams can modify specific business model canvas elements as they go along without completely redoing a 50- or 100-page document.
Focused on being actionable
Every business plan needs to be actionable. Using a business model canvas helps you accurately define your organization’s core value proposition and keep it aligned to your business strategy.
Your focus could be to achieve profitability in the first year or gain a large market share. Stay competitive by defining actionable steps for your team within the business model canvas.
Flexible and scalable as the business evolves
No business stays the same forever but evolves as it interacts with diverse market dynamics, competitors, product innovations, and changing consumer needs.
To take your idea to market, you need a tool that connects the dots between what your customers want, your business's unique offering, and the desired profitability streams.
By creating a business model canvas template, you instantly get an edge over other market players engrossed in lengthy business plan documents.
Puts the customer first
Ignoring customers sets businesses up for failure . Companies flounder if they direct their energies solely towards making a great product or service. With a business model canvas template, your focus stays on the ultimate end-users of your product.
Having a business blueprint will force team members to think about what customers want, the primary issues they need help with, and how your product or service can do that.
Helps get team and executive buy-in
23% of businesses fail without the right team on their side. Every company needs team members with a diverse mix of skills, experiences, and talents.
Companies require a solid business blueprint for hiring team members or bringing in investors. Having a business model canvas can help get everyone on board with your organization’s core vision. Potential employees and investors can visualize how the different organizational parts interact and see how they can become an integral part of the company.
Promotes focus on the unique value proposition of your business
19% of companies fail due to being outperformed by their competitors. If there's no difference between your product and one from another firm, why should customers come to your company? Every business needs a clear value proposition that helps them stand out — that's where a business model canvas template comes in.
When you look at the nine core elements of a business model canvas (explained below), you'll quickly notice some factors are controllable to a certain extent, while others are more fractious.
Your company's core value proposition sits right in the middle. It acts as the central pillar around which all other elements exist, defining the fundamental nature of the business.
What goes into each segment?
To fill out a business model canvas, you should know what goes into each of the nine fundamental segments.
Have a business model canvas template ready before you and your team start brainstorming on each of these elements (you'll find one below) and then add the research and data into the relevant sections.
Customer segments In this fundamental business area, teams identify the core individuals they will help with their product or service. To do this, they create two to three buyer personas — potential customers that a business seeks to serve.
A buyer persona is a simple but detailed description of a prospective business customer. It assists with capturing the customer’s real-life problems and motivations, helping the business deliver what they want.
Value proposition The value proposition is the ultimate value that a customer will get from your product or service. It seeks to answer the question, “Why will a customer buy?” Here are a few popular value propositions for any organization:
- Customization ability
- Unique product design
- Innovation in product or service
- Exceptional service or product status
- Affordable pricing and clear pricing model definition
Channels In a business model canvas, channels are the platforms through which a company sells its product or service to end-users. To identify the best channel for your business, look at how you plan to connect with your customers.
A few possible channels can be:
- A self-owned retail store
- Direct sales staff
- Affiliate marketing platforms
- Google Adsense
A business can either own its channels or partner with other companies that have their own channels.
Customer relationships Customer relationships in a business model canvas define how the company will obtain, retain, and increase new customers. Let's take a look at how customer relationships are built:
- Identify how to obtain customers and from which platforms (e.g., Google, Facebook ads)
- Gain clarity on how to retain existing customers using different techniques (e.g., exceptional customer service)
- Discover how to increase the customer base of the business (e.g., sending text or email notifications to prompt website visits)
Revenue streams Revenue streams help the business owner decide how to generate revenue and achieve their predefined organizational goals . Key decisions with revenue streams include:
- Choosing from a one-time payment model or monthly subscriptions
- Keeping a free plus paid model or a wholly paid product or service with a free trial
- How payment from customers will be received — website payments, PayPal, or in-store
Key resources Key resources in your business model canvas represent the assets that are vital to your company’s operation. Business assets can include anything from the below categories:
- Physical assets , including machines, buildings, IT hardware, and vehicles
- Intellectual assets , including patents, copyrights, partnerships, brands, and employee skills
- Human assets , including talented employees in knowledge industries such as IT, law, and content marketing
- Financial assets , like cash balances in the bank or lines of credit
Key activities Want to make your business canvas model work? Make sure to list the key activities that will help expand the business's core value proposition. Key activities can come from any of the below categories:
- Production: How you will deliver your end product to the customers. You may need to order more stock or upgrade materials
- Platform: For example, the software used to sell your product, which may require upgrades or maintenance
- Problem-solving: For example, designing innovative solutions for issues that your customers face
Key partners Every business has some non-core activities that should preferably be outsourced. Key partners are the companies or individuals that complete these non-core activities.
Take a company like Facebook, for example — its key activity is to upgrade and maintain its platform. It doesn't create its own ads, so it also needs to strike deals with companies that wish to advertise on its platform.
Similarly, it doesn’t create its content — the users do. The primary reasons for choosing key partners can be:
- Achieving economies of scale
- Mitigating risk and unpredictability in business
- Acquiring resources and advertisements for its business (e.g., ads for Facebook)
Cost structure Once the key activities are outlined on the business model canvas, it's time to assign cost structures. Be clear and precise with the estimated business costs of the planned activities to ensure you reach your profitability goal.
Business model canvas example and template
- Customer segments: Facebook's customers can be divided into two distinct categories — advertisers and platform users
- Value proposition: The primary reasons platform users come to Facebook. Users feel connected to friends and families, while companies get more leads through advertising on the platform
- Channels: The website where all data is stored
- Customer relationships: Facebook incentivizes users to stay on the platform through notifications and new features, leading more companies to advertise on it
- Revenue streams: Facebook earns money through advertising, while companies gain new customers from Facebook ads
- Key resources: Facebook's key resources are its platforms — Facebook.com, the Messenger application, and Facebook Ads Manager for advertisers
- Key activities: Maintaining the website and its infrastructure are two of Facebook’s key strategic activities
- Key partnerships: Facebook's key partners are its users and advertisers
- Cost structures: Major costs incurred by Facebook include managing the software, backend engineering operations, product development, regular operations, and staff salaries
How to create a business model canvas (with template)
Ready to create your business model canvas? Before you begin, take some time to brainstorm answers to these questions related to the nine core fundamental areas of the canvas. Here's a simple business model canvas template exercise that can help your team get started.
- Customer segments: Can you identify your potential customers?
- Channels: Once the product or service is ready, how will customers discover it?
- Key partnerships: Can any non-core business activities be outsourced?
- Customer relationships: How will your business generate leads and retain and increase your customer base?
- Cost structures: Can the business classify its main costs and expenses into fixed and variable? Is there a way to align costs with the core value proposition and planned revenues?
- Revenue streams: Has the business decided on a profit margin? How will it make money?
- Key resources: Which core resources are critical for the business to succeed?
- Value proposition: Why will customers choose your business? Does the company satisfy any particular need with its product or service?
- Key activities: Are there any activities that help your business deliver its unique value proposition to customers?
Do I need a lean model canvas?
If your business is still an idea or in its infancy, choosing a lean model canvas makes more sense.
Inspired by the business model canvas, the lean model canvas was created by Ash Maurya . It is a one-page business plan template that distills the lean startup methodology into the original business model canvas.
Lean model canvas assimilates multiple essential data points to develop a simpler, start-up optimized version of a business model canvas. It adds four more building blocks to the business model canvas, namely:
- Problem: Identify the problem faced by the customer and focus on solving it
- Solution: Start with a minimum viable product that helps solve the customer problem effectively
- Unfair advantage: List the barriers to entry in a specific sector and your company’s competitive advantages
- Key metrics: Focus on one goal at one time to ensure you’re doing a good job
Lean model canvas drops four elements from the original business model canvas — key partners, key activities, key resources, and customer relationships.
While the original illustrates a more comprehensive business approach, the lean model canvas has a sharper customer orientation. Many start-ups prefer the lean model canvas to a traditional business plan for building an actionable roadmap.
The lean model canvas is a great fit for younger companies or those working with a tight time frame or budget to market with a more targeted problem resolution approach.
Why you should use Wrike to build a business model canvas
The business model canvas’ nine building blocks clearly illustrate the core business areas and their interrelationships. Whether you're trying to figure out the model for a company with three employees or 50,000, a business model canvas can be very useful.
Begin by mapping out the most crucial information about your business, then link the blocks to ensure every value proposition is linked to a revenue stream and a specific customer segment.
Using Wrike to build your business model canvas template, you can iterate faster, communicate with ease, and enable organization-wide success . With a centralized hub, your teams can configure custom dashboards easily and produce better quality work using premade templates . Implement what you've learned about the business model canvas by trying out a free two-week trial of Wrike today.
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Business Model Canvas Template
The executive summary of a business
What is the Business Model Canvas?
The business model canvas is a strategic planning tool used by managers to illustrate and develop their business model. The business model canvas template clearly identifies the key elements that make up a business. Additionally, it simplifies a business plan into a condensed form. In this way, the business model canvas template acts like an executive summary for the business plan.
Corporate Finance Institute®’s Corporate & Business Strategy Course has more tools that you can use to manage and improve your business!
Download the Free Template
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History of the Business Model Canvas
The business model canvas template was originally introduced by Alexander Osterwalder in his 2004 thesis, “The Business Model Ontology – A Proposition in a Design Science Approach”. Since then, the business model canvas template has been taught at business schools and iterated upon to fit more niche businesses.
Structure of the Business Model Canvas Template
There are nine main building blocks in the business model canvas template:
- Key Partners
- Key Activities
- Key Resources
- Value Propositions
- Customer Relationships
- Customer Segments
- Cost Structure
- Revenue Streams
The following is a breakdown of each of these nine elements. These elements all link and work with each other to ensure the success of the business.
#1. Key Partners
Key partners are the companies or people your business works with to create a strategic relationship. A few examples of key partners are suppliers or distribution partners in the supply chain .
Here are a few things to consider about key partners:
- What key resources does your company receive from these partners?
- What key activities are performed by these partners?
- What is your company’s motivation for working with these key partners? Is there something specific that only they can provide? Do they help lower costs?
#2. Key Activities
Key activities are specific activities or tasks that are fundamental to the operation of your business. An example of a key activity would be the procurement of fresh produce in bulk for a restaurant.
Here are a few things to consider about key activities:
- What key activities are necessary to deliver your value proposition ?
- What activities set your company apart from others?
- How do your revenue streams , distribution channels , and customer relationships differ from competitors? How do your key activities affect these?
- Do you need to procure specific niche resources?
- Do you need to streamline to keep costs and prices low?
#3. Key Resources
Key resources are the assets necessary to operate and deliver your value proposition. For example, a diamond mining company cannot operate without mining equipment . Alternatively, an automotive company cannot operate without the human capital and expertise that goes into designing cars.
Here are a few things to consider about key resources:
- What specific assets are necessary to operate your business and deliver your value proposition ?
- What resources do your distribution channels and revenue streams need to function?
- What resources are needed to maintain customer relationships and customer satisfaction ?
- Does your company require significant capital or human resources?
#4. Value Propositions
Value propositions are arguably the most important element of the business model canvas template. The value proposition determines the fundamental offering the company is trying to give its customers. It is the primary driver of business operations. For example, Spotify’s value proposition, “Music for everyone.” , eloquently states its mission and offering. Spotify wants to be a music streaming platform that has music selections for everyone.
Here are a few things to consider about value propositions:
- What exactly is your company trying to give to customers?
- What problem is your company trying to solve and what needs are your company satisfying?
- How do you offer something different that satisfies the demands of your customer segments (e.g. price, quality, design, status, etc.)?
#5. Customer Relationships
Customer relationships are the different types of interactions a company has with its customers. For example, a designer suit company will provide significant help for the customer, tailoring to their needs and working directly with them to create the suit they want. Conversely, telecommunications companies often have poor reputations and customer relationships as many practice aggressive and predatory sales practices through their call centers. Compared to telecommunications companies, the designer suit company has significantly richer and more fulfilling customer relationships.
Here are a few things to consider about customer relationships:
- What type of relationship does your company have with its customers? For example, do you provide dedicated assistance or are they expected to self-serve their needs through provided support channels?
- How does the business interact with customers and how does this differ between customer segments ?
- Does your company frequently communicate with customers?
- How much support is provided by your company?
#6. Channels
Channels are the different structures and methods that are used to deliver your company’s product and value proposition to its customers. Channels encompass all of a company’s supply, distribution, and marketing channels. It is important to consider all channels of a company and make sure they are functioning cohesively. For example, a company like Amazon needs to consider how its fulfillment centers and shipping services are integrated to send out timely shipments.
Here are a few things to consider about channels:
- How do you deliver your value proposition ?
- How do you reach your customer segments ? What channels are used?
- Are your supply, distribution, marketing, and communication channels well-integrated and cost-efficient? Are they being utilized effectively?
#7. Customer Segments
Customer Segments are the different types of customers that a company manages. A company that produces different products will need to interact with different types of customers.
An example of this would be airline companies. Airlines offer tickets for economy, business, and first-class customers. First-class passengers have access to exclusive benefits and luxury travel arrangements. Conversely, economy passengers are provided much less support, thus costing less, but also coming in significantly larger amounts.
Here are a few things to consider about customer segments:
- Who is the main focus of your value proposition? Who are you creating value for?
- Who are your most important customers? What are they like? What do they need? What do they enjoy?
- What are your different types of customers ?
- What is the customer market like? Is your company targeting a small niche community or a mass market?
#8. Cost Structure
The cost structure refers to how a company spends money on operations. It consists of the company’s key costs and the company’s level of focus on costs. If a company is cost-driven, it focuses on minimizing costs and, thus, prices for customers. Alternatively, if a company is value-driven, it focuses on creating value for its customers, with less focus on cost.
An example of this would be a comparison between fashion retailers, Forever 21 and Gucci. Forever 21 is a fast-fashion company focused on delivering the newest styles at low costs – a cost-driven company. Alternatively, Gucci is a luxury brand focused on delivering high-quality clothes and accessories designed with the latest trends in the fashion industry – a value-driven company.
Here are a few things to consider about cost structure:
- What are the key costs in your company’s business model
- What are the major drivers of cost ?
- How do your key activities and key resources contribute to the cost structure?
- How do your costs relate to your revenue streams?
- Is your company properly utilizing economies of scale ?
- What proportion of costs are fixed and variable ?
- Is your company focused on cost-optimization or value?
Check out CFI’s course on Budgeting and Forecasting Course to learn more about estimating future cash flows, revenues, and expenses!
#9. Revenue Streams
Revenue streams are a company’s source of cash flows . They are the final element of the business model canvas template. Revenue streams are the different ways your company’s value proposition generates money. A company might have multiple revenue streams. For example, Apple has multiple revenue streams between its variety of products and its services, such as Apple Music.
Here are a few things to consider about revenue streams:
- Does your company have multiple methods of generating revenue ?
- What is the pricing strategy for the products offered by your company?
- Through what channels do your customers pay?
- Does your company offer multiple forms of payment (up-front, payment plans, financing, etc.)?
Example of a Business Model Canvas
Here is a simple example built for an automotive company using our business model canvas template!
Additional Resources
Proper financial management is the backbone of any business. Corporate Finance Institute has resources that will help you expand your knowledge, advance your career, and manage the financials of your company! Check out the helpful CFI resources below:
- Financial Modeling & Valuation Analyst (FMVA)® Certification Program
- Corporate & Business Strategy
- Budgeting and Forecasting
- Three Financial Statements Summary
- See all management & strategy resources
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Business Model Canvas: The Definitive Guide and Examples
Before 2004, entrepreneurs suffered from prolonged and cumbersome business plans. Alexander Osterwalder facilitated the creation of a business model by introducing the Business Model Canvas (BMC) .
By definition, it’s a visual template that illustrates various objects of a business model . Osterwalder’s original canvas includes nine elements, which we will have explained below in the article. They represent vital aspects of business survival.
What to Begin With?
Once you decided to use the Business Model Canvas approach, you need to prepare the essentials:
- Decide on the team members involved.
- Allocate time
- Prepare the tools.
The necessary tools depend on how you decide to brainstorm:
- Offline. Download a PDF Business Model Canvas template, and take several colored markers, sticky notes, and anything else you may need. For example, if you are brainstorming in a big team, a board is a must for enhanced convenience.
- Online. Choose the platform where you will work with a template. It can be Google Docs, Omnigraffle, or the Stratygizer web app.
Why Choose Business Model Canvas?
What makes The Business Model Canvas stand out in an array of approaches to business model creation? Its 1-page nature drives the following advantages:
- Focus – With all the data presented on a single page, business owners don’t spread themselves too thin. They formulate key elements and eliminate unnecessary ones.
- Density – It’s much better to read one dense piece of paper than look through a 30-page report.
- Flexibility – The canvas is easy to customize; therefore, you can fill out several templates, compare them, and choose the best one.
About the Nine Business Model Canvas Elements
Let’s elaborate on what is behind the nine Business Model Canvas blocks:
1. Customer Segment
Daily operations highly depend on customers and their behavioral patterns. That’s why customer segmentation is a must when creating a business model.
In this block, you need to describe the buyer persona. The description includes the following:
- Demographics (age, gender, etc.)
- Professional status
- Motivation and goals
- Shopping preferences
This is a basic list of points. You can add specific parameters. For example, software developers may identify the preferred device type. Already-established brands can also introduce visitors’ tiers that differentiate people according to their level of connection with a brand.
Read an in-depth article about customer segments here .
2. Value Proposition
A value proposition is a brief description of your product and its ultimate value for a client. In other words, write down in a Business Model Canvas why consumers should buy your goods or services. Ideally, it solves a problem or drives additional value for an end-client.
Keep in mind that the wording should be precise and short. Don’t describe your value proposition in several sentences. Limit it to a single but eloquent phrase. Here is a good example from Maps.me : “Fast, detailed, and entirely offline maps with turn-by-turn navigation – trusted by over 140 million travelers worldwide.”
Read an in-depth article about value proposition here.
3. Distribution Channels
Osterwalder, together with Pigneur, described five phases of channel development.
- Awareness includes channels that establish the initial contact with the target audience and develop the connection. It usually involves marketing channels.
- Evaluation implies allowing potential buyers to try your goods and see the value. Popular channels are free samples, reviews, and case studies.
- Purchase is about when and by what means customers can buy your product. The channels vary significantly depending on the prevalence of online or offline communication.
- Delivery describes how an end consumer receives a product.
- After-sales is usually limited to customer support that provides after-sales service and resolves problems.
Read an in-depth article about distribution channels here.
4. Customer Relationship
A customer relationship strategy determines how your target audience interacts with your brand. You can choose from five types of customer relationships in terms of the Business Model Canvas:
- Personal assistance is a traditional approach where a customer interacts with a personal assistant when contacting your brand. It implies a high level of personal care and deep, meaningful relationships.
- Self-service is the opposite of personal assistance: a brand doesn’t directly communicate with a consumer – instead, the consumer can understand the product via guides and FAQs.
- Automated service involves AI-based suggestions and bots that can provide basic assistance. This type is more engaging than self-service.
- Communities are spaces developed by a brand itself to help the audience understand the product better. A good example is Oracle, which practices the approach.
- Co-creation implies educating the customers via user-generated content.
Read an in-depth article about customer relationships here.
5. Revenue Streams
The next block of the Business Model Canvas is about determining where your revenue comes from. Here, you should consider the buyer’s persona to identify what the target audience is ready to pay for.
There can be several methods of monetization:
- Direct sales : Implies selling your service or product for a fee. It’s common for the majority of industries.
- Advertising : It’s relevant for such niches as blogging or IT platforms. The revenue comes from advertisers who want to reach your audience.
- Freemium : This applies to services only. Some features are free, while premium ones are paid for.
- Subscription : It’s similar to a fee-based monetization. The only difference is that a consumer pays for getting access to the service for a limited time, not forever.
Read an in-depth article about revenue streams here.
6. Key Resources
In the Business Model Canvas, key resources are divided into four categories. Here are they explained:
- Tangible – Any physical resources, from real estate to equipment. The stocks also fall in the category.
- Intangible – Intellectual property like patents, copyrights, licenses, and customer knowledge
- Human – Your employees that make the business run
- Financial – All the finance, regardless of whether it’s an obligation or not. It includes cash, bank loans, grants or donations, and other finances.
Read an in-depth article about key resources here.
7. Key Activities
Key activities included in a canvas are the business activities vital for work. They vary from industry to industry. Some design this block by uniting the activities into one out of three categories:
- Problem-solving
For example, software developers fall in the first category as they design new products, while an IT company with its own taxi service is attributed to the third category.
Read an in-depth article about key activities here.
8. Key Partners
Key partners are parties like suppliers who are vital to flawless business operations. In other words, a company can’t survive without them. There are four categories to include in the Business Model Canvas:
- Supplier – A partner who supplies you with raw materials or finished goods
- Non-competitors – Companies you team up with to leverage their resources: for example, you can source goods from several suppliers
- Joint ventures – Partners who help you fill the gap: enter a new market or reach a new niche. The result of a joint venture is enhanced mutual profitability.
- Coopetition – Partnership between two competitors, which may take place as a merger to market a new product
Read an in-depth article about key partners here.
9. Cost Structure
All the mentioned above blocks of the Business Model Canvas aren’t implemented for free. Startups and enterprises spend money on production and accompanying services. To set realistic revenue goals, a company needs to estimate the costs first.
The costs vary depending on the industry. For example, some businesses have to cover R&D expenditures, together with production and post-service. Others, however, exclude this debit from the template.
Read an in-depth article about cost structure here.
Applications and Analysis
Once the Business Model Canvas is ready, you need to analyze it. For this, you should assess the canvas in terms of three points:
- Is it logical and coherent? Are there are misaligned blocks? If yes, address the issue.
- What can be improved? If you find any mediocre blocks, devote more time to improve them.
- Are there any other ideas to consider? Maybe you can add something to the existing template or design a new one?
- Does my team agree with the canvas? If not, reconsider the arguable moments. To prove your point of view, rely on data and facts.
- Have I taken into account a long-term competitive advantage? If no, address the point. You need to consider the market and competitors when building a business plan.
What to Do After?
After you have examined the canvas, you can integrate it into your daily routine. Here is how it can be utilized:
- Track the changes. Any company evolves with time. A plan helps to make sure that changes don’t contravene core principles.
- Onboard top-management. The model communicates who you are and how you live. Instead of describing everything on your own, you can let new hires read everything.
- Guide the brainstorming. Every time you have a meeting where a team is generating ideas, place the canvas in front. It will help to reject unfit ideas.
Besides, you can use the same technique in other areas. For example, if you have several customers, you can describe an approach to them with the help of the BMS.
Some Tips for Beginners
If you have never created the Business Model Canvas before, comprehending all the above-mentioned data may be hard. Here are five tips that will help to navigate across the template easier:
- Prefer teamwork: It’s better to brainstorm side by side with reliable and competent team members rather than alone. You reduce the risk of designing the canvas from one perspective.
- Work on a whiteboard: The more space you have, the better. It allows the whole team to have a good look at the template and facilitates the process.
- Stock up on stationery: Colored markers and stickers will help you to group the ideas when brainstorming. Otherwise, you risk ending up with an incoherent Business Model Canvas.
- Devote enough time: Don’t allocate half an hour or schedule an important meeting right after the brainstorming. You will need a minimum of one hour for a draft.
- Determine the sequence of blocks to fill in: It’s advisable to start with customer segmentation or value proposition. After that, you can determine the sequence as it’s convenient for you.
Software for Business Model Canvas
If you prefer digital solutions to traditional paper and markers, you can opt for software to create the Business Model Canvas. There are many useful tools on the web. These three, however, are the best:
- Canvanizer. The tool is free, simple, and shareable. It allows collaborative brainstorming in Google Docs. Later, the canvas can be exported to an image or other formats.
- Strategyzer. The free software is more advanced with deep analytics and enhanced user experience. For example, the tool can assess the financial viability of a business idea. It also offers additional modes: for example, a dashboard for Lean Startup development.
- CNVS. The software with a simple interface is easy-to-understand. It allows building not only the BMC but also a Lean and Feature Canvas.
What Are the Benefits of the BMC?
Businesses of all scopes choose the Business Model Canvas approach because of four core benefits:
- Enhanced Visibility. Since the canvas involves visual presentation, it facilitates data comprehension. The team has all the information in front of their eyes; therefore, the analysis and decision-making are much easier.
- Customization. You can change some blocks of the canvas in no time if they don’t match with others. It won’t take several hours to retype and reprint a 40-page report.
- Focus on Value. Typically, the value of the product is at the core. It means that all the other blocks are designed with the end-benefit in mind.
- A Single Message. A team gets a clear message of the operation. The Business Model Canvas eliminates risks of failure because of misunderstandings.
What Does the Business Model Canvas Lack?
Although the Business Model Canvas is a popular and recognizable approach, many critics revolve around it. In particular, some executives criticize the model because of the lack of:
- Competitors
- Market analysis
- Brand mission
- Key priorities
While it may bother some people, in reality, there is nothing wrong. The nature of the BMC doesn’t imply focusing on these aspects. Its ultimate objective is to facilitate the process of crafting business models. And the template includes the core blocks only. After all, the market and competitors’ external outcomes aren’t shaping the company’s inner structure.
Why Should Already-Established Companies Implement the Business Model Canvas?
Traditionally, the canvas approach is the prerogative of startups. But it can also be useful for already-established enterprises. The BMC covers the following tasks: Helps to identify gaps in the model and discover new opportunities.
- Allows comparing your model to competitors to identify competitive advantages
- Enhances a presentation of a company to potential investors
- Allows examining and testing new business models
- It helps to unite the model and eliminate misunderstandings in a team
- Allows recreating the company from scratch
As can be seen, the Business Model Canvas helps to effectively analyze the whole company or particular project, map out possible changes or gaps, and address them.
Real Examples of the Business Model Canvas
Examples help executives to grasp the basics of the BMC better. Here are two examples of canvases from different industries:
Airbnb is a provider of affordable accommodation around the globe. Its canvas may look like this:
- Customer segments – budget tourists, unconventional travelers, locals seeking extra income
- Value proposition – easy and fast booking, huge offer, competitive prices, local lifestyle
- Distribution channels – social media, travel bloggers, word-of-mouth
- Customer relationships – self-service with customer support
- Revenue streams – a fee system, affiliate marketing
- Key resources – a community of both landlords and guests, platform, IT-specialists
- Key activities – user research, customer support, maintenance
- Key partners – tourists and travelers, hosts, investors, payments providers, insurance companies
- Cost structure – marketing, platform maintenance
LinkedIn is a professional social network.
- Customer segments – HR, professionals seeking employment, marketing specialists
- Value proposition – building a professional network of contact, sourcing potential employees, blogging.
- Distribution channels – app stores, website
- Customer relationships – self-service, customer support
- Revenue streams – freemium, marketing, and hiring solutions
- Key resources – platform, IT-specialists, user-generated content
- Key activities – platform maintenance
- Key partners – users, SlideShare
- Cost structure – marketing, maintenance
The Business Model Canvas is one of the numerous approaches to business modeling. For more than fifteen years of existence, it has proved its worth in the corporate community. Despite some critics, the method is effective and illustrates the business plan precisely. Moreover, thanks to its visual feature, it’s easy to comprehend and assess.
Download a Business Model Canvas Template
Download our free tools below to create your own Business Model Canvas right now.
BUSINESS MODEL CANVAS TEMPLATE PDF
BUSINESS MODEL CANVAS TEMPLATE PPT
BUSINESS MODEL CANVAS TEMPLATE EXCEL
BUSINESS MODEL CANVAS TEMPLATE WORD
BUSINESS MODEL CANVAS TEMPLATE GOOGLE SHEETS
BUSINESS MODEL CANVAS TEMPLATE GOOGLE SLIDES
You may also be interested in the Value Proposition Canvas template , a complementary tool to the Business Model Canvas.
Daniel Pereira
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The 9-Step Business Model Canvas Explained (2023 Update)
Written by Raquel Alberdi
Business | entrepreneurship, 0 comments(s).
Blog » The 9-Step Business Model Canvas Explained (2023 Update)
“A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business . And by “business” we simply mean how the company makes money by acquiring and serving its customers”.
-Reid Hoffman
After meeting with hundreds of entrepreneurs and business owners over the years I believe the LinkedIn co-founder and Blitzscaling author Reid Hoffman’s got it spot on.
People tend to focus on specific parts of their business, such as which software packages are being used, which is the cheapest supplier, how to optimize internal processes…?
They get so bogged down in the details of the day-to-day running that they lose the overall vision of their business.
Without this vision they are unable to scale, they make marginal profits, miss opportunities, struggle to innovate, and end up running “just another” business.
Another handy metaphor in understanding this common mistake is the soldier in the trenches .
Every meter of ground gained comes at a heavy cost, mistakes are made, and progress is hard-fought and slow…a day-to-day experience for 99% of entrepreneurs and businessmen.
But when you do have that 360 vision you see the entire battlefield. Decisions are much clearer, fewer mistakes are made, and progress is fast and methodical.
Fortunately, a business model framework exists that gives you both vision and clarity .
The Business Model Canvas provides entrepreneurs, business owners, and strategists with a tool to analyze, structure, and evolve a business while always keeping the bigger picture front of mind.
So let’s take a closer look at how it works.
Table of Content
What is the Business Model Canvas?
Customer segments, value propositions, customer relationships, revenue streams, key resources, key activities, key partners, customer segments, value proposition, strategyzer, business model canvas tool, would you like to learn more about business models.
Created by Swiss entrepreneur and Strategyzer co-founder, Alexander Osterwalder, the Business Model Canvas is a visual representation of the 9 key building blocks that form the foundations of every successful business. It’s a blueprint to help entrepreneurs invent, design, and build models with a more systematic approach.
Why is it so popular within the business community?
Its simplicity. The business model canvas allows us to carry out a high-level analysis without drilling down and getting lost in the details. You just draw out the 9 building blocks on a blank canvas, fill them in as each concept relates to your business, and hang it somewhere everybody can see.
It’s a visual overview of your entire business on a single canvas.
While the Business Model Canvas is an extremely fluid concept and hyper-specific to individual companies, each canvas is still broken down into these 9 key building blocks:
When laid out on the canvas the model will look something like this:
While you’ve probably come across each of the 9 building blocks before, the attractiveness of the Business Model Canvas is that it confines them to a single page , not a traditional 42-page document.
This makes it a lot easier to digest, as well as assess existing business models or map out new ideas.
How do I fill out the Business Model Canvas?
To start your Business Model Canvas you will need to breakdown and analyze each of the 9 building blocks.
A good way to approach this is to gather the heads from marketing, sales, operations, finance, and manufacturing (if product-based) and pencil-in a morning where you can all meet together.
Then, after drawing a mock canvas onto a whiteboard, proceed to dissect and discuss each of the 9 building blocks as they relate to your business. You can use sticky notes to better organize your thoughts around the canvas.
If you are an entrepreneur or new business owner working alone and don’t have a team to bounce your ideas off, not to worry. You can still carry out your analysis before sharing it with a like-minded entrepreneurial community or forum, like those found on ThePowerMBA , to get useful, insightful feedback.
Whichever way you decide to approach it, I recommend you complete each block in the following order:
- Cost structure
For continuity, I’m going to use the fashion retail giant Zara when analyzing each of the 9 key building blocks.
If you’d like to skip to another case study similar to your own business, navigate to the table of contents at the top of the page and select one of the other business model canvas examples.
The first block of the Business Canvas Model is about understanding who is the most important customer(s) you’re delivering value to. Or, in other words, who are they? What do they do? And why would they buy your product or service?
Not a single company exists without its clients, making customer segments the best block to start with while drawing out your business model canvas.
A great exercise to define your customer segments is to brainstorm and create your company’s buyer persona (s) .
Buyer personas are fictional depictions of an ideal or hypothetical client. Typically when brainstorming a buyer persona you’d want to define certain characteristics (age, demographic, gender, income, industry, pain points, goals, etc.)
However, remember at this stage we want a snapshot of our customer segment. There’s no need to jump into great detail just yet.
In the case of Zara, there are three distinct customer segments to whom they offer different products.
The products created for each of these customer segments (clothing, shoes, and accessories) are not trans-consumable. That is to say, a woman’s dress is highly unlikely to be worn by a 7-year-old child.
Once we know exactly who it is we are targeting, it’s time to look at what we as a company have to offer.
The second phase is about figuring out your company’s value propositions , and importantly, your UVP (unique value proposition). The “what” that makes customers turn to you, over your competitors? Which of their problems are you best at solving?
Each value proposition consists of a bundle of products or services that fulfill the needs of a buyer persona from your customer segment. It’s the intersection between what your company offers, and the reason or impulse customers have for purchasing.
Some popular questions to ask while determining your UVP are:
- Which specific customer pain point are you trying to solve?
- What job are you helping customers get done?
- How does your UVP eliminate customer pain points?
- What products or services do you provide that answer this specific pain point?
So let’s try and apply this to Zara. Why do people choose to purchase from them, over their competitors?
Zara’s principal value propositions are fairly clear. They offer various ranges of stylish men’s, women’s, and children’s clothing and accessories at an affordable price.
But there’s more to it than that.
If we dive a little deeper we see Zara’s value propositions are more complex, which are behind the success of the brand:
Fast fashion
Zara adds new clothes and designs to its collections every 2-3 weeks, both in its stores and online. It keeps the brand updated, fresh, and modern while maintaining its all-important medium price point
Great eCommerce experience
Once you enter Zara’s online store you’re presented with a clean, easy-to-navigate, and high-end feel. The customer segments are visible on the left navigation bar with a search tab to further aid customers with their online experience.
Localized stores
You can find a store in nearly all major retail locations (shopping malls, retail outlets, airports, etc.) meaning accessibility is not an issue for the majority of consumers.
Flagship stores
Zara demonstrates its aesthetic evolution to customers through its flagship stores. The recent opening of their Hudson Yards , New York City flagship is a great example of this. Customers shop around its vivid, minimalist layout offering them an experience aligned with the brand’s deeper, eco-friendly values.
Zara Hudson Yards, New York
The next step is to ask yourself how you are reaching your customers, and through which channels ?
This includes both the channels that customers want to communicate with you as well as how they’ll receive your products or services.
Is it going to be a physical channel? (store, field sales representatives, etc.) Or is it a digital channel? (mobile, web, cloud, etc.).
Zara has 3 primary channels in which they communicate and deliver products to its customers:
- Direct sales through their stores
- Online (both app and website)
- Social media
Customers can go to a traditional “bricks and mortar” store to browse, model, and purchase different items of clothing at one of their retail stores.
Alternatively, they can shop online or through their mobile application and have the product delivered straight to their door or nearest store. The choice is completely up to them!
So that covers Zara’s commercial channels, but what about how they communicate with customers?
While they do communicate through their mobile app, their predominant channel is social media.
What’s more, they’re really, really good at it.
For example, did you know that Zara invests less than 0.3% of its sales revenue into advertising?
This is only possible due to an A-rated social media presence . Customer queries are not only dealt with quickly, but recommended re-works are sent back to HQ, forwarded onto in-house designers who then apply the feedback to future collections.
This customer-first approach through fluid communication channels has saved them thousands of dollars in marketing, strengthened their brand, and created a loyal customer base.
You should only step away from this building block once you’ve decided how each of your customer segments want to be reached.
Once you have acquired customers, you will need to think about how you can build , nurture, and grow those relationships.
Now, this can be automated and transactional like large eCommerce brands Amazon or Alibaba. Or, it could be at the complete opposite end of the scale and require a more personal relationship you’d typically have with a bank or your local bike shop.
Zara’s relationship with its customers is threefold, and lies somewhere in the middle of transactional and personal:
- Salesperson at store
- Brand through social media
- Sentimental attachment to a product
Yes, you have the initial transactional touchpoint at the store or online, something relatively impersonal and for many the only interaction they’ll have with the brand.
However, customers (especially in the fashion industry) are encouraged to continue to interact with a brand through social media platforms.
As we mentioned before when discussing channels, Zara has a very effective communication system in place. Not only can people instantly get in touch with the brand, but also engage with new posts, images, and collections uploaded to social media.
This personal approach to customer relationship building can, in some cases, lead to the natural growth of brand ambassadors and communities .
An attachment can also develop between customers and particular garments or accessories from one of their collections. The sentimental attachment to these products also creates another potential form of brand loyalty.
Now that you’ve described how you are going to create real value for your customers, it’s time to look at how you plan to capture that value.
What are your revenue streams? Is it going to be a transactional, direct sales strategy ? Are you going to consider a freemium mode l, where you give a portion of your product or service away for free with the idea of converting later on down the line?
If you’re a SaaS company such as SalesForce or Strava , then it’s likely that a licensing or subscription revenue model will be more appropriate.
At Zara, it’s extremely simple. They make their money by selling clothes and accessories either at a store or online.
As you can see, we’ve filled in the entire right-hand side of our business model canvas. We touched upon:
- Value propositions
- Revenue streams
- Distribution channels
Now it’s time to move over to the left side of the business canvas model and look at what we need, internally , to deliver our value propositions.
To start with, let’s take a look at key resources.
The key resources are all things you need to have, or the assets required to create that value for customers.
This could be anything from intellectual property (patents, trademarks, copyrights, etc.) to physical holdings (factories, offices, delivery vans, etc.) right down to finances (the initial cash flow perhaps needed to start your brand).
Another key resource every company needs to consider is its human capital . Are you going to need highly specialized software engineers? Or field-based sales teams?
They are relatively capital-heavy resources that need to be factored into your business model.
In the case of Zara, they are going to need a number of key resources if they hope to deliver their propositions:
- Stock management
- A large, interconnected network of physical stores
- A strong brand
- Logistics and supply chain infrastructure
Stock is vital for both online and offline customers.
If they are unable to supply their range of products and meet customer demands, satisfaction levels fall and they have a serious problem on their hands.
A large distribution network of brick and mortar stores combined with a strong brand name help mitigate these factors, as well as reinforce any ongoing marketing activities and communication efforts.
Finally, an efficient logistics process within Zara is critical, especially when you consider the complexities involved with such a large-scale operation.
They will require the necessary technology to analyze data on inventory, storage, materials, production, and packaging, with the staff to execute each of these stages and manage the delivery of the final products.
The next step is to define the key activities – the areas you need to be good at to create value for your customers.
To mix it up a little let’s take a look at a slightly different business in Uber .
Their key activities can be broken down into:
- Web and mobile app development
- Driver recruitment
- Marketing: customer acquisition
- Customer service activities : drivers’ ratings, incidents, etc.
They need a fast, clean UX for their customers using the app, drivers to carry out their service, and the ability to both market the product and deal with any customer queries.
Zara’s key activities will differ to those of Uber. Some of the things they need to consider would be:
- Manufacturing
- Retail process (point of sale and 3rd party management)
- Distribution channel / logistics
Design is a key activity as Zara’s value proposition is to provide stylish garments at an affordable price. Their collections need to be constantly updated to follow the latest fashion trends at the time.
To produce their collections Zara will also require manufacturing capabilities. Now Zara doesn’t own their own factories (we will get to that in the Key Partners section) but they still need to be involved in the garment manufacturing process.
Everything from fabric selection to pattern making, to detailing and dyeing affects the outcome of the final product which of course they have to then go on and sell.
The effective management of the retail and distribution channels (online, offline, shipping, and communication with providers) is also key. A breakdown in either of these activities, such as a poor relationship with an important provider will have serious consequences for the business.
Most modern business models now require brands to build out and work with various key partners to fully leverage their business model.
This includes partnerships such as joint ventures and non-equity strategic alliances as well as typical relationships with buyers, suppliers, and producers.
A great example of a strategic partnership would be between ThePowerMBA and Forbes . In exchange for exposure of our brand to the magazine’s global audience, we provide expertise and content on high-level business education programs.
As we touched upon when discussing key activities , Zara requires strategic partnerships with many different providers if they are to design and produce their collections.
Another key partner is their major holding company, Inditex .
Inditex has several subsidiaries including Massimo Dutti , Pull & Bear , and Oysho . Being a subsidiary of Inditex means they share a consolidated balance sheet, stakeholders, management and control, and various legal responsibilities.
While as a subsidiary Zara is afforded certain freedoms when it comes to design, delivery, and the general running of the company, the overall strategy will need to be aligned with Inditex and its other subsidiaries.
The final step of the Business Model Canvas is to ask yourself, how much is it going to cost to run this model?
This includes some of the more obvious needs such as manufacturing costs, physical space, rent, payroll, but also areas such as marketing activities.
If you are unsure of exactly what to include in your cost structure take a look at a Profit and Loss statement ( P&L ) from a competitor or company in a similar industry to yours. You’ll find many items overlap such as research and development ( R&D ), cost of goods sold, admin expenses, operating costs, etc.
Once that’s done you should prioritize your key activities and resources and find out if they are fixed or variable costs .
As Zara is such a large, corporate business they are going to have both fixed costs (rent, payroll, point of sales personnel) and variables, such as costs associated with the fluctuating sale of goods, purchase of materials and, manufacturing costs.
Once you’ve completed these 9 steps, your Business Canvas Model should look something like this:
Business Model Canvas Examples
Hopefully, you were able to get a good feel for the effectiveness of the business model canvas with our run-through of Zara.
However, if you found it difficult to follow due to the stark difference between your industries, I’m going to quickly go through 3 more companies to demonstrate the tool’s flexibility:
- Netflix (Media service/production)
- Vintae (Vineyard)
Even if these business model canvas examples don’t align exactly with your industry, I honestly believe that studying different models gives you a competitive advantage in your professional career regardless.
If you’re currently employed by a company, you’ll better understand how your specific role helps the company achieve some of its “long-term” goals.
Alternatively, if you are a business owner yourself (or perhaps thinking of starting your own business) you’ll have a better understanding of your business and where potential opportunities lay.
I’m sure you’re familiar with our next business model canvas example candidate, Netflix .
The global media company offers an online streaming service of various movies, documentaries, and TV programs produced in-house or licensed 3rd-party content. Their success sparked a revolution in the online media world with the likes of Amazon, Apple, Disney, HBO, and Hulu all rushing to launch their own online video streaming platforms.
Netflix started life as an online DVD rental company, basically a web version of the more popular (at least at that time) “bricks and mortar” Blockbuster.
Co-founder Reed Hastings predicted as far back as 1999 that the future of media was in online streaming, saying “postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months.”
It wouldn’t be until 2007 that Hasting’s prediction would become true when Netflix, as we now know it, was born.
So let’s take a current look at their business model canvas:
As you probably know, there are very few people out there who haven’t subscribed, watched, or at least heard of Netflix. There is content for everybody: wildlife documentaries, sci-fi movies, rom coms, action-thrillers, you name it – it’s there.
That’s why their customer segment can be classified as a “ mass market ” as the base is just so diverse.
All people require is a computer, TV, internet, and/or smartphone and they’re good to go. For most developed markets, that covers just about everybody.
Whether on the train to work, sitting in the car (if you’re not driving!), or relaxing at home in front of the TV, you can consume their online, on-demand video streaming service.
They also have a huge library of content for consumers to choose from, ensuring that people keep coming back, as well as increasing their mass-market appeal.
They also produce high-quality, original content to differentiate themselves from their competitors.
Most people access Netflix either through their website or mobile/TV App . Another popular channel that you may have picked up on is their affiliate partners .
You’ve perhaps signed up for a mobile, TV, and internet package where the provider offers Netflix as an extra to sweeten the deal, so to speak.
That would be an example of an affiliate partnership between Netflix and mobile service providers.
I doubt many consumers have had direct contact with Netflix unless it’s to resolve a subscription issue or general query. It’s very much a self-automated service – you download the app, select the program you wish to watch, and hit play.
Very simple, very effective.
Again, this doesn’t need much embellishment. Netflix generates money from the different tiers and packages put together in their subscription services.
This varies depending on the region to account for local markets, but on the whole, it’s sold at a low price point.
Originally, Netflix’s Key Resources would have been their unrivaled DVD collection combined with a cost-effective mail-order system.
Nowadays it’s undoubtedly the rights to stream online video content. Netflix has brokered deals with some of the biggest production studios worldwide.
Combined with their huge library of in-house productions , it’s more than enough to encourage customers to renew their subscriptions.
To help sustain interest in their product, Netflix understands they need to serve-up relevant content for each sub-sector of their mass audience. Therefore their machine learning algorithm selects content for consumers based on streaming habits (what they watched, at what time, etc,.) to personalize the customer experience.
This explains why over 80% of all content streamed on Netflix was cherry-picked by this algorithm, making it a Key Resource for their business model.
Also, Netflix accounts for a whopping 12.6% of global bandwidth usage . The literal capacity to stream their services must be met meaning bandwidth must also be included here.
Content procurement is arguably their biggest Key Activity. They need to find people to produce and deliver their original content, including actors, studios, writers, etc. as well as secure the licensing and streaming rights from 3rd party producers such as Sony, Warner Bros, and Disney.
Finally, they need a fast, easy-to-use application to host their online streaming service. This needs to be available for both TV and mobile devices if they are to deliver their “on-demand” value proposition.
K ey Partners
Seeing as Netflix’s entire business model is largely based around streaming 3rd party content, key partnerships need to be built with production studios . No content, no Netflix!
Also, as we touched upon earlier Netflix is one of the largest consumers of bandwidth worldwide. If the speed and delivery of their streaming service are to be continued then deals will also need to be made with internet service providers (ISPs).
Netflix’s biggest expenditures come from both their in-house content procurement and 3rd party licensing agreements . The high-quality standard of video streamed on Netflix is only possible due to the speed and performance of its online platform and application , which has additional costs of staff, software, etc.
To show you just how flexible the business model canvas can be, I wanted to throw in a slightly leftfield example. Vintae is a Spanish wine producer who, after a detailed analysis of the business model canvas, was able to innovate and disrupt one of the world’s most competitive industries.
As some of you may know, the wine industry is extremely competitive. It’s also steeped in history and tradition , making it very challenging for newcomers to grab market share, let alone think about year-on-year growth and revenue.
However, CEO “Richi” Arambarri looked at the traditional “ bodega ” business model and saw a chink in its armor.
A “small” innovation in the business canvas model helped them to become one of the region’s most important winery groups, with over 10 installations and a presence across all regional denominations (Rioja, Priorat, Rias Baixas, etc.) with year on year growth of 30% – practically unheard of in such a competitive industry.
So how did Vintae analyze the business model canvas to find a niche in their market?
To answer that question, we must first look at the traditional winery business model .
As you can see, the wine industry has historically been patrimonial. Vineyards and estates are passed down through generations with the winery responsible for all phases of production, clarification, and distribution.
The traditional winery business canvas model suggests you must be the owner of the winery/vineyard where the wine is “manufactured”, meaning physical assets are a key resource of the business model.
So, if you wanted to start producing a Rioja, for example, you’d have to set up your vineyard in the region.
This is monumentally expensive as you need to:
- Purchase the land
- Plant a vineyard
- Absorb set-up and installation costs
- Deal with maintenance costs
It’s here where Vintae saw their opportunity.
What if we move vineyard ownership across the business model canvas from key resources to key partners ?
By leasing the equipment and space of large wineries (of which there was plenty), they could still produce their wine but reduce the cost and exposure associated with land purchase, crushing equipment, huge storage tanks, vineyard maintenance, and their bottling line.
This enabled them to focus on their sales, marketing, and distribution channels to create a better brand experience for their customers.
Also, it afforded them more flexibility when creating new wines as they were no longer confined to the limitations of grapes grown on their vineyard.
The lightness of this new business model eliminates maintenance overheads, channels energy into personalizing the customer experience, and allows for unprecedented levels of growth in one of the world’s most competitive industries.
Business Model Canvas Software
Although I did mention starting with a large whiteboard, sticky notes, and a pack of colorful sharpies there are several options in which you can digitize the business canvas model production process.
While I still believe the aforementioned process is extremely valuable (it gets your entire team’s input in a single hour-long session) you may decide it more viable for each member of management to pool their ideas digitally before sharing with the rest of the group.
If that’s the case, then take a look at some of the following software tools for creating your business model canvas.
Created by the founders of the business model canvas Alex Osterwalder and Yves Pigneur , Strategyzer offers a range of business model canvas templates for you to get started with.
If you opt for the paid model (there is a 30-day free trial period) they offer a series of various classes that teach you how to build and test different value propositions and business models.
A real-time built-in cost estimator analyzes the financial viability of some of your business ideas, identifying alternative areas you may wish to explore with your model.
All-in-all, it’s a great resource to play around with and test some of your business ideas, with the option to dive into further detail if you see fit.
Canvanizer is a free, easy-to-use web tool that allows you to share links between team members who are brainstorming ideas for a business model canvas, but working remotely.
Like Strategyzer, there are several business model canvas templates provided to help you get started with your analysis. The strength of this platform is its accessibility. Much like a Google Doc., several people can brainstorm on the same canvas simultaneously with changes being synchronized automatically.
A ThePowerMBA alumni, impressed by the simplicity and effectiveness of the tool, went ahead and created the free application Business Model Canvas Tool .
It’s an incredibly intuitive, and easy-to-use tool that allows you to create templates simply by clicking the + button in each building block.
Each business model canvas created can be downloaded and shared as a pdf. with the rest of the team.
If, after going through our 9-step guide on how to use the Business Model Canvas you’d like to learn more about different business model analysis tools , take a look at our alternative MBA business program .
As you’ll see, the course gives students a 360-degree view of business and management practices – such as engines of growth, segmentation and targeting, and value propositions.
I highly recommend you go check it out.
Regardless, I’d love to hear what you thought about this guide. Was it helpful? Would you like to see additional business cases analyzed from your industry?
Let us know in the comments below.
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How To Describe Your Business Model (Facts You Should Know)
Clearly describing your business model to others, such as partners, investors, consulters, employees, etc., enables you to share your knowledge and effort completely. This article will show you how to describe your business model clearly and easily.
The best way to describe your business model is by using these two tools: The Business Model Canvas, and The Business Model Metrics. By combining these two tools, you will create a clear and concise description of your business model.
Table of Contents
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What is the business model?
A business model describes how a company works to achieve its goals. It describes how the company creates value (product), provides value to the customer, and generates profit.
The business model was a confusing term
In fact, at that time, there was no standard framework for the business model, and much confusion and ambiguity were surrounding the term. In this case, there was a lack of understanding among all parties.
The appearance of the business model canvas
In 2010, when Alexander Osterwalder published his book “Business Model Generation “, he provided a visual tool called the business model canvas, which was sorely needed. This tool consists of 9 blocks used to describe the business model. This tool provides a standard framework for a business model that can be used in discussions.
The business model canvas
The business model canvas consists of 9 blocks, as shown in the image below. These blocks are used to describe any company’s business model.
The 9 blocks of the business model canvas are:
Fill the nine blocks of the business model canvas with detailed, clear information. This is the first step in the process of describing your business model. Now, let’s take these blocks one by one in a few lines.
1. Customer segments
2. value proposition.
In the value propositions block, you will describe the group of products and services that create value for your Customer Segment.
Also, you need to describe how important the value proposition is to your customers. Is it a priority need or a luxury need that can be easily discarded?
3. Channels
The company typically uses multiple channels for different functions. For example, specific media are used for advertising. In contrast, another channel is used by customers to communicate with your company, and others are used to deliver the value proposition to customers and so on.
4- Customer Relationships
5- revenue streams.
In the revenue streams block, you will describe the cash a company generates from the customer segment.
6- Key Resources
These resources can be physical, financial, intellectual, or human. Also, the resources can be owned or leased by the company, or they may be acquired.
7- Key Activities
8- key partnerships, 9- cost structure.
The cost structure block describes all costs incurred to operate the business model, such as the primary operating costs of the business, the cost to build and make the product, the costs of using different channels, the cost to get, keep, and grow customers …etc.
Additional description is required
Visualization tools have a significant impact. So try to make your description as visible as possible and support your description with shapes and graphics. ِFor example, you can use the value proposition canvas to illustrate how the value affects the customer segment.
Hidden sides of the business model canvas
Is it enough to use the business model canvas alone.
Therefore, we coupled the business model canvas tool with the business model metrics tool as an additional description tool to supplement any lack in your description.
The Busines model metrics as description tool
The business model metrics are used to evaluate the business model. But we also found it helpful as a description tool with some modifications. For more detail about the original business model metrics, refer to this article: “ What Are The Business Model Metrics? How Do You Evaluate Any Business Model ”
The following paragraphs show these factors. Some questions have been added under each element as illustrative examples to identify easily what is required.
1- Profitability
2- competition, 3- repatriable, 4- scalability.
The business model canvas has been a well-known tool for describing a business model since 2010. But it is not an excellent tool to describe a business model independently, especially for the non-expert.
The business model canvas description blocks
The business model metrics 5 factors.
Using the above mothed, the process of describing the business model will be straightforward. The outcome of this process will be a clear and sufficient description of your business model, even if you’re a non-expert at this point.
Related Articles:
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How to Make a Business Model Canvas There are nine building blocks in the business model canvas and they are customer value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key partners, key activities, and cost structure.
The business model canvas is one framework for sharing your story, or business model, with potential investors. This strategic management framework was first developed by Alexander Osterwalder in the mid-2000s.
A business model canvas is a simple, visual framework that helps teams outline the most fundamental elements of a business. As a handy business tool, teams can use a business model canvas to map the nine core areas of a business, such as customer needs, value proposition, and platforms for customer acquisition.
The business model canvas is a strategic planning tool used by managers to illustrate and develop their business model. The business model canvas template clearly identifies the key elements that make up a business. Additionally, it simplifies a business plan into a condensed form.
Download a PDF Business Model Canvas template, and take several colored markers, sticky notes, and anything else you may need. For example, if you are brainstorming in a big team, a board is a must for enhanced convenience. Online. Choose the platform where you will work with a template.
To start your Business Model Canvas you will need to breakdown and analyze each of the 9 building blocks. A good way to approach this is to gather the heads from marketing, sales, operations, finance, and manufacturing (if product-based) and pencil-in a morning where you can all meet together.
How should you describe your business model? The best way to describe your business model is by using these two tools: The Business Model Canvas, and The Business Model Metrics. By combining these two tools, you will create a clear and concise description of your business model.