Business Model Canvas
A Business Model Canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model.
The Business Model Canvas is comprised of 9 key segments:
The left hand section of the Business Model Canvas is the Infrastructure section and comprises three key areas:
- Key Activities: The most important activities in executing a company’s value proposition.
- Key Resources: The resources that are necessary to create value for the customer.
- Partner Network: In order to optimize operations and reduce risks of a business model, organization usually cultivate buyer-supplier relationships so they can focus on their core activity.
The middle section of the canvas describes the business offering and is the value proposition delivered to different customer segments.
- Value Proposition: The collection of products and services a business offers to meet the needs of its customers. According to Osterwalder, (2004), a company’s value proposition is what distinguishes itself from its competitors. The value proposition provides value through various elements such as newness, performance, customization, “getting the job done”, design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability. The value propositions may be: Quantitative – price and efficiency, or Qualitative – overall customer experience and outcome.
The right hand side of the Business Model Canvas describes the customers, the channels through which you deliver services and and the relationships you have with your customers.
- Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients.
- Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost effective. An organization can reach its clients either through its own channels (store front), partner channels (major distributors), or a combination of both.
- Customer Relationships: To ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments.
The bottom section of the canvas describes the finances.
- Cost Structure: This describes the most important monetary consequences while operating under different business models. A company’s DOC.
- Revenue Streams: The way a company makes income from each customer segment.