The Business Model Canvas was first developed by Alex Ostenerwalder, co-founder of strategyzer.com and lead author of the Business Model Generation, as a tool to actionably conceptualize innovative ideas. Since its inception it has been tweaked and adapted for all types of businesses, organizations, and personal goals. The model is based on complex systems and understanding how your business operates in a simple, visual way.
This tool is especially critical to early phase businesses that may have shifts in their model as they get feedback from customers or develop new iterations by creating a simple guide that ensures all aspects of the model all are covered and understanding how they relate.
It’s also helpful for existing businesses as they develop new products or reach out to new markets. Each expansion should be viewed through the lens of customer discovery and creating small iterations until the right solution and customer is found.
Building Your Model
You can start anywhere, but most people like to start with the Value Proposition.
The Value Proposition Canvas makes explicit how you are creating value for your customers. How does your product/service ease the pains, increase the gains, and solve problems for customers. Although it can be the most difficult to discern, once you have a strong value proposition the model is simple to complete.
Customer Segment – Who do you help?
Customer Relations – How do you interact? How do they view you?
Channels – How do you reach them (message & delivery or product/service)?
Key Activities – Stripped down, what are the things you MUST do to operate this model?
Key Resources – What do you need?
Key Partners – Who will help you with any aspect of implementing your model?
Cost Structure – What will it cost? (Resources, time, energy)
Revenue Stream – How much will you make?
It’s important that you incorporate all costs into the solution you’re developing. Even if you don’t make a profit right away, understanding the relationship and when you should make a profit is critical.