Business Model Canvas Definition
Creating a traditional business model can be a lengthy process, but understanding your organization’s value and growth strategy is key to success. Communicating value through a traditional business model can be very difficult, so it’s important to have a tool to visualize your business model.
A business model canvas is an organizational template that helps visualize the development of a business model. It helps align your business’s infrastructure in relation to your value proposition, internal activities, and competitive advantage.
Using a business model canvas (BMC for short) allows you to focus on the core elements that will drive the success of your business. It can be hard to isolate these variables in a traditional business plan, so using a BMC helps create a template where you can focus on the key elements of your growth strategy. That being said, a business model canvas is not a replacement for a traditional model. It can’t account for every detail in a complete model and should be used in parallel to help communicate information and collaborate with others.
One of the key differentiators of a business model canvas is the ability to share it with others. Anyone can easily analyze a BMC to understand the building blocks of an organization, and you can use this template to communicate information efficiently. Communicating via a traditional business model is complicated, so it’s really helpful to use a business model canvas template when collaborating on your strategy.
For additional context, Alexander Osterwalder and Yves Pigneur originally created the business model canvas template. They collaborated on this template to help expand on the value and infrastructure behind a successful business.
Business Model Canvas Template
The business model canvas template is made up of nine sections, all focusing on unique aspects of an organization’s infrastructure. These sections are listed below with some tips for filling out the template. Use sticky notes to collaborate with your team and fill out your template.
Key Partners
Prompting questions: Who are your key partners in getting a competitive advantage? What partners do you have that will be able to support you? These could be people, other businesses, or any other organization.
The “key partners” section is the first step in filling out the business model canvas template and prods at the strategic partnerships you can leverage to gain a competitive advantage.
It’s important to consider partnerships when developing a business plan because they will eventually become necessary for the growth and publicity of the business. Using partners as champions for your product helps give your business credibility at an early stage, helping propel your growth rate.
Key Resources
Prompting questions: What are the specific resources that you will need to make your business a success? How can you acquire them?
Resources are one of the biggest drivers of change within a business, and it’s important to recognize which resources you have and which resources you need; these resources play directly into the future success of the organization and will affect how you plan for the future. By thinking about the resources you need to create a business, you tangentially focus on the steps that need to be taken to get it off the ground.
Key Activities
Prompting questions: What activities will your business enable for customers?
This section focuses on the product/service being provided and how you will engage with your customers to deliver on your value proposition. When thinking about what activities your business enables or improves, you are inherently thinking about the customer’s journey and what they will experience as a user.
The product/service that users interact with will be the driving force for the entire business, so it’s important to have a solid understanding of what this will be and how people will interact with it. You should also consider the activities made possible as an extension of your business. These scenarios are examples of how your business enables and improves other activities, which could provide other beneficial use cases in the future.
Value Proposition
Prompting questions: What is your unique value proposition? What do you bring to your customer that they didn’t have before? How do you make their life easier?
The value proposition should be one of the most fleshed-out details of the entire business model. Without a value proposition, there is no meaning behind the business, and customers will not feel like they can identify and find loyalty with your brand.
The value proposition should be something that is both in-demand and unique. It doesn’t have to be an entirely unique idea, but it does require some defining features that make it stand out. This gives customers a reason to use your product/service ahead of the competition. Because of the importance and centrality to the entire business model, the value proposition should be one of the most descriptive and prioritized sections of your business model canvas.
Customer Relationships
Prompting questions: How will you manage interactions with your current and potential customers? How will you market your value proposition to your customers?
Building and maintaining customer relationships is key to a successful business plan, and thinking about these interactions in advance helps communicate your team’s goals and expectations. It can be easy to assume customer interactions will happen naturally, but especially when starting a business, there has to be a solid push to facilitate these interactions.
It’s equally important to consider how you will allow your value proposition to shine through in these instances. Your business’s unique value should attract new customers and provide value to those currently using your product/service. It’s important to think about ways to provide this information when planning your interactions so that your customers understand your unique features.
Channels
Prompting questions: How are you going to reach your customers? What channels of communication will you utilize? How will you get people’s attention?
For this point, think about how you will reach your customers. This could be through direct outreach, word of mouth, blog posting, advertising, or any other medium. These outlets will generate unique interactions with different customer bases and should be weighed strategically to optimize your publicity.
Customer Segments
Prompting questions: Who is your business targeting? Describe your ideal customer in a few words.
This section is meant to highlight the specific persona that your business is targeting. Think about the profile that defines your target audience, and write these details in a couple of notes.
This is arguably one of the most critical sections in the business model canvas because this principal user will define your entire strategy and method of outreach. They are the business’s core users, and many of your features will eventually be catered to their needs. It can be wise to pair this part of the template with a Persona Map to gain a deeper understanding of your principal user.
Cost Structure
Prompting questions: What do the internal finances of the business look like? What are you spending money on, and how much does it cost? What’s your runway?
The final two points are logistic markers for the financials of your business plan. Firstly, you must consider the marketing, development, and operational costs of creating your business. Depending on how you want to set up your business, these can be fixed or dynamic. With your team, brainstorm what you spend money on, how much you spend, and what your spending plan for the future will be.
Revenue Stream
Prompting questions: What is the pricing model of your solution? Will people pay for your product/service, and if so, how much?
This point should be a detailed explanation of how you will create revenue by delivering your value proposition. Think about the pricing structure of your product/service. Will it be a SaaS service? Will people pay for it, or will it be free? These are essential things to consider when thinking about your business’s financial plan.
Business Model Canvas Advantages
Using a business model canvas makes understanding and communicating your business plan easier than ever. Here are the biggest advantages to utilizing a business model canvas template.
Provides a simple and direct structure
A business model canvas takes a holistic view of your organization without going too deep into any one section. Using a streamlined diagram of a traditional business model allows you to focus on the components that are vital to building a sustainable business plan rather than getting lost in the details. With this template, you can see how the elements of your business are related to each other and help work towards your overall goals.
Part of the value of a business model canvas comes from its simplicity as well. The BMC template provides a simple visualization of your business and helps define multiple different areas from a birds-eye view. Compared to a traditional, long-form business plan, this template is much easier to use.
Builds around your value proposition
Your value proposition is key to the success of your business in every sense. Because it’s so important, the business model canvas places it right in the middle, allowing you to use it for context throughout your collaboration.
Using a BMC template removes many of the distractions of a traditional business model and puts your value proposition at the center of the conversation. This focus helps inform the rest of your discussions around what drives the value of your business and how that seeps into every facet of your strategy.
Is accessible for everyone
Creating an effective business model requires collaboration and communication. If completed in isolation, you will lack the perspective and context to move forward successfully. Using a business model canvas template on Fresco means you can share it with anyone, collaborate, and iterate on your plan.
Not only is collaboration easier on a BMC, but you can share your completed template with the rest of your organization. Especially with stakeholders and partners, having an updated view of the business is key for confidence and communication. Not only is it easy to share it with these parties, but it’ll be easy for them to understand as well.
The creative accessibility of this template means no matter where the team might be in the process; they can very easily change their strategy and document it directly on the template. This accessibility is extremely helpful when creating a go-to-market strategy or a new business plan, and this template can accommodate a versatile set of needs.
Is quick and efficient
One of the best parts of using a business model canvas template is being able to create a business plan quickly and efficiently. Regardless of its depth, you can use this template to create a business model in 30 minutes. Even if this isn’t your final version (it probably shouldn’t be), you can easily iterate on this plan multiple times to find the perfect balance for your organization.
Fresco’s Business Model Canvas Example
In the above example, we outline a business model canvas template for a communications company.
The Value proposition for the company is grounded in an intuitive and integrated experience. It’s defined as “We offer a special communication experience that is intuitive, integrated, and prioritizes real-world relationships.”
The rest of the template builds on this value proposition, looking into how the value prop targets specific users and how the channels of engagement focus on areas that the value proposition is highly coveted.
The partners, resources, and activities sections focus on how the business can improve internally to function more effectively and reach more dedicated users.
Overall, this example demonstrates how easy it is to use the business model canvas template and how connected it is in providing a holistic overview of a sample organization.
