Using a Business Model Canvas has become one of the premium alternatives to dragging one out on paper. These boards make creating and interpreting business plans or go-to-market strategies a collaborative endeavor and something anyone can create.
This article will define what a business model canvas is and discuss its various advantages, how to use them, and walk you through our very own business model canvas. If you’re interested in learning more about our other template definitions, you can look at our guides on Kanbans, customer journey maps, SWOTs.
Business Model Canvas Definition
What is a Business Model Canvas?
A business model canvas is an organizational tool that helps visualize the development of a potential business model. It describes the components required to successfully take a business to market.
The end goal of using a business model canvas is to gain a better understanding of a target customer base, how to drive a profit, and how to deliver a unique value proposition. These are some of the key components to using a business model canvas and must be defined in order to achieve a successful go-to-market strategy.
Business model canvases are an effective alternative to the traditional method of documenting a business plan, which is usually presented in long multi-page documents.
These templates make the core elements of a business plan more palatable and easy to understand while providing quick visualizations of these pieces of information. When used through an online whiteboard like Fresco, it also enables collaboration on these items, inherently making the results more accurate and informed.
Business Model Canvas Advantages
If you aren’t fully convinced that using a business model canvas would be an effective use of time/resources, allow us to document some of the various advantages they hold.
Simple and Direct
The business model canvas is a streamlined visualization of a traditional business model. This means that you are able to focus on the core components that go into building a solid business plan and can avoid the needless details that can be sorted out later. Besides a visualization board, this can also be thought of as a preview of the more lengthy business model.
The simplicity and direct approach of the business model canvas allows teams to focus solely on their major goals. These goals and benchmarks are the core of a good business model and will affect every other part of the plan, so it’s necessary that they get full attention and importance.
One of the hardest parts about comprehending a traditional business model is simply its format. When business models are long-form and incorporate every single detail, it’s much more difficult to gain a full understanding of the important components.
On a business model canvas, however, these components are all displayed front and center and are accompanied by visual elements to help aid in their understanding. This also makes the important parts of the business model easily understandable by anyone. These advantages make using a business model canvas much easier to comprehend and digest than a more traditional model.
Because Fresco’s business model canvas is available on a virtual whiteboard, that means it’s accessible from anywhere and anyone can access it. This accessibility allows for greater collaboration potential on the template and constant accessibility for anyone who needs it.
Not only can it be accessed from anywhere, but stakeholders can easily reference it while making decisions and even edit it directly to improve the vision of the business model. This creative accessibility 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 is able to accommodate the flexible needs of these plans.
Using a business model canvas means anyone can create a business model that is comparable to another organization. The ability to create a solid business model no matter what kind of organization or company you are operating from is a good example of how flexible and applicable the business model canvas is.
Besides allowing many different organizations to utilize the template, the online business model canvas also visualizes the different interactions of the components of the business model. Seeing how different components intersect with each other allows for a more engaged and comprehensive experience. These interactions are critical and will often determine the outcomes of the various sections.
Business Model Canvas Explained
Once you completely understand why to use a business model canvas, it’s time to dive into the methodology behind each step. In this section, we will explain how to properly plan for success on a business model canvas.
Questions to ask: “What are your key partners to getting a competitive advantage?”
This question prods at the possible strategic partnerships to align your business with in order to gain an advantage over the competition. This could be certain people, other companies, or any type of collaborative partnership.
It’s important to consider partnerships when developing a business plan because they will eventually not only come in handy but be necessary for the growth and publicity of the business. They can also serve as an early advantage and can push a small business forward at exponential levels.
Questions to ask: What resources are needed to make your idea work? If you don’t already have these resources, what steps can be taken to obtain 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. By thinking about the resources you need to create a business, you tangentially focus on the steps that need to be taken in order to get it off the ground. The resources play directly into that and will affect how you are able to strategically create your plan.
Questions to ask: What activities will your business enable for customers?
This is effectively where you detail the product/service that is being provided. 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 exactly they will use it. While thinking about the product/service is important, you should also think about the activities that are made possible as an extension of your business. These could be tangential actions or actions done in collaboration with other businesses. All of these scenarios are examples of how your business enables and improves other activities.
Questions to ask: What is your unique value proposition? What do you bring to your customer’s lives that weren’t present before? How do you make their life/job easier?
The value proposition should be one of the most fleshed-out details of the entire business model because it is the core reason for creating the business. 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 have to have some kind of defining feature to make it stand out. This gives customers a reason to use your product/service over another. Because of the importance and centrality to the entire business model, the unique value proposition should be one of the most descriptive and prioritized sections of the template.
Questions to ask: How will you manage interactions with your current and potential customers? How will you get your value proposition across to them?
Building and maintaining customer relationships is key to a successful business plan, and thinking about these interactions in advance is greatly helpful in communicating your team 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 strong push to facilitate these interactions.
It’s equally important to think about how you will allow your value proposition to shine through in these instances. This unique element to your business is ideally what will attract new customers and provide demand to those that are 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 special features.
Questions to ask: How are you going to reach your customers? What channels of communication will you utilize?
For this point, think about the various ways you will plan to reach your customers. This could be through direct outreach, word of mouth, blog posting, advertising, or any other medium. These outlets will generate different unique interactions with different customer bases and should be considered to optimize your outreach.
Questions to ask: Who is your business targeting? Describe your target audience 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 important sections in the business model canvas because this principal user will define your entire strategy and method of outreach. They are the end goal of the business plan and many of your features will eventually be catered to their needs. It can be smart to pair this part of the template with a Persona Map in order to gain the deepest understanding of your principal user that you possibly can.
Questions to ask: What are you planning to spend on marketing and product development? Are you planning to charge for your product/service?
The final two points are meant to be logistic markers for how you plan to operate the financials of your business plan. Firstly, you must think about the marketing, development, and advertising costs of creating your business. These can be fixed or dynamic depending on how you want to set up your business. Next, 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 important things to consider when thinking about your business’s cost structure.
Questions to ask: Where will the money come from? How will these revenue streams drive profits?
Revenue streams are effectively how your business makes a profit and the exact location of where this money comes from. Mainly, it should be coming from a point detailed in the cost structure (how you charge for your product/service). Think about the specific cost structure and how that will end up driving a profit for your business.
Using a business model canvas is one of the best ways to create a comprehensive business plan, and as we’ve shown, is only made better by using an online whiteboard. If you want to see more Fresco content make sure to check out our guest-written blog posts on Lander and TryMyUI blogs.