What Is the Business Model Canvas and How to Use It

The Business Model Canvas will help you visualize the entire operating model for your business on a single sheet of paper. The Business Model Canvas consists of 9 building blocks that provide a coherent view of a business’ key drivers. The left side of the Business Model Canvas is focused on the business and the right side on the customer. Both sides come together with Value Proposition in the center of the template which shows the exchange of value between your business and your customers. 

So what are the elements of the Business Model Canvas?

Customer Segments. You need to figure out who your customers are and why they would want to buy from you. The output of this section should be a list of personas, and you should determine what these personas think and feel about your products.

Value Propositions. Think about what customer pain points you are addressing and what value you deliver to your customers. Create a prioritized list of value propositions and link each persona with the value proposition relevant to them.

Channels. This section shows where you reach your customer segments to communicate your value propositions, sell your products, and interact with them during the customer journey. You need to make a list of channels and link them to the corresponding segments or personas.

Customer Relationships. This section describes how you interact with your customers. You must decide what relationship you want to have with your customers, for example, dedicated personal service, self-service, co-creation, automated services, communities.

Revenue Streams. You can use different ways to generate revenue streams for your company, for example, product sale, subscription fees, usage fees, licensing, leasing, advertising. The output is a list of revenue streams linked to personas or segments and the value propositions.  

Revenue streams are the core financial aspect covered by the business model canvas. It’s the great tool to list the streams though it has no capacity to estimate their sustainability and sufficiency. Use Lean Case to develop the full-fledged business model.

Key Activities. The section represents the work you must perform to interact with your customers to deliver your value proposition. You need to create a list of key activities linked to your value propositions. It may include product distribution, research and development, strategy etc.

Key Resources. These are the most important assets you need to deliver your value proposition such as your office, equipment, machinery, infrastructure, human resources, transportation, electricity, intellectual properties (patents, customer lists) etc. Make a list of key resources and map them to your key activities.

Key Partnerships. Key partners and external companies or suppliers that you need to rely on to perform your key activities and deliver value to your customers. Create a list of partners and note how they relate to your key activities.

Cost Structure. This section includes all costs you need to keep your business running. It will help you see which key resources and activities are the most expensive. You need to list all cost structure elements and provide notes about their relationship to key activities.

If you still are not sure how to design the Business Model Canvas for your company, a good idea is to review some Business Canvas Model examples available on the Internet.

Business Model Canvas is mostly used to define how the business is functioning and to verify the value it creates. It’s a great tool for businesses that want to enhance and organize their activity. While the Business Model Canvas targets both new and existing businesses, the Lean Canvas, was designed for startups and has components specifically targeted to support the lean startup process. It’s a model that’s more about product development, finding the customer’s needs and solutions. Using Lean Canvas, entrepreneurs and startups can quickly validate their business idea following the principles of lean start-up.

The Lean Canvas outlines a problem-focused approach and is divided into 2 parts with Unique Value Proposition in the center. The left side is focused on the product and the right side focuses on the market. Since startups have no tested product to sell, the Lean canvas doesn’t lay much emphasis on Customer Segments. They removed such elements like Key Activities, Key Resources, Key Partnerships, and Customer Relationships and added new elements – Problem, Solution, Key Metrics, and Unfair Advantage (the way in which the project will be protected from the competitors).

Every business needs a strategy which includes actions and decisions that explain how a company achieves a competitive advantage. You can use strategic canvas and a variety of other strategy modeling techniques and tools, for example, operating model templates that will help you visualize your ideas and clearly communicate your strategic plan, business model, and operating model.

Using the Business Model Canvas is a good starting point in developing your business idea. To make sure you have all aspects under control and to look reliable in the eyes of your investors, you need to have a solid financial business model in place. You will benefit from using Lean Case, a toolset that simplifies the creation of business models and eases the presentation to the investors.