The business model canvas is a strategic approach that is applied to developing new businesses or analyzing the state of an existing business.
It consists of a template with 9 building blocks to be completed and compared on the value proposition, infrastructure, finances, and customer.
The business model canvas was defined by Swiss theorist Alexander Osterwalder in 2005, and since then it has continued to inspire new strategic models for business analysis.
Using a business model canvas template, it is possible to analyze the current profitability of a business and the opportunities that exist to expand it to other channels.
The 9 building blocks of the business model canvas
- Key activities: The activities that the company should undertake to achieve its value proposition and company objectives. For example, increasing the efficiency of production or distribution and reducing costs.
- Key resources: The human, technological, and financial elements necessary to offer value to the customer. This includes all the physical infrastructure (warehouses, offices, shops, etc.), the technical equipment (hardware and software), the staff along the entire chain, the intellectual property, and the financing.
- Key partnerships: The alliances formed with partners to strengthen the services the business offers. These can be strategic partners or partners linked to the supply chain, like distributors.
- Value proposition: All the services or products offered by the company, the way in which they are offered, and how they meet the needs of the customer on a quantitative (price and function) and qualitative (experience) level.
- Customer segments: What buyers is the company aiming to reach and how are those buyers divided into groups? This improves the effectiveness of business actions. An approach can be massive in nature (aimed at a large market), based on a niche (a specialized market), segmented by sociodemographic groups, or it can be a varied approach with multiple groups, markets, and platforms.
- Customer relationships: Maintenance of clientele to encourage loyalty through customer service. The business can offer anything from fully individualized, custom assistance to helpful materials, self-service guides, or even generate a customer community in which resources are shared among the members.
- Channels: Through what channels is the product offered to customers? These can be the business’s own channels or those of the partner network. This also involves the brand’s communication channels when cultivating its image and sales proposals – from social networks and advertising to articles in the media and user reviews and ratings.
- Cost structure: The financial structure that will be applied by the company. What are the fixed and variable costs of the strategy and is the aim to reduce costs or pursue value despite the costs incurred?
- Revenue streams: The ways by which the company earns money with its customer segments. The models for obtaining revenue can be the direct sale of services or products, fees based on use, subscriptions, renting or assignment of resources, commissions, licenses, and advertising.
Like all strategic approaches, the business model canvas has its pros and cons.
Amongst its advantages, it is a very visual and synthetic model that all company departments can use to have a reference on the business’s development, its objectives, and the means that are being used.
It is important to choose well the participants who will provide information to the business model canvas to avoid a saturation of proposals.
Also, contributions must be kept brief. A business model canvas aims to highlight key ideas, not to develop each one of its stages in depth.
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