Business Model Canvas: Explained with Examples

pop-out-icon

Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.

In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.

What is a Business Model Canvas

A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.   

The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.  

The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.

The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.

The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.

Business Model Canvas Explained

What Are the Benefits of Using a Business Model Canvas

Why do you need a business model canvas? The answer is simple. The business model canvas offers several benefits for businesses and entrepreneurs. It is a valuable tool and provides a visual and structured approach to designing, analyzing, optimizing, and communicating your business model.

  • The business model canvas provides a comprehensive overview of a business model’s essential aspects. The BMC provides a quick outline of the business model and is devoid of unnecessary details compared to the traditional business plan.
  • The comprehensive overview also ensures that the team considers all required components of their business model and can identify gaps or areas for improvement.
  • The BMC allows the team to have a holistic and shared understanding of the business model while enabling them to align and collaborate effectively.
  • The visual nature of the business model canvas makes it easier to refer to and understand by anyone. The business model canvas combines all vital business model elements in a single, easy-to-understand canvas.
  • The BMC can be considered a strategic analysis tool as it enables you to examine a business model’s strengths, weaknesses, opportunities, and challenges.
  • It’s easier to edit and can be easily shared with employees and stakeholders.
  • The BMC is a flexible and adaptable tool that can be updated and revised as the business evolves. Keep your business agile and responsive to market changes and customer needs.
  • The business model canvas can be used by large corporations and startups with just a few employees.
  • The business model canvas effectively facilitates discussions among team members, investors, partners, customers, and other stakeholders. It clarifies how different aspects of the business are related and ensures a shared understanding of the business model.
  • You can use a BMC template to facilitate discussions and guide brainstorming brainstorming sessions to generate insights and ideas to refine the business model and make strategic decisions.
  • The BMC is action-oriented, encouraging businesses to identify activities and initiatives to improve their business model to drive business growth.
  • A business model canvas provides a structured approach for businesses to explore possibilities and experiment with new ideas. This encourages creativity and innovation, which in turn encourages team members to think outside the box.

How to Make a Business Model Canvas

Here’s a step-by-step guide on how to create a business canvas model.

Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

While you can create a business model canvas with whiteboards, sticky notes, and markers, using an online platform like Creately will ensure that your work can be accessed from anywhere, anytime. Create a workspace in Creately and provide editing/reviewing permission to start.

Step 2: Set the context Clearly define the purpose and the scope of what you want to map out and visualize in the business model canvas. Narrow down the business or idea you want to analyze with the team and its context.

Step 3: Draw the canvas Divide the workspace into nine equal sections to represent the nine building blocks of the business model canvas.

Step 4: Identify the key building blocks Label each section as customer segment, value proposition, channels, customer relationships, revenue streams, key resources, key activities, and cost structure.

Step 5: Fill in the canvas Work with your team to fill in each section of the canvas with relevant information. You can use data, keywords, diagrams, and more to represent ideas and concepts.

Step 6: Analyze and iterate Once your team has filled in the business model canvas, analyze the relationships to identify strengths, weaknesses, opportunities, and challenges. Discuss improvements and make adjustments as necessary.

Step 7: Finalize Finalize and use the model as a visual reference to communicate and align your business model with stakeholders. You can also use the model to make informed and strategic decisions and guide your business.

What are the Key Building Blocks of the Business Model Canvas?

There are nine building blocks in the business model canvas and they are:

Customer Segments

Customer relationships, revenue streams, key activities, key resources, key partners, cost structure.

  • Value Proposition

When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.  

Business Model Canvas Template

Let’s look into what the 9 components of the BMC are in more detail.

These are the groups of people or companies that you are trying to target and sell your product or service to.

Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.

Customer Persona Template for Business Model Canvas Explained

There are different customer segments a business model can target and they are;

  • Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.  
  • Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
  • Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
  • Diversified: A diversified market segment includes customers with very different needs.
  • Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.

Use STP Model templates for segmenting your market and developing ideal marketing campaigns

Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.

In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.

There are several types of customer relationships

  • Personal assistance: you interact with the customer in person or by email, through phone call or other means.
  • Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.  
  • Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
  • Automated services: this includes automated processes or machinery that helps customers perform services themselves.
  • Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
  • Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.

You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.

Customer Journey Map

This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.

Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

  • Owned channels: company website, social media sites, in-house sales, etc.
  • Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.  

A revenue stream can belong to one of the following revenue models,

  • Transaction-based revenue: made from customers who make a one-time payment
  • Recurring revenue: made from ongoing payments for continuing services or post-sale services

There are several ways you can generate revenue from

  • Asset sales: by selling the rights of ownership for a product to a buyer
  • Usage fee: by charging the customer for the use of its product or service
  • Subscription fee: by charging the customer for using its product regularly and consistently
  • Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
  • Licensing: customer pays to get permission to use the company’s intellectual property
  • Brokerage fees: revenue generated by acting as an intermediary between two or more parties
  • Advertising: by charging the customer to advertise a product, service or brand using company platforms

What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.

There are 3 categories of key activities;

  • Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
  • Problem-solving: finding new solutions to individual problems faced by customers.
  • Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.

This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

  • Human (employees)
  • Financial (cash, lines of credit, etc.)
  • Intellectual (brand, patents, IP, copyright)
  • Physical (equipment, inventory, buildings)

Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.

Types of partnerships are

  • Strategic alliance: partnership between non-competitors
  • Coopetition: strategic partnership between partners
  • Joint ventures: partners developing a new business
  • Buyer-supplier relationships: ensure reliable supplies

In this block, you identify all the costs associated with operating your business model.

You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.  

Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).

Value Propositions

This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.

A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.

Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).

Value Proposition Canvas

What to Avoid When Creating a Business Model Canvas

One thing to remember when creating a business model canvas is that it is a concise and focused document. It is designed to capture key elements of a business model and, as such, should not include detailed information. Some of the items to avoid include,

  • Detailed financial projections such as revenue forecasts, cost breakdowns, and financial ratios. Revenue streams and cost structure should be represented at a high level, providing an overview rather than detailed projections.
  • Detailed operational processes such as standard operating procedures of a business. The BMC focuses on the strategic and conceptual aspects.
  • Comprehensive marketing or sales strategies. The business model canvas does not provide space for comprehensive marketing or sales strategies. These should be included in marketing or sales plans, which allow you to expand into more details.
  • Legal or regulatory details such as intellectual property, licensing agreements, or compliance requirements. As these require more detailed and specialized attention, they are better suited to be addressed in separate legal or regulatory documents.
  • Long-term strategic goals or vision statements. While the canvas helps to align the business model with the overall strategy, it should focus on the immediate and tangible aspects.
  • Irrelevant or unnecessary information that does not directly relate to the business model. Including extra or unnecessary information can clutter the BMC and make it less effective in communicating the core elements.

What Are Your Thoughts on the Business Model Canvas?

Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.

What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

FAQs About the Business Model Canvas

  • Use clear and concise language
  • Use visual-aids
  • Customize for your audience
  • Highlight key insights
  • Be open to feedback and discussion

More Related Articles

What is an Action Plan? Learn with Templates and Examples

Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.

The 9-Step Business Model Canvas Explained (2023 Update)

parts of business model canvas

Written by Raquel Alberdi

Business | entrepreneurship, 16 comments(s).

Business Model Canvas

Blog » The 9-Step Business Model Canvas Explained (2023 Update)

parts of business model canvas

“A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business . And by “business” we simply mean how the company makes money by acquiring and serving its customers”.

-Reid Hoffman

After meeting with hundreds of entrepreneurs and business owners over the years I believe the LinkedIn co-founder and Blitzscaling author Reid Hoffman’s got it spot on.

People tend to focus on specific parts of their business, such as which software packages are being used, which is the cheapest supplier, how to optimize internal processes…?

They get so bogged down in the details of the day-to-day running that they lose the overall vision of their business.

Without this vision they are unable to scale, they make marginal profits, miss opportunities, struggle to innovate, and end up running “just another” business.

Another handy metaphor in understanding this common mistake is the soldier in the trenches .

Every meter of ground gained comes at a heavy cost, mistakes are made, and progress is hard-fought and slow…a day-to-day experience for 99% of entrepreneurs and businessmen.

But when you do have that 360 vision you see the entire battlefield. Decisions are much clearer, fewer mistakes are made, and progress is fast and methodical.

Fortunately, a business model framework exists that gives you both vision and clarity .

The Business Model Canvas provides entrepreneurs, business owners, and strategists with a tool to analyze, structure, and evolve a business while always keeping the bigger picture front of mind.

So let’s take a closer look at how it works.

Table of Content

What is the Business Model Canvas?

Created by Swiss entrepreneur and Strategyzer co-founder, Alexander Osterwalder, the Business Model Canvas is a visual representation of the 9 key building blocks that form the foundations of every successful business. It’s a blueprint to help entrepreneurs invent, design, and build models with a more systematic approach.

Why is it so popular within the business community?

Its simplicity. The business model canvas allows us to carry out a high-level analysis without drilling down and getting lost in the details. You just draw out the 9 building blocks on a blank canvas, fill them in as each concept relates to your business, and hang it somewhere everybody can see.

It’s a visual overview of your entire business on a single canvas.

While the Business Model Canvas is an extremely fluid concept and hyper-specific to individual companies, each canvas is still broken down into these 9 key building blocks:

Customer Segments

Value propositions, customer relationships, revenue streams, key resources, key activities, key partners.

When laid out on the canvas the model will look something like this:

 Scheme of business model in which 9 important fields are developed for its execution.

While you’ve probably come across each of the 9 building blocks before, the attractiveness of the Business Model Canvas is that it confines them to a single page , not a traditional 42-page document.

This makes it a lot easier to digest, as well as assess existing business models or map out new ideas.

How do I fill out the Business Model Canvas?

To start your Business Model Canvas you will need to breakdown and analyze each of the 9 building blocks.

A good way to approach this is to gather the heads from marketing, sales, operations, finance, and manufacturing (if product-based) and pencil-in a morning where you can all meet together.

Then, after drawing a mock canvas onto a whiteboard, proceed to dissect and discuss each of the 9 building blocks as they relate to your business. You can use sticky notes to better organize your thoughts around the canvas.

If you are an entrepreneur or new business owner working alone and don’t have a team to bounce your ideas off, not to worry. You can still carry out your analysis before sharing it with a like-minded entrepreneurial community or forum, like those found on ThePowerMBA , to get useful, insightful feedback.

Whichever way you decide to approach it, I recommend you complete each block in the following order:

  • Cost structure

For continuity, I’m going to use the fashion retail giant Zara when analyzing each of the 9 key building blocks.

If you’d like to skip to another case study similar to your own business, navigate to the table of contents at the top of the page and select one of the other business model canvas examples.

Customer segment business model canvas for Zara company

The first block of the Business Canvas Model is about understanding who is the most important customer(s) you’re delivering value to. Or, in other words, who are they? What do they do? And why would they buy your product or service?

Not a single company exists without its clients, making customer segments the best block to start with while drawing out your business model canvas.

A great exercise to define your customer segments is to brainstorm and create your company’s buyer persona (s) .

Buyer personas are fictional depictions of an ideal or hypothetical client. Typically when brainstorming a buyer persona you’d want to define certain characteristics (age, demographic, gender, income, industry, pain points, goals, etc.)

However, remember at this stage we want a snapshot of our customer segment. There’s no need to jump into great detail just yet.

In the case of Zara, there are three distinct customer segments to whom they offer different products.

The products created for each of these customer segments (clothing, shoes, and accessories) are not trans-consumable. That is to say, a woman’s dress is highly unlikely to be worn by a 7-year-old child.

Once we know exactly who it is we are targeting, it’s time to look at what we as a company have to offer.

Zara Customer Segments business model canvas template showing the development of the 9 fields

The second phase is about figuring out your company’s value propositions , and importantly, your UVP (unique value proposition). The “what” that makes customers turn to you, over your competitors? Which of their problems are you best at solving?

Each value proposition consists of a bundle of products or services that fulfill the needs of a buyer persona from your customer segment. It’s the intersection between what your company offers, and the reason or impulse customers have for purchasing.

Some popular questions to ask while determining your UVP are:

  • Which specific customer pain point are you trying to solve?
  • What job are you helping customers get done?
  • How does your UVP eliminate customer pain points?
  • What products or services do you provide that answer this specific pain point?

So let’s try and apply this to Zara. Why do people choose to purchase from them, over their competitors?

Zara’s principal value propositions are fairly clear. They offer various ranges of stylish men’s, women’s, and children’s clothing and accessories at an affordable price.

But there’s more to it than that.

If we dive a little deeper we see Zara’s value propositions are more complex, which are behind the success of the brand:

Fast fashion

Zara adds new clothes and designs to its collections every 2-3 weeks, both in its stores and online. It keeps the brand updated, fresh, and modern while maintaining its all-important medium price point

Great eCommerce experience

Once you enter Zara’s online store you’re presented with a clean, easy-to-navigate, and high-end feel. The customer segments are visible on the left navigation bar with a search tab to further aid customers with their online experience.

Zara's Canvas business model where you can see the innovative presentation of its image

Localized stores

You can find a store in nearly all major retail locations (shopping malls, retail outlets, airports, etc.) meaning accessibility is not an issue for the majority of consumers.

Flagship stores

Zara demonstrates its aesthetic evolution to customers through its flagship stores. The recent opening of their Hudson Yards , New York City flagship is a great example of this. Customers shop around its vivid, minimalist layout offering them an experience aligned with the brand’s deeper, eco-friendly values.

Zara's Canvas business model where you can see the innovative presentation of the image of its stores

Zara Hudson Yards, New York

Business Model Canvas Template Zara - Value Propositions

The next step is to ask yourself how you are reaching your customers, and through which channels ?

This includes both the channels that customers want to communicate with you as well as how they’ll receive your products or services.

Is it going to be a physical channel? (store, field sales representatives, etc.) Or is it a digital channel? (mobile, web, cloud, etc.).

Zara has 3 primary channels in which they communicate and deliver products to its customers:

  • Direct sales through their stores
  • Online (both app and website)
  • Social media

Customers can go to a traditional “bricks and mortar” store to browse, model, and purchase different items of clothing at one of their retail stores.

Alternatively, they can shop online or through their mobile application and have the product delivered straight to their door or nearest store. The choice is completely up to them!

So that covers Zara’s commercial channels, but what about how they communicate with customers?

While they do communicate through their mobile app, their predominant channel is social media.

What’s more, they’re really, really good at it.

For example, did you know that Zara invests less than 0.3% of its sales revenue into advertising?

This is only possible due to an A-rated social media presence . Customer queries are not only dealt with quickly, but recommended re-works are sent back to HQ, forwarded onto in-house designers who then apply the feedback to future collections.

This customer-first approach through fluid communication channels has saved them thousands of dollars in marketing, strengthened their brand, and created a loyal customer base.

You should only step away from this building block once you’ve decided how each of your customer segments want to be reached.

Zara Channels business model canvas template where its components are developed

Once you have acquired customers, you will need to think about how you can build , nurture, and grow those relationships.

Now, this can be automated and transactional like large eCommerce brands Amazon or Alibaba. Or, it could be at the complete opposite end of the scale and require a more personal relationship you’d typically have with a bank or your local bike shop.

Zara’s relationship with its customers is threefold, and lies somewhere in the middle of transactional and personal:

  • Salesperson at store
  • Brand through social media
  • Sentimental attachment to a product

Yes, you have the initial transactional touchpoint at the store or online, something relatively impersonal and for many the only interaction they’ll have with the brand.

However, customers (especially in the fashion industry) are encouraged to continue to interact with a brand through social media platforms.

As we mentioned before when discussing channels, Zara has a very effective communication system in place. Not only can people instantly get in touch with the brand, but also engage with new posts, images, and collections uploaded to social media.

This personal approach to customer relationship building can, in some cases, lead to the natural growth of brand ambassadors and communities .

An attachment can also develop between customers and particular garments or accessories from one of their collections. The sentimental attachment to these products also creates another potential form of brand loyalty.

The relations with Zara's clients to give a Business Model Canvas where the 9 points to be developed are seen

Now that you’ve described how you are going to create real value for your customers, it’s time to look at how you plan to capture that value.

What are your revenue streams? Is it going to be a transactional, direct sales strategy ? Are you going to consider a freemium mode l, where you give a portion of your product or service away for free with the idea of converting later on down the line?

If you’re a SaaS company such as SalesForce or Strava , then it’s likely that a licensing or subscription revenue model will be more appropriate.

At Zara, it’s extremely simple. They make their money by selling clothes and accessories either at a store or online.

Zara business model canvas template for the development of Revenue streams within the 9 points to work

As you can see, we’ve filled in the entire right-hand side of our business model canvas. We touched upon:

Customer segments

  • Value propositions
  • Revenue streams
  • Distribution channels

Now it’s time to move over to the left side of the business canvas model and look at what we need, internally , to deliver our value propositions.

Key resources of the Zara Business Model Canvas

To start with, let’s take a look at key resources.

The key resources are all things you need to have, or the assets required to create that value for customers.

This could be anything from intellectual property (patents, trademarks, copyrights, etc.) to physical holdings (factories, offices, delivery vans, etc.) right down to finances (the initial cash flow perhaps needed to start your brand).

Another key resource every company needs to consider is its human capital . Are you going to need highly specialized software engineers? Or field-based sales teams?

They are relatively capital-heavy resources that need to be factored into your business model.

In the case of Zara, they are going to need a number of key resources if they hope to deliver their propositions:

  • Stock management
  • A large, interconnected network of physical stores
  • A strong brand
  • Logistics and supply chain infrastructure

Stock is vital for both online and offline customers.

If they are unable to supply their range of products and meet customer demands, satisfaction levels fall and they have a serious problem on their hands.

A large distribution network of brick and mortar stores combined with a strong brand name help mitigate these factors, as well as reinforce any ongoing marketing activities and communication efforts.

Finally, an efficient logistics process within Zara is critical, especially when you consider the complexities involved with such a large-scale operation.

They will require the necessary technology to analyze data on inventory, storage, materials, production, and packaging, with the staff to execute each of these stages and manage the delivery of the final products.

Zara business model canvas template where the Key Resources are developed

The next step is to define the key activities – the areas you need to be good at to create value for your customers.

To mix it up a little let’s take a look at a slightly different business in Uber .

Their key activities can be broken down into:

  • Web and mobile app development
  • Driver recruitment
  • Marketing: customer acquisition
  • Customer service activities : drivers’ ratings, incidents, etc.

They need a fast, clean UX for their customers using the app, drivers to carry out their service, and the ability to both market the product and deal with any customer queries.

Zara’s key activities will differ to those of Uber. Some of the things they need to consider would be:

  • Manufacturing
  • Retail process (point of sale and 3rd party management)
  • Distribution channel / logistics

Design is a key activity as Zara’s value proposition is to provide stylish garments at an affordable price. Their collections need to be constantly updated to follow the latest fashion trends at the time.

To produce their collections Zara will also require manufacturing capabilities. Now Zara doesn’t own their own factories (we will get to that in the Key Partners section) but they still need to be involved in the garment manufacturing process.

Everything from fabric selection to pattern making, to detailing and dyeing affects the outcome of the final product which of course they have to then go on and sell.

The effective management of the retail and distribution channels (online, offline, shipping, and communication with providers) is also key. A breakdown in either of these activities, such as a poor relationship with an important provider will have serious consequences for the business.

Zara business model canvas template showing the key activities for its development

Most modern business models now require brands to build out and work with various key partners to fully leverage their business model.

This includes partnerships such as joint ventures and non-equity strategic alliances as well as typical relationships with buyers, suppliers, and producers.

A great example of a strategic partnership would be between ThePowerMBA and Forbes . In exchange for exposure of our brand to the magazine’s global audience, we provide expertise and content on high-level business education programs.

As we touched upon when discussing key activities , Zara requires strategic partnerships with many different providers if they are to design and produce their collections.

Another key partner is their major holding company, Inditex .

Inditex has several subsidiaries including Massimo Dutti , Pull & Bear , and Oysho . Being a subsidiary of Inditex means they share a consolidated balance sheet, stakeholders, management and control, and various legal responsibilities.

While as a subsidiary Zara is afforded certain freedoms when it comes to design, delivery, and the general running of the company, the overall strategy will need to be aligned with Inditex and its other subsidiaries.

Zara Key Partners business model canvas template where the eighth point is developed

The final step of the Business Model Canvas is to ask yourself, how much is it going to cost to run this model?

This includes some of the more obvious needs such as manufacturing costs, physical space, rent, payroll, but also areas such as marketing activities.

If you are unsure of exactly what to include in your cost structure take a look at a Profit and Loss statement ( P&L ) from a competitor or company in a similar industry to yours. You’ll find many items overlap such as research and development ( R&D ), cost of goods sold, admin expenses, operating costs, etc.

Once that’s done you should prioritize your key activities and resources and find out if they are fixed or variable costs .

As Zara is such a large, corporate business they are going to have both fixed costs (rent, payroll, point of sales personnel) and variables, such as costs associated with the fluctuating sale of goods, purchase of materials and, manufacturing costs.

Once you’ve completed these 9 steps, your Business Canvas Model should look something like this:

Business Model Canvas Examples

Hopefully, you were able to get a good feel for the effectiveness of the business model canvas with our run-through of Zara.

However, if you found it difficult to follow due to the stark difference between your industries, I’m going to quickly go through 3 more companies to demonstrate the tool’s flexibility:

  • Netflix (Media service/production)
  • Vintae (Vineyard)

Even if these business model canvas examples don’t align exactly with your industry, I honestly believe that studying different models gives you a competitive advantage in your professional career regardless.

If you’re currently employed by a company, you’ll better understand how your specific role helps the company achieve some of its “long-term” goals.

Alternatively, if you are a business owner yourself (or perhaps thinking of starting your own business) you’ll have a better understanding of your business and where potential opportunities lay.

I’m sure you’re familiar with our next business model canvas example candidate, Netflix .

The global media company offers an online streaming service of various movies, documentaries, and TV programs produced in-house or licensed 3rd-party content. Their success sparked a revolution in the online media world with the likes of Amazon, Apple, Disney, HBO, and Hulu all rushing to launch their own online video streaming platforms.

Netflix started life as an online DVD rental company, basically a web version of the more popular (at least at that time) “bricks and mortar” Blockbuster.

Co-founder Reed Hastings predicted as far back as 1999 that the future of media was in online streaming, saying “postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months.”

It wouldn’t be until 2007 that Hasting’s prediction would become true when Netflix, as we now know it, was born.

So let’s take a current look at their business model canvas:

Netflix business model in which the 9 topics are taken into consideration

As you probably know, there are very few people out there who haven’t subscribed, watched, or at least heard of Netflix. There is content for everybody: wildlife documentaries, sci-fi movies, rom coms, action-thrillers, you name it – it’s there.

That’s why their customer segment can be classified as a “ mass market ” as the base is just so diverse.

All people require is a computer, TV, internet, and/or smartphone and they’re good to go. For most developed markets, that covers just about everybody.

Value Proposition

Whether on the train to work, sitting in the car (if you’re not driving!), or relaxing at home in front of the TV, you can consume their online, on-demand video streaming service.

They also have a huge library of content for consumers to choose from, ensuring that people keep coming back, as well as increasing their mass-market appeal.

They also produce high-quality, original content to differentiate themselves from their competitors.

Most people access Netflix either through their website or mobile/TV App . Another popular channel that you may have picked up on is their affiliate partners .

You’ve perhaps signed up for a mobile, TV, and internet package where the provider offers Netflix as an extra to sweeten the deal, so to speak.

That would be an example of an affiliate partnership between Netflix and mobile service providers.

I doubt many consumers have had direct contact with Netflix unless it’s to resolve a subscription issue or general query. It’s very much a self-automated service – you download the app, select the program you wish to watch, and hit play.

Very simple, very effective.

Again, this doesn’t need much embellishment. Netflix generates money from the different tiers and packages put together in their subscription services.

This varies depending on the region to account for local markets, but on the whole, it’s sold at a low price point.

Originally, Netflix’s Key Resources would have been their unrivaled DVD collection combined with a cost-effective mail-order system.

Nowadays it’s undoubtedly the rights to stream online video content. Netflix has brokered deals with some of the biggest production studios worldwide.

Combined with their huge library of in-house productions , it’s more than enough to encourage customers to renew their subscriptions.

To help sustain interest in their product, Netflix understands they need to serve-up relevant content for each sub-sector of their mass audience. Therefore their machine learning algorithm selects content for consumers based on streaming habits (what they watched, at what time, etc,.) to personalize the customer experience.

This explains why over 80% of all content streamed on Netflix was cherry-picked by this algorithm, making it a Key Resource for their business model.

Also, Netflix accounts for a whopping 12.6% of global bandwidth usage . The literal capacity to stream their services must be met meaning bandwidth must also be included here.

Content procurement is arguably their biggest Key Activity. They need to find people to produce and deliver their original content, including actors, studios, writers, etc. as well as secure the licensing and streaming rights from 3rd party producers such as Sony, Warner Bros, and Disney.

Finally, they need a fast, easy-to-use application to host their online streaming service. This needs to be available for both TV and mobile devices if they are to deliver their “on-demand” value proposition.

K ey Partners

Seeing as Netflix’s entire business model is largely based around streaming 3rd party content, key partnerships need to be built with production studios . No content, no Netflix!

Also, as we touched upon earlier Netflix is one of the largest consumers of bandwidth worldwide. If the speed and delivery of their streaming service are to be continued then deals will also need to be made with internet service providers (ISPs).

Netflix’s biggest expenditures come from both their in-house content procurement and 3rd party licensing agreements . The high-quality standard of video streamed on Netflix is only possible due to the speed and performance of its online platform and application , which has additional costs of staff, software, etc.

To show you just how flexible the business model canvas can be, I wanted to throw in a slightly leftfield example. Vintae is a Spanish wine producer who, after a detailed analysis of the business model canvas, was able to innovate and disrupt one of the world’s most competitive industries.

As some of you may know, the wine industry is extremely competitive. It’s also steeped in history and tradition , making it very challenging for newcomers to grab market share, let alone think about year-on-year growth and revenue.

However, CEO “Richi” Arambarri looked at the traditional “ bodega ” business model and saw a chink in its armor.

A “small” innovation in the business canvas model helped them to become one of the region’s most important winery groups, with over 10 installations and a presence across all regional denominations (Rioja, Priorat, Rias Baixas, etc.) with year on year growth of 30% – practically unheard of in such a competitive industry.

So how did Vintae analyze the business model canvas to find a niche in their market?

To answer that question, we must first look at the traditional winery business model .

Traditional Winery Business Model with its 9 developed points

As you can see, the wine industry has historically been patrimonial. Vineyards and estates are passed down through generations with the winery responsible for all phases of production, clarification, and distribution.

The traditional winery business canvas model suggests you must be the owner of the winery/vineyard where the wine is “manufactured”, meaning physical assets are a key resource of the business model.

So, if you wanted to start producing a Rioja, for example, you’d have to set up your vineyard in the region.

This is monumentally expensive as you need to:

  • Purchase the land
  • Plant a vineyard
  • Absorb set-up and installation costs
  • Deal with maintenance costs

It’s here where Vintae saw their opportunity.

What if we move vineyard ownership across the business model canvas from key resources to key partners ?

By leasing the equipment and space of large wineries (of which there was plenty), they could still produce their wine but reduce the cost and exposure associated with land purchase, crushing equipment, huge storage tanks, vineyard maintenance, and their bottling line.

This enabled them to focus on their sales, marketing, and distribution channels to create a better brand experience for their customers.

Also, it afforded them more flexibility when creating new wines as they were no longer confined to the limitations of grapes grown on their vineyard.

The lightness of this new business model eliminates maintenance overheads, channels energy into personalizing the customer experience, and allows for unprecedented levels of growth in one of the world’s most competitive industries.

Vinate business model

Business Model Canvas Software

Although I did mention starting with a large whiteboard, sticky notes, and a pack of colorful sharpies there are several options in which you can digitize the business canvas model production process.

While I still believe the aforementioned process is extremely valuable (it gets your entire team’s input in a single hour-long session) you may decide it more viable for each member of management to pool their ideas digitally before sharing with the rest of the group.

If that’s the case, then take a look at some of the following software tools for creating your business model canvas.

Strategyzer

Created by the founders of the business model canvas Alex Osterwalder and Yves Pigneur , Strategyzer offers a range of business model canvas templates for you to get started with.

If you opt for the paid model (there is a 30-day free trial period) they offer a series of various classes that teach you how to build and test different value propositions and business models.

A real-time built-in cost estimator analyzes the financial viability of some of your business ideas, identifying alternative areas you may wish to explore with your model.

All-in-all, it’s a great resource to play around with and test some of your business ideas, with the option to dive into further detail if you see fit.

Canvanizer is a free, easy-to-use web tool that allows you to share links between team members who are brainstorming ideas for a business model canvas, but working remotely.

Like Strategyzer, there are several business model canvas templates provided to help you get started with your analysis. The strength of this platform is its accessibility. Much like a Google Doc., several people can brainstorm on the same canvas simultaneously with changes being synchronized automatically.

Business Model Canvas Tool

A ThePowerMBA alumni, impressed by the simplicity and effectiveness of the tool, went ahead and created the free application Business Model Canvas Tool .

It’s an incredibly intuitive, and easy-to-use tool that allows you to create templates simply by clicking the + button in each building block.

Each business model canvas created can be downloaded and shared as a pdf. with the rest of the team.

Would You Like to Learn More about Business Models?

If, after going through our 9-step guide on how to use the Business Model Canvas you’d like to learn more about different business model analysis tools , take a look at our alternative MBA business program .

As you’ll see, the course gives students a 360-degree view of business and management practices – such as engines of growth, segmentation and targeting, and value propositions.

I highly recommend you go check it out.

Regardless, I’d love to hear what you thought about this guide. Was it helpful? Would you like to see additional business cases analyzed from your industry?

Let us know in the comments below.

FREE CLASSES

What’s it like to take one of our programs.

The best thing is to try it yourself with these classes that are totally FREE! Sign up and experience being part of the business school that has challenged the traditional educational model.

How much do you know about business?

Tools, concepts, business methodologies… Find out with this test! (it won’t take you more than 3 minutes)

parts of business model canvas

You may also like

Reasons why you should use geomarketing

Reasons why you should use geomarketing

Mar 29, 2024 | Marketing

Would you like more people to visit your store? It’s true that there are many ways to achieve this, but with...

Are you aware of what the flywheel is?

Are you aware of what the flywheel is?

Mar 22, 2024 | Marketing

The way things around us work is constantly changing, as consumers' needs also change with great frequency. This is...

Discover the 4 features of Firebase console that you probably didn’t know about

Discover the 4 features of Firebase console that you probably didn’t know about

Mar 15, 2024 | Programming

Are you into application development? If so, you will be interested to know more about Firebase console, one of...

16 Comments

Ayeah Goodlove

Perfect thought

kourosh abdollahzadeh

I am a DBA student. I have used your site a lot. Thank you for the information

KJ Hwang

Well defined steps, Thanks for good contents.

Reza Ebadi

Dear Sir many thanks for you guideline. it was very effective for me. Thanks a Million

Debashis Rout

Well explained with practical business case

Allen

Wow, this article was incredibly helpful! I’ve heard about the Business Model Canvas before, but I wasn’t sure exactly how it worked or how to use it for my own business.

NIMAKO JAMES

I need a sample of business model canvas for a beauty palour

Opoku Samuel

you’ve done a great job. keep it up

Claudia Roca

This is a very insightful content with a step-by-step practical approach of how to write a BMC and what exactly it should contain.

My team and I literally used your guide to write a BMC for a project we were working on, and in just about an hour we were done.

Thank you so much for this content, it was really helpful.

Franco

Thank you very much Collins and we are glad you are using this tool.

Jude

Insightful! Gave me the clarity I needed for my upcoming business. Thank you so much.

Praveen

Thank you very much for the business model example of ZARA. It was very very informative

Efi

This is a great explanation, the best i’ve seen. Thanks

Thank you very much for reading and sharing your comments

Tatyasaheb Phadtare

Really great tool for business and whom want to enter,. Thanks

Trackbacks/Pingbacks

  • How traditional business accepted, adapted and transformed using Digital marketing tools. – Current Affairs - […] Netflix Business Model Canvas […]
  • Entrepreneur vs intrapreneur: What’s The Difference? 👀 - […] Business Model Canvas […]
  • Buyer Persona, how to Create An In-Depth? (+ FREE Template) - […] you could use a buyer persona canvas (similar to the framework used for the business model canvas) to draw…
  • Demystifying business model canvas – Karmen Skaro - […] Additional information on business model canvas find here and here. […]
  • Saas Business Model (2023) - […] in this material you will learn all about SaaS as a business model. It’s an interesting material that will…
  • What is the main objective of inferential statistics? (2023) - […] offers a lot of information about different phenomena or behaviors that are relevant for making business decisions. The results…
  • How to Prepare a Canvas Business Model - The Passionate Seeker - […] you have filled out each building block of the Business Model Canvas, you will have a comprehensive overview of…
  • The Business Model Canvas: A Comprehensive Guide for SMEs and Start-ups – AdvantEdge - […] Further insights and practical applications of the BMC can be found here: The Power MBA’s Guide. […]
  • Top 5 Tips For Business Success by Freeduhm Team | Milyin - […] that market and have a chance to make money and become profitable. Additionally, you can use a business model…

Strategic Management Insight

Business Model Canvas (BMC)

Business Model Canvas

What is the Business Model Canvas

Business Model Canvas (BMC) is a framework that helps determine how a business creates, delivers, and captures values. It is a visual representation of the important aspects or parts to consider when designing a Business Model.

BMC aids in constructing a shared understanding of a business by condensing it into a simple, relevant, and intuitively understandable one-page visual while not oversimplifying the complexities of how enterprises function.

This concept has been applied and tested around the world and is used in organizations such as GE, P&G, Nestlé, IBM, Ericsson, and Deloitte, including Government Services of Canada and many more [1],[2] .

The Nine Building Blocks

BMC describes a business through nine basic building blocks that show the logic of how a business intends to make money. These nine blocks cover the four main areas of a business: Customers, Offer, Infrastructure, and Financial Viability.

BMC acts as a shared language for describing, visualizing, assessing, and changing business models. It is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

Nine building blocks of a business

Each of these blocks is explained in more detail as follows:

1. Customer Segments (CS)

These are the groups of people or organizations that a business aims to reach and serve. Customers are the heart of a business model, and without (profitable) customers, a business cannot survive.

Customers are grouped into distinct segments with common needs, common behaviors, or other attributes. Customer groups represent separate segments if:

  • Their needs require and justify a distinct offer.
  • They are reached through different Distribution Channels.
  • They require different types of relationships.
  • They have substantially different profitability.
  • They are willing to pay for different aspects of the offer.

An organization must make a conscious decision about which segment(s) to serve and which segments to ignore. Once this decision is made, a business model can be carefully designed around a strong understanding of specific customer needs.

The following two questions, if answered with clarity, help a business identify its CS.

  • For whom are we creating value?
  • Who are our most important customers?
  • What are the customer archetypes?

Examples of some of the Customer Segments are shown in the figure:

Examples of Customer Segments

2. Value proposition (VP)

Value Proposition describes the bundle of products and services that create value for a specific Customer Segment chosen by a business.

A VP is the reason why customers turn to one company over another. VP must solve a customer’s problem or satisfy a need. A business can have more than one VP, but each must consist of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment.

While some VPs may be innovative and represent a new or disruptive offer, others may be similar to existing market offers but with added features and attributes.

An organization’s VP must answer the following questions with clarity:

  • What value do we deliver to the customer?
  • Which one of our customer’s problems are we helping to solve?
  • Which customer needs are we satisfying?
  • What bundles of products and services are we offering to each CS?

Elements from some of the following can contribute to customer value creation:

Examples of Customer Value Propositions.

3. Channels (CH)

Channels describe how a company communicates with and reaches its Customer Segments to deliver a Value Proposition.

Channels are customer touch points that play an important role in the customer experience and serve several functions, including:

  • Raising awareness about a company’s products and services
  • Helping customers evaluate a company’s Value Proposition
  • Allowing customers to purchase specific products and services
  • Delivering a Value Proposition to customers
  • Providing post-purchase customer support

To establish an effective channel, a company must first answer the following:

  • Through which Channels do our Customer Segments want to be reached?
  • How are we reaching them now?
  • How are our Channels integrated?
  • Which ones work best?
  • Which ones are most cost-efficient?
  • How are we integrating them with customer routines?

There are five distinct phases (figure below) through which a channel passes, and it could cover more than one of these phases at a time.

Different phases of channels

Channels can be either direct, indirect or hybrid, as shown:

Different types of channels

Finding the right mix of Channels to satisfy how customers want to be reached is crucial in bringing a Value Proposition to market and can create a great customer experience.

4. Customer Relationships (CR)

Customer Relationships describe the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated. An organization’s CR strategy may be driven by one of the following motivators:

  • Customer acquisition
  • Customer retention
  • Boosting sales (upselling)

A business can arrive at the optimum CR by asking the following questions:

  • What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
  • Which ones have we established?
  • How costly are they?
  • How are they integrated with the rest of our business model?

Several categories of Customer Relationships may co-exist in a company’s relationship with a particular Customer Segment. Some of which are:

Types of Customer Relationships

5. Revenue Streams (RS)

Revenue Streams represent the company’s cash (earnings) from each Customer Segment and are like the arteries of any business.

Revenue streams

There are two distinct categories of Revenue Streams:

  • Transaction Revenues which are one-time customer payments
  • Recurring Revenues that are ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support

A business can arrive at its ideal revenue stream by asking the following questions:

  • For what value are our customers willing to pay?
  • For what do they currently pay?
  • How are they currently paying?
  • How would they prefer to pay?
  • How much does each Revenue Stream contribute to overall revenues?

There are several ways a business can generate revenue, such as:

Types of Revenue streams

A business may have one or more Revenue Streams, each with different pricing mechanisms. The choice of pricing mechanism greatly influences the revenues generated.

There are two main types of pricing mechanisms, Fixed and Dynamic, as follows:

Types of Pricing Mechanisms

6. Key Resources (KR)

The Key Resources describe the most important assets required to make a business model work.

These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues. Different Key Resources are needed depending on the type of business model.

For example, a chip fabrication business like TSMC [9] requires capital-intensive facilities worth billions of dollars, while a chip designer like NVIDIA [10] would need skilled manpower as its Key Resource.

Key Resources can be owned or leased by a business or acquired from its key partners. They can be identified by answering the following questions:

  • What Key Resources do our Value Propositions require?
  • What resources are required to sustain our Distribution Channels, Customer Relationships and Revenue Streams?

Key Resources can be categorized as follows:

Key Resources

7. Key Activities (KA)

Key Activities describe the most important things a company must do to make its business model work. They are required to create and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn revenues.

Key Activities differ depending on the business model type. For example, Microsoft’s Key Activity is software development, while for Dell, it is Supply Chain Management. For a consultancy firm like McKinsey, Key Activity is problem-solving.

A business can identify its Key Activities by answering the following questions:

  • What Key Activities do our Value Propositions require?
  • What activities directly contribute to maintaining our Distribution Channels, Customer Relationships and Revenue Streams?

Key Activities can be categorized as follows:

Key Activities

8. Key Partnerships (KP)

The Key Partnerships describe the network of suppliers and partners that make the business model. There are four types of partnerships:

Four types of partnerships

A business must ask the following questions before forming partnerships:

  • Who are our key partners?
  • Who are our key suppliers?
  • Which Key Resources are we acquiring from partners?
  • Which Key Activities do partners perform?

Primarily, there are three motivations for a business when creating partnerships, as shown:

Three motivators to creating partnerships

9. Cost Structure (CS)

Cost Structure describes all costs incurred to operate a business model. A business incurs costs in creating and delivering value, maintaining customer relationships, and generating revenue. Costs are business-specific, where some are more cost-driven than others.

A business must answer the following questions to arrive at an optimum cost structure:

  • What are the most important costs inherent in our business model?
  • Which Key Resources are most expensive?
  • Which Key Activities are most expensive?

While costs should be minimized in every business model, it is useful to distinguish between two broad classes of business model Cost Structures:

  • Cost Driven : This model focuses on minimizing costs wherever possible. This approach aims at creating and maintaining the leanest possible Cost Structure, using low-price Value Propositions, maximum automation, and extensive outsourcing. Examples: No frills airlines like Southwest & easyJet, Fast food joints such as McDonald’s & KFC.
  • Value Driven: Premium Value Propositions and a high degree of personalized service usually characterize value-driven business models. Examples: Luxury hotels, Expensive Cars like Rolls-Royce

Cost Structures can have the following characteristics:

characteristics of cost structures

Putting-it-all together

The nine business model Building Blocks form the basis for a handy tool, which is called the Business Model Canvas (figure below). This tool resembles a painter’s canvas preformatted with nine blocks that allow painting pictures of new or existing business models. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis.

Template for The Business Model Canvas

BMC works best when printed out on a large surface such that groups of people can jointly note, sketch, and discuss business model elements.

Example of Business Model Canvas

Nespresso [17] , a fully owned daughter company of Nestlé, changed the dynamics of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels).

The two-part strategy involved selling their patented coffee machine to retail customers first to lock them into the brand. This generated a recurring demand for coffee refills (pods) that led to constant revenues. These pods were sold directly through mail/website/own stores, thereby eliminating middlemen/dealers, which further increased profits [1] .

Nespresso’s strategy plotted on a Business Model Canvas looks as follows:

Example of business model canvas

Business Model Canvas helped Nespresso establish a solid and enduring foundation by engaging consumers directly and bringing a barista-like experience within the reach of a home or an office.

Advantages & Limitations

  • Encourages Collaboration – collaborative framework, which helps put different business stakeholders in sync. This improves the likelihood of generating new ideas and their quality.
  • Facilitates testing of ideas before launch – allows business owners, strategists, and managers to think through business ideas as well as test concepts that would otherwise get tested with potential customers where the stakes are higher.
  • Customer-centered approach – Key customer segments, relationships, activities, and value propositions are all elements that focus on creating, delivering, and capturing value for customers.
  • Clarity – Analyzing the business through the lens of nine blocks brings better clarity and structure to the business model.

Limitations

  • Lacks a section for defining the start-up’s mission statement, which is crucial to understanding the goals and objectives of any business.
  • Overlooks the importance of a profit mechanism beyond costs and revenues, including decisions on how to use potential profits.
  • The order of the canvas is not intuitive, making it difficult to read and understand the strategic decisions in a logical sequence.
  • Does not depict interconnections between different elements, which can have a significant impact on the overall business model.
  • Fails to acknowledge the company’s role within its ecosystem, including its impact on the environment and local communities.
  • External factors such as competition, history, and other industry-specific factors are absent from the canvas, which can greatly influence the success of a business model.

1. “A Better Way to Think About Your Business Model”. Harvard Business Review, https://hbr.org/2013/05/a-better-way-to-think-about-yo . Accessed 01 Aug 2023

2. “Business Model Generation”. Alexander Osterwalder, https://www.strategyzer.com/books/business-model-generation . Accessed 28 Jul 2023

3. “The Apple M1 is a revolution that is changing the computing world”. Citymagazine, https://citymagazine.si/en/apple-m1-is-a-revolution-that-changes-the-computer-world/ . Accessed 29 Jul 2023

4. “Mass Customization”. Corporate Finance Institute, https://corporatefinanceinstitute.com/resources/management/mass-customization/ . Accessed 29 Jul 2023

5. “Moka Pot”. Wikipedia, https://en.wikipedia.org/wiki/Moka_pot . Accessed 29 Jul 2023

6. “NetJets Homepage”. NetJets, https://www.netjets.com/en-us/ . Accessed 01 Aug 2023

7. “Distribution Channels – Definition, Types, & Functions”. Feedough, https://www.feedough.com/distribution-channels-definition-types-functions/ . Accessed 30 Jul 2023

8. “Lease from Hertz”. Hertz, https://www.hertz.com/rentacar/rental-car/car-lease . Accessed 30 Jul 2023

9. “TSMC”. Wikipedia, https://en.wikipedia.org/wiki/TSMC . Accessed 30 Jul 2023

10. “NVIDIA”. Wikipedia, https://en.wikipedia.org/wiki/Nvidia . Accessed 30 Jul 2023

11. “BMW, Daimler, Ford and Volkswagen team up on high-power charging network”. Techcrunch, https://techcrunch.com/2017/11/03/bmw-daimler-ford-and-volkswagen-team-up-on-high-power-charging-network/ . Accessed 31 Jul 2023

12. “Honda And Sony Combine Talents To Build Electric Vehicles”. Forbes, https://www.forbes.com/sites/peterlyon/2022/06/26/honda-and-sony-announce-joint-venture-to-build-electric-vehicles/ . Accessed 31 Jul 2023

13. “Uber and Spotify launch car music playlist partnership”. BBC, https://www.bbc.com/news/technology-30080974 . Accessed 31 Jul 2023

14. “Walmart Has the Scale and Infrastructure to Generate Positive Gains”. Yahoo Finance, https://finance.yahoo.com/news/walmart-scale-infrastructure-generate-positive-201822628.html . Accessed 31 Jul 2023

15. “Demand-Side Economies of Scope in Big Tech Business Modelling and Strategy”. MDPI, https://www.mdpi.com/2079-8954/10/6/246 . Accessed 31 Jul 2023

16. “The Business Model Canvas”. Strategyzer, https://www.strategyzer.com/canvas/business-model-canvas . Accessed 31 Jul 2023

17. “HomePage”. Nespresso, https://www.nespresso.com/us/en/ . Accessed 01 Aug 2023

18. “Business Model Canvas of Nespresso”. Alex Osterwalder, https://www.youtube.com/watch?v=dhQh-tryXOg . Accessed 01 Aug 2023

19. “Nespresso Capsule”. Electromall, https://electromall.net/product/nespresso-capsule/ . Accessed 01 Aug 2023

20. “The Best Nespresso Machine (But It’s Not for Everyone)”. Newyork Times, https://www.nytimes.com/wirecutter/reviews/best-nespresso-machine/ . Accessed 01 Aug 2023

21. “Business Model Canvas”. Think Design, https://think.design/user-design-research/business-model-canvas/ . Accessed 01 Aug 2023

22. “6 Problems with the Business Model Canvas”. The Pourquoi Pas, https://www.thepourquoipas.com/post/problems-with-the-business-model-canvas . Accessed 01 Aug 2023

  • McKinsey 7S Model
  • Elaboration Likelihood Model of Persuasion
  • The Johari Window Model

Leave a Comment Cancel reply

Save my name and email in this browser for the next time I comment.

Advisory boards aren’t only for executives. Join the LogRocket Content Advisory Board today →

LogRocket blog logo

  • Product Management
  • Solve User-Reported Issues
  • Find Issues Faster
  • Optimize Conversion and Adoption

What is a business model canvas? Overview with template

parts of business model canvas

In 2013, I co-founded a startup in the Indian online gifting industry with three friends. It was my first involvement with a startup. Startups are fascinating — they’re small, agile, and quick. However, another key feature of startups is their ability to creatively solve problems.

What Is A Business Model Canvas Overview With Template

At that time, we aimed to target India’s gifting market, which was more than 90 percent offline. We had plans to establish an online shop selling a wide variety of gifts. But before we got started, we decided to document our idea. Amidst many templates, we discovered the business model canvas, a lean tool for outlining business models. It was neat, straightforward, and free. This tool brought remarkable clarity to our idea.

Despite shutting down the startup in 2015, I gained a wealth of knowledge during those two years. One major takeaway was the tools and techniques I learned along the way. The business model canvas was one of them. Even after seven years, I still use the business model canvas in my role as a product manager.

In this blog post, we’ll explore how product managers and entrepreneurs can effectively use a business model canvas.

What is a business model canvas?

The business model canvas is a template introduced by Alexander Osterwalder in 2005 as part of his Ph.D. studies under the supervision of Yves Pigneur. The business model canvas outlines nine crucial elements of a business model in an easy-to-understand visual template: customer segments, value proposition, channels, customer relationships, revenue streams, key activities, key resources, key partnerships, and cost structure.

Various companies, including startups, scale-ups, and large software organizations, have utilized this template since its inception to simplify their business strategy and improve their understanding of the overall business structure. However, before we delve into what a business model canvas entails, it’s important to comprehend why simplifying business strategy and structure is essential.

The last company I was part of employed 10,000 individuals. It ran more than 20 different businesses, each generating millions in revenue. When operating on such a large scale, it’s vital to have a clear strategy that outlines the business models. This strategy should define who the customers are, identify key partners, elaborate on the value proposition, and explain the cost structure, among other things.

The strategic blueprint serves as a go-to source of information whenever confusion arises. While this is true for large corporations, it’s equally applicable to smaller scale-ups and startups. It’s crucial to understand the business strategy and models from the onset. This comprehension aids in crafting a framework that can be applied when tackling complex issues or determining priorities.

This is where the business model canvas proves invaluable. It assists in laying out business models in a straightforward, user-friendly format.

What are the 9 components of the business model canvas?

The business model canvas comprises nine key elements:

Customer segments

Value proposition, customer relationships, revenue streams, key activities, key resources, key partnerships, cost structure.

9 Components Of A Business Model Canvas

These components cover the three main areas of a business: desirability, viability, and feasibility. The nine components also aim to bring transparency and understanding to a broad audience, which can include upper management and internal teams such as engineering, design, product management, marketing, sales, legal, and customer service.

Collectively, these elements capture the essence of a business model. They help map the relationship between these elements and how they intertwine with one another. Let’s take a more in-depth look at each element.

Everything starts with the customers, which is why this is the first element of the business model canvas. This component identifies the different customer segments a company targets. These can vary across business models.

parts of business model canvas

Over 200k developers and product managers use LogRocket to create better digital experiences

parts of business model canvas

For example, while working at Zalando (one of Europe’s largest fashion eCommerce companies), there were multiple business models. One focused on end customers, while another focused on partners selling products on Zalando. The business model canvas helps outline these customer segments in a single snapshot.

Try to avoid being too detailed. Mention who the partners are, but there’s no need to note the demographics, age, gender, etc., of the customer segment unless required.

This term refers to the unique advantage or value a business provides. It’s what sets the business apart from competitors. This could be a product or a service that the business uses to solve a customer’s problem.

For instance, Uber’s value proposition is its ability to help customers travel from point A to point B on demand.

Channels are the various ways through which a business intends to interact with customers and/or partners. For Airbnb, their website and apps are the primary channels. But they also leverage social media, offline hoardings, email marketing, and community forums to reach their audience.

This element addresses the various ways a business interacts with customers to improve satisfaction and the overall experience. Monitoring customer feedback and how they interact with a company’s product is critical in a competitive landscape.

Amazon, a company that prioritizes customer focus, includes 24/7 customer support, personalized recommendations, regular newsletters, ratings and reviews, Amazon Prime membership, and community engagement as part of its customer relationships.

This component lists the different ways a company plans to generate revenue. For Google, revenue streams include advertising, the Google Play Store, Google Cloud, and hardware sales.

This section includes all necessary activities needed to keep the business functioning smoothly and to deliver value to all users. Microsoft’s key activities, for example, include software development, hardware development, cloud computing, gaming, research and development, and VR.

More great articles from LogRocket:

  • How to implement issue management to improve your product
  • 8 ways to reduce cycle time and build a better product
  • What is a PERT chart and how to make one
  • Discover how to use behavioral analytics to create a great product experience
  • Explore six tried and true product management frameworks you should know
  • Advisory boards aren’t just for executives. Join LogRocket’s Content Advisory Board. You’ll help inform the type of content we create and get access to exclusive meetups, social accreditation, and swag.

As the name implies, key resources are the essential tangible and intangible resources needed to keep the business operational. These resources incur costs, making their documentation vital. An online gift-selling company would require a website/app, collaborations with manufacturers, and marketing capabilities.

This element focuses on the partnerships or collaborations a business might have with other companies to better serve customers, reduce risks, and increase profits. For Facebook, key partners include regular users who generate content, advertisers, and influencers who create content at scale.

This element outlines the costs and expenses associated with a business. For companies like Google and Facebook, costs can be substantial given their value propositions. While it may be difficult to capture the cost structure of these giants in a small space, it becomes easier and beneficial for smaller companies.

For example, McDonald’s cost structure would include manufacturing costs, service-based costs (such as employee costs), franchise costs, and infrastructure costs.

What are the benefits of using a business model canvas?

Indeed, using a business model canvas offers many advantages for businesses of all sizes. To summarize, some of the key benefits include:

Benefits Of Using A Business Model Canvas

Visual representation

A business model canvas provides a visual overview of all the critical elements of a business. This allows stakeholders to see how these elements relate to each other, facilitating understanding and decision-making.

The visual nature of the canvas makes it accessible to various stakeholders, including top management, engineers, designers, customer service, and operations teams.

Clear collaboration, communication, and alignment

Developing and managing products often require the input and collaboration of multiple stakeholders . A business model canvas provides a clear, concise tool for aligning all these parties, promoting better communication and collaboration. It also helps product managers secure buy-in from stakeholders at an early stage, reducing risks and fostering better alignment, especially in a cross-functional environment.

Strategic long-term thinking and analysis

By design, a business model canvas encourages long-term strategic thinking. It helps identify business strengths and weaknesses, facilitates brainstorming new ideas and improvements, and shapes long-term strategies to better serve customers.

Flexibility

Businesses and ideas evolve, and a business model canvas accommodates these changes. It offers a flexible template that can be easily modified, often featuring version numbers to track document evolution. This flexibility supports an iterative approach, ensuring the canvas captures all necessary information as the business evolves.

Business model canvas template

The internet is replete with various business model templates. A quick Google search will return 34,200,000 results. Here’s a quick template that I created on Google Sheets:

Business Model Canvas Template

Click here to access the business model canvas template. You can click File > Make a copy to download the canvas and customize it for your business.

Example of successful use of the business model canvas in product management

Here’s an example of a business model canvas for Facebook:

Business Model Canvas Facebook

How do I create a business model canvas for my business?

After you fill out the nine components we went over earlier, there are some other key points to keep in mind to successfully create a business canvas model.

Involve all the stakeholders early on

Since a business model canvas has elements ranging from tech to marketing, sales, and customer service, it’s important to involve these stakeholders right at the start. This reduces the risk and helps to bring everyone on the same page.

Keep it simple

Don’t use complex sentences while explaining the pointers under every element. Use simple and short words. Simplicity will make it easier for the audience to consume the information effectively.

Be data-driven

Let every pointer included in the business model canvas be data-driven. This will help lay down a strong foundation for long-term decision-making.

Focus on an iterative approach

It’s difficult to come up with a business model canvas right at the first go. Hence, it’s important to keep an iterative approach and let the document evolve depending on the feedback from the contributors. You can use versioning to keep track of all the changes.

Consider external factors

Currently, the growth of many businesses is slow and it’s projected to be the same for the entire year. It’s important to consider these external factors while coming up with a business model canvas since it helps to consider factors that might not be in control of a business.

Conclusion and key takeaways

A business model canvas can be a very effective tool if used right away. Product managers can use this tool before starting a product or a feature. It can help them have clarity on the idea before the actual development work starts.

Also, since it involves all the major stakeholders right at the start, a business model canvas can help mitigate risks early on. It’s a great tool for validating business ideas, products, or a feature.

Featured image source: IconScout

LogRocket generates product insights that lead to meaningful action

Get your teams on the same page — try LogRocket today.

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Reddit (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Facebook (Opens in new window)
  • #tools and resources

parts of business model canvas

Stop guessing about your digital experience with LogRocket

Recent posts:.

Christine Kuei Leader Spotlight

Leader Spotlight: Growing the omnichannel market, with Christine Kuei

Christine Kuei, Director of Product Management at Forever 21, shares her experience growing and optimizing omnichannel experiences.

parts of business model canvas

Decoding marketing jargon: A glossary of terms

The world of product marketing is always evolving. Even for experts, it can be hard to keep up with the latest concepts, terms, and jargon.

parts of business model canvas

Leader Spotlight: Bettering learning velocity, with Jonas O. Klink

Jonas talks about his team’s initiatives to “better the learning velocity” — taking an initial idea through hypothesis-driven development to build customer-centric, scalable solutions.

Navya Rehani Gupta Leader Spotlight

Leader Spotlight: Energizing your leadership style, with Navya Rehani Gupta

Navya Rehani Gupta talks about her three main pointers for mastering the art of zooming in and zooming out.

parts of business model canvas

Leave a Reply Cancel reply

  • Integrations
  • Learning Center

How to Build a Product Roadmap Based on a Business Model Canvas

Could you list all of the key building blocks you need to develop, manage, maintain, market, and sell a product on a single sheet of paper? With the business model canvas, you can! Using the business model canvas approach is a great way to force yourself to focus on the most strategically important elements of your product. As the name suggests, the typical use case for this tool is to outline the fundamental building blocks of a business, but it also can work really well for a product.

Today we’ll show you how the business model canvas works and how you can use it to come up with a high-level product strategy.

What is a Business Model Canvas?

As you can see from the sample example below (thanks, Strategyzer.com), a business model canvas is a one-page summary describing the high-level strategic details needed to get a business (or product) successfully to market.

The categories or buckets contained in a canvas can be customized. But most will look similar to the one here—covering such key areas as:

  • The product’s value propositions (what it does and promises)
  • Customer segments (who it’s for)
  • Key activities (the steps the team must complete to make it successful)
  • Key resources (what personnel, tools, and budget the team will have access to)
  • Channels (how the organization will market and sell it)
  • Customer relationships (how the team will support and work with its customer base)
  • Key partners (how third parties will fit into the plan)
  • Cost structure (what it costs to build the product as well as how to sell and support it)
  • Revenue streams (how the product will make money)

Business Model Canvas by Strategyzer

If you think about it, that’s a fairly comprehensive set of building blocks you’ll need to think through for your product before you begin developing it. There will certainly be additional factors that’ll affect your strategy, but if you can fill in these high-level details—which, as you can see, should fit comfortably on a single page—you’ll have a useful strategic guide for developing your product roadmap.

Why Should I Use a Business Model Canvas to Develop a Product Roadmap?

Okay, but why? What’s the benefit of building a business model canvas (or the, even more, stripped-down variation, the lean canvas) to guide my product roadmap ?

There are plenty of reasons. But simply put, you can think of a business model canvas as a mission statement for your product roadmap. It’s a handy reference you can refer to, to make sure your roadmap always reflects all the strategic elements needed for your product’s success.

Tweet This: “Think of a business model canvas as a mission statement for your product roadmap.”

Our co-founder Jim Semick has a couple of great short videos explaining the business model canvas concept, which you can check out in the player below.

As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies:

1. You can use a business model canvas to roadmap quickly.

You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes).

This way, rather than trying to write out every detail about your product plan beforehand, you can just document the highlights—and then you can get rolling translating the canvas into your product roadmap.

Read the Product Roadmaps Guide ➜

2. A business model canvas will be more agile.

One problem with the old structure of documenting a business model—the traditional business plan—was that it was almost always inaccurate as soon as the author finished drafting it.

These meaty plans included detailed cost estimates, revenue projections going years into the future, and long-term plans for growing the staff. How could any of that remain accurate for long?

In product terms, you can think of the business plan as resembling an MRD (Market Requirements Document). It’s long, detailed, and probably mostly untrue by the time it’s done.

But because you can put a canvas together so quickly, it will much more accurately reflect your strategic thinking and your company’s current reality. And if things change, it’ll be easier than a long and detailed plan to adjust. This brings us to Jim’s third benefit…

3. Business model canvas roadmaps allow you to pivot as needed.

If you build a business model canvas to guide your business roadmap , and something happens that forces you to re-prioritize or pivot your product , it will be a lot easier to update this short, high-level document than it would be if you had some monster MRD or business plan to tear apart and edit.

With a one-page business model canvas acting as the strategic undergirding for your roadmap, you’ll always be able to quickly spot any items or plans that need updating whenever priorities change or new realities demand that you adjust your approach.

How Can I Use A Business Model Canvas to Guide My Product Roadmap?

The alexa example.

Let’s talk through a hypothetical example, using Amazon’s Echo device (“Alexa”) as our guide.

Imagine that as they were talking through what belonged in the “Revenue Streams” bucket of the business model canvas, Amazon’s Echo team came up with three sources of revenue to start with:

1) Selling Echo devices.

2) Using the device to sell other stuff as customers ask it to connect to the Amazon marketplace. (“Alexa, please add laundry detergent pods to my shopping cart.”)

3) Licensing Echo’s proprietary speech-recognition technology to other businesses.

Now, if the Echo product team put these on their business model canvas, they’d know that they need to make room for budget, time, and resources on their product roadmap for all of these revenue streams.

Another Hypothetical Example of the Business Model Canvas: Channels

Or think about the Channels bucket in the business model canvas. If your team was building out a canvas, maybe you’d have several ideas for reaching customers:

1) The in-house sales team. 2) Affiliate partners. 3) Word-of-mouth advertising from users.

It’s easy to write. But how are you going to translate that “word-of-mouth” strategy into an actual plan?

Maybe you’ll need to budget time and resources for developing things right into your product that make it easier for users to share their experiences with friends, such as a handy tool to help them tweet about it. Maybe you’ll even want to include an “Invite a friend” feature that lets users easier send a trial license to friends, or a couponing feature that offers some reward to a user who brings in two more users.

The point is, your business model canvas can serve as a great strategic reminder of the things you’ve determined are important enough to make it onto your product roadmap .

So you can always look back and see immediately—it’s just one page, after all—if you’re still working on all of the essential elements of your product, or if you’ve inadvertently strayed from them and gotten lost in the wrong details.

That’s why we’re big proponents of the business model canvas approach to guiding your product roadmap .

Do you have an opinion about using the business model canvas approach for developing and documenting your product’s strategy? Feel free to share them in the comments section.

product management training

Product Management Training: 5 Excellent Resources

If you want to become a software developer, one option is to major in computer science or software engineering in...

Safe Agile ProductPlan Large Organizations

A Product Manager’s Role in SAFe®

Agile started with software development. Although many organizations have found the principles beneficial. The ability to quickly assess, adjust, and...

5 Roadmap Templates for Product Executives

5 Roadmap Templates for Product Executives

Product roadmaps shouldn’t be a one-size-fits-all proposition, as different stakeholders care about various elements and require different levels of detail....

Continue exploring

You can search or explore specific categories.

Prioritization and Backlog

Company news and updates, templates and workbooks, remote product management, product metrics and analytics, product strategy example, product managers, tools and resources, customer-centricity, product leadership, product management, roadmap and roadmap management, product strategy, agile & product development, career and interviews, try productplan free for 14 days, share on mastodon.

parts of business model canvas

  • Business Model Canvas: A Complete Guide

parts of business model canvas

Featured in:

parts of business model canvas

A business model describes how a company creates, delivers and captures value. Everyone has their unique way of viewing the business model. During discussions about this, there has been an increasing need for an uniform template to define and discuss the business model. This template should be applicable to new and old businesses alike, across industries.

Business Model Canvas

© Flickr | marcfonteijn

In this article we will look at 1) what is a business model canvas? , 2) the traditional approach to a business model , 3) the 9 building blocks , 4) why to use the business model canvas , and 5) applying the business model canvas .

WHAT IS A BUSINESS MODEL CANVAS?

The Business Model Canvas , developed by Alexander Osterwalder, is a visual representation of current or new business models, generally used by strategic managers. The Canvas provides a holistic view of the business as a whole and is especially useful in running a comparative analysis on the impact of an increase in investment may have on any of the contributing factors.

The Business Model Canvas gives people a common language through which they can evaluate traditional processes and bring innovation into their business models.

THE TRADITIONAL APPROACH TO A BUSINESS MODEL

Most startups fail because entrepreneurs put all their faith in the idea of the product the organization exists to create. In their loyalty to this product or service, they fail to give in depth consideration to the business model their organization will follow. Usually the business model is either a one-size-fits-all model, common in the industry or it is a random amalgamation of systems and processes, created at the spur of the moment to further the main goal; sell the product or service.

Successful new ventures do not go to market with their first idea; instead, the product/ service has usually gone through several iterations before arriving at the final version. Similarly, organizations are more sustainable if they have considered several business models before deciding on a particular one.

THE 9 BUILDING BLOCKS

The Business Model Canvas categorizes the processes and internal activities of a business into 9 separate categories , each representing a building block in the creation of the product or service. These categories represent the four major aspects of a business; customers, offer, infrastructure, as well as financial viability. All 9 categories are listed and explained below.

1. Customer Segments

The total customer pie is divided into segments based on the manner in which an organization’s products or services address a specific need for the segment. The customer segment is an essential part of an organization’s business model and is key to ensuring that the product features are aligned with the segments characteristics and needs.

To carry out an effective customer segmentation, a company must first know its customers, both through their current and future needs. Then the organization must list its customers in terms of priority, including a list of potential future customers. Finally, the company should do a thorough assessment of its customers by understanding their strengths and weaknesses and exploring other kinds of customers who may benefit the company more if they are to focus on them.

Various customer segments are as below;

  • Mass Market : An organization opting for this type of customer segment gives itself a wide pool of potential customers because it feels that its product is a relevant need amongst the general population. A potential product for such an organization could be Flour.
  • Niche Market : This customer segment is based on highly specific needs and unique traits of its clients. An example of an organization with a niche customer segment is Louis Vitton
  • Segmented : Organizations adopting the segmented approach create further segmentation in their main customer segment based on slight variations in the customer’s demographics and resultantly, their needs.
  • Diversify : An organization with a Diversified Market Segment is flexible in the iterations of its product or service tweaking it to suit the needs of segments with dissimilar needs or traits.
  • Multi-Sided Platform/ Market : This kind of segment serves customers who have a relationship to each other, i.e. blogging sites need a large group of active bloggers to attract advertisers. And they need advertisers to create cash flow. Hence, only by creating a pull with both segments will the blogging site be able to have a successful business model

2. Value Propositions

An organization’s value proposition is the combination of products and services it provides to its customers. Osterwalder stated that these offerings need to be unique and easily differentiated from competition. Value propositions can be divided into two categories:

  • Quantitative : this stresses the price or efficiency of the product or service
  • Qualitative : this value proposition highlights the experience and results the product and its use, produce.

The value proposition provides value through a number of attributes such as customization, performance, “getting the job done”, brand/ status, design, newness, price, cost and risk reduction, accessibility, as well as convenience/ usability.

When creating your product’s value proposition, the first question an entrepreneur must ask himself is, what problem he is solving through his offered product or service. Then one needs to look into how the product, service or overall experience can be improved so that it provides greater value than the competition. Finally, it is imperative to identify the core value that your business provides. One way to identify this value is for an owner to specify what he/ she wants customers to remember about their interaction with the company.

3. Channels

The medium through which an organization provides its value proposition to its customer segment is known as a channel. There are various options for channels available to an organization, and the selection is based on the channel that is the quickest, most efficient with the least amount of investment required. There are two basic kinds of channels; Company owned channels such as store fronts or Partner Channels such as Distributors. A company can opt to choose either one or employ a combination of both.

For an entrepreneur, the first step in dealing with channels is to identify the customer channels. Touch points with customers can be limited or diverse depending on company strategy. Then he/ she needs to evaluate the strength of the channel by conducting an SWOT analysis on the channel. Finally, the company can identify and build new customer channels.

4. Customer Relationships

An organization must select the kind of relationship it will have with its customer segment in order to create financial success and sustainability. Customer Relationships can be categorized as follows;

  • Personal Assistance : In this kind of relationship the company interacts with the customer directly through an employee who provides the human touch by assisting the customer presale, during the sale and even may provide after sales services.
  • Dedicated Personal Assistance : This kind of relationship is characterized by a very close interaction between the customer and the company through a dedicated representative who is assigned a set of clients and is personally responsible for the entire experience the customer has with the company.
  • Self-Service : Self-Service places the onus of the customer experience on the tools the company provides for the customer to serve him or herself.
  • Automated Services : These are customized self-service relationships where the historical preference of the customer is taken into account to improve the overall experience.
  • Communities : In today’s electronic age creating communities of clients allows organizations to communicate with them directly. This allows for an enhanced client experience because the community allows clients to share their experiences and come up with common challenges and solutions.
  • Co-creation : The customer has a direct hand in the form the company’s product or service will take.

For an entrepreneur, the priority is to identify the type of relationship he/ she has with the customer. Then the value of the customer must be evaluated in terms of the frequency of his expenditure on the firms product and services. Loyal customers are relationships that the company should aim to invest in as they will yield steady revenue throughout the year.

5. Revenue Streams

A revenue stream is the methodology a company follows to get its customer segments to buy its product or service. A revenue stream can be created through the following ways;

  • Asset Sale : the company sells the right of ownership over the good to the customer.
  • Usage Fee : the company charges the customer for the use of its product or service.
  • Subscription Fee : the company charges the customer for the regular and consistent use of its product or service.
  • Lending/ Leasing/ Renting : the customer pays to get exclusive access to the product for a time-bound period.
  • Licensing : the company charges for the use of its intellectual property.
  • Brokerage Fees : companies or individuals that act as an intermediary between two parties charge a brokerage fee for their services.
  • Advertising : a company charges for others to advertise their products using their mediums.

When setting up revenue streams, it is important to recognize that an effective price for the product and/or service will be arrived at through the process of elimination. Different iterations of prices should be listed and evaluated. It is important, in the end to take a break ad reflect on possible avenues open to you as a business.

6. Key Resources

These are the assets of the organization fundamental to how it provides value to its customers. Resources can be categorized as human, financial, physical and intellectual.

For an entrepreneur, it is important to begin with listing your resources. This gives you a clear idea of what final product or service your company needs to create for the customer and which resources are dispensable, resulting in cost savings for your company. Once the final list of resources is available, the company can decide on how much it needs to invest in these key resources to operate a sustainable business.

7. Key Activities

Activities that are key to producing the company’s value proposition. An entrepreneur must start by listing the key activities relevant to his/her business. These activities are the most important processes that need to occur for the business model to be effective. Key activities will coincide with revenue streams. Now it is important to evaluate which activities are key by adding or removing some and evaluating their impact.

8. Key Partnerships

To create efficient, streamlined operations and reduce risks associated with any business model, an organization forms partnerships with its high-quality suppliers . Key partnerships are the network of suppliers and partners who complement each other in helping the company create its value proposition. Partnerships can be categorized as follows;

  • Strategic alliance between competitors (also known as coopetition),
  • Joint ventures and
  • Relationships between buyers and suppliers.

An entrepreneur must begin by identifying its key partners followed by making future partnership plans. This can be done through an evaluation of the partnership relationship to judge which characteristics of the relationship need improvement and what kind of future partnerships will be required.

9. Cost Structure

This defines the cost of running a business according to a particular model. Businesses can either be cost driven i.e. focused on minimizing investment into the business or value driven i.e. focused on providing maximum value to the customer.

Following are some traits of common cost structures;

  • Fixed Costs : costs that remain the same over a period of time
  • Variable Costs : as the name suggests, these costs vary according to a variance in production
  • Economies of Scale : costs decrease as production increases
  • Economies of Scope : costs are decreased by investing in businesses related to the core product.

The first step for an entrepreneur is to obviously identify all costs associated with the business. A realistic understanding of the costs of the business is one of the hallmarks of a good business model. After identification, it is important to list all the costs on the canvas, so they are visually present and then create plans for each cost. Some costs may be decreased through certain measures while others may go up if you decide that an investment in a particular section will result in future gains.

WHY TO USE THE BUSINESS MODEL CANVAS

  • Visual Thinking: The tool allows for easy, visual representation for decision makers to ponder upon. The tool provides a neat breakdown of the major considerations impacting the business and also makes clear the direction the organization is taking through its business model.
  • Iterate Quickly: If a poster sized of the canvas printout is taken, it can be used in combination with sticky notes for executives to evaluate current and potential tweaks in the business model and their impact.
  • Grasp the relationship between the 9 blocks: The Business Model Canvas allows the executive team to understand how the 9 building blocks relate to each other and the different ways these relationships can be changed to increase efficiency or effectiveness. An opportunity or innovation can be spotted through the use of this tool.
  • Short and Succinct: The tool encourages teams to keep their suggestions short and simple enough to fit on post-it notes.
  • Easy to circulate: The tool allows easy access and sharability. Pictures of the completed canvas or simply physically passing it around so people can grasp its gist as well as add to it, if need be, make the Canvas a very portable and convenient tool.

APPLYING THE BUSINESS MODEL CANVAS

The biggest Business Model success story is Apple . Apple was a game changer when it introduced the iPod to the world. Through iTunes, Apple integrated device, software and an online store into an experience that set the music industry on its ear.

Even though Apple was in no way the first entrant into the mp3 player market, its unique and well-executed business model ensured lasting success. This business model was in essence the seamless coming together of the key components of the business model canvas to leverage its distinctive value proposition. Apple has lasting partnerships through the deals it negotiated with music producers so it could sell their music through its store.

Apple revenue stream comes from the sale of its iPods. However, the added benefit of the online store creates a package that competitors have been hard pressed to match.

Comments are closed.

Related posts

The Future of Talent Recruitment

Talent recruitment is among the key issues businesses must solve. Attracting the right talent and …

Starting Guide to Local Commerce

In an increasingly digitized world, adaptation is necessary, if not for getting ahead of the …

Successful Hiring Process – How to Win a Great Team and Not Just to Hire Employees?

This article will take you through steps of the hiring process for gathering the ideal team. The …

408,000 + job opportunities

parts of business model canvas

Not yet a member? Sign Up

join cleverism

Find your dream job. Get on promotion fasstrack and increase tour lifetime salary.

Post your jobs & get access to millions of ambitious, well-educated talents that are going the extra mile.

First name*

Company name*

Company Website*

E-mail (work)*

Login or Register

Password reset instructions will be sent to your E-mail.

loading

How it works

For Business

Join Mind Tools

Article • 11 min read

The Business Model Canvas

Understanding what makes your company successful.

By the Mind Tools Content Team

parts of business model canvas

Do you know what your company's business model is? How well do you understand it? And why does this matter?

A company's business model determines how it generates its revenue, operates successfully, and makes a profit. If your company's business model is out of date or wrong for its market, then it's likely to fail.

Understanding your company's business model is an important part of developing the "commercial awareness" you need to solve problems effectively, make good decisions, and become known as a trusted leader in your organization.

This article explores a useful model that you can use to think about your business model.

What Is the Business Canvas Model?

Alex Osterwald and Yves Pigneur developed their Business Model Canvas in 2010.

They collaborated with 470 members of the Business Model Innovation Hub – an online forum for business professionals and researchers – who contributed case studies, examples, and critical comments to their research. As such, the Business Model Canvas represents the collective experience of a community of business people.

It appears as a template of nine basic building blocks, as shown in figure 1, below. These form a blueprint, based on which business models can be systematically designed, explained and challenged.

Figure 1: The Business Model Canvas

parts of business model canvas

The Business Model Canvas is the property of BusinessModelGeneration.com / strategyzer.com , and it is distributed under a Creative Commons copyright license .

How to Use the Business Model Canvas

To use the Business Model Canvas, think about each building block using the questions below. You may want to download our worksheet to help with this.

CS: Customer Segments

Your customer segments are your target markets – the specific groups of people or organizations that your business serves.

Instead of trying to satisfy everyone, all of the time, group your customers according to common attributes like their location, needs, or behaviors, and decide which segments to focus on. This way, you can deliver a product or service that is closely tailored to the specific needs of particular groups.

See our article on market segmentation for more on this.

Record your results in the CS block of the canvas.

VP: Value Propositions

The value propositions block defines how you'll deliver value to your customers. You can create value in many ways, including offering a low price, a high standard of design, good accessibility, convenience, and high performance. Consider these questions:

  • How do you create value for your target market?
  • What problem or need does your product or service solve for the customer?
  • How does your product or service differ from your competitors' offerings?

If you are struggling to crystallize your value proposition, conduct a USP Analysis and Core Competency Analysis to assess how your product or service stands out from those of your competitors.

Write your value proposition in the VP block of the Business Model Canvas.

R$: Revenue Streams

In this block, you analyze how each customer segment pays for your product or service.

There are many different ways to pay for a product or service. For example, is the price fixed, or will you charge customers for each use, by subscription, or with ongoing payments? Will any negotiation or bargaining be involved? And who, ultimately, is the customer? (Your customer may be an advertiser, for example, rather than the user of the service.)

Consider these additional questions:

  • What do your customers currently pay for similar products or services?
  • How do they pay for this?
  • What do you charge for your product or service?
  • Do customers get any free services or perks that your competitors don't offer?

Record this in the R$ block of the Business Model Canvas.

CH: Channels

The word "channel" refers to the way you deliver your value proposition to each customer segment. Channels include a direct sales force, web sales, own brand stores, partner stores, and wholesalers. Consider these questions:

  • How do you make your customers aware of your products and services?
  • What channels do your customers prefer to use?
  • How will you help customers evaluate your value proposition?
  • How do customers want to buy your products and services?
  • How do you provide customer support?

Record your answers in the CH block of the Business Model Canvas.

CR: Customer Relationships

This block defines the type of relationship you want to foster with each of your customer segments. There are several categories to consider here.

  • Dedicated personal assistance – This is where the wants and needs of each customer are handled by a dedicated customer service representative. For example, many types of business dedicate an account manager to highly valued clients.
  • Personal assistance – Here, customers can communicate with a customer service professional during and after the sales process. This can happen in person at the point of sale, or through a call center, email, or IM.
  • Self-service – Customers can purchase products without assistance.
  • Automated Service – An automated service recognizes individual customers through a login or other identifier. This provides a customized service that "remembers" the customer's preferences and presents options accordingly.
  • Communities – Here, the organization builds communities using social networking and blogs to encourage customers to communicate with one another, share ideas, and solve problems.
  • Co-creation – In these relationships, organizations go beyond the traditional customer-vendor relationship by encouraging customers to take a more active role in shaping what the product or service might be. For example, some companies encourage their customers to review their products, or create content that can be shared with others.

To think about how your business develops relationships with customers, you can use the Buy-Sell Hierarchy , Focus Groups , and Customer Experience Mapping to understand what your customers want from their experience, and then use this information to build the customer relationships you need.

Record your findings in the CR block of the Business Model Canvas.

KR: Key Resources

Your key resources are the things you most need to make your business model work, and different types of business need different types of resource.

Key resources may be owned by your company, leased, or used through some other arrangement with key partners.

Consider these questions:

  • What human resources will you need?
  • What financial resources will you need?
  • What physical resources will you need?
  • What intellectual property resources will you need?

Conduct a VRIO analysis to explore how you can make best use of the resources you have available.

Make a record of these key resources in the KR block of the Business Model Canvas.

KA: Key Activities

Your key activities are the most important business processes that your organization must use to operate successfully. Examples of these include designing, manufacturing, and delivering a product; providing new solutions to customers; or providing a platform on which customers are able to complete transactions.

List your key activities in the KA block of the Business Model Canvas.

KP: Key Partnerships

This is the network of partners, stakeholders and suppliers that you rely upon to make your business model work. Consider these questions:

  • What strategic alliances do you have in place to bring your product or service to market?
  • What partnerships are needed to access key resources such as areas of expertise, raw materials, or access to customers?
  • What partnerships allow you to access economies of scale?
  • Who have you joined forces with to minimize risk and uncertainty?
  • Who are the key stakeholders for your product or service? How can you create strategic partnerships with these people?

Conduct a Stakeholder Analysis to identify who has the most power and influence. And, as you evaluate potential partners, use our 10 Cs of Supplier Evaluation checklist to evaluate them carefully.

Write your key partnerships – both potential and present – in the KP block of the Business Model Canvas.

C$: Cost Structure

The last block you need to analyze is your cost structure. This looks at all of the operating costs that your business incurs as part of its business model. These costs should be easy to identify, now that you've defined your key resources, activities, and partnerships.

Record your findings in the C$ block of the Business Model Canvas.

Applying What You Have Learned

By working through the Business Model Canvas for your own company, you'll get a good insight into the things that really matter for your business.

You can use this understanding to make informed decisions about business areas that you are responsible for by checking, in particular, that your decision won't undermine the wider business in any way. You can also quickly identify business areas that will be improved by your decision, and this will help you "sell" your recommendations.

It also gives you a head start when you're scanning the business news or industry press for changes that will positively or negatively affect your business. You'll know the core things that your business depends on, and you can watch out for changes that affect these.

Another advantage of the Business Model Canvas is that it clarifies how your own part of the company affects, and is affected by, other departments. This helps all parts of the business co-operate with one another more efficiently.

The Business Model Canvas was developed by Alex Osterwald and Yves Pigneur, in collaboration with a community of business professionals at the Business Model Innovation Hub. It is a useful tool for designing and analyzing business models in an objective, structured way.

The Business Model Canvas incorporates nine building blocks:

Block 1: Customer segments.

Block 2: Value propositions.

Block 3: Channels.

Block 4: Customer relationships.

Block 5: Revenue streams.

Block 6: Key resources.

Block 7: Key activities.

Block 8: Key partnerships.

Block 9: Cost structure.

You can use the Business Model Canvas to develop a new business model, or refresh an outdated one; analyze the viability of a new business idea; and even to analyze your competitors' business models to discover opportunities for making your own business stand out.

Download Worksheet

You've accessed 1 of your 2 free resources.

Get unlimited access

Discover more content

How to deliver on-the-spot feedback.

Improving Performance in Real Time

Expert Interviews

Why Should Anyone Work Here?

Add comment

Comments (0)

Be the first to comment!

parts of business model canvas

Get 20% off your first year of Mind Tools

Our on-demand e-learning resources let you learn at your own pace, fitting seamlessly into your busy workday. Join today and save with our limited time offer!

Sign-up to our newsletter

Subscribing to the Mind Tools newsletter will keep you up-to-date with our latest updates and newest resources.

Subscribe now

Business Skills

Personal Development

Leadership and Management

Member Extras

Most Popular

Newest Releases

Article am7y1zt

Pain Points Podcast - Balancing Work And Kids

Article aexy3sj

Pain Points Podcast - Improving Culture

Mind Tools Store

About Mind Tools Content

Discover something new today

Pain points podcast - what is ai.

Exploring Artificial Intelligence

Pain Points Podcast - How Do I Get Organized?

It's Time to Get Yourself Sorted!

How Emotionally Intelligent Are You?

Boosting Your People Skills

Self-Assessment

What's Your Leadership Style?

Learn About the Strengths and Weaknesses of the Way You Like to Lead

Recommended for you

Developing commercial awareness.

Understanding How Businesses Make Money

Business Operations and Process Management

Strategy Tools

Customer Service

Business Ethics and Values

Handling Information and Data

Project Management

Knowledge Management

Self-Development and Goal Setting

Time Management

Presentation Skills

Learning Skills

Career Skills

Communication Skills

Negotiation, Persuasion and Influence

Working With Others

Difficult Conversations

Creativity Tools

Self-Management

Work-Life Balance

Stress Management and Wellbeing

Coaching and Mentoring

Change Management

Team Management

Managing Conflict

Delegation and Empowerment

Performance Management

Leadership Skills

Developing Your Team

Talent Management

Problem Solving

Decision Making

Member Podcast

  • Product Management

Business Model Canvas Explained – a One-Page Business Plan

Earlier, we blogged about the lean canvas* – a startup-friendly idea validation tool . Now, we want to pay tribute to the solution that underlies it – the business model canvas**. So, let’s talk about a sort of a business plan that you can scale in a one-page table.

Here is a short intro to the business model canvas framework. It is the brainchild of Alexander Osterwalder. He offered it as an alternative to the business plan, which he considered a time-waster. The idea was to single out the crucial components of a company that are required to make money. Thus, you get nine sections on the canvas to fill in with relevant data.

Hard to believe, but this document can replace pages of analytics and formulas. And that’s just one of the advantages if we compare business model canvas vs. business plan . What else does this tool have to offer?

Why entrepreneurs love business model canvas

Time-efficient and flexible.

Time is one of the most precious assets in the business world. And Osterwalder’s tool helps you use it efficiently. All the elements of business model canvas are easy-to-understand of what to be filled in. We do not promise you will have a handle on it within 20 minutes or less. But within a few hours, you’ll get an aggregated break up of what you need to generate revenue. Moreover, once it is done, you can and most likely will update the canvas over time. Business plans won’t grant you such flexibility.

Risk-identifying

The canvas provides you with input data to identify risks at an early stage. You can measure most of the bottlenecks to build a high-performance growth strategy. This is not a guarantee to avoid failure. But you’ll know your weak points and be able to pivot if needed.

Value-centered

Of all the business model canvas elements, Value Propositions are pivotal. It tells you why your business exists and what value it delivers. We can say that the entire business model canvas is built around this section. As a result, you get a wide scope of jobs to be done and versatile supporting inputs. You won’t find any irrelevant data on the canvas. The graphical design beacons essential information required to grow your business.

Self-intuitive

The tool is very intuitive. Some users don’t even need the business model canvas explained to start working with it. Indeed, you don’t have to be a genius to get the hang of it. Moreover, the canvas is built using a common language. This makes it easy-to-understand by both internal and external stakeholders.

By the way, we are hiring. Check out our job openings.

How to get started with the business model canvas?

Now, it’s time to shift from product-centric thinking towards business model ideation. We’ll explain how to fill in the components of business model canvas step by step. So, try out the flow yourself using this editable template by Mural . Also, you can download the canvas from Strategyzer .

In our video, we used Uber to explain the lean canvas . Let’s pick this company here as well to display real-life examples.

Customer Segments

Alexander recommends you to start with this section. Try to figure out who is the most important customer you’re delivering value to. The Persona method can help you create an imaginary representation of user categories. As an outcome, you’ll get a list of segments or Personas.

Feel free to spend much time on Customer Segments. Similarly to a lean methodology perspective, this section, together with Value Propositions, calls the shots of the entire canvas. For Uber, we have two categories of users – drivers and passengers. In this case, you may build two separate canvases per each one.

Answer to : Who do you deliver the value to?

Domain knowledge required :

  • Market dimensions

Value Propositions

Each Persona has a set of problems or needs that your product/service can solve. And that’s what you need to specify in the Value Propositions section. For this, we advise you to make use of the Jobs To Be Done framework.

Answer to : What problems and needs can you solve with your product?

  • Jobs To Be Done

A channel means a communication unit that entrepreneurs use to reach customer segments. If you’re selling your products via a website – that’s one of your channels business model canvas. Other solutions that draw customers’ attention to your products are also channels. These may include search engines and tools, social media, and even word of mouth marketing .

Answer to : Which are the optimum channels to reach your customer segments?

  • Market behavior

Customer Relationships

This section defines how you interact with customers. It goes beyond the sale-and-purchase interplay via the Channels. Business model canvas Customer Relationships involve post-sales liaison and feedback. If you use a call center or a chatbot to interact with users, mention them here.

Answer to : Which type of interaction suits best to each customer segment and how much do they cost?

Revenue Streams

Revenue Streams list the ways you use to get money for your product. They mostly derive from mapping Customer Segments to Value Propositions. For example, Uber passengers pay for their ride with a bank card. Uber gets revenue in the form of a ride commission. Other ways that generate money within your product are also revenue streams. These may include different billable add-ons, subscriptions, premium accounts, etc.

Answer to : What exactly do your customers pay for?

  • Jobs to be done

Key Activities

Now, the tough part begins. Key Activities cover all the things you need to accomplish to make your business work. For digital products, this involves ongoing product evolution and marketing. These activities, in turn, include recruiting, advertising, etc. If you deliver specific services, this may cover things that refine your propositions. When doing Key Activities business model canvas, take into account other sections you’ve already filled in.

Answer to : What do you need to implement for your business to deliver value to your customers?

Key Resources

Key Resources are the assets you need to run your business at full force. In other words, this is what you can’t do without. Uber rests on a sophisticated technological platform. Also, it requires drivers to complement its value proposition. Services-oriented businesses mostly rely on their staff and expertise.

Answer to : What resources can’t your business propositions do without?

Key Activities:

Key Partners

Now, let’s take a look towards external things that can contribute to your business. Key Partners is the section for this. Here, you need to define all the external stakeholders. We advise you to map them to Key Activities and Key Resources if any. For Uber example, investors can contribute to developing tech platform. Recruiting partners can help with hiring drivers. And so on.

Answer to : Which external stakeholders can contribute to your business?

Key Activities & Resources

Cost Structure

It’s time to strike a balance:) Actually, Cost Structure should tell you what you spend money for. Also, you need to specify prospective costs if your business is growing. This section covers costs for hardware purchases, software development, rental services, and so on.

Answer to : What are you paying for and which costs are most important in your business model?

That’s it. Once you have it done, the next step ahead is business model canvas analysis. You have a broad picture of things in your business and can discover bottlenecks. Also, make sure to share it with stakeholders to refine the content. The canvas is a flexible document, so you should not feel obligated to stick to the first version.

Why entrepreneurs hate business model canvas

A coin always has two opposite sides, unless you’re using Harvey Dent’s lucky coin:) It means that the business model canvas is not a one-size-fits-all tool. And here are some reasons why you may want to abandon it.

  • Learning needed You’ve read this business model canvas review and learned the basics on how to fill it in. Some enthusiasts prefer to skip this step and get at working with the canvas right away. If you use it in the wrong context, it may be misleading for your analysis.
  • Iterative planning The canvas requires an iterative approach to working with it. It means you have to update it regularly according to the business flow. Using the canvas for linear planning won’t let you experience business model canvas benefits to the full.
  • Not full picture The canvas lacks important business facets like existing alternatives, regulatory environment, and others. Planning without them can be a dead-end road. In this regard, the lean canvas offers you broader horizons. So, it’s essential to understand the purpose of the business model canvas. It can be a great augmentation to other business analytical tools you use.
  • Too simple Simplicity is not always a benefit. As a rather easy-to-use tool, the business model canvas cannot dive deep in analytics. Generally, it is an actionable communicative tool to get a general overview of the business flow. But, you should not rely on it as a full-fledged analytical tool.

A solid alternative to the Business Model Canvas

It’s clear that the Business Model Canvas has its limitations, even when it’s combined with the Value Proposition Canvas tool. Since neither allows you to delve deep into the context of your product idea, it’s likely that you will need to make use of another tool in order to achieve this.

We recommend using BRIDGeS, an all-in-one tool for flexible idea generation , validation, and selection. When compared directly to the Business Model Canvas, BRIDGeS bears several key advantages, including the fact that it’s versatile, easy to use, and allows for deep context understanding. The framework also gives you the opportunity to analyze a Subject from all angles in order to discover new insights or approaches. By the end of the process, you won’t just have a general overview of the problem you are trying to solve — you’ll have a firm idea of how to move forward with your business/product idea.

To get a better understanding of how BRIDGeS compares to the Business Model Canvas, check out the Uber Case Study.

Not sure if you should try the Business Model Canvas?

We would not pressure you to go with Osterwalder’s canvas. It is a specific tool and not every business can benefit from it. If, however, you’d like to give it a shot, we do advise you to start with the value proposition canvas*** . It’s derived from the business model canvas components – Value Propositions and Customer Segments. At the same time, it lets you understand the value of your product/service from the customer’s standpoint.

If you are a startup founder, BRIDGeS or the Lean Canvas is what you need from the outset. Check out how Amazon, Google, and other big names could have taken advantage of the lean canvas tool earlier. As an all-in-one tool, BRIDGeS can also be beneficial for nailing down your product idea during the early stages of your startup journey. Apart from that, it probably won’t be until your business is up and running that you’ll understand if other discovery tools are a better fit or whether the Business Model Canvas is the way to go.

* Lean Canvas was designed by Ash Maurya, based on the Business Model Canvas designed by Alex Osterwalder, Strategyzer.com , licensed under CC BY SA 3.0.

** Business Model Canvas is designed by Alex Osterwalder, Strategyzer.com , licensed under CC BY SA 3.0.

*** Value Proposition Canvas is designed by Alex Osterwalder,  Strategyzer.com .

Lorem ipsum test link amet consectetur a

  • Career Skills
  • Change Management
  • Communication Skills
  • Decision Making
  • Human Resources
  • Interpersonal Skills
  • Personal Development
  • Program Management
  • Project Management
  • Team Management
  • Learning Tracks
  • Free Productivity Course

author image

By Denis G.

Business Model Canvas Explained with Examples

In this article:

In this article, we’ll examine the nine steps needed to create your first business model using the Business Model Canvas. We’ll also look at the business models of Google, Uber, and Gillette to bring the theory to life and integrate all nine steps.

Before we jump in and look at the Business Model Canvas, let’s take a moment to define what we mean when we use the phrase “business model”.

What is a business model?

A business model is defined as:

  • A plan for the successful operation of a business, identifying sources of revenue, the target customer base, products, and details of financing.

Essentially it tells us how the key drivers of a business fit together.

Now if you think about writing all this down in a document, then it’s obviously going to require multiple pages to capture all of that information. Now think about trying to get all of this information into your brain at the same time and its easy for business models to overwhelm us.

That’s where the Business Model Canvas comes in. It gives you a way to create a pretty clear business model using just a single sheet of paper. And what is great about it is it can be used to describe any company – from the largest company in the world to a startup with just one employee.

Advantages of the Business Model Canvas

The reason why you might want to create a Business Model Canvas is that they have the following advantages:

  • Easy to understand : Because the canvas on just a single page and is very visual it’s very easy to understand.
  • Focussed : It removes any fluff that might have been present in a traditional business model. It’s all killer no filler.
  • Flexible : It’s quick and easy to make changes to your model and sketch out different ideas.
  • Customer Focused : the canvas forces you to think about the value you’re providing to your customers, and only then what it takes to deliver that value.
  • Shows Connections : The single page graphical nature of the canvas shows how the different parts of the model interrelate to each other. This can be really difficult to ascertain from a traditional business plan.
  • Easy to Communicate : Because the canvas is so easy to understand you’ll be able to share and explain it easily with your team, making it easier to get them on board with your vision.

Using the Business Model Canvas

The first thing to notice is that there are nine elements or building blocks which make up the canvas:

Business Model Canvas

We’ll look at each building block of the canvas in more detail shortly, but briefly, each segment tries to answer the following questions:

  • Customer Segments : Who are your customers?
  • Value Proposition : Why do customers buy from you? What is the gain you provide or the need you satisfy?
  • Channels : How are your products and services delivered to the market?
  • Customer Relationships : How do you get, keep, and grow your customers?
  • Revenue Streams : How does your business earn money?
  • Key Resources : What unique strategic resources does your business have or need?
  • Key Activities : What unique strategic activities does your business perform to deliver your value proposition?
  • Key Partnerships : What non-key activities can you outsource to enable you to focus more on your key activities.
  • Cost Structures : What are the major costs incurred by your business?

Left/Right Split

Before we dig deeper into the detail of each of these elements, there’s just one thing to be aware of…

Broadly speaking we can say that those elements on the lefthand side of the canvas represent costs to the business, whereas elements on the righthand side generate revenue for the business.

With that, let’s dig into each of the nine building blocks in a little more detail.

1. Customer Segments

In this building block, you enter the different customer segments or that you will serve. If you can, create one or more persona for each segment you serve. A persona is simply a relatable description of each customer type you serve. They try to highlight your customers’ motivations, their problems and capture the “essence” of who they are.

One really important point to get across here is that customers don’t exist for you, but rather you exist to serve your customers.

Many businesses will serve just one customer segment, but not all. For example, Google serves two customer segments, people performing searches as well as advertisers.

If you think about breaking down the advertiser customer segment into personas, then there are many different types of advertisers you might identify. For example, Fortune 500 companies such as Nike with massive advertising budgets might be one persona, whereas small one-man businesses might form another.

2. Value Proposition

The value proposition describes the value that you deliver to each customer segment. What problems do you solve for each customer segment? What needs do you satisfy? The Value Proposition answers the question, “why will customers buy from us?”.

Some of the most common value propositions are:

  • High performance.
  • Ability to customize.
  • Brand/Status.
  • Cost reduction.
  • Risk reduction.
  • Convenience.

3. Channels

Channels refer to how your products or services are sold to customers. To complete this section ask yourself how do your customers want to be reached? How are you reaching them now?

Broadly speaking you can either have your own channels or partner with someone else.

Your own channels might include any combination of stores you own, a sales force you employ, or your website.

Partner channels could include a multitude of options, from using a wholesaler to working with affiliates to sell your products or even using Google Adsense.

4. Customer Relationships

The Customer Relationships building block answers the question of how you get, keep, and grow customers.

  • Get : How do customers find out about you and make their initial purchase? For example, this could be through advertising on Google.
  • Keep : How do you keep customers? For example, excellent customer service might help keep customers.
  • Grow : How do you get our customers to spend more? For example, you could send out a monthly newsletter to keep them informed about your latest products.

The easiest way to define all of this is to walk through the entire customer journey in detail. That is how do customers find out about you, investigate whether to buy your product, purchase it and how are they managed after purchase.

5. Revenue Streams

Where does the money come from? In this building block, you state where your revenue is generated.

This might sound super simple but it isn’t. You’re actually trying to figure out what strategy you’ll use to capture the most value from your customers? Will customers simply pay a one-time fee? Will you have a monthly subscription fee? Perhaps you give away your product for free like Skype and hope that some portion of customers upgrade to the paid premium product?

Consider Google. Advertisers pay Google to place their ads in front of users with buying intent. For example, if you search for “Nike trainers” you will see ads. If you search for something without purchasing intent, such as “picture of flowers” you probably won’t see any ads.

In fact, you could say that Google operates searches without purchase intent as a loss leader to keep people using the Google system.

Taking a Step Back

If you look at what we have done so far we’ve filled in our Value Proposition and the building blocks to the right of it.

In a nutshell, we’ve developed our understanding of everything that relates to our customers.

Now we need to work on the area to the left of the value proposition. We need to build our infrastructure to be able to best provide the value proposition.

So with that let’s move on to the first infrastructure building block, Key Resources.

6. Key Resources

This building block describes your most important strategic assets that are required to make your business model work.

Broadly speaking resources can fall into one of four categories:

  • Physical : such as buildings, vehicles, machines, and distribution networks.
  • Intellectual : such as brands, specialist knowledge, patents and copyrights, partnerships, and customer databases.
  • Human : sometimes your people will be your most key resource, this is particularly true in creative and knowledge-intensive industries.
  • Financial : such as lines of credit, cash balances etc.

7. Key Activities

The Key Activities are the most important strategic things you must do to make the business model work. Key Activities should be directly relatable to your value proposition.

If your Key Activities are not relatable to your Value Proposition then something is wrong, because the activities you view as most important aren’t delivering any value to customers.

Key Activities can typically be broken down into three broad categories:

  • Production : refers to delivering your product. You will typically do this to either a high quality or a high quantity.
  • Problem Solving : Consultancies and other service organizations often have to come up with new solutions to individual customer problems.
  • Platform/Network : Networks, software platforms can function as a platform. For example, a key activity for Facebook is updating the platform.

When completing this section, it is a mistake to list all the activities of your business, instead only include activities which are absolutely core to delivering your value proposition.

8. Key Partners

In this building block, you list the tasks and activities that are important but which you will not do yourself. Instead, you will use suppliers and partners to make the business model work.

Let’s look at Spotify. Spotify’s key activity is updating its platform. However, as it doesn’t produce its own music one of the key partnerships of Spotify will be the deals it strikes with record labels and publishing houses, without which it would have no music!

There are usually three reasons for creating a partnership:

  • Economies of scale.
  • Reduction of risk and uncertainty.
  • Acquisition of resources or activities (e.g. music for Spotify).

9. Cost Structure

In the Cost Structure building block, we want to map key activities to costs. We also want to ensure that costs are aligned with our Value Proposition.

It should be straightforward to determine your most important costs and your most expensive after you’ve defined your Key Resources, Key Activities, and Key Partnerships.

Business Model Canvas Examples

That’s the theory out of the way. However, the Business Model Canvas comes to life when you see it in action.

So let’s look at three different examples of the Business Model Canvas so you can see just how useful it can be.

Example 1: Google

The first thing you should know about Google’s business model is that it is multi-sided. This means that it brings together two distinct but related customers.

In Google’s case, its customers are its search users and its advertisers. The platform is only of interest to advertisers because search users are also present. Conversely, search users would not be able to use the platform free of charge were it not for advertisers.

The Business Model Canvas for Google is shown below:

Business Model Canvas: Google

As you can see the diagram gives you an immediate understanding of the key parts of Google’s business model.

We can see that:

  • Google makes money from the advertiser customer segment, whose ads appear either in search results or on web pages.
  • This money subsidizes a free offering to the other two customer segments: search users and content owners.

Google’s business model has a network element to it. That is, the more ads it displays to web searchers the more advertisers it attracts. And the more advertisers it attracts the more content owners it attracts.

Google’s Key Resource is its search platform including google.com, Adsense (for content owners) and Adwords (for advertisers).

The key strategic activities that Google must perform are managing the existing platform including its infrastructure.

Google’s key partners are obviously the content owners from whom a large part of its revenues is generated. OEMs (Original Equipment Manufacturers) also form a key partner.

OEMs are companies who produce mobile handsets to whom Google provides its Android operating system to for free. In return, when users of these handsets search the internet they use the Google search engine by default, thus bring more users into the ecosystem and generating even more revenue.

A Word on Color Coding

There are no hard and fast rules when it comes to using color within your canvas. Some people prefer to use color to represent the links between elements, as we have done in this article. Others like to use different colored elements or sticky notes to represent related elements.

The choice is up to you. What is important is that any relationships between elements are easy to identify and easy to understand.

Example 2: Skype

In the diagram below you can see the Business Model Canvas for Skype.

Business Model Canvas: Skype

From the Business Model Canvas we can see that Skype has two key value propositions:

  • The ability to make calls over the Internet, including video calls, for free.
  • The ability to make calls to phones cheaply.

Skype operates a freemium business model, meaning the majority of Skype’s users (the Free Users customer segment) use the service for free to make calls over the internet, with just 10% of users signing up to the prepaid service.

We can see from the customer relationship building block that customers typically have a help themselves relationship with Skype. Typically this will be by using their support website.

The channels Skype uses to reach its customers are its website, skype.com, and partnerships with headset brands.

Looking at key partnerships, key activities, and key resources together, the main thing to notice is that Skype is able to support its business model of offering cheap and free calls because it doesn’t have to maintain its own telecoms network like a traditional telecoms provider. Skype doesn’t need that much infrastructure at all, just backend software and the servers hosting use accounts.

Example 3: Gillette

The Business Model Canvas for Gillette is shown below:

Business Model Canvas: Gillette

Gillette’s business model is based on the “Bait & Hook” business model pattern. This model is characterized by an attractive, inexpensive or even free initial offer that encourages ongoing future purchases of related products or services. With this business model, the bait is often provided at a loss, subsidized by the hook.

In Gillette’s case, an inexpensive razor handle forms the bait, and continued purchases of the blades represent the hook.

The business model is very popular in SaaS (Software as a Service) businesses, where typically a free initial month leads to a monthly subscription.

In the diagram above we have used the thickness of the arrows to indicate the size of revenue generated. In Gillette’s case, all revenues are generated by just one customer segment, but the vast majority of revenues come from Frequent Blade Replacements, with just minor revenues coming from the purchase of handles.

If you look at the left-hand side of Gellettes Business Model Canvas you will notice how all major costs are aligned with delivering the value proposition. For example, marketing costs help to build Gillette’s strong brand and R&D costs help to ensure that the blade and handle technology is unique and proprietary.

Key Takeaway

Through these three Business Model Canvas examples, you should be able to see just how easy it is to represent the complete business model of any company on just one single sheet of paper.

Creating Your First Business Model

If you’re going to do create your first Business Model Canvas, then here are some tips to help you get started:

  • Don’t go it alone: Don’t try to create your model singlehandedly. Instead get a small team of 3-5 people together so you can brainstorm ideas.
  • Use a whiteboard if you can.
  • Have plenty of different colored whiteboard pens and sticky notes handy.
  • Plan on the process taking about an hour to complete your first draft Business Model Canvas.
  • Decide which building block you’re going to fill in first. Usually, it makes sense to start with Customer Segments or Value Proposition and then work from there.

The Business Model Canvas provides a way to show the key elements of any business model on a single sheet of paper. The canvas is based on nine building blocks and the interrelationships between them. You can use the canvas regardless of whether you are trying to understand a startup with two employees or a Fortune 500 company with over 50,000 employees.

Cite this article

Minute Tools Content Team, Business Model Canvas Explained with Examples, Minute Tools, Oct, 2018 https://expertprogrammanagement.com/2018/10/business-model-canvas-explained/

author image

Originally hailing from Dublin, Denis has always been interested in all things business and started EPM in 2009. Before EPM, Denis held a leadership position at Nokia, owned a sports statistics business, and was a member of the PMI's (Project Management Institute’s) Global Executive Council for two years. Denis now spends his days helping others understand complex business topics.

How useful was this post?

Click on a star to rate it!

Average rating 5 / 5. Vote count: 2

No votes so far! Be the first to rate this post.

Related Tools

Hoshin planning explained.

Hoshin planning, also known as Hoshin Kanri or policy deployment, is a 7-step strategic planning system. It ensures that the […]

Porter’s Generic Strategies

To thrive in a competitive market, every business needs a clear strategy to achieve a sustainable competitive advantage over its […]

The Balanced Scorecard

The balanced scorecard model is a strategic performance management tool used by management teams to set and measure performance in […]

Horizontal vs. Vertical Integration

Horizontal and vertical integration refers to an organization’s strategic approach when expanding externally, through the acquisition of, or a merger […]

CAGE Distance Framework

The CAGE Distance Framework is a model that can take some of the guesswork out of deciding which country to […]

The Ansoff Matrix

The Ansoff Matrix, also known as the Product/Market Expansion Grid, is a framework that can help your organization develop growth […]

Porter’s Five Forces

Porter’s Five Forces is a method for analyzing and understanding the competitive forces that are shaping a marketplace. It is […]

Porter’s Value Chain

Porter’s Value Chain is a strategic tool that helps you map out the internal activities you perform that add value […]

Diffusion of Innovation Theory

The diffusion of innovation theory, created by Everett Rogers in 1962, is a model that explains how, why, and at […]

VRIO Framework

VRIO framework is a strategic analysis framework that can help you uncover resources and capabilities within your organization that can […]

cta image

In our course you will learn how to:

This 5-week course will teach you everything you need to know to set up and then scale a small, part-time business that will be profitable regardless of what’s happening in the economy.

So if you’ve always wanted to be your own boss and have the flexibility and freedom that entails, then…

Do your future self a favor and check out our course designed to help you achieve exactly that.

Home Blog Business What is a Business Model Canvas? Quick Guide + Examples

What is a Business Model Canvas? Quick Guide + Examples

What is a Business Model Canvas

Based on the work of Alexander Osterwalder, a Business Model Canvas , or BMC for short, is a diagram used to visualize a business model; it allows structured organization and a quick method of evaluation and reflection on the effectiveness of a Business Model. The use and study of Business Model Canvas Examples allows us to understand it in a complete way and apply it to different types of organizations.

The Role of the Business Model Canvas

What are the benefits of using a business model canvas, 1. customer segments, 2. value propositions, 3. customer relationships, 4. channels, 5. revenue streams, 6. key activities, 7. key resources, 8. key partnerships, 9. cost structure, the power of a bmc in entrepreneurship: visualize the business model, mcdonald’s.

  • How to Utilize a Business Model Canvas for your Success

Business Model Canvas PowerPoint Templates

Whether it be in small business entrepreneurship or large corporate product launches, the business model sits at the center. The one thing that stands at the very heart of the daily operations of an organization, is a model that dictates where the opportunity lies and how the company effectively acts on it at each step in the process.

The very best professionals will have all of this knowledge and action driving their decisions. However, the original business model one may follow may not always be applicable to the obstacles that an organization faces, thus it’s incredibly useful to fully display organizational structure and operations.

The Business Model Canvas is a powerful tool for businesses of all sizes and industries. Here are some key benefits of using this visual framework:

Simplifies Complexity: Business models can be intricate, with various elements and interactions. The BMC simplifies this complexity by breaking down the model into nine essential building blocks. This visual representation makes it easier for entrepreneurs, team members, and stakeholders to grasp the core components of the business without getting lost in a lengthy business plan. It’s a powerful tool for distilling complex ideas into a clear, concise format.

Enhances Focus: When creating a BMC, you’re prompted to think critically about each building block, such as customer segments, value propositions, and revenue streams. This process encourages a deep understanding of how these components interact and depend on each other. By explicitly defining these elements, you gain a sharper focus on your business strategy and objectives. It helps you identify gaps, redundancies, or areas where your model can be refined.

Promotes Collaboration: The BMC is designed to be a collaborative tool. It’s not something a single person creates in isolation; instead, it encourages cross-functional teams to work together. Each team member can contribute their expertise to fill in the relevant sections. This collaborative approach ensures that everyone involved in the project shares a common understanding of the business model, which is essential for successful execution.

Iterative and Adaptable: Business environments are dynamic, and your business model should be too. The BMC supports an iterative approach, allowing you to make changes and updates as needed. For instance, if market conditions change, you can easily adjust your value propositions or customer segments. It’s a flexible tool that accommodates experimentation and learning. You can use it to test different assumptions and hypotheses about your business and refine your model accordingly.

Cost-Effective: Creating a traditional business plan can be a time-consuming and expensive process. In contrast, developing a BMC is a cost-effective alternative. It doesn’t require extensive resources or financial investments. This makes it particularly valuable for startups and small businesses with limited budgets. It’s a pragmatic way to initiate strategic planning, especially in the early stages of a venture when resources are scarce.

The Basics of the Business Model Canvas

Whether one is creating an all-new business model, comparing a pre-existing model, or adjusting a model to improve value, the BMC excels in keeping anyone invested in the business on track without wasting time and focus. By displaying only, the most critical pieces in business operations or a product, this tool is both a time saver and a method to sharpen your awareness of expectations vs. reality.

Here is the Business Model Canvas explained: There are nine sections in a BMC, each containing a specified topic of information that composes the core of any business model.

PPT Template Business Model Canvas

This section contains the information related to the core target audience that you are selling to. Simple and traditional segmentation analysis must be done to identify the top segments of the model. Start simple with questions like Which are the demographics of the major customer groups being targeted? Why are they going to be interested in the product or service? In essence, how well does the model comprehend who is being sold to? It is crucial that you identify clearly the segments as when facing reality, you will need to focus only in a few (1 or 2) to really test your model without a full operation in place.

Create a list of the unique business value propositions you will offer. Why is the idea or company valuable? What makes it stand above competitors? If there aren’t any direct competitors, what gaps are being filled in given markets?

This section could be extremely lengthy, depending on the business model, but should only contain the most central concepts at the heart of the model that attract customers or generate revenues. This section will contain the aspects of the business that relieve a customer’s pains. If you’re struggling to identify what is most important, consider using a Value Proposition Canvas, another easy-to-visual tool that helps establish your target audience with your strengths. Focus on solving a real pain for the segments identified.

The information of this section should refer to how to connect segments and the value proposition. During the analysis, you should be asking questions like How are customers convinced that your product or organization has the advertised special qualities? What methods are used to interact with them? How does an audience engage with each strategy in the product lifecycle? Additionally, how is customer engagement tracked?

Once the customer is convinced of the goods or services, how would you deliver them? This should include every step of the process it takes to make the financial transaction and value delivery possible. Is there a separate supplier? Who distributes the product? How is it displayed? Think about what the model requires from start to finish in order to make a sale.

If the customer connects with the product or service, and they want to proceed with doing business, then how does the actual exchange of money happen? How is the cash flow tracked? Are there any middlemen between the sale and the income to the business?

Business Model Canvas Diagram for PowerPoint

Source: Editable Business Model Canvas PowerPoint Template

This section should include specific activities that the organization will do to create value. Unlike the Value Propositions, it’s not just about a new product or business practice, but rather the day-to-day operations that each team will take.

Similar to Key Activities but focusing on assets that are used. Is there a special supplier? Is there access to any materials or a local storefront that puts you in an advantageous position? Do you have a special intellectual property or patent that introduces new knowledge into the niche?

For areas that may be lacking, or areas that are too costly for the business to manage by itself, what can be outsourced to partners to focus on? Which areas would it be more cost-efficient to hire from supporting businesses? Specifically, identify model strengths, maximize time and money on them, and move identified weaknesses to connected partners that can address them better or solve them altogether.

Finally, what are the major expenses in the model? Are they a flat fee, or are they a variable cost? This may factor into previous sections, like key activities, resources, and partnerships.

Additionally, how does this relate to the Revenue Streams? How will the predicted costs vs. the actual be monitored? Most importantly, what will be done if costs outweigh the incoming funds?

Creating a Business Model Canvas involves analyzing each of these sections individually and as a whole, and connecting the dots between them.

Introducing a new business or product to the world is no small undertaking, especially when you consider how much competition and other new ideas are thrown into the world on a regular basis.

This also means keeping the model current and responsive. A business model, after all, is only a well-educated guess on how to generate success from a demand. If reality does not match up to the prediction, then even the very best business models are useless. A BMC is your abstract representation of how a business delivers value to customers to help them solve problems.

Steven Blank’s book to entrepreneurs and business leaders, ‘Four Steps to the Epiphany’ , demonstrates the difference between those who watch and listen to their model in action, and those who convince themselves that their business model is flawless, and the world will adjust to follow it instead. The fact is, you may have the most amazing ideas in the world, but it won’t matter if you aren’t paying attention to unforeseen challenges that arise between conception and actualization of a successful model.

The BMC is an excellent tool to get away from the guesswork, and out into the metaphorical streets. It allows an individual or team to compare expectations with reality, to double-check targets and see if those targets are still manageable, and it gives an opportunity to make adjustments to a business model before it’s too late.

This practice is called, ‘Get out of the building’, an important part of the Lean Startup Methodology . It means to develop a BMC and test it against reality. For this to work, you need to create an MVP ( Minimum Viable Product ) that materializes your Value proposition and tests it against real-life customers. Testing means that they should really purchase the MVP and that they complete the different sections of the BMC for true validation. This process is really iterative, and it helps entrepreneurs and business executives make the adjustments necessary to really market a value proposition, reducing the risk of mounting a full-scale operation.

Get Out Of The Building PowerPoint Template

Business Model Canvas Examples

By using examples of Business Model Canvas, we can evaluate business models and identify just what changes need to be made to the model in order to ensure growth and success. In addition, analyzing Business Model Canvas examples and being able to study success stories is beneficial to be able to apply it in different industries, helping you better understand Business Model Canvas explained with examples.

Let’s take a look at the BMC Example of the MoviePass company, which launched with the idea to sell a monthly service to the general public for daily movie tickets at major theater chains for a flat monthly membership fee. The company reasoned that they could benefit two groups, the average moviegoer would be able to see more movies, and movie theaters themselves would see better attendance. This innovative approach required the development of robust membership software to handle the logistics and subscriptions efficiently, making it one of the notable examples of a business model.

In theory, it sounds like a reasonable concept, but in reality, MoviePass had not developed a functional business model which resulted in a poor performance against new technologies. There was no constant evaluation to keep track of their cash flow, and by failing to keep the company growing fast enough, it couldn’t support the necessary costs. Perhaps if leadership had followed a BMC these issues may have been recognized earlier.

Business Model Canvas Example - MoviePass

By using the BMC, MoviePass could have visualized earlier that the business model was in need of a pivot, a change to a section of the model in order to address an issue. In MoviePass’s case, areas like cash flow and customer acquisition had some gaps that required a solution. Had the company been more aware of its business model, it might have seen a need for a Minimum Viable Product (MVP) where they could test the results of their ideas with a few early adopters.

An MVP is the bare bones of a product or service that can provide invaluable information about how a small group of customers reacts. By having a testing period of limited engagement, a business can limit costs while drastically improving knowledge on how to proceed. Had MoviePass used this, they might’ve been able to observe early on that some customers used their service to the max, purchasing a movie ticket per day, far outweighing the profit of their service from the cost of providing it.

The pivot would adjust to their business model, and a new MVP could be created to test the new approach. This new iteration of the business may have changed the original direction of the company. Through each pivot and each new iteration of the model, MoviePass BMC would adjust accordingly, allowing an easy method in which to keep track of the major changes without getting overwhelmed in all the details that lay underneath each educated decision.

There are, however, examples of well-crafted business models that can be observed on a BMC. Let’s take a company that has spread its business model all over the world and has undoubtedly enacted countless pivots and iterations of the business model in order to evolve, adapt, and thrive over the years: McDonald’s, as one of the prime business model examples.

When thinking about the massive scope of McDonald’s, it’s both interesting and telling of how the BMC can still capture the essence of their business model. McDonald’s is a global corporate cash cow requiring a rock-solid model, but that doesn’t mean it’s the same one since the conception of the company.

With the many decades in operation, you can be sure that a McDonald’s BMC would not look the same at the beginning as it does today. What originally started as a single burger joint on a street corner, now faces the challenges of global food service. Each time a new challenge or opportunity presented itself, the McDonald’s business model was forced to pivot by observing the environment, developing an appropriate plan of action, and monitoring the progress accordingly.

Over the years the world has grown to experience many iterations of the McDonald’s brand, whether it be an icon of American cuisine or an example of adaptation to dietary health. Flexible and ambitious, McDonald’s always made sure the business model matched the desired outcomes.

Business Model Canvas Example McDonalds

Uber is a ride-hailing service that has caused massive disruption for conventional taxi services. By using digital technology and a specific standard for cars and drivers offered to customers, many taxi services and individual taxi drivers have found it hard to compete with Uber. In contrast to developed countries, taxi drivers in developing countries have been unable to meet the minimum vehicle standards to qualify as Uber drivers, competing with them virtually out of the market. On the contrary, it has also attracted a new segment of people looking to use Uber as a part-time job to earn extra money.

By looking at Uber using the BMC Example we can see that its key partners include customers, drivers, payment processors, mapping data providers, and local authorities in the country it operates. Its key activities include developing its digital platform and algorithms, driver onboarding, marketing to balance demand and supply, and supporting customers using the service. The key resources of Uber are its digital platform, pricing, and routing algorithms. Uber relies on a peer-to-peer (P2P) circular economy. Where customers and drivers continue to contribute to the Uber revenue in almost a loop. And since Uber is easier to use compared to conventional taxi services, both customers and drivers tend to often use it as a routine. For example, many drivers have completely switched to Uber from conventional taxi services and new drivers entering the market cannot imagine providing services without the model Uber provides. Similarly, customers can get used to the service in a way that the Uber service itself becomes a part of their daily routine.

The value proposition of Uber is the provision of an on-demand taxi service for customers, whenever and wherever they need it. Uber fills the gap for the availability of an instant taxi service, without the need to necessarily ensure pre-booking or find a taxi manually. This offers user convenience, with various value benefits for both the customer and drivers, including the option to avail a cash-free taxi service by customers, earning opportunities for drivers and the supply of passengers and drivers through its ever-increasing base of users.

Uber reaches its customers and even attracts new drivers through its marketing and makes it easier for people to use its services through its app. Making it easy for the customers and drivers to communicate. Uber provides the utility of not just an on-demand service but also uses its algorithms to match supply and demand, find the shortest routes for customers, and to allocate the closest driver. However, since Uber is primarily connecting customers and drivers, it also shifts much of its costs to the former, since it does not require owning and maintaining a large fleet of cars. It can also adjust its revenue based on the market it’s operating in, and adjust prices to match not only demand and supply but the purchasing power and market rates of the country or area it operates in.

Business Model Canvas Example - Uber

When Amazon started in 1994, terms like e-commerce or online shopping were virtually unheard of. In fact, Amazon can be easily credited with being one of the first e-commerce platforms in the world. However, its customer-led approach, with the convenience Amazon offered soon turned it into a famous retailer, which now has various other services attached to its name including an online video streaming platform called Amazon Prime, a cloud storage service (Amazon Drive), Kindle tablets, Fire TV, etc. However, to keep things simple, let’s look at Amazon’s BMC Example in the context of its retail store.

Amazon provides users with a range of services from its network of sellers. These sellers are rated by customers according to their experience and sellers that fail to adhere to Amazon’s standards are removed from the platform. For example, during the start of the COVID-19 pandemic, many people began hoarding hand sanitizers and selling them at inflated prices online. Amazon was quick to act to remove such vendors.

The approach that Amazon has is based on not just connecting buyers and sellers but ‘continually raising the bar of the customer experience’. To ensure this, amazon often takes innovative steps that not only include improving its digital platform but also ensuring a steady supplier base. In 2019, Amazon announced $10,000 and three months worth of their gross salary to employees who quit their jobs and started a delivery service. Anticipating the need to expand its supplier base. Amazon has also been famous for offering competitive employee benefits and creating a corporate culture that encourages innovation and employee loyalty.

Through its colossal warehouses, customer-centric approach, and corporate culture that creates an atmosphere of employees to remain closely connected with the company, Amazon’s revenue stream simply does not rely on its customer experience, workforce, or supplier base but on how it’s able to create an environment where stakeholders, including customers and employees feel a sense of loyalty towards the company.

Business Model Canvas Example Amazon

Over the years, AirBnb has been among companies that have leveraged their platform to transform conventional modes of doing business. Using its rating-based digital platform, AirBnb enables people looking to rent accommodation and hosts to be able to connect and become a part of its revenue stream with a few simple taps or clicks.

The platform has not only helped people who have conventionally been renting out their property but also enabled individuals with extra space to consider becoming hosts to earn extra money by renting out space for a short period of time. Similarly, the customers benefit from avoiding hefty rates of hotels and expensive accommodation options.

Like Uber, AirBnb has also been a disruptive force in the market it has operated. It uses its digital infrastructure to connect travelers and hosts. While offering the value proposition of making money by utilizing underutilized space to hosts and offering low-cost accommodation for people looking to save money. This model has enabled the company to surpass large hotel chains and make a major impact in the industry for rent and accommodation. In 2020 AirBnb was valued at $75 billion, surpassing giants like Hyatt Hotels valued at $2.07 billion and Marriott Hotels International valued at $10.57 billion.

Business Model Canvas Example - AirBnb

From its launch in 1997 to 2006 in the United States, Netflix had a per-rental model per DVD. However, in 2007 it launched a subscription-based model that turned out to be more successful. Today, Netflix is available for streaming in over 190 countries, each with its own catalog of Movies and TV shows.

According to Netflix’s Business Model Canvas Example, its value proposition is the provision of on-demand entertainment regardless of where you are. Its subscription models provide access to one or more screens, with the utility to watch Netflix via mobile, tablet, laptop, gaming consoles, etc. Its packages include an economical package with an SD (480P) resolution limited to a single device to more exclusive packages offering Full HD (1080p) Ultra HD (4K) and HDR (2160p) resolutions.

Needless to say, the market segment of Netflix is quite close to universal. Outmaneuvering cable operators and conventional TV channels with exclusive on-demand content. While Netflix’s partners have included broadcasters and production companies, it has recently been focusing on original content. Through Netflix’s subscription-based model, there is very little need (if any) for customer interaction, unless a user is reporting a bug. The Netflix model focuses on self-service with an ‘all you can eat’ style subscription model, with algorithms constantly suggesting content to users to keep them engaged based on their viewing preferences.

Neflix Business Model Canvas Example

Ikea’s value proposition is to provide affordable furniture that is sturdy, aesthetic, and functional enough to cater to customer needs. In doing so Ikea claims to create a better everyday life for people who use its products. The Business Model Canvas Example of Ikea includes its vendors, suppliers, franchisees, and logistics partners making it possible to reach out to customers globally.

Unlike companies like Amazon, e-commerce is only part of Ikea’s operations, as it has a robust physical presence in more than 50 countries. Over the years Ikea has undergone continuous product development with new furniture designs and a range of products being released on a consistent basis. This has helped the company to cater to the needs of different customer segments including families, businesses, and people who need something that is easy to use, assemble, and disassemble.

Ikea Business Model Canvas Example

How to Utilize a Business Model Canvas for Your Success

Whether it be a brand-new business endeavor or a product launch at a long-standing company, it’s critical that the business model is kept at the core of every decision. A Free Business Model Canvas Template is a tool to easily keep the model insight and offers an easy method to open the dialogue when that model may need to pivot.

The whole purpose of the BMC is to allow for a simple presentation of information, reducing complications in understanding just what is required in each new iteration of a business model. At a glance, anyone invested in the outcome of the model should be able to understand the who, what, when, where, and why of the model, or bring it to everyone’s attention if they don’t.

Most importantly, the BMC is a tool to help drive success. If there are issues in your business model that need to be addressed, a BMC makes it easier to visualize where the gaps are, and how they may be filled. Keep in mind that pivoting is crucial to the success and survival of a business model and that change, growth, and adaptation are not an abandonment of what matters, but a natural progression to find the best outcomes to the ultimate goal. As Eric Ries, author of Startup Lessons Learned, puts it: ‘pivoting may lead [successful startups] far afield from their original vision, but if you look carefully, you’ll be able to detect common threads that link each iteration.’

Frequently Asked Questions

Business Model Canvas is like a blueprint for your business. It’s a visual tool that helps you plan, understand, and describe how your business works. It breaks down your business into key parts, like who your customers are, what you offer them, and how you make money.

A real-life example would be Airbnb. They use the Business Model Canvas to show how they connect hosts with travelers, offer unique accommodations, and earn money through commissions on bookings.

To determine your value proposition , you need to identify what makes your product or service special. Ask yourself: What problem does it solve for customers? What benefits do they get? Your value proposition should clearly communicate these advantages.

Building and maintaining customer relationships involves providing excellent customer service, staying engaged with customers through various channels (email, social media), seeking feedback, and addressing their needs promptly.

When establishing partnerships, consider what resources or expertise your business lacks and seek partners who can provide them. Think about how these partnerships will benefit both parties and align with your overall business goals.

The Business Model Canvas allows you to see all aspects of your business in one place, making it easier to identify weaknesses and opportunities. By analyzing each component, you can make informed decisions to optimize your model for better results.

Yes, the Business Model Canvas is versatile and can be used for various businesses, from startups to established companies, in different industries. It helps structure and clarify the business model for any venture.

The frequency of updates depends on your business and market dynamics. In rapidly changing industries, you might need more frequent updates, while others may do so annually or when major changes occur.

Use your Business Model Canvas as a visual aid during presentations. Walk stakeholders through each section, explaining how your business operates and creates value. Encourage questions and discussions to ensure clarity and alignment.

If you want to create professional-looking Business Model Presentations, take a look at the following Business Model Canvas templates , ready to edit and easy to use.

1. Free Business Model Canvas Template for PowerPoint

parts of business model canvas

Build a top-notch company presentation using Free Business Model Canvas Template for PowerPoint. The cool scheme is relaxing to the eyes. The clear layout can provide the audience with quick understanding of the entire report in just one slide.

Use This Template

2. Animated 3D Business Model Canvas Template for PowerPoint

parts of business model canvas

Created with a 3D Model, this professional PowerPoint Template is ideal for creating videos or animated versions of your Business Model Canvas. Very popular among educators and speakers of the entrepreneurship niche.

3. Business Model Canvas PowerPoint Templates

parts of business model canvas

This Business Model Canvas PowerPoint Template is created 100% with editable PowerPoint Shapes, allowing the user to customize the content and visual appearance of the presentation. Suitable for educational presentations where you need to navigate each section of the BMC, or for investors presentations where you need to deep dive on each section of your Business Model.

4. Business Model Canvas Template for PowerPoint

parts of business model canvas

Our most popular Business Model Canvas Template. Ideal for working in groups and iterating with different BMC’s. Its suitable for cooperation editing, and allows very simple compositions. Well suited for developing your MVP and crossing the assumptions that were negated by reality.

5. 3D Perspective Business Model Canvas PowerPoint Template

parts of business model canvas

This Business Model Canvas Design is inspired in the idea of empty boxes, that entrepreneurs need to fill with their ideas. The design is simple to edit and decorated with a colorful theme. Designed to impress every audience.

6. Lean Canvas PowerPoint Template

parts of business model canvas

This Lean Canvas template for PowerPoint and Google Slides is perfect for anyone who needs to pitch a business idea to investors, present their idea to stakeholders or company leadership. This template is 100% editable, allowing the user to customize the content and visual appearance.

7. Product Management Canvas PowerPoint Template

parts of business model canvas

The Product Management Canvas PowerPoint Template is a strategic planning and modeling presentation. This is a single-slide template showing various aspects of product planning and successful management. The purpose of this canvas is to consider all aspects of the product.

8. Editable Business Model Canvas PowerPoint Template

parts of business model canvas

Editable Business Model Canvas PowerPoint Template is a professional presentation representing the Business Model Canvas in “board” format. All the presentation design is completely editable and the user can move, or add, post-its like text boxes to work with the canvas.

9. Simple Business Model Canvas Template for PowerPoint

parts of business model canvas

If you are looking to create an aesthetic Business Model Canvas Template, the Simple Business Model Canvas Template for PowerPoint will allow you to give your presentation the style you need. You will be able to add sticky notes with information for each of the sections of your Business Model.

10. Business Model Canvas Template with Widget Design

parts of business model canvas

100% editable Business Model Canvas template for Google Slides and PowerPoint presentations, with a widget design and look and feel.

parts of business model canvas

Like this article? Please share

Acquisition, Business Model Canvas, Channels, Cost Structure, Customer Development, Customer Relationship, Customer Segments, Key Activities, Key Partners, Key Resources, Lean Startup, Management, Minimum Viable Product, MVP, Prototyping, Revenue Streams, Startup, Steve Blank, Strategy, Value Proposition Filed under Business

Related Articles

How to Create a Sponsorship Deck (Guide + Examples)

Filed under Business • January 31st, 2024

How to Create a Sponsorship Deck (Guide + Examples)

Impress your audience and secure deals by knowing the insights on how to create a winning Sponsorship Deck. Step-by-step instructions + templates.

How to Create a Great Investor Pitch Deck Presentation and Close the Deal

Filed under PowerPoint Tutorials • January 7th, 2024

How to Create a Great Investor Pitch Deck Presentation and Close the Deal

If you’re a start-up, then you probably already heard the term pitch deck presentation. A pitch deck presentation is a presentation and it’s intended to showcase your company’s product, opportunity, team to potential investors. Pitch decks are your company’s elevator pitch in a presentation. You are often used to help convince investors to raise capital. […]

How To Present an Action Plan

Filed under PowerPoint Tutorials • November 8th, 2023

How To Present an Action Plan

An Action Plan is a sequence of steps that must be performed for a strategy to succeed. Learn how to present your Action plan to an Executive Audience.

2 Responses to “What is a Business Model Canvas? Quick Guide + Examples”

If your business is a non-for-profit , how can you adapt your MVP? You are not selling anything as such, so how do you test if your product (MVP) will be purchased?

Hi Elena If there is a “business model”, there is always a business. So, you are selling something. Even non-for-profit sell. They just sell at “cost” or “subsidized”, but there are customers which pay at the end. Otherwise, rather non-for-profit, it is philanthropy and there is no “business” around. Hope this helps. Regards GV.

Leave a Reply

parts of business model canvas

What is Business Model Canvas?

Get to know our team: doug harding, llc vs sole proprietorship: which one is best for your business.

What is Business Model Canvas?

Do You Need a Business Model Canvas?

Tunca Cali

More by this contributor:

  • Finding Your Target Audience
  • Five Marketing Trends for 2022
  • Google Analytics - Why Your Small Business Need It!

Comments (0)

You may like.

How to Write a Business Plan for Your Small Business

How to Write a Business Plan for Your Small Business

Do You Need an Employer Identification Number (EIN)?

Do You Need an Employer Identification Number (EIN)?

Guide to Starting a Sole Prop in PA

Guide to Starting a Sole Prop in PA

Business Model Canvas Explained: Definition, Pros, Cons, and Building Blocks

parts of business model canvas

So, here's the thing. We all know that we need structure to work effectively, but where do we start with so many options available? One tool worth considering is the Business Model Canvas (BMC) . Used effectively, it can give solid structure to your planning. 

In this article we will examine how the model works and a few ways to use it effectively. Then, we will describe its best practices and some recommendations on getting started. Finally, we will explore possible alternatives. 

Ready to get to know all about the BMC? Let's begin.

The Business Model Canvas, explained

The Business Model Canvas is a strategic management tool that helps businesses visualize and analyze their business models. It consists of 9 fundamental building blocks that describe the core aspects of a company's value proposition, infrastructure, customers, and finances (more on that later, we promise). 

By using it, organizations can gain a deeper understanding of their overall business model , identify areas for improvement, and develop new strategies for growth. One of the key benefits of the BMC format is that it's very visual. Used adequately, it allows organizations to create a display of their business model in alignment with strategic business objectives and the overall value proposition.

The nine BMC building blocks were initially presented in 2005 by Alexander Osterwalder. They were based on his Ph.D. work on business model ontology, supervised by Yves Pigneur. Since its release, the authors have developed other related tools, such as the Culture Map and the Value Proposition Canvas, which have helped the BMC tool to evolve and added value to it.

Business Model Canvas examples

Some examples of the BMC include:

  • Strategy planning
  • Business planning
  • Business modeling

Lean Canvas vs. Business Model Canvas

Both the Lean and Business Model Canvas enable you to capture your entire model on a single page. The primary difference between them is that the Lean Canvas focuses mainly on solving a particular problem. The Business Canvas Model, on the other hand, is more sales orientated and usually focuses on selling products or services. 

Advantages and disadvantages of the Business Model Canvas

Even though the BMC offers a series of features in order to effectively visualize and analyze your organization's business model, there are also some possible drawbacks to be aware of – and avoid. 

To start on the right note, the benefits of the Business Model Canvas include:

  • A clear and comprehensive business model overview in a single visual format. This makes it easier to understand, articulate, and communicate.
  • Strong collaboration and breaking down silos. Using the BMC approach incentives people to work as one team, as it involves all stakeholders, and enables them to actively participate in developing, improving, and refining the business model.
  • Colleagues constantly progressing with feedback (to borrow from an ITIL principle). The BMC approach allows for a fast and efficient testing of different business model configurations, speeding up the innovation process and reducing the time to market.
  • A structured and systematic approach to analyzing and designing business models, which helps identify areas for improvement and innovation.
  • A flexible approach that enables innovation instead of limiting it. The framework can be adapted to different types of businesses, industries, and customer groups.

However, if you choose to work with this management tool, you need to consider its potential disadvantages :

  • Using the BMC approach effectively can be challenging without prior knowledge of business modeling concepts and terminology. You will need to put the work in and do some pre-reading to get the most out of it.
  • Because it's so visual, it may oversimplify the complexity of a business model, making it more challenging to articulate some of the aspects of the organization's operations and performance. This makes it unsuitable for highly-specialized or complex businesses.
  • Because it's a framework rather than a prescriptive standard that must be strictly adhered to, it doesn't provide detailed guidance on implementing or executing the business model, which can lead to difficulties in translating the canvas into action.
  • It can rely on assumptions and hypotheses, which may not always be accurate or relevant for real-world situations.

The 9 building blocks of a Business Canvas Model

business-model-canvas-building-blocks

The Business Model Canvas is organized in nine  building blocks that represent a business model's key elements. These building blocks are:

  • Value Proposition - The unique value the business provides to its customers and how it differentiates itself from competitors. In other words, it’s what sets your business apart, what makes it special, and what value it brings.
  • Customer Segments - The different groups of customers the business targets with its products or services. This building block looks at your most important customers.
  • Customer Relationships - The business' relationships with its customers and how it interacts with them. This is a fundamental building block as not only does it help you build and maintain a relationship, it also enables you to map out the cost and deliverables needed to continue to improve that relationship.
  • Channels - T he different channels that the business uses to reach and interact with customers, including physical and digital channels.
  • Key Partnerships - The relationships and collaborations that the business has with its suppliers, vendors, and other external partners.
  • Key Activities - The key activities that the business must perform to deliver its value proposition and operate successfully. This building block helps you to define your most mission-critical actions and prioritize them accordingly.
  • Key Resources - The key resources the business requires to operate, including human resources, physical assets, and intellectual property. This can also include relationships, distribution channels, and virtual assets.
  • Revenue Streams - The different sources of revenue that the business generates from its customers, including one-time sales, recurring revenue, and other revenue streams. This building block also helps determine how each stream contributes to the business profit.
  • Cost Structure - The various costs that the business incurs to operate, including fixed costs, variable costs, and other expenses. It also helps you identify your most expensive assets and activities to make effective financial plans for the future.

How to build a Business Model Canvas in 14 steps

The Business Model Canvas is flexible – no one size fits all. But for our money, there are 14 steps to effectively build it.

Step 1: Define the purpose 

The first step is to define the purpose of the Business Model Canvas. Where are you now, and where do you want to be? What do you hope to achieve? Who is the target audience? Have you double-checked to ensure what you want to achieve is in line with the strategic objectives of the rest of the business?

Step 2: Identify the nine building blocks

Identify the nine building blocks of the BMC, review each in relation to your business, and understand their purpose.

Step 3: Define the Value Proposition

What will add value? Start by defining the unique value that your business offers to customers. This will be the foundation of your canvas.

Step 4: Identify your Customer Segments 

Define the different groups of customers your business targets and their specific needs and preferences so you can focus and direct your efforts accordingly.

Step 5: Define Customer Relationships 

Identify your business' relationships with its customers and how it interacts with them. You can also use this step to identify your most important relationships so you can focus more effort on maintaining and improving them.

Step 6: Determine the Channels

Identify your business's channels to reach and interact with its customers, including physical and digital channels. From a service desk perspective, this could be offering a tier 0 channel with self-service or AI-enabled support capabilities before providing tier 1 and level 2 channels which offer a more people-centric user experience .

Step 7: Define Key Partnerships

Identify your business's relationships and collaborations with its suppliers, vendors, and other external partners. Remember, it's not just relationships with customers and stakeholders that matter, your suppliers are part of your team, so manage those relationships appropriately.

Step 8: Identify Key Activities

Define the key activities that your business must perform to deliver its value proposition and operate successfully.

Step 9: Determine Key Resources

Identify the key resources that your business requires to operate, including people, knowledge and wisdom, financial assets, and IT assets.

Step 10: Determine Revenue Streams 

Identify the different sources of revenue that your business generates from its customers. If you have a finance team,  work with them to identify current revenue streams and plan for future ones.

Step 11: Determine Cost Structure

Work with your finance team to identify the various costs that your business incurs to operate, CAPEX, and OPEX costs. 

Step 12: Build the Canvas

Once you have defined all of the building blocks, you can start creating the canvas to visualize what you are planning to accomplish.

Step 13: Review and refine

The BMC isn't a one-and-done approach. Review your model and seek feedback from your stakeholders to correct the course when needed.

Step 14: Keep going! 

In the words of Walt Disney, "Keep moving forward." Build and refine your model over time to reflect current and future activities more accurately. 

How to complete a Business Model Canvas

No one likes a blank page, do they? The difficult part is always getting started, but I promise, if you follow these steps, you'll be off to a great start: 

  • Start with the Value Proposition - Before you do anything else, fill in the Value Proposition block in the center of the canvas. This should describe the unique value that your business provides to customers and how it differentiates itself from competitors. Focus on getting this point right because value is everything in terms of the BMC.
  • Add in your enablers - This will include your key activities, customer segments, relationships (both customer and supplier relationships) assets, key activities, and channels.
  • Add in your financials - Put in your revenue dreams and your cost models to make your BCM more transparent and ensure there are no hidden costs.
  • Progress iteratively with feedback - Once you have filled in all the building blocks, review your canvas, iterate, and redefine  as needed. Seek input from stakeholders and make adjustments.
  • Give the gift of clarity - Remember, this is a visual model, so don't get too stuck on the details or use too much jargon. The effect you're looking for is clear, concise, and visual.
  • Relationships matter - We are talking about the relationship between each building block, so ensure they are correctly represented in your diagram.

Six alternatives to the Business Model Canvas

While the Business Model Canvas is a popular tool for developing and communicating a business model, other options are available too. Some alternatives include:

  • Lean Canvas - This tool is similar to the BMC but focuses on startups and small businesses. It includes fewer blocks and focuses on validating hypotheses and testing assumptions quickly.
  • SWOT Analysis - This tool helps to identify a business's strengths, weaknesses, opportunities, and threats. This can be a valuable tool for assessing the current state of a company and identifying areas for improvement.
  • Business Model Innovation - This involves developing a new business model that is different from the traditional one used in the industry. It can be done through creative thinking, exploring new technologies, or adopting a new approach to customer relationships.
  • Blue Ocean Strategy - This framework helps businesses to create new markets and uncontested market space. It involves identifying and focusing on areas of innovation that competitors have not explored.
  • Value Proposition Canvas - This tool helps businesses to define and communicate their value proposition to customers. It focuses on the customer's needs, desired outcomes, challenges, and how the company can better meet those needs than its competitors.

Key takeaways

The Business Model Canvas or BMC is a strategic management tool that helps businesses visualize, design, and analyze their business models. Some of its common applications include business planning, value propositions, and modeling.

If you want to give it a shot to plan your organization’s strategy, make sure that you have your BCM template ready with the nine key elements that need to be completed. And don’t forget to follow through our six tips on how to get started!

  Frequently Asked Questions

How do you make a good business model canvas .

To make a good Business Model Canvas, clearly define the unique value proposition of your business and ensure that the key building blocks of the canvas (such as channels, revenue streams, and cost structure) are aligned with the overall strategic objectives of the business. Review and improve the canvas as needed to continue improving and aligning with business needs.

What are the four types of business models? 

The four types of business models are product, service, platform, and sub-subscription-based.

What are the three sections of the Business Model Canvas? 

Value Propositions, enablers, and financial planning.

Read other articles like this : Project Management

Read other articles like this:

Evaluate invgate as your itsm solution, 30-day free trial - no credit card needed.

parts of business model canvas

Liviu Prodan Signature

Everything You Need To Know About Business Model Canvas

' src=

If you are here, I’m quite sure that you are looking to gain a better understanding of the business model canvas. Well, if I’m right, you’ve come to the right place. This blog post will cover everything you need to know about the business model canvas, which is such a popular tool used by entrepreneurs and business leaders. By the end of this post, you’ll have a solid understanding of the business model canvas and how to apply it to your own business.

1. What is the Business Model Canvas?

What is the Business Model Canvas

At the beginning of the day, it’s important to understand what the Business Model Canvas is. In short, it is a lifesaver for business owners. I used it when starting my own business, and it was a game-changer. Why is that? Well, it provides a roadmap-like visual representation of all the key components of your business, helping you understand how they interact and fit together. In this way, it helps you quickly identify areas that need improvement and make informed decisions about your next steps.

But the canvas is more than just a tool for structure. It encourages you to think outside the box and come up with innovative ways to increase customer value and generate revenue streams . You can uncover new opportunities and transform your business into a game changer by exploring different customer segments , value propositions, and key resources. I can assure you that it is not easy without this tool.

The best part? This way of doing things encourages collaboration and fosters a sense of collective ownership among all stakeholders. As well, it helps make decision-making and problem-solving processes quicker and more efficient .

In short, the Business Model Canvas is a must-have if you are looking to create a profitable and scalable business model. Whether you’re starting from scratch or pivoting an existing business, the canvas will save you time and effort and give you a competitive edge . That, I believe, is what we’re all looking for.

2. How to Use the Business Model Canvas

How to Use the Business Model Canvas

To fully leverage the benefits of the canvas, it’s important to have a clear understanding of its structure and how it can be applied to your specific business needs. Here’s “how to,” step-by-step:

Step 1: Familiarize Yourself with the Canvas

Familiarize Yourself with the Canvas

The first step is to become familiar with its components. The canvas is made up of nine blocks that show the most important parts of a successful business model. These are customer segments, value propositions, key activities, key resources, customer relationships, channels, revenue streams, cost structures, and key partners. The goal here is to look at how these parts work together so you can learn more about how your business works and find places where it could be better.

Step 2: Identify Your Customer Segments

Identify Your Customer Segments

One of the most important elements of the business model canvas is the customer segmentation block. In order to create a successful business model, it is critical to understand who your customers are and what their needs are. If I bolded this point, it’s because I didn’t use sufficient powerful words to highlight the importance of this step. You’re like a shooter with his eyes closed if you don’t know what your customer needs .

Step 3: Develop Your Value Proposition

Develop Your Value Proposition

As part of your strategic planning , the value proposition block is where you define what sets your business apart from your competitors. In other words, why choose your business instead of others? Ask yourself: What unique benefits do you offer to your customers that they can’t find anywhere else? Most of the time, this point is forgotten, and our business becomes just another “one.”

Step 4: Identify Key Activities and Resources

Identify Key Activities and Resources

The key activities and key resource blocks are where you determine what it takes to deliver your value proposition. Is your business engine. Without them, your business will be tight from the start. could be the processes, skills, and resources you need to bring your value proposition to life. By identifying these key components, you can assess the feasibility of your business model and have a good chance of making the right decision about how to put your resources in the right budget pocket. By figuring out these key parts, you can figure out if your business model is likely to work and have a good chance of making the right decision about where to put your money.

Step 5: Evaluate Your Revenue Streams

Evaluate Your Revenue Streams

The revenue streams block is where you identify how your business will generate income. Consider this point the lifeblood of your business. Think about the different ways you can make money from your value proposition and decide which ones are most likely to work. Without a constant revenue stream, you don’t have a business.

Step 6: Determine Your Cost Structure

Determine Your Cost Structure

The cost structure block is like a rainbow, built from different colors. Generally speaking, these are the costs you need to pay to deliver your value proposition and make money. This extends the context to build a clear perspective about pricing and profitability.

Step 7: Leverage Key Partnerships

Leverage Key Partnerships

The key partnership block is where you consider the relationships you need to build in order to bring your business model to life. They are critical dots. If you miss them, your business will burn a lot of fuel without having a good chance to take off. Consider it an external vane system connected to yours. Here, the key is your ability to create quality connections. In other words, to be the master of networking.

Step 8: Fine-Tune Your Business Model

Fine-Tune Your Business Model

Every new day is an opportunity to do things better. Let’s talk about this step as being Kaizen, or continuous improvement . The Business Model Canvas is not a one-time exercise; it’s a work in progress. So, use the canvas to review and improve your business model as you learn more about your customers and market and gather more information. You need to continue tweaking your business model so you can stay ahead of the curve and remain a force to be reckoned with.

So, there you go. These are all steps involved in the process. Now, let’s move on.

3. What business model canvas to use?

What business model canvas

The original Business Model Canvas, created by Alexander Osterwalder and Yves Pigneur , detailed above, is the most commonly used and well-known canvas for mapping out a business model.

But there are also different versions and changes to the original Business Model Canvas, each with its own set of building blocks and ways of thinking.

For example, the Lean Canvas is a simplified version of the Business Model Canvas that focuses on solving problems and testing assumptions, while the Business Model You Canvas helps you create a personal business model, which could be an interesting exercise to do.

Ultimately, the choice of which business model to use will depend on the specific needs and goals of your business. If you are just starting out and are looking for a simple, visual tool to help you get a handle on your business idea , the Lean Canvas might be the best choice.

If your business is already up and running and you want to better understand and explain your current business model, the original Business Model Canvas may be a better fit.

4. Benefits of Using the Business Model Canvas

Benefits of Using the Business Model Canvas

Sometimes, our attention can be caught by different business tools without a clear understanding of their benefits. Now, let’s be the lawyers of the devil and break the Business Model Canvas benefits into small parts.

To solve this problem, let’s look at the different parts of the canvas and how they can help you make a business model that is strong and scalable.

A Complete Look at Your Business: The Business Model Canvas encourages you to look at your business as a whole, find the key parts of your business model, and look into different customer segments, value propositions, key resources, and partnerships. We could conclude that this holistic approach helps you see the big picture and make informed decisions without getting lost in the weeds.

Brainstorming and Working Together: Using this model, you can set up a good environment for brainstorming and working together, which will help everyone involved feel like they own the project as a whole. With everyone on board, decision-making and problem-solving become quicker and quite effective.

Identifying Areas for Improvement ( Kaizen ): This helps you make data-driven decisions and stay ahead of the curve by quickly identifying areas that need improvement or re-evaluation. One Kaizen step every day will increase your chance to remain in the game.

Creating new revenue streams: This point encourages businesses to think beyond their own products or services and consider how they can use partnerships, technology, or new customer segments to create new value propositions and revenue streams. This creative approach can lead to game-changing innovations that can help you stand out in a crowded market .

A Better Understanding of Your Business Model: This doesn’t mean that we don’t know our business numbers. However, by providing a framework for understanding the structure of a business model, the Business Model Canvas gives you an understanding of how your business model works.

In conclusion, the Business Model Canvas is a great tool for making a business model that is strong and scalable, and it could be a real bright spot in the business world. So, if you’re caught between a rock and a hard place trying to navigate the complexities of business, the Business Model Canvas might just be the breath of fresh air you need.

5. Why is the business model canvas important?

Why is the business model canvas important

Let’s face it: if we are looking only at the dry words and numbers without visual representation, it’s difficult to have a clear perspective on our business structure.

This model lets you look at your business as a whole and find the most important parts, such as customer relationships, value propositions, key activities, key resources, customer segments, key partnerships, revenue streams, cost structure , and so on. And so, in just one or two pages, we can map entire business pockets.

6. Examples of Companies That Use the Business Model Canvas

Business Model Canvas Example_1

Let’s take a look at a couple of them who embrace this model.

Airbnb, the popular home-sharing platform, used the Business Model Canvas to reimagine the traditional hotel industry and disrupt the market with its innovative business model.

Spotify: The music streaming service leveraged the Business Model Canvas to better understand its customer segments, value propositions, and revenue streams and to create a successful business model that can sustain its growth and profitability.

Dropbox: The file hosting service used the Business Model Canvas to identify key components of its business model.

Tesla used the business model canvas to design and launch its new business model, which included innovative product offerings, customer segments, and revenue streams.

Amazon: The e-commerce giant used this model to analyze its existing business operations and identify opportunities for growth and innovation.

These are just a few examples of companies that use the Business Model Canvas and demonstrate its versatility and usefulness in a variety of business contexts. In the actual competitive market, your business needs to be a well-oiled machine with everything and everyone working together seamlessly. Moreover, we need to be nimble and adaptable in an ever-changing market. Of course, one of the answers that can sustain these efforts is this tool: the business model canvas.

7. Conclusion

Conclusion Business Model Canvas

Now, let’s wrap up: we could definitely say that the business model canvas is a must. It gives a structured way to design and develop a business model, but you also need to know a lot about your business and market.

However, by using the canvas to its full potential, you can be a breath of fresh air in an otherwise crowded market and ultimately transform your business into a high-runner. Let it be your roadmap to success, and you’ll be a master of the business model generation game in no time.

cropped Liviu Prodan My story

About the Author

Liviu Prodan

Liviu is an experienced trainer and LifeHacker. He’s been living the ‘Corpo life’ for more than 15 years now and has been a business developer for more than 12 years. His experience brings a lot of relevancy to his space, which he shares on this blog. Now he pursue a career in the Continuous Improvement & Business Development field, as a Lean Six Sigma Master Black Belt, a path that is coherent with his beliefs and gives him a lot of satisfaction.

Similar Posts

Get Started With Total Productive Maintenance: Here’s What You Need To Know

Get Started With Total Productive Maintenance: Here’s What You Need To Know

Lean Snapshots: Redefining Lean Manufacturing

Lean Snapshots: Redefining Lean Manufacturing

The 7 Types Of Waste In Lean Manufacturing

The 7 Types Of Waste In Lean Manufacturing

Principles Of Lean Supply Chain Management

Principles Of Lean Supply Chain Management

Mastering Quality Tools For Improved Efficiency And Productivity

Mastering Quality Tools For Improved Efficiency And Productivity

How To Streamline Your Workflow With Kanban

How To Streamline Your Workflow With Kanban

Everything about business improvement, grab the chance today.

parts of business model canvas

Get business improvement tips, strategies, and advice from Liviu Prodan, a business consultant with years of experience in the industry.

Liviu prodan

© 2024 Liviu Prodan • All Rights Reserved

Glossary

  • Agile & Development
  • Prioritization
  • Product Management
  • Product Marketing & Growth
  • Product Metrics
  • Product Strategy

Home » What is Business Model Canvas? Importance and Examples

What is Business Model Canvas? Importance and Examples

July 20, 2021 max 6min read.

business model canvas

This article covers :

What Is a Business Model Canvas?

What forms a business model canvas, why should you use a business model canvas, what are some of the business model canvas examples, how can a product manager use business model canvas, business model canvas definition.

A business model canvas is the visual representation of the actual business model. It highlights all the critical strategic factors of a business. Components of a business model canvas are the overview of the company’s customers, its workings, revenue streams, and so on.

Have you heard of the BMC or business model canvas before? It’s a handy one-page framework for mapping out the critical parts of your business idea.

A business model canvas refers to a short summarized report including the basic details of the strategy for introducing any product or service to the market. 

The contents of the canvas can change based on the type of business and market. However, some components are broadly identified. Since the canvas is generally short and in the form of a summary, it is likely to be a visual representation. 

A business model canvas offers a chart describing a company’s or the product’s value proposition, functionality, infrastructure, customers, and finances. 

Alex Osterwalder created the BMC to help visualize and plan businesses. It breaks things down into nine building blocks: value props, customer segments, revenue streams, resources needed, partnerships, and costs.

Creating a canvas gives the big picture of how everything interconnects. It’s great for brainstorming each piece and gaining clarity. What resources and partners do you require? How will people hear about you and make purchases?

We like that the BMC makes abstract concepts tangible. You can draw out your idea on a page and start validating assumptions. It also helps evolve your model over time-based on feedback. We revised ours tons pre-launch via customer research .

We recommend giving the BMC a shot, whether starting fresh or running something already. It takes some thought but provides a foundation for planning operations and revenue.

The parts of a business model canvas are primarily strategic and aspirational. They must refrain from attempting to portray fine details of a company’s overarching goals. 

Ideally, the canvas should describe a broad image of the customers and the product, including the value proposition . Essentially, the canvas acts as an outline of how the product will benefit the customer.

Notably, the canvas must describe how the business could generate the maximum profit from the marketplace, i.e., how the product aims to make money. 

There will be a description of various pathways through which the product would be distributed in the marketplace and sold. 

The canvas should also identify individuals and groups that could affect the product’s success .

Companies must also document the activities happening within the business internally and the budgets, resources, and individuals required. 

At last, businesses must include a summary of all the expenses at every stage of the product development, i.e., production, circulation, marketing, and sales.

The full summary is typically on a single page and some schematic. Hence, each element of the product’s story must be dealt with concisely. 

The entire outline is a refined work to the basic requirements of the product. This step is critical because the canvas must accurately describe various interlaced themes.

There are many reasons, but you could imagine the business model canvas as a mission statement for your product roadmap . Use product roadmap software for a better experience!

It is a handy reference point to ensure that you always stay on track and achieve all the strategic goals described in the roadmap.

Quicker and easier roadmaps

The canvas approach generally takes only a few hours. 

Hence, by this method, rather than writing every intricate detail about the product beforehand, you can just mention the highlights and then start translating the canvas to the product roadmap.

More agility

A major drawback of the old way of documenting business models was that it became almost inaccurate as soon as the author had finished drafting it.

The plans generally included detailed cost estimates, revenue projections going far into the future, and even long-term plans on how the staff could grow. 

Obviously, these things can remain accurate for some time, but only for a bit longer.

In product terms, the canvas can be understood as a business plan resembling the MRD – long, detailed, and mostly untrue by the time you finish it.

But only because you can put the canvas together so quickly does it become much more accurate while reflecting your strategic plans and the company’s current status. And if anything changes, it will be easier than adjusting a long and detailed plan.

Room to pivot as needed

Suppose something happens during the development process that forces you to re-prioritize or pivot your product. 

Updating this short, high-level document will be much easier than updating a long, exhilarating MRD or some business plan to tear apart and update.

With this one-page business model canvas as a guide to your business roadmap, you can always spot any plans that need updating quickly.

You will have to update whenever the priorities of the company change or some new data comes to light that demands a different approach to what you were doing till then.

Let’s look at the business model canvas example of McDonald’s.

McDonald’s Business Model Canvas 

McDonald’s key partners : delivery providers Uber Eats and door dash, suppliers

McDonald’s key activities : payment processing, delivery, innovation, and implementation, product sale

McDonald’s value proposition :

For buyers : quick and affordable food, service with consistency in quality

Franchisees have become more successful than the brand itself.

McDonald’s customer relationships : 

Social media, customer, and community services

McDonald’s customer segments : 

Buyers: it is for the people who wish to buy products like fries, burgers, etc.

Franchisees: restaurants that want to increase their profit using MacDonald’s name

McDonald’s cost structure :

Salaries, marketing, payment processing, and administration and operations

McDonald’s revenue streams : 

Royalties, license fees, and rent fees

The role of a product manager is crucial in introducing the product to the market . How the product manager chooses to use the business model canvas can play a pivotal role in what the product looks like, the timeline of its release, and how the audience receives it. 

Sometimes, you may replace the traditional business model canvas with a ‘product canvas,’ and it may also be that you may contain the latter in the former. 

Either way, it is up to the product manager to use those terms and what purposes they ought to serve.

The canvas acts as a thorough guide on the product for a product manager.

It contains the costs, budget projections, resources projects, product releases, sales planning, and many other key aspects.

Therefore, it is a robust document to help the product manager keep the product on track. They must also use product manager tools to guide them. 

A canvas requires a lot of background work. Hence, how much the product manager values the document is easily said.

In any complex or intricate development process where multiple dependencies may be active, and resources may be limited, the business model canvas serves as an idea for providing the right direction and making correct decisions. 

The canvas may also help the PM take notice of any time constraints and the pressure to meet any deadlines. 

Competing priorities having only a subtle difference between them can be looked into just a glance using the canvas as a reference. 

People with short attention spans and people who can be easily distracted may find the canvas extremely useful without being overly burdened by all the pressure.

Hence, for a product manager, the canvas forms a universal language in product development and helps find solutions to problems and resolve all misunderstandings. 

The workforce in the company can look into the canvas and analyze how their roles and responsibilities affect the final product delivery .

More like this:

  • What Is Customer Segmentation? Definition and Examples
  • Difference Between Strategic Thinking and Strategic Planning
  • How To Handle Customer Complaints Effectively
  • How to Understand Your Customers Deeply
  • How to Improve Customer Satisfaction and Reduce Churn

Companies mainly use the business model canvas to visualize the basic building blocks at the start of their development. It describes the product’s or sometimes a company’s value proposition, functionality, infrastructure, customers, and finances.

Generally, the teams work on a business model canvas by answering strategic questions about the product and the target users.

For example:

  • Who will use this product? 
  • How will they use this product? 
  • How does it affect their lives? 
  • How will the product be marketed or distributed when it is ready?

Many of these templates are also available online to help you out.

Absolutely, the business canvas model is a strategic management tool. The purpose of the business canvas model is to let businesses visualize and assess their ideas. 

The three main disadvantages of a business canvas model are:

  • The business model is limited to well-established businesses and does not include companies in the early stages of development
  • The business model canvas does not take strategy into account
  • There are no interconnections
  • The business model canvas denies the role of a company within its ecosystem

Crafting great product requires great tools. Try Chisel today, it's free forever.

Business Model Canvas Explained

Business Model Canvas Explained

Getting a business idea is easy. But converting that idea into a full-fledged business that makes money is the hard part.

Most businesses fail because they cannot make their business model profitable or sustainable in the long run.

This is where the business model canvas comes in.

It is powerful business ideation, modelling, and strategic planning tool that helps you identify how your business will operate and make money. It can be used to manage your existing business. Startup founders can also use it to validate their business idea and minimise the risk of failure before they start their business.

What Is Business Model Canvas?

A business model canvas (BMC) is a strategic management template used to organise and visualise the key elements that go into making a business model work.

In simple terms, it’s a template you fill to visualise –

  • Who is your customer?
  • What value do you provide to your customer?
  • How does your business provide value?
  • How does your business operate?
  • How does your business make money?

Technically –

The business model canvas is a conceptual structure that supports the viability of the business and explains who the business serves to, what it offers, how it offers it, and how it achieves its goals.

It is an important business development and strategy tool that helps you validate your business idea before spending too much time and effort on it.

Osterwalder’s Business Model Canvas Template

business model canvas template

Conceptualised by Professor Alex Osterwalder, the business model canvas is a template used to represent different components of running a business.

Originally published in a business model design book, entrepreneurs and startups have used the business model canvas to help them visualise a broad overview of their businesses.

The business model canvas template has nine major components (or sections), and each section helps answer questions on what, how, and who of your business operations:

Customer Segments

Value proposition, customer relationships, revenue streams, key resources, key activities, key partners, cost structure.

To download this business model canvas template right click on the above image and select ‘save image as’ or you can  click here  to get a printable PDF version of the same.

The Components Of Business Model Canvas

The right side of the business model canvas focuses on the customer, while the left side on the business. Both sides come together with a value proposition in the centre to signify the exchange of value between your business and the customers.

Consider the components of a business model canvas as a shared language that helps you describe your business in a structured way. This shared language makes it easier for anyone to understand how your business works, what are its assumptions and dependencies, etc.

Here are the nine components of a business model canvas:

  • For whom do you create value?
  • Who are your most important customer or consumer groups?

Customer segments are groups of target prospects with similar needs and characteristics. They are identified based on factors such as demographics, psychographic, behavioural patterns, etc.

For example –

  • All the people who live in a particular area.
  • All the people with a common characteristic like having a certain age, income, interest in a certain subject, etc.

Your entire business model revolves around your customer. It is therefore very important to understand your customer’s needs and how you are going to provide value for them. This will also help you identify your key segments –

  • What groups of customers are most critical to the success of your business?
  • What are their needs, wants, and the value they place on the benefits you are offering.

People living in a particular geographical location (customer segment) will have different needs and wants than people living in another part of the country.

If your target market is women with a high income, your value proposition, marketing and positioning strategy, etc. will be very different from that of a middle-class customer.

  • What solution are you providing to the customer problems you have identified in your customer segments?
  • How does your offering make your customer’s life easier?
  • What is the value that your customers receive from your offering?

The value proposition is the essence of the customer benefits you offer through your product or service.

It is the main reason customers will buy your product over the competitors’.

Consider it to be the promise of tangible benefits that your customers will receive from consuming or experiencing the offering.

Starbucks offers an experience in the form of a coffee-shop ambience that allows customers to enjoy premium coffee. Customers buy Starbucks because it helps them relax, socialise, and have quality time in their hectic life.

The value proposition is significant in mapping out your business model canvas because it helps you understand your company’s competitive advantage – what makes your company stand out from the competitors in the eyes of the customers.

  • What marketing, distribution, and sales channels do you use to reach your customer segments?
  • Do you serve customers directly, sell through distributors or retailers, etc.?

Channels refer to the path a business takes to communicate with and provide its offering to the end consumer.

They include marketing, distribution, and sales channels.

Channels are the touchpoints your customers encounter as they interact with your business.

If you run a small coffee shop near a college campus, the best way to reach out to students and prospective customers would be through word of mouth and social media. Your distribution and sales channels may include dine-in, takeaway, UberEats, etc.

However, if you open a coffee cart at a busy place in the city, your distribution channels would be different. You will have to focus on outlets that are frequented by office goers or working professionals – perhaps even vending machines or company canteens.

  • What relationships do your customer segments expect you to have with them?
  • How do you establish such relationships?
  • What’s your strategy to get, keep, and grow your customer base?

Customer relationships define the degree of intimacy or intensity of engagement between the brand and the customer, including purchase frequency, loyalty, etc.

Starbucks forms strong customer relationships by directly communicating with its customers through e-mails. They also offer rewards for frequent customers in the form of free coffee, discounts, etc.   

Customer relationships are critical to the success of your business because you will be providing value for your customers through these relationships. When done right, customer relationships can lead to customer referrals and word-of-mouth marketing that is free for you.

  • What are the sources of revenue in your business model?
  • How much do customers pay for your offering?
  • What revenue streams contribute to what percentage of total revenue?

Revenue streams refer to how a company generates revenues from its business model.

In other words, it is the way a company makes money through its offering. It includes both primary and secondary incomes.

Primary income is derived from customers who buy your offering. Secondary income comes from other non-core sources.

For example – Starbucks brings in its primary income through regular customers who specifically choose Starbucks over the competition because of their value proposition and customer experience. Their secondary revenue source includes selling coffee beans or merchandise on their online store, etc.

  • What activities does your business need to perform to operate successfully?
  • What activities does your value proposition require you to perform?

Key activities refer to those activities that help you deliver your value proposition. Planning, organising, staffing, controlling, etc., these activities will keep your business running efficiently.

They are the most important activities that enable your business to run smoothly and provide its value proposition.

For example – Coffee-shop’s key activities would include roasting coffee beans, brewing coffee, managing servers, taking orders, delivering the order to the customer.

For a PC manufacturer, key activities would be designing PCs, sourcing PC components, manufacturing products, offering after-sales services, etc.

  • What do you need to have to produce your offering?
  • How will you create, deliver, and distribute the offering to your customers?

Key resources are the most important inputs required to create and deliver the promised value proposition, leverage different channels, maintain relationships with the customers, and earn revenue.

It includes elements like

  • Human resources
  • Property and equipment
  • Raw material
  • Intellectual property, etc.

For example, to run a coffee shop, you will require human resources in the form of Baristas who can prepare delicious coffee, skilled management to manage the operations , etc. You will need property and equipment such as coffee machines, tables and chairs in the shop for people to sit and enjoy their coffee, etc.

  • Which external organisations and individuals enable your business to offer and deliver the value proposition?
  • If you don’t perform these activities yourself, who does?

Key partners refer to those organisations and people who play an important part in supporting you in creating and delivering the promised value proposition.

These are alliances with third parties who bring their unique resources, skills or assets to complement yours, which in turn, helps you –

  • Optimise your business model
  • Acquire better resources
  • Reduce costs
  • Reduce risks
  • Gain access to new markets

For example – Lenovo doesn’t create its own processors. Instead, it partners with Intel to use its microprocessor.

Similarly, a coffee shop may partner with a bakery that can supply them with baked goods on demand.

  • What are the costs required for your business to operate?
  • How much has each cost contributed to bringing in revenue?

A company’s cost structure highlights its operating expenses and how they evolved over time. It shows what percentage of revenues goes to different expenditure items like paying employees, buying raw materials, etc.

The cost structure basically summarises a company’s expenses in a particular time period. You calculate it after defining all the other business model canvas elements.

For example – In a given year, a coffee shop may have operating costs, including rent, salary for employees , cost of equipment, etc., amounting to $1,000,000. Their revenue in the same year is $3,000,000. This means that their net income after operating expenses is $2,000,000.

The Importance Of Business Model Canvas

The business model canvas (BMC) is considered an effective strategic tool to develop or modify existing businesses. It helps you to clearly see all the elements of your business model and analyse them for big areas of opportunity.

A clear understanding of what, how and for whom your business will create value is invaluable in making key decisions related to operations, revenue generation, distribution channels, etc.

Here’s why you should always develop a business model canvas for your business –

  • Allows you to visualise the different parts of the business model, which is difficult otherwise.
  • Enables detailed analysis of all elements that give rise to value creation – the key resources, key activities, key partnerships, etc.
  • Helps you identify and segregate value-adding and non-value-adding activities, which in turn helps you cut down on unnecessary costs.
  • Provides a clear picture of your business’s revenue model, which helps you identify key revenue drivers and areas that require more focus.
  • Provides an understanding of the channels you can use to distribute your products or services.
  • Helps you identify gaps in operations, areas where there is scope for improvement etc.
  • Helps you identify all possible risks associated with the business model – both external and internal.
  • Gives a clear answer to what matters most when it comes to your business – what your business is, how it operates and makes money, who are the key partners to collaborate with, what are the costs involved, etc.

Business Model Canvas Examples

We shall present some examples of Osterwalder’s Business Model Canvas in the following section.

Google business model canvas

Bottom-Line?

A Business Model Canvas Is More Than Just An Infographic

Many individuals think of a business model canvas as just another marketing tool or infographic to help present their idea in a more attractive way.

But it’s not just that. It actually helps you gain a comprehensive view of your business.

The objective of creating a business model is to have complete clarity on how your business will create, deliver and capture value. The more clearly you are able to identify, describe and visualise all the elements involved, the better it is for your overall business.

It becomes easier for you to understand the different elements of your business and identify areas where you can improve, innovate or add more value.

The Startup Process

We know how important your dream business is to you. Therefore, we’ve come up with an all in one guide:  The Startup Process  to help you turn your vision into reality.

Aashish Pahwa

A startup consultant, digital marketer, traveller, and philomath. Aashish has worked with over 20 startups and successfully helped them ideate, raise money, and succeed. When not working, he can be found hiking, camping, and stargazing.

Related Posts:

startup process

Floship

  • Floship Kickstart

Crowdfunding Logistics, Simplified.

  • Floship Pro

Advanced Solutions for Complex Requirements

  • Floship Essential

Complete Supply Chain Coverage

  • Floship Modular

Flexible Supply Chain Management

  • Floship Returns

Redefining Linear Supply Chains

  • Floship Connect

Extensive Connections & Partnerships

Comprehensive Ecommerce Shipping Insurance

  • Floship Portal

A powerful, all-in-one logistics Tech platform

  • Integrations

A fast-growing circular ecosystem that covers all your needs.

Floship in a glance

  • Case Studies

Get the scoop on Floship from our clients

  • Warehouse Locations

Global warehousing & fulfillment locations

Get the latest Floship update

  • Request A Free Quote

Floship Insights

What is the business model canvas and why do i need it.

Business Model Canvas- Floship

Starting a small business is a monumental task. It seems like there are a million things you have to take care of before you can make your first dollar. You need to register your business, set up your website, work out your budget, figure out your marketing plan, test your products, and establish good relationships with your manufacturers and suppliers.

You also need to create your business plan and your business model. So much to do.

You know what a business plan is. It’s your step-by-step guide on how your business will achieve its objectives. What you might not fully understand is you business model.

A business model is simply a design for the successful operation of a business. It’s how you create value for yourself (e.g. make money) while delivering products or services to your customers.

There are numerous types of business models, and they can all be mapped onto physical chart called the “business model canvas”.

The business model canvas and was developed by Alex Osterwalder, and if you don’t have a business model canvas it’s a great tool to use to improve the focus and clarity of what your business is trying to achieve.

It eliminates all of the fluff from the traditional business plan and lets you zero in on what’s important.

The Business Model Canvas Explained

Business Model Canvas

The business model canvas is broken into nine building blocks for your customers.  We’ll break down each of those segments so you can get a better understanding of what each of them means for your company.

#1 – Value Propositions

The first section is about your value proposition. Your value proposition is what your company is making and who they’re making it for. It’s not about your specific idea or product, it’s about solving a problem or filling a need. It’s also about who you are solving that problem for.

Once you know what problem your solving and who you’re solving it for, you can get into what exactly your product or service is. This is where you list all the benefits and features of your product and what they do to solve the problem.

#2 – Customer Segments

Perhaps the most important part of your canvas is the customer segments. If you don’t know who your business is catering to you’ll never be able to sell to them. You need to figure out who your customers are and why they would buy from you. You want to get very specific and figure out where your customer lives, what their social habits are, how old they are, if they’re male or female, etc. You want to be so detailed that you could draw a picture of your customer, put it on a wall, and have it detail their exact persona.  On day one this is nothing but a hypothesis, but as you start testing and selling your products, you will be able to change this accordingly.

#3 – Channels

Your channels are what you use to deliver your product from your company to your customer. In the old days you really only had one channel and that was the physical channel. You had a storefront and your goal was to get people to visit your store.

With the rise of technology, a storefront is no longer necessary. Now many people use the internet and mobile devices as their channels. Even if you have a physical channel setup, you’re most likely still going to have a web presence. You need to decide which outlet or outlets are best for you to get your product to the customer.

#4 – Customer Relationships

Customer Relationships

Your customer relationships are the fourth piece in your business model canvas. This section is about how you get your customers, how you keep your customers, and how you grow your customer. The channel you choose to distribute your product will also help determine your customer relationships.

A physical store will acquire its customers differently than an online store. If you’re using a website as your main channel, you need to figure out how to get them to your website, how to get them to buy once they are there, and how to get them to hang around and buy more of your products. Just like previous steps this is only a hypothesis on day one and will be figured out as your business grows.

#5 – Revenue Streams

Your revenue streams are how you will actually make your money from your value proposition. What value is your customer paying for and how are you going to capture that value?

Depending on your company it could be a direct sales model, a freemium model, a subscription model, or a licensing model. Again, the model you choose depends on your business, and your business could use multiple revenue models. Your revenue streams aren’t about the actual pricing of your product, it’s just your way of capturing revenue.

#6 – Resources

The next section of your business model canvas deals with is your resources. This is what you need to sell your product, the assets that are required for you to be successful.

The most important resource for many new companies is financing. Do you have enough cash on hand to fund your business? WIll you need funding or a line of credit?  There are also physical needs like a store, manufacturing plant, or delivery trucks. You might need intellectual properties as patents and customer lists. You might also need a good, strong workforce of salesmen, programmers and manufacturers.

#7 – Key Partners

Your key partners are the people and companies who are going to help you grow your business. There are some things you aren’t going to be able to do and some you just won’t want to do on your own, so you’ll want to partner with people that can do them for you. Two of the most common partnerships are suppliers and buyers.

The two main questions you need to ask yourself before forming a partnership is what you’re going to get from them and what activities they are going to perform. If you have a one man startup, your partnerships will likely be different than the partnerships a larger company has.

In your first year you might choose to do everything yourself just to save money. As your business grows, you will be able to invest in partnerships that can save you time and help grow profits.

#8 – Key Activities

business model

Your key activities are the most important things your business must do to make your business model work. If you’re in the production business you’ll be making products.  Maybe you’re a consultant and you’re in the business of solving problems. You could also be in sales and be responsible for getting people to buy various products.

Whatever it is that your business does, your key activities are what you need to become an expert in for your business to be successful.

#9 – Cost Structure

Your cost structure is what it’s going to cost you to keep the business running. You have to think beyond the obvious costs like your payroll, rent, and materials and be sure you are including everything.

You need to know what the most important costs are, what your most expensive resources are, and how much your activities and partnerships cost. Then you will need to ask the typical accounting questions like what your fixed and variable costs are, and any economies of scale. Anything that is going to cost you money to keep your business operational needs to be included here.

The Lean Business Model Canvas

Something that has become increasingly popular over the last few years is the “lean business” or “lean startup.” The lean business is essentially a business method that gets you from idea to business as fast as possible.

In a lean business you put out wh at is called your “minimum viable product”. This is your product in its most basic form with none of the extra bells and whistles. You put that product out to a select group of people to see if they like it. If they like it you can move on with that product, if they don’t you either pivot or scrap the idea all together.

The lean model allows you to get to market as fast and as cheaply as possible. The lean business model canvas was made in the spirit of the lean business. It’s more actionable and entrepreneur based and focuses on the way time can affect the revenue stream of a business. When the lean business model canvas was created, four more elements were added.

#1 – Problem

A problem box was created because many businesses spend a lot of time and money on a product that isn’t needed or doesn’t solve a problem. It’s important to know what problem you are solving before you do anything else.

#2 – Solution

Once you know what problem you are solving, it’s time to work on your solution. This is where you would describe your MVP (minimum viable product).

#3 – Key Metrics

Your key metrics are the range of products or services you want to provide.  It is key to choose the right metrics because choosing wrong could lead to disaster for your business.

#4 – Unfair Advantage

Your unfair advantage is just that – any unfair advantage you might have over your competitors. It is very important to know if you have any unfair advantages over your competitors, or if they have any over you.

To truly make it the “lean” canvas, they had to remove the elements they didn’t think were necessary. They removed:

  • Key activities
  • Key resources
  • Key partnerships
  • Customer relationships.

They were removed because they were either a waste of time to a lean startup, covered in another element, or they were more outside focused and not focused directly on the business.

business plan

Whether you’re an established business or just getting started, a business model canvas is an amazing tool to help you reach your goals. It provides you with a one page document that cuts out the fluff lays everything out right in front of you. It’s easily editable so as your business changes you can change your canvas to match. And if you’re creating a lean startup, there is a business model canvas made just for you.

For other Canvas Models check out  Toptal’s Technology Product Canvas

Copy of Lockup Black

Ready To Upgrade Your Logistic Solution?

Speak to Floship ecommerce logistic consultant about improving your global support chain today

Latest news

parts of business model canvas

Market Insight

A Comprehensive Guide to Incoterms

parts of business model canvas

AI in Logistics – What’s In Store for 2024

parts of business model canvas

Duties, Taxes & Ecommerce – A Definitive Guide

parts of business model canvas

Challenges With Reverse Logistics for Ecommerce

Teaching Entrepreneurship

Experiences teach skills..

Learning the Business Model Canvas with Dr. Alex Osterwalder

Teaching the Business Model Canvas: Part 1 – Intro

October 4, 2021 doan winkel comments 0 comment.

When we ran a workshop with Dr. Alex Osterwalder about how he teaches his Business Model Canvas, attendees were so excited about what he was sharing, 98% of them voted to change our schedule on the fly and extend his session from 60 to 90 minutes.

The exercises he was sharing were too engaging to let him stop.

In this article, the first in a 3-part series, we’ll structure Osterwalder’s exercises into easy-to-implement lesson plans you can use with your students.

parts of business model canvas

Exercise #1: Business Model Matching

To introduce students to the 9 components of the BMC, Dr. Osterwalder starts by giving students a set of business model hypotheses and asking them to place each one in the appropriate box of the BMC.

Prepping Before Class

To make the most efficient use of class time, assign students to watch these videos before class:

  • Getting from Business Idea to Business Model
  • Visualizing Your Business Model
  • 9 Steps to Creating a Successful Business Model

Then you’ll want to print out the worksheets linked in the lesson plan below. Digital worksheets are also in the lesson plan if you’re teaching remotely.

Step 1: Fill the Boxes

Alex uses Airbnb in his first exercise because:

  • Students are familiar with Airbnb
  • As a two-sided marketplace, Airbnb is a great example of how one business model may need to fulfill the needs of multiple customer segments to be successful

Starting with the “Airbnb BMC: Travelers” worksheet, ask students to write each of the provided business model hypotheses in their appropriate boxes:

parts of business model canvas

Copies of this worksheet are available in the lesson plan below.

We recommend each student complete this individually. While students will work in pairs for the next step, to help increase engagement and discussion, we like using Think. Pair. Share. with this type of exercise, which starts by having students work on their own.

Step 2: Pair

Next, ask students to pair up (if necessary, create breakout rooms for virtual students), and compare their answers. If there’s anything they disagree on, ask them to try to discuss and come to a consensus.

Note: this is an important part of the Think. Pair. Share. process. Talking with a peer helps them organize their thoughts better and practice vocalizing them. If your students are reluctant to speak in class, pairing students up like this before asking for a class-wide discussion can help inspire more interaction.

Step 3: Share

Reconvene the class. Go one by one through the boxes and ask a pair to share what they wrote for a particular box. Go through each of the boxes in this order:

  • Customer Segments
  • Value Proposition
  • Customer Relationship
  • Revenue Streams
  • Cost Structure
  • Key Activities
  • Key Resources
  • Key Partners

Ask a new pair to report out what they wrote for each box and then ask the rest of the class if they had anything else different for that box. If student pairs disagree on what should be in a particular box, use that as an opportunity to increase discussion and, before you reveal the correct answer, have your students vote on which answer they think will be right.

Business Model Canvas for Airbnb Travelers

Slides with the correct answers, like the one above, are available in the lesson plan below.

Step 4: Repeat with Airbnb Hosts

Now ask students to fill out the AirBnB BMC: Hosts worksheet using the same Think-Pair-Share technique. 

parts of business model canvas

Take time to explain that many businesses don’t have just one business model as a part of their success. Instead, many businesses, like Airbnb, are a multi-sided market. In this business model, the needs of two parties must be met.

You can highlight the popularity of this business model by pointing out that Uber, Doordash, Amazon all have this multi-sided market where the business has to keep multiple customers happy.

Business Model Canvas for Airbnb Hosts

Summary & Next Steps

Alex prefers simple matching exercises like these as a quick way to introduce the BMC. For more details on how to use it, including worksheets and slides, check out the free lesson plan below.

Next up, Alex provides students with BMCs that are partially filled out and asks students to fill in the rest – which we’ll detail in the next article in this series! We’ll share two more steps in the process Dr. Osterwalder uses to teach the business model canvas:

  • How to use fill in the blank exercises to help students create their own canvases
  • How to use prioritization exercises to teach how to use the BMC to test business model assumptions

Want More from Dr. Osterwalder?

parts of business model canvas

Find more about Alex’s work at Strategyzer.com .

Watch Alex Teach

If you’d like to see Alex teach the Business Model Canvas himself, just enter your email below to watch his full workshop on Teaching the BMC:

Get the Teaching the Business Model Canvas Lesson Plan

We’ve created a detailed lesson plan for the “Teaching the Business Model Canvas: Part 1” exercise to walk you and your students through the process step-by-step.

parts of business model canvas

Read Part 2 In This Series of Teaching the Business Model Canvas

Check out the second post in this series, focused on using a fill-in-the-blank exercise to help students develop their own hypotheses.

parts of business model canvas

What’s Next?

In upcoming posts, we will share two more steps in the process Dr. Osterwalder uses to teach the business model canvas.

Subscribe here to be the first to get these in your inbox.

Join 15,000+ instructors. Get new exercises via email!

Enter Your Teaching Email:

Missed Our Recent Articles?

Whether you are new to our community of entrepreneurship educators, or you’ve been contributing for years, we wanted to give you a list of the posts our community finds most valuable:

  • Improving Your (Inherited) Course. Inheriting an entrepreneurship course presents many challenges. Re-design the course and provide engaging experiences with this curriculum.
  • How to Improve Student Outcomes & Evaluations. Journaling can transform your students’ experience in your classroom. And can be a great way to get quality feedback on whether you’re an effective educator
  • “The best class I’ve taken!”   We all want a Dead Poets Society moment in our entrepreneurship class. One professor using the Experiential Entrepreneurship Curriculum got hers!
  • Teaching Customer Interviewing.  This card and the online game is a powerful way to teach students the importance of customer interviewing, and the right questions to ask.

Want 30+ more engaging exercises?

Leave a reply cancel reply.

Your email address will not be published. Required fields are marked *

Get a copy of the  lesson plan on Google Docs:

Or you can just view it here .

IMAGES

  1. Business Model Canvas

    parts of business model canvas

  2. What is Canvas Business Model? and Its Components

    parts of business model canvas

  3. The Business Model Canvas: Better Than a Business Plan [+ Free

    parts of business model canvas

  4. Taller práctico "Business Canvas Model"

    parts of business model canvas

  5. What is a Business Model & Top Examples

    parts of business model canvas

  6. The evolution of a Business Model Canvas ~ We master it

    parts of business model canvas

VIDEO

  1. Business Model Canvas (BMC) for SUL HOMEMADE

  2. Create your Business Model Canvas and Build your Brand's presence online I Season -02 I Class 03

  3. BUSINESS MODEL CANVAS

  4. Business Model Canvas (BMC) #snsinstitutions #snsdesignthinkers #snsdesignthinking

  5. Business Model Canvas for Academic Ventures

  6. Building a Business Model Canvas

COMMENTS

  1. Business Model Canvas: Explained with Examples

    Here's a step-by-step guide on how to create a business canvas model. Step 1: Gather your team and the required material Bring a team or a group of people from your company together to collaborate. It is better to bring in a diverse group to cover all aspects.

  2. Business Model Canvas Explained: Definition and Components

    The Business Model Canvas consists of nine building blocks, each represented by a rectangle. 1. Key partners: A business's key partnerships include stakeholders, joint ventures, and strategic alliances that will help the business carry out its objectives. This is also the place to consider suppliers.

  3. Business Model Canvas: A 9-Step Guide to Analzye Any Business

    Created by Swiss entrepreneur and Strategyzer co-founder, Alexander Osterwalder, the Business Model Canvas is a visual representation of the 9 key building blocks that form the foundations of every successful business. It's a blueprint to help entrepreneurs invent, design, and build models with a more systematic approach.

  4. Business Model Canvas: The Definitive Guide and Examples

    Before 2004, entrepreneurs suffered from prolonged and cumbersome business plans. Alexander Osterwalder facilitated the creation of a business model by introducing the Business Model Canvas (BMC).. By definition, it's a visual template that illustrates various objects of a business model.Osterwalder's original canvas includes nine elements, which we will have explained below in the article.

  5. Business Model Canvas (BMC): The Ultimate Guide

    Business Model Canvas (BMC) is a framework that helps determine how a business creates, delivers, and captures values. It is a visual representation of the important aspects or parts to consider when designing a Business Model. BMC aids in constructing a shared understanding of a business by condensing it into a simple, relevant, and ...

  6. Business Model Canvas

    The Business Model Canvas is a strategic management template used for developing new business models and documenting existing ones. It offers a visual chart with elements describing a firm's or product's value proposition, infrastructure, customers, and finances, assisting businesses to align their activities by illustrating potential trade-offs.. The nine "building blocks" of the business ...

  7. What is a business model canvas? Overview with template

    The business model canvas is a template introduced by Alexander Osterwalder in 2005 as part of his Ph.D. studies under the supervision of Yves Pigneur. The business model canvas outlines nine crucial elements of a business model in an easy-to-understand visual template: customer segments, value proposition, channels, customer relationships ...

  8. Business Model Canvas: Definition, Benefits, and Examples

    As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies: 1. You can use a business model canvas to roadmap quickly. You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes). This way, rather than trying to write out every detail ...

  9. Business Model Canvas: A Complete Guide

    The Business Model Canvas, developed by Alexander Osterwalder, is a visual representation of current or new business models, generally used by strategic managers. The Canvas provides a holistic view of the business as a whole and is especially useful in running a comparative analysis on the impact of an increase in investment may have on any of ...

  10. The Business Model Canvas

    This helps all parts of the business co-operate with one another more efficiently. Key Points. The Business Model Canvas was developed by Alex Osterwald and Yves Pigneur, in collaboration with a community of business professionals at the Business Model Innovation Hub. It is a useful tool for designing and analyzing business models in an ...

  11. Business Model Canvas

    Here is a short intro to the business model canvas framework. It is the brainchild of Alexander Osterwalder. He offered it as an alternative to the business plan, which he considered a time-waster. The idea was to single out the crucial components of a company that are required to make money.

  12. How To Use The Business Model Canvas

    Step 1 (of 10): Customer Segments. This sounds obvious, but when you get into the detail many people overly simply the customer and don't create a clear picture of who they are. As a result, the tendency is to make generalizations. Sections of the Business Model Canvas. 1.

  13. The Business Model Canvas Explained, with Examples

    Example 2: Skype. In the diagram below you can see the Business Model Canvas for Skype. From the Business Model Canvas we can see that Skype has two key value propositions: The ability to make calls over the Internet, including video calls, for free. The ability to make calls to phones cheaply.

  14. What is a Business Model Canvas? Quick Guide + Examples

    Based on the work of Alexander Osterwalder, a Business Model Canvas, or BMC for short, is a diagram used to visualize a business model; it allows structured organization and a quick method of evaluation and reflection on the effectiveness of a Business Model. The use and study of Business Model Canvas Examples allows us to understand it in a complete way and apply it to different types of ...

  15. Business Model Canvas Explained

    The Business Model Canvas is an excellent tool to create a business model and present your ideas. It gives a clear picture of how you will make money and sustain your business. ... The Business Model Canvas consists of nine essential parts: Customer Segments, Value Proposition, Revenue Streams, Channels, Customer Relationships, Key Activities ...

  16. Business Model Canvas Explained: Definition, Pros, Cons, and ...

    The Business Model Canvas is a strategic management tool that helps businesses visualize and analyze their business models. It consists of 9 fundamental building blocks that describe the core aspects of a company's value proposition, infrastructure, customers, and finances (more on that later, we promise). By using it, organizations can gain a ...

  17. Everything You Need To Know About Business Model Canvas

    Step 1: Familiarize Yourself with the Canvas. Everything You Need To Know About Business Model Canvas 22. The first step is to become familiar with its components. The canvas is made up of nine blocks that show the most important parts of a successful business model.

  18. What is Business Model Canvas? Importance and Examples

    A business model canvas refers to a short summarized report including the basic details of the strategy for introducing any product or service to the market. The contents of the canvas can change based on the type of business and market. However, some components are broadly identified. Since the canvas is generally short and in the form of a ...

  19. Business Model Canvas Explained

    A business model canvas (BMC) is a strategic management template used to organise and visualise the key elements that go into making a business model work. ... Allows you to visualise the different parts of the business model, which is difficult otherwise. Enables detailed analysis of all elements that give rise to value creation - the key ...

  20. Make a Business Model Canvas (How-tos, Examples, Tips)

    A business model canvas is a strategic management tool that helps companies visualize new and existing business models they develop. This one-page template allows you to examine the external and internal factors that could make or break your business, such as the infrastructure running your business, what value you're offering, the customers you serve, and the finances that keep your business ...

  21. What Is The Business Model Canvas and Why Do I Need It?

    A business model is simply a design for the successful operation of a business. It's how you create value for yourself (e.g. make money) while delivering products or services to your customers. There are numerous types of business models, and they can all be mapped onto physical chart called the "business model canvas".

  22. Teaching the Business Model Canvas: Part 1

    Step 1: Fill the Boxes. Alex uses Airbnb in his first exercise because: Students are familiar with Airbnb. As a two-sided marketplace, Airbnb is a great example of how one business model may need to fulfill the needs of multiple customer segments to be successful. Starting with the "Airbnb BMC: Travelers" worksheet, ask students to write ...

  23. What is Lean Canvas?

    The Lean Canvas is a business modeling tool created to help deconstruct a startup idea into its key and most risky assumptions. Deeply influenced by the lean startup methodology, the Lean Canvas servers as a tactical plan to guide entrepreneurs navigate their way from ideation to building a successful startup. The methodology has been developed ...