Business Model Generation Organization Elements Key Partners Example
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Introduction: How to Make a Business Model Canvas

If you have a business idea, new venture, or established organization, this instructable will show you how to describe your business model on one page. A business model describes the rationale of how an organization creates, delivers and captures value. The business model canvas will allow you to effectively share your business model with employees, investors, or partners. When an organization doesn't understand their business model, they experience a major breakdown in communication and goal making. Here are some companies that currently use their own Business Model Canvas: Microsoft, MasterCard, 3M, Adobe, Intel, and even NASA! When looking to understand your business model, the canvas is much better than a full business plan because it saves time and is more cooperative.

The Business Model Canvas is a visual chart documenting key aspects of a new or existing business. It provides an organizational blueprint for further planning and action. The canvas collects information under nine areas critical to an organization or product’s success – addressing value proposition, customers, infrastructure, and finances. PayPal has a key partner in eBay. Dutch flower growers have a key partner in Eneco. Zipcar has key partnerships with environmentally-conscious city authorities. By using a business model, Ronald Chan identified three new key partners.

This instructable requires the designer(s) to understand all aspects of their idea or organization. This knowledge must at least be accessible and usable. Basic general business knowledge is recommended.

In addition, basic organization, communication, and teamwork skills are required to effectively make the business model canvas.

Here are the items you must gather:

1. Business Model Canvas template

Follow link: http://businessmodelgeneration.com/canvas/bmc?_ga=..

2. Appropriate writing utensil

3. Stack of Post-it Notes (at least 30)

4. (Optional) Whiteboard

5. (Optional) Business Model Generation (the book)

Follow link: http://www.amazon.com/Business-Model-Generation-Vi..

Attention: Time duration for creating a first draft Business Model Canvas usually takes from an hour to a couple days.

Tip: The Business Model Canvas creation works best when printed out on a large surface or drawn on a white board so groups of people can jointly start sketching and discussing business model elements with Post-it notes or markers.

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Step 1: Customer Segments

1. Reflect on your own Business

Who are you creating value for?

The first step is to find out what type of customers your organization is targeting. Below are the 5 types of customer segments. Select which one(s) apply to your organization and reflect how.

Mass Market

One large group of customers with broadly similar needs and problems. An example would be customers who need shoes.

Niche Market

One group of customers with specific needs and problems. An example would be customers who need children's shoes.

Segmented

Multiple groups of customers with slightly different needs and problems. An example would be college students attending a university.

Diversified
Multiple unrelated groups of customer segments with very different needs and problems. An example of this use would be Amazon utilizing online shoppers with Amazon.com and web developers with selling cloud computing services.

Multi-Sided Platform

Multiple independent groups of customer segments that may have different needs and problems, but the business model requires both. An example would be a credit card company that needs credit card holders and merchants who accept those credit cards.


2. Fill in your Canvas

Grab a Post-it Note

Write down a customer segment for your business on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the 'Customer Segments' section of the canvas.

Repeat process for however many customer segments your business appeals to.

Tip: If you have multiple value propositions, use different colors of Post-it notes for their respective customer segments.

Step 2: Value Propositions

1. Reflect on your own Business

What value do we deliver to the customer?

Once you know who you are providing to, then you can appeal to them with a value proposition. This part goes further than just stating your product/service, by expressing why your product/service is valuable. Below are 11 elements that contribute to customer value creation. Select which one(s) pertain to your value proposition and reflect how:

Newness

Fulfills an entirely new set of needs that customers previously didn't perceive because there was no similar value proposition.

Performance

Improves product or service performance.

Customization

Tailored to the specific needs of individual customers.

Getting the job done

Helps customers get a certain job done.

Design

Stands out because of superior design.

Brand/Status

Stands our because of the popularity or respect of a brand/status.

Price

Offers a similar value but at a lower price.

Cost Reduction

Helps customers reduce their own personal costs they would take on without the product/service.

Risk Reduction

Offer customers a chance to reduce their own risks. (Ex. 1-year guarantee)

Accessibility

Provides to customers that previously lacked access to product/service.

Convenience/Usability

Provides customers an easier way to use a vital product/service. (Ex. iTunes)

2. Fill in your Canvas

Grab a Post-it Note

Write down a value proposition for your business on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the 'Value Proposition' section of the canvas.

Repeat process for however many value propositions your business provides.


Step 3: Channels

1. Reflect on your own Business

How do you our Customer Segments want to be reached?

These channels include communication, distribution and sales. Below are 5 channel types, select which one(s) best reflect your organization's structure and how:

Sales Force

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In-person sales.

Web Sales

Online sales.

Own Stores

In-store sales.

Partner Stores

In-partner-store sales.

Wholesaler

Distributed sales.


2. Fill in your Canvas

Grab a Post-it Note

Write down a channel for your business on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the 'Channels' section of the canvas.

Repeat process for however many channels your business utilizes.

Step 4: Customer Relationships

1. Reflect on your own Business

What type of relationship does each of our Customer Segments expect us to establish and maintain with them?

Connecting with your customer base is important in keeping your reputation as a caring organization. Below are 6 types of relationships to have with customers. Select which one(s) pertain to your organization and reflect how:

Personal Assistance

Customers can talk with human assistance.

Dedicated Personal Assistance

Customer representatives are directly and solely connected to an individual customer.

Business Model Generation Organization Elements Key Partners Example For Free

Self-Service

Customers are given resources to help themselves. (Ex. FAQs)

Automated Services

Customers are given customized help usually through software and automation.

Communities

Customers are able to connect with other customers for help. (Ex. Forums)

Co-Creation

Customers are able to create value for the company. (Ex. YouTube video uploads)


Business Model Generation Organization Elements Key Partners Example

2. Fill in your Canvas

Grab a Post-it Note

Write down a type of customer relationship your business utilizes on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the 'Customer Relationships' section of the canvas.

Repeat process for however many customer relationships your business appeals to.

Step 5: Revenue Streams

1. Reflect on your own Business

How do your Customer Segments purchase your Value Proposition?

In this step, we will find out how exactly your customers buy your product/service. Below are 6 common types of Revenue Streams. Select which one(s) pertain to your organization and reflect how:

Asset Sale

One time sale of ownership rights of a physical product.

Usage Fee

Ongoing costs to continue use of product/service. (Ex. Pay-Per-View)

Subscription Fees

Cost allowing customers to use product/service for specific time period.

Lending/Renting/Leasing

Temporarily granting someone the exclusive right to use a product/service for a specific time period.

Licensing

Granting customers permission to use protected intellectual property.

Advertising

Income through fees for advertising a particular product/service/brand.


2. Fill in your Canvas

Grab a Post-it Note

Write down a revenue stream your business uses on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the Revenue Streams section of the canvas.

Repeat process for however many revenue streams your business utilizes.

Step 6: Key Resources

1. Reflect on your own Business

What Key Resources does our business require?

This section describes the most important assets required to make a business model work. Below are 4 types of resources. For each of the 4, think of an example of what your organization uses:

Physical

Facilities, buildings, vehicles, machines, distribution networks, ect.

Intellectual

Brands, proprietary knowledge, patents, copyrights, partnerships, customer databases, ect.

Human

Key people involved in business activities.

Financial

Capital, financial guarantees, lines of credit, ect.


2. Fill in your Canvas

Grab a Post-it Note

Write down a key resource your business uses on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the Key Resource section of the canvas.

Repeat process for however many key resources your business requires.

Step 7: Key Activities

1. Reflect on your own Business

What does your business do with your resources?

In this step, we will discover the most important actions a company must take to operate successfully. Below are 3 ways activities can be categorized, think of an example of how each of them connect to your business:

Production

Relate to designing, making, and delivering a product.

Problem Solving

Relate to creating solutions to ongoing customer problems.

Template

Platform/Network

Relate to continually maintaining Key Resources.


2. Fill in your Canvas

Grab a Post-it Note

Write down a key activity your business performs on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the 'Key Activities' section of the canvas.

Repeat process for however many key activities your business performs.

Step 8: Key Partnerships

1. Reflect on your own Business

Who are your suppliers and service providers?

In this section, we will discover what partnerships your business has forged. Below are 4 types of partnerships, select which one(s) pertain to your company and how:

Strategic Alliances

Partnership between non-competitors.

Coopetition

Partnership between competitors.

Joint Ventures

Partnership between ventures to develop new a business

Buyer-Supplier

Partnership between buyers and suppliers to assure reliable supplies.

2. Fill in your Canvas

Grab a Post-it Note

Write down a key partnership your business has on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the 'Key Partnership' section of the canvas.

Repeat process for however many key partnerships your business appeals to.

Step 9: Cost Structure

1. Reflect on your own Business

What are your most important costs?

In this step, we will develop how your company views costs and what costs it requires to operate. Below are two types of cost structures, reflect how your company chooses to utilize them:

Value-Driven

Focus on improving high value propositions.

Cost-Driven

Focus on reducing costs whenever possible.

(Attention: many business models fall in between these two structures)

Below are 4 characteristics of cost structures, reflect on how each of them may pertain to your company's costs:

Fixed Costs

Costs that remain the same no matter the volume of goods or services produced.

Variable Costs

Costs that change proportionally to the volume of goods and services produced.

Economies of Scale

Costs are reduced with the increase of the volume of goods and services produced.

Economies of Scope

Costs are reduced with the increase of business operations.

2. Fill in your Canvas

Grab a Post-it Note

Write down a cost for your business on the Post-it Note. (Tip: Refer to example for further guidance)

Stick the Post-it Note on the 'Cost Structure' section of the canvas.

Repeat process for however many costs your business has.

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Business Model Canvas: nine business model building blocks, Osterwalder, Pigneur & al. 2010

Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models.[1][2] It is a visual chart with elements describing a firm's or product's value proposition, infrastructure, customers, and finances.[3] It assists firms in aligning their activities by illustrating potential trade-offs.

The nine 'building blocks' of the business model design template that came to be called the Business Model Canvas were initially proposed in 2005 by Alexander Osterwalder[4] based on his earlier work on business model ontology.[5] Since the release of Osterwalder's work around 2008,[6] new canvases for specific niches have appeared.

Description[edit]

Formal descriptions of the business become the building blocks for its activities. Many different business conceptualizations exist; Osterwalder's 2004 thesis[5] and coauthored 2010 book[3] propose a single reference model based on the similarities of a wide range of business model conceptualizations. With his business model design template, an enterprise can easily describe its business model. Osterwalder's canvas has nine boxes; the name of each is given in bold below. Descriptions below are based largely on the 2010 book Business Model Generation.[3]

Business Model Generation Organization Elements Key Partners Example Review

  • Infrastructure
    • Key Activities: The most important activities in executing a company's value proposition. An example for Bic, the pen manufacturer, would be creating an efficient supply chain to drive down costs.
    • Key Resources: The resources that are necessary to create value for the customer. They are considered assets to a company that are needed to sustain and support the business. These resources could be human, financial, physical and intellectual.
    • Partner Network: In order to optimize operations and reduce risks of a business model, organizations usually cultivate buyer-supplier relationships so they can focus on their core activity. Complementary business alliances also can be considered through joint ventures or strategic alliances between competitors or non-competitors.
  • Offering
    • Value Propositions: The collection of products and services a business offers to meet the needs of its customers. According to Osterwalder (2004), a company's value proposition is what distinguishes it from its competitors. The value proposition provides value through various elements such as newness, performance, customization, 'getting the job done', design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability.
      • The value propositions may be:
        • Quantitative – price and efficiency
        • Qualitative – overall customer experience and outcome
  • Customers
    • Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on their different needs and attributes to ensure appropriate implementation of corporate strategy to meet the characteristics of selected groups of clients. The different types of customer segments include:
      • Mass Market: There is no specific segmentation for a company that follows the Mass Market element as the organization displays a wide view of potential clients. e.g. Car
      • Niche Market: Customer segmentation based on specialized needs and characteristics of its clients. e.g. Rolex
      • Segmented: A company applies additional segmentation within existing customer segment. In the segmented situation, the business may further distinguish its clients based on gender, age, and/or income.
      • Diversify: A business serves multiple customer segments with different needs and characteristics.
      • Multi-Sided Platform / Market: For a smooth day-to-day business operation, some companies will serve mutually dependent customer segments. A credit card company will provide services to credit card holders while simultaneously assisting merchants who accept those credit cards.
    • Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company's value proposition in ways that are fast, efficient and cost-effective. An organization can reach its clients through its own channels (store front), partner channels (major distributors), or a combination of both.
    • Customer Relationships: To ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments. That element should address three critical steps on a customers relationship: How the business will get new customers, how the business will keep customers purchasing or using its services and how the business will grow its revenue from its current customers. Various forms of customer relationships include:
      • Personal Assistance: Assistance in a form of employee-customer interaction. Such assistance is performed during sales and/or after sales.
      • Dedicated Personal Assistance: The most intimate and hands-on personal assistance in which a sales representative is assigned to handle all the needs and questions of a special set of clients.
      • Self Service: The type of relationship that translates from the indirect interaction between the company and the clients. Here, an organization provides the tools needed for the customers to serve themselves easily and effectively.
      • Automated Services: A system similar to self-service but more personalized as it has the ability to identify individual customers and their preferences. An example of this would be Amazon.com making book suggestions based on the characteristics of previous book purchases.
      • Communities: Creating a community allows for direct interactions among different clients and the company. The community platform produces a scenario where knowledge can be shared and problems are solved between different clients.
      • Co-creation: A personal relationship is created through the customer's direct input to the final outcome of the company's products/services.
  • Finances
    • Cost Structure: This describes the most important monetary consequences while operating under different business models. A company's DOC.
      • Classes of Business Structures:
        • Cost-Driven – This business model focuses on minimizing all costs and having no frills. e.g. Low-cost airlines
        • Value-Driven – Less concerned with cost, this business model focuses on creating value for products and services. e.g. Louis Vuitton, Rolex
      • Characteristics of Cost Structures:
        • Fixed Costs – Costs are unchanged across different applications. e.g. salary, rent
        • Variable Costs – Costs vary depending on the amount of production of goods or services. e.g. music festivals
        • Economies of Scale – Costs go down as the amount of goods are ordered or produced.
        • Economies of Scope – Costs go down due to incorporating other businesses which have a direct relation to the original product.
    • Revenue Streams: The way a company makes income from each customer segment. Several ways to generate a revenue stream:
      • Asset Sale – (the most common type) Selling ownership rights to a physical good. e.g. retail corporations
      • Usage Fee – Money generated from the use of a particular service. e.g. UPS
      • Subscription Fees – Revenue generated by selling access to a continuous service. e.g. Netflix
      • Lending/Leasing/Renting – Giving exclusive right to an asset for a particular period of time. e.g. Leasing a Car
      • Licensing – Revenue generated from charging for the use of a protected intellectual property.
      • Brokerage Fees – Revenue generated from an intermediate service between 2 parties. e.g. Broker selling a house for commission
      • Advertising – Revenue generated from charging fees for product advertising.

Application[edit]

The Business Model Canvas can be printed out on a large surface so groups of people can jointly start sketching and discussing business model elements with post-it note notes or board markers. It is a hands-on tool that fosters understanding, discussion, creativity, and analysis.[7] It is distributed under a Creative Commons license[8] from Strategyzer AG and can be used without any restrictions for modeling businesses.

The Business Model Canvas is also available in web-based software format.

Alternative forms[edit]

The Business Model Canvas has been used and adapted to suit specific business scenarios and applications.[9][10][11] Examples include:

Criticism[edit]

The Business Model Canvas was characterized as static because it does not capture changes in strategy or the evolution of the model.[12] Some limits of the template are its focus on organizations and its consequent conceptual isolation from its environment, whether this is related to the industry structure[13] or to stakeholders such as society and natural environment.[14][15]

See also[edit]

References[edit]

  1. ^Barquet, Ana Paula B., et al. 'Business model elements for product-service system'. Functional Thinking for Value Creation. Springer Berlin Heidelberg, 2011. 332–337: They stated that 'The Canvas business model was applied and tested in many organizations (eg IBM and Ericsson), being successfully used to easily describe and manipulate business models to create new strategic alternatives.'
  2. ^De Reuver, Mark, Harry Bouwman, and Timber Haaker. 'Business model roadmapping: A practical approach to come from an existing to a desired business model'. International Journal of Innovation Management 17.01 (2013): They described the business model canvas as the 'Most prominent.. popular tool that makes it simple for practitioners to design business models in a creative session.'
  3. ^ abcOsterwalder, Alexander; Pigneur, Yves; Clark, Tim (2010). Business Model Generation: A Handbook For Visionaries, Game Changers, and Challengers. Strategyzer series. Hoboken, NJ: John Wiley & Sons. ISBN9780470876411. OCLC648031756. With contributions from 470 practitioners from 45 countries.
  4. ^Osterwalder, Alexander (2005-11-05). 'What is a business model?'. business-model-design.blogspot.com. Archived from the original on 2006-12-13. Retrieved 2019-06-19. .. we could define a business model as a simplified description of how a company does business without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems. However, now that we know that the business model is a simplified representation of how we do business, we still have to decide which elements to describe. A synthesis of literature shows that there are mainly 9 building blocks to help us describe a business model ..
  5. ^ abOsterwalder, Alexander (2004). The Business Model Ontology: A Proposition In A Design Science Approach(PDF) (Ph.D. thesis). Lausanne: University of Lausanne. OCLC717647749. See also: Osterwalder, Alexander; Pigneur, Yves; Tucci, Christopher L. (2005). 'Clarifying business models: origins, present, and future of the concept'. Communications of the Association for Information Systems. 16 (1): 1. doi:10.17705/1CAIS.01601.
  6. ^Osterwalder, Alexander (2008-07-02). 'What is a business model?'. business-model-design.blogspot.com. Archived from the original on 2008-09-06. Retrieved 2018-10-17.
  7. ^'Business Models: Do the right thing'. blog.bizzdesign.com. Archived from the original on 2015-04-02. Retrieved 2015-03-28.
  8. ^'Can I use the Business Model Canvas or Value Proposition Canvas in my own teachings or public projects?'. support.strategyzer.com. Retrieved 2015-03-22.
  9. ^'Business Model Canvas for User Experience'. grasshopperherder.com. 2012-06-19. Retrieved 2012-06-20.
  10. ^'Lean Model Canvas vs. Business Model Canvas'. practicetrumpstheory.com. Archived from the original on 2014-04-26. Retrieved 2014-04-25.
  11. ^'Internal Communication Canvas'. eee.do. 2016-04-28. Retrieved 2016-05-28.
  12. ^Sinkovics, Noemi; Sinkovics, Rudolf R.; Yamin, Mo (2014). 'The Role of Social Value Creation in Business Model Formulation at the Bottom of the Pyramid – Implications for MNEs?'. International Business Review. 23 (4): 692–707. doi:10.1016/j.ibusrev.2013.12.004.
  13. ^Searle, Nicola; White, Gregor (2013). Towse, Ruth; Handke, Christian (eds.). 'Business Models'. In Handbook on the Digital Creative Economy. Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing: 45–56. doi:10.4337/9781781004876.00014. ISBN9781781004876.
  14. ^Bocken, N.M.P.; Rana, P.; Short, S.W. (2015). 'Value mapping for sustainable business thinking'. Journal of Industrial and Production Engineering. 32 (1): 67–81. doi:10.1080/21681015.2014.1000399.
  15. ^Sparviero, Sergio (2019). 'The Case for a Socially Oriented Business Model Canvas: The Social Enterprise Model Canvas'. Journal of Social Entrepreneurship. 10 (2): 232–251. doi:10.1080/19420676.2018.1541011.

External links[edit]

  • Media related to Business Model Canvas at Wikimedia Commons
  • Alexander Osterwalder: Tools for Business Model Generation, a 53-minute video discussing the Business Model Canvas in detail. Stanford Entrepreneurship Corner, 26 January 2012
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