Business Model Canvas: Step by Step


Business Model Canvas: Step by Step


reading business section

The Business Model Canvas (BMC) is a strategic tool for the product owner that helps to build a faster and more visual representation of new products and services. It consists of a panel divided into nine blocks, such as those displayed in the picture below, which represent the basic elements (building blocks) that compound a business model.

business model canvas

The main goal of this panel is to generate value proposition that meets and potentiates the desired objectives before actually implementing the product or service. Below, I depict the dynamics of how to build a BMC, created by Alexander Osterwalder.

Building the Canvas

In order to apply the Canvas as shown in the picture above, you can either use a printed version (using this pdf) in A0 size to facilitate the collaboration, draw on a whiteboard (simple layout to replicate) or create it online (Lucidchart has a helpful template).

Lucidchart is a good option for distributed teams because it can be built online in a collaborative way. There is also a web-app available created by the makers of BMC.

The Canvas already filled in below can be split into two dimensions: the dimension located on the right contains more subjective and “emotional” elements, while the dimension on the left contains structural and logical elements. It is recommended that you fill out the Canvas from right to left. This way, the wishes and aspirations of the stakeholders can be addressed before you start defining in a more factual method.

filled in canvas

Dimensions and Basic Elements

The illustration below shows how the nine elements of the Canvas are integrated with each other. As mentioned before, we will begin to explore the right dimension of the Canvas first.

nine elements of the Canvas

We start by putting the block “Customer Segments” in place, which maps who we are targeting to provide value and who are the potential customers to our desired objectives. For instance: customers over the age of 50, women, customers from California and so on.

In the block “Value Proposition,” ideas are generated to fulfill the needs of the potential customers, while always keeping in mind the business objectives that are driving this product or service. Examples of value propositions include cost reduction, agility, convenience, customization and decision support. The Customer Segments and Value Propositions blocks are the main elements that will lead the remaining components of the Canvas.    

Once we determine the potential customers and value propositions, it’s necessary to think about how we can link these two fundamental components. This is the purpose of the “Channels” or “Distribution Channels” block, which includes items such as the delivery, blog, newsletter, customer service and webinar. These are the channels that distribute and deliver the value propositions to the customers.

Next, we should understand  the “Customer Relationships” block. In other words, we should figure out how to strengthen customer involvement with the business. To give a few examples: business development partnership, customer retention, customer support, online chat and feedback.

The last right block is the “Revenue Stream,” which translates to the path to generate revenue based on the recommended value proposition. Examples include a monthly subscription, direct sale, paid ads and license.

The image below depicts the fundamental elements of the right dimension from the Canvas.

right dimension of canvas

In the left dimension of the Canvas, we can find more direct and objective definitions that sustain the components mapped in the right dimension.

The “Key Resources” refer to the resources directly associated with the business model operation, such as teams, machines, investments and technology platforms.

The “Key Activities” are all activities needed to meet the value proposition, build channels and keep relationships. We might consider managing the social networks (a powerful mechanism to strengthen the customer relationship) or building a web store.

“Key Partners” are people who contribute to both key activities and key resources. Some partners (outsourcing companies, for example) can provide machines to drive towards any key resource. Other types of partnerships can supply contractors or execute some of the key activities, such as monitoring the social networks.

Representing the required costs to maintain and build the proposed solution is performed by the  “Costs Structure” block, which indicates, for example, the amount of money necessary to pay the machines’ maintenance, contractors, OPEX, infrastructure and resources.

The picture below illustrates the basic elements of the left dimension from the Canvas.

left dimension of canvas

Conclusion

The Business Model Canvas is useful for driving the conception of new products and services through its nine basic elements from both rational and emotional perspectives. It also allows the teams to brainstorm insights, ideas and opinions around the product, enabling a common understanding among the stakeholders as well as generating strong performance indicators towards a strategic innovation.

It’s another helpful tool for the product owner to conceive a new product, service, website, e-commerce or game.

Have you used the BMC before? Do you plan on using it in the future? Let me know in the comments section below.

 



 

Paulo Rebelo helps companies to improve using agile and lean principles and methods like Scrum, XP and Kanban. He currently works at Blackhawk Network in the U.S.

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