The Business Model Canvas is one of the most famous templates to develop new business ideas, proposed by Alexander Osterwalder. This template is extracted from the theory talked in the book Business Model Generation, published in 2010.
This template is used to centralize the understanding of a business idea. Is divided in nine different sections:
- Customer segments
- Value proposition
- Channels
- Customer relationships
- Key activities
- Revenue streams
- Key resources
- Key partners
- Cost structure
How to use the Business Model Canvas template?
The proper way to use the Business Model Canvas template is to start filling one field at a time. You have to make a brainstorming inside of every field and write it in a post it to paste it inside the section.
The way that I like to fill it is like this:
- Discuss and write ideas of every field, one at a time.
- Write and paste post it of every idea generated for every field.
- Review if some ideas are redundant and covered it in a same item.
- After filling all the fields, read all the ideas looking for correlated ideas between all the sections.
- If there is any other idea from one field, write and paste the post it in the corresponding field.
What to cover in every field?
Customer segments
In this section you will describe the main characteristics of your target customers group. You have to describe it and classifying it in a useful way to easily understand it. The main focus to start defining segments are understand the customer needs and classifying them by it. The same product could serve two different needs, depend on the customer characteristics and expectations.
This will be useful to understand: what could be the strategy to approach and to start measuring the market size. These two action points will help to understand the priorities and the opportunities for the business.
Value proposition
In this section you have to describe a list of reasons of why the solution is valuable for the customer. You have to take in consideration all the characteristics of why a customer could buy it.
Is important to highlight:
- What kind of innovation the product or service offer.
- How better is in performance, price or design.
- Any customization opportunity available to the customer.
Channels
In this section is described in items, how the business will deliver the product or service to the customer.
The channels could be classified into two levels:
- First level channel: where the customer can directly buy the product or service. Could be a physical point of sale, an e-commerce an online store inside a social media, strategic alliances and others.
- Second level channel: where the customer can get the information about the product or service and get to know the benefits and become a potential customer. An example of this could be the social media to promote products and services or advertising about it.
Customer relationships
This section is to describe how your business will manage the relation with the customers. The customer relationships is about an active communication with them providing proper ways to happen, like giving customer service and personal assistance to use the product or service, providing platform or places to self-service or personalizing a system where you can setup an automatic way of recurring purchases.
Key activities
In this section is important to describe all the activities needed to perform the business in the most effective way. Identifying this will help to understand what processes are important to track and perform efficiently to operate the business and delivering the product or service to the customer.
Is important to order the key activities in priority relation with the delivery of the product or service.
Revenue streams
The revenue streams are all the ways the business could generate incomes from sales. Could be different ways to sell the same product or service (direct purchase, subscription, leasing, through sellers alliance and others) or different products or services.
In this section is important to describe all the revenue streams from the main one to the considered the less important.
Key resources
Inthis section is important to describe the main resources required to perform your business and deliver your product or service.
You can classify your business resources by type: financial (like having credit available for customers) intelectual (patents, copyrights, etc.), physical (vehicles, machines, etc.) or humans (specific skills performed by area).
After identifying your type of resources you can order the list, considering the ones that makes a difference from your value proposition.
Key partners
In this section you describe the key partners of your business and is important to name the alliances you have to make your operation efficient.
You can include as a key partners the carriers, the vendors of the business raw material, the providers with you have exclusive contracts or special prices, the insurers and others.
Cost structure
In this section you include all the cost required to maintain an active business operation, from the production to the delivering of the product or service.
You can classify the costs into:
- Fixed costs, all that you have to maintain an active operation in your company, like electricity, internet providers, online services like e-mail, hosting and others.
- Variable costs or cost of sales, all costs required to complete a sale, like the sales commission, the production cost, the delivery cost and others),
- Contracts with partners
- Scalable costs, all the costs you can reduce growing the amount of sales.