If you have ever searched for "Business Model Canvas" on the internet, I assure you that the first results referred to Strategyzer, Alex Osterwalder and Yves Pigneur, and rightfully so, since it is their proposal. However, over the years new tools have appeared; variations of Osterwalder and Pigneur's Business Model Canvas applied to special cases or alternatives for the generation of successful businesses.
- Strategyzer's Business Model Canvas
- Guide to using Business Model Canvas
- Alternatives to Strategyzer's BMC
Strategyzer's Business Model Canvas
First and foremost, Strategyzer is a strategy and operations consultancy that aims to "unlock the potential of millions of people to create value for themselves, organisations and society". Its co-founder is Alexander Osterwalder, who is interested in business models and developed his doctoral thesis in Management Informatics published in 2004 under the title: Ontology of Business Models.
Together with Yves Pigneur, they have created practical tools used by leading companies worldwide, such tools are: Business Model Canvas, Value Proposition Canvas and Business Portfolio Map. In 2010 they published the book "Business Model Generation" as a practical guide for the design of the business model canvas.
This book defines a business model as that which "describes the basis on which a company creates, delivers and captures value" and states that the best way to build a model is to divide it into nine basic modules, representing the main variables of a business. These elements are captured in the Business Model Canvas (BMC) in such a way that the right side of the canvas focuses on the customer (external factors) and the left side focuses on the company (internal factors), with the value proposition at the center as the element of exchange between business and customer.
The nine modules are:
- Market segments
- Value proposition
- Customer relationships
- Revenue streams
- Key resources
- Key activities
- Key partnerships
- Cost structure
To understand each of these and the BMC tool in general, you can watch the 2-minute video published by Strategyzer on its YouTube channel called Business Model Canvas Explained.
Guide to using Business Model Canvas
The first thing to consider, and this is recommended by Osterwalder himself, is 3 steps:
- Draw the canvas on a poster.
- Hang the canvas on the wall.
- Sketch the business model.
Now, if you are wondering how to fill in the canvas or what information to consider, here are the answers. Following the same order of the nine modules mentioned above, in each of them you must define a series of fundamental aspects for the functioning of your business.
What makes you choose between one company or another? The factor that makes you choose one of the options is the value proposition offered by the business. In this module you should describe the products or services that create value for the potential customer, i.e., solve a need.
To define it you can ask yourself:
- What is the problem we are solving?
- What need are we satisfying?
- What value are we giving to the customer?
For a business to be profitable and survive it must have customers, therefore, in this module you define the people or entities that your company is targeting. Here you can ask yourself:
- For whom do we create the value proposition?
- Who do we solve the problem for?
- Is there competition?
- What are the characteristics of our potential customers?
- How many segments do we need to define?
Once you have defined what you offer and to whom, it is time to determine the media. In this module you must define the communication, distribution, and marketing channels that you are going to use to bring the value proposition to the market segments.
To define this, you can ask yourself:
- What channels do customers prefer?
- How are we in contact with customers?
- In-house or outsourced channels?
- Which channels perform best?
- Which are more profitable?
- How do we deliver the value proposition to the customer?
- How does the customer buy the proposition?
You need to define the types of relationships you want with the market segments by asking yourself the following questions:
- What kind of relationship do the different segments expect?
- Do we use personal assistance, human interaction?
- Do we not maintain a direct relationship, but offer self-service?
- Automated services?
Sources of revenue
Here you need to define the cash flow of your business by asking yourself the following questions:
- What price is each market segment willing to pay?
- What pricing mechanism do we use?
- Fixed pricing, negotiation, or volume pricing?
- How does the customer pay?
- Is my source of revenue from asset sales, usage fees, subscriptions, loans, or licenses?
To create and deliver the value proposition to the customer, it is necessary to have resources, and this module describes the key assets to make the business work. Therefore, it is necessary to ask the question:
- What key resources do we need to create the value proposition?
- What resources do we need for the distribution channels?
- What resources do we need to maintain the types of customer relationships?
- Do we need resources for revenue streams?
- Facilities, outlets, distribution networks?
- Information, patents, copyrights, databases?
- Human resources?
- Cash, credit lines, working capital?
Everything is based on processes; your business needs a series of actions to function. Like resources, this module describes the activities needed to create and deliver the value proposition to the customer.
- What key activities do we need to create the value proposition?
- What activities do we need to do for the distribution channels?
- What activities do we need to maintain the types of customer relationships?
Here you need to define the networks of suppliers and partners you need to make the business work.
The key questions to ask are:
- Who are our suppliers?
- Who are our partners?
- Are there alliances because we need to guarantee the delivery of supplies?
- Do we need strategic alliances with competitors?
Having clarified the key resources, activities, and partnerships, you can go on to describe the costs incurred by the business to keep it going.
- What costs do we incur to maintain key resources?
- Cost of carrying out the necessary activities.
- Costs of partnerships?
- What are our fixed and variable costs?
- Direct and indirect costs?
Once you have completed the canvas it is time for analysis; find the patterns, research the types of business models, understand the characteristics of your business to establish the model that will generate the most profit. You can read the following blog: 14 Successful Business Model Patterns
Alternatives to Strategyzer's BMC
Now that you have understood the Business Model Canvas created by Osterwalder, we can look at some alternatives for generating successful businesses.
- 3C model:
The 3C model was developed by strategy expert Kenichi Ohmae and focuses on the strategic triangle - Company, Customers and Competitors. At the intersection of these three factors lies the key to competitive advantage.
By understanding who your customers are (their characteristics, needs and motivations), where you stand in relation to competitors (differences and similarities) and how your company operates (strengths, weaknesses, current strategies) you will have a simple and practical analysis of how to take your business forward in the long term.
- Lean Canvas
Lean StartUp is a methodology proposed by the Silicon Valley entrepreneur, Eric Ries. The objective is to reduce the risk of launching new products and services to the market through rapid experimentation with customers, either with prototypes, minimum viable products (MVP)... In this way feedback on the value proposition is obtained as soon as possible.
However, the Lean Canvas is an adaptation of Osterwalder's BMC created by Ash Maurya and designed as a tool of the Lean Startup methodology. It is an alternative to the BMC for entrepreneurs with a business idea in process.
As you may recall, the BMC is divided into two hemispheres, one side focused on customers and the other on the company. In the case of the Lean Canvas, its division is a bit more practical for startups as it maintains the analysis of the environment, but instead of studying the company as such, it reflects on the product/service. Therefore, it changes the key associations, key activities and key resources to problem, solution, and metrics, respectively. In addition, the relationship with customers becomes the advantage.
- Opportunity Canvas
Created by Jeff Patton, it is a tool that facilitates discussion about a new feature or capability of a product. It was conceived as a fusion between Business Model Canvas and Lean Canvas with the difference that it involves a product that has already been created, so it is a good tool for mature products.
The numbers are the guide to fill in the spaces, you can start with the problem or the solution, then move on to field number 2 and so on. If you start with the problem, the last one you fill in is the solution and vice versa.
As you will see, you can apply these tools to your business for a broad business analysis, from Strategyzer's famous Business Model Canvas to alternatives for your start-up or your mature product.