Business Model Canvas is a strategic tool that assists teams in creating a business model or for those that wish to have a guide that analyzes or refocuses the direction of an ongoing business.
It provides a visual representation of the critical elements of the company's value proposition; however, finding a comprehensive and centralized view of all organizational objectives can be challenging and complicated, and it is difficult to know where to start in putting the puzzle together; this is why this tool is helpful for the different areas of the company. Here I explain how to achieve it.
- What is Business Model Canvas?
- How to better understand our customers?
- Benefits and advantages for companies
I. What is Business Model Canvas?
As mentioned at the beginning, Business Model Canvas (BMC) is the representation on a canvas of an organization's business model. It highlights the key strategic factors of the business model. A business model contemplates those aspects by which value is created, captured, and delivered. Therefore, the BMC provides a complete way of how the company works, the customers, revenue streams, routes to market it, etc.
The BMC comprises nine pillars, which we will further develop below. The tool's name was proposed in 2005 by Alexander Osterwalder, created in his doctoral work supervised by Yves Pigneur on business model ontology.
II. How can we get the most out of it to understand our customers better?
Generating value involves not only an isolated thought of continuing to grow in the market. Of course, we must stay ahead of the curve, but we must actively listen to our customers and go beyond what they expect from our services or products. How can I alleviate those burdens that cause their progress or expectations to be truncated? This canvas allows organizations to analyze their strategies and update their models as the organization grows, the market changes, or new trends emerge. With this, it is essential to know the nine pillars, what each one contemplates and how, in the end, the Business Model Canvas results to be aligned and deliver a good customer experience.
The exercise is very enriching because it also allows us to check a project's viability, feasibility, and desirability, as its conceptualization, planning, and management of the vital elements for its proper execution. The understanding of different areas and that it is in agreement in responding to our client's needs.
Feasibility refers to generating income from the hand of the positive impact on people and their environment. Feasibility is whether it can execute it and has the resources available to carry it out. Last but not least, desirability, where beyond providing a solution, is something that is wanted because it brings relevance to people's tasks in a particular way.
Once we are clear about these concepts, we can analyze each of the pillars, what each one consists of, and certain questions to address them:
- Market segments:
We will focus on the information of our main customers, who purchase our products and services. Make a market segmentation. Know what are the reasons why they buy from us, why they are there.
What makes me different and stand out in the market? What are the customer's pains, and how can they be alleviated? Why should they choose me? Within this, several ideas can emerge so you can facilitate them with the canvas. It is an easy tool to visualize where you frame the target audience.
There are communication, distribution, and sales channels. Establish the traceability of the processes from how they learn about our company and the purchase to deliver the product or service that the customer acquires. Through which channels are we reaching our customers? How does our product or service get them?
- Relationships with customers:
We must establish the relationship we will have with each market segment. How can I maintain that relationship? How do my customers know that my products or services meet the characteristics described? Among the types of customer relationships are personalized, self-service, and automated, to name a few.
- Revenue sources:
These sources of income arise when customers purchase our products and services and how we keep generating an income stream. Where does my income come from? How do I develop it? What are my sources? You must be completely clear and answer truthfully.
- Key resources:
Establish only those specific resources that our organization uses to create value. While all activities in an organization work together, it is necessary to focus on delivering and providing value. The more resources, the more effort. What are my resources? What resources do I require to deliver value?
- Key activities:
Similar to the last pillar, but focused on the specific activities to deliver value to our customers. Only the most important ones are taken into consideration. Of the whole process, what is most relevant?
- Key partnership:
Establish strategic alliances to streamline processes, be more efficient, cut execution times, and maintain or improve quality with my key suppliers and partners, allowing the company to operate and deliver the value proposition. With whom can I establish win-win alliances? Who are my suppliers and partners?
- Cost structure:
These are the costs involved in developing my business model. List the business model's main expenses and consider pillars such as resources, key activities, and partnerships. Know the fixed costs and variable costs of the company.
III. Benefits and advantages for companies
Some of the positive characteristics of this exercise are as follows:
1. Created on a single canvas: By having everything captured in one place, the work teams can obtain a faster understanding of the model entirely.
2. Connections: The functioning of each pillar is known as well as the interrelation of all of them so that the work teams can detect opportunities for improvement if there is coherence between one pillar and another when the exercise is developed.
3. Easy to share tool: It concisely summarizes the aspects of the business model for those new people who must get up to date with the path of the organizational strategy.
If we are creating the business model from scratch, if we are looking to compare the business model with a previously developed one, or if we want to adjust the business model to improve the value we offer, Business Model Canvas is a tool that excels in keeping any team invested in the business under focus. This is because it provides those critical pieces for proper management. It is a valuable tool that sharpens the awareness of the teams in front of the reality of where the market is, showing gaps and how to reduce them and consequently deliver to our customers a valuable product meeting their needs and expectations.
If you want to know more about this tool, we invite you to contact the Strategy team, who will be willing to resolve any questions you may have. Visit the Imagineer website.