When you think of creating a business model, what comes to mind? – Your product or service? Who your customers will be? Your financial costs and/or short and long-term profits? What your revenue streams will be? Lists will probably be created under several headings, which will then develop into greater detail over several pages before you have your finished business model. This is all very time-consuming, especially as you will have to change these plans if something doesn’t quite work the way you thought it would. It’s usually a case of back to the drawing board, checking through all those details and making the necessary changes – right? That’s a lot of time and money.
Using a Business Model Canvas, on the other hand, could prove to be a valuable tool in helping you to develop your venture’s model and achieve success in it, regardless of what type of venture it is. It enables you to visualise and map your model onto one page and allows you to make changes as and when required. This canvas (made up of 9 building blocks) provides you with a clearer understanding of the relationship between products, channels of distribution, costs and so forth. (see reference below)
These blocks consist of:
1. Key Partners – e.g. partners, suppliers
2. Key Activities – e.g. distribution channels, customer relationships, revenue streams
3. Key Resources – e.g. human, financial
4. Value Propositions – e.g. brand, price, design
5. Customer Relationships – e.g. personal assistance, self-service
6. Customer Segments – e.g. mass market, niche market
7. Channels – e.g. delivery, after-sales
8. Cost Structure – e.g. fixed costs, variable costs
9. Revenue Streams – e.g. commodity sales, subscription fees
Although the canvas is pre-structured, each component will be unique to your model. Visualising the relationship between components, allows both the entrepreneur and existing owner to experiment with various strategic possibilities thus maximising the potential for success, growth and profitability. To learn the technique in the right way, it would be good to hire a business coach and learn the core of the technique.
The business model canvas is not meant to be static; it is for the purpose of learning by experimentation and from making mistakes. With the benefits of having a visual tool, experimentation doesn’t need to have major costs, such as those that can be incurred by taking a product to market, only to find your channels of distribution could have been less costly and/or more effective. Rather, it allows you to make quick changes to your business model and help secure your competitive strategy.