HOW TO DO A CANVAS BUSINESS MODEL STEP BY STEP
What is a canvas business model?
The Canvas business model is a template used in the business world to generate business models quickly and succinctly.
At a glance, you can visualize the business opportunities that represent a particular idea of blocks and modules which describe the different parts of a Company.
In this article, we're going to explain how many blocks the Canvas business model can have and what kind of information each of the Canvas business model modules contains.
What does “Canvas” mean?
The author of the canvas model is the Swiss Alexander Osterwalder, who published his work in a book in 2008. Since then it became one of the most used tools for the design of entrepreneurship projects because of its great ease of use and its catalyst power.
What is the difference between the Canvas business model and a business plan?
When we consider whether the Canvas methodology is worthwhile, we need to look at the pros and cons of the Canvas business model compared to the traditional business plan. The main difference is that the Canvas business model is used in agile environments, and especially in start-ups, where the business model can vary from day to day. In these settings, extensive traditional business plans don't make sense because they can become useless overnight.
How to do a canvas?
The canvas model organizes our business model into 9 different blocks or modules. In each of these blocks we’ll define our business model using a few questions as a guide.
Once you have filled out the 9 modules, you can decide if every part of your business idea is feasible on the actual market. Furthermore you’ll be able to modify each part individually, without having to change the entire business plan. This is called "pivoting" in lean startup terminology. The idea is to get a canvas in which the 9 blocks stand in contrast to each other.
The 9 blocks of the canvas business model
The canvas is divided into 9 blocks that encompass all crucial aspects of a company: important partners and activities, value propositions, customer relationships, customer segments, important resources, programmes, cost structures, and revenue streams.
Below you can find the questions that guide you through each of the tool modules. These 9 blocks cover the key elements of a business model.
In the template you downloaded at the beginning, you’ll find examples for each question, which will help you to understand what you need to fill in in each section.
Important partners
In this first module we’ll decide about the most important associations that we’ll establish with other companies.
Who are our most important partner?
Who are our most important suppliers?
What important resources will we gain from our alliances?
What key activities do our partners do?
Important activities
This questions are about the key activities or key processes that keep the company going.
What key activities does our value proposition require?
What key activities do our sales channels require?
What about our customer relationships?
What about our sources of income?
Value Propositions
This is the central part of the business model. Here we’ll describe what we’re offering the customer and why they are all different.
What value do we ascribe our customers?
Which of our customers' problems will we helping to solve?
What product and service packages do we offer to each customer segment?
What customer needs are we fulfilling?
Business relationships with clients
In this section we’ll define what we want customer relationships to be like.
What kind of relationship do you expect from us to build and maintain each of our customer segments?
Which ones have we established?
How are they integrated with the rest of our business model?
How much do they cost?
Customer segments
Now we define every customer segment that we direct in as much detail as possible.
For who do we create a value?
Who are our most important customers?
Important recources
Let's take a look at what resources we have and what resources will be needed for every aspect of our company.
What key resources does our value proposition require?
What resources do our distribution channels require?
What about our customer relationships?
What about our sources of income?
Channels
Here we analyze the channels through which we reach the customer; which are more efficient, which are better for each segment, etc.
Through which channels do our customer segments want to be contacted?
How are we contacting them now?
How are our channels integrated?
Which ones work best?
Which ones are more cost-efficient?
How do we integrate them with customer routines?
Cost strucutre
Here we will break down the costs of maintaining our company and each of its parts separately.
What are the most important costs inherent in our business model?
Which key resources are the most expensive ones?
Which key activities are the most expensive ones?
Sources of income
Last but not least, we will analyze how we get revenue from our customers, what the different sources of income are, which are more efficient, what can be improved, etc.
What value are our customers really willing to pay for?
What are they currently paying for?
How are they paying now? How would they prefer to pay?
How much does each source of income contribute to total revenue?
Once we have our business model canvas elaborated, we can analyze at a glance the whole operation of our company and we’ll know quickly what is failing and where to make changes.