Monica Ray Scott

Dec 11, 2017

The Business Model Canvas — A tool anyone can use to visualise their business

This month we’ll talk about one of the quickest tools to get the hang of: The Business Model
Canvas. The BMC is a lean startup tool, developed by Alexander Osterwalder, that comes in the
form of a blank canvas consisting of nine slots that cover the topics concerning the customers,
the offering, infrastructure and finances. It’s an accessible, easy-to-use template, that can be
filled in to describe any sort of business model and be adapted for different situations. We’ve
hacked our own version for our Kick-Off Workshops and it helps us collaborate with our clients
to figure out who their target audience is and how we can design information to create value for
them.

What do you need to give the BMC a try?

All you’ll need are all the standard collaboration tools of sharpies, post its and a poster print-out
of the canvas. You can download it here, or use it digitally on a tool like realtimeboard — which
makes it easier to share and collaborate with remote teams.

Then it’s time to start sketching out your business. If you’re not quite sure how to use it, or get
stuck along the way, the book version is a great investment. It’s also helpful to take look at the
business models of other companies, like nespresso, to know what you need to focus on and
see how others use it.

Ready, set, go!

Then all you need to do is get your team together. It’s always good to involve others and go
through the nine blocks step by step. It really doesn’t matter where you start — you can fill out
what you know best and save the tough stuff for later — or the other way around…

The nine BMC Blocks

BMC — Customer Segments
Customer Segments: Who are you creating value for? Who are your most important customers?

As we always put the user first, we like to start off with customer segments. It’s very important to
know who are you creating your product/service for and what their needs and wishes are. Try to
get to know you your customers as well as you can and create your business model accordingly.
After all, you won’t be able to survive without them.

BMC — Value Proposition
Value Proposition: What value are you delivering to you customer? Which pain-points are you
addressing? Which problem are you solving?
This is where you get to describe what your offering is. Describe the unique service/product
combination that you are offering. And also what makes it innovative enough for your customers
to pay you for it rather than someone else. Find out what mix of quantitative (price, speedy
delivery) and qualitative attributes (design, status) you can offer.

BMC — Channels
Channels: Which channels will you use to reach your customers? How are these channels
interlinked and how effective are they?

Think about all the touchpoints you will have with your customers. These can be direct; like your
website, social media channels or customer support, or indirect; like a partner store or a reseller.
You need to continuously find new ways to raise awareness and think about how, where and
when new and returning customers interact with you.

BMC — Customer Relationships
Customer Relationships: What type of relationship do you maintain with your customers? What
do your customers expect from you? What are the associated costs?

This building block describes the relationship you have with your customers. Your offering could
be a self-service system or you could focus more on personal contact. Or maybe you can offer
them a unique community and access to like-minded people.

BMC — Revenue Streams
Revenue Streams:

What are your customers willing to pay? How do they pay? How much does each revenue
stream contribute to your overall revenues?

It’s up to you to figure out how much can you charge for the added value you’re offering. Decide
if it is sustainable to have a subscription-based service or a single-usage fee for your service.
Another factor worth considering is how you do your pricing, is it fixed like a list price, or is
dependent on volume or dynamic in the form of an auction or even bargaining system?

BMC — Key Resources
Key Resources: What key resources does your value propositions require? What are your
distribution channels, how do you manage your customer relationships?

The ‘key resources’ field covers all the assets you need to make your specific business model
work. This covers assets such as physical resources like rent and storage space, as well as
human resources (especially when it comes to the creative industry) or intangible resources like
patents, software, or your brand.
BMC — Key Activities
Key Activities: What key activities do your value propositions require? Your distribution
channels? Customer relationships? Revenue streams?

What activities do you need to do, to make your business model work? This could focus on
production methods, whether it’s designing, making or delivering but also for a consultancy, it
would be knowledge management. Or is the maintenance of a platform the most important part
for you, which is usually the case if you deliver your services through a website or an app.

BMC — Key Partnerships
Key Partnerships: Who are your key partners? Your key suppliers? Which key resources are
you acquiring from them and what activities do they need to perform?

Partners are a vital part of quite a few business models and cover anyone you need, to help you
create your offering. There is no need to do everything yourself and strategic partnerships can
help you save money and reduce risks. You can work with your partners for licensing
agreements, sharing customers, manufacturing specific parts of your product that can’t or don’t
need to be done in-house.

BMC — Cost Structure
Cost Structure: What are the most important cost drivers in your business model? How
expensive are your key resources and activities?

You can work out how much costs incur during your business operations by summing up the
different factors you list in key resources, key activities and key partnerships. This can cover
salaries, office rent and software licensing but also many other fixed (for example manufacturing
facilities that remain constant) and variable (costs that rise and fall depending on how much you
produce) costs.

Iteration trumps procrastination

Like with all lean startup/design thinking methods it’s best to start somewhere even if you’re not
100% sure. The great thing about working with posits, sketches and low fidelity prototypes
means you can mix and match and move things around. No-one’s business model is set in
stone and you should share it as soon as you can and get other’s feedback on it.