The Business Model Canvas

What is a business model? What is the purpose of the business model canvas?

A Business Model
describes…
the rationale of
how an organization
creates,delivers,
and captures value.
The Business Model Canvas
Getting from Business Idea to Business Model

1 Select the Idea

This is your prototype

2 Build the Model

The business model canvas

3 Tell the Story

The canvas provides the key

solution that addresses is an excellent tool for points needed to pitch your
the challenge validating the new idea business model to others

Identify the Challenge

For Confidentiality,
You May Want to
Use a Practice Idea
2 Determine the
Nine Building Blocks 3 Present the
Why, How,
What

A business model describes the rationale of how an

organization creates, delivers, and captures value.
The Business Model Canvas
The Nine Building Blocks

1. Customer Segments
A business or organization serves one or several customer segments
2. Value Propositions
You want to solve customer problems and satisfy customer needs with value propositions
3. Channels
Value is delivered to customers through communication, distribution, and sales channels
4. Customer Relationships
Meaningful relationships are established and maintained with each customer segment
5. Revenue Streams
Revenues result when the value propositions are created and delivered to customers
6. Key Resources
These are the assets needed to create and deliver your products, services, and solutions
7. Key Activities
You create and deliver value by performing a number of key activities
8. Key Partnerships
Some key activities are outsourced and some resources are acquired outside the business
9. Cost Structure
The business model elements result in the cost structure needed to create and deliver value
The Business Model Canvas
The Nine Building Blocks: Start with Customer Segments (#1)

Customer Segments Mass Market

This building block defines the CUSTOMER
SEGMENTS Focusing on one large group
different groups of people you with broadly similar needs.

aim to reach and serve.

Niche Market
Profitable customers comprise the heart of any
business model. To best satisfy customers, you need Catering to needs of a specific
group with very specific needs.
to group them into distinct segments based on
common needs, problems, or behaviors. Successful
entrepreneurs make a conscious decision about which Segmented
segments to serve and which segments to ignore. Distinguishing between groups
with slightly different needs.
Which customer segment is most important?
Source: Adapted from the book Business Model Generation written by Alexander
Osterwalder and Yves Pigneur
The Business Model Canvas
The Nine Building Blocks: Next, Determine the Value Propositions (#2)

According to Osterwalder and Pigneur, the Value Proposition (VP) is the reason why customers turn to one company over
another. The VP is typically a bundle of benefits that a company offers customers. Some VPs may be innovative and
represent a new or disruptive offer. Others may be similar to existing products and services but with added features and
attributes. The key is identifying the customer’s most critical PAIN and then finding ways to help relieve that PAIN.

Quantitative Qualitative Game-Changing

Creating new customer value improvements Creating products and services that improve Creating a product or service that will truly
in speed of service, pricing innovations, the customer experience via new designs disrupt an industry and perhaps become known
adding new features and functions. and improved emotional interface strategies. as a category-killer.

Getting the Job Done Performance Product Newness

Price Competitiveness Customization Create New Industry
Cost Reductions Brand Identity Human-Centered Innovation
Convenience Status Enhancement Think iPhone
Think Wal-Mart Think Apple

Source: Adapted from the book Business Model Generation written by Alexander Osterwalder and Yves Pigneur
 The Business Model Canvas
The Nine Building Blocks: The Channels (#3) and Customer Relationships (#4)

Identifying the Channels Establishing Customer Relationships

How will we communicate with and reach our What type of relationship does each Customer Segment
Customer Segments to deliver the Value Proposition? expect us to establish and maintain with them?
Channel Definition
Communication, distribution, and sales Channels are a
Customer Relationship Definition
company’s interface with customers. They serve as key Research shows that human beings are not thinking creatures that
touch points that determine the customer’s satisfaction. feel, but rather feeling creatures that think. Customer relationships
can range from highly personal to automated.
Channel Types Customer Relationship Categories
Sales Force, Web Sales, Company-Owned Stores, Personal Assistance, Dedicated Personal Assistance, Self-Service,
Partner-Owned Stores, and Wholesalers Automated Services, Communities, and Co-Creation

Channel Phases Customer Relationship Motivations

Awareness, Evaluation, Purchase, Delivery, and After Sales Customer Acquisition, Customer Retention, Increasing Sales

Source: Adapted from the book Business Model Generation written by Alexander Osterwalder and Yves
Pigneur
The Business Model Canvas
The Nine Building Blocks: The Revenue Streams (#5) and Key Resources (#6)
Revenue Streams
If Customer Segments comprise the heart of a business model,
then the Revenue Streams are its arteries.
Revenue Streams Defined
For what value is each Customer Segment truly willing to pay?
Each Revenue Stream has a pricing mechanism such as fixed list pricing,
discount pricing, market dependent pricing, or volume dependent
pricing
Transactional Revenues
These revenues result from one-time customer payments. A
good example anAsset Sale where a business, like amazon.com, sells
books, music, or consumer electronics; or when Ford sells an
automobile.
Recurring Revenues
These revenues result from ongoing payments to deliver a
Value Proposition to customers or provide post-purchase customer
support. Examples are subscription fees, usage fees, and licensing
fees.
Source: Adapted from the book Business Model Generation written by Alexander Osterwalder and Yves
Pigneur
Key Resources
Every business model requires Key Resources to deliver the
Value Proposition to the Customer Segments.
Physical
This category includes physical assets such as manufacturing facilities, retail
stores, machines, vehicles, point-of-sale systems, warehouses, and distribution
networks. Retailers like Wal-Mart and amazon.com rely heavily on physical
resources.
Human and Intellectual
Every business requires human resources and they are most crucial in knowledge-
intensive and creative industries. Intellectual resources such as brands, proprietary
knowledge, patents, and customer databases are increasingly important.
Financial
Most business models call for significant financial resources or financial guarantees,
such as cash, lines of credit, or offering stock options in order to hire key
employees. Banks, capital markets, and venture capitalists may provide financial
support.
 The Business Model Canvas
The Nine Building Blocks: The Key Activities (#7) and Key Partnerships (#8)

Key Activities (KA) and Key Partnerships (KP) are closely related. KAs are the most important
actions that a company takes to operate successfully. In most cases the business model cannot
be realized without the help of KPs—your network of suppliers, partners, and strategic alliances.

Key Partnerships
Partnerships and strategic alliances are becoming a cornerstone
Key Activities
of many business models. These alliances help optimize your
Every business model requires a significant number of business model, reduce risk, or acquire needed knowledge and
key activities. These are the most important actions a resources. There are typically four different types of partnerships.
company can take to create and deliver the Value Proposition
to the key Customer Segments while maintaining the desired Strategic alliances between non-competitors
Customer Relationships needed to generate the Revenue Coopetition or Strategic partnerships between
Streams. competitors Joint Ventures to develop new businesses
Key Activities are often categorized as:
Buyer-Supplier Alliances to assure reliable supplies
Operations and
Production Marketing and
Sales Finance and
Administration

Source: Adapted from the book Business Model Generation written by Alexander Osterwalder and Yves
Pigneur
The Business Model Canvas
The Nine Building Blocks: The Cost Structure (#9)

COST-DRIVEN VALUE-DRIVEN COMBINATION

Cost-Driven models focus on minimizing costs wherever possible to create a lean Cost Structure. (Think Southwest Airlines)
Value-Driven models focus on value creation and are less concerned with the cost of delivering the Value Proposition (Think Luxury
Hotels) Many business models are a combination of both approaches but almost all business models have to choose a dominant approach.
Cost Structures typically include fixed costs and variable costs, with an emphasis on taking advantage of economies of scale.

Source: Adapted from the book Business Model Generation written by Alexander Osterwalder and Yves Pigneur
The Business Model Canvas
Telling Your Story: The “Do’s” and the “Don’ts” of Presenting Your Business
Model

Don’t #1 Do #1
“Knock them dead” by showing your Tell your business model like a
business model all at once. story,
one scene at a time.
Don’t #2 Telling the Do #2
Try to convince others that your Business Model Reinforce your case by explaining
idea or prototype solution is great. Story what you learned from your testing.

Don’t #3 Do #3
Wait to share your Show others how your business model
business enables you to compete.
model until it’s perfect.