Business Model Canvas
The most common and widespread tool for developing and visualizing a business model is the Business Model Canvas by Alexander Osterwalder and Yves Pigneur. The canvas was co-created with many practitioners and was based on The Business Model Ontology developed by Alexander Osterwalder in 2004. The results are a best-seller book, entitled Business Model Generation, and the tool Business Model Canvas. The canvas has been published online with a Creative Common License and therefore published and iterated by many practitioners.
The 9 Building Blocks
The underlying idea is, that a business model consists of nine building blocks describing the value proposition, customers, value delivery and value creation, as well as the financial perspective.
- Value Propositions: What kind of value do you deliver to your customer (e.g. efficiency, convenience, social status, low prices)? How do you satisfy your customers’ needs?
- Customer Segments: For whom are you creating this value? Can you differentiate between different customer groups?
- Channels: How do you deliver the value to your customer segments? This starts from raising awareness and also applies to purchasing, delivery and aftersales.
- Customer Relationships: What is the relationship between you and your customer? E.g. self-service, personal assistance during sales, creating a community where members share knowledge.
- Revenue Streams: How do you generate revenue? Whom do you generate revenue from and what form does the revenue have (e.g. subscription fee, renting fee, advertisement, etc.)?
- Key Activities: How do you generate value (service / product) for your customer?
- Key Resources: What knowledge, infrastructure and financial resources do you need?
- Key Partnerships: Who are our partners that help us to create value? Who are our suppliers?
- Cost Structure: What costs arise from creating and delivering value to your customer, from your key activities and your key resources?
- Well-known tool for business model innovation
- Easy to apply
- Easy to understand the general structure
- A lot of additional information, resources and online tools available
- Easy to compare different business model canvases
- Helps to focus on the value proposition for the customer instead of the product and its features
- Comprehensive high-level overview
- Relations between components are not visible
- Value exchange between actors and core concept are not visible
- No information on growth strategy and competitive strategy
- No team or cultural elements (only within resources)
- No differentiation between customers and users
- Missing perspective for sustainability and responsibility of business
How to apply this tool?
- With an idea: start with defining the value proposition for a specific customer segment.
- With potential / existing customers: start with the customer segment, ask what value proposition you are delivering / could deliver to them and how.
- With your resources: start thinking about what key resources (competences, experiences, physical resources, financial resources, etc.) you and your partner(s) have and, based on this, develop your offer for a specific customer group.
View on Responsibility
- Book: Business Model Generation by Osterwalder & Pigneur
- Strategyzer: Paid Online Tool by the authors
- Overview on different online tools
- Osterwalder (2004): The Business Model Ontology – A Proposition In A Design Science Approach
- Businessmodelgallery.com is a database with more than 100 company business models visualized with the Business Model Canvas.