Business Model Canvas: Tool for future titans

In the world of business where everything is moving at the speed of light, new ideas are born, new businesses are started and at the same pace, many go into liquidity. Have you ever wondered what led to the fall of great ideas? There are tonnes of explanations to the question; to some, it was not a great idea, many didn’t have a proper plan, and for the rest of the entrepreneurs, they lost belief in the business idea. Well, the questions that are raised by the mindset required for having a great idea will be covered in the subsequent blogs but, the question on how to build an action canvas on the breakthrough idea will be covered today.

As an entrepreneur, you have discovered the WHY part of the business plan, the next step is to discover the HOW and WHAT part, these parts have more to do with the visualization and actionable steps in the business plan, this is where the Business Model Canvas (BMC) developed by a swiss business theorist and entrepreneur, Alexander Osterwalder, comes into the picture. BMC is a tool that helps businesses to define, analyze, plan, structure, and organize the business activities necessary to design the business and ensure all key aspects are touched upon. Imagine a template that emphasizes all the key business attributes that are necessary to be touched upon when launching a new business, going through them one-by-one is troublesome and this is where the BMC aids the entrepreneur. A tool that many titans have used to shape the business and many who will be using it to shape theirs, a tool, a template, a plan that inter-relates every aspect are like a masterplan in itself, so let’s understand the Business Model Canvas and why it so effective.

Business Model Canvas (BMC):

The Business Model Canvas is a tool that is being used by many businesses to understand the degree of effectiveness of the idea and the efficiency of the idea and what the idea will generate in the future. So what makes BMC so special that it has turned out to be the best brain-storming canvas of all times. To answer this BMC is a set of 9 different elements that are the core of any business plan, these 9 key elements are divided into two sides: the right side of the business model focuses on the customer, and the left side of the business model focuses on the internal factors that help in the smooth functioning of the business. These two sides meet at the centre where the value proposition lies, this is the core of any business, as it emphasises the wants and needs of the customer and what the business is going to offer the customer. Before you start learning and implementing the business model canvas search for the WHY and discover the WHY because it is your WHY that will motivate you to move through the tough times.

Key elements of BMC:

• Value Proposition: The value proposition is the key to any business model. It is the point that is common to both the success of the business and the wants of the customer. The value proposition is one or two things that you are trying to provide or change from the list of all wants and needs of your target customer. The more you know about your customer the better will be the value proposed and perceived by the customer. Value proposition can be both tangible and intanglible. Value proposition could be analyzed with the help of Maslow’s Hierarchy of Needs, as it lays the basis of human needs based on the levels of needs in a person’s life.
• Customer Segmentation: Customer segmentation is how the customer could be segmented into groups: age, gender, common likes, geographical groups, classes of the society, and economic status. Customer segmentation helps in selecting the target customer who will be interested in the product you are offering. Segmentation helps in understanding who is going to benefit from the problem you’re going to solve, who are the competitors, what is the scope of the business idea, what are the key triggers that motivate the target customers, etc.
• Customer Relationship: Customer relationship is the heart of the business, it defines how the business care for their customers and how the customers react to it. Customer relationship plays a vital role when it comes to building loyal customers. It is a strong motivator when done in the right way. Imagine a startup that focuses more on the customer w.r.t a big established business that fails to care for the customer and only believes in sales, no one would be willing to do business with the established one since it cares less about its customers. So customer relations going beyond the business in developing bonds and relations that can turn tides. Creating a user journey map will help in establishing a good relationship with the customer.
• Distribution Channels: Distribution channels helps in understanding the different avenues through which the businesses come in contact with the customer. A business might opt for a direct distribution channel (business-customer) or a multi-distribution channel (business-wholesale-retail-customer). The channels are selected based on customer interaction (social media, direct, networking, etc) with the business.
• Revenue Streams: Revenue streams is how the business gains revenue from the value proposition. It is the most effective way of generating revenues and building a loyal customer base. Revenue streams are the direct reflection of why the customer trusts and cherishes your product.
• Key Activities: Key activities are crucial things that need to be done to deliver the value proposed by the business. The key activity is the fuel that helps in building the road map to success in the business journey. These activities define the passion and how the entrepreneurs plan to make the journey. A key activity is a game strategy that an entrepreneur uses to stand-out from his/her competitors. It defines the actions that you take to deliver the product to satisfy the wants and needs of the customer.
• Key Resources: Key resources are the things required for the smooth working of the business. The key resources are required to achieve the key activities of the business. These are the assets that are required to stay ahead of the competition, good key resources help in better engagement of the business and delivery of the key activities to target the customers.
• Key Partnership: No business is built by a single person, businesses are built with the help of both internal and external teams. Key partnerships are the external aids that help the business to achieve the key activities and deliver to the customers. Key partnerships could be with influencers, agencies, equipment dealers, and manufactures, etc.
• Cost Structures: Cost structure is the cost involved in operating the business. It is the total cost that is required for carrying out the daily operations and future operations of the business. The cost structure helps in identifying the high-cost and low-cost activities and also aids in tailoring the budget to suit the demands of the business for current and future working and analysing the necessary activities to facilitate the business to offer value to the customer.

Source: Business and financial know how. (n.d.). Retrieved from http://teamstart.ca/Library/Marketing/Creating_BusinessModels.html

Benefits of BMC for startups:

• Helps in customer mapping.
• Helps in identifying the key elements of the business.
• Helps in developing a clear picture of the value perceived by the customer.
• Helps in understanding the interrelation between the different elements.
• Helps in understanding the customer journey and value delivery.
• Helps in building customer portfolio to design specific strategies.
• Helps in building revenue stream and understanding the cost required to continue the operations.
• Helps in building a framework to co-relate all the necessary activities and operations to launch a product.
• Helps in building a clear vision for the team to work upon.
• Helps the entrepreneur to tweak the model as per the current and future requirements making it a flexible business model.

BMC model of Apple:

In the image given below, I’ve built a BMC of Apple company. Since Apple company is one of the leading market players in the technology sectors they have proved over-and-over that the design and customers lie at the heart of their BMC. Having discussed the key elements it will be easy for you to understand why Apple continues to be a market leader, why it is so successful and why Apple users are loyal to Apple. Apple focuses on the desirability aspect of the product and how the design appeals to the human mind. Apple aims to provide the user with the best technology in the market and at the same time aims to offer a premium quality product.

“A business model describes the rationale of how an organization creates, delivers, and captures value”

-Alexander Osterwalder

References:

• Alexander OSTERWALDER: Tools for business Model generation [entire Talk]. (2012, February 06). Retrieved from https://youtu.be/8GIbCg8NpBw
• Alex Osterwalder’s business model canvas. (2014, January 15). Retrieved from https://e-equalsmc3.com/alex-osterwalders-business-model-canvas/
• The 20 minute business plan: Business model canvas made easy. (2020, July 03). Retrieved from https://www.alexandercowan.com/business-model-canvas-templates/