Lesson 1

What is a Business Model Canvas?

A Business Model is how an organization creates, delivers and captures value. Any Business exists because it has to create and deliver some value to its customers. In return, the businesses are also able to capture value in the form of revenues, brand value, increase in stock price and profits etc. A Business Model Canvas is a visual tool that you can use to create your Business Model.

It is not the only tool to generate the Business Model but is preferred because it gives the stakeholders a common framework to create a Business Model together. The structure of the Business Model Canvas is such that no essential component of the Business Model is missed.

A Business Model Canvas covers the four main areas of any business :

  • Customers – For whom you are creating the product or service
  • Offer – What are you offering to your customers and at what price
  • Infrastructure – What are the tangible and intangible resources you need to set up. All these will cost you something
  • Financial Viability – Is how much you earn > how much you are spending in creating value for your customers?

These 4 areas are explained through these 9 building blocks of the Business Canvas:

  1. Customer Segment
  2. Value Proposition
  3. Channels
  4. Customer Relationships
  5. Revenue Streams
  6. Key Resources
  7. Key Activities
  8. Key Partnerships
  9. Cost Structure

All these blocks will be covered in detail in the upcoming lessons.

For the sake of understanding, just imagine that if your Business is a show, the Business Model Canvas is a Theatre. There are audience and actors on the front stage and then there are people who are working on the backstage to run the show. The right-hand side of the canvas is the front stage where you and your customers are interacting. They are viewing you and paying you something in return of value you provide to them. To ensure the uninterrupted show/value you need to ensure everything that happens behind the curtains, i.e. internally is strong. You will need to have a solid infrastructure, a team that knows their roles and maybe even some partnerships in place.

To ensure the uninterrupted show/value you need to ensure everything that happens behind the curtains, i.e. inside your organization is strong. You will need to have a solid infrastructure, a team that knows their roles and maybe even some partnerships in place. Ultimately in order to be profitable, you would like to ensure that the revenue you generate is higher than the cost incurred by you in presenting your show.

In the upcoming sections, we will discuss each of these blocks in detail. A Business Canvas is a pretty powerful tool as it gives you the holistic picture of your existing or prospective business on a single sheet of paper. It is a really great tool to validate your new business idea or disrupt the current business as you are able to have a shared language through which you can describe and manipulate the Business Model with your teammates and other stakeholders.

The Story behind Business Model Canvas

Though Business Model in itself is not a new discovery, the Business Model Canvas was proposed by Alexander Osterwalder in the year 2004, as a part of his Ph.D. thesis on Business Model Innovation with Professor Yves Pigneur. 2006 onwards, the approach outlined by the thesis became a part of notable companies like 3M, Ericson, Deloitte, and Telenor. Later, the book Business Model Generation was published in the year 2010. It was co-created with several Business Innovation Practitioners around the globe who came together on a single online platform – “Hub” to share their writings and learnings.

Take the Quiz

This small quiz is designed to help you self-assess what you have learned in this lesson. It also helps you to learn and test your knowledge. If you have any questions please feel free to reach to [email protected] with your questions and queries.

TAKE THE QUIZ

Next Steps

In the coming lessons, each block of the Business Model will be discussed. To learn and experiment on your own, download the Business Model Canvas and start mapping out your own plan. For the sake of easily making changes to the Canvas, do not write directly on the canvas. Use Sticky notes to write and then paste the Sticky Note on the Canvas. This way you are not attached or committed to any part of the Canvas unless you have validated the model.

DOWNLOAD BUSINESS MODEL CANVAS

References

The Business Model Theatre

The Book – Business Model Generation by Alexander Osterwalder and Yves Pigneur