The business model canvas

The ¨Business model canvas¨ is a tool used when creating a business model. The tool is a guide/stencil to help you develop you’re vision of a company. The definition of a business model is ¨A business model describes rasjonality behind how a company creates, deliver and hold value¨ as Alexander Osterwalder and Yves Pigneur says in the book ¨business model generation¨. The model you start with is not necessarily the one you end up with. Since the model is a guide for your start-up it does not mean that it is a rule book you need to follow completely, changes in the model will most likely happen over time as you think of new ways to develop and run, your business.  

How does the model work? The model as the name implies is a canvas, its main function is to help you visualise how and were your company gets its value from. The canvas is built up by nine sections/ building blocks, these are:

  1. Key partnerships
  2. Key activities
  3. Value proposition
  4. Customer relationships 
  5. Customer segment
  6. Channels
  7. Key resources
  8. Cost structure
  9. Revenue streams

Key partnerships: here you want to list all the partner who is going to be essential for your business or for the business you are analysing. In my example photo, I’ve included a study we did on HjemmeLegene which is a Norwegian Home doctor business. HL is a home doctor version of Uber and Airbnb, you put it in simple terms. We listed companies who are partners with HjemmeLegene and resources in the form of people (the doctors who sign up to be doctors for HL).

Key activities: this means what the business does, so we wrote that one of the activities HjemmeLegene does is connect doctors with patients who wants a visit form a doctor at home. HL also do most of the administrative work and they provide a platform that connects the doctors with the patients.

Value proposition: what gives the customers value? We put down in our study that the service provides value with that is saves the customers time, it’s easy and quick to use, you don’t need to stand in line, its effective and safe, and the come to you pretty much any time and place.

Customer relationship: here you want to write down what your relationship with the customer is going to be like. HjemmeLegene doesn’t interact with the customers directly, but the doctors do. They interact with the users by meeting them at home and providing the service and they also interact with their patients on the app.

Customer segment: this is the part where you think about who the customers are or is going to be. In the exampl we wrote parents, people who like/need to save time and people who are to sick to go outside.

Channels: This one is very simple. You just put down where the service is provided/ were the product is distributed, for example, webpage, app, in store (Staples or your own store name) etc.

Key resources: here you want to list all the resources, there are of course different types of resources like financial (money and investments)- material (things you need to make a product like plastic)- and immaterial resources (employs, investors and other partners).  In our canvas, we wrote network of doctors, webpage and investors. The most important resource for HjemmeLegene is their network of doctors. If they don’t have doctors, then they don’t have a service.

Cost structure: what is the main part of the businesses financial resources going towards. For example, HjemmeLegene’s cost structure is marketing, webpage development, salary for the doctors / their cut of what the customers pay, administrative costs and future development/ expanding of the service.

Revenue stream: now we have just looked at where our money will go, but where will this money come from? Usually the money will come from paying customers, investors/investments and sometimes sponsors. When listing paying customers on our canvas, we also wrote in what we get and what the doctors will get. For example, we put down 30-70% spiltt between the parties based on the information we received form HjemmeLegene.

The structure of the model is very simple to follow, you just write in your vision or thoughts around each section. The best way to use the canvas especially when you are working in groups is to either print it out on paper (A3 or bigger is recommended) or draw it up on a whiteboard. You can use both post-its or marking pen to fill it in, post-its are great if you know you need to move things around or remove them. This way everyone can see the model and work better together. You can also combine the ¨business model canvas¨ with ¨the value proposition canvas¨ (https://strategyzer.com/canvas/value-proposition-canvas ) to ensure that you are working towards value for both the company and it’s customers.

Why should I use it? It’s very helpful when you are starting a new business. The model is also a good tool to help you to analyse someone else’s company. I have used it for both purposes, it really helped visualicing the business and get a structure for what I needed to include in my work. It is also a great way to get your team/group involved in the project and it helps to visualise your goals.

You can read more on the subject here:

English

https://en.wikipedia.org/wiki/Business_Model_Canvas

https://strategyzer.com/

Norwegian

3 thoughts on “The business model canvas

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