Guide: business model canvas (BMC)
The Business Model Canvas (BMC) is a strategic tool that helps you make your business model clear on one page. It is a visual diagram that depicts the key building blocks of a business, including customers, value positions, revenue sources, and more. Developed by Alexander Osterwalder, this model makes it easier to map, adjust, and improve your business model.
In this guide, I explain how to complete the BMC, including examples to help you put the theory into practice.
The 9 Building Blocks of the Business Model Canvas
- Customer segments
- Value proposition
- Channels
- Customer Relations
- Revenue streams
- Key Resources
- Core business
- Key Partners
- Cost Structure
1. Customer Segments.
This describes the different groups of people or organizations your company serves.
Question to answer: Who are your customers? For whom are you creating value?
Example:
- Airbnb serves travelers looking for unique accommodations and homeowners looking to rent out their homes. Both groups are an important customer segment for the platform.
2. Value Propositions.
The value proposition defines what makes your company unique and what problems you solve for your customers.
Question to answer: What problems do you solve? What makes your product or service unique?
Example:
- Apple’s iPhone offers an intuitive user experience, high quality and seamless integration with other Apple products. These are core values that their customers value and that set Apple apart from competitors.
3. Channels.
This describes how you bring your value proposition to your customers. This can be done through various physical and digital channels.
Question to answer: How do you reach your customers? Through what channels do they come in contact with your product?
Example:
- Nike uses a combination of physical stores, its own online store and platforms such as Amazon to reach customers. They also have a strong presence on social media to promote their brand.
4. Customer Relationships.
Describe how you build and maintain relationships with your customer segments. This can range from personal service to automated systems.
Question to answer: How do you maintain the relationship with your customers? Is it one-time or ongoing?
Example:
- Zalando offers personalized customer service with easy return options, which helps build long-term customer relationships and gain trust.
5. Revenue Streams (Revenue Streams).
This shows how your business makes money. Each customer segment can generate different revenue streams, such as one-time payments or recurring revenue.
Question to answer: How do you generate revenue? Is it a subscription model, product sales or something else?
Example:
- Spotify earns through two primary revenue streams: premium subscriptions and ads for free users. This model provides recurring revenue.
6. Key Resources.
What are the key resources you need to deliver your value proposition? These could be physical resources, people or intellectual property.
Question to answer: What resources do you need to support your business model?
Example:
- Tesla’s main resources are their technology (batteries, electric motors), their brand, and their infrastructure of Gigafactories to produce cars.
7. Key Activities.
This describes the key activities you need to perform to deliver your value proposition.
Question to answer: What do you need to do to deliver your value proposition? What processes and operations are critical?
Example:
- Netflix must constantly invest in content creation and licensing agreements to keep their streaming platform up-to-date and attractive to subscribers.
8. Key Partners (Core Partners).
This is about the outside companies or suppliers you work with to make your business model successful.
Question to answer: Who are your key partners and suppliers? Why do you need these partners?
Example:
- Uber works closely with drivers (partners) who are the core of their business model. Without these partners, Uber would not be able to offer ride services.
9. Cost Structure (Cost Structure).
Describe the major costs you incur to operate your business model.
Question to answer: What are the biggest expenses in your business? Are there fixed or variable costs?
Example:
- Amazon has high costs for logistics, warehousing and technology development. At the same time, they keep operating costs low by leveraging economies of scale.
Example: Airbnb
- Customer segments: Travelers who want a unique experience, homeowners who want to generate additional income.
- Value proposition: Access to unique accommodations worldwide, an opportunity for homeowners to generate income.
- Channels: Website, mobile app, social media, word of mouth.
- Customer relations: Peer-to-peer reviews, customer service via chat.
- Revenue streams: Commissions on bookings, service fees for travelers.
- Key Resources: platform technology, brand, user base, payment system.
- Core activities: Platform management, marketing, customer service, partner relations.
- Key Partners: Hosts, payment processors, IT vendors.
- Cost structure: technology development, marketing, personnel, legal fees.
Summary
The Business Model Canvas is a powerful tool for creating an overview of your business. By going through each of the nine building blocks thoroughly and formulating specific answers and strategies, you will gain a better understanding of your business and be able to make more focused plans. Each component provides opportunities to adjust and optimize your model.
