Advantages of the Business Model Canvas

Whether you’re in startup mode or gaining traction, you need real clarity on your business model so you can design your business for success. The Business Model Canvas (BMC) was originally developed by Alex Osterwalder and Yves Pigneur, and presented in their seminal 2010 book ‘Business Model Generation’ as a visual framework for devising, developing and testing an organization’s business model(s). Traditionally, the first thing that an entrepreneur was ‘expected’ to do was to create a business plan outlining the key opportunities, activities and strategies, as well as initial financial projections for the business. Invariably, by the time many had competed their plans things had moved so rapidly that the market reality had changed; a problem that has exacerbated over time as the pace of business has accelerated. To many, the mere prospect of having to create a business plan in the first place was such an overwhelming and intimidating task that it became an excuse to procrastinate from actually starting the business.

The concept of the BMC was to provide a simple, intuitive and flexible tool that can be developed rapidly and applied ongoing to iterate and refresh the business strategy. In a single page view, the BMC provides an overview of the business: it’s offering, infrastructure, market and finances. The following Slideshare provides an outline of the elements and structure of the BMC, as well as some pointers as to how to think about and use it.

The Business Model Canvas has 3 significant advantages:

1. Focus

The BMC is designed to guide thinking through each of the key components or building blocks for devising a business model. In this respect it allows the business to understand how each aspect relates to the others; how the functions, activities and processes interlink and interlock. It gets you to think about your business in a more systematic and formal way, ensuring that each area is effectively covered to produce a more comprehensive and considered picture of the business. The BMC focusses the business on the strategic elements that matter most and will have the greatest impact on driving growth. Its visual nature aids comprehension by being able to see the overall picture of the business and thereby spot areas of strength and weakness depending on the inputs. It builds the business model such that the whole is comprised of and greater than the sum of the parts.

2. Speed & agility

The key principle of the BMC is to concentrate on quality rather than quantity. It is not an exercise in filling boxes (ala the SWOT), or creating a document with pages and pages. Rather, it is about determining the key inputs to each building block. As Steve Jobs once said, “I’m as proud of what we don’t do as I am of what we do.” The BMC’s construct is simple and focussed, hence quick to get started with, develop and iterate. It is a living document that should be tested and re-worked over time, fostering an agile mentality of planning, verification and iteration. At any point it is purely a set of hypotheses that need to be tested and validated with actual customers; as Steve Blank famously quoted “No business plan survives first contact with a customer.” The BMC is fluid and progressive in this respect.

3. Common language

The beauty of the BMC is that it creates a common reference and language that can be used to articulate, share and thereby gain feedback on each business model and its constituent parts. It’s intuitive nature doesn’t take any deciphering and is therefore easy to interpret and consume. It provides a straight-forward yet transparent reference that can be used internally across teams, as well as externally with advisors, investors and partners.

The BMC is a great starting point for discovering, building, ratifying and developing the organization’s business model(s). There are other considerations to business success that are implied but not explicitly covered by the BMC such as: the level and nature of competition, roles and responsibilities, core competencies and capacities, and defining measurable goals; yet the BMC framework covers and connects the primary driving factors.

Centred on the value proposition

Critically, at the heart of the Business Model Canvas is the value proposition. To the left, the BMC considers factors relating to your product and which are mostly under your control; the right side concerns the market, many aspects of which are not directly under your control. In the middle though, straddling both dimensions, is the value proposition. It is the central pillar around which all the other elements revolve; it is the defining component of the Business Model Canvas. It is the reason why the business exists; it determines the core behaviors and activities of the business, providing the guiding direction for all aspects. An impactful, engaging and resonant value proposition is vital to the overall success of any business model.

Resources:
Business Model Generation – Alexander Osterwalder and Yves Pigneur