The business model canvas [1] is used as a powerful strategic management tool. It allows you to design, challenge your ideas, deliver, realize or pivot your current business model. More specifically, it describes how you will make money and create wealth for your company and its shareholders.
TO START, WHAT IS A BUSINESS MODEL?
The business model describes, in an easily understandable format, how the company creates and delivers the value proposition to customers, and in turn, creates value for its shareholders. It is a “blue-print” of the company’s strategy.
The canvas is a simple and visual way of representing how a company achieves its revenue. It is essentially a simplified analysis tool for business strategy and value creation processes.
The business model canvas differs from the business plan which is much more complete (presentation of the company and its shareholders, its market, its products/services, accompanied by sales and marketing plans, human resources , operating and financial).
HOW USEFUL IS SUCH A TOOL?
SME managers are often faced with strategic planning and many of them find this process cumbersome and complex. The business model canvas is an easy-to-use tool that helps reduce the effort spent on strategic planning. In addition, for the budding entrepreneur, this tool allows you to validate certain parameters or premises of your ecosystem, which will be beneficial when creating your business.
The canvas allows, among other things:
- explain the business model to stakeholders in a simple, clear and concise manner (for example: banker, investors, employees, family, etc.);
- to identify the skills necessary to carry out the business project (those you have or those to be acquired);
- to delimit the market study and/or validate the beginnings of the sales and marketing strategies;
- to identify the necessary resources (material, human, financial and technological);
- to prioritize objectives, follow-up, analyze progress.
THE OBJECTIVES PURSUED BY THE BUSINESS MODEL CANVAS
- Describe and analyze the 4 main dimensions of a business, namely the customer, the offer, the infrastructure and financial viability. These dimensions are broken down into 9 main economic aspects, all presented in a matrix;
- Allow better analysis, and above all, to have a global vision of the company's issues;
- Facilitate dialogue and generate ideas using creativity techniques;
- Identify the interdependencies that connect each of the economic aspects and thus discover the strengths and weaknesses of your business;
- Design a relevant business model that makes sense from a financial point of view.
HOW IT WORKS
The business model canvas is a visual matrix made up of 9 blocks which describes the main economic aspects of a company, namely:
- Customer segment (who they are, in what markets – mass, niche, segmented, diversified, etc.);
- Value proposition – the offer – (seeks to solve and satisfy a customer problem);
- Value proposition distribution channels (communication, sales and marketing, distribution, web technology, etc.);
- Customer relations (establishment and maintenance of customer relationships);
- Sources of revenue (from the value proposition);
- Key resources (material, human, financial resources, etc.);
- Key activities (the most important activities the company must do for its business model to work);
- Key partners (suppliers, subcontractors, bankers, experts, etc.);
- Cost structure (evaluation of all costs essential to the economic model for the realization of the business plan as well as the valuation of shareholders' equity).
NOTES
- The “Business Model Canvas”, from which this document is inspired, is distributed under a Creative Commons license. http://creativecommons.org/licenses/by-sa/3.0/
- You can learn more about the authors of “Business Model Generations” by visiting their website: https://strategyzer.com/
IN SUMMARY
The first versions of this tool appeared around 2002. This tool is increasingly recognized worldwide and accepted by large companies such as Desjardins as well as government organizations such as Services Canada.
It is a very innovative, easy to use and unifying tool. It helps transform your business into a successful organization.
If you would like to share your thoughts on this article, simply reply to this message or email us at info@6dt.ca . We look forward to reading your comments.
[1] Translation of Business Model Canvas (BMC) – The method presented is that developed in the work: “Business Model Generation” by Alexander Osterwalder and Yves Pigneur.