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Business Objects ‘Not Up for Sale’
Despite evidence that Business Objects was once a takeover target of Oracle, the business intelligence specialist has clung to its independence through a period of consolidation in the software industry. And that’s how Business Objects Chief Executive Officer John Schwarz wants things to stay.
“Business Objects is not up for sale,” Schwarz said Thursday in an interview.
“There are a lot of rumors, but we are managing the business to remain independent, and believe our customers want that,” he said.
That independence shows in the company’s operating system platform strategy. While Business Objects offers its applications on Windows, Unix and Linux, and integrates its reporting tools with Microsoft’s Office suite, Schwarz would like to see the open-source OS grow.
“We think that Linux is a much better platform than Windows, and it’s a platform that is a lot less predatory than Windows,” he said. “Our hope and expectation was that it would begin to displace Windows in the enterprise, but that has not happened yet.”
For Business Objects, Linux has about one-third the market share of Unix, and revenue from Linux applications is “still fairly light.” That’s because the platform attracts cost-conscious customers, Schwarz said.
Software as a service is another aspect of Business Objects’ offering that produces little revenue, but which Schwarz wants to see grow.
The company launched CrystalReports.com in North America in April with two services based on its reporting software: a free version, for up to 10 seats, and a paid version for larger installations.
The service has attracted 6,000 users so far, mostly to the free service, Schwarz said. After three months or so, many of them want to expand their usage and move to the paid service, he said.
“We are busily building out a robust software-as-a-service platform that will make it relatively easy for us to plug new applications into it and plug new users into it,” he said.
Schwarz expects that platform to be ready in the spring, and if the Crystal Reports service is a success, the company will consider moving its entire range of products online, he said.
CrystalReports.com “has not played a huge part in our revenue growth yet,” Schwarz said.
The company is growing all the same. On Thursday it reported third-quarter revenue of US$310 million, up 19 percent year on year.
License revenue for the company’s core business intelligence software accounted for $100 million of that, down 5 percent compared to a year earlier. However, $96 million of that came from the new version, Business Objects XI, up 47 percent year on year.
Although the new version offers customers a lot of value, the upgrade required them to make a lot of effort, which has distracted them from starting projects.
“Customers are spending their money on the migration effort and spending a lot less money on buying new technology,” Schwarz said.
In the Americas, that migration cycle is over, but it will be another quarter or two before customers in Europe are ready to spend on new Business Objects licenses for new projects, he said. Europe, the Middle East and Africa account for just over one-third of the company’s revenue.
Business Objects’ consulting and training business grew 34 percent, to $50.3 million for the quarter. Schwarz estimates the potential market for such services at four times its software revenue, or around $500 million. He expects the company to hold its share of the service opportunities at about 20 percent of that market, leaving the rest to partners, he said.
-Peter Sayer, IDG News Service (Paris Bureau)
Business Objects Launches Data Integration Tools
- Business Objects Offers Software as a Service
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What is a Business Model Canvas?
Head of Studio
26 March 2020
If you’ve ever planned a company, you likely know that there are a lot of moving parts to consider. Finding a centralized, essential view to take it all in can be tricky. Fortunately, this is where the business model canvas comes in!
Business Model Canvas Definition
A business model canvas is a visual representation of a business model, highlighting all key strategic factors. In other words, it is a general, holistic and complete overview of the company’s workings, customers, revenue streams and more.
The actual business model canvas definition was first proposed by Alexander Osterwalder, a Swiss entrepreneur, and consultant, but has gone to be used around the world.
What’s the Purpose of a Business Model Canvas?
Other than providing a general overview of the business model, these canvases enable companies to visualize and analyze their strategy. This includes updating the model as the company evolves, such as changes in the market, new streams or expansions.
The business model canvas provides the central, common source of knowledge through which each department can add their unique input from their respective domains.
It is a template that defines the business - specifically, how each section interacts with the others. For example, understanding the value proposition, the target customer and the channels through which they are engaged all need to be analyzed together, not just in individual vacuums.
Alternatively, the business model canvas can be used by organizations to plan, assess or execute new models altogether. In this way, the canvas highlights the key essentials and ensures that no vital factors are forgotten. If the canvas is incomplete, then the respective strategy is also incomplete.
Elements of a Business Model Canvas
So, what does a business model canvas include?
Whether its B2B or B2C, all businesses have customers. These are the people or organizations that buy your products, use your service or are otherwise essential for creating a profit.
Customers can be defined through various means but it’s important to focus on the core customers first, then assess less critical or potential future clients. The canvas should assess, among other factors:
Current and future needs : what are customers looking for, and what might they be looking for in the immediate future?
General demographic : age range, location, interests, etc
Likes, dislikes and pain points : what do your customers enjoy and what puts them off? Knowing this will help understand how best to approach them.
Relations with other segments : this is important if your business relies on multiple groups interacting. Airbnb, for example, has both property owners and guests - the business strategy only works if both are satisfied.
Additionally, you can list additional segments that may utilize the product or service in the future. This will highlight future directions the strategy can go in, once success has been gained with the core, primary audience(s).
A company’s value proposition is the sum of its various products and services, specifically in regards to how it uniquely stands out amongst the competition. In layman's terms: what is the unique factor that makes this business better than another?
The creator of the business model canvas, Osterwalder has also stated that organizations need to offer something unique and, what’s more, this needs to be immediately discernible from the competition.
The value proposition can be as simple as being cheaper, faster, more efficient or more readily available than the competition. However, we can roughly place all values in two broad categories:
Quantitative. This refers to benefits that can be easily counted; from a customer’s point of view, this means they can be easily compared to the competition. Examples of this can include pricing or speed. Users may very well choose your service because it's cheaper or quicker.
Qualitative. This refers to abstract concepts such as value or experience - those that can’t be readily measured by hard numbers, but nonetheless, give a strong emotional response to your audience. Examples of this can include various characteristics, such as using local products, being eco-friendly or having a personal, customer-centric approach that competitors lack.
Another way of expressing the core value is by asking what you want customers to remember. When it comes to recommending your business to others, what’s the essential benefit that people should mention? This is the value that your organization needs to drive - so it needs to be on the canvas.
Of course, your value also needs to be maintained. For instance, if your value lies in being the only service in a respective region, what will happen when a larger competitor eventually decides to move in? The business model canvas should highlight these weaknesses, in order to better plan ahead.
How will you and your customer interact? Once you define your customer, as well as flesh out your unique value, this will impact what channels you use.
For example, if your audience is busy and on the go, a mobile-facing service will be essential. Likewise, if you’re targeting specific locations, perhaps a physical presence is also needed? What’s important here is that you consider the many touchpoints that your customers may want and highlight the beneficial ones.
However, it should be noted that channels can adapt over time and this is one area where the business model canvas is likely to be updated.
For example, when Domino’s first started, there were only a handful of options, namely dialing the store or visiting in-person. The invention of the internet and mobile apps quickly changed this and now there are over 10 different ways, including smart TVs, slack integration and voice commands.
Yet the decision to expand with new digital products didn’t just happen on a whim; the business model canvas considered the customer needs (efficiency and a desire for less effort) with their value proposition (making food ordering and delivery as easy as possible) to define new channels.
This section covers your relationship with each customer. This includes how customers first came to use your business, how you kept these initial customers and, ultimately, how the business will grow its audience.
There are a number of factors to consider here, especially in regards to the type of relationship you want:
Personal Assistance. In these forms, customer service is essential. Clients want a personal approach from your company and, in turn, you offer a direct approach tailored to their specific needs. This often involves having employees attached to specific customers (such as a sales or business development position) both before and after the sale process itself. This is something a bank might have for its business clients, for example. How dedicated this exact relationship depends on the nature of your service, as well as your customers.
Automation and Self-Service . On the other hand, you might not want to have a direct, personal relationship at all. This can often be found in e-commerce stores, for example; customers just want to browse and shop at will, without speaking to anyone. Automation can enhance this through personalization, without the customer being aware, such as Netflix’s recommended viewing.
Communities. Alternatively, if your target audience is a particular niche, segment or region, you might want to establish a community. In this approach, your business model brings people of shared interests together, to facilitate more actions.
Ultimately, a company has to turn a profit. On the business model canvas, this is represented by revenue streams: the various channels with which income can be generated.
Here are the most common revenue streams to consider:
Asset or goods sales: this is one of the oldest streams. By selling goods, the business generates revenue at each transaction.
Subscription: If your providing an ongoing service or rented out products, then these fall under subscription models; your customers pay on a regular schedule (such as per month or year) as long as they are using your business.
Leasing or lending: This is similar to the subscription, but differs in that it’s for a predefined period. Car rentals, for instance, often do this, as customers define the rental period before purchasing. Newer models, however, try to challenge this status quo by offering a more subscription-based service.
Licensing: This is where the business sells licenses to other companies or individuals to use the property. It’s similar to sale, but differs in that you still own the intellectual property; the user can’t resell it.
White labeling: Similar to licensing, white labeling is where you provide a product or service that businesses can relabel as their own. This is typically done as a subscription or one-off license purchase, so it can be considered an additional variant of the above.
Advertising: Perhaps your model is designed to attract users, but currently drive revenue from advertising opportunities? Social media networks are the most famous example of this; they don’t make money through purchases or subscriptions, but through charging advertisers to benefit from this network.
It’s important to note that these revenue streams are not set in stone - they will adapt and evolve as the market changes. As a business, you should regularly return to the canvas to make sure each stream is as effective as it can be. This includes different pricing plans and options (especially if you have multiple streams) or adding new streams, such as with Domino’s, for example.
Every organization runs on resources: the essential assets in running the business and providing the value (defined earlier) to customers. Like the other elements, this can come in many forms.
Human resources: if you’re providing personalized value or have a model that requires a lot of staff, the cost and training of employees need to be considered.
Financial: how much investment is required to run and maintain a business before it makes a profit? The more money is needed upfront, the bigger the burden to generate ROI.
Physical: expanding your presence, opening offices or buying physical space is also an asset that needs to be considered. This is mostly true for organizations that need prominent positions, such as high street retailers or hotels. For a lot of businesses, the push into a digital landscape is quickly reducing the strain of this particular resource.
Intellectual property: this can include everything needed to develop your IP (such as an app), as well as develop and maintain it. For example, subscriptions and licenses survive by ensuring customers can not use the service without your business, as you still hold the intellectual property rights.
Through these factors, you should identify what is currently available and what is needed to succeed. Much of this will be defined in your previous channels; this is where you focus on what those channels need to succeed - with an end goal of creating a sustainable business model.
Similar to the last section, what do you need to do to produce your value proposition and ensure it succeeds? This section includes the key activities needed to make your model effective and successfully connect with customers.
This can include initial investment, such as finding a development company, or even marketing and advertising to generate that initial awareness. This section should take everything into account, including the impact each has on the overall business, to understand the absolute essentials and recommended extras.
Very few companies survive on their own. Identifying and preparing key partnerships is essential for long term survivability. Here are the primary partnerships that you’ll typically need to consider.
Distributors: how will your business sell to customers? Whether its using online stores, sales agents or other companies, you need some form of distribution.
“Coopetition”: sometimes two businesses, that would otherwise be competitors, can join forces to take on larger markets. This works where this is enough potential gains that a joint venture makes more fiscal sense: there isn’t a clear risk of one siding gaining at the expense of the others. For example, smaller organizations can often team up to provide a larger, holistic offer to users, or to even attend events that are outside of either side’s budget.
Suppliers: Similar to distribution, you also need suppliers for everything from raw materials to software development. If there’s something you need and can’t produce in-house, then you need to identify trusted suppliers.
Existing customers: Perhaps if you have existing clients, you can offer some recommendation rewards, or a commission-based system, to spread awareness?
Like everything else, much of this will be subject to change. As the business grows, you might find you no longer need certain partnerships, and likewise need to move to others. All of this should be noted in the business model canvas.
Finally, as far as business model canvas elements go, you need to define all potential costs. After all, you need to know how much you’ve spent to know when you’re generating profit. The cost structure takes both existing and future costs into account:
Fixed costs are the easiest to determine as they have a singular price or a repetitive price that doesn’t change. Rent is a good example.
Variable costs, on the other hand, can vary and their high peaks need to be accounted for. Factors such as temperature can often impact businesses that need to maintain a certain heat or humidity - they may spend more (or less) in the warmer months.
Economies of scale and scope , similarly, refer to decreasing costs as the business expands. This is because larger production can introduce better efficiencies (scale) while creating new partnerships and improving internal processes, as a result, can improve the wider organization (scope). For example, you might rely on third-party providers for immediate support, such as packaging, but move this in-house when it becomes cost-efficient to do so.
It’s important to understand these variables so that the business model canvas provides a realistic view of costs right now, as well as where the company aims to be short.
Benefits of a Business Model Canvas
Visuals at a glance.
Thanks for having everything in one place, people in the company can gain an immediate understanding of the business model as a whole. It’s easily interpretable and offers a single source of truth for the wider strategy.
Quick Improvements & Iterations
By having everything connected, organizations can see how every part of the business works with the wider structure. This is where people can highlight flaws or identify solutions. By comparing all the factors, such as customers, revenue streams and costs, the company can begin to make strategic improvements it might not have otherwise identified before.
Nobody wants to go through a 2-hour presentation everything they want to go through the business strategy. The business model canvas definition is a better way to show this plan. It can be easily shown to new people to help bring them up to speed, while simple changes don’t require extensive explanations; people can see how they fit onto the updated canvas.
TL;DR - What Is a Business Model Canvas?
A business model canvas is an effective way to bring all the elements of your strategy together, from initial costs to customer & revenue streams. Doing so helps bring in all departments in your company and allows for a broad, but deep, an overview of the intended business model. Whether its propose updates to an existing strategy or developing an entirely new company, the canvas is one of the best ways to get an initial overview and assess directions as early as possible.
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Why a business model canvas is important to organizational innovation.
How can an organization innovate?
That's the question every business leader should be asking themselves in 2016. Failing to innovate successfully could mean closing your doors in today's business and technology climate.
To achieve organizational innovation , every facet of a business needs to move together in the same direction. That can be difficult without a clear visual of what your business model is and how your activites should be aligned. You need to identify what your company wants - and is prepared - to do before innovation can turn from a buzzword into an action.
Need help with your company's innovation strategy? Request a consultation. We'd love to talk.
Are you familiar with a Business Model Canvas? You should become familiar - the Business Model Canvas is a methodology on the rise. It helps companies visualize and position their business models for growth and innovation.
What is a Business Model Canvas?
Strategyzer defines it : "The Business Model Canvas, is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model."
The Business Model Canvas breaks your business model down into easily-understood segments: Key Partners, Key Activities, Key Resources, Value Propositions, Customer Relationships, Channels, Customer Segments, Cost Structure, and Revenue Streams.
By digging into these elements of your company, you can recognize and act on areas that can be improved. It also reveals clear paths on which to build your organizational innovation strategy.
Gaining a better understanding of your business never hurts. It helps you communicate your goals to your team. It helps communicate to clients why they should do business with you. It helps pull into focus what your business does and how it will continue to do it - successfully - into the future. The Business Model Canvas is an invaluable tool for startups and Fortune 500 staples alike.
Watch this for more information on why your company should use the Business Model Canvas:
How can it help organizational innovation?
Innovation is disruptive. But, not every business is prepared for disruption. Without a plan, pivoting is next to impossible. For an organization to innovate, it has to have a fine-tuned strategy that guides it towards a viable future business model. Using a tool like the Business Model Canvas can serve to unite your company under a clear visualization of where your organization sits today and where it can be tomorrow (and how it will get there).
The Business Model Canvas moves innovation out of the 'in-theory' stage and into the planning stage. See clearly, for example, what your strongest revenue streams are and how they can complement each other. Or, more closely examine your value propositions and discover better ways to position your product or service to customers. Use customer segments to find out exactly who you're talking to and how to approach them more effectively.
Your company's future is hidden in the details. Find it and you'll be ready to innovate successfully.
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How to Build a Product Roadmap Based on a Business Model Canvas
Could you list all of the key building blocks you need to develop, manage, maintain, market, and sell a product on a single sheet of paper? With the business model canvas, you can! Using the business model canvas approach is a great way to force yourself to focus on the most strategically important elements of your product. As the name suggests, the typical use case for this tool is to outline the fundamental building blocks of a business, but it also can work really well for a product.
Today we’ll show you how the business model canvas works and how you can use it to come up with a high-level product strategy.
What is a Business Model Canvas?
As you can see from the sample example below (thanks, Strategyzer.com), a business model canvas is a one-page summary describing the high-level strategic details needed to get a business (or product) successfully to market.
The categories or buckets contained in a canvas can be customized. But most will look similar to the one here—covering such key areas as:
- The product’s value propositions (what it does and promises)
- Customer segments (who it’s for)
- Key activities (the steps the team must complete to make it successful)
- Key resources (what personnel, tools, and budget the team will have access to)
- Channels (how the organization will market and sell it)
- Customer relationships (how the team will support and work with its customer base)
- Key partners (how third parties will fit into the plan)
- Cost structure (what it costs to build the product as well as how to sell and support it)
- Revenue streams (how the product will make money)
If you think about it, that’s a fairly comprehensive set of building blocks you’ll need to think through for your product before you begin developing it. There will certainly be additional factors that’ll affect your strategy, but if you can fill in these high-level details—which, as you can see, should fit comfortably on a single page—you’ll have a useful strategic guide for developing your product roadmap.
Why Should I Use a Business Model Canvas to Develop a Product Roadmap?
Okay, but why? What’s the benefit of building a business model canvas (or the, even more, stripped-down variation, the lean canvas) to guide my product roadmap ?
There are plenty of reasons. But simply put, you can think of a business model canvas as a mission statement for your product roadmap. It’s a handy reference you can refer to, to make sure your roadmap always reflects all the strategic elements needed for your product’s success.
Tweet This: “Think of a business model canvas as a mission statement for your product roadmap.”
Our co-founder Jim Semick has a couple of great short videos explaining the business model canvas concept, which you can check out in the player below.
As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies:
1. You can use a business model canvas to roadmap quickly.
You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes).
This way, rather than trying to write out every detail about your product plan beforehand, you can just document the highlights—and then you can get rolling translating the canvas into your product roadmap.
2. A business model canvas will be more agile.
One problem with the old structure of documenting a business model—the traditional business plan—was that it was almost always inaccurate as soon as the author finished drafting it.
These meaty plans included detailed cost estimates, revenue projections going years into the future, and long-term plans for growing the staff. How could any of that remain accurate for long?
In product terms, you can think of the business plan as resembling an MRD (Market Requirements Document). It’s long, detailed, and probably mostly untrue by the time it’s done.
But because you can put a canvas together so quickly, it will much more accurately reflect your strategic thinking and your company’s current reality. And if things change, it’ll be easier than a long and detailed plan to adjust. This brings us to Jim’s third benefit…
3. Business model canvas roadmaps allow you to pivot as needed.
If you build a business model canvas to guide your business roadmap , and something happens that forces you to re-prioritize or pivot your product , it will be a lot easier to update this short, high-level document than it would be if you had some monster MRD or business plan to tear apart and edit.
With a one-page business model canvas acting as the strategic undergirding for your roadmap, you’ll always be able to quickly spot any items or plans that need updating whenever priorities change or new realities demand that you adjust your approach.
How Can I Use A Business Model Canvas to Guide My Product Roadmap?
The alexa example.
Let’s talk through a hypothetical example, using Amazon’s Echo device (“Alexa”) as our guide.
Imagine that as they were talking through what belonged in the “Revenue Streams” bucket of the business model canvas, Amazon’s Echo team came up with three sources of revenue to start with:
1) Selling Echo devices.
2) Using the device to sell other stuff as customers ask it to connect to the Amazon marketplace. (“Alexa, please add laundry detergent pods to my shopping cart.”)
3) Licensing Echo’s proprietary speech-recognition technology to other businesses.
Now, if the Echo product team put these on their business model canvas, they’d know that they need to make room for budget, time, and resources on their product roadmap for all of these revenue streams.
Another Hypothetical Example of the Business Model Canvas: Channels
Or think about the Channels bucket in the business model canvas. If your team was building out a canvas, maybe you’d have several ideas for reaching customers:
1) The in-house sales team. 2) Affiliate partners. 3) Word-of-mouth advertising from users.
It’s easy to write. But how are you going to translate that “word-of-mouth” strategy into an actual plan?
Maybe you’ll need to budget time and resources for developing things right into your product that make it easier for users to share their experiences with friends, such as a handy tool to help them tweet about it. Maybe you’ll even want to include an “Invite a friend” feature that lets users easier send a trial license to friends, or a couponing feature that offers some reward to a user who brings in two more users.
The point is, your business model canvas can serve as a great strategic reminder of the things you’ve determined are important enough to make it onto your product roadmap .
So you can always look back and see immediately—it’s just one page, after all—if you’re still working on all of the essential elements of your product, or if you’ve inadvertently strayed from them and gotten lost in the wrong details.
That’s why we’re big proponents of the business model canvas approach to guiding your product roadmap .
Do you have an opinion about using the business model canvas approach for developing and documenting your product’s strategy? Feel free to share them in the comments section.
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- Building Blocks of Business Model Canvas
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- Key Partnerships
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- Value Propositions
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Pick Another Building Block
The business model canvas , invented by Alex Osterwalder of Strategyzer, is made up of nine building blocks showing the logic of how a company intends to deliver value and make money.
The nine blocks cover the three main areas of a business: desirability, viability and feasibility. The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.
Below a description of each of the nine blocks with links to detailed support on each block. You can also click on the diagram at left to navigate through each of the blocks. To deeply learn and understand the canvas, take our online course: Mastering Business Models
The Value Proposition's Building Block describes the bundle of products and services that create value for a specific Customer Segment The Value Proposition is the reason why customers turn to one company over another. It solves a customer problem or satisfies a customer need.
The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve Customers are the heart of any business model. Without (profitable) customers, no company can survive for long.
The Channels Building Block describes how a company communicates with and reaches its Customer Segments.
Channels are customer touch points that play an important role in the customer experience.
The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments. A company should clarify the type of relationship it wants to establish with each Customer Segment.
The Revenue Streams Building Block represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings).
If customers is the heart of a business model, Revenue Streams are its arteries. A company must ask itself, For what value is each Customer Segment truly willing to pay?
The Cost Structure describes all costs incurred to operate a business model. This building block describes the most important costs incurred while operating under a particular business model.
The Key Resources Building Block describes the most important assets required to make a business model work Every business model requires Key Resources. These resources allow an enterprise to create and offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and earn revenues.
The Key Activities Building Block describes the most important things a company must do to make its business model work. Every model calls for a number of Key Activities. These are the most important actions a company must take to operate successfully.
The Key Partnerships Building Block describes the network of suppliers and partners that make the business model work. Companies forge partnerships for many reasons, and partnerships are becoming a cornerstone of many business models.
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Business Model Canvas Explained
The Business Model Canvas is a business tool used to visualise all the building blocks when you want to start a business, including customers, route to market, value proposition and finance. You could also try the Lean Canvas , a 20min, 1-page business plan template that helps you pull apart your idea. It is adapted from Alex Osterwalder’s Business Model Canvas.
The blocks on the BMC are:
Customer Segments: Who are the customers? What do they think? See? Feel? Do? Value Propositions: What’s compelling about the proposition? Why do customers buy, use? Channels: How are these propositions promoted, sold and delivered? Why? Is it working? Customer Relationships: How do you interact with the customer through their ‘journey’? Revenue Streams: How does the business earn revenue from the value propositions?
Key Activities: What uniquely strategic things does the business do to deliver its proposition? Key Resources: What unique strategic assets must the business have to compete? Key Partnerships: What can the company not do so it can focus on its Key Activities? Cost Structure: What are the business’ major cost drivers? How are they linked to revenue?
Each of these blocks needs to be accurately filled in, and revisited regularly to ensure the business model is still accurate – its a good thing to do before you register a business.
The DIY Toolkit has a great version of the BMC, which explains each section as well. Click on the image at right to print a copy of the BMC from Steve Blank.
BaB lecture 3: Maria Nikolou
DIY Toolkit: business model canvas
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Jul 7, 2016
How To: Business Model Canvas Explained
Use this tool to quickly and easily define and communicate a business idea..
The Business Model Canvas (BMC) is a strategic management tool to quickly and easily define and communicate a business idea or concept.
It is a one-page document that works through the fundamental elements of a business or product, structuring an idea in a coherent way.
The right side of the BMC focuses on the customer (external), while, the left side of the canvas focuses on the business (internal).
Both external and internal factors meet around the value proposition, which is the exchange of value between your business and your customer/clients.
Why do we use it?
- To quickly draw a picture of what the idea entails.
- It allows us to get an understanding of your business and to go through the process of making connections between what your idea is and how to make it into a business.
- It looks at what kinds of customer decisions influence the use of your systems.
- It allows everyone to get a clear idea of what the business will likely be.
How to use it
The Value Proposition is foundational to any business/product.
It is the fundamental concept of the exchange of value between your business and your customer/clients.
Generally, value is exchanged from a customer for money when a problem is solved or pain is relieved for them by your business.
Good questions to ask when defining your business/product:
- What is the problem I am solving?
- Why would someone want to have this problem solved?
- What is the underlying motivator for this problem?
A good way to approach this for users/customers is by looking at your customer segments and figuring out where your product/service solves the problem for your customer, based on Maslow’s Hierarchy of Needs .
If you are selling your product or service to another business, you are a key partner in them achieving their Value Proposition for their customers.
It is important to have context around the goals the company is trying to achieve for their Customer Segments and where your business/product/service fits in the value chain.
Customer Segmenting is the practice of dividing a customer base into groups of individuals that are similar in specific ways, such as age, gender, interests and spending habits.
Things to consider when determining your Customer Segments:
- Who are we solving the problem for?
- Who are the people that will value my value proposition?
- Are they another business?
- If so, what are the characteristics of those businesses?
- Or, are they other people?
- Does my value proposition appeal to men/women or both?
- Does it appeal to young adults aged 20 to 30 or teenagers?
- What are the characteristics of the people who are looking for my value proposition?
Another thing to gauge and understand is your market size, and how many people there are in the Customer Segment. This will help you understand your market from a micro and macro perspective.
A great place to start understanding your customer is to create customer personas for each of your Customer Segments.
You can read the guide to Persona Development here.
Okay, so we know our Value Proposition and have developed Personas to better understand our Customer Segments or ‘customers’, but what is the relationship we have with our customers?
Customer Relationships is defined as how a business interacts with its customers.
So, do you meet with them in person? Or over the phone? Or is your business predominantly run online so the relationship will be online too?
Some examples are:
- In-person (one-to-one)
- Third-party contractors
- Events (one-to-many)
A really helpful step is to create a User Journey Map of your customers as they interact with your business.
This helps clarify the points of engagement between you and your customer and the modes used to relate to your customers.
This will also help you start to define your operations as a business and also help you identify opportunities for automation.
Channels are defined as the avenues through which your customer comes into contact with your business and becomes part of your sales cycle.
This is generally covered under the marketing plan for your business.
Good questions to ask when identifying the channels to reach your customers are:
- How are we going to tell our customer segment about our value proposition ?
- Where are our customers?
- Are they on social media?
- Are they driving their car and listening to the radio?
- Are they at an event or conference?
- Do they watch TV at 7pm on a Friday night?
Examples of channels:
- Social media
- Public speaking
- Electronic mail (email marketing)
- SEM (Search Engine Marketing)
- SEO (Search Engine Optimisation)
- Engineering as marketing
- Viral marketing
- Targeting blogs
- Sales and promotions for commissions
- Existing platforms
- Unconventional PR
- Social advertising
- Trade shows
- Content marketing
- Community building
- Offline advertising (billboards, TV, radio)
Understanding how to reach your customers is so crucial to your business.
We recommend you listen to Traction (Audiobook) by Gabriel Weinberg & Justin Mares.
The Key Activities of your business/product are the actions that your business undertakes to achieve the value proposition for your customers.
Questions to ask:
- What activities does the business undertake in achieving the value proposition for the customer?
- What is the resource used?
- Distribution of product?
- Technical development?
- Offer resources (human/physical)?
- What actions does it take you and/or your staff to achieve value exchange?
- Web development
Next, you should think about what practical resources are needed to achieve the key activities (actions) of the business.
Key means the resources your business requires to do business.
These resources are what is needed practically to undertake the actions/activities of your business:
- Office space
- People (staff)
- Internet connection
Key Partners are a list of other external companies/suppliers/parties you may need to achieve your key activities and deliver value to the customer.
This moves into the realm of ‘if my business cannot achieve the value proposition alone, who else do I need to rely on to do it?’.
An example of this is ‘if I sell groceries to customers, I may need a local baker to supply fresh bread to my store’.
They are a key partner to achieve the value my business promises to the customer.
Your business cost structure is defined as the monetary cost of operating as a business.
- How much does it cost to achieve my business's key activities?
- What is the cost of my key resources and key partnerships?
- How much does it cost to achieve the value proposition for my customers/users?
- Are there additional costs to running a business?
- What is the cost of my business?
- It is important also to place a monetary value on your time as a cost.
- How much would it cost you to hire you?
- What is the opportunity cost of running your business?
Revenue Streams are defined as the way by which your business converts your Value Proposition or solution to the customer’s problem into financial gain.
It is also important to understand pricing your business accordingly to pain of purchase in exchange for the pain of solving the problem for your customer.
But how do you gain revenue?
There are many different revenue models here:
- Pay per product (pay per view)
- Fee for service
- Referral feeds
- Equity gain
Tools to Use
Apple computers, related resources.
Creating a Startup: The importance of understanding your customer
Three Questions You Should Ask Before Making An App
How To: Idea Validation | Introduction to Prototyping
SEED’s Road to MVP Guide
Want some help building your startup, growing your business and creating products/services that your customers will love? Contact SHEDA to make an inquiry.
This blog originally appeared on the SHEDA website.
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Of all of the start-up tools out there, the Business Model Canvas is one of the most well-known and relied-upon to help entrepreneurs transform an idea into an organized strategy and an actionable business plan.
The Business Model Canvas gives entrepreneurs a wide snapshot of every aspect of their business – everything from the value proposition and customer segments to operations and the financials. The tool itself, however, is no more complex than a series of nine boxes representing business segments drawn across one sheet of paper. A large part of its effectiveness is in its simplicity. The exercise forces owners to stay focused and concise as they map out their business according to each of the boxes to hone in on their business strategy and plan.
A Business Model Canvas lets you put your entire business down on paper and assess your strategy, planning gaps and exposure to risk.
According to Bruce Gitlin, SCORE mentor and business development expert, the Business Model Canvas can help entrepreneurs address specific risks and acquire more information about competitors, costs, customer segments or a market niche.
"Many start-up entrepreneurs and small businesses are so busy trying to get started and survive that they spend little time planning. When they do try to plan, they are often confused and don't know where to start,” explains Gitlin. “This tool sets an overarching framework for developing a business strategy, a detailed business plan, and/or a prioritized action plan.”
You can easily create your own Business Model Canvas and go through the exercise yourself.
When planning your start-up, go through your own Business Model Canvas exercise and integrate your completed canvas into your business plan. If your business is already operating, going through the exercise is just as valuable. You’ll have the opportunity to assess your business plan using actual data and refine your strategy to get closer to your goals.
Here is a breakdown of the nine Business Model Canvas building blocks and how to think through each one as you create your own canvas.
- Key Partners
Who are the buyers and suppliers you need to form relationships with? What other alliances will help you accomplish core business activities and fulfill your value proposition to customers?
- Key Activities
What are the most important activities you must engage in to fulfill your value proposition, to secure distribution channels, to create and strengthen customer relationships, to optimize revenue streams, and more?
- Key Resources
What resources do you need to create value for your customers and sustain your business?
- Value Proposition
What core problem does your business solve? What benefits does your business deliver? And, what products or services will you offer to meet the needs of your customers?
- Customer Segments
Who will your business serve? Will you serve a single customer type or multiple customer segments? Which customers are the most critical for your business’ success?
- Customer Relationships
What types of relationships will you forge with your customers? What are the relationship expectations from each customer segment?
- Sales Channels
Through what means will you reach your targeted customers and deliver your products and services to them? Which will be the most cost-effective? How are your sales channels integrated?
- Cost Structure
What are all of the costs that you’ll incur while operating your business? There are two primary types of cost structures: value-driven and cost-driven. A part of this block is determining which structure makes the most sense for your business and factoring that into your cost strategy.
- Revenue Stream
How will you charge for our product or service? What are customers willing to spend? And, how much will each revenue stream contribute to your overall annual revenue?
Identifying planning gaps between these nine building blocks is the real value of the Business Model Canvas.
According to Gitlin, gaps in planning stand out when using the tool, making it effective for entrepreneurs who are new to starting and running a business.
"The Business Model Canvas helps visualize what is important and forces users to address key areas,” he says. “It can also be used by a team (employees and/or advisors) to understand relationships and reach agreements."
Completing your own Business Model Canvas is one of the most valuable planning steps in your overall business plan. Whether you’re a new business owner crafting a business plan for the first time or an owner looking to address planning gaps in a current business, going through the Business Model Canvas exercise is even more valuable with a SCORE mentor by your side.
Since 1964, SCORE “Mentors to America’s Small Business” has helped more than 11 million aspiring entrepreneurs and small business owners through mentoring and business workshops. More than 10,000 volunteer business mentors in over 250 chapters serve their communities through entrepreneur education dedicated to the formation, growth, and success of small businesses. For more information about starting or operating a small business, call 1-800-634-0245 for the SCORE chapter nearest you. Visit SCORE at www.score.org .
Funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.
Copyright © 2023 SCORE Association, SCORE.org
The Easy Guide to the Business Model Canvas
Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.
In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.
What is a Business Model Canvas
A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.
The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.
The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.
The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.
The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.
Why You Need a Business Model Canvas
- The BMC provides a quick overview of the business model and is devoid of the unnecessary details compared to the traditional business plan.
- The visual nature of the business model canvas makes it easier to refer to and understand by anyone.
- It’s easier to edit and it can be easily shared with employees and stakeholders.
- The business model canvas can be used by large corporations as well as startups with just a few employees.
- It clarifies how different aspects of the business are related to each other.
- You can use a BMC template to guide a brainstorming session on defining your business model effectively.
How to Make a Business Model Canvas
There are nine building blocks in the business model canvas and they are customer value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key partners, key activities, and cost structure.
When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.
What are the 9 Components of the Business Model Canvas?
- Customer Segments
- Customer Relationships
- Revenue Streams
Key resources, key partners.
- Cost Structure
- Value Proposition
Let’s look into what the 9 components of the BMC are in more detail.
These are the groups of people or companies that you are trying to target and sell your product or service to.
Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.
After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.
There are different customer segments a business model can target and they are;
- Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.
- Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
- Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
- Diversified: A diversified market segment includes customers with very different needs.
- Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.
Use STP Model templates for segmenting your market and developing ideal marketing campaigns
Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.
In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.
There are several types of customer relationships
- Personal assistance: you interact with the customer in person or by email, through phone call or other means.
- Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.
- Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
- Automated services: this includes automated processes or machinery that helps customers perform services themselves.
- Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
- Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.
You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.
This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.
Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.
There are two types of channels
- Owned channels: company website, social media sites, in-house sales, etc.
- Partner channels: partner-owned websites, wholesale distribution, retail, etc.
Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.
A revenue stream can belong to one of the following revenue models,
- Transaction-based revenue: made from customers who make a one-time payment
- Recurring revenue: made from ongoing payments for continuing services or post-sale services
There are several ways you can generate revenue from
- Asset sales: by selling the rights of ownership for a product to a buyer
- Usage fee: by charging the customer for the use of its product or service
- Subscription fee: by charging the customer for using its product regularly and consistently
- Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
- Licensing: customer pays to get permission to use the company’s intellectual property
- Brokerage fees: revenue generated by acting as an intermediary between two or more parties
- Advertising: by charging the customer to advertise a product, service or brand using company platforms
What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.
These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.
There are 3 categories of key activities;
- Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
- Problem-solving: finding new solutions to individual problems faced by customers.
- Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.
This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.
There are several types of key resources and they are
- Human (employees)
- Financial (cash, lines of credit, etc.)
- Intellectual (brand, patents, IP, copyright)
- Physical (equipment, inventory, buildings)
Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.
Types of partnerships are
- Strategic alliance: partnership between non-competitors
- Coopetition: strategic partnership between partners
- Joint ventures: partners developing a new business
- Buyer-supplier relationships: ensure reliable supplies
In this block, you identify all the costs associated with operating your business model.
You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.
Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).
This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.
A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.
Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).
What Are Your Thoughts on the Business Model Canvas?
Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.
What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.
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