You have an exciting idea for a new business venture? That’s great but how do you turn an idea into a successful business model? In this article, we will give you an introduction to the business model canvas and how to use it effectively for your business idea.
What Is a Business Model?
Before we explore the details of a business model canvas, we want to talk about what a business model is. If you want to establish a well-functioning and successful business, you need a plan on how to achieve that. You need a roadmap to cover all relevant details before you embark on the new venture.
A business model takes all the important factors of a new business into account. These factors range from creating your product to addressing your target audience to finances and profits and many more. You need to think about how you want your business to operate. A business model is the blueprint for that plan.
There are various types of business models that you can customise. For example, you can follow a subscription business model that offers monthly subscription plans to generate a profit for your business. But this is just one of manyexamples. For this article, we will disregard the impact of the different business model types and approach the business model canvas from a general perspective.
What Is the Business Model Canvas?
In 2010, Osterwalder and Pigneur introduced and popularised a simple tool to create an overview of all key components of a new business. The business model canvas comes in handy as a first step towards reaching the final version of your business model.
By using several blocks that highlight developmental steps, core goals, and characteristics of your future business, the business model canvas visualises your idea. It outlines your resources, the relationships you want to have with customers, and the vision for key partners and activities. It also helps to structure costs and revenue and highlights how your idea fits into the market or what value you want to create.
This basic business model canvas template includes the following sections we will explain briefly:
This section outlines who your key partners and suppliers are. You address what actions or resources you need from your key partners and your motivations for wanting them.
Next, you need to clearly define all key activities in your business model. What activities does your venture require? Cover all basic key aspects of production, distribution and revenue.
This next section covers what key resources you will need for production, distribution, and every other aspect of your business. These resources can be financial, physical, intellectual, or human – all to make your business run as smoothly as possible.
This is one of the most important sections on this business model canvas. Here, you outline what value you deliver to the market and, thus, your customers. After all, your product or service ideally offers a solution to a problem or a need. This is a rather broad section that can range from discussing designs, to prices, to convenience and performance. Refine it for your needs and customise it accordingly.
In this section, determine how you want to structure your customer segments and what kind of relationship you want to establish with them. Define all aspects related to customer relationships here. This ranges from customer service to how you want them to access your product or service to the communities you could build.
This segment outlines the channels that link your customers to your product or service. You evaluate or reevaluate how your channels are performing, from raising awareness and PR work to how you deliver your value proposition to your customers. This section basically evaluates the entire process of your sales, all the way to post-purchase customer support.
Here, you want to take a deep dive into your target audience. You define for whom you are creating value and who the most important customers are. This includes thinking about what part of the market you want to occupy and what groups of people will benefit from your product or service.
As the title already explains, this section outlines every aspect of your costs. You address the costs of the key resources and activities, as well as what type of business you want to create. Do you strive for a cost-driven structure, or do you place more emphasis on quality and value creation? Either way, you will want to address the scale and scope of your plans and all factors you need to consider in terms of costs.
This final section concerns why and how your customers pay for your product or service. It relates back to your cost structure as well.
How Do You Apply Your Idea to the Business Model Canvas?
You have a business idea and want to design a business model canvas for it. But how do you do that? First, you need to find a template to work with or draw one yourself. You can use the template design we showed you earlier in this article. However, you can also use websites such as Miro or Lucidspark to create a business model canvas online.
We want to illustrate this process with a tangible example.
Let’s say someone is in the early stages of developing an application for international students in Germany to socialise locally and integrate into German society. This entrepreneur would then decide on which template to use. Here, they will use the detailed business model canvas we discussed earlier.
Depending on their needs and business model, they will then customise and fill out this template. For the “key partners” block, for example, they would take notes on software developers they could work with. They might also list local event managers they could partner with to bring international and German students together. Last, they could set out a goal to form relationships with local universities to promote their app in this section of the business model canvas.
In the “cost structure” block, this person would then outline an initial strategy to monetize the app and calculate the expected cost structure. They would address the scope and scale of their business and calculate, for example, a financial plan for the first year of the business.
In the “value propositions” section, this entrepreneur would address the actual intent and purpose of this application in more detail. Why does Germany need an app to connect international and German students? How would this app help these people in specific terms? These are all questions that would be answered in this section.
In short, this entrepreneur would work their way through the business model canvas and continuously develop their business idea in more and more concrete terms until they have a complete overview of the key components.
What Does the Business Model Canvas Mean for Entrepreneurship?
The primary advantages of the business model canvas are its simplicity and straightforwardness. It’s not the finished business model itself and not even a specific road map for your approach. Instead, it’s a first overview of key aspects to think about before taking your idea to the next, more practical level.
This canvas can also serve to engage others in your venture as it paints the full picture of what you want to achieve. Stakeholders and investors will be pleased to see you already have answers to key questions. Thus, the business model canvas simplifies and performs your idea.
Business Model Canvas as One of Many Tools
As the business model canvas is a tool in the early stages of your business, consider linking it to customer personae or empathy maps. A persona or empathy map can be part of the development of your business model canvas sections concerning customers.
You can find more information on customer personae and empathy maps on our blog entries “How to Take Advantage of Customer Personae in Business” and “Empathy Maps and How to Use Them Effectively.”
If you need an easy and effective way to consider all relevant factors in establishing a new entrepreneurial project, design a customised business model canvas. This canvas helps you develop your idea and eventually turns it into a success. It’s easy to use and helps you or others to better understand your vision before you take it to the next level.