You meet a fellow entrepreneur to brainstorm an idea. Using a revolutionary new technique, you structure the business model on one page and have the bones of a business plan that previously took 30 pages and months to write.
Welcome to the Business Model Canvas, a deceptively powerful business-model planning tool designed by academics Alexander Osterwalder and Yves Pigneur.
The one-page Canvas has nine building blocks: customer value proposition, customer segments, channels (to reach customers), customer relationships, revenue streams, key resources, key partners, key activities, and cost structure.
The customer value proposition says what your business will do. Customer relationships, segments and channels say who you will do it with. Key partner, activities and resources say how you will do the idea. And the cost structure and revenue streams show how much money the business model could deliver.
Although it’s been around for a few years, the Business Model Canvas is starting to get a lot more traction in the Australian entrepreneurship community. I rate this model for five reasons.
Forget a 40-page business plan if you’re launching a start-up venture with low fixed costs.
It helps structures discussions
Some entrepreneurs take Business Model Canvas sheets to meetings and use the building blocks to guide brainstorming. Grouping comments and ideas under the nine headings quickly gives ideas shape.
Forget a 40-page business plan if you’re launching a start-up venture with low fixed costs. Use the Canvas to write a one-page business model to see if the idea has legs, and take a lean entrepreneurship approach where you discover customers and the best business model in real time in the market.
It’s great for developing a portfolio of ideas
Under traditional business-plan thinking, you spent weeks or months writing one business plan for one idea. Using the Business Model Canvas, you can spend minutes or hours sketching business models for multiple ideas. You still have to do more research, and might end up writing a long business plan to secure capital or promote the ideas, but it’s a quick way to weed out bad ideas.
It intuitively makes sense
In its simplest form, the Canvass has front and back stages. The front stage shows what drives value and how you reach and make money from customers. The back stage shows what is required to make the front stage possible. Having used the Canvas many times, I find it quickly clarifies thinking on the business model and that one building block naturally leads to the next.
The value proposition
I like how the customer value proposition is at the heart of the Business Model Canvas. It forces you to think deeply about what your venture delivers to the customer, which problems it helps solve, and which customer needs are satisfied. Great ventures start with the customer and work backwards. Weak ventures start with the product, hope there is market for it, and put customers at the end of the product development process.
Tony Featherstone is a former managing editor of BRW and Shares magazines.