Rethinking Everything: The Business Model Canvas

For existing businesses and startups alike, there is always difficulty in getting your business organized with clarity so that owners can simply think and strategize.  Having a process to do this is extremely important.  The 9 building blocks of the Business Model Canvas is helpful for doing this at the highest levels.  First one must understand what we mean by business model:

“A Business Model describes the rationale of how an organization creates, delivers, and captures value.” – Business Model Generation by Alex Osterwalder and Yves Pigneur

Far too often we just jump right to the service or product that we are going to deliver, without ensuring that it actually provides value to a paying customer.  For you existing businesses: “When was the last time you actually asked your clients to describe the value you are creating?”  “Have you documented this and applied it to your product, service, and how you now market?”

It’s always interesting to me when businesses create strong value, but are still marketing from a value proposition standpoint when in actuality they can be marketing their specific value created in terms of increased revenue, lower costs, efficiency, or customer satisfaction using real numbers.

For those of us who need to think through this, it is helpful to use the Business Model Canvas and start from scratch.  You should always start with your customer segments, how many do you have, and have you created a profile or defining characteristics of the customer who will best respond to your product or services’ value proposition and the marketing channels you use to engage them.  If you don’t get this right, everything else will be built on false assumptions.  Hopefully by now you have been doing discovery based on the email we sent a few weeks ago.

COVID-19 is forcing us to rethink everything, and doing this exercise with your executive team, partner, or even just yourself will help you.  You get out of it what you put into it; meaning if you make assumptions with no basis you will build on these false assumptions setting the business on the wrong path.  Hopefully your experience and discovery will give you confidence when you create your customer profile, give specific marketing channels, outline revenue strategies, etc.  How do you know these answers?  What happened before COVID-19 may not work now, and we have to make adjustments.  There are no perfect answers; all we can do is visualize the customer journey and build a business model that meets them where they are.  Below are more specifics on the Business Model Canvas.  I would go through this exercise once a month over the next 6 months with such an inconsistent business environment that we are in.

We fill out our Business Model Canvas in the following order:

Building Block 1: Customer Segments

These are the specific customers that we serve.  Sometimes we serve more than one customer segment and as a result you would put 1 more or customer groups in this building block

Building Block 2: Value Propositions

This is the solution, product, or service that we are delivering to the customer(s).  These are the features of our solution and what our customer seeks from us.

Building Block 3: Channels

This is the methodology by which we deliver our product or service to the customer(s).

Building Block 4: Customer Relationships

This is how our customer wants to be treated by us when we interact with them including in some cases avoiding interaction.

Building Block 5: Revenue Streams

This is how we charge our customer(s) or in some cases how we are subsidizing a customer which would negative revenue in delivering our product or service.

Building Block 6: Key Activities

These are the operational actions that we take to make sure we provide our Value Proposition to our customer(s).

Building Block 7: Key Resources 

These are the assets that we will need in order to support our Key Activities and provide our Value Proposition to the customer(s).

Building Block 8: Key Partners

These are vendors and suppliers that take on Key Activities and/or provide Key Resources to our businesses that we can not or should not do ourselves.

Building Block 9: Cost Structure

This building block helps us analyze what our operating costs will be in delivering our Value Proposition to the customer(s).

Link to the Canvas: http://neverstop.co/wp-content/themes/StartCo/documents/Business_Model_Canvas.pdf

Descriptions to the 9 Building Blocks: http://neverstop.co/start-launching/business-modeling-9-building-blocks/

Analysis

Each one of these building blocks can be looked at as a lever that can be changed or tweaked in order to alter the form of our business.  It should be noted though that not all changes that can be made will be independent of having to make changes in the other building blocks.   However, the Business Model Canvas does structure our thinking on how we can analyze each building block and in isolation and in the aggregate.