Although several ways exist to design a business model, this conception is tied to the term “Business Model Canvas.” which is undoubtedly the most common and well-known method in this field.
Alexander Osterwalder proposed the business model canvas in his book Business Model Generation for the first time.
This practical and straightforward tool quickly became widespread to use all over the world.
Learn more: Business Model vs. Business Plan: What Is the Difference?
Business Canvas and St. Gallen Model
You may have wondered how Osterwalder and his colleague pigneur opened their way to the world of management and business, especially since they have not been very active outside of the business model field and have little contact with other business thinkers.
Observing Google and website search will help you understand these two authors have formed an independent island separate from the current management territory.
In brief,, the business model canvas idea goes back to the origins of Osterwalder and Pigneur. Osterwalder is Swiss, and Pigneur lives in Switzerland/Norway.
A school of management is common in Switzerland and Europe, known as the St. Gallen School (Osterwalder himself was born in St. Gallen, Switzerland).
The common ideas and schools in today’s world of economics usually come from the United States. However, those looking for economics in European schools are likely to be familiar with the St. Gallen school. The following books are written accordingly. Although they do not precisely define the business model canvas, their framework is close to it:
Marketing Concepts- The St. Gallen Management Approach
Business Model Canvas Definition
The Business Model Canvas is the plan, which clearly states how a company or startup will produce its products and deliver them to the customer to generate revenue. It is actually a business plan to achieve success. Without a map, reaching the destination and goal is difficult and even impossible!
The business model canvas consists of 9 parts. Each section describes the elements that come into a relationship with other sections.
Although the canvas of all businesses consists of these nine parts, its items vary depending on the type of company and the services it offers. That’s why every business needs to design its own canvas.
Business Model Canvas Template PDF- The Original Version
Business Model Canvas Framework and Component
The business model canvas, as the word “canvas” implies, is a visual model.
You need to answer nine key business questions and write the answers in a specific section of the business canvas.
The issues raised in the business model canvas are in three categories:
- The central part: value proposition
- Left: Business issues
- Right: Customer issues
The Central Part of The Canvas
Value Proposition
The set of products and services that a business offers to meet the needs of its customers. A company’s value proposition is what sets it apart from its competitors.
Some of the key questions you should answer in the value proposition section are as follows:
- 1.What value has your product created?
- 2.Why do customers buy your product?
- 3.What problem does it solve?
- 4.What solution have you offered?
- 5.What is the advantage of the product over competitors?
Learn more: Value Creation, the Modern Businesses Need
The Right Side of the Canvas: Customers or the Market
Customer Segments
In this section, you need to answer the question, who are our customers?
Note that the Osterwalder model uses the term “Customer Segments,” not “Customers,” which implies that some are our customers and others are not supposed to be. You should specify the common features between the customers.
This section introduces all those who are going to use your service or product. Suppose you want to launch a service website, all the users who visit your site and those who wish to advertise on your website are among your customers.
The following questions help you to fill this section:
- Who is the customer of my service or product?
- What are their demographic features?
- Where are they from?
In this section, you should group customers based on common features.
Channels
This part of the business model canvas specifies through which channels you offer your product and service.
- 1.Do the customers have to visit your store?
- 2.Do you offer your products and survive via digital tools and the Internet?
- 3.Do you go to the customer’s location to provide services or products?
- 4.Do you use the capacity of existing retail systems?
- 5.What channels do you use to communicate and interact with customers?
Note that communication channels have a variety of functions, and you may consider different channels (or channels) for each of the following purposes:
- Channels for potential customers
- Channels for those who want to buy the product
- Customer access channels to the product / its information
- After-sales service channels
Customer Relationships
In brief, this section deals with the customer’s position in the business and the type of relationship you will establish with them.
- Is the customer merely buying the product or service or also involved in its production? (Think of platforms)
- Are you going to help the customer in their purchasing decision? How? (Compare insurance sales with supermarket sales)
- How much of this relationship is interpersonal, and how much is left to mechanical processes? (Where is the place of marketing and sales automation in this business model?)
The Left Side of the Canvas: Business
Key Resources
We have already discussed this part in detail in the article “Key Resources in the Business Canvas.” In short, the questions include:
- What resources do we need to create value, reach the customer, and deliver the product to him?
- How to provide these resources?
- Do we have enough income to provide, maintain and manage these resources for a long time?
In brief, physical resources, human resources, knowledge, information, and financial resources are among the topics included in this section.
Key Activities
If you list your business activities, you will find headings that make up the core of that business. In other words, if you delete them, there is nothing left to continue.
For example, in the case of a plastic button manufacturing workshop, the product line and processes associated with plastic injection are among key activities. However, advertising, despite its importance to the business’s success, is not a critical activity.
In another business that designs and offers a luxury brand, advertising, and branding, alongside product design, may be classified as key activities. Yet, mass production may not be so critical.
Key Partnerships
Not everything is supposed to be within the formal boundaries of your business. What matters is the integrity of the system. The fact that a business has to distribute its products does not necessarily mean that it is supposed to have a transportation unit (although having such a unit may be justified).
Services, activities, and resources provided by third parties require building relationships. Naturally, depending on the type of business and product, the number and variety of these relationships may change. So consider the following as just a few examples:
- 1.Relationship with raw material suppliers
- 2. Relationship with consulting companies
- 3.Relationship with financial institutions
Revenue Stream
If a business has no income, it will not survive. However, you need to complete this part of the business canvas in the final stages. The revenue stream is not clear until the other components of the canvas are identified.
However, many novice entrepreneurs fill the revenue stream before other sectors. This reduces the accuracy of the business model, and you may have to re-evaluate it.
The business model can include two different types of revenue streams:
1) Transactional revenues:
Transactional revenue is the result of a customer paying for a single purchase.
2) Repeatable income:
Repeatable revenue results from repeated payments by customers in exchange for providing a value proposition or providing after-sales service to them.
There are various ways to create a revenue stream:
Asset Sale: The sale of asset results from the sale of ownership of a physical product
Membership fee: The membership fee is created by selling continuous access to services.
Franchise Grant: This revenue stream is created by allowing customers to use protected intellectual property in exchange for royalties.
Brokerage fee: Brokerage fee is derived from intermediation services between two or more parties.
Advertising: Advertising revenue comes from paying a fee for advertising a particular product or service.
Cost Structure
The cost structure is also an essential part of the business model canvas.
You may see two seemingly similar businesses with very different cost structures. For example, two clothing brands, in one of which the cost of advertising is the most critical component of cost and in the other the cost of production.
No-Frills businesses are examples of businesses that have created a completely different market by changing the cost structure.
In some businesses, economies of scale may also change the cost structure.
