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The Business Model Canvas (also known as the Canvas Model Business or BMC), is one of the powerful innovation tools that you use in the Business Model Hacking method. This blog contains a powerful step-by-step Business Model Canvas explanation.
Download the Business Model Canvas template: Powerpoint (easy to fill in template), pdf.
The Business Model Canvas has completely changed the way we think about business design. Alexander Osterwalder, created together with his colleagues at Strategyzer a powerful innovation tool to think in “business models” instead of just thinking in products in services.
The Business Model Canvas provides a visual overview in which the important components of a company are described on 1 page. The canvas shows how an organization creates, delivers and harvest value.
People who start working with the Canvas Model for the first time often ask the question: What are the components of the Business Model Canvas? The Canvas Model consists of 9 different building blocks: customer segments, value propositions, customer relationships, channels, revenue streams, key activities, key resources, key partners & cost structure.
Below we discuss each building block of the canvas model in more detail using an example from Airbnb.
Who are your customers? Most companies do not focus on everyone, but on a part of the market: one or more segments.
The example above shows Airbnb’s key customer segments.
A value proposition goes beyond just naming your products and services. It’s about the promise your customers make about the value your offering creates for them.
The customer segment and the value propositions together form the heart of the canvas. Value creation is a prerequisite for a successful business model.
The example above shows Airbnb’s Value propositions for each segment.
The customer relationships building block describes how the company is in contact with the customer. It’s about how relationships are built and maintained with each customer segment. Choices you make here have an effect on the other building blocks of the canvas.
Would you like to delve deeper into this building block? Read our Business Model Canvas customer relationship deep dive.
Channels refer to all the ways in which an organization interacts with the customer. Finding the right mix of channels is crucial to reach customers and convince them to choose for your offer.
The example shows some channels that Airbnb uses to get, keep & grow customers.
A company without a good revenue model is doomed to fail! The cash register has to ring, because a dripping money tap is not enough to survive.
The example shows some of Airbnb’s revenue models.
The core activities building block describes the most important activities that a company needs to perform to make the businessmodel work. It about the core activities that the organization must perform in order to realize the value proposition, reach customers, maintain customer relationships and create revenue streams.
The example shows some of Airbnb’s core activities.
The key resources needed to realize the value proposition and run the business. Key resources can be owned by the company, but can also be leased or obtained from key partners.
Would you like to delve deeper into this building block? Read our Business Model Canvas key resources deep dive.
There is an old saying that goes: ‘The whole is greater than the sum of its parts’. Partners can help an organization do things that alone would not be possible. The right partnerships help to be successful, grow and compete.
The example above shows examples of key partners.
The value streams must be greater than the costs in order to speak of a viable business model.
Would you like to delve deeper into this building block? Read our Business Model Canvas cost structure deep dive.
This Business Model Canvas explanation is not complete without discussing the different use cases. the BMC is a multifunctional tool that you can use in countless situations. Due to its versatility and the country of origin of the inventors, it is also called the Swiss army knife among innovation tools.
With Business Model Hacking you use the BMC to critically examine your company and design new strategic options. The Business Model Hacks inspire and give new ideas to strengthen your company. This often produces many individual ideas that you then concretize with the help of the canvas and transform them into prototypes of business models.
Begin with a quick sketch of your Business Model Canvas to capture the big picture. This helps avoid getting lost in unnecessary details early on. A rough sketch encourages a design mindset, allowing flexibility before committing to specific ideas.
If needed, create a more detailed version of the canvas. This involves deepening your understanding of the relationships between components, quantifying where possible, and ensuring all elements are specifically described.
Ensure the canvas is both complete and appropriately detailed. Avoid overcomplicating, but make sure critical aspects are fully addressed.
Evolve the detailed canvas into a business case, testing the viability of the options. Evaluate strategic choices, consider external factors, and justify why the business model is worth pursuing.
Entrepreneurship is about action. Use the canvas to define key assumptions, track progress, and validate through experiments. Apply Lean Startup principles: test, learn, and iterate continuously. Winning business models are developed over time through ongoing refinement.
Below are 10 tips which helps you to get better results out of the Business Model Canvas.
Get the book Business Model Hacking. This book gives you access to a powerful innovation method which helps you to get more result out of the Business Model Canvas. Business Model Hacking is a powerful approach while ideate with the Business Model Canvas. Instead of reinventing the wheel, you use proven patterns to get new ideas to strengthen an existing business model or develop new ones. It consists of more than 200 proven elements that helps you to create better, more resilient business models.
You won’t regret it.
A great way to learn how to effectively use the Canvas Model is by studying well-known examples. By examining these real-world examples, you can better understand how to apply the canvas to your own business, ensuring a comprehensive and strategic approach to innovation and growth.
Explore the following Business Model Canvas examples:
The Business Model Canvas has a Creative Commons license. The nice thing about this is that anyone can modify this tool, as long as reference is made to the original creators. We think the following variants are strong and can offer a better fit in some situations.
The Circular Canvas is our variantion of the Business Model Canvas which helps businesses in the transition towards a circular economy. It has the same building blocks but focuses on key aspects of circular business models, such as resource efficiency, waste reduction, and the creation of value through product lifecycle management.
Someone recently asked us: Can I use the Business Model Canvas for international expansion? Yes, but the Export Canvas is maybe a better option. The Export Canvas is a strategic tool designed to help businesses plan and execute their international expansion. It provides a structured framework for analyzing key aspects of exporting, such as target markets, entry strategies, regulatory requirements, and logistics.
The Lean Canvas is a streamlined adaptation of the Business Model Canvas, designed specifically for startups and entrepreneurs. Developed by Ash Maurya, it focuses on key elements that are critical for early-stage ventures, including problem identification, customer segments, unique value propositions, and key metrics.
Would you like to have more information on ”Why Lean Canvas vs Business Model Canvas? Read Ash Maurya’s famous linkedin post.
We often receive the following questions from participants about the Canvas Model. To help you get started as best as possible, we have created a small FAQ.
The Business Model Canvas is a visual tool that outlines the key elements of a business model on a single page, focusing on simplicity and flexibility. In contrast, a traditional business plan is a detailed document that covers all aspects of the business in depth, often running dozens of pages. The canvas is ideal for quickly iterating ideas, while a business plan is better for comprehensive planning and securing funding.
The Canvas Model is ideal for startups. It allows entrepreneurs to quickly map out, test, and refine their business ideas on a single page. Its simplicity makes it easy to pivot and adapt as the startup evolves, helping founders focus on essential elements like customer needs, value propositions, and revenue streams without getting bogged down in lengthy documentation. Some people prefer to use the Lean Canvas for startups.
To validate a Business Model Canvas it’s important to validate the riskiest assumption on the right order. You can validate the parts of the business model with various experiments like customer feedback, prototyping, small-scale experiments, data analysis & more. It’s important to understand that validating a business model is an iterative process.
Use the insights gained to refine and adjust your canvas, repeating the validation process until your model is proven robust and aligned with market needs.
It is recommended to validate a business model based on the following constructive focus.
1. Problem-Solution fit: The alignment between a customer’s problem and the proposed solution, ensuring the solution effectively addresses the problem.
2. Product-Market fit: The degree to which a product satisfies the needs and demands of the target market, demonstrating that there is strong demand for the product.
3. Business Model fit: The compatibility between a company’s business model and its market environment, ensuring that the model effectively supports sustainable operations and growth.
The Business Model Canvas should be reviewed regularly. The frequency depends on your company’s stage and market changes:
Established company: For executing an existing model, conduct a quarterly review of the business model, strategy, and market trends. Adjust the review frequency based on market changes to maintain continuity and avoid disruptive issues.
Startup: As you search for a repeatable and scalable model, use the Canvas as a scorecard and incorporate results from experiments. Review every 2 weeks during sprint cycles and at least quarterly.
Consider our Business Growth Consulting services. Contact us to schedule an introductory appointment
