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Business Model Canvas explanation – Step-by-step, for better results

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), png.

What is the Business Model Canvas?

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.

Advantages

  • It maps your company in a clear way
  • It is very visual and therefore easy to communicate with third parties
  • Multifunctional tool that is quick to set up and adjust
  • Helps to analyze your business from a distance
  • It allows you to quickly create new business model options

What are the building blocks of the Business Model Canvas?

The canvas consists of 9 different building blocks. Below is a clear Business Model Canvas explanation using an example of Airbnb.

1. Customer segments | Business Model Canvas explanation

Business Model Canvas explanation | Customer Segments

Who are your customers? Most companies do not focus on everyone, but on a part of the market: one or more segments.

  • Which customer segments are you targeting?
  • Can a distinction be made between (paying) customers and users?

The example above shows Airbnb’s key customer segments.

2. Value Propositions | Business Model Canvas explanation

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.

  • How will your offer improve the lives of customers?
  • Would they be sorely disappointed if your company shuts down tomorrow?

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.

3. Customer relationships | Business Model Canvas explanation

Business Model Canvas explanation | Customer relationships

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.

The example above shows how Airbnb’s establish relationships with their customers.

4. Customer relationships | Business Model Canvas explanation

Business Model Canvas explanation | Channels

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.

5. Revenue streams | Business Model Canvas explanation

Business Model Canvas explanation | Revenue streams

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.

  • What is the revenue model?
  • And what are the revenue streams for each customer segment?

The example shows some of Airbnb’s revenue models.

6. Core activities | Business Model Canvas explanation

Business Model Canvas explanation | Key activities

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.

7. Key resources | Business Model Canvas explanation

Business Model Canvas explanation | Key resources

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.

In the Business Model Canvas example you see some of the key resources of Airbnb.

8. Key partners | Business Model Canvas explanation

Business Model Canvas explanation | Key partners

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.

9. Cost structure | Business Model Canvas explanation

Business Model Canvas explanation | Cost structure

The value streams must be greater than the costs in order to speak of a viable business model.

  • What does the cost structure look like?
  • What are fixed costs and which costs are variable?
  • And are the revenue streams greater than the expenses?

The example above shows a number of components of Airbnb’s cost structure.

When to use the Business Model Canvas?

My 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.

Tips when applying the Business Model Canvas

Below are 10 tips. If you want more information about each tip, read the following blog:

  1. Make sure the goal is clear
  2. Match the level of detail to the goal
  3. Only list the most relevant things on the canvas
  4. Make sure that the building blocks are connected to each other
  5. Avoid unclear, woolly language on the canvas
  6. Work out each idea on a separate canvas
  7. Use different colors of post-its
  8. Use pictures to reinforce
  9. Distinguish between assumptions and facts
  10. Separate the current situation from the future situation

Want to get more result out of the Business Model Canvas?

Buy 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.

Try Business Model Hacking now!

We have created a demo tool that allows you to experience the power of Business Model Hacking. It only takes you 30 seconds and is completely free.

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