Business Model Canvas (BMC) is a strategic management tool developed by Alex Osterwalder and adapted by recognised institutions. Its a tool which helps you build the bare essentials to a detailed version of your business plan. Most Angels and VC’s expect a BMC depicted in the pitch document. Most startups assume that their business plan is well thought of, but the fact is that most failures happen due to poor planning. A key reason to that is the plan is generally thought in isolation eg: “Key Partners” are the most important aspect when it comes to delivery of “Value Proposition” but they are never taken into account while the later is planned.
Taking time out to solve this management science tool for your business, would help you avoid a lot of jams in the future.
Importance of Business Model Canvas (BMC)
Common Language : The beauty of the BMC is that it creates a common reference and language that can be used to articulate, share and thereby gain feedback on each business model. It provides a straight-forward yet transparent reference that can be used internally across teams, as well as externally with advisors, investors and partners.
It helps structures discussions : Entrepreneurs should 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.
It’s fast : 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.
It intuitively makes sense.
In its simplest form, the Canvas 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.
Pillars of Business Model Canvas
The Business Model Canvas categorizes the processes and internal activities of a business into 9 categories, each representing a building block in the creation of the product or service. These categories represent the four major aspects of a business; namely, customers, product or service, infrastructure, as well as financial viability.
1.Value Proposition:
An organization’s value proposition is the combination of products and services it provides to its customers. Osterwalder stated that these offerings need to be unique and easily differentiated from competition.
2.Customer Segments:
Customer Segmenting is the practice of dividing a customer base into groups of individuals that are similar in specific ways, such as age, gender, interests and spending habits
3.Customer Relationships:
An organization must select the kind of relationship it will have with its customer segment in order to create financial success and sustainability.
4.Channels :
Channels are defined as the avenues through which your customer comes into contact with your business and becomes part of your sales cycle.
5.Key Activities :
Activities that are key to producing the company’s value proposition. An entrepreneur must start by listing the key activities relevant to his/her business. These activities are the most important processes that need to occur for the business model to be effective.
6.Key Resources :
These are the assets, external or internal, which help you deliver value to your customers. Resources can be categorized as human, financial, physical and intellectual. For an entrepreneur, it is important to begin with listing resources. This gives a clear idea of what the final product or service a company needs to create for the customer.
7.Key Partners :
To create efficient, streamlined operations and reduce risks associated with any business model, an organization forms partnerships with its high-quality suppliers. Key partnerships are the network of suppliers and partners who complement each other in helping the company create its value proposition and the product or service itself..
8.Cost Structures :
To identify all costs associated with the business. A realistic understanding of the costs of the business is one of the hallmarks of a good business model.
9.Revenue Streams :
Your revenue streams are how you will actually make your money from your value proposition. What value is your customer paying for and how are you going to capitalise that value.
NOTE :
We are going to come up with a series of articles in which we will break down all the pillar/segments of Business Model Canvas (BMC) and mention detailed process of all the 9 segments.
Reference :
http://www.shortpress.com.au/five-big-benefits-of-the-business-model-canvas
https://medium.com/seed-digital/how-to-business-model-canvas-explained-ad3676b6fe 4a
https://www.floship.com/business-model-canvas-what-why/
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