Abstract • If it is a hobby, how can you turn it into a

business?
In my previous Article “How Innovation is
Easy” and especially in last section “WHY Introduction
INNOVATION IN SMALL FIRMS IS
SUBSTANTIALLY DIFFERENT THAN IN A business model describes how a company
LARGE COMPANIES?” I mentioned the six creates, delivers and captures value.
Proponents of open innovation and one of Everyone has his or her unique way of
them was Business Model Canvas. So here viewing the business model. During
we will discover and approach more and discussions about this, there has been an
more about Business Model Canvas (BMC). increasing need for a uniform template to
What that mean BMC and What is using for? define and discuss the business model. This
template should be applicable to new and old
For small businesses, it is important to businesses alike, across industries.
analyses all situations carefully before taking
any decision. That way, there will be fewer A business model is a description of how
chances of making mistakes and designing your business intends to operate and make
strategies that will not work. To help these money. Sounds simple, RIGHT?
businesses, several analytical tools are
available like SWOT Analysis Canvas, The Business Model Canvas is a strategic
LEAN Canvas, FEEDBACK management and lean start-up template can
Canvas, Open Innovation Canvas, HR be used as aid for developing a new, or
Innovation CANVAS, PITCH PLANNER analyzing and mapping an existing business
CANVAS, PROJECT CANVAS, and other model of a company. It is a visual chart with
analysis tools that we will make you discover elements describing a firm or product's value
them in next articles. Moreover here we will proposition, infrastructure, customers, and
show you and explain you in details the finances. It assists firms in aligning their
WHY, HOW and WHAT of Business Model activities by illustrating potential trade-offs.
Canvas. However, before you start using It gives a graphic representation of a number
a Business Model Analysis template and of variables that show the values of the
check out pervious analysis examples, it is organization.
important to understand what this analytical
method is all about. BMC helps you answer The Business Model Canvas was initially
two important questions: proposed and developed by Alexander
Osterwalder based on his earlier work on
• Is this a business or a hobby? Business Model Ontology. Since the release
of Osterwalder's work in 2008, new canvases
for specific niches have appeared.
Business model canvas has 9 building blocks Segmentation (CS), Cost Structure (C$)
that are Key Partners (KP) , Key Activities and Revenue Streams (R$).
(KA) , Key Resources (KR), Value
Proposition (VP), Customer Relationships
(CR), Channels (CH), Customer

objectives. It helps to take into consideration

The information provided by the canvas of all the company inputs and creating valued
regarding the products, services, resources output the customers. It is affected by the
and the partners of the company helps in the external world and other processes other than
analysis of the processes and functions for the the business itself.
achievement of organizational goals and
What is a business model? How does it relate destination. The planning is how you are
to a business plan? Alternatively, better yet, going to get there.
business planning? They live together. They
synchronize. Your business planning makes How to Build Business
your business model happen. And your
business plan is a regular step in your
Model Canvas?
The illustration below shows how the nine
Business planning. It is not business plan vs.
elements of the Canvas are integrated with
business model, the way some people seem
each other. As mentioned before, we will
to think. The business model is like a
begin to explore the right dimension of the

Canvas first.
 of the “Channels” or “Distribution
Channels” block, which includes items such
as the delivery, blog, newsletter, customer
service and webinar. These channels
distribute and deliver the value propositions
to the customers. How are these propositions
promoted, sold and delivered? Why? Is it
working?

Next, we should understand the “Customer

Relationships” block. In other words, we
should figure out how to strengthen customer
involvement with the business. To give a few
examples: business development partnership,
customer retention, customer support, online
We start by putting the block chat and feedback. How do you interact with
“Customer Segments” in place, which the customer through their ‘journey’?
maps who we are targeting to provide
value and who are the potential The last right block is the “Revenue
customers to our desired objectives. For Stream,” which translates to the path to
instance: Who are the customers? What generate revenue based on the recommended
do they think? See? Feel? Do? value proposition. Examples include a
monthly subscription, direct sale, paid ads
In the second block “Value Proposition,” and license. How does the business earn
ideas are generated to fulfill the needs of the revenue from the value propositions?
potential customers, while always keeping in
mind the business objectives that are driving
this product or service. Examples of value
propositions include cost reduction, agility,
convenience, customization and decision
support. What is compelling about the
proposition? Why do customers buy, use?
The Customer Segments and Value
Propositions blocks are the main elements
that will lead the remaining components of
the Canvas.

Once we determine the potential customers

and value propositions, it is necessary to
think about how we can link these two
fundamental components. This is the purpose
In the left dimension of the Canvas, we can Some partners (outsourcing companies, for
find more direct and objective definitions that example) can provide machines to drive
sustain the components mapped in the right towards any key resource. Other types of
dimension. partnerships can supply contractors or
execute some of the key activities, such as
monitoring the social networks. What can the
company not do so it can focus on its Key
Activities?

Representing the required costs to maintain

and build the proposed solution is performed
by the “Costs Structure” block, which
indicates, for example, the amount of money
necessary to pay the machines’ maintenance,
contractors, OPEX, infrastructure and
resources. What are the business’ major cost
drivers? How are they linked to revenue?

What is the relation

between Business Model
Canvas and StartUPs Fail?
The “Key Resources” refer to the resources
directly associated with the business model
operation, such as teams, machines,
investments and technology platforms. What
unique strategic assets must the business
have to compete?

The “Key Activities” are all activities

needed to meet the value proposition, build
channels and keep relationships. We might
consider managing the social networks (a
powerful mechanism to strengthen the
customer relationship) or building a web
store. What uniquely strategic things does the
business do to deliver its proposition?

“Key Partners” are people who contribute Depending on whom you ask, somewhere
to both key activities and key resources. between 50% and 80% of businesses fail
within their first five years. There are plenty
of reasons why that happens, but they all
come down to one thing: lack of profitability.
Whether or not you make a profit depends on Infrastructure
how well you design and execute all the
activities and resources that make up your · Key Activities: The most important
business—your business model. activities in executing a company's value
proposition. An example for BIC, the pen
In his, book Business Model Generation: A manufacturer, would be creating an efficient
Handbook for Visionaries, Game Changers, supply chain to drive down costs.
and Challengers, business theorist Alexander
Osterwalder writes, “An organization must · Key Resources: The resources those
make a conscious decision about which
are necessary to create value for the
segments to serve and which segments to
customer. They are considered an asset to a
ignore.” It is vital to prioritize your efforts
company, which are needed in order to
because there are so many ways to serve or
sustain and support the business. These
ignore your company’s different segments,
resources could be human, financial, physical
and every dollar spent on one-project takes
and intellectual.
away from another project. One of the best
ways to weigh competing priorities is to use
· Key Partner: - Partner Network- In
the Business Model Canvas, a strategic
order to optimize operations and reduce risks
management and lean startup tool based on
of a business model, organization usually
years of research by Osterwalder. It
cultivates buyer-supplier relationships so
condenses strategic planning onto a single
they can focus on their core activity.
page and covers nine areas divide into 4
Complementary business alliances also can
majors: ·Infrastructure, Offering, Customers,
be considered through joint ventures,
Finances:
strategic alliances between competitors or
non-competitors.

Offering
· Value Propositions: The collection
of products and services a business offers to
meet the needs of its customers. According to
Osterwalder, (2004), a company's value
proposition is what distinguishes itself from
its competitors. The value proposition
provides value through various elements such
as newness, performance, customization,
"getting the job done", design, brand/status,
price, cost reduction, risk reduction, mutually dependent customer
accessibility, and convenience/usability. segment. A credit card company will
provide services to credit card holders
The value propositions may be: while simultaneously assisting
merchants who accept those credit
1. Quantitative – price and efficiency cards.
2. Qualitative – overall customer
experience and outcome · Channels: A company can deliver
3. Customers its value proposition to its targeted customers
through different channels. Effective
· Customer Segments: To build an channels will distribute a company’s value
effective business model, a company must proposition in ways that are fast, efficient and
identify which customers it tries to serve. cost effective. An organization can reach its
Various sets of customers can be segmented clients either through its own channels (store
based on the different needs and attributes to front), partner channels (major distributors),
ensure appropriate implementation of or a combination of both.
corporate strategy meets the characteristics of
selected group of clients. The different types · Customer Relationships: To
of customer segments include: ensure the survival and success of any
businesses, companies must identify the type
1. Mass Market: There is no specific
of relationship they want to create with their
segmentation for a company that
customer segments. Various forms of
follows the Mass Market element as
customer relationships include:
the organization displays a wide view
of potential clients. e.g. Car 1. Personal Assistance: Assistance in a
2. Niche Market: Customer form of employee-customer
segmentation based on specialized interaction. Such assistance is
needs and characteristics of its performed either during sales, after
clients. e.g. Rolex sales, and/or both.
3. Segmented: A company applies 2. Dedicated Personal Assistance: The
additional segmentation within most intimate and hands on personal
existing customer segment. In the assistance where a sales
segmented situation, the business representative is assigned to handle
may further distinguish its clients all the needs and questions of a
based on gender, age, and/or income. special set of clients.
4. Diversify: A business serves multiple 3. Self Service: The type of relationship
customer segments with different that translates from the indirect
needs and characteristics. interaction between the company and
5. Multi-Sided Platform / Market: For a the clients. Here, an organization
smooth day-to-day business provides the tools needed for the
operation, some companies will serve
 customers to serve themselves easily 1. Fixed Costs – Costs are unchanged
and effectively. across different applications. e.g.
4. Automated Services: A system salary, rent
similar to self-service but more 2. Variable Costs – These costs vary
personalized as it has the ability to depending on the amount of
identify individual customers and production of goods or services. e.g.
his/her preferences. An example of music festivals
this would be Amazon.com making 3. Economies of Scale – Costs go down
book suggestion based on the as the amount of good are ordered or
characteristics of the previous book produced.
purchased. 4. Economies of Scope – Costs go down
5. Communities: Creating a community due to incorporating other businesses
allows for a direct interaction among which have a direct relation to the
different clients and the company. original product.
The community platform produces a
scenario where knowledge can be · Revenue Streams: The way a
shared and problems are solved company makes income from each customer
between different clients. segment. Several ways to generate a revenue
6. Co-creation: A personal relationship stream:
is created through the customer's
direct input in the final outcome of the 1. Asset Sale – (the most common type)
company's products/services. Selling ownership rights to a physical
good. e.g. retail corporations
Finances 2. Usage Fee – Money generated from
the use of a particular service e.g.
· Cost Structure: This describes the UPS
most important monetary consequences 3. Subscription Fees – Revenue
while operating under different business generated by selling a continuous
models. A company's DOC. service. e.g. Netflix
4. Lending/Leasing/Renting – Giving
 Classes of Business Structures: exclusive right to an asset for a
particular period of time. e.g. Leasing
1. Cost-Driven – This business model a Car
focuses on minimizing all costs and 5. Licensing – Revenue generated from
having no frills. e.g. Low cost airlines charging for the use of a protected
2. Value-Driven – Less concerned with intellectual property.
cost, this business model focuses on 6. Brokerage Fees – Revenue generated
creating value for their products and from an intermediate service between
services. e.g. Louis Vuitton, Rolex 2 parties. e.g. Broker selling a house
for commission
 Characteristics of Cost Structures:
 7. Advertising – Revenue generated N.B : The 4 most common mistakes
from charging fees for product
advertising.
1. You fill it once and you're done
8. Resources the main inputs that your
2. You fill it all at once
company uses to create its value
3. You don't take everything you wrote
proposition service its customer
as an hypothesis
segment and deliver the product to the
4. You are generic in what you write
customer. down

The Business Model Canvas gives you a

True at all stages
bird’s eye view of your business while
encouraging understanding, discussion,
Going off of the common mistakes we
creativity and analysis among your team
discussed before there's obviously a few
members. It’s used by successful innovators
things you must do no matter what stage
around the world like Intel, Panasonic, 3M,
you're at:
and MasterCard, and many users recommend
filling out the canvas in just 20 minutes. 1. Being specific
2. Taking everything as an hypothesis
Conclusion to test: remember you're just laying
the assumptions to built that
The Business Model Canvas is useful for hypothesis.
driving the conception of new products and 3. Creating multiple canvases to
services through its nine basic elements from choose amongst: don't fixate on just
both rational and emotional perspectives. It one option, go wide then deep.
also allows the teams to brainstorm insights, 4. Be quick on your feet: fill those
ideas and opinions around the product, blanks quickly (lees than 1 hour<1hr)
enabling a common understanding among the and don't bike shed. Remember you
stakeholders as well as generating strong are putting hypothesis together that
performance indicators towards a strategic you will test, don't try to think them
innovation. It’s another helpful tool for the through in your head.
product owner to conceive a new product, 5. If you ran a test hopefully you've
service, website, e-commerce or game. learned something so go back and
update your canvas based on it.
Have you used the BMC before? Do you plan
6. regularly consult your
on using it in the future? Let me know in the BMC (especially if you are a techy):
comments section below, or if you have the temptation of going off to build
Updates about this Topic (BMC). stuff is always so strong that going
back to the BMC weekly can provide
a great grounding checkpoint.
 Examples of Business Models Canvas:

■ Skype Business Model Canvas

■ Spotify Business Model Canvas
■ Google Adwords Business Model Canvas
Sources:

1. Business Model Generation - by Alexander Osterwalder

2. THE 20 MINUTE BUSINESS PLAN: BUSINESS MODEL CANVAS MADE EASY -

by Alexander Cowan

3. Business Model Canvas: Step by Step - by Paulo Rebelo

4. How to use the business model canvas correctly - by Spike Morelli

5. How to Make a Business Model Canvas - by mgustin12

6. Business Model Canvas: A Complete Guide - by Martin

7. What is a business model?- by Alan Gleeson

8. Osterwalder's business model canvas - by Edwin Muilwijk

9. Business Model Canvas - by From Wikipedia, the free encyclopedia

10. Business Model Canvas And Generation Marketing Essay - by UKessays.com

11. Business Model vs. Business Plan vs. Business Planning - by Tim Berry
12. The Business Model Canvas - by Bill Martin

13. Business Model Canvas 101: A Step-by-Step Guide to Strengthening Your Strategy -

by jshumway
14. Business Model Canvas with Explanations - by 6W2X