The Business Model Canvas

The business model canvas is an excellent model for designing better businesses. The model can be used by a variety of roles but also for a multitude of purposes.

The primary purpose though is to align the processes of the organization to create the right value propositions for the customers (in case of a business) or clients (in case of a public organization or NGO).

The business model canvas can be used in combination with the value proposition canvas to create an overview of how the organization can produce products or service (if not both) for current as well as new customers.

The model is particularly relevant for new FinTech companies and for incumbent financial companies that have to adapt to new market conditions. The business model canvas can be used for an as-is analysis and for a to-be analysis. The scope of the model is to identify how the business is working and how it creates value.

The business model canvas can be applied actively in workshops and as a model for validation of the information collected in interviews or at the workshops.

Nine Building Blocks

The business model canvas consists of building blocks. Each building block can be explored in detail and their relationships can be explored in order to identify ways to optimize.

Key Partners

The key are suppliers and collaborators that are needed for the organisation to produce the products and services that it sells or provides for its customers and clients.

Key Activities

The key activities are about the tasks that have to be conducted in order for the company to produce the value adding products and activities.

Key Resources

The key resources are needed for the company to produce the services or the products that are sold to its customers.

Value Proposition

The value proposition is key for the customers. What value does the company’s customers receive. Do the customers agree to the value proposition?

The value proposition canvas can be used together with the business model canvas in order to explore the possibilities of the value proposition and it fits with this building block.

Customer Relations

This building block is about what kind of customer relations the company has and should try to create. There are several forms of customer relations and how these have to be handled in order to achieve the best possible strategy.

Channels

The channels component deals with how the company (or organization) can deliver its products or services (or in combination) to its customers. If an analysis of the cash flow of the company identifies that the customers do not pay on time, then this block might be worth investigating in detail with parallel with the  block on value proposition.

Customer Segments

The customer segment block is about what customers segments that the company has as-is. During the analysis the customer segments can be subject for granularity, and it can be combined with the value proposition block. The customer segments and the value proposition blocks can in combination be a part of the value proposition canvas.

Cost Structure

The building block on cost structure is essentially dealing with what elements that impact the production of products and services including:

  • Marketing,
  • Human resources,
  • Capital expenditure,
  • Transport of goods,
  • Information and Communication Technologies.
  • Salaries,
  • Licenses for software and patents (and other intellectual property).

This building block can be investigated in detail by applying techniques like management accounting, advanced management account and managerial economics.

Revenue Streams

This building block in the business model is about the revenue that the company creates by selling its products and/or services. Like the cost structure building block the revenue stream can be analysed by activity based costing, managerial economics and advanced management accounting.

Other Forms of Usage

The approach to business design and value proposition design has been added and to some extent modified by other communities for different purposes. An example of this is the SAFe community where the community has modified and adapted the business model canvas, and renamed it Portfolio Canvas (SAFe 2018), for program management and it appears as an artefact for the PI stage, where the program does its incremental planning.

The other ways to approach the business model canvas are indicators of the model’s viability and the model’s universal applicability. The model has been associated with design thinking, enterprise architecture and LEAN-approaches.

Conclusion

The business model canvas is a relevant approach for FinTechs and more traditional financial companies in the sense that it can be used for the design for new products, services and for a new business organization in order to achieve a competitive advantage. It is relevant for the new FinTechs in order to define how the product should be designed in order to compete against the traditional financial institutions, whereas the financial institutions have interest in staying relevant for their customers and by applying the business model canvas for business transformations, new products/services or projects that can enable competitive development.

Applying the business model canvas can be a bottom-up process, but in order to gain the best possible impact for the organization it is necessary for the enterprise architect, designer or project manager to get the top of the business to support the development of the organization’s business model.

Sources

Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (1st edition). Hoboken, NJ: John Wiley and Sons.SAFe. (2018). Portfolio Canvas. URL: https://www.scaledagileframework.com/portfolio-canvas/ . Accessed: 19th of April 2019.