Canvas Business Model

 Background

The Canvas model was developed by PhD in Management Information System Dr. Alex Osterwalder and PhD in Information system Professor Dr. Yves Pigneur. 

The Canvas model was published in the book “Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers” in 2010.

Business Canvas Model is a tool for creating a clear business model using just a single sheet of paper. The great thing about the Business Canvas Model is that it can be used to describe any organization - from the largest company in the world - to a startup with only one employee. It also makes no difference whether the organization is in the private or public sector.

The Business Canvas model is a tool for creating a plan for how your organization can successfully run a business.

The model consists of nine elements, also called building blocks.

These nine building blocks are divided into two main areas.

The five building blocks on the right side of the canvas is the value creation side. This half of the canvas will ensure the value you deliver is to the right customers who are willing to pay for your product or service.

The four building blocks on the left side of the canvas is the efficiency half. It is where you learn how to scale your business efficiently.

Broadly speaking we can say that those elements on the left-hand side of the canvas represent costs to the business, whereas elements on the right-hand side generate revenue for the business.

The is no fixed starting point in the model and there is no right order.

But it feels right, to begin with, the building block - customer segments. Without customers, there is no business.

You must make a conscious decision about which segments to serve and which segments to ignore.

It makes sense to carry on with the building block – value proposition

The value proposition describes your offer from the view of the customer. It is about the value for the specific Customer Segment or customer segments you choose in the previous building block, not about the features of the product or the service. 

In the building block – Channels - It is about how your company communicates with and reaches your customer segments to deliver product or service. 

You must ask yourself the question How do these customers want to react with my offer. Do they want to have personal contact in a store or office - or do they want to order on-line? 

In the building block – Customer relationships, we establish a connection with the customer. A relationship can range from personal to automated.

The last building block on the right side of the canvas model is Revenue streams. 

The four building blocks on the left side of the canvas model. 

The first building block on the left side of the model is Key resources. 

In the second building block on the left side of the model – Key activities

– we will review what activities we need to do. 

In the third building block on the left side of the model – Key partners – we establish a network of suppliers and partners that make the business model work.

The fourth and last building block on the left side of the canvas model is Cost structure.

The cost can be calculated relatively easy after defining the three building blocks – Key resources, Key activities and Key partners.

You must focus on minimizing costs. But at the same time, you must focus on value creation and being less concerned with cost implications. You can, at the beginning of a business adventure, invest heavily in bringing the right employees on board or creating the right marketing campaign for your new product line. 

Criticism of model

The model has no defined beginning or end. You have to identify in which building block, it is most relevant to start, and when you have done enough. It can be a complicated process. 

There is no right or wrong result. Many times, it becomes a qualified guess about the relationships between the nine building blocks.

The advantage of working with the model is that your organization goes in the same direction and that you never loses the value offered to the customer out of sight. 

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