A good management skill will certainly be in-line with the business success. Therefore, it is important for a company to have a clear, straightforward, and structured business plan.
In this case, the business model canvas can be the answer to achieving business success.
The approach uses visuals to deliver ideas and explain abstract concepts so that they are easier to understand. The effectiveness in conveying ideas can help to produce more optimal performance.
Ready to know more? Read the rest of the article to know what is and how to create the business model canvas.
What is business model canvas?
The business model canvas is a strategic management framework used to develop ideas and business models in a structured way. It breaks down into a number of important elements and plans them in more detail.
Using this model will help you visualize abstract concepts and analyse the expected outcomes. You can also use it to get more insights about the customers and how the business could expand its opportunities.
In addition to being more detailed, the framework will provide you with a more concise picture. It describes and delivers your ideas, customers, products and company’s infrastructures in a clear form that can be understood by anyone.
This is what makes it a great choice for discussing new business concepts or strategies.
There are many companies that have successfully applied the model on their business. The example of business model canvas can be seen at Amazon, Honda, and Toyota companies.
The elements of business model canvas
There are nine fundamental elements in this business model. Together these elements provide a coherent view to achieve business goals. This framework will help you visualize, describe, and assess business ideas or concepts coherently and clearly. It describes the rationale and detailed information of each existing element. So, what are the elements?
The targeted customer is a must-know information for every business. Therefore, it is important to identify and determine customer segmentation in the first step.
The identification will be useful for the marketing strategies to directly reach the potential customers. Customer segment will be a practice in which you need to divide and categorize a customer base into specific groups of individuals based on interests, age, or spending habits.
Aside from knowing who your target customers are, knowing the business value is foundational for any business. You need to determine the value of your business and the products you offer. What benefits will my customers get?
These simple questions will help you grasp the idea of what is actually you are offering or what is the problem you are trying to solve. The value propositions can contain answers to problems or new solutions that have never been offered.
Channels in business model canvas are defined as the avenues through which your business makes communication with customers. It can be either for the purpose of promotion or product purchase. Channel selection needs to consider who the targeted customers are.
Choose a channel where your customers are engaged and they can easily reach you. As an example, you can use a website as the main channel for products buying or offering and social media as a promotional channel.
Now, you know who your customers are and where you can come in contact with them, but what is the relationship you have with them? The element of customer relationship defines how a business communicates with its customers. This is a column where you can determine the best strategy for interacting with customers.
The process might not only discuss the promotion strategies but also how the customers can reach you as if they want to complain. Managing good communication with customers will help you to identify opportunities for business success.
The key activities in business model canvas define the core activities that your business undertakes to achieve the goals or the value propositions for the customers. You need to explain the operational system in your business clearly on this element.
For example, the key activities for an online store are managing the marketplace where transactions take place. So you need to make sure that the channel runs normally and can be easily accessed by customers.
The elements of key activities certainly would not run properly without the support of key resources. This is where you think about the practical resources that are needed in order to achieve the key activities of the business. A good resource selection will bring into a good performance in the key activities as it helps the business run smoothly.
The key partners are a list of other external companies that are considered important to support the key activities of the business. Key partners can be collaborations with other businesses related to yours.
For example, to support the business activities of an online clothing store, the entrepreneur cooperates with the expedition service to facilitate the process of sending products to customers. This expedition service is what is called a key partner.
The business cost structure contains all the monetary cost of the business operation. In this element, you need to define the overall business activities and write down the costs involved in each of them. The cost might increase or decrease depending on any other factors either internal or external. Therefore, you need to arrange it carefully.
Revenue would certainly be an essential point to ensure the long-term success of a business. This element is defined as the way by which you gain a financial benefit from your business. You can analyze how and where the business’ revenue comes from. Thus, the management of the company’s financial system will be more structured.
How to create the business model canvas
After getting to know the nine elements, you may now wonder how to apply this framework to get the desired results. Check out these tips on how to create a business model canvas:
1. Know your competitors
Knowing who your competitors are and digging up their information is important to do before mapping your framework. You can learn a lot from them by identifying their markets and how they interact with their customers.
Armed with this you will have deep insights into the customers interests and behaviors. It would be even better if you were able to identify gaps that could be optimized to outperform your competitors.
2. Optimize the elements
There are no standardized rules to create and arrange the elements. Each of them is important but knowing where the priorities are is the key to its success. Start by mapping out the business on the vital aspects. This is so that you focus more on the crucial elements for achieving business goals.
3. Focus on current state
This business model is not a standard rule. On the other hand, your map must always follow the current condition of your business market. Conditions will always change, especially if new competitors emerge. Therefore, it is important to continue making changes and adapt to the current situation and consumer demand.
When everything is set, try to take a step back and check whether you forget something. Make sure that you have linked to crucial elements in your framework.
Periodical checks should also be done to ensure that all elements work effectively. You can rank your framework’s performance with 1-10 for each element. This can be an indicator for improvement and evaluation.
The business model canvas can be the best strategy choice for your business growth. However, it takes resilience and good analytical skills to reach good results.