Visualizing Your Business Model

Now that you have a clearer sense of how to define a business model and know some types of business models let’s explore how to craft your own.

The Business Model Canvas is a great tool to understand what your business model is. This tool was developed by Alexander Osterwalder and Yves Pigneur with the goal of helping you describe, challenge, design, and invent business models for your venture.

It’s called a canvas because it’s a one-page layout where you can paint and repaint what your business model is. It consists of nine components, each representing a key aspect of a venture. Here’s what the Business Model Canvas looks like:

BMC

Source: Digital Enterprise

The canvas has nine components that, when combined, help you understand how your business creates, delivers, and captures value for your target customer.

📺 Watch the following video to get a better understanding of the business model canvas and how to use it to map out your venture’s business model.

To recap, there are nine essential building blocks that make a business model canvas:

  1. Customer Segments. This identifies the different groups of people or organizations your venture aims to reach and serve. For example, if you were building a fitness app, your customer segment could include individuals looking to workout at home, young professionals who are gym enthusiasts, or corporate wellness programs.
  2. Value Propositions. This describes how your product uniquely addresses your customer segment’s problem or fulfills their needs. For example, if you were creating a premium electric car like Tesla, your value proposition could be that it is high-performance, has zero emissions, and has cutting-edge technology.
  3. Channels. This outlines the ways your venture delivers its value proposition to customers, considering distribution and communication channels. For example, if you have a software company, your distribution channels could include partnerships with tech retailers or having a sales team, and your communication channels could be social media.
  4. Customer Relationships. This defines the ways your venture engages or interacts with your customer segment. For example, a subscription-based streaming service like Netflix could use personalized content recommendations and responsive customer support as a way to maintain relationships with their customers.
  5. Revenue Streams. This identifies how your venture makes money from each customer segment. For example, if you have a mobile app, your revenue streams could include app purchases, in-app advertisements, and premium subscription services.
  6. Key Resources. This lists the crucial assets and capabilities required to deliver the value proposition, reach customers, and operate effectively. For example, if you were a health tech company, some of your key resources would be healthcare professionals and experts, your technology infrastructure, etc.
  7. Key Activities.This describes the key tasks and processes necessary to execute your business model. For example, if you had a social media platform, some key activities would include content moderation, user analytics, and algorithm development for content delivery.
  8. Key Partnerships. This highlights external organizations or individuals crucial to the success of your business model. For example, if you have an e-commerce platform, you may form partnerships with shipping companies, payment processors, and product suppliers.
  9. Cost Structure. Identifies all costs associated with operating the business model. For example, a fast-food chain's cost structure includes expenses such as raw materials, labor, rent for locations, and marketing.

Together, these nine components give a holistic view of a venture, which helps you make informed decisions about your product, operations, and strategy. It's important to note that the relationships between these components are essential to understanding how your venture will function as a whole.

❓ Let’s bring this back to mPharma. In the padlet below, share what you think should go in each business model canvas block for their business.

Business Model Canvas and DFV

📺 Watch the following video to see how the Desirability, Feasibility, and Viability (DFV) evaluation framework interacts with the business model canvas.

From the video and the reading, we see that you can understand the:

  • Desirability of your venture by understanding the:
    • Customer Relationships
    • Customer Segments
    • Channels
    • Value Propositions
  • Feasibility of your venture by understanding the:
    • Key Partners
    • Key Resources
    • Key Activities
  • Viability of your venture by understanding the:
    • Cost Structure
    • Revenue Streams