Business Model Canvas – Key Components Explained

12.11.20 Theories & Concepts Time to read: 10min

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Starting a business from scratch requires a lot of work and planning. The amount of preparation put into the process significantly influences its success. For this reason, a Business Model Canvas is important. In this article, we will be looking at the details of this specific business conceptualization, and why it is indispensable in an entrepreneur context. Finally, we’ll talk about how you can create one and provide two filled-out models as examples.

Business Model Canvas in a nutshell

The Business Model Canvas is a tool for strategic management and entrepreneurship, used for developing new business models or documenting and analysing existing ones. It provides a visual chart with elements describing a company’s value proposition, infrastructure, customers, and finances. While the right side of the model focuses on the external components, the customer, the left side focuses on the internal business models components, the business itself. The aim is to help businesses align their activities by understanding the potential trade-offs. This approach encourages a clear and concise overview of how a business creates, delivers, and captures value.

Definition: Business Model Canvas

The Business Model Canvas (BMC) is a systematic, visual framework that facilitates the conceptualization and articulation of a business’s operational and strategic mechanisms. Alexander Osterwalder and Yves Pigneur developed it in their book “Business Model Generation.” The BMC enables the detailed depiction of a company’s value proposition, infrastructure, customers, and finances within a cohesive structure, promoting an integrative view of how individual business components interrelate and contribute to the overall business model.

Scientifically, the BMC can be regarded as an entrepreneurial tool that employs a gestalt approach to business model conceptualization, allowing practitioners and scholars to map, discuss, analyse, and innovate business models in a structured and comprehensive manner. It comprises nine core components:

  1. Value propositions
  2. Customer segments
  3. Customer relationships
  4. Channels
  5. Revenue streams
  6. Key resources
  7. Key activities
  8. Key partnerships
  9. Cost structure

Academic context

In addition to the business context in which the BMC is used and applied, it also plays a role in the academic context within the methodology. The mode is widely utilized in academic writing and research within entrepreneurship, business strategy, and innovation management. It serves a dual role: as a theoretical framework for dissecting business models and a practical tool in empirical research and educational settings.

The popular tool serves three basic purposes:

  • Theoretical application for academics to gain insights
  • Structuring research data for case study comparisons and analysis
  • Integration into scholarly discussions to clarify complex concepts
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Key components

The Business Model Canvas can be conceptually divided into internal and external components, with each playing a crucial role in defining how a business operates within its ecosystem.

External components relate to the business’s interactions with the market and its environment. These components help a business understand its position and strategy in relation to the outside world, including customers, partners, and market dynamics.

The internal components of the Business Model Canvas focus on the operational and strategic aspects of a business model, detailing how a business creates, delivers, and captures value. Business models components are inherently linked to the core operations and strategies of the organisation .

Below, we’ll briefly explain all the nine building blocks of the BMC, along with questions that can be asked to elucidate each section.

The network of suppliers and partners that support the business model. Partnerships can help optimize operations, reduce risks, or acquire resources.

Questions

  • Who are our key partners?
  • Who are our key suppliers?
  • What key resources are we acquiring from partners?
  • What key activities do partners perform?

Examples

  • Supplier partnerships
  • Strategic alliances
  • Co-competition

These refer to the most essential actions a business must undertake to deliver its value proposition effectively to its customer segments. Identifying and focusing on the right key activities allows a business to efficiently allocate resources and ensure operational effectiveness, directly impacting its competitive advantage and profitability.

Questions

  • What key activities do our value propositions require?
  • What activities are critical for our distribution channels?
  • What activities are critical for our customer relationships?
  • What activities are critical for our revenue generation?

Examples

  • Production
  • Research and development
  • Marketing and sales

These are the main assets required to make a business model work. They can be physical, financial, intellectual, or human resources.

Questions

  • What key resources do our value propositions require?
  • What resources are essential for our distribution channels?
  • What resources are essential for our customer relationships?
  • What resources are essential for our revenue streams?

Examples

  • Office space
  • Computers
  • Internet connection

Your business cost structure outlines the most expensive resources and activities.

Questions

  • What are the most significant costs inherent in our business model?
  • Which key resources and key activities are the most expensive?

Examples

  • Physical assets
  • Intellectual assets
  • Human resources

These are the main assets required to make a business model work. They can be physical, financial, intellectual, or human resources.

Questions

  • What value do we deliver to the customer?
  • Which one of our customer’s problems are we helping to solve?
  • What bundles of products and services are we offering to each customer segment?
  • Which customer needs are we satisfying?

Examples

  • Convenience
  • Customization
  • Cost reduction

Maslow’s Hierarchy of Needs can be helpful when figuring out where the products/services solve the problem for the customer.

The types of relationships a company establishes with specific customer segments, which could range from personal assistance to automated services.

Questions

  • What kind of relationship is expected from each of our customers?
  • How are they integrated with the rest of our business model?
  • How much do they each cost?

Examples

  • In-person
  • Online
  • Events

Here, the customer base is divided into different groups of people or organisation s an enterprise aims to reach and serve. To understand them, you can create customer personas for each segment.

Questions

  • For whom are we creating value?
  • Who are our most important customers?
  • What are the characteristics of the people who are looking for our value proposition?

Examples

  • Mass market
  • Niche market
  • Diversified market

These refer to the methods and pathways a company uses to communicate with its customer segments and deliver its value proposition to them. The choice of channels affects how effectively a business can reach its customers, distribute its products or services, and maintain customer relationships.

Questions

  • Through which channels do our customer segments want to be reached?
  • How are we reaching them now?
  • How are our channels integrated?
  • Which ones work best?
  • Which ones are most cost-efficient?
  • How are we integrating them with customer routines?

Examples

  • Social media
  • Networking
  • SEO (search engine optimization)

The ways a company makes money through various streams from different customer segments.

Questions

  • For what value are our customers willing to pay?
  • For what do they currently pay?
  • How are they currently paying?
  • How would they prefer to pay?
  • How much does each revenue stream contribute to the overall revenues?

Examples

  • Fee for service
  • Fixed rate
  • Subscription

Tips

Before we delve into practices, we’ll take a look at tips that may be helpful for creating a Business Model Canvas yourself.

  • Understand the components
    familiarise yourself to understand what information is required for each section.
  • Start with customer segments and value propositions
    Identify your target customers and the problems or needs you aim to address.
  • Conduct market research
    Gather data on customer needs, market trends, and competitors.
  • Define key activities, resources, and partnerships
    Determine these sections based on your value proposition.
  • Detail your channels and customer relationships
    Decide how you will reach your customers and the type of relationship you want to build with them.
  • Outline your revenue streams and cost structure
    Consider how you will generate revenue and what your main costs will be.
  • Use a collabourative approach
    Involve team members or advisors in the process to gain different perspectives.
  • Validate your assumptions
    Test your assumptions with potential or existing customers to validate your business model.
  • Be prepared to iterate
    Your first version is likely not going to be perfect, so be prepared for adjustments.
  • Utilize online tools and templates
    These can provide a structured way to fill in your information and make it easier to visualize and share.

Now, how does one find out the information required for filling out a Business Model Canvas? Refer to the table below to find out how you can collect relevant information most effectively.

Customer segments & value propositions
  • Direct feedback from (potential) customers
  • Market surveys and competitive analysis
Key activities, resources & partnerships
  • Internal analysis of your capabilities
  • Discussions with potential partners/suppliers
Channels & customer relationships
  • Look into case studies
  • Conduct experiments
Revenue streams & cost structure
  • Financial modeling
  • Analysis of similar businesses/industry benchmarks

Business Model Canvas examples

First, we’re going to look at a more general exemplary business everyone knows, Apple. We will discuss each section and give the solutions afterward. Finally, we’ll be doing the same thing for our own business: BachelorPrint. If you want to practice along, download our template and get started!

Apple

Creating a Business Model Canvas for Apple involves outlining its key business operations and strategies across the nine business model elements. Please note that the specifics might vary over time as Apple continues to innovate and expand its business model.

  • Developers
  • Phone companies
  • Publishers
  • Content creators
  • Design
  • Quality control
  • Manufacturing
  • Software development
  • Brand
  • Intellectual properties
  • Design culture
  • People
  • Sourcing people
  • Marketing and branding sales
  • Operational expenses
  • High-end products
  • Innovative technologies
  • Usability/UX
  • Self-service
  • Apple Care
  • Love brand
  • Mass market
  • Retail
  • Website (apple.com)
  • Apple shops
  • Hardware sales
  • Media and licensing
  • Subscription revenue
BMC Apple solution
Download

BachelorPrint

After we’ve done Apple, we will continue with our brand, BachelorPrint. Apple is well-known, so it should’ve been relatively easy to create a BCM. However, more research is necessary for a BCM of BachelorPrint. Below you’ll see the solutions.

  • Material suppliers
  • Logistics companies
  • Academic institutions
  • Design
  • Printing and binding
  • Marketing/content
  • Website development
  • Supplier network for materials
  • Printing and binding machinery
  • Staff (IT, customer service, marketing)
  • Facilities
  • Operational costs
  • Technological maintenance
  • Employee salaries
  • Marketing and advertising
  • High-quality printing for academic documents
  • Wide range of customization
  • Fast processing and delivery times
  • Easy-to-use online platform for ordering
  • Online self-service
  • Customer support (e-mail, telephone)
  • Community engagement (through blogs, social media)
  • University students
  • Ph.D. students
  • Academic institutions
  • Researchers and academics
  • Website (bachelorprint.com)
  • Social media (Instagram, TikTok, X, Facebook, YouTube)
  • Direct sales from printing services
  • Complementary products (plagiarism cheques, proofreading services)
BMC BachelorPrint solution
Download
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Business Model Canvas template

The following is a business model design template that outlines the nine building blocks, providing a basis for analysing or developing a comprehensive strategy for your business. You can download the document in PDF format for printing or export it to applications such as Goodnotes. Alternatively, we provide the download as a Microsoft Word document, allowing for direct typing and editing within the document. You can also use this portfolio of business models to create your own!

BMC template PDF
Download
BMC template Word
Download

Business Model Canvas FAQs

The Business Model Canvas, abbreviated as BMC, is a strategic management tool designed for visualizing, defining, and altering the business model of an organisation . It provides a succinct one-page overview that outlines the fundamental factors a company utilizes to create, deliver, and capture value. The BMC aids businesses in aligning their activities by illustrating potential trade-offs clearly and straightforwardly.

Creating a business model canvas doesn’t have to be difficult. You need to reflect keenly on your business and find out all the significant details. Such details include the key partners, activities, and resources as well as the value proportions, customer relationships, customer segments, channels, cost structures, and revenue streams.

The nine Business Model elements are as follows:

  1. Key partners
  2. Key activities
  3. Key resources
  4. Value propositions
  5. Customer relationships
  6. Customer segments
  7. Channels
  8. Cost structure
  9. Revenue streams

A BMC is indispensable because it helps you gain an in-depth understanding of your business. It’s made up of several segments that are central to your business. By strategically delving into each of the segments, you can tell which areas need improvement and visualize a clear path on which you need to build your business.

The main key activities in a BMC depend on the type of business. They consist of everything that your business does with resources (money, labour, and raw materials among others). Examples of key activities include:

  • Production
  • Problem-solving
  • Network of maintaining the key resources

The value propositions are typically placed in the middle of the model. It includes the products or services your business will offer its customers and how it differs from your competitors. Examples are:

  • Price
  • Efficiency
  • Luxurious packageing

In a BMC, your business model is on paper and visualized, with the external and internal environments split into subsections. This is great for showcasing your business idea. A business plan, on the other hand, often stems from a financing plan. Both are necessary for starting a new business.