Business Model Canvas (from Alex Osterwalder’s book “Business Model Generation”) – One other model that I will also briefly cover is the Business Model Canvas as this is getting more and more attention due to its value in showing many aspects of a business in one concise view. This allows you to see your “whole business” in a short hand way, providing visibility into all key elements of your business in one place. The canvas is a set of interworking elements that in total represent your overall value chain. This can be explained via the numbered illustration below:
- The first building block identifies which customers you are serving. It is helpful to also answer the question “which jobs do they really want to get done?” in this section for clarity. And, in some cases your “user” is separate from “who pays” (which is the customer). Identify both, and what is in it for them.
- This block identifies the value proposition that you plan to deliver to your target customers. What are you offering them? What is it you are “getting done” for them? Why do they care?
- This block answers the question of how your target customers want to be reached. Trough what channels? In today’s SaaS, eBusiness, Cloud, Virtual world this can be creative.
- The next block addresses customer relationships – How will you connect with, keep and grow customers? How will you deepen relationships? Loyalty? Passion?
- Next, you identify what your customers are willing to pay for. Again, this can be innovative in an internet / adver-net / cloud world. In some cases the end user does not pay – but how do you get paid?
- Next, identify what resources underpin your business model – what are the resources you use to deliver your value proposition? What is critical for success, what is unique and differentiated?
- Here, identify what activities are critical to success – what must you be very good at. The must ties to your resources, and together indicate how differentiation will be achieved.
- Next, essential partners and suppliers need to be identified. Who will you rely on and how is that an advantage? What partnerships can accelerate success? Do you need ecosystem development?
- Finally, identify your cost structure and which key elements of your model drive cost?
Once this is canvas is complete, you are in a great position to review your business, product, or portfolio item strategy concept with key stakeholders and refine it. Because it is succinct in format, but holistic it can be a great vehicle for plan development, brainstorming, discovery and validation. And, after vetting the concept with partners and stakeholders, you can test the concept out on potential customers for additional feedback. Of course, you will also need to follow on with supporting financial spreadsheets, implementation plans, SWOT and other strategy development and planning tools, but this process can provide great insight and the lean approach lends itself well to developing “emergent” strategies where you advance the strategy through multiple iterations and review with peers, luminaries and customers.
Emerging variations on this model include the “Lean Canvas”. Please link to this post to learn more on this variation. http://practicetrumpstheory.com/2012/02/why-lean-canvas/ There are some very interesting changes in the Lean Canvas approach, namely emphasizing problem definition (A problem well stated is a problem half solved – Charles Kettering), and a major emphasis on identifying your “unfair advantage” that you will create to drive your success.