The Business Model Canvas is the New & Improved Business Plan
Your business plan can be easily summed up on a one page canvas, called the Business Model Canvas.
The days of developing a long-winded business plan are over.
Today, your business plan can be easily summed up on a one page canvas, called the Business Model Canvas.
The Business Model Canvas (BMC) is a widely used innovation tool that helps companies quickly and easily define and communicate a business idea.
This one page template outlines 9 fundamental building blocks of a business or product, structuring an idea in a coherent and digestible way.
This blog post will cover:
What is a business model?
Why the Business Model Canvas?
How to create your own Business Model Canvas with Examples
Link to a downloadable Business Model Canvas template for you to fill out
We don’t gatekeep!
1. What is a Business Model?
A business model describes the rationale of how an organization creates, delivers, and captures value - Business Model Generation
Every company has a business model!
Business models are frameworks that outline how a business operates, creates value, and generates sustainable revenue.
Your business model outlines the foundation of your business, including how it generates revenue, serves customers, manages costs, and differentiates itself from competitors.
2. Why Use the Business Model Canvas?
One of the biggest mistakes companies make, especially in early stages, is forgetting the customer.
Your customer, the person buying your product or service, should be at the heart of every decision made.
Teams get off track by overly focusing on the product they offer which in turn means they are neglecting the needs of their customers, and therefore compromising the success of the business.
This is where the BMC comes in!
The Business Model Canvas facilitates strategy, planning, and communication within a company... in only one page!
It can also be very valuable for startups and established businesses looking to innovate, pivot, or refine their business models to stay competitive in the market.
Why should every company have a Business Model Canvas?
Alignment & Clarity - Creates a shared language using simple approach, better teamwork
Innovation - Helps foster better brainstorming
Customer-centric - Keeps the customer at top of mind
Business Planning - Creates structured, practical outcomes to implement
via Strategyzer.com
3. Creating Your Business Model Canvas
Let’s get into the contents of the canvas by using Spotify’s Business Model Canvas as an example.
Spotify is a great business model example because a majority of us are familiar with their streaming platform.
Left side of the BMC = Internal aspects of the business
Right side of the BMC = External aspects / customer-centric
The external & internal factors meet in the middle at the value proposition, which is the exchange of value between your business and your customer/clients.
Key Partners
Whom will you work with as you run the business? Who are your suppliers and partners?
Spotify's key partners that allow them to provide a services are record companies, rights holders, independent musicians, investors, and marketing partners
Key Activities
What are the key activities our value propositions require? What are the tasks and activities that must be done every day to keep the business running?
The key activities that take place within Spotify are maintain software on PC/web/app, manage music library, content acquisition, contract negotiations, and marketing.
Cost Structure
In your business model, what are the most important costs? What are the fixed and variable costs to launch your product or service? Consider the cost at each stage from setting up a website, hiring employees, production, marketing, and bringing them to consumers.
At this stage, Spotify’s cost structure consists of music royalties & licensing fees, employee salaries, platform development and maintenance and marketing.
Key Resources
To satisfy our customers, what are the key resources we need? What are the tangible and intangible things you need to create your product?
Software platform, contracts with key partners, a brand, and content are Spotify’s key resources.
Value Proposition
What is the need you are trying to address? What value will you bring to your customers?
Spotify has two main customers - subscribers and advertisers. So we separate their value propositions based on the customer.
Spotify’s value proposition for subscribers or free users:
Access to library of millions of songs for cost effective fee (with ads)
Instant access to music through streaming service
Spotify’s value proposition for their advertisers:
Effective advertising (i.e. utilize the emotive power of music)
Ability to reach active”free user” base of 317 million
Customer Relationships
What type of relationship does each segment of customers expect?
Spotify’s customer relationships entail customer service, email marketing, social media, and the Spotify platform.
For advertisers the customer relationship would be sales and customer service. If Spotify designed the ads for the advertisers it would also be design and marketing.
Channels
Where will your product be available? How do we reach each of our customer segments?
Spotify’s channels are their website, desktop app, mobile app.
Customer Segments
Who is your customer? For whom are we creating value? List the personas that you expect to use your product.
Subscribers, free users, content creators/artists and advertisers are their main customer segments.
Revenue Streams
How will you generate income? What value are our customers willing to pay for?
Spotify generates income through subscription services and advertising revenue.
What other partners, channels or customer relationships could be in Spotify’s future?
There are countless examples of BMC’s online. You can search almost any major company or industry and you’ll find tons of examples.
4. Fill Out Your Own Business Model Canvas
Now it's time to fill out your own. I bet you can do it in less than 30 minutes!
Right click and download the Business Model Canvas image above as a template for you to fill out for your business.
Whether you’re starting a podcast, launching your own product, or providing a niche service, Culture Climax Agency is here support you throughout the process.
In conclusion,
In today’s business climate where companies need to ‘fail fast’, the Business Model Canvas allows for quick testing, pivoting, of your business model.
We've found that our small business clients particularly benefit from using the BMC, providing them with more autonomy and clarity in scaling their ventures.
Founded in 2005 by Dr. Alexander Osterwalder, the BMC has been downloaded over 5 million times, and is one of the world’s best corporate innovation tools.
Comment below if you want to learn about other canvases that could help your business!