What is Business Model Canvas? Example and Guide to draw a Business Model Canvas

Business model canvas strategizes the entire business system of the enterprise. As a result, businesses can implement business plans to achieve development and financial stability. Let's learn more about the model with Viindoo right in this article.

What is Business Model Canvas?

Business Model Canvas (BMC) is a tool used to develop a new business model. The canvas provides an overview of the business through 9 components. This is extremely useful when businesses need to do a comparative analysis of the impact of increased investment on any factor.

In addition, the business model canvas allows administrators to re-evaluate current processes and modify their business models if needed.

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Why use Business Model Canvas?

A lot of startups fail because they put all their faith in their product concept. When they put all their energy to create the product, they seem to ignore following an appropriate business model.

Nevertheless, some startups develop too many kinds of products/services without really considering the relevance, available resources, and development capabilities of the business. This leads to a waste of resources and time.

Startups are more likely to succeed if they don't rush to market with an initial idea. This means products and services have gone through many iterations of the development process until the final version. Organizations tend to be more sustainable if they carefully consider diverse business models before deciding on one. BMC helps:

  • Businesses visualize and position their business models for corporate growth and innovation.
  • The innovation process from theory to planning go smoothly.
  • Businesses define ideas and engage all stakeholders.
  • Administrators generate suitable ideas.
  • Business innovate.

9 key elements of the Business Model Canvas

Model canvas helps businesses analyze their financial situation and figure out how to maximize profits for businesses. The factors affecting the business model canvas templates include:

Customer segment

The customer segment is the range of customers or markets that businesses target to provide services and products. Businesses segment customers according to criteria such as habits, preferences, tastes, etc. There are 5 sub-markets including:

  • Mixed market.
  • Universal market.
  • Market that provides different types of products.
  • Market that has diverse segments.
  • Niche market. 

After businesses have determined the target market and target segments, they should next consider the behavior, demographic features, preferences, etc. of potential customers. After that, businesses can well understand customers and come up with reasonable product development strategies.

Businesses target suitable segments

Businesses target suitable segments

>>>> See More: What is customer categorization? Principles and Guides to customer segmentation

Value propositions

Value propositions describe the goals of products or services created for customers. This is the reason to convince customers to experience their products. Here are 11 suggested value propositions for businesses to refer to:

  • Unique and beautiful design.
  • New products or services.
  • High products or services value.
  • Personalized experiences.
  • Product branding.
  • Cost optimization during product creation.
  • Reasonable selling price.
  • Risk minimizing.
  • Requirements adaptability and good support for customers.
  • Convenience when buying and selling the product.
  • Quick response to customers.
Value proposition refers to the goals of the products provided

Value proposition refers to the goals of the products provided

Distribution Channels

Businesses use distribution channels to interact with customers. Through these channels, businesses can bring customers wanted products and services. These are quick channels to bring products from the place of production to the consumer. 

There are two common forms of distribution channels: direct distribution (sales staff, physical selling points, e-commerce sites, etc.) and indirect distribution channels (agents, partners' stores).

Distribution channels bring goods and services to customers

Distribution channels bring goods and services to customers

Customer Relationships

Customer relationships are built during the process of conducting business activities. Businesses should know how to attract new customers and retain old ones. Here are several tactics that support building relationships with consumers:

  • Get customers involved in creative contributions.
  • Allow self-service.
  • Let customers feel familiar with your brand.
  • Provide exclusive benefits for VIP customers.
Businesses must build relationships with customers

Businesses must build relationships with customers

Revenue Streams

Revenue streams are the cash flow in the business, representing the source of revenue earned. This is the most concerning issue for businesses and investors. There are 6 methods to help create revenue streams:

  • Franchising.
  • One-time usage fee.
  • Sale of business assets.
  • Subscription by time.
  • Rent advertising programs.
  • Discount.
Revenue streams represent the company's source of profits

Revenue streams represent the company's source of profits

Key Activities

These are the most important activities to maintain smooth operations and ensure the success of the business model canvas. The main activities consist of 3 main types:

  • Conduct production activities.
  • Implement policies.
  • Build the foundation for business activities.
Key activities are the most important factors to maintain smooth operations.

Key activities are the most important factors to maintain smooth operations.

Key Resources

These are the main resources to ensure the successful implementation of the business plan. There are 4 main resources:

  • Human resources.
  • Money (Financial elements).
  • Knowledge.
  • Facilities and machinery.
The main resource is the driving force for the business to implement its business plans

The main resource is the driving force for the business to implement its business plans

Key Partners

A good relationship between the business and key partners helps best-developed business execution. These relationships are about

  • Cooperation for the development of both sides.
  • League.
  • Venture.
  • Relationship between manufacturers and suppliers of raw materials.
Relationship with key partners

Relationship with key partners

Cost Structure

The cost structure describes all the costs required to maintain business operations. This is also the amount of money that businesses have to pay to run the business. The cost structure has a decisive influence on the value of products and services. There are two methods to value costs:

  • Based on the value of the product of the business.
  • Based on production costs.

Several factors influence the cost structure:

  • Fixed costs: Costs that do not change during production periods.
  • Variable costs: Proportional to the volume of goods and services produced.
  • Economies of scale: When productivity increases, prices will decrease.
  • Scope of operation: A new product or service will be supported by an existing system.
The cost structure represents the total cost of maintaining the business

The cost structure represents the total cost of maintaining the business

>>>> See More: What are hidden costs? Examples and methods calculate and reduce hidden costs

Advantages and disadvantages of the model canvas

The model is popular for business model innovation. The business model canvas delivers:

  • Focus: Removing complicated content in traditional business plans, improving clarity and concentration on what's driving the business (as well as unimportant work and problematic issues).
  • Flexibility: Providing model adjustments and considerations (from a planning perspective) to visualize content.
  • Transparency: Being able to see the bigger picture of the business model.

However, businesses also need to note the following 3 disadvantages:

  • Canvas lists quite a detail of the factors inside the business but ignores the external factors. Meanwhile, external factors have a great impact on the existence and development of enterprises, especially factors related to competition. 
  • This model has not mentioned the vision, mission, and strategic goals of a company, customer-centric ideas, revenue, cost structure, and profit. Therefore, this model has limitations in its application to NGOs and government organizations.
  • The model excludes the human factor and the interaction between group members, while they are the key factors that create value for customers. This limitation can lead to incomplete and inaccurate identification of factors that create value for customers.

Consequently, the business model canvas is not likely to be a comprehensive tool for daily business management. Two significant aspects are missing, which are the external environment and internal personnel. BMC is also not an overnight job. BMC needs continuous adjustment to match the business development.

Business model canvas examples

Following, Viindoo will introduce some business model canvas examples of today’s large enterprises.

Example 1: Business model canvas of Apple

Business Model of Apple

Business Model of Apple

Example 2: Business model canvas of Amazon

Business Model of Amazon

Business Model of Amazon

Tools and software to create a business model canvas

Here are some tools and software that readers can refer to when creating a business model canvas.

Strategyzer 

The software to create a business model canvas was founded by Alex Osterwalder and Yves Pigneur. Strategyzer provides users with a wide range of different canvas templates to choose from to build a business model. 

Users will get a 30-day free trial and will be charged an additional fee when the trial ends. For the paid option, Strategyzer offers a variety of classes to train and guide users to build and experience different business models. 

The software will estimate the appropriate cost as well as the financial capacity from the users’ ideas for doing business. Overall, this is a great business model canvas that any business should consider.

Selecting a business model canvas template with Strategyzer

Selecting a business model canvas template with Strategyzer

Canvanizer

Canvanizer tool allows free creating business model canvas. Using the tool, users can share links for others to jointly come up with ideas and build business models remotely. 

Similar to Strategyzer software, Canvanizer also provides business model canvas templates for users. The strength of this tool is its accessibility ability. Like Google docs, multiple people can work on the same file and any changes are synced.

Canvanizer is a free tool for making a business model canvas

Canvanizer is a free tool for making a business model canvas

Canvas Modeling Tool 

This free tool is provided by an ex-alumnus of ThePowerMBA. Users can experience the tool with simple and easy operations. To create a template, users simply click on the “+” sign in a building block. The created business model canvas is downloadable and shareable as a pdf

Design a business model canvas with the business model canvas tool

Design a business model canvas with the business model canvas tool

The above article by Viindoo has provided readers with information about the business model canvas as well as its benefits. When combined with Viindoo comprehensive enterprise management software solution, businesses will have the right orientation in the process of conquering knowledge of Technology, Administration, and Digital Transformation.

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What is Business Model Canvas? Example and Guide to draw a Business Model Canvas
Hue Nguyen March 23, 2021

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