The Business Model Canvas for Startups.
Business Model Meaning
Business Model Canvas is strategic management and entrepreneurial tool for developing new and documenting existing business models. It is a visual chart that allows you to describe the design, invent, and improve your business model.
For every great idea, there needs to be a great business model.
The canvass contains nine building blocks, including the following:
- Customer segment
- Value proposition
- Customer relationships,
- Revenue streams,
- Cost structure.
If you structure these 9 block segments in this formation, you will get the answer for all of your fundamental questions about any business idea.
This business canvas is for any idea, newer, existing.
Business Model Vs. Business Plans
The Business Canvas model has four advantages over the traditional business plan.
Business Canvas is designed to guide you thinking through each of the nine building blocks for devising a business model business.
Canvas focuses on the strategic elements that matter most and have the greatest impact on driving growth.
It forces you to think of your business more systematically and formally.
The business model is nine boxes into a single piece of paper, so you have to be consistent.
Startups never create a classic business plan in the early stage unless required by your bank or investor.
In the early stage of a startup, it is really important to change things in your model easily. In the standard business plan, each small change will provide a lot of additional work.
The best way is to print business canvas into big paper sheets or draw on a whiteboard and stick posted notes to it.
When you stick post-it notes on it, you can easily change how you figure out your business model.
It is a standard form that is understandable for everyone.
You can easily share, get feedback from your partner or investor, and update building a funny business model.
Business Model Canvas
When you are using business models for your idea, there is no standard path from which building blocks you should start. If you are an entrepreneur, then you have extensive knowledge of the market.
If you know the market segment, then you should start with the customer segment, then you continue with the value proposition.
But if you are an entrepreneur that has the product idea, but you are not sure who your customer is, start with the value proposition.
We will start with the Value Proposition, but remember, you can also start from customer segments.
The value proposition is the first box that we fill in. Its response to the following questions;
- This is about what problem do you solve with your product?
- What value do you deliver to the customer or which customer needs?
- Are they satisfied?
Let’s take Skype as an example.
The value proposition for Skype is a free Internet voice and video calls and low-cost calls to landing in mobile numbers.
Think about what problem you solve and fill in this field
This is about for whom you are creating value?
Who is your product for, and who are your most important customers?
The purpose here in this box is to look deeper within the general market in order to locate customers with more specific needs for your product.
You can fill this block info such as my target audience, our kindergarten teachers from 30 to 40 years old in New York, or if we take Skype as an example.
The customer segment is people globally, which hold meetings or call their families and friends and companies that want to make cheap international calls.
Which channels to your customer segments want to be reached? Remember, Channels doesn’t mean only. How do we deliver a value proposition to customers?
But also, how do we raise awareness about our product and service?
And how do you provide post-sales customer support if we take Skype as an example?
Channels that Skype uses to connect value proposition and customer segment is a desktop application, mobile application, and website
If we take the Apple iPad as an example, the channel that Apple uses for this product, our retail stores, Apple stores, and website
The next field is customer relationships, the types of relationships a company establishes with specific customer segments.
This is about how do you get to keep and grow your customer base?
If we take the same example for Skype in this block, we will write down personal and self-service Skype software, download Skype subscriptions, etc.
It is about how do you generate cash from each customer segment. For what value are your customers willing to pay?
It is also about how are they currently paying, and how would they prefer to pay?
It can be usage fees, asset sales, licensing, and so on.
Revenue streams for Skype are basic service and fee credit and subscriptions, and Skype hardware.
What activities does a company engage in that allow it to execute its strategy and establish a market presence?
It is not about what you do. It is about the most important things a company must do to make its business model work.
For example, the key activities of Skype is a software development and complaint management.
It is about the infrastructure and resources you need to deliver what you have promised? Or what is the key resource that you need to perform the key activities? This can be the equipment for humans’ licenses, financial requirements, and so on.
Skype Key Resource is our software developer’s software and Skype brand itself.
Who do you need to make this work?
How does each partner help the business or what strategic partnerships does a company form to increase the scalability and efficiency of the business?
It can be suppliers, developers, distributors, inventors, collaborators, affiliates, and so on.
In the Skype example, the key partners are payment providers, telecom companies, and distribution partners.
All of these key activities, key partners, and key resource is cost money, and all of these costs need to be written down in the cost structure block.
Here, you have to write down the most expensive key activities and key resource is all fixed and variable costs.
It is not about the ideas. It is about making ideas happen. So, grab your pen and start to work on your idea.