Are you an entrepreneur in search of the next groundbreaking business model? Then you’re not alone. Being able to simplify business process modeling is a key part of any entrepreneur’s skills. It also means being able to see where the weak points as well as opportunities exist. In this post I’ll show you how a business model canvas template helps streamline and clarify the process for all your employees.
The purpose of the business model generation canvas
- What is a business model?
- What are the available business models available?
- What is the use of the business model canvas?
- Who is Alex Osterwalder?
All of these questions will be discussed here to clarify for entrepreneurs how to visualize the many business improvement and supply-chain techniques available to your firm. As a starting point, you’ll need to understand what exactly a business model is, and how it helps you craft and design the type of company you want in the future.
First of all, what is a business model?
A business model describes how a business carries out its transactions. It states the manner of how a business gives its services to customers, how they attract their customers to avail their products and/or services and how they can make profit from the payments of their customers.
Over the years a lot of business models were developed by different companies across the world to gain advantage over their competitors. The clash of business models against each other results loss for some companies, but for others it became their trump card.
It is very important to have a good business model for your company because it will define what kind of fighting chance you will have against your competitors. Remember that your profit will depend always on how you do things for your customers and client. You can come up with the most unique type of business idea on the market, these mean nothing if your business model fails to implement and deliver the product in such a way to satisfy customer needs.
As said earlier there are a lot of new business models developed over the years. Here are some of them:
1. The Brick and Click business mode which is based on offline and online actions.
2. Razor and Blade business model wherein products are sold on low cost in order to increase sale of complementary supplies. The name comes from the grooming industry where razors are sold at a loss and the real profits are made on selling razor blades. The same approach applies to printers and printer cartridges.
3. Direct Sale model where products are sold directly to the customers and not on a fixed store location.
4. The Franchising model which is a fairly standard business model these days concerned with making chain of stores (e.g. McDonald’s fast food chains).
5. Cutting out Middle man model where businesses cut out the middle party like a distributer and just deal with their customers directly.
How Alex Osterwalder visualizes the model canvas
Developing a business model for your company is part of the business strategy of companies. However, creating and using the right one is no easy feat. This is where Alex Osterwalder’s business model canvas come in. Alex Osterwalder is an author, speaker and advisor on business model innovation.
He advised the use of the business model canvas. The business model canvas is an analytical and entrepreneurial graphical tool that lets you easily and systematically design, create and develop a business model for your business.
To put it in simple terms, the canvas allows you to visualize a complex business model as its component parts, of which there are nine (detailed below). If you can simplify your business model canvas then you can:
- identify where bottlenecks might appear (e.g. in your supplier network)
- identify where you can efficiently make savings (e.g. outsourcing development work in order to speed up time to market)
Understanding and using a business model canvas template
The business model canvas template is composed of nine blocks that make up the business model namely: Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships and Cost Structure.
- The Customer Segments include the people or organization you are offering your products and/or services.
- The Value Propositions are the products and services that your business offer.
- Channels are the way on how you can deliver your products and services to your customers or clients.
- Customer Relationship describes the kind of relationship you make with your customers and clients.
- Revenue Streams outlines on how your business can profit from the products and services your business offers.
- The Key Resources tells what the structures and resources you need to create and deliver your products and services.
- The Key Activities describes the activities necessary for your business to perform its purpose.
- The Key Partnerships outline those who can help you in your business model since your business would only perform key activities only have key resources.
- Finally the Cost Structure section tells you how much your business activities will cost you.
Using this kind of presentation you can clearly see your business model and how you can develop or recreate it. The business model canvas is usually printed out with a large scale and then placed on a big surface so that a group can brain storm and talk about the business structure model they can develop.
Their are a lot of business model innovation approaches that can be developed using this tool simply by focusing on one of the nine items above and doing them better or more creativity then your competition. A new business model can always be born to serve this new era of businesses.
One extra thing: But don’t make the mistake of thinking this is a tool which entrepreneurs will only find useful when starting up a brand-new business. Use the templates to map out your existing business model in order to identify flaws are opportunities. Sometimes with existing/mature businesses is all too easy to overlook your existing operating model.
Remember: Development can never stop, because it is in development that we succeed and prosper. Using new tools to develop a business can prove to be very useful in this fast paced world, where those who fall behind innovations fail. As Alex Osterwalder said “Companies that aren’t able to systematically rejuvenate will struggle to survive and thrive.”