Business Model Canvas

The Art of Business: Meet Your New Canvas

Here’s all you need to fundamentally change the way you think about your business, and yourself in relation to it: a piece of paper, a pen, sticky notes and 15 minutes.

You might be saying, “Fifteen minutes? This guy’s full of it!”

But that’s all it takes to create a Business Model Canvas, which isn’t some hokey idea I’ve devised to avoid the arduous process of writing a traditional business plan.

First, though, think back to the moment you decided to start your business. You had a particular area of expertise — designing websites or making pizzas or practicing law — that made you want to build a business around that skill.

You also had a dream of working for yourself and becoming financially independent, so you took the leap of setting up a shop, and you’ve been trying to make it work ever since. But there’s an important difference between applying your expertise to a job at an existing organization, and bringing that expertise to bear in a new business that you’re building from the ground up.

This is why many people fall into the trap of trying to do everything themselves. In doing so, they spread themselves so thin that they aren’t able to focus on what really matters to the success of the business.

After all, the difference between a successful business and one that files for bankruptcy isn’t so much that one makes a good product and the other one doesn’t. The one that succeeds is the one that’s asking the right customer-centric questions about what makes a product “good.”

Any given product or service has value only to the extent that it addresses a customer’s need, and does so at a price that’s equal to, or less than, that customer’s willingness to pay. In other words, your product is a means to an end: satisfying your customers’ needs or wants.

Because it’s a means to an end, recognize that the product is not the core of what you do.

What is the core? Your business model. And that model must be mapped out — but forget about a traditional business plan. There’s a growing rejection of them and the underlying assumption that the CEO is all-knowing and, therefore, capable of dictating a plan that’s infallible and should be followed to the letter.

This new movement has sought ways to apply scientific discovery to business development, deploying an approach of continuous learning that involves testing hypotheses and listening to customers.

This new way of thinking goes by various names. “The Lean Startup,” a book by Eric Ries, takes its title from the “Lean Manufacturing” revolution pioneered by Toyota. Steve Blank calls his approach “The Customer Discovery Method.” The Business Model Canvas was developed by theorist and author Alexander Osterwalder, with the help of 470 co-creators.

Regardless of name, the point of this new approach is to take some of the guesswork out of starting and running a business and, instead, to turn it into more of a science.

Business Model Canvas


Also on StartupNation.com: Your Business Needs a (Nontraditional) Plan


The Business Model Canvas reduces a formal business plan from dozens, if not hundreds, of pages into a single page (plus those sticky notes). This means all stakeholders can understand the model at a glance. As new information arises, it’s easily adjusted to offer a new view of the business — a view that allows new questions and discoveries. It’s designed for experimentation and to make sure all components of the plan to work harmoniously.

Now grab that piece of paper and pen. Divide the paper into boxes like the Business Model Canvas above. Now grab the sticky notes and think about the box in the middle.

That box is why the business exists. Everything else radiates from Value Propositions.

The core of the business is the value it brings into the world, not what service it provides or what it makes. Think “convenience,” “peace of mind,” “quality,” or even “social connection.”

Value Propositions ensure “product-market fit,” which means the product satisfies a need or a want, and the target market can support it. A guess isn’t good enough because this is the single most important part of the process.

Here’s a brief rundown of the rest of the canvas.

Customer segments

  • Customers are the judges of the Value Propositions. You must know who they are.

Channels

  • This is how is the Value Propositions are delivered to the customers.

Customer relationships

  • This section is all about sales and marketing.

Revenue streams

  • This is where the money is made.

Key activities

  • The most important activities the team — not you — must expertly perform to create the value the company exists to provide.

Key partners

  • Who can help you propel the business beyond its limited cash flow?

Key resources

  • Who and what the business relies on for its core product. 

Cost Structure

  • Add all costs associated with the activities, partnerships, and resources on the left side of the canvas, and what’s left is the fundamental cost structure for operating the business.

In the coming months, we’ll explore the process more by diving deeper into the left and right sides of the Business Model Canvas so you can draft one for your small business. This single piece of paper will make your business smarter and more efficient than it’s ever been — and help liberate you from the DIY trap.

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