Business Model Canvas (BMC): why is it essential to the startups?

The Business Model Canvas is a strategic management tool that provides a visual framework for developing, describing, and analyzing a business model.

Business model canvas is an important tool during the product discovery phase. As depicted in the hand drawing below, we test our hypotheses by running experiments and continuously update our business model.

Business Model Canvas was introduced by Alexander Osterwalder and Yves Pigneur in their book “Business Model Generation.”

The canvas comprises nine fundamental building blocks that help organizations define and understand their business.

These blocks are:

• Value Proposition – This block describes the unique value that a business offers to its customers within each customer segment. It answers the question, “Why should customers choose your product or service?” There is another tool called Value proposition Canvas to define the customer value proposition.
• Customer Channels – Channels are the means by which a business reaches and communicates with its customer segments to deliver its value proposition. This can include online platforms, physical stores, sales teams, and more.
• Key Activities – Key activities represent the crucial tasks and processes that a business must perform to deliver value to its customers and operate effectively. These can include manufacturing, marketing, sales, and support activities.
• Key Resources – These are the assets, capabilities, and resources a business needs to deliver its value proposition, reach customers, and maintain operations. They can be physical, intellectual, human, or financial resources.
• Revenue Streams – Here, you identify the sources of revenue for your business. This could be through one-time sales, subscription models, licensing fees, or other revenue generation strategies.
• Cost Structure – This block outlines the various costs and expenses associated with operating the business model. Understanding your cost structure is essential for determining profitability and sustainability.
• Customer Segments – This block defines the different groups of people or organizations that a business aims to serve. It’s important to identify and understand the specific needs and characteristics of each customer segment.
• Customer Relationships – This block outlines the types of relationships a business establishes and maintains with its customer segments. It can range from personal assistance to self-service and automated support.
• Key Partnerships – In this block, you identify the external organizations, suppliers, or partners that play a significant role in your business model. Partnerships can help reduce costs, access resources, and expand your reach.

Sample Business Model Canvas created for a new GYM opening in your city.

Tips to create and maintain the Business Model Canvas:

• Initial draft should not take more than 30 minute.
• It’s a living document which needs an update as an when you test your hypothesis.
• Remember, the primary purpose of an early startup firm is to search for a repeatable and scalable business model, and BMC helps in that search.
• Keep it simple and customer focused.
• It’s a team based activity, use white boards and sticky notes for more clarity.
• Don’t include too many things, and avoid cluttering the document.

In summary, writing a Business Model Canvas is a practical and versatile tool that can provide numerous benefits for both startup entrepreneurs and established businesses (mainly startups). It encourages strategic thinking, helps with communication, and enhances the overall understanding and management of your business model.