The Business Model Canvas¡¯s chief virtue is its transparency, and that transparency helps create focus. That said, to create a meaningful and worthwhile take on the Canvas, you want some depth. Here we¡¯ll walk through 3 steps that will help you dig deep into what your business is about and how to frame that using the Canvas.
What is the Canvas
The Business Model Canvas is a tool for articulating and innovating business models. It has the nine blocks shown below. You can probably sit down right now and fill out a version of it for your business.
If you¡¯re prefer something printable, here¡¯s a PDF.
1.?Go Deep on the Linkage Between ¡®Customer Segments¡¯ and ¡®Value Propositions¡¯
The Canvas looks flat, but actually it¡¯s not, it¡¯s hierarchical. The relationship between ¡®Customer Segments¡¯ and ¡®Value Propositions¡¯ is the independent variable that should drive the rest of the Canvas. Given that, it¡¯s worth spending as much time as you need here.
Customer Segments
When I work with students, I have them start by creating a set of personas, humanized portraits of their customers, be the buyer and/or user of the company¡¯s product. Who are they? What kind of shoes would they wear? Can you think of five real-world examples? Which are most important?
Personas vs. Customer Segments: Technically there¡¯s a difference. Segmentation is a way of heuristically grouping sets of customers and personas is a tool for humanizing your understanding of them. I prefer working from the bottom up and starting with the personas–presumably, you¡¯re doing the Canvas so you can peel back the onion and really look at what¡¯s driving the business. If you find you have a lot and they fit into logical groups, then, sure, group them by Segment. But I wouldn¡¯t worry too much about that at the outset.
Value Propositions
Located dead center in the Canvas, this is the nexus of your business model. I work through this by rewinding a couple of steps. First, what problem scenarios are important to your personas? If it¡¯s a business to business proposition, what jobs are you doing for them and how do those need improving? If it¡¯s a consumer proposition, what underlying needs and desires are you fulfilling?
Second, what are the customer¡¯s current alternatives? These are important to understand so that you¡¯re sure you understand the problem scenario well and because that¡¯s your critical threshold: your Value Proposition has to be better enough than those Alternatives for you to get traction. Here¡¯s a summary of inputs for this part of the Canvas:
Once you get a list of full articulated Value Propositions, sort them in order of most to least compelling and record them on the Canvas.
Here¡¯s how it might look on the actual Canvas (you can overlap this kind of annotation in the Google Doc¡¯s template):
One final note on this area: If you organize your inputs this way, you¡¯ll find they¡¯re already in a highly testable formulation that you can go validate (or invalidate) ala Lean Startup:
A certain PERSONA exists¡
¡and they have certain PROBLEMS¡
¡where they¡¯re currently using certain ALTERNATIVES¡
¡and we have a VALUE PROPOSITION that¡¯s better enough than they alternatives where the persona will (buy our product, use our site, etc).
More
For a more detailed explanation, see Steps 1, 2 of my Business Model Canvas Tutorial
For a workshop you can use with your collaborators, here¡¯s materials for a Business Model Canvas Workshop
For more on design thinking and creating personas, you can try this Personas Tutorial or this online workshop: Venture Design I, Achieving Customer Relevance
02. Storyboard the Customer Journey(s) to Think Through ¡®Customer Relationships¡¯ and ¡®Channels¡¯
The Customer Relationship and Channels blocks are often given short shrift, but they tease out an important and often neglected area of your business model: creating an efficient, high quality customer journey.
To think through the customer journey, I use a framework that¡¯s over 100 years old: AIDA (attention, interest, desire, action). I add onboarding and retention to make it ¡®AIDAOR¡¯.
Storyboarding is a great way to make sure you¡¯ve really thought through this part of your business model. Below is an example for ¡®Enable Quiz¡¯, a fictional company I use in my curriculum. They offer lightweight online quizzes for managers to assess technical talent. You can see ¡®Helen the HR Manager¡¯ finding out about the product and starting to use it to screen candidates for new positions at her company.
After completing the storyboard, fill out Customer Relationships and Channels asking yourself for each step of AIDAOR ¡®Does this make sense? Can I visualize this working? How can I validate that?¡¯
More?
For a more detailed explanation, see Steps 3, 4 of my Business Model Canvas Tutorial
For more on storyboarding, you can try this Storyboarding Workshop.
03. Define a Business Type Before You Go After the ¡®Infrastructure¡¯ (Left) Part of the Canvas
A body of work around ¡®unbundling the corporation¡¯ is closely associated with use of the Canvas. One of the propositions of that work was the idea that successful companies focus on operating against one particular business type: infrastructure, scope, or product. An infrastructure-driven business has a large fixed asset or system that it¡¯s looking to sell to as many different segments as possible. A scope-driven business creates an economy of scope, doing a bunch of things for a particular type of customer. A product-driven business creates something unique and proprietary which inherently delivers a proposition relevant to one or more segments.
Here are a few examples:
Decide which type you are, at least a working view, and then consider that as you fill out the next three areas of the Canvas.
Key Activities: Which activities are uniquely, strategically important to the business? Does that makes sense with the business type?
Key Partners: Given the company¡¯s business type, for which Key Activities should we be seeking partners?
Learn more about starting about business plans.
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