A broad range of strategic frameworks have come and gone over the years as companies strive to keep pace with ever-shifting technological, social, and global dynamics. Some of these tools remain useful while others have grown long in the tooth. We have composed our thoughts on the relevance of some of the most popular methods in the modern business environment.
The Business Model Canvas (BMC)
The Business Model Canvas, introduced by Alexander Osterwalder in Business Model Generation (2005), is a visual representation of a business model. The BMC has endured because it is simple to complete, to understand, and to communicate.
Business Model Canvas - Traditional version
The model includes nine components, which together are lauded for providing a holistic view of the business:
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Customer Segments: Who are our most important customers / groups of customers?
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Value Propositions: What benefit are we delivering to customers?
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Channels: How do we deliver our product to each customer segment?
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Customer Relationships: How do we interact with each customer segment?
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Revenue Streams: What are our customers willing to pay for?
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Key Activities: What unique items does our business do to meet our value proposition?
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Key Resources: What do we need to deliver on key activities and meet the value proposition?
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Key Partnerships: What can others do so that we can focus on our key activities?
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Cost Structure: What are our most significant expenditures?
Benefits of the Business Model Canvas
The BMC continues to be one of the most popular strategy tools and has a several key benefits:
- Simplicity: It is easy to understand and use due to intuitive components and flow.
- Workshop-ability: The model is perfect for a workshop setting. Create a large poster, hand out sticky notes, and get started. It doesn’t take long before everyone is pitching in and bringing the BMC to life. This collaboration can also be accomplished with remote teams via Miro.
- Shareability: Pass the completed BMC to a colleague, and they will immediately understand.
- Visuals: The visual representation does a good job of visually breaking down the relationships among the major components of a business.
Drawbacks of the Business Model Canvas
- Oversimplicity: Simplicity is a double-edged sword with this tool. Its ease of use also means that it only offers a high-level view and is not so helpful when considering the underlying details. Interestingly, the BMC has spawned many versions and sub-canvases to help dive into the next level of analysis.
- Internally Focused: This generates a purely internal view of the business. Sure, it includes customers and customer segments, but only from the view of team members. Outside factors such as Political, Economic, Social, and Technological (PEST) have a huge impact on the business model’s eventual success or failure.
- No Distinct Problem Statement: Finding a true problem to solve is the core to a new or innovative business model. However, that element is missing from the BMC. As a result, some strategists have begun including a problem statement within the Value Proposition section.
- Objectives Limited to Profit: The BMC shows an opportunity for financial success in terms of profit by way of the Revenue Streams and Cost Structure sections. However, other key business outcomes are not accounted for, such as patient outcomes for a hospital or environmental impact for a manufacturer.
- Missing Broader Stakeholders and Competitors: Suppliers are included, but other stakeholders such as employees, shareholders, the community, and the government are also critical. Adding a Competitors section is another common modification to this approach. Understanding how other companies target the same or similar value proposition is helpful in determining if the business model is viable.
- Missing Key Performance Indicators (KPIs): Every business model has metrics that are the most critical indicators of success. KPIs should drive action and results, and it is smart to think about them from the beginning to keep focus on the end goal.
Putting the Business Model Canvas to Use
Depending on your stated purpose, the BMC can be incremented or combined with other tools to become even more valuable. Incorporating a “Customer Problem” section and making it your starting point, or at least making it part of the “Value Proposition” section, is critical for any BMC. The example below also adds a “KPI” section which is very impactful. Of course, strategists should add other relevant sections to their model as needed, such as competitors and stakeholders, to increase the tool’s value.
Business Model Canvas - Enhanced version
Click here to download our templates for the Traditional and Enhanced Business Model Canvas.
How Aspirant Can Help
These planning tools are intended to be simple to employ, but external support can prove invaluable - even for organizations with a mature planning function:
- Dedicated resources that remove the burden from internal teams, enabling them to focus on their 'day jobs'
- Experience that streamlines and accelerates the process
- Objective, impartial facilitation that removes bias from addressing sensitive topics
- Third party perspective that prevents groupthink
Use the form below to request a casual discussion with our Strategy experts about how we can help your organization improve its strategic planning, and in turn, achieving its goals.