BUSINESS MODEL CANVAS
A model that enables you to look at your business as a whole using key building blocks
They say a picture is worth a thousand words. John Tukey, an American mathematician, once famously wrote "The greatest value of a picture is when it forces us to notice what we never expected to see". We have all looked at a problem, analysed data and whichever way we examined it, a straightforward solution was not obvious. The canvas helps us see the picture.
Seeing business problems as a picture is captured by Alexander Osterwalder and Yves Pigneur in their hugely successful book, Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers published in 2010. This is a book that brings all parts of a business proposition together using engaging graphics. Their thesis is that business problems can be examined on a canvas using a number of building blocks. They suggest nine blocks that look at the infrastructure, the offering, customers, finances, and revenue streams. They are summarised in the diagram.
These are worthy subjects. Using the model, all the key parts of a business are explored. In this way it is possible to identify strengths and weaknesses and so focus on aspects of the business that need most attention. Working through each of the nine building blocks, the final result would produce a very useful marketing plan.
As with all models, it can be adjusted to suit. You could use a canvas to build a picture of a business problem using your own building blocks. The key idea of a canvas is to get everything on one piece of paper to bring the problem into better focus and to integrate the different components that are faced in the market place. Don’t worry about your artistic abilities, just start sketching.
Take for example a typical problem that many companies face - sales that are levelling off. When this happens we need to identify the cause of the problem in order to determine the solution. Is it the economy that is slowing down and dragging down sales or is the company doing something wrong? Is the levelling off due to an outdated product? Are prices too high? Have the competition stolen a march? Have consumers tastes changed? Is there something wrong with the route to market?
Identifying the most appropriate corrective action can be difficult by looking at these questions in isolation. However, if you build a picture that answers four questions (the precise wording doesn't matter but they should cover the following issues) the solution may be apparent. In this example the four questions could be:
What is happening to the market?
Are we supplying the right segments?
Is our offer value for money?
What do we need to improve?
Answering these questions posed in this example, the picture should be clearer and a solution more obvious. The sketch in the top left suggests that the market for the product is buoyant - so that isn’t the problem. The sketch top right shows that the proportions of large, medium and small customers served by our company are the same as for the market as a whole. We are not out of kilter here as we mirror the market. However, when we plot the price of our product against the benefits and compare the result to the competition, we see that we have a perceived high price relative to our offer. (The bottom left sketch). An analysis of customers' views of our product's performance on quality, price , delivery and range suggests that product quality (which is very important) is considered lacking. The canvas sketches help us identify the cause of the problem and this bring us much closer to a solution.
You have probably noticed that there is a strong overlap here with SWOT analysis. The business model canvas is a sort of pictorial SWOT.