The Business Model Canvas is one of the essential tools for designing your business model on a single page in the form of a table and proceeding step by step to launch your startup project.
It represents the entire global strategy put in place for the proper functioning of your business. Ideally, it defines itself at the start of the business, then improves and adapts as development proceeds which is a sequence that entrepreneurs launch your startup project.
The Business Model Canvas (BMC) is a tool imagined by Alexander Osterwalder and Yves Pigneur, authors of the book Business model generation which experienced a great boom a few years ago.
Today, it has found its place among startups who want to design a business model quickly. Hundreds of thousands of entrepreneurs no longer hesitate to use it.
- What is the Business Model Canvas?
- A tool to materialize the business model of a company
- The 9 components of the Business Model Canvas
- Example of a Business Model Canvas: Airbnb
- Download a frame of the Business Model Canvas matrix
What is the Business Model Canvas?
The business model canvas is an effective management tool to help you create or adapt the economic model of your company.
It differs from “classic” business plans by its visual aspect and its intuitive side. It allows you to quickly identify a synthetic vision of your strategy and the actions to be implemented.
Indeed, some entrepreneurs have an idea for a product or service without necessarily knowing the precise needs of their target. The BMC will allow validating the consistency between the proposed solution and the problems of the customers.
It also sheds light on the communication and sales channels needed to help you launch your startup project.
Another common case is the very (too) detailed Business Model which does not allow the company to be agile and turn around quickly. The Canva Business Model also shows its usefulness by helping the entrepreneur to articulate an idea for a business project, in a simple and visual way.
Indeed, a company is segmented into different sectors, themselves divided into several activities. As an entrepreneur, you can launch your startup project using The Business Model Canvas visually shows all this synergy by proposing 9 strategic blocks all linked together.
Once your business model has been established, it is important to specify that it is not definitive but very progressive, especially in the startup universe where the environment can change very quickly.
A tool to materialize the business model of a company
The BMC brings the entrepreneur to focus on the key elements of his business plan: the market, the infrastructure, or even the financial aspects. It brings the project creator(s) to ask the right questions that will help launch your startup project:
- What product or service with high added value to offer?
- How to deliver my proposal to the client?
- The process to produce value?
- How to capture value?
The tool gives a global view of the project and allows you to validate the first hypotheses related to the business. However, it is important to remember that the Business Model Canvas is not everything, it is one tool among others and a market study based on the SWOT and PESTEL matrices is just as essential.
BMC makes it possible to further develop thinking around the product, the target, the means to expect it, and the revenue models.
The 9 components of the Business Model Canvas
To show in concrete terms the interests of the different components of the Business Model Canvas, we will base ourselves on the strategy of Airbnb which notably used this tool in its beginnings and whose success is no longer to be demonstrated today.
First and certainly the most important element: your customers. What is their profile? What are their needs? Are they present in a mass-market? Niche?
Be careful not to mix all of your segments if your business caters to different types of customers. E.g. (BtoB and BtoC). If your customer profiles require different strategies (you will not approach your customers in the same way) your marketing actions and your cost structure will be different. Favor a matrix for each profile.
Example : At Airbnb, there are several customer profiles: travelers, accommodation providers, photographers, and businesses. There are therefore two offers: a B to C and a B to B. The typical profile of travelers, at the launch of the company, was a person who likes to travel and live new experiences, wanted to save money on their stay and live a unique adventure in contact with local people.
As for the hosts, these were people who wanted to rent their available space to obtain additional income, while meeting new people.
THE VALUE PROPOSITION
Why should your customers buy your product? What problems will you solve with your solution? For each need, what is the product or service offered? What is your added value compared to the competition? The answer to this will determine how you can launch your startup project.
All the answers to these questions should cause the famous “wow effect” among your customers, which encourages consumption.
Example: Airbnb promises travelers to sleep with locals and therefore to save money during their trip. For the hosts, Airbnb provides them with an additional salary without having to look for punctual tenants,. The platform manages everything, invoicing and payments included.
How will you sell your product/service? What will be the preferred distribution channel: will you be a Pure Player with online sales only? If you sell products, which delivery solution do you prefer?
This part concerns all the distribution circuits to deliver your solution that will guide you to launch your startup project.
Example: Airbnb is an online platform. Its main distribution channels are therefore the website as well as the Android and iOS applications.
THE CUSTOMER RELATIONSHIP
How are you going to retain your customers? What actions will you take? What tools and for what cost?
Customer relations are obviously a key element in your value creation. If your customers do not feel this proximity, they may quickly lose interest in your business. Remember: branding is just as important as the quality of products and services (isn’t it Apple?)
Example: Airbnb customers have access to 24/7 assistance via the platform. They also have the possibility of exchanging via social networks.
This is the total revenue generated by your customer segments, taking into account the budget spent to create your value. How do you make money? What are the established prices? How much do you spend on each activity?
Example: Airbnb charges a 3% service charge commission to hosts. The platform also takes a commission between 6 and 12% on each booking.
This block covers all the important tasks without which your business would not work. It can be daily or monthly activities and all departments of the company are affected.
Example: To maintain and expand its community, AirBnB relies on its Community Management activity. Other essential activities include the development of updates to constantly improve the user experience.
These are all the elements essential to the operation and development of your startup: human resources, financial aspect, furniture and real estate needs. Write down what you have and what you need.
Example: To work, Airbnb needs the hosts, without whom the concept could not work, but also reliable technology, its employees to manage the day-to-day business and a large community of customers.
Who are your strategic partners and what benefits do they bring to your business? Forming partnerships can be beneficial in the sense that they bring you additional assets such as better visibility, funds or clients.
Example: Airbnb is developing alongside several key partners: hosts, travelers, photographers, their investors and even the payment solutions it has set up on its site.
THE COST STRUCTURE
Among all these resources listed, it is now a question of which ones will be more expensive than the others. What are the priority costs? The highest?…
Example: For the platform, the highest resource is the costs linked to the development and improvement of the site and applications, then the marketing and communication budget second and finally human resources.
Example of a Business Model Canvas: Airbnb
An undeniable success, a valuation that exceeds one billion dollars and a presence in nearly 200 countries: Airbnb has become a textbook case.
For those who do not know this company, Airbnb is a platform for connecting travelers and private hosts for accommodation. Travelers benefit from homestay accommodation and have the opportunity to live a unique experience that is often much cheaper than a night at the hotel.
On the other hand, the hosts have a good way of obtaining additional income.
The platform also offers a B to B solution by offering business trips to business leaders and their teams.