The Business Model Canvas

Having recently finished my MBA (at The Global Asia program offered by Columbia University, London Business School, and Hong Kong University), I’ve been inundated for the better part of two years by business “frameworks.”  Indeed, at times, it seems like the path to Business School Professor fame is to develop a framework, some simple way to represent a business problem of some sort on a single page (and it seems, ideally, in a 2 by 2 graph).  More often than not, these frameworks seem like an overly simplistic and poor representation of the real world, but many business “experts” achieve their status by writing a book about a framework that they have developed.

When I first heard of the Business Model Canvas, I was skeptical.  It’s supposed to provide a framework that allows one to represent a business model on one page (or “canvas”).  Developed by Alexander Osterwalder and “an amazing crowd of 470 practitioners from 45 countries,”  I’ve seen in popping up in more and more places.

I had read a bit about the Business Model Canvas online and flipped through the book (which is really nicely designed).  It wasn’t until I joined Steve Blank‘s Lean Launch Pad class at Columbia University that I got my first real taste of how to use the canvas.

And, I must say, I’m impressed.  It really is possible to communicate the important pieces of a business model using the canvas.  The canvas is made of nine sections:

  1. Customer segments: Who are the group of customers?
  2. Value proposition: What is the offer for each customer segment?
  3. Channels: How to reach each of the customer segments?
  4. Customer Relationships: How to relate with customers over time?
  5. Revenue streams: How to earn revenues?
  6. Key resources: What assets are required to run the business?
  7. Key activities: What are the important activities/processes?
  8. Partner network: Who are the key partners and suppliers?
  9. Cost structure: What are the important costs?

that are the fundamental building blocks of any business.  The Lean Launchpad class basically has students start off by creating a Business Model Canvas for their business idea.  Each item in the canvas is assumed to be a hypothesis, something that needs to be tested in order to “validate” your business idea.  Students develop simple ways to test these hypotheses and “get out of the building” to test them.

The idea of “framework” and “hacker” might seem to clash.  However, I’d argue that the Business Model Canvas is a perfect way to “hack” a business model.  It’s quick and allows a high level view of all the pieces.  Pieces then can easily be changed, moved, and adapted.  Different models can be compared and evaluated.  I just used the Business Model Canvas in the Entrepreneurial Finance class I teach.  Student will start by defining their business model, from their I will have them create a working capital and investment model needed to make their business model happen.  These are what I will have students hand in for their final project rather then yet another 40 page business plan that no one ever reads.

As a tool to help increase business innovation, the Business Model Canvas offers some interesting and compelling properties.

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