Monday, April 15, 2013

Business Model Canvas

Entrepreneurs starting a new venture need to answer a basic question: what is your business model, how will you earn money? Answering this question requires a framework for describing a business. A good recent definition of a business model is a description of “how an organization creates, delivers and captures value” (Osterwalder & Pigneur). An organization can be a single entity or a collection of entities working together to deliver a product or service that creates value for a customer.

The Business Model Canvas is a convenient visual framework for talking about a business model. It is a poster format chart that enables 9 elements of a business model to be captured and discussed by a group of people working together. The nine elements are visualised in the cartoon at the right. They are:

-> Customer segments: for whom do we aim to create value? Who are our most important customers?

-> Value Propositions: what do we offer to whom? What value do we deliver to a customer in a given segment? What needs do we satisfy?

-> Channels: how do we reach each customer segment? What is easiest for the customer?

-> Customer Relationships: how do we build and maintain these? How do they fit effectively in both the customer’s world and our own?

-> Revenue Streams: for what will our customers pay? How much? How would they prefer to pay?

-> Key Resources: what resources are essential to deliver our Value Propositions through the Channels and maintain our Customer Relationships?

-> Key Activities: what are the most important things you must do to make your business work?

-> Key Partnerships: who are our Key Partners and why? What Key Resources do they provide and what

-> KeyActivities do they carry out? What’s in it for them? What relationship should we have?

-> Cost Structure: what costs are implied by our Business Model? Which are largest? What is fixed and what is variable? What drives them?

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