Download this free template to unlock innovative business models
The business model canvas has become an important part of my toolbox since I discovered it in Alexander Osterwalder and Yves Pigneur’s excellent book, Business Model Generation. It’s the simplest tool I’ve found to explain the complex interplay between a business, its suppliers, and its customers. The canvas condenses a business model to a single-page diagram that anyone can understand.
Business model components
The business model canvas identifies 9 essential elements that together make a business work. The right-hand side of the canvas is about creating value for customers. The left-hand side is more efficiency-focused and describes the resources, activities, and partnerships used to deliver a product or service to the customers.
- Customer Segments. The different markets or customers the business aims to serve.
- Value Proposition. Product and service bundles that solve customer problems or fulfil their needs. Attributes like novelty, performance, customization, design, status, utility, convenience, cost reduction and risk reduction all factor into the Value Proposition.
- Channels. The methods the business uses to communicate with Customer Segments and deliver the Value Proposition.
- Customer Relationships. The type of relationships the business establishes with different Customer Segments. Is it a self-service model or are high levels of personal assistance needed? Does the business cultivate customer communities around the products? Do customers co-create content with the business?
- Revenue Streams. Customer Segments must generate revenue for the business to survive, though one segment may subsidise others. Revenue generation options include the sale of goods, subscription fees, leasing, licensing, advertising fees, and brokerage fees.
- Key Resources. The physical, intellectual, human and financial assets that make the business possible.
- Key Activities. The essential activities that make the business model work. These are typically related to production, problem-solving and developing a platform or network.
- Key Partnerships. The essential suppliers and partners that help the business deliver the Value Proposition.
- Cost Structure. The costs incurred in operating the business.
Seeing the canvas in action is the easiest way to understand it. Let’s look at a couple of familiar examples. These were created with my OmniGraffle template that you can download at the end of this post.
Nespresso delivers a consistent, convenient espresso experience at home or in the office. The Nespresso model is a modern adaption of the Gillette razor model. A small percentage of revenue comes from the sale of coffee machines and accessories. Repeat purchases of coffee capsules contribute the bulk of the revenue. A staggering 1700 patents protect the Nespresso system. The Nestlé Group outsources coffee machine production to partners like De’Longhi and Krups.
Even massive businesses like Amazon can be distilled into the nine essential components. Amazon offers the convenience of a huge range of products to a global mass market. Economies of scale and automation enable Amazon to keep prices competitive. Buyers co-create content by reviewing their purchases, helping other shoppers to make informed buying choices. Product sales generate revenue and an affiliate program helps to drive more traffic to Amazon’s website. Amazon Prime contributes recurring revenue and encourages repeat purchasing.
What can I use the business model canvas for?
The simplicity of the business model canvas belies its power. It lets you describe how a business works without writing a lengthy and difficult-to-understand document. The canvas also makes it easy to experiment with different options and explore their implications for an existing business. Armed with a blank canvas projected onto the wall and a stack of post-it notes, a small team can explore innovative business model alternatives for hours on end.
I’ve recently used the canvas to document the current business model for an organization. We’re building some new services which will change the way the business works. The canvas has helped to explore a range of different scenarios.
Business Model Generation lists some common patterns and these are a good starting point for experimentation when you’re new to the tool. Your models contain enough detail to validate your ideas with potential customers. This reduces the risk of costly organizational changes which don’t deliver the outcomes customers want.
Get started with my free business model canvas OmniGraffle template
I found a couple of existing OmniGraffle templates but they were fairly basic. This more sophisticated template has worked well in my current project. Layers let you add text directly on the canvas, or on sticky notes so you can move ideas around. Help text and notes layers can be turned on or off as required. Try it out and let me know what you think.
|OmniGraffle template||PDF template|
To install the OmniGraffle template
Once you’ve downloaded the template file:
- Open your Downloads folder in Finder.
- Double-click business_model_canvas_A4.gtemplate.zip to extract the archive.
- Double-click the stencil file.
- Click Move. This makes the stencil available through the Resource Browser in OmniGraffle.
- To create a new business model, select the business model canvas template from the Miscellaneous folder in the templates section of the Resource Browser (File, Resource Browser).
Find out more
The business model canvas is one of the best I’ve found for documenting and explaining business models. Strategyzer.com has more information if you’d like to find out more. I recommend getting the Business Model Generation book if this tool looks useful. It’s a beautifully designed and illustrated book packed with examples to lead you through the process. Strategyzer.com also have companion iPad and web apps.