Business Model Canvas: 9 Building Blocks For Developing A Business Model

Companies - startups in particular, have to keep up with innovation and need to spend their time wisely. Business plans tend to take time, significant effort and resources to prepare. The Business Model Canvas is the lighter and more agile version of a business plan that can help businesses define what they are about. It is suitable for both new and existing businesses.

Business theorist Alexander Osterwalder and Yves Pigneur in 2004, introduced a technique known as the Business Model Canvas. A business model comprises 9 building blocks and shows how an organization creates and delivers value to its customers. It provides a blueprint for implementing a business strategy but usually does not include strategic details or approaches. It can also be used as a lens to examine the current state of any business. For example, you may be able to identify how much time and resources a company devotes to each of these building blocks.

As part of building your business model canvas, it’s important to ask the right questions. This article provides a checklist of questions to ask when developing your business model.

1. Customer Relationships

This building block defines who your target customer is and how they are acquired and retained.

Key Questions

1.     Who are our target customers?

2.     Which additional stakeholder groups do we generate value for? 

3.     How do we acquire these customers?

4.     How do we keep the customers we have?

5.     How do we increase the number of customers we have?

2. Customer Segments

Customer segments provide a means of grouping customers with common needs and attributes, so that their needs can be efficiently addressed. Segments can be defined based on:

  • Needs per segment

  • Profitability between segments – Customers may be grouped based on the amount of revenue they bring in

  • Formation of customer relationships – For example, Online Vs Walk-in customers

  • Device Type

  • Geographical location

  • Gender

  • Sex

Key Questions

  1. Have we segmented our customer base? 

  2. What are the key segments we should be looking at?

  3. What business relationship are we looking to form with each segment? 

3. Value Proposition

This represents what the customer is willing to pay for to fulfill a specific need.

Key Questions

  • What problem are we trying to help our customers solve?

  • What needs do our customers have?

  • What products and services should we offer to our customers per segment?

  • What value do we deliver to our customers that would make them come to us?

  • What value do we provide that distinguishes us from our competitors?

4. Distribution Channel

Distribution channels refer to how a business reaches its customers to deliver services or products to them.

Key Questions

  • How do we reach our customers and what are the alternatives?

  • Are these channels in line with what our customers need? 

    • How would customers like to be reached?

5. Key Resources

These are the assets needed to execute a business model. They may be physical, financial (line of credit) or human.

Key Questions

  • What resources are needed for us to deliver on our value proposition?

  • How can we best allocate resources in an efficient manner?

6. Key Activities

This is a combination of value-add (activities customers will pay for), non-value-add activities, and activities performed to meet regulatory needs, which the customer is usually not willing to pay for.

Key Questions

  • What activities do we need to undertake to deliver value to our customers?

  • What activities are we able to carry out with the resources we have?

  • What additional activities should we be carrying out and do we have the right resources in place?

7. Key Partnerships 

Partners are required for a business to be able to perform its activities. This type of relationship can evolve into a merger/acquisition. Partnerships are particularly useful in saving costs, reducing risk and helping businesses gain access to the capabilities/resources they lack internally. 

Key Questions

  • Who are our important partners and why are they important to us?

  • Who are our important suppliers and why are they important to us?

  • What activities are our partners good at?

  • What do our partners expect to get out of their engagement with us?

8. Cost Structure

It's important to understand where funds are being devoted, how costs can be reduced and the different types of costs affecting the business.

Key Questions

  • What are the key costs for us?

  • What are the financial risks we face and how do we mitigate these risks?

9. Revenue Streams 

These define the ways in which revenue comes into an enterprise in exchange for the realization of a value proposition. Examples include:

  • Licensing/subscription

  • Transaction/usage fees

  • Sales

  • Lending, renting or leasing

Key Questions

  • What are our sources of revenue?

  • What is the customer willing to pay us for?

  • What can we do to increase our revenue?

  • How do our customers pay and how do we want them to pay in the future?

  • How much does each stream of revenue contribute to our turnover?

Please share your experience with using the Business Model Canvas.