What Should Everyone Know About the Business Model Canvas
By Balaji Viswanathan, Product Manager at a VC Funded Startup.
Original Link Here
Traditionally, when entrepreneurs think of a business, the first thing they think of is the business plan. A business plan details the business models and key things a business does. However, the problem now is that things are so rapidly moving that by the time you finish your business plan, the market reality might have already changed. Moreover, for many people business plan creation is such an intimidating task that they use this as an excuse to procrastinate the starting of their business.
Business model Canvas is a way to think about the business in a visual and intuitive way. In just 1 page, you can get your entire business represented. It is a cool way to think about the business. Look at this video:
The idea is to get all the key elements of your business in a single page. The Canvas consists of 9 key elements:
1.Problem (customer painpoints)
2.Solution (your magic sauce)
3.Key Activities (what you guys do to give the customer the value)
4.Unique Value Proposition (what the customer actually gets)
5. Competitive Advantage (secret sauce to protect yourselves from competition)
6. Channels (how do you reach the customers)
7. Customer Segments (who are your customers)
8. Cost structure (what are your costs and how much you need to charge)
9. Revenue Streams (in what ways you make money)
I am using a slightly modified version of the Business model canvas used by lean startup guys.
The canvas is designed in a way that the left half of the canvas is about your product and which is mostly under your control, and the right half of the canvas is about the market – many of which not under your control.
What used to fill an entire 40 page business plan report could be condensed in a single page and used as a living document. Now, the whole team can see what your business is and where you are going. Periodically you want to revisit them to do course corrections.
What are the advantages of using a business model canvas?
It forces you to think of your business in a more scientific and formal way.
It reduces your business model into a set of assumptions that you can then test to either validated or reject.
The overall design and layout forces you to think about the various key aspects of the business. When you see one part of the canvas empty, you know where you need to put more effort.
It is visual and intuitive. This makes it easier to communicate the ideas.
It is easy to create and maintain. This makes the business models very agile that can be constantly adapted to be in sync with the business realities.