Business Model Canvas Explained

A business model is important for the long term success of any business.

There are a lot of business modelling tools out there.

We will talk of one such important tool i.e Business Model Canvas by Alexander Osterwalder of strategyzer.

It is a simple but effective tool to craft your business model.

So let’s dive into the components of Business Model Canvas which will help create your business model.

Business model Canvas has 9 segments.

  1. Value Proposition
  2. Channels
  3. Customer Segments
  4. Customer Relationships
  5. Revenue Streams
  6. Key Activities
  7. Key Resources
  8. Key Partners
  9. Cost Structure

Value Proposition

Here you describe the value u offer to the customers. In simple words what are the product/services that a business offer?

For example, Consider an e-commerce website that sells computer hardware here the product/services offered are computer chipsets, RAM, graphic cards, computer cases, computer cooling systems, accessories. etc.

Channels

Channels are the stream through which the customers will interact with the business and finally makes a purchase.

For example, for an e-commerce business that sells computer hardware the channel would be website through which the customers will interact and buy the product.

Customer Segment

Customer Segment is the classification of people who will buy product/services offered by a business.

For example, for an e-commerce site that sells computer hardware the customer segments generally will be computer shops, IT hardware repair team, individual who want to upgrade their current computer or build their computer. Etc.

Customer Relationships

Customer relationships are the reason why a customer will buy the product/services that are offered by a business.

For example, The reason why a person will but from a particular e-commerce site that sells computer hardware would be because of the excellent customer service, discounts, hassle-free returns, quick delivery or high-quality product. Etc.

Revenue Stream

The revenue stream is how a business makes money by your product/services.

For example, an e-commerce business selling computer hardware makes money by selling computer hardware with a profit margin. 

Key activities

These are the main activities that a business has to perform to run the business and meet the everyday needs of a business.

For example, Key activities of a business that sells computer hardware will be.

● Manage and buy inventory

● Manage the website 

● Update the products on the website

● Logistics

● Marketing

● Keep track of sales

● Analyse sales data

● Etc…

Key Resources

Key resources are the essential resources that are required to run the business and it also makes a business uniques form another.

For example, key resources for an e-commerce business that sells computer hardware would be

● Inventory

● Website 

● Employees

● Funds

● Etc…

Key Partners

Key partners are the partnership that a business has with other entities such as vendors, logistic partners, regulatory bodies, capital provider etc.

For example, a business that sells computer hardware online will have the following key partners

● Vendors/wholesalers 

● Logistic providers

● Etc…

Cost Structure

The cost structure is the expenses that a company has to incur to run the business.

For example, A business that sells computer hardware online the cost structure would be

● Domain costs

● Logistics costs

● Internet cost

● Inventory cost

● Storage of inventory (if rented a warehouse)

These are the components of the Business Model Canvas made by Alexander Osterwalder of strategyzer. with an example.

You can download the Business Model Canvas from the official Strategyzer site here and use this canvas to create a business model for your own business.

And always remember Business Model is a dynamic document so make changes to it as you learn and grow.

Wish you all the luck…

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