Business Model Canvas Explained: Definition and Components

A Business Model Canvas (BMC) is a single-page template used to outline the goals and objectives of a business. As a strategic management tool, a BMC can help business owners and other stakeholders develop new business models or evaluate existing models.

The Business Model Canvas was co-created by Alexander Osterwalder and Yves Pigneur in 2005. At the time, it was revolutionary, offering a simplified, visual alternative to the traditional business plan. The BMC led to the creation of other canvases, such as the Lean Canvas Model, used specifically to validate a business idea, and the Value Proposition Canvas, which helps identify if a product or service meets customers’ needs.

The Business Model Canvas consists of nine building blocks, each represented by a rectangle.

1. 1. Key partners: A business’s key partnerships include stakeholders, joint ventures, and strategic alliances that will help the business carry out its objectives. This is also the place to consider suppliers.
2. 2. Key activities: The key activities of a business are all of the tasks and responsibilities that need to be done in order to make the business model work, including its revenue streams. This might include production tasks, marketing or networking activities, and problem-solving.
3. 3. Key resources: Your key resources are the primary assets you will need to complete your key activities. This could include employees, finances, equipment, or intellectual property.
4. 4. Value proposition: The value proposition of a business is the unique offering or solution that a business offers its customers. A value proposition might be a new product or service customers can’t get anywhere else, or an improved version of an existing product or service.
5. 5. Customer relationships: This building block involves defining the customer’s relationship to the business and examining the customer experience. Some businesses require personal assistance, while others are self-service.
6. 6. Customer segments: This involves defining the customer base, or the types of people (or businesses) the company will target. The more specific the target customer demographics, the easier it is to understand the customer journey and meet customer needs. It is possible to have multiple customer types, and it’s important to list them and rank them by importance.
7. 7. Channels: Channels are how businesses communicate with and market to their customers. This includes distribution channels for getting goods or services to a customer. Channels can be owned by the business, such as a company website or storefront, or may be owned by partners or third parties, such as retailers or partners who stock the business’s product and even word-of-mouth marketing.
8. 8. Cost structure: The cost structure defines all the costs the business will incur during operation, including variable costs and fixed costs. Consider the costs of starting a new business along with the daily costs of maintaining an existing business.
9. 9. Revenue streams: A company’s revenue streams are the ways that the business makes money. This could be through single transactions, like selling assets, or through recurring sales, such as monthly subscription fees.

The best part about the Business Model Canvas is that it is very simple to complete on your own. You can find Business Model Canvas templates online that you can print out to then fill out, or you can make your own by drawing nine boxes for each of the nine components on a piece of paper, some sticky notes on a wall, or on a whiteboard.

Generally the left side of the page will have information on the business itself, including key partners, key activities, key resources, and cost structure. The value proposition will be in the middle, and the right side will have the customer and market information, including customer relationships, customer segments, distribution channels, and revenue streams. Discuss and brainstorm as a team to fill these sections out in their entirety, and try to be as specific as possible.

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