What is a Business Model Canvas?
A Business Model Canvas is a way to visualize all the building blocks of a business model. By using a shared language and visual organization, the Canvas helps everyone involved better understand how a business creates value.
A Business Model defines the key aspects of your business, including your Value Proposition Canvas, how you create and deliver that value, and the resulting costs and benefits. Your Business Model is likely going to contextualize many of your customer relationships. In essence, it is the Who, What, How, and Why of your business.
When you design a Business Model, it is useful to lay out the assumptions or hypotheses that animate your business in a structured way. A Business Model Canvas helps you to do just that. The canvas helps you to easily understand your current Business Model, design a new one, see if you have missed anything important, and compare your model to others.
By using a Business Model Canvas, you can think critically about a company’s performance and evaluate its successes and failures. You can identify opportunities for growth, and you can recognize where to pivot.
The Business Model Canvas, originally developed by Alexander Osterwalder is the most commonly used tool for developing business models. It draws on Michael Porter’s Value Chain maps and Peter Drucker’s theories of the firm.
Business Model Canvas Building Block
Before we explore how The UNITE eXtended Business Model Canvas expands and integrates previous models, let’s consider all of the Core Business Model Canvas’s sections.
An Operating Model is both an abstract and a visual representation of how an organization delivers value to its customers or beneficiaries. It focuses on how an organization actually runs itself. The concept of an Operating Model Canvas was originally developed by Andrew Campbell and his colleagues. We have developed an iteration of it that will consider additional aspects geared towards innovation.
The Value Model is first of all defined by the Value Proposition(s) you offer.
So what is a value proposition? A Value Proposition is a direct description of what you will provide to your customer, your value proposition must meet a need by completing customer jobs in order to create a gain.
It is a detailed look at the relationship between two parts of Osterwalder’s broader Business Model Canvas, customer segments, and value propositions, While these pieces interact in complex ways, a value proposition is really a simple statement centered around customer jobs and your product or service.
The Value Model also covers the supporting Product System, in other words, the complementary products and services which you offer in support of your core product. Think about accessories, related services and guarantees, and whatever allows you to up and cross-sell.
The Service Model defines the differentiating, core, and supporting services delivered by an organization.
Include your service strategy, your core competencies, and differentiating services. Also consider Service-Level Agreements, service channels, and possible self-service.
The Experience Model defines the ways in which your customers experience your Value and Service Models. The Experience Model covers your brand, customer relationships, customer engagement, and marketing.
Your operations drive your efforts and thus costs. Once you understand your Key Activities, Key Resources, and Key Partners, it should be relatively easy to identify the key cost drivers and potential Opportunity Spaces for innovation. This is the section of the Canvas for considering variable costs, fixed costs, and potential opportunities to lower costs.
The Revenue Model Outlines how you earn money and document your revenue streams. In the context of the Revenue Model, think also about any other benefits you may be getting. Don’t simply remain focused on cash flow. Not all value is monetary!
Why use the Business Model Template?
The tool we’ve designed for this purpose is an iterated canvas based on the original Business Model Canvas created by Alexander Osterwalder and popularized by the Lean Startup movement. The Business Model Canvas has become the preferred tool for both start-ups and corporations since it allows a team to easily understand, discuss, and evaluate a Business Model.
Not only is the visual depiction of a business’s concerns helpful, but the Business Model Canvas Template also ensures that all parties involved are using a shared language.
Additionally, with a completed template in hand, it’s easier to rapidly design or redesign a new one when new directions are required.
The Business Model Template is preferred because it condenses years of business school knowledge and management consulting practice into a single page (with some straightforward questions to help you fill in each section).
There are several strengths to the Business Model Template that you’ll find to make it helpful.
As anyone in the business world knows, much of what makes a company successful is complicated. It can be difficult to get to grips with all its moving parts at once.
Placing the important elements into the Business Model Canvas helps to clarify how all the pieces work together or don’t.
The creation of the Business Model Canvas allows a business to evaluate its progress quickly and at little cost. Because evaluation and re-evaluation are so important when a business is working through innovation, being able to complete these reflections quickly is vital.
Short and Succinct
The templates deliberately limit the space available for response. That forces businesses to be direct and clear in their reflections, keeping difficult concepts easier to understand and act upon.
Easy to Circulate
A completed Business Model Template is the perfect file to share with stakeholders everywhere.
Shared electronically, you can place it in a format that you can confidently assume everyone can open. Printed physically, the BMC fits comfortably on standard paper sizes or works nicely blown-up poster-sized. While a typical business plan might extend for many pages, a Canvas is compact and able to be reviewed quickly.
The language and concepts used in the Canvas will make sense to everyone at all levels of any organization.
The UNITE eXtended Business Model Canvas
The UNITE core Business Model Canvas describes how an organization creates, delivers, and captures value. However, it’s valuable to understand a Business Model using a wider view.
The UNITE eXtended Business Model Canvas contextualizes an organization’s Business Model by outlining its underlying drivers, the customers and their needs, and the team and their structures, values, and culture.
Additionally, the eXtended Business Model Canvas helps you understand and articulate your Unfair Advantage, which is admittedly not part of a Business Model but is useful to help you enhance your competitive advantage. This approach is in not like different business models which fail to offer a truly comprehensive, contextualized view of all your concerns and key activities.
How Does the eXtended Business Model Template Work?
Like other Business Model Canvases, the eXtended Business Model Canvas template is a visual representation of a complete business. By completing each of the template’s pieces, you’ll gain a better understanding of the total Business Model.
Key elements that set the eXtended Business Model Canvas apart from the others are the Drivers, the Team, and the Unfair Advantage.
Let’s go through the additional building blocks the eXtended Business Model Template Covers:
The drivers help you explore your deep “why” when you are creating a new Business Model.
- Business Intention and Objectives: What is it that you ultimately want to achieve? This is where we advise you to start since this helps you link your Business Model to the overarching purpose and intention of your innovation. Consider your key activity, corporate strategy, and other building blocks of your mission.
- Massive Transformative Purpose: Rapidly growing organizations, successful social movements, and breakthroughs in science and technology have something in common: they are often byproducts of a deeply unifying purpose. There is a name for this type of motivation: it is called a Massive Transformative Purpose or MTP. A Massive Transformative Purpose shifts focus and are a key enabler of exponential growth.
Most innovations and businesses struggle to grow. The key to driving growth is to improve Solution/Market Fit (and not just increase the marketing budget!). To improve Solution/Market Fit, organizations need to better understand their customers. Don’t assume you know what your customers need. Go out and ask them.
- Jobs-to-be-Done: What are the key functional and emotional jobs of your customers?
- Customer Segments: For whom are you creating value? For which segments and representative (data-driven) Personas? Who is your most important customer?
Who and what will be helping you innovate and develop?
- People and Structure: The biggest difference between success and failure is having the right combination of people. A team constantly evolves. It requires a forward-looking perspective. The structure of an organization needs to be adaptable to change inside and outside the organization.
- Values and Culture: The values and your Organizational Culture are the single most important factors for long-term sustainability. They are the keys to supporting both uniqueness and differentiation in any Business Model.
The Unfair Advantage
An Unfair Advantage is not an actual part of a Business Model, but it will ideally be an output of its unique features and configuration. This section of the business model canvas is an open invitation to think about the things in your business that cannot be easily copied or bought. Particularly think about which differentiating assets and capabilities you already have or can bring to the table, especially when your competitors are unable to match your abilities.
Connecting The Dots: The UNITE Business Model Framework
“How to Create Innovation” includes a number of canvases that focus on value creation and finding the right business model to meet your customer segment and customer needs. The framework is built to inspire drastic changes that help you find a competitive advantage. Our hope is that your company grows through business model innovation, and so we again encourage you to look deeper into our website and the book.
Here is a summary of the key ingredients of the framework:
The centerpiece is the Business Model Canvas, which covers the six main areas of a Business Model (the Operating, Value, Service, Experience, Cost, and Revenue Models).
The eXtended Business Model Canvas adds the immediate business context, including Business Drivers, customers, and the team, as well as the Unfair Advantage.
A Business Model can be broken out into its numerous aspects. Depending on what challenges you face, you can zoom in on your area of interest using an appropriate tool or canvas:
- Your Business Intention and objectives as well as your Massive Transformative Purpose summarize your drivers and give direction to what you do.
- The Value Proposition Canvas details the central components of your offering (the product or service).
- To dig into your Customer Segments, work with data-driven Personas.
- The JTBD Customer Job Statement and Job Map frame the JTBD of your customers.
- The Business Model Environment puts your Business Model in a market context composed of emerging trends and disruptive forces.
- The Innovation Culture Canvas helps you understand and consciously shape a culture that supports innovation.
- The Innovation team structure enables you to draft a team structure for your innovation initiative.
- Using learning and growth metrics, you can measure progress at the initial stages of development. These metrics help you focus on what really matters instead of creating a detailed business plan that will not really help you. Later on, you can expand the financial aspect of the Revenue and Cost Models with a full business case.
- The Operating Model Canvas helps you think through the Operating Model.
- The UNITE Value Proposition Canvas: The Beating Heart of the Business Model
- The UNITE Operating Model Canvas: Bridging the Strategy-Execution Gap
- The Three Horizons of Growth: A Roadmap to Successful Innovation Strategy
- The UNITE Business Model Environment Canvas
- The UNITE Culture Canvas – Identifying Organizational Culture Critical Elements
- Business Capability Map: A Practical Business Approach
- Jobs to be Done Framework, Examples, and Statements (JTBD)
- Identifying Hidden Market Opportunities for Innovation through JTBD