A complete guide to developing a business model canvas (BMC) with example (Part 1)

 

Are you an entrepreneur struggling to understand the business model that fits you?

 

This is the go-to tool for you. BMC is a tool developed by Alexandar Osterwalder and it will guide you to understand how to create, capture, and deliver value with your business to the consumer.

 

But first, you need to be clear on the value you create.

 

So before you jump into the BMC, it is important to understand your value proposition. It is getting complicated now? Not really, there is a tool for this too. The value proposition canvas (VPC).

 

Let's start.

 

What is VPC?

 

 

 

 

Look at the chart, there are two sides to the VPC. Let’s look at the client profile. This side of the VPC discusses your consumer. It is broken down into 3 main parts: pains, gains, and customer jobs. Pains are the problems or unpleasant situations customer experience. Customer job is the solution you offer. Gains are the desired outcomes that are more than expected.

 

Shall we look at an example?

 

Imagine you are developing an app to find plumbers.

Customer jobs - Find an available plumber

Pains - Difficulty to contact a plumber, Not finding a plumber on time, varying cost

Gains - easy portal to contact the plumber, safety, affordable and fixed price for the job

 

Now you are clear on your customer side of the VPC. Your next task is to define the offering more. The left side of the VPC describes how you will reduce the pain points and create value to match customer expectations. Let's look at the example,

 

Products and services - Easy to-navigate app to find plumbers

Pain relievers - in-built message service to contact plumbers, a mechanism to show plumber availability, and a large pool of plumber community registered with the app

Gain creators - Fixed price charts visible for everyone, safety as the plumbers are registered with the app, no risk of not showing up

 

Below chart shows the identified value proposition in the chart.

 

 

 

 

 

Now you are clear about your offering and how it will create value for your customer. You can now move on to the BMC.

 

BMC has nine building blocks that elaborate the way your business creates, captures, and delivers value. Below is the template developed by Alexander Osterwalder.

 

 

Golden rule: always develop VPC first, it is the foundation for BMC.

 

At this stage, it is better if you can brainstorm and understand and analyse each building block. Re-look at it a few times, you need to fine-tune the model many times to conclude the model. 

 

I will briefly explain the nine building blocks for you. 

 

1. Customer segments - now that you are clear on your offering, you need to describe your customer. This is the place you understand your target market. You can use STP, persona, and any tool you wish in this regard.

2. Value proposition - this is the place you describe how will your business create value for the customer segment.

3. Channels - channels are the ways to reach your customer. Else you can describe the ways you would acquire, retain and grow customers for the offering.

4. Customer relationship - you can explain the nature of the relationship you could maintain with your customer. This could be an automated or direct relationship.

5. Revenue streams - this building block will explain the revenue streams for the company. This is important in deciding the feasibility of your model.

6. Key resources - these are the basic assets needed for the model.

7. Key activities - describes the most important things for the company.

8. Key partners - what other relationships do you need for the success of the business model.

9. Cost structure - calculates the cost elements related to operations of the business model.

 

Now you know the role of each building block. Let’s develop the BMC for our mock company in my next article.

 

Read further: 

Osterwalder, A. (2010) Business model generation: a handbook for visionaries, game changers, and challengers. New Jersey:John Wiley and sons.

Osterwalder, A., Pigneur, Y., Bernarda, G. and Smith, A. (2015) Value proposition design: How to create products and services customers want. New Jersey:John Wiley and sons.