The Business Model Canvas

Developing a Creative Business Model Canvas

The Business Model Canvas

The Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models.  It is a visual chart with elements describing a firm’s or product’s value proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential trade-offs.

The Business Model Canvas was initially proposed by Alexander Osterwalder based on his earlier work on Business Model Ontology. Since the release of Osterwalder’s work in 2008, new canvases for specific niches have appeared, such as the Lean Canvas.

Description of the Canvas

Formal descriptions of the business become the building blocks for its activities. Many different business conceptualisations exist; Osterwalder’s work and thesis (2010, 2004) propose a single reference model based on the similarities of a wide range of business model conceptualisations. With his business model design template, an enterprise can easily describe their business model.

  • Infrastructure
    • Key Activities: The most important activities in executing a company’s value proposition. An example for Bic, the pen manufacturer, would be creating an efficient supply chain to drive down costs.
    • Key Resources: The resources that are necessary to create value for the customer. They are considered an asset to a company, which are needed in order to sustain and support the business. These resources could be human, financial, physical and intellectual.
    • Partner Network: In order to optimize operations and reduce risks of a business model, organization usually cultivate buyer-supplier relationships so they can focus on their core activity. Complementary business alliances also can be considered through joint ventures, strategic alliances between competitors or non-competitors.
  • Offering
    • Value Propositions: The collection of products and services a business offers to meet the needs of its customers. According to Osterwalder, (2004), a company’s value proposition is what distinguishes itself from its competitors. The value proposition provides value through various elements such as newness, performance, customization, “getting the job done”, design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability.
      • The value propositions may be:
        • Quantitative – price and efficiency
        • Qualitative – overall customer experience and outcome
  • Customers
    • Customer Segments: To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients. The different types of customer segments include:
      • Mass Market: There is no specific segmentation for a company that follows the Mass Market element as the organization displays a wide view of potential clients. e.g. Car
      • Niche Market: Customer segmentation based on specialized needs and characteristics of its clients. e.g. Rolex
      • Segmented: A company applies additional segmentation within existing customer segment. In the segmented situation, the business may further distinguish its clients based on gender, age, and/or income.
      • Diversify: A business serves multiple customer segments with different needs and characteristics.
      • Multi-Sided Platform / Market: For a smooth day-to-day business operation, some companies will serve mutually dependent customer segment. A credit card company will provide services to credit card holders while simultaneously assisting merchants who accept those credit cards.
    • Channels: A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost effective. An organization can reach its clients either through its own channels (store front), partner channels (major distributors), or a combination of both.
    • Customer Relationships: To ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments. Various forms of customer relationships include:
      • Personal Assistance: Assistance in a form of employee-customer interaction. Such assistance is performed either during sales, after sales, and/or both.
      • Dedicated Personal Assistance: The most intimate and hands on personal assistance where a sales representative is assigned to handle all the needs and questions of a special set of clients.
      • Self Service: The type of relationship that translates from the indirect interaction between the company and the clients. Here, an organization provides the tools needed for the customers to serve themselves easily and effectively.
      • Automated Services: A system similar to self-service but more personalized as it has the ability to identify individual customers and his/her preferences. An example of this would be Amazon.com making book suggestion based on the characteristics of the previous book purchased.
      • Communities: Creating a community allows for a direct interaction among different clients and the company. The community platform produces a scenario where knowledge can be shared and problems are solved between different clients.
      • Co-creation: A personal relationship is created through the customer’s direct input in the final outcome of the company’s products/services.
  • Finances
    • Cost Structure: This describes the most important monetary consequences while operating under different business models. A company’s DOC.
      • Classes of Business Structures:
        • Cost-Driven – This business model focuses on minimizing all costs and having no frills. e.g. Low cost airlines
        • Value-Driven – Less concerned with cost, this business model focuses on creating value for their products and services. e.g. Louis Vuitton, Rolex
      • Characteristics of Cost Structures:
        • Fixed Costs – Costs are unchanged across different applications. e.g. salary, rent
        • Variable Costs – These costs vary depending on the amount of production of goods or services. e.g. music festivals
        • Economies of Scale – Costs go down as the amount of good are ordered or produced.
        • Economies of Scope – Costs go down due to incorporating other businesses which have a direct relation to the original product.
    • Revenue Streams: The way a company makes income from each customer segment. Several ways to generate a revenue stream:
      • Asset Sale – (the most common type) Selling ownership rights to a physical good. e.g. retail corporations
      • Usage Fee – Money generated from the use of a particular service e.g. UPS
      • Subscription Fees – Revenue generated by selling a continuous service. e.g. Netflix
      • Lending/Leasing/Renting – Giving exclusive right to an asset for a particular period of time. e.g. Leasing a Car
      • Licensing – Revenue generated from charging for the use of a protected intellectual property.
      • Brokerage Fees – Revenue generated from an intermediate service between 2 parties. e.g. Broker selling a house for commission
      • Advertising – Revenue generated from charging fees for product advertising.
  • Resources: the main inputs that your company uses to create its value proposition, service its customer segment and deliver the product to the customer.

We will come back and look at all these sections in more detail later. In the meantime thanks to all at Wikipedia for the note on the Business Model Canvas.

 

Ian Oliver

Head of Creative Entrepreneurship at the Centre for Creative Practices
Ian@cfcp.ie

Creative Business Model Canvas

Find out more about the canvases and how to use them in your creative business

Developing a Creative Business Model Canvas

The core issue at stake is to identify and design adequate tools enabling students and graduates of creative disciplines to successfully develop their business ideas.   

One of the critical tools missing at present in creative education is a business planning model that reflects the specifics of the creative sector.

For far too long education in creative disciplines has focused solely on artistic and academic excellence, and has not offered tools, knowledge and recourses helping their students to build careers as creative entrepreneurs.

At the same time business planning has focused on the writing of formal business plans and not on developing models that allowed for easy testing and developing of business ideas.

This all changed with the development of the business model canvas and the lean model canvas.  These models allow businesses to quickly test and develop ideas in a lean manner before taking them to market.

We have identified a huge potential in applying the lean methodology and the business model canvas to support business planning by creative entrepreneurs.

However, the focus of creative businesses is not only on the business side but also on their cultural, aesthetical or social impact, areas that we felt should also be suitably addressed in the business model planning.

Yet, the currently available canvases do not include these aspects and thus we are working to adapt the existing models to the specific needs of creative sector.

Our adapted Creative Entrepreneurs Business Model Canvas is based on the business model canvas developed by Alex Osterwalder and the Lean Business Canvas developed by Ash Maurya.

 

Your Business Model Canvas


The business model canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent and pivot your business model.

Your Value Proposition


The Value Proposition Canvas makes explicit how you are creating value for your customers. It helps you to design products and services your customers want.

References:

  • Osterwalder, Alexander, and Yves Pigneur. Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons, 2010.
  • Maurya, Ash. Running lean: iterate from plan A to a plan that works. " O'Reilly Media, Inc.", 2012.

Creative Business Model Canvas

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How can I use the Business Model Canvas?

Why Do We Need To Develop a Creative Business Model Canvas? When Alex Osterwalder and Yves Pigneur wrote Business Model Generation in 2009 they couldn't have imagined all the different applications users would come up with for their Business Model Canvas. In this post...

CFCP Creative Entrepreneurs Academy

What people say about the CFCP Creative Entrepreneurs Academy

Creative Entrepreneurs Intensive Training Programme

12 - 14 May 2017

Cork, Ireland
Early Bird Price €200 till 2 May then €300

You know that feeling? You want to develop your creative or artistic practice and give it some structure. But there is never enough time or resources to focus on the business side of your practice. On the other hand it drives you mad that it doesn’t work as it could and should. You are not making enough sales, not getting enough contracts or you simply do not know how to start to build a sustainable creative career.

We have been there ourselves and know exactly how frustrating it can be. All we can recommend to you is to STOP, take 2.5 days out and join us for our intensive Creative Entrepreneurs Training Programme.

You will spend this time working on the business side of your creative practice. Together with you we will (re)define where you are right now with your creative business and where you want to be. You will formulate goals and steps to take with the primary focus on your specific creative niche.

Online Courses For Creative Entrepreneurs

Building a Strategy For Your Creative Business

April 2017
€250
Online

The courses focuses on starting, growing and sustaining your creative business – planning the strategy for development, growth and the necessary steps you can take to build a sustainable career.  This all takes place in an inspiring, creative and relaxed online environment!

We will spend really exciting time together online between the 1 and 30 April 2017 working on our Creative Business Model Canvas – the visual alternative to the boring business plan which we have developed and based on the business model canvas developed by Alex Osterwalder and the Lean Business Canvas developed by Ash Maurya.

We will answer the 4 questions that every creative business needs to answer: Why – What – How – Who; We will look at your vision for the future and the value propositions that you are basing your creative business around but critically we will ask, who are you? why you do what you do, your motivation and much more…

The delivery will be online but what's different is that we will be there to work in partnership with all of the participants.  We will create outcomes together that we are both responsible for and we will be on-hand to help you via group and one-to-one online meetings, email support, webinars and mentoring. We will run the course over the 4 weeks with a group workshop once per week for 2 hours, a 1 hour group Hangout once per week for any group questions / feedback you might have and a 1 hour one-to-one online session with us each week.  So all in all you will get a minimum of 4 hours working with us per week plus a lot of videos, workbooks and assignments to complete each week that will really move your creative business forward.

The course works just was well for individuals as well as companies, however, because of the nature of the course we can only take 5 people at a time on the journey with us at this stage.  The price of the course will be €250 per person so if more than one person from your organisation would like to take part then you can.

We will also close the registration of interest on Friday, 24 March 2017 at 11.59pm GMT.