Session 5: Business model canvas

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Business model

- Business model defined:

- A business model defines the rationale of how an organization creates, delivers
and captures values (Pigneur and Osterwalder, 2013).
- According to Teece (2010, p.20), business models reflect “management’s
hypothesis about what customers want, how they want it and what they will
pay, and how an enterprise can organize to best meet customer needs, and get
paid well for doing so”.
- Business model canvas
- A tool that allow people to describe and think through the business model or
the organisations, the competitors, or any other enterprises.
- A shared language for describing, visualizing, assessing, and changing business
models to create new strategic alternatives.
(Pigneur and Osterwalder, 2013)

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Business model canvas

• Business model canvas contains the objects, concepts and their relationships,
expressing the logic underlying the business.
• It includes nine building blocks: 1) customer segments, 2) value proposition, 3)
channels, 4) customer relationships, 5) revenue streams, 6) key resources, 7) key
activities, 8) key partnerships, and 9) cost structure
• Each block contains a set of questions to validate the model and corroborate its
internal strength.

(Trimi and Berbegal-Mirabent, 2012)

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 Business Model Canvas

(Pigneur and Osterwalder, 2013)

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The building blocks of a Business model canvas

There’re 9 building blocks of a business model canvas

- Customers segments
- Value propositions
- Channels
- Customer relationships
- Revenue streams
- Key activities
- Key partnerships
- Cost structure

(Pigneur and Osterwalder, 2013)

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1 Customer Segment (CS)

- Customer segment building block defines groups of people or organisations an

enterprise aims to research and serve.
- For whom are we creating value?
- Who are our most important customers?
- Different types of customer segments:
- Mass market
- Niche market
- Segmented
- Diversified
- Multi-sided platforms (or multi-sided markets)
(Pigneur and Osterwalder, 2013)

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2 Value Propositions (VP)
- What value do we deliver to the customers?
- Which one of customer problems are we helping to solve?
- What bundles of products and services are we offering to each customer segment?
- Which customer needs are we satisfying?
- Characteristics:
- Newness
- Performance
- Customization
- “Getting the job done”
- Design
- Brand/status
- Price
- Cost reduction
- Risk reduction
- Accessibility
- Convenience/usability
(Pigneur and Osterwalder, 2013)
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3 Customer Channels (CH)

- How a company communicates with and reaches its Customer Segments to deliver a
Value Proposition.
- Through which channels do our customer segments want to be reached?
- How are we reaching them now?
- How are our channels integrated?
- Which ones works best?
- Which ones are cost-efficient?
- How are we integrating them with customer routines?

(Pigneur and Osterwalder, 2013)

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4 Customer Relationships (CR)

- What types of relationship does each of our customer segment expect us to

establish and maintain with them?
- Which one have we established?
- How are they integrated with the rest of our business model?
- How costly are they?
- Examples:
- Personal assistance (call centres, emails etc)
- Dedicated personal assistance (private banking, home loan brokers etc)
- Self-service
- Automated services
- Communities
- Co-creation (e.g. YouTube)
(Pigneur and Osterwalder, 2013)

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5 Revenue Stream (R$)

- For what value are our customers really willing to pay?

- For what do they currently pay?
- How are they currently paying?
- How would they prefer to pay?
- How much does each revenue stream contribute to overall revenues?

(Pigneur and Osterwalder, 2013)

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6 Key Resources (KR)

- What key resources do our value propositions require? Our distribution channels?
Customer relationships? Revenue streams?
- Types of resources:
- Physical
- Intellectual (brand patents, copyrights, data)
- Human
- Financial
(Pigneur and Osterwalder, 2013)

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7 Key Activities (KA)

- What key activities do our value propositions require? Our distribution channels?
Customer relationships? Revenue streams?
- Categories:
- Production
- Problem solving
- Platform/network

(Pigneur and Osterwalder, 2013)

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8 Key Partnerships (KP)

- Who are our key partners?

- Who are our key suppliers?
- Which key resources are we acquiring from our partners?
- Which key activities do partners perform?

- Motivations for partnerships

- Optimization and economy
- Reduction of risk and uncertainty
- Acquisition of particular resources and activities
(Pigneur and Osterwalder, 2013)

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9 Cost Structure (C$)

- What are the most important costs inherent in our business model?
- Which key resources are most expensive?
- Which key activities are most expensive?

- Sample characteristics
- Fixed costs (salaries, rent, utilities)
- Variable costs
- Economy of scale
- Economy of scope
(Pigneur and Osterwalder, 2013)

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Business model canvas

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How business model canvas benefits entrepreneurs?

- It involves entrepreneurs undertaking an exercise of constant reflection, developing

the business model using a graphical tool where all the elements are related to each
other, providing cohesion to the overall business model.
- It allows entrepreneurs, customers, employees, executives, and even competitors to
understand how the business articulates its different components.
- It forces entrepreneurs to simultaneously consider each of the elements of the
business individually but also as a whole.
- The use of a graphical tool contributes to increase business creativity and
innovation.

(Trimi and Berbegal-Mirabent, 2012)

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