Knowing when to use the business model canvas enables you to use it optimally in the right place, resulting in the desired results. This article will guide you towards achieving your aim.
When to use the business model canvas? The Business model canvas is used to visually describe the business model for the accuracy and clarity of the visual description than the actual description in words.
The visual description of the business model defines concepts more accurately and conveys information more easily and quickly than describing it using words. According to the famous saying,” A picture expresses a thousand words.” This article will show you how to use the business model canvas. Moreover, the importance of using it in description and explanation. Let’s Begin
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When to use the business model canvas
The business model canvas is used to describe and illustrate the business model. In other words, the business model canvas is used to demonstrate how companies work and how they make profits.
The essential characteristic of the business model canvas is describing the business model from other methods using the visual description.
Companies use the business model canvas to review and discuss the way they work continuously and repeatedly in several places, including:
1- During startups
2- During investors negotiations
3 – During companies development
These tasks will be explained in detail in the following paragraphs. But first, let’s see the importance of using the business model canvas in the description of the business model.
The importance of using the business model canvas
The importance of the business model canvas appears when you view issues that existed before the canvas appeared. This is better expressed in the below paragraphs to show the most important of these issues.
In the 1990s, the term ‘business model’ became a common term in business.
Usually, when a company works in a team to improve the business, create new products, describe its goals during investor’s meetings, etc., they discuss their business model.
In fact, at that time, there was no standard framework for the business model, and much confusion and ambiguity were surrounding the term. In this case, there might be a lack of clarity among all parties.
This misunderstanding occurs when people talk, but they do not understand each other. Not because they are not smart, but because they do not speak the same language. They spend effort, time, and money. Yet, the session might not produce the desired result.
Finally, if you do not clearly describe your business model, you will lose a lot of effort, time, and money on irrelevant discussions.
In 2010, when Alexander Osterwalder published his book “Business Model Generation “, he provided a visual tool called the business model canvas, which was sorely needed. This tool consists of 9 blocks used to describe the business model. The tool provides a standard framework for a business model that can be used during discussions.
We suggest attending the Free Training course How to Build a Startup for more details on this subject and related topics.
What are the components of the business model canvas?
The business model canvas consists of 9 blocks, as shown in the image below. These blocks are used to describe any company’s business model.
Here is the Google Doc Template of the Business Model Canvas
The nine blocks of the business model canvas are:
- Customer segment
- Value proposition
- Channel
- Customer relationship
- Revenue stream
- Key activity
- Key resource
- Key partnerships
- Cost structure
For more detail about the business model canvas, see how to describe your business model article.
Startups
Startups aim to find a suitable business model. During the research process, startup companies conduct numerous tests on the proposed business models to ensure their suitability for work.
During testing and continuously test-running the business model, the canvas follows these changes easily and quickly. This performance will help the working team unite their efforts and ideas to accomplish their tasks quickly and easily.
In the past, startups make many mistakes, including using the business plan to get things done. Studies have shown that these plans are one of the main reasons for the failure of most of these startups. Using a single-page canvas is much better than using a business plan of more than 40 pages. For more information on how startups work, see this article.
We suggest attending the Free Training course How to Build a Startup for more details on this subject and related topics.
During investors negotiations
Companies, especially in their early stages, are looking for financing for growth and market penetration.
Investors will provide money to enable companies to achieve their goals.
Investors do not throw their money haphazardly. Instead, they are looking for better investment opportunities that can yield them optimal returns. Therefore, investors ask about the business model and how their potential companies generate their profits.
Company owners and managers are responsible for persuading investors to provide funding for the business and the growth of the companies.
The business model canvas illustrates how the company works to achieve its objectives to convince investors to provide the necessary funding.
The business model canvas is used to accomplish this task efficiently and has become a common language widely shared in business.
Companies Development
Companies always need to develop their business and keep abreast of market changes and customer consumption patterns to continue in the markets.
The Development team provides suggestions for modifying the business model to maintain this development. In this case, the suitable and efficient tool for this mission is the business model canvas.
The business model canvas helps to ease communications and construct ideas significantly. For example, entrepreneurs take the business model canvas to meetings and use its key elements to guide brainstorming. Gather comments and ideas under the nine headings quickly and effectively.
Benefits of the business model canvas
The business model canvas has become a widely known medium in business, enabling it to be the primary go-to tool for illustrating and explaining the business model. The use of the business model canvas has, therefore, become indispensable.
However, the business model canvas is no longer limited to startups. Large companies such as Microsoft, GE, and MasterCard use the business model canvas to achieve their goals. This is due to several reasons; here are some of them:
1. The business model canvas is based on the visual sense in the description:
The business model canvas relies mainly on drawings and boxes, allowing the description of the business model more clearly than a text description.
A business model’s visual description defines the concepts more accurately and transfers information more easily and quickly than using words. Therefore, the picture expresses more than a thousand words.
2. The business model canvas is brief and expressive:
Rather than using a 40-page document to explain how companies work, the Business Model canvas helps you shorten and summarize these documents on a single page that briefly reflects the information in a large number of documents.
This great brevity and unbroken ideas are helpful for efficiently communicating with your team, investors, partners, and employees.
3. The Business Model Canvas helps you think about all aspects of the business:
Often, the company founder focuses on the product and does not attach much importance to other elements upon which the success of companies lies – especially the customers’ needs.
The business model forces you to think outside your product. For example, the canvas will force you to ask the following questions: How do you sell your product? What resources do you need? What are the different customer segments?
The business model canvas provides a comprehensive description of the most critical elements of the project and how they are interlinked and interrelated quickly and briefly.
4. A quick and organized way of discussion and brainstorming
Instead of discussing a work plan of at least 40 pages. Entrepreneurs take Business Model Canvas papers to meetings and use key elements to guide brainstorming. Grouping comments and ideas under the nine headings give the ideas a quick form.
5. The business model canvas is a common language in business
Due to its broad reach and proven effectiveness in accomplishing tasks efficiently, the business model canvas has become a common language in business. Making it easier for others to participate in discussions and provide feedback.
The intuitive nature of the business model canvas components requires not too much decryption. Therefore, it is easy to interpret and consume. It provides a direct and transparent reference that can be used internally across teams and externally with advisors, investors, and partners.
Hidden sides of the business model canvas
The Business Model canvas illustrates the business model quickly and easily by presenting the most critical aspects that affect the success of companies.
However, other considerations of business success are implicit but not explicitly covered by the business model board, such as the level and nature of competition and the determination of measurable goals.
Therefore, some additional means are added to the business model canvas to illustrate these implicit factors. See this article on how to describe your business model.
Finally, the Business model canvas has become a widely known medium in business. So, it has become a common language in business. Making it easier for others to participate in discussions and provide feedback.
We suggest attending the Free Training course How to Build a Startup for more details on this subject and related topics.
