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Developing a business model canvas

Bernard Ross
=MC Consulting | Developing A Business Canvas Model - Illustration of a man in an office pointing to a strategy whiteboard

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The canvas ensures your approach is thought through by asking you to scope the nine essential elements of a business model and showing how they connect systematically.

The canvas is one of the newer strategic tools, based on brilliant work done by two European management consultants Alex Osterwalder and Yves Pigneur. It has been further developed by Angela Cluff and Bernard Ross at =mc consulting to make it useful for public bodies, charities, INGOs and NGOs.

Structure

At the centre of the canvas is the Value Proposition.  This summarises how your offering fits with the market you want to engage with. A Value Proposition has to make explicit what you have to offer and how does it meets the needs those who are interested in it. The structure of the canvas encourages you to answer these questions. If you draw a vertical line straight in the middle, you’ll have two sides: the left which addresses the Offering elements and the right which addresses the Market components. The canvas is joined in the middle where the Value Proposition is formed. Underneath are ways of exploring the Cost and Income base.  There’s a simple animated explanation in this brief video.

Nine Key Elements

The canvas, in essence, asks you to explain how your existing or new business idea works in terms of nine key interlinked elements. These elements are the essential components that make up your business model.

Here is what every section in the canvas means and the kinds of content it contains:

1. Key Partners

Individuals or agencies, normally external, who contribute to some part of your business canvas. These can be suppliers, affiliates, vendors and even competitors. You may explore here what resources/services you get from them and link them to how they add value.

2. Key Activities

Those activities that directly or indirectly contribute to delivering the value proposition to customers/consumers/service users. They can include elements of the value proposition, but also how they enable distribution channels, support customer relationships and help revenue streams.

3. Key Resources

The resources that contribute to the value proposition, channels, relationships and revenue. These resources may be tangible or intangible– they might include intellectual property, your brand, hardware, software, finance, facilities and people- staff or volunteers.

4. Value Proposition

At the heart of the canvas is the Value Proposition. This describes the actual and perceived value you deliver or the challenge(s) you’re solving for them or need(s) you’re meeting. Elements of a VP can include ease of use, design, brand association, status improvement, price etc.

5. Customer Relationships

This covers the type of relationship with each segment – consumer, donors, user, beneficiary- and their needs. For example, personal attention, self-service, sense of community, co-creation etc. You can also describe the relationship frequency– one-off, regular, infrequent?

6. Distribution/Engagement Channels

This explores how you plan to reach and communicate with your customers- this could include online peer to peer, retail, wholesale, direct marketing, face to face etc. You may, of course, have multiple channels. And indeed different channels for different customers.

7. Customer Segments

Here you should describe you key customers clusters. Customers can include service users, donors who support the service, or even members. Who actually benefits from the value you create? And who pays for it? They may be different. How to they relate to the Value Proposition?

8. Cost

This section lays out the most important costs- direct and indirect- you incur in delivering your Value Proposition. These are often directly associated with the key resources you need to deliver and the key activities you have to undertake.  You need to consider how to handle any capital you need for startup.

9. Revenues

This covers the ways in which you will make money. This may involve establishing how much your customers, users or donors are willing or able to pay for the level of value you deliver. Think also about how they would like to pay- cash or credit, one off or direct debit?

Sequence for developing a strategy canvas

You can create the canvas from almost any starting point:

  • Considering what you might do with partners
  • Working out how to reach a financial target
  • Establishing who might be a new customer?
  • Thinking about something you can do and how to monetize it?

However, it is normally done in a particular sequence, ensuring you begin with and then build on the more important components.  This allows you to focus and then elaborate on each item separately. A common sequence would be:

  1. Begin by identifying your current or potential Customer Segment(s)
  2. Consider what you have to offer and how it meets customer needs- your Value Proposition
  3. Next map out the Customer Relationships
  4. Then consider the most appropriate Channels
  5. Identify the Key Activities you need to undertake
  6. Identify the Key Resources you need to acquire or have access to
  7. Establish who could come on board as Key Partners
  8. Clarify your potential Revenue Streams
  9. Work out the Cost Structure to deliver your Value Proposition

But you can begin as you would with a jigsaw and simply fill in what is obvious, and then build out to the other sections.

What the canvas doesn’t cover

Note that the canvas doesn’t explore some other elements that you might want need to create a complete business case – these include:

  • context in which you might be operating?- normally developed though a PEST or SWOT
  • competition who else is in the market or what alternatives are there to your proposition?
  • culture: does your agency have a positive approach to developing new ways of working?
  • competencies: do you need to develop some organisation skills to deliver the model?
  • capital: how will you secure the startup finance needed to underpin development?

There are other tools that can help you scope these.

How to find out more

=mc consulting has worked with a wide range of charities on adapting their business models. 

We’ve used the model with a range of organisations from major INGOs like Doctors without Borders USA and UNICEF International, UK charities like the British Red Cross, NSPCC, local authorities such as London Borough of Brent, London Borough of Hackney, Rotherham MBC and small social enterprises like Crossroads Care in Kent and Age Exchange.

If a Business Canvas Model sounds interesting and if you’d like to find out more about them or strategic development generally then =mc consulting can help you consider how or what to change.

You can download some further information here.

Contact Bernard Ross, Director

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