What Is the Business Model Canvas?

The canvas comes from the book "Business Model Generation" by Alexander Osterwalder and Yves Pigneur, published by Wiley in July 2010. The official template is distributed by Strategyzer, which presents itself on it as the makers of the book, under a Creative Commons licence that allows copying and adapting it.

The nine blocks, each with a question that helps fill it in. The questions are a guide from this glossary; the official template only gives the names. - Customer segments: for which groups of customers is value created? - Value propositions: what problem does the offer solve, or what need does it meet, for each segment? - Channels: through which routes does each segment learn about, buy and receive the offer? - Customer relationships: what relationship does each segment expect, and how is it maintained? - Revenue streams: what is each segment willing to pay for, and how does it pay? - Key resources: which assets are needed to deliver the value proposition? - Key activities: what does the company have to do well for the model to work? - Key partners: which suppliers or partners provide resources or activities the company does not have? - Cost structure: what costs does the model generate, and which blocks drive them?

Strategyzer describes the layout like this: the right side is the market, the left side is what it takes to serve that market, and the value propositions sit between them. Costs and revenue take up the bottom strip.

Two canvases have similar names. The Value Proposition Canvas, explained in the entry on the value proposition, zooms into two blocks: it describes one segment with its jobs, pains and gains and sets it against the offer. The Lean Canvas is an adaptation for startups that Ash Maurya created in 2010. According to his company, LEANSTACK, it replaces four blocks (partners, activities, resources and customer relationships) with problem, solution, key metrics and unfair advantage.

One canvas describes one business model. Strategyzer advises filling it in for a specific model rather than for the whole company. A company that sells to consumers and to businesses may need two canvases.

A practical order starts with the segments and the value proposition for each one. Then come the channels, relationship and revenue for that segment, and last the resources, activities, partners and costs needed to serve it.

One misreading is to treat the canvas as a business plan that is filled in once and filed away. A related one is filling in each block on its own. An invented example: the segment says "small shops", the channel says "large retail chains" and the revenue says "annual licence for enterprise accounts". Each box makes sense alone, but the three do not describe the same business. Strategyzer puts it this way: move a customer segment, and the channels, activities and costs all have to move with it.

The check is a line through the canvas: this segment, this value proposition, this channel, this revenue stream. Where the line breaks in a block, a decision is missing.

Nor is the canvas ever final. The official template has fields for date and version, and Strategyzer advises dating it and redrawing it as evidence comes in. According to the same page, cost structure and revenue streams only hold if the seven blocks above them are right.

On one page, the whole team sees the same model and the dependencies between its parts. A change of price or channel can be discussed by looking at which other blocks it touches.

Every block is an assumption. Strategyzer advises treating the canvas as a claim, not a plan. That puts the work in order: first test the assumptions the others depend on, for example the segment and its value proposition.

The canvas connects with other entries in this glossary. Segmentation defines the groups in the first block. A freemium model is a decision that affects two blocks at once: revenue, because only some users pay, and costs, because free users cost money too.

The canvas describes the company's own model but does not say whether the industry leaves room for profit. That is what Porter's five forces are for. For a closer look at the key activities, Porter's value chain breaks the company down into activities and asks which ones the costs and the margin come from.

• Make one canvas per business model, not one for the whole company.
• Start with the segments and write a value proposition for each one.
• Draw the line from segment to value proposition, channel and revenue before filling in the left side.
• Put a date and a version number on every canvas.
• Mark which blocks have been checked against data and which are still assumptions.
• Redraw the canvas when a test disproves an assumption.

• Treating the canvas as a finished business plan.
• Filling in the nine blocks separately without checking that they describe the same business.
• Writing "everyone" or "SMEs" as the segment.
• Describing the value proposition through product features instead of the problem it solves.
• Putting models with different customers, channels and revenue into one canvas.
• Confusing the Business Model Canvas with the Value Proposition Canvas or the Lean Canvas.