BMC Part One: How To Use The Business Model Canvas
The Business Model Canvas, created by Strategyzer, is a tool that helps create and assess business ideas.
It’s free to use – all you need to do is print one out, or grab a whiteboard or sketch one out on a sheet of paper.
A canvas is a visual description of your idea, creating clarity for your team, your investors and yourself.
It won’t magically make your idea profitable, and it won’t do the work for you.
Instead, it makes you ask good questions, and good questions enable great ideas.
For example, it will ask you why you hold your current assumptions.
· It will ask you if there are other people who could be your customers.
· It will ask if there are other reasons behind why people buy from you.
· It will ask if there are other ways of structuring your team.
· It will ask if you’re charging the right amount.
Most importantly, it will keep you accountable: all the little comforting lies we tell ourselves are hard to ignore when they’re out on a single page.
However, there’s one question that’s missing, so it’s important that we think about it now:
Why do you want to start this business?
Or if you’re already up and running
Why does your business exist?
J.P. Morgan said that behind every decision are two reasons – the good one and the real one.
Let’s be frank about the real reasons. What factors are driving your decisions?
Is it about making money?
Is it about creating change?
Is it about building your dream job?
Is it about building an empire?
Is it about a decision made by your board?
Is it about building something you’re proud of?
By calling it what it is, we can avoid committing to a losing idea.
If it’s about money, we’ll build something profitable.
If it’s about impact, we’ll build something impactful.
If there’s a reason why we’re committed to a particular industry, we can use that as a design constraint.
We’re also establishing which elements are flexible – the things that we can happily change if the idea doesn’t look like it will work.
This avoids problems like
“Look, my boss said it has to be a retail store, so stop talking about online platforms!”
“I don’t want to run a wholesale business from a warehouse, I want to run a cool café”
“Yes it creates impact, but where’s the profit for our parent company?”
We call this Intent.
Not some cliché mission statement; a simple description about why you’re building this business.
That way, we know what elements are up for discussion, and which are untouchable.
Here are some from my clients:
“We want to create stable lives for young people, which comes from stable jobs and stable relationships”
“We want to create a cash cow that provides $100k of surplus to fund our charity”
“To change the way people think about the clothes they buy”
“To build a job that provides me with freedom and excitement”
“To prevent waste from ending up in landfill”
“To fulfil the Christian Mission, and spread God’s word”
“To create new business units that ensure (our organisation’s) longevity”
None of them say “To create a cool bar on High St that sells $18 cocktails” or “To sell minimalist mid-priced Swiss watches online”
They might each be a great how, but not a clear enough why.
Four questions to determine your Intent
· What’s your why?
· How will you make decisions?
· What does success look like?
· What will you never do?
Now that you have a clear articulation of your Intent, we can get stuck into the nine boxes.
Each box asks you a set of questions, but they’re not checklists.
We’re not making nine lists in isolation, they all need to work together
A helpful way of thinking about it is with IDEO’s Three Lenses of Innovation.
We call them Lenses, because they’re a way of examining one aspect of your business.
Each lens will highlight different strengths and weaknesses, and by looking at all three, we can create strong ideas that make money.
They are: Desirability, Feasibility and Viability.
Desirability is about understanding your customer, what motivates them, how they engage with you and what makes/breaks a purchase decision.
We need to be desirable to our customer, or else we’ll have no sales.
Feasibility is about how you make everything happen behind the scenes. This includes hiring the right people, using the right tools, working with the right partners, and focusing on the right set of activities.
We need to run in a way that’s constantly feasible, or else we’ll implode.
Viability is about the dollars, how many we earn and how many we spend. No matter your legal structure, you need a surplus to survive – meaning there’s money left over at the end of the day.
We need to be viable, or else we’ll go bankrupt.
You’ll probably find it easy to tick off two of the three. That third one is the killer, and it can’t be ignored.
Our idea needs to sit at the heart of these three lenses. Designing a business like this is tough, and it will take a fair few goes to get it right.
That’s what is so good about a canvas – it’s disposable, it’s free and it’s quick to do.
We can create an idea, test it, and fix any weaknesses.
Nine boxes sound like a lot, however they are simply better ways of describing our three lenses.
Desirability is explored through Customer Segments, Customer Relationships, Channels and Value Proposition.
Feasibility is explored through Key Resources, Key Activities and Key Partners.
Viability is explored through Cost Structure and Revenue Streams.
Grab your canvas, and let’s get started on the first box: Customer Segments…
This is a multi-part series on the Business Model Canvas.
If you’d like to jump straight to a particular section, go to:
Overview: How To Use The Business Model Canvas