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Business Model Canvas

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Katarzyna Waroczyk

on 12 June 2014

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Transcript of Business Model Canvas

Business Model Canvas
Kamil Łacny
Katarzyna Maleszka

1. Introduction to Business Model Canvas
2. Structure of Business Model Canvas
3. Execution of Business Model Canvas
4. Case study - examples of
Business Model Canvas
5. Lean Canvas
6. Summary
7. References
LinkedIn case study

Osterwalder A. , Pigneur Y., Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers (2010), John Wiley & Sons
"Facebook Reports Fourth Quarter and Full Year 2013 Results", Facebook, January 29, 2014
Introduction to Business Model Canvas
The tool is strategic management and lean start-up template for developing new or documenting existing business models.

Business Model Canvas consists of a chart with elements describing a firm's value proposition, infrastructure, customers, and finances.
Structure of Business Model Canvas
A business model can be described through 9 basic building blocks:
1. Customer segments.
2. Value proposition.
3. Channels.
4. Customer Relationships.
5. Revenue streams.
6. Key resources.
7. Key activities.
8. Partner network.
9. Cost structure.
“A Business Model describes the rationale of how an organization creates, delivers, and captures value.”
PhD Alexander Osterwalder
Course: Case Study
Thanks for your attention!
Introduction to Business Model Canvas - cont.
A business model shown within just one sheet may be useful on nearly every phase of functioning of a company, especially when it comes to:
analyzing market position;
designing of new products and services;
innovating within existing processes, products and services.
Customers are key to every profit-oriented company, since understanding and fulfilling their needs generates sales and revenue.

To fulfill customers' needs better, it is needed to group customers into segments according to their common characteristics (e.g. age, gender, size of business).
Channels are ways of communication between segments of customers. They can be divided into:
own (e.g. established chain stores);
affiliate (e.g. warehouses selling products);
indirect (e.g. other non-affiliated retailers);
direct (e.g. established Internet store).
Depending on type and size of the company, resources might be:
internal (e.g. bought production hall, machines);
external (e.g. leased, rented).
Key activities can be grouped into the following:
production - manufacturing and delivering products to the market;
provision of services - solving customers' problems (consulting, conducting researches, etc.);
processes of managing, sustaining and acquiring customers.
Minimizing costs is not always the best solution.

Determination of cost structure should involve assessing demand type, which is the main drive here, what is determined mainly by business type.
Execution of Business Model Canvas
Very important thing in design of a Business Model Canvas is a working environment.

Currently in many offices setting of tables, type of furniture or walls color are subjects of studies, where influence on performance of employees is being determined.

Mostly used and appreciated resources during design of Business Model Canvas are:
isolated and cozy room;
comfortable chairs;
markers in various colors;
Execution of Business Model Canvas - cont.
Way of designing
Design Thinking
There are many types of brainstorming, which are restricted by various rules, what results in various outputs. Proven rules for effective brainstorming in case of Business Model Canvas are as follows:
no judging and criticizing ideas of other people, since it may impact their willingness to share information;
encouraging outstanding ideas, even if they are highly forward-thinking or weird when analyzing at first;
developing on ideas of other participants, by merging and adding new features to already mentioned solutions;
reminding of the subject - keeping discussion creative, but within range of determined scope;
quantity, not quality - here, number of ideas is critical factor (the standard is ~100 ideas within 60 minutes).
Prototyping uses visual way (like Business Model Canvas), to show ideas in a stimulating way.

Prototypes do not need to resemble a final product or a product at all - they might show e.g. interface of a new Customer Relationship Management (CRM) platform or simulation of a production process.

Also, prototypes can be created during brainstorming session out of office resources, like pieces of paper, duct tape, etc. Such use of prototypes may allow to develop more creative ideas about all 9 building blocks of Business Model Canvas.
largest professional network in the world
161 million members from 200 countries.
helps the professionals stay connected by creating and managing their identity and building a network
it is multi-sided platform, which offers different solutions to many user categories
an example of a Freemium business model: while the core offering is free for its network members, premium offering comes for a price
Facebook Business Model
Google Business Model
Job recommendations to its members over Job You May Be Interested In (JYMBII)

LinkedIn Corporate Solutions, LinkedIn Jobs and Subscription products

Marketing solutions enable advertisers to reach target audience thanks to clicks monitoring, click-through rates, etc.

Set of APIs and widgets is provided for developers helping to create third-party applications leveraging LinkedIn data
Banking Business Model Canvas
the leading Social Networking Site (SNS) of the World
mission is to make the world more open and connected
has built a Multi-sided Platform (MSP) that serves different customer segments with different value propositions
monthly active users (MAUs) for December 2013 - 1.23 billion
Lean Canvas
Lean Canvas - cont.
Main aim of Lean Canvas is to be as actionable as possible, while staying enterpreneur-focused, what allows startups to create their own business models.

Making Lean Canvas actionable required removing all elements of Business Model Canvas that are risky or uncertain in judgement.
Ash Maurya created Lean Canvas, different adaptation of Business Model Canvas, since the original version in his opinion did not allow startups to develop their business models in proper way.
Lean Canvas - cont.
Many startups fail, since they waste money on creating a wrong product. Problem building block aim to list all elements that are currently wrong withing the company. Main questions applicable here are:
what is not working correctly?
why is a product or service not fulfilling customers' needs?
Helps Internet users stay connected with their friends, families, and colleagues
Advertisers can engage with users based upon the information shared by users such as Age, Gender, Location, Education, Work history or specific Interests
Businesses (marketers) can also create Facebook Pages to engage with interested customers
Developers can use Facebook platform to build apps and websites that are more personalized, social, and engaging
To increase the user engagement even further, Facebook has partnered with companies such as Netflix, Hulu, Spotify, Washington Post providing online movies, TV shows, music, and news.

Their apps help users share what they are watching, listening, or reading with their friends and family.
When all problems are listed, solutions for them can be developed using many methodologies, like 5W, Ishikawa diagram or other Lean tools.
Lean Canvas - cont.
Startups often try to calculate and analyze many factors and numbers, which brings only chaos and uncertainty, while only some really matter. Key metrics building block allows to list those the most certain ones.
Key Metrics
Unfair Advantage
Unfair Advantage building box should contain all market entry barriers and competitive advantages that competitors have. Purpose of this building block is to create a focus on lacking elements within a startup and defining them as problems.
The technology vendors provide IT solutions in various areas e.g. customer experience management, business process improvement, loans origination and processing, Risk Management, Predictive Analytics
Banking industry is highly regulated by the government. The regulatory agencies maintain control over the banks because they are the lifelines of an economy. The control is also needed to protect the depositors against any fraud.
from lenders
charge for different kinds of operations
paid to depositors
among the leading Technology companies in the World
most popular for its Search engine. Google maintains vast index of websites and helps users search different types of content through its products
Gmail is another very popular product of Google, for free email services to the users
provides social networking services to its users through its Google+ product.
Advertisers create text-based Ads through Google Adwords – a self-serve auction-based advertising program
Ads appear next to the search results
Most advertisers pay Google on a Cost per Click (CPC) basis
Google helps advertisers extend their Ad campaigns to the Google Network members’ websites through its Adsense program, members get a share of Ad revenues in return
Google provides Display Advertising services through DoubleClick advertising technology. Display advertising comprises of video, text, images, and other interactive ads. Display ads appear on Youtube, Google Finance, and Google Network member websites.
Gmail, Google Docs, Google Calendar, and Google Sites.
Money paid to the Google Network websites under the Adsense program and to the distribution partners who distribute Google Toolbar and other products or drive traffic to the Google websites.
Sales&Marketing, General&Administrative Expense
Google generates over 96% of its revenues from advertising.
which cover 20%, 30% and 50% of total revenue of the company respectively
Initially it was proposed by Alexander Osterwalder and Yves Pigneur in 2008.

Description can be found in their book "Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers".
Introduction to Business Model Canvas - cont.
Summary - cont.
Understanding of what business model actually is, seems to be an important issue during discussions, meetings or workshops on business model innovation.

The concept of Business Model Canvas allows to describe a business model of the existing or planned organization through determining nine basic building blocks, which cover the main areas of business.

The idea has been applied and tested around the world and is already used by such organizations as:
Opponents of Business Model Canvas point out following disadvantages of the described solution:
static picture of the company, which allows to understand the idea, but does not help in management;
helpful only for developed companies, not startups;
does not include any business factors;
cost and revenue analysis might be not sufficient to build a good business model.
Despite its drawbacks, the model is used due to its strong advantages, which are as follows:
easy and intuitive preparation of a business model;
clear composition of the canvas;
easy analysis of a created business model;
elasticity allowing describing business models for companies within many markets.
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