Startups can use this one-page model to gain insight on customers, value proposition, channels, competition and finance.
Alex Cowan is a faculty member at the University of Virginia, Darden where he teaches three courses in design and digital innovation. Prior to his time at Darden, Cowan was an entrepreneur and an intrapreneur. Here he explains what the Business Model Canvas is, the theory behind it and why it is an effective tool for startups.
What is Business Model Canvas?
- It is business tool used to visualise all the building blocks needed to start a business, including customers, product market/fit, finance, and more.
- It is usually a one-page document which works through the fundamental elements to structure the business idea in a coherent way.
- It helps you develop something that's going to be of value to your customers and determine if that value is unique, or relatively unique, in the marketplace versus competitors.
- It serves as a focal point to ask the hard and provocative questions about your business model.
- Major companies use it as part of their strategic planning process or to create verticals.
Why is it effective?
- It is good way engage your collaborators. They are unlikely to read a 20-page marketing plan or sales plan but if you're all sitting in front a one-page Business Model Canvas it can facilitate meaningful dialogue.
- Leads to insights about the customers you serve, what value propositions are offered through what channels, and how your company makes money.
- It helps you understand your own business model, your competition and the market.
- It makes you focus on systems, resources and key activities, how they are connected and the ways in which they are affected by customer decisions.
- It clarifies the idea of what the business will likely be for you and stakeholders.
- It makes it easier to research marketing channels, determine the best revenue stream and identify key resources and activities.
Now that you know what Business Model Canvas is and why it is an effective tool, the next step is to build your own. This is explained in Part Two.
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