Millions of users have successfully applied the Business Model Canvas both in the startup and corporate world. Here are five common questions that people don't always dare to ask us.
Why these nine building blocks?
In the year 2000 Yves Pigneur and Alex Osterwalder set out to search for the most important elements that any organization needs to decide on when designing its business model. They went through all the existing research, prototyped and iterated models, and stress tested them with business leaders and seasoned entrepreneurs. The final result were nine building blocks described in a PhD dissertation that later on became the Business Model Canvas. Ever since, millions of users in Fortune 500s, start-ups, and social ventures alike applied and appreciated the approach. Even local and national governments use it.
What happens if I eliminate or change any of the building blocks?
It means you eliminate or change one or more of the nine most important elements you need to decide on when designing your business model. Changing or eliminating a block will still give you a partial view of your model, but you might not consider all critical elements to the success of your business model. For example, if you replace the key resources, key activities or partnerships blocks, you stop describing the infrastructure decisions required to make your business model work.
Let me illustrate this with three examples where a particular key resources or key activity was a foundational pillar for the success of the business model (risk management for Kiva, patents for Nespresso, large audience for Google). When KIVA started their social lending platform they didn't have risk management as a key activity and it almost brought them down. Google's business model only works because they have a large audience (from free search) that is a key resource that they can "sell" to advertisers. Nespresso, the Nestlé owned coffee company, couldn't have built a competitive advantage without patents as a key resource that protected their pods from being copied for decades (review example on Harvard Business Review).
What are the foundational pillars of your business model? If you change one or more of the nine building blocks of the Canvas you eliminate one ore more of the questions that help you figure out the pillars of your business model.
Does the layout of the building blocks matter?
The nine building blocks are all related and integrated. There is no such thing as a revenue stream without a customer paying for a value proposition. There is no value proposition that can be offered to customers without performing activities and drawing on key resources. The best way to explain this configuration of the nine building blocks is by using the analogy of a theater as we show in the video below.
The theater analogy nicely shows that there is no revenues without a great play. There is no play without a backstage infrastructure. There is no theater that lasts if the revenues from the play don't outdo the costs resulting from the backstage infrastructure....
Why isn't there a building block for competition, problems or measurements?
Because great tools don't do everything. Great tools do some things extremely well and work together with other great tools to get the work done. Imagine if you had to go through brain surgery and your doctor showed up with a swiss army knife? A surgeon uses several instruments and learns to master them in over a decade of training.
With the Business Model Canvas you describe how your organization intends to create, deliver, and capture value in a profitable way. You are better off using the Value Proposition Canvas to describe how exactly your organization intends to create value for your customers (another type of "surgery" with a different objective). Two tools that perfectly integrate for two different objectives that you need to get right as a business.
Understanding the business model environment, measuring the success of your business model, or testing if will succeed in the market are yet other objectives for which you need great tools. One of Strategyzer's objectives is to provide that perfectly integrated toolbox on paper and as software. To help "business surgeons" test business models we designed Test Cards specifically for that purpose, but integrated with the other tools in an upcoming blogpost or by pre-ordering Value Proposition Design).
What's the difference between a business plan and the business model canvas?
The business plan is a long, well thought through document in which you describe how you intend to implement a business. You'll describe the leadership team, the vision, the competition, the business model, the marketing plan, the financials, your milestones, etc.
There's nothing wrong with business plans per se. However, when you get started with a new venture you have no idea if your business model will actually work. So you are better off exploring and testing potential business models on one page with the Canvas instead of reflecting on and writing a long refined document. Until you figure out a business model that will actually work by testing it you will have to craft dozens if not hundreds of Canvases. You can't do that kind of prototyping as easily with a business plan document.
Write a business plan of how you will implement your business model only once you have market evidence that proves that your business model could work .