By Gabriel Onyango
Most often, for every successful idea millions fail. Even when your idea is the best thing ever conceived, it could still fall flat on its face. A business model canvas is a tool that helps you map, design and invent new business models for your business to ensure it is scalable, financially sustainable and can adapt to environmental factor hence increase its chances of success.
A business model canvas has 9 segments each representing a section of the business:
- Value preposition
- Customer segment
- Channels to reach customers
- Customer relationships
- Revenue streams
- Key Resources
- Key Activities
- Key partners
- Cost Structure
What value are you giving your customer, how are they benefitting and what problem are you solving for them? Why are they paying you?
What groups of customers are you targeting; this is a group of customers with similar characteristics, that you target for a similar product or service.
You cannot serve everyone thus identify that group of people whom you offer most value. The segment you choose should be lucrative, big enough and not have excessive competition.
Methods to reach your customers; how you plan to deliver value to your customers from your end to theirs! Channels include a website, a shop, a truck, a sales team etc.
Touch points and relationships you have with customers. It is simply how you reach out and retain customers. It could involve automation, one on one customer’s service or indirect relationships when using a third party such as a distributor
How will the business sustain itself financially, what are the avenues where the business will earn? A business without a revenue stream whether direct or indirect is a charity and can’t survive without outside help.
What kind of resources do you need to deliver value? Machinery, land, financial and human resources are all paramount for different types of businesses. Establish if you have access to them, and what is needed to get hold of those you do not have.
All the activities you need to be doing to perform well. These can include accounting, marketing, production, transportation etc. This section is closely linked to the key resources segment, because once identified, you will realize the key resources are needed to perform the key activities.
Identify the partners key to delivering value to your customers, they may include, subcontractors, website developers, accountants, suppliers, manufacturers whose products you use as raw materials etc depending on your type of business.
It is vital to identify partners and to know whether they will be accessible. Also, how adaptable you can be in case of any changes.
How much will it cost you to create value and deliver it to your segment? Knowing the cost structure helps you budget and prepare for everything needed to bring your idea into fruition. It will also give you a picture (once compared to revenue streams) of how profitable the venture is going to be.
Rules of thumb
- Focus on your business model and not just your product or idea-it gives a big picture perspective.
- Don’t fall in love with your first business model, create several variations out of the ordinary versions.
- Understand successful models in other industries e.g. Mpesa and its use of agents, the People’s Daily and its free newspaper model, bloggers -they offer free content and use the traffic to attract advertisers.
- Prototype, make a representation of your idea, product or service and make sure it gives an experience similar to what the final idea would. Test-experiment with real world customers; new discoveries and modifications will help you come up with something new.
Below are some of the factors outside your business that may affect how you operate. You can control some, while others-not quite.
What technological advancement might boost or undermine your business model? E.g., Use of artificial intelligence in automation might help marketers reduce their dependence on personnel.
What regulations or society shifts might be connected to your business model e.g.? If people are moving towards healthy drinks and your business model involves a drink with artificial sugar. What might this mean for your business?
These involve political, economic, social and technological factors such as market uncertainty, inflation, capital availability etc. Finding out which ones have a big impact on your business allows you to take measure to protect yourself or find alternatives.
What other market segments are there apart from what you have identified, what makes them less or more lucrative than yours? What segments are showing potential for growth and why? What might they desire or resist?
Questions to ask yourself; what next?
- Does your business model have a competitive edge, now and in the future?
- Is your model prepared for emerging trends?
- Is your model in line with emerging customer needs?
- How will your model adjust to macroeconomic shifts (political, economic, social, and technological)?
Entrepreneurs using the business model canvas run agile and competitive businesses able to adapt to today’s fast moving business environment. Its emphasis on experimentation allows testing of ideas without breaking the bank therefore encouraging fearless innovation.