What is the Structure of the Business Model Canvas?

First published in 2010 by Alexander Osterwalder and Yves Pigneur in the book “Business Model Generation”, the concept and structure of the Business Model Canvas represents a tool for simplified illustration of business models. During the creation process, the business model is broken down to its essential components, presented in a structured way in the canvas, and in this form serves as the basis for further strategic analyses and considerations.

The Business Model Canvas serves as an aid for the company to integrate and further develop a business idea or a business model modification in an existing business model. The clear, yet holistic illustration of the individual components of the business model aims, among other things, to take note of any obstacles on the way to implementation in good time and to creatively design solution concepts. Originally developed primarily for start-ups, today SMEs and large companies also use the “business model canvas” to develop concepts for better market positioning, to introduce new products or, more generally, to think strategically. The clear, yet holistic illustration of the individual components of the business model aims, among other things, to take note of any obstacles on the way to implementation in good time and to creatively design solution concepts. Originally developed primarily for start-ups, today SMEs and large companies also use the “business model canvas” to develop concepts for better market positioning, to introduce new products, or to engage in strategic thinking in general. [Lukas, 2017, p. 146]

Structure of the Business Model Canvas

In his work Business Model Generation, Osterwalder identified exactly nine core areas that make up each business model and can therefore essentially be described with the same. Accordingly, the Business Model Canvas also consists of these nine areas, visualized by individual “building blocks”. Accordingly, the Business Model Canvas also consists of these nine areas, visualized by individual “building blocks”.

At the center of the presentation are the “value propositions”, the company’s value propositions, around which the entire business model and thus the structure of the Business Model Canvas revolves. This centrally located building block also fulfills a second function: it serves as a boundary line between the internal view of the business model and the external view of the company.

While all aspects that enable the production and offering of the value proposition can be found in the building blocks of the internal view, the company is viewed from the market view via the building blocks located on the right. The author and business developer Tobias Lukas provides an extremely clear comparison: Author and business developer Tobias Lukas provides an extremely clear comparison:

“This division becomes clearer if you compare the model with a theater. The left part (backstage) describes the equipment needed, the makeup, the dressing room or the actors preparing themselves. The right part is then the stage (frontstage), where the play is performed and thus interacts with the audience in different ways.”

The process begins by filling in the Canvas template with the essential aspects of each area through internally / externally available information, logical reasoning, and research work. Basically, Osterwalder does not prescribe a fixed order for filling in the Business Model Canvas. However, according to various sources, it is recommended to start with the external view or the right-hand side of the canvas and move from there to the internal view. [Ematinger, 2018, p. 21-22; Osterwalder, 2010, p. 16-17]

In order to understand the interrelationships of the individual building blocks and the structure of the Business Model Canvas, a basic definition of each individual component is first required. The declaration is made in the recommended order of filling.

Customer Segments

In the “Customer Segments” module, all groups of people and roles of people for whom the company primarily wants to offer added value are entered. These persons (groups) represent the main addressees to whom all marketing measures are directed. The segmentation of several customer groups always makes sense as soon as their need satisfaction requires different value offers. [Lukas, 2017, p. 148-150; Ematinger, 2018, p. 23-24; Osterwalder, 2010, p. 20-30]

The following questions are addressed:

• Who are my company’s customers?
• Which customer segment is strategically important?
• Do we serve the mass market or a niche market?
• Does the buyer also represent the user of my product?

Value Propositions

The “Value Propositions” are also a central component of the structure of the Business Model Canvas. They deal with the benefits created by the company’s products and services from the customer’s point of view. This benefit can be expressed, for example, in the satisfaction of needs or in the solving of problems of the customer. Care should be taken to ensure that this module does not describe the functionalities of the product, but only the specific benefit from the customer’s point of view. [see ibid.]

The following questions are addressed:

• What customer problem do I solve with my product?
• Which product feature is essential for the added value of my product?
• How does my product differentiate itself from those of the competition?

Channels

The “Channels” module comprises the sales, distribution and communication channels that serve as a vehicle for the company to communicate and offer benefits to its customers. [see ibid.]

The following questions are addressed:

• Which channels are efficient and effective?
• Which sales and communication channels fit my value proposition and my customers?
• What aspect of customer interaction is important/critical to my business model?

Customer Relationships

The “Customer Relationships” field in the structure of the Business Model Canvas describes the extent to which and, above all, the means by which the company establishes and maintains relationships with its most important customer segments. Particularly in the case of a realignment, several facets of this building block should always be illuminated. For example, service-oriented positioning as a “trusted advisor” increases customer loyalty, but on the flip side leads to costs for the company that should not be underestimated. [see ibid.]

The following questions are addressed:

• How intense should the relationships I want to build with my customers be?
• Is it worth it for us to build a deeper bond with the customer?
• What customer loyalty measures would we like to establish?
• What is the cost/benefit ratio for the targeted customer retention?

Revenue Streams

Within the “revenue streams”, the added value for which the customer is willing to pay is analyzed. It is important here to distinguish between the types of revenue streams and payment models. For example, between pure product sales or recurring subscription revenues, between “pay per use” or “pay as a service” models. It is important here to distinguish between the types of revenue sources and payment models. For example, between pure product sales or recurring subscription revenue, between “pay per use” or “pay as a service” models. [see ibid.]

The following questions are addressed:

• What is the customer willing to pay for?
• According to which model does the customer currently pay?
• How would the customer like to pay?
• Are “radical” solutions for our business model also conceivable, such as offering the value proposition free of charge?

Key Resources

The “Key Resources” belong to the key factors in the company and therefore also in the structure of the Business Model Canvas. The key resources are necessary to generate customer value and to realize the business idea. The most important tangible and intangible resources are listed, such as production facilities, branch network, patents or employee know-how. [see ibid.]

The following questions are addressed:

• What resources are needed for the business model?
• Are the key resources more tangible or intangible?
• Are these resources protected or is it possible to protect them?

Key Activities

“Key Activities” in the Business Model Canvas, refer to those activities that must be performed to create the value proposition for customers or are elemental to other components of the business model. These can be, for example, customer loyalty measures, which are carried out regularly, but also marketing activities, supplier selection or direct sales. [see ibid.]

The following questions are addressed:

• Which activities are absolutely needed for value creation?
• Which activities represent the core of our business?

Key Partners

The “Key Partners” module examines which partners in the corporate environment are necessary and important for delivering the value proposition. These partnerships can be extremely diverse and may involve unilateral / mutual dependencies. If the company creates most of the value added itself, fewer partners are usually involved. Thus, raw material suppliers, investors, authorities, but also customers themselves can represent partners with whom the company cooperates. If the company creates most of the value added itself, fewer partners are usually involved. Thus, raw material suppliers, investors, authorities, but also customers themselves can represent partners with whom the company cooperates. [see ibid.]

The following questions are addressed:

• Which collaborations are essential to delivering the value proposition?
• On which partners are we heavily dependent? Who depends on us?
• Does forward / backward integration make sense to reduce dependencies?

Cost Structure

The “Cost Structure” describes the cash outflows triggered by key activities, partners and resources. Here it is important to distinguish the type of costs, similar to the analysis of revenue streams. In addition, it can be equally useful to distinguish between fixed costs and variable costs in order to uncover potential optimization points. As an example, the company could come to the conclusion, through a detailed examination of the most important cost factors, to outsource activities that are necessary for the value proposition, but less relevant, and thus to concentrate more on the core competencies. Here, it is important to distinguish the type of costs, similar to the analysis of revenue streams. In addition, it can also be useful to distinguish between fixed costs and variable costs in order to uncover possible optimization points. As an example, the company could come to the conclusion, through a detailed examination of the most important cost factors, to outsource activities that are necessary for the value proposition, but less relevant, and thus to concentrate more on the core competencies. [see ibid.]

The following questions are addressed:

• What is the cost structure of our company?
• What are the most critical cost factors currently and in the future?
• Can we gain a competitive advantage by optimizing the cost structure?
• What is the proportion of fixed and variable costs?

The well thought-out structure of the Business Model Canvas provides every company, regardless of industry affiliation and current development phase, with a tool that enables all participants to gain a deeper understanding of the business model. It forms the basis for future restructuring and strategic considerations.