In this lecture we learn about business models and about the Business Model Canvas as a tool for mapping business models.
We learn that a company is for executing a business model whereas a startup is for finding one and then becoming a company.
I fully agree with the view of a startup as a different kind of entity than a company, it is a very fresh and important realisation. However, I have a problem with companies that view the search as completely over. That’s how record companies find themselves replaced with this new kid called the Internet. If I ever find myself as Chief Executive Officer of a company, I’ll make sure to Search and not only Execute, no matter what profits that the current business model yields.
Then we get introduced to…
The Business Model Canvas
The BMC is a technique for describing a business model, a division into the most important blocks. A map of sorts. When searching for a business model, one is supposed to make an empty canvas, hang it on the wall and tape post-it notes filling the different blocks, which will then be modified many times while iterating on improving the model.
I don’t know whether the BMC is a good map – whether it captures all essential details and no inconsequential details. I’ve never formed a company and I can’t say which are the essential details. I’m taking it as sage advice – Steve has more experience than me and he’s telling me “here are the important things to notice when making a business plan”, so I’m taking his word until I know better. I guess in practice it varies a little depending on the kind of business you’re planning, but it makes sense that it doesn’t vary too much and one canvas design can fit most uses.
To make sure I don’t miss anything important, once in a while I will try to draw different projections of my business plan – perhaps as a story or a roleplaying game – as different projections tend to focus on different details.
The rest of the lecture describes the different blocks in the BMC – The all-important Value Proposition, Customer Segments, Channels and Customer Relationships leading to Revenue Streams and Key Partners, Key Resources and Key Activities leading to the Cost Structure.
I found Steve’s descriptions good but not always sufficient. I found lots of assistance from the grey text on the “Business Model Generation” Business Model Canvas PDF. Where I still didn’t know exactly what to write, the excellent descriptions and two examples (spot ’em) in the free preview of the Business Model Generation book clarified it for me.
To get a good feel of a new idea, it is always a good idea to practice a bit:
This is my guess of a business model for a Coca Cola franchisee. It was evident while working on this that when dealing with products that have complex distribution chains, there is need to flush distribution channels better than the canvas allows. To partially solve this, I treated distributors also as clients and partners where it was relevant.
For those who have never heard of Waze, they make crowdsourced GPS navigation software for smartphones, which is one of the products with most value I’ve ever seen. Once again, I needed a bit more separation between two kinds of clients – users and advertisers, which are treated very differently. Also, I had to guess more because the internet can tell me less about their business practices (and it’s getting late).
I highly recommend reading the links introducing the plan. Readers who don’t usually ask questions that are answered in there.
As you can see, I have lots of different entities gaining value, and needed a way to encode what relates to which of them in the right side of the canvas. I chose color coding, and I think it works pretty well. I’m not sure I decided correctly to include the possible future venture of training technology companies.
All in all, I think I like the Business Model Canvas as a map of my business. It made me think about many aspects of my business and feels like a good map. Time will tell, when I try to update it, how well it works for iterating on a changing business model idea.