BUSINESS MODEL CANVAS

Before beginning the explanation of Canvas model first we will define what exactly a
business model is.
Business Model. Describes the rationale of how an organization creates, delivers, and
captures value, it is necessary that the concept of the model to use is simple, intuitive and
easy to understand by everyone.
The BUSINESS MODEL CANVAS consists of nine building blocks that allows to create
new and alternatives strategies in a fairly simple and logical with easy understanding,
becoming a certain way in a shared language by all employees who manipulate and use it.
The building blocks mentioned above are:
Customer Segments (CS)
Defined as a different group of people or organizations an enterprise
aims to reach and serve (they are the heart of the company), these are
grouped according to needs, common behaviors and other attributes;
the organization must decide which one of the segments will attack and
ignore.
Customer groups represent separate segments if:
- Their needs require and justify a distinct offer.
- They are reached through different distribution.
- They require different types of relationships.
- They have substantially different profitabilities.
- They are willing to pay for different aspects of the offer.
Value Propositions (VP)
Describes the bundle of products and services that create value for a
specific Customer Segment. Some value propositions may be
innovative and represent a new offer, or may be similar to existing
market offer, but with added features and attributes.

Values are classified into two groups:

Quantitative. Like the lower price, speed of service, easy use.
Qualitative. Like the superior design, newness, customization, brand/status,
accessibility.

Channels (CH)

Describes how a company communicates with and reaches its customer

segments to deliver a value proposition. These are very important
because are customer touch points where their main functions are:
inform about products and services and to allow to purchase, deliver
the value proposition and provide post-purchase customer support.
There are several types of channels such as direct and indirect or own or partners, the
organization can choose how many the want but the most important is to find the right
combination to reach their customers segments.
Customer Relationships (CR)
Describes the types of relationships a company establishes with
specific customer segments, the may be driven by the customer
acquisition and retention, boosting sales or cross selling.

Some of the customer relationships are: personal assistance, self-service, automated

services, communities on-line (more involved and connections with and between the
customers)
Revenue Streams (RS)
Represents the cash a company generates from each customer segment
(are the arteries of the organization), the cost must be subtracted from
revenues to create earnings). There are two different types of revenue
streams: resulting from one-time customer payments and the ongoing
payments to either deliver value proposition or provide post-purchase
customer support.
The ways to generate revenue streams are: asset sale, usage fee, subscription fees,
lending/renting/leasing, licensing.
Key Resources (KR)
Describes the most important assets required to make a business model
work, these resources allows to create the value proposition, customer
relationships and earn revenues

The key resources can be physical (buildings, vehicles, machines, systems, distribution
networks), intellectual (brands, proprietary knowledge, customer databases), human,
financial (cash, lines of credit).

Key Activities (KA)

Describes the most important actions a company must do to make its
business model work. The key activities can be categorized as:
production (relate to designing, making, and delivering a product with
a superior quality, problem resolution (relate to coming up with new
solutions to individual customer problems) and platform/network.
Key Prtnerships (KP)
Describes the network of suppliers and partners that make the
business model work with the purpose of optimize it, reduce risk or
acquires resources. There are four types of partnerships: strategic
alliances, strategic partnerships between competitors, joint ventures to
develop new businesses, buyer-supplier relationships to assure
reliable supplies.
Cost Structure (CS)
Describes all costs incurred to operate a business model, there is two
types of cost structure: cost-driven (focus on minimizing costs
wherever possible) and value-driven (less concerned with the cost
implications and focus on value creation like personalized service o
exclusivity).
The cost structures can have the following characteristics:
-

Fixed costs. Costs that remain the same despite the volume of goods or services
produced.
Variable costs. Costs that vary proportionally with the volume of goods or services
produced.
Economies of scale. Cost advantages that a business enjoys as its output expands.
Economies of scope. Cost advantages that a business enjoys due to a larger scope of
operation.

Patterns. Is the idea of capturing idea as descriptions with a standardized format for an
immediate use in the design of business model.
Design. There are several techniques and tools that help to design an innovative business
model and create value for users.
Strategy. It will help to question the business model established and strategically analyze
the environment in which it operates.