Limitations and Assumptions of the Busines Model Canvas

I am a student from the Masters in Management program at NOVA School of Business and Economics, Lisbon, Portugal.

Currently, I am developing my final work project about business models presented by football clubs in Portugal. To perform it, I intend to use the Business Model Canvas. Consequently, I will have to include in my thesis a theoretical framework about it including its limitations, assumptions, advantages and disadvantages. I can perform an analysis of the Business Model Canvas myself, however, I should, and need to, base my assessment on published articles or something more "formal".

Until now, regarding its limitations, I only see the fact that it is a recent study and its higher number of elements (9 blocks) comparing to other frameworks that might either be a positive or a negative point.

 

Could you please help with this?

 

Thank you very much for your attention and help,

 

Sincerely,

Nuno Bolas

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Business models are now integrating "social and environmental impact" in their strategy formulation. It should be included in business model generation. Value generation is nt onlye "customer value" and "economic value". We must consider "social value" and "environmental value". Regards, Jesús

Thank you for you insight Jesús,

Best regards, Nuno

Social and environmental impact are outcomes, not building blocks. Just like profit is a financial impact, but not included in the canvas.

Using other frameworks for evaluating all impacts, and then adjusting the model to get more social or economic value, is a more effective strategy than trying to add building blocks for these.

 

All the best,

-Alan

Business model canvas has two limitations in my opinion.

1: We've get to consider "Creating Shared Value (CSV)" , when we think about "Value Proposition".

CSV, you know differs from CSR, which was proposed by Michael Porter. CSV would be able to produce contenual social value. 

2: We've get to consider "(strange) Event or Experience" , when we think about "costomer value".

Why we get iphone?

We wanna get telephone?  

No, We would like to carry out strange experience from having  it.  

If you wanna get more infomation, you would read book "Managing Flow", which was written by Ikujiro Nonaka, who is one of  "The most influential bisiness thinkers, Wall Street Journal ".

Regards, Aki.

 

Thank you very much for you insight Akihiro!

Regards, Nuno

Any model is an abstraction of reality. They help us get some clarity and it is cheaper and smarter to create these models on paper or PC/iPad and test them out with a few alternatives BEFORE going and building the real one.

As with any model, we need to test the underlying assumptions in the model- call it hypotheses- and it is no different with BMC.

What I find really good about this model are the following:

- it is simple, visual and you get people to stand up and doodle on a large screen/poster and this very process energises them;

- because the participants 'create' their business model, they take 'ownership' of it and therefore are more likely to work with it and improve it;

- with a practical iPad 'App' now available, it makes comparision and validation of hypotheses a lot easier than creating new spreadsheets; and

- most importantly, business managers and entrepreneurs easily relate to it when we show them the model and they basically say, "Oh my god, why did I not do this earlier!'

While the basic buidling blocks work for me in all sectors- profit, not-for-profit, social entrepreneurs and government- imagination is key.

In my view, we need not get hung up on semantics as long people localise the 'definitions' for their context without missing the core purpose of each of the building blocks.

 

 

Thank you Cheenu. I totally agree with you. I think the main limitation is that sometimes it appears to be more suitable for start-ups since it allows them to organize ideas, relationships and most of all define an operationalization process.

Nuno

You would be surprised that existing viable businesses find it useful yo create a BM canvas to understand their current business and that of their competitors (this includes alternative products and/or substitutes). This process works for all, entrepreneurs included. So you do not have to restrict its application as the process provides enormous clarity.

Absolutely - "as the process provides enormous clarity."

In fact it is a good exercise for any organization in any phase - startup, growth, peak or decline to 'Picture the Business" (as my friend Arunagiri graphically describes the process) and see whether there are any inconsistencies or scope for improvement in the way the building blocks link up with one another.

Another use we have found for BMC in our experience is it serves as handy communication tool while doing an 'elevator pitch'. 

Srini 

BMC is actually a good structure for the development commercial and profitable business platforms. However,I believe that it is not the best framework for non-profits and government departments due to:

(1) Its built in assumptions especially on the nature of value.

(2) Its inherent asymmetry when dealing with the relationship between suppliers and customers and

(3) Its lack of support for modeling relationships with regards to the investors and beneficiaries.

Although it is, however, advantageous when it comes to simplicity.

I think its useful as a template for thinking about some of the critical dimensions of a business model but beyond that it really doesn't offer much value. They aren't saying anything new that hasn't been said for years by far more robust management experts and in trying to simplify everything onto a single page they lose 9/10 of the detail that can't just be summarized into a few sticky notes. Where is the systemic thinking for example?

Steve Blank's book is even worse in my opinion. He makes very bold claims that have no real validity beyond his opinions. He is heavily critical of the techniques used by large businesses and claims that startups must operate differently. This has some face validity to it, particularly if you buy into the anti-corporate propaganda,  but if you dig deeper you'll find that he's just taking cheap shots at the bad practices of larger businesses and not all business operate ineffectively as he implies. And then he offers pretty low-brow techniques which are mostly modified from what effective businesses of all sizes do anyway and claims he is revealing the secret sauce for startups. He should have done a little fact checking before he published his book.

Where do all these new self-proclaimed gurus think concepts like Lean and Agile came from? They certainly didn't invent them yet they aren't shy about trying to claim credit for them.They are mostly relying on their track-records as entreprenuers. And most successful entrepreneurs admit that luck & timing played a large part in their successes, so we cannot fall into the trap of believing that some success qualifies you as the infallible expert on the new rules of doing business.

Its largely the stuff of fads; hype & marketing over substance and robustness. I suggest that it appeals to the startup community because it is simple and requires less mental effort, not because it is a formula for developing sustainable businesses. If your exit strategy is to sell your venture to Google or something, go for it because this is largely about smoke & mirrors and who cares about your real business model. If you want to build a real company, there's a little more involved and stripping out all the difficult and often monotonous work of thinking deeply, planning and research is really not a strategy or mindset that I would endorse. Rather I think its actually negligent advice because put into the hands of an inexperienced young person with the next big idea, they aren't likely to read between the lines and see the gaping holes in their philosophies and postulations.

Nuno, I think a useful issue to focus on is how to generate a sustainable & holistic business model over time. Beyond putting sticky notes into a template which is just a starting point. I would also focus on the differences between popular press and the work of exemplary thinkers. Eric Reis vs Peter Senge or Drucker. Hmmm, shouldn't be too hard to judge the winners.

Dave,

Interesting point and beyond thought provoking.

If you take a step back about 50+ years ago the lean approach was first started by Taiichi Ohno of Toyota.

Karl

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