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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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Permalink Reply by Srinivasan N on April 26, 2012 at 6:33am

Your points are well taken. I guess the model/canvas is as good as one can make it.

For instance there is no apparent visibility to how the business is funded which is an important criterion to start, run, sustain and evaluate a business. However the blocks "Key Resources" and "Key Partnerships" can be used to fit in those details.

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Permalink Reply by Rod on April 26, 2012 at 9:49am

@ Dave Roberts:

Bravo! Very well said. You present an excellent and a fair critique of the Customer Development Stack, which seems to be based on a Newtonian paradigm.

As you rightly note, Systems Thinking seems to be missing from the Customer Development Stack. The current focus of the Customer Development Stack is on the HOW at the expense of the WHY.

Inasmuch as I like the progress being made in the startup community through use of the evidence-based approach of the Customer Development Stack, its portfolio of tools has serious limitations especially from a Living Systems Perspective. A surviving and prosperous business is a living system. Consequently, a living system, organization, or business cannot be merely treated as a sum of 9 building blocks such as in the Business Model Canvas which implicitly promotes a Newtonian paradigm. A "DNA" or Darwinian perspective of a business is more relevant especially in today's turbulent environment where businesses are conceived and killed at a faster rate than any period in history.

In the startup phase, I believe that the focus should be on designing a business as an evolutionary and scalable living system and in particular, as a living fractal. Starting with a Newtonian perspective is a good move. But in the end, Darwinian and Einsteinian perspectives of business, industry, and the economy as well as of business models will rule the day.

Best,

Rod.

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Permalink Reply by Erwin Fielt on April 28, 2012 at 2:10pm

Specifically focused on business models and the frameworks, of which the Canvas is only one, I made an overview and a descriptive, experience based (rather than critical or systematic) comparison, see the following link: http://eprints.qut.edu.au/41609/.

For related, earlier concepts, such as Drucker's Theory of Business and Humphrey's TAM, see also some post on my blog: http://fieltnotes.blogspot.com.au/2010/08/business-models-earlierre...

There are only a few more rigorous/academic papers about business models that relate them to more theoretical insights, the most prominent one being the following: Amit, R., & Zott, R. (2001). Value creation in e-business. Strategic Management Journal, 22(6-7), 493-520.

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Permalink Reply by Alex Osterwalder on April 29, 2012 at 3:19pm

Nuno, the Canvas is based on my PhD dissertation, which you can find here:

http://scholar.google.com/scholar?cluster=5452906355585828894&h...

Good luck with your work,

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Permalink Reply by Sandra Pickering on May 20, 2012 at 10:17am

Nuno,

I find the BMG works best with the addition of more detailed models in whichever 'box' is needed. In particular, I have always driven down in detail on the value proposition as manifest in a branded offer.

I use a well-tested brand model to explore and define the 'correct' brand to link customer needs to internal capabilities. There are a number of other brand-driven tools that work off that: brand extensions, brand architecture etc.

That isn't a critique, more a development and build from the useful start point of the BMC.

Sandra

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Permalink Reply by Mike Lloyd on October 2, 2012 at 11:19am

Hi Nuno,

You might like to evaluate Business Model Canvas from a Systems Thinking perspective (Wikipedia has an excellent introduction to ST). This will give you a well-documented academic foundation with which to analyse BMC.

A practical limitation of BMC is that it is only concerned with strategic models. (This is not a criticism of BMC, just an observation - it is what it is). BMC provides, if you like, a "Level 0" analysis of an organisation and its strategy or unique selling proposition (USP). I would argue that there are at least three other levels that need to be mapped, modeled or documented:

* A "Level 1" analysis of precisely how an organisation structures what it does (its capabilities) and how they interact with each other (this is what my tool, Entabula, does well);

* A "Level 2" analysis describing processes implemented within each capability (for which BPMN is a good candidate);

* A "Level 3" analysis describing platforms (whether that means computers, software, other technologies, etc) (for which there are any number of approaches, including Togaf).

The advantages of BMC are its consistency, disciplined approach and structured thinking. The potential disadvantages are that it is consistent, disciplined and structured - in other words, practitioners can take the framework and turn it into a straitjacket.

In my opinion BMC looks like a valuable way to describe a new business strategy and compare it with its competitors, but I'm less convinced of its value in providing the insight needed to develop a new business model. In other words, it might be more useful for analysis than synthesis.

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Permalink Reply by Mike Lloyd on October 3, 2012 at 9:59am

Hi Nuno - something I should have added. Business Canvas centres (literally) on value propositions. These are vitally important and deserving of careful attention, but they are not the totality of business strategic thinking.