A Better Business Model Canvas

reposted from the Explorics Blog


Note: Learn more about this at our upcoming webcast.
Living Lean Startup: Business Model Canvas
Thursday, May 10, 2012 at 2pm ET
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Whether you are building a new business or planning the growth of an existing one, having a complete picture of your business strategy is indispensable. The Business Model Canvas has emerged as a fantastic tool for putting all the interconnected facets of a business plan on one piece of paper so you can easily capture, assess, and refine them.

First developed by Alexander Osterwalder and described in his book Business Model Generation, the tool has gained popularity over the last couple of years – quite rapidly in fact. And it has spawned all sorts of interesting activity from both Alexander and others:

We use the Business Model Canvas every time we engage with an entrepreneur – it has become one of the core parts of our Market Sprint customer development process. And through these projects we’ve come up with what we feel is a better Business Model Canvas.

So without further ado, let me introduce the Business Model Canvas II (download the PDF here):

Here are the key differences between the original Business Model Canvas and our own version:

  1. “Lead with demand” orientation. You can build a product, or you can build a product that fills a need in the market. That last part turns out to be really, really hard. All too often, we as tech entrepreneurs focus too much on what we are creating, letting our customers’ voices take a backseat to some internal, ivory-tower vision. So the business model canvas we created puts customer & sales related information on the left, and product & delivery information on the right. The purpose is to force the author to always start with demand, building what people want. We find this is a much more logical way to tell the story of the business, which is the ultimate goal of this document in the first place.
  2. Call out the core value prop. You’ll also notice that a subset of the categories are placed in a bold box in the center. This area captures the core value proposition of your market. It answers the basic questions of any business model: who is your market, what is your value, why are you better, and how will you make money. Surrounding the central area are all the supporting aspects of your business. They are still crucial to understand, but only insofar as they support the more central concepts. Best practice for using this canvas is to begin in the center and really nail your value proposition. Make sure everything there is well-aligned and meaningful. Then, once you are satisfied that your value statements hold together, you can identify all the other keys to executing your strategy in sales and in delivery.
  3. Alternatives. Knowing what you are up against is absolutely essential to business model planning. Whether your target customers are using directly competitive products or cobbling something together themselves, you have to position your product against something that they are already familiar with in some way or another. If the problem you are solving is big enough, people will have some way of addressing it. Use this area of the box to explain what options already exist, and how you differentiate your product from these options.
  4. Market size & opportunity. Finally, our Business Model Canvas II has an area where you can describe the nature of your market size and/or opportunity. For example – are you pursuing every consumer in a major metropolitan area between certain ages? If so – describe that here, and indicate about how many of them exist. If you are entering a more mature market, add some information about the current size of that market and your addressable portion of it.

We hope you will try out this version of the Business Model Canvas and let us know what you think.

And for more information on how to use this document, please check out our webcast Living Lean Startup: Business Model Canvas.

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Tags: business, canvas, model

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Comment by Brian Gladstein on May 29, 2012 at 5:06am

Thanks for your comments, and I'm glad that people are finding this helpful.

Mike, I appreciate your sharing the post about competition - I've read a little bit about the discussion of competition and business model generation. First off, I think there is an important difference between "alternatives" and "competition" and I was careful in not confusing the two. That being said though, as someone who has built more than a few business models, I see two sides of the story.

1) I understand the point that competition/alternatives are outside of your control, and therefore part of the environment in which you are building your business model.

2) However, my view is that you absolutely have control over how you position against alternatives, and therefore who you choose to complete with. And that is a key part of your business model.

An example may be helpful. Let's say I'm opening a burger joint. I can describe my target customers and my value proposition, and I can talk about my customer relationships and my key partners. But a huge part of my business model is in fact defined by how I choose my customers' alternatives. Consider how much is revealed about my model, my strategy, and my potential competitive responses by simply identifying competition in these various ways: 

  • I'll compete against McDonald's, Burger King, Wendy's
  • I'll compete against Five Guys, In & Out Burger
  • I'll compete against upscale steakhouses
  • I'll compete against any other restaurant in the downtown area

It is absolutely true that you choose your competitors. I have seen how an entire business model can depend on that. You can't control what they do, but you can control how your customers perceive you.

What do you think?

Comment by Rocky Romero on May 12, 2012 at 12:23am
I will be using this version with clients that I have worked with before using the BMC.

The BMC II will allow me to uncover questions & thoughts that may have been missed initially.

Thanks for the presentation which helped me to be open to other possibilities.
Comment by Mike Lachapelle on May 11, 2012 at 1:21pm

HI Brian

This is an interesting variation on the canvas. It certainly focusses the attention on the core relationship of customer-value proposition. Whether intentional or not, it also places a perceived heavy emphasis on the financial model by visually emphasizing these elements.

I again challenge the inclusion of "alternatives" (another term for competitors) and market size as these two items are not part of 'your' business model; i.e. things you can control. They are external influences in your business environment. For a further explanation see Alex's blog on the subject:

Competition is NOT part or your business model

Embedding the differentiation of your model's value differentiation is similar to Ash Maury's Lean Canvas. Personally, I prefer to do that outside the canvas itself using a variety of tools to explain and analyze; like value mapping (Board of Innovation, or CDM) or 4 actions framework (Blue Ocean strategy).

Comment by Paul Bahnisch on May 11, 2012 at 6:54am

I like the new approach and structure given that it makes it clearer in terms of the value proposition and starting point to then move out left or right in terms of sales and delviery, etc.

Comment by Brian Gladstein on May 8, 2012 at 9:37pm

Hi folks - I reposted this blog post on this forum because I am really interested in hearing people's thoughts about the layout I've put forward and have been using. It has been interesting reading other people's improvements and changes as well. Would love to hear what you think.

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