Updated: May 20
Around the world, business owners frequently employ Alexander Osterwalder's Business Model Canvas. It is a valuable tool. The BMC laid the foundation for startups to learn to consider every aspect necessary for a new firm to succeed. Unfortunately, the traditional canvas models only provide a 9-item checklist, or as others have put it, "Headings on a blank piece of paper."
My experience in trying to fill in the business model canvas with founders & business leaders is that most find it complex, confusing and hard to work. They are reluctant to work on it even if they are convinced of its importance. Hence lose steam & enthusiasm as they start working on it or rush through it to end with an elementary-level business plan. Some of the key factors I identified that contribute to this phenomenon are:
1. It is not in the right order: We are all inherently straightforward humans—some a little more than others. When confronted with a new document, we naturally read it from left to right because that is how we are accustomed to doing things. As you can see, beginning with key partners is completely illogical. When discussing strategy, we begin with WHY - discovering the problems/pains faced in the market, WHO is experiencing them (customer segment), WHAT experimenting with possible solutions (a product or service), and HOW this product or service will be offered to the customer segment.
2. Mission and vision are missing. The founder's (organisation's) mission and vision are not mentioned or accounted for when preparing the BMC. Hence, most of the time, the completed BMC is disconnected from its core purpose. It leads to most people hitting a dead end or not knowing what to do next. How to use the BMC for designing the sales & marketing strategy to achieve business growth and profitability.
3. It does not show any interconnections. Because certain factors will significantly impact others, the sequence in which strategic decisions are made also matters. The BMC may not always show these connections. For instance, selecting a certain B2B customer segment may limit the tactical options open to the business owner: customer relationships will be more significant, and storefront selling will be all but useless. Although there are no restrictions on how you define a potential business' value proposition, everything that follows will be seen through the lens of that initial decision! Certain links are significantly stronger than others: for example, whereas the customer segment chosen has a significant impact on customer relationships, resources have little to do with partners (directly, at least).
4. External factors are absent. No business is created in a vacuum. Business models only exist in connection to industry, its historical environment, and other external factors. Those factors frequently influence the definition of a business model.
You are not warned of this in the "classic" business model canvas. It isn't even mentioned. For this reason, it is crucial to include some external aspects in the Business Model Canvas. Every business owner should be fully aware of the political, social, economic, and technological environment, especially out of fear that they won't be able to keep up with an always-evolving society.
5. There is more than just cost & revenues: Profit is just the difference between revenues and costs. But the tale is not over yet. A virtuous loop is formed when revenues exceed costs promptly, allowing a business to make larger investments and qualify for more favourable bank loans since it has more cash on hand in practice than in principle.
However, smaller businesses and entrepreneurs do not have the luxury of such simple options. Should they increase the CEO's or founder's pay? Reinvest that cash directly back into the company? Give it away to a worthy cause? All of these questions would be addressed by a distinct profit strategy that goes beyond revenues minus costs. This tactical consideration is addressed by inserting a "profit mechanism" between costs and revenues.
6. What next? One of the key reasons for working & having a BMC is that it should lead to designing the customer acquisition, retention and revenue growth strategy (sales, customer success & marketing activities). The BMC doesn’t suggest steps in that direction.
The Business Model Canvas is, in theory, a visual summary of just nine components of a business.
Several experts have attempted to add supplementary tools and procedures as a result of the Business Model Canvas' shortcomings in the areas of pain (issue) discovery and resolution. Even Osterwalder himself created the "Value Proposition Canvas" tool to improve the Business Model Canvas's capacity for problem-solving and problem-discovery.
“We put the Business Model Canvas under a Creative Commons license to allow people to make their versions.” Alexander Osterwalder
Entrepreneurship is difficult. If I have learned anything from my years as a consultant, it is that using frameworks is essential to taking on problems rationally and head-on. However, it is crucial that we periodically challenge these frameworks to avoid repeating past mistakes and missing out on opportunities for innovation.
The modestly innovative business model canvas I offer can be used to accomplish this.
Use it, and share your experience, opinion, and feedback in the comment to improve it.