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What is a Business Model Canvas?
4 mins read

Business Model Canvas

What is a Business Model Canvas?

As a recognized business tool, it was originally devised by Alexander Osterwalder in 2005 and derived from his earlier work on ontology. Over time, the original canvas has been adapted to serve changing business needs.

What is Contained in the Business Model Canvas?

The components within the Business Model Canvas are strategic and therefore aspirational in nature. They should not attempt to present the fine detail of a company’s overarching objectives. Typically, the canvas will describe a broad profile of the consumers of the product. It will also contain the value proposition of the product. Essentially, this will be an outline of how the product is going to benefit the consumer. Crucially, the canvas will contain a description of how the business is going to extract profit from the marketplace. Or more simply, how the product will make money. Also in the summary will be a description of the channels through which the product is to be distributed and sold. Where appropriate, the canvas should identify those individuals or groups that will play a role in the product’s success too. An outline of what must take place within the business internally will be described as well as the individuals, groups, resources, and budgets required. Finally, a summary of the costs of all the stages of the product’s development should be included: assembly, circulation, marketing, and sales.

Since the entire summary will be contained on a single page and is typically a schematic of some kind, each element of the product’s story needs to be dealt with concisely. The whole outline is a distillation to the bare bones of the requirements of the product. And this is key because the canvas needs to be a clever snapshot of many interlaced themes.

The Business Model Canvas and the Product Manager (PM)

It is fairly obvious that the role of Product Manager is a pivotal one in getting the product to market. How the Product Manager uses the Business Model Canvas can have a profound impact on what the product looks like, when it is released, and how it is received. Sometimes the Business Model Canvas will be replaced by the ‘product canvas’ and sometimes the latter will be contained within the former. Either way, for the Product Manager, the terms are interchangeable and will mostly serve a similar purpose.

The canvas acts as a compelling guide for a Product Manager. What with it containing costings, budget projections, material projections, and product release and distribution planning, among other key aspects, it is a robust document that can profoundly aid the Product Manager in keeping the product on track. As a lot of background work is invested in the canvas, it is easy to understand the value of the document to a Product Manager. And since the PM will have likely been party to the effort put into the creation of the canvas, the actual process of creating it serves to hone the PM’s thinking in understanding the commercial opportunity of the product and identifying and solving any issues.

In a complex and intricate development process where multiple dependencies are interacting and resources may be strained, the Business Model Canvas is ideal for providing direction and making decisions. The canvas as a tool can help the PM with time constraints and pressure to meet deadlines. Competing - and only subtly different - priorities can be assessed in a glance using the canvas as control and guide. Staff with short attention spans or people who are easily distracted can use it without being overly encumbered. For the Product Manager, the canvas is able to formulate a universal language for the product’s development and resolves any misunderstandings moving forward. Benefiting the PM but not limited to just the development of the product, the workforce across the whole business can see how their role fits into the wider delivery of the product.

Things to Consider When Using the Business Model Canvas

In order to use a Business Model Canvas effectively, there are some particular aspects worthy of note.

  • Theoreticals A Business Model Canvas will see creation while the product itself remains theoretical. What this means is material facts will be in short supply and measured assumption and educated supposition will take their place. At this stage, it is difficult to avoid but as the product goes into development, the business model - and therefore its canvas - should cater to any consequences of assumptions proving wrong. It may even be helpful to create multiple canvas versions. Hypothetically planning out multiple product paths can offset the level of assumption at the early stages.

As production continues, suppositions should be removed and the canvas regularly updated. 

  • Bias The Staff inside the business will always bring their biases into the work environment. This applies across departments and up and down hierarchies. This can affect the Business Model Canvas. A way in which to combat such bias is to present the canvas - where possible - to people outside the business environment. Since the document is self-evident, an unbiased party should be able to provide some useful feedback.

  • Updates As the canvas is a short and lean document, it should be easy to update. There is little reason than for it to wither when adjustments to business strategy emerge or changes in the marketplace occur. Time should be set aside to regularly review it.

  • Order of business Traditionally, a Business Model Canvas deals with the ‘what’, the ‘why’, and the ‘who’ first. From these concepts, the canvas is typically built. Coming from an idea, these concepts provoke questions of opportunity and viability. If an idea can withstand these initial assessments, the canvas should then engender concepts of ‘how’ and ‘how much’. The logic for attempting to bring the product to market should always be driven first by the opportunity and then by the possibility.

General FAQ

How do you create a business model canvas?
Teams can create a business model canvas by answering a number of key strategic questions about the product and its target audience. For example, consider: Who will be using the product? What will it do to make their life easier? How is the product to be sold or distributed when it’s ready? You can find many business model canvas templates online, to help you out.
Why is a business model canvas important?
The business model canvas serves as a streamlined resource for product teams to refer to throughout the development process. In a way, it’s similar to a mission statement, but it can be updated as required to ensure it reflects any changes that occur before release.
What are the parts of a business model canvas?
A business model canvas typically comprises multiple elements, covering: customer segments; value propositions for products; revenue streams; key activities involved in bringing the product to market; crucial resources required to deliver products; and the overall costs involved in development.
Who needs a business model canvas?
A business model canvas is a valuable resource for product managers. It can make a significant impact on how a final product aligns with the original vision and meets the target audience’s requirements or expectations. Teams can use the business model canvas to keep product development on track, and stay aware of costs, essential activities, etc.
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