The Business Model Canvas: An introduction plus background to the most successful entrepreneurship tool. Dr. Hein Roelfsema

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1 The Business Model Canvas: An introduction plus background to the most successful entrepreneurship tool Dr. Hein Roelfsema 1

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3 What problem does BMC solve? 1. The BMC approach comes from Alexander Osterwalder and Yves Pigneur book Business Model Generation (2010). 2. The previous focus on extensive business plans is cumbersome, as they take a long time to develop. What one needs is a short version of the business plan. 3. Making a business plan should visualize the key elements. This focus on visual presentation in a cooperative setting (the Post It's) at the time was revolutionary in strategy making, borrowing from ideation in design thinking. 4. A visual representation makes it easy connect the key elements of a business plan. 5. For educators and business coaches great to structure classes for each block. Over time, there have been thousands of books on parts of the business model canvas. 3

4 The right hand side: Connection to marketing 1. The right hand side of the Canvas (Customer segments, Customer Relations, Channels, Value Proposition, Revenue Model) are the cornerstones of the field of Marketing. 2. Customer segments: Segmentation. Key is to find the right segment to start (not too small, not to big, low entry costs). It is important to distinguish between B2B and B2C markets. 3. Value Proposition is a traditional concept in strategic management. Essentially, it is a choice between cost leadership (making activities cheaper/more easy for your customers) or product differentiation (expanding the range of choice for your customers). It is useful to think about in what way the value proposition is creative: by bending, by blending, by breaking. 4. Customer relationships can be made concrete by thinking in terms of Unique Selling Points (USPs) through the eyes of the customer. 5. Channels are close to concept of value chain analysis. Key is to think how each step between the value proposition and consumption adds value and how to optimally organise this. 6. The revenue model is often close to the pricing strategy. It is all connects to the central marketing mix, the 4Ps: Product, Place, Promotion, Price. However, the explicit customer focus and lean (agile) methodology is quite new in modern entrepreneurial techniques. 4

5 The left hand side: connection to the Resource Based View 1. One can think of Resources and Key Partners as ingredients and key activities as the recipe to make a unique meal (the value proposition). 2. Resources can best be defined as core capabilities available in the founding team essential for the value proposition. Important to stress that these are team capabilities that arise from diversity. 3. Key partners are the resources that you do not have in the company but that may come from outside. Important to ask why these key partners would want to work with you. 4. Activities are the key actions your firm is going to take to transform the resources and capability into the value proposition (the how question). 5. Cost structure, start from the activities and use activity based costing. So, what would the actions (not the resources themselves) cost. 5

6 Business Models: Hein s Kindle Starting List The Big Three Pigneur, Y., & Ostenwalder, A. (2010). Business Model Generation A Handbook for Visionaries. Game Changers, and Challengers, Hoboken. Ries, E. (2011). The lean startup: How today's entrepreneurs use continuous innovation to create radically successful businesses. Crown Books. Blank, S. (2013). The four steps to the epiphany: successful strategies for products that win. BookBaby. Customer Segments Value Proposition Customer Relations Channels Activities Revenue Model Resources Aulet, B. (2013). Disciplined entrepreneurship: 24 steps to a successful startup. John Wiley & Sons. Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition design: How to create products and services customers want. John Wiley & Sons. Eyal, N. (2014). Hooked: How to build habit-forming products. Penguin. Ellis, S. (2012). Lean Startup Marketing: Agile Product Development, Business Model Design, Web Analytics, and Other Keys to Rapid Growth: A step-by-step guide to successful startup marketing. Hyperink Inc. Wickman, G. (2012). Traction: Get a grip on your business. BenBella Books, Inc.. Gassmann, O., Frankenberger, K., & Csik, M. (2014). The business model navigator: 55 models that will revolutionise your business. Pearson UK. Wasserman, N. (2012). The founder's dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton University Press. Page, S. E. (2017). The diversity bonus: How great teams pay off in the knowledge economy. Princeton University Press. Key Partners Cost Structure Entrepreneurial Mindset Hwang, V. W., & Horowitt, G. (2012). The rainforest. Los Altos Hills: Regenwald. Rogers, S., & Makonnen, R. (2008). Entrepreneurial finance. McGraw-Hill Professional Publishing. Godin, S. (2010). Linchpin: Are you indispensable? How to drive your career and create a remarkable future. Hachette UK. 6