Business Model Canvas (BMC)
Recently, I have just finished a course called Business Model Canvas on Coursera. It is a framework helping the entrepreneur to program their business to bring it to real life from the initial ideas. Through this post, I want to summarize what I have learnt, on one hand, for myself to recap everything, on the other hand, to introduce with you about this model as well as this course.
1. Why do we need this Business Model Canvas?
Everyday, there are a lot of business ideas appearing. However, just a few of them succeed, the rest will fail, or even not be executed. Because creating a business cannot just base on the business idea. To nurture it, the idea should be thought and built in a model. Â It is the first step to bring the idea to life.
In other words, the BMC describes the rationale of how an organization creates, delivers and captures value.
2. BMC Overview
Here is the template of the BMC. The story begins at Customer Segments, who our organization serves. Then which Value Prepositions we would create for them. To deliver the value to the customers, which Channels we would use, this element is like the combination of the third P - Places in 4P of Marketing and the media in the fourth P - Promotion. Followed by the Channels is the Customer Relationships, how we want to be in their perceptions. This concept is very close to Positioning in Marketing.
After going through those parts, we have to consider about the Key Activities and Key Resources, respectively what we will do to create, deliver and capture values, and which tools, people we need. Normally, our Key Resources is not enough to create values so we need to cooperate with Key Partners to achieve it.
And last but not least, every business has to bare in mind the Revenue Streams, from who and where they will get the cash and Cost Structure, what do they have to pay to run the model.
3. Customer Segments
Customer Segments are a term to call the groups of customers who have different specific needs.
Choosing the most important segments is a crucial task because of its lead to the most profitable figures.
Because of the limitation of the organization’s resources, we just focus to serve a few significant segments, and ignore the rest ones.
For example: I start my idea of The Chess Academy for kids, my customer segment could be parents whose kids are from 5 to 10.
Focusing to the chosen segments, we have to observe and describe them through 3 elements:
Customer job: The things customers try to get done
For example: Parents try to find a good suitable hobby with their kids.
Customer pain: Anything makes the customers annoyed before, during and after getting the job done
For example:
+ Few kid courses (Chess, Piano, Art, etc) in the neighborhood.
+ Kids get attracted more to the junk hobbies like Videos Games, Comics, etc
Customer gain: Outcome, benefits that the customers want
For example: Their kids learn new hobby which is good for their development and can be applied in daily life.
4. Value PropositionÂ
It is the bundle of benefits a company offer to its customer segments that make them choose the company but others.
The Value Proposition also follows 3 elements which should be in line with ones from the CustomerÂ
- Product/Service:Â List of what the company offers
For example: Chess Course by Grand Masters taught online and in the classroom. One in the class room takes place in weekends.
- Pain reliever: It describes exactly how we can reduce the customer annoyance before, during or after their jobs
For example:
+ A Chess academy that they can rely on
+ Inspiring course that can nurture their children’s enthusiasm
- Gain creator: It describe what customers can gain after using the product/service
For example:
+ The pride of their children
+ The peace of mind when the children develop and be able to apply the skills in daily life
5. Channels
Channels in the model help the organization communicate, distribute and sell the products/services to the customers. In other words, it helps to deliver the value to the customer segments.
For example:
- Owned media: Fanpage and website
- Udemy
- Leaflet, brochure at Elementary Schools
- Location marketing and sale
- Free demo class at Elementary Schools
6. Customer Relationships
Simply, it is similar to the Positioning in Marketing. In the book, the author defined this term as the types of relationships a company establishes with specific Customer Segments. Relationships can range from personal to automated and they can be driven by the motivations:
- Customer acquisition: Finding new customers
- Customer retention: Keep the current customers
- Upselling: Sell more products or higher prices to the current customers
In my case, my business is new, so the motivation is customer acquisition. My company will try to communicate the image as chess experts, kid lovers, and inspiring coaches.
7. Key activities
These are the most important activities to make the business model work. It is simple to build this block if we have already got the clear value propositions.
With my project, at first we need to create the products and services as building the syllabus, training our teachers, creating the videos and materials for online teaching.
Also, we have to communicate our value as we could make their kids enthusiastic in chess which can benefit their thinking in daily life so that the parents can get peace of mind.
Last but not least, free classes and sponsorship for the elementary schools are also the way to promote and communicate our company.
8. Key resources
To do all of the things above, we need the key resources which are the most important assets, they can beÂ
- Teaching materials like chess boards, chess pieces, wall chess boards
- Chess teachers
- Venues
- Website, fanpage
9. Key partners
This block describes the network of suppliers and partners that make the business model work.
Our chess academy model requires some key partners like
- Elementary schools staff and teachers
- Designers, producers
- Freelance chess teachers
10. Revenue streams
It represents the cash a company generate from each customer segment.
Because our chess academy has two platforms: Online and at class so there are two different incomes.
11. Cost structure
Simply, this term describes all cost used to operate the business model.
In our case, it can be the salary for the chess teachers, marketing cost, venue cost, etc.
12. Some notes when using the BMC
BMC is not a stable model so that we should not fall in love with it after the first creation. Instead, before launching, we have to test it with small scale because our hypotheses on the customer segments are not always true. After realizing the wrong points, fixing it and changing some blocks of the model are necessary. Even after launching, the BMC still keep evolving to adapt the change of the micro-economics, industry as well as the change in the customer segments.
Finally, I hope that you can find some interesting information through my post. If you are interested in this, just go to the Coursera course I introduce at the start of the note. After going through that course, I really recommend that you should reading 2 books Business Model Generation and Value Proposition Design below to reinforce your knowledge.
