The business model canvas is a tool designers use to map out a business or product’s key actors, activities and resources, the value proposition for target customers, customer relationships, channels involved and financial matters. It gives an overview to help identify requirements to deliver the service and more.
“A business model describes the rationale of how an organization creates, delivers, and captures value.”
— Alexander Osterwalder, Co-creator of the Business Model Canvas
Learn about the business model canvas and how it helps in design.
In service design, two tools are essential to use early in your design process: the business model canvas and the value proposition canvas. You can use the business model canvas to build an overview of changes to be made to an existing business (e.g., a merger) or of a totally new business opportunity or market gap. At the start of your design process, it’s vital to map out the business model of your service to see how it will fit into the marketplace. You’ll also need to ensure what you propose can bring maximum value to both your customers and business, and keep doing so in terms of customer retention, profitability and more.
To gain the most accurate vision of a proposed product or service, it’s essential to understand all the components and dynamics of not only the customer experience but also the service as a whole ecosystem. This ecosystem contains all the channels and touchpoints that must work together to deliver and sustain maximum value to the customer.
This canvas gives you several important advantages, namely these:
It’s collaborative – so you can bring the various partners together on the same page to generate and analyze ideas, and have an early testing ground for concepts before you advance to service staging a prototype.
It’s human-centered – so you can keep close track on how to create and maximize value for customers as well as stakeholders and other partners.
It makes it easier to collect rich data – if you have a clear purpose and strategy in mind.
A business model canvas typically contains 10 boxes:
Key Partners – The people who will help you fulfill the key activities, using the key resources.
Key Activities – Those vital actions that go into the everyday business to get things done; these are all the activities needed to realize and maintain the value proposition, and to power everything else involved.
Key Resources – The tools needed to get those things done, stretching across all areas the canvas covers to include, for example, customer retention.
Value Proposition – The item you think will create value for your customer: e.g., a new idea, a price drop. This is a summary of what your business will deliver to customers, and feeds into the value proposition canvas, the tool you’ll use to expand this.
Customer Relationships – Where you envision the relationship each customer segment expects: e.g., customer acquisition, retention and upselling (i.e., How do you get customers? How do you keep customers? How do you continue to create value for them?).
(Note: boxes 5 and 4 are closely linked as everything you do revolves around retaining the customer and considering the customer lifecycle.)
Customer Segments – Your most important customers (e.g., seniors); consider the value of personas here.
Channels – How you deliver the value proposition. Will it be online, through physical means or a combination? Here, you identify which channels are the best (both desirable for customers as well as cost-efficient and cost-effective for the brand).
Cost Structure – Here you find the most essential cost drivers. This allows you to consider the return on investment (ROI).
Revenue Streams – Where you find potential revenue sources (e.g., advertising).
Sustainability – How sustainable your offering is overall, to the environment, to the social good, etc.
© Strategyzer AG, modified, CC-BY-SA-3.0
For the best results, follow these guidelines and aim to fill in all the gaps, looking out for cause-and-effect relationships that run between boxes/throughout:
Complete the top seven boxes (Key Partners to Customer Segments) – using all the information you can gather from your research.
Complete the next boxes:
Cost Structure – Determine the cost drivers from the Key Partners, Activities and Resources boxes; and
Revenue Streams – Determine these from the Customer Relationships, Customer Segments and Channels boxes.
Once you have established these, you can work to estimate them in monetary terms.
Complete the Sustainability box – according to the insights you’ve found.
Here’s an example of a business model canvas as a work in progress:
© Interaction Design Foundation, CC BY-NC-SA 3.0
Overall, remember your canvas is a flexible tool. It’s also a living document that you can revisit and use to find the most effective alternatives. With a clear sense of goals, a keen eye for detail and ear for input, and a readiness to refine this canvas, you can use it to fine-tune the best service prototype every time.
Take our Service Design course, featuring a template for service blueprints.
Read this example-rich piece by experienced strategy designer Justin Lokitz for tips on using the business model canvas.
Find some additional tips on how to make the most of your business model canvas here.
Here’s the entire UX literature on the Business Model Canvas by the Interaction Design Foundation, collated in one place:
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