For the last five years I have been designing, developing and improving business models for clients using the business model canvas. For a simple tool it has a vast amount of subtlety and complexity buried in it. In that it is like Go, which I still remain a novice despite my best efforts.
Unlike company financials or other tools the business model canvas offer the possibility to deeply understand how a company makes money, and why it is not. We are looking at the skeleton and how the whole body moves, rather than it’s acne or the locks of rapidly greying hair.
I wanted to use this post to briefly describe where I have taken the business model canvas over the last year and where it can go in the future.
The basic business model canvas shows the underlying business model of the company. Set out on a single page of A4 it allows anyone to quickly understand the company and what is important to it.
Using the 9 segments of the business model we are able to make claims such as. Company X makes money by delivery value Y to customer group P and generates revenue by K.
A number of people have then taken the canvas and plugged sales and costs into it to give a sense of how money flows through the business model and is created and or destroyed.
Business Model Canvas and Performance
My focus has been on looking at performance. There are many existing KPIs inside companies and these can often be mapped onto the business model canvas. The result is an instant appreciation of how well the business model, as opposed to the company, is performing.
Because everything in the business model canvas can be seen as a system failure, analysis becomes as lot easier. Improvement plans can deliver more. For example sales performance can be low due to a poor value proposition which is caused by inadequate access to key resources.
Business Model Canvas and SWOT Analysis
This performance based approach looks at the company in static terms. Of course the competitive environment is ever less static so another tool that I’ve developed working with customers is looking at the the threats and challenges that they face. Using the business model canvas we are able to go well beyond traditional SWOT analysis.
This is effective because you see where and how the impact is on the model rather than thinking that ‘company’ has a strength or weakness. It is a lot more granular and as a result can be far more easily addressed by leaders.
Business Model Canvas and Competitive Analsysis
The latest work that I am doing is using the business model canvas for competitive analysis. For many companies data comes back from the sales and marketing teams that a competitor is doing X. This is the what.
What we are able to understand as we probe them with the business model canvas is the why? Done correctly it enables us to simulate how a competitors management team is thinking about their key problems and consequently helps us to understand why they are doing what they are doing. This makes the what easier to disrupt or counter.
These are all linked in my 5 Step business model innovation workshop
Where Next with the Business Model Canvas?
One of the areas that I am fascinated with is business model depreciation. Every business model depreciates. How can we measure the rate of depreciating and the risk of catastrophic depreciation? Is it even quantifiable?
Another area that I’m looking at is how companies transition from one business model to another. IBM has famously done it multiple times. Kodak, infamously almost managed it, and then failed spectacularly (it sold 40% of all digital cameras at one point).
Finally the business model canvas offers lots of opportunity to be the core dashboard for running a company. Here I’m looking for companies willing to experiment a bit and find out what the best ways of doing this are. If this sounds interesting let me know