Business Model Canvas – How to Arrive at a Robust Business Model
Business Models, StartUps, Funding are all the terms that you will hear when speaking to startup ecosystem follower. No one will ever agree that they do not follow it (no matter how little they follow it). Thus the first words that come out of a newbie is Business Model of X. He or she thinks that they know about the business model of the company more than its founder and start criticizing and evaluating it for no reason whatsoever.
Well we are not gathered here to discuss about newbies or any of their tantrums, we are here to understand what a Business Model Canvas is and how it can be used to create a profitable business model out of a simple idea and couple of number. Lets dive down and understand what it actually is.
Business Model Canvas
Who is this little fella, almost every one of my consulting startups ask me this at the beginning of our gig.
Well before we move to what the Business Model Canvas is, we should seriously read through on what a Business Model Actually is.
No it is not the IDEA itself and,
No it is not the profits that the business will make, it is essentially:
“The exact business activity of the company coupled with the customer to be targeted for and the ways in which the customer will be reached out. This boiling down to numbers of cost required for customer acquisition and the business generated out of that particular revenue line is called a Business Model”
Thus the Business Model Canvas is a Chart containing all critical elements of the business in one single sheet of paper highlighting the business activity (core of making money), key partners in accomplishing the same, revenue lines, cost heads and prime customer segments who will eventually give business. The various elements of the Canvas are described in details below. (For understanding purpose we will take example of Ola Cabs and make its business model canvas).
Key Partners in the Business Model Canvas
Key Partners are the part of your startups ecosystem without which your business simply does not exist. Consider them as the fuel that keep your engine running. For Ola Cabs – The Canvas will have the following as Key Partners:
- Car Selling Companies / Car Leasing Companies
- Technology Partners (Devices, GPS etc)
- Financing Companies to Finance the Cars
- Online Payment Companies
- Garages / Service Centers
Key Activities of the Business Model Canvas
Key Activities are the Bread and Butter of the Company. It is the core business which defined the existence of the company in the financial jungle. For Ola, following are the Key Activities:
- Ensure On-time, Safe, Prompt, Courteous, hassle free Rides to Customers
- Ensure Up-time of the Infrastructure for the cabs to be booked
- Ensure safety of Drivers / Passengers
- Driver Payments
- Customer Refunds
- Online and Offline Marketing for Generating Business
Key Resources of the Business Model Canvas
Key Resources for the Canvas are the bare minimum things without which the company can not function smoothly, For Ola following are the key resources:
- Good Network Support (Internet)
- Availability of Drivers
Value Proposition of the Business
What is the one thing that separates you from the rest of your competition?
- Ensure rides at Door Step
- Sufficient Cabs for Peak Time
Customer Relationship Management of the Business
What measures are being taken to ensure customer relationship is intact and we stay at the top of the customers head when he looks to book a Cab?
Having a Good CRM – today or tomorrow – is a part of the Business Model Canvas.
- Customer Data Management (DOB etc)
- Customer Account Regular Update
- Customer Update via Email and SMS on ride completion
- Prompt Refund processing
Delivery channel for the Business Activity
Where all will the delivery of the service be done through?
Which essentially means as for – Which all modes can the customer come to you and can book the service on their own?
- Android app
- iOS app
- BlackBerry app
- Windows app
Tele Booking Desktop booking
Customer Segment in the Business Model Canvas
Define the customer segments as to which all customer types would use your product or service.
Please be as specific as to which customer segment will form which revenue line and will contribute to what portion of the top line of the company.
- People using Shared Cab
- People using Personal Cab
- People using Micro / Mini (Lower end of the price curve)
- People using Sedan / Prime (Higher end of the price curve)
Costs Involved in Setting up the Business
All Businesses come with an initial outlay called Capex – Capital Expenditure and the Opex – Operating Expenditure.
These need to be segregated properly and evaluated properly before hand, the costs involved in Ola Cabs Business Model Canvas are:
- Legal Costs
- IT Costs
- Marketing Costs
- Rentals and other Office Expenses
Revenue Streams of the Business
Where all will the money come from into the company. Which all Revenue Streams will contribute most to the Top Line is an important factor to consider while making the Business Model canvas of the organization.
See Detailed Explanation on Business Model Canvas of Ola : How does Ola Make Money
There is some other business model canvas called as the Lean Canvas as well. Not pretty much different I would say but use of different terminology and addition of couple of blocks on the canvas diagram, that’s it. While I feel the current analyzed one is the fundamental of them all and is universally applicable, you are free to take your own judgement.
This completes the tutorial on how to make a business model canvas, hope you now have a complete understanding of how to make a canvas for your business. Please do let me know in case you have any doubts over the same via the comments form below.
Disclaimer: The understanding of the How to make a Business Model Canvas is of the Author’s himself, neither any company or qualified consultants have confirmed or explained the same to the author and the descriptions, stats, facts and figures, if used, are either obtained through secondary web research or interrogation of the users / founders or other resources on the web. Please use your own discretion to use this info when required and by continuing to read you agree to indemnify the author & Unicornomy from all liability arising out of using this info on your own.