Top Stories | Tue, 31 Dec 2024 04:21 PM

How to Use the Business Model Canvas for Strategic Planning

Posted by : SHALINI SHARMA

The business model canvas is to say the least one of the most interesting perspectives that any organization can ever be in possession of. For starters, it is a graphical representation that allows one to learn and test the inner workings of a business quite easily. This is very useful for a new venture seeking to cement its position or even an established company trying to reshape its strategy. This is because through the BMC, it can get a better understanding of its operations, customers, value offerings and so many other areas of interest to it.

So equally here we want to look specifically and show how you can incorporate the business model canvas to your strategic planning in the most practical and easy way possible.

What are the Basic Elements of Business Model Canvas?

The very first thing to be delivered before the précising of the Business Model Canvas is the fact that, it is important to understand the components of the Business Model Canvas. The BMC consists of nine crucial elements which are broken down in the following order:

Customer Segments (CS): The various demographic groups or organizations that make up the customers’ base of the firm, for instance, can be household consumers, various industries or even particular market niches.

Key Performance Indicators: This is what makes your business unique in the marketplace. It’s what adds value to the customers in such a way, that he is able to solve a problem or a need.

Market segments: Outlines the relationship with the organization or individual. Self-service or personal services.

Key Partners: This may include selling products, offering licenses, subscription, or any other money-making ways.

Cost Structure: Those elements make up physical factors, intellectual, technological, and skilled employees.

Revenue Streams: The key element in trying to make your model work. This might include developing new goods, marketing them, selling them, or supporting the customers.

Key Activities: The external parties that can help your business grow. They may be suppliers or joint ventures, even business partnerships.

Customer Segments: Different alternative ways through which you can offer services to your clients. Be it through websites, physical shops, sales reps or even partnerships.

Cost Structure (CS): The expenses incurred while running your operations. They could be fixed, variable, operational expenditures, or costs of key resources, activities, and partnership.

One, having identified fundamental elements of the BMC, we are ready to look at the next section where we aim to address the ‘how’ of using the tool appropriately in strategic planning.

Specify Your Actual Business Model

It’s hard to develop a strategy if you don’t know your strategy. Begin using the BMC by recording what you already know about your organization. Take time to answer all nine issues, analyzing how things are currently carried out in the practice. For instance:

Who are your customers, and what segments do they fall into?

What is the core value your business has been selling to them?

What channels are you using to deliver your products or services to them?

This exercise will definitely help identify the major issues that you are currently facing as a company. It will make visible such strategic issues like how Gaps are, particularly, channels that perform poorly, and areas of your value proposition that have little or no differentiation.

Search for Strategic Possibilities Noting that you have a diagram of your current business model, let’s dwell on the matter of innovation and business development. Strategic planning is not only improving what you are already doing, but also the search of other possibilities. 

The Business Model Canvas is of use for this by letting you consider the possibilities arising from each component and ask: Can we target additional customer groups or other geographical regions Are their new revenue sites that we can pursue like, for example, the introduction of premium or subscription services?

Can we reinforce our critical relationships or adopt new technologies?

Consider how each of the nine blocks could be changed or improved so as to create new levels of opportunity. 

In the same regard, can you consider modifying your distribution channels to include e-business or grow your e-content strategy?

Make Your Model Support Your Business Strategy Any strategic planning should never overlook your general business objectives.

Are you targeting expansion across borders Being at the forefront of innovative ventures?

Or targeting high-end customers with exclusive services?

The Business Model Canvas precisely does that, it makes it possible for all the parts of your business to be directed towards attainment of the larger goals.

As an example, if you are focusing on becoming more customer-oriented, the activities in the Customer Relationships block could be engaged in – by providing more tailored services or even through engaging customers more through electronic means.

Conduct SWOT Analysis for Your Business Model

In fact, Business Model Canvas gives a good deconstruction of ‘SWOT’ analysis (strength, weaknesses, opportunities and threats). It helps, therefore, to take a moment to assess each of the components of your business model using this viewpoint: Strengths: What positive actions are you undertaking? Perhaps some of your Key Resources such as intellectual property or your Value Proposition are beneficial to the company.

Weaknesses: What are the weaknesses of your model are there channels that are unsupported or the partnerships are misplaced?

Opportunities: Identify gaps in such trends such as sustainability and even economies of the future which your customers are crying out for.

Threats: Keep in mind the scale of problems like other companies, policy changes or even customers’ changes.

This analysis will let you know which components of the metrics can be optimized, augmented or even revamped completely.

Evaluate and Test the Hypothesis

One huge benefit attributed to the BMC for strategic planning is the opportunity it provides to test and verify the assumptions behind your particular business model. This becomes especially handy when trying to establish if a new strategy has a good chance of succeeding. For instance, if one is contemplating the introduction of a new service, he or she should design a separate BMC that captures that new service. Then, contrast it with your existing one to establish whether the new idea is workable within the existing model as well as within the overall scheme of things.

This strategic approach to testing helps to manage risks by enhancing the probability that such strategic decision processes will yield the expected results.

Collaborate and Get Input Across Teams

The Business Model Canvas is designed as a participatory tool. Do not hesitate to ask for contributions from different departments marketing, operations, finance and so on as you develop your BMC. Everybody has an angle and that angle can help you perfect your strategy.

For example:

The marketing department may assist in deciding which customer segments to aim for.

Sales teams can give suggestions about which offers are appealing to the customers.

Operations may point out performance constraints on other critical activities that are important to your productivity.

In this way, you will develop broader and more useful strategic processes through joint efforts.

In The End, Review and Make Changes

Once the strategic plan is drafted it should not be considered a onetime activity only. This is a perpetual activity, so the BMC enables you to monitor your implementation efforts and make changes in your strategy as time passes. Make it a practice to periodically revise and modify your business model so that it does not lose its applicability as the market, customers, or the organizational objectives change. 

If done well, through this iterative process one is bound to remain relevant and competitive in the long run.

Reasons Why Business Model Canvas Has Become So Popular Over the Years

Emphasis: The BMC is a visual template which simplifies the comprehension and communication of a particular business strategy to the stakeholders within and outside the organization.

Efficiency: The BMC is not a static document and it allows for changes and inventions quickly. If you want to change one part of your business strategy, or want to redevelop it and invent an entirely new one, it is easier to do that with the BMC.

Communication: It promotes cooperativeness between different business units to make sure that they are all working towards the same business objectives.

Creativity: The BMC also stimulates the imagination of the users. When evaluating each component of the business model, you can find additional ways that may free up other processes that would otherwise be constrained.

Concluding Remarks

The Business Model Canvas, is not only a framework to be used. Instead, it is a way of thinking that can help form business policies. This, strategic approach, enables one to maintain a clear view of the various components of the organization, so that informed choices can be made, and considered for optimization, areas that would fit within the firm’s strategy in the long-term.

Regardless of your situation, whether you’re a starting business aiming to reach the market with your first product or you’re an established organization on the verge of a big shift the BMC is suitable because it will let you build a viable business. Therefore, do not shy off spending some time and looking at your enterprise through the lens of the Business Model Canvas, as it is arguably the most appropriate method for strategic planning in this era of high levels of competition and change business environment.