Radar for Business: Adapting the Business Model Canvas for Strategic Planning
In the dynamic world of business, the Business Model Canvas (BMC) has emerged as a strategic management tool that allows professionals to develop and sketch out new or existing business models. It is a visual chart like a business snapshot that describes a firm’s value proposition, infrastructure, customers, and finances. However, the BMC has some objective limitations because of its static nature. This article will guide you through a new proposed framework that leverages BMC with dynamic components and new visual representation for better strategic business planning.
Some History
The nine “building blocks” of the business model design template that came to be called the Business Model Canvas were initially proposed in 2005 by Alexander Osterwalder, based on his PhD work supervised by Yves Pigneur on business model ontology. Since the release of Osterwalder’s work around 2008, the authors have developed related tools such as the Value Proposition Canvas and the Culture Map, and new canvases for specific niches have also appeared.
Understanding the Business Model Canvas
The BMC is divided into nine segments:
1. Value Propositions: What core problem does your business solve? What value do you deliver to the customer?
2. Customer Segments: Who are your target customers?
3. Channels: Through which channels do your Customer Segments want to be reached?
4. Customer Relationships: What type of relationship does each of your Customer Segments expect you to establish?
5. Revenue Streams: How does the business earn revenue from the value propositions?
6. Key Resources: What unique strategic assets must the business have to compete?
7. Key Activities: What uniquely strategic things does the business do to deliver its proposition?
8. Key Partnerships: Who are your key partners/suppliers? What are the motivations for the partnerships?
9. Cost Structure: What are the business’ major cost drivers? How are they linked to revenue?
Step-by-Step Guide to Using the BMC
Step 1. Ideation
Begin by brainstorming ideas for each segment. Use sticky notes or a digital tool to jot down ideas that can be easily moved around as your understanding of the model evolves.
Step 2. Sketching the canvas
Draw the BMC on a large surface and place your ideas accordingly. This visual representation helps in understanding the interrelations between different segments.
Step 3. Defining the value proposition
Focus on the value proposition, as it is the cornerstone of your business model. Ensure that it aligns with your customer segments’ needs and wants.
Step 4. Identifying customer segments
Define your customer segments and understand their needs deeply. Tailor your value proposition to solve their specific problems.
Step 5. Mapping out channels and customer relationships
Determine the most effective channels to reach your customers and establish the type of relationship you want to build with them.
Step 6. Revenue streams and cost structure
Identify how each value proposition will generate revenue. Subsequently, outline the cost structure and how it supports the business model.
Step 7. Key resources, activities, and partnerships
Detail the resources, activities, and partnerships essential to delivering your value proposition.
Step 8. Testing and iteration
Test your business model in the real world and be prepared to iterate based on feedback and changing market conditions.
Capability and Limits
The BMC has been characterized as static because it does not capture changes in strategy or the evolution of the model nor much detail about the interaction between the components and how this makes the model work. Some limits of the template are its focus on organizations and its consequent conceptual isolation from its environment, whether this is related to the industry structure or to stakeholders such as society and natural environment.
However, despite its rigor it is still static in nature (e.g. Baden-Fuller & Morgan, 2010) and does not capture changes in strategy or the evolution of the model. To this end, some authors extended Osterwalder and Pigneur’s (2010) business model canvas by adding two more dimensions, namely change in offering and change in strategy.
Opportunity Definition
Although BMC is static by its nature, it gives an opportunity to adapt itself for the assessment of the business dynamic characteristics. That means that a new framework developed on the BMC basis can reflect a time-related set of states of a firm (or even a person).
In the context of business management, the dynamic elements derived from the Business Model Canvas (BMC) that demand the attention and efforts of business operators are as follows:
- Execution of key activities: This encompasses activities such as community engagement, innovation, product creation, transactions (buying and selling), ridesharing, freelance services, education, and addressing environmental issues.
- Maintenance of channels and customer relationships: This involves effective communication and interaction with customers to sustain and enhance relationships.
- Collaboration with partners: This includes cooperation and coordination with business partners to achieve mutual goals.
- Management of key resources: This pertains to the strategic assets essential for business competitiveness, including human resources and goods.
- Optimization of revenue streams and cost structure: This involves the strategic management of income sources and expenses to maximize profitability.
These elements are critical for business operators to monitor and manage. An idiom says: It should be on your RADAR. A sunburst diagram is proposed as an optimal visual representation, where the radius signifies time and the sectors represent the various BMC elements, indicating areas of focus and effort.
How to Read
To analyze the example provided, we begin by examining the primary components.
The radius of the circle represents the timeline, which can be segmented into various periods such as months, years, or decades.
Each circular sector corresponds to a specific focus or effort item.
The angle of the circular sector indicates the volume of effort or attention that should be allocated periodically.
By moving from the center to the edge of the circle, we can observe how the volume of effort changes over time. This analysis can be conducted for:
The past: To review and analyze previous experiences, identifying patterns and lessons learned.
The future: To plan activities and set milestones, ensuring strategic alignment and resource allocation.
Depending on the purpose and the items represented by the sectors, a critical angle can be established for each item. This critical angle signifies the point at which a decision must be made to adjust efforts and restore balance.
Practical Application
Data collection: Gather historical data and future projections for each focus item.
Visualization: Use software tools to create the sunburst diagram, plotting the timeline and effort volumes.
Analysis: Examine the diagram to identify trends, peaks, and troughs in effort allocation.
Decision-making: Use the critical angles to pinpoint when adjustments are necessary to optimize performance and maintain balance.
Benefits
Enhanced Strategic Planning: Provides a clear visual representation of effort distribution over time, aiding in strategic decision-making.
Resource Optimization: Helps in identifying areas where resources can be reallocated for better efficiency.
Proactive Management: Enables early detection of potential issues, allowing for timely interventions.
By incorporating these elements, analysis becomes a powerful tool for both retrospective evaluation and future planning, ultimately leading to more informed and effective business management.
Now you can see that this diagram is better suited for dynamic resource-consuming items.
How to Build
To construct a diagram, adhere to the following guidelines:
Selection of the object: Identify the subject of analysis, which could be a business entity, personal life aspects, or other areas of interest.
Identification of items: Determine the specific elements or activities to be represented in the diagram.
Determination of the time period: Choose the appropriate timeframe for the analysis, such as months, years, or decades.
Placement of items on the diagram: When positioning the items on the diagram, strive for consistency by keeping the same item in different time frames as close to each other as possible. This approach facilitates easier reading and analysis.
By following these steps, the resulting diagram will provide a clear and organized visual representation, aiding in the effective analysis of the chosen object.
Conclusion
The Business Model Canvas (BMC), while inherently static, offers significant potential for adaptation to assess dynamic business characteristics. By developing tools based on the BMC framework, it is possible to reflect a time-framed set of states of a firm, thereby capturing the evolving nature of business operations.
Key activities such as community engagement, innovation, product creation, and various transactions, along with maintaining customer relationships, collaborating with partners, managing key resources, and optimizing revenue streams and cost structures, are critical elements that demand continuous attention from business operators. These elements should be consistently monitored and managed to ensure business success.
The proposed sunburst diagram serves as an optimal visual representation, where the radius signifies time and the sectors represent the various BMC elements, indicating areas of focus and effort. This diagram facilitates the analysis of effort allocation over time, enabling both retrospective evaluation and future planning.
By following a systematic approach to constructing and analyzing the diagram, business operators can enhance strategic planning, optimize resource allocation, and engage in proactive management, and can enrich business analysis/consunlunsy tools for professionals. This comprehensive analysis tool ultimately leads to more informed and effective business management, ensuring sustained competitiveness and growth in a dynamic business environment.
