Using the Business Model Canvas in Enterprise Architecture

The Business Model Canvas, created by Alex Osterwalder, is a powerful, open-source tool for developing and documenting business models. It offers a one-page view into how an organization creates, delivers, and captures value, and enables you to target opportunity or drive improvement by focusing on a company’s business model.

Just as we’ve come to practice different technical patterns of enterprise architecture, organizations employ different business models, and they may employ more than one model. They may be nuanced. That is, an organization may exchange value with more than one customer-type; the model may be complex, a one-off, or highly constrained. In the end, successful value exchange (for example, leads passed, purchases made, revenue earned, or even likes given or stories shared) goes to the very crux of the matter for any organization looking to transform, reduce costs, increase revenue, or simply engage customers in new ways.

The canvas can be used in many ways and can even be combined with other tools. With experience, an enterprise architect can use the Business Model Canvas to:

• Capture a current state representation of the business
• Inform the scope of a capability assessment
• Identify critical solutions required for capturing value or servicing customers
• Add value to (or overlay with) a business context diagram to emphasize points of value exchange

For greater depth and breadth on the topic — including training on the canvas and a number of other business innovation products — be sure to visit the Strategyzer team.

The nine blocks of the Business Model Canvas

The Business Model Canvas brings together nine key elements of a business model, making it possible to observe and describe the relationships of those nine elements to each other. As architects, plotting the relationship of one element to other elements is familiar territory. We align patterns, find gaps, map gives and gets, and understand strategy by assessing the relationships of the critical systems in an architecture landscape. The Business Model Canvas is yet another tool to help us convey understanding.

Many enterprise architects hang their hats on “People, Process, Technology,” the popular PPT framework popularized in the 1990s. The roots of PPT extend further back, to the 1960s and the Diamond Model from Harold Leavitt. PPT and the Diamond Model are useful, for certain, but the canvas offers something that every enterprise architect should value. In the aggregate, the nine blocks tell the story of the organization, how it goes to market and aims to create, deliver, and capture value. Going one step further, Osterwalder and Pigneur explain the beauty of the canvas succinctly, “the nine blocks cover the four main areas of a business: customers, offer, infrastructure, and financial viability.” For enterprise architects, it is a much-needed update to PPT, empowering us with a tool that completes the picture, bringing our customer to the forefront of our thinking, and showcasing the importance of the customer relationship in the health of the business.

The nine blocks are:

• Customer Segments — Once you capture who your customer is, or better, who you are promising value to, you can launch into deeper discussions on topics like personas, total addressable market, and market attractiveness as well as related canvas elements, like customer relationships and channels.
• Value Propositions — The promises we make say a lot about who we are. The same holds true with a business. For those customer segments you want to exchange value with, are you promising a great burger? Fame and recognition? Are you promising a low-cost, no-frills product, or are you promising a high-touch, best-in-class experience to that segment? Or is it segments? As you work the Value Propositions block, remember that every promise comes with a cost. Be prepared to show that connection in key activities, resources, and cost structure when you get there.
• Channels — Successfully meeting customers on their terms, where and how they want to transact is an obviously important aspect of value exchange. Consider your channel. Is it mobile? Is it retail? Is it ship-to-home? Is it a combination of all three? More? Look back to your customer (segments) and understand what channels they demand. There’s additional complexity here; some channels may be intended as value-received from the customer and others are value-delivered. Moreover, there may be value-delivery channels for different types of value, for example, metered use of licensed SaaS via portal, shipping alerts via SMS, goods delivered via a partner-owned shipping service, or feedback surveys via email. For each channel the business instantiates, you must attend to concerns in data, integration, and cohesion of experience. Remember, the canvas is balanced. Channels require key resources and activities to maintain them.
• Customer Relationships — Describe the connection and interactions with each of the customer segments you identify on the canvas. Just like our own interpersonal relationships, business relationships are often complex. The business has goals for the relationship and methods to foster it, but does the customer view the relationship the same way? Does the relationship meet the expectations of that customer segment?

The relationships a business maintains can manifest in a number of ways. They may be highly focused on the transactional sale of product, turning a blind eye toward the customer’s preferences or even feedback. Some relationships feature expensive, accommodating person-to-person experiences, while others may be highly contractual, legally bound relationships based on terms and conditions. It’s often a mix.

Businesses invest in these relationships, enable them, and attend to them, so that they can create and capture value. Again, let’s be clear. Nothing is free. So when we ask, “How much does it cost to maintain that relationship?” we’re listening for the architecturally significant implications.

• Revenue Streams — How do you describe revenue? It may be recurring, stem from fees, or be highly transactional. The successful business model (hopefully) produces revenue when value exchange occurs. Ideally, revenue exceeds expenses and costs. Understand how you are completing value exchange with the different customer segments (collecting revenue). Know the different types of revenue applicable to each segment, and find ways to increase it. Easing value exchange (reducing friction in pricing, quoting, and receivables) reduces the business’ cost of revenue.
• Key Resources — Key resources are what the business needs to make all that value exchange happen.

A key resource can be people. You may want to call out specific types of people with a descriptor of some type, identifying those considered to be highly skilled, for example. For example, an experienced sales force is a critical key resource in a business dependent upon enterprise sales. Key resources may be intangible, or they may be intellectual assets. Consider the importance of brand as a key resource, and reflect upon a value proposition with and without brand attached to it. Other examples might be data, business intelligence, or copyrights and other IP. Rounding it out, you might also include key resources such as physical assets, like real estate or infrastructure, or financial assets, like cash or credit.

As you work on the Key Resources block, reflect on everything required to operate those channels, fulfill those value propositions, and maintain those relationships detailed in the canvas.

• Key Activities — Key activities are what a person or group does to make the business model run. Reflect here on which of these activities are most important. Which activities are required to fulfill your value proposition? Which activities are required for maintaining those customer relationships? Which activities are overly complex or expensive?
• Key Partnerships — A business will often look to a partner to manage or improve an important service that is beyond that business’ core expertise. Similarly, a partner might offer access to an important market or reduce risk. Whatever the case may be, the Key Partnerships block is where you identify the partners you rely upon to make the business model work.

Again, think about friction in value exchange. A partnership with less friction will be better. Ask: How is that partner integrated? How do we manage provisioning? How do we share data? How are we ensuring a cohesive experience?

• Cost Structure — Cost Structure describes all the costs required to run the business model. When working with this block, practice restraint. It is not meant to be a full telling, or full accounting, of every item, pencil, and computer bought. Instead, include here the important costs — the material costs of the business model.

All businesses aim to manage cost appropriately. Depending upon the business model, cost structure may play a more featured role. Some business models’ value propositions are entirely focused on providing the low-cost alternative. Other business models are more sensitive to one type of cost vs. another. For example, optimizing capital expenditures vs. operating expenditures is a conversation many companies face as they manage migration to public cloud and SaaS platforms.

What’s next

Using the canvas is simple. The team gathers, and working together, populates each of the nine blocks with the key elements important to that aspect of the model. Remember to practice abstraction; like your technical architecture drawings, capture the details that are material to understanding the architecture, or in this case, business model. Finally, you’ll see it coming together. Attaching sticky notes, always one element per note, the team iterates and tells the story of how the business creates and captures value.

At this point, why not try your hand with the Business Model Canvas? The canvas shines when printed out in large scale with your team attaching sticky notes, but we’ve had tremendous success using it virtually with a distributed team over Zoom. For that virtual experience, we’ve included two links below. The first link aligns to what many practitioners describe as best practice; we don’t write directly upon the canvas. The template features a starter canvas with movable, virtual sticky notes to encourage fluidity of collaboration, just as you might use it when collaborating in the room with your team. The second link provides access to the canvas without the virtual sticky notes; it’s presented in this way to ease export to PDF and provide greater support for accessibility features.

• Business Model Canvas template with virtual sticky notes
• Business Model Canvas template without sticky notes

For another perspective on the Business Model Canvas — including another template — check out this guide from Lucid.

The Business Model Canvas offers a way to keep enterprise architecture fresh and collaborative. Take some time to think about when and how you can incorporate the Business Model Canvas as a key resource within your own enterprise architecture practice to help organizations innovate — and create, deliver, and capture value.

Related resource:

• Business Model Exploration Course (Partner Learning Camp login required)