The Business Model Canvas

Your constantly-updated definition of the Business Model Canvas and collection of videos and articles
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What is the Business Model Canvas?

The business model canvas is a tool designers use to map out a business or product’s key actors, activities and resources, the value proposition for target customers, customer relationships, channels involved and financial matters. It gives an overview to help identify requirements to deliver the service and more.

“A business model describes the rationale of how an organization creates, delivers, and captures value.”

— Alexander Osterwalder, Co-creator of the Business Model Canvas  

Learn about the business model canvas and how it helps in design.

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The Business Model Canvas – Flexible Chart, Early-Warning System and More 

In service design, two tools are essential to use early in your design process: the business model canvas and the value proposition canvas. You can use the business model canvas to build an overview of changes to be made to an existing business (e.g., a merger) or of a totally new business opportunity or market gap. At the start of your design process, it’s vital to map out the business model of your service to see how it will fit into the marketplace. You’ll also need to ensure what you propose can bring maximum value to both your customers and business, and keep doing so in terms of customer retention, profitability and more.

To gain the most accurate vision of a proposed product or service, it’s essential to understand all the components and dynamics of not only the customer experience but also the service as a whole ecosystem. This ecosystem contains all the channels and touchpoints that must work together to deliver and sustain maximum value to the customer.

This canvas gives you several important advantages, namely these:

  • It’s collaborative – so you can bring the various partners together on the same page to generate and analyze ideas, and have an early testing ground for concepts before you advance to service staging a prototype.

  • It’s human-centered – so you can keep close track on how to create and maximize value for customers as well as stakeholders and other partners.

  • It makes it easier to collect rich data – if you have a clear purpose and strategy in mind. 

A business model canvas typically contains 10 boxes:

  1. Key Partners – The people who will help you fulfill the key activities, using the key resources. 

  2. Key Activities – Those vital actions that go into the everyday business to get things done; these are all the activities needed to realize and maintain the value proposition, and to power everything else involved.

  3. Key Resources – The tools needed to get those things done, stretching across all areas the canvas covers to include, for example, customer retention.

  4. Value Proposition – The item you think will create value for your customer: e.g., a new idea, a price drop. This is a summary of what your business will deliver to customers, and feeds into the value proposition canvas, the tool you’ll use to expand this.

  5. Customer Relationships – Where you envision the relationship each customer segment expects: e.g., customer acquisition, retention and upselling (i.e., How do you get customers? How do you keep customers? How do you continue to create value for them?).

    (Note: boxes 5 and 4 are closely linked as everything you do revolves around retaining the customer and considering the customer lifecycle.)

  6. Customer Segments – Your most important customers (e.g., seniors); consider the value of personas here.

  7. Channels – How you deliver the value proposition. Will it be online, through physical means or a combination? Here, you identify which channels are the best (both desirable for customers as well as cost-efficient and cost-effective for the brand).

  8. Cost Structure – Here you find the most essential cost drivers. This allows you to consider the return on investment (ROI).

  9. Revenue Streams – Where you find potential revenue sources (e.g., advertising). 

  10. Sustainability – How sustainable your offering is overall, to the environment, to the social good, etc.

© Strategyzer AG, modified, CC-BY-SA-3.0

How to Build a Business Model Canvas

For the best results, follow these guidelines and aim to fill in all the gaps, looking out for cause-and-effect relationships that run between boxes/throughout:

  1. Complete the top seven boxes (Key Partners to Customer Segments) – using all the information you can gather from your research.

  2. Complete the next boxes: 

    1. Cost Structure – Determine the cost drivers from the Key Partners, Activities and Resources boxes; and

    2. Revenue Streams – Determine these from the Customer Relationships, Customer Segments and Channels boxes.

    Once you have established these, you can work to estimate them in monetary terms.

  3. Complete the Sustainability box – according to the insights you’ve found.  

Here’s an example of a business model canvas as a work in progress:

© Interaction Design Foundation, CC BY-NC-SA 3.0

Overall, remember your canvas is a flexible tool. It’s also a living document that you can revisit and use to find the most effective alternatives. With a clear sense of goals, a keen eye for detail and ear for input, and a readiness to refine this canvas, you can use it to fine-tune the best service prototype every time.

Learn More about The Business Model Canvas

Take our Service Design course, featuring a template for service blueprints.

Read this example-rich piece by experienced strategy designer Justin Lokitz for tips on using the business model canvas.

Find some additional tips on how to make the most of your business model canvas here.

Questions related to the Business Model Canvas

What are the key components of the Business Model Canvas?

First, there are customer segments, which define the different groups of people or organizations a business serves—or will serve. Second, value propositions enter the picture, which describe the unique benefits and solutions the business will offer each customer segment. Third, there are channels, which outline how a company will deliver its value proposition to customers—for example, online or via retail stores.

For the fourth component, you've got customer relationships—a critical element (not that any of the others are any less so) that explains how a business interacts with customers—for example, self-service or through personal support. Fifth are revenue streams. These identify how the business earns money from each customer segment. The sixth component is key resources, which lists the assets—which could be physical, intellectual, human, and/or financial—that it will take to create value.

For the last three (traditional) components, you’ve got key activities, which cover the essential tasks a company has to perform to deliver its value proposition; key partnerships, which include external organizations, suppliers, or partners that help the business function, and—last, but not least—cost structure, which details the expenses involved in operating the business.

Sustainability is the final component on (or in) some versions of the BMC, and it’s all about how sustainable your offering is overall, to the environment, to the social good, and so on.

A vital thing to remember when you’re using the BMC is to make customer validation a priority, so be sure to test your assumptions early on by engaging real users.

Watch as CEO of Experience Dynamics, Frank Spillers explains how to use the Business Model Canvas:

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How does the Business Model Canvas differ from a traditional business plan?

The Business Model Canvas (BMC) is a fast, flexible, and visual way to map out a business, while a traditional business plan is a detailed and text-heavy document that outlines every part of a business in depth.

The BMC focuses on nine key elements—like customers, revenue, and partnerships—and sometimes a tenth (sustainability), and it helps teams brainstorm, test ideas fast, and adapt. Not for nothing, then, do startups and innovators use it to pivot quickly without needing to rewrite long documents.

A traditional business plan includes detailed financial projections, market research, and long-term strategies. Investors and banks often require it for funding, and it takes time to write and isn’t easy to change.

The key difference is that a BMC is lean and action-driven, while a business plan is comprehensive and structured. So, it’s best to use the BMC for big-picture thinking and quick iteration, while a business plan may be better when you’re seeking investment or long-term planning.

Take our Service Design course, featuring a template for service blueprints.

What are the benefits of using the Business Model Canvas in product and service design?

The Business Model Canvas (BMC) is valuable for brands and teams because it helps them visualize, test, and improve a product or service quickly. It keeps ideas clear and focused by breaking them into key parts, like customers, value, and revenue. For designers, the BMC is helpful for seeing the big picture and spotting weak points early, and another massive benefit is how it makes collaboration easy because everyone works from the same simple, one-page tool. Changes happen fast, without any need to rewrite long documents.

What’s more, the BMC connects product design with business goals, and teams can align on customer needs, pricing, and marketing before launching, a vital “safeguard” that helps prevent costly mistakes later.

For services, the BMC helps map out user experiences, partnerships, and delivery methods and ensures the service stays useful and profitable. How valuable the BMC is for 21st-century products and services is all but impossible to overstate, not least since it saves time, improves teamwork, and helps designers build products and services that succeed (and therefore saves money and reputation, too, since they’re brands that are more likely to do well).

Watch as CEO of Experience Dynamics, Frank Spillers explains how to use the Business Model Canvas:

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How can UX/UI designers use the Business Model Canvas to align design decisions with business goals?

UX/UI designers can use the Business Model Canvas (BMC) to make sure their designs support business goals when they map out key elements like customer segments, value propositions, and revenue streams, and—from that—they’ll be able to understand what the business needs are and how users interact with what the brand’s offering them.

For example, if the revenue stream depends on subscriptions, designers can focus on a smooth sign-up flow and upgrade options. If the value proposition is convenience, meanwhile, designers can simplify navigation and reduce friction.

Another great benefit the BMC offers in the “department” of aligning decisions with goals is how it also helps designers collaborate with other teams—and they can align their choices with marketing, sales, and product strategy. From using the BMC, UX/UI designers can make sure that every design choice—from button placement to user flowssupports both user needs and business success, so keeping the business profitable while they make better user experiences that give users what they’re after in a design, and delighting them enough to convert into loyal brand supporters.

Watch as CEO of Experience Dynamics, Frank Spillers explains how to use the Business Model Canvas:

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How does the Business Model Canvas help in defining user personas and customer segments?

The Business Model Canvas (BMC) helps teams identify and understand their target users by breaking down customer segments and value propositions—and so spurs brands on to define who their customers are and what problems they need to solve.

From mapping out customer segments, teams group users by shared traits, like age, behavior, or needs—something that makes it easier to create detailed user personas that reflect real customers.

Watch as Author and Human-Computer Interaction Expert, Professor Alan Dix explains important points about personas:

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The value proposition section connects in a direct way to these segments, and it helps teams match products or services to user needs and get it right. If a company serves both students and professionals, for instance, then the BMC shows how each group gets value in different ways. This process is another effective guardrail to help brands not make the mistake of designing for “everyone” and instead focuses on real users—and so, it helps teams prioritize features, messaging, and user experiences that matter and reflect in long-term success as the products and services they design, develop, and release fit real customer needs and drive engagement.

Take our Service Design course, featuring a template for service blueprints.

Can the Business Model Canvas be used to improve existing products or services?

Yes, if you’ve got an existing product or service, you can analyze and improve existing products or services with the BMC—and a huge benefit lies in how it gives a clear, one-page view of how a business operates, and so makes it easier to spot weak areas and find new opportunities.

From reviewing the customer segments, teams can check if they’re serving the right audience or if new customer groups exist. Then the value proposition section helps them see if the product still solves real problems or if it needs an update. Another plus is how the BMC also highlights inefficiencies. So, if a business spends too much on key resources but gains little in the way of revenue streams, it can adjust its pricing, cut costs, or improve offerings.

For services, meanwhile, the BMC helps businesses refine customer relationships and delivery channels. So, for example, if users struggle with support or usability, teams can improve these areas without guessing and taking redesign missteps. The BMC is a powerful tool for making smarter decisions, keeping products and services relevant, profitable, and user-friendly—no matter if the brand is just about to come into being, is a fresh startup, or has been “up and running” for some time.

An example of a brand that’s achieved this is Netflix, which began as a DVD-rental service and successfully adjusted to a new market landscape when content streaming replaced the old model of renting DVDs. Netflix “revisited” its model of convenient rentals with one of on-demand streaming and self-produced content and shows to delight audiences to the point that it’s a major household name and industry heavyweight.

Take our Service Design course, featuring a template for service blueprints.

What are common mistakes when filling out a Business Model Canvas?

One big mistake when filling out a BMC is being too vague—as in, instead of clearly defining customer segments, a designer or stakeholders write “everyone” or “all users,” which makes it hard to target the right audience.

Another mistake is focusing too much on the product and ignoring the business side. For example, teams might describe features, which is all right, but forget to explain how the product creates value or makes money.

Some businesses make the “fatal” error of not testing their ideas—they fill out the BMC based on assumptions instead of real customer feedback, leading to poor decisions, rather like building an escalator to nowhere because you fail to connect what you want to send up to the people you think want it and it misses the mark completely because they’re not at that place to receive it.

Another common issue is ignoring key partnerships, and many businesses fail to list important suppliers, collaborators, or distributors that help them scale. Last but not least, some teams treat the BMC as a one-time exercise instead of updating it regularly, a big faux pas because markets change, as does the tech involved, and the BMC should evolve with them.

Watch as CEO of Experience Dynamics, Frank Spillers explains how to use the Business Model Canvas:

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What are some popular and often-cited books about the Business Model Canvas?

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Literature on the Business Model Canvas

Here’s the entire UX literature on the Business Model Canvas by the Interaction Design Foundation, collated in one place:

Learn more about the Business Model Canvas

Take a deep dive into Business Model Canvas with our course Service Design: How to Design Integrated Service Experiences .

Services are everywhere! When you get a new passport, order a pizza or make a reservation on AirBnB, you're engaging with services. How those services are designed is crucial to whether they provide a pleasant experience or an exasperating one. The experience of a service is essential to its success or failure no matter if your goal is to gain and retain customers for your app or to design an efficient waiting system for a doctor’s office.

In a service design process, you use an in-depth understanding of the business and its customers to ensure that all the touchpoints of your service are perfect and, just as importantly, that your organization can deliver a great service experience every time. It’s not just about designing the customer interactions; you also need to design the entire ecosystem surrounding those interactions.

In this course, you’ll learn how to go through a robust service design process and which methods to use at each step along the way. You’ll also learn how to create a service design culture in your organization and set up a service design team. We’ll provide you with lots of case studies to learn from as well as interviews with top designers in the field. For each practical method, you’ll get downloadable templates that guide you on how to use the methods in your own work.

This course contains a series of practical exercises that build on one another to create a complete service design project. The exercises are optional, but you’ll get invaluable hands-on experience with the methods you encounter in this course if you complete them, because they will teach you to take your first steps as a service designer. What’s equally important is that you can use your work as a case study for your portfolio to showcase your abilities to future employers! A portfolio is essential if you want to step into or move ahead in a career in service design.

Your primary instructor in the course is Frank Spillers. Frank is CXO of award-winning design agency Experience Dynamics and a service design expert who has consulted with companies all over the world. Much of the written learning material also comes from John Zimmerman and Jodi Forlizzi, both Professors in Human-Computer Interaction at Carnegie Mellon University and highly influential in establishing design research as we know it today.

You’ll earn a verifiable and industry-trusted Course Certificate once you complete the course. You can highlight it on your resume, CV, LinkedIn profile or on your website.

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