Innovation & product
Business Model Canvas
A one-page visual template that describes how an organisation creates, delivers and captures value across nine building blocks, from customer segments through to cost structure, so an entire business model can be seen, questioned and redesigned in a single view.
Also known as BMC, Osterwalder canvas, Nine building blocks. First set out by Alexander Osterwalder and Yves Pigneur in 2010; the primary source is cited in full below.
- Format
- Canvas
- Level
- Business unit · Product
- Best for
- Plan execution · Evaluate options · Understand customers
- Decision stage
- Diagnose · Explore options · Plan
- Difficulty
- Intermediate
- Time to apply
- A focused half-day workshop for a serious first canvas; expect to revise it as evidence arrives.
Plate · The model
The components
Key partners
The network of suppliers and partners that makes the model work: alliances that reduce risk, secure scarce inputs or supply activities the business chooses not to perform itself.
Signals of strength
A single partner controls a critical input or channel · Partnerships rest on goodwill rather than agreement · Activities are kept in-house that a partner could do better and cheaper · Partner incentives pull against your own
Key activities
The most important things the organisation must actually do to make the model work, whether production, problem-solving or running a platform.
Signals of strength
Effort concentrates on activities customers do not pay for · An activity critical to the value proposition has no clear owner · The activity list reads as a full org chart rather than a short set of essentials
Key resources
The most important assets the model requires, whether physical, intellectual, human or financial. These are the things competitors cannot easily copy or hire.
Signals of strength
The value proposition depends on a capability nobody in the business yet has · A key resource is rented, licensed or borrowed on short notice · Brand or know-how carries the model but appears nowhere in planning
Value propositions
The bundle of products and services that creates value for a specific segment: the reason customers turn to this business rather than another, stated as the job done for them rather than as features.
Signals of strength
The proposition reads as a feature list rather than a customer outcome · One proposition is stretched across segments with different needs · Customers buy for a reason other than the one written down
Customer relationships
The type of relationship established with each segment, from personal assistance through self-service to communities and co-creation, chosen deliberately for acquisition, retention or upselling.
Signals of strength
The relationship customers want differs from the one the cost structure can afford · Retention is assumed but nothing on the canvas produces it · Every segment gets the same relationship by default
Channels
How the organisation communicates with and reaches its segments to deliver the value proposition, across awareness, evaluation, purchase, delivery and after-sales.
Signals of strength
A single channel carries most revenue and is owned by someone else · Channel margin consumes the profit the value proposition earns · Customers discover the offer through channels the business does not manage
Customer segments
The distinct groups of people or organisations the business aims to reach and serve. Segments are distinct when they need different offers, channels or relationships, or pay in different ways.
Signals of strength
Everyone is the customer, which means nobody is · Two segments with conflicting needs are being served with one offer · The most profitable segment gets the least attention
Cost structure
All the costs incurred to operate the model, and whether the model is fundamentally cost-driven or value-driven. The largest costs should trace directly to key resources and activities.
Signals of strength
Major costs serve no block on the rest of the canvas · A value-driven proposition sits on a cost base built for cheapness, or the reverse · Fixed costs assume a volume the revenue side has not evidenced
Revenue streams
The cash the model generates from each segment, and the mechanism behind it: asset sale, subscription, usage fees, licensing or brokerage. Each stream has its own pricing logic and its own margin.
Signals of strength
One stream subsidises the others without anyone deciding it should · Pricing is set by habit or by competitors rather than by value delivered · Recurring revenue is claimed but customers can leave at any moment for nothing
When it earns its keep
- You are designing a new venture or offer and need the whole model visible before committing money to any one part of it.
- An established business is under margin or channel pressure and you suspect the model itself, rather than the execution, is the problem.
- You want to compare two or three candidate business models for the same value proposition and see where their economics genuinely differ.
- A leadership team holds conflicting mental models of how the business makes money, and you need one shared picture before strategy can be discussed.
And when it doesn't
- The question is about competition or industry attractiveness. The canvas has no box for rivals; pair it with Porter's Five Forces or PESTEL for the outside view.
- You need financial rigour. The cost and revenue blocks name the moving parts; a proper model in a spreadsheet must still do the arithmetic.
- You are planning execution. The canvas describes what the model is, and a roadmap, budget and owners must come from elsewhere.
- A very early-stage venture is still searching for a problem worth solving. Customer discovery comes first; a canvas drawn before any evidence exists tends to harden guesses into commitments.
How to run it
Before starting, gather the inputs the analysis depends on:
- A clear decision about which business, unit or offer is being mapped, since mixing several models on one canvas blurs all of them.
- Evidence on customers: who the segments really are, what job they hire the offer to do, and what they currently pay.
- Working knowledge of channels, cost drivers and revenue mechanics, ideally from management accounts rather than memory.
- An honest view of the resources, activities and partner dependencies the model cannot run without.
- 1
Set the scope
Decide precisely which business model is being mapped: one company, one unit, or one offer. A brewery that wholesales to pubs and runs a taproom is operating two models, and forcing them onto one canvas hides exactly the tensions the tool exists to expose.
- 2
Map the customer side first
Fill in customer segments and value propositions before anything else, and be concrete about the job each segment is paying to get done. Every other block exists to serve this pairing, and a canvas started from the product side tends to describe the founders' enthusiasms rather than a business.
- 3
Trace delivery and money
Work through channels, customer relationships and revenue streams for each segment. Name the actual channel and the actual pricing mechanism. 'Online' is not a channel and 'sales' is not a revenue stream; the discipline is in the specifics.
- 4
Map the supply side
Complete key resources, key activities, key partnerships and cost structure. Ask what the model genuinely depends on, and flag any resource or partner whose loss would stop the business within a quarter.
- 5
Read the canvas as a system
Check coherence across the whole page. Does the cost structure match the value proposition, so that a premium promise is backed by premium resources? Do revenue streams cover every segment? The insight lives in the joins between blocks, never in any single box.
- 6
Challenge and iterate
Identify the riskiest assumption on the page, test it against evidence, and redraw. Osterwalder and Pigneur present the canvas as a design tool for generating alternatives, so sketch at least one deliberately different model before settling.
Reading the result
A single-page description of the business model: nine completed blocks, the connections between them made explicit, and a shortlist of the assumptions the model most depends on. Done well, it also yields at least one sketched alternative model for comparison.
- Read the canvas right to left: the right half (segments, propositions, channels, relationships, revenue) describes value and who pays for it, while the left half (resources, activities, partners, costs) describes what it takes to deliver. The model works only if the two halves balance.
- Look for blocks doing no work. An entry that could be deleted without changing any other block was probably filler, and a block the whole model leans on deserves the next round of attention.
- Treat the finished canvas as a set of hypotheses ranked by risk, and test the riskiest first. A canvas that is never revised after contact with customers has become decoration.
A worked example
A Manchester craft brewery redesigns its model around the taproom
An eight-year-old craft brewery in Manchester sells most of its output as keg and cask through a wholesale distributor to pubs, at margins that have thinned every year. The founders are weighing a shift towards taproom sales, a webshop and a monthly subscription club. Before committing to a fit-out loan, they map the current and proposed models on the canvas.
- Key partners
- Malt and hop merchants are commodity suppliers with low dependency. The wholesale distributor is currently the critical partner and takes a large margin; under the new model it shrinks to a capacity outlet. New partners appear: street-food vendors for the taproom and a courier for the webshop.
- Key activities
- Brewing and quality control carry over unchanged. Hospitality operations, events programming and digital marketing are new activities the team has never run. Wholesale account management shrinks. The activity profile of the business changes more than the founders had assumed.
- Key resources
- The brewkit, the premises licence and a well-regarded brand with two national awards. The honest gap is human: nobody on the payroll has managed a bar. The canvas flags hospitality capability as a missing key resource rather than a detail.
- Value propositions
- For pubs, a reliable mid-price cask range, an offer under constant price pressure. For drinkers, fresh beer at the source, taproom-only small batches and a place to spend an evening. The proposition shifts from product supply to freshness and experience, which is defensible in a way wholesale never was.
- Customer relationships
- Today, trade account management with landlords. The new model needs community: a subscription club, events, and regulars known by name. This relationship type is cheap to sustain but slow to build, which limits how fast revenue can ramp.
- Channels
- Currently one channel, the distributor, which owns the customer relationship. The new model adds the taproom, the webshop and the subscription, all direct and all margin-rich, with social media doing the awareness work the distributor never did.
- Customer segments
- Two genuinely distinct segments emerge: pub landlords buying on price and reliability, and local drinkers aged roughly 25 to 45 buying on freshness and occasion. Their economics differ so much that the canvas is really describing two models sharing one brewhouse.
- Cost structure
- Brewing fixed costs are unchanged. The taproom adds fit-out, staffing and licensing costs, most of them fixed. Distributor margin disappears on every direct litre sold. The model's risk concentrates here: the taproom must clear a utilisation threshold to cover its own staff.
- Revenue streams
- Wholesale keg and cask at thin margin; taproom pints at roughly four times the margin per litre; subscriptions that smooth cash flow across the month; a modest merchandise line. Direct streams are smaller in volume but far richer, and recurring.
The read. The canvas does not decide the pivot; it reframes it. The bet is on staffing and taproom utilisation rather than on the beer, and the missing key resource is hospitality management. The founders conclude they should hire an experienced bar manager before signing the fit-out loan, keep wholesale as a capacity filler rather than a growth engine, and treat the first hundred subscription members as the test of the community relationship the whole model now leans on.
Pitfalls
- Filling boxes as inventory lists rather than choices. A canvas that lists everything the business touches asserts nothing about what the model depends on.
- Writing the value proposition as a product description. The block asks what job the customer is paying to get done, and features are only evidence towards that.
- Mapping several distinct models on one canvas. Wholesale and direct-to-consumer, or free and enterprise tiers, deserve separate canvases and an explicit comparison.
- Treating the canvas as finished once the boxes are full. Its authors present it as an iteration tool, and a canvas that survives contact with customers unchanged has not been tested.
- Forgetting that competition exists. The canvas has no competitor block, so a model can look coherent on the page while being beaten on every block in the market.
What the critics say
The canvas omits strategic purpose, competition and the external environment, so a model can appear sound in isolation while sitting in a hostile industry. Ching and Fauvel's review of criticisms concluded it works best alongside outward-looking tools rather than as a standalone analysis.
Ching, H. Y. and Fauvel, C. (2013) 'Criticisms, variations and experiences with business model canvas', International Journal of Small Business and Entrepreneurship Research, 1(4), pp. 26-37.
A systematic assessment found the canvas excludes competition, offers a static snapshot with no mechanism for depicting change over time, and gives no guidance on trade-offs between blocks.
Coes, B. (2014) Critically Assessing the Strengths and Limitations of the Business Model Canvas. Master's thesis, University of Twente.
For early-stage ventures the canvas assumes more certainty than exists. Maurya's Lean Canvas replaced partners, resources, activities and relationships with problem, solution, metrics and unfair advantage, arguing the original suits established businesses better than startups still searching for a model.
Maurya, A. (2012) Running Lean: Iterate from Plan A to a Plan That Works. Sebastopol, CA: O'Reilly Media.
Work it through
Fill in the nine blocks for one business model at a time, starting from the customer side. Your entries persist for this browser session and can be copied out as Markdown or printed.
0 of 9 blocks filled
Run it as a workshop
Print the canvas at genuine wall size, all nine blocks visible at once, and work customer-side first: Customer Segments, then Value Propositions, before touching the operational blocks. A canvas built cost-structure-first nearly always produces an inventory list rather than a set of real choices.
Running order
| Frame: one business model only, named explicitly | 10 min |
| Customer Segments and Value Propositions | 40 min |
| Channels and Customer Relationships | 25 min |
| Key Partners, Key Activities and Key Resources | 35 min |
| Cost Structure and Revenue Streams | 30 min |
| Read it back as a set of choices, not an inventory | 30 min |
| Total | 2h 50m |
You will need
- A wall-sized nine-block canvas printout
- Sticky notes in at least two colours (assumptions to test vs. confirmed facts)
- A camera or phone to photograph the finished canvas before it gets taken down
- A parking-lot sheet for anything that belongs on a different canvas entirely
Traps to avoid
- Filling boxes as lists of everything the business touches. A canvas is a set of choices about what the model depends on, not an inventory of activity.
- Writing the Value Propositions block as a product description. Insist on the job the customer is actually paying to get done.
- Mapping two distinct business models onto one canvas because both are 'the business'. Wholesale and direct-to-consumer, or free and paid tiers, need separate canvases and an honest comparison.
- Running out of room time before the Cost Structure and Revenue Streams blocks, so the model looks resolved on the customer side and vague on the money side. Protect that time explicitly.
Sources and further reading
- Osterwalder, A. (2004) The Business Model Ontology: A Proposition in a Design Science Approach. Doctoral thesis, Universite de Lausanne.
- Osterwalder, A. and Pigneur, Y. (2010) Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, NJ: John Wiley and Sons.
- Osterwalder, A., Pigneur, Y. and Tucci, C. L. (2005) 'Clarifying business models: origins, present, and future of the concept', Communications of the Association for Information Systems, 16(1).
- Strategyzer: The Business Model Canvas. ↗