For Entrepreneurs

A critical look of the Business Model Canvas

From the Value-Proposition Cavas to the Lean-Canvas back to the Business Model Canvas: Nothing has blurred the discussion on what a business model is more than the introduction of the canvas-based frameworks. 
But nonetheless, these canvases can provide use. If you understand their value-add.


BUSINESS-MODEL CANVAS

First off, the name says BM Canvas! That says about everything. It is not a business model, it does not create business models. So what are they?

In total: they are a minimal way of presenting both milestones-achieved and to-dos that you encounter when building your business. They are a tool to store all top-level insights on your “company-building” activity as a founder.

So what exactly happens when you work with the business model canvas?

You store information in and on the pre-defined categories: stakeholders, key competencies, target market, financials, etc. That is a great thing. Because these elements are core-focus elements based on which you can devise a communication strategy to bost your top-executives and investors. This is where they by any means necessary want to be kept in the loop.
They are throw-away prototypes of the high-level system state of your company.  The high-level term means they require you to really focus to keep information minimal and most relevant. They are iterative in nature. You build them, communicate them an throw them away and build a new one. A lot better than writing a ton of business plan iterations. They reduce your communication complexity.

Do they relate to the business model? Well, in some sense. Namely, if you have a business model and you work on executing it, you will have all relevant information to fill the business model canvas and it will force you to keep out the detailed intricacies your investors wouldn’t understand anyway.

Great! So now let’s look at some business models. Thanks to Pinterest, here are some I found on the web without checking them.


Facebook

Facebook CanvasYou clearly see focus on this one. All revenue streams simply outlined. Same for Customer segments for which FB has to optimize UX. Network effects govern the relationships and the channels are mobile and web front-ends and API tools for developers. They use the colors to group aspects of different categories to the same segments. As FB has matured, the Key partners do no longer include venture capitalists or special partners. It is all about the content providers (which includes users.) Of course, the financial markets are partners and need to be managed as a traded company. But it would be bogus to mention it in the Canvas, as everybody would know. The only really disturbing item on the Canvas is SG&A (General and Administrative). WHY ON EARTH? Every company has SG&A in its financial statements and you certainly would never put such an item on the Canvas. Unless you see a true issue in the over-proportionate size of the SG&A position. If facebook would put this on teh Canvas itself, you would likely be concerned as an investor.
From that point: you can clearly see that Facebook enjoys power, it does not really depend on a single key partner and it controls all stakeholders of its platform as actual customer from which it earns revenue (except IT infrastructure which it hosts in-house.). Facebook runs on a very simple value chain. And you can see why HR is such a hot focus. It is the only resource that builds the core leverage of the cost and capability.


AirBnB

AirBnB CanvasNow this looks different. Customers for a matching platform is natural: two different segments. Here very general. Not detailed focus on a niche. Colors again used to map customer segments of elements in the other categories.
Key activities are somewhat bogus now: marketing? Really? Captain Obvious is happy to be once again put into perspective. So here the model isn’t very focused. But Lord, look at the Partners and Cost structure! It is a mess. Okay, the photographers are a major role. But it seems somewhat confusing that they do not mention them in the customer segments. Because you want to drive your channel and relationship management to deliver UX to all customers and in the end the photographers are also customers that require channels and relation management to work for them. Apart from that, PayPal and Western Union are certainly important partners and you can see that there is a lot of interest and control dilusion given all the venture firms. At the same time, this really helps you understand that VCs are key partners. They provide financing and – more importantly – access to networks of potential other partners (Western Union is too conservative to be intrigued by a Pitch from AirBnB management alone, the VCs certainly played a role here.), etc.
Y Combinator makes sense from recruitment and networking perspective in the early phase. AndreesenHorrowitz and GreyLock provide a good mix for “social proof” and mixing tech-affinity with conservatism. But what the heck is Youniversity doing here???
What also strikes the eye is how washy the Value proposition is. Great places is simple, yes. But does your mind immediately tell you HOW GREAT AirBnB can be with all the great photographers? Have you really understood the value-add of the photographers from watching this Canvas? I would not be convinced. But at least, I would raise the question what the Fuzz with the photographers is all about, if interviewing them on the Canvas. Overall it is simple enough to be read quickly.

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