The Business Model Canvas PDF

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The Business Model Canvas and the effectiveness of use...

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Strategic Management Tools DT 365/4 Assignment 3 – Business Model Canvas (Osterwalder) Submission Date: Friday 17th November Word Count: Group #1 Group Name: Gold Fast Consulting

Group Members Clarke, Lorcan C13401252 Carew, Emily C13569177 Darker, Ciara C13750371 d’Estelle-Roe, Marcus C14420098 Hogan, Ben C13363696

Summary “A business model is a conceptual tool containing a set of objects, concepts and their relationships with the objective to express the business logic of a specific firm.” Osterwalder Osterwalder (2005, p.5). Essentially this means showing the core elements of the business, while creating relationships between them with the desire to display the mission of the business. The business model canvas (BMC) assists one in visualising the business structure by mapping out its key components (Osterwalder & Pigneu, 2010; Baden-Fuller & Morgan 2010).

Osterwalder & Pigneu (2005) describe the aim of the BMC as a way of identifying the elements and relationships that accurately depict a company’s operations. Osterwalder updates this description to suggest that the business model lays out an organisation’s methods for creating, delivering, and capturing value (Osterwalder & Pigneur, 2010). The BMC outlines how the business works as a structure, as opposed to most strategies and tools which focus on planning and execution (Osterwalder & Pigneu 2005). Shafer et al., (2005, p.203) offer a different perspective, suggesting that business models “reflect choices and their operating implications.”

Figure 1. The business model canvas (Osterwalder & Pigneur, 2010)

Business Model Canvas Examples Along with the original BMC, there are also adapted versions for startups, mission oriented organisations and non-governmental organization’s (NGO’s).

For startups, the lean BMC is used (Eisenmann, 2012). It is a simplified portrayal of the core startup business model. This adapted version benefits entrepreneurs more as it provides the whole picture to utilise whereas the generic BMC targets a specific audience of specialists whose interests might differ such as investors, advisors and consultants (Link, 2016)

Figure 1 below is a proposed business model canvas for Airbnb.

Figure 1. Business Model Canvas Airbnb (Uenlue, n.d.)

Mission oriented organisations can utilise the mission model canvases, also called the ‘social business model’ (Yunus et al, 2010, p. 319). This canvas is suited to organisations that do not earn money, but mobilize resources and a budget to rectify particular problems. Their aim is to create value for certain beneficiaries such as: citizens, support organizations, warfighters and congress (Blank, 2017). Government organisations or health services could use this type of canvas. NGO’s can also use this model. It is slightly altered to focus on fundraising, marketing and financing to increase the organisations impact (Sleurink, 2002; Anheier 2010). Oak Foundation, WWF and CARE are organisations that this canvas would suit (Dahan et al., 2010). The main difference between this version and the original is that the right half (customer facing

side) is altered slightly to help direct the organisation to its goals. See red text in figure 3 below.

Figure 3. The mission model canvas (Blank, 2016)

Cross Reference Tool - Blue Ocean Strategy; Kim & Mauborgne (Tool 15) The blue ocean strategy is focused on delving into untouched markets, where competition is irrelevant (Chan & Mauborgne, 2004). The strategy canvas, an analytical tool aimed at maximising value and minimising costs, examines the industry and pinpoints the current market situation (Chan & Mauborgne, 2005). In tandem with this, the four actions framework (Figure 4 below) is utilised, which is concerned with rising above current standards and increasing value, thus rendering the competition as irrelevant. As the business model canvas has a narrow view on the value proposition, the blue ocean strategy can complement it by helping to identify the

factors which the industry currently competes on and the value that customers currently derive from the products or services (Bocken et al. 2013).

Figure 4. The four actions framework (Chan & Mauborgne, 2005)

Osterwalder & Pigneur (2010) claim that by blending these two tools together (see figure 5 below), the user is given the ability to examine a business model in a more holistic fashion. The four action framework questions can be asked for each section of the business model, and their implications for other parts of the business model can be recognised immediately. For example, if we decrease costs how does this affect the section concerned with values?

Figure 5. Blending blue ocean strategy with the BMC (Osterwalder & Pigneur, 2010)

Critique Bezerra et al. (2013) note that making the decision to change or implement a new business model canvas to suit certain aspects of the business can have an impact on its corporate strategy. However, Bezerra et al. (2013) conclude that the business model canvas is feasible for identifying the necessary changes to be implemented in order to improve the business. Osterwalder himself questions the validity of his canvas within the workplace due to the fact that it took longer than anticipated to be substantiated within the industry (Osterwalder & Pigneu, 2005). Hedman & Kalling (2003) also believe that the model is not well defined, nor is there theory to support it. In contrast to this it has been noted that there is new found credibility in academic literature with a surge of over 80% in the number of articles published around the topic from 2003 to 2011 (O’Neill, 2015)

Additionally, the BMC is also being used increasingly by business incubators and startups, suggesting that it is widely believed to be an effective tool within the area of enterprise (O’Neill, 2015). Contrary to this, there are four problems that can arise from the creation and implementation of business models; flawed assumptions underlying the core logic, limitations in the strategic choices considered, misunderstandings about value creation and value capture

and flawed assumptions about the value network (Shafer et al., 2005, p.203). Furthermore, Shafer et al., (2005, p. 206;207) concludes that business models are beneficial to the success of a business, however, the canvas must be used on an ongoing basis to trial various strategic options of the organisation.

Judging by the literature surrounding the topic, it took a number of years for the BMC to gain acceptability amongst academics. Authors agree has now gained validity and is accepted as a useful entrepreneurial tool (Yip, 2004; Vives & Svejenova, 2011. We concur with Shafer et al. (2005)’s beliefs and would add that the BMC is not a means to an end, but rather a guide that should be used regularly to assist in achieving the strategic goals and value creation of an organisation. Conclusively, we believe the BMC is a useful tool to remind businesses to think about the organisation as a whole, rather than getting caught up on the details.

It could also be argued that the BMC has similarities to the deliberate versus emergent strategy tool, however, rather than emergent strategies being more effective as it is widely believed, a deliberate strategy would be more comparable to the BMC. Focusing on potential opportunities could risk losing sight of the organisation, which is the essence of the business model canvas.

References Anheier, H. K. (2010). Nonprofit organizations: Theory, management, policy. London: Routledge Baden-Fuller, C., & Morgan, M. S. (2010) Business models as models. Long Range Planning, 43, 156-171. Bezerra A.P., Gouvea de Oliviera, M., Roman Amigo, C., Pinheiro Cunha, V. & Rozenfeld, H. (2013) Employing the business model concept to support the adoption of product–service systems (PSS). Industrial Marketing Management. 42(5) 693-704 Bocken, N., Short, S., Rana, P., & Evans, S. (2013). A value mapping tool for sustainable business modelling. Corporate Governance: The International Journal of Business in Society, 13(5), 482– 497. https://doi.org/10.1108/CG-06-2013-0078 Blank, S. (2016). The Mission Model Canvas – An Adapted Business Model Canvas for MissionDriven Organizations. Retrieved 17 November 2017, from https://steveblank.com/2016/02/23/the-mission-model-canvas-an-adapted-business-modelcanvas-for-mission-driven-organizations/ Blank, S. (2017). The Mission Model Canvas: An Adapted Business Model Canvas for MissionDriven Organizations. HuffPost. Retrieved 12 November 2017, from https://www.huffingtonpost.com/steve-blank/the-mission-model-canvas_b_9298440.html Chan, K. W., & Mauborgne, R. (2004). Blue Ocean Strategy. Harvard Bus Review - HBR’s MustReads on Strategy (October 2004), 70–80. Chan, K. W., & Mauborgne, R. (2005). Blue Ocean Strategy (Vol. 47). Boston, Massachusetts: Harvard Business School Press. Dahan, N. M., Doh, J. P., Oetzel, J., & Yaziji, M. (2010). Corporate-NGO collaboration: Co-creating new business models for developing markets. Long Range Planning, 43, 326-342. Eisenmann, T. R., Ries, E., & Dillard, S. (2012). Hypothesis-driven entrepreneurship: The lean startup. Harvard Business School Background Note 812-095, December 2011. Hedman, J. & Kalling, T. (2003) The business model concept: theoretical underpinnings and

empirical illustrations. European Journal of Information Systems. 12: 49-59 Joyce, A. & Paquin, R.L. (2016) The triple layered business model canvas: A tool to design more sustainable business models. Journal of Cleaner Production. 135: 1474 - 1486

Link, P. (2016). How to Become a Lean Entrepreneur by Applying Lean Start-Up and Lean Canvas?. Advances In Digital Education And Lifelong Learning. (2) 57 - 71 http://dx.doi.org/10.1108/s2051-229520160000002003 O'Neill, T.W. (2015) "The business model canvas as a platform for business information literacy instruction", Reference Services Review, 43(3) 450-460 Osterwalder, A. & Pigneur, Y. (2010) Business model generation: A handbook for visionaries, game changers, and challengers. Wiley, Hoboken, NJ. Osterwalder, A. Pigneur, Y. & C.L. Tucci (2005) Clarifying business models: Origins, present and future of the concept. Communications of the Association for Information Systems, 15: 1-40 Shafer, S., Smith, H. & Linder J. (2005) The power of business models. Business Horizons. 48 (3) 199-207 Sleurink, A. (2002). E-business for NGOs. IICD Research Brief. Uenlue, M. (n.d.). Business Model Canvas Airbnb. Retrieved 17 November 2017, from https://www.innovationtactics.com/wp-content/uploads/2017/08/Business-model-canvasAirbnb.png Vives, L., & Svejenova, S. (2011). Business Models: Towards an integrative framework. Management Research: The Journal of the Iberoamerican Academy of Management, 9, 230242. Yip, G. S. (2004). Using strategy to change your business model. Business Strategy Review, 15, 17-24. Yunus, M., Moingeon, B., Lehmann-Ortega, L., 2010. Building social business models: lessons from the Grameen experience. Long Range Planning 43, 308-325.

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