The business model canvas was first developed by Swiss business theorist Alexander Osterwalder in 2008 and has been widely used in business education ever since. GVSU integrated the canvas into the B.B.A curriculum in 2010, teaching it in Management 330, Management 495 and Business 671.
Using a visual chart, the business model canvas ties together the nine basic building blocks of running a business: value proposition, customer segments, distribution channels, customer relationships, revenue streams, key resources, key activities, key partners and cost structure. How does the business model canvas differ from a business plan? Where a traditional business plan is based on the unchallenged assumption of the success of that plan, the business model canvas operates on hypothesis and testing.
The canvas allows you to pivot in one area based on the rest of the canvas and vice versa. For instance, through testing your hypothesis, you may discover that your customer segment is entirely different than what you originally had in mind. So, you will be able to see clearly how your customer relationship and distribution channels are going to have to change as well. This ensures that the decisions you make moving forward are in your best interest and that all of the working parts will in fact work together.
Mary Brown works in the Business and Psychology Department at Grand Rapids Community College and came across Osterwalder’s ideas on business modeling in 2008. She has used the business model canvas in her teaching at GRCC and in business counseling at Grand Rapids Opportunities for Women (GROW).
“It helps break down some of the barriers for people who don’t have a lot of business experience,” Brown said. “It is visual and that helps people connect to it.”
Using the model requires founders to get on the ground level at stage one, gather information about every component of the model and orient themselves to their findings. It is designed for your original plan to fail (because it will), then adapt to reality and find success. It allows you to discover under what specific circumstances you are likely to succeed without taking the risks and suffering the losses that using only a traditional business plan as your guide will lead to.
Michael Kurley, CEO of Soletics, was first introduced to the canvas three and half years ago in an entrepreneurial class taught by Dr. Tim Syfert.
“It was the first process we used to learn the consumer validation process,” Kurley said. “It has been instrumental. It works because it clearly outlines all of the driving, critical factors of running a business in a way that is clear to understand. It can be very hard to narrow down and identify problems in specific areas. With the business model canvas, you can effectively segment it.”
For more information about the business model canvas, check out “Business Model Generation” by Alexander Osterwalder & Yves Pigneur.
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