1.2 Business Model Canvas

CANVAS
Business Model
www.leansixsigmainstitute.org Canvas 1
Learning objectives
Participants will learn how business models can help the company
to develop new ideas and provide new ways to develop strategies.
Specific Objectives:
1. Understand why Business Model Canvas is important
2. Understand how to develop Business Models
3. Identify applications
Canvas 2
www.leansixsigmainstitute.org 1
AGENDA
CONTENT
I. Background
II. What is Canvas?
III. Who uses Canvas?
IV. Elements of Canvas
V. Examples and Exercise
VI. Where to use Canvas?
VII. Procedure
VIII. Model Evaluation
Canvas 3
Base Line Goal 1 2 3 4

NPS 55% 70%
Revenue 4.5 M 5 M
Days to launch new products 123 45
Market Share 12% 15%
I. Background
Facility sigma level 3.3 4.2
Ontime deliveries 78% 99%
OEE 53% 78%
Delivery time (days) 12 8
Designed for: Designed by: Date: Version:
Inventory Value 24 M 16 M
The Business Model Canvas
Inventory turns 4 12
Successful execution
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
The Business Model Canvas

Designed for: Designed by: Date: Version:
Conversion Costs 2.1 M 1.25 M
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments Cost of poor quality 125 K 12 K
Sigma Level
Number of nonconformities 3 0
Canvas Key Resources Channels
On time implementation
Key Resources
Cost Structure
Channels
Revenue Streams
Make it simple!! Certification progress
Sugestions per person
Accidents
21%
-
3
78%
1
0
Results
Cost Structure Revenue Streams
Demand 2500 K 3000 K
TOP MANAGEMENT MANAGEMENT PLANNING Production Capacity
TACTICAL PLANNING - EXECUTION - 3000 K 3500 K
designed by: Strategyzer AG
Objectives
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. Indicators Baseline Objective Strategies Indicators Baseline Objective Available
Key activities/Improvement projectscapacity 1 2 3 4 5 6 7 8 9 # # #
The makers of Business Model Generation and Strategyzer strategyzer.com
1.1 Increase profit/revenue to 18% Inventory Value 24 M 16 M 1.1 Reduce inventory to 2 M

1. Increase Increase ROI from 1.2 Increase RONA to 24% Conversion costs 1950 1500 K 1.2 Find investments options Inventory Value 24 M 16 M
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
designed by: Strategyzer AG

The makers of Business Model Generation and Strategyzer strategyzer.com
profitability 7 to 12% 7% 12% Materials cost 990 K 900 K 1.3 Find new vendors to reduce material cost
Revenue
1.4 Implement Lean Cost Accounting 4.5 5M
Increase domestic 2.1 Sell services that add value to our customers NPS 55% 70% 2.1.1 Design customer service Material
packages Costs 990 K 900 K
2. Increase sales by 15% and 10% 15% 2.2 Increase sales with current customers Revenue 4.5 M 5M Conversion
2.1.2 Analyze purchase frequency Costs
and identify trends 1950 K 1500 K
sales international sales 29% 32% 2.3 Launch new products in record time Days to launch new products 123 45 2.3.1 Develop product a for market X
by 32% 2.4 Enter new niche markets Market Share 12% 15% 2.3.1 Implement lean design Value Stream Profit
Facility sigma level 3.3 4.2 Value Stream ROS
3.1.1 Train personnel on Six Sigma
Ontime deliveries 78% 99% 3.1.2 YB, GB, BB certification
Strategy
OEE 53% 78% 3.1.3 Executive training
Increase 25% 45% Delivery days 12 8 3.1.2 Pilot implementation in area A
profitability of the 3.1 Implement Lean Company Inventory Value 24 M 16 M 3.1.2 Certify personnel as multiskilled operators
3. Become a operation from Inventory turns 4 12 3.1.3 Implement Lean Accounting
TOP MANAGEMENT MANAGEMENT PLANNING TACTICAL PLANNING - EXECUTION -
world-class 25% to 45%, Cost > 11% Conversion Costs 2.1 M 1.25 M 3.1.4 Implement Lean Logistics pilot
company reducing defects
Objectives Indicators Baseline Objective Cost of poor quality
Strategies 125 K Indicators
12 K 3.1.5 Implement Lean Product Development
Baseline Objective Key activities/Improvement projects 1 2 3 4 5 6 7 8 9 # # #
(reduce and improving 3.1.6 Implement Lean Quality system
1.1 Increase profit/revenue to 18% Inventory Value 24 M 16 M 1.1 Reduce inventory to 2 M
expenses) customer
1. Increase 2 Increase0ROI from 3.2 Maintain ISO 9000:2000
1.2 Increase RONA to 24% Number of 3
Conversion 0
costs 2.2.1 Conduct
1950 internal
1500audits
K 1.2 Find investments options
satisfaction, cost
profitability 7 to 12% 7% certification
12% nonconformities Materials cost 2.2.2 Perform
990 Kall corrective
900 K actions
1.3 Find new vendors to reduce material cost
reduction of 11%
1.4 Implement Lean Cost Accounting
2.3.1 Initial Training
3.3 Implement New Information
Increase domestic On value
2.1 Sell services that add time implementation
to our customers NPS 9 2.3.2 Configure
55% modules 2.1.1 Information
70% & Transfer Design customer service packages
System
2. Increase sales by 15% and 10% 15% 2.2 Increase sales with current customers Revenue 4.5 M pilot run
2.3.3 Develop 5M 2.1.2 Analyze purchase frequency and identify trends
sales international sales 29% 32% 2.3 Launch new products in record time Days to launch new products 123 45 2.3.1 Develop product a for market X
Project
Certification progress 21% 78% 3.1.1 Conduct a diagnosis of the organizational climate
4. Make HR a Achieve less than by 32% 2.4 Enter new niche markets Market Share 12% 15% 2.3.1 Implement lean design
7% 1% Sugestions per person - 1 3.1.2 Establish a suggestions program and present it
competitive 1% annual 3.1 Establish a suggestions program
Safety - Days without accidentsFacility sigma level 3.3 to all program
3.1.3 Training 4.2 3.1.1 Train personnel on Six Sigma
staff
advantage turnover
Ontime deliveries 78% follow-up
3.1.4 Conduct 99%audits 3.1.2 YB, GB, BB certification
OEE 53% 78% 3.1.3 Executive training
Portfolio
Increase 25% 45% Delivery days 12 8 3.1.2 Pilot implementation in area A
profitability of the 3.1 Implement Lean Company Inventory Value 24 M 16 M 3.1.2 Certify personnel as multiskilled operators
3. Become a operation from Inventory turns 4 12 3.1.3 Implement Lean Accounting
world-class 25% to 45%, Cost > 11% Conversion Costs 2.1 M 1.25 M 3.1.4 Implement Lean Logistics pilot
company reducing defects Cost of poor quality 125 K 12 K 3.1.5 Implement Lean Product Development
(reduce and improving 3.1.6 Implement Lean Quality system
Value Stream Structure

expenses) customer
2 0 3.2 Maintain ISO 9000:2000 Number of 3 0 2.2.1 Conduct internal audits
satisfaction, cost
certification nonconformities 2.2.2 Perform all corrective actions
reduction of 11%
3.3 Implement New Information
On time implementation 9
2.3.1 Initial Training
2.3.2 Configure modules & Transfer Information
Canvas 4
System
2.3.3 Develop pilot run
Certification progress 21% 78% 3.1.1 Conduct a diagnosis of the organizational climate
4. Make HR a Achieve less than
7% 1% Sugestions per person - 1 3.1.2 Establish a suggestions program and present it
competitive 1% annual 3.1 Establish a suggestions program
Safety - Days without accidents 3.1.3 Training to all program staff
advantage turnover
3.1.4 Conduct follow-up audits
Is Canvas for you?
§ Do you have an entrepreneurial spirit?
§ Are you constantly thinking about how to create value and develop new business?
§ Are you constantly thinking about how to improve or transform your organization?
§ Are you looking for innovative ways to do business to replace old or obsolete ones?
Canvas 5
Not everyone has a clear understanding of what a business model is.
Strategic conversations about business models are unproductive.
6 Canvas 6
Typical conversation when there is no common language
§ Director: The world is changing ... we urgently need to reinvent our business model
§ Person 1: We should focus on services
§ Person 2: The numbers indicate that we should grow in emerging markets
§ Person 3: But, what about the new technology that we have been looking for?
§ Director: In fact I know the right person to acquire that technology
Canvas 7
3 hours later..
§ Person 2: bla bla bla bla
Canvas 8
Origin- Alex Osterwalder
The Business Model

Alex Osterwalder Ontology – A Proposition
in a Design Science
Approach
January 2004
PhD Thesis, University of

Lausanne, Switzerland
Canvas 9
II. What is a Business Model “Canvas”?
It is a visual and practical business tool to describe, test, implement and manage
business models during their life cycle.
Canvas 10
A business model describes the fundamentals of how an
organization creates, develops and captures value.
Canvas 11
III. Who uses Canvas?
650,000 copies sold

26 languages
Canvas 12
What universities use Canvas?
Canvas 13
What types of professionals use Business Model Canvas?
§ Directors, Executives and Managers: Manage businesses

§ Entrepreneurs: Develop new businesses
§ Employees: Sustain and improve business models
§ Consultants: Help their clients
§ Designers: Create high value products
§ Investors: Evaluate business opportunities
Canvas 14
IV. Elements of Canvas
Your business model on one page
2. Value
4. Customer
7. Key Propositions
Relationships
Activities
8. Key 1. Customer
Partners Segments
5. Revenue
Streams
9. Cost 6. Key 3. Communication

Structure Resources & Distribution
Channels Canvas 15
Another way to see it
BACKSTAGE FRONTSTAGE
Canvas 16
Canvas is designed like the human brain
Logic Emotions
Canvas 17
Why use Canvas?
§ The best ideas are put on the table

§ Create a common and shared language
§ Improve teamwork with better
conversations about strategies
§ Ensures better collaboration between
areas
§ Create a structured and practical
approach that helps to implement
ideas for improvement
Canvas 18
1. Customer segments
For whom do we create value?
They are the different groups of people or organizations that a

company seeks to reach and serve.
Massive markets: Very large group with similar problems and needs
Niche Market: Group of customers with specific needs
Segmented markets: Willing to pay at different price levels
Canvas 19
2. Value propositions
We have to declare what we are going to offer to solve problems or satisfy

needs. There may be different offers according to different customer groups.
Novelty Customization Price Risk reduction
Performance Do the work Speed Accessibility
Service Design, brand / status Costs reduction Convenience
Canvas 20
3. Communication & distribution channels
How will we make the client receive our value proposition?

How to deliver the product or service?
Channels: Sales force, web, wholesalers, own or external stores
Phases: 1 contact, 2 evaluate, 3 buy, 4 deliver, 5 aftermarket

Canvas 21
4. Customer relationships
What kind of relationships do we establish so that the customer stays tied

to the value offer even after having acquired it?
Personal assistance Automated services: online banking

Dedicated staff Communities: users help each other
Self-service: FAQ Co-creation: YouTube Canvas 22
5. Revenue streams
What kind of profits will the business have?

Sale of products Rent
Free use Licensing
Subscriptions Leasing
Brokers Advertising
Canvas 23
6. Key resources
What are the key assets to make the business model work?
Physical: buildings, vehicle machines, systems, distribution networks, etc.
Intellectual: patents, copyrights.
Human: everyone needs people, but refers to key personnel
Financial: credits, cash, etc.
Canvas 24
7. Key activities
What activities and processes should be carried out to produce the

value proposition?
Production Logistics
Problem solving Software development
Maintenance Research and development
Canvas 25
8. Key partners
Suppliers and partners that make the model of business work

Strategic alliances between non-competitors
Strategic alliances between competitors
Joint projects to develop new businesses
Buyer - seller to ensure reliable supply
Canvas 26
9. Cost structure
What costs are significant to operate the business model?

IT Research & Development
Marketing Logistics
Sales Production
Canvas 27
Google 1997
§ Larry Page and Sergey Brin Revenue 2017 = $109.65 Billions US Dollars
§ They created the Google search engine

§ It is free!
§ So, how to make money from a free service?
Canvas 28
V. Examples
Google
R&D Automated
Internet
Distribution Data users
partners management
Free search
Advertisers &
Search marketers
www.google.com
algoritm
Audience
Developers Adwords
Apps
IT Sales & Mktg

Free $ per clicks
R&D Data Operations
29 Canvas 29
Xerox 1958
§ They invented a machine that could photocopy 2000 copies a

day when the competition could do 30 to 40 copies a day
§ The machine was 7 times more expensive
§ They did a market study and they saw that no customer would
would buy such an expensive machine
Great product! Wrong business model
Canvas 30
Xerox
Monthly
leasing Corporations
Copy Machine
$95 per month $.04 /copy after

leasing 200 copies included
Canvas 31
Skype
Software
Development Automated
Instant
Communication Call center Internet
Telecomunication Advertising
users
partners
Low cost calls

Payment
Intellectual Business
partners skype app
property users
Brand
Sales & Marketing

Free Pre-paid calls
R&D
Technical Support
Canvas 32
Exercise
Develop the Nespresso business model with the elements shown on the next
slide
Canvas 33
Nespresso Recurrent
Nespresso Machine pod sales
Machine
Nespresso
manufacturers
Captive Brand pods
Shopping
Distribution
Online order
channels
Nespreso stores Machine sales
Production Retail stores
Patents
Marketing
Homes Production
Factories
Costs
Distributions costs
Coffee
Retail stores producers
Businesses
Marketng costs Canvas 34
Nespresso
Machine Production Nespresso Captive

manufacturers Machine Shopping Households
Marketing
Coffee Nespresso Businesses
producers pods
Patents Retail stores

Brand
Online order
Distribution channels
Nespresso stores
Coffee producers Retail stores
Factories
Distributions costs
Production Machine sales Repetitive
Costs Marketing costs pod sales
Canvas 35
VI. Where to use Canvas?
Strategy Innovation Alignment Investment
Canvas 36
Strategy
1. Guide to plan the strategy of the company
Next year
Last year
Canvas 37
Strategy
2. Dashboard
Canvas 38
Strategy
3. Understand suppliers
Suppliers
Canvas 39
Strategy
4. Portfolio of business models
Improve Invent
Canvas 40
Innovation
5. Design, test and build new growth engines
Canvas 41
Innovation
6. Develop multiple ideas that can be used
Canvas 42
Innovation
7. Understand customers
Customers
What is the current value proposition they receive?

Compare it with what they expect to receive
Canvas 43
Alignment
8. Incorporate people into the organization
Managers use systematic canvas to help executives to understand the business model
Canvas 44
Alignment
9. Communicate the strategy
Canvas 45
Alignment
10. Common language about functions
Better conversations
Canvas 46
Alignment
11. Understand model elements
Canvas 47
Investment
12. Investment decisions
Canvas 48
Investment
13. Mergers and acquisitions
Canvas 49
How will you use the Canvas

business model in your
organization?
Canvas 50
Implementation
Define Execution
Design Test
Canvas 51
When?
Improve Invent
Canvas 52
VII. Procedure
1. Introduction to the methodology
Choose a business 2. Current canvas
product / service 3. Research environment around the
Teams of 5 people current canvas:
§ Market trends
Structure of the Canvas: § Technology trends

§ Needs Trends
§ Strengths and weaknesses
4. Generate future canvas prototypes
5. Feedback
6. Define Canvas future and following Canvas 53
Note
§ Several business models can be generated for each line of business.
§ To make it effective, only those that can be executed must be chosen.

Generally, great enthusiasm is generated in the creation of the model.
§ Make sure you keep that enthusiasm in execution.
Canvas 54
VIII. Evaluate your model
1. Cost of change
2. Recurrent income
3. Earn before spending
4. Game changes in the cost structure
5. Make others do the work
6. Scalability
7. Protection of competition
Canvas 55
1. Cost of change
How easy or difficult is it for your customers to

trade for another company?
§ In 2001, Apple developed the iPod to have 1,000 songs

in your pocket (a product innovation focusing on
storage). It was a business model strategy to get
customers to copy all their music into iTunes and their
iPod, which would make it more difficult for them to
switch to competing digital music players.
Canvas 56
2. Do you have recurring income?
Is each sale a new effort or will it result in revenue and follow-up

purchases?
§ Once you buy a Nespresso machine, you will have to continue buying the coffee
capsules
Canvas 57
3. Earn before spending
Are you making money before spending it?
§ Dell started selling machines directly to customers.

§ They start manufacturing when or very close to when customers make the purchase
Canvas 58
4. Game change in the cost structure
Is your cost structure substantially different and better

than your competitors?
§ Skype developed a cost model substantially different from the
companies that offered communication services and that had very
high cost structures.
§ Free calls using infinitely less or almost zero cost infrastructure

through software that routes calls
§ Airtel outsourced the entire telecommunications infrastructure

(variable vs fixed)
Canvas 59
5. Make others do the work
How much does your business model generate customers from third
parties to create value for you?
§ Facebook offers a platform to contact your friends

§ When customers change content, the platform becomes increasingly valuable, and it is
the users who create the content.
Canvas 60
6. Scalability
How fast could your business model grow?

Dinners Club
§ They offer credit to business people to eat at restaurants that accept the card, and pay
a very low annual fee
§ They offer access to many loyal customers and receive 7% for each customer
transaction. Once you acquire customers from one side, you can easily scale it.
Canvas 61
7. Protection from competition
How much does your business model protect you from the competition?
§ Apple created iOS technology with 400 million users
§ Application developers (800,000) are attracted by the large number of users.
§ It is estimated that Apple generates between 70% and 75% of the profits of the entire
cell phone industry with only 7% market share
Canvas 62

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CANVAS

Base Line Goal 1 2 3 4

The Business Model Canvas

1.1 Increase profit/revenue to 18% Inventory Value 24 M 16 M 1.1 Reduce inventory to 2 M

designed by: Strategyzer AG

Value Stream Structure

§ Do you have an entrepreneurial spirit?

Not everyone has a clear understanding of what a business model is.

Strategic conversations about business models are unproductive.

§ Person 1: We should focus on services

§ Person 2: The numbers indicate that we should grow in emerging markets

§ Director: In fact I know the right person to acquire that technology

§ Person 2: bla bla bla bla

§ Person 4: bla bla bla bla

§ Person 1: bla bla bla bla

§ Person 3: bla bla bla bla

The Business Model

PhD Thesis, University of

II. What is a Business Model “Canvas”?

III. Who uses Canvas?

650,000 copies sold

What types of professionals use Business Model Canvas?

§ Directors, Executives and Managers: Manage businesses

§ Employees: Sustain and improve business models

§ Consultants: Help their clients

§ Designers: Create high value products

§ Investors: Evaluate business opportunities

9. Cost 6. Key 3. Communication

Another way to see it

Why use Canvas?

§ The best ideas are put on the table

For whom do we create value?

They are the different groups of people or organizations that a

We have to declare what we are going to offer to solve problems or satisfy

How will we make the client receive our value proposition?

Phases: 1 contact, 2 evaluate, 3 buy, 4 deliver, 5 aftermarket

What kind of relationships do we establish so that the customer stays tied

Personal assistance Automated services: online banking

What kind of profits will the business have?

What activities and processes should be carried out to produce the

Suppliers and partners that make the model of business work

What costs are significant to operate the business model?

§ They created the Google search engine

IT Sales & Mktg

§ They invented a machine that could photocopy 2000 copies a

§ The machine was 7 times more expensive

Great product! Wrong business model

$95 per month $.04 /copy after

Low cost calls

Sales & Marketing

Machine Production Nespresso Captive

Patents Retail stores

VI. Where to use Canvas?

Strategy Innovation Alignment Investment

1. Guide to plan the strategy of the company

What is the current value proposition they receive?

8. Incorporate people into the organization

9. Communicate the strategy