What is a Canvas model? 8 steps to effective canvas planning

Currently, businesses tend to prefer using the Canvas model to build an overall picture of the unit's business situation. So what is the Canvas model and how to plan the Canvas effectively? The content below from 1C Vietnam will answer the above questions in detail.

1. What is a Canvas model?

Business Model Canvas , also known as BMC (Business Model Canvas), is a visual tool that helps describe the key elements of a business strategy. This model was developed by Alexander Osterwalder, a Swedish management expert.

Canvas includes 9 main elements, specifically:

• Customer segmentation
• Value solution
• Distribution channel
• Customer relationship
• Revenue stream
• Main resource
• Main activities
• Main partner
• Cost structure

2. Benefits the Canvas model brings to businesses

Understanding and effectively applying the Canvas model in business brings many benefits to businesses, specifically:

• Understand the relationships between factors: Using the Canvas business model helps companies clearly understand the relationships of the 9 factors in the model. This allows businesses to recognize potential opportunities and challenges, thereby making appropriate adjustments.
• Fast and convenient: The Canvas model is designed to be simple and easy to use. Businesses can easily fill in information and edit flexibly according to needs, thereby saving time and effort in building and evaluating models.
• Understanding competitors: By outlining a competitor's business model Canvas, businesses can better understand their competitors' strengths, weaknesses, opportunities and threats. This is a favorable basis for the company to develop a more effective competitive strategy.
• Intuitive, clear thinking: Canvas helps businesses synthesize information about their business model on one page. Thanks to that, the company can easily grasp and understand the important elements of the model, thereby making more accurate decisions.

3. How to effectively plan a Canvas model in business

Once you understand the concept and advantages of the Canvas model , the next question is: how to create an effective business plan according to Canvas? Below are detailed 8 steps to build a business Canvas model that companies can refer to:

3.1. Identify target customers

Customer segmentation is the process of dividing customers into small groups based on common characteristics, such as interests, consumption habits, needs, etc. To determine target customer segments, businesses need to pay answer the following questions:

• What are the main characteristics of your target customers? (Gender, age, income, occupation, geography,...)
• What are consumers' preferences and shopping habits?
• How interested are buyers in the solutions?
• On what criteria do customers evaluate a solution?

3.2. Identify main distribution channels

Distribution channels are the means that businesses use to contact and interact with customers. Through this, the company can quickly introduce and promote products/services to target customers.

Currently, there are two main distribution channels that businesses can consider choosing:

• Direct distribution channel: Businesses directly contact customers through sales staff, points of sale,...
• Indirect distribution channels: Businesses use agents and partner stores to reach customers.

3.3. Build relationships with customers

This is an element that cannot be ignored in the Canvas model , thereby helping businesses track the entire customer experience from knowing the brand and product until becoming a loyal consumer. Understanding and building successful relationships with buyers will help the company easily attract new customers, develop and maintain old customers.

3.4. Expected revenue source

One of the important steps is that businesses need to identify the sources of revenue that bring the organization. This is the foundation to help business units grasp the financial situation to balance revenues and expenditures, eliminate unnecessary funds and establish a central revenue source.

3.5. Determine the financial resources of the business

Financial resources are a key aspect of supporting businesses to operate, develop sustainably and apply the business Canvas model effectively. Units need to have effective budget management plans to ensure resources always remain at a stable level, meeting the operating needs of the business.

3.6. Identify the main activities of the business

To implement and achieve goals, businesses need to clearly identify key activities. These activities may include: Manufacturing, product/service supply, marketing, sales, finance, accounting, human resource management, research and development.

Depending on the product, business field and business goals, the main activities may be different. However, all activities need to be closely linked together to form a closed, highly effective process.

3.7. Identify the main partners of the business

These are partners that play an important role in the operation and development of the business. They can be suppliers, distributors, retailers, service companies, etc. The main partner should be based on the following criteria:

• Suitability with the business field of the enterprise.
• Ability to provide quality products/services at reasonable prices.
• Prestige and operational experience.

3.8. Determine cost structure

Cost structure is an important factor that needs to be clearly defined in a business. Thereby, administrators can identify unnecessary spending sources to cut, or focus on core investments to improve product and service quality.

If a business plans to invest in any project or campaign, it should use the ROI index (Return On Investment: Ratio of net profit to total investment cost) to evaluate the effectiveness of the project. If ROI is high, the project has the potential to bring high profits, so investment capital should continue.

4. Apply the Business Model Canvas model for businesses

Canvas is a useful tool that helps businesses identify, evaluate and optimize their business models. Many successful businesses such as Apple, Uber, BMW,... have also applied this model and achieved amazing results.

Original ideas are often difficult to make successful. Instead, the product/service needs to be tested and innovated many times to produce the most perfect final product. Apple is a prominent example of this.

Apple changed music listening culture around the world by launching the iPod. With iTunes, Apple has integrated devices, apps, and online stores into a single experience, earning it the distinction of being the music industry's go-to.

Apple's business model canvas seamlessly combines the pillars to deliver a uniquely successful solution. Specifically, Apple has long-term partnerships with music providers through negotiated agreements. Apple's revenue stream comes from iPod and App Store sales. Apple's unique sales model brings long-term success to the company.

Above is basic information to help answer in detail the question of what the Canvas model is and detailed instructions on the steps to create an effective Canvas plan. This will be a useful tool for companies of all sizes and industries, helping to build a more solid and effective business model. In addition, to learn more information related to corporate governance, don't forget to follow other articles on 1C Vietnam's website.