Question

Benefits of Business Model Canvas? What are the benefits of The Five Component Model?

Answer 1

The Business Model Canvas (BMC) is an entrepreneurial tool that enables you to visualize, design, and reinvent your business model. Swiss business theorist and author Alexander Osterwalder developed it. The BMC is a visual way of identifying key elements of your business and how they relate. Using the BMC, you can develop a clear view of your value proposition, operations, customers, and finances. As a small business owner, you can use it to identify target market segments and how to appeal to those segments. That’s powerful when deciding where you need to focus your time and attention as you start and grow your business.

Benefits of The Five Component Model

The five-component model can help guide your learning and thinking about IS. The five components are symmetric. The outermost components, hardware and people, can both take actions. The software and procedure components are both sets of instruction. The middle component, data, is the bridge between the computer side on the left and the human side on the right. You are the most important component, since you are a part of every information system that you use, and you are the one that knows best in how to interpret data and know what to do with it. All components must work. The five-component model will help you to better locate the cause of any problems and create effective solutions. High-tech information systems usually mean that more work is being transferred from the human side to the computer side, and vice versa for low-tech information systems.   You need to be able to understand the scope of new information systems. Use the five components to access how big of an investment any new technology represents. Finally keep in mind that the five components are ordered by difficulty and disruption, starting from the left as simplest to right as hardest and most disruptive. (Leftmost hardware easy to change, rightmost personnel hardest to change as firing / hiring / training is difficult and disruptive to an organization).

The Business Model Canvas has nine different areas of focus that make up building blocks in a visual representation of your business.

• Key Partners—Who are the buyers and suppliers you need to form relationships with? What other alliances will help you accomplish core business activities and fulfill your value proposition to customers?
• Key Activities—What are the most important activities you must engage in to fulfill your value propositions, to secure distribution channels, to strengthen customer relationships, to optimize revenue streams, etc.?
• Key Resources—What resources do you need to create value for your customers and sustain your business?
• Value Propositions—What products and services will you offer to meet the needs of your customers? How will your business be different from your competition? What challenges will you solve for your customers?
• Customer Relationships—What types of relationships will you forge with your customer segments? What are the relationship expectations of each customer segment? How are they entwined with the rest of your business model?
• Customer Segments—What sets of customers will you serve? Which are most important to your business?
• Channels—Through what means will you reach your targeted customers and deliver your products and services to them? Which are most cost effective? How are the channels integrated?
• Cost Structure—What are the key costs your business will face? Which resources will cost the most? Which activities will cost the most?
• Revenue Streams—How much will you charge for your products and services? What are customers willing to pay for? How will customers pay? How much will each revenue stream contribute to your overall revenue?