Business Model Canvas: The Nine Blocks, an Example, and What Comes Next
The Business Model Canvas fits an entire business onto one page, which is exactly why it is so useful in a workshop and so incomplete the morning after. Here is how to fill it in well, and how to turn it into something an organization can build.
By Capstera Business Architecture Staff · Updated
13 min read
The Business Model Canvas is a one-page template, developed by Alexander Osterwalder with Yves Pigneur, that describes how an organization creates, delivers and captures value in nine building blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure.
A leadership team spends a day around a wall-sized canvas covered in sticky notes. By evening, the new business idea has customers, a value proposition, channels, a revenue model and a rough cost picture. Everyone can see the whole thing at once, and several arguments that would have taken weeks by email are settled in an afternoon. Then the canvas is photographed, and nothing happens. The canvas did its job: it described a business model. It was never designed to say which capabilities the organization must build, in what order, or how the work will be organized. That second step is where many good canvases stall, and where business architecture picks up.
Key Takeaways
- The Business Model Canvas describes a business model in nine blocks on one page: who the customers are, what is offered, how it reaches them, how money comes in, and what it takes to deliver.
- The right-hand side is about value for customers; the left-hand side is about how the organization delivers it efficiently.
- Fill in customer segments and value propositions first, and test every other block against them.
- A canvas describes what the business model is, not how the organization will run it. That is the operating model's job.
- Key activities and key resources translate directly into business capabilities, which is the bridge from canvas to execution.
- Use one canvas per business model or segment. A canvas that tries to describe a whole conglomerate says nothing.
What Is the Business Model Canvas?
A business model describes how an organization creates value for customers and captures some of it for itself. The canvas is a structured way to write one down.
Alexander Osterwalder developed the canvas from his doctoral research at the University of Lausanne, supervised by Yves Pigneur, on a business model ontology: a defined set of elements that any business model can be described with. The two popularized it in the 2010 book Business Model Generation. Its strength is constraint. Nine boxes on one page force a team to be concise and to see how the parts depend on each other.
The canvas reads in two halves. The right side, customer segments, value propositions, channels, customer relationships and revenue streams, describes value from the customer's point of view and how the organization is paid for it. The left side, key activities, key resources, key partnerships and cost structure, describes what the organization must do and have to deliver that value, and what it costs. Value propositions sit in the middle, connecting the two.
The Nine Building Blocks
Each block answers one question. Writing the answer as specifically as possible is most of the skill.
| Block | The question it answers | A weak entry | A stronger entry |
|---|---|---|---|
| Customer segments | For whom are we creating value? | Businesses | Mid-sized food manufacturers running their own compressed-air systems |
| Value propositions | What problem do we solve, or need do we meet, for each segment? | High-quality products | Compressed air paid for by use, with uptime guaranteed and no capital outlay |
| Channels | How do we reach and deliver to each segment? | Sales and online | Direct sales for the first contract; a customer portal for usage and service |
| Customer relationships | What relationship does each segment expect? | Good service | A named service manager and monitored equipment with proactive maintenance |
| Revenue streams | What are customers willing to pay for, and how? | Sales revenue | A monthly fee per volume of air delivered, with a minimum commitment |
| Key resources | What assets are essential to the value proposition? | Our people | Installed equipment on customer sites; usage telemetry; field engineers |
| Key activities | What must we do well to deliver it? | Operations | Remote monitoring, predictive maintenance, usage billing |
| Key partnerships | Who do we rely on, and for what? | Suppliers | An equipment-finance partner; regional service subcontractors |
| Cost structure | What are the most important costs? | Running costs | Equipment financing, field service, monitoring platform, energy where included |
How to Fill In a Business Model Canvas
Order matters. Starting from the resources you already have tends to produce a canvas of the business you already run.
- Pick one business model. A canvas describes one way of creating and capturing value. If segments are served in fundamentally different ways, use one canvas for each.
- Start with customer segments. Be specific enough that you could name examples.
- Write the value proposition for each segment. Describe the job it does for the customer, not the features of the offering.
- Add channels and customer relationships. How each segment finds, buys, receives and is supported.
- Add revenue streams. How each segment pays, and for what.
- Then the left side: key activities, key resources and key partnerships needed to deliver the right side.
- Finish with the cost structure, driven by the activities, resources and partnerships just listed.
- Test the connections. Every activity and resource should support something on the right side; anything that does not is either a hidden assumption or a cost without a purpose.
- Mark assumptions. Distinguish what is known from what is believed, and decide how to test the riskiest beliefs first.
A Business Model Canvas Example: Equipment as a Service
An illustrative example. The manufacturer is invented to show a complete canvas and what it leads to.
A manufacturer of industrial air compressors has always sold equipment outright. Its largest customers are asking for something different: they want compressed air, not compressors, and they would rather pay for it monthly than find capital for a new machine. The leadership team uses a canvas to describe the new model, shown in the table above as the stronger entries.
The canvas makes three things clear that the original discussion had not. The value proposition is uptime, not equipment, which means monitoring and predictive maintenance become key activities rather than after-sales extras. The company would keep its equipment on its balance sheet, so it needs a finance partner, and the cost structure shifts from manufacturing toward financing and service. And customer relationships change from a sale every decade to a monthly account that can be lost at renewal.
Those observations are the end of the canvas's job and the beginning of the architecture work.
Business Model vs. Operating Model
The two terms are often confused. The distinction is the difference between a plan and the means to carry it out.
A business model describes what value the organization offers, to whom, and how it makes money. An operating model describes how the organization is set up to deliver that business model: its capabilities, processes, organization structure, locations, technology, information and suppliers, and how decisions are made.
One business model can be delivered through very different operating models. Two companies selling the same equipment-as-a-service offer might run field service in-house or through partners, centralize monitoring or regionalize it, build their own billing or buy it. The canvas does not settle any of these choices, and it was not meant to. The operating model, and the target operating model for a business model that does not exist yet, is where they are settled.
| Business model | Operating model | |
|---|---|---|
| The question | What value do we offer, to whom, and how do we make money? | How is the organization set up to deliver that? |
| Typical tool | Business Model Canvas | Operating Model Canvas; capability map; target operating model |
| Changes when | Customers, offers or revenue models change | How the work is organized, sourced or supported changes |
| Owned by | Strategy and business leadership | Business leadership with operations, architecture and functions |
| Level of detail | One page | Many views: capabilities, value streams, organization, technology |
From Canvas to Capabilities: The Business Architecture Step
The left side of the canvas is a short list of what the organization must be able to do. Business architecture turns it into a plan.
Key activities and key resources map directly onto business capabilities. In the example, "remote monitoring", "predictive maintenance" and "usage billing" become capabilities such as Equipment Condition Monitoring, Maintenance Planning and Usage-Based Billing. Each can be assessed: does the manufacturer have it today, and how well? For a new business model, the honest answer is often "partly" or "not at all", and the gap is the investment the business case must fund.
The right side maps onto value streams. "A customer signs up and starts receiving air" is a value stream with stages from contract to installation to the first bill; "equipment shows a fault and is fixed before the customer notices" is another. Walking those streams shows which capabilities each stage draws on, and where the handoffs will be.
Key partnerships become sourcing decisions on specific capabilities: which ones the organization will build, which it will buy, and which a partner will perform. And the cost structure becomes a capability-level cost model that a business case can rest on.
That sequence, canvas, capabilities, value streams, operating model, roadmap, is what turns an agreed business model into something an organization can build and fund.
Go further
- Business Model Canvas vs. operating model — Where the canvas stops and operating model design begins.
- Target operating model — Designing how the organization will run a new business model.
- Value proposition vs. value stream — The customer's view of value, and the organization's flow that delivers it.
- Business case — Funding the capability gaps a new business model creates.
Common Mistakes with the Business Model Canvas
The canvas is simple to fill in and easy to fill in badly.
- One canvas for everything. Describing several business models on one canvas produces entries so general they mean nothing.
- Starting from the left. Listing current resources and activities first tends to describe the existing business, not the new one.
- Features instead of value. A value proposition that lists product features rather than the customer's job or problem misses the point of the block.
- Assumptions presented as facts. A canvas mixes known and believed; without marking which is which, the riskiest beliefs go untested.
- Treating the canvas as the plan. The canvas describes the model; capabilities, operating model and roadmap describe how to get there.
- Never revisiting it. Business models change as markets do; a canvas from three years ago is a historical record.
Frequently Asked Questions
What is the Business Model Canvas?
A one-page template, developed by Alexander Osterwalder with Yves Pigneur and popularized in their 2010 book Business Model Generation, that describes how an organization creates, delivers and captures value in nine building blocks.
What are the nine building blocks of the Business Model Canvas?
Customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure.
In what order should you fill in a Business Model Canvas?
Start with customer segments and value propositions, then channels, customer relationships and revenue streams, then key activities, key resources and key partnerships, and finish with the cost structure. Then check that every element on the left supports something on the right.
What is the difference between a business model and an operating model?
A business model describes what value the organization offers, to whom, and how it makes money. An operating model describes how the organization is set up to deliver it: capabilities, processes, organization, technology, information and suppliers.
What is the difference between the Business Model Canvas and the Lean Canvas?
The Lean Canvas, adapted by Ash Maurya for startups, replaces some of the canvas's blocks with problem, solution, key metrics and unfair advantage, to focus on testing an untried idea. The Business Model Canvas suits describing and redesigning established models as well as new ones.
What is the Value Proposition Canvas?
A companion tool that zooms into the fit between one customer segment and one value proposition, describing the customer's jobs, pains and gains and how the offering addresses them.
How does business architecture use the Business Model Canvas?
Key activities and key resources become business capabilities that can be assessed and funded; the customer-facing blocks become value streams; key partnerships become sourcing decisions; and the cost structure becomes a capability-level cost model for the business case.
Can one organization have several business model canvases?
Yes, and it usually should when it serves segments in fundamentally different ways. Each canvas then describes one business model clearly, and the capability map shows which capabilities the models share.
Pro Tips
- Write each canvas entry so that someone outside the room could check whether it is true.
- Use a different color for assumptions, and plan how to test the riskiest ones first.
- After the workshop, translate key activities and key resources into named capabilities and assess them the same week.
- Keep one canvas per business model, and use the capability map to show what the models share.
- Date every canvas, and revisit it when a segment, offer or revenue model changes.