Chapter 14: Business Model Canvas - Testing How the Organisation Creates, Delivers, and Captures Value

Video: Business Model Canvas & Lean Canvas: Visualise, Align, and Strengthen Your Case Solution

“A business model is not a collection of boxes. It is a system for creating, delivering, and capturing value.”

Learning Objectives

By the end of this chapter, you should be able to:

• explain howthe anpurpose organisationof creates,the delivers,Business andModel capturesCanvas

  value;
• understand

  identify the nine building blocks of thea Businessbusiness Modelmodel

  Canvas;
• identify

  understand how the relationshipscomponents among customers, activities, resources, partners, costs, and revenues;

• distinguishof a business model fromconnect
  a
strategy

• distinguish between customer value and aorganisational revenuevalue

  model;

• identify weaknesses, gaps, contradictions, and unsupported assumptionsdependencies within a business model;model

• compare an organisation's current and proposed business models;
• determine how a recommendation changes other parts of the organisation;
• evaluate a business model for customer desirability, organisational feasibility, and financial viability;
• decide when to

  use the Business Model Canvas orto Leanunderstand Canvas;how an organisation makes money

• identify opportunities to improve, redesign, or disrupt a business model

• connect business model analysis to Value Chain, VRIO, SWOT, and financial analysis

• use the assumptionsBusiness that should be tested before implementation;

• use theModel Canvas to strengthengenerate strategic alternatives,alternatives
  recommendations,
and
• implementation

  test plans.whether a proposed strategy actually strengthens the organisation's business model

---

Why This Matters

A case can describe an organisation with strong products, loyal customers, talented employees, and attractive financial results.

ManyBut casethat teamsstill jumpleaves directlyan fromimportant analysisquestion:

How does the organisation actually create, deliver, and capture value?

A company may create tremendous value for customers but capture very little of that value financially.

Another company may have an attractive product but an inefficient delivery model.

A third may have a profitable business today but a business model that is becoming obsolete.

Understanding the business model allows you to Recommendation.see Theythe recommend:

organisation

• enteringas a newsystem market;
rather
• launching a digital platform;
• introducing a premium product;
• developing a subscription;
• expanding internationally;
• targeting a new customer segment;
• forming a strategic partnership.

Each initiative may sound attractive on its own, but the team may not have determined how the pieces fit together. A new customer segment may require:

• a different value proposition;
• new marketing and distribution channels;
• different customer relationships;
• additional capabilities;
• new partnerships;
• changes to operations;
• a different pricing model;
• higher costs; and
• new measures of success.

If those connections are ignored, the Recommendation becomesthan a collection of activitiesindividual ratheractivities.

than a coherent strategy.

The Business Model Canvas provides a one-pagestructured viewway ofto howexamine anthat organisation:system.

The

• createsobjective valueis fornot customers;
to
• deliversfill value through activities, resources, partners, channels, and relationships; and
• captures value through revenues and a sustainable cost structure.

Its greatest value doesn't come from fillingin nine boxes.

It

The comesobjective fromis examiningto whetherunderstand the logic connecting the nine parts work together as a credible system.boxes.

---

Discover Your MAD Skills Principle

EverythingDon't injust describe the business modelmodel. mustTest fitwhether the pieces work together logically.

A strong value proposition aimed at the wrong customer will fail. An attractive customer segment without an effective channel will remain unreachable. A compelling solution without the required activities, resources, or partners will remain undeliverable. A popular offering with an unsustainable cost structure will notto create a viablesustainable business.advantage.

A

useful

The Business Model Canvas analysisbecomes followsvaluable when you move beyond description.

Anyone can identify:

• the customers

• the products

• the channels

• the revenue streams

• the costs

The stronger case solver asks:

• Why do customers choose this progression:organisation?

  Customer
Need
• →

  What Valuedoes Propositionthe →organisation Deliveryactually Systemdeliver?

  →
Economic
• Model

  Which →activities Strategicmake Fit.that Thepossible?

  central
question

• Which resources are essential?

• Where does the money come from?

• What does it cost to deliver the value proposition?

• Which parts of the model are difficult for competitors to replicate?

• Where is not: "Have we completed all nine boxes?" It is: "Does this businessthe model work as an integrated system?"vulnerable?

• WhereWhat happens if one component changes?

That is where the Business Model Canvas Fitsbecomes a thinking tool rather than a template.

---

What Is the Business Model Canvas?

The Business Model CanvasCanvas, isdeveloped by Alexander Osterwalder and Yves Pigneur, provides a business-modelvisual analysisframework andfor design tool. It is particularly useful when a case involves:

• a start-up;
• a new product or service;
• a new customer segment;
• market entry;
• business-model innovation;
• digital transformation;
• a strategic pivot;
• a platform business;
• a partnership model;
• a subscription;
• a new distribution channel;
• a revenue-model change;
• organisational growth;
• commercialising an idea.

It can help teams:

• understand how the current business works;
• identify gaps and contradictions;
• visualise a proposed strategy;
• compare strategic alternatives;
• test whether a recommendation is internally coherent;
• identify capability and partnership requirements;
• recognise financial implications;
• plan implementation.

The Canvas may be less useful when the problem is narrow and doesn't materially change how the organisation creates, delivers, or captures value. For example, the full Canvas may not be necessary for:

• a small process improvement;
• a short-term financing decision;
• a limited human-resource policy change;
• a specific operational bottleneck.

The case's characteristics should determine whether the full Canvas or only selected blocks add value.

Business Model, Strategy, and Revenue Model

These concepts are connected, but they are not the same.

Business Model

A business model explainsdescribing how an organisation creates, delivers, and captures value. It describes the system connecting:

• customers;
• value propositions;
• operations;
• resources;
• partners;
• channels;
• relationships;
• costs;
• revenues.

Strategy

Strategy explains how the organisation will make choices and create an advantage. It addresses questions such as:

• Where will we compete?
• Which customers will we prioritise?
• How will we win?
• What will we choose not to do?
• Which capabilities will we build?
• How will we respond to competitors and change?

A business model explains how the system works. Strategy explains the choices that make the system distinctive and defensible.

Revenue Model

A revenue model explains how the organisation earns income. Examples include:

• direct sales;
• subscription fees;
• licensing;
• commissions;
• advertising;
• transaction fees;
• usage fees;
• membership;
• leasing;
• professional-service fees.

The revenue model is one partconsists of the business model. Changing how customers pay may also require changes to:

• the value proposition;
• customer relationships;
• technology;
• service;
• cash flow;
• pricing;
• customer acquisition;
• performance measures.

A subscription is not a complete strategy, nor is it a complete business model.

The Nine Building Blocks

The Business Model Canvas contains nine interconnected building blocks. They can be understood through four questions:blocks:

·

CustomerSegments

·

ValuePropositions

·

Building Block	Key Question
Customer Segments	Who are we serving?creating value ofor?
Value Propositions	What value are we creating?creating for othem?
Channels	How do we reach and servedeliver them?value to customers?
Customer Relationships	How do we interact with and retain customers?
Revenue Streams	How do we capture economic value?
Key Resources	What assets and capabilities do we need?
Key Activities	What must we do particularly well?
Key Partners	Who helps us deliver the business model?
Cost Structure	What does it cost to operate the model?

The nine components can be grouped into three fundamental questions:

1. How do we create value?

Value Proposition + Key Resources + Key Activities + Key Partners

2. How do we deliver value?

Customer Segments + Channels + Customer Relationships

3. How do we capture value?

Revenue Streams + Cost Structure

oThis Channelscreates the central business-model logic:

oCreate Customer→ RelationshipsDeliver → Capture

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Deciphering Case Characteristics

Before building a Business Model Canvas, ask whether the case actually requires one.

oThe Keyframework Activitiesis particularly useful when the case involves:

• a new business

• a new product or service

• a business transformation

• declining profitability

• changing customer behaviour

• digital disruption

• platform businesses

• subscription models

• new distribution channels

• partnerships or ecosystems

• expansion into new markets

• changing revenue models

• questions about long-term sustainability

It is especially valuable when the case question sounds like:

“How should this organisation change the way it does business?”

Before completing the canvas, determine:

oWhat Keypart Resources

o   Key Partners

·        How doesof the business model makeis economicactually sense?under pressure?

o

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Revenue Streams

o   Cost Structure

The CustomerNine Side

Building

Blocks

1. Customer Segments

Start with the customer.

CustomerNot Segmentseveryone identifiesis necessarily the peoplecustomer.

or organisations the business serves.

Different segmentscustomer groups may have different:

• needs;

  needs

• motivations;
• purchasing behaviours;

• willingness to pay;pay

• decision processes;

  behaviours

• barriers;

  purchasing criteria

• service expectations;requirements

• definitions of

  profitability

  value.

ExamplesFor include:example, a software company might serve:

• mass-market consumers;

  individual consumers

• niche customers;

  small businesses

• small businesses;

  large enterprises

• large institutions;

• government agencies;

organisations
• donors;
• beneficiaries;
• buyers;
• users;
• platform participants.

Buyers,Each Users, and Beneficiaries May Be Different 

In some business models, the person using the product is not the person paying for it. For example:

• a parent buys a service used by a child;
• an employer purchases software used by employees;
• a donor funds a program used by beneficiaries;
• an advertiser pays a platform used by consumers;
• a government funds a service delivered to citizens.

The Canvas should distinguish these roles because each groupsegment may require a different value proposition, channel,sales orprocess, relationship.pricing model, and service model.

The MAD Skills Question

Who is the organisation really creating value for—and which customers matter most?

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2. Value Propositions

The value proposition explains why customers choose the organisation.

QuestionsIt tomay Askbe based on:

• Who experiences

  price

• convenience

• quality

• performance

• speed

• customization

• design

• reliability

• accessibility

• risk reduction

• brand

• experience

The important distinction is between features and value.

A feature describes what the problem?organisation provides.

A value proposition explains why that feature matters to the customer.

Weak Analysis

“The company offers same-day delivery.”

Stronger Analysis

“Same-day delivery reduces the customer's waiting time and increases convenience, giving the company an advantage for time-sensitive purchases.”

The second statement explains the value created.

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3. Channels

Channels describe how the organisation reaches its customers and delivers its value proposition.

They may include:

• physical stores

• Who uses

  sales representatives

• websites

• mobile apps

• distributors

• marketplaces

• social media

• partners

• direct delivery

Channels affect both customer experience and economics.

For example, a company moving from physical retail to direct-to-consumer e-commerce may change:

• distribution costs

• customer data

• pricing

• inventory requirements

• customer relationships

• geographic reach

Therefore, a channel decision is rarely just a marketing decision.

It can change the offering?entire business model.

---

4. Customer Relationships

How does the organisation interact with customers?

Relationships can range from:

• personal service

• Who makes

  dedicated account management

• self-service

• automated service

• communities

• subscriptions

• loyalty programs

• customer support

The appropriate relationship depends on the purchasecustomer decision?segment and value proposition.

A luxury service may depend on personal interaction.

A low-cost digital platform may depend on automation.

The key question is:

What kind of relationship does the customer value—and what does that relationship cost the organisation to provide?

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5. Revenue Streams

Revenue streams explain how the organisation captures value from its customers.

Common models include:

• one-time sales

• Who pays?

  subscriptions

• Who influences

  licensing

• usage fees

• advertising

• commissions

• transaction fees

• leasing

• freemium models

• memberships

Do not simply ask:

“How does the decision?company

Whichmake segmentmoney?”

Ask:

“Why is mostthe important?customer

Howwilling largeto pay, how much will they pay, and attractivehow does that payment relate to the value being created?”

This is eachwhere segment?the

Business Model Canvas connects directly to financial analysis.

---

6. Key Resources

What does eachthe segmentorganisation value?need to operate the business model?

Resources may include:

Physical

• facilities

• Are

  equipment

• inventory

• distribution infrastructure

Financial

• capital

• cash

• access to financing

Intellectual

• patents

• trademarks

• proprietary technology

• data

• intellectual property

Human

• employees

• expertise

• leadership

• specialised talent

But remember:

Resources are not automatically capabilities.

A company may own sophisticated technology without having the capability to use it effectively.

This is where the Business Model Canvas connects with VRIO.

Ask:

Which resources are simply necessary, and which provide a meaningful competitive advantage?

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7. Key Activities

What must the organisation actually do to deliver its value proposition?

Activities may include:

• manufacturing

• product development

• marketing

• sales

• logistics

• research

• customer service

• platform management

• technology development

• relationship management

The important question is not simply:

“What does the company do?”

Instead ask:

“Which activities are critical to the business model working?”

This connects directly to Value Chain Analysis.

---

8. Key Partners

Few organisations operate completely independently.

Partners may include:

• suppliers

• distributors

• technology providers

• manufacturers

• strategic alliances

• franchisees

• logistics providers

• financial institutions

• platform partners

Partnerships may allow the organisation to:

• reduce costs

• access expertise

• increase scale

• reduce risk

• enter new markets

• access technology

• improve distribution

But partnerships can also create dependency.

Partnership Test

For every major partner ask:

What does the partner provide that we tryingcannot easily or efficiently provide ourselves?

Then ask:

What happens if that partner changes its strategy, raises its price, or becomes unavailable?

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9. Cost Structure

The final building block examines the economics required to serveoperate toothe manybusiness segmentsmodel.

with

Costs onemay model?include:

• labour

• materials

• technology

• facilities

• marketing

• distribution

• customer service

• administration

• financing

Two broad business-model orientations are often useful:

Cost-driven

The business model is designed around:

• efficiency

• automation

• scale

• low overhead

• standardization

Value-driven

The business model is designed around:

• premium offerings

• customization

• service

• experience

• differentiation

Most businesses contain elements of both.

The important question is:

Does the proposedcost strategystructure changesupport the value proposition and revenue model?

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The Business Model Is a System

The biggest mistake with the Business Model Canvas is treating the nine boxes as independent.

They are not.

They form a system.

Consider a premium coffee company.

Its:

Customer Segment
→ customers seeking quality and experience

supports its:

Value Proposition
→ premium coffee and customer experience

which requires:

Key Activities
→ sourcing, roasting, training, store operations

which require:

Key Resources
→ skilled employees, brand, equipment, supply relationships

supported by:

Key Partners
→ coffee suppliers and distribution partners

delivered through:

Channels
→ stores and digital ordering

supported by:

Customer Relationships
→ personal service and loyalty programs

which generates:

Revenue
→ premium product prices

while creating:

Costs
→ higher-quality inputs, labour, locations, and service.

Change one component and other components may have to change.

That is the power of the framework.

---

The Business Model Consistency Test

One of the most useful ways to use the Business Model Canvas is to test whether the pieces are internally consistent.

Ask:

Customer → Value Proposition

Does the value proposition actually address an important customer need?

Value Proposition → Revenue

Are customers willing to pay for the value being created?

Revenue → Costs

Does the revenue model generate enough value to support the cost structure?

Resources → Activities

Do the organisation's resources allow it to perform the activities required?

Activities → Value Proposition

Do the key activities actually deliver the promised value?

Partners → Activities

Do partners provide capabilities the organisation needs?

Channels → Customers

Do the chosen channels effectively reach the target customer?

This creates a powerful diagnostic chain:

Customer Need → Value Proposition → Delivery Model → Revenue Model → Cost Structure

If the chain breaks, the business model has a problem.

---

The Business Model Stress Test

Once the current model is understood, deliberately challenge it.

Ask:

What if customers change?

• What if customer preferences shift?

• What if willingness to pay declines?

• What if a new customer segment emerges?

What if technology changes?

• What becomes obsolete?

• What becomes cheaper?

• What new channels become possible?

What if competitors copy us?

• Which elements are easy to imitate?

• Which elements are difficult to replicate?

What if costs increase?

• Which costs are most sensitive?

• Can the business raise prices?

• Can the organisation redesign the model?

What if a partner disappears?

• Is there a substitute?

• Can the organisation bring the activity in-house?

What if the revenue model changes?

• Could the organisation move from transactions to subscriptions?

• Could it introduce recurring revenue?

• Could it monetize another part of the customer relationship?

This turns the canvas from a Warningsnapshot Signinto a strategic stress test.

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Finding Business Model Gaps

A strong case analysis looks for mismatches.

Gap 1: Customer Need vs. Value Proposition

Customers want something the organisation does not provide.

Gap 2: Value Proposition vs. Delivery

The organisation promises more than its operating model can deliver.

Gap 3: Value vs. Price

Customers do not perceive enough value to justify the price.

Gap 4: Revenue vs. Cost

The business generates revenue but the economics are unattractive.

Gap 5: Resources vs. Capabilities

The organisation owns resources but lacks the capability to exploit them.

Gap 6: Capability vs. Customer Need

The organisation is excellent at something customers no longer value.

Gap 7: Partner Dependency

A critical part of the business model depends too heavily on another organisation.

These gaps can become the starting point for strategic alternatives.

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Connecting the Business Model Canvas to Other Frameworks

The Business Model Canvas becomes much more powerful when combined with other tools.

Business Model Canvas + PESTLE

PESTLE identifies external forces that may disrupt the business model.

For example:

Technology change
→ changes channels

Regulation
→ changes key activities or costs

Economic pressure
→ changes customer willingness to pay

---

Business Model Canvas + Five Forces

Five Forces identifies competitive pressure.

The Business Model Canvas helps explain how the organisation responds to that pressure.

For example:

High buyer power
→ stronger value proposition
→ greater differentiation
→ alternative pricing model
→ stronger customer relationships.

---

Business Model Canvas + Value Chain

Value Chain asks:

Where are activities creating or destroying value?

"Everyone"Business Model Canvas asks:

How do those activities fit into the broader business model?

Together they connect operations to strategy.

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Business Model Canvas + VRIO

VRIO asks:

Which resources and capabilities can create defensible advantage?

Business Model Canvas asks:

Where do those capabilities fit into the business model?

A powerful strategic question becomes:

Can the organisation build a business model around capabilities competitors cannot easily replicate?

---

Business Model Canvas + Financial Analysis

The canvas should ultimately connect to numbers.

Ask:

• What drives revenue?

• What drives cost?

• What are the margins?

• What is the customer acquisition cost?

• What is the customer lifetime value?

• What investment is required?

• How quickly can the model scale?

• What happens to profitability if assumptions change?

The Business Model Canvas describes the logic.

Financial analysis tests the economics.

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Worked Example: A Meal-Kit Business

Consider a meal-kit company that delivers pre-portioned ingredients and recipes directly to customers.

Customer Segments

• busy professionals

• families

• customers seeking convenience

Value Proposition

• convenient meal preparation

• reduced planning time

• pre-portioned ingredients

• variety

Channels

• website

• mobile app

• home delivery

Customer Relationships

• subscription

• personalized recommendations

• digital support

Revenue Streams

• weekly subscription

• premium meal options

• add-ons

Key Resources

• brand

• technology platform

• customer data

• supplier relationships

• distribution network

Key Activities

• menu development

• ingredient sourcing

• order management

• packaging

• delivery

• customer acquisition

Key Partners

• food suppliers

• logistics providers

• technology providers

Cost Structure

• ingredients

• packaging

• labour

• logistics

• marketing

• technology

Now move beyond description.

What might the analysis reveal?

The value proposition depends heavily on convenience.

But convenience may be undermined by:

• delivery delays

• poor ingredient quality

• excessive packaging

• high subscription prices

The company therefore cannot simply increase marketing.

It may need to improve the underlying business model.

Possible alternatives might include:

• redesigning delivery routes

• using local fulfilment centres

• introducing flexible subscriptions

• improving customer personalization

• reducing packaging costs

• introducing premium and value tiers

• developing complementary products

The canvas helps identify where the intervention should occur.

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From Business Model Analysis to Strategic Alternatives

A Business Model Canvas should ultimately help you generate choices.

Possible strategic moves include:

Strengthen

Improve an existing part of the business model.

Remove

Eliminate activities or costs that do not create sufficient value.

Redesign

Change how value is delivered.

Reposition

Target a different customer segment.

Monetize

Find new ways to capture value.

Partner

Use external capabilities to strengthen the model.

Integrate

Bring a critical activity inside the organisation.

Disrupt

Redesign the business model rather than simply improving the existing one.

The objective is not to produce the largest number of alternatives.

It is to identify the few changes capable of materially improving the business model.

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The Business Model Innovation Test

When considering a usefulnew customerbusiness segment.model, Aask five questions:

1. Customer

Who will benefit?

2. Value

What problem are we solving?

3. Delivery

How will we deliver the solution?

4. Economics

How will we make money?

5. Advantage

Why will competitors struggle to replicate it?

If you cannot answer all five, the idea probably needs more work.

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Winning the Room

Do not present a Business Model Canvas by walking judges through nine boxes.

That is analysis without insight.

Instead, identify the business-model story.

For example:

“The company has a strong Canvasvalue identifiesproposition for time-sensitive customers, but its delivery model is too expensive to support the customerscurrent forpricing whomstructure. We recommend redesigning the organisationdistribution model to reduce cost per order while protecting the convenience that customers value most.”

That is intentionallymuch designingmore value.powerful than:

“Here is our Business Model Canvas.”

The framework should support the argument.

2.It Valueshould Propositionsnot become the argument.

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Coach's Lens

“Don't tell me what the business model is. Tell me where it works, where it breaks, and what you would change.”

When presenting business-model analysis, look for:

TheCustomer Need → Value Proposition explains→ whyDelivery → Economics → Advantage

If you can explain that chain clearly, you are demonstrating strategic thinking rather than simply completing a customerframework.

would

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choose

Common Mistakes

1. Filling in the organisation'sboxes offering.without Itfinding shouldan connect:insight

A completed canvas is not analysis.

2.

aTreating meaningfulall customernine problemblocks oras need;

equally

theimportant

benefit

Some components will be strategically critical. Others may simply support the organisationmodel.

provides;

3.

theConfusing reasonfeatures thewith offering is more relevant or attractive than available alternatives.

value

Possible sources of value include:

• lower cost;
• greater convenience;
• better quality;
• faster service;
• reduced risk;
• accessibility;
• customisation;
• simplicity;
• trust;
• status;
• sustainability;
• expertise;
• reliability;
• a better experience.

A product feature is not automatically a valuecustomer proposition.benefit.

"AI-powered"

4. describesIgnoring economics

A business model must eventually make economic sense.

5. Treating the current model as fixed

The canvas is a feature.starting Thepoint valuefor proposition explainsasking what thatcould featurechange.

does

6. forIgnoring dependencies

A business model may look strong until one critical supplier, technology platform, or distribution channel changes.

7. Forgetting competitive advantage

A profitable model today is not necessarily a defensible model tomorrow.

8. Using the customer:canvas Reduceswithout evidence

Every important assumption should be supported by case evidence, calculations, or reasonable estimates.

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MAD Skills Drill

The Business Model Stress Test

Choose a company or case and complete the timefollowing requiredexercise.

Step 1 — Map

Complete the nine Business Model Canvas components.

Step 2 — Identify the Critical Link

Which connection between two components is most important to preparethe abusiness weeklymodel?

inventory

For forecastexample:

from

Value fourProposition hours→ Revenue

Step 3 — Find the Weak Link

Which component creates the greatest vulnerability?

Step 4 — Find the Leverage Point

Which single change could create the greatest improvement?

Step 5 — Test the Economics

What happens to 20revenue, minutescosts, margins, or investment requirements if your proposed change occurs?

Step 6 — Test the Competition

Could competitors easily copy the change?

Step 7 — Build the Strategic Choice

Complete this sentence:

“We recommend changing ______ because ______. This will allow the organisation to ______ while improving forecast______.”

accuracy.

Step 8 — Deliver It

Present your analysis in 90 seconds.

QuestionsNo framework tour.

No reading the boxes.

Tell the judges the business-model story.

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Chapter Summary

The Business Model Canvas provides a structured way to Askunderstand how an organisation:

Creates Value → Delivers Value → Captures Value

The nine building blocks provide a useful map, but the real analytical value comes from understanding the connections between them.

A strong case solver uses the canvas to identify:

• What problem

  customer needs

• value propositions

• critical activities

• essential resources

• partner dependencies

• revenue drivers

• cost drivers

• business-model weaknesses

• opportunities for innovation

The canvas becomes even more powerful when connected to PESTLE, Five Forces, Value Chain, VRIO, and financial analysis.

---

Key Takeaways

• The Business Model Canvas is a thinking tool, not a template to complete.

• The nine building blocks are weinterconnected.

  solving?
• What outcome

  Start iswith the customer seeking?and the value proposition.

• What does

  Test whether the customerorganisation valuecan most?actually deliver the promised value.

• Why is

  Connect the currentrevenue alternativemodel inadequate?to the cost structure.

• What functional,

  Identify emotional,the social,weak orlinks and critical dependencies.

• Use the canvas to generate strategic alternatives.

• Test new business models against customers, economics, delivery, and competitive advantage.

• Connect business-model analysis to financial analysis.

• Present the insight, not the framework.

---

Bottom Line

A strong business model aligns customer value, operational capability, and economic value iscapture.

created?

Why would the customer choose this offering?

Is the value proposition different for each segment?

Can the organisation credibly deliver the promise?

Will the customer pay enough for the value created?

AThe Strongbest Valuecase Proposition

analysis

Adoes strongnot value proposition is:

• customer-specific;
• problem-focused;
• benefit-oriented;
• differentiated;
• credible;
• connected to the rest of the business model.

Reaching and Serving the Customer

3. Channels

Channelssimply describe how the organisation communicatesoperates with customers, enables purchase, and delivers the offering. Channels may include:today.

It

• physicalasks:
  locations;
• direct sales;
• distributors;
• retailers;
• websites;
• mobile applications;
• marketplaces;
• social media;
• call centres;
• delivery partners;
• sales representatives;
• strategic partners.

AWhat channel may support several stages of the customer journey:

1. awareness;
2. evaluation;
3. purchase;
4. delivery;
5. after-sales support.

Questionsneeds to Ask

• How do customers discover the offering?
• How do they evaluate it?
• Where and how do they purchase?
• How is the offering delivered?
• Which channels do customers prefer?
• Which channels are most effective?
• Which channels are most expensive?
• Does the organisation own the customer relationship?
• Does a partner control customer access or data?
• Can the channel consistently deliver the value proposition?
• Does the proposed strategy require a new channel?

Channel Trade-Offs

A partner channel may provide:

• faster market access;
• credibility;
• distribution capacity;
• lower initial investment.

It may also create:

• fees;
• reduced margins;
• weaker customer relationships;
• dependence;
• limited data;
• loss of control over the experience.

The Canvas helps make those trade-offs visible.

4. Customer Relationships

Customer Relationships describes the type of relationship the organisation establishes with each customer segment. Relationships may be:

• personal;
• automated;
• self-service;
• community-based;
• advisory;
• contractual;
• transactional;
• subscription-based;
• co-created;
• account-managed.

The appropriate relationship depends on:

• the complexity of the offering;
• customer expectations;
• price;
• risk;
• purchase frequency;
• service requirements;
• the economics of the model.

Questions to Ask

• What relationship does the customer expect?
• How much support is required?
• Is the relationship transactional or ongoing?
• Is personal service important?
• Can some interactions be automated?
• How will the organisation acquire customers?
• How will it onboard them?
• How will it retain them?
• How will it handle complaints and feedback?
• Does the relationship model fit the price and margin?

A premium value proposition supported only by impersonal, inconsistent service may create a contradiction.

The Operating Side

5. Key Activities

Key Activities are the actions the organisation must perform exceptionally wellchange for the business model to work. They may include:

• product development;
• manufacturing;
• service delivery;
• marketing;
• sales;
• logistics;
• platform management;
• data analysis;
• supplier coordination;
• quality control;
• customer support;
• research;
• regulatory compliance;
• partner management.

The objective is not to list everything the organisation does. Identify the activities most critical to:

• delivering the value proposition;
• reaching the customer;
• maintaining the relationship;
• generating revenue; and
• protecting the organisation's position.

Questions to Ask

• Which activities are essential to the value proposition?
• Which activities most influence customer experience?
• Which activities drive cost?
• Which activities must remain inside the organisation?
• Which activities could be outsourced?
• What must change under the proposed model?
• Which activities could become bottlenecks?
• What quality or scale requirements must be met?

Value Chain Analysis can provide the detailed operational evidence behind this block.

6. Key Resources

Key Resources are the assets and capabilities required to operate the business model. They may include:

Physical Resources

• facilities;
• equipment;
• inventory;
• vehicles;
• production capacity;
• distribution infrastructure.

Intellectual Resources

• brands;
• patents;
• licences;
• data;
• content;
• proprietary technology;
• organisational knowledge.

Human Resources

• specialised talent;
• leadership;
• sales capability;
• technical expertise;
• customer relationships;
• operational knowledge.

Financial Resources

• cash;
• credit;
• investment;
• working capital;
• access to funding.

Questions to Ask

• What resources does the value proposition require?
• Which resources support the channels and customer relationships?
• Which resources are already available?
• Which are missing?
• Which are strategically important?
• Which resources could be difficult to acquire?
• Which capabilities must be built, bought, borrowed, or accessed through a partner?
• Does the organisation have sufficient working capital?
• Can the required resources scale?

VRIO can help determine whether a key resource or capability creates competitive advantage or merely enables the organisation to compete.

create

7.more Keyvalue, Partners

deliver

Keyit Partnersmore are the external organisations or individuals that help the business model work. They may include:

• suppliers;
• distributors;
• technology providers;
• manufacturers;
• logistics companies;
• financial institutions;
• research organisations;
• governments;
• community organisations;
• strategic allies;
• licence holders;
• platform participants.

Partnerships may provide:

• specialised capabilities;
• access to customers;
• local knowledge;
• distribution;
• technology;
• credibility;
• lower investment;
• risk sharing;
• greater speed.

Questions to Ask

• Why is the partner required?
• What resource or activity does the partner provide?
• What does each partner gain?
• How dependent will the organisation become?
• Who controls the customer relationship?
• Who owns the data or intellectual property?
• How will quality be maintained?
• Are incentives aligned?
• What happens if the partner underperforms?
• Could the partner become a competitor?
• Is a partnership better than building or acquiring the capability?

"Form a partnership" is not a complete recommendation. The team must explain the partner's role, contributions, incentives, governance,effectively, and risks.

capture

The Economic Side

8. Revenue Streams

Revenue Streams explains how the organisation captures financial value from each customer segment. Revenue may come from:

• product sales;
• service fees;
• subscriptions;
• usage fees;
• transaction fees;
• commissions;
• licensing;
• leasing;
• advertising;
• memberships;
• donations;
• grants;
• sponsorships;
• a combinationmore of sources.

Questions to Ask

• Who pays?
• What are they paying for?
• How much are they willing to pay?
• How frequently do they pay?
• Is the revenue recurring or transactional?
• Is pricing fixed, tiered, dynamic, usage-based, or negotiated?
• Does the price reflect the value created?
• How long does it takecreates?
  to

collect the revenue?

How predictable

That is the revenue?

Does one customer segment subsidise another?

How does the Recommendation affect cash flow?

Revenue Is Not the Same as Profit

A model can generate revenue while destroying value. The team must connect revenue to:

• customer-acquisition cost;
• cost to serve;
• gross margin;
• retention;
• capacity;
• investment;
• working capital;
• risk.

A subscription may create predictable revenue, but only if customers remain long enough to recover acquisition, onboarding, and service costs.

9. Cost Structure

Cost Structure identifies the most important costs required to operate the business model. Costs may include:

• labour;
• materials;
• production;
• technology;
• marketing;
• customer acquisition;
• distribution;
• facilities;
• partner fees;
• service;
• compliance;
• research and development;
• inventory;
• administration;
• financing.

The team should distinguish:

• fixed and variable costs;
• one-time and recurring costs;
• direct and indirect costs;
• operating and capital costs;
• costs that increase with scale.

Questions to Ask

• Which activities and resources drive the most cost?
• What investment is required before launch?
• Which costs increase with each customer or transaction?
• What costs remain fixed?
• Are there economies of scale?
• Could growth create diseconomies or bottlenecks?
• Are partner or platform fees material?
• What is the cost to acquire and serve the customer?
• How long will the model take to break even?
• Does the organisation have enough funding and working capital?
• What costs are missing from the proposal?

A common case-competition error is presenting a revenue forecast without identifying the resources, activities, and costs required to generate that revenue.

Seeing the Canvas as an Integrated System

The nine blocks should never be analysed independently. Consider a company that wants to target a premium customer segment. That change may require: New customer segment → stronger value proposition → premium branding and channels → more personal customer relationships → additional service and quality activities → specialised employees and technology → selected premium partners → higher costs → higher price or recurring revenue requirement. If the team changes the customer segment but leaves the other eight blocks untouched, the proposed business model is probably incomplete. A useful connection test asks: if this block changes, what else must change? Examples include:

• A new value proposition may require new resources and activities.
• A direct channel may change customer relationships and partner roles.
• A subscription may require continuing service, retention capabilities, and new financial measures.
• Automation may change activities, resources, costs, and customer relationships.
• Outsourcing may change partners, cost structure, control, and customer experience.
• International expansion may change segments, channels, partners, resources, compliance, pricing, and costs.

The Canvas becomes strategically useful when the team follows those connections.

Testing Strategic Coherence

A coherent business model answers five questions.

1. Customer Fit

Do the customer segment and value proposition fit together?

• Is the customer clearly defined?
• Is the problem important?
• Does the proposed value match what the customer wants?
• Is there evidence of demand?
• Is the customer willing and able to pay?

2. Delivery Fit

Can the channels and relationships deliver the value proposition?

• Can customers find, purchase, receive, and use the offering?
• Does the channel support the expected experience?
• Does the relationship match the complexity and price?
• Does the organisation retain enough control over the customer experience?

3. Operational Fit

Do the activities, resources, and partners support delivery?

• Does the organisation have the required capabilities?
• Are responsibilities clear?
• Can the model operate at the required quality and scale?
• Are critical dependencies manageable?
• Can partners perform their roles reliably?

4. Economic Fit

Do the revenues support the costs?

• Is pricing aligned with customer value?
• Are margins sufficient?
• Can customer-acquisition costs be recovered?
• Is the cost to serve sustainable?
• What investment and working capital are required?
• Can the model reach break-even?

5. Strategic Fit

Does the model fit the organisation and its environment?

• Does it build on relevant capabilities?
• Does it respond to external and industry conditions?
• Is the position defensible?
• Does it create a meaningful advantage?
• Can the organisation implement the required changes?

A weakness in any one area can undermine the entire business model.

Desirability, Feasibility, and Viability

Another way to test the Canvas is through three lenses.

Desirability: Do Customers Want It?

Desirability examines:

• customer needs;
• customer problems;
• value proposition;
• demand;
• willingness to pay;
• channels;
• customer relationships.

Ask:

• Is the problem important enough?
• Does the value proposition solve it meaningfully?
• Will customers change their behaviour?
• Can the organisation reach them?
• Will they pay?

Feasibility: Can the Organisation Deliver It?

Feasibility examines:

• key activities;
• key resources;
• key partners;
• capabilities;
• technology;
• implementation;
• scale;
• operational risk.

Ask:

• Can the organisation build and deliver the offering?
• Does it have the required capabilities?
• Can gaps be addressed?
• Are partners available?
• Can quality be maintained?
• Can the model scale?

Viability: Can the Organisation Sustain It?

Viability examines:

• revenue streams;
• pricing;
• costs;
• investment;
• margins;
• working capital;
• cash flow;
• risk.

Ask:

• Will revenue exceed the total cost of creating and delivering value?
• How long will the model take to break even?
• Are the assumptions realistic?
• Is the model financially sustainable?

A recommendation should pass all three tests. A desirable solution that cannot be delivered is not feasible. A feasible solution customers don't want is not desirable. A desirable and feasible solution that cannot generate sustainable economics is not viable.

Current Canvas Versus Proposed Canvas

One of the strongest uses ofwhere the Business Model Canvas inmoves from a casenine-box competition is comparing:

• the current business model; and
• the proposed business model.

The current Canvas explains how the organisation works today. The proposed Canvas explains how the Recommendation changes that system. A simple change table can make the comparison clearer than displaying two complete Canvases.

Canvas block	Current model	Proposed model	Required change
Customer Segment	Individual consumers	Institutional customers	Develop institutional sales capability
Value Proposition	Convenience and variety	Reliability, compliance, and volume	Adapt offering and service standards
Channel	Website and application	Direct sales and procurement	Build sales team and tender capability
Relationship	Automated self-service	Dedicated account management	Hire and train account managers
Revenue	Individual subscription	Multi-year contracts	Develop contract pricing
Key Activities	Consumer fulfilment	Contract management and volume planning	Redesign forecasting and operations

This approach focuses attention on what changes and what implementation requires.

The Ripple-Effect Test

For every major change, ask:

1. Which Canvas block changes first?
2. Which other blocks must change because of it?
3. What capabilities are required?
4. What new costs or risks appear?
5. What assumptions must be tested?
6. What should be implemented first?

This turns the Canvas into an implementation tool.

Identifying Gaps and Contradictions

The Canvas can expose situations where the pieces don't fit.

·        Value Proposition–Segment Gap

o   The proposed value doesn't solve an important problem for the target customer. Example: Offering extensive customisationframework to a segmentstrategic thatdecision-making primarily values low cost and simplicity.tool.

·

---

Channel–Segment

Looking Gap

o   The organisation cannot effectively reach the intended customer. Example: Targeting senior executives through a broad consumer social-media campaign.

·        Relationship–Economics Gap

o   Customer relationships cost too much for the revenue generated. Example: Providing dedicated account managementAhead to low-value,Chapter one-time customers.

15

·        Promise–Capability Gap

o   The value proposition promises somethingUnderstanding the organisation cannot deliver. Example: Promising same-day delivery without the necessary inventory visibility or distribution capacity.

·        Revenue–Cost Gap

o   Revenue doesn't cover the total cost of the model. Example: Charging a low monthly subscription while providing high-touch onboarding and unlimited personal support.

·        Partner–Control Gap

o   The organisation depends on a partner but has not addressed control, incentives, data, or quality. Example: Relying on a delivery platform for the customer experience while having no service-level agreement or access to customer data.

·        Scale Gap

o   The model works during a small pilot but fails at larger volume. Example: A founder personally manages every customer relationship, making the experience difficult to scale. A strong case team actively searches for contradictions rather than trying to make every initial idea appear viable.

Business Model Assumptions

Every proposed business model contains assumptions. These may involve:

• customer demand;
• willingness to pay;
• acquisition cost;
• retention;
• partner interest;
• operational capacity;
• adoption speed;
• conversion;
• utilisation;
• pricing;
• unit cost;
• technology performance;
• regulatory approval.

An assumption is not automatically a weakness. An unrecognised or untested assumption is.

Identify the Critical Assumptions

Ask:

• Which assumption must be true for the model to work?
• Which assumption is least supported by evidence?
• Which assumption would cause the greatest damage if wrong?
• Which assumption can be tested quickly and inexpensively?

A practical test matrix might include:

Critical assumption	Evidence available	Risk if wrong	Test
Customers will pay $25 per month	Small survey	High	Pre-sale or pricing experiment
Delivery partner can meet two-hour window	Partner estimate	High	Limited operational pilot
Acquisition cost will remain below $80	Benchmark only	High	Paid-channel test
Customers will use the service weekly	Interviews	Moderate	Prototype trial
Supplier can support expansion volume	Current discussions	High	Capacity and contract review

The Canvas should lead to an evidence plan, not only a strategy diagram.

From Assumptions to Pilots

When uncertainty is high, teams should avoid recommending immediate full-scale implementation. A pilot can test:

• customer demand;
• pricing;
• channel effectiveness;
• conversion;
• retention;
• operational capacity;
• partner performance;
• unit economics;
• customer experience.

A strong pilot identifies:

• the target segment;
• the value proposition being tested;
• the geographic or operational scope;
• the required resources and partners;
• the duration;
• the success measures;
• the investment limit;
• the expansion criteria;
• the conditions that would stop or redesign the initiative.

For example: Launch a three-month pilot with 200 customers in one city. Test a $25 monthly subscription through two acquisition channels. Expand only if acquisition cost remains below $80, three-month retention exceeds 70%, and contribution margin is positive. The pilot reduces uncertainty across several Canvas blocks.

Understanding the Lean Canvas

The Lean Canvas is an adaptation designed primarily for start-ups, early-stage ventures, and business models with significant uncertainty. Its nine blocks typically include:

• Problem;
• Customer Segments;
• Unique Value Proposition;
• Solution;
• Channels;
• Revenue Streams;
• Cost Structure;
• Key Metrics;
• Unfair Advantage.

Problem

What are the customer's most important problems? Avoid listing every inconvenience. Focus on the problems significant enough to influence behaviour.

Customer Segments

Who experiences the problem, and who are the early adopters most likely to try the Solution?

Unique Value Proposition

Why should the customer pay attention and choose this Solution?

Solution

What product, service, or feature will address the priority problem? The solution should remain open to testing. Early-stage teams often fall in love with a solution before confirming the problem.

Channels

How will customers discover, evaluate, purchase, and receive the Solution?

Revenue Streams

How will the venture earn income, and what might customers be willing to pay?

Cost Structure

What costs will be required to develop, launch, operate, and grow the model?

Key Metrics

Which measures demonstrate whether the model is working? Examples include:

• activation;
• conversion;
• retention;
• acquisition cost;
• engagement;
• revenue per user;
• contribution margin;
• referral.

Unfair Advantage

What advantage cannot be easily bought or copied?

Examples might include:

• proprietary data;
• an established community;
• exclusive access;
• a trusted reputation;
• deep domain expertise;
• network effects;
• a difficult-to-replicate capability.

"First-mover advantage," "passion," and "a great idea" are not automatically unfair advantages.

Business Model Canvas or Lean Canvas?

The choice depends on the case.

Use the Business Model Canvas when…	Use the Lean Canvas when…
The organisation or model is relatively established	The venture is early stage
Partners, activities, and resources are central	Problem–solution fit is uncertain
The Recommendation changes the operating model	The Solution still needs testing
You need to understand the complete value-delivery system	Early adopters and key metrics are especially important
Organisational capability and delivery are major concerns	The greatest risk is whether the model will gain traction

The two tools are not competitors. The important question is which Canvas helpstells us understand the uncertainty and decision in this case.

A Worked Example

Return to the regional meal-kit company examined in Chapters 11–13. The company is considering expanding into another Canadian city by leveraging its capability in locally differentiated meal development.

Current Business Model

Customer Segment

Urban consumers seeking convenient home cooking.

Value Proposition

Convenient meal preparation using fresh, locally sourced ingredients.

Channels

• website;
• mobile ordering;
• digital advertising;
• referrals;
• home delivery.

Customer Relationships

• subscription;
• automated ordering;
• digital support;
• limited personal service.

Revenue Streams

Weekly meal-kit subscriptions and add-on purchases.

Key Activities

• menu development;
• demand forecasting;
• ingredient sourcing;
• assembly;
• fulfilment;
• delivery;
• customer support.

Key Resources

• local supplier relationships;
• culinary expertise;
• customer data;
• production facility;
• brand;
• ordering technology.

Key Partners

• local producers;
• packaging suppliers;
• delivery providers;
• payment processor.

Cost Structure

• ingredients;
• labour;
• packaging;
• delivery;
• customer acquisition;
• technology;
• food waste;
• refunds.

Proposed Change

The company initially proposes entering three new cities within 12 months. The Canvas reveals several gaps.

·        Customer Gap: The company has limited evidence that customers in the new cities value local ingredients enough to pay the proposed price.

·        Resource Gap: The company lacks local supplier relationships and production facilities in the new markets.

·        Activity Gap: Its process for developing local menus depends heavily on informal relationships and cannot yet be replicated consistently.

·        Partner Gap: Delivery and supplier partners have not been identified.

·        Channel Gap: Digital advertising may reach customers, but acquisition costs in the new markets are unknown.

·        Cost Gap: The proposal doesn't include the cost of local facilities, supplier development, launch marketing, or duplicated management.

·        Revenue Gap: Revenue assumptions are based on the existing market's conversion and retention rates.

Revised Business Model

The team recommends a one-city partnership-led pilot.

Customer Segment

Professionals and families who value convenience and locally sourced meals.

Value Proposition

Regionally distinctive meal kits offering reliable convenience and transparent local sourcing.

Channel

A combination of:

• targeted digital acquisition;
• local producer communities;
• employer partnerships;
• referral incentives.

Customer Relationship

A flexible subscription supported by:

• simple onboarding;
• delivery updates;
• preference-based recommendations;
• responsive digital service.

Key Activities

• customer testing;
• regional menu development;
• supplier onboarding;
• forecasting;
• fulfilment;
• delivery coordination;
• retention management.

Key Resources

• culinary development capability;
• supplier-onboarding process;
• integrated forecasting data;
• local operations team;
• launch funding.

Key Partners

• local producers;
• a shared commercial kitchen;
• a regional delivery provider;
• selected employers.

Revenue Streams

Subscription revenue and premium add-ons.

Cost Structure

• customer acquisition;
• local ingredients;
• kitchen access;
• labour;
• packaging;
• delivery;
• technology integration;
• launch costs.

Critical Assumptions

The revised model depends on several assumptions:

• customers will pay for local differentiation;
• a shared kitchen can meet volume and quality requirements;
• delivery reliability will meet the customer promise;
• local suppliers can provide consistent volume;
• acquisition costs will remain within the target;
• retention will support positive unit economics.

Pilot Measures

The team proposes measuring:

• customer-acquisition cost;
• conversion;
• average order value;
• contribution margin;
• food waste;
• on-time delivery;
• customer satisfaction;
• eight-week retention;
• referral rate.

The Canvas has changed the Recommendation from broad expansion to a focused test of an integrated business model.

The Canvas Is Not the Recommendation

Completing a Business Model Canvas doesn't establish that the proposed model is attractive or achievable. A complete process is:

1. define the strategic decision;
2. map the current business model;
3. identify the block most affected by the Recommendation;
4. trace the change across the other blocks;
5. test customer desirability;
6. assess operational feasibility;
7. evaluate financial viability;
8. identify critical assumptions and risks;
9. compare strategic alternatives;
10. design a pilot or implementation plan;
11. establish measures and decision points.

The Canvas tests the coherence of the recommendation. It doesn't replace customer research, financial analysis, capability assessment, risk analysis, or implementation planning.

Turning the Canvas into Action

For each major change to the business model, specify:

• what is changing;
• why it must change;
• which other blocks are affected;
• what capabilities are required;
• who owns the change;
• which partners are involved;
• what investment is needed;
• what assumptions must be tested;
• how performance will be measured;
• what happens if the assumptions are wrong.

A recommendation such as "Launch a subscription model" is incomplete. A stronger recommendation is to pilot a tiered subscription with the company's highest-frequency customers. Introduce recurring benefits, automated renewal, member support, and retention communications. Test willingness to pay, usage, churn, cost to serve, and contribution margin before expanding. The second version reflects the connections among:

• customer segment;
• value proposition;
• relationship;
• channel;
• activities;
• resources;
• revenue;
• cost.

Winning the Room: Presenting the Canvas Effectively

A complete nine-block Canvas can contain too much information for a presentation slide. The judges don't need to read every block. They need to understand how the Recommendation changes the business.

Lead with the Business-Model Change

For example: We are moving from broad, company-owned expansion to a focused, partnership-led regional model.

Show the Critical Changes

Focus on the blocks most affected:

Current model	Proposed model
Three-city expansion	One-city pilot
Company-owned facility	Shared-kitchen partner
Broad digital acquisition	Targeted local and employer channels
Existing-market assumptions	Tested local acquisition and retention
Immediate scale	Expansion triggered by unit economics

Explain the Connections

Show why the blocks must change together: A partnership-led operating model reduces initial facility investment but requires clear quality standards, supplier coordination, technology integration, and partner governance.

Connect the Canvas to Implementation

Explain:

• what changes first;
• what capabilities are required;
• what assumptions will be tested;
• what success looks like;
• what triggers expansion.

The analytical chain becomes: Business-Model Change → Connected Requirements → Assumptions → Pilot → Scale Decision.

Coach's Lens

One of the strongest uses of the Business Model Canvas in a case competition is comparing how the business works today with how it must work under the Recommendation. Ask what changes, then ask what else must change because of that change. If a team recommends a new customer segment but cannot explain the required value proposition, channel, relationship, capabilities, costs, and revenues, it has not finished the Recommendation. I often use the Canvas as a stress test:

• Does the customer want it?
• Can the organisation deliver it?
• Can the organisation make the economics work?
• What must be true?
• How will we test it?

A strong strategy is not merely a good idea. It is a system that can work.

Common Mistakes

·        Filling in the Canvas Without Thinking: Completing all nine blocks doesn't guarantee understanding. Explain the relationships, assumptions, and implications within the model.

·        Treating the Blocks as Independent: A change in one block often requires changes in several others. Use the ripple-effect test after every major strategic change.

·        Starting with the Solution: Teams may design activities and technology before defining the customer problem. Begin with the customer segment and the value proposition.

·        Serving "Everyone":  A broad definition of the customer produces a vague value proposition and an unfocused model. Prioritise the segments for which the organisation is intentionally creating value.

·        Confusing Features with Value: Technology or product features don't automatically explain why customers should care. Translate each feature into a customer outcome.

·        Focusing Only on Revenue: Revenue cannot be separated from customer value, delivery, acquisition, retention, and cost. Evaluate the contribution margin, cash flow, investment, and cost to serve.

·        Treating Partnerships as Free Resources: Partners require incentives, governance, coordination, and risk management. Explain what each partner contributes and receives.

·        Ignoring Capability Gaps: The proposed model may require skills, systems, relationships, or assets the organisation doesn't possess. Connect Key Resources and Key Activities to the VRIO framework and capability-gap analysis.

·        Using Existing-Market Assumptions in a New Market: Customer behaviour, costs, channels, and competition may differ. Identify which assumptions must be retested.

·        Assuming a Subscription Guarantees Loyalty: Recurring billing doesn't guarantee recurring value. Explain why customers will remain, how retention will be managed, and whether lifetime value exceeds acquisition and service cost.

·        Ignoring Cash Flow: A model may appear profitable eventually but require more cash than the organisation can fund. Evaluate investment timing, working capital, payment timing, and break-even analysis.

·        Showing the Entire Canvas When It Is Not Necessary: A crowded Canvas can obscure the strategic message. Present only the blocks and connections that changed the Recommendation.

·        Treating the Canvas as Proof: The Canvas organises assumptions. It doesn't validate them. Identify the evidence, tests, and decision criteria.

·        Confusing the Canvas with the Recommendation: A completed business model still needs prioritisation, evaluation, implementation, and financial support. Use the Canvas to test and strengthen the Recommendation.

MAD Skills Drill

Choose an organisation and build a simplified Business Model Canvas for it.

Step 1: Map the Current Model

Complete the nine blocks using concise, evidence-based statements.

Step 2: Identify the Central Logic

In one sentence, explain:

• who the organisation serves;
• what value it creates;
• how it delivers that value;
• how it captures value.

Step 3: Change One Block

Change one important element. For example:

• select a new customer segment;
• introduce a subscription;
• add a direct channel;
• outsource delivery;
• create a digital service;
• introduce a premium offering.

Step 4: Trace the Ripple Effects

Identify every other block that must change as a result of the initial change. For each affected block, explain:

• what changes;
• why it changes;
• what capability or investment is required.

Step 5: Test the Model

Evaluate:

·        Desirability: Will the customer want it?

·        Feasibility: Can the organisation deliver it?

·        Viability: Can the economics work?

·        Strategic Fit: Does the model build on relevant organisational capabilities and respond to the external environment?

Step 6: Identify Critical Assumptions

Identify the three assumptions most important to the model's success. For each assumption, specify:

• current evidence;
• risk if wrong;
• a practical test.

Step 7: Compare Current and Proposed Models

Identify the five most important differences.

Step 8: Deliver the Insight

Prepare a 60-second explanation answering:

1. How does the current business model work?
2. What is changing?
3. Which other blocks must change?
4. What assumption creates the greatest risk?
5. How should the organisation test or implement the proposed model?

Don't read all nine blocks. Explain the system change that shaped your Recommendation.

Chapter Summary

The Business Model Canvas helps case teams understand how an organisation creates, delivers, and captures value through nine interconnected building blocks:.

But

• Customerthere Segments;
is
• Value Propositions;
• Channels;
• Customer Relationships;
• Revenue Streams;
• Key Resources;
• Key Activities;
• Key Partners;
• Cost Structure.

Its value doesn't come from completing nine boxes. It comes from testing whether:

• the customer wants the offering;
• the value proposition solves ananother important problem;
question:
• channels

  and

  How relationshipsis reach and serve the customer effectively;

• activities, resources, and partners can deliver the promise;
• revenue supports the cost structure;
• the organisation possessesactually orstructured canto developmake theall necessary capabilities;
• the complete model is strategically coherent.

Strong Business Model Canvas analysis followsof this progression: Customer Need → Value Proposition → Delivery System → Operating Requirements → Economic Model → Assumptions & Risks. happen?A weak Canvas describes nine parts of a business; a strong Canvas explains how those parts work together and what must change for the Recommendation to succeed.

Key Takeaways

✓ The Business Model Canvas provides an integrated view of how an organisation creates, delivers, and captures value.

✓ A business model is broader than a revenue model and different from a strategy.

✓ Begin with the customer segment and the problem or outcome that matters to that customer.

✓ Translate product and technology features into clear customer value.

✓ Distinguish buyers, users, beneficiaries, and influencers when they are different.

✓ Evaluate how channels support awareness, evaluation, purchase, delivery, and after-sales service.

✓ Ensure the customer relationship matches customer expectations, offering complexity, pricing, and economics.

✓ Identify only the activities, resources, and partners critical to making the business model work.

✓ Explain what every partner contributes, receives, controls, and risks.

✓ Connect revenue assumptions to acquisition, retention, cost to serve, investment, cash flow, and margin.

✓ Analyse the Canvas as an interconnected system. A change in one block may require changes across several others.

✓ Test the business model for customer desirability, organisational feasibility, financial viability, and strategic fit.

✓ Compare the current and proposed models to reveal capability gaps and implementation requirements.

✓ Identify the critical assumptions that must be true and design practical tests for them.

✓ Use the Lean Canvas when problem-solution fit and early-stage uncertainty are more important than understanding an established operating model.

✓ In the presentation, focus on the business-model changes that shaped the recommendation rather than displaying every Canvas block.

Looking Ahead

The Business Model Canvas shows how customers, value propositions, activities, resources, partners, channels, revenues, and costs fit together. However, even a coherent business model can fail if the organisation's structure, systems, leadership, people, skills, and culture don't support it. The next chapter introduces the McKinsey 7S Framework,and whichexamines helpsthe evaluatealignment whetherbetween strategy, structure, systems, skills, staff, style, and shared values.

Because a good strategy can fail when the organisation is not aligned and ready to execute theit.

strategy.