From SCORE Richmond by Doug Carleton:
The business model canvas shows the logic of how you are going to make money. It takes the four main areas of the business: customers, offer, infrastructure, financial viability, and shows how they all relate in achieving the desired goal. The current gold standard of developing a business model was created by Alexander Osterwalder, and set out in his book, Business Model Generation – a wide-ranging introduction and discussion of the canvas. He shows the nine building blocks that it takes to deliver your product to market and make a profit – all on one page.
A business plan involves a mission statement, problems, solutions, data and forecasting all used to show how a startup would execute success in the future. It defines why you are in business and what your company does. What it does not describe is how company does it. It is generally a one-time static document that winds up filed away and never looked at again. Its most practical use is when pursuing financing.
The business model canvas is a perfect example of visual thinking. Business models are complex concepts composed of various building blocks and their interrelationships. In a business model one element influences another. It only makes sense as a whole, and capturing that big picture without visualizing it is difficult. Looking at the nine blocks of the business model canvas allows you to do that.
One of the most effective ways to use the canvas is with Post-it notes. When I have taught the canvas I took it and blew it up to 11 x 17 and gave everyone 1 ½” x 2” Post-its, and as we discussed each block they could use the notes to put in information pertaining to that block. Just one example – the Customer segment. One Post-it might have been “I’m solving this customer pain.” By the time we were finished some peoples’ canvases were almost completely covered with Post-its. It is a great tool with which to study how your company makes money, and it is especially useful for startups. Even the best-planned startups sometimes don’t realize all the interactions that different parts of the business have on each other. The business model canvas enables them to see all the relationships as they interact with each other to make a profit.