Business Model Canvas for User Experience

Business Model Canvas 1024x477 Business Model Canvas for User Experience

Alexander Osterwalder’s Business Model Canvas is the tool of choice for a quick, one page dashboard of your business hypotheses. It very much appeals to the business guy in me, but it irks the User Experience (UX) part of my brain.

But hey…the canvas is a tool. Use the right tool for the right job.

Don’t have the right tool? Make your own.

I’m not suggesting the canvas is wrong.

It is neither right nor wrong. It’s a paradigm through which you can view your business model.

There are many such paradigms available for your to choose. Ash Maurya has his own “lean” canvas, there’s the Balanced Scorecard approach, Getting to Plan B dashboards, etc.

These are all just tools. Use the one that helps you.

tl;dr This is a fairly detailed follow up of why I’ve modified the BMC for UX focus. You can always skip to the end and I’ve posted a “how to use the business model canvas” example.

And here’s the download link:

icon download sumome 300x76 Business Model Canvas for User Experience

Form Should Fit Function

The first time I saw the canvas I just could not figure out why it was shaped the way it was no matter how hard I looked. Brant Cooper finally had to explain it to me.

Production is on the left, customer is on the right, product meets in the middle. Costs are mostly associated with production, so those go under production. Revenue comes from the customer so that’s under the customer.

Makes sense, but even after looking at it for years and through it’s evolution I still have questions:

  • Aren’t distribution channels and customer relationships/support COSTS? Shouldn’t costs be under them as well?
  • Like most English readers I read left to right, so I start looking at the canvas, so why should I start thinking about my business model by focusing on Partners instead of the Customer?
  • Why is Key Partners so damn big?
  • Why can’t I fit my customer persona (which is an 8.5″x11″ piece of paper horizontal) onto the customer block?

RTFM

Of course these questions are a bit unfair and nit picky.

Osterwalder does a great job of explaining things step by step in his book Business Model Generation and sure enough…he starts with the Customer, not Key Partners.

But I hate reading the f***ing manual and Steve Krug says “Don’t Make Me Think“. So I’m going to tweak this for my own purposes.

Customer Comes First

First nitpick, the customer should be the focus of the canvas. You’re reading this sentence left to right, the canvas is the same.

The Business Model Canvas is organized chronologically because it’s made by business people, for business people, and it’s based on a supply chain.

You negotiate with your your suppliers (a.k.a Key Partners) to purchase raw materials (a.k.a. Key Resources) and then transform them via your manufacturing process (a.k.a Key Activities) into a product (a.k.a Value Proposition) which is then delivered via Channels to the Customers.

…but I don’t really came about chronology here. I’m trying to think out what I need to produce my Value Proposition. So I want to start left to right.

This is an easy change, but this will irritate those of you very comfortable with the current BMC:

Backwards Business Model Canvas 1024x477 Business Model Canvas for User Experience

Simple fix.

Now when filling this out I’m going to start (as Osterwalder does) with Customer (“Who am I trying to help?”) and work my way towards the Value Proposition (“What does the customer want?”) Only then will I figure out how to produce that value.

Now let’s zoom in on the top left quadrant…

Product / Market Fit

Product Market Fit in the Business Model Canvas 1024x673 Business Model Canvas for User Experience

Here we have the Value Proposition (product) delivered via Channels to the Customers.

Strangely, we also have Customer Relationships being delivered by a similar arrow to the Customer. This makes sense if you consider Customer Support as a value you deliver to the Customer. That’s fair.

…but Customer Support is a value that the Customer delivers to us…the company.

In the early stages of product development, Steve Blank tells us to get out of the building and talk to customers. Eric Ries also emphasizes the Build-Measure-Learn loop as a means of getting feedback from real user behavior and improving on our Value Proposition.

So where’s the Build Measure Learn loop in this picture?

There isn’t one.

The Customer Relationship is Backwards

As suggested by Osterwalder, it’s true that your customer relationship might be community based and very hands off like Google. (I dare you to try and get a Googler on the phone to help you with you gmail account.) So the Canvas supports that view of the world.

(Note: Ash Maurya’s version of the canvas considers Customer Relationship / Support so unimportant and/or obvious that it doesn’t even get a box anymore. It’s been replaced with Unfair Advantage.)

But from my perspective, customer support is customer development.

So I want to make sure that my business model constantly emphasizes getting feedback from the Customer to my Value Proposition. So let’s flip that arrow.

Product Market Fit with Business Model Canvas with Build Measure Learn Loop Embedded 1024x699 Business Model Canvas for User Experience

Now whenever I look at my canvas and think about Customer Relationships I’m going to be thinking about it as a feedback loop to the Value Proposition.

Now let’s look at…

The Supply Chain

Supply Chain in the Business Model Canvas 1024x707 Business Model Canvas for User Experience

There are a few things here that get in the way of my thinking.

First, Key Activities and Key Resources are visually coupled with Key Partners, but not with each other. That’s a bit weird since you need Resources to perform some Activities.

Second, the Key Partners is huge box and I never wind up with enough real estate in Key Activities or Key Resources.

Finally, why neither Activities nor Resources is visually linked to Value Proposition, I will never understand.

(Note: Similar to Customer Relationship, Ash Maurya found the left hand side of the BMC to be the same for every business he was considering, so he replaced it with Problem, Solution, and Key Metrics.)

To fill out this side of the canvas and figure out how to produce my Value Proposition, I step through it this way:

  1. What Key Activities does someone need to perform in order to produce my Value Proposition?
  2. What Key Resources are required as an input to those Key Activities?
  3. What Key Partners might perform some of the Key Activities or provide Key Resources instead of my company directly?

I work backwards from the Value Proposition step by step and construct a very basic production line of Key Activities with yellow sticky notes. Then I can just use another row of sticky notes underneath to note the Key Resources and Key Partners I need underneath that production line.

From this perspective, it turns out Key Partners are really just Key Resources.

So let’s just remove Key Partners all together and make some new shapes to more strongly stress the production nature of this quadrant.

Supply Chain in the Business Model Canvas Interlinked 1024x707 Business Model Canvas for User Experience

Now I have plenty of space and a visual queue making my eyes goes back to the left towards the Value Proposition and the Customer. But there’s a little more to be done.

Cash Flow

The separation of Cash and Costs makes a lot of sense from a hypothesis perspective. I’m tempted to keep these as two separate boxes. But I am admittedly mentally lazy here.

I need a visual queue to associate my Costs with various components of the business model and the biggest Cost that most entrepreneurs forget is the Cost of Customer Acquisition…a.k.a Channels.

Costs and Revenues should be directly and visually associated with the aspects of the Business Model that create them. So let’s just finish this off by making one big box for Costs and Revenues. That way I can just drop cost or revenue directly underneath each box that might impact Cost or Revenue.

This way I’ll remember to account for costs of Customer Relationships as well as Channels. If I’m lucky, maybe this will even get me thinking about some nice way of adding a Revenue Stream from a Key Partner (now listed under Key Resources) or Key Activity.

Now we finally have:

Revised Business Model Canvas for UX 1024x483 Business Model Canvas for User Experience

(Note: For those of you terrified of mixing up which sticky note is a Cost and which is a revenue, time to invest in more than one color sticky note. I’d suggest red for Costs and green for Revenue.)

Practical Use

This suits me pretty well, but when I look at it as I’ll use it, in 2D and heavily simplified, there are still some issues.

Business Model Canvas for User Experience in 2d 1024x792 Business Model Canvas for User Experience

Couple issues here:

  1. I’ve lost all the nice visual queues I had with interlocking parts
  2. Customer comes first, but isn’t emphasized
  3. The Build Measure Learn Loop is no longer implied

So let’s do one final tweak to get something useable and just for good measure, let’s shove in a Think-Make-Check loop (same thing as Build-Measure-Learn) as long as we’re doing this for User Experience peeps.

Start and End with the Customer

Business Model Canvas Template for User Experience UX 1024x791 Business Model Canvas for User Experience

Tada!

Now we have a Business Modal Canvas which starts with the Customer. As we fill out the pieces, we’re forced to think about how we are building our Think-Make-Check loop (or Build-Measure-Learn if you prefer) into the Business Model itself. We also have a strong visual queue in the form of a massive arrow drawing our eyes back to the Customer as we think about production.

(Hint: There’s a special bonus prize here for 2-sided markets. You can stack these and drop the Cash box to the bottom and you’ll find a nice way to lay out both markets so you can see overlaps in the Activities and Resources.)

If you have further suggestions as to how to improve this for User Experience, please send them my way. But in the meantime, feel free to download and save the Business Model Canvas for User Experience template:

icon download sumome 300x76 Business Model Canvas for User Experience

That was admittedly a lot of work for something relatively academic, but it’ll let me explain some (im)practical applications faster in the next few posts where I explain how to create a Business Model Canvas for Renting Puppies.

Post update: there is newer post on the Product/Market Fit Storyboard here.

So…what should I post next? Tweet to tell me what to write:

Show me how to test product market fit!

or

How can I do lean startup in my friggin' huge company?

49 comments

  1. Erich von Hauske says:

    I really LOVE the changes you made, this way I find it a lot more intuitive and easy to remember (this one is very important to me :), I would also change the word “Relationship” to something more towards brand experience, or something else to make it broader, something about the perception the customer has of your company and not about how your company wants to see the customer.

    In the way I like to see a business I wouldn’t combine costs and revenue, because understanding your “economic engine” may be very important, think of a Yahoo vs Google, the difference between their economic engines was not based on their Relationship or Customer Acquisition, it was based on the cost of their activities and I personally find easier to understand my economic engine viewing my cost structure vs my revenue stream (if possible), this way I may decide which customer segments should I focus on, for example, or change your price strategy (think Gillete here).

    • Tristan says:

      I think I agree with you on the Cash box. It may make sense to me to combine them, but the whole canvas should be a cognitive queue. So if two boxes make for a good trigger, then it should be two boxes.

      Perhaps it should be two boxes stacked on one another so that you can still visually align each Cost and Revenue underneath the canvas item that it corresponds to.

      I’m also wondering if there should be differentiation between fixed and variable costs or not.

      Not sure on the Relationship terminology. I take Relationship to mean, “By what means does your Customer communicate and maintain a relationship with the company” I don’t want it to be about perceptions. I want it to be about feedback and communication.

      • Erich von Hauske says:

        ” I want it to be about feedback and communication”, then where would you put UX? :)

        • Tristan says:

          Wait…you mean UX isn’t just a feature you add to the product at the end?

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  4. Ray says:

    Would love to see a two-sided market account! But would you still tackle one market first based on it’s a riskier hypothesis?

    B-M-L loop this way is awesome FTW.

    • Tristan says:

      Cool thanks!…the example use I’m writing can be a two sided market, but yes I’d still try to tackle one side first and fake the other side.

  5. Very interesting! Your modification of the BMC makes sense to me. I like it to have centralized the customer focus on the canvas.

    For the two sided business model you perfectly can add an extra customer focus box on the right side of the canvas. Then you can easily see what the effect will be of changes in activities and resources for both sides.

    • Tristan says:

      Yes! I’ve tried that.

      Sometimes it works and sometimes it’s better to put them on top of one other. I haven’t used it in enough cases to say which works more consistently.

      I found the back-to-back approach a little cognitively dissonant because I wasn’t sure which activities were valued by which customer/user. (I use different colored sticky notes depending on whether the activity is adding value or would be considered waste/muda.)

      Stacked seems to reveal some synergies sometimes particularly if you are listing the activities in reverse chronological order. You sometimes find you can put the same activities underneath one another and then you’ve found a nice synergy.

      Dropping down costs at that point, you only have one.

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  7. I really like what you’ve done to the canvas, and the way you presented your thinking and changes in your post. I TOTALLY agree with the need to put customer first, and it’s one of the most important things I do when I use this tool.

    I actually created my own version of the canvas that is focused on Go-To-Market planning and strategy. I appreciate your adoption of this for UX – it’s great to be able to use these tools to fill specific niches: http://explorics.com/2012/05/07/a-better-business-model-canvas/

    • Tristan says:

      Hi Brian,

      I like the addition of Alternatives on yours. That’s an interesting thing to ponder. The personas we create often have this information embedded, but it’s not so explicit.

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  10. Fernando Mortara says:

    It is amazing how your first proposed change – flipping the BMC – impacts the whole approach. I work for a company that operates on the manufacture->sell model. Few years ago we started offering services, and this is a growing business nowadays.

    The effort required to make people see the difference between a customer oriented and a manufacturing oriented model is huge, and your explanation will help me a lot.

    Great thinking! Thank you very much.

    • Tristan says:

      Thanks Fernando! Yes…a big difference from a small change. Good luck!

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  13. Great stuff about turning the BMC around. It’s so simple and elegant. I was considering to think about it myself, but you just took away the necessity. I am going to give a talk about combining the BMC and UX and I was wondering if it’s okay if I add your model to the talk (of course with the necessary references)?

    Ivor

    • Tristan says:

      Please be my guest! Just make sure to credit Osterwalder. Cheers, Tristan

  14. Gill Phazey says:

    Thanks for such a practical explanation of the BCM, and for your thoughts on restructuring this. I am relatively new to business models, and feeling daunted by the many elements of the business canvas and how to approach it, i found this article very useful in thinking about the model and how to apply it in a systematic way. I also echo your comments about partners and resources, as i ended up with similar answers in each box which was confusing.

    Also found your worked example, and information on developing the customer persona extremely helpful in understanding how to start mapping out the customer.

    Thanks for the help!

  15. Wow Tristan!

    You made my day here.
    I am giving a public speech soon about the innovation opportunities that companies can unleash by leveraging the “Customer Relationship” and “Channels” blocks.

    Your flipped BMC and flipped “Customer Relationship” arrow would help me explain much better my ideas.

    I am wondering if I can include your sketches in my Prezi (mentioning you of course!).

    Thank you for the great job!

    Paolo Lorini

    • Tristan says:

      Of course! Please feel free to share or modify. Everything is CCed under the Osterwalder license so please make sure to credit him.

      • Credited both him and you.
        My talk went great!
        Thank you again Tristan.

  16. This is great!
    Thank you for your quick feedback.
    My talk is… tomorrow!

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  18. Agree with comments, excellent changes. Consistent with Deming cycle and lean start up.
    I have adapted this approach into a mindmap that I use with clients. They love the interactive mindmap format together with the intuitive business canvas structure.
    Happy to share with others if interested.
    Mike

    • Mike, I’d love to hear it. I actually have modified my canvas further. I will do a follow up post shortly.

    • Paul says:

      I’m doing some work on a new business model.

      A mindmap would really help some of the people who I work with your are F & S in Myers-Briggs; would be great if you could share. Ta

  19. Hi Tristan, I like your analysis over BMC.

    I want to ask your opinion about a tool I built recently, http://www.CanvasBM.com I made it simple without any colours or icons.

    I think the user should already know what are each canvas boxes mean when he starts actually creating one.

    • Tristan says:

      There are a ton of tools to make digital BMCs, but a piece of paper is still better for many reasons.

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  22. Hi! Great article.
    I was experimenting today with your new canvas and find out somehing that could be improved..
    Instead of removing the ‘partners’ section, you can stack it over (or under) the tasks.
    That way, you remove the gray unused parts of the diagam (space gain) and also reminds you to add some details that otherwise could forget.
    Also, you can line the partners underneath to the key resource they provide underneath the key activity that it’s being fullfilled. Right on top on how much is costing you.
    For example, place the activity ‘Set up hosting’ right on top the resource ‘Server’ on top of the ‘goDaddy’ partner, on top of the ‘$2.99 monthly’ cost…
    The not-quite-empty canvas (icons there) could end like this: http://i.imgur.com/UUBmRfQ.png
    Enjoy!

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  34. Kenny Nguyen says:

    I noticed that you interchange “cash” (or cash-flow) with “revenue” and “cost” in between your drawings and your BMC-UX template. Which is more important to think about when you’re in the early phases of finding customers and testing your business model?

    • Tristan says:

      I don’t have a blanket answer for that. Some businesses innovate on the cost side of things. A cheaper way to manufacture graphene better focus on the cost side of things. If we’re a SaaS business and the cost per users is going to be negligible, then focusing on revenue makes more sense.

      One cost that I think we always need to keep in mind is customer acquisition cost. In B2C or B2B (think about the fixed cost of sales people)….CAC can be a killer.

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