Business modeling mobile applications & services with the Business Canvas
I have been working the last few months on the establishment of a mobile applications business incubator at the Hogeschool van Amsterdam, University of Applied Sciences at the School of Design and Communication in Interactive Media. We have about 150 teams comprised of young entrepreneurs working through a 6 week intensive business modeling course that starts with idea conception and ends with a pitch and business plan. The best teams, elected by the participating entrepreneurs, are invited to ‘The Pitch’ where they present their concepts to a jury comprised of public and private sector professionals leading in the Dutch mobile space. The winning teams are invited for meetings with possible partners/investors for their concepts.
Central to this course is the application of the the Business Model Canvas, a visual tool for addressing questions in strategic management. The Business Model Canvas was originally created by Alexander Osterwalder and builds on his earlier work on Business Model Ontology. Specifically the canvas allows us to develop, sketch and analize new or existing business models. I can say that through using this tool I can see it has been quite useful in working through different scenerios the teams face in implementing their business i.e. key assumptions in target customer or strategic business partner that if proved wrong/otherwise force considerable changes on the business model and thereby their value proposition.
The Business Canvas is a visual template that consists of nine components that includes: Infrastructure 1) Key Activities: The activities necessary to execute a company’s business model 2) Key Resources: The resources that are necessary to create value for the customer 3) Partner Network: The business alliances which complement other aspects of the business model. Offering 4) Value Proposition: The products and services a business offers Customers 5) Customer Segments: The target audience for a business’ products and services 6) Channels: The means by which a company delivers products and services to customers. This includes the company’s marketing and distribution strategy 7) Customer Relationship: The links a company establishes between itself and its different customer segments. The process of managing customer relationships is referred to as customer relationship management. Finances 8) Cost Structure: The monetary consequences of the means employed in the business model 9) Revenue Streams: The way a company makes money through a variety of revenue flows.
The first week the teams dedicate themselves to an analysis of mobile opportunities and the gaps currently presented in the marketplace. Building on this analysis they move forward with Idea Generation that produces about fifty ideas based on four user personas and five mobile themes. The teams form 9 idea clusters they reduce to three primary focus areas. In some cases the teams revert back to nine idea clusters if searching for a new direction. In most cases the teams are able to make a selection and pitch their concept for approval. In user generated & crowdsourcing fashion the participants in the program are tasked with appoving each others ideas.
In a second stage the teams work through their market analysis and leverage tools such as the SWOT, Porter’s Five Forces and the Empathy Map (pictured). These basic structures help organize the teams information they then input into the Business Canvas for analysis. These outputs are again presented for the participants in the program. The feedback is used to iterate the business model and work through a marketing plan of attack. In the final stages the teams work through their financial projections, submit their plans for revision and practice their pitches.
Working from an Interactive Media perspective, and our background in User Centered Design, we find that starting with the Customer Segment is a natural entry point into the canvas. Our tradition is to focus on the user experience and our approach to everything we do starts from a user perspective. From this foundation the teams are well positioned to identify the channels and thereby identify their partners and outline the resources they need to target their early adopters. In a second round the teams approach the same process from a cost perspective whereby the same analysis is done through the vantage point of having no/to little startup capital. This second vantage point helps the teams focus their ideas and achieve more depth in their modeling by being forced to be extremely specific. If you only have a few thousand euros you better be investing in the right channels! Both approaches raise a number of strategic questions that serve to test our teams creativity. Its through this process that many touch back to the value proposition and adjust them to the revisions they have made along the way.
The Business Canvas is a great tool for working through some key decisions and I believe is helping our teams refine their concepts.