The business model canvas is a strategic framework that breaks down organizations into nine building blocks. The balanced scorecard is a management tool to understand the various components that make it possible to manage an organization. Both tools can be used in conjunction to elaborate and execute a business strategy.
Aspect
Business Model Canvas
Balanced Scorecard
Purpose and Focus
The Business Model Canvas is primarily a tool for designing, describing, and visualizing a business model. It helps organizations understand how they create, deliver, and capture value.
The Balanced Scorecard is a performance measurement and strategic management framework. It provides a balanced view of an organization’s performance across various aspects.
Development Stage
It is typically used during the early stages of business development, such as startup planning or business model innovation.
The Balanced Scorecard is more often used in established organizations seeking to align their strategies and monitor performance over time.
Components
It consists of nine building blocks: Customer Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partners, and Cost Structure.
It comprises four perspectives: Financial, Customer, Internal Processes, and Learning and Growth.
Visualization
The Business Model Canvas uses a visual one-page format with interconnected building blocks that allow users to see the entire business model at a glance.
The Balanced Scorecard typically uses a strategic map or a multi-page report with indicators and measures organized under each perspective.
Use Cases
It is ideal for brainstorming, prototyping, and assessing the viability of various business models. It encourages creative thinking and rapid experimentation.
The Balanced Scorecard is suitable for performance measurement, strategy communication, and the alignment of organizational goals and objectives.
Strategic Focus
It focuses on understanding how a company creates and delivers value to customers while ensuring profitability.
It emphasizes a broader perspective, including financial outcomes, customer satisfaction, internal processes, and learning and growth capabilities.
Flexibility and Adaptability
It is highly flexible and can accommodate changes and iterations as the business model evolves.
The Balanced Scorecard can be adapted to reflect changing strategic priorities and evolving business environments but may require more formal adjustments.
Key Metrics and Indicators
Key metrics in the Business Model Canvas are often specific to each building block, such as customer acquisition cost, customer lifetime value, or revenue per customer segment.
The Balanced Scorecard uses key performance indicators (KPIs) and metrics tailored to each perspective, e.g., revenue growth, customer satisfaction, process efficiency, or employee training.
Alignment with Strategy Execution
It provides a foundation for strategy development but may not offer a structured approach to strategy execution.
The Balanced Scorecard is explicitly designed to align strategies with operational activities, ensuring that the strategic plan is effectively executed throughout the organization.
Communication Tool
The visual format makes it a powerful communication tool for internal and external stakeholders, aiding in conveying the business model’s essence and value proposition.
It serves as a communication tool that helps organizations articulate their strategy and objectives to all levels of the organization, fostering understanding and alignment.
Examples and Adoption
Widely adopted by startups and entrepreneurs, it is often used by businesses of all sizes to innovate and refine their business models.
Commonly used by large corporations, government agencies, and organizations in various industries seeking a structured approach to strategic planning and performance measurement.
Integration with Other Tools/Frameworks
It can be used in conjunction with other tools and frameworks, such as the Lean Startup methodology or design thinking, to facilitate innovation and entrepreneurship.
The Balanced Scorecard can be integrated with other management tools, such as Six Sigma, Total Quality Management (TQM), or enterprise resource planning (ERP) systems.
Scalability and Complexity
It is suitable for businesses of varying sizes and can adapt to both simple and complex business models.
The Balanced Scorecard is often more relevant for larger organizations with complex operations, multiple departments, and a need for comprehensive performance measurement.
Real-Time Monitoring
It may not inherently offer real-time performance monitoring, but digital tools and software can be used to track and update metrics in real time.
The Balanced Scorecard often involves regular data collection and reporting, enabling organizations to monitor performance trends and make informed decisions.
Risk Assessment and Mitigation
It primarily focuses on value creation and may not explicitly address risk assessment and mitigation strategies.
The Balanced Scorecard can incorporate risk management by including relevant metrics and initiatives under the internal processes perspective.
Financial Perspective Emphasis
While financial aspects are considered, they are just one of the nine building blocks, allowing for a broader exploration of value creation.
The financial perspective is a primary component, with a strong emphasis on financial metrics and objectives.
Customer-Centric Approach
It encourages a deep understanding of customer segments and value propositions, promoting a customer-centric mindset.
While customer satisfaction is one of the perspectives, the Balanced Scorecard also includes non-customer-focused aspects like internal processes and learning and growth.
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.
Key Similarities between Business Model Canvas and Balanced Scorecard:
Management Tools: Both the Business Model Canvas and the Balanced Scorecard are strategic management tools used to analyze and improve organizational performance.
Framework Approach: Both tools utilize a structured framework approach to break down and understand various components of the organization.
Strategy Execution: Both tools contribute to the elaboration and execution of a business strategy, albeit from different perspectives.
Visualization: Both tools are visually oriented, providing a clear and concise representation of the organization’s key elements and strategic goals.
Key Differences between Business Model Canvas and Balanced Scorecard:
Focus: The primary focus of the Business Model Canvas is on designing, understanding, and communicating the business model of an organization. It analyzes the core elements that drive the value creation process and revenue generation.
Components: The Business Model Canvas consists of nine building blocks, including key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.
Strategic Goals: The Balanced Scorecard, on the other hand, emphasizes the alignment of an organization’s activities with its strategic goals. It provides a balanced view by measuring performance across four perspectives: financial, customer, internal processes, and organizational capacity.
Management System: The Balanced Scorecard functions as a management system that allows organizations to monitor their performance against strategic objectives and take corrective actions when necessary.
Integration and Complementarity:
Both the Business Model Canvas and the Balanced Scorecard can be used in conjunction to enhance the overall strategic management process:
Alignment: The Business Model Canvas provides a comprehensive understanding of the organization’s value creation and revenue generation mechanisms, which can be aligned with the strategic goals measured by the Balanced Scorecard.
Strategy Execution: The Balanced Scorecard helps in executing and tracking the progress of the business strategy, while the Business Model Canvas aids in identifying potential areas of improvement and innovation within the business model.
Decision-Making: The information obtained from both tools can facilitate informed decision-making, allowing organizations to optimize their business model and align it with the strategic priorities defined by the Balanced Scorecard.
Holistic View: Together, these tools provide a holistic view of the organization, integrating its business model, strategic objectives, and performance metrics to create a coherent and effective management approach.
Financial: Increase premium subscribers, grow ad revenue.
Customer: Improve music discovery, diversify podcast offerings.
Internal Processes: Optimize streaming quality, enhance user recommendations.
Organizational Capacity: Artist partnerships, tech infrastructure expansion.
Key Takeaways:
The Business Model Canvas and the Balanced Scorecard are both valuable strategic management tools.
The Business Model Canvas focuses on understanding and designing the business model, while the Balanced Scorecard emphasizes aligning activities with strategic goals and measuring performance across various perspectives.
Using both tools in conjunction can lead to a more comprehensive and effective strategic management process, allowing organizations to optimize their business model and achieve their strategic objectives.
Key Highlights:
Business Model Canvas (BMC):
Developed by Osterwalder and Pigneur.
Offers a visual framework for developing, analyzing, and describing a company’s value proposition, infrastructure, customers, and finances.
Comprises nine building blocks: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.
While BMC emphasizes value creation and the business model’s various facets, the Balanced Scorecard zeroes in on aligning operations with strategic objectives across multiple perspectives.
BMC comprises nine building blocks, whereas the Balanced Scorecard is centered around four main perspectives.
Integration Potential:
Both tools can be used synergistically.
BMC can inform the design and nuances of a business, while the Balanced Scorecard can monitor and guide its strategic progress.
Together, they offer a holistic understanding of an organization’s strategy, operations, and performance.
The ADKAR model is a management tool designed to assist employees and businesses in transitioning through organizational change. To maximize the chances of employees embracing change, the ADKAR model was developed by author and engineer Jeff Hiatt in 2003. The model seeks to guide people through the change process and importantly, ensure that people do not revert to habitual ways of operating after some time has passed.
You can use the Ansoff Matrix as a strategic framework to understand what growthstrategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growthstrategy can be derived from whether the market is new or existing, and whether the product is new or existing.
The business model canvas is a framework proposed by Alexander Osterwalder and Yves Pigneur in Busines Model Generation enabling the design of business models through nine building blocks comprising: key partners, key activities, value propositions, customer relationships, customer segments, critical resources, channels, cost structure, and revenue streams.
The lean startup canvas is an adaptation by Ash Maurya of the business model canvas by Alexander Osterwalder, which adds a layer that focuses on problems, solutions, key metrics, unfair advantage based, and a unique value proposition. Thus, starting from mastering the problem rather than the solution.
The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.
The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, who were consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard elements and four soft elements.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
The McKinsey Horizon Model helps a business focus on innovation and growth. The model is a strategy framework divided into three broad categories, otherwise known as horizons. Thus, the framework is sometimes referred to as McKinsey’s Three Horizons of Growth.
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.
According to Michael Porter, a competitive advantage, in a given industry could be pursued in two key ways: low cost (cost leadership), or differentiation. A third generic strategy is focus. According to Porter a failure to do so would end up stuck in the middle scenario, where the company will not retain a long-term competitive advantage.
In his 1985 book Competitive Advantage, Porter explains that a value chain is a collection of processes that a company performs to create value for its consumers. As a result, he asserts that value chain analysis is directly linked to competitive advantage. Porter’s Value Chain Model is a strategic management tool developed by Harvard Business School professor Michael Porter. The tool analyses a company’s value chain – defined as the combination of processes that the company uses to make money.
Porter’s Diamond Model is a diamond-shaped framework that explains why specific industries in a nation become internationally competitive while those in other nations do not. The model was first published in Michael Porter’s 1990 book The Competitive Advantage of Nations. This framework looks at the firm strategy, structure/rivalry, factor conditions, demand conditions, related and supporting industries.
A SWOT Analysis is a framework used for evaluating the business‘s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision making by avoiding two pitfalls: underprediction, and overprediction.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
