A business model canvas is a framework to evaluate the key building blocks that make up a company from a competitive advantage standpoint. A value chainmodel instead focuses on how value is delivered to potential customers through a set of activities and via the company’s organizational structure. Both tools can be used to assess the competitive edge of a company and how to deliver value.
Aspect
Business Model Canvas (BMC)
Value Chain
Purpose and Background
The Business Model Canvas (BMC) is a visual tool for developing, describing, and analyzing a business model. It provides a high-level overview of how a company creates, delivers, and captures value. It was introduced by Alexander Osterwalder and Yves Pigneur in their book “Business Model Generation.”
The Value Chain is a concept developed by Michael Porter in his book “Competitive Advantage.” It is a framework for analyzing a firm’s activities and how they create value. It helps in understanding the competitive advantage of a company.
Components and Structure
The BMC consists of nine building blocks: Customer Segments, Value Proposition, Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partnerships, and Cost Structure. Each block represents a specific aspect of the business model.
The Value Chain is divided into primary activities and support activities. Primary activities include Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, and Service. Support activities encompass Firm Infrastructure, Human Resource Management, Technology Development, and Procurement. These activities are linked to create value.
Focus on Value Creation
The BMC emphasizes how a business creates, delivers, and captures value. It places a strong emphasis on understanding Customer Segments and Value Propositions, ensuring alignment between what customers need and what the business offers.
The Value Chain focuses on how a company’s activities create and enhance value. It analyzes each activity’s cost and potential for differentiation, helping companies identify areas for improvement or cost reduction. It is more operationally oriented.
Customer-Centric Approach
The BMC encourages a customer-centric approach by highlighting the importance of understanding customer needs and designing value propositions that address those needs. Customer segments and relationships are central elements.
While the Value Chain considers customer needs indirectly by aiming to create value for customers, it does not have a specific customer-centric focus. Instead, it looks at value creation from a process and cost perspective.
Business Model Visualization
The BMC uses a visual canvas format, which makes it suitable for workshops, brainstorming, and collaborative discussions. It allows teams to quickly iterate and communicate their business model.
The Value Chain is typically represented as a series of linked activities or processes, and it is often presented in a linear format. It serves as a tool for internal analysis and optimization rather than a visualization for external communication.
Strategic Planning Tool
The BMC is widely used for strategic planning, business model analysis, and presenting an overall view of a business’s value creation strategy. It is particularly valuable for startups and established companies looking to optimize their models.
The Value Chain is primarily a strategic tool for understanding how a company’s activities contribute to its competitive advantage. It helps companies identify opportunities for cost reduction or differentiation within their processes.
Innovation and Adaptation
The BMC is well-suited for startups and businesses that need to quickly iterate and adapt their business models based on customer feedback and market changes. It aligns with the lean startup approach.
The Value Chain is more focused on optimizing existing processes and activities. While it can inform strategic decisions, it may not be as agile in responding to rapid market changes as the BMC.
Dynamic Environment
The BMC is ideal for businesses operating in dynamic and uncertain environments. It allows companies to experiment with different components of their business model and pivot when necessary.
The Value Chain is traditionally used for industries with stable processes and slower changes. It may be less suitable for businesses in rapidly evolving markets where agility is essential.
Startups vs. Established
The BMC is particularly popular among startups because it provides a clear, concise way to outline their business model assumptions and test them quickly.
The Value Chain is more commonly used by established companies looking to analyze and optimize their existing operations. It may not be as well-suited for startups.
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.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.
Table of Contents
Key Similarities between Business Model Canvas and Value Chain Model:
Strategic Analysis: Both the Business Model Canvas and the Value Chain Model are strategic analysis frameworks that help organizations evaluate and understand their internal operations and competitive advantage.
Value Delivery: Both tools focus on delivering value to customers. The Business Model Canvas assesses how value is created and delivered through the business model, while the Value Chain Model analyzes the processes that create value for consumers.
Competitive Edge: Both tools can be used to assess the competitive edge of a company. The Business Model Canvas helps identify unique value propositions and competitive advantages, while the Value Chain Model examines how activities in the value chain contribute to a company’s competitive advantage.
Organizational Structure: Both frameworks consider the company’s organizational structure and how different activities and resources are utilized to achieve the overall objectives.
Key Differences between Business Model Canvas and Value Chain Model:
Focus: The primary focus of the Business Model Canvas is on designing, understanding, and communicating the business model of an organization. It analyzes the key building blocks that make up the company and how they create and deliver value to customers.
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.
Value Creation: The Value Chain Model, on the other hand, is specifically focused on value creation within the company’s internal operations. It breaks down the company’s activities into primary and support activities to identify points of competitive advantage.
Michael Porter’s Model: The Value Chain Model was developed by Michael Porter and is described in his book “Competitive Advantage.” It is a comprehensive analysis tool that examines the sequence of activities within a company.
Integration and Complementarity:
The Business Model Canvas and the Value Chain Model can be used together to gain a comprehensive understanding of a company’s competitive advantage and value delivery:
Alignment: The Business Model Canvas helps identify the key building blocks and value propositions of the business, which can be aligned with the value chain activities to ensure efficient and effective value delivery.
Value Chain Analysis: Value Chain analysis can help identify areas of improvement and optimization within the company’s operations, which can then be integrated into the Business Model Canvas to enhance the overall value proposition.
Competitive Edge: Both tools contribute to assessing and enhancing the competitive edge of the company by understanding how value is created and delivered to customers.
Strategic Decision-Making: Together, these tools provide valuable insights for strategic decision-making, enabling organizations to develop a clear and effective business model while optimizing their internal processes.
Key Takeaways:
The Business Model Canvas and the Value Chain Model are strategic analysis frameworks that can be used to assess a company’s competitive advantage and value delivery.
While the Business Model Canvas focuses on the overall business model and value proposition, the Value Chain Model delves into the internal operations and activities that create value for customers.
Used together, these tools can help organizations align their business model with value chain activities, optimize their operations, and strengthen their competitive edge.
Case Studies
1. Starbucks:
Business Model Canvas:
Key Partners: Coffee bean suppliers, local farmers, machine manufacturers.
Primary Activities: Inbound logistics (content acquisition, server maintenance), operations (streaming service, user data analysis), outbound logistics (content delivery to users), marketing and sales (ad campaigns, partnerships), service (user support, bug fixes).
Support Activities: Infrastructure (data centers, streaming technology), HR management (content teams, tech teams), technology development (streaming improvements, personalization algorithms), procurement (content licenses, server equipment).
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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.
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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.
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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.
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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.
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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.
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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.
