Business Model Canvas Vs. Value Chain

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 chain model 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.

AspectBusiness Model Canvas (BMC)Value Chain
Purpose and BackgroundThe 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 StructureThe 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 CreationThe 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 ApproachThe 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 VisualizationThe 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 ToolThe 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 AdaptationThe 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 EnvironmentThe 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. EstablishedThe 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.

business-model-canvas
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.
porters-value-chain-model
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.

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.
  • Key Activities: Brewing coffee, customer service, product development.
  • Value Propositions: High-quality coffee, friendly ambiance, loyalty program.
  • Customer Relationships: Barista-customer interaction, mobile app engagement.
  • Customer Segments: Coffee lovers, remote workers, meeting attendees.
  • Critical Resources: Coffee beans, store locations, trained staff.
  • Channels: Physical stores, mobile app, online store.
  • Cost Structure: Bean procurement, store operations, marketing.
  • Revenue Streams: Drink sales, merchandise, online sales.

Value Chain Model:

  • Primary Activities: Inbound logistics (bean sourcing, inventory), operations (brewing coffee, baking pastries), outbound logistics (deliveries for online sales), marketing and sales (ad campaigns, loyalty programs), service (customer service, loyalty program management).
  • Support Activities: Infrastructure (store setup, IT systems), HR management (staff training, recruitment), technology development (app improvements, new brewing methods), procurement (bean sourcing, equipment purchase).

2. Netflix:

Business Model Canvas:

  • Key Partners: Content producers, licensing agencies, streaming technology providers.
  • Key Activities: Content streaming, original content production, algorithm development.
  • Value Propositions: Vast content library, original shows, personalized recommendations.
  • Customer Relationships: Personalized user profiles, customer support.
  • Customer Segments: TV and movie watchers, households, binge-watchers.
  • Critical Resources: Streaming technology, content licenses, user data.
  • Channels: Mobile app, website, smart TVs.
  • Cost Structure: Content production, licensing fees, technology maintenance.
  • Revenue Streams: Monthly subscriptions, content partnerships.

Value Chain Model:

  • 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).

3. Apple (focusing on iPhone):

Business Model Canvas:

  • Key Partners: Component suppliers, app developers, retail partners.
  • Key Activities: Product design, software development, retail operations.
  • Value Propositions: High-quality design, integrated software ecosystem, brand appeal.
  • Customer Relationships: In-store service, online support, software updates.
  • Customer Segments: Tech enthusiasts, brand loyalists, professionals.
  • Critical Resources: Proprietary software, patents, brand reputation.
  • Channels: Apple stores, online store, third-party retailers.
  • Cost Structure: R&D, manufacturing, marketing.
  • Revenue Streams: Device sales, app store commissions, accessory sales.

Value Chain Model:

  • Primary Activities: Inbound logistics (component sourcing, inventory management), operations (assembly, software integration), outbound logistics (shipping to stores, online deliveries), marketing and sales (product launches, ad campaigns), service (Apple Care, software updates).
  • Support Activities: Infrastructure (retail stores, online platforms), HR management (employee training, recruitment), technology development (iOS improvements, new feature development), procurement (component agreements, manufacturing equipment).

Read Next: Business Model CanvasValue Chain.

Related Strategy Concepts: Go-To-Market StrategyMarketing StrategyBusiness ModelsTech Business ModelsJobs-To-Be DoneDesign Thinking, Lean Startup Canvas.

More Strategy Tools: Porter’s Five ForcesPESTEL AnalysisSWOTPorter’s Diamond ModelAnsoffTechnology Adoption CurveTOWSSOARBalanced ScorecardOKRAgile MethodologyValue PropositionVTDF Framework.

Connected Strategy Frameworks

ADKAR Model

adkar-model
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.

Ansoff Matrix

ansoff-matrix
You can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived from whether the market is new or existing, and whether the product is new or existing.

Business Model Canvas

business-model-canvas
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.

Lean Startup Canvas

lean-startup-canvas
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.

Blitzscaling Canvas

blitzscaling-business-model-innovation-canvas
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.

Blue Ocean Strategy

blue-ocean-strategy
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 value innovation, 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 Framework

business-analysis
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.

BCG Matrix

bcg-matrix
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.

Balanced Scorecard

balanced-scorecard
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.

Blue Ocean Strategy 

blue-ocean-strategy
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 value innovation, 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.

GAP Analysis

gap-analysis
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.

GE McKinsey Model

ge-mckinsey-matrix
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.

McKinsey 7-S Model

mckinsey-7-s-model
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

mckinseys-seven-degrees
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.

McKinsey Horizon Model

mckinsey-horizon-model
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

porter-five-forces
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.

Porter’s Generic Strategies

competitive-advantage
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.

Porter’s Value Chain Model

porters-value-chain-model
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

porters-diamond-model
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.

SWOT Analysis

swot-analysis
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.

PESTEL Analysis

pestel-analysis

Scenario Planning

scenario-planning
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.

STEEPLE Analysis

steeple-analysis
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.

SWOT Analysis

swot-analysis
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.

Main Guides:

About The Author

Scroll to Top
FourWeekMBA