What are the primary components of a business model?

Although there is not a single way to define a business model, there is a standard called “business model canvas” which is a good way to start to understand what are the pieces and moving parts of a company value creation chain. As highlighted in the business model canvas there are seven key ingredients for any business model to succeed:

• Key partners
• Key activities
• Value proposition
• Customer relationship
• Customer segment
• Key resource
• Distribution channel
• Cost structure
• Revenue stream

However, in a world where information technology has become predominant, being agile becomes critical. In that context, an evolution of the business model canvas, the lean startup canvas has become more accurate to design a business model for a startup. The key difference is how a startup “behaves” compared to a corporation:

The lean startup canvas started from the lean startup movement launched by Steve Blank in 2013. In short, while large companies relied and still relies primarily on elaborate planning, with business plans hundreds of pages long, full of assumptions. Startups primarily rely on experimentations. Where large corporations invest large resources upfront to design or build up a product or service; Startups use the process of iterative design and agile development, where users help the startup get from MVP to product/market fit.

Whether you decide to use the business model canvas, the lean startup canvas or develop your own methodology, it is critical to gain a holistic understanding of your business. Thinking in terms of business modeling is the key to reach that kind of understanding!