Hey, Entrepreneur! Build a Killer Company with the “Business Model Canvas”
Think you have a brilliant health innovation idea (or any business idea, for that matter)? Congrats.
But before you kick your legs up and bask in your glory, ask yourself: how sure are you that your business model is a sound one?
I mean REALLY sure.
Your mom or 5 of your colleagues loving the idea isn’t quite enough.
It’s all about building a strong business model (and other fun processes like validating market need — but that’s another soapbox for another time).
A business model isn’t just about how a company makes money. It’s about finding a systematic way to unlock long-term value for an organization while delivering valuable products and services.
Business modeling is also about the kind of value a business can create for its customers, the distribution networks it’s able to tap into, and the key partnerships it can leverage.
It’s about designing a business that’s desirable, feasible, and viable. And, achieving business model fit means your business model is profitable and scalable.
Fortunately, there’s a systematic tool to help understand, define, and design a business that creates, delivers, and captures value. It’s called the Business Model Canvas. (Source: Business Model Generation.)
The Business Model Canvas
You might already be familiar with the nine building blocks of Alexander Osterwalder and Yves Pigneur’s Business Model Canvas.
Here’s an overview of each building block, a description of each, and the questions to ask yourself and your team as you’re mapping out different business model prototypes.
Describe the different groups of people or organizations you aim to reach and serve.
Who are you creating value for? Who are your most important customers?
2. Value Propositions
Describe the bundle of products and services that create value for a specific customer segment.
What value do you deliver to the customer? Which one of the customers’ problems are you solving or needs you’re satisfying?
Describe how a company communicates with and reaches its customer segment to deliver a value proposition.
How are these propositions promoted, sold and delivered? How are your channels integrated? Which ones work best?
4. Customer Relationships
Describe the types of relationships a company establishes with specific customer segments.
How do you interact with the customer through their “journey?” What customer relationship does each segment expect?
5. Key Partners
Describe the network of suppliers and partners that make the business model work.
What key partners can the company align with so it can focus on its key activities? Which key resources and key activities are you getting from your partners?
6. Key Activities
Describe the most important things a company must do to make its business model work.
What activities are required for the business to deliver its proposition? What distribution channels, customer relationships, and revenue streams do you need in place?
7. Key Resources
Describe the most important assets required to make a business model work.
What unique strategic assets must the business have to compete? What distribution channels do you need? What financial resources do you need?
8. Cost Structure
Describe all the costs incurred to operate a business model.
What are the business’ major cost drivers? How are they linked to revenue? Which key resources and activities are most expensive?
9. Revenue Streams
Describe the cash a company generates from each customer segment.
How does the business earn revenue from the value propositions? For what value are customers really willing to pay? What do they currently pay? What are they willing to pay? How much does each revenue stream contribute to overall revenues?
Testing Your Business Model
Once you design your business model, you’ll need to test the assumptions you made to eliminate uncertainty and risk.
- Is the market you’re targeting too small?
- Do too few customers want the value proposition?
- Can the company acquire and retain targeted customers?
- Can the business manage, scale, and get access to key resources, activities and partners required to make the business model work?
- Can the business generate more revenue than costs?
Develop a hypothesis to test for each of the nine building blocks in your Business Model Canvas. You want to validate the business through the Three Lenses of Innovation.
1. Desirability (People want it)
2. Feasibility (You can actually do it)
3. Viability (You won’t go broke)
And, here’s how the Business Model Canvas coincides with the Three Lenses of Innovation.
Image source: Testing Business Ideas
It gets a bit technical — I know. You don't need to dive into these rabbit holes yourself. But you do need someone on your team who can navigate the concepts and frameworks designed to make your healthcare innovation a success.
This article is a chapter from my white paper, 10 Steps to Health Tech Innovation Success. Looking to learn more about how to make sure you successfully commercialize your health innovation? Download the whole (super robust) white paper for free!