How do you create a business model?

Your business model provides an overview of all the processes and resources your company needs to manage to make money. It should answer questions such as:

• what will you deliver?
• who is the customer?
• who are your allies and competitors?
• how will you sell?
• how will you charge?
• how will you deliver?

At an early stage, most ideas will be uncertain. For example, they will not yet have been tested and validated with paying customers. We recommend that you start by outlining your business model, preferably exploring several versions. We believe this is more useful than spending a long time writing a detailed business plan. You can discuss your business model ideas with both your colleagues and us.

Banks, potential investors and public funding bodies will often expect you to have a well-developed business model before they provide financing or other support.

There are several ways to develop business models. The Business Model Canvas, developed by Alexander Osterwalder, is a tool we have found effective. It provides a framework of nine building blocks that help you map customer segments, value propositions, channels, customer relationships, revenue streams, resources, key activities, partners and costs.

We have created an online course for everyone working with innovation and business development. The course is for those of you who want to use the Business Model Canvas in your organisation and give everyone involved the same introduction. You set your own pace and can use the tools for as long as you like.

You get:

• insight into a visual tool that has become widely used across the industry to describe business models.
• a common language for describing different business models. You can use it to communicate within your company and with external stakeholders, advisers and potential partners.
• a better understanding of how business models work and where they may not work as intended.

Often, your first idea is not the best one. Use simple tools, think differently and sketch out a range of options. Ultimately, you need to test everything. The most challenging part is often deciding what to test first, how to test it and how to document what works (and what does not).

Your business model should serve both as documentation and as a dynamic plan that evolves as you gain new insights. You should review, revise and update it as you learn.

Watch this short video to see how the tool works: