The Business Model Canvas: nine building blocks

1. What you will learn

The Business Model Canvas is the most widely used tool for describing, designing and discussing business models. It fits the whole logic of a business on one page. In this lesson you will learn each of its nine building blocks in depth and how they connect. By the end you will be able to:

• name the nine blocks and explain the question each one answers;
• describe the two halves of the canvas: the value side and the efficiency side;
• fill a complete canvas for an existing business;
• check a canvas for internal consistency, so that every block supports the others;
• use the canvas as a shared language with your team, lenders and partners.

2. The idea explained

Origin. The canvas was developed by Alexander Osterwalder, building on his doctoral research, and presented with Yves Pigneur in Business Model Generation (2010). It is a visual template of nine blocks arranged so that the customer side sits on the right and the operational side on the left, with the value proposition in the centre.

The nine blocks.

1. Customer Segments (CS) — Who are we creating value for? Who are our most important customers? Types include mass market, niche market, segmented (related segments with slightly different needs), diversified (unrelated segments) and multi-sided platforms (two or more interdependent segments, such as buyers and sellers).
2. Value Propositions (VP) — What value do we deliver to each segment? Which problems do we solve? Value can come from newness, performance, customisation, getting the job done, design, brand or status, price, cost reduction, risk reduction, accessibility, and convenience or usability.
3. Channels (CH) — How do we reach segments to raise awareness, help them evaluate, enable purchase, deliver, and give after-sales support? These five channel phases are awareness, evaluation, purchase, delivery and after sales. Channels may be own (sales force, website, own stores) or partner (wholesalers, marketplaces, partner stores), and direct or indirect.
4. Customer Relationships (CR) — What type of relationship does each segment expect? Types include personal assistance, dedicated personal assistance, self-service, automated services, communities and co-creation. Relationships may be driven by acquisition, retention or upselling.
5. Revenue Streams (R$) — For what value are customers willing to pay, how, and how much? Types include asset sale, usage fee, subscription fee, lending/renting/leasing, licensing, brokerage fees and advertising. Pricing may be fixed (list price, volume-dependent, segment-dependent) or dynamic (negotiation, auction, real-time market).
6. Key Resources (KR) — What assets does the model require? Categories are physical, intellectual (brands, patents, data, know-how), human and financial.
7. Key Activities (KA) — What must we do well? Categories are production, problem solving and platform/network management.
8. Key Partnerships (KP) — Who are our key partners and suppliers, and what do we get from them? Partnership types include strategic alliances between non-competitors, coopetition (partnerships between competitors), joint ventures and buyer-supplier relationships. Motives include optimisation and economies of scale, reduction of risk and uncertainty, and acquisition of particular resources and activities.
9. Cost Structure (C$) — What are the most important costs? Models range from cost-driven (lowest possible cost) to value-driven (premium value creation). Characteristics include fixed costs, variable costs, economies of scale and economies of scope.

Two halves. The right side (CS, VP, CH, CR, R$) is about value for customers and revenue. The left side (KR, KA, KP, C$) is about efficiency: the infrastructure and costs of delivering that value. A strong model balances both.

Connections. Blocks are linked. Each segment needs a matching value proposition, reached through suitable channels and relationships, producing revenue. The value proposition requires certain activities and resources, some supplied by partners, and these drive the cost structure. A useful practice is to use one sticky-note colour per segment so that you can trace every element linked to it across the canvas.

3. Let us work through it

Step 1 — Start with the customer or the offer. Most teams start with Customer Segments, then the Value Proposition for each. An established firm may start from existing resources, but still return to the customer quickly.

Step 2 — Complete the right side. For each segment, fill channels by phase, the relationship type and the revenue stream with pricing mechanism.

Step 3 — Complete the left side. List the activities and resources required to deliver each value proposition, then which of these partners provide.

Step 4 — Fill the cost structure. List the main costs arising from the left-side blocks and customer acquisition; mark each as fixed or variable.

Step 5 — Trace each segment. Using colours or labels, check that every segment connects to a value proposition, channel, relationship and revenue stream.

Step 6 — Check for orphans. Remove any activity, resource or cost that supports no value proposition; add missing elements where a value proposition has no delivery mechanism.

Step 7 — Mark assumptions. Label items without evidence and add them to your assumption map.

5. Common mistakes and how to fix them

• Mixing several segments without distinction. Fix: use a different colour or label for each segment and its linked elements.
• Writing features instead of value. "Aluminium body" is a feature; "light enough to carry daily" is value. Fix: phrase value propositions in terms of customer benefit.
• Listing every activity. Fix: include only the key activities that the value proposition depends on.
• Leaving the left side vague. Fix: name specific resources and partners; vagueness hides feasibility risks.
• Treating the canvas as a one-off exercise. Fix: date versions and update after each test or major change.
• Ignoring connections. Fix: trace every segment across the canvas and remove orphans.