The Business Model Canvas sets out the nine building blocks of an organisation’s business model on a pre-structured template:
- Customer segments – the people and organisations who access and pay for your products, services and other offerings;
- Value propositions – the benefits gained and/or problems solved for each customer segment;
- Channels – the touchpoints and interactions you have with customers and the ways you deliver value, which could include face-to-face meetings, customer service lines, events, social media, word-of-mouth, eNewsletters, networks and committees, and more;
- Customer relationships – the types of relationships you build with your customers, which might include transactional, personalised, intimate, one-off or ongoing;
- Revenue streams – the income you generate through delivering value, such as fee-for-service payments, IP licensing, government grants, donations from the general public etc.;
- Key resources – the assets you require to deliver value, including people, building and facilities, software, hardware, equipment, policies and processes;
- Key activities – the major functions which you need to deliver value, such as customer service, marketing, human resources, finance and planning;
- Key partners – the people and organisations you can collaborate with to deliver value, ideally for mutual benefit, noting that partnerships may increase or decrease your expenses; and
- Cost structure – the expenses associated with your activities, resources and partnerships.
At Spark, given we work entirely with not-for-profit and other for-purpose organisations, we have made some tweaks to the Business Model Canvas to better suit our clients.
- Change customer segments to stakeholders, which includes service users (or beneficiaries) and customers (including funders and donors). As noted above, impact-led teams and organisations may be providing services to one cohort of people (e.g. giving child health and safety information to first-time parents) which is paid for by someone else (e.g. a government department or foundation). Alternatively, a social enterprise café might have primary beneficiaries (e.g. young people experiencing disadvantage who get a job and training), who are different to service users (e.g. people buying coffees). In this instance, the service users – who are people buying coffees – are also the customers. As such, it is critical to explicitly include both service users and customers.
- Adding impact at the top. To ensure a continued focus on and commitment to purpose, it can be helpful to adapt the Business Model Canvas to have a row up top where organisations speak to their impact. To differentiate this from value propositions, this is sometimes about systemic or long-term benefits.
Get clear: Define success
The first step is to have objectives that clarify the outcomes you’re seeking from the business model design or business model review. This is about knowing the drivers for change, what you want to achieve and the key questions you’ll ask along the way. This could be financial sustainability, increased reach, greater impact or something else entirely.
The following questions are likely to be useful at this stage of your business model discussions?
You may want to write down one or more outcome statements as well as a list of key questions and requirements, and keep coming back to this document throughout the project.
Get organised: Scope the project
Once you have agreed objectives in place, it’s time to get your ducks lined up so you have a clear project plan. This is about mapping out a timeline with defined activities, roles and responsibilities, and project risks.
Questions that we generally find useful at this stage of our own business model projects are:
- Who has ultimate sign off on our new or refined business model?
- Who will drive this sustainable business model work? Will it be conducted by our team or facilitated by external consultants? If we are doing the work in-house, do members of our team need training around business models and business model design?
- What budget and resources do we have to conduct this work?
- Who will we engage to review and enhance our business model? Who will we engage from our Board, Executive and broader team? Which community members, consumers, beneficiaries and/or customers will we engage? Will we engage external partners and funders? Who else has ideas about how our business model could be improved or has their own innovative business model?
- How will we engage stakeholders? Will we use surveys, one-on-one discussions, focus groups, workshops or online engagement tools (e.g. word clouds)?
- What does governance of this business model work look like? Will we set up a project steering committee or project control board?
- What are the project risks for this business model project?
Get ready: Do your homework
Unless you’re starting completely from scratch (i.e. you’re a brand new start-up), you’ll probably want to map your current business model first. This is about understanding your current business model, and assessing its strengths and weaknesses. In addition, and to avoid an insular approach, it’s worth look at what others are doing. This is about researching who has an innovative business model, a sustainable business model or an effective business model.
Our key questions here are:
- How would you describe your organisation’s business model?
- What works well and is effective about your current business model?
- What doesn’t work well or is ineffective about your existing business model?
- Have you mapped your current business model to the Strategyzer Business Model Canvas (see above)?
- What are others in your industry or sector doing? How would you describe and characterise their business models? Who can we learn from because they are demonstrating innovation or high performance?
In thinking creatively about your business model, we generally cover off on the following:
- What problems do we exist to solve? For whom?
- How else could we support and benefit our existing beneficiaries, consumers and customers? Does this translate into new products, services and/or income streams?
- How else could we support and benefit our existing funders and partners?
- Does our value apply to other stakeholder groups? Does this translate into new products, services and/or income streams?
- What other partnership opportunities are there for us? How would these impact the other components of our business model?
- Could we tailor and adapt another organisation’s business model or a component of their business model? What would this mean for our organisation and the work we do?
Get realistic: Apply rigour
Now that the creative component of your business model review is done, it’s time to apply rigour and analysis to test your ideas. In the testing phase of business model development, you can employ traditional frameworks such as SWOT, PESTLE and Porter’s Five Forces to see how your initial thinking stacks up. We also strongly recommend financial modelling (high level P&L forecasting at the least) to stress test your candidate business model(s). Scenario analysis can also be helpful at this stage to consider how your business model option(s) will fare in different contexts.
To test your sustainable business model thinking to date, it may be helpful to answer:
- Which business model option will best deliver on the objectives we defined at the start of the project?
- Does our business model articulate a relevant and strong value proposition or set of value propositions?
- Have we missed any key concepts or considerations in our candidate sustainable business model(s)?
- What political, economic, sociodemographic and technological developments are relevant? Does the business model appropriately factor in and respond to these considerations?
- Are there specific scenarios we could use to test our business model option(s)? This could include: a change of government; an economic, environmental or health crisis; or a new, highly effective competitor entering the market.
- What revenue streams comprise our new sustainable business model? What does a P&L forecast show for the coming years? Do we anticipate making a loss, breaking even or turning a profit? What is our appetite for financial risk?
- Do we have the capacity and capability to deliver this business model? If not, do we have the resources for training, recruiting or outsourcing?
By the time you’re done and dusted with this stage, you will have identified one business model to take forward.
Get practical: Make a plan from here
We’ve said it before and we’ll say it again: ideas are only as good as their best execution. This phase of the process is about taking the business model concepts and ideas that have come to the fore, and developing a practical action roadmap and indicators. The action roadmap will help you establish, or transition to, a sustainable business model. The indicators will help you measure and track performance.
At Spark, we refer to this phase as ‘action planning’ and there are two key sets of questions to consider here:
Get going and keep going: Implement and evaluation
By now you’ve defined a new sustainable business model and developed a supporting action plan. This means the hard work begins now – implementation. In transitioning to a new or refined business model, you may need to consider things like human resources, internal communications, technology, systems and processes. And then don’t rest on your laurels. Our view is take a continuous improvement approach to your business model. This is about tracking progress and performance based on the indicators you mapped in the last stage. It’s also about asking questions like is anything missing from our sustainable business model that would add more value? Is there anything we should stop doing because it isn’t delivering a lot of value? What are others doing in our sector and adjacent sectors, and what can we learn from them?
Business models: Our style
At Spark, we work with our clients, not to them. From facilitated workshops to bespoke one-on-one interviews, all of our engagements are highly interpersonal. Our approach is centered on value-based design, combining subject matter expertise with extracted insights to develop solutions that are cutting edge, inspiring and achievable. We pride ourselves on getting to the heart of your business and making it our own. That means when you partner with us you gain a team of highly qualified advisors who will work alongside your own staff to build their capability and ensure that your business model meets all of its financial, social and environmental obligations.
We believe that documentation alone provides little value without the skills and expertise to execute, refresh or adapt the business model as your organisation grows and transforms. Therefore, our approach is grounded in building the capacity of our clients to ensure that our work remains relevant beyond the bounds of our engagement. We openly share our IP with our clients through the form of highly practical tools, techniques and facilitation approaches that can be revisited at any time to address a range of strategic, governance or reporting challenges.
Business models: What we offer
Our process to review, design and transform your business model is heavily workshop and interview-based, complemented by ample “behind the scenes” rigour and analysis. As such, we generally structure our projects around two or three key business model workshops, which are then accompanied by meetings, one-on-one discussions, desk-based research, financial modelling and other activities. Furthermore, we use a range of tools throughout the process to elicit and test ideas. Many of these tools and methodologies can be shared with employees to be used beyond the scope of the project.
One last point to make on what we offer – every business model project we work on is bespoke. This is because generic approaches to business models that blend greater impact with financial resilience do not work. As such, we tailor our process and our insights to the unique goals, assets, strengths, expertise, capacity and budgets of our clients. This means our sustainable business model projects vary in scope, duration and solution, and we offer everything from “do it with me” to “do it for me” approaches. Saying that, our preferences is very much for the “do it with me” approach in the interest of building capability and ensuring ownership amongst your team.
Business model examples
Some examples of our work to develop sustainable business models include:
