How to Design a Winning Business Model

Applying the Business Model Canvas to Associations

Summary

“Proper business models include human flourishing.”

Richie Norton

Over the next several weeks, I will be writing about business models. I will start with a common, practical, and powerful tool called the Business Model Canvas.

​​The Business Model Canvas (BMC) comes from the book Business Model Generation by Alexander Osterwalder and Yves Pigneur. It is a one-page strategy tool to quickly and easily define, visualize, and communicate a business idea by working through the fundamental elements of an organization or product.

The BMC consists of nine essential building blocks which can guide how an association intends on creating and delivering value. A well-designed business model motivates focused-action. It helps us create the right kind of value to help solve our member’s problems. 

The Product Community is a product development learning community designed specifically for associations.

Why It’s Important

“A business model describes how your company creates, delivers and captures value.”

Steve Blank

Most, if not all, associations have a mission, vision, and values. 

In order to survive, grow, and thrive, we also need a strategy and a business model. I covered my favorite strategy process in an earlier article. This article focuses on creating a winning business model using a widely-used strategy tool called the Business Model Canvas.

A business model is a conceptual structure that supports the viability of a business and explains who the org serves, what it offers, and how it achieves its goals.

All associations need an overarching business model and a business models for each of our offerings. In this way, the model can create focus, guide actions, and ensure we operate consistently. Business models should be created with great care and in deep collaboration. 

Like I explained in my earlier articles on developing a strategy (see Playing to Win) and developing a value proposition (see What is Your Secret Sauce?), a business model is driven by choice. When we make choices to do some things, we are make choices to not do others.  

Business models are important for the following reasons:

1. Clarity and Visualization. Business models provide a clear, visual representation of how different elements of an association fit together, making it easier to understand and communicate complex ideas (without dumbing them down).

2. Holistic Approach. By addressing multiple components simultaneously, a business model can help identify potential gaps, strengths, and interdependencies.

3. Adaptability and Innovation. It encourages flexibility and innovation by allowing associations to experiment and make changes to specific elements without disrupting the entire model.

4. Alignment and Focus. Business models help align strategies, resources, and activities toward a common goal, fostering a more focused approach to strategy and planning.

The right side of the BMC focuses on the customer or external lens of the association (see green blocks below); the left side focuses on the business or internal lens of the association. Both external and internal factors are built around an association’s (or product’s) unique value proposition (a value prop is a promise of value to the member).

Why use the business model canvas?

• To quickly draw a picture of what an idea or emerging concept might entail.

• To gain understanding of an association and to make connections between an idea and how to make it into a business.

• To determine the kinds of customer decisions influence the purchase and use of our offerings.

• To allow everyone to get a clear idea of what the business (association) will likely be.

Now, let’s review the guts of the business model canvas, also known as the nine building blocks. 

The Nine Building Blocks

“Having the ability to be brutally honest with yourself is the greatest challenge you face when creating a business model. Too often we oversell ourselves on the quality of the idea, service, or product. We don't provide an honest assessment of how we fit in the market, why customers will buy from us, and at what price.”

Mark Cuban

The Business Model Canvas has nine interlocking components or building blocks. Here are high-level descriptions, quick examples, and key questions split into three broad categories: the anchor (or value proposition) in yellow, the customer (external) in green, and the business (internal) in pink. 

The Anchor. The most important block is the value prop as it clearly defines the unique value proposition and ensures the key building blocks of the canvas are aligned with the overall association’s strategic objectives. 

1. Value Proposition (see article What’s Your Secret Sauce?)

   1. Description. Defines the products or services that create value for the identified customer segments.

   2. Example. A professional association might offer networking opportunities, training workshops, and access to industry insights as its value proposition.

   3. Key questions

      1. What unique value do we offer to our customers and how is it different from competitors?

      2. How does our product/service solve specific problems or fulfill particular needs of our customers?

      3. What features or benefits make our value proposition compelling?

Strategzyer

The Customer (external). These blocks represent the market and how your association or product offering will make money.

2. Customer Segments

   1. Description. Identifies the customers our association aims to serve.

   2. Example. Customer segments might include individual professionals, corporate members, or group memberships.

   3. Key questions

      1. Who are our most valuable customers and what are their distinguishing characteristics?

      2. What specific needs or problems do these customer segments have that we can address?

      3. Are there new or emerging customer segments that we could potentially target?

3. Channels

   1. Description. Encompasses how the association delivers its value proposition to customers.

   2. Example. Channels might include in-person events, online webinars, newsletters, or social media platforms.

   3. Key questions

      1. Through which channels do our members prefer to be reached or engaged?

      2. How can we optimize our distribution channels to enhance member experience?

      3. Are there new channels we could leverage to better reach our target audience?

4. Customer Relationships   

   1. Description. Explores the type of relationships the association establishes and maintains with its customers.

   2. Example. Building relationships through personalized communication, feedback mechanisms, or dedicated support for members.

   3. Key questions

      1. What type of relationship does each member segment expect us to establish and maintain with them?

      2. How can we personalize interactions with different customer segments to maximize satisfaction?

      3. What strategies can we use to acquire new customers and retain existing ones?

5. Revenue Streams

   1. Description. Identifies the sources of revenue for the association.

   2. Example. Revenue streams might come from membership fees, sponsorships, event ticket sales, or advertising.

   3. Key questions

      1. What is our pricing strategy, and how do customers prefer to pay for our product/service?

      2. Are there opportunities to introduce new revenue streams or modify existing ones?

      3. How can we maximize revenue from each customer segment?

The Business (internal). These blocks represent the association, internal operations, and/or the product itself. It explains what resources and costs go into creating and delivering value.

6. Key Resources

   1. Description. Lists the essential assets required to deliver the value proposition.

   2. Example. Key resources could include a strong network of industry experts, a digital platform for content delivery, or skilled staff.

   3. Key questions

      1. What are the essential resources (physical, intellectual, human, financial) needed to deliver our value proposition?

      2. Are there potential resource partnerships or cost-saving strategies we can explore?

      3. How can we efficiently allocate and manage our resources to optimize performance?

7. Key Activities

   1. Description. Outlines the crucial actions the association must undertake to operate effectively.

   2. Example. Key activities might involve organizing events, curating educational content, managing member databases, and advocacy efforts.

   3. Key questions:

      1. What are the core activities that drive the delivery of our value proposition?

      2. How can we streamline or innovate our key activities to enhance efficiency or quality?

      3. Are there activities that can be outsourced or automated to improve our operations?

8. Key Partnerships

   1. Description. Identifies external entities or collaborations crucial to the success of the association.

   2. Example. Partnerships could involve alliances with SMEs or partners for content development, sponsorships with industry players, or collaborations with regulatory bodies.

   3. Key questions

      1. Who are our key partners, and what key activities do they perform?

      2. What are the mutual benefits of these partnerships, and how do they contribute to our value proposition?

      3. Are there potential new partnerships that could help us expand or improve our business?

9. Cost Structure 

   1. Description. Outlines all the costs associated with operating the association.

   2. Example. Costs may include staff salaries, marketing expenses, technology infrastructure, event logistics, and administrative overhead.

   3. Key questions

      1. What are the primary cost drivers in our business model?

      2. How can we optimize costs without compromising the quality of our value proposition?

      3. Are there alternative cost structures or cost-saving measures we can implement?

By building and socializing these interconnected elements, we can better anchor who we serve, what we offer, what channels we use, and how we fund our programs. 

Most importantly, the business model canvas can force us to focus and to be hyper aware of our members and their needs. This the catalyst that drives focused action.

Best Practices

I caution associations to run too much like a business. I do, however, think it’s vital to borrow from and use strategy techniques (many of which come from business) so we can become (and remain) indispensable. 

Indispensability, underscored by making specific strategic choices, can help achieve what we all desire: a vibrant community, exciting offerings, sustainable growth, and superior performance. Here are some best practices to make the most out of the business model canvas:

1. Start with a Clear Vision. Before diving into the canvas, it’s important to have a clear understanding of vision and the problem we look to solve or value we're offering to members.

2. Collaborate and Brainstorm. Use the canvas in a collaborative setting. Bring together team members or stakeholders to gather diverse perspectives and insights. This can uncover different angles and ideas for your business model.

3. Focus on Member Needs. Begin by defining your customer segments and understanding their pain points, needs, and preferences. This helps tailor our value proposition and key activities to address these member needs effectively.

4. Iterate and Refine. Don't expect your first draft to be perfect. Use the canvas as a living document that evolves as you learn more about our market, stakeholders, and external environment. Regularly revisit and update it.

5. Keep It Simple. Use concise and clear language when filling out the canvas. Avoid jargon or overly complex explanations. The canvas should be easy to understand for anyone looking at it.

   

   Jane Jacobs

6. Connect the Dots. Ensure that each element of the canvas aligns with the others. For example, our key activities should directly support our value proposition and revenue streams.

7. Test Assumptions. Treat the canvas as a set of hypotheses about our association. Continuously test these assumptions through market research, customer feedback, or small-scale experiments to validate or refine our model.

8. Balance Exploration with Exploitation. While it's essential to explore new ideas and opportunities, ensure a balance between exploring new avenues and exploiting existing strengths. Don't lose sight of what's working well.

9. Adapt to Changes. The business environment is dynamic. Be ready to adapt your canvas in response to market changes, new technologies, or shifts in member preferences.

10. Use Visuals and Annotations. Incorporate visuals, diagrams, or color coding to enhance understanding. Annotations can add depth by explaining the rationale behind specific choices or strategies.

Remember, the BMC is a tool to stimulate strategic thinking and focused choices about who our members are, what they value, and what value (products, services, and programming) we ultimately deliver to them. Its value lies not just in the canvas and its outcomes, but in the discussions, insights, and the culture of momentum it generates.

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About the Author

James Young is founder and chief learning officer of the product community^®. Jim is an engaging trainer and leading thinker in the worlds of associations, learning communities, and product development. Prior to starting the product community^®, Jim served as Chief Learning Officer at both the American College of Chest Physicians and the Society of College and University Planning.

Please contact me for a conversation:  james@productcommunity.us.