1 Why are business models important?

Business models enable you to create value out of new ideas. Simply having a good idea for a new product or service is not enough if you can’t answer some key questions about how to take it forward. Likewise, having positive feelings about doing good things for people is not a strong basis for creating a platform on which to deliver important services, especially in sectors such as development and social enterprise. Working with colleagues to give structure to an idea helps to draw out important risks and assumptions associated with that idea (Figure 1).

Five men in discussion round a table with one of them writing on a large piece of paper on the table

Figure 1: Working with colleagues can be very helpful

The Business Model Canvas offers a concise tool for thinking through the business and keeping the key points highly visible to you, your team and your other stakeholders.

Leading global companies, including MasterCard, General Electric, Adobe and Nestlé, use the Canvas to manage strategy or create new growth engines, while start-up businesses, schools, development organisations and other enterprises use it in their search for the right business model.

It is often very difficult to think through every single influence on your ideas and plans: how can you explain what you do, why you do it and how you do it in a simple and structured way? When you are planning or looking back at an initiative it is useful to look at how you are doing things now and how you could do them better in the future.

Activity 1

Allow about 10 minutes for this activity

The section above included the following sentence:

[H]aving positive feelings about doing good things for people is not a strong basis for creating a platform on which to deliver important services, especially in sectors such as development and social enterprise.

In the text box below, explain what you understand by this and why you think the Business Model Canvas would be important in this context?

Provide your answer...

Key point

The Business Model Canvas provides a framework for obtaining the most amount of value from a new idea while taking an objective look at any potential risks and assumptions it carries.

1.1 Developing your Business Model Canvas

The Business Model Canvas is a helpful way for mapping potential opportunities and drawbacks related to the idea you have.

The Canvas is generally used in one of two ways:

  1. Existing programmes can develop new ideas and identify opportunities while becoming more efficient by illustrating potential trade-offs and aligning resources and activities.
  2. New programmes can use it to determine and plan how to make their offering a reality.

See Case Study 1, below, for an example of this.

The Canvas creates a complete overview of your strategy, the products you should offer, the people you should focus on, the paths you should take and the resources you should use to make your idea as successful as possible. Taking the time to sketch out your model and explore it in detail enables you to identify both its advantages and drawbacks so that you can make an informed decision about whether or not to commit resources to taking it forward.

Case Study 1: Small projects fund in Ghana

Paul works for a medium-sized non-governmental organisation (NGO) in Cape Coast, Ghana. The NGO has a focus on supporting entrepreneurship and has a ‘small projects’ fund which gives grants to individuals to help them establish or grow their own social enterprise. Paul administers this fund.

Paul noticed that the people who came to him for this fund often presented good ideas but they hadn’t thought them through in sufficient detail. The official application form for the fund focuses on administrative details such as budget, schedule and deliverables, and Paul was concerned that people were not exploring all of the risks and assumptions as well as the benefits in their plans. When he asked for more detail, applicants often assumed that he was being negative about their ideas, and became defensive.

After some research, Paul found the Business Model Canvas template and now includes this as a mandatory document in the application packs for the small projects fund. He has noticed a significant increase in the sustainable value and the quality of evidence that new ideas and plans have long term.

Activity 2

Allow around 10 minutes for this activity

In the text box below, make some notes about how you think the Business Model Canvas might be useful for a development idea you have.

Provide your answer...