Since its introduction ten years ago, the business model canvas has been rapidly adopted as a strategic management tool by investors, entrepreneurs, and even corporate leaders. And for good reason: It’s a great way to align a team on the revenue and operational assumptions that a business operates with.
However, many social entrepreneurs struggle with its use. In our MovingWorlds S-GRID program, one of the most common questions participants have is HOW to highlight social impact as part of the business model canvas. This is an important question, and one without a straightforward answer. We’ve seen many new initiatives grapple with this, some of which have even launched variations of the tool to incorporate social impact as an additional building block. However, we don’t think these variations are a good idea. In fact, the whole idea of social enterprise is to integrate social impact into all aspects of your business, and so adding it as a separate building block detracts from the very idea of social enterprise.
What is the Business Model Canvas (BMC)?
The business model canvas (BMC) is the simplest way to document the key building blocks of your business, share them with your team, and highlight the assumptions that go into your business model. The 9 building blocks are:
- Customer Segments – The target audience(s) that you plan to create value for.
- Value Propositions – A summary of the value you provide to the customer.
- Channels – How you deliver value to your customer segments.
- Customer Relationships – How you build and manage relationships with your consumer segments.
- Revenue Streams – How you generate revenue from each customer segment, and how much.
- Key Resources – The assets available to the business that allow you to create value for your customer segments.
- Key Activities – The processes and activities that utilize all your resources to create value.
- Key Partnerships – Other entities that turn resources and activities into value more efficiently, and your working relationship with them.
- Cost Structure – All of the costs associated with the business.
As one of the founders of the Lean Startup movement, Steven Blank said, “Unless you have tested the assumptions in your business model first, outside the building, your business plan is just creative writing.” The most important thing that the BMC does is guide you and your team to document your different assumptions so you can figure out what you know to be true vs. what you hope to be true.
Why is the Business Model Canvas a Good Idea for Social Enterprises?
“The only way to win is to learn faster than anyone else.” -Eric Ries
The ultimate benefit of the BMC is that it helps you learn more about your customers so that you can solve their problems, help them reach their goals, and generate revenue in the process so that you can continue to invest in delivering value. To make this more real, let’s learn a little more about the Business Model Canvas. This video explainer from Steven Blank is one of the better ones:
In the MovingWorlds S-GRID program, as well as in our professional development Institute, one of the most important things that we teach is that the business model canvas is tied to a specific product, service, or program – not the business at large. So, at MovingWorlds for example, we have a different BMC for each of our revenue+impact producing programs: the MovingWorlds Institute, S-GRID, Experteering Network, Capacity Building Programs, and Corporate Social Impact Programs. The reason for this is simple: Each group has a different target customer, value proposition, revenue model, impact model, and cost structure, and is therefore built upon different assumptions. By creating a unique BMC for each, we can more effectively operate and innovate each program for greater impact as a purpose-driven company.
For social enterprises looking to identify their best scale-up business model and create new revenue partnerships with the corporate sector, step one should be identifying different possible customer segments, and then creating a new BMC for each. It’s a lot of work, but it’s worth it
Regardless of how many BMCs you use, the value of going through the exercise is that it forces you to identify what you know about your customers, and what you don’t know. It’s also a great tool for aligning your team to understand the business, the most important next steps, as well as the most important learnings.
As the author of the Lean Startup said, “Let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek.”
How Should Social Enterprises Use the Business Model Canvas to Ensure Growth and Impact?
Social enterprises should use the BMC just like any other startup entrepreneur would: as a tool to help you build, measure, and learn! That said, there is one really important addition for social enterprises: every single one of the 9 building blocks should be evaluated independently to ensure that they are:
- Not creating harm
- Ensuring equity
- Achieving their social mission
- Making the systems around them better
There are many ways to do this, but we recommend starting simply: Once your BMC is completed, go through every line-item, and highlight in green those acting as an impact accelerator. For every item that might detract from your mission and/or cause unintended consequences, highlight those red.
Remember, the foundation of the BMC is that it is a collection of assumptions that should be tested and validated, starting with the most risky hypothesis. So this means that your theories about something creating social good or harm is also an assumption. By highlighting the potential risks to realizing social impact as you go, your team will be able to focus on your impact hypotheses as you progress.
When Should Social Enterprises Use the Business Model Canvas?
One of the biggest mistakes we see from leaders is that social enterprises create a BMC and then never revisit it again. The reality is that the BMC should be a living model that documents your assumptions and guides you on what to test next.
In order words, as you are trying to find your scale-up approach, planning a pivot, expanding into a new market, and/or targeting a new customer segment, you’ll want to keep your business model canvas front and center. Organizing a weekly or monthly review with your key team members to work through it and ensure it’s still accurate is a great idea.
Using the Business Model Canvas to Create More Impact
Your social enterprise will get the most out of the BMC when used as a framework to help you document and validate assumptions you have about both your business potential and your social impact potential. Remember these tips:
- Social impact should be generated through the core work of your business, and you don’t need a separate tool or plan – your impact should be integrated into your BMC for each building block
- Develop a BMC for each of your core business lines and keep it current
- Highlight impact accelerators and detractors so you and your team keep impact front and center
- Revisit it often and keep testing assumptions!
Need help building and validating your canvas? Apply to join the S-GRID Social Enterprise Accelerator for the know-how, connections, and support to realize your vision!