The business model canvas is a great tool to help you understand a business model in a straightforward, structured way. Using this canvas will lead to insights about the customers you serve, what value propositions are offered through what channels, and how your company makes money. You can use the business model canvas to understand your own business model or that of a competitor! The Business Model Canvas was created by Alexander Osterwalder, of Strategyzer.
HOW TO USE THE BUSINESS MODEL CANVAS
A business model describes the rationale of how an organization creates, delivers and captures value. The business model canvas is a visual tool providing a shared language for describing, visualizing, assessing, and innovating business models. The Canvas consists of nine building blocks: Customer Segments, Value Propositions, Customer Relationships, Channels, Revenue Streams, Key Activities, Key Resources, Key Partners, and Cost Structure.
TESLA VS. BMW
You can learn a lot by analysing business models in your, but especially other industries. For example, It is great to compare traditional business models with companies who challenge the status quo. In this example we look at the differences between BMW and Tesla. We are following up here on my earlier posts on in the automotive industry looking into the value proposition, the context canvas, the customer journey, the persona canvas and the cover story of Elon Musk. Let’s see what we learn when we put the business models together.
BUSINESS MODEL CANVAS FOR TESLA
Below, the Tesla business model is visualized. Let’s go over it, block by block.
People who are environmentally and safety conscious, are the customers of Tesla. They have a salary of approx. more dan $100k per year. With the used Tesla cars, Tesla is also attracting the upper middle class segment.
Tesla proclaims itself as the ‘Safest car ever’. They offer the quickest acceleration and the longest range. One of the most important thing is that you can charge your car anywhere: in your home, on your way, and at your destination. Charging your Tesla car is as easy as charging your phone. With the wall charger, an additional product for $500, you can charge your Tesla twice as fast. The earlier Tesla models are also becoming available as used cars and serving a new group of customers (upper middle class).
If you visit the Tesla website, you are invited to schedule a test drive. They don’t say: visit our store for more information, you can book your test drive right away. They have 24/7 service each day of the year, Smart Alerts, and are connected to you and your Tesla through system monitoring, remote diagnostics and software updates. Everything for a satisfied Tesla driver.
Tesla uses a direct sales approach to consumers (and also their corporate customers) through their own Stores. They deliver service through Service Centers and Mobile Service Vans. They don’t outsource sales and service, which is obviously a deliberate strategic choice.
Tesla earns money with the sales of vehicles. Besides that they earn money by selling Maintenance Plans and their Wall Connector product. The Model 3 was pre-sold through a $1,000,- downpayment, which generated an estimated 600,000 in pre-sales.
Tesla is not building another car of piece of tech, but building a car around the driver. They are also setting a new status quo for automotive service. They are always working on improving your Tesla by doing over the air software updates. They innovate to keep you and your Tesla out of the maintenance shop, and on the road.
Tesla has a different mindset about everything. They really think differently about value creation and product development. They use simplified engineering as the concept to build a superior product that requires less maintenance by design. They have talented people in everything from R&D, product development, maintenance, and service.
Tesla partners with locations (such as hotels and garages) so that customers can charge their Tesla at their destination. Tesla delivers service with their own employees, which is why they don’t have service partners.
Developing and working with cutting-edge technology is an important cost. Besides that, Tesla being software with wheels spends money on ICT and software development. Other costs are related to production, sales, marketing and servicing. In order to stay ahead, Tesla employs the most talented people.
BUSINESS MODEL CANVAS FOR BMW
Below, the BMW business model is visualized. Let’s go over it as well, block by block.
The customers of BMW are performance-driven and quality-minded people. Recently, they also started targeting urbanites and environmentally-conscious people with their electric cars and mobility services.
BMW offers various cars (also hybrid and full electric) that gives customers the ultimate driving experience. This ultimate driving experience is constantly enhanced from a customer point of view through new technologies. Where Tesla is promising that they have the safest car ever, BMW focuses on performance. A BMW comes with Connected Drive, making sure you reach your destination on time and relaxed. The car has active cruise control to assist you in driving. They also offer various services around the car to make sure you stay mobile (e.g. accident and roadside assistance). BMW also offers DriveNow, which is a mobility service, where people can get the ultimate driving experience, by the minute.
BMW is always by your side, by providing Co-Pilot Driver Assistance, and at your service. They are a love brand: for many people it becomes a car for life, once people experienced driving a BMW.
BMW uses a traditional dealer network to sell and service their customers. They deliver services and the connection to your car through apps (e.g. MyBMW).
BMW earns money with car sales. Besides that they earn money with service & maintenance, leasing fees, and rental fees.
BMW is constantly working on innovating their cars for a better driving experience, and develop for the future of mobility. Sales, marketing and production are daily activities.
BMW is because of the talented people who work there. BMW has Efficient Dynamics and the Agile Manufacturing System.
To constantly keep an eye on the future, visionaries are partners of BMW. Employees of BMW and visionaries are thinking about how BMW can innovate to stay ahead of the trends and the client wishes. BMW works with other car companies (for example Toyota) and with IT companies to develop new technologies together.
In order to deliver the value proposition there are several costs that BMW has to make. They invest in innovation and exploration, to keep the ultimate driving experience up to date. They spend budget on sales and marketing every day. In order to deliver a great service, they train their people.
Sketching the Business Model Canvas creates the bigger picture and makes it easier to strategize about how you create, deliver, and capture value. The Business Model Canvas brings clarity, simplifies, and shows how all the moving parts in your business are connected. The canvas ensures your strategic conversations stay focused on value creation. “Diving into the weeds” leads to (unnecessary) discussion, which halts the creative process and the ability to see things for what they are. The solution: first do and then discuss. Focus on creating the bigger picture. This is what’s really important.
When creating your business model, that of your competitor’s or even when you want to compare different business models, the power is to keep it simple and focused on the essence of the value creation. Great business models are straightforward and simple. Add to many details to your business model, and your point of view will become foggy.
To simplify and clarify your point of view and the story you’re telling, use sketches or pictures instead of words. Even better, puzzle your business model together using hand-drawn icons cut out from a template.