Business Model Canvas in practice: what entrepreneurs want

In this article, I'd like to share something exciting: a discussion about the Business Model Canvas (BMC), a tool that many people know and use but which some colleagues and I questioned in one of our research projects. Throughout the text, we will discuss whether the BMC is effectively the "treasure map" it promises to be or whether it falls short when the terrain is rougher and more uncertain. It's essential to be aware of its practical limitations to prepare for your business endeavors fully.

Let's start with the basics: BMC is known for organizing a business model into nine components, among which are value proposition, customer segment, channels, and revenue streams. It has a coherent structure, no doubt about it, and many renowned companies have started their journeys with it. That is the case for Airbnb, Uber, and other companies that have already applied the BMC at the beginning of their operations to outline their strategies and business models and consolidate their brands. But is it suitable for all contexts? 

Practice vs. theory: what are the BMC boundaries?

To answer this question, my associates and I conducted a study with Brazilian companies that had received training in using BMC from SEBRAE. This institution works very closely with small and micro-entrepreneurs in Brazil. We published this research in a paper entitled "Business Model Canvas and Entrepreneurs: Dilemmas in Management Practice," which you can download and read for free by clicking the link. After interviewing 57 entrepreneurs from sectors as diverse as fashion, food, and consultancy, one thing became clear in this research. While many appreciated the BMC as a visual map for understanding and planning their business, the actual use of the tool varied significantly based on each person's perception of their market.

Companies in markets considered stable found value in BMC, using it to identify their priority customers, define partnerships, and organize their core activities. However, entrepreneurs in more dynamic sectors left BMC to one side, preferring to rely more on day-to-day experience and the practical lessons that reality teaches. Understanding the need for flexibility in these dynamic markets is crucial for empathizing with these entrepreneurs.

Companies like Netflix know well the need for flexibility. Think of Netflix—whenever it launches a new feature or changes its catalog, would it adapt its BMC? It wouldn't be feasible because it needs agility. Entrepreneurs in volatile sectors—such as technology, fashion, and even food—face that need for constant adaptation daily.

Stability or dynamism: how entrepreneurs use BMC

Our study showed that BMC works well for entrepreneurs running businesses that benefit from more stable and less reactive planning. Think of ventures in industries like manufacturing, where changes are less intense, and entrepreneurs can analyze their decisions more carefully. BMC can help create a solid structure and identify key points for success. On the other hand, in highly dynamic markets like technology or fashion, where changes are frequent and rapid, what entrepreneurs really valued was learning directly from experience, what we call 'experiential learning' or 'vicarious learning. ' 

But in highly dynamic markets, entrepreneurs value learning directly from experience, called 'experiential learning' or 'vicarious learning.' Entrepreneurs evolve that learning on a day-to-day basis, where intuition and the ability to adapt quickly are more valuable than a structured model. For example, 3M adopts flexible learning rather than a rigid structure because it suits a company focused on innovation. They encourage employees to experiment and learn from mistakes, fostering a mindset that the BMC alone does not capture. This logic is also applicable to the small entrepreneurs we studied: several of them said that they even started out using BMC. Still, it then put it aside, preferring to conduct its business by privileging this 'experiential learning.' 

So, how do you use BMC effectively?

I would like to discuss this part: How can we get the most out of BMC while acknowledging its practical limitations? The answer lies in using it as an initial map to understand the business's structure and then integrating tools and methods that bring flexibility to day-to-day operations. An interesting combination would be to use the BMC to organize the main blocks and, in parallel, rely on financial monitoring software or performance metrics adjusted in real time.

If you're a teacher, here's a tip: when teaching BMC, show its benefits but prepare your students for its practical limitations. Encourage them to see BMC as one piece of a giant puzzle, which must be complemented by more agile methods and valuable tools for those on the front line. This approach allows the entrepreneur to have the "map" and the freedom to take alternative routes when necessary.

In short, BMC is helpful, but it's not everything

To conclude, BMC is not a magic solution but a starting point for entrepreneurs who want to understand the cornerstones of a business model. When the business scenario requires quick adjustments and agile responses, it must be complemented with tools that allow for more practical adaptation. In a world where everything constantly changes, a static model like the BMC is helpful, but it can't be the only resource for those who want to stand out.

I hope this discussion has brought you new insights and has shown you the importance of understanding the context before embracing any model. After all, in entrepreneurship, nothing is absolute. Everything depends on the market, vision, and courage to adapt to change. Understanding the context will guide you in making strategic decisions and standing out in the business world, empowering you to make informed choices.