# Business Model Canvas | BMC

**Creator/Source**: Alexander Osterwalder & Yves Pigneur, *Business Model Generation*
**Core Value**: Use a single canvas to clearly describe how a company creates, delivers, and captures value
**One-liner**: A business model is the logic of how a company makes money — the canvas makes this logic visible

---

> **Case Boundary**: Company/industry cases in this file are illustrative examples for framework structure and reasoning, not current factual claims by Alpha Insights. Before reusing any numbers, shares, dates, or conclusions in a live study, re-check sources and record them in the Evidence Claim Ledger.

## I. Framework Overview

### 1.1 Business Model Canvas Structure

```
┌─────────────────────────────────────────────────────────────────────────┐
│                        Business Model Canvas                           │
├─────────────────────────────────────────────────────────────────────────┤
│                                                                         │
│  Key Partners   Key Activities    Value Proposition  Customer Relations │
│  (KP)           (KA)              (VP)               (CR)              │
│                                                                         │
│                  Key Resources                       Channels           │
│                  (KR)                                (CH)               │
│                                                                         │
├─────────────────────────────────────────────────────────────────────────┤
│                                                                         │
│  Cost Structure (C$)                  Revenue Streams (R$)              │
│                                                                         │
├─────────────────────────────────────────────────────────────────────────┤
│                                                                         │
│                    Customer Segments (CS)                                │
│                                                                         │
└─────────────────────────────────────────────────────────────────────────┘
```

### 1.2 Nine Canvas Modules

| Module | Core Question | Position |
|--------|--------------|----------|
| **Customer Segments (CS)** | Who do we create value for? | Bottom |
| **Value Proposition (VP)** | What problems do we solve? | Center |
| **Channels (CH)** | How do we reach customers? | Right |
| **Customer Relationships (CR)** | How do we maintain customers? | Right |
| **Revenue Streams (R$)** | How do we generate revenue? | Bottom-right |
| **Key Resources (KR)** | What resources do we need? | Left |
| **Key Activities (KA)** | What must we do? | Top-left |
| **Key Partnerships (KP)** | Who do we need help from? | Top-left |
| **Cost Structure (C$)** | What are our costs? | Bottom-left |

### 1.3 Canvas Usage Logic

```
Design Sequence (right to left):

1. Who is the customer? (CS)
        ↓
2. What problems do customers have? (VP)
        ↓
3. How to reach and retain? (CH + CR)
        ↓
4. How to make money? (R$)
        ↓
5. What resources, activities, partnerships needed? (KR + KA + KP)
        ↓
6. What are the costs? (C$)
```

---

## II. Nine Canvas Modules Explained

### 2.1 Customer Segments (CS)

**Definition**: The different groups of people or organizations a company aims to reach and serve.

**Key Questions**:
- Who do we create value for?
- Who are our most important customers?

**Customer Segment Types**:
| Type | Description | Case |
|------|-----------|------|
| Mass market | Broad customer base | Coca-Cola |
| Niche market | Specific market segment | Rolls-Royce |
| Segmented market | Multiple market segments | P&G multi-brand |
| Diversified market | Multiple unrelated markets | Amazon (e-commerce + cloud) |
| Multi-sided platform | Interdependent multi-sided users | Taobao (buyers + sellers) |

**Segmentation Dimensions**:
| Dimension | Segmentation Criteria | Example |
|-----------|---------------------|---------|
| Demographics | Age, gender, income | Young vs middle-aged |
| Geography | City, region | Tier-1 vs lower-tier |
| Behavioral traits | Usage frequency, loyalty | Heavy vs light users |
| Need characteristics | Functional, emotional, social needs | Value-for-money vs quality |
| Enterprise characteristics | Industry, size, procurement model | Large enterprises vs SMEs |

### 2.2 Value Proposition (VP)

**Definition**: The bundle of products or services that creates value for a specific customer segment.

**Key Questions**:
- What problem do we help customers solve?
- What value do we provide?

**Value Proposition Types**:
| Type | Description | Case |
|------|-----------|------|
| Novelty | Unprecedented experience | First-generation iPhone |
| Performance | Better product performance | Dyson vacuum cleaners |
| Customization | Personalized need fulfillment | Custom-tailored suits |
| Convenience | More convenient usage | Food delivery |
| Price | Lower prices | Pinduoduo |
| Brand/Identity | Social recognition | LV, Moutai |
| Risk reduction | Reduced uncertainty | Extended warranty |

**Value Proposition Canvas**:
```
┌─────────────────────────────────────────────┐
│          Value Proposition Canvas            │
├─────────────────────────────────────────────┤
│                                             │
│  Customer Profile                           │
│  • Customer Jobs                            │
│  • Pains                                    │
│  • Gains                                    │
│                                             │
│  Value Map                                  │
│  • Products & Services                      │
│  • Pain Relievers                           │
│  • Gain Creators                            │
│                                             │
│  Fit: Value Map addresses Customer Profile  │
│                                             │
└─────────────────────────────────────────────┘
```

### 2.3 Channels (CH)

**Definition**: How the company reaches customers and delivers value propositions.

**Key Questions**:
- Through which channels do we reach customers?
- Which channels are most effective?

**Channel Types**:
| Type | Description | Case |
|------|-----------|------|
| Owned channels | Company-built channels | Website, direct stores |
| Partner channels | Third-party channels | Distributors, e-commerce platforms |
| Online channels | Internet channels | Tmall, Douyin |
| Offline channels | Physical channels | Supermarkets, specialty stores |

**Channel Phases**:
```
5 Channel Phases:

1. Awareness → Let customers know about us
2. Evaluation → Help customers evaluate value
3. Purchase → Let customers complete purchase
4. Delivery → Deliver the value proposition
5. After-sales → Provide post-purchase service
```

### 2.4 Customer Relationships (CR)

**Definition**: Types of relationships established and maintained with specific customer segments.

**Key Questions**:
- What type of relationship do we build with customers?
- How do we maintain customers?

**Relationship Types**:
| Type | Description | Case |
|------|-----------|------|
| Personal assistance | Human service | Bank relationship manager |
| Self-service | Customer does it themselves | Self-checkout |
| Community | User community | Xiaomi community |
| Co-creation | Customer participates in creation | UGC platforms |
| Automated | Algorithm-driven | Douyin recommendations |

**Relationship Objectives**:
| Objective | Description | Metric |
|-----------|-----------|--------|
| Acquisition | Acquire new customers | CAC |
| Retention | Keep existing customers | Retention rate |
| Growth | Increase spend per customer | ARPU |

### 2.5 Revenue Streams (R$)

**Definition**: Cash income generated from each customer segment.

**Key Questions**:
- What are customers willing to pay for?
- How should we price?

**Revenue Models**:
| Model | Description | Case |
|-------|-----------|------|
| Asset sale | Sell products | Apple selling iPhones |
| Usage fee | Charge per use | Utilities |
| Subscription | Recurring charges | Netflix membership |
| Leasing | Rent usage rights | Bike-sharing |
| Licensing | IP licensing | Qualcomm patents |
| Commission | Transaction commission | Taobao, Didi |
| Advertising | Traffic monetization | Douyin, Google |

**Pricing Mechanisms**:
| Mechanism | Description | Case |
|-----------|-----------|------|
| Fixed pricing | Price is set | Supermarket goods |
| Dynamic pricing | Price fluctuates | Flights, ride-hailing |
| Freemium | Basic free, premium paid | Cloud storage |
| Auction | Bid-based pricing | Ad bidding |

### 2.6 Key Resources (KR)

**Definition**: The most important assets needed to make the business model work.

**Key Questions**:
- What resources do we need?
- What are our core resources?

**Resource Types**:
| Type | Description | Case |
|------|-----------|------|
| Physical | Facilities, equipment, stores | Tesla factories |
| Intellectual | Patents, copyrights, data | Pharma patents |
| Human | Talent, teams | Consulting firms |
| Financial | Capital, credit lines | Banks, funds |
| Digital | Platforms, algorithms, users | Douyin algorithm |

### 2.7 Key Activities (KA)

**Definition**: The most important things a company must do to make its business model work.

**Key Questions**:
- What must we do?
- What are our core activities?

**Activity Types**:
| Type | Description | Case |
|------|-----------|------|
| Production | Manufacturing products | Foxconn |
| Problem solving | Solving customer problems | Consulting firms |
| Platform/Network | Operating platforms | Taobao, WeChat |
| R&D | Technology innovation | Huawei |
| Marketing | Customer acquisition, branding | Perfect Diary |

### 2.8 Key Partnerships (KP)

**Definition**: The network of suppliers and partners needed for the business model to work effectively.

**Key Questions**:
- Who do we need help from?
- Who are our key partners?

**Partnership Types**:
| Type | Description | Case |
|------|-----------|------|
| Strategic alliance | Non-competitor cooperation | Starbucks + Alipay |
| Coopetition | Competitor cooperation | Didi + Uber China |
| Joint venture | Joint investment in new entity | SAIC Volkswagen |
| Supplier relationship | Supply assurance | Apple + Foxconn |

**Partnership Motivations**:
| Motivation | Description | Case |
|-----------|-----------|------|
| Scale optimization | Resource sharing | Logistics alliances |
| Risk reduction | Risk sharing | Joint investment |
| Resource acquisition | Complementary resources | Technology licensing |

### 2.9 Cost Structure (C$)

**Definition**: All costs incurred in operating a business model.

**Key Questions**:
- What are the core costs?
- What is the cost structure?

**Cost Types**:
| Type | Description | Case |
|------|-----------|------|
| Fixed costs | Don't vary with output | Rent, salaries |
| Variable costs | Vary with output | Raw materials, logistics |
| Economies of scale | Larger scale = lower costs | Manufacturing |
| Economies of scope | Multiple products share costs | Platform economy |

**Cost Drivers**:
| Driver | Description | Strategy |
|--------|-----------|----------|
| Cost-driven | Minimize costs | Pinduoduo, Southwest Airlines |
| Value-driven | Maximize value | Luxury brands, premium hotels |

---

## III. Business Model Canvas Execution Steps

### Step 1: Map Customer Segments

**Goal**: Clarify target customers.

**Analysis Framework**:
```
1. List all possible customer groups
2. Group by needs/behavior/characteristics
3. Evaluate attractiveness of each group
4. Select groups to serve
```

### Step 2: Define Value Proposition

**Goal**: Clarify value created for customers.

**Analysis Framework**:
```
1. Customer Jobs: What does the customer want to accomplish?
2. Pains: What difficulties does the customer face?
3. Gains: What benefits does the customer expect?
4. Value Proposition: How do we solve this?
```

### Step 3: Design Channels and Customer Relationships

**Goal**: Design how to reach and maintain customers.

**Analysis Framework**:
```
Channel design:
• Which channels reach target customers?
• Which channels are most cost-efficient?
• How to integrate online and offline?

Customer relationships:
• What relationship type suits target customers?
• How to balance human and automated service?
• How to increase LTV?
```

### Step 4: Design Revenue Model

**Goal**: Design monetization approach.

**Analysis Framework**:
```
1. What are customers willing to pay for?
2. Which revenue model fits best?
3. How to price?
4. Is revenue sustainable?
```

### Step 5: Identify Key Resources and Activities

**Goal**: Identify key elements supporting the business model.

**Analysis Framework**:
```
Key Resources:
• What assets are indispensable?
• What is hard for competitors to replicate?

Key Activities:
• What must be done well?
• What is the source of differentiation?
```

### Step 6: Design Partnerships

**Goal**: Identify key partners.

**Analysis Framework**:
```
1. Which activities can be outsourced?
2. Who has key resources/capabilities?
3. What is the partnership model?
4. How to distribute benefits?
```

### Step 7: Calculate Cost Structure

**Goal**: Calculate business model costs.

**Analysis Framework**:
```
1. Cost of each activity
2. Fixed costs vs variable costs
3. Are costs sustainable?
4. Are there scale effects?
```

### Step 8: Validate the Business Model

**Goal**: Validate business model feasibility.

**Validation Framework**:
```
1. Value validation
   • Do customers recognize the value?
   • Are they willing to pay?

2. Growth validation
   • Is customer acquisition sustainable?
   • Are there flywheel effects?

3. Profitability validation
   • Does Unit Economics work?
   • When is break-even?
```

---

## IV. Output Format

### 4.1 Business Model Canvas

```markdown
## Business Model Canvas - [Company/Business Name]

### Customer Segments (CS)
- **Core customers**: [...]
- **Secondary customers**: [...]
- **Customer characteristics**: [...]

### Value Proposition (VP)
- **Core value**: [...]
- **Problems solved**: [...]
- **Differentiation**: [...]

### Channels (CH)
| Channel | Function | Cost | Efficiency |
|---------|---------|------|-----------|
| ... | ... | ... | ... |

### Customer Relationships (CR)
- **Relationship type**: [...]
- **Retention strategy**: [...]
- **LTV improvement**: [...]

### Revenue Streams (R$)
| Revenue Source | Share | Growth Rate | Sustainability |
|--------------|-------|-----------|---------------|
| ... | ...% | ...% | High/Medium/Low |

### Key Resources (KR)
| Resource | Type | Importance | Scarcity |
|----------|------|-----------|----------|
| ... | Physical/Intellectual/Human/Financial | High/Medium/Low | High/Medium/Low |

### Key Activities (KA)
| Activity | Description | Importance | Outsource/Build |
|----------|-----------|-----------|----------------|
| ... | ... | High/Medium/Low | ... |

### Key Partnerships (KP)
| Partner | Partnership Content | Partnership Model | Importance |
|---------|-------------------|------------------|-----------|
| ... | ... | ... | High/Medium/Low |

### Cost Structure (C$)
| Cost Type | Share | Fixed/Variable | Trend |
|----------|-------|---------------|-------|
| ... | ...% | Fixed/Variable | Rising/Declining |
```

### 4.2 Business Model Diagnostic

```markdown
## Business Model Diagnostic

### Strengths
- [Strength 1]
- [Strength 2]

### Weaknesses
- [Weakness 1]
- [Weakness 2]

### Risks
- [Risk 1]
- [Risk 2]

### Improvement Recommendations
- [Recommendation 1]
- [Recommendation 2]
```

---

## External Research Supplement: BMC Best Practices

Based on Alexander Osterwalder's research and practice:

### 1. Nine Elements Explained

| Module | Core Question | Tool |
|--------|--------------|------|
| Customer Segments | Who do we create value for? | User personas |
| Value Proposition | What problem do we solve? | JTBD, value curves |
| Channels | How do we reach customers? | Channel maps |
| Customer Relationships | How do we maintain customers? | Customer journey |
| Revenue Streams | How do we make money? | Pricing models |
| Key Resources | What assets do we need? | Resource inventory |
| Key Activities | What must we do? | Process diagrams |
| Key Partnerships | Who can help us? | Ecosystem maps |
| Cost Structure | Where are the costs? | Cost decomposition |

### 2. Canvas Usage Flow

Customer Segments → Value Proposition → Channels + Relationships → Revenue → Resources + Activities + Partners → Costs

### 3. Common Errors

| Error | Manifestation | Correction |
|-------|--------------|-----------|
| Isolated elements | Nine elements operate independently | Check logical consistency between elements |
| Vague value | "Better product" | Specify value (quantify/compare) |
| Ignoring costs | Only discussing revenue, not costs | Fully account for cost structure |

---

## V. Platform Business Model Extension

### 5.1 Platform Canvas vs Traditional Canvas

Traditional BMC has insufficient support for platform business models. The following extensions are needed:

| Dimension | Traditional BMC | Platform Extension |
|-----------|----------------|-------------------|
| Customer segments | Single segment | Two-sided/multi-sided market |
| Value proposition | One-directional value | Network value |
| Key resources | Physical/intellectual | Network effects, data |
| Revenue streams | Direct monetization | Commission, advertising, data |

### 5.2 Platform Canvas Key Elements

```
Platform business model canvas extension:

1. Producers
   • Who are the value creators?
   • Why join the platform?

2. Consumers
   • Who are the value consumers?
   • Why choose the platform?

3. Value Unit
   • What is the basic unit of exchange?
   • How to standardize?

4. Matching Mechanism
   • How to connect supply and demand?
   • Algorithm/price/social/geographic?

5. Governance Rules
   • Access rules
   • Behavioral rules
   • Quality control

For detailed analysis, use the Platform Canvas framework
```

---

## VI. Case Study

### Pinduoduo Business Model Canvas Analysis

| Canvas Module | Pinduoduo Status | Key Data |
|--------------|-----------------|---------|
| **Customer Segments (CS)** | Price-sensitive consumers (primarily lower-tier markets) + White-label/factory merchants | Annual active buyers ~870M (2023 filings) |
| **Value Proposition (VP)** | Ultra-low prices (C2M cutting middlemen) + Social group-buying fun | Same products 20-40% cheaper than Taobao |
| **Channels (CH)** | WeChat ecosystem (Mini Program + share/fission) → Standalone App | WeChat entry contributed >50% of early traffic |
| **Customer Relationships (CR)** | Algorithm recommendations (products find people) + Social relationship chains | DAU >300M |
| **Revenue Streams (R$)** | Merchant advertising (>60% share) + Transaction commission | 2023 revenue ~¥247.6B |
| **Key Resources (KR)** | Algorithm technology + 870M annual active buyers + WeChat ecosystem entry | Tech team >7,000 people |
| **Key Activities (KA)** | Recommendation algorithm optimization, merchant operations, category expansion (Temu overseas) | Temu 2023 GMV estimated >$18B |
| **Key Partnerships (KP)** | Factories/white-label merchants, logistics (J&T Express, etc.), WeChat ecosystem | Active merchants >13M |
| **Cost Structure (C$)** | Marketing expenses (~50%) + Tech R&D + Personnel | 2023 marketing expenses ~¥92B |

**So What**: The core of Pinduoduo's canvas is its "revenue from advertising, not commission" model — advertising revenue share >60%, far higher than Taobao's ~45%. This dictates that Pinduoduo **must continuously grow traffic**: traffic is the prerequisite for advertising monetization. Once user growth slows, the revenue model immediately comes under pressure. Temu's overseas expansion is essentially replicating the same traffic-advertising flywheel internationally.

---

## VII. Data Source Recommendations

| Analysis Dimension | Recommended Data Sources |
|-------------------|------------------------|
| Business model decomposition | Prospectuses (S-1/F-1), annual reports (20-F), securities research deep dives |
| Revenue structure | Filing segment information (Revenue Breakdown), earnings call transcripts |
| Cost structure | Filings + securities research, industry benchmarking data |
| User data | QuestMobile, Trustdata, company filing disclosures |
| Channel analysis | E-commerce platform public data, third-party monitoring (Chanmama/Feigua) |
| Competitor comparison | Industry reports (iResearch/Analysys), multi-company filing cross-comparison |

---

## VIII. Common Mistakes

| Mistake Type | Manifestation | Correction |
|-------------|--------------|-----------|
| Vague customer definition | "Everyone is a customer" | Clarify segmentation, focus on core |
| Empty value proposition | "Providing quality service" | Specify the problem being solved |
| Single channel | Relying on one channel only | Diversify channels |
| Unclear revenue model | Don't know how to make money | Clarify payment points and pricing |
| Confusing resources and activities | Resources and activities not distinguished | Resources are assets; activities are actions |
| Ignoring partnerships | Doing everything yourself | Identify key partnerships |

---

## IX. Integration with Other Frameworks

| Upstream Framework | Input Content | This Framework's Output | Downstream Framework |
|-------------------|--------------|------------------------|---------------------|
| Industry research | Industry landscape | Business model design | Platform Canvas |
| Competitive analysis | Competitor models | Model comparison | Value Chain |
| JTBD | User needs | Value proposition | TAM/SAM/SOM |
| Three-Layer Analysis | Business data | Model diagnostic | Flywheel |

**Typical Combinations**:
- **Business model analysis**: BMC → Value Chain → Unit Economics
- **Market entry**: BMC → Playing to Win → Three Horizons
- **Platform design**: BMC → Platform Canvas → Flywheel

---

## X. China Market Specifics

| Dimension | China Characteristics | Case |
|-----------|----------------------|------|
| Platform-dominated | Business models highly dependent on mega-ecosystem platforms; channels and customer relationships controlled by platforms | Brands within Tencent/Alibaba ecosystems struggle to operate cross-ecosystem |
| Traffic-driven | Traffic acquisition is the prerequisite for viable business models; channel weight is extremely high | Perfect Diary leveraged Xiaohongshu/Douyin traffic to IPO in 3 years |
| Lower-tier markets | Lower-tier markets represent massive incremental space; value propositions need differentiated design | Pinduoduo redefined e-commerce BMC for lower-tier populations |
| Instant gratification | Rapid fulfillment capability becomes a key resource and core activity | Meituan 30-minute delivery, Dingdong Maicai forward warehouse model |
| WeChat ecosystem | Official Accounts + Mini Programs + WeCom + Pay form a complete business model closed loop | Luckin achieved low-cost repurchase through WeChat private domain |
| Douyin ecosystem | Content + commerce + livestream integration spawning new business models | Douyin livestream e-commerce restructured brand channel strategies |
| Supply chain advantages | China manufacturing clusters support quick-response supply chains, reducing core activity costs | SHEIN's small-batch quick-response model leverages Pearl River Delta industrial belt |
