Digital transformation isn’t like flipping a switch. It’s a slow and often messy process, but for those who pull it off, it can make their businesses more efficient, productive, and profitable. Business Model Canvas is a tool that can help — and all you need is a single piece of A3 paper.
I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end.
I’ve shared monthly lessons on how to steer organizations through the rough waters of digital transformation. Yes, there is homework. But if you pay attention and put in the effort, it won’t be long before you start seeing real results.
Digital transformation is different for every organization. It depends on a wide range of factors. Some are internal, like culture and existing technology, and are some external, like competitor behavior and economic conditions. Digital transformation activities can be big or small, from establishing an entirely new business model to automating a single process.
Whatever the nature of your transformation, you should learn how it can affect your business plans. A change in one department may have implications elsewhere that you need to consider. If you are planning a whole business change, understanding how everything fits together is critical.
This month’s lesson introduces a simple tool to get an integrated view of your digital transformation activity. It focuses on your business model and the main elements that enable your organization to function effectively—and makes them visible in a holistic, easy to understand way.
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Traditional business planning poses problems
Business planning has traditionally been a lengthy process. Long periods of consultation are followed by the creation of detailed, organization-wide plans that are often articulated in verbose documents.
This long planning process restricts the pace of change and is inadequate in the age of digital transformation. It also makes modifying the strategy difficult. This process was designed for an era of slow change. Today it is obsolete.
Introducing the Business Model Canvas
I’ve written about the Value Proposition Canvas, a tool to ease development and validation of ideas for new products and processes. Alex Osterwalder designed this tool for lean tech startups, and it’s part of a larger planning tool called the Business Model Canvas.
The Business Model Canvas integrates the main elements of an organization on a single A3 sheet of paper. Tech startups have used this tool with great success to design their business models to create and deliver their technology products and services.
This tool can also be used to plan your digital transformation activity. By viewing all of the key business elements together, the Business Model Canvas makes it easier to understand the impact of technological changes and plan for them effectively. It is also much easier to make modifications as you see the actual impact of your implementation.
The Business Model Canvas considers both the internal and external aspects of your business. It is centered on the value that your business provides to customers. Once you have used the Value Proposition Canvas, you can complete the rest of the Business Model Canvas. It includes the following:
- Customer segments: Who are your customers, and are they in different segments? Will your transformation activity change this?
- Customer relationships: How do you routinely engage with them — e-mail, phone, conferences, etc.? Will your transformation activity change this?
- Channels: How do you contact your customers to make sales — e-mail lists, social media, advertising, sales reps, etc.?
- Key activities: What are your business’ main activities that create value? This may include your manufacturing, design, maintenance, etc. Does your new technology change this?
- Key resources: The main practical resources you need to create your value. This may include physical equipment such as robots, machine tools, floorspace, people, and the Internet
- Key partners: The external organizations or people that you need to create value and complete key activities. This may include suppliers and services such as cloud providers. These may change as you digitally transform.
- Cost structures: What are your main organization costs — human resources, energy, distribution, raw materials, etc.?
- Revenue Streams: How does the value you create result in revenue for the organization. Examples include subscriptions, as well as sale of products or services. What does your transformation mean for your costs and revenues?
The Business Model Canvas can be organized as in the below template from Strategyzer.
The Business Model Canvas in action
The following example of the Business Model Canvas considers the introduction of technology in a whisky distillery. The current position of the business is represented in the Business Model Canvas below:
The distillery wants to move into more direct-to-customer distribution while expanding its product range to appeal to more people in a younger market. This will require automation in the production process to enable faster changes from one product type to another (for example, from Cask Strength whisky to Sherry Oak Finish).
A warehouse management system (WMS) will be needed to handle the complexity, which will include sensors to enable closer monitoring and control of warehouse conditions. This is an important element in whisky aging, and it would support the substantial increase in direct shipping that is expected in the future.
A customer relationship management (CRM) system with data analytics capabilities can facilitate direct relationships with customers and support the direct sales activity. Also, artificial intelligence can enable individualized customer communications. Given the distillery’s level of technical capability, cloud hosting will be used where possible.
The management team created a new version of their Business Model Canvas for the completed technology project:
Using the Business Model Canvas for digital transformation
Organizations worldwide have used the Business Model Canvas to assist with their strategic change. You can modify if needed to add other categories. Remember, though, that the simplicity of the Business Model Canvas is its strength. It can be quickly understood and form the basis for a group discussion on changes being made.
Digital transformation requires engagement from everyone in the organization. Wide, patient consultation on changes is needed and should create support for the changes you are making. The Business Model Canvas allows that to happen.
Old models for business planning required extensive documentation and were hard to change. You can create models quickly and often, providing a historical record of your discussions and the changes made.
Your digital transformation homework
It won’t take you long to try out the Business Model Canvas. Try it, and you’ll see how easy it is to use and gain confidence in arguing for its adoption in your organization.
First, create a Business Model Canvas for your organization today. Next, imagine a technology-based change that you think would be valuable, and create a plan based on that change. Finally, use your completed charts to demonstrate its value to others.
Editor’s note: This column is reposted from Automated Warehouse sibling site Engineering.com.
