Full Article: Business Model Innovation for Education

Here is a link to a full version .pdf of the Business Model Innovation for Education article.

You can also find prior articles on my website.

Cheers... Rob

In Conclusion: Business Model Innovation for Education

In conclusion. Institutional leaders need to reinvent existing and deploy new, innovative business models in order to achieve competitive advantage and financial sustainability. Business model canvases are useful tools for shaping planning thought processes, building organizational capacity, and guiding execution of changes in institutional business models. Based on our experience over the past few years, the following principles should guide the deployment of business model canvases by institutional leaders.

1. Change the language when it gets in your way and craft value propositions and narratives that fit your institution’s circumstances and culture.
   
2. Establish a commitment to business model innovation, competitive advantage, and financial sustainability at the strategic level; refine existing business models and innovate new business models at the tactical and operational levels (action planning and execution).

3. Unless an institution produces a small number of value propositions, don’t try to build a canvas on the institutional level.
   
4. Focus on a single value proposition at a time such as a particular degree offering, a single program, or on a clear value producing effort, then frame this in the larger institutional context.
   
5. Focus on a single customer or stakeholder segment at a time, then consider how others may be connected or impacted.
   
6. Create multiple, interrelated canvases when simplification is not attainable.
   
7. Reimagine some of the traditional customer segments, beyond students and learners, more like partners; if they are proving inputs and resources to the business model, they likely delivering resources and key activities more so then customer-centric revenues (for example, Federal financial aid programs).
   
8. Treat institutions as value-producing ecosystems; consider our revised ecosystem-canvas for this when the traditional canvas cannot fully serve your needs.
   
9. Embed the principles and tools of business model innovation in your institution’s planning processes, capacity building efforts, and execution of strategies and action plans; develop the skills of executive leaders, management, staff, and faculty in their application.
   
10. Move to execution by adequately planning, building the capacity necessary for change, and staying focused on the ultimate goals through the execution.

Based on these principles, we recommend embedding business model principles and practices in the following manner in your institution’s planning, capacity building and strategy execution processes.

Planning. Most institutional strategic planning processes do not deal specifically with the concept of the institution’s business models and how to change them to achieve and maintain financial sustainability. These are serious shortcomings. The institution’s strategic plan should establish business model reinvention and innovation as strategic drivers. The plan should articulate the institution’s strategic intent to leverage innovative business models, fulfill fresh value propositions, pursue competitive advantage and achieve financial sustainability. These principles then influence the application of the business model canvas in designing, resourcing, executing and communicating of changes in existing programs and new offerings, in order to fulfill value propositions essential to learners and other stakeholders.

Capacity. Institutions need to build capacity concurrently with executing strategy and action plans. To successfully innovate business models and deploy business model tools, institutional leaders must assess and develop their organizational capacity to do so. This includes their capacity to understand the strategic nature of business model innovation; insightfully analyze their existing portfolio of business models; and creatively innovate new business models and programs, services and experiences that achieve them. The institution’s developed and demonstrated organizational capacity to thoughtfully reshape its portfolio of offerings, experiences, and business models will be one of the critical success factors for institutions seeking to thrive over the next decade and beyond.

Execution. Institutions craft innovative business models as part of the action planning and execution stages, and continue to do so over the life of a strategic plan. With one or more canvases fleshed-out and plans in place to pursue change – it’s time to take action on executing business model changes and building capacity to do an even better job in the future. The application of business model canvas tools links to executing, resourcing, and communicating strategy; reinventing existing programs and developing new revenue streams; enhancing competitive advantage; and achieving financial sustainability. Over time, institutions must also actively change their culture as part of building capacity to utilize evidence-based innovation in programs, services and experiences.

Please enjoy these tools, share with us your experiences, and get in touch when you need help.

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Robert Brodnick, Ph.D. Founder, Brodnick Consulting Group robert@brodnick.consulting 530.798.4082 Donald Norris, Ph.D. President, Strategic Initiatives dmn@strategicinitiatives.com

Practical Pursuits Moving Forward

All of the positive reasons we identify seem to make the canvas an excellent tool for higher education applications. And it is; however, there are some cautions and potential pitfalls that need to be better understood before being able to deploy the tool effectively. The education industry is a special case that suggests modification of the canvas before it can achieve wider acceptance. Some of these changes are cultural and semantic and can be dealt with through careful choice of language. Others deal with the factor of public support for higher education and the contribution of education to both civic and economic prosperity. These factors complicate conversations about higher education business models and require some distinctions. Still others revolve around the complexity, situational nature, and difficulty of measuring learning experiences and outcomes. Moreover, most institutions generate multiple outcomes – learning, human development, research, knowledge generation, public service, and economic development. Combine these factors with the insights we have gained using the canvas over the past few years, which can save practitioners time and energy and ensure impactful applications.

The special case of the education industry. Several factors make the industry stand out as a special case for consideration when working with the canvas: 1) culture, language, and semantics, 2) higher education as a public good, 3) the illusive nature of learning; and 4) the multiple outcomes and stakeholders of higher education.

The culture and language of educational institutions is unique. Slowly over time, institutions of higher education have assimilated the tools of business to improve the efficiency and effectiveness of their planning and operations. However, most academics resist thinking of education as a “business” and viscerally reject language that is adapted from business applications. This artifact of the culture of institutions creates a special situation where language and semantics must be modified and translated to fully engage institutional members, especially the faculty. Terms of art from the business world are rejected as “jargon.” For example, the term “customer” is resisted by many academicians who believe their relationships with students are both deeper and more multifaceted than a mere customer relationship. To deal with these sensitivities, the language used in the canvas must be reviewed and refined to be acceptable to potential academic users in most cases, and fully replaced in others. Customer is the most obvious target for refinement. This is the term most likely to repulse potential academic users. This affects the entire right side of canvas as the word “customer” appears in most of the building blocks. There is, however, no simple substitute and this deepens the mystery of higher education culture. Simply using the term “student” works for some academic programs and with some campus groups like faculty, but it leaves out a long list of other customer groups like employers, the public, parents, and graduate schools who often admit recent undergraduate degree attainers. Use of the terms “beneficiary” or “stakeholder” might pass muster. Stakeholder would also expand the concept to include not just direct beneficiaries but indirect parties such as parents and employers. These cultural anomalies expose an even more difficult aspect of the higher education business model.

Higher education is dependent on public support in its financial model. Higher education evolved over the years, and especially in the last 50, as a public good. Public and private institutions benefit from direct and indirect public support from federal, state and local sources. Tax relief and student financial aid are two areas in which even private institutions receive tremendous benefits from government funding or forgiveness. Such benefits are given because the public understands that education provides both personal and public benefits, including civic and economic prosperity in our communities and to the nation as a whole. This complicates the canvas in several ways, both on the cost and revenue sides, as public entities like the Federal government, states, and counties provide support for institutions, offset costs to parents and students, and place demands and accountabilities on outcomes. The canvas is useful in better exploring and understanding the role of government and the public interest in the value proposition of the education industry. The canvas can be utilized to analyze and deconstruct the role of government and the nature of the public interest in the higher education industry. It can be used to illuminate the value proposition for public investment in education. Understanding the nature and dividends from public support is an important issue. Elements of the public interest can be portrayed in various parts of the business model. They can be used in the difficult task of diagnosing the competing and countervailing roles of government. They can also be used to illustrate how state and federal government can both be a partner and at the same time retard success. To make the issue even more complicated, the impact of the public investment in higher education is uneven and diminishing over time. There are myriad legal statuses of institutions from nonprofit public and privates to for profit S and C corporations that can be publically or privately held. Our experience is one of significant challenge to represent all of these stakeholders at the institutional level in a single or small number of canvases.

The true nature of learning is neither well understood nor adequately measured within the industry. Value propositions are at the heart of the canvas and there is ongoing confusion and lack of clarity, and perhaps even lack of trust, about the primary value that higher education provides. For some, especially first-time college goers and undergraduates, the prized outcome is a job after graduate. For others, it is the learning about oneself and the world that is the key outcome. For others further from the direct learning, it’s the development of an educated population or employee base. The fact is that the industry serves all of these outcomes and others, which requires a multidimensional canvas to fully represent the layered value propositions. To complicate the matter further, the true nature of learning remains undefined. Even experts have trouble explaining what is learning and how it can be measured. Is learning measured by test scores in any given class or is more about an individual's ability to navigate the world over a lifetime to achieve happiness? Moreover, research and advances in personalized learning are revealing vast differences in how individuals learn; so far, these insights have not been widely deployed in operational practice. These challenges are magnified by the fact that the learning needs and expectations of individuals change depending on one’s age and stage of life and career. Given these challenges, understanding learning remains a difficult hurdle to overcome on the institutional level with the canvas. These challenges are not as great on the program or auxiliary enterprise levels.

Multiple stakeholders and outcomes complicate unpacking and crafting value propositions and generating simple building blocks. The current state of the higher education industry from its culture, to the role of government, to the illusive nature of learning complicates the simple and elegant nature of the business model canvas. The fourth aspect of the special case of higher education adds to the difficulties. Clearly articulating a single value proposition is difficult when the outcomes produced by an institution are both transactional and developmental, involve both curricular and co-curricular experiences, and benefit multiple stakeholders. For example, over the length of an undergraduate’s degree, they may take 40 or more individual courses, participate in clubs, organizations, and athletics, volunteer, living in housing, participate in study abroad, internships, and cooperatives, and take a number of leadership position. The cumulative effect of these experiences provide the student with many benefits such as helping them prepare for a job and career, develop stronger social and occupational networks, help them develop as individuals and citizens, and to gain independence from their families economically and socially. It becomes difficult to determine the extent to which any one of the inputs generated value along any one of the outputs. Such complexities require simplification in deploying the canvas and an understanding of the simplified nature of such representations, while at the same time requiring a number of canvases to best understand the full impact of the program and supporting experiences. What we also have learned is that the value of the undergraduate degree changes in perception of the course of the decade or so that follows graduation. In the first year or two, graduates place high value on gaining entry to certain graduate programs or landing the first job. Later in their career, this value shifts to career preparation and others like appreciation of the arts, cultures, or human understanding. Complicated indeed!

An adapted canvas for higher education – Introducing the Education Business Model Ecosystem-Canvas. How then can we modify the existing Business Model Canvas to overcome the challenges presented by the special case of the education industry and reap the rewards of all of the benefits we espouse?  Our revised Education Ecosystem-Canvas is an industry specific modification of the traditional business model canvas tailored for higher education institutions. We chose to revise the layout of the traditional canvas from rectilinear to circular to enhance the concept of flows through the model and interchanges with the environment. The ecosystem model introduces an outer shell to help manage the multiple elements that can influence any individual business model by allowing the opportunity to identify additional value propositions, stakeholder groups, or influences from internal or external forces.

The following element definitions use language that may be more suitable for cultures in educational institutions:

• Learner Centered Value Proposition: Institutions seek to solve learner problems and satisfy learner needs with value propositions. They represent the reason that learners choose one institution over competitors. These propositions articulate the value delivered to the learner. They may describe the learner’s problems that are being solved and which needs are being satisfied. Some value propositions may be differentiated to target several distinct learner or stakeholder segments.

• Stakeholder Channels: Value propositions are delivered to learners and stakeholder through channels that cover communication, distribution, and sales. This element describes the channel in detail including all of the touch points for each stakeholder segment. Channels help raise awareness about products and services, help stakeholder understand the value proposition, allow stakeholder to purchase products and services, and provide support.

• Stakeholder Relationships: Relationships are established and maintained with each stakeholder segment. There are a wide variety of ways institutions can maintain relationships with stakeholder segments, from close personal relationships to more automated contacts and interactions. These are shaped by stakeholder expectations and vary depending on institutional capacities and how the relationships can be integrated with the rest of the business model.

• Stakeholder Segments: An institution serves one or several learner and stakeholder segments. This element defines the different groups of people or organizations an institution hopes to reach and serve. These segments should be separated out if they have different needs, have their own channel, require different kinds of relationships, or have substantially different characteristics.

• Revenue: Value propositions successfully embraced by learners and stakeholders generate revenue streams. These revenue streams represent the cash an institution generates from each stakeholder segment in exchange for products and services. Transaction revenues result from one-time payments while recurring revenues result from ongoing payments.

• Key Partners: Partners can be engaged to provide resources and activities; some activities are outsourced and some resources are acquired outside the institution. Partnerships are increasingly important in institutions. They can be created to optimize a business model, reduce risk, acquire resources, or add value to any part of the business model. There are four kinds of partnerships: strategic alliances with non-competitors; cooperative partnerships between competitors; joint ventures to develop new business; or buyer-supplier relationships to assure continuing supplies.

• Key Resources: Key resources are the assets required to offer and deliver value to the learners and stakeholders through the key activities of the institution. These resources are fundamental to making the business model work. They can include physical, financial, intellectual, human, or other resources. They may be owned by the institution, leased as needed, or acquired from key partners.

• Key Activities: These are the critical functions necessary to offer and deliver value to the learners and stakeholders. These activities are the most important things an institution must do to make the business model work; actions an institution takes to be successful. They can fall into categories of production or problem solving; can occur in platforms or networks, or may be expressed in other kinds of ways.

• Costs: The business model elements combine to generate the cost structure. This element describes the most important costs to operate a business model. Costs should be calculated after defining the Key Resources, Key Activities, and Key Partnership elements.

• Other Stakeholders: An institution may serves other stakeholder segments beyond the learners. This element includes the additional groups of people or organizations an institution hopes to reach and serve. Stakeholder groups should be separated out if they have different needs, have their own channel, require different kinds of relationships, or have substantially different characteristics.

• Interdependent Value Propositions: Additional value propositions are delivered to stakeholders that may or may not be related to the core value proposition to learners. Each interdependent value proposition should be separated out if they address different needs, channels, relationships, or have substantially different characteristics.

• Other Institutional Factors: Forces internal to the institution impact the overall ecosystem and should be noted here. These may impact any element of the business model, but may have special impacts on key resources or key activities.
• Other Environmental Factors: Forces external to the institution impact the overall ecosystem and should be noted here. These may impact any element of the business model, but may have special impacts on key partners or stakeholders.

Using the Business Model Canvas for Change in Education

The Canvas is a relatively new tool for educators. We have seldom seen the tool used for existing or future business models in higher education. However, we advocate four applications of the Business Model Canvas, each of which has a variety of uses in the industry. In this next section, we explore and describe four scenarios in higher education where the Canvas would provide a powerful tool for faculty, administrators, planners, and leaders.

Scenario 1: An institution is struggling financially or has one or more major programs failing. These institutions can use the Canvas to diagnose their current value propositions and pivot while they still can. What do we mean by failing institutions or programs? The most obvious are institutions that have experienced pernicious enrollment declines, discount rates that have grown to dangerous levels, structural deficits, and or tapping endowment or cutting expenditures to avoid deficits. Such institutions need immediate analysis and corrective action. But beyond institutions that are financially unsustainable in the short run, many institutions face increasing costs, competition, and eroding value propositions that make them financially unsustainable in the long run – yet they don’t fully understand their predicament. Failure to achieve long-term financial sustainability is a threat to all institutions.

The Business Model Canvas can be used by the leadership of struggling institutions, and by leaders that wish to position their institution for future success, in the following ways. 1) Deploy the Canvas as a diagnostic tool and communication device. The Canvas can be used to diagnose, understand, and communicate the elements of the current business models and practices. Many institutions have neither the interest nor the ability to understand their existing business models then portray them in a manner that can be easily understood and acted on. The Canvas can help these institutions envision and communicate their business models for the first time. This can serve as a clarion call to decisive action, before it is too late. 2) Use the diagnoses to understand and act on the contributors to financial sustainability. Deconstructing an institution’s business models enables its leadership to identify the contributions made by its economic engines (programs and services that contribute toward sustainability). Guided by this knowledge, leadership can direct and reallocate resources to programs and services that will achieve strategic goals and financial sustainability. 3) Reinvent program evaluation. Current program realignment and reallocation initiatives miss the mark! Many struggling institutions have turned to program realignment and resource reallocation initiatives to confront short-term and long-term financial sustainability. However, they seldom examine their underlying business models as part of these efforts. Nor do they innovate their culture and capacity to shape business models to create real returns on investments and sustainability. This is a missed opportunity for struggling institutions.

Given the turbulence in the higher education landscape, all institutions should prepare for uncertainty and changing conditions. Struggling institutions cannot survive, let alone thrive, by just “muddling through” and continuing existing practices. Even stronger institutions have been impacted by shifts in the marketplace. We suggest that all institutions explore their value propositions and business models now as a core planning tool to strengthen their competitiveness down the road. Institutional leaders need to portray their current business models and then pivot by changing their business models to improve their competitive position and fulfill improved value propositions to their customers. The Canvas can be used to provide a future focus and add a sense of urgency to institutional strategy.

Scenario 2: Innovating new revenue streams. Any institution can use the Canvas to explore business model innovations and implement new revenue streams as well as augment existing programs and operations. Most program enhancements and innovations in higher education do not fundamentally and planfully change institutional business models. Changing business models is critical to truly getting the most out of reinvention of existing programs and discovering new revenue streams.

Program innovation has a rocky history in higher education. We have seen this pattern over and over again – a good idea is born, partially implemented without much concern for the cost and revenue structures, then as the idea fails to gain traction it is very rarely, if ever, eliminated. A better approach to innovation can be attained with the Canvas. 1) Leaders can use the Canvas to guide the reinvention of existing programs and operations. By deconstructing and reinventing the business model elements of existing programs and services, institutional leaders can extend the life of their current offerings. 2) An institution can use the Canvas to innovate an entirely new revenue stream. Most new revenue streams pursued by institutions involve repurposing existing offerings and models to different settings or industries. Genuinely innovative new revenue streams require innovations in the targeted value proposition and in the other elements of the Canvas. The innovations also need to extend to include effective implementation that enlivens both the cost and revenue sides of the Canvas equation. 3) Innovation can help programs and offerings achieve cost and differentiation optimization. Roger Martin, leading strategist, suggests that sustainable programmatic innovations in higher education will be those that achieve either a sustainable advantage in cost, a clear differentiation in features and outcomes, or a combination of the two. The Canvas can help planners craft innovations that will achieve and defend such sustainable elements in the face of competition. The Canvas will also aid in sharpening the institution’s message and communicating these features to stakeholders and customers.

Here is an example of an institution that made recent progress with a business model: Ocean County College offerings to enhance K-16 education. Ocean County College has created a variety of new revenue streams. Many of these involve online delivery of existing programs, but offered in collaboration with an on-the-ground international partner. Some feature new business models and fresh value propositions. A prime example is the New Jersey Network for School Success. This venture depends on a creative public/private partnership and collaboration across K-16 that will deliver value through a digital resources and standards platform/utility for teachers, curriculum development specialists, parents, and students. Professional development and professional growth resources for teachers will be made available through the platform, over time.The innovative business model for this venture will use the NJ Consortium of Community Colleges to engage school districts in their county service area, train the trainers, and augment the effectiveness of the platform. Revenues will be shared with the community colleges from subscription fees paid by school districts and drawn from an infusion of federal ESSA funds. This venture is both low cost and features services that are highly differentiated from comparable offerings. We have employed the Canvas to depict, explore, and innovate the business models for these ventures.

Scenario 3: Simplifying overly complex portfolios of institutional business models. Over time, institutions have “complexified” their existing portfolios of business models relating to academic programs, support services, co-curricular activities, auxiliary enterprises and other activities. In many cases, this situation negatively impacts their core mission of student learning. Faculty continually receive mixed messages about what’s important and how they can succeed. It can also drive up cost through bundling together unwanted services and costs and charging a fixed price, independent of which services are actually used. Institutions should consider revising, reducing or eliminating competing business models and sharpening their communication messages to focus on core value propositions for different stakeholder and customer groups.

Complex institutions have many business models in play. Often, these business models compete with each other rather than complementing or enhancing one another or the overall experience. 1) By using the lens of multiple Canvases, negative interactions can be better understood with the intention of strengthening the institution by revising, reducing or eliminating troublesome or competing business models. Alternatively, institutions may enable students to pay differentially depending on what combination of services they consume. While it is more convenient and profitable for institutions to charge students for the fully bundled set of business models and activities, in the future competitive pressures may drive institutions to unbundle and price differentially. Many educational institutions offer services that are unnecessary, inefficient, or have no evidence of positive outcomes. The Canvas can be used to help 2) eliminate or revise services or offerings with insufficient demand, elements that are dysfunctional, and elements that are competing. When institutions compare and analyze their business models for the portfolio of different activities, they are challenged to figure out what to do with undergraduate education, graduate education, research, public services, academic support services, co-curricular services, athletics, and other auxiliary enterprises. Comparisons are complicated by the existence of cross-subsidies across different activities. A third and highly recommended activity for institutions is 3) to use the Canvas to fully evaluate their business model portfolios. This allows institutions to simplify the portfolio, reinvent elements, and perhaps enable differentiated choices and prices. In the future, pressure will increase for institutions to control costs and the price of services, in the face of price-conscious competing options. Leadership will be pressed to carefully dissect the business models for services and activities that need to be eliminated, reduced, or made optional.

Several institutions are moving down this path, but we are not sure how many of these are using a tool like the Canvas to aid their work. For example, Georgia Tech uses online learning and MOOCs to unbundle and differentiate learning experiences. Georgia Tech is experimenting with low-cost, online masters degrees, MOOCs, and a variety of online offerings targeting undergraduate students. Their emerging strategy appears to be to create a variety of options for online experiences that will enable undergraduates in the future to personalize a baccalaureate experience that may involve only two or three years on campus and personalized combinations of services and experiences.

Scenario 4: Exploring genuinely new learning delivery models. There is ample opportunity across the industry for innovation in learning experiences and outcomes. An important type of new revenue stream involves new learning delivery models that enable innovations in the learning experience, outcomes, and cost. Several areas of learning are ripe for innovation in delivery models to include online learning, competency based learning, enhanced learning with artificial intelligent systems, and granular “knowledge nuggets”.

The Canvas can be a helpful tool for unpacking and understanding the various value propositions, exploring new markets for learners and customers, and clarifying the cost structures and resources required to deliver these innovations. 1) The first generation of online learning demonstrated that well-crafted online learning could be as effective as face-to-face and offered an enhanced value proposition of convenience for many place-bound and working learners. Over time, online providers enhanced other aspects of the business model for online learning: improved remedial learning, embedding analytics to measure student progress and success, creating lower cost learning options, and unbundling learning from other student life experiences that were not needed by adult learners. The Canvas can be used by institutional leaders to understand how to continue to upgrade business models for online learning to optimize the outcomes for the learners and the financial sustainability outcomes for the institution.

Genuinely new value propositions offered by competency-based learning, adaptive, personalized learning, and other innovations yet to be discovered are still unclear for many providers. The emerging generation of learning delivery promises to change business models even more, on both the cost side and the revenue side of the business models. 2) The Canvas can be used to explore these more fully. Challenges remain such as competence-based learning and personalized learning have significant upfront costs associated with developing new platforms and capacities. Moreover, the new learning experiences may enable fresh approaches to charging for learning in different configurations. A new cadre of vendor and solution provider partners are working with institutions to introduce these practices and business models in an affordable manner. For example, the Western Governors University has reinvented the business model for competency-based learning leading to baccalaureate degrees. It has unbundled teaching, assessment, and certification; eliminated face-to-face teaching faculty; created the role of faculty mentors to shepherd student progress; and enabled student to finish a baccalaureate degree on an accelerated schedule and at reduced cost.

Technology leaders are making dramatic advances in intelligent systems and applying them to learning applications and several large institutions are exploring moving education beyond the course and credit hour. 3) These two trends combine to form an opportunity to use the Canvas to depict and innovation fresh models of learning. For example, IBM has invested heavily in developing Watson Education’s capacity to support personalized, adaptive learning and to make these capabilities available to institutions, corporations, and other learning-driven enterprises. Watson provides cognitive solutions that understand, reason, and help educators gain insights into the learning styles, preferences, and aptitudes of every individual learner. Moreover, a number of institutions are working to create highly granular “knowledge nuggets” that tell practicing professionals “what’s new” and “what’s coming” in their field of practice. These know-how-based services will require a new and emergent business model based on new approaches for paying for actual consumption of knowledge nuggets from an intelligent system.

What is Business Model Innovation?

What is Business Model Innovation?

Business models are designs for running a business and include details regarding operations, generating revenue, defining customers and markets, products and services, and financial management. Like any kind of model, the map is not the territory, however business models are fair depictions using narratives and images to best represent the components of a business and how they interact. Innovation has three components: 1) creating something new or using something in a novel way, 2) putting the idea into practice, and 3) generating value through the implementation. Combining these ideas, business model innovation then entails generating new business models and taking action to implement them in such a way that value is created for the institution, constituents, stakeholders, customers, etc.

We can innovate business models in many ways. MBA and corporate training programs all offer suggestions and practices for creating business models and there are good resource materials for those readers looking for deep dives or comparative analyses of different approaches. Here, we are going to focus on the Business Model Canvas developed by Alex Osterwalder, Yves Pigneur, along with a host of collaborators. The process of innovation allows for the exploration of how an organization creates, delivers, and captures value. It also helps organizations explore alternatives, challenge assumptions, compare and set new strategies, and build shared vision and language.

Introducing the Business Model Canvas. The canvas is composed of 9 building blocks which we will only briefly explain here (for a more robust explanation, please read Business Model Generation by Osterwalder and Pigneur). They have kindly and wisely made their work available under the Creative Commons Attribution-Share Alike 3.0 Unported License. You can view a copy of this license or learn more about this way of sharing knowledge at http://creativecommons.org or directly to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

Here are the 9 building blocks or elements of the canvas in general organizational terms. We will later provide a somewhat revised canvas more appropriate for higher education.

We found this nice graphic online at https://handbook.globalservicejam.org.

1. Customer Segments: an organization serves one or several customer segments. This building block defines the different groups of people or organizations an organization hopes to reach and serve. These segments should be separated out if they have different needs, have their own channel, require different kinds of relationships, or have substantially different characteristics.
   
2. Value Propositions: organizations seek to solve customer problems and satisfy customer needs with value propositions. They represent the reason that customers choose one organization over  competitors. These propositions articulate the value delivered to the customer. They may describe the customer’s problems that are being solved and which needs are being satisfied. Some value propositions may be differentiated to target several distinct customer segments.

3. Channels: value propositions are delivered to customers through channels that cover communication, distribution, and sales. This building block describes the channel in detail including all of the touch points for each customer segment. Channels help raise awareness about products and services, help customers understand the value proposition, allow customers to purchase products and services, and provide customer support.
   
4. Customer Relationships: relationships are established and maintained with each customer segment. There are a wide variety of ways organizations can maintain relationships with customer segments, from close personal relationships to more automated contacts and interactions. These are shaped by customer expectations and vary depending on organizational capacities and how the relationships can be integrated with the rest of the business model.
   
5. Revenue Streams: value propositions successfully embraced by customers generate revenue streams.  These revenue streams represent the cash an organization generates from each customer segment in exchange for products and services. Transaction revenues result from one-time payments while recurring revenues result from ongoing payments.
   
6. Key Resources: key resources are the assets required to offer and deliver elements 1-5. These resources are fundamental to making the business model work. They can include physical, financial, intellectual, human, or other resources. They may be owned by the organization, leased as needed, or acquired from key partners.
   
7. Key Activities: these are the critical functions necessary to offer and deliver the elements 1-5. These activities are the most important things an organization must do to make the business model work. They are the actions an organization takes to be successful.  They can fall into categories of production or problem solving; can occur in platforms or networks, or may be expressed in other kinds of ways.
   
8. Key Partnerships: partners can be engaged to provide building blocks 6 and 7; some activities are outsourced and some resources are acquired outside the organization. Partnerships are increasingly important in organizations. They can be created to optimize a business model, reduce risk, acquire resources, or add value to any part of the business model. Osterwalder identifies four kinds of partnerships: strategic alliances with non-competitors; cooperative partnerships between competitors; joint ventures to develop new business; or buyer-supplier relationships to assure continuing supplies.
   
9. Cost Structure: the business model elements combine to generate the cost structure. This building block describes the most important costs to operate a business model. Costs should be calculated after defining the Key Resources, Key Activities, and Key Partnership blocks.

The Value Proposition is the central element in the Business Model Canvas. The left side blocks (Partners,  Resources, Activities, and Costs) focus on cost and efficiency. The right side elements (Customers, Relationships, Channels and Revenue) focus on revenue and value generation.

Applications in strategy crafting. How does one use the canvas? There are a number of potent applications for the business model canvas.

• Business model depiction: all activities that generate revenue and incur costs are business models, whether there are articulated as such or not. If an organization’s activity is creating value in exchange for goods or services, the underlying mechanisms of a business model are at play. An initial application of the canvas can be to make the invisible visible by creating a graphical version of an existing business model. This may be no small task, but when completed there can be great insight gained about the value proposition at work or any of the other building blocks.
  
• Business model evaluation: a more advanced kind of application once a business model has been articulated and visualized can be to evaluate the model as a whole or any of the components – how they work and interact. Business models that originate and develop organically can be suboptimized and a systematic approach to evaluating the models can uncover any number of potential variations or improvements.
  
• Business model evolution: when a business model no longer works or reaches limits in how effective it is, the canvas can be used to help evolve the model and make changes. Models may have developed poorly or lose effectiveness in turbulent environments. By seeking to evolve a business, one can improve the fit and function of the building blocks and realign the model with changing environment conditions. Organizations may also have multiple business models operating at one time and business model evolution can include balancing how the models together create value, consume resources, and generate revenue.
  

Business model design and innovation: a fourth application of the business model canvas it the innovation of completely new business models using various design principles like customer insights, ideation, visual thinking, prototyping, storytelling, and scenarios. This kind of innovation has three key steps, 1) creating an entirely new business model or using an existing business in a new application or industry, 2) putting the business into practice by enlivening both the cost and revenue sides, and 3) generating a value proposition for one more customer segments through the implementation.