Three. Business model canvas.

Businesses around the world use the business model canvas to understand, change and improve their operations.

Regardless of the size or industry sector of your business, it provides a 1 page overview of how your business works.

To better understand this tool, let's look at how it works with a business example we can all understand.

This is Penny, and her business is a lemonade stand.

Penny knows that being open to change will build the resilience of her business, whether she's proactively changing or reacting to something unexpected.

Listening to her team and talking with them will help her develop better ideas on adapting her business.

Prepare your business for change by using the business model canvas.

This tool helps you capture how your business currently works, what changes might be needed, how these changes might impact your business model.

A business model is simply a plan for how your business makes money and how all the components of your business work together.

Let's understand Penny's current business model using the business model canvas.

The business model canvas is essentially a 1 page business plan. It's made up of 9 areas that describe who your customers are, how you provide products or services and how you create revenue.

Let's take a closer look at Penny's business.

First up, customer segments, which is a list of all the people or groups your business aims to reach and serve. In this case, neighbours, passers-by and friends.

The value proposition describes what value you provide to each of the customers you've identified. Penny's value proposition is refreshing lemonade.

Channels describe how customers access your products or services and how you deliver your value proposition. Penny sells to her customers using a booth or lemonade stand.

Customer relationship describes how your business establishes and maintains a lasting relationship with your customers. Penny plans to sell to passers by and personal contacts of her and her friends whom she's recruited to help her.

Revenue streams describe the way your business will make money. Penny's revenue stream is charging 1 dollar per cup of lemonade.

Key resources describe the most important assets you'll need to make your business work. Penny's got a lemon tree in the front yard, she's also got her dad's secret recipe. With a table and chairs, some cups and some friends, she's got the key resources she needs.

Key activities describe the most important things you must do to make your business model work. In other words, what do you do every day to run your business? Making lemonade is a key activity, so is operating the lemonade stand and putting up posters around the neighbourhood.

Key partners are the network of suppliers that make the business work. Key partners are other businesses that allow your business to do what it does without having to develop or own everything. For Penny, the sugar, ice and cups come from a supermarket.

Costs describe the underlying expenses to run your business, including the key resources, activities and partners. Penny gets free lemons from her tree, but will have to buy sugar, ice and cups, which is a cost. She will have to split her profits with her helpers.

Download and complete your business model canvas now. Consider each of the sections of the canvas and document how your business currently works.

Four. Understanding external change.

Whether you're planning a global business or a local start up, it's important to know there are things you can and can't control.

It can help to think of external factors as market trends. While trends themselves are often out of your control, your ability to understand trends and how they could affect your business is not.

The challenge is to use trends to your advantage by learning to anticipate and quickly respond to them.

To understand the concept of external change, let's go back to our simple example of Penny's lemonade stand.

For Penny, winter is coming and the lemonade stand is not doing as well as it used to.

Some changes you make might fail, but some will succeed. It's your job to adjust and develop your business according to what's happening around you.

New ideas won't always work, so introduce changes on a small scale as quickly and as cost effectively as possible before you commit to larger, more expensive changes.

When it comes to understanding external change, use the context map canvas to help you and your team expand your thinking beyond your current products and services.

For Penny, the economic and environmental realities are clear. With winter coming, there's less foot traffic and customers prefer to stay indoors.

Looking at technology trends, we see that the demand for lemonade has shifted to buying online. Customers want the convenience of making their own lemonade at home.

Penny's lemon tree is also extremely low in fruit. Penny doesn't know whether the tree will be able to supply enough lemons in the future.

She needs to think about these external factors if she wants to continue selling lemonade.

The context map canvas will help you identify what's going on in the world and what's changing that will affect your business today and in the future.

It will help you understand the impact of external change both in opportunities and threats.

Download the tool and think about external factors that might affect your business. Discuss this with your team or friends or family who understand your business.

Five. Understanding internal change.

Regardless of the size of your business, whether you're a local business or even if you're setting yourself up for global expansion, understanding that there are changes you can make within your business is critical to your success.

Internal changes are decisions you make within your business, and these decisions are something you can control.

Penny has just completed her context map canvas, which has helped her identify changes happening in the world around her business.

She realises that her market has changed and that she needs to make some changes too.

Think about the context map canvas you've completed and how the shifts you identified could affect your business. Update these on your current business model canvas.

In Penny's case, there's been a run of bad weather and other reasons why less people can visit her stand. So she needs to make some internal changes to her business.

Penny adds online customers to her customer segments.

Because of this, she has to change her value proposition to selling lemonade syrup.

This has also meant her channel to customers has to change to an online store with home delivery.

She's also refocused her customer relationship efforts to a friendly online experience and trained her friends to provide excellent phone support.

With her lemon tree now very low in fruit, this has caused some risk to her key resources, she must investigate a more consistent supply of lemons.

Instead of table, chairs and cups, she'll need to investigate bottles and packaging options.

Her research and development team will also need to adapt her lemonade recipe to a lemonade syrup.

Her friends will need to be retrained to help package the syrup for post.

Under key partners, Penny has found a wholesaler for sugar and lemons, which reduces costs.

Under cost structures, Penny no longer needs posters and cups, but will need to pay for the online store and online ads to get her products seen. She must also allow for postage and packaging.

For revenue, the price per cup has been replaced with price per bottle and per dozen. She's also offering a lemonade club subscription where customers receive 2 bottles per month delivered without having to reorder, creating convenience for customers and also a more consistent revenue model for Penny.

Penny takes a look at how her changes are making an impact on her business. She notices her sales have increased, which means her profits are rising too.

Revisit your own business model canvas. Have a think about the 9 areas on your canvas with a fresh lens.

What internal changes might help shift your business into a higher gear?

How will changes to parts of your canvas affect the other parts?

Are there opportunities to improve your business or create more efficiency?