Get students and entrepreneurs to build sustainable business models

How can you, as a teacher, integrate the use of the Circular Canvas within your classes?

When setting up a new business, the multitude of issues you’ll be dealing with can make it easy to lose sight of the bigger picture. Filling in the Circular Canvas will not only help you to stay focused but also to visualize the impact that different adjustments may have on your business plan. 

Of course, there is no “one-way” road to becoming a successful entrepreneur, but here’s our take on a step-by-step approach using the Circular Canvas to build a business.

A. Defining the problem

Identifying the issue you want to address is one of the most important parts of your entrepreneurial journey. If you do not fully understand what you are trying to solve, then there is a high likelihood your business model will not successfully address a demand. Every entrepreneurial endeavor aims to tackle a specific socio-environmental-economic issue – once you’ve found the one you want to focus on, formulate a clear mission statement and fill in the first box.

B. Shaping your core activities and stakeholders

The mission statement you defined in the first part will help you shape your key activities and identify all the possible partners which may be involved in those processes.   

Fill in the Activities and Partners boxes and consider the external impact, be it positive or negative, your activities can have on territories and the surrounding living systems.

C. Identifying your target market

The market you are trying to approach needs to be large enough for your product or service to be profitable, while at the same time show specific characteristics that will make it an ideal target. The choice of the market will be strongly influenced by the resources available, the size and growth of the market itself, as well as the draft of product/service you had in mind. To make you adopt a user-centric approach in the design of your solution, create an end-user profile and identify a persona for your niche market. What are the sociodemographic, psychographic and behavioral characteristics of the customer you are trying to target?

Once you are done with your brainstorming, fill in the Users & Contexts box and consider the impact targeting such customer segments will have on the revenue to be generated. Calculating your total addressable market will help you get a clearer picture of the size and potential growth of your market. 

D. Designing your end product/service

To understand how each part of the Circular Canvas will interact with the product or service you are trying to introduce, detail its complete life-cycle and provide an overview of the high level product specifications (design, functionality, energy consumption…). This will help you fill in the following sections.

  • Think about the resources you will use – How and who will you choose to join you in your entrepreneurial venture? Are you thinking of hiring top-executives from large companies or new graduates? Will you power your production facility with coal energy or renewable sources? – Natural, Technical, Energy Resources
  • Think about the logistics involved – How far is your end customer from your end product/service? How will you leverage your social media communication and marketing to address your targeted market? – Distribution
  • You cannot design your product without first thinking what will happen with it once customers can no longer use it. Get creative in terms of the possible future uses. Think of the mantra Recycle, Reuse, Repurpose. – Next Use

Once all those boxes have been filled out, analyze how your costs will be impacted and the impacts your decisions will have on your surrounding ecosystem. 

E. Defining your value proposition and how it relates to your customers

Make sure you have a clear, distinctive value proposition which you can also quantify. If you target different market segments, think about how your product or service helps address the needs of each of your specific targets. Fill in the value proposition box and consider how it will impact society and the environment. 

Once you have defined your value proposition, return to your customers and identify their Decision-Making Unit (Advocate, End User, Primary Economic Buyer), meaning the actors who are likely to influence whether or not your product might be bought. You should make a note of it in the Users & Contexts box, and be mindful of the fact that your end-user may not be your Primary Economic Buyer. While your value proposition speaks to the End User, the other parties to the DMU will also need to be convinced for you to sell your product/service. 

F. Making your business profitable in the long-term

There is no business without profitability. Once you have filled-in all the above categories, take a moment to look at your Canvas and identify a pricing strategy that best fits. 

To do so, take a look at how the elements you’ve established so far fit together in a Cost/Revenue analysis. You are almost there! Now take a moment to calculate a couple of profitability metrics, like the Lifetime Value (LTV) of your customers and the Cost of Customer Acquisition (COCA). Those metrics will help you talk to potential investors. 

If you want your business to be profitable in the long-term, it is instrumental for you to assess both the positive and negative consequences of your business so far. Can you find ways to increase the former and minimize the latter? 

Design and test a base version of your prototype. Take note of any adjustments you make on the Circular Canvas and go back to it as often as needed. 

Always keep in mind throughout your process that all the changes you make on the Canvas will likely affect the costs/revenues and negative/positive impact sections!

Adopting the Circular Canvas as its strategic analysis tool can help shift society’s mindset from “Lets compensate for our negative environmental and social impacts” to “Lets fundamentally transform the way we do business”.

Benefits

  • Encourage entrepreneurs to think about all aspects relevant for holistic business model design
  • Generate sustainable and innovative business models and products 
  • Capturing new business opportunities by integrating systemic approach
  • Be able to clearly communicate your business idea to potential investors