Business Model Canvas Guide: Duolingo Example

Have you ever wondered how your favorite company is structured?

Where do their cool ideas come from, how do they make money, and why do we love their products so much? All of this can be broken down using the Business Model Canvas tool. This "map" helps us understand how any business works, from a small startup to a giant corporation. Let's dive into how to use it and figure out how to create your very own business masterpiece!

What is the Business Model Canvas and Why Use It?

A business model is like a map that illustrates how a company creates value for its customers while generating revenue. It’s not just a collection of ideas but a carefully designed system that encompasses all aspects of a business, from product creation to sales.

An effective business model includes not only ways to generate income but also critical aspects such as identifying target customer segments, delivery channels, key partnerships, and other elements. It explains how a company can create and deliver value to its consumers.

Why do you need a business model?

Imagine you’re building a house. Without a clear plan, you risk wasting a lot of money and time, only to end up with something entirely different from what you wanted. A business model is the same kind of plan, but for your business. It helps you:

• See the big picture: Understand how all the parts of your business are interconnected, how they interact, and influence one another.
• Attract investments: When you have a clear plan for how you’ll generate revenue, investors are more likely to put their money into your project.
• Grow and develop: A business model helps you find new ideas for products and services, adapt to changes, and discover new markets and audiences.
• Explore new opportunities: It allows you to identify new revenue streams or optimize existing processes.

BMC is like a puzzle made up of nine pieces. Each piece answers one key question about your business. Let’s take a closer look at them:

• Who are your customers? Identify your target audience.
• What do you offer them? What value do you create for your customers?
• How do they learn about you? What channels do you use for promotion?
• How do you build relationships with customers? What kind of service do you provide?
• How do you make money? What are your revenue streams?
• What do you need to achieve this? What resources (financial, human, technological) are necessary?
• What do you do best? What key activities does your company perform?
• Who do you collaborate with? What partners support your business?
• What are your expenses? What costs are associated with your business?

The Process of working with the BMC consists of two stages:

1. Creating a business model: This is the process of structuring your business ideas and developing a detailed plan. It involves filling out the nine blocks, each answering a critical question about your business.
2. Validating the business model: This step assesses how viable and effective your model is. It helps identify weak points and determine what changes need to be made.

How to properly develop a Business Model Canvas

To complete a Business Model Canvas, you need to consider each of the nine blocks representing the key aspects of a business model. Together, we’ll go through each block, determine the questions you should ask yourself, and explore the data and tools that can assist in the analysis.

We’ll break down the process using the example of Duolingo, a popular language-learning platform offering an interactive format: gamified lessons, quizzes, and tasks. Duolingo employs a freemium model: the basic course is free, but users can pay for additional features such as offline access or an ad-free experience through a subscription.

1. Customer Segments

The key questions to address are: Who are our customers? Which customer segments are the most important for us? Which groups of consumers are willing to pay for our product or service?

Don’t make up data out of thin air. If you are just starting your business, form a hypothesis about WHO your customer is and conduct demographic research using surveys and focus groups.

If your company is already operational and you are refining your approach and vision, don’t overlook data from Google Analytics and similar tools. Segment your audience in CRM systems and rely on real data.

Let’s examine Duolingo’s business model, which focuses on three main customer segments:

• For language learners
• For students and educational institutions
• For professionals and business users

2. Value Propositions

In this block, it is essential to define what exactly we, as a business, are offering. The following questions can help us articulate the value proposition:

• What problems does our product solve?
• What benefits does it provide?
• How are we different from our competitors?

In the first approach and fill you can formulate your thoughts in a generalized way to build and test them as hypotheses. However, to make definitive decisions, conduct research and interviews with customers, as well as competitor analysis.

Some useful tools to consider include: SWOT analysis for comparing offerings and value proposition templates.

Depending on the segment, the company tailors its offerings as follows:

• For language learners: Duolingo offers convenient and engaging language learning, allowing users to choose their own pace and format. The platform creates a gamified experience, turning learning into an interactive journey with achievements and progress tracking, making the process enjoyable and motivating.
• For students and educational institutions: Duolingo provides digital support for traditional educational programs, offering schools and universities an interactive solution for mastering languages. The platform helps improve students’ language skills through a modern and accessible approach, enhancing learning outcomes.
• For professionals and business users: Duolingo offers tailored courses for professional growth, helping specialists acquire the language skills necessary for career success and effective interaction in an international environment.

3. Channels

In this block, we define how we will deliver our product to the end user/customer. Through which channels do they prefer to interact with us?

Analyze consumer preferences and test different channels to assess their effectiveness and select the most optimal approach. Perform analytics on acquisition channels (e.g., Google Ads, social media analytics tools).

For Duolingo, these are channels that help reach a new audience and attract them through a personalized approach. The channels include:

• Mobile App: The primary channel for accessing Duolingo is its mobile app, where users can learn languages by completing exercises and accessing interactive features.
• Web Platform: Duolingo also provides a web version accessible through browsers, enabling users to study on their computers and expanding the platform's usability.
• Partnership Programs: Duolingo collaborates with educational institutions, companies, and government organizations to offer specialized language programs for their students and employees.
• Social Media: Through social media channels like Facebook, Twitter, and Instagram, Duolingo engages with its community, shares updates, and motivates users to learn languages.
• Referral Program: Duolingo encourages users to invite friends and acquaintances to the platform, driving organic growth through recommendations and word-of-mouth.

4. Customer Relationships

It is crucial to define how you will build relationships with customers from the very beginning. In the future, this can serve as the foundation for a loyalty program, which will provide additional opportunities to boost the product's retention metrics.

Questions to help shape this point: How do we build relationships with our customers? What does the customer expect from interacting with us?How do we maintain loyalty?

Data and Tools:

• Surveys: NPS (Net Promoter Score) and CSAT (Customer Satisfaction Score) to evaluate customer satisfaction and analyze customer behavior.
• Tools: CRM systems, loyalty programs, chatbots for quick customer communication.

Duolingo has built customer relationships through:

• Self-service: Duolingo offers an intuitive platform where users can register, take courses, track their progress, and access materials independently, without the need to contact customer support.
• Community support: The company fosters an active community where users can engage on forums, participate in language clubs, and share experiences. This allows learners to interact, exchange knowledge, and find answers to their questions.
• Gamified learning process: Gamification elements such as leaderboards, badges, and achievements are implemented to maintain motivation and make learning enjoyable.
• Reminders and notifications: The platform uses push notifications and emails to remind users of their progress and encourage them to continue learning.
• Feedback collection: The company actively collects and incorporates feedback from its users, which allows it to improve courses, functionality and the overall user experience on the platform.

5. Revenue Streams

One of the final, yet crucial, blocks in the first part of the canvas. At this stage, you need to determine what will generate revenue. While specific amounts can be calculated later, once costs are clearer, it’s essential to provide a preliminary estimate and identify sources now.

Questions to consider: What are customers willing to pay for? How do they prefer to pay? Which monetization models are the most profitable?

To avoid making assumptions or guesses, analyze competitors’ pricing, explore monetization methods, and segment customers by income level.

If you’re already running a business, rely on data from platforms that analyze pricing and demand.

Duolingo’s revenue sources consist of:

• Super duolingo subscription
• Language certification tests
• Advertising partnerships
• Language solutions for businesses
• In-app purchases

6. Key Resources

What resources do we need to create and deliver our value proposition? What resources are crucial for distribution channels, customer relationships, and revenue streams? Go through each previously completed block and determine, "What do I need to make this happen?" These resources can be tangible or intangible (equipment, knowledge, etc.).

For an existing company, you can rely on data from ERP systems, resource tracking spreadsheets, or competency maps.

In the case of Duolingo, the following key resources were identified:

• Language сourses: Duolingo’s core asset is its extensive library of courses, offering users a wide selection of languages to learn. This library is continuously updated to maintain high quality.
• Technological platform: Duolingo's reliable infrastructure and strong software development capabilities allow it to offer training via web and mobile apps, providing stable and convenient access to educational content.
• User community: An active user community not only helps promote the platform but also adds value by supporting each other, providing feedback, and enhancing the learning process.
• Brand reputation: Duolingo’s strong brand and recognition as a leading language-learning platform play a critical role in attracting and retaining users.
• Data and analytics: Duolingo extensively uses data to analyze user behavior, fine-tune learning algorithms, and optimize courses, thereby improving the effectiveness of learning and enhancing the user experience.

7. Key Activities

At this stage, you need to determine what needs to be done to ensure everything works as planned. What actions and processes are necessary to create and deliver the value proposition? What key processes support your distribution channels and revenue streams?

Here, it’s worth considering developing a business process and creating a list of key operations. Tools such as BPMN, process diagrams, or task trackers (e.g., Jira, Asana) can be helpful.

For Duolingo, the key activities can be outlined at a high level as follows:

• Application development and maintenance
• Creation of interactive language courses
• Gamification and user motivation
• Expansion of language offerings
• Curation of user-generated content

8. Key Partners

Who are our partners and suppliers? What resources do we obtain from them? What partnerships help reduce risks and optimize costs?

In addition to analyzing partnership programs and contracts, it’s important to evaluate partnership risks. Involve legal experts to review contracts and conduct tenders to find the best terms.

For Duolingo, partners include:

• Experts and linguistics educators
• Translators
• Companies for sponsorship and advertising
• Collaboration with universities

9. Cost Structure

The final, but certainly not the least important point, is the cost structure. It is here, by comparing with point 5, "Revenue Streams," that we can determine how viable our idea is. In this block, we identify:

• What are the main expenses associated with our business model?
• Which resources and activities are the most costly?

Tools to use include unit economics and a key metrics tree. If you are just planning your startup, study articles on financial and accounting principles. This will provide insights into what calculations you should not overlook.

For Duolingo, the cost structure includes investments in all its key activities and resources, as well as its channels, specifically:

• Infrastructure and server maintenance
• Employee salaries
• Course creation and quality assurance
• Marketing and user acquisition
• Research and development expenses

What Have We Achieved?

Thus, at a high level, we arrive at the model presented below. However, it is important to remember that when filling out your own Business Model Canvas for your business or startup, avoid neglecting SWOT analysis, competitor analysis, and providing more accurate estimates for customers, costs, etc. This will help assess the viability of the model in the future.

To make your canvas completion as effective as possible, don’t invent data. Also, use the following:

• Customer focus: Conduct interviews with customers and test hypotheses to truly understand their needs. Avoid making assumptions based on personal opinion—rely on real data.
• Team collaboration: Involve representatives from all functional areas, from tech leads to legal experts, in the discussion.
• Iterative approach: Schedule regular reviews of the BMC (e.g., quarterly) to adapt the model to changing market conditions.

As a convenient template, you can use a ready-made framework from Miro.

But why this order of completion? 

Osterwalder envisioned that the model should first align with the desired business solution and address the questions, "Does the customer want this?" and "Can we create it?"

Secondly, we need to assess how feasible the business idea is by answering, "Can we implement it?" and "Can we deliver it to our customer?"

Finally, we must evaluate and demonstrate the economic viability of the business. "Can we make a profit?"

This is already part of the validation process. You need to assume that each part of your business model is a hypothesis that must be tested. The only way to validate your business model is to test your assumptions.

How do you choose the strongest model from several options?

There are various ways to analyze and evaluate a business model. A very common approach is to use SWOT analysis to understand the strengths, weaknesses, opportunities, and threats of your business.

However, in addition to using additional tools, testing hypotheses, and other methods, we also recommend answering the following questions as honestly as possible:

1. What is the switching cost to a competitor? Is it easy for a customer to switch to a competitor?
2. How much effort is required to generate recurring revenue? Or, after the first deal, is there a guarantee of subsequent transactions?
3. Have you accounted for all types of "inflows": income, revenue, and profit?
4. What is your cost structure, and is it better than your competitors'?
5. Is it possible for consumers or third parties to create value for your company for free?
6. How scalable is your business model?
7. Protection from competition: How easy is it to copy your business?

Answering these questions will help assess the potential of your business model. It is very likely that at this stage, you will identify the most promising option among those you have previously developed.

The Business Model Canvas is a practical tool that helps transform an abstract business idea into a real, functioning business. By completing each block of the model, you create a clear action plan that allows you to use resources efficiently and achieve your goals.

By regularly updating and analyzing your model, you can respond promptly to changes and discover new growth opportunities. Remember, a successful business is not a final destination but an ongoing process of finding new solutions and adapting to new conditions.