Moving Forward With A New Business Model Canvas

It would be an understatement to say Alexander Osterwalder’s Business Model Canvas (BMC) and Ash Maurya’s Lean Startup Canvas (LSC) did not have an impact in how businessfolks structure their thinking methods. Both frameworks allow entrepreneurs to think critically about new businesses, existing companies, brand new product, operations and the list goes on. Albeit the two have their shortcomings, they provide businesses systematic thinking needed to grow, adapt and succeed in their environment. The key difference between the two canvas is their user demographics. Business Model leans toward new and existing businesses whereas Lean Startup is for startups, hence the name. Although there are overlapping characterizations between startups and small businesses and multiple definitions of what constitutes a startup, there are minor tweaks distinguishing the two, but not exclusive to one another. Diving a bit further:

• Business Model was created for any new or existing business that does not need to provide a new solution or validated market to an established industry with an emphasis on relationships and obtainable needs. Think of a restaurant, laundromat, wood mill, web dev shops, and private investigation.
• Lean Startup was specifically aimed towards startups who are validating an unmet market, or disrupting an industry. Examples would be business software, an app for hailing a taxi, new beverage line, and on demand service in a dying field.

Now anyone could use either canvas for their business and will see some form of results, but one is slightly better suited for the job depending on the task at hand. Not saying you’re limited to only one, or could utilize both. Yet, due to their shortcomings in their blind spots, it leaves a few areas unchecked that could bring the company down. Although the BMC covers external relationships, such as partners and customers, it doesn’t get the user focused on one thing of why they are incorporated or how to continue that path whereas LSC creates a tunnel vision to conquer the problem startups are solving at the expense of ignoring external forces outside of their control, which may hinder or halt their entire product. Similar to athletes, companies should be able to keep a pulse on their abilities, objective and fans while knowing their competitors and other obstacles that could prevent them achieving their goal. Thus, the creation of Luong Biz Canvas (promise I will brainstorm a better name). Over the past few days, I tested it with several startups and first-time entrepreneurs to see if their way of thinking has altered by using this over the other two. Specifically, I wanted to validate if this framework force users to think along the box lines, both interior and exterior, easier to use and gives new perspective not seen previously. Let’s break it down piece by piece:

Problem

Jot down as many problems you want to solve, especially those revolving your passion or pain point. Don’t worry about overfilling the box as you will be reviewing those later.

Customer Segment

After selecting a promising problem, brainstorm the type of customers who share the same issue, and who they are exactly.

Value Proposition

The value proposition is not your actual product, but what you are offering to resolve the issue at hand. Unlike the service or product you will be offering, the unique proposition guides the team to think what the product will end up being. Example: “valet parking on demand” is the value proposition for those who want that particular service and the product could be an app. Maybe after a few months research, you discover these customers prefer phoning in rather than using an app. The original product would change yet the value proposition and customer segment stays the same.

Revenue and Cost

I don’t think I needed to explain each, so here they are. Think of the multiple ways you could make money and potential costs incurred while developing.

The first five boxes are the largest because they are the foundation of your startup. Not understanding these five points could collapse upon the boxes below it; think of a highway falling on top of the road beneath it. Originally used a house as the analogy in order to say a weak foundation would result in a collapsed dwelling; however, from a user experience standpoint, this makes more sense.

Product

Now it’s time to ponder how the solution will materialize. Start simple, then expand later on. This box could change depending on research conducted later in the product’s life.

Resources

Does SWOT analysis ring a bell? This section borrows quite a bit from that matrix as one should know thy limitations and available capabilities. Think internally of what you know, how much runway (money money) is in the bank, and gaps needing to be filled (giggity) for this idea to come fruition. Afterward, go back through the previous boxes and see if any items hold up due to your limitation. Can you solve all the items listed in Problem? Can you tackle each customer segment? If your answer is no at any point, then it’s time to narrow down to 1 or 2 in every box so that you’re focused on succeeding in specific areas rather than scattered.

Don’t half ass [something], go full ass — Ronald Swanson

Distributions

Pop-up shops, farmer’s market, social market, referrals, a section in Macy’s, and the list continues as to how you will get the product in front of customers. Sometimes social media can’t cover the entire distribution system, especially if your product needs to be dispensed with certain methods.

External Forces

Lending from Porter’s Five Forces, think about what outside forces are trying to kill your idea. Don’t underestimate this rectangle as it is the business and landscape who could dicate your survival. Any laws or regulations preventing you from disbursing the product, like alcohol laws varying state to state? How much knowledge does your market have on your product industry before marketing your own product, ie do fashionistas know what Virtual Reality is prior to selling products through VR? Is there a cartel in power preventing newcomers from entering, or oversaturated with 101+ direct competitors? Are indirect competitors satisfying the market’s need, like tracking customer history with Google Sheets instead of an accounting software? Giving thoughts to these variables will shed light on whether this startup is truly something you want to give your heart. Additionally, are you swimming in Blue, Red or Purple Ocean given the competition?

Wrapping Up

Skip around. Don’t be forced to scribble something just to have an answer. It shows where you lack knowledge and need to fill. See which box looks the weakest and that shows what areas you should direct time to figure out. After completing the canvas, it’s time to do market research in order to launch your startup. I would love to hear if this assists anyone in their thinking, so please tweet to @BrandonTLuong or email me at brandon@grindhub.co.