Business model canvas vs Lean canvas — Issue #8
Objectively, writing a business plan is not simple, actually being a very long, very complicated procedure.
That’s why startuppers have devised new ways to create a prospect that let them illustrate all their business model in a simpler way — especially at an early stage.
The Business Model Canvas is a summary on a page of what’s typically going to be written in a Business Plan and, although business owners are usually more familiar with an ordinary stand-alone Business Plan, the Business Model Canvas is nothing more than a condensed version of it, heading toward a clearer informative output.
The idea behind this model, proposed by Swiss economist Alexander Osterwalder in 2008, is to take the business idea and the vision and try to draw up a document that is helpful at facilitating communication with other people.
The Business Model Canvas is a template that synthesizes in a short page how well we are managing our own startup.
The model consists of nine parts: customers, distribution channels with which customers are reached; relationship that is established with them; unique value proposition; needed resources, activities to carry out; partners with whom deals are contended with.
As already stated, a startup makes sense if it produces a value for its customers and when it solves the identified problem; in summary, it works when solution that the customer wants and has the opportunity to buy is created.
This solution is sold through a channel, so understanding how to reach a client and what kind of relationship to build with is key — mostly thanks to features based on the business itself such building a business-to-consumer B2C service where our client is a private instead of a business-to-business B2B where we deal with other companies
The right-hand side of the Business Model Canvas is the market, that is, all the features useful to conclude the sale.
At the same time, to reach the market it is necessary to put in place a series of activities and resources to produce the product or service that we highlight on the left side of the model.
In the IT field, and especially in the web, the startuppers, especially when they are technical, tend to think that only create the product or service is the clockwork that will turn their sale wheel on.
Focus on technicalities, performance, and sometimes, shaping head on problems that do not exist, may be losing sight of the goal, which is to create value for customers.
Too often the way in which a product to sell is created, how it enters the market, how to shape it to really solve a problem bounces on creating value for customers because it focuses only on the product itself.
It is futile to strive to build a Ferrari, investing a lot of time and money, then finding no fuel to feed it.
Many other times, however, a solution that solves a problem is not what we face as we likely face a solution seeking a problem — that is, the entrepreneur has invented something but needs to understand who is interested in that something and which is the problem to risolve.
As it is logical to think, whenever it is about a startup — essentially an experiment moving in a state of uncertainty — all the elements that are at the core of the Business Model Canvas are to be discovered and changed over time.
The Business Model Canvas built in day one will not have to be static but will have to change over time the one moment of the experiments are done.
Following the above-mentioned Lean principles, it is necessary to build a series of functional work hypotheses and go for tests to verify their validity.
Only after verifying these assumptions we can start a planning phase and plan drafting thereafter, because otherwise there are no conditions, numbers, and basic metrics that allow scheduling — without it there is barely inventing.
It can be summarized that a startup should start its business and begin collecting data, design a business model accessible to all team members and stakeholders alike and finally use such template as the basis for writing down its business plan.
Another noteworthy work was published in 2010: the book Running Lean by Indian entrepreneur Ash Maurya.
According to the author, it was necessary to make further modifications to the Osterwalder Business Model Canvas to facilitate its use by startups and early-stage entrepreneurs, stating that it takes only twenty minutes to create one’s own business model following this methodology — the Lean Canvas method.
Beyond the time it takes to use one or the other model, Maurya has rightly stated that the focal point is not to focus on drawing up a perfect business plan that takes into account all possible variables — a bomb-proof test — but more on a starting path with an Initial Plan A leading to a working Plan N.
Although some sections have changed, the Lean Canvas model always has nine blocks — customers, problem, solution, UVP, revenue and costs, channels, metrics, and advantages over the competitors.
According to the author in the compilation of the model it is necessary to start from the two areas to the end, ie customers and the problem.
Focusing on the former areas, we need to make a detailed breakdown between customers (those who pay and who are configured as our Early Adopters) and users, (ones that have come in touch with the company but have not yet converted).
In the section dedicated to the problem it would be advisable to not write a summary of the problem to be solved but to identify the three main problems the solution is developing — in such case instead of joining together it will be necessary to subdivide.
For each of the three identified problems we should find a feature of the product or service that meets this problem, and we would include these three or more solutions in the specific area.
There is also the revenue area which includes the assigned price, whose definition must also take into account the alternatives on the market in case of competitors.
At the center the UVP, whose definition has already been cited earlier; the channels, those paths that need to be built to reach and acquire our customers; the costs, that need to be estimated through financial statements so that they remain sustainable; metrics, them already analyzed above.
In this model, unlike the other, considerable importance is taken to the part dedicated to the benefits of our product or service, in this section it must be indicated what can not be easily purchased or copied by our competitors.
It is common thought that it one of the greatest advantages for a startup is to be the first on a market or a market niche.
Often, in the course of history, many companies have emerged that, while not being the first, knew how to learn from predecessors to improve and become more efficient.
There are many examples in history, such as Ford, Toyota, Microsoft, Google or Facebook, although they were not the first companies operating in the industry, they have been able to innovate and conquer a huge slice of the market — in some of the aforementioned cases, also become the market itself.
If you want to continue this trip, stay tuned :)
Photos by Maarten van den Heuvel, Samuel Zeller, Lou Levit.
