Struggling with Business Plan? Use Lean Canvas
“Hit Refresh Your Business Plan.” Why I borrowed my blog caption from Satya Nadella’s latest book?
Everything has a reason. I have too ;)
A week ago, I was just brushing up my eyes through the LinkedIn feed, when my eyes got stuck here — in this post. Nick was actually asking the fellow Lean Startup experts what tool he might use to track assumptions.
A conversation that kept me hooked into. With people throwing suggestions like the use of Trello, BMC, upperstory.io, and even Spreadsheet to track dozens of assumptions. The pivotal point was when Ash Maurya, creator of lean canvas entered the session.
I was excited at the fact which he noted down. Here’s a screen captured.
He spoke about Lean Canvas, something not new to me, but I was unaware of the fancy name. (Seems like I’m a NOOB! :O)
With increasing popularity of the lean startups, we are seeing that the lean canvases have become hot topics. However, there is often a confusion about the real concept and utility of the tool.
When I started dreaming of a startup, the first thing I used to do was writing a fresh business plan every night. And in a few minutes, I used to put it in the Trash Bin and start writing a fresh one. However, now its been 6 years and I am driving Innofiedsuccessfully.
I never liked the idea of scribbling 100 pages. I wanted to build something and then sell it with a concrete execution. But nonetheless, I have to write dozens of pages called a “business plan” and I have been completely lazy. And I don’t think that I’m alone to have a grudge, right?
Only 30 percent of them had ever written a business plan and less than 2 percent enjoyed the process, says Ash Maurya.
Validating a market or setting up a targeted business model is essential and priceless. But how much money the company or project will do in 5 years and how many employees I will have — mentioning them beforehand is utter nonsense.
My experience and even the Angel Investors are aware of the fact that the wannabe- entrepreneurs exaggerate the numbers and KPIs when they share the business plans.
And that’s where I felt Dear Mr. Nadella is so right in his book “Hit Refresh.” People, organizations, and societies must transform and press the “hit refresh” button in the quest for new ideas and new energy. To replace conventional business plan and adopt lean canvas in this phase is thus important. So I borrowed the name of my blog from his book.
Curtain Raiser for Lean Canvas
Steve Blank says, “Business Plan: a document investors make you write, that they don’t read.”
And to add Eric Ries says, “Startups operate under conditions of extreme uncertainty.”
And just as Ash says that “Lean Canvas is a 1-page business model. Like the Business Model Canvas, the Lean Canvas uses a set of building blocks that help capture a snapshot of your business model story.”
Lean canvas replaces the traditional BP. A revolutionary tool that simple to understand and easy to execute. Yet many people suggest writing down a business plan before launching your business. Why do they say so?
Why Do People ask To Write A Business Plan, If It’s A Waste Of Time?
A business plan is actually dead. However, like the cockroaches refuse to die — The companies which still require a business plan is actually into a habit, and they cannot give it up.
A business plan is a simple instrument that is in use for ages. But with changing business needs a plan cannot be a static one. They can start with a business plan, but you need to introduce changes to me the current needs.
Like a BP ask three major questions -
- “Where is your business now?”
- “Where do you want to be?”
- “How will you get there?”
Business plans are written for a period of 2 to 5 years and need a regular review on a regular basis. Once the company goals are identified and agreed by the stakeholders, the remainder of the BP can be summarized to answer the final question, “How to Get There?”
After you invested months and thousands of dollars in the BP — what to do with it?
Put it on the top shelf and never refer to it again.
But damn! A written plan is of great internal use. Every new team member should be familiar with it and should use it to plan the strategy meetings and amend the circumstantial changes.
However, who will read that 40 pages BP and memorize the points? None in my team would have shown interest, rather will have gone into a CLINOMANIAC Mode!
This leads to the rise of lean startups who do not need huge capitals to start. They want a compact way to share their business plan for quick actions.
Does That Mean You Will Start a Business Without a Plan?
Some startup owner thus shuns BP and goes ahead with “just-do-it” approach. But guys trying to build a business with without a BP is like building without a blueprint. Yet a house is less complex and less uncertain compared to a business. So it is important to have a PLANNING at the forefront if not a PLAN.
Again for a few product launch a BP rocks, but say if you are the Marketing Manager of a brand like Burger King and want to launch a new range of Burgers. You have to follow the previously used procedures and create many billboards to attract a pre-calculated number of customers.
But what will happen if they want to launch a mobile app? Which previous data can help them launch one with all sorts of new information about the products?
So you see, a Business Plan fails to work here, what you needed is a quick business planning.
We’re now a new breed of startups who like to use new business planning tools that can support this new reality and meet the needs of both startup owners and investors. And thus we like to use Lean Canvas. Let us see how it works.
Understanding Lean Canvas
We at Innofied, have created a version of the Lean Canvas that will help to understand how business can intelligently map the core connections between different parts of the business. Here’s a quick explainer of all the blocks in the Lean Canvas block:
- PROBLEM: The customer segment you are thinking to work upon have a set of problems which you need to resolve. In this box try to list three high priority problems.
- CUSTOMER SEGMENTS: Problem and CS are connected and without CS is mind you can’t think of Problems. (How to Win More Customer Using Lean Strategy?)
- UNIQUE VALUE PROPOSITION: This is a promise of value to deliver. This is a reason for which a prospect will buy the solution from you. (Here are some useful value proposition ideas)
- SOLUTION: Finding a solution to the problem will never be an issue. Though you would not get it in the first stroke, what you need to do is “get out of the building” as says godfather of Lean Startups, Steve Blank. Interview your customer segments, keep on asking them questions and validate learning through Build-Measure-LearnCycle.
- CHANNELS: Channels are ways for you to reach customer segments. In the initial stage, don’t think about scale, simply focus on learning. This will give enough access to your CS through channels like email, social media, PPC ads, blogs, trade shows, radio & TV, webinars etc.
- REVENUE STREAMS: How will you price your business should be mentioned in this segment. Though startups like to offer something free to gain traction, this can pose problems. But getting people to sign for FREE stuff is a lot easy than asking them to pay. Use this simple price strategy to rock your LEAN startup.
- COST STRUCTURE: List all the operational costs of taking the business to a target market. Costs like total monthly expenditure to interview your CS, market research paper costs etc. Sum up all these costs to calculate a rough break.
- KEY METRICS: Every business requires some key metrics to monitor their performance. And for this, you need the help of a good model like Dave McClure’s ARRRR Pirate Metrics.
- UNFAIR ADVANTAGE: One of the difficult block to answer. This unfair advantage can be inside information, a dream team or expert endorsements. So rather thinking about commitment and passion as an unfair advantage, think about that no one else can buy.
Why Should Startups Opt for Lean Canvas?
Well, there might be a number of reason from the Lean Experts just like the conversation Nick had. But if you ask me, I will suggest startups in their early launch days will found lean Canvas profoundly useful and strategic to rope their business.
- Lean Canvas is built around a Customer-Problem Solution — This paradigm makes it startupreneur focused. Those business plan nitpicker might criticize the Lean Canvas, as they can feel it as highly product-oriented. And that’s what startups of today need. Less time to waste, so an idea capture tool is just too perfect for makers to engage.
- Solution box is kept intentionally small — Though there is a solution box in the LC model, you will find that it is intentionally kept too small. Because it wants to prove the notion that business model is the true product and not the solution.
- Lean Canvas is too easy to understand — It is simple and intuitive. Ash made the LC model undergo a good deal of usability testing with startups and finally tweaked the smallest details as well.
- Creating multiple models of plans is easy — In the early stages of a product development everything seems possible, and you find it difficult to capture all the possibilities in one plan. Thus, creating multiple models and dinting them against each other is something useful.
- A one-page documentation making it less boring for investors — This is a 1-page documentation and you simply cannot resist but read it. If you want faster feedback from peers or advisors — nothing could be better than Lean Canvas.
- Regularly update your planner at your convenience — A planner that allows you to update regularly is a great feature. LC allows you to capture the evolution of your business model story. Lean Canvas is highly iterative allows you to have search then execute approach unlike plan then execute approach of BP.
I think this is what Ash has even discussed in the conversation with Nick. If you are highly focused and want to launch something with the perfect backup plan, you need the Lean canvas on the table. And to growth hack your startup you can look up to this seamless advice from Sam Hurley.
Why I Give a Thumbs Up to Lean Canvas Over Old-School Business Plans?
After narrating this long story as big as a Business Plan, it’s time for me to wrap up.
I liked Lean Canvas model and have proposed many startup clients. Since investor will love to review the attractive LC for their one-page information. In less than a minute they were able to convey their mission to the investors.
More eyes you get to stay glued to the plan, more opportunities your startup gets and reach the right person who wants to invest in your business. After all, time is money and with this one-page business model, your business can offer problem-solving at one place. Moreover, as per the Harvard Business Review, 75 percent of the startups fail without a compact problem-solving tool.
What I liked the most about Lean Canvas is their methodology. It is so well-planned, allows more space for creativity and experimentation. The flexibility of the LC model as you can adjust it as per customer feedback.
The self-confidence a startup business owner can gain through Lean Canvas, make sure that the business does not fail. A quick response plan that can adjust and recover quickly.
Are you struggling with a business plan? It’s time to change.
Let me know what is your opinion — what do you love a Lean Canvas or a Traditional Business Plan or a Business Model Canvas in the comments below.