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Lean Canvas (Business Model)

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lean business model canvas
As an alternative to the Business Model Canvas, the Lean Canvas Template helps you develop an initial business idea. And, it’s easy to use as a visual tool for teams and single entrepreneurs. You can even build several Lean Models as well as map existing businesses in your space. The lean canvas is a new and efficient approach to developing a single page business plan that helps you to deconstruct your business idea into key assumptions and analyze it. Use it as you develop and test your ideas in the Lean process and then modify and re-evaluate the model.

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Description

The Lean Business Model Canvas is a variation of the original “business model canvas” devised by Alexander Osterwalder (thanks to its Creative Commons BY-SA license).

Extremely simple in its design, the Business Model Canvas empowers entrepreneurs to create, visualize and test business models without wasting capital or overcomplicating their approach. Today, it’s used by startups to break new ground, as well as massive companies like GE, P&G and 3M to explore new models and keep up with the competition. It’s also the core of the book Business Model Generation (co-authored by Osterwalder and Pigneur), which has sold over a million copies in 30 languages.

THE ORIGINAL BUSINESS MODEL CANVAS

It’s said that no business plan survives its first contact with customers
– Osterwalder.

The Business Model Canvas was partially born out of this need to create more flexible plans that could be tested and changed quickly to meet customer needs. Most importantly, it standardizes the elements of business models and turns them into modules that predictably interact with and influence one another.

The Business Model Canvas is constructed out of nine building blocks — nine blocks that equip you to think of thousands of possibilities and alternatives (and find the best ones):

  • Customer segments (your audiences).
  • Value propositions (the product or service you provide).
  • Channels to reach customers (distribution, stores).
  • The type of relationships you want to establish with your customers.
  • Revenue streams you generate the key resources you have to work with (capital, talent).
  • The key activities you can use to create value (marketing, engineering).
  • Your key partnerships (who can help you leverage your model).
  • The cost structure of the business model (what you must invest).

These nine elements are arranged to show how they impact each other.

THE LEAN BUSINESS MODEL CANVAS

There are several variations, but the Lean Canvas has gained traction thanks to the lean innovation movement.  Each tool adopts takes a different approach to the original by Osterwalder based on the to the goal or the development stage of the business idea.

One of the most popular of these alternative versions is the “lean canvas” created by Ash Maurya. I’m going to walk you through how it differs from the original and show you when and how to use it.

Lean Canvas vs Business Model Canvas

The difference between both tools lies in the alteration of the four units:

  • Key Partners (Business Model Canvas) vs. Problem (Lean Canvas)
  • Key Activities (Business Model Canvas) vs. Solution (Lean Canvas)
  • Key Resources (Business Model Canvas) vs. Key Metrics (Lean Canvas)
  • Customer Relationships (Business Model Canvas) vs. Unfair Advantage (Lean Canvas)

Who Should Use The Lean Canvas?

The Lean Canvas is designed specifically for startups; it focuses on addressing how your solution solves customer problems and what unique value you offer compared to others in the market or other possible solutions. It fundamentally challenges you to move away from the idea that you love! and start to validate it.

On the other hand, the business model canvas was created to solve the issue of business plans being uninterruptedly outdated as soon as they are in the initial stages of development. The business model is based on assessing and strategically analysing an existing business – both internally and competitors.

For that reason, it can be said that it was developed for existing companies, large or small, which already have established their presence in the market and got traction with customers.

However, startups don’t have a customer base and often no products or prototypes. So when they try and use the business model canvas, they aren’t able to fill all the boxes and the canvas remained incomplete.

The Lean Canvas includes also helps deal with uncertainty and risk. All startups are limited by time and resources. They urgently need to reduce risk and prove that their idea fits the market and customers will pay money for it. Of course, the hope is that then it can do this profitably.

The Lean Canvas also reflects the principles of the “Lean Startup” approach build-measure-learn.

In other words, an iterative and rapid cycle of development, testing and validating each hypothesis upon which your idea is based.

CanvasBusiness Model CanvasLean Canvas
Suitable forExisting BusinessStartups
For use bySenior Management, Operations, MarketingEntrepreneurs, Founders, Investors
BasisValue proposition, incremental and rdical innovationIdea testing, Evaluation of assumptions, Customers Focus, Value Proposition
ApplicationMixed teams to develop common strategic understanding of existing business model and identify opportunities.Focus on problem-solution market-fit for new entrants.
   
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Sections

Problem

The problem box in Lean Canvas was created to list one to three high priority problems that need solving. The wrong products are built when several businesses fail to apply good effort, time and fiscal resources. It is thus crucial in understanding the problem first.

Customer Segments

It has been observed that if the target is to attract more than one range of customers, for example, engineers and accountants, it is better to create a canvas for each one. The Problem box and CS can be seen as linked with each other intrinsically, i.e. You can’t think of any problems without a Customer Segment, and vice versa.

Unique Value Proposition

Unique Value Proposition is situated in the middle of the Lean Canvas. A promise of value to be delivered to the customers is called a value proposition. This should be the main reason a prospective buyer has to buy from you. Thinking and understanding why your product is dissimilar and why should your Customer Segments want to buy or invest in your company and your product is the best way to understand Unique Value Proposition.

Solution

A cordial solution has to be found once the problem has been recognized. This is the reason why the Minimum Viable Product concept within a Solution box was introduced in the Lean Canvas. The jackpot has been finding the solution to the problem. What is needed to be done is ‘Get Out The Building’ — a phrase created by the godfather of Lean Startup, Steve Blanks. What Blanks meant is that the solution cannot be found in the office building but out there in the streets. The best way to understand the phrase is by interviewing your CS, asking them questions and taking those learning into account.

Key Metrics

It is better for a Startup to pivot on one metric and develop on it.  The metrics should include the range of services or products you like to provide. Since the wrong one could be disastrous to the startup, it is therefore critical that the right metric is identified. Irrespective of industry or size, every business will have some key metrics that are used to monitor performance.

Channels

Channels are the best way for you to reach out to your Customer Segment. It is essential to focus on learning about the channels than to not to think about scale in the initial stages. Channels, which are free as well as paid, can be used to reach your customer directly. Some examples of Channels are social, trade shows, email, CPC ads, radio & TV, blogs, webinars, articles etc.

Cost Structure

The entire variable cost, as well as the fixed costs, is to be listed here. Questions regarding Cost Structure are to be thought here. How much will it cost to build a page? What is the amount required to run your company in a month? What will be the cost to interview your customer segment? How much do market research papers cost? etc. A rough break-even point can then be calculated from these costs and potential revenue streams.

Revenue Streams

The model type decides how you rate your business. It is common for startups to lower their cost or even offer it for free in the beginning to gain attraction. The key is it actually delays or even avoid getting checked for validity. It has been seen that getting people to sign up for something for free is a lot different than asking them to pay as they are more interested in free products.

Unfair Advantage

Ash Maurya said, “You may initially have to leave this box blank but the reason it’s here is to have you really think about how you can both make yourself different and make your difference matter”. A startup should always have the capability to recognize whether or not it has an unfair advantage over others. Unfair advantage can come in different forms like getting expert endorsements, a dream team, insider information, existing customers etc.

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lean business model canvas

canvas model strengths

Strengths

  • Focus on the problem-solution fit
  • Includes measuring the success
  • Reflects a lean startup mindset: Build-measure-learn
  • Unfair advantage helps to differentiate in the market
  • Easy to understand the elements and the structure
canvas model weaknesses

Weaknesses

  • Partners and value exchange between different actors is not visible
  • Defining the unfair advantage can set barriers in a to early stage of the development of the idea
  • No team or cultural aspects (only within resources)
  • Missing building blocks for special usage, such as sustainable business models
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How To Use

How to use the Lean Plan Template:

Just download the template from this page and either fill out the PDF or print it out. If you print it, use a pen and pencil or Post-It notes to add your ideas. Create multiple versions as you experiment with different business strategies, marketing and sales plans, and business models.

Tips To Help You Get The Best Results

#Tip 1.  Start with a blank canvas and then put up one Post-It Note at a time, walking through each and how they lead to one another. This is important to do even if you’re by yourself.

#Tip 2. Sketch companies that have already been successful – this gives you an idea of how to examine the different components and get used to using the Lean Canvas.

#Tip 3. Set a time limit to get it done. One of the secrets to creativity is being constrained and having to work with limited resources, that includes time. The idea here is to spend around 30 minutes to get that idea down on to paper. Some people prefer to project the PDF onto a wall and use sticky notes to add their ideas into the boxes.

#Tip 4. Sketch several canvases.  A useful way to think about your business model is as an ongoing draft, never a finished product. So, start with a first draft of your Lean Canvas, as shaky as it will. Then, after some market feedback, update it to a second draft and so on. Keeping a different version of the canvas for each major update (so, not overwriting it) will allow you to clearly see progress or pivots (changes in direction for one or more components of your business model) and learn.

 

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