The Most Powerful Tool And Entrepreneur Must Have
A business idea can sound good. When we hear a cool feature or neat-sounding product we can quickly think that it will be the next big thing. Any seasoned entrepreneur knows there is another truth.
Making sense of your business model and how you make money can be very vague in the early days. Evaluating if a business idea is any good is full of guesses, assumptions, even bias. As a business matures, understanding the complexity and inner forces of what makes money can be equally as intangible.
Alexander Osterwalder came along and tackled the challenge of understanding your business model. He took it one step further and designed a tool that uses the practices of the lean startups.
Welcome to the Business Model Canvas. It now has a lean canvas version thanks to Ash Maurya. This lean version is the single best tool that helps entrepreneurs understand their business and how they make money. After using the tool hundreds of times, I wanted to share the essential lessons of the lean canvas.
Master the source of your business profits
The success of a business lies in understanding the big picture. Great entrepreneurs understand how customers, costs and offerings inter-relate. Entrepreneurs succeed when they push the right buttons that result in happier customers that spark healthy longterm profits.
The lean canvas helps by putting everything on a page in a straightforward fashion. No longer do we need a 20-page business plan of the industrial era.
The canvas provides a snapshot of the nine fundamental building blocks of business:
2. Customer Segments
3. Unique Value Proposition
6. Revenue Streams
7. Cost Structure
8. Key Metrics
9. Unfair Advantage
Stick to your strengths and outsmart competitors
By using the canvas and studying the blocks in isolation, you can see what your business does best.
As entrepreneurs, we are so mission-driven, and deep into the business, we can lose some perspective on the business model. Too many customer emails and meetings can lead to a myopic view or bias.
By studying and discussing the canvas, you will start to master your business model and economic value engine. One of the biggest things you can learn from the tool is where the strengths lie within the business. Do you have a strong value proposition or an efficient cost structure?
If you conduct experiments and tests to validate your canvas, you might reveal some significant dependencies or assumptions. It's always better to know early on rather than discover at the 11th hour that your held hostage by a supplier or partner dependency. Likewise, you may apply the canvas to your competitors and identify new opportunities to differentiate.
Avoid Classic Startup Mistakes by Solving Something Important
Making something that nobody wants is the single biggest entrepreneurial mistake. If you use the lean canvas and test the assumptions within it, you'll avoid many errors.
The value proposition is my favourite part. There's even a canvas just for the value proposition that's all about ensuring you are serving your customer and solving their pains and creating gains for them at the same time.
The lean canvas is a useful tool. With rigorous testing and discussion of the assumptions, it becomes excellent. It can provide clear insight to help anyone building a product avoid the classic pitfalls and get heading in the right direction. A place where they can profitably solve problems for their customers.