1. Business Model Theory
2. Business Model Canvas inception
3. Lean Canvas Overview

Business Model describes the way company creates, delivers and captures value (Osterwalder & Pigneur, 2010).

What are your customers willing to pay for and how? Business Model describes the rationale of how company creates, delivers and captures value. When moving your idea from merely thoughts to business opportunity you need to consider sustainability of your business. How can you make enough money to make the business operational in the long term? In business model you think about the important elements that ensure the delivery of your service or product. Business Model is key part of your business plan.

Alex Osterwalder introduced simple tool for business model capturing and business model brainstorming or innovation. Entering the market with innovative business model can be a major source of competitive advantage. For example, Uber that uses online application to cut intermediaries and connects drivers and riders directly. Traditional business plans are long documents and it usually takes few months to create a feasible business plan. Alex Osterwalder proposed simple tool that captures the important elements of Business Model on one A4 page. It is a predefined blueprint where you fill information. You shortly describe and sketch key elements of your idea or established business. This method is very fast, you can sketch a rough model in 20 minutes. This approach to business model capturing and visualisation will help your structure your thoughts. You can see the logic and workflow of your opportunity or business on one page. Business Model Canvas is a perfect tool for sharing your thoughts with your team, partners and investors. It will help you focus conversation on what really matters. You can learn how to fill the Business Model Canvas from a video on this web page https://strategyzer.com/canvas/business-model-canvas

Source: www.strategyzer.com

Based on the principles of Business Model Canvas Ash Maurya proposed the Lean Canvas. Inspired by a popular start-up development method Lean Canvas is based around Problem – Solution fit. Ash Maurya exchanged four fields of the original Business Canvas –with what he believes – better reflects the needs of new companies and the lean start-up approach. According to lean start-up the biggest waste is creating product that nobody wants. It is an investment of time and money that never comes back. Thinking about the business model and filling out the lean canvas, will help you identify potential weaknesses of the business opportunity.

The Lean Canvas is a A4 template that you fill out in predefined order. It resembles the Business Model Canvas and you use it in a similar way. The difference is in higher focus on customers. The Lean Canvas starts with a problem(s) of potential customers. You identify what is causing them pain or discomfort in their life. You develop the business model based on the solutions – products and services – that you plan to offer based on the problems. This approach should lower the failure rate of your start-up. Founders sometimes focus too much on their product or service and forget about the customer and their needs. Customer’s decisions to purchase are key for your business success.

In addition to the elements that the Business Model Canvas suggests, the Lean Canvas also considers problem, solution, key metrics and unfair advantage. They replace key partners, key activities, key resources and customer relationships.

Think about the problems of potential customers. If you help someone solve a pressing problem, he will probably pay for this solution. The Problem box is one of the biggest on The Lean Canvas. It forces you to think about the lives of customers. What specific problems in their life does your product solves? This thinking broadens your scope of consideration. You gain empathy by thinking about problems of other people. Empathy is key when you plan to create valuable product or service to someone else. “A problem well stated is a problem half-solved.” – Charles Kettering

When you understand problem of you customers, you can brainstorm effective solutions. The box is intentionally small. Majority of founders fell in love with their products or services. This way they are constrained to focus on important aspects. It is also aligned with the concept of Minimum Viable Product. Building version that can solve the biggest pain, testing it with customers, learning and improving.

What metrics like number of signups, revenue, customer satisfaction, retention – number of customers that repeat the purchase – do you plan to monitor? This box can be illustrated with Tom DeMarco’s quote “You can’t control, what you can’t measure” It would be foolish to make only intuitive decisions, even though in the harsh start-up world they are important ingredient. Your task in this box of the Lean Canvas is to brainstorm indicators that will help you stay on the right track with your business. Those metrics usually change over time. In the beginning, you focus on value metrics–product quality, customer loyalty, customer satisfaction and later in development on drivers of growth–number of items sold, earnings growth, cash flow.

Like competitive advantage or barriers to entry from traditional business plan. “A true unfair advantage is something that cannot be easily copied or bought.” – Jason Cohen. All successful businesses attract copy-cats and competitors. Think early about the things that can help you stay ahead. This could be intellectual property protection like patents or unique expertise of your team.

The Canvas is quite minimalistic tool. It will take you approximately 20 minutes to fill it based on your brainstorming. You won’t find following boxes in the original Business Model Canvas: Key Partners, Key Activities, Customer Relationships, Key Resources. They are oriented more on bigger established businesses not new ventures seeking viable business model.

Using the Lean Canvas to brainstorm your future business model helps you to understand and develop your future strategy. Using canvas to visualize value flows will help you plan all aspects of the business.

Source: https://leanstack.com/is-one-page-business-model

What you should write to boxes of the Lean Canvas.

Problem: List top 1 to 3 problems – related to your business – that you observe in the lives of your customers.

Existing Alternative: List how these problems are solved today.

Customer Segments: List your target customers and users. Customers are paying you for the product or service. Users might be using your product for free. For example, users of Facebook are all people using this social network. Customers are agencies or individuals buying ads on Facebook. If this applies to your idea, make this distinction clear.

Early adopters: Which sub-group of your customers will be willing to buy your product as first. Usually it is the people that perceive the problem you are solving as really big.

Unique Value Proposition: Single, clear, compelling message that states why you are different and worth paying attention. This should be simple explanation of the value you are bringing to life of your customers.

High-lever concept: Describe your product with existing products, services or concepts that are well known to public. For example, when the team of YouTube was working on first version, they were shortly explaining they work on something like Flicker, but for videos.

Solution: Short description of your product or service. Do this in relation to your described problems of your customers.

Channels: How will you get the message that you exist to your customers? How will you deliver your services?

Revenue streams: List all sources of revenue. What are you customers paying for? You can describe your pricing strategy.

Cost Structure: What are you paying for. Differentiate between fixed and variable costs.

Key Metrics: Which numbers will tell you, how is your business doing in relation to your vision.

Unfair Advantage: What will help you stay ahead of competition? It could be intellectual property – patents, trademarks, industrial designs, copyright.

The Lean Canvas is easy to create. You can share it with your colleagues or investors. It fosters focused discussions. It helps you structure your ideas and identify weak spots of your implementation plan.