Lean Canvas Business Model for Start Ups: Basics with Hypothetical Examples

In my previous two articles we discuss the Business Model Canvas (BMC) and mapping the BMC with some real world business projects. The BMC essentially explains the different perspectives of a business to bring more strategic focus on operational efficiency and profitability. It helps the business that want to enhance and organize their activity.  But unlike the existing business the perspectives of a start-ups or new business projects focuses more on customer problems and solutions. Here comes the Lean Canvas, which is the adoption of the Business Model Canvas for start-ups and entrepreneurs. Ash Maurya, the inventor of lean canvas, changed a vector a bit to obtain a problem-solution approach to business analysis. It’s more about product development, finding the customer’s needs and solutions by which entrepreneurs and start-ups can quickly validate their business idea following the principles of lean start-up.

We may define Lean Canvas as a start-up focused planning tool that identifies and documents key aspects of a business and serves as an actionable 1-page business plan based on problem-solution fit approach. With the lean canvas the focus shifted towards the practicability and viability of the offered idea. Central to the Lean Canvas approach is the need to understand customer’s problems as the first step before you can focus on the solutions to those problems and how to deliver them to the market.

With Lean Canvas entrepreneurs can evaluate the potential of an idea before allocating time, effort, and resources into development.  This simple format is readily understood by stakeholders and investors and easy to update in response to changed business conditions. It is used to –

• Develop an overview of the critical aspects that drive a business;
• Streamline planning;
• Facilitate conversations about an organization’s strategy;
• Create an understanding of the plan across the entire organization;
• Help employees collaborate better through a shared understanding of how the business operates and its environment;
• Underpin strategy execution, resource prioritization, and effective action plans.

How It Differ from Business Model Canvas

As we discussed the Osterwalder’s Business Model Canvas (BMC) gives a holistic view of the business and lays emphasis on a strategic conversation with related parties. The problem with BMC is, it lacks orientation at the customer needs and available options for the customer to solve the problem.  In that regard, the lean business canvas seems more practical as it follows the problem-solution approach with customer focus.

Business Model Canvas Vs Lean Canvas | Source: Compiled by Author | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.

Considering the structure and component blocks, it can be said that BMC was developed for existing companies, which already have established their presence in the market and got traction with customers. On the other hand, start-ups don’t have a customer base and often no products or prototypes. So for start-ups the lack of available input to fill all the boxes make the canvas incomplete. We can sum up the analysis by carefully drawing a strength-weakness matrix for the lean canvas, which is as below –

Strengths and Weaknesses of Lean Canvas | Source: Compiled by Author | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.

The Lean Canvas includes also helps deal with uncertainty and risk. Reducing risk and prove the idea fits the market and customer need is the immediate task all start-ups need to do. Lean canvas helps the entrepreneurs and start-ups to make it happens.

Working with the Lean Canvas Model

Ash Maurya, who adopt lean canvas from Alex Osterwalder’s Business Model Canvas replaces four elements to make it enforceable for start-ups.

• 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)

Ash Maurya also added a few additional elements including –

• ‘Early Adopters’ in customer segment
• ‘Existing Alternatives’ that solve the identified customer problems
• ‘High Level Concept’ of the proposed idea in value proposition

The lean canvas layout is as below:

Lean Canvas Model Template | Source: Compiled by Author | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.

We will discuss the updated sections of lean canvas in the subsequent part of this article.

Customer Segments

The lean canvas starts by identifying the target customer. Often start-ups fail or need to pivot rapidly because they didn’t spend enough time understanding the customer segment upon which the rest of the business model depends. Without customers, there is no business. Narrow down the customer segment as accurately as possible.

Early Adopters

There is a supplementary section in customer segments, where the start-up need to specify the actual people who will deal with the raw product and are the first feedback providers.

Problem

It is vital to define and understand the problem you are trying to solve before applying effort and resources into the development of a product or idea. Each customer segment (CS) you identify will have a set of problems that need solving. In case you have several customer segments with different problems, you may make separate canvases for each of them.

Problems can be based on complexity, time vs. ease of use, price, and quality vs. features, there are many different ways to identify problems. If you’re not sure then take time to go out and talk to customers. Also, observe them in the situation and context that relates to your idea.

Existing Alternatives

Existing Alternatives section of problem box is designed to contain the competitors that deal with the same problems. These are your rivals to compete with and win their clients over.

Solution

This section of the lean canvas outlines the potential solutions/features for each of the problems identified in problem section. Finding a solution may be an easy task but mapping it with the relevant blocks is not easy. Before finalizing the solution, you should–

• • • Run through the main features and benefits of your product or service;
    • Prioritize them;
    • Go to a customer and ask them to prioritize them;
    • Consider the strengths and flaws of each and reduce your list down to the top three.

You can also use other strategy exercises like using brand positioning to help define your solution.

Unique Value Proposition

The Unique Value Proposition (UVP) reflects how your solution solves the customer’s problems. It should be a single clear compelling message that captures the essence of your product and the solutions it offers your target audience with respect to the problems you are trying to solve.

A UVP should:

1. 1. • Be easy to understand in about five seconds;
      • Communicate the benefit a customer receives from using your products and/or services;
      • Explain how your offering is different from and better than competitors’.

High-Level Concept

In the bottom of the unit, there is a place for creating a high-level concept – a short and easy-to-grasp statement about your product. It’s a kind of elevator pitch you, as well as your team members and customers, will use.

Key Metrics

Key Metrics measure how well you are progressing towards your goals. Since it acts as Key Performance Indicators (KPIs) for your business, it is crucial that to identify the right metrics. Few example matrices can be like –

• • • Monthly recurring revenue
    • No of registered users
    • No of active users
    • Churn rates etc.

Unfair Advantage

Unfair advantage represents something that offers competitive advantage over others and creates barriers to entry for new competitors. Unfair advantage may include a good reputation, exclusive access to some data, personal authority, community, and other extra power. It’s not necessary to seek out your competitive advantage right now – you can fill this box later when some other things start going your way.

(Unchanged – Channels, Cost Structure, Revenue Steams remain unchanged to Business Model Canvas)

Lean Canvas Examples with Imaginary Business Idea

For the subsequent understanding of the lean canvas we will draw two canvases for imaginary start-ups. We will take a look at the canvas model in two different perspectives – subscription basis and online sale driven.

Canvas Model 1: Mobile App for Child Health Tracking

Particularly focus on inventing solutions or technologies to make it easier to track and monitor the child’s health. This model is designed to be profit-oriented start-ups from subscription by the users.

Lean Canvas Example of Mobile Apps for Child’s Health Tracking  | Source: Compiled by Author | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.

Canvas Model 2: Mobile App for Swimming Workout Tracking

Particularly focus on inventing solutions or technologies to make it easier to track the workout sessions. This model is designed to be a platform free to users while revenue can be generated from brand advertisements and merchandising sale.

Lean Canvas Example of Mobile Apps for Swiming Tracking  | Source: Compiled by Author | Copyright © 2020 – iammoulude.wordpress.com. All right reserved.

Lean Canvas Final Takeaways

In the concluding thought, the Business Model Canvas was built to encapsulate ‘all types’ of businesses hence a few elements didn’t seem to fit well for start-ups. On the other hand, the Lean Canvas offers a much more ‘problem vs solution’ approach. It makes founders think about the pain points that their target customers face and craft the solutions accordingly.

• The Lean Canvas focus on the 2 primary elements of a start-up: the problem each customer segment faces and the solution for those problems.
• Depicting the ‘early adopters’ makes me think about the first group of customers that will adopt my product, which then helps to specify channels.
• The ‘key metrics’ helps to makes the key needle that need to push for the business to move forward.
  
• ‘Unfair advantage’ and ‘high-level concept’ captures the genesis of the business model.

Both tools Business Model Canvas and Lean Canvas deserve attention. It depends on the state of business how it’s worth catching up on the benefits each canvas can give. The lean canvas focuses on the customer needs and the way the product will be able to satisfy them. Its basis, the business model canvas, focuses on improving the essential aspects of the existing business.

References:

1. Maurya Ash (Feb 28, 2012), Why Lean Canvas vs Business Model Canvas? Lat retrieved on 20 June, 2020. 

Also Read: Business Development Model of Canvas: The 9 Building Block Approach

Also Read: Fill In A Business Model Canvas: Learn through Real Life Examples