reposted from the Explorics Blog
Note: Learn more about this at our upcoming webcast.
Living Lean Startup: Business Model Canvas
Thursday, May 10, 2012 at 2pm ET
Whether you are building a new business or planning the growth of an existing one, having a complete picture of your business strategy is indispensable. The Business Model Canvas has emerged as a fantastic tool for putting all the interconnected facets of a business plan on one piece of paper so you can easily capture, assess, and refine them.
First developed by Alexander Osterwalder and described in his book Business Model Generation, the tool has gained popularity over the last couple of years – quite rapidly in fact. And it has spawned all sorts of interesting activity from both Alexander and others:
We use the Business Model Canvas every time we engage with an entrepreneur – it has become one of the core parts of our Market Sprint customer development process. And through these projects we’ve come up with what we feel is a better Business Model Canvas.
So without further ado, let me introduce the Business Model Canvas II (download the PDF here):
Here are the key differences between the original Business Model Canvas and our own version:
- “Lead with demand” orientation. You can build a product, or you can build a product that fills a need in the market. That last part turns out to be really, really hard. All too often, we as tech entrepreneurs focus too much on what we are creating, letting our customers’ voices take a backseat to some internal, ivory-tower vision. So the business model canvas we created puts customer & sales related information on the left, and product & delivery information on the right. The purpose is to force the author to always start with demand, building what people want. We find this is a much more logical way to tell the story of the business, which is the ultimate goal of this document in the first place.
- Call out the core value prop. You’ll also notice that a subset of the categories are placed in a bold box in the center. This area captures the core value proposition of your market. It answers the basic questions of any business model: who is your market, what is your value, why are you better, and how will you make money. Surrounding the central area are all the supporting aspects of your business. They are still crucial to understand, but only insofar as they support the more central concepts. Best practice for using this canvas is to begin in the center and really nail your value proposition. Make sure everything there is well-aligned and meaningful. Then, once you are satisfied that your value statements hold together, you can identify all the other keys to executing your strategy in sales and in delivery.
- Alternatives. Knowing what you are up against is absolutely essential to business model planning. Whether your target customers are using directly competitive products or cobbling something together themselves, you have to position your product against something that they are already familiar with in some way or another. If the problem you are solving is big enough, people will have some way of addressing it. Use this area of the box to explain what options already exist, and how you differentiate your product from these options.
- Market size & opportunity. Finally, our Business Model Canvas II has an area where you can describe the nature of your market size and/or opportunity. For example – are you pursuing every consumer in a major metropolitan area between certain ages? If so – describe that here, and indicate about how many of them exist. If you are entering a more mature market, add some information about the current size of that market and your addressable portion of it.
We hope you will try out this version of the Business Model Canvas and let us know what you think.
And for more information on how to use this document, please check out our webcast Living Lean Startup: Business Model Canvas.