lean-startup-canvas

What Is a Lean Startup Canvas? Lean Startup Canvas Explained

 

The lean startup canvas is an adaptation of the business model canvas by Alexander Osterwalder, which adds a layer to the traditional business model canvas that focuses on problems, solutions, key metrics and unfair advantage based on a unique value proposition.

This starts with the lean start-up methodology of experimentation, customer feedback, and iterative design. A lean start-up is a temporary organization designed to search for a repeatable and scalable business model.

Before we dive into the lean start-up canvas. Let me introduce the lean start-up methodology.

What is the lean startup methodology?

Steve Blank, launched the Lean Startup Movement, which as he explained in a 2013 HBR article "Why the Lean Start-Up Changes Everything:"

 It’s a methodology called the “lean start-up,” and it favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development. 

Today startups take this methodology for granted. Yet at the time this was an innovation as Steve Blank recounted:

Although the methodology is just a few years old, its concepts—such as “minimum viable product” and “pivoting”—have quickly taken root in the start-up world, and business schools have already begun adapting their curricula to teach them.

lean-startup-vs-corporation

Some of the key aspects fo the lean startup movement is based on using a "scientific method" and a process of creating, launching and growing a startup.

This focuses on getting insights as quickly as possible from customers without focusing too much on business planning. As Steve Blank remarked in his 2013 article:

A business plan is essentially a research exercise written in isolation at a desk before an entrepreneur has even begun to build a product. The assumption is that it’s possible to figure out most of the unknowns of a business in advance, before you raise money and actually execute the idea.

Once the money is raised:

Developers invest thousands of man-hours to get it ready for launch, with little if any customer input. Only after building and launching the product does the venture get substantial feedback from customers—when the sales force attempts to sell it. And too often, after months or even years of development, entrepreneurs learn the hard way that customers do not need or want most of the product’s features.

In the lean startup movement and methodology, three things are critically important. In fact, those are the new pillars that by challenged the old assumption of how an enterprise should look like have allowed the lean startup movement, thus the lean startup canvas.

Business plans rarely survive first contact with customers

As remarked by Steve Blank business plans are long documents written by entrepreneurs or aspiring ones in isolation and to get money from investors. Most of the time those documents won't survive the first contact with customers. I argue this happens for several reasons.

The business plan main purpose isn't to plan for the business but to impress investors. Most of the times targeting the right market is more a matter of tinkering than planning. And usually, a business plan is biased by the view of the world and untested hypotheses by the person drafting it.

Five-year plans are worthless and a waste of time

On the HBR article Steve Blank remarks the waste of time a five-year business plan represents:

No one besides venture capitalists and the late Soviet Union requires five-year plans to forecast complete unknowns. These plans are generally fiction, and dreaming them up is almost always a waste of time.

Start-ups are not smaller versions of large companies

One of the critical differences is that while existing companies execute a business model, start-ups look for one

This point is critical because of a large organization or existing companies operating with known business models.

The lean startup instead iterates until it finds a business model that fits that startup. In fact, Steve Blank defines the lean startup as:

a temporary organization designed to search for a repeatable and scalable business model

It is crucial to emphasize the fact that the business model needs to be repeatable and scalable.

The lean start-up movement is about agile development

The agile development is a methodology that works hand-in-hand with customer development.

This methodology "eliminates wasted time and resources by developing the product iteratively and incrementally." 

The lean startup canvas vs. business model canvas

In the Business Model Canvas we saw how it comprises nine building blocks:

Business-model-canvas

The business model canvas is a useful way to assess the overall business model. However, as Ash Maurya has noticed, that canvas seemed to be useful at hindsight.

In short, he was looking for a way to get more insights on what business model would be best suited for a start-up before it scaled up.

This is why in 2010 with his article "How to Document Your Business Model On 1 Page" he came up with an adaptation to the business model canvas with the new lean startup canvas:

The main purpose follows the lean startup movement by Steve Blank, and it tries to create something more actionable compared to the business model canvas:

  • Create a Business Model versus Business Plan
  • Ash Maurya found the business model canvas a bit too general for a lean startup 
  • The business model canvas might be good to understand businesses from outside-in, but less to give actionable insights to the insider entrepreneur

That is why he created his version for the lean startup canvas. As Ash Maurya mentioned in "Why Lean Canvas vs. Business Model Canvas," he recruited other entrepreneurs:

To start building an online version of Lean Canvas with the initial goal of facilitating more of these learning conversations in my workshops, and subsequently opening it up to everyone.

As Ash Maurya was adding four more blocks (problem, solution, key metrics and unfair advantage) he needed to take out four building blocks:

lean-startup-canvas-vs-business-model-canvas

Sourceblog.leanstack.com

In short, Ash Maurya took out key partners, key activities, key resources and customer relationships and substituted it with problem, solution, unfair advantage, and key metrics, respectively.

As he mentioned in his 2010 article, that is built upon these nine building blocks:

There’s a clear delineation down the middle, on PRODUCT versus MARKET and here’s a brief description of each block and the order in which I like to think/validate them:

1. Problem: A brief description of the top 3 problems you’re addressing

2. Customer Segments: Who are the customers/users of this system? Can they be further segmented? For example, amateur photographers vs. pro photographers. If I have multiple target customers in mind, for example, graphic designers vs. lawyers, I will create a separate canvas for each. More than likely a lot of the other pieces like problem, solution, channels, etc. will be different too.

3. Unique Value Proposition: What is the product’s tagline or primary reason you are different and worth buying?

4. Solution: What is the minimum feature set (MVP) that demonstrates the UVP up above?

5. Key Activity: Describe the key action users take that maps to revenue or retention? For example, if you are a blogging platform, posting a blog entry would be a key activity.

6. Channels: List the FREE and PAID channels you can use to reach your customer.

7. Cost Structure: List out all your fixed and variable costs.

8. Revenue Streams: Identify your revenue model — subscription, ads, freemium, etc. and outline your back-of-the-envelope assumptions for life time value, gross margin, break-even point, etc.

9, Unfair Advantage: I left this for last because it’s usually the hardest one to fill correctly. Jason Cohen, a smart bear, did a great 2 part series on competitive advantages. Most founders list things as competitive advantages that really aren’t. Anything that is worth copying will be copied. So what is a competitive advantage:

lean-startup-canvas

Sourceblog.leanstack.com

It is critical to remark here that the "unfair advantage" is the essential part of the lean startup canvas and that is why it is crucial to understand it deeply.

What is an unfair advantage?

As Jason Cohen remarked in "Real Unfair Advantages:"

Anything that can be copied will be copied, including features, marketing copy, and pricing. Anything you read on popular blogs is also read by everyone else. You don’t have an “edge” just because you’re passionate, hard-working, or “lean.”

Thus, as he remarked in the same article, "the only real competitive advantage is that which cannot be copied and cannot be bought."

I suggest you read the article carefully as he mentions six things that can give you an unfair advantage:

  • Insider information
  • Single-minded, uncompromising obsession with One Thing
  • Personal authority
  • The Dream Team
  • (The right) Celebrity endorsement
  • Existing customers

It is also critical to know what it's not a competitive advantage the can bring you toward the unfair advantage.

As Jason Cohen pointed out in "No, that IS NOT a competitive advantage," although common misconceptions the following are not competitive advantages:

  • We have feature X
  • We have the most features
  • We’re patenting our features
  • We’re better at SEO and social media
  • We’re passionate
  • We have three PhDs / MBAs
  • We work hard
  • We’re cheaper

Also, keep in mind the unique value proposition, and unfair advantage are not the same thing. As remarked in "Why Lean Canvas vs. Business Model Canvas?"

The job of a UVP is to capture a customer’s attention while the job of the Unfair Advantage is to deter copy cats and competitors. These two are often NOT the same thing.

and he goes:

For example, with Facebook:
UVP
: “Connect and share with the people in your life.”

UA: Large network effects

Is lean startup canvas for anyone?

From the perspective of the lean startup canvas, it is essential to remark that this might not be suited to anyone.

As noted by Ash Maurya "lean Canvas was designed for entrepreneurs, not consultants, customers, advisors, or investors."

Is it better to use the business model canvas or the lean startup canvas?

The answer isn't easy. I like the business model canvas to have an overview of other businesses.

For instance, if I'm studying the business models for Apple, Google, Amazon and so on, the business model canvas might be a helpful tool.

However, most of the times those companies created a business model based on a lot of tinkering, rather than design.

Also, the business model canvas might be better suited to understand how to run the overall business rather than have more insights about product development to reach the so-called "product-market fit."

If you need a canvas to understand better your customers' problems, I would start from the lean startup canvas.

If instead, you need a canvas to understand other businesses or to have an overview of your business the business model canvas might be more suited.

As Ash Maurya pointed out "the most important takeaway is that you document your key business model assumptions (and learning) in a portable format that you can share and discuss with people other than yourself."

Key takeaways

In this article, we explored the evolution that leads to the lean startup movement. From that movement, it was clear that a scientific method based on experimentation, tested assumptions and continuous iterations are the key.

From this movement, the lean startup canvas was born. This is a model that helps entrepreneurs get actionable insight for the business and product development.

This is based on profound understanding of the problems your customers are facing and the unfair advantage you can build or have built into your business.

I'd like to remind that the lean startup canvas is a practical and portable tool for the entrepreneur.

The main aim is to have a holistic view of your business in one page, which allows you to iterate on your business model.

Thus, I'd say that the lean startup canvas is as much about "market-business model fit" than it is about "product-market fit."

In short, you aim to generate a repeatable and scalable business model that unlocks value for your organization, as quickly as possible.

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Published by

Gennaro Cuofano

Creator of FourWeekMBA.com | Head of Business Development at WordLift.io | International MBA

2 thoughts on “What Is a Lean Startup Canvas? Lean Startup Canvas Explained

  1. Wonderful article. Just a thought. What if it’s a disruptive idea? Then the customer may lack knowledge to comprehend the MVP to give feedback.

    1. Hi Prashanth, thanks and good point! Timing is extremely important and sometime it might be too early for a product. I believe in that case part of the strategy is communicating the problem rather than the “disruptive idea.” In that case, it will be important to communicate the unique value proposition and tools like the lean startup canvas might be more valuable for that: https://fourweekmba.com/lean-startup-canvas/

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