|Component||Questions to Ask||Description||Applications|
|Problem||– What problem are you solving? – Who experiences this problem? – How severe is the problem? – Is this problem urgent or chronic?||Clearly define the problem or pain point your target customers are facing. Understand the specific challenges and needs that your startup aims to address.||– New product development – Identifying market gaps – Problem validation|
|Customer Segments||– Who are your potential customers? – What are their demographics? – What behaviors or characteristics define them? – Are there distinct customer segments?||Identify and categorize the different groups of customers who may benefit from your solution. Segment them based on shared characteristics, behaviors, or needs.||– Target audience identification – Market segmentation – Customer profiling|
|Unique Value Proposition||– What makes your solution unique? – How does it solve the problem better than alternatives? – What benefits does it offer to customers?||Define the compelling value that your startup provides to customers. Clearly communicate how your product or service stands out and addresses the identified problem.||– Crafting marketing messages – Competitive differentiation – Value proposition testing|
|Solution||– What is your product or service? – How does it work? – What features does it include? – How does it address the problem?||Describe your solution in detail, including its features and functionalities. Explain how it effectively solves the identified problem and meets customer needs.||– Product development – Prototype creation – Solution testing|
|Channels||– How will you reach your customers? – What distribution methods will you use? – Where can customers find your solution? – Are online and offline channels needed?||Outline the channels and distribution methods you plan to utilize to connect with and acquire customers. Consider both online and offline channels, if applicable.||– Marketing strategy – Sales channels – Distribution planning|
|Customer Relationships||– How will you engage with customers? – What support or assistance will you provide? – How will you gather feedback? – Are personalized interactions needed?||Define your approach to building and maintaining relationships with customers. Specify the methods for support, feedback collection, and personalized interactions as required.||– Customer support strategy – Feedback mechanisms – CRM implementation|
|Revenue Streams||– How will your startup make money? – What pricing models will you employ? – Are there multiple revenue sources? – What is the value customers are willing to pay for?||Clearly state the ways in which your startup will generate revenue. Consider different pricing models, revenue streams, and the perceived value of your solution to customers.||– Monetization strategy – Pricing strategy – Revenue model development|
|Key Resources||– What resources are essential for your startup? – What physical, human, intellectual, or financial assets are required? – Do you need specific partnerships or technology?||Identify and list the critical resources your startup needs to operate successfully. These resources can include physical assets, technology, expertise, and strategic partnerships.||– Resource allocation – Partnership development – Asset management|
|Key Activities||– What actions are fundamental to delivering value to customers? – What core functions does your team need to perform? – Are there specific development or marketing activities?||Specify the key activities your team must undertake to create and deliver value to customers. These activities encompass product development, marketing efforts, and other core functions.||– Activity planning – Task prioritization – Process optimization|
|Key Partnerships||– Do you require external collaborators? – What partnerships can provide access to resources or expertise? – Are there suppliers, distributors, or strategic allies needed?||Identify potential external partners, suppliers, or collaborators that can contribute to your startup’s success. Partnerships can provide access to resources, distribution, or specialized knowledge.||– Partnership building – Supply chain optimization – Collaborative ventures|
|Cost Structure||– What are the costs associated with your startup? – Are there fixed and variable expenses? – How will resources be allocated? – What is the budget allocation for different activities?||Detail the cost structure of your startup, including both fixed and variable expenses. Allocate resources and budget for various activities and functions within your business model.||– Financial planning – Budget allocation – Expense management|
|Metrics||– What key metrics will you track? – How will you measure success? – Are there specific KPIs for customer satisfaction? – What data is essential for informed decision-making?||Identify the key performance indicators (KPIs) and metrics crucial for assessing your startup’s progress and success. These metrics should align with business objectives and customer satisfaction.||– Performance measurement – Data analytics – Continuous improvement|
The evolution from lean manufacturing to continuous innovationAs Ash Maurya highlighted when I interviewed him:
If we go back to, let’s say, the last hundred years or so, that’s when we were in that manufacturing era, and the unfair advantage all companies were all about mass production.He continued:
The companies that produced the most amount of products for the lowest costs tended to win. It was all about efficiency. After the war, a number of companies started to get squeezed, and this is where Taiichi Ohno over at Toyota invented the Toyota Production System, which kind of spawned this new way of thinking.As Ash Maurya further explained:
Taking a lot of Just in Time techniques and bringing in what became eventually Lean Manufacturing. That’s kind of the origin that we trace back a lot of even what we talk about today in the startup world. Some of those core principles go back to this idea of being less wasteful, and continuous improvement. Now it has morphed over the years, so as the world has changed,as we have moved from that manufacturing era to more digital products, the need for speed became ever more important. As we got into PC computing, requirements began to change faster and faster, and so methodologies and frameworks evolved.We moved from traditional manufacturing to waterfall.For more on the historic process that brought us from lean manufacturing to lean startup, check out blog.leanstack.com
When Lean Startup came on the scene, the big shift then was our move away from even just PCs to the internet. As we moved onto the internet, the connection between us and our customers almost vanished.We’re more connected today than ever before to customers, which means that we can learn faster, but also it means that customers demand more than ever before.This led us to the lean startup and the concept of continuous innovation:
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.Some of the key aspects of the lean startup movement are based on using a “scientific method” and creating, launching, and growing a startup. This focuses on getting customers’ insights as quickly as possible 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. Those are the new pillars that challenged the old assumption of how an enterprise should look and allowed the lean startup movement, thus the lean startup canvas.
Business plans rarely survive first contact with customersAs remarked by Steve Blank, business plans are long documents written by entrepreneurs or aspiring ones in isolation 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’s primary purpose isn’t to plan for the business but to impress investors. Most of the time, 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 timeIn 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 oneThis 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. Steve Blank defines the lean startup as:
a temporary organization designed to search for a repeatable and scalable business modelIt is crucial to emphasize that the business model needs to be repeatable and scalable.
The lean start-up movement is about agile developmentAgile 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 canvasIn the Business Model Canvas, nine building blocks help us assess any business model. The business model canvas is a helpful way to assess the overall business model. However, as Ash Maurya has noticed, that canvas seemed helpful in 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:
Ash Maurya’s adaptation to Business Model CanvasThe primary 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 for understanding businesses from outside-in, but less to giving actionable insights to the insider entrepreneur
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:
The Lean Canvas is an adaptation of the Business Model Canvas by strategyzer.com
Source: blog.leanstack.comIn short, Ash Maurya took out key partners, key activities, key resources, and customer relationships and substituted them with a 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.
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:
The Lean Canvas an adaptation of the Business Model Canvas by strategyzer.com
Source: blog.leanstack.comIt is critical to remark here that the “unfair advantage” is an essential part of the lean startup canvas, so 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.
- 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.
and he goes:
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.
For example, with Facebook: UVP: “Connect and share with the people in your life.” UA: Large network effects
Is a lean startup canvas for anyone?From the lean startup canvas perspective, 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 business models for Apple, Google, Amazon, and so on, the business model canvas might be helpful. However, most of the time, 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 your customers’ problems better, I will start with the lean startup canvas. If, instead, you need a canvas to understand other businesses or 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.“
The 10x growth modelAnother paradigm of a lean startup is that of looking at exponential growth. In our interview with Ash Maurya, he highlighted the following:
When we looked at Facebook, for instance, they out of constraints of no money had to go to one campus and then they went to three other campuses and then they kind of rolled out systematically. 10x kind of puts that into more of a systematic context. What we generally tell people, if you’re giving yourself permission to scale, instead of thinking of, “I’m just going to launch to everyone,” start with one customer. I know one sounds just wrong, but that is what I call the singularity moment of a product. The moment you can get one person to buy your product and part with their hard earned money, that’s something to celebrate. Now one, of course, is not enough, but if you think about it, every company, whether it’s Amazon, Facebook, your company, starts with one customer. Everyone starts in the same place, and then they double and then double subsequently many many times. If you think of 10x, that is really a sequence of doublings through the power of three is 8x. If you keep doubling, you will eventually 10x, and most people will have 10 customers. You will 10x once, some of you will get a hundred customers, you will 10x again. The only difference between a company like Facebook and say, my company or your company, is Facebook just doubles more times in rapid succession and we will, and they keep doubling and then they eventually slow down. We may not need to get that big because our business model starts working for our scale much, much sooner. The whole idea of 10x-ing is almost giving you a mathematical way of thinking of permission to scale. The way I break it down is I get, no matter what the idea is, I will get a startup or corporate innovator to start thinking of, “How do I convert my first customer, and then how do I get to 10, how do I get to 100, how do I get to 1,000?” That nonlinear thinking automatically works towards prioritizing the right types of risks. If we think about the world we live in today, most products, not all, but most products don’t suffer from technical risks. They suffer from customer and market risk. When you are only serving 10 customers, you can fairly easily do that from a technical perspective. You may only need one web server, for instance, or you may be able to provide high touch onboarding. That allows you to supplement the shortcomings of a fully scalable product. By giving yourself that permission of doing 10 customers initially, you can do that. As you go to the next level, it’s not about getting another 10 customers, now you have to get 100 customers. That forces you to start investing incrementally in things that will need to scale. You don’t have to go all the way to scale, but it’s an incremental way of not just doing easy jumps. It’s still hard, but they are manageable harder steps in that journey.
- We explored the evolution that led to the lean startup movement.
- From that movement, it was clear that a scientific method based on experimentation, tested assumptions and continuous iterations is the key.
- From this movement, the lean startup canvas was born. This model helps entrepreneurs get actionable insight for business and product development.
- This is based on a profound understanding of the problems your customers are facing and the unfair advantage you can build or have built into your business.
- I want to remind you 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 on 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” as 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.
- Lean Startup Canvas:
- The Lean Startup Canvas is adapted from the Business Model Canvas by Ash Maurya.
- It includes elements focused on problems, solutions, key metrics, unfair advantage, and unique value proposition.
- The canvas prioritizes understanding and mastering the problem before developing solutions.
- Evolution from Lean Manufacturing to Continuous Innovation:
- Historically, companies emphasized mass production and efficiency in manufacturing.
- Toyota introduced the Toyota Production System (TPS) focusing on waste reduction and continuous improvement.
- Lean Manufacturing principles influenced modern methodologies, including those in the startup world.
- Lean Startup and Continuous Innovation:
- The Lean Startup methodology emerged with the shift to digital products and the internet.
- It emphasizes experimentation, customer feedback, and iterative design.
- Lean Startup seeks quick insights and avoids extensive upfront planning.
- Lean Startup Methodology:
- Steve Blank initiated the Lean Startup Movement, favoring experimentation, customer feedback, and iterative design.
- Concepts like “minimum viable product” (MVP) and “pivoting” gained prominence.
- Lean Startup applies a scientific method approach to validate assumptions.
- Lean Canvas vs. Business Model Canvas:
- Lean Canvas is a tailored version of the Business Model Canvas for startups.
- Lean Canvas includes problem, solution, key metrics, and unfair advantage blocks while omitting others.
- It provides actionable insights for entrepreneurs by focusing on key elements.
- Unfair Advantage and Unique Value Proposition:
- Unfair advantage is a central concept in Lean Canvas.
- It represents a competitive advantage that’s difficult to copy or buy.
- Unique value proposition captures customer attention, while unfair advantage deters competitors.
- Lean Startup’s 10x Growth Model:
- Lean Startup encourages thinking in terms of 10x goals.
- Achieving 10x growth involves continuous iterations and gradual scaling.
- Startups aim to reach a “singularity moment” where even gaining one customer is significant.
- Key Takeaways:
- Lean Startup emphasizes experimentation, customer feedback, and iterative design.
- Lean Canvas offers actionable insights for startups, focusing on the business model.
- Unfair advantage and unique value proposition are critical for differentiation.
- Lean Startup’s 10x growth model encourages nonlinear thinking and incremental scaling.