Anyone willing to develop a startup company should familiarize themselves with the lean startup concept developed by Eric Ries. You can check our articles on MVP and pivot and here we are reminding about key lean startup elements and show how to use business model canvas and lean canvas for startup planning purposes.
What is lean?
Lean is a concept of startup development based on three principles:
- Instead of spending months on planning and deep market analysis for creating an ultimate business plan startupers need to formulate the hypothesis and fill in a business model canvas or lean canvas canvas according to it. These canvas show how the startup is going to create value.
- Customer development requires startupers to go out of the building and talk to potential customers in order to identify their needs and get feedback on your hypothesis implemented in MVP. Based on the feedback MVP is improved and a new cycle begins or a decision to pivot startup is made. Read our article to learn about types of pivot.
- Following agile development — it is assumed that after each iteration teams gets a finished product that is then tested according to the customer development approach and improved.
Every lean business is functioning according to this scheme:
In lean methodology traditional business plan is replaced with business model canvas or lean canvas. Let’s learn more about them.
Business model canvas
It’s a canvas Alex Osterwalder describes in his book “Business Model Generation: A Handbook For Visionaries, Game Changers, And Challengers”. It consists of nine blocks:
- Customer segments are groups of clients included into your startup business model.
- Value propositions are advantages startup offers its users. For example for Instacart those are an ability to get necessary products without spending time on shopping.
- Distribution channels are channels you use to sell you product. For apps it would be Apple Store or Google Play.
- Customer relations are established and maintained by all members of the team communicating with customers.
- Revenue streams are your sources of income. It could be one-time purchases or subscriptions.
- Key resources the startup relies on: material, intellectual, financial and human.
- Key activities performed by the startup.
- Key partners that help you startup function: provide resources, consultations of assist in other ways.
- Cost structure are expenses associated with the model. They depend on key activities, resources and partners.
Here’s an example of business model canvas by Alex Osterwalder for iPod/iTunes:
According to the business model canvas, value propositions included cheap cost per track, ability to buy only one song from the album and taking music with you everywhere you go. The services was created for mass market and thus revenue streams were formed by a large volume of content sold to the users and high-margin iPod players revenue.
Use this business model canvas for Google Draw to quickly create canvas for your startup ideas.
Ash Maurya suggests to use lean startup canvas he introduced in his book “Running Lean” instead of the business model canvas. He was familiar with lean methodology by Eric Ries and client development by Steve Blank and set a goal to include in his canvas only those elements that carry the most risk. Here they are:
- Problem. Startups fail because they aren’t solving user problems. Read our article to learn more about startups solving user problems.
- Solution. In Ash’s model it is placed in a small box since it should be simple, just as its implementation called minimum viable product.
- Key metrics. To prevent you startup from drowning in piles of data and vanity metrics you’ve got to clearly specify indicators used for measuring effectiveness of your startup.
- Unfair advantage. If your startup is unique, at first it won’t have much competitors but you’ve got to think about the future with copycats of your service appearing very quickly just like it happened with Uber. That’s why you need to find an advantage that will set your startup apart from the competitors.
Here’s an example of lean canvas for a photosharing desktop app CloudFire Ash Maurya provides in his book:
According to the lean canvas, the main problem solved by the service is time-consuming process of downloading and uploading photos. Unique value proposition is quick automated sharing of photos and videos. The service was subscription-based with a free trial. Key metrics included:
- first gallery creation;
- sharing gallery with friends;
- inviting family and friends;
- subscription purchase.
Use this lean canvas template for Google Draw to quickly create canvas for your startup ideas.
Lean canvas does better job at capturing answers to the questions important for any startup:
- What user problem does the startup solve?
- What solution is the startup offering?
- What about its uniqueness? What advantage will allow the startup leave its competitors behind?
- Who is startup target audience?
- How are you going to measure startup effectiveness?
- Which channels will be used for promotion?
- What expenses will startup operation require?
- How the startup will earn money?
While planning lean startup development you can also use mind mapping tools. And what tools do you use for planning startup development? We will be happy to hear about them in the comment section.
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