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The Business Canvas Model
The Business Canvas Model is a way to effectively capture the most important hypotheses about business development. Created in 2009, the method was used primarily for working with SaaS startups ( software as a service ).
Today this approach is taught in more than 200 universities around the world, is included in the program of well-known start-up accelerators. Is practiced in many large companies. The number of followers of the Lean Template exceeds 125,000 – with its help. More than 175,000 models have already been created for various business sectors.
Lean Canvas author Ash Maurya admits he did not expect such popularity: even fishermen from Chile listen to his advice!
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Profit is not the main thing?
Initially, Ash Maurya addressed his ideas to participants in closed workshops and boot camps, and since the information was not publicly available, as a result of adaptation and refinement, the original version of the methodology has undergone significant distortions.
This became clear after Benjamin Kampmann’s post “The Lean Canvas: Wrong Tool for the Job”. A well-known developer describes several of the problems he faced while modeling startups. using templates.
According to Kampmann, Lean Canvas is too fixated on profit as the main goal of any startup. He argues that such a focus on money is doomed to failure for companies that go beyond the standard (user = customer) scheme, such as non-profit business models.
Ash commented on this as follows:
“First of all, I would like to thank Ben for sharing his experience openly. I will try to answer the questions of concern to him, along with others that have accumulated by this time, ”he writes. “Although I don’t like to think of money as the sole purpose of a business, I compare money to oxygen.
We do not live for oxygen, but we need oxygen to live. There is a difference between money and profit. And I don’t see profit as a universal goal of a business or product. ”
Universal purpose
The central theme of Ash’s book, The Customer Factory, is the following statement: “The universal purpose of business is to make customers happy.”
Satisfied customers who pay you for your work and do it consistently are the real business challenge, according to Lean Canvas.
This is true of any company, whether you are a non-profit organization or make money from your invention, create products or provide services, develop software or industrial equipment, conventional or high-tech.
It is this understanding of the universal business purpose that underlies the use of Lean Canvas for modeling startups that Ash revealed to his followers. The characteristic of “the pursuit of profit” given to it occurred due to the presence of the “ Revenue Streams box ” section in the template.
How do I complete this section?
As Ash notes, “A grateful customer as a goal of any business is not a reason to avoid filling out this section in Business Canvas Model. I see quite often in many templates I have reviewed – even in commercial models. There is no business without a stream of income. ”
To understand what this is about, let’s start by looking at the most standard, direct business model. At the same time, as the author of the Canvas Model seeks to convey. You do not need to limit yourself to listing the sources of your income. Also of great importance are the current prices and the forecast of LTV, or the “life cycle of buyers”: for example, $ 50 / month for 2 years of “life”.
These numbers are necessary to assess your capabilities and understand whether the problem is worth solving. If the situation is not appropriate enough, then why spend any effort on it?
However, despite the relatively simple scheme of applying Lean Canvas to a direct business model. It regularly raises a number of questions.
1. How do I price the product if there is no solution yet?
Answer: “Buyers worry about their problems, not about your solution.”
You need to set the price based on the value of your product, and not on what it will cost you to develop and bring it to the consumer. Ideally, you should be able to provide a decent alternative to existing options, the best proof of which is monetizable pain:
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2. How to predict the “lifespan” of a buyer?
This is a slightly more difficult, but equally important task.
Although all entrepreneurs dream that customers will stay with them forever, in every business, there is churn or some limitation of the “lifespan” of customers. Sometimes customers leave because they do not like the product. Sometimes because they love the product so much that they actively use it to solve their problems, and over time the need for it disappears.
One way to predict a customer’s “lifespan” is to understand their problem. Is it singular or recurring? If repetitive, how often will the client need to solve it and for how long? This information will allow you to calculate when a customer will stop needing your product.
Competitor research can also help you effectively estimate the average LTV of your customers. In the meantime, if all the other players in your area fail, make predictions very carefully.
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3. What if I have multiple customer segments?
Try to keep your pricing model as simple as possible, especially in the early stages. By doing this, you will not only make your preliminary assessment easier, but you will also be able to validate your business model faster.
Ash advises to start with one price, which is worth checking out with early adopters . The point is, if you can’t get the most loyal segment to accept your pricing, what’s your chance with the rest of your customers?
If you still intend to work with multiple categories of buyers. Use a simple customer segment allocation model to set the average prices for each category.
4. What if I give away my product for free?
There is no business model without profit.
In his book, Ash explains why freemium (freemium, free – free, premium – characterized by a higher quality) is a business model. The essence of which boils down to offering to use a product or service for free. While its extended (improved) version is offered at an additional cost. Unsuccessful startup business model.
Instead of convincing customers to upgrade to the full version, freemium offers a reasonable alternative, with the result that many of them choose to get by with the free version.
Choosing tariffs is the most risky step in creating a business model, because a smart price does much more than just bring you profit. It affects the perception of your product and even the audience you attract.
You might think that all of the above only applies to direct business models. However, Ash gives the following definition of a business model from Saul Kaplan of The Business Model Innovation Factory:
“A business model is a story of how an organization creates, offers and receives value.”
By creating value by creating a Unique Value Proposition and delivering a Solution. You get some of that value back in the form of Revenue Streams .
And while in the case of direct models, the situation is a little easier, since the story is always the same. How your users become your customers – nevertheless. Each business should be able to tell it in its own way.
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