Learn the Concept of Lean Canvas for your Startup
How often have you been told or guided to write a business plan when you have tried to communicate your startup idea with someone? Discussions on the significance of a business plan will attract few polls in its favor and few against it.
Well, to cut the long story short, business plans are not at all necessary at the ideation stage. In fact, to write a well-researched business plan, sometimes you may need to spend weeks which results in a waste of time. One of the major drawbacks of writing a business plan is that it is never updated and almost never read by anyone.
In the words of Steve Blank,
“Business Plan: a document investors make you write, that they don’t read”.
What is a Lean Canvas?
The lean canvas is a single page business plan template using which you can break down your idea into its key assumptions. Created by Ash Maurya, It is an alternative to writing a business plan.
“My main objective with Lean Canvas was making it
as actionable as possible while staying entrepreneur-focused”
– Ash Maurya
Why Lean Canvas?
There are several reasons of using lean canvas instead of a business plan:
- Lean Canvas helps you to break down your idea into its basic assumptions making them editable and readable.
- It has been adapted from Alex Osterwalder’s Business Model Canvas and replaces complex business plans with a portable and accessible 1-page document.
- It emphasizes more on problem-solution which is the primary and foremost requirement of any startup before they reach the stage of product-market fit.
- The hypotheses of your business model are captured on a single page. Hence they can be easily pivoted and updated. This makes the lean canvas quite suitable for startups.
- It helps to prioritize the riskiest assumptions making the canvas more actionable.
- Lean Canvas emphasizes on prioritizing your customer-problem-solution foundation in order.
Lean Canvas v/s Business Model Canvas –The Difference
Difference in Application
Business Model Canvas is more suited to businesses that already have a physical presence in the market. It helps such companies to see their business on a single page, ease their planning and execute the next phases successfully.
While in the very initial stages, startups do not have a physical presence in the market and when they set out to fill the business model canvas, many of the blocks in the canvas remain unfilled.
The most important thing for the startups in the very early stages is to remain lean i.e. avoid any wastage and prioritize their riskiest assumptions. Lean Canvas enables startups to do just that and puts greater emphasis on Problem/Solution rather than product-market fit. Also, it helps startups describe their business models easily.
Difference in Layout
At the first look, both the canvases look quite similar. However, Ash Maurya took out four boxes from the business model canvas and replaced them with new boxes in the Lean Canvas.
Key Activities & Key Resources have been removed because these boxes are more “outside-in” focused. I.e. they help outsiders to understand what the startup is doing.
Ash Maurya is an advocate of starting every product with a direct customer relationship through interviews or observations. According to him, these relationships seem better captured by the existing Channels box, and therefore he has replaced the Customer Relationships box in Lean Canvas.
The innovative startups usually have an untested product and therefore pursuing key partnerships from day one can be a form of waste. Thus Key Partners has been removed from Lean Canvas.
Structure of lean Canvas
Following is the brief explanation of each component:
In this box, the top three high priority problems faced by customers are listed. Without a problem worth solving, there is no solution.
Most startups fail due to a lack of “problem understanding” from the beginning. They spend their time, effort, and money building a wrong product (one which no one wants or that does not solve the high priority problems).
The problem and customer segment are connected since the problems intended to be solved are faced by customers after all. One thing to be remembered is to create a different canvas for different target segments if there are multiple customers’ types.
Unique Value Proposition
A unique Value Proposition is a promise of value to be delivered to the customers. This conveys the main reason for a prospective buyer to buy the product from you and not from others.
Understanding the unique value proposition is all about knowing the reason why you are different and worth buying from.
There are better chances of getting a possible solution once the problem is understood. The solution that is actually needed by customers is arrived by building a Minimum Viable Product (MVP). While building an MVP, customers are always kept in a feedback loop and interviewed to arrive at the product they want.
These are the measurable key parameters that startups need to care about at any given time. There are only a few key metrics that matter at any point in time. It can be deadly for a startup if it fails to identify the right key metric— leading to undesired results like running out of resources while chasing the wrong goal.
Channels are the ways to reach out to your Customer Segment. Free as well as paid channels can be used to reach your customer. Examples of channels are social media, email, trade shows, TV, radio, blogs, etc.
Variable as well as the fixed costs are to be listed here including the operational cost of the business such as the cost to build a landing web-page, cost to interview the customer segment, monthly cost to run the company, cost of market research papers, etc. It’s necessary to know these costs along with the revenues to arrive at the approximate break-even point.
In this block, you put your revenue model – freemium, ads, subscription, etc. and outline the assumptions such as break-even point, gross margin, etc.
This is the competitive advantage or barrier that prevents new entrants in your business. If you lack the defensive mechanism against the copy-cats, they will wipe you out of the market soon.
Usually, the first time entrepreneurs think that the first-mover advantage is an unfair advantage, though the opposite is actually true. As Ash Maurya says, “Being truly first to market is not an unfair advantage, but an unfair disadvantage.”
Few examples of unfair advantage are insider information, a dream team, large network effects, etc.
To Wrap Up
Seeing the potential of Lean Canvas, it will surely inspire and benefit many more startups. This effective & actionable tool is undoubtedly the first choice of startups especially those at a very early stage. I strongly recommend such startups to use this tool and navigate themselves to faster outcomes.
Do you feel there is something more to be included? Kindly write to us. We will be more than happy to consider your valuable suggestions.