Business Model Canvas is a basic tool for defining the way of the functioning of a business. It is a simplified model of a business plan, which is used to verify the quality delivered to clients based on the market conditions. The model enables you to logically examine the relationships within your activity, take a close look at your own proposition and judge it rationally. Business Model Canvas is also a kind of a test – is your business matched with the clients’ needs, and is your proposition profitable?
Alex Osterwalder, the creator of Business Model Canvas, listed 9 business canvases important from the perspective of running a business:
Business Model Canvas:
Business Model Canvas is mostly used to define the way of functioning of the business and verifying the value it creates. BMC is said to be used by enterprises that already exist on the market and want to enhance and organize their activity. Needs of startups have contributed to modification of this model. That’s how Lean Canvas came to be. It’s a model that’s more about product development, finding the client’s needs and solutions. It is used most often when you introduce a new idea to the market, because as the idea’s creator Asha Muray says, it is based on focusing on your own resources.
It is estimated that 90% startups in Silicon Valley fail. CB Insights did a study on 101 startups, analyzing 20 main reasons for their failure. The biggest mistake was the mismatch between the solution to the market need. Moreover, in the first ten, apart from the issues with financing, the following things also appeared: wrong team member selection, competitors, weak product, business model and marketing. All these elements are part of a bit complex question, which is strategic management of a company. That’s why after the initial sketching of the business activity and checking the logic behind the relations, you need to enhance this basic sketch with a more in-depth analysis. Lean Canvas is a starting point for startups which helps you validate your idea.
There are 4 aspects that make Lean Canvas different from the Business Model Canvas. Namely:
Problem – what problem does your product/service solve? What does it makes better or easier, what does it give your clients? What is the main frustration that is solved, what client needs should we focus on? The accurate diagnosis will help you avoid the risk of mismatching your proposition with the market needs. At this stage, you can also characterize your main competitor offering their product/service to the same target. It will let you not only perform comparative analysis in terms of competitive advantages, but also find an alternative satisfying the needs of your mutual clients.
Solutions – do you know in which way your business solves the client’s problem you defined earlier? In what way does it offer value? When running a business, LC lets you estimate when the product will be ready to meet the basic need of your client and when it will be minimally ready for the market (MVP – Minimum Viable Product).
Measurements – selection of client’s activities that will be a value to your enterprise; in which way you’re going to define success and which parameters are going to determine it; will they be measurements related to cashflow, or rather traffic, recommendation, performing a certain action; which short- and long-term effects will be achieved to the benefit of the business.
Unfair competition – is the way in which the project will be protected from the competition. You need to take care of protecting it from being copied or stolen. LC also lets you analyze what makes it advantageous over your competition, what makes it unique (maybe it’s related to a unique skill, knowledge, contact, infrastructure or possessed resource) and how difficult it will be for the competition to copy it.
The advantage of these models is focusing on keystones that are important from the business perspective. In a clear way, you can describe the basic functions, which are essential. Thanks to these models, you can notice the flow between separate elements, the relations between them and their logic. At this stage, you should see all inconsistencies stemming from not enough specification and incoherence of your idea. BMC and LC make it easier to evaluate the idea and verify the assumptions. You need to remember, however, that filling out the canvas should be the starting point, a sketch of the reality in which you’re going to operate.
From the strategic management point of view, you should then complement your analysis with more detailed descriptions and strategic goals with success measures. The cards above don’t answer to questions about what the micro- and macroeconomic environment conditions (SWOT and PEST) are, or what kind of personas are in our target group. Let’s notice that they also don’t discuss the marketing aspect of designing a business, connected with creating the brand’s identity (which is often decisive in choosing a given company). Bear in mind that these canvases are good models, but not nearly enough to skip the aforementioned 90%.