Business Model Canvas and Lean approach

Maria Nikolou, PhD, MBA

Senior Programme Manager

Entrepreneurship Centre,

Saïd Business School

28th October 2014

Business Model Canvas

and Lean approach

General facts and ideas…

Start-ups are NOT just smaller

versions of large companies!

Start-ups search for business models

NOT execute known business models.

‘A start-up is a temporary organization design to

search for a business model.’

- Steve Blank

Business model

• Write a business plan

• Pitch it to investors

• Assemble a team

• Develop a product/service

• Introduce a product

• Start selling

Launching a business…

• Write a business plan

• Pitch it to investors

• Assemble a team

• Develop a product/service

• Introduce a product

• Start selling

Launching a business…

Old way:

• Elaborate planning

• Intuition

• Up front investment

in development

New way:

• Experimentation

• Customer feedback

• Iteration or pivot

Higher risk Lower risk

Process of starting a company

Lean Start-up approach

Lean start-up

‘It is like driving at night in the fog. You can

only see as far as your headlights but you

can make the whole trip that way.’

- E. L. Doctorow

There’s no ABC process16

A start-up is a pile of assumptions.

The faster you bounce these assumptions off the

market, the faster you will progress.

What is progress?

Progress is:

Learning from the customers. ✓

Not building stuff and planning in isolation. ✗

The Number 1 thing you need in order to have a

business is:

CUSTOMERS!

You CANNOT plan under uncertainty

so you need a way to search and

acquire data.

Launch fast and iterate…

“If you are not embarrassed by the first

version of your product, you have launched

too late.”

- Reid Hoffman

Tools and methods

Summarize your hypothesis

Customer development

Understand your customers

Minimum Viable Product

Be agile and launch fast

A. Osterwalder & Y. Pigneur

You sell your value proposition….

Value propositions are not just a list of features:

It is how you create joy or alleviate pain!

To a customer segment….

It is better to have multiple specific customer segments

than a generic one.

Who you reach through some channel….

Channels:

- How they hear about your product?

- Where they will actually buy it?

You want to create an ongoing relationship

to create retention and lock-in….

- How do you make sure they choose your product again next time?

- How do you increase lock-in and retention?

That’s how you make money…

Revenue Stream;

- What value are your customers paying for?

- Where is your revenue coming from?

The left side of the canvas…

Innovation on the left side of the canvas is about managing

the costs.

It is how you create your value proposition.

What is the activity

so strategically

core to your

business that you

would never

outsource it?

To create the value proposition, you do certain Key Activities

To create value proposition…

What are the core activities required to deliver your

value proposition?

You do certain key activities.

Using your key resources…

Key resources are what others will need to replicate in

order to compete with you;

- What makes your business unique?

Anything you don’t do yourself…

Your company has certain core competencies used to create and deliver the value proposition. Everything else can be outsourced.

You get from a partner.

• Print it out and put it on the wall

• Use different colour post-its for each customer

segment; explore lots of possibilities

• Then focus on one customer segment and fill the rest

of the canvas.

• Use as few sticky notes as possible; refine & reduce

• Focus on quick communication, not perfect

representation

Tips on using the canvas

Changing something changes everything.

You can’t think about any one part without

thinking about the rest.

External environment

Rivalry

existing

competitors

Bargaining power

of suppliers

Threat of new

entrants

Threat of

substitutions

Bargaining power

of buyers

Michael Porter’s five forces analysis

Case Study: Google

Why do

Chrome and Android matter so

much to Google?

Searchers

anything Searchers

.000X / search

So who is paying?

anything Searchers

.000X / search

anything Searchers

.000X / search

Advertisers

anything Searchers

.000X / search $ / click

Advertisers

anything Searchers

Advertisers

effective

advertising

anything Searchers

Advertisers

effective

advertising

Measurable

anything Searchers

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effective

advertising

Measurable

Any budget

anything Searchers

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effective

advertising

Measurable

Any budget

Big audience

anything Searchers

Advertisers

effective

advertising

Big audience

anything Searchers

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effective

advertising

Big audience

Those are the basics

how do they get and keep users?

anything Searchers

Advertisers

effective

advertising

Big audience

anything Searchers

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effective

advertising

Big audience

anything Searchers

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effective

advertising

Big audience

anything Searchers

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Seems weak.

When the answer seems

suspicious, keep looking.

When you searched for something today,

why did you use Google?

anything Searchers

Advertisers

effective

advertising

Big audience

anything Searchers

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effective

advertising

Big audience

anything Searchers

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effective

advertising

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anything Searchers

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effective

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anything Searchers

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anything Searchers

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It’s the

default

The default? Where?

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

Browser

partnerships

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

Browser

partnerships

$X00 M / year

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

Browser

partnerships

$X00 M

/ year

Why do

Chrome and Android matter so

much to Google?

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

Browser

partnerships

$X00 M

/ year

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

Browser

partnerships

$X00 M

/ year

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default Mozilla’s

Firefox

Apple’s

Safari

Browser

partnerships

$X00 M

/ year

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

$X00 M

/ year

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

$X00 M

/ year

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

$X00 M

/ year

Build a

browser

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

$X00 M

/ year

Build a

browser

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

$X00 M

/ year

Build a

browser

Our own

browser

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

$X00 M

/ year

Build a

browser

Our own

browser

default

search

anything Searchers

Advertisers

effective

advertising

Big audience

It’s the

default

$X00 M

/ year

Build a

browser

Our own

browser

default

search

etc...

The business model holds the answer;

If Google didn’t win with Chrome

and Android…

they would be forced to spend a

fortune on partnerships

(and might even lose their whole

business)

Customer Development

Minimum Viable Product (MVP)

Customer Development

Save your time and energy…before you build

anything:

Find customers (early adopters)

confirm their intend to buy.

Talk to people

How do you know it’s bad data?

Compliments

That’s a great idea! I love it!

Generic comments

I usually… I always…

You should include feature X and Y and …

Common knowledge

Data you could find through desktop research

Demographics

Why conversations go wrong…

When we ask people about our idea:

We feel

like we’re

scientific

But really,

we’re just

fishing for

I have this awesome idea for a

business that I’ve been

working on for months…

Do you like it?

Because:

they don’t have a strong opinion about it,

they don’t want to discourage you,

they don’t want to keep talking about it for

another hour…

If you pitch your idea,

most people will lie to you!

What you DON’T need:

Formal meetings

Business cards

Interview scripts

To pay people

An hour or more

What you DO need

1.To know what

you want to learn

2.To ask about

their life

What you need to do:

Know what information you need to know.

Pick customers you have easy access to and have a

casual conversation.

Don’t start a conversation by talking about your idea.

Don’t try to convince them that your idea is great.

Talk about their lives; ask about facts: past actions not

future one!

Listen more and talk less.

Remember…

“No idea survives its first encounter

with the customer!”

-Steve Blank

The simplest product you can build to

test a critical hypothesis of your

business.

Minimum Viable Product (MVP)

I have a crazy product idea and the

manufacturing process is expensive.

How do I test it?

Summary

Use the Business Model Canvas to:

Organize your thinking

Map the different aspects of your business

Track your hypothesis

How do you convert hypothesis into facts?

Talk to potential customers;

Design experiments

Run tests

Gather data

What do you do when the hypothesis

don’t match the reality?

You pivot:

change one or more business model

components and try again!

“It is not the strongest of the species

that survives nor the most intelligent but

the one most responsive to change”.

- Charles Darwin

Questions?

Thank you!

Useful references

The lean start-up by Eric Ries

Business Model Generation by Alex Osterwalder and Yves Pigneur

Business Model Canvas Explained

http://www.youtube.com/watch?v=QoAOzMTLP5s

The Mom Test: How to talk to customers & learn if your business is a

good idea when everyone is lying to you; by Rob Fitzpatrick.

FounderCentric; http://www.foundercentric.com/

Crowdfunder; http://www.crowdfunder.co.uk

KickStarter; https://www.kickstarter.com/?ref=nav

Wobble Bowls by Speechless Studios;

https://www.kickstarter.com/projects/speechless/wobble-bowls-by-

speechless-studios

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