Category Archives: Business Model Canvas

What is a Business Model Canvas?

The Business Model Canvas is a work sheet
The Business Model Canvas is a work sheet

The canvas is a central tool for capturing what you learn during your customer discovery process. You start by making a best guess at filling out each section, knowing you’re almost certainly mistaken. Then you go out and talk to people, focusing initially on defining your problem, solution and audience (Value Proposition, center box). Getting this right is the ultimate goal of the HTRLaunchPad process because accurately defining a value proposition means you’ve found your scalable, profitable business model.

But there are nine boxes on the canvas and each contributes to your knowledge base. You may, for example, be discussing pricing and find that the market wants the service bundled with other services by a third party (channel). Even if this was not the focus of your conversation it is valuable and what you learn should be added to the Channels box on the Canvas.

As you proceed there is going to be a lot of erasing and rewriting of your work sheet. Things you assume are correct early on get revised or completely changed. And during the process the Canvas serves as a snapshot of the knowledge you’re accumulating and the progress you’re making. It may even tell you that you’re not making progress and have to consider a change in plans (pivot).

When you’ve had your 120-150 conversations your Canvas will represent your business model. You should have a much clearer idea of how you market, operate, generate revenues, your financial requirements and more. It all fits into the Business Model Canvas which becomes, at that point, a model for your operational business plan.

It’s a deceptively powerful tool that forces entrepreneurs to succinctly define all the important pieces of their business on one page.

The ‘One’ Problem (Value Proposition)

Early in our program the teams all seemed to trying to solve multiple problems for multiple customer segments. This multi-sided approach is very difficult execute on because your focus is all over the place and customers sense this. And they are certain to ask themselves if you’re serious about their problem. The challenge during the first half of your discovery process is to find the one problem you should be tackling and focus your resources on it. But it has to be the right problem. Fortunately the goal of the LaunchPad process is to help you find that ‘one’ problem. Let’s try and define it:

  • It is a big enough pain or pleasure point that it is directly in front of the customer (there are emotions involved!)
  • The need is immediate, as in ‘I want it now!’
  • A lot of people have the problem
  • It needs to be solved on a frequent basis for multiple users
  • You can make money solving it, and it is clear how and when
  • It is possible to (easily) reach those in pain or seeking this pleasure
  • You can actually solve it, in a cost effective manner

Your canvas is really a worksheet for finding this one problem and determining if there is a business you can build around it. As I mentioned in another post, this is why the canvas starts out messy and busy. However, as you refine and learn, you’re also eliminating until a real, marketable problem emerges. When your canvas has clarity, you are nearing a scalable, profitable business model. And you should be able to simply articulate it to others.

Discovery: It’s a numbers game

Keep piling up those numbers! *
Keep piling up those numbers! *

During weeks 4 and 5 of the HTRLaunchPad program we saw confusion reigning with several of our software teams. Two completely changed course and others executed pivots to more defined markets and more focused solutions. During the last two sessions, weeks 7 and 8, things began to noticeably tighten up, in a good way. Minimum Viable Products become much more focused, the value propositions had much clearer value and we started to see the business model canvas worksheets become less complex and more understandable. Progress!

But we also noticed a direct correlation between the number of customer contacts being made and the amount of progress. Simply put, more contacts means faster progress and a much higher likelihood of success. You can understand all the principles of the launchpad methodology, make lots of educated guesses and fill out a canvas but it is all a meaningless exercise if you don’t get out and talk to people, lots of people. It is, to a high degree, a numbers game.

I have contended since my first introduction to this methodology that if any business or organization spoke with 120-180 customers over a three month period (10-15 contacts per week) and made sure at least two people were in on each conversation, they would experience a huge change in their understanding of their business. When you add in the methodology for getting the most out of these conversations, they become even more valuable.

Market research and surveys are great tools but live conversation reveals much more, including what you don’t know, how decisions are made and what people will pay for viable solutions. They will also tell you when your assumptions are wrong, before you invest time and money into them. This is why launchpad stresses that failures are a form of success: They keep you from exhausting resources on dead-end projects.

The message is clear: talk to more people every day.

*Image courtesy of free images.co.uk

Mentor Point of View: Focus

focus1
Time To Zero In!

This morning I had a long mentoring session with one of our founders and afterwards realized that nearly all of my input was about focus. Specifically, choosing a market, a user-profile and a simple minimum viable product (MVP) with the emphasis on ‘a‘ as in a single one of each. We’re nearly halfway through the classroom sessions and most teams are still struggling with this and looking at pivots, as I discussed in my last post. My general advice at this stage is that you should be starting to understand how to refine your business model down to these segments: One market, One customer/user profile and one example you are showing people.

For the market, consider these filters:

  • Size
  • Accessibility
  • Need
  • Ability and willingness to pay
  • Urgency

Choose the one that has all of these characteristics and focus your model on it. If you don’t have one that meets these criteria, your idea is probably flawed.

For the customer/user:

  • Early adopter
  • Technology- friendly (it doesn’t scare them)
  • Willing to accept imperfection
  • Willing to refer you to peers
  • Wants to buy

These are the people within the market that you want to focus on.

For the MVP:

  • Only enough to demonstrate how it solves the problem
  • Build the user interface, don’t worry about the code and underlying data
  • Build your story- in this morning’s case, they needed to populate their demo with content to show how it works

Here’s the deal: Don’t spend time and money building functionality until your business model is complete and validated. Getting the user-interface and story right makes the actual development process much easier.

So, it’s time to focus on these three things. Let everything else go, especially the ideas you love that don’t have a market, a qualified user or an easily understood solution.

Elevator Speech = Value Proposition

Our Roc Control Innovations team posted a blog post about their search for an elevator speech. I’ve done some coaching in the comments (which were in moderation as I write this, but should be live soon). Here’s why this is important. Getting your value proposition down to one sentence means you are very close to discovering your business model. I took their speech and refined it down to a sentence and then added a few variations for when they are talking to non-railroad people (in the comment chain).

So you get something like this:

“We offer railroad operators reliable, cloud-based switch and crossing gate status reporting at a fraction of the cost of existing systems.”

Now if your audience are not railroad people you might want to add a note about safety issues:

“This is a safety issue. Unknown switch positioning and  stuck crossing gates are a leading cause of railway accidents.”

The audience will get it.

I would like to see every team phrase your value proposition, on your canvas, as an elevator speech. This one defines the audience/market (railroad operators), the problem (switch and crossing gate status), the solution (cloud-based reporting), and the value/return on investment (fraction of the cost of existing systems, implied safety improvements).