You may have a great idea for a product or a new business, but how can you be sure it will work? As we all know from life experiences, even the best idea requires brainstorming and hard work to become a good business strategy. Developing a good strategy for a new idea or business can take weeks or months.
To streamline working on these strategies, you can use the Lean Canvas planning technique. This will assist you in rethinking your business plan and focusing on the important elements while excluding the completely irrelevant ones.
What is the Lean Canvas model
Business Canvas is a visual model that entrepreneurs can use to register an existing company model or create a new one. It was created by Alexander Osterwalder in 1995, with business owners in mind. It was meant to be an alternative to the standard business plan, which was too rigid - you can learn on how to create a business plan HERE. The Business Model Canvas is a two-dimensional representation that allows entrepreneurs to present their vision of their company on a single sheet.
But what is the Lean Canvas model? The Lean Canvas is a leaner, simplified version of the Business Model Canvas, particularly useful for start-up companies. Its creator, Ash Maurya concluded that when creating a business plan, many things are unknown.
The main problem for most companies is operating in an unpredictable environment. For example, many people are fans of the SWOT analysis—but let’s be frank: most companies don't know their weaknesses or threats, which makes the entire model untenable. That's why Lean Canvas focuses on strategies and possible problems, allowing you to adjust your strategy to meet emerging challenges.
How categories work in the Lean Canvas scheme
Problem
What is the issue your customers are facing? In this box, write down the main challenges that your various customer groups are facing and which you want to address. The product and service of your business must address the needs of your customers.
For example, initially you might think that traffic jams in the city center are a problem. But the problem, after all, is really that there are too many cars on the streets, causing people to miss work and lose productivity. The jams and high gas prices are the symptom, high traffic is a problem.
Customer segments
To understand how you can deal with the problem, you need to determine who your target audience is. In the customer segment section, you can write down multiple customer groups. Since your customers and their problems are interrelated, you will most likely have to consider both at the same time.
In our example, traffic jams affect commuters the hardest—and, of course, people who own cars and don't use public transportation. However, people responsible for the high traffic, such as local governments or road departments are also our customers.
Unique value proposition
This section is at the center of the Lean Canvas template because it is what you want to give your consumers. It defines the distinct value and advantage that your company has. Think about what differentiates your brand, product, or service from the competition who is trying to address the same challenges as you.
Solution
What solution are you going to offer to your customers' problems? You won't always find the perfect solution right away, but with Lean Canvas you'll be able to get the brainstorm going. It all depends on your ideas, market knowledge and willingness to work with your customers. Listen to your customers and try to put themselves in their shoes.
In our Lean Canvas example, you understand that car owners want to get directly to their workplace, and not have to wait for a bus. But what if, for the price of one ride, they could, for example, get on an electric scooter near their home, get to the bus or metro stop, take a comfortable ride, and from the station get another bike or scooter to the office?
If you manufacture scooters yourself, your brand is precisely what makes your unique value. If you create applications - it’s your programming crew.
Channels
Decide what channels you will use to reach your customers. Put the marketing and advertising strategies you'll use into the Lean Canvas template, from online marketing such as SEO to more traditional media such as radio, print, and television.
In our Lean Canvas example, a lot depends on the city partners—but since your system will be present in the urban outdoor space, you’ll need to advertise with posters and banners. What's more, local radio and television will certainly give you some free publicity if the plan is implemented.
Revenue streams
Consider how you will price your service and where your money will come from. Your pricing plan is an essential part of what you’re selling, and you need to extensively research and test it. What would be people willing to pay for, and what is the least you can charge to meet your goals? Would you need a loan to start your business?
You want the entire ride and commute to be integrated—the city and bus lines can share some of the profits. Your model relies on the fact that renting a scooter can be very expensive—but a one-time ticket purchase will be a much smaller expense for the end customer.
Cost structure
These are the expenses your company will incur to operate and advertise your product. This can include, but is not limited to, market research, technology, and employee expenses. With an idea of one-time and regular expenses, you can try to calculate how many customers you will need to come out ahead.
In our example, you’ll need to not only manufacture and operate the scooters, but also set up a system to manage them, hire employees to transport them to key locations and, of course, advertise our services. The scooters should be electric, so charging them may also be a cost—and we also need to think about the environment and infrastructure.
Key metrics
Your key indicators will be used to track how well your business is doing. You can choose some important activities to monitor closely to observe how people are engaging and using your company and its products/services.
One can measure the popularity of scooters using the number of rides—they will be easy to track down using app and localization chips. It's also a good idea to use statistics and check the commute time to and from work. In this case, either the product will work or it won't—using scooters on a smaller scale as a trial run might not bring in the complete metrics we need.
Unfair advantage
The thing you have that no other company has is your unfair advantage. It cannot be reproduced or purchased, so it will help you stand out from the crowd. This is the last and most difficult stage of the Lean Canvas procedure. Your unfair advantage can be anything from well-trained employees to expert endorsement.
What do you have that another scooter company doesn't? Why are you the ones who can conquer the market? For example, maybe you know your city, and know how it works. It's worth thinking about and discovering something you specifically can achieve that others can't.
Why use the Lean Canvas template?
This model of analyzing the situation focuses on understanding the problem the company is trying to deal with. You immediately analyze solutions and decide how to verify them. It allows you to check unknown situations, assumptions and missing data.
Of course, as with SWOT analysis, you don't know what you don't know. Lean Canvas analysis often focuses on internal issues and does not take into account competitors or random events such as natural disasters.
Many experts also say that Lean Canvas does not consider tools or resources. In doing so, you can come up with solutions without providing the means to implement them.
Entrepreneurs can use Lean Canvas to focus on identifying challenges and solutions. It is meant to support start-ups and help entrepreneurs develop their ideas. It's a good way to analyze problems and create strategies, but real life problems can always surprise you.
How to use Lean Canvas
Lean Canvas is a good exercise for brainstorming in a team—it's worth setting aside a separate meeting for this. Of course, you won't have all the information you need at this point. However, the canvas will help you determine whether the concept for the new project makes sense and what to do next.
It's worth remembering to stick to the structure of the Lean Canvas template: limited spaces are easy to understand and encourage entrepreneurs to think carefully.
Since only limited space is available, condensing key ideas into the most relevant information is crucial. Your goal is to get to the important points when developing a business strategy—and that's the best way to apply the Lean Canvas.
