An essential element any startup needs to succeed is a clear business plan. Entrepreneurs seeking a better way to capture the essential elements of an effective business plan should consider using a lean business model canvas, which visually describes and links those elements together in a succinct format.
A lean canvas is a one-page business model template that helps entrepreneurs identify the nine key building blocks of a successful business model (visually represented as nine boxes), that allow them to be more agile and get to market faster.
Those nine key elements are: Problems that your customers are facing, how your business helps them solve those problems, key metrics to track, your unique value proposition, your competitive edge, channels to reach your customers, and identifying your target customers, your costs, and your revenue streams.
I was first introduced to the concept of a business model canvas in 2012. It seemed foreign in a world of detailed and extensive business plan documentation processes and rigorous Stage Gate steps to create new products and services. It seemed so peculiar that my team rolled up our sleeves with vigor and delved deep into this new “nine-box” approach to gain greater understanding.
The business model canvas helps teams develop, communicate, and improve their business models objectively and efficiently. I’ve used the canvas approach with greater frequency in both mature companies and in startups. (For detailed canvas images and additional background, search for the works of Alex Osterwalder and Ash Maurya.)
A Canvas Approach for Startups
The lean canvas approach is aimed at startups. This canvas still has nine boxes adapted from the business model canvas, but is customized to the unknowns and inherent risks faced by startups.
The lean canvas begins in the first box on the left-hand side of the table with a statement about the specific problem that your company is targeting and the existing alternatives.
When I meet with startups, I begin with questions about their problem and the alternatives. I look for a crisp and well-defined statement and seek to know if their identified problem is something for which customers want a solution. Also, is this problem solvable and will customers pay for a solution?
It helps us to stop jumping first to the solution and gives a strong foundation
for their company’s existence and purpose. I am amazed at how many startups have passed over this lightly and lack that specific response to these questions as it is foundational to a successful business model.
Unique Value Proposition
A central element of the lean canvas approach is identifying the unique value proposition (UVP) of your business model. The UVP statement is defined at the literal center of the canvas for a reason and should not be understated. The UVP is a statement of why you are different and worth it to your customer.
If a startup cannot define their value proposition based on the problem they target and link that to their customers, then they will most likely fail. Words used to describe the UVP must be chosen carefully by capturing your customers’ pains and ways to alleviate them. Building the UVP statement into the canvas allows the business to test and update its business model and remain agile.
Startups should begin with a lean model canvas nine-box and build a first draft and identify the areas of highest risk. Then gather data from your customers to learn more and make adjustments or pivots to address key challenges.
Your full canvas with its cost and revenue estimates gives you quantitative feedback as you progress. The lean canvas approach is a great way to capture the critical elements of your business that will yield success. You will still use time tested business principles to complete each part of the canvas, but the difference is that you will have it captured on one page and it will be concise, portable,
and testable.
Nathan Pascarella is the director of Hypertherm Ventures in Hanover. He is also a board director for the NH Tech Alliance, a member of the Alliance’s Startup Committee, and an adjunct facutly member at the UNH Paul School of Business.
