Many start-up bosses have unlimited ideas, but how to implement them in a systematic way? I would describe Lean Startup Canvas as “startup must-see”, which provides a framework to help start-up bosses building a profitable business model for the company, and more importantly, helps the company finding its Unique Value Proposition (UVP).
Ash Maurya, author of “Running Lean”, developed a Lean Startup Canvas for start-up bosses. It uses 9 interrelated elements as a starting point and presents them in a visual way. Through this framework, companies can think through their company’s positioning.
1)&4) Problem & Solution
It is recommended that start-up bosses think about 3-5 problems that customers are facing, and 3-5 solutions that the company can provide. The problem has to be specific with its impact, its significance, and even the emotions it evokes. After identifying the problems faced by customers, describe the solutions the company can provide.
2) Target Customer Segments
Similarly, start-up bosses set 3-5 target customer groups. The target customer group can be divided into age, region, behavior, interests, activities, values, beliefs, etc., and may also differ depending on the B2B or B2C industry. The potential markets can be unlimited yet resources are limited. After setting the priority of the target customer groups, you can focus your resources, and put effort into understanding the domain know-how of the market. Only then can the team be exploring the market more effectively.
3) Unique Value Proposition (UVP)
What unique market value does the business provide? What is unique about the product? What are the attractive factors that customers will buy? It is recommended that business owners think about what is the biggest differentiator between your products / services and those offered by the competitors? UVP is the core value of the business and must clearly communicate how the product or service stands out and solves the problems faced by customers. A successful UVP is the key to a company’s long-term success.
5) Distribution Channels
What are the channels used to reach the company’s target customers? Many business failures are not because the products are not good enough, but because they are unable to reach the target customers and do not operate good distribution channels. Business owners can organize different distribution channels, including direct and indirect, free and paid, automated channels, ready-made communities, etc. In addition, you should also consider whether you have created content that can attract your target customer base, and set a budget according to different distribution channels.
6) Revenue Streams
Business owners often ask a question, are the products and services priced high enough? I think if the business owner fully understands the company’s UVP and market positioning, the better he or she can establish a reasonable charging model and pricing. The charging model and pricing are closely related to the company’s target customers.
The sources of income can be one-time or ongoing, and can include: selling products and services, selling assets, subscription fees, usage, licensing, commissions, advertising fees, franchise fees, leasing fees, interest rates, etc.
7) Cost Structure
The business owner lists the 3-7 most expensive fixed and passive costs. What are the costs involved in product development, launch and operation? Common costs include: employee salaries and benefits, research and development costs, equipment, marketing and promotion expenses, licensing fees, franchise fees, taxes, etc.
8) Key Metrics
Business owners list the 3-5 most important business indicators to define and measure the success of their products or services. Business metrics don’t have to be financial or revenue-related; they can also be customer value. Each business model has different key indicators to evaluate current operating results, and different product cycles have different indicators used to measure them.
Common indicators are financial (profitability) or product usage (usage, quality, scalability). The following are other common indicators: active users, customer volume, average payment per user, turnover, gross profit margin, marginal profit margin, renewal rate, customer satisfaction, etc.
9) Unfair Advantage
Here is the most difficult part for the business owner, what’s the competitive advantage of the company? What are the competitive advantages of a business that cannot be copied or easily replaced? Competitive advantage is the most of an enterprise and the key to its sustainable development and profitability. Competitive advantages include: switching costs, brand, patents, cost advantages, government relations, etc.
Conclusion
The Lean Startup Canvas is just a starting point. To avoid indulging in empty talk., startup bosses must be pragmatic. Like every other management model, there are pros and cons to Lean Startup Canvas. When business owners set targets, they should base on the specific customer values. However, start-ups have not yet had practical experience. The target customer group is set based on the business owner’s understanding of the market, which may be different from the reality. In addition, the Lean Startup Canvas does not include operational risks, and startup bosses must take operational risks into consideration when making decisions.
Startup is an evolving process. I recommend startup owners revise the Lean Startup Canvas according to the actual situation and revisit the company’s profit-making business model from time to time.