The Lean Canvas is a business modeling tool created to help deconstruct a startup idea into its key and most risky assumptions. Deeply influenced by the lean startup methodology, the Lean Canvas servers as a tactical plan to guide entrepreneurs navigate their way from ideation to building a successful startup.
The Lean Canvas is composed of nine building blocks, just as the Business Model Canvas. But, on the Lean Canvas, these blocks have their titles and purposes modified, in a logical order that begins from your customer’s problem. Let’s understand better how this modeling system works.
Why use the Lean Canvas?
It is really important, for any kind of entrepreneur, to put their ideas on paper, so it’s possible for every stakeholder to be aware of the goals and threats of the project. That’s the best way to make everyone think of solutions and accomplish the aimed results. But this process needs to overcome two challenges:
- Translate your thoughts into some language. It is complicated to translate what’s in our mind into words, in a clear and assertive way. Often, the opposite takes place: everything gets even trickier when concepts must become something concrete and visible.
- The time this translation can take. Traditional business plans usually take weeks – sometimes even months – for elaboration. This may become a waste of time and energy. Especially when we consider that the market and the scenario where your business is can change in a few days. When we think of an unexpected crisis, they can transform drastically.
The purpose of Lean Canvas is precisely to solve both problems. Because this method is based on practical principles, with a simple user-friendly visual language, which allows the entrepreneurs to test their hypotheses more efficiently.
How does the Lean Canvas work?
Lean Canvas puts all the information you and your team need to visualize and analyze together, in a single canvas, eliminating unrelated and irrelevant details. The focus, here, is to avoid waste – of time, energy, processes, money – just as Lean Startup methodology encourages.
So, this modeling system is based, as mentioned above, on only nine building blocks, which are:
- Problem: when you want to sell a solution (whether a product or a service), there should be a demand, in other words, at least one identifiable problem. Every customer segment you are going to define has its own problems, and it’s your business’s purpose to solve them. You are going to build your whole canvas over this building block. This section, then, must contain up to three priority problems.
- Customer Segments: perhaps this is the first building block for you to establish. Because probably the first step to understanding your business will be to discover who your customer is. After all, you can only get to know what are the problems you are going to solve when you know the ones who face them. Thus, if there is more than one customer segment, you ought to develop one canvas for each.
- Unique Value Proposition: This block shows how your business differentiates from others, what the value your customer will only have through your product or service, and no one else. Therefore, list what makes your brand stand out over the competition – i.e., why your customer must buy from you rather than your rival.
- Solution: now that you know what and whose the problem is, it’s time to offer the solution. It must stand for the minimum set of functionalities and features (Minimum Viable Product) that allows you to deliver the value proposition from the previous block.
- Channels: here, you have to inform the means you are going to use to reach your audience. That includes all marketing, communication, and distribution channels that you intend to adopt, both from traditional and digital media.
- Revenue Streams: ask yourself “how much will my customer pay for my product/service?”. The price and the payment system was chosen are a very important part of your offer. That can mean the success or failure of your venture.
- Cost Structure: gather here all the costs needed for you to be able to sell your product. You should list all the expenses, from research and development to monthly fees and salaries.
- Key Metrics: it’s imperative for you to get to know what metrics you are going to apply when measuring your business’s performance. That’s the only way you may monitor the team towards the results.
- Unfair Advantage: ask your team “what does this business/product/service have, that no one else does?”. This is possibly the most difficult question in the whole canvas. The answer has to be something that cannot be copied, mimicked, or acquired – that is unique in the market. It’s challenging, but it’s an essential matter, mainly if you intend to use the canvas for attracting partners and investors.
As you may have noticed, we are talking about only nine blocks, very objective. Therefore, it is about a modeling method that can be concluded within 20 minutes! Can you think of something leaner?
The Benefits of Using Lean Canvas
Besides the brevity and objectivity of this 20-minute tool, there are other advantages in using the Lean Canvas, such as:
- Focus on the solution. Especially when compared to complicated typical business plans, Lean Canvas permit the stakeholders to adjust their focus on problem-solution relation. That makes the hypotheses simpler and clearer.
- User-friendly design. This one-page canvas encourages all the team members to take part in the development and fulfillment of ideas. Also, there is little space available – on purpose – what compels to reduce the analysis to what is completely fundamental, leaving aside unconnected and trivial data.
- From entrepreneurs to entrepreneurs. The method has been created by businesspeople. They are aware that the business plan is for the company owner and team – it will seldom be present to outsiders. Therefore, there is no need to waste time and energy in details and accessories.
What’s the difference between Lean Canvas and Business Model Canvas?
As the creator of Lean Canvas, Ash Maurya, said, one is not better than the other. They are just different. While the Business Model Canvas focuses on planning the business from a strategic point of view, Lean Canvas focuses on the customer-problem-solution relationship.
In practice, the difference between the two tools is just on the four blocks, which Maurya modified in Lean Canvas from Business Model Canvas. But this “small” change transforms the entire understanding of the business model.
Maurya’s objective, by modifying Business Model Canvas’s blocks, has been turning it into a more user-friendly tool, that didn’t need explanations from experts. One where you could simply read the titles to understand how the components are supposed to be filled out.
What building blocks have been introduced in Lean Canvas?
- Problem: most businesses that fail at the beginning of their operations choose the wrong product to be produced. They waste a lot of time, money, and energy on creating and developing a product that doesn’t really interest their audience.
To avoid that, sometimes it is easier to define what the problem of your customer is, what challenges they are facing that needs a solution. Thus, you will be able to develop a product which solves this problem and will not waste time in the wrong – and useless – product.
- Solution: having established the problem to be solved, then you can move to developing the solution for this issue. If you compare the space provided in each of the blocks – Problem and Solution –, you will see that the second one is half the size of the first. This is purposeful, to align with the idea of the Minimum Viable Product (MVP).
- Key–Metrics: the purpose of this component is to make the entrepreneur focus on the most important numbers of their business. Often, you can decide on a particular metric and practically ignore the rest, because this is the foundation of your business. The objective, therefore, is to find out what these key metrics are, so as not to spend time, money and energy on activities or resources that are not essential and that, more than that, may change in the very near future.
- Unfair Advantage: the unfair advantage is that factor that differentiates your business from the competition, capable of blocking the entry or expansion of your competitors in the market. It is, in simple words, that which cannot be easily copied or purchased.
Often, new companies don’t have – or fail to identify – their unfair advantage right away, so this block may end up going blank at first. But the component is there to encourage the entrepreneur to continue searching and working to find their unfair advantage, in order to protect it from the competition, especially from new entrants.
Which Business Model Canvas’s building blocks have been replaced?
- Customer Relationship: this component has been substituted partly by the Channels, the Solution, and the Customer Segment. Because you determine the solution to a customer segment’s problem and keep a relationship with that segment, through the channels.
- Key Partners: although some businesses essentially depend on partnerships, for the vast majority this is not true. Especially for beginning and unknown entrepreneurs, seeking partnerships right away can be a real waste of time and energy.
- Key Activities and Key Resources: These blocks are more for outsiders to understand your business than for you to make it work yourself. In addition, the key activities will only be discovered, indeed, during the operation, and only after your solution – your MVP – has already been tested.
As for the main resources, a good part of the new businesses, mainly the startups, are no longer focused on “physical” resources. More and more, it takes fewer resources to launch a product on the market. Again, this will only become very clear with the progress of the operation.
Different tools for different purposes
Check out, bellow, how differently both tools can be applied to business management:
- In simple words, we may say that the Business Model Canvas is more appropriate for those who are beginning a business – especially if that is not a startup – from scratch. On the other hand, Lean Canvas aims other activities, such as iteration, expansion or innovation startup development, since that focuses on problem-solution relations.
- Another difference is that Lean Canvas focuses straightly on the customer, by seeking to create value by observing their problems that need solution. While Business Model Canvas, to be used this way, needs to be combined with the Value Proposition Canvas, and you end up with two canvases instead of only one.
- This way, Lean Canvas is simpler than the Business Model Canvas, since BMC emphasizes the creation and building of a whole new business model from the beginning. And that’s why it’s so fundamental for the businesses that are coming out from scratch.
Lean Canvas, on the other hand, approaches the business as the product itself. So, the business model is not perfect yet. It is a lean framework, in progress, that can be iterated the same way you could do with a product.
- Besides, while Business Model Canvas has been developed to and by managers, Lean Canvas has been thought as an accessible tool for any kind of person, whether the entrepreneur or any other team member. That’s why the blocks have been simplified.
- For that same reason, the Lean Canvas can be used outside the marketing and management area, too. It is, actually, a tool that has been used by engineers, designers, and even high school students.
As may be seen, both tools, therefore are useful and efficient. As Maurya stated, there is not “the best one”. You must get to know what your objective is, regarding business modeling, and choose the alternative you believe will fit better to what you need.
Ash Maurya’s Lean Canvas’s Book
The book revolves completely around the main premise of Maurya’s Lean modeling: “life’s too short to build something nobody wants”, i.e., nobody should waste time, money, and energy on developing the wrong product.
The best way to do that, according to Ash Maurya is his book, is to achieve a product/market fit. And that is done based on innovative methodologies, including Lean Startup and its Lean Canvas.
Final Considerations about the Lean Canvas
It is important to keep in mind that the Lean Canvas is not a project for the entire lifetime of the company. On the contrary, it is about a method that permits experimentation. You and your team may test different combinations until you find out what the ideal business model for your venture is.
Never forget: it is always better to invest some time planning and experimenting, than building a product nobody wants.