If you're an entrepreneur (or non-profit leader for that matter) and you can't summarize your business model in a single visual that connects all the important dots, then you're going to have problems. Politics reign over clear-headed decision making. Fiefdoms rule the day. The tactics of day-to-day work are untethered from strategy. Ultimately you may be fine, but the pathway to success will be a lot slower.
If you're an investor, a one-page business model like Business Model Canvas or Lean Canvas should be part of your due diligence process. In fact, it can help unify what is often a fragmented process. It can and should be a collaborative tool to help the entrepreneur and the investor operate against the same set of expectations.
Why Another Version?
Let me say right away that I love the two dominant models out there today. My version is a response to multiple attempts to reconcile both while also trying to get important parts of the conversation into the model. My list of "Adjustments" below summarizes my reconciliations.
Alexander Osterwalder and Yves Pigneur of Strategyzer have pioneered this tool, and it's brilliant. Here's their version:
Ash Maurya has critiqued it from the perspective of the "lean startup" movement and offered his own version.
His adjustments have always rung true for me. Specifically, I love the way he amended the left side of the canvas to include problem, solution, and key metrics. This is naturally how my mind works through business models -- what problem do you solve, how do you solve it, and how do you know you're solving it?
It seems intuitively important to me to differentiate "UVP" (unique value proposition) from solution. The "Solution" is a conceptual statement that must clearly map back to the "Problem." The UVP is a marketing promise and gets you thinking about how you'll communicate to your "Customer Segments."
I also think that his inclusion of the Unfair Advantage is critical for startups. Small companies with few resources have to be very focused on this problem. If the solution is easily replicated by bigger companies with more resources, then that's a major risk. Identifying it early is critical.
All that said, my experience has led me to my own adjustments. Before I go into those, here's my version.
Adjustment #1 - Swim Lanes
You'll see on the left side I have vertically oriented text that indicates the thee different swim lanes of the model:
- Concept -- Problem, Solution, Value Prop, and Customer Segments are the core of a business concept. But that's all that they represent -- a concept. You believe these things to be true, but they aren't necessarily tested. That comes in the second swim lane.
- Execution -- I found it important to call out this swim lane because it focuses on taking concrete steps to prove that the Concept is accurate. To this end, it includes a time dimension (more about that later) and Execution Goal that provides the context for Key Activities and Key Metrics (the first from the original Osterwalder version and the second from Maurya's version).
- Capital -- How much is it going to cost to fund Execution? This seems vitally important to me. What are you funding (i.e., Cost Assumptions)? What Revenue Streams do you expect (i.e., Revenue Streams and Goals)? You should be able to quantify your assumptions for each of these boxes.
Adjustment #2 - Market Sizing
In my version, you'll see that I've separated Customer Segments from a box called "Reaching Customers." It seemed vitally important to me that you be able to describe your customer segments AND how you will reach them. These should be separate because their might be multiple ways to reach the same segment and vice versa.
You'll also notice that I bridge these sections with a Market Sizing box. How big is the addressable market of Customer Segments that you will be Reaching? This is an essential assumption to any new business, product or service. I want it on my version of the Canvas.
Adjustment #3 - Time Dimension & "Actionability"
A time dimension should be included in any Canvas. To me, it's what pivots the Canvas from a conceptual representation of the business to a living document that provides the context and meaning for all the important actions.
The Concept swim lane is what you're trying to prove. The Execution swim lane represents how you'll prove it. The Capital swim lane represents your capital needs and financial assumptions and goals. The latter two swim lanes have strong implicit time dimensions, which should be called out.
Adjustment #4 - Connecting the Dots
Osterwalder and Pigneur show how they use colored lines to connect different parts of their version of the model. For my version, this is a crucial exercise. You need to be able to connect dots through the model to make sure you're not missing anything. If you can't connect Problems, Solutions, Value Props, and Segments, you have big problems ahead of you. If you can't connect Customer Segments to Reaching Customers and to Revenue Streams, you really have problems. If you can't connect Customer Segments and Reaching Customers back to Activities and Metrics, you're not working on the right things.
That's my take on the Business Model (Lean) Canvas. It's a critical tool in how Think Clearly goes about its work with entrepreneurs and non-profits. (Yes, there's no reason non-profits shouldn't be able to use this tool.) Boiling down complex business ideas to a single, disciplined page forces you to think clearly through your assumptions and make sure that the actions you're taking make sense to a larger strategic context.