In this article, we are going to take a detailed look at the lean canvas, a business planning a tool that was created by Ash Maurya. The lean canvas is great, because it helps you deconstruct your idea down to one A4 page, using nine easily completed squares with questions.
A lean canvas can help you clearly communicate your idea to others, such as investors, potential co-founders and the like.
So I’ll take you through this, and to see it in the ‘real world’, we will create one, using Uber as an example.
To work out your business activities you need a business plan. A good business plan requires a massive amount of work. however how can you verify your idea before investing so much time and effort? The lean canvas method can help you with that.
You need a lean canvas if you want to create a product that will be in demand in a fast-changing market. You can see and get a Lean Canvas template here.
This tool allows startup founders to mitigate the risk and uncertainty associated with a product creation. As mentioned, the lean canvas is a one-page document consisting of nine boxes to be filled in. Initially the last one was designed for well-established businesses and not really applicable to startups.
That’s where lean canvas comes in. Its key difference from the business model canvas is its problem-solution oriented approach and focus on the customer. To address this the four business model canvas boxes namely: key partners key activities key resources and customer relationships were replaced with problem solution key metrics and unfair advantage respectively.
That helps founders focus their products on resolving their customers problems instead of specific features of the product. In practice it doesn’t take a huge amount of time to fill in the lean canvas. We recommend you to stick to the following order however it’s not obligatory and you’re free to choose the way you feel comfortable with. Let’s do this together through the example of the world known peer-to-peer ride-sharing app – Uber back when it was getting off the ground.
We should start by defining the target customer. Narrow down the customer segments as accurately as possible. You’ll be able to expand it later as you grow into newer target markets. Uber offers its service to passengers and drivers. The passenger segments can display narrower by demographics type of usage and socio-economic characteristics.
Drivers also divide into users who opt for Uber as a full-time job solution and those who leverage it in addition to their main job. It’s best to mark each segment in different colours of your convenience. In the early adapters section you can specify the actual people who will be the first to use the very basic version of your product when it first comes out. These may include first customers, developers, friends and even you the founder.
In the problem box we refer to customer problems that your product is meant to solve. If you have several customer segments with different problems you may make separate canvases for each of them. Here we have specified problems for passengers and drivers separately.
Therefore we’ve got such problems as expensive taxi service availability of cabs long waiting time during the rush hours advance booking is often required and lack of driver profile for passengers. Drivers need extra income a part-time job opportunity and awareness of who they are going to drive.
In the existing alternatives section you should place your closest competitors that are already solving the specified problems. We’ll split the Uber existing alternatives according to different user segments. So passengers can opt for public transport a taxi service or ride with a friend. And drivers are limited to taxi service and other full or part-time jobs to get income.
The product you are going to create must bring revenue. Usually entrepreneurs use the cost based approach where you need to calculate costs and add a margin. However we recommend you to rely on the average value required for the customer to solve the problem. For example Uber takes around 25% of the pay for each ride.
All problems you specified in the neighbouring box should be matched by the relevant solutions. Explain what experience the customers are meant to have. Uber offers a cheaper ride opportunity wide car network fast pickup route tracking as well as drivers and passengers ratings to solve the mentioned problems. Cooperation with your target customers will allow you to learn their needs and offer the most suitable solution.
It’s no accident that the unique value proposition box takes the central part of the lean canvas. The unique value proposition is a brief message which is meant to attract customers attention. You need to describe the uniqueness of your product and show it’s key difference from the existing alternatives.
Uber attracts customers not only with its speed and low price but also a package of services in one app which allows you to find a safe ride 24/7/365. Drivers in turn opt for Uber as they can work on their own schedule, manage their revenue, navigate the route through the app and forget about taxi license issues.
In the lower part of the unique value proposition box there is a place for creating a high-level concept – a short and easy to understand statement about your product. It’s kind of elevator pitch you will use when addressing your product. As an example Uber is like taxi however cheaper safer and more flexible.
Even the most ground breaking product on the market can fail if the customers are not aware of it. Specify communication channels to reach out to your target audience. In our canvas Uber relies on PR word-of-mouth and user referrals.
Define key tracking metrics to measure the progress of your business. Initially you can deal with one key metric like minimum success criteria – meaning the outcome that can be deemed a success.
Later on you can expand your lean canvas with other vital metrics. As for Uber they factor in the number of users and rides money earned and referred users. The fixed and variable costs find their place in the cost structure box.
These may include costs for the office rent hardware recruitment market research etc. It’s enough to narrow your time window to a particular milestone like a product release or customer acquisition channels, such as achieving the first 100 customers. Once your cost structure box is filled in you can balance it with revenue streams and get answers to such questions as “how many customers do I need to pay off the investments?” “where is the break-even point?” and others related to the winning outcome.
In our example let’s focus on cost for product development infrastructure and support as well as the marketing expenses and salaries.
The last step in the lean canvas is your own unfair advantage. This term denotes a special thing about your idea that your competitors are not able to copy or obtain in any possible way. Unfair advantage may include a good reputation exclusive access to some data personal authority community or any other unique advantage.
It’s not necessary to find all of your competitive advantages right now. You can fill in this box later when some other things have started to go in your favour. When Uber was founded its unfair advantage was the experience the application offered: low priced rides at the push of the button.
That’s it! Remember that your lean canvas can and needs to be changed once you get new feedback from your customers. While you’re in a startup mode you are still testing various hypotheses. Some get confirmed some don’t. however make sure you adjust your lean canvas according to the facts and not how you wish the things were.
About the Author
Lauren Clarke writes for a number of outlets, and likes to share her knowledge of business, startups and technology. When not writing, Lauren enjoys a good red wine and book.