In 2009, after years of work, Alexander Osterwalder and Yves Pigneur published the book Business Model Generation. It was a handbook for those "striving to defy outmoded business models and design tomorrow’s enterprises," and it allowed teams to brainstorm an entire business model on one page called The Business Model Canvas. The authors built a community of practitioners who use their web application, for a price, but they continue to offer free resources for those looking to build a business model. We found their web series, co-developed by the Kauffman Foundation, to be especially accessible and helpful.
However, many of the business model canvas components seemed better suited for established companies looking to change, rather than people with ideas who were starting from scratch. Ash Maury thought so too, and thus, Lean Canvas was born.
Here is a quick walkthrough of the Lean Canvas, which will give you a little preview into our thought process as we built our own business model for Meerkat.
Customer Segment - List the customers you want to sell to. Make this as specific as possible. For example, you don’t want to target all Hogwarts students; you want to target just Hufflepuff house members.
Problem - List the top 1-3 problems your customer group has that you aim to solve. Keep these as concise as possible. A few words can speak volumes, such as "textbooks are too expensive."
Unique Value Proposition - Write a simple message telling the world why you are different. Aspire to be as clear and compelling as Skype: "Wherever you are, wherever they are – Skype keeps you together."
Solution - List solutions that directly address each of your stated problems while achieving the unique value proposition. You might be noticing a common theme here: keep these specific and brief. Remember that a canvas should fit on an 8 ½ x 11 sheet of paper.
Channels - List the channels you will use to access customers. Brainstorm what they see each day; is it Facebook ads, posters in their neighborhood, or bloggers' recommendations? Go where your customers are.
Revenue Streams - List your sources of revenue. Don’t be tempted to just list a variety of revenue sources because those might be completely different business models. For example, you may have the goal of selling the best Chinese food around, but selling by the plate versus entree are two different models.
Cost Structure - List all your fixed and variable costs. To start, you might want to do just a back of the napkin calculation, but the closer you get to writing your business plan the more certain these numbers must be.
Key Metrics - List the numbers that will indicate how your business is doing. For example: number of personal referrals, number of times software is uninstalled or number of downloads.
Unfair Advantage - List the thing that your company can do that cannot be easily bought or copied. This is the hardest box and often isn’t filled in until your solution has been tested in the market. For example, Nike’s advantage is that they can attract the best talent to represent their shoes (i.e. Lebron James).
For more information about the Business Model Canvas and Lean Canvas, click through the links.