Starting a business is hard. As a new entrepreneur, you will face a lot of uncertainties, especially in your first year. One of the first problems you face is how to articulate your idea to others. Although, with the right tools in place, you can clarify your message and learn how to communicate your idea to others. One of those tools is the “Lean Canvas.”
The Lean Canvas, a derivation of the Business Model Canvas, is a one-page business plan template. Originally created by Ash Maurya, the canvas helps you deconstruct your idea into its key assumptions. The version we will present to you is specifically for startups. It simplifies how you communicate the many aspects of your new business.
Business plans are long, rarely updated, and almost never read by others. With the Lean Canvas, you can change an outdated business plan into an easy to understand document. It gives you a clear outline of what you need to do to get started.
So now that you have a general view of what the Lean Canvas is let’s go through the details. Each section is a crucial step to think through as you craft your new business. Even if you don’t have an idea for a new digital product, learning the components of the Lean Canvas can be beneficial in discovering what problem you are uniquely suited to solve.
12 Building Blocks of the Lean Canvas
Step 1: Problem
The first step, and arguably the most important, is the problem. When you discover a new idea for a digital product, you are saying that you have identified a unique problem facing a group of people. That problem is what drives you to invest time and money into developing your product and releasing it to those who need it.
If you can’t identify a problem to solve with your new product, go back to the drawing board. Your product needs to solve a problem, or it won’t have a use on the market or in people’s lives.
Step 2: Solution
Once you have identified the problem you are solving, the next step is crafting the solution. The solution is the product or service you are creating to make the lives of your target customers better. You might not get the solution right off the bat, but that’s okay!
Talk to your future customers, learn how you could best help them, and use that information to make the best solution. Your solution could change overall as your product develops and you receive more feedback from users. Having a solution that allows for future growth will guide your business into the future.
Step 3: Unique Value Proposition
After you have chosen your solution, you must consider what value you will offer to your customers. This is the primary reason your customers should buy from you as opposed to other products already on the market.
How can you make your product stand out? Take time to research other solutions and adjust your features to make them unique. Don’t run the risk of thinking that your product is unique. Instead, make sure it is.
Step 4: Unfair Advantage
What does your product have that no one else can buy? This can be a difficult question to answer, especially for a new entrepreneur. Think about a tangible answer you could give to show your advantage, not just how committed or passionate you are.
Your unfair advantage could be a certain feature that is unique to your product, a solid set of investors or even a huge base of existing customers. For example, FedEx has the unfair advantage of delivering packages the fastest. Streaming services like Netflix and HBO Max have certain hit shows that are only available on their platforms, like Stranger Things and Game of Thrones.
Step 5: Customer Segments
The customer segment is essential to the success of your product. Without identifying who you will target your product to, you can only guess that your solution will matter to them and the best way to market to them.
When you identify your customer segment, everything becomes easier. When you have a question, you can ask “what would my customers want?” And even better, you will have an answer to that question because you have spent time researching the wants and needs of your customer segment.
Step 6: Existing Alternatives
Your competition is the existing alternatives already on the market. Chances are the problem you are solving already has a solution, whether a digital or physical product or service.
Don’t shy away from finding those existing alternatives and writing them down. The more you can learn from what they are doing right and doing wrong will help you in the long run. Talk to customers who use those products and see how you could offer a better solution.
Step 7: Key Metrics
How will you monitor the performance of your product? Every business, large or small, uses key metrics to measure its performance. Your key metrics may change over time as your product grows, but finding what to measure at the beginning is important.
For example, if you are developing a mobile app your key metrics could be the number of downloads, subscribers, and users actively engaged during a time period.
Step 8: High-Level Concept
When you go to present your product to your target audience you will want to make sure that they will understand what you are offering. The best way to do this is through high-level concepts.
Your customers already have big brands and products in their minds and an easy way to make your product have a place in that mind is to compare it with an “X for Y analogy.”
For example, Youtube is “Flickr for video.” Instagram is “Twitter for pictures.”
What is your product’s X for Y?
Step 9: Channels
Channels are the path to your customer segment. They are anywhere that you are connecting with your target customer. Channels are extremely important early on as you build your audience and invite people to learn more about what you have to offer.
Your channels could be social media accounts, landing pages, opt-in ads, or nurture funnel emails. Your channels will be unique to your product and where your customers are.
Step 10: Early Adopters
The customers who first show interest in your product and plan to stick around until you release to the market are your early adopters. They are the customers you will build a relationship with and that will learn to see you as a credible brand.
The advantage of early adopters is the ability to ask for feedback about needs, wants, and nice to have features of the product. When you have a beta version, these are the people you will turn to with requests for testing. You want your early adopters to be open and honest with you so that your product has a higher chance of success.
Step 11: Cost Structure
As a new business, you will face a lot of uncertain costs. As you create your Lean Canvas, you should list all of the costs associated with taking your product from an idea to market.
While you might not know every cost, you can get a general idea of which costs will be fixed or variable. As you begin to talk with potential developers, you will have a better view of exactly how much your project will cost.
Step 12: Revenue Streams
Now that you have thought through almost every aspect of your product, it’s time to start thinking about how you will make money. Revenue streams are the only way to recoup the money you spent on development and can come in many different ways.
Start thinking of ways your product or service could produce revenue. For an app, this could be monthly or yearly subscriptions where users could get greater functionality from your product. Your brand could sell products and merchandise that corresponds with your solution.
Risk of not using the Lean Canvas model
If you don’t fill out the Lean Canvas model, or a similar model, you run the risk of not having something in your business plan. If you get halfway through development and realize that you have been targeting the wrong customer segment, the features of your product could completely change. It is better to do the work in the beginning than wasting valuable time and money.
You’ve filled out the Lean Canvas; now what?
After you complete the canvas, the next step is to complete a Pitch Deck. This is a simple presentation that provides your target audience and potential development partners with a quick overview of your business plan. The Lean Canvas makes creating a Pitch Deck much easier.
It can be very helpful to work with a business coach to work through all the steps of your Lean Canvas. Not only are coaches helpful in forming your business idea, but throughout the whole process of development as you make important decisions for the future of your product.