Tag Archives: Alexander Osterwalder

In search of a business model…

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The next step for me is to spend a little time brainstorming my business model. This is where the business planning comes in rather than a traditional business plan.

To do this I will be following the process initially laid out by Alexander Osterwalder in Business Model Generation. This is a great book but the process by which it all came together is more interesting, it is a crowdsourced book written with over 470 contributors in 45 countries. In fact I will be using a slightly modified version of the original aimed at startups that was developed by Ash Maurya that he has named Lean Canvas.

The aim of using a ‘canvas’ is to get an overall view of the business in one place and to encourage and challenge you to focus and distill your proposition on to one single page. You can see a picture of a blank canvas below but I will be experimenting with the best way of writing this up and sharing it.

In the first instance I will throw down everything on the one canvas and then break it down into an individual canvas for each customer segment.

The sections of the plan are as follows and I will proceed in this order:

PROBLEM (AND CUSTOMER)

Highlight the top 3 problems

What are the existing alternatives that people are using to solve this problem?

CUSTOMER SEGMENT

Make sure to break it down into users and customers.

Continue to break it down to customer segments with shared behaviour and common needs

UNIQUE VALUE PROPOSITION

What problem are we solving and what value will we provide?

SOLUTION

Highlight the top 3 solutions

What is the simplest Minimum Viable Product that can test the problem and my assumptions.

CHANNELS

One of the key areas to establish that is often overlooked in the early stages of a startup is how do we get the product to the customer segments highlighted above?

REVENUE STREAMS & COST STRUCTURE

Will someone pay to solve the problem that we have highlighted? This is an area that needs to be addressed in the customer interviews.

What is the revenue model?

How much will it cost to carry out 30-50 customer discovery interviews?

How much will it cost to define, build and launch an MVP?

What is the burn-rate? Fixed and Variable results.

Once all this information is gathered it will give an idea of both the break even point and the runway.

KEY METRICS

What are the key activities I will measure to judge progress?

A common set of metrics used is Dave McClure’s pirate metrics: (Can you work out why they are referred to as Pirate metrics?

  • Acquisition
  • Activation
  • Retention
  • Revenue
  • Referral

UNFAIR ADVANTAGE

This is the thing that sets you apart from the competition, it is something that can’t be easily copied or bought. It is also one of the hardest sections to fill in at this stage and often only makes itself known in the face of competition.

While many people think the approach is ‘to simplistic’, I have shared this model with startup business and walked through the process with a few and every time I am amazed at its power.

A few pointers that I have to be cognizant of:

  • Do this in one sitting
  • At this stage it is ok to leave sections blank, this in fact can help highlight the potentially riskiest areas of the business and focus attention.
  • Be concise
  • Keep Ideas moveable- using post-it notes
  • Tell a story
  • Use colours and draw

I am hoping to have the initial draft of this completed tonight and then I will share with you where I am up to tomorrow. Wish me luck!

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What is all this Lean Startup business about?

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Good question. This blog post started off life as a brief foundation of The Lean Startup principles,  with the aim of giving everyone an idea of what I am talking about. As with most things in life the original thought grew arms and legs and it has caused me to re-assess my approach.

When I first read The Lean Startup book it wasn’t so much the individual steps that hooked me but rather the over riding philosophy.

This philosophy runs through three books at the core of the Lean Startup and is more than any one book or author:

  • The Four Steps to the Epiphany by Steve Blank
  • The Lean Startup by Eric Reis
  • Business Model Generation by Alexander Osterwalder

At this stage, rather than focus on the individual steps laid out in one book, I want to look at the common themes across the movement.

The one unifying theme among all proponents of the movement is to re-assess how we approach startups in the business world with the aim of increasing the success rate. We have all heard the statistics around the failure rate of new businesses the world over, clearly there is something wrong.

 The one point that really hit home for me was the realisation that startups are not simply smaller versions of large corporations- often referred to as the dollhouse fallacy. Once we accept this we realise that the tools and procedures for measuring and monitoring the success of established corporations are not suitable for startups. The Lean Startup philosophy tackles this in an innovative way.

In the process of writing the post it became very apparent to me that while I have read The Lean Startup by Eric Reis I needed a better understanding of the wider process. This insight has prompted me to create and share a reading list to broaden my understanding and ensure that I have the right process in place for when the business launches. More on that to follow!

I am currently at the theoretical stage of starting the business and ultimately the real learning will happen when I start to implement the principles but it is imperative that I have a strong foundation to build on. I’d rather be spending my time doing this than a traditional business plan trying to guess my turnover in 1,3 and  years.

I apologise if you were looking for a more comprehensive answer to the question of title but I promise that this approach will be much more beneficial in the long-run!

The journey continues….