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?
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?
Highlight the top 3 solutions
What is the simplest Minimum Viable Product that can test the problem and my assumptions.
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.
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?
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!