The One Tool Startups Need to Brainstorm, Test and Win
The word “lean” is everywhere these days. Lean processes, lean startups. While Eric Ries, author of The Lean Startup, has arguably become the face of this movement, its philosophy is largely based on something called the Business Model Canvas — a tool developed by author and entrepreneur Alexander Osterwalder and Swiss academic Yves Pigneur.
Extremely simple in its design, the Business Model Canvas empowers
entrepreneurs to create, visualize and test business models without
wasting capital or overcomplicating their approach.
Today, it’s used by
startups to break new ground, as well as massive companies like GE,
P&G and 3M to explore new models and keep up with the competition.
It’s also the core of the book Business Model Generation (co-authored by Osterwalder and Pigneur), which has sold over a million copies in 30 languages.
At Stanford's Entrepreneurship Corner, Osterwalder — joined by lean evangelist Steve Blank — demonstrated the value of the Business Model Canvas for startups:
How they can use it to generate ideas, de-risk guesses, and make sure
they are solving the right problems for the right people. Below, learn
how one sheet of paper can help your company find and hold on to
product/market fit.
The Basic Canvas
“It’s said that no business plan survives its first contact with customers,” says Osterwalder. “As soon as it’s out there, the first thing you want to do is burn it, and you feel like you wasted all this time.” The Business Model Canvas was partially born out of this need to create more flexible plans that could be tested and changed quickly to meet customer needs. Most importantly, it standardizes the elements of business models and turns them into modules that predictably interact with and influence one another.
“When I ask the question, ‘What is a business model?’ I get different answers everywhere I go,” Osterwalder says. “There are as many answers as people in the room even though it’s a word we all use a lot — some think profit, others product, technology, process, strategy, sales channels. We would have a better discussion if we all agreed on what a business model is.” The Canvas creates this shared language and makes it visual to achieve clarity.
The Business Model Canvas is constructed out of nine building blocks — nine blocks that equip you to think of thousands of possibilities and alternatives (and find the best ones):
“It’s said that no business plan survives its first contact with customers,” says Osterwalder. “As soon as it’s out there, the first thing you want to do is burn it, and you feel like you wasted all this time.” The Business Model Canvas was partially born out of this need to create more flexible plans that could be tested and changed quickly to meet customer needs. Most importantly, it standardizes the elements of business models and turns them into modules that predictably interact with and influence one another.
“When I ask the question, ‘What is a business model?’ I get different answers everywhere I go,” Osterwalder says. “There are as many answers as people in the room even though it’s a word we all use a lot — some think profit, others product, technology, process, strategy, sales channels. We would have a better discussion if we all agreed on what a business model is.” The Canvas creates this shared language and makes it visual to achieve clarity.
The Business Model Canvas is constructed out of nine building blocks — nine blocks that equip you to think of thousands of possibilities and alternatives (and find the best ones):
- Customer segments (your audiences)
- Value propositions (the product or service you provide)
- Channels to reach customers (distribution, stores)
- The type of relationships you want to establish with your customers
- Revenue streams you generate
- The key resources you have to work with (capital, talent)
- The key activities you can use to create value (marketing, engineering)
- Your key partnerships (who can help you leverage your model)
- The cost structure of the business model (what you must invest)
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