—A Practical Guide From A to Z—
If you never heard about this ‘stuff’ called “Lean Canvas” don’t panic or worry yourself because I was in the same boat two years ago with an awestruck face the first time I learnt about it from Prof. Ira Kaufman, a distinguished digital marketing evangelist and a co-author of the father of modern marketing Dr. Philip Kotler, whom I met during a mentorship session in Dubai.
Well, lean is not a new concept-thanks to Toyota Production System or TPS that transfigured the manufacturing industry in 1950s, ‘60s and beyond. Consequently, the lean methodology is evolving up to this time with its new modern application in various verticals. What it does is simply helping businesses in a variety of industries eliminate waste, improve processes, boost innovation, and create a true customer value.
The famous book of Eric Ries titled “The Lean Startup” replicates merely alike the idea of lean methodology but in a tech startup world. The book proposes a scientific approach in how to create, steer, turn and grow startups with the fastest way possible “revolution per minute—RPM”.
On other hand, our one-page blueprint lean canvas does the same from a different angle with startups’ founders or entrepreneurs. It consists of 9 basic building blocks helping you to clear out any foggy business idea from your head then to be converted into a minimum viable product or MVP in a very short time period. The Lean Canvas Model was developed by Ash Maurya who remodeled and adapted it based on the popular Business Model Canvas of Alexander Osterwalder.
Figure (1): Business Model Canvas of Alexander Osterwalder—downloaded from strategyzer.com
Let’s begin with the mainstream sections we shall to go through our Lean Canvas Model:
- Customer Segments
- Unique Value Proposition
- Revenue Streams
- Cost Structure
- Key Metrics
- Unfair Advantage
Figure (2): Lean Canvas Model – By Ash Maurya
It begins always by raising this question: Do your target audience really have the problem you believe they have? Is it worth it to be solved? It’s very obvious as entrepreneur urged to jump off a cliff to gear up your “next big thing” idea to hold on and challenge the problem you believe is a problem.
I did similar exercise while surveying dozens of my “potential customers” to assess if there is such a problem in need of a particular solution and if it’s useful to go after it. Ash Maurya justifies broad startups’ failures not because they missed out to build what it should be built, but they went the wrong route then time wasted in building something nobody needs.
Eric Ries articulated it well in his book when he advocated the worthiness of spending time with potential customers in doing something called a sanity check. In Japanese factories, they call this principal “genchi genbutsu” which means go and see for yourself inspired again by the Toyota Production System. This is even confirmed by a true story of Toyota Sienna minivan when penetrated the North American market. The chief engineer in charge of Sienna drove this minivan on a national road trip—beyond believe— lasting 85,295 KM (53,000 miles) mileage and extending over all fifty US states, all Canada provinces further to all states of Mexico. And guess what was the purpose of his interminable journey? Just meet and talk to Toyota’s real customers!
So, on this canvas try to list 1 — to — 3 problems for your potential customers or each customer segment if you have more than one group of customers you’re aiming to serve.
2. Customer Segments
In this exercise, you’ll find yourself playing a hawk-dove game if the problem statement is not well articulated because it’s simply a process. It’s better to start brainstorming some potential customers bearing in mind that your selection bias risk is not avoidable resulting to what Maurya describes “local maxima” problem which relates to the optimum proposed solution for your selected customers. YES! All young entrepreneurs are wrongly rushing to the solution first.
From my humble experience, it has taken some time to understand well who’re our customers with a plain distinguish from our users. The basic definition of a customer is the one who pays you money for the solution/product is getting from you! But a user doesn’t pay you anything. Even now, you may have users who turned out to be your customers all depending your business model as well. Maurya stresses on another important point when you have broad segments of customer, it’s preferable to split them into small groups. Actually it makes sense because you can’t be honey “with everyone” in effectively building or designing a product that fits all your segments.
3. Unique Value Proposition — UVP
Honestly speaking, this part was my hardest exercise ever on this lean canvas! But, it’s also the most important one. The UVP states clearly what is unique about your solution, why you’re different and worth grabbing attention of people? Please pay attention to these underlined words herein “grabbing attention”.
So, the fight is not even selling your product but it’s how to attract initially your customers’ attention in such “Red Ocean”.
For instance the challenge of reducing your bounce rate so extending the time your visitors may spend on your website is purely linked to the exposed UVP on your landing page! Another unbelievable challenge is what marketers call “the skippable world’s five seconds challenge” on Youtube Ads. If advertisers fail to attract attention during the first five seconds, they can’t object if customers ignore the whole of their content.
It seems this unique value proposition is a real stiff but Ash Maurya has given a formula of Dane Maxwell in crafting an effective UVP:
- Instant Clarity Headline = End Result Customer Wants + Specific Period of Time + Address the Objections
Here is a selection of sharp UVPs from famous tech brands for inspiration purpose only:
- MailChimp — Send Better Emails
- Lyft — Rides in Minutes
- Apple MacBook — Light Years Ahead
- Weebly — The Easiest Way to Make a Website
- Pinterest — A few (million) of Your Favorite Things
- Salesforce — Accenture Moves Faster with Salesforce Lighting
This part is what we all vehement in coming up with our stunning “solution box”! Dave McClure from 500 Startups quoted it crystal clear to us: “Customers don’t care about your solution. They care about their problems.”
Apropos of this, Maurya’s recommendation to us is to bind our solution to our potential customers’ problems as late as possible! The line of his reasoning here is quite simple since what we did until now is having some “untested” problems.
Therefore, big chances to reframe and change many things along our journey of meeting those potential customers. I did this mistake when I first started surveying one customer segment while the missed ones’ feedback forced me to readapt the whole business model because our initial solution was impossible!
How are we going to reach our potential customers? This is a crucial questions that can lead to a massive failure if not rigorously answered. Channels are the pathway to reach our audience. In his book “Running Lean”, Maurya caught my attention when he said that “the initial goal of a startup is to learn, not to scale!”.
This statement lights up so much insights to bear in mind! Fasten your belt, you’re going to have an endless learning journey while assimilating the market in meeting customers and understanding them. So that’s the starting-block of an entrepreneur!
During this process, usually startups will be forced to build a path in reaching their customers at an early stage. Thus, if someone asks you “how did you get to this customer” you know well your path then!
Another important aspect before you fill up this block on your canvas, the scalability of a channel would play a paramount role especially when having different customer segments.
As per the lean canvas, there are two type of channels: inbound—pull strategy and outbound—push strategy. The following list of channels are for illustration and can differ absolutely from what you may have, all hang on your specific case.
- Search Engine Optimization—SEO
- Social Media
- Online Forum
- Search Engine Marketing—SEM
- Google Ads
- Referral Marketing
- Print Ads
- Network Marketing—MLM
- Cold Calling
- TV Ads
Since we’re discussing lean modus operandi, it’s advisable to focus on inbound than outbound channels from cost wise. Similarly, Ash recommends to use direct sales as an effective way by reason of meeting your customers to learn and understand them. The best takeaway of this section is: first sell it manually, then automate!
6. Revenue Streams
Revenue projection is an awkward exercise! Because pricing a service or product, depending your nature of business, is tedious and a time consuming process. In case of a tech startup, this process is postponed or not taken seriously by the founders because of a general mindset that says push your minimum viable products—MVP as quickly as possible to the market, get some customers to test it for free, how can we charge for something minimal? And endless reasons go on.
It’s very true that nobody did it perfectly from day one nor having customers instantly. Maurya’s point in this regards is not to underestimate pricing your services from blast off even with an MVP! So getting paid is the first form of validation!
Another interesting insight I learnt from “Running Lean” is an MVP is never synonymous to nutty or half-baked product!
Pricing can be based on the following methods:
- Product cost: how much did it cost you to build your MVP and launch it in the market for instance? Any co-founders involved with you? How much time did you spend?
- Competition: spying similar rivals or products in your industry can give you an estimation to gauge your minimum and maximum market price!
- Price positioning: in this case you may keep your pricing in the middle of market price to stay competitive.
An interesting free ebook on software pricing if any tech startup reading this post— “Don’t Just Roll the Dice” by Neil Davidson’s.
7. Cost Structure
We covered partially this stream in previous section but let’s iterate shortly with some examples. All operational cost should be included such as the cost of your market study (interviewing/surveying 100 customers), your MVP development (API, App, website, etc), and the ongoing running expenses to be counted as well. This will help you to price your product then estimate well your breakeven point.
8. Key Metrics
An interesting methodology by Dave McClure—ex-founder 500Startups— called Pirate Metrics spanning over the customer’s lifecycle shown in figure (3) below:
Figure (3): Pirate Metrics – By Dave McClure
- Acquisition: lot of channels and marketing endeavors can be used alike SEM, SEO, PR, blogs, campaigns, email, social media, etc.—Metrics: page visits, downloads, site visits, installs, etc.
- Activation: this is the first moment of truth, FMOT—your customer’s first experience when he lands at your page.—Metrics: registrations, session length, one-day retention, screens per session.
- Retention: how to retain your customers for example via loyalty programs, push notification, pro-active communication, etc.—Metrics: monthly active users, #day retention, etc.
- Referral: this is the advocacy metric judged by ratings, sharing, likes, recommendations, etc.—Metrics: #referrals, #ratings & reviews, etc.
9. Unfair Advantage
I do agree to some extent with Ash Maurya when he cited Jason Cohen’s definition of a real unfair advantage being something cannot be easily copied or bought. In this case, either you invent something like Coca-Cola secret formula or Google’s secret algorithms!
I believe that any solution/product worth copying will be replicated from day one. What matter is how you outwork your peers and respond to competition?
Figure (4): Lean Canvas Model Case Study: CloudFire/BoxCloud – By Ash Maurya