A business model is a company's plan for making a profit. It identifies the products or services the business will sell, the target market it has identified, and the expenses it anticipates. It is a high-level plan for profitably operating a particular business in a specific market. A primary component of the business model is the value proposition. The value is a description of the products that a startup offers, and why they are desirable to their customers, ideally stated in a way that is different from competitors' products. The business model also covers startup costs and sources of financing, the target customer base for the business, marketing strategy, a review of the competition, and projections of revenues and expenses.
We use the Lean Canvas to get to the heart of a business before any other activities. Within 10 compact cells, Lean Canvas allows us to ask vital questions about their foundations, covering essential elements from their business idea to their revenue streams.
1. What is Lean canvas?
Lean Canvas is a one-page business plan method, which is adapted from the Business Model Canvas. The plan features 10 cells which help map out key points that will get startups from business ideas to going to market. The Lean Canvas is created especially for entrepreneurs to make it easier for them to get a clear and simple view of what they're doing.
Lean Canvas should be a collaborative activity between the product design team and stakeholders. For designers, we get deep insights into their business model, and most importantly their underlying problems. For stakeholders, they get a second perspective about their business, helping them reconsider factors which have been their biased opinions before.
2. Why we need Lean canvas
- It shows how the design is connected to the user's actual needs
- Ensures we are solving the right set of problems before we begin the work
- Can help us identify creative solutions not envisioned in the brief
- The easy to share format can help us describe solutions to stakeholders
- Gives a high-level picture of business requirements behind the solution request
3. How to create Lean canvas
Here's a short practice explanation on how we can use and utilize the lean canvas.
- Problem: The top 3 problems our client is trying to solve for their customers, along with how their customers are feeling about them. This section gets us to an overview of our design challenges.
- Solution: How your client is currently solving these problems with their products. It's best to list a maximum of 3 features of the product, so we can focus on analyzing the strengths and weaknesses of each one.
- Key Metrics: These are the activities your clients use to track and measure their performance, meaning the effectiveness of their problem-solution above.
- Customer Segments: This sector defines the target audiences, the people who benefit the most with the solutions we offer. We should conduct customer research before filling out this sector, so our customer segments can be as accurate as possible. A solution doesn't work if it doesn't know who it's serving.
- Unfair Advantage: The factors that set our client apart from their competitors, elements that only they have and their competitors cannot copy.
- Channels: Also known as touchpoints, they are how our clients communicate with their customers. Be mindful that these channels include both online (social media, website, advertising...) and offline (tradeshow, physical store...), these channels don't necessary meaning revenue, they are how customers encounter a brand.
- Unique Value Proposition: This is where you win or lose. Combine all the above factors, here we should have a short message (almost a one-sentence pitch) about your product, the essence of the product and the solutions it has to solve problems for the target audiences.
- Cost Structure: Where the client is spending their money for the business (hiring, operating, development...)
- Revenue Streams: Where the client is getting their money from, their sources of income. Knowing this factor will help us allocate our effort and set our priority for our product strategy.