In today’s article, we’ll be talking about 4 reasons why you should be using the business model canvas for your startup. We’ll talk about why many successful companies have used it, why being testable is one of it’s greatest benefits and lastly, we’ll look at how it allows your startup to be agile, by only dealing with the essentials needed to get your startup to product-market-fit.
“Today countless innovative business models are emerging. Entirely new industries are forming as old ones crumble. Upstarts are challenging the old guard, some of whom are struggling feverishly to reinvent themselves.” – Alexander Osterwalder and Yves Pigneur in Business Model Generation
Reason #1: The Business Model Canvas Is A Proven System
The business model canvas has been used by over 5 millions teams and it’s recommended by one of the best startup gurus, Steve Blank. He has helped hundreds of startups use it to build successful companies. Why it is so successful? Well it forces you to look at your startup differently than all the other founders just chasing their tale.
One sure way to succeed in your startup is to do what other successful startups have done. This is true for technology as well as your business model. Now as a side note, you also need to have the correct definition of success. If to you success means raising a bunch of venture capital, then just take a look at the countless startups that have raised millions of dollar from some of the brightest investors and ended up broke and liquidated.
The best way to determine whether your startup will succeed is customer dollars not investor dollars (although investor dollars in theory should help you get customer dollars). This is why the business model canvas is great, it makes sure your know who your customer is and what they find valuable in your product (if anything).
Reason #2: The Business Model Canvas Is Testable
One of the greatest benefits of the business model canvas is that it’s testable. Rather than assuming all your assumptions about your idea are correct and people will throw money at you left and right, using the business model canvas teaches you to take your idea and put it in front of your potentials customers and ask them what they think.
Makes sense right? They are the ones who actually know what they want or need. This testing also helps you not hold on too tightly to any one idea. I remember building my own startup and after 3 months in of building our product, I would completely drown out anything that would even remotely suggest changing it.
This is very different than the “blood sweat and tears” method of most modern startups. Now I’m not saying you shouldn’t work hard at building your startup, but I am saying that you should put your effort in the right place.
“Relentless execution without knowing what to execute is a crime” – Steve Blank and Bob Dorf in The Startup Owners Manual
The Customer Development model
Because the business model canvas is testable, this means you can use it with the customer development model taught by Steve Blank. I’m not going to take the time to explain the ins-and-outs of this model here, but check out The Startups Owner’s Manual for more details.
In simple terms, the customer development model allows you to scientifically define who your customer is and whether they want what your selling. In the business model canvas that’s why you start with defining your “customer segments”. This is core to every business, knowing who your customer is.
You probably have an idea who you think would benefit from your product or service, but wouldn’t you feel more confident knowing that more than a handful of these have already committed to buying (before you’ve even built anything)?
Reason #3: The Business Model Canvas Allows You To Be Agile
You probably got the feeling that this is going to result in a lot of change, and that’s because it is. Remember what you’re doing, you’re attempting to validate your guesses about your startup. Guesses are usually wrong, although not all the time. But once you start turning guesses into facts, you’re heading towards success.
This is why it’s important that you and your startup team are agile. By agile I mean capable of changing direction on a dime (if you’re into football).
You can change it
“No business plan survives first contact with customers” – Steve Blank and Bob Dorf in The Startup Owners Manual
The business model canvas will help you be agile because it is changeable. Unlike a business plan, which takes hours upon hours to write, and the end result is a professional looking book. The business model canvas is just one sheet of paper (or whiteboard if you’re into that sort of thing). You and your team can probably nail it out in a day and spend the rest of your time outside talking to customers. When the data suggests your business model canvas is wrong, just print another and jot down your new findings.
(Steve Blank says once your reach IPO you can burn these)
Reason #4: The Business Model Canvas Is Quick To Implement
You are probably thinking you don’t have time for this, since you’re probably wearing all the hats right now. But just remember while it is added time, it’s actually very quick to implement and even more than that it will save you potentially years of working on a product doomed from the start.
It only deals with the essentials
“A business model describes the rationale of how an organization creates, delivers, and captures value” – Alexander Osterwalder and Yves Pigneur in Business Model Generation
Lastly, the business model canvas will help you focus on the essentials that will help you build a successful company. It will teach you to think of your startup in terms in moving business parts that organically work together, rather than just thinking of your product. Don’t get me wrong your product is important, but even more important is understanding the value that your customer receive from it – a successful company is one that delivers some form of value that someone wants or needs to pay for.
So if you take anything away from this article, stop what you’re doing, get your team together and start working on your business model canvas. If you’re looking for how to actually fill out the business model canvas then check out Alex Osterwalder’s book Business Model Generation and his official templates,which you can find links to at his site http://alexosterwalder.com/. If you’re looking for more tools to help you with your BMC, check out the site he founded strategyzer.com and another great tool called Glidr, which is a web app for tracking your BMC changes and documenting customer discovery and research findings. This site will help you work better with your team since you will have a central hub for all things relating to your business model canvas.
Here’s what we’ve looked at so far:
1. Successful startups have proven that the business model canvas is a proven system
2. The business model canvas is testable, so you can turn your guesses into facts. And it can be used together with the customer development model.
3. The importance of your startup being agile, and how the business model canvas allows your team to change often and quickly without wasting precious time.
4. Why you should use the business model canvas to focus only on getting the essential right for your startup. Defining who your customer is and what value your providing them.
I’ll leave you with a quote from Alexander and Yves in Business Model Generation, “For entrepreneurs, executives, consultants, and academics, it is high time to understand the impact of this extraordinary evolution. Now is the time to understand and to methodically address the challenge of business model innovation”.