Business Model Canvas!

What is a company? business that sells product or service in exchange for revenue. goal can be profit goal can be social good (non-profit, b corp) takes time to do activities. usually pay for time with money gratipay

What is a startup? temporary org designed to search for a repeatable and scalable business model - steve blank what happens when model isn’t repeatable? scalable? run out of time…get more time with more money (raise money for more time to find repeatable and scalable business model i.e. product market fit)

What is a business model? how an entity organizes itself to create value and derive revenue - business model generation - alex osterwalder

Business Models - Who cares?

Who here wants to start a company? Who wants to innovate within an existing company?

Have you written a traditional business plan? Lengthy, time consuming process meant to be created once, and never looked at again.

These days we have a tool that takes just a few minutes to create, and is meant to have hundreds of iterations over the lifetime of your business. This tool helps you find business models that work. If you had a tool to clearly explain your vision for success to stakeholders (employees, investors, managers, co founders), to greatly reduce your risk for failure, and to systematically find successful business models, I bet you would use it. We do have this tool, it’s called the business model canvas!

What is the business model canvas?

a shared language to describe the business model

a picture is worth a thousand words

visualizes how a company creates value for itself (monetary or social good…whatever the goal is) while delivering product or service

a common platform with a common language to discuss the building blocks of a business

ask questions about the way we do things, and why? see the impacts everywhere. evaluate risks of changing biz model structure. imagine new business models and create new value and new rev streams.

quick overview of how a business operates / will operate

dynamic - expected to shift and change as more learning takes place. Keep a record of all canvases so you can have an evolution of the business logic to show new stakeholders

useful for new companies, brainstorming ideas at startup weekend, or business model innovation for existing companies (intrapreneur)

Presentation by Alexander Osterwalder:

...and a funnier one:

More time?

What’s your biggest fear as an entrepreneur? failure: running out of time, money, sanity, energy before finding a business model that works. the #1 reason for failure? building something nobody wants

Check out why a business model matters: A Better Place vs Tesla Hint: Tesla found what customers’ wanted before spending hundreds of millions on something they don’t want Tesla also found people want sports cars

So how do you find out what people want? Get out of the building - do customer interviews - ask the right questions. Then, compliment the interviews with cheap, small experiments to gather concrete data. Someone in an interview says, I would hire someone to shovel snow and pay $100. So, the experiment could be: “hey, we offer snow shoveling services, and there’s a blizzard tomorrow. Will you hire us?”

The best way to validate an assumption is with cold hard cash. If you find a customer, you have validated a product or service. Don’t take a hypothetical ‘yes i probably would’ as a clear sign to move forward. Set a price point and ask them for a check.

but even if you do know what someone wants, you could build the wrong business model around it, and still fail. Take a look at home videos. Many people want to watch movies at home! Every house has a DVD player. Why did netflix succeed and Blockbuster fail? I bet it’s related to their business model.

What if, before you invested time, money and a ton of energy, you were sure your business would succeed. what is success?

ways to increase chances of success, decrease risk of failure should be #1 priority as an entrepreneur.

3 kinds of fit: problem - solution fit: you have evidence that customer cares about jobs, pains and gains…and you developed a value prop to solve it (hypothesis) product market fit: your value prop is solving the customers’ pain in the marketplace. i.e. you’re generating value for the customer. you’re starting to gain traction and have gone through several tests validating and invalidating assumptions underlying your value proposition. business model fit: you’re value prop is embedded in a profitable and scalable business model. are you generating value for both the customer and your organization?

achieving these fits involves getting out of the building - going back and forth between the drawing board, customers to directly test and experiment.

My notes on the sections of the canvas:

**Value prop:** (Start here) it is not about your idea or product! it is about solving a need or problem of a market large enough to sustain your company. If solving your own problem - are there many likeminded people? How to find out? Get out of the building. who cares about the need or problem? Hopefully your customer will they pay for it? trade time for it? trade resources if problem is solved? it is about satisfying a customer need **Customer segment:** who are they? Women (and men) in their 30s who like to spend > 1000 on shoes per year. Businesses that have no online presence with less than 5 employees in the new england area. 24-34 y/o college graduates who live in urban areas and is obsessed with My Little Pony Get detailed! customer archetype geographic social demographic Why would they buy? To solve a problem: my new shoe hanging solution saves closet space so your significant other does not throw out shoes you haven’t worn in years. To increase gains: this product increase productivity 1000% **Channel** How do you reach your customer segment? physical channel malls direct sales web / mobile channel online sales advertising **Customer relationship** how do you get, keep, grow your customers? What kind of relationship will you have with your customers? automated, semi automated, hands on, highly personalized (specially craft product or service for you). **Revenue streams** how do you make money off of each segment? what value is the customer paying for? **Key Resources:** what are the most important assets required to make the biz model work? financial investment, loans relationships (customer lists) relationships with distributor, manufacturer Production - factory intellectual - patents, software human - thought leaders, engineers **Key partners:** people who can do things better than we can, that we will work with. who are the key partners and suppliers needed to make the biz model work? What key resources are we acquiring from them? what key activities do they do? ex: payment processor, factory software and hosting co **Key activities:** what are the most important you should do to make the biz model work? production? problem solving? supply chain mgmt? **Costs:** what are the costs to operate the biz model? what are most important? most expensive? cost for key activities? fixed vs variable costs salaries fees to payment processes Now you can start sketching out your business model in a visual way, in less than 30 minutes! suggested topics to research, if you're new to this sorta thang: business model generation lean startup Eric Reis, Steve Blank