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how to compile a lean canvas

How to compile a Lean Canvas, the business plan in one page

how to compile a lean canvas
To compile a Lean Canvas is the very first step for evaluating a business idea and for identifying the riskiest assumptions to be tested. A Lean Canvas is also the perfect companion along the journey from initial idea to Product-Market fit.

The whole concept behind a Lean Canvas is to briefly and concisely explain a business model to a person who does not know anything about what the company is doing and why.
It just takes a few minutes to create a first draft and it’s so powerful that
the simple act of preparing it will help anyone with a business idea to get more clarity on their thoughts.
A Lean Canvas template is available from LeanStack.com, together with some guidance on how to proceed. I encourage you to use LeanStack, as it keeps track of the different versions you will prepare and you can easily share the canvas either with the rest of your team or with advisors/coaches. Moreover, it’s free.

 

How to compile a Lean Canvas online video interactive courseHere’s an online video course I’ve prepared to guide you through each step of compiling a Lean Canvas.
It’s 75 minutes long, very practical and full of examples, and spiced up by my exotic Italian accent.

You are welcome to use the coupon “EARLYBIRD” to get a 50% discount.

 

THREE KEY RULES TO COMPILE THE PERFECT LEAN CANVAS

Although the Lean Canvas has been designed to be simple and straightforward, it might present some challenges for first timers. There are three key rules to keep in mind:
– write sentences that are specific and concise. Don’t just write “time” as a problem, but, for example, “the process of finding the right supplier is complex and requires too much time” . Keep sentences simple, straight to the point, short (maximum 10 words each) and meaningful.
– after you have prepared a draft, go through each step, telling this story to yourself: we will help these people (customer segments) to solve (problem) by providing them (solution). They will know about us through (channels) and they will be convinced to join us because (value proposition) and because we already (unfair advantage). We will charge them by (revenue) and we believe this will cover our (costs). We will measure our performance by tracking (key metrics). It should all flow and make sense, like it is a story where everything is linked. If it doesn’t, the Lean Canvas needs more work.
– prepare a Lean Canvas for each customer segment of your business idea. This is because each customer segment may have different problems, solutions, channels, revenue, costs, etc.

A LEAN CANVAS EXAMPLE: UBER LONDON

To get an idea of what we are talking about, let’s see an example of how a Lean Canvas would look like for a well known company: Uber in London.

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what to ask customers to validate pain points

What to ask Customers in order to Validate their Pain Points?

what to ask customers to validate pain points

Speaking with customers from a very early stage of a new product definition is an extremely powerful, informative and cheap tool to validate assumptions on customer segments and their problems. Customer discovery interviews will also equip you with insights to define a Unique Value Proposition for a product for which there is an actual market need.

However, it is crucially important to avoid spending precious time without getting to know the truth from customers. The biggest risk is to collect either false positives (what a great idea) or false negatives (this is never going to work).
We have seen already a few tips on how to run successful customer interviews (read here).
It’s now time to understand how to conduct the actual interviews, which are the questions to avoid and which are the best ones to use.

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Library Of Tests To Validate A Business Idea

How to Select a Test to Get Market Validation for a New Product or Business Idea

Library Of Tests To Validate A Business Idea

To test assumptions for a new business or new product idea is among the foundations of the Lean Startup methodology.
By selecting the riskiest assumption, defining an hypothesis, testing it with customers and then analysing the results to decide the way forward, entrepreneurs can systematically reduce the risk of launching a new product.
This is extremely important, since 72% of all new products fail to generate the expected results in terms of positive impact on profit.

But how do we choose the right test to validate the riskiest assumption?
Any 3 pennies out of 4 spent during the early stage of a new business or product idea are very likely to be wasted, so it’s best to minimise by:

  • using cheap and quick tests when uncertainty is high
  • using more expensive and longer tests when the riskiest assumptions have been tested and validated already

In order to facilitate the difficult task of choosing the right test at the right time, I’ve collected a library of tests to get market validation, combining my personal experience with what the Strategyzer team have written in their Value Proposition Design bestseller book.

The tests are ordered below from the cheapest and quickest one to the longest and most expensive.
One note though: this is just an overview, intended to be a catalogue to facilitate choice, not execution. You will find in the text links to other posts where I’ve collected more details on how to conduct specific actions required by each test.
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how to identify early adopters

How to identify early adopters for a new business idea? The Uber case study.

how to identify early adopters

Identifying early adopters of a new business idea is the key to achieve traction and validation.
Even if a new business idea is targeting a broad market, the best way to introduce a new service or an innovation is to start from the segment of customers that are more eager to use it. (Everett Rogers has written a interesting book about this)
The more they want to use it, the easiest will be to sell it, it’s as simple as that.
In fact, in an initial phase, the Minimum Viable Product (or MVP) of a new product is going to be mostly designed around early adopters, so that the business can get enough traction and validation with them and then scale up to attract a broader customer base.

Customer development interviews are the cheapest and fastest way to validate assumptions about the problems that a new business idea is intending to solve and about who are the customers affected the most. (Here are few tips on how to recruit customers to interview and how to conduct successful interviews).
However, once the round of interviews is completed, how to identify who are the early adopters?

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customer centric competitive analysis

How to compile a customer centric competitive analysis?

customer centric competitive analysis

The two most important elements to define a powerful Unique Value Proposition statement are to communicate why a business is different from what is already available on the market, and to make sure that the difference matters to the target customers. And this is where a customer-centric competitive analysis comes to rescue.

A competitive analysis is a tool that shows where a new business idea or a new product is positioned against competitors. It is able to highlight strengths and weaknesses, and helps establish what makes a new product unique.
However, the key thing is: unique is the eyes of who?

One of the ways to compile a competitive analysis able to inform an effective Unique Value Proposition (or UVP) statement is to use the validated customers needs that the new business or new product is willing to solve as a foundation. As Ash Maurya puts it, “the key to unlocking what’s different about your product is deriving your UVP directly from the number-one problem you are solving. If that problem is indeed worth solving, you’re more than halfway there already“.

So these are the eight steps I recommend to follow to compile a meaningful customer centric competitive analysis:

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value proposition market test

How to validate a value proposition with the least possible investment?

value proposition market test

The most exciting part of having understood customers frustrations and pains through interviews is to be able to come up with a value proposition ready to be tested and validated. This is important because without a valuable value proposition in place, no new product or business idea is ever going to work.

The thing that makes bringing to life a value proposition a critical stage is that at this point entrepreneurs and companies start spending money.
The size of the investment really depends from the type of business, but the key thing is: whatever the business is, the level of uncertainty at this stage is still so high that it’s imperative to minimize the expenditure, as it all might turn out in a massive loss.

The best way to approach this is to fake the proposition in the most credible way and test it on the field, with the objective of minimising potential losses in case something was fundamentally wrong or needs to be drastically changed.
This is a practice that Alberto Savoia called “pre-totyping“. He defined pre-totyping as “fake it and test it before you make it“. It’s quite clear what “make it” means in this case: do not necessarily start coding for months, or do not secure a premium commercial location on a busy road to open that organic restaurant. Instead, there are at least seven techniques to be explored to gather customer commitment, and possibly start collecting revenue, before putting big money on the table.
The seven techniques are roughly ordered below so that the ones requiring the least amount of financial resources are at the top:

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validate business idea no business plan

Why a business plan is not the first thing to do when you have a business idea?

validate business idea no business plan

The first thing that normally comes into mind when someone has a new business idea is: “I need to prepare a business plan“.
The first time I did that, I produced a document of 70+ pages, soon realising that, despite all the time spent writing it and all the research done, it was mostly made up.
All the figures about revenue and marketing costs were just pure invention. I had asked some numbers to the member of the team with some expertise in sales, and I put them in the spreadsheet.

As Alexander Osterwalder writes, preparing a business plan to validate an early stage business idea or a new product is a dangerous double edged sword.
On one side, it provides a tool to make an idea sound convincing when you are presenting to investors or to senior managers. But on the other end, should they consider the plan reasonable and well grounded, they might actually buy it. And if they do that, they will expect you to deliver that! This may be a major headache, because most of the plan was in fact made up.

So if a full length business plan is not the right thing to do, how do you assess whether a business idea is a good one and how do you plan for it financially?

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proof of concept to validate idea

Why developing a technical proof of concept is not the first thing to do to validate an idea?

proof of concept to validate idea

Very often companies giving a first pass approval for a new product idea decide to invest time and resources in a technical Proof of Concept.
From a certain point of view it makes perfect sense, as it’s a way to test internal capabilities before deciding to go ahead or not.
A Proof of Concept (POC) will answer two main questions:

  • are we able to deliver the idea?
  • how much is it going to cost to deliver?

POC is a helpful assessment of the feasibility and cost structure of a new product idea.

However, the first thing we should ask ourselves when starting a new product journey is “is there a market need for it?”, and not not “can we do it?”
Most of the insights that a POC will deliver are related to the internal organisation, its capabilities, its skills and cost structure. But how about the customers? They are the ones that are going to buy – or not – whatever you are able to build!

Moreover, it’s not even free to do. By delivering a POC, companies invest time and money.

  • engineers and materials involved have an actual cost
  • opportunity cost: engineers’ time and skills could work on something else, a new feature for an existing product that is already positively contributing to company’s bottom line, for example
  • Finally, credibility and team morale should be considered. No one wants to work on pointless stuff.

How to prevent this from happening?
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how to run customer development interviews

Ten tips to run effective customer development interviews

how to run customer development interviews

Meeting with customers during the early stages of a new product definition provides an understanding of the underlying needs, opinions, and motivations behind their behaviour. It validates assumptions about the problems we are willing to solve and informs a value proposition. At the same time, we have the chance to develop ideas or hypotheses to be tested with a successive quantitative research.

Customer interviews help develop a deep understanding of the situation before deciding to take action. Having 40+ hours of interviews is not like sitting at a research agency de-brief reviewing a bunch of PowerPoint slides. I usually come back from the experience with real faces in my mind, people’s words surface to rescue me whenever I need insights to take a difficult decision.

However, as most of the valuable things in life, it’s not easy stuff. Interviews take a lot of practice, and at the end of the day we might feel exhausted. They don’t cost much money, but do require quite a lot of time to recruit the right people, to organise the agenda to accommodate them, and to run the actual sessions.

Here are ten tips I put together on how to run effective customer development interviews.
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online surveys for new product

Are online surveys really effective to inform a new product design?

online surveys for new product

Preparing an online survey may be the first thing that comes to mind to gather customer insights.
In fact it’s easy-peasy: join a free tool, brainstorm the most burning questions we have about the new product and share the survey on Facebook or LinkedIn hoping for a snowball effect. It all s
ounds like a brilliant idea.
However, there are at least three reasons why online surveys at a very early stage of a new product definition are more likely to produce harm than benefit, and might end up to provide incorrect information to guide us through the new product definition.
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customer development recruitment

How to recruit early adopters for customer development interviews?

customer development recruitment

To recruit customers for customer development interviews may be one of the most difficult and time consuming things to do in a customer-centric new product development process.

One of the mantras of Steve Blank, the serial entrepreneur and academician who started the entire Lean Startup movement by developing the Customer Development methodology, is to “get out of the building“. What Steve says is to get out of the office and speak with real people. I believe his claim is provocative on purpose in opposition to the corporate habit of spending hours in crowded meeting rooms to review hundreds of boring slides while trying not to be noticed when glancing at our Twitter feed. In fact there are a number of reasons why getting out on the street to stop people passing by is not really a good idea:

  • Stopping people on the street is incredibly awkward. I tried a few times, not really nice.
  • Selecting a specific area – like a neighbourhood – might help me find relevant people, but I’d be essentially picking up at random. It will take ages until I have enough sample to validate my assumptions.
  • It’s very unlikely that I will find anyone willing to spend more than a couple of minutes talking with me. People on the streets are always in a rush, and I need engaged customer to provide me with meaningful information..

So instead of running around like headless chickens, a little bit of homework might help to get the customer insights we need.
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Most startups fail because there is no market need for what they do

Why most startups fail and how to succeed?

startups Fail Because No Market Need

The hard truth of startups and new products is that at least 72% of all new products fail, causing damage to individuals’ savings, company’s cash flows and P&L, and affecting the morale of the team involved. The Silicon Valley Venture Capital Greylock Partners and the Venture Capital Database CB Insights analysed startups post-mortem earlier in 2017 and confirmed that user and customer demand is a north star for the success of a new business idea or a new product.
According to 100firsthits.com, the TOP1 startup mistake is “Building something nobody wants.

This all look like commons sense in fact. If there is no market need, whatever awesome product we will manage to put together and promote, we won’t sell it.
So the question is: how do we find out whether there is customer demand for a business idea, and how does the product need to be to satisfy that demand BEFORE investing big money

Eric Ries, author of “The Lean Startup” wrote something interesting about this: “startup success is not a consequence of good genes or being in the right place at the right time. Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.” 

So there is a recipe for success.
This is great because entrepreneurship has a magic power, it triggers positive energies and it leaves people with an irresistible willingness to start doing things.
However, all these positive energies can be very easily transformed into negative when they are not channelled in the correct direction.
And with negative I mean: having quit a day job, having spent most of our savings, having re-mortaged the house and ultimately having trouble explaining to our life partner, family and friends why we have done all of that and we haven’t been able to succeed. That’s awful.
Let’s follow the process then. Instead of jumping into build mode and start developing and hiring people immediately, these are the questions that we need to answer in order to build and launch a product customers need and for which there is market demand:

  • Which problem are we going to solve?
  • Who has the pain in our market?
  • Who are the early adopters?
  • What is the value proposition able to satisfy their needs?
  • How much are they willing to pay for it?
  • What is the minimum set of features required for launch?

The way to answer most of these questions is to engage with customers from the very early stage of the new product development, get to know them profoundly, create a value proposition based on the insights captured that relies on the company’s key strengths to create a competitive advantage customers care about, and test and iterate that proposition on the market until we reach product-market fit.

Most of this can be done before investing any substantial resource into the business, and that’s really the best thing about Lean methodology.
The most difficult thing is to resist from the instinct to jump into “build mode”, and invest some time to de-risk an idea before investing heavily in it.
Anyone is in love with their idea, and the last thing we want to know is that it’s not a good one. But the sooner we realise an idea is flawed (i.e. there is no market need for it) the better it is.
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