Ditch the Business Plan
Business plans, in the traditional sense, don't work very well. Many small businesses are too uncertain about how to write a business plan, and most businesses that have a business plan never look at it after it’s written. Traditional business plans are full of problems.
In general, traditional business plans:
- Contain more detail than is necessary or practical
- Take an immense amount of effort to write
- Aren’t flexible enough for when problems arise
- Require so much investment in the document that the business ends up being too tied to its initial ideas even when they aren’t working
- Are rarely referred to once the business has real customers
- Get put on the shelf and never referred to once the business has real customers
The Business Model Canvas is here to help. Traditional business plan can take hundreds of hours to prepare. Completing a canvas can take as little as 30 minutes. This not only means saving a lot of time, but it also allows faster iteration on your ideas.
What is the Business Model Canvas?
The Business Model Canvas is a single-page document template. It helps rapidly explain existing business models, or quickly develop new models.
Business Model Generation, a book developed by Alexander Osterwalder and Yves Pigneur introduced the Business Model Canvas to the masses. The book combines academic work from Osterwalder with learnings from use of the canvas with businesses around the world. This framework for the Business Model Canvas provides instruction and guidance on its use.
The canvas is a visual document made up of nine blocks that are the foundation of a business model.
- Customer Segments
- Customer Relationships
- Value Propositions
- Key Activities
- Key Resources
- Key Partners
- Cost Structure
- Revenue Streams
The layout of the canvas also helps to map connections and relationships between different parts of the business model.
Why Use the Business Model Canvas?
Business Model Canvas is a rapid route to documenting a business model. Because of the simple nature of the plan, it is very easy to get the business working sooner. If you’re a fan of the Lean Startup, as we are, this aligns with ideals like test often and fail early. Because the time to develop a canvas is relatively short, going back to the drawing board to revise is not a burdensome task.
In our experience, the Business Model Canvas is also a great way to uncover new ideas. The canvas is a great workshop tool where representatives of different areas of the business complete it together. Any collaborative effort tends to generate new ideas better than having individuals working in isolation. Completing the canvas as a group leaves room for debate and diverse opinions and contributions.
Use of the canvas isn't limited to new businesses, it is effective with the documentation of existing or evolving business models as well. At Lift, we've found success using the Business Model Canvas for new startup businesses, existing business heading in a new direction, and in planning the introduction of new products.
Planning a New Business
We often deal with entrepreneurs who have a great idea and understand the problem they’re solving. While they may not have the depth of knowledge in the technology itself and the process build a product.
Using the Business Model Canvas allows us to transfer the knowledge they have about the business idea quickly to our team. In the process, we're able to clarify elements of the business model where technology plays an important role. By breaking down the business in this way, before we start building software, we can test some of the assumptions early. Anytime we can confirm (or invalidate) assumptions before finalizing requirements it's a win for everyone involved.
We have also found that knowledge transfer in these sessions isn't one way. Working on the canvas together with a client is a great way for them to gain understanding of how we think about designing for the web.
Heading in a New Direction
Business models evolve. Most of the time change doesn't mean a completely new business model, but sometimes elements will shift.
Sketching out a new Business Model Canvas in these situations can help. For those who have been a part of the business for a long time, it confirms the current state before looking at where change is needed. It's also an opportunity for newer members of a team to add insight into what they see in the model.
Working through a canvas can uncover new ideas for old models, even where there isn't a major shift at all. Sometimes it's worth taking a bit of time to just document the current state. If you have copies of a previous canvas to compare to, you may be surprised by some of the changes that have crept in over time.
Introducing New Products
When introducing new products, it's easy to assume that the existing business model will continue to work. While this assumption may be true, it's equally likely that relying on that assumption could be a misstep.
The process of completing a Business Model Canvas for a new product introduction forces a look at more than just the basics. By looking at each of the nine blocks one by one, any assumptions are examined. Where the product fits within the existing model, no adjustment is necessary, but if there are differences, they can be handled appropriately.
30 minutes as a team could save you months of moving in the wrong direction with a new product release.
A Business Model Canvas workshop can help to clarify the direction of your business (or a section of it) and build cohesion on your team around an idea. Whether you choose to facilitate a session yourself or hire a company like Lift, there are some great resources out there you can look at first.
If you'd like to have us plan a workshop for you, please get in touch.