Business Model Canvas

and Lean approach

Maria Nikolou, PhD, MBA

Senior Programme Manager
Entrepreneurship Centre,
Saïd Business School

28th October 2014

General facts and ideas…

2
Start-ups are NOT just smaller
versions of large companies!

3
 Start-ups search for business models

NOT execute known business models.

‘A start-up is a temporary organization design to

search for a business model.’

- Steve Blank
4
Business model

vs

5
Business model

6
Business model

?
7
Launching a business…

• Write a business plan

• Pitch it to investors

• Assemble a team

• Develop a product/service

• Introduce a product

• Start selling
8
Launching a business…

• Write a business plan

• Pitch it to investors

• Assemble a team

• Develop a product/service

• Introduce a product

• Start selling
9
Process of starting a company

Old way: New way:

• Elaborate planning • Experimentation
• Intuition
• Customer feedback
• Up front investment
in development • Iteration or pivot

Higher risk Lower risk

10
Lean Start-up approach
Lean start-up

9
13
14
‘It is like driving at night in the fog. You can
only see as far as your headlights but you
can make the whole trip that way.’

- E. L. Doctorow

15
There’s no ABC process 16
A start-up is a pile of assumptions.

The faster you bounce these assumptions off the

market, the faster you will progress.

What is progress?

17
Progress is:

Learning from the customers. ✓

Not building stuff and planning in isolation. ✗

18
The Number 1 thing you need in order to have a
business is:

CUSTOMERS!

19
You CANNOT plan under uncertainty
so you need a way to search and
acquire data.

20
Launch fast and iterate…

21
 “If you are not embarrassed by the first
version of your product, you have launched
too late.”

- Reid Hoffman

22
Tools and methods

Business Model Canvas

Summarize your hypothesis
Customer development
Understand your customers
Minimum Viable Product
Be agile and launch fast

23
Business Model Canvas
A. Osterwalder & Y. Pigneur

25
26
You sell your value proposition….

Value propositions are not just a list of features:

It is how you create joy or alleviate pain!
27
To a customer segment….

It is better to have multiple specific customer segments

than a generic one.
28
Who you reach through some channel….

Channels:
- How they hear about your product?
- Where they will actually buy it?
29
You want to create an ongoing relationship
to create retention and lock-in….

- How do you make sure they choose your product

again next time?
- How do you increase lock-in and retention?
30
That’s how you make money…

Revenue Stream;
- What value are your customers paying for?
- Where is your revenue coming from? 31
The left side of the canvas…
It is how you create your value proposition.

Innovation on the left side of the canvas is about managing

the costs.
32
 e the value proposition,
To create value proposition…
certain Key Activities
You do certain key activities.

vity

ou

What are the core activities required to deliver your

value proposition?
33
Using your key resources…

Key resources are what others will need to replicate in

order to compete with you;
- What makes your business unique?
34
Anything you don’t do yourself…
You get from a partner.

Your company has certain core competencies used to

create and deliver the value proposition. Everything
else can be outsourced.
35
Tips on using the canvas

• Print it out and put it on the wall

• Use different colour post-its for each customer
segment; explore lots of possibilities
• Then focus on one customer segment and fill the rest
of the canvas.
• Use as few sticky notes as possible; refine & reduce
• Focus on quick communication, not perfect
representation
 Changing something changes everything.

You can’t think about any one part without

thinking about the rest.

37
External environment

Threat of new
entrants

Rivalry
Bargaining power among Bargaining power
of suppliers existing of buyers
competitors

Threat of
substitutions

Michael Porter’s five forces analysis

Case Study: Google
 Why do

Chrome and Android matter so

much to Google?
Searchers
 Find
Searchers
anything
 Find
Searchers
anything

?
 Find
Searchers
anything

.000X / search
So who is paying?
 Find
Searchers
anything

.000X / search
 Find
Searchers
anything

Advertisers

.000X / search
 Find
Searchers
anything

Advertisers

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Measurable

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Measurable

Any budget

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Measurable

Any budget

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Those are the basics
but

how do they get and keep users?

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Seems weak.

When the answer seems

suspicious, keep looking.
When you searched for something
today,

why did you use Google?

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find
Searchers
anything

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

 Find It’s the
Searchers
anything default

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

The default? Where?
 Find It’s the
Searchers
anything default

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

Mozilla’s Find It’s the
Searchers
Firefox anything default

Cost-
effective Advertisers
advertising

Big audience

.000X / search $ / click

Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience

.000X / search $ / click

Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience

.000X / search $ / click

Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience
Browser
partnerships

.000X / search $ / click

Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience
Browser
partnerships

.000X / search $X00 M / year $ / click

Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience
Browser
partnerships

$X00 M
.000X / search $ / click
/ year
 Why do

Chrome and Android matter so

much to Google?
Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience
Browser
partnerships

$X00 M
.000X / search $ / click
/ year
Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience
Browser
partnerships

$X00 M
.000X / search $ / click
/ year
Mozilla’s Find It’s the
Searchers
Firefox anything default

Apple’s Cost-
Safari effective Advertisers
advertising

Big audience
Browser
partnerships

$X00 M
.000X / search $ / click
/ year
 Find It’s the
Searchers
anything default

Cost-
effective Advertisers
advertising

Big audience

$X00 M
.000X / search $ / click
/ year
 Find It’s the
Searchers
anything default

Cost-
effective Advertisers
advertising

Big audience

$X00 M
.000X / search $ / click
/ year
 Build a Find It’s the
Searchers
browser anything default

Cost-
effective Advertisers
advertising

Big audience

$X00 M
.000X / search $ / click
/ year
 Build a Find It’s the
Searchers
browser anything default

Cost-
effective Advertisers
advertising

35% Big audience

browser
share

$X00 M
.000X / search $ / click
/ year
 Build a Find It’s the
Searchers
browser anything default

Cost-
effective Advertisers
advertising

Big audience Our own

35%
browser
browser
share

$X00 M
.000X / search $ / click
/ year
 Build a Find It’s the
Searchers
browser anything default

Cost-
effective Advertisers
advertising

Big audience Our own

35%
browser
browser
share
Phone
default
search

$X00 M
.000X / search $ / click
/ year
 Build a Find It’s the
Searchers
browser anything default

iOS
Cost-
effective Advertisers
etc...
advertising

Big audience Our own

35%
browser
browser
share
Phone
default
search

$X00 M
.000X / search $ / click
/ year
The business model holds the answer;

If Google didn’t win with Chrome

and Android…

they would be forced to spend a

fortune on partnerships

(and might even lose their whole

business)
 Customer Development
&
Minimum Viable Product (MVP)
Customer Development

Save your time and energy…before you build

anything:

Find customers (early adopters)

and

confirm their intend to buy.

89
Talk to people

90
How do you know it’s bad data?

Compliments
That’s a great idea! I love it!
Generic comments
I usually… I always…
Ideas
You should include feature X and Y and …
Common knowledge
Data you could find through desktop research
Demographics
91
 Why conversations go wrong…

When we ask people about our idea:

But really,
we’re just
re
fishing for
ic kind
92
I have this awesome idea for a
business that I’ve been
working on for months…
Do you like it?

93
If you pitch your idea,
most people will lie to you!

Why?
Because:
they don’t have a strong opinion about it,
they don’t want to discourage you,
they don’t want to keep talking about it for
another hour…
94
 What you DON’T need:
you DO need

Formal meetings
know what
Business cards
u want to learn
Interview scripts
askToabout
pay people
eir life
An hour or more

95
What you need to do:

Know what information you need to know.

Pick customers you have easy access to and have a
casual conversation.
Don’t start a conversation by talking about your idea.
Don’t try to convince them that your idea is great.
Talk about their lives; ask about facts: past actions not
future one!
Listen more and talk less.

96
Remember…

“No idea survives its first encounter

with the customer!”

-Steve Blank

97
Minimum Viable Product (MVP)

The simplest product you can build to

test a critical hypothesis of your

business.

98
I have a crazy product idea and the
manufacturing process is expensive.

How do I test it?

100
Summary

Use the Business Model Canvas to:

Organize your thinking
Map the different aspects of your business
Track your hypothesis

How do you convert hypothesis into facts?

Talk to potential customers;

Design experiments
Run tests
Gather data

101
What do you do when the hypothesis
don’t match the reality?

You pivot:
change one or more business model
components and try again!
102
 “It is not the strongest of the species
that survives nor the most intelligent but
the one most responsive to change”.

- Charles Darwin

103
Questions?

104
Thank you!

105
Useful references

The lean start-up by Eric Ries

Business Model Generation by Alex Osterwalder and Yves Pigneur
Business Model Canvas Explained
http://www.youtube.com/watch?v=QoAOzMTLP5s
The Mom Test: How to talk to customers & learn if your business is a
good idea when everyone is lying to you; by Rob Fitzpatrick.
FounderCentric; http://www.foundercentric.com/
Crowdfunder; http://www.crowdfunder.co.uk
KickStarter; https://www.kickstarter.com/?ref=nav
Wobble Bowls by Speechless Studios;
https://www.kickstarter.com/projects/speechless/wobble-bowls-by-
speechless-studios
106