Lean Canvas

Use this tool when:

  • You want to get your first new startup idea from your head into a tangible format.

Overview

Time± 45 minutes
Difficulty3 / 5
People3 - 5
AuthorAsh Maurya
Websitehttps://leanstack.com/leancanvas
License CC BY SA 4.0
canvas

What is it and when should I use it?

Similar in purpose to the Business Model Canvas, the Lean Canvas is a single-page representation of all of the important aspects of a new business idea. It is the perfect one-page format for brainstorming possible business models.

Where the Business Model Canvas can be used very well for both startups and existing companies, the Lean Canvas is specifically geared towards startups and new ideas. The Lean Canvas has been adapted by Ash Maurya from the very popular Business Model Canvas that was developed by Alexander Osterwalder.

The Lean Canvas uses the same 9 blocks concept and layout, but here they’ve been modified slightly to suit the needs, purposes, and requirements of a Lean Startup.

Tool Overview

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  1. Problem The top-3 problems you are trying to solve for your customer segments.

  2. Solution The top-3 features your solution has in order to solve the problems.

  3. Key Metrics How will you measure your progress

  4. Unique Value Proposition The single, clear, compelling message that states why your solution is different and worth buying

  5. Unfair Advantage What makes your solution difficult to copy?

  6. Channels How your customers find and acquire or access your solution

  7. Customer Segments Your customer segments

  8. Cost Structure What does it cost to create and produce your solution and get it in the hands of your customers

  9. Revenue Streams How will you generate revenue?

Step-by-step

1 Define the Problem and the Customer

Start by figuring out the problem you want to solve, and for whom you are solving it. You can easily come up with different variations, but to start a great business, you really must understand the problem. Without a problem to solve, you won’t have a product/service that anyone needs.

Each customer segment (CS) you are thinking to work with will have a set of problems that they need solving. In this box try listing the one to three high priority problems that your customers have.

‘High priority’ problems means that the problems are high priority to your customers, not to you! To make sure that your problems are high priority and not unimportant or latent needs, have a look at the Customer Needs canvas.

The problem you want to solve and Customer Segments are intrinsically connected – without a customer segment in mind you can’t think of their problems, and visa-versa.

Try to come up with 2-3 combinations of customer segments and problems. Once you have defined your customer segment and your problem, it is good practice to set up a small experiment to validate this problem really exists and is high priority for your customers.

2 Solution

Once you have defined your problem and your customer segments, it’s time to think about your solution. To do that, try to come up with different ways to solve the problem for your customers. This is a real brainstorming part of the process – there can be multiple possible solutions to mitigate or avoid the problem.

The solutions you come up with will have different implications and different values for your customers. In the innovation process, that is another moment you should validate. It can be very hard to know what your customers find an acceptable solution for their problems – and even harder to figure out what is their preferred solution! Making sure your solution matches your customers is top priority early in the innovation journey.

For each of the solutions you come up with and validate, try to define the 3-5 top features that make that solution stand out.

3 Channels and Unfair Advantage

Now that the solution is more or less defined, it’s time to think about the ‘backstage’ part of your business. How are you going to deliver your solution into the hands of your customers? And what makes it difficult for competitors to copy your solution?

4 Unique Value Proposition

Now that you know the most important features of your solution as well as an unfair advantage and channels, it’s time to turn it into a Value Proposition. What makes your solution preferable for your customers? What turns it into a simple, clear message? You’ll probably need to work on your value proposition throughout your innovation journey, so don’t burn too much time on it the first attempt: your customers will give you feedback soon enough to help you sharpen it.

5 Cost Structure and Revenue Streams

The next step is to figure out how you are going to generate revenue and what your cost structure is going to be. Think about different revenue streams, revenue models, and pricing models you might use, as well as tallying up what it costs to produce your solution, deliver value and operate the business.

When defining the cost structure, one helpful way of looking at the costs is to divide them into fixed and variable costs. Fixed costs remain (more or less) the same regardless of how many solutions you sell. Think of IT cost, salary, or housing Variable costs vary with the amount you sell. Think of marketing cost, production cost, and logistics costs.

Another great lens is to look at how much a new customer costs you, vs how much revenue that customer will generate for you over their lifetime. Customers have a life cycle for your company: they first need to be convinced to become a customer (which costs money, e.g. through marketing). Once they are customers, they do one or more transactions, bringing in revenue. At some point, they stop being a customer, for instance because they have no further need for your product or service or because they have found a product that they like better. The ratio between the cost of acquiring a customer and the amount they generate over their lifetime is an important metric to pursue.

6 Key Metrics

And that brings me to the last building block of this canvas: Key Metrics. This block helps you guide your innovation journey. Here, you can define the metrics you want to monitor to see if you are making progress. These can range from Monthly Recurring Revenue, Number of Daily Active Users, or the length of your customer lifetime. Your metric will evolve over time, and needs to fit the stage your business is in. At the start of the innovation journey you might be most interested by the number of new customers, but later it becomes more important that these customers also stay customers for a longer period of time.

7 Next Steps

Just filling nine building blocks of your canvas won’t make your idea a reality. Now it’s time to see if your idea has any merit, by validating it. Earlier, in steps 1 and 2, there were already experiments mentioned, but in effect every single building block you define needs to be validated in the real world. Your idea for a channel may look great on paper, but until you try making it work you won’t know for sure. Checkout the Experiment Canvas and the Experiment Cookbook to get your experiments flowing.

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