Using BMC and the Lean Canvas, explain your team's business concept.
Have you ever been involved in brainstorming a business idea? If so, have you or the rest of your team missed any details, such as what business strategy was created?
I’ll show you how to describe or explain the visual of your business concept so that your company’s stakeholders (or shareholders, maybe) understand your business creation.
To explain your business concept visually, there are two frameworks: BMC (Business Model Canvas) and Lean Canvas. I’ll start with the BMC.
Overview
The Business Model Canvas (BMC) is one of the Business Canvases and is a simple template for writing down your team’s assumptions about a product and then tracking their changes over time.
There are many business canvasses (see. Product Management for Dummies by Lawley & Schure, 2017); for example, the problem canvas, the product solution canvas, the business model solution canvas, and the BMC and Lean Canvas.
However, for this time, I will only discuss BMC and the lean canvas of all these business canvases.
BMC (Business Model Canvas)
Alexander Osterwalder is the person who first developed the BMC (Business Model Canvas) in 2008, and he has also written this book on Business Model Generation.
Challengers (2010)
A BMC is a business canvas containing a business model used to describe, visualize, assess, and change it in a shared language. This BMC summarizes and connects business aspects such as production and distributors to consumers.
You can find out what to consider in building a business model for your product idea that can be applied and profitable.
All business aspects are summarized in nine components, such as:
- Customer Segments
A company serves one or more customer segments. The customer is at the core of every business model. With profitable customers, the company can survive. So, to maintain customer satisfaction, companies can determine market segments based on user needs, behaviors, and attributes.
Here are five categories of the customer segment:
a) Mass Market
A large customer base with similar needs and issues means a company always produces immense quantities. For example, smartphone manufacturing companies sell their products to a large market segment.
b) Niche Market
Specific products for specific markets and customer bases. A company usually avoids competition with market leaders.
Tesla, for example, is a well-known brand that sells electric cars worldwide. Customers prefer Tesla because of its high-end, eco-conscious brands and products.
c) Segmented Market
Same category, but the targeted customers have different needs. The target customer in the segmented market is more significant than the niche market.
For example, a retail bank, ICBC, differentiates its customers into 3 types based on the product or service chosen by the customer. ICBC’s products include Smart Savings, Savings 88, and All-in-One Savings with their benefits, respectively. These products are adapted to different customers’ needs and problems but are still in the same category.
d) Diversified Market
A company sells different products or services to unrelated target customers with different needs or problems.
e) Multi-sided Platform Market
A company serves two or more distinct but interdependent customer segments.
2. Customer Relationship
Customer relationships are what the customer expects to improve or develop and what our company has improved. From these improvements, the company will get some feedback.
3. Channel/Distribution Channels
Through which customers can reach us and how we can get them too. We also consider which ones work best and are cost-effective.
4. Value Proposition
The value proposition is the value that we offer to customers; what are the customer’s problems and needs that we will satisfy with our product or service?
5. Key Activities
Key activities describe the most important activities our company undertakes for a successful business model to work. These key activities vary depending on the type of business model. There are three categories of key activities:
- Production
- Problem solving
- Platform/Network
6. Key Resources
The key resources describe the necessary things we must own for the successful key activities and the value proposition to be delivered to the customer successfully.
7. Key Partner
Key partners are parties that we can potentially cooperate with, such as suppliers, company resources, or others.
8. Revenue Streams
Revenue streams are ways that our company can generate revenue and profit. Here are some ways to generate revenue, including
9. Cost Structure
The cost structure is a breakdown of the highest costs we have to spend to carry out key activities and produce a value proposition.
The visual form of the BMC template and when brainstorming is done, as in the following example image.
Another example of BMC for big companies in the world:
2. LinkedIn
3. Amazon
4. Tesla
After discussing the BMC, I will discuss more about the Lean Canvas.
Lean Canvas
Lean Canvas was first created by Ash Maurya, the CEO of Leanstack. He also wrote a book about Lean Canvas and Running Lean in 2010.
Lean Canvas is an adaptation of the BMC with similar principles but different goals. Lean Canvas focuses on making business ideas actionable after identifying what is most at risk for business sustainability.
Some main boxes were removed to make room for problem boxes, unfair solutions and benefits, and key metrics. The key activities and key resources boxes were removed because they were more helpful in helping entrepreneurs understand their businesses than helping them understand what they were doing.
So, in simple terms, the BMC is released when a business already exists and is successful, so it won’t be easy to apply new business ideas. While Lean Canvas focuses on identifying problems and solutions, which are designed to fit the mindset of budding entrepreneurs and help build their business ideas.
All summaries of business aspects are summarised into 9 Lean Canvas components, including:
- Problems
Each customer segment, we define, will have a set of problems that they need to solve. Try to list one to three high priority problems that your customer segment has
2. Customer Segments
A company serves one or more customer segments. The customer is at the core of every business model. With profitable customers, the company can survive. So, to maintain customer satisfaction, companies can determine market segments based on user needs, behaviors, and attributes. Try to list your target customers and users.
3. Unique Value Proposition
A value proposition is a promise of value to be delivered. That’s the main reason prospects should buy from you.
The way to understand this is to think about why you are different and why your customer segment should buy/invest time in you . Further reading: A Useful Value Proposition Example (and How to Create a Good One).
4. Solution
Finding a solution to this problem is the point! You won’t get this in the first place, but that’s okay.
All you need to do is get out of the building — a phrase coined by Steve Blanks. The solution is not in your office, but on the streets. So, interview your customer segments, ask them questions, and accept the learning. Remember, Lean Startups are validated learning through a continuous Build — Measure — Learn cycle
5. Channels
Channels are how you reach your customer segments. And remember that in the early stages, it is important not to think about scale but to focus on learning.
With that in mind, try to think about which channels will give you enough access to your customer segment while giving you enough learning.
Channels can be email, social, CPC ads, blogs, articles, trade shows, radio & TV, webinars etc. And BTW, you don’t have to be in everything, just where your customer segment is.
6. Revenue Streams
How you price your business will depend on the type of model. However, it is very common for startups to lower costs, even offer them for free, to gain traction. However, this can create some problems.
The trick is that it actually delays or avoids validation. Encouraging people to sign up for something for free is a lot different from asking them to pay. There is also the notion of perceived value.
7. Cost Structure
Here you must list all the operating costs of bringing this business to market. How much does it cost to build or land a page? What is your burn rate—your total monthly operating costs? How much does it cost to interview your customer segment? How much does a market research paper cost? etc.
You can then use these costs and potential revenue streams to calculate a rough break-even point, or BEP.
8. Key Metrics
Every business, regardless of industry or size, will have several key metrics used to monitor performance.
The best way to help with this is to visualize the top of the funnel flowing from the large open top, through several stages, to the narrow end.
A good model to help with this is Dave McClure’s ARRRR (aka Pirate Metrics)
9. Unfair Advantage
This point is the most difficult to answer. However, try to think of this as having an unfair advantage as this can help when looking for partners and investors.
The visual form of the Lean Canvas template and what happens when brainstorming is done, as in the following example image.
Another example of the Lean Canvas for big companies in the world:
2. Amazon
3. Apple
4. Tesla
Well, that’s the BMC and Lean Canvas I explain to you. If you are curious about this topic, you can read from my references below, or you can also browse other sources.
Please don’t hesitate to leave comments so I can improve my writing better next time. Thank you for reading my article.
