Startup Strategy Canvas – Business Model Canvas 3.0
Author: Simon Gifford. Co-founder and CEO of Mashauri Limited.
Introduction
The first part of this article offers a new version of the business model canvas (called the “Startup Strategy Canvas”) incorporating the best ideas from Alex Osterwalder’s Business Model Canvas and Ash Maurya’s Lean Canvas; with the addition/substitution of some new building blocks which we believe makes it slightly better for early stage startups – especially when used to test the elements of the model as proposed by the “lean startup” approach.
The second part demonstrates how you might use it in practice when moving from idea to paying customers using the same lean startup process.
We assume that the reader is familiar with the existing model (Business Model Canvas) mentioned above and some of the basic concepts in Eric Ries’ “Lean Startup”. If you are not familiar with these, we have included some reading material at the end of the article.
Background
First let me say that I have the utmost admiration for both Alex Osterwalder and his team in designing the simple, elegant and powerful business model canvas. (click to his book).
Second, I am also a great fan of Ash Maurya who subsequently refined the original version to develop the lean canvas (click to his book).
Their business model canvases are depicted below.
At Mashauri, we have used both models but over time we have found that there are certain building blocks that added less value than others. Then there were a few other elements that we wish were available and we tended to tack them on to the edges of the original model.
The Startup Strategy Canvas is our enhancement of these two prior canvases. It contains all of the elements that require testing as you move to winning your early customers and as such can be the unifying tool to take you through every step. If you have no problem with either of the earlier models then we suggest you carry on using them – but please have a look at the Startup Strategy Canvas – you may find that at times it suits your needs better.
The Startup Strategy Canvas
Therefore, at the risk of being sacrilegious in the startup world, we would like to introduce an enhanced model – the Startup Strategy Canvas – aimed at early stage new ventures. It is depicted below:
To briefly describe each of the elements:
- Problem: the problem that the customers in the target market face
- Solution: our envisaged solution to the problem that is being solved
- Customer segments: the customers we will serve
- Channels: how we will reach these customers to acquire, retain and deliver our service
- The growth engine: the primary growth model: paid, sticky, viral.
- Value proposition: the benefits we deliver to the customers
- Competitive advantage: the difficult-to-copy basis that allows us to compete in the medium and long-term. One can add in positioning here as well.
- Activities: the key activities we must undertake in producing and delivering our product
- Resources: the critical resources required to undertake these activities
- Partners: our main partners without whom we would not be able to deliver our value proposition
- Revenue model: what and how we will charge our customers.
- Lifetime value of customers: the amount of revenue generated by each customer over the time in which they are a paying customer
- Cost of acquisition: the total cost of acquisition (normally marketing and sales) for each customer (total costs / # users acquired)
Note: the last two calculations can be somewhat complex, but the downloadable model has links to sites offering further explanation.
The reasons for the additions are that in the early stages of a startup,
- the problem and solution are not a given an d require testing – especially in relaton to the early target market
- the type of growth engine chosen is fundamental to all the other elements of the business
- the aggregation of a detailed financial plan into revenue and costs tends to beg more questions than answers – – but the three key drivers of profitability can be described (revenue model, cost of acquisition and lifetime value of customer).
- although sustainable competitive advantage may not always be initially obvious; consideration should be constantly given to this area as without it, there is no real long-term profitable business – it is absolutely critical to a sustainable business model.
If you are interested, you may download an Excel version of the Startup Strategy Canvas template here. (it takes a 3 clicks, but well worth the effort!). Each building block has a hover-able summary of its definition. It also includes dynamic “post-its” allowing you to populate the canvas with your venture. What’s more it includes a worked example too.
How to use the Startup Strategy Canvas
This second section of the article is how to use this Startup Strategy Canvas within the lean startup process. We believe there are two primary ways of using it.
- Firstly, in the “traditional” format as a description of the overall business and a vision of what it would look like when you reach scale. Obviously the details will change throughout the development of the business, but this is, at least, the broad hypothesis with which you begin the journey. There is an example in the downloadable template.
- However, this future state is less useful when you are at the early stages of development. Initially, it is important to narrow your target market down to a “beachhead” market and test the elements of the business model in a controlled, scientific process. The Mashauri programme leads our founders through this process and having the Startup Strategy Canvas allows you to easily visualise the hypotheses and experiments.
The following three diagrams are examples of how the Startup Strategy Canvas could be used in the early stages of testing your business model:
Problem-solution testing
Problem – customer – solution testing
Value proposition testing
Using this format, it is far easier to quickly capture your assumptions and design experiments to test them. Supported by some of the other Mashauri tools, you can easily plan experiments, capture the results and track progress over time. The Startup Strategy Canvas then evolves with your venture as hypotheses are proven (or disproven), pivots are undertaken and the new model is again tested.
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Conclusion
We are beginning to use this model within the Mashauri acceleration programmes to see how it stands up in practice. In the meantime, we would welcome any comments, criticisms and improvement suggestions as to how we might make it even more practical and user-friendly.
We would like to re-emphasise that we have “stood on the shoulders of giants” to develop this Startup Strategy Canvas (notably Alex Osterwalder, Ash Maurya and Eric Ries).
If you are unfamiliar with business model thinking, the lean startup process, value propositions, et cetera, you have a number of choices:
- Enter one of the Mashauri programmes and “learn as you do”
- Read up on the topics using one or more of the following books
Downloadable: Excel version of the Startup Strategy Canvas template here.
If you have any queries or comments, plase feel free to contact me at simon.gifford@mashauri.com