Lean Canvas vs. Business Model Canvas
The Lean Canvas vs. The Business Model Canvas: A quick guide for beginners
Business strategies guide an organization's decision-making process, providing a roadmap for achieving its objectives. A critical component of these strategies is the business model, which describes how an organization creates, delivers, and captures value. Two popular tools for designing business models are the Lean Canvas and the Business Model Canvas. This article will give you an overview of both the Lean Canvas and the Business Model Canvas, helping you understand the pros, cons, and practical applications of each.
The Business Model Canvas
The Business Model Canvas, conceptualized by Alexander Osterwalder and Yves Pigneur, provides a visual framework for designing, analyzing, and evolving business models. It has nine components, each representing a critical business element:
Value Proposition: The unique combination of products and services a business offers to meet its customers' needs.
Customer Segments: The different groups of people or organizations a business aims to reach and serve.
Channels: How a business reaches its Customer Segments to deliver its Value Proposition.
Customer Relationships: The types of relationships a company establishes with specific Customer Segments.
Revenue Streams: The cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings).
Key Resources: The most important assets to make a business model work.
Key Activities: The essential activities a business must undertake to operate successfully.
Key Partnerships: The network of suppliers and partners contributing to the business's success.
Cost Structure: All costs incurred to operate a business model.
This model's primary advantage is its comprehensive nature, enabling businesses to understand their operations holistically. However, it's broad in scope, which can lead to generalizations, oversights, or delays in the development process due to its complexity.
Companies like Skype have effectively used the Business Model Canvas. Skype's primary value proposition is providing free or low-cost communication services, targeting a broad customer segment worldwide.
The Lean Canvas
Proposed by Ash Maurya, the Lean Canvas is a variant of the Business Model Canvas, tailored to startups. Its nine blocks are:
Problem: The top problems the business is solving.
Solution: The solution offered for these problems.
Key Metrics: The key actions that matter the most to the business.
Unique Value Proposition: A single, clear, compelling message that states why you are different and worth paying attention to.
Unfair Advantage: Something that cannot easily be copied or bought.
Channels: The paths to customers.
Customer Segments: The target customers.
Cost Structure: All costs incurred to operate the business model.
Revenue Streams: The way the company makes money.
The Lean Canvas is ideal for startups because it focuses on problem-solving, adaptability, and fast iteration. Yet, its primary limitation is that it may oversimplify certain business aspects, especially for complex, large-scale operations.
Companies like Dropbox have used Lean Canvas. Dropbox's unfair advantage was its viral referral system, significantly lowering customer acquisition costs.
Comparing the Business Model Canvas and the Lean Canvas
Purpose and Focus
While both the Lean Canvas and Business Model Canvas visually represent your business model, they each have a unique purpose and focus. The Business Model Canvas is designed for established companies looking to innovate within their existing model. It presents a broad perspective suitable for the complexities of large, multifaceted businesses. In contrast, Lean Canvas is designed for startups, favoring agility and emphasizing key issues that startups often face, such as problem identification, testing potential solutions, and establishing unique value propositions.
Component differences
The two models differ in their components as well. The Business Model Canvas includes blocks like "Key Partnerships" and "Customer Relationships," reflecting the broader stakeholders and relational dynamics of established businesses. On the other hand, Lean Canvas replaces some of these components with "Unfair Advantage," "Problem," and "Solution," placing greater emphasis on competitive differentiation and problem-solving, critical aspects for startups.
Implementation process
Another distinguishing factor is the implementation process. The Business Model Canvas, due to its comprehensive nature, might require more significant cross-functional effort and time to fill out effectively. Conversely, the Lean Canvas can be filled out quickly, enabling rapid iterations and pivots based on market feedback.
Risk and uncertainty
Finally, risk and uncertainty are handled differently in each canvas. The Business Model Canvas presumes a certain level of business model certainty, which might not be present for startups or new projects within established businesses. On the other hand, Lean Canvas adopts a problem-solution approach, encouraging continuous learning and adaptation in the face of high uncertainty.
How to choose?
The Business Model Canvas and Lean Canvas serve different purposes, and they are best suited to different types of businesses. They're not mutually exclusive and could be used in tandem to provide different perspectives on your business model. The choice between the two will depend on your business's context, needs, and the level of certainty or uncertainty you are dealing with.
How to implement either the Lean Canvas or Business Model Canvas
Implementing either of these models requires understanding your business deeply. Start by filling out each segment honestly and objectively, focusing on your business's current status. Remember to review and iterate your canvas regularly, as business models are dynamic and should evolve over time.
Common mistakes include being overly optimistic or pessimistic in your assessments and not taking the time to validate your assumptions. These can be avoided by regularly testing your hypotheses and gathering feedback from your target market.
Conclusion
Both the Lean Canvas and Business Model Canvas offer valuable insights into your business's operations. They enable you to visualize your business model, identify potential weaknesses, and devise strategies for improvement. Therefore, we encourage you to explore both models and use the one that best fits your business's needs.
Further Reading and Resources
For those interested in learning more about these models, "Business Model Generation" by Alexander Osterwalder and Yves Pigneur is an excellent resource for the Business Model Canvas. For the Lean Canvas, "Running Lean" by Ash Maurya offers a comprehensive guide. Various online courses, webinars, and workshops are also available for both models. To get started with designing your own canvas, Miro provides free online templates for both the Lean Canvas and the Business Model Canvas.
This marks the beginning of your journey into Lean Canvas and Business Model Canvas. Happy exploring!