Want to build the best solution in the market? The solution is not in your office, it’s out there in the streets. So go interview your customer segment, ask them questions, and take those lessons!
Did you know there are 150 million startups in the world today? That’s not it all either, 50 million new startups launch every year! On average, there are 137,000 startups emerging every day.
Nice numbers, right? But how many startups survive the violent waves of change that have completely transformed the very nature of today’s startups? How can a startup survive in such an environment? Let’s find out!
According to Robert Yawe a business mentor and adviser to startups in the TUMI Startup Accelerator , the critical resources for a startup are time, money, workforce, experience and insights. These resources are always limited and put pressure on the founders to optimize the efforts and approach.
However, the Lean Canvas is an excellent tool, that if well understood and appropriately applied makes a big difference in appropriating the effort of a startup. So, what exactly does the Lean Canvas tool entail and mean to a startup?
The Lean Canvas consists of the following main components:
- Customer segments.
- Unique value proposition.
- Revenue streams.
- Cost structure.
- Key metrics and
- Unfair advantage.
Most startups fail in the market because they start at the solution level without finding the problem they want to solve. Each customer segment (CS) you are thinking to work with will have a set of problems that they need solved. In this box try listing the one to three high priority problems that your CS has. Without a problem to solve, you don’t have a product/service to offer.
The problem and Customer Segments can be viewed as intrinsically connected — without a CS in mind you can’t think of their problems, and vice-versa. While addressing the issue, unique value proposition chips in as this is the promise of value to be delivered. A startup should major on these key stages before now coming to the fourth stage – the solution.
Finding a solution to the problem is the golden egg! You’re not going to get this right off the first bat — it’s OK, as that’s what Lean is all about. What you need to do is Get Out of The Building — a phrase coined by the godfather of Lean Startup, Steve Blanks. This means the solution is not in your office, it’s out there in the streets. So go interview your customer segment, ask them questions, and take those lessons. The Lean Startup is validated learning through a continual Build — Measure — Learn cycle.
Channels are ways for you to reach your CS. In the initial stages, it’s important not to think about scale but to focus on learning. With that in mind try to think which channels will give you enough access to your CS and at the same time give you enough learning. Channels can be email, social, CPC ads, blogs, articles, trade shows, radio & TV, webinars etc.
How you price your business will depend on the type of model it is, however, it’s quite common for startups to lower the cost of their product, even offer it for free to gain traction, however, this can pose a few problems. The key being it actually delays/avoids validation. Getting people to sign up for something for free is a lot different than asking them to pay. There is also the idea of perceived value.
On the cost structure, you should list all the operational costs for taking your business to the market. How much will it cost to build a landing page? What is your burn rate — your total monthly running costs? How much will it cost to interview your customer segment? How much do market research papers cost? etc. You can then use these costs and potential revenue streams to calculate a rough break-even point.
Every business, no matter what industry or size, will have some key metrics that are used to monitor performance. The best way to help with this is to visualize a funnel top down that flows from the large open top, through multiple stages to the narrow end. A good model to help with this is Dave McClure’s ARRRR (Pirate Metrics)
An unfair advantage is the most difficult to avoid. However, trying to think about this as having an unfair advantage can help when it comes to seeking partners & investors. According to Jason Cohem, the only real competitive advantage is that which cannot be copied and cannot be bought. Unfair advantage can be insider information, a dream team, getting expert endorsements, existing customers etc. So rather than thinking about adding something like “commitment and passion” as an unfair advantage (because it is not), think about what you have that no one else can buy.