One of the more interesting tools I’ve discovered lately was the Business Model Canvas. This was created by Alex Osterwald with a huge group of people. I thought it was incredibly useful for putting issues that companies have into a specific context. However, I did feel that something was missing. Something important. The picture linked above is extremely useful for an existing company that wants to put everyone on the same page, but I felt that it would fall a little flat in helping a new company start. There are simply too many unknowns to answer a lot of the questions that are in the frame work.
This is where the book Running Lean comes in. The author decided to adapt the business model canvas into something that a lot of entrepreneurs could use the Lean Canvas. In entrepreneur circles today, the most important thing to focus on is the problem trying to be solved. If you don’t have a clear articulation of the problem you’re trying to solve you’re going to fail. As such, there is more of a focus on the problem, the metrics associated with the problem and less focus on the planned solution. Secondly, Ash Maurya, argues that the best way to use the Lean Canvas is to look at both the problem and customer segment concurrently. Ignoring any potential solution, but looking at the problem you’re trying to solve and the people you’re trying to solve it for. This helps keep in perspective the real goal with your product, solving a problem for a customer that they’d be willing to pay you to solve.
However, I believe that this solution is still missing something which is something of an analysis of the existing competition and the planned solution. While Maurya does highly recommend including existing solutions under the problem, there is no effort to really use them – other than to make sure your product is different than their product. With the Lean Canvas the goal is to interview customers to identify if your existing solution is worth pursing more through rapid continual feedback – leveraging the MVP that I discussed in my last article. There are a few questions that can be asked to help shape the direction of the solution before talking to any customers.These questions come from the Theory of Disruption which argues that there will be less competition over time for the customers you’re pursuing because incumbent firms truly don’t want them as customers.
Does this product compete with Non-consumption? If you can answer yes to this, then you are expecting to undercut an existing incumbent that does not serve an existing market segment. In the case of Radios this mean extremely low quality devices that most people wouldn’t buy. In the case of video games now, you could argue that consoles are competing against non-consumption, this argument makes even more sense in terms of games on a smart phone. If the answer is No, then you need to ask the next two questions.
Does this product represent a sustaining technology? If you introduce this product to the market does it go after the same customers that the existing firms are already attempting to serve? Furthermore, does it go after the highest most valuable customers in those customers segments? If you answer yes to this, you will face extremely stiff competition from incumbent firms. They want those customers and will fight you tooth and nail for them. You will lose against those businesses and should look for a different solution to the problem you’re trying to address. If the answer to this is no, then you need to ask yourself the next question.
Does this product represent a disruptive technology? If you introduce this product would only the least valuable customers decide to purchase it? These would be customers that are being over served by existing solutions. For example, Pandora and Google Play Music both represent solutions for people that are over served by Apple’s iTunes. For customers that find iTunes to be part of their iDevice there’s little reason for them to look outside Apple’s Ecosystem especially since there are solutions for Apple users in that ecosystem. However, for non-iDevice users, iTunes represents a product that has many features that are undesirable. So Pandora and Google Play Music represent a smaller music collection where you never own the actual music you’re listening to even if you pay a premium for the updated services. This is disruptive to iTunes for that very reason.
Including these three questions at the minimum, with a clear understanding as to what they each mean, will help shape the solution to the problem you are trying to solve. Additionally, it will help you understand what customer segments you should pursue from the very beginning. As you are successful in capturing the lower tier customers you will continually improve your product and begin to move farther and farther up market. Which allows you to then truly disrupt the market.
Combining these theories into the Lean Starup approach will help understand the best route to pursue. Furthermore, you might not be able to answer these questions honestly. You will likely need to get customer feedback pertaining to these questions. Don’t as straight forwardly if the customer thinks it’s sustaining or disruptive, they won’t understand what that means. You will need to ask them if a competitor is already offering this service and if they aren’t using it why. If they are using a similar service make sure you try to differentiate between the competing product and high light the differences. Try to understand if your competitor would release this and if their customers would use the service.
That’s where the Lean Startup Build Measure Learn cycle comes back into the fore, you ask questions, learn build again, learn, and continue the cycle.