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Handout

Creating Your Lean Canvas: FAQs and Tips

A. FREQUENTLY ASKED QUESTIONS

1. WHAT IS THE DIFFERENCE BETWEEN A BUSINESS MODEL AND A BUSINESS PLAN?

While a Business Model is the way through which a company creates value and generates its profit, a Business
Plan is a document presenting the company's strategy and expected financial performance for the years to
come. In Steve Blank’s words, the Business Model is the plan before the plan.

Remember, without a Business Model, there can be no Business Plan. A word of caution - You should start on
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your Business Plan only after you have executed your business model, that is, after you have brought your
product to the market. Watch this video to learn more: https://www.youtube.com/watch?v=zibpovqIx2g

2. WHAT IS A LEAN CANVAS?

The Lean Canvas is a portable 1-page diagram and is the perfect format for brainstorming possible business
models, prioritizing where to start, and tracking ongoing learning.

In the beginning, entrepreneurs have an inkling of the problem, solution, and customer in mind. They can start
by brainstorming the list of possible customers they envision using their product.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B1. GENERIC TIPS TO FILL THE LEAN CANVAS

# KEY POINTS EXPLANATION

If there are multiple user roles in a product, you need to


Distinguish between customers and
1 identify your customers. A customer is someone that pays for
users
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the product.

Some startups feel that the problems they are solving are so
Split broad customer segments into universal, they apply to everyone. One cannot effectively build,
2
smaller ones design, and position a product for everyone. Even Facebook
started with a specific user in mind - college students.

The elements of a business model can and will vary greatly by


Sketch a Lean Canvas for each customer segment. Ash Maurya recommends starting with the
3
customer segment top 2-3 customer segments that you understand the best or
find most promising.

While a business plan can take weeks or months to write, the


4 Sketch a Lean Canvas in one sitting initial canvas should be sketched quickly and in one sitting
based on the knowledge at that point.

Rather than trying to research or debate the “right” answers, it


is better to write something down quickly on the canvas or
5 Leave sections blank
leave it blank and come back to it later. Some elements like
“Unfair Advantage” take time to figure out.

Business plans try too hard to predict the future which is


impossible. Instead, fill up the canvas with a “getting things
6 Think in the present done” attitude. Based on your current stage and what you
know at the present moment, what are the next set of
hypotheses you need to test to move your product forward?

In the book, Running Lean, Ash Maurya recommends using a


customer-centric approach. It is best to start with the Customer
7 Use a customer-centric approach
Segment and follow the order described below to sketch the
initial canvases.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B. 2. PROBLEM AND CUSTOMER SEGMENTS

The “Problem-Customer” pair usually drives the rest of the canvas which is why they are tackled together:

1. List the top 3 problems: For the customer segment you are working with, describe the top 1-3
problems that need to be solved.
2. List existing alternatives: Document how you think your early adopters address these problems today.
Unless you are solving a brand new problem, most problems have an existing solution.
3. Identify other user roles: For example, in a blogging platform, the customer is the blog author while the
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user is a reader.
4. Hone in on possible early adopters: Narrow down the distinguishing characteristics of your prototypical
customer. Your objective is to define an early adopter - not a mainstream customer.

Note: You have identified the problem that you thought was worth solving using JTBD. List down the top
1 to 3 problems that you had originally shortlisted on your canvas.

B.2.1. CASE STUDY: CLOUDFIRE - PROBLEM AND CUSTOMER SEGMENTS

Having just become a parent, Ash Maurya observed a storm of problems that he wanted to explore further,
listed here and shown in the Lean Canvas below (Figure B.2.1.)
 The demand for photos and videos taken increased significantly after the baby was born.
 They were sleep-deprived and found the existing solutions time-consuming and painful to use.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B.3. UNIQUE VALUE PROPOSITION

Unique Value Proposition (UVP) can be defined as how you are different and worth getting attention. A good
UVP should fit in the headline of your landing page. Here are some tips to craft a unique value proposition:
1. Derive your UVP directly from the #1 problem you are solving.
2. Find and target early adopters with a bold, clear, and specific messaging.
3. Focus on the finished story benefits that your customers will derive after using your product. For
example, for a résumé-building service, the finished story benefit would be “landing your dream job.”
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4. Pick your words carefully and own them. For example, Performance: BMW; Design: Audi.
5. A good UVP needs to answer 3 questions clearly, “What is your product?”, “Who is the customer?”, and
“Why use it?” To answer the “Why” use a sub-heading. For example, CloudFire - Photo and Video
Sharing for Busy Parents. Get back to the more important things in your life.
6. Visit the landing pages for some brands and deconstruct how and why their messaging works.
7. Create a high-concept pitch that builds on other familiar concepts to quickly get an idea across and
make it easily spreadable. For example, YouTube: “Flickr for video.”

Note: Keeping in mind your solution and the value proposition that you have captured in the Value Proposition
Canvas in terms of pain relievers and gain creators, you need to fill the UVP block. In the next lesson, you will
go through the Blue Ocean Strategy which will help you refine your value proposition and ensure that it is
unique.

B.3.1 CASE STUDY: CLOUDFIRE - UNIQUE VALUE PROPOSITION

Given the current list of existing alternatives, Ash Maurya decided to use speed as the “difference that would
matter” for the UVP and “no uploading” as the keywords to position around.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B.4. SOLUTION

You are now ready to start documenting the minimum set of features feature set needed to solve your top 1-3
problems. As all that you have are untested problems, avoid getting carried away with fully defining your
solution just yet. Rather, sketch out the simplest thing you could build to address each problem. Bind a
solution to your problem as late as possible.
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B.4.1 CASE STUDY: CLOUDFIRE - SOLUTION

Based on a list of problems, Ash created a short list of top features to include in the Minimum Viable Product or
MVP.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B 5. CHANNELS

The initial goal of a startup is to learn, not to scale. Look for the following characteristics in your early
channels:

1. Free versus Paid: Free channels such as SEO, social media, and blogging have a human capital cost associated
with them. In search engine marketing, keyword competition is so fierce now that you need to either out-spend
or outwit your competition. These activities are better suited for later.
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2. Inbound versus Outbound: Inbound channels use “pull messaging” to let customers find you while outbound
channels rely on “push messaging” to reach customers. Examples of inbound channels: blogs, SEO, e-books,
white papers, and webinars. Examples of outbound channels: SEM, print/TV ads, trade shows, cold calling.
3. Direct versus Automated: As a learning channel, direct selling is one of the most effective. First sell manually,
then automate.
4. Direct versus Indirect: Often, startups waste energy in prematurely trying to establish strategic partnerships.
First, sell yourself, then let others do it.
5. Retention before Referral: Referral programs can be very effective in spreading the word about your product.
However, first you need to have a product worth spreading the word about!
6. Building the Ideal Early Channel: An early channel that delivers on all the points above is Content Marketing.
Content Marketing uses a combination of Content, Search Engine Optimization (SEO), and Social Media to work.
Content Marketing is not free, takes time to build, and does cost time.

B.5.1 CASE STUDY: CLOUDFIRE - CHANNELS


Ash planned to start with several outbound channels (friends and other parents at a daycare) for interviews,
and listed a few possible, more scalable channels for later.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B 6. REVENUE STREAMS AND COST STRUCTURE

The bottom two boxes, labeled “Revenue Streams” and “Cost Structure,” are used to model the viability of the
business. First, define, build, and launch your MVP. Then, revise after you get there.

B 6.1 REVENUE STREAMS

If you intend to charge for your product, you should charge from day one. Let’s see why:
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1. Price is part of the product. Suppose there are two bottles of water. One bottle costs 50 cents and the
other costs $2. You will not be able to tell them apart in a blind taste test. However, you might be
inclined to believe that the more expensive water is of higher quality. Price has the power to change
your perception of the product.
2. Price defines your customers. From the existing market for bottled water, we know there is a viable
business for bottled water at both price segments. What you charge signals your positioning on which
customers you want to attract.
3. Getting paid is the first form of validation. Getting a customer to give you money is one of the
hardest tasks for them to achieve and is an early form of product validation.

B 6.2 COST STRUCTURE

List the operational costs you will incur while taking your product to market. It is hard to calculate these too
far into the future accurately. Instead, focus on the present:
 What will it cost you to interview 30 to 50 customers?
 What will it cost you to build and launch your MVP?
 What will your ongoing burn rate look like regarding both fixed and variable costs?

Use the revenue streams and cost structure inputs to calculate a break-even point and estimate how much
time, money, and effort you need to get there. You will use this later to prioritize which model you start with.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B 6.3 CASE STUDY: CLOUDFIRE – COST AND REVENUE

Using the existing alternatives for price anchoring, which ranged from $24 to $39 per year for Flickr and
SmugMug, to $99/year for Apple’s MobileMe (a lot more than just photos/videos), Ash decided to start with
$49/year pricing.

Prints represented a potential secondary revenue stream that could only be realized once customers derived a
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core UVP. The only initial costs to getting an MVP out were people costs, which he listed in the next section.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B 7. KEY METRICS

Every business has a few key numbers that can be used to measure how well it is performing. These numbers
are key to both measuring progress and identifying hot spots in your customer lifecycle. Ash Maurya advocates
using Dave McClure’s Pirate Metrics shown below.
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B 7.1 CASE STUDY: CLOUDFIRE - KEY METRICS

The Lean Canvas below maps specific user actions that correspond to each of the key metrics discussed earlier.

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Handout
Creating Your Lean Canvas: FAQs and Tips

B. TIPS
B 8. UNFAIR ADVANTAGE

This is usually the hardest section to fill which is why it is left till the end. Most founders list things as competitive
advantages that aren’t so, such as passion, lines of code, or features. Here are some examples of real unfair
advantages:

The right “expert”


Insider information A dream team Personal authority
endorsements
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Community Large network effects Existing customers SEO ranking

You may have to leave this box blank when you first start out, but it is here to make you think about how you
can/will make yourself different and make your difference matter.

B 8.1 CASE STUDY: CLOUDFIRE: UNFAIR ADVANTAGE


Even though CloudFire is built on a proprietary p2web framework that might give an early advantage, anything
worth copying will be copied. So Ash Maurya decide to base the unfair advantage on something harder to
replicate. In this case, community.

This content is attributed to Ash Maurya and his book, Running Lean, Second Edition (O’Reilly). Copyright 2012 Ash
Maurya, 978-1-449-30517-8.

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