In this article you’ll learn:
Every business starts as an idea.
A set of business assumptions and hypotheses.
Here’s a fact whether it’s for your startup or a new feature for your existing product:
Nobody wants to spend their hard earned cash and 2 years of their life working on something that customers won’t buy.
So let’s get right into how we can avoid that.
Why you Need to Know Your Business Assumptions?
In a previous article on Customer Discovery we looked at understanding customers problems and experiences so that you can create the product or service that will blow their mind.
But what happens before that?
The purpose behind customer discovery is to interview customers to understand their point of view regarding a particular pain point that your business will, or plans to, solve.
And to have an effective customer interview, you need a clear picture of your assumptions and ideas around that pain point.
The assumptions are all the guesses, that we make regarding our business.
Think of it like this:
You notice that certain person X is struggling with Y, and you get an idea that maybe you could to do Z to help them?
It’s an idea without evidence, that needs to be proven.
Your Basic Sales Assumption Validates your Business
Let’s say you want to start a brand of jeans trousers because you think that you could make a better quality product and sell it online.
The assumption here is that customers would be interested to buy a better quality jeans trouser from a new-comer and that they would buy it online.
This is your basic sales assumption.
There's no proof that customers would be willing to:
Without evidence to back-up your business assumptions, it’s just a theory.
If you want to know whether you have a business, prove your basic sales assumption.
The sooner you find out the holes in your business assumptions, the better.
It’s less expensive and less painful.
So how do you uncover these assumptions in a structured reliable way?
Lean Model Canvas
What if you had a process to create an overall view of every single business idea you have?
Is there a proven framework you can use consistently every single time?
You’d say Bring It On!
Enter The Lean Model Canvas.
Created by Ash Maurya and adapted from the Business Model Canvas.
It helps you create a high-level picture of your most crucial business assumptions in record time on a single page.
Whether you use it for a new product/service or for an already existing one, it’ll still be useful.
You can download a template of the canvas here.
The Lean Canvas Will Categorize Your Assumptions Into:
By the end of completing your Lean Model Canvas you have a ready-to-use set of custom-made business assumptions.
The only thing left after that is interviewing customers to determine whether what you assumed is true or not.
Here's the kicker:
Completing the Lean Canvas will only take 30 mins tops.
Dropbox had serious problems when they first started before they turned it around and grew their user base from 100,000 to 4 Million.
It's not until they started implementing the Customer Development process and focusing on learning as fast as they could from customers that they started to see this massive growth.
Now that we’ve covered the why, let’s get into the how of completing your lean canvas.
Lean Canvas Examples For Each Category
Define the specific type of customer you are targeting with your product or service.
A study by marketing leader Hubspot showed that SkyTap increased sales leads by 124% by using targeted personas.
HR Managers in multi national companies.
If your customer segment is too general, consider breaking it down to smaller segments and create a separate Lean Canvas for each segment for more clarity.
Take a look:
Go deeper into your customer segment and list the main characteristics of this group.
HR managers that have been in their role for less than 2 years and use collaborative software daily.
This will be further refined with the information you collect from your customer interviews which we'll talk about in more detail in another article.
But you can start with this:
A quick exercise to determine your Early Adopters.
Complete the following statements as a starting point to uncover Early Adopter characteristics.
"This is the perfect customer segment to target right away because they already" :
- Do or use...
- Know about or have information on...
- Spend on...
- Are interested in....
In fact, Geoffrey Moore's talks specifically about "early adopters" in his best selling book, Crossing the Chasm.
He explains the idea behind focusing on those who are open to experimenting with new things prior to targeting the mainstream market.
Lean Canvas Problem
List the top 3 problems you suspect your specific customer segment is currently experiencing that your product or service is looking to solve.
For example, problems with existing solutions are:
List all the solutions your customers are currently using to solve the above problems. Even if this is not a direct competitor or tool.
If your product is a software tool that helps customers easily complete their taxes then:
Lean Canvas Value Proposition
What is the main differentiator between your offering and competitors that adds value to customers?
We will go into depth on this topic in Product Development.
For now, take the main problem you want to solve for your customer and translate it into the deeper benefit it represents.
The time consuming problem mentioned earlier might translate into higher order needs of reliability and convenience.
To explain this further, see the example below.
Lean Canvas Solution
Define outlines of potential solutions/features for each of the above problems.
Remember though, at this point you are not defining a final solution.
This is because you have not yet conducted customer interviews to learn whether your assumptions around the problem and customer are proven or not.
Outlines of solutions will help with "divergent solution thinking" which we will cover in more depth under Product Development also.
Brainstorm as many solutions and features as you can.
During customer interviews, you'll understand what customers like and dislike about the existing solutions and use that info to filter the features you've listed.
You'll craft an improved product or service rather than directly asking if they would like the solution you may have in mind.
Think of this in 2 ways:
1) Where can your potential paying customers be found both online and offline?
Blogs, forums, social groups, networking events, industry events etc
2) How you plan to reach them both online and offline?
Partnerships, cold outreach, online marketing channels (paid and un-paid), networking, Word of Mouth campaigns etc
This is a good starting point for when you'll need to create a Go-To-Market and Traction strategy.
Lean Canvas Key Metrics
List the Key Performance Indicators (KPIs) for your business.
In platform businesses, this is probably liquidity.
If you're building a social network, consider metrics such as Daily Active Users vs Monthly Active Users (DAU:MAU), engagement rate etc.
With eCommerce or SAAS, consider things like customer acquisition costs , visitor conversion rate, retention rate, checkout drop-off's etc.
Also known as your business "Defensibility".
Or as Warren Buffet calls it, your "Moat".
This is the thing that gives your business a competitive advantage over others and creates barriers to entry for new competitors.
High Level Concept
This is an analogy of your business that helps customers, investors, stakeholders instantly understand what your business is about.
Often this will come from your customers themselves.
Personally, I'm not a big advocate of this section but an example would be:
Flickr for videos (Youtube)
List the fixed and variable costs that you anticipate and your expected break even point.
Fixed costs are those that do not change such as rent and salaries.
Variable costs are those that change according to the Cost of Goods Sold (COGS) such as production costs, packaging costs, Customer Acquisition Cost, distribution costs etc
Here are the definitions as per Investopedia:
List the different potential options you anticipate for generating revenue from your product or service.
An example of what a completed Lean Canvas looks like.
Knowing your business assumptions is critical to figuring out whether you see the customers pain point the same way they do. Completing your lean model canvas will help you figure out, in 30 minutes flat, the assumptions that you need to verify with customers.
It doesn't require a lot because you’re just putting down thoughts. The aim is to “thought dump” everything on paper and speed through this. After all, there's no evidence to support these idea yet so no point to over think it. If a section is taking too long, skip it and move on.
Pen to paper and keep going.
You’ll be surprised how you flow.
And best of all:
You’ll know exactly what to confirm with customers for a deeper understanding of their pain point.
Hell yea to that!