If you met me in an elevator, would you be able to explain your business model to me in the time it takes to get from the lobby to my floor?
Let’s be generous, and give it four minutes.
Some entrepreneurs that I meet make the mistake of going into detail too early when they explain their idea to me, and by the time I am leaving the elevator to go to my next appointment have missed an opportunity because I haven’t seen the whole story.
There are a few tools that I urge people to explore when preparing to create, design or articulate their business plan. One of them is the Business Model Canvas which I think is an invaluable tool although I add two sections to it when I work with teams to factor in purpose and culture.
Created by xxxxxxx in xxxxx
The essence of it is that you should be able to explain your entire business model on one piece of paper. Some people say this is impossible because their business is so complex or the market is complex or they have lots of different customer segments. To these people I remind them that one of my teachers, Jay Forrester, created a simulation model of EARTH that fit on one piece of paper. The challenge is to be succinct, to distill things down to their elemental core so that you can explain things clearly and see the high level dynamic detail knowing that at any time you can drill into the detail in any area of your business model.
I mentioned Jay earlier, another thing that I learned from him was that it is important to be able to articulate your mental model of the world and to share that with others so that they can challenge you and add value to it in the collective. Being able to document and share your business model and your hypotheses is very important to allow you to explain it to others and have it be improved and so that is why being able to have it on one piece of paper is important. It creates a common language something you can easily share with co-founders, team members, investors, advisors, suppliers etc.
So the canvas that I use with teams is this.. adapted from the canvas created by ……… It has xxx building blocks.. imagine them as lego pieces or pieces of a jigsaw puzzle that individually don’t seem like much but when you put them all together you create a picture that tells a thousand words
Target Customer Segment
who are your target customer segments that have common needs or attributes. Emphasis here on “Target” the key customer segments
how are you solving the customer problem or satisfying need and therefore adding value to them. The aggregation of products and services you offer that add value to a particular customer segment
How do you generate revenue from your customers, what are your sources of revenue, how much will your customers be willing to pay?
What channels do you use to sell, deliver and communicate to your target customers. They key customer touch points. How do potential customers find out about you, evaluate you, purchase from you and how do you deliver your value proposition to them.
How are you serving each of your target customers through your value proposition and how will you gather feedback from them.
What resources do you need to execute your plan. For example: human resources, financial resources, intellectual property etc
Purpose & Culture
What is the purpose of your organization and what is the culture that will best serve the execution of your value proposition through your team members
Value Chain Activities
The key activities that you perform with your team in order to deliver your value proposition, the operations of the business
Partnerships critical to the delivery of your proposition – outsourced partners, resource partners, the network of suppliers and partners: alliances, joint ventures, suppliers etc
The costs of the company to allow the company to create products and services and deliver on the value proposition to customers and earn revenue