As the business world evolves at a rapid pace, traditional business planning methods are becoming outdated. Instead, agile and lean approaches are gaining popularity, and one such approach is the Lean Business Model Canvas (LMC). This innovative tool helps businesses focus on delivering customer value while minimising waste and maximising resources. In this blog post, we will discuss the importance of LMCs, how to fill them in, with examples, and the difference between BMC and LMC.
The LMC is essential because it provides a clear and concise overview of your business plan. It allows you to see the big picture and make better decisions based on customer needs and market trends. With the LMC, you can quickly identify areas where you can improve your offerings, streamline your operations, and cut costs. Additionally, the LMC helps businesses remain agile and responsive to changes in the market, which is crucial in today's fast-paced business environment. Now that you understand the importance of LMC, let's go through the nine steps to fill it in.
Identify the top 1-3 problems your business solves. The first step is to understand the problems that your business solves. This is the foundation of your business, and you need to be crystal clear on what your customers need. By identifying the problems your business solves, you can create a targeted approach to solving them, which will help you deliver better customer value.
Example: A ride-hailing app like Uber solves the problem of transportation, making it easy for people to get around without owning a car.
2. Customer Segments:
Define the groups you want to serve. Next, you need to define the customer segments you want to target. This could be a mass, niche, segmented, or diversified market. Understanding your customer segments helps you create targeted marketing and communication strategies.
Example: A ride-hailing app could target frequent business travellers or tourists who need transportation services.
3. Unique Value Proposition:
What sets you apart? Your unique value proposition (UVP) is what sets you apart from your competitors. It's essential to identify your UVP, as it helps you differentiate yourself in a crowded market. Your UVP should describe your offerings, the needs you meet, and why customers should choose you over your competitors.
Example: Uber's UVP is the convenience of on-demand transportation that's affordable and reliable.
List the top 1-3 solutions to the problems your business addresses. In this step, you need to identify the solutions your business provides to the problems you identified in step one. Remember, not every solution is the perfect fit, so it's essential to evaluate which solutions will provide the most value to your customers.
Example: Uber's solution is to provide a reliable and affordable transportation service with an easy-to-use app.
Determine how to reach and communicate with each customer segment. Your channels are the ways you reach and communicate with your customers. It's essential to establish touchpoints to grab attention, deliver value, provide support, and evaluate your proposition. By understanding your channels, you can create targeted marketing and communication strategies.
Example: Uber's channels include the app, social media, and email marketing.
6. Revenue Streams:
Describe cash flow from each segment. In this step, you need to describe the revenue streams for each customer segment. Consider the price your customers are willing to pay for the value they receive. By understanding your revenue streams, you can optimise your pricing strategy and ensure that your business is profitable.
Example: Uber generates revenue by taking a commission on each ride and offering premium services for an additional fee.
7. Cost Structure:
List all costs to operate your business profitably. To operate your business profitably, you need to list all costs, including creating and delivering value, acquiring and maintaining customers, and generating revenue. This step helps you understand your cost structure and identify areas where you can reduce costs. Thinking about these two steps help you develop financial skills for entrepreneurs.
Example: Uber's costs include driver salaries, marketing and advertising, and technology development.
8. Key Metrics:
Identify the indicators that show your business's performance. Identifying key metrics is essential to measuring your business's performance. These metrics could be revenue, customer acquisition cost, churn rate, or customer lifetime value. By identifying key metrics, you can monitor your progress and adjust your strategy accordingly.
Example: Uber's key metrics include the number of rides per day, customer satisfaction, and driver retention rates.
9. Unfair Advantage:
What unique asset do you have that others can't buy? Your unfair advantage is what sets you apart from your competitors and gives you a competitive edge. It could be a unique product innovation, team talent, or loyal customers. By identifying your unfair advantage, you can create a sustainable competitive advantage that's difficult for others to replicate.
Example: Uber's unfair advantage is its first-mover advantage, established brand, and advanced technology.
Key Differences between BMC and LMC
The BMC and LMC are both business model tools, but there are some key differences between them. The BMC is a more comprehensive tool that includes building blocks that cover all aspects of a business, including partnerships, activities, and resources. The LMC, on the other hand, is a simplified version that focuses on the essential elements of a business model, such as customer value and revenue streams.
Here's a side-by-side table comparing the differences between the Business Model Canvas (BMC) and Lean Business Model Canvas (LMC) in terms of the boxes to fill in:
|Business Model Canvas (BMC)||Lean Model Canvas|
|Key Resources||Key Metrics|
|Value Proposition||Unique Value Proposition|
|Customer Relationships||Unfair Advantage|
|Customer Segments||Customer Segments|
|Cost Structure||Cost Structure|
|Revenue Streams||Revenue Streams|
The LMC replaces Key Partners and Key Activities, which are more suitable for larger and more complex businesses, with Problem and Solution, which focus on the core customer needs and solutions provided by the business.The LMC also includes Unfair Advantage, which represents the unique assets or advantages that set the business apart from its competitors.
Overall, the LMC is a more agile version of the BMC, suitable for small and medium-sized businesses that need a flexible and dynamic approach to business planning. The BMC is more detailed and suitable for larger and more complex businesses that require a comprehensive overview of their business model.
When To Opt For An LMC
One of the benefits of using the LMC is that it allows businesses to be more agile and responsive to changes in the market. By focusing on the essential elements of the business model, such as customer needs and revenue streams, businesses can quickly adjust their strategy and pivot if necessary. This level of flexibility is crucial in today's fast-paced business environment and is especially relevant to start-ups, where market trends and customer needs can change rapidly.
Filling in both BMC and LMC should be an iterative process. As businesses grow and evolve, their business models may need to be adjusted and updated to reflect new opportunities and challenges. The process of filling in both should involve regular review and revision of the canvas to ensure that it accurately reflects the current state of the business.
For example, a start-up may start with the LMC to quickly map out its business model and identify key customer segments and revenue streams. As the company grows and becomes more complex, it may switch to the BMC to provide a more detailed overview of the business model, including key partnerships and resources.
However, even when using the BMC, the company should still regularly review and revise the canvas to ensure that it accurately reflects the current state of the business.
In conclusion, The Lean Business Model Canvas (LMC) is an essential tool for any business looking to remain agile and responsive to changes in the market. By following the nine steps to fill in the LMC, businesses can create a clear and concise plan that focuses on delivering customer value while minimising waste and maximising resources. While the BMC is a more comprehensive tool, the LMC is ideal for small and medium-sized businesses that need a more agile and responsive approach. By embracing the LMC, businesses can soar to new heights and create a sustainable competitive advantage that's difficult for others to replicate.
The Creo Incubator Business Model Course is designed to help entrepreneurs and businesses create a clear and concise business model. Entrepreneurs learn how to fill in both the BMC and LMC and how to iterate and revise the canvas as the business evolves. This programme provides entrepreneurs with the tools and resources to create a sustainable and profitable business. By learning how to use these tools effectively, businesses can adapt and thrive in today's fast-paced and constantly changing business landscape.