I'm a big fan of Alexander Osterwalder's Business Model Canvas. It's a great tool to help you think broadly about a new venture or business idea. I also find it very helpful as a tool to understand a company's existing business, value proposition and how all the pieces fit together.
Over the years, I've made many mistakes in designing these canvases. Here are the top 5 mistakes I've made and frequently see during design sessions: 1. A broad definition of your customer segment If you catch yourself defining your customer segment as 'Millennials' or some other broad group, it should be an automatic red flag that your target audience is too big. Narrow it down until you can describe a day-in-the-life of this target customer. Narrow focusing at this stage forces you to pick a strategic beachhead, where you can deploy your minimal resources and win. You can always expand afterwards. 2. A value proposition that's focused on being the best at something If your value proposition states you're going to be the 'best at something', it's a good sign that you're on a collision course with other competitors in your industry. Unfortunately, avoiding this is non-intuitive as the mindset to be-the-best in the industry permeates through lots of management literature. Either you win or I do is the wrong mindset at this stage. Instead of focusing on being-the-best, focus on being unique. The goal here is to create unique value and deliver it to your end customer in a unique way. 3. Key activities that are similar to other rivals in your industry Michael Porter addressed this issue specifically in his book on Competitive Strategy: "The essence of strategy and competitive advantage lies in activities, in choosing to perform activities differently or to perform different activities from those of rivals". The common mistake I see here, comes from the mindset that competitive differentiation starts and stops in the 'Unique Value Proposition' section. To design a better model, each section within the canvas should showcase your differentiation and more importantly when chained together should amplify your unique proposition to the market. If your key activities look like the key activities of your rivals, you have no sustainable competitive advantage against them and they will eventually copy, reproduce what you're doing. If your value proposition is truly unique, it will need a unique set/chain of activities. 4. Cost structure not aligned with unique activities & resources In the ideal world, one should be able to look at a Business Model Canvas' cost structure to quickly identify how they are truly different from their competitors. I.e. if you spend money on something, it must be important to your value proposition. If you've skilfully avoided mistake #3, you should now have a tailored set of activities & resources that offer unique value in a differentiated way to your end customer. The key point at this stage is to check that you are capturing your total costs in delivering this differentiated value and ensure that it is not greater than the predicted revenue stream. This is where the rubber meets the road and should bring up questions like am I targeting the right customer? Have I over committed in my value proposition? If you can't attain profitability in your model, you're going to have a tough time building the real thing. 5. Not clear about what you won't do. Or trying to be everything to everyone. This is an overarching problem not specific to one particular section. It can also be the hardest thing to correct as people generally tend to think more is better. The quick test for this is if your Business Model Canvas looks really crowded. I tend to stick to the most important points that show your unique value in each section. Also, I've found it useful to bullet things that I will not do with an 'x'. E.g. If I was Ikea, I would never get into building expensive furniture as the rest of their business model canvas (activities, resources, channels, etc) are not optimized to achieve this value proposition. Defining what you will not do, is a key checkpoint to ensure you are delivering your core value in the most efficient and effective manner possible. It's also a great way to prevent copycats who will have to change their existing business (usually really hard to do) to deliver similar value within the same cost structure. I'm sure there are many more mistakes that I haven't covered in the list above. If you've seen something repeatedly in your experience then please share in the comments! And lastly, if you like what you've just read, please like/share & follow to get more updates on business strategy, product management and startup life in general. Happy designing!
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11/14/2022 06:42:38 am
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Theban GaneshI’m passionate about helping teams answer two questions: “What should we build?” and “Why?”. Archives
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