When it comes to business models, which is best? This article looks at the business model canvas and lean business model canvas and lets you know which is the right one to use.
When you’re working on a startup, it may be tempting to dive right in and launch straight away.
However, consider the five Ps: prior planning prevents poor performance.
Taking the time to plan your idea and identify the potential pitfalls will benefit your startup in the long run.
A business model is a way you can break your startup down and create a business case for the product or service you plan to build, all on one page. It’s all visual, meaning that if you’re one of the 90% that prefers visual over written content, it can be a great way of spotting potential benefits and issues quickly.
Plus, a short version of your business model makes it more appealing to prospective investors!
There are two types of business models available to use– the business model canvas and the lean canvas. If you want to use one of them but aren’t sure which is best, this article will break down the pros and cons of each.
- The problems of the traditional business plan
- What is the business model canvas?
- Advantages of the business model canvas compared to the lean canvas
- Disadvantages of the business model canvas compared to the lean canvas
- What is the lean canvas?
- Advantages of the lean canvas compared to the business model canvas
- Disadvantages of the lean canvas compared to the business model canvas
- Take a third option… the value proposition canvas
- Business model canvas or lean business model canvas: which one should I choose?
- In summary: pick the model that provides the most value for your business
Previously, we were digging into a Time and Material estimates. Today, we wanna start with life before the business model canvas and lean canvas, when companies had to create very long and intricate business plans.
The problems of the traditional business plan
Before the lean canvas and business model canvas were a thing, businesses had to create traditional business plans. While these were very thorough, they were also very long. By the time startups had finished writing their plan, the market had shifted so much that the plan they had created was no longer viable!
The advantages of the business model canvas and lean canvas are that they can fit on a page of A4 paper. They’re quicker to write but still give startups all the information they need to push their business forward.
What is the business model canvas?
‘A business model describes the rationale of how an organisation creates, delivers and captures value’ – Alex Osterwalder
The business model canvas was created in 2005 by Alex Osterwalder, a Swiss business theorist. It was developed to make it easier for businesses to get to market quickly.
The business model canvas looks at nine key areas, which include:
- Key activities. What activities will you need to carry out to ensure the success of your business?
- Key partners. What external companies and suppliers will help you carry out your key activities?
- Key resources. What resources will you need to carry out your key activities? This can include people, money, and equipment
- Value propositions. What does your product or service do that no one else in the market does?
- Customer relationships. What relationship will you have with your customers, and how will you interact with them?
- Customer segments. Who will your target audience be?
- Channels. How will you reach out and communicate to your customers?
- Cost structure. What will you need to spend your money on, and what will be your most significant expense?
- Revenue streams. How will your product or service make money?
There’s a business model canvas template on Wikimedia – just download, print, and you’re ready to go!
Advantages of the business model canvas compared to the lean canvas
While the lean canvas is purely focused on startups (more on that a little later), the business model canvas can be used by both new and existing businesses.
As it is more detailed, a business model canvas is good for reviewing your business as a whole entity, rather than just a singular product or service.
The business model canvas also lets you review your relationships with any third parties you work with, potentially leading to more fulfilling business relationships.
Disadvantages of the business model canvas compared to the lean canvas
While startups can use the business model canvas, they may find that it focuses more on financing and revenue streams rather than how to find a solution to the customer’s pain point.
With this in mind, the lean canvas may be a better alternative for businesses that are just starting out. Let’s take a look at what creating a lean canvas plan entails…
What is the lean canvas?
‘My approach to making the canvas actionable was capturing that which was most uncertain, or more accurately, that which was most risky.’ – Ash Maurya
The lean canvas (also known as the lean business model canvas) is a modified version of the business model canvas. Created by Leanstack founder Ash Maurya in 2010, the lean canvas was designed specifically to help new businesses, using lean methodology.
Maurya advised that he loved the actionability of the business model canvas. However, he wanted to make it more relevant to startups and take the high-risk factors they frequently struggle with into account. To do this, he removed some of the sections he thought were irrelevant to startups and replaced them.
Like the business model canvas, the lean business model canvas is divided into nine distinct sections:
- Problem. What pain points do your prospective customers currently experience that need solving? This is new to the lean canvas and does not feature in the business model canvas
- Solution. How can your product or service fix the problem your prospective customers are experiencing? This is new to the lean canvas and does not feature in the business model canvas
- Unique value proposition. What does your product or service do that no one else in the market does? This section does feature in the business model canvas, but the name has been slightly altered
- Unfair advantage. What is your product or service really good at, to the point that your competitors can’t replicate it? This may sound similar to your unique value proposition, but by really thinking about your crucial advantage in the marketplace, you’ll be able to protect against competitors plagiarising your business model. This is new to the lean canvas and does not feature in the business model canvas
- Key metrics. What metrics will you measure to show that your product or service is successful? Any metrics you choose should be specific, measurable, attainable, relevant and timely. This is new to the lean canvas and does not feature in the business model canvas
- Customer segments. Who will your target audience be? This section is the same as the business model canvas.
- Channels. How will you reach out and communicate to your customers? This section is the same as the business model canvas.
- Cost structure. What will you need to spend your money on, and what will be your most considerable expense? This section is the same as the business model canvas.
- Revenue streams. How will your product or service make money? This section is the same as the business model canvas.
Want to see the lean business model canvas in action? This website has a couple of excellent examples.
If you’re looking for a lean canvas template, Leanstack lets you download a pdf version or alternatively, you can create your canvas online.
Advantages of the lean canvas compared to the business model canvas
The lean canvas methodology has been created specifically for startups that are yet to go to market. It lets entrepreneurs identify the problems customers experience and determine the unique selling point that the startup has.
The lean business model canvas is good as it also takes metrics into account, letting newer startups track their business to see what is working and what needs to be improved.
Disadvantages of the lean canvas compared to the business model canvas
Critics of the lean canvas approach argue that it is too simplistic compared to the business model canvas. While simplicity is definitely a good thing when it comes to launching your product or service, you don’t want to risk overlooking any important details.
Take a third option… the value proposition canvas
Earlier on in the article, we said there were two business models to choose from. Forgive us, but we told a bit of a lie!
There is an alternative to the business model canvas or lean business model canvas you can use – the value proposition canvas. This was created by Osterwalder in 2012, so after Maurya created the lean business model canvas.
This business model only focuses on two sections – value proposition and customer segment. The advantage of this is that you can see if there is a good fit between your product and the market.
The value proposition canvas can be helpful if you want to add a feature to an existing product or are looking to expand into a new market. Think of it as an enhancement of the business model you have already created.
Business model canvas or lean business model canvas: which one should I choose?
As you can see, both the business model canvas and lean canvas have their uses in the business world. The question we need to ask is… which is the right option for your startup?
The lean business model canvas has been created especially for startup businesses and designed to provide entrepreneurs with additional insight into their product or service. However, many people find that the business model canvas provides them with a more holistic view of their startup.
The good news is that there are no hard or fast rules about which business model you should utilise. Review both and choose the one that provides you with the most insight into your business.
Remember that both of these business models are only as good as the information you enter into them. The more detail you provide, the better the chances of your product or service succeeding. Similarly, keep your business model updated. The marketplace will grow and evolve over time, and by keeping your model up to date, you can grow and evolve too.
In summary: pick the model that provides the most value for your business
We hope this article has explained the differences between the lean business model canvas and business model canvas and which is the best option for your startup.
You may feel frustrated that we haven’t been able to give you a definitive answer, but the right choice depends on your startup and what you want to achieve.
Many experts believe having some form of business model in place is the main thing. No matter if it’s a lean or business model canvas (or even a traditional business plan), a startup with a plan will have 30% higher sales compared to a startup without.
So, roll up those sleeves, brew some coffee and get working on that business model!
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