Lean Canvas—Your Unfair Advantage

Before you finish your Lean Canvas, you have one last box to complete: your Unfair Advantage.

Image courtesy of jesadaphorn / FreeDigitalPhotos.net

Image courtesy of jesadaphorn / FreeDigitalPhotos.net

You have probably heard you need a Competitive Advantage. That’s the advantage you have that is going to give you the edge and keep competitors from taking your business. What is the Unfair Advantage you have over your competition? How will you defend against their attacks? If you are successful, you will need one—you will have competitors come after you!

One characteristic which many people consider an Unfair Advantage is being “First to Market.” If you get there ahead of everyone else, you have an advantage, right?

Actually, maybe not. When you are first with a product you have to educate your customers about what it is you’re selling (the category) and why your customers should consider it. When you are a “Fast Follower,” you can capitalize on all the work the First to Market folks did to educate the world about your category of products. In that case, you only have to convince your customers that your brand is better than the other guy’s brand. You do that, and the sale is yours.

If being “First to Market” isn’t the Unfair Advantage you were hoping for, what might be?

Lots of entrepreneurs settle for drab descriptors that aren’t really Unfair Advantages. Things such as:

  • More features
  • Less features
  • Design
  • Passion
  • Determination

Ash Maurya shares his favorite definition from Jason Cohen: “A real unfair advantage is something that can’t be easily copied or bought.”

Here are some advantages that might qualify as “unfair:”

  • Insider information
  • Personal authority
  • A dream team
  • Existing customers
  • The “right” celebrity endorsements
  • Large network effects
  • Community
  • Organic search ranking
  • Patents
  • Core values

The truth is, you may not have any of that when you’re just starting out. That’s ok. Normal, even. And if you don’t have one, the best thing to do is leave that box blank on your lean canvas.

If you fill the blank with drab, unconvincing “advantages,” you’ll probably stop asking yourself about what Unfair Advantage you might have or might be able to develop.

On the other hand, if you leave it blank, you will be forced to consider what might develop or where you might find an unfair advantage as your business launches and grows.

So that’s it—fill in your Unfair Advantage or leave it blank. Either way, by completing your lean canvas, you will have a big picture perspective on what your new business is all about and whether it is worth taking the next step.

Speaking of next steps, what’s your next step for your business? Do you know where to go from here? If so, let me know your thoughts. If not, we should talk. I might be able to help.

Lean Canvas—How Will You Measure Success (Metrics)?

Metrics. Even the word can be unnerving. Visions of Six Sigma, Excel spreadsheets and pivot tables.

Image courtesy of artur84 / FreeDigitalPhotos.net

Image courtesy of artur84 / FreeDigitalPhotos.net

And yet, if we don’t measure how we’re doing, how will we know? I mean really know. Whether for fun or profit (or both), it’s helpful to know the score. Picture this: you fly to New York, spend a small fortune to buy tickets to the Seahawks vs. Broncos game, take a cab to the stadium and walk in 10 minutes after kickoff. You buy a beer and a hot dog, find your seats, and sit down. You turn to the guy who’s sitting next to you.

You: “Who’s winning?”
The Guy: “No one. They’re just having fun!”
You: “Why am I here?”

It sounds silly, but we do this sort of thing all the time in business. Sometimes it’s because getting the numbers is hard, but more often it’s because we don’t like the hassle, or we don’t want to see what’s really going on. Sometimes numbers can be scary.

To minimize that fear, Maurya suggests that we need to understand and measure at least a couple of things. The first is to figure out the key customer action that drives value. If you’re thinking about your employment business, you might decide that the key action is weekly participation in your group coaching program. Or attendance at your “Get Hired Now” seminar.

The second thing you need to measure is what Maurya calls your Success Metric: what would you need to achieve to make this target worthwhile? A revenue target? A profit target?

For your employment business, you might say that your success is $100,000 in annual revenue. Or you might say that it is a 90% success rate for people participating in your program. You get to decide what makes it worth it.

That being said, you should decide what makes it worth it. What does success look like in your business and how will you know when you’ve achieved it?

 

 

Lean Canvas—How Will You Get to Your Customers?

Image courtesy of KROMKRATHOG / FreeDigitalPhotos.net

Image courtesy of KROMKRATHOG / FreeDigitalPhotos.net

We’re almost done with your Lean Canvas. So far, you have a great idea about your customers, their problems, your solution, your unique value proposition, and your price. Guess what! If you can’t get your solution in front of enough customers, none of the work you’ve done might matter.

That’d be a shame.

So how do you get in front of your customers, or help your customers get in front of you? The answer is Channels, paths that will help you find your customers and your customers find you.

There are two types of channels, outbound and inbound. Both are important, so you need to get this right. Here’s a helpful infographic from Mashable, but the essential differences are:

Inbound Marketing:

  • Communication is interactive and two-way.
  • Customers come to you via search engines, referrals and social media.
  • Marketers provide relatively more value.

Outbound Marketing:

  • Communication is one-way.
  • Customers are sought out via print, TV, radio, advertising and cold calls.
  • Marketers provide relatively less value.

At first, you will probably need to focus on outbound channels. Even though they are harder in some ways, you can learn a lot about what works and what doesn’t from your outbound marketing.

Here are some ways Maurya suggests you get in front of customers:

  • Make a list of people that you know. Ask them if they would be interested in your solution.
  • Ask those people to introduce you to others who may be interested in your solution.
  • Create a teaser page with an opt-in and, from that, create an email list. Then email them about your solution (more about how to do this in an upcoming blog post, but I like Aweber, LaunchRock and LeadPages).
  • Ask your blog readers if they are interested in your solution or know someone who might be.
  • Talk about your solution on Facebook, LinkedIn, and Twitter. (Be careful about being very salesy—remember that people don’t like to be “sold” but they love to buy.)
  • Buy Google Adwords and Facebook Ads.
  • Cold call people you think might benefit.
  • Sponsor groups or events where potential customers will see you and can get to know you.
  • Content marketing.
  • Hiring a sales force.

So which channels do you think might help our hypothetical employment assistance business find Bill Johnson or help Bill Johnson find us?

First question I would ask: where is Bill now? In real life, is he going to any networking meetings? Job seeker support groups? Is he part of the Kiwanis Club? Who do you know that Bill knows? Online, is he on Facebook? LinkedIn? Craigslist? Does he tweet? When he is looking for help with his job search, what words does he Google?

As you think about what’s going on in Bill’s life now, you’ll have a much better chance of picking the right channels, reaching him and being able to share your solution.

Lean Canvas—Show Me the Money

Today is a big day. An important day. One of the most important in the life of your business. Today you get to decide how much money you are going to charge your customers for the solution to their problem. Or at least begin the process of deciding.

You’ve got your Unique Value Proposition nailed down. Now let’s turn your attention to the Lean Canvas canvas box marked “Revenue Streams” and figure out what your pricing model should be.

Image courtesy of jannoon028 / FreeDigitalPhotos.net

Image courtesy of jannoon028 / FreeDigitalPhotos.net

Why are we talking about pricing now? Because pricing is actually part of your product. Your price will help to define your product in the mind of your customer and determine who your customers will be.

It’s not easy, though. There are lots of variables and no magic answers. According to Charles Toftoy, associate professor of management science at George Washington University, pricing is “probably the toughest thing there is to do.”

To help you in your decision about price, Maurya has some helpful suggestions. First of all, realize that cost-based pricing is a mistake. Cost-based pricing goes like this: It costs me $1 to produce, so I’ll charge 2 times cost. Or 3 times cost. Or whatever. The truth is, it’s irrelevant how much it costs you to produce your solution. When you look at cost-based pricing, you are forgetting the most important consideration: your customers are hiring your product/solution to do a job and fix a problem. They don’t care whether it costs you $1 or $100 to produce. Can you fix their problem?

If cost-based pricing isn’t the right answer, what is? Value Based Pricing. The real consideration your customer has is the value of your solution, and that value relative to your competitors’ offerings. In other words, if I have a problem, what will it cost me to hire your solution to fix it? What will it cost me to do something different to try to fix it? And remember, cost doesn’t always mean or even necessarily mean price.

Ben Guild recently wrote a blog post about selling TV’s three different ways: FOBO, Craigslist, and Fulfillment by Amazon. Craigslist turned out to be the place where he made the most money (net profit), but there were also considerations of inconvenience, speed of transaction, security, etc. In the end, Guild suggests FOBO has the right combination of factors to be the choice for most people. The profit was higher with Craigslist, but the cost was least with FOBO. Your customers will consider price as well as other factors. How convenient will it be? How fast can I get it? Is assembly required? Is it safe? How confident am I that this solution will really solve my problem?

As you are considering your business model, look at similar solutions in your marketplace. You have a Unique Value Proposition, but you know who your competitors are. Let’s look at our business designed to help people find work after 60. Who is doing that?

Honestly, I don’t know that market well enough to know who all the players are. But let’s assume that one option is the in-person career coach. According to this article, a career coach can start at $100 per hour and can costs thousands. According to this article, a resume and cover letter writing service can set you back $250 to $1000 or more.

To solve our hypothetical job-seeker Bill Johnson’s problems, he may need something like career coaching, but perhaps needs assistance with resume and cover letter writing as well. Perhaps a pricing model of $500/month service X 3 months with a guarantee to keep working with someone after if they haven’t found the right job might work. Or a $2500 flat fee.

On the other hand, Bill might just need a good book. Peggy McKee over at CareerConfidential.com has an ebook she’s selling for $1.99. Maybe we could write an ebook and charge $1.98.

Bottom line: your business model will determine your competitors, and your competitors’ solutions will set the price anchors in your customers’ minds.

More helpful pricing guidance: keep your pricing as simple as possible. Keep your early adopters in mind and consider what they are looking for. Eventually, you may want to go with a more complex pricing model. Today, keep it simple.

So that’s it. Or at least enough to take a first crack at it. What are you going to charge for your product or solution?

 

Lean Canvas—Clarity About Customer Problems

Here is a Google doc of the Lean Canvas you can use for yourself or to play along at home.

When you complete a Lean Canvas, Ash Mauyra recommends that you work on Customer Segmentation and Problem Statements simultaneously. You know who you customers are now. What are their problems?

Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

Mauyra recommends that you first list your customers’/early adopters’ top 3 problems, the problems you are going to help them solve. In order to do that, he recommends the 5 Whys method of seeking the root cause.

In the scenario from yesterday’s post, a 5 whys analysis might look something like this:

Problem: Bill Johnson hasn’t found a job.
Why? Because he hasn’t convinced an employer to hire him.
Why? Because he hasn’t had an opportunity to speak to a person with hiring authority and present the value he offers to potential employers.
Why? Because he hasn’t been able figure out who the people with hiring authority are.
Why? Because he doesn’t know how to find the pertinent information.
Why? Because the employers set up road blocks to keep job seekers away.
Why? Because employers don’t have time/don’t see the value in talking with potential job applicants.

There is nothing magical about the number 5, of course. It could be the 4 whys or the 8 whys. The important thing is that you dig until you get a clear sense of what the problems are (or at least a reasonable hypothesis regarding the problems).

Using the example above, we might hypothesize that Bill’s 3 biggest problems are:

  1. Bill doesn’t know how to find the contact information for the appropriate person with hiring authority.
  2. Bill doesn’t know how to get over or around the road blocks employers set up to thwart job seekers from contacting them directly.
  3. Bill doesn’t know how to communicate the value that he offers a potential employer.

The good news? At this stage you could be dead wrong. These might not be your potential customers’ biggest problems. But if they aren’t, when would you rather discover that you’re wrong—today or after you’ve invested countless hours and dollars to create a solution for a problem that doesn’t exist? Finding out you’re wrong that this stage is inexpensive and instructive—you can learn, pivot and grow.

Another way of looking at this, Clayton Christensen says, is to consider the question, “What is the job the customer is hiring you or your product to do?” The premise is that customers hire your product to get a job done. They may already be solving or attempting to solve that problem without you. Alternatively, they may not be doing anything about the problem because addressing it is relatively less stressful than not doing anything.

Given his predicament, Bill might do any or all of the following:

  • Ignore the challenge he’s facing and go to the movies.
  • Go to the library to look up company contact information in the white pages.
  • Pretend he is friends with the hiring manager if he gets the gatekeeper on the phone (“Is Bob there? Tell him it’s Bill.”)
  • Try to make the hiring manager look/feel stupid for not considering a job candidate with Bill’s qualifications.

You get the point. People can do anything. The question you need to ask and answer is, “What are my current prospects doing now (or not doing now) to solve their big problem?”

Soon we’ll be discussing the next components of the Lean Canvas: your solution, your unique value proposition, and your revenue streams.

In the meanwhile, what are your customers’ top 3 problems? How are they addressing (or not addressing) their top 3 problems currently?

 

Lean Canvas—Before You Write a Business Plan, Try This

The Lean Canvas Will Make Your Business Plan Better

I was talking with a friend of mine earlier about what it takes to start a business. We talked about vision, strategies for innovation, funding, market research, etc. Like lots of entrepreneurs, me included, he also said he felt like he needed a business plan, which meant he needed information and a process for creating a meaningful, effective business plan.

Everyone talks about a business plan, but few entrepreneurs actually create them. And when they do, they are usually a lot of wishful thinking designed to get money-loans or investors. The Small Business Administration has a helpful series of articles outlining the contents of the various sections a model business plan that are worth reading.

I have found, though, that before you start your business plan, there are several tools that will make the business plan process much easier and more useful. Some are simple: write down 5 people you know personally that would buy the product or solution you’re selling. Some are more complex: SWOT analysis, PEST analysis, TOWS Matrix.

One of my favorites is the Lean Canvas.

If you are familiar with the brilliant work of Alexander Osterwalder in his Business Model Generation, you will recognize similarities between the Business Model Canvas and the Lean Canvas.

Lean Canvas

Lean Canvas

Business Model Canvas

Business Model Canvas

Differences Between the Lean Canvas and the Business Model Canvas

There are significant differences between the two, of course. The Lean Canvas adds Problem, Solution, Key Metrics, and Unfair Advantage and removes Key Activities and Key Resources, Customer Relationships, and Key Partners. We’ll discuss the reason for these variations this week as we walk through the various aspects of the Lean Canvas and applying them to a specific business.

In the meanwhile: do you have a business plan? If so, do you use it? If not, why not?