How to Use the Lean Canvas
Creating alignment and clarity on what matters most
This post was first published at LogRocket
The business plan is a term that used to drive me nuts. When I worked as a business analyst, I’d spend long hours addressing every aspect of our scenario to ensure our plan was solid enough. The challenge is no matter what I did, it was never enough.
A thirty-page document combined with advanced spreadsheets was the way of crafting a business plan for a while. And what was the result? A significant waste.
A business plan aims to have a shared understanding of the critical business aspect and know what to focus on and what to drop. But how would you achieve that with a document nobody would understand?
Thankfully, Alexander Osterwalder and others came up with the Business Model Canvas—one image with everything you need to know. But something was still missing because the focus was on the business, not creating something from scratch. Then, Ash Maurya came up with Lean Canvas, which focuses on developing a new business and understanding its essential aspects.
Let me help you understand what’s Lean Canvas, how to use it, and the differences between this model and the traditional Business Model Canvas.
What’s Lean Canvas?
Simply put, it’s one canvas with all the critical aspects you need to consider to move from an idea to a business.
The result of crafting a Lean Canvas is a clear alignment of the most relevant aspects behind your business idea. Contrary to what you may think, it’s not about filling the blocks with information and moving on. It’s about making decisions on the business fundamentals, iterating, learning, and adapting.
The Lean Canvas is extremely simple. But getting all the blocks together can be time-consuming. You need to make decisions on your audience, the problem you choose to solve, your unique selling proposition, etc. Such decisions require many considerations. Yet, a well-crafted lean Canvas will help you accelerate decision-making and focus on what matters most.
Now let’s get into crafting it.
Sidenote: If you want to learn more about it directly from Ash Maurya. A product conference will take place in Munich on the 13th of October, 2023. Attendance online is free, and for in-person tickets, I got a 15% discount for you. Voucher: UNTRAP-PRODUCT-15. I will be there, and it will be a chance for us to exchange ideas in person. Shall we?
How to fill your Lean Canvas
This canvas has a specific order to fill, and the reason is simple, it will help you build a story and align on it. The following image represents the sequence.
The question is, how do you fill each block? Let me help you with a theory combined with an example of Tesla when it started.
1 — Customer Segments
First comes your customers. Without them, you have nothing.
Define the target audience you aim to serve as precisely as possible. You can have different levels. Make them clear. Also, don’t forget to mention the early adopters in your market because starting with them is fundamental.
Tesla target initially sports car lovers because they wanted to create a fancy electric car. As early adopters, they got Martin Eberhard, an American inventor, and Marc Tarpenning. Although they co-founded Tesla, they started using cars so others could become interested in them.
2 — Problem
Name problems your target audience face. Make the problems brief and easy to understand. Ensure to mention the available alternatives to the identified problems.
Tesla visualized the problem of high fuel consumption and wanted to foster an alternative to it. The current options were other car brands, such as General Motors.
3 — Unique Value Proposition
Define why customers would come to you. In other words, make it clear how you create value by addressing the problems of your customer segments.
Tesla used battery-electric sports cars with high efficiency. It was something unimaginable when they started.
4 — Solution
Reflect on how you solved the problem by describing your solution in a high-level way.
Tesla aimed to develop electric cars with high performance. That was the solution they targeted.
5 — Channels
Knowing how customers get to your product and service is highly important. That’s what this block is for. Reflect on the question, how do you get to your customer segments?
Tesla answered simply: Retail Stores. You can, of course, explore different ones, e.g., affiliates, sales force, etc.
6 — Revenue Streams
Which sources of income do you create? Typical examples are subscriptions, premium subscribers, ads, commission, etc. You can combine multiple revenue streams.
Tesla initially didn’t have a revenue stream, but it had venture capitalist funds.
7 — Cost Structure
Now comes the critical aspect. Knowing how you organize your cost structure to deliver on your promises.
What do you need to keep delivering your solutions? Some examples are development, marketing, and payroll costs.
Tesla had the car production cost, research and development, and technology.
8 — Key Metrics
New ideas are fragile, and you may hit the wall. That’s why it’s important knowing how you measure success.
Set three to five key metrics to ensure your business is booming.
Tesla’s initial goal was that people buy their cars. They strived to prove a market fit.
9 — Unfair Advantage
How long it can protect its unfair advantage makes or breaks a business. Google has, for example, the most advanced web search and has protected it for so long that the company’s name became a verb.
The unfair advantage reflects what you have that others cannot easily copy. The more complicated it is to copy, the stronger your unfair advantage.
Tesla had the unfair advantage of pioneering electric sports cars, putting them ahead of their competitors as they did it right.
The following image represents Tesla’s Lean Canvas.
Identify Assumptions
You won’t get your Lean Canvas right from the beginning. On the way, you’ll learn, and adapting will be inevitable.
I recommend going block by block and asking what our assumptions are. Let’s take Tesla as an example:
Sports cars fans are open to having an electric sport car
The high-efficiency battery will trigger customers to buy
Customers care about saving fuel costs
The above represents some of the assumptions of the business model. The key is to test the most critical ones. You can use the Assumption Matrix by David Bland to do it. Categorize assumptions based on evidence and business-critical, then focus on testing the most critical ones you lack supporting evidence.
You can download the Google Slides template for free.
It’s normal to pivot solutions, audiences, and problems. Continuously iterate until you have solid evidence supporting your business model. Remember that Netflix started by renting DVDs per post, then moved to streaming, and now it has advertisements.
Successful business models adapt to reality instead of living in a fantasy world.
What’s the difference between Business Model Canvas and Lean Canvas?
You may stumble upon the Business Model Canvas and confuse whether to use it or move to Lean Canvas. They can be combined and add value. They aren’t mutually exclusive. Let me help you understand the core differences.
The Business Model Canvas focuses on the business aspects. It shows you the fundamental parts of keeping your business running. For example, it addresses the key activities, partners, and resources. Such elements relate to running a business and not bringing an idea to life.
The Lean Canvas focuses on the idea part and its characteristics. It considers you before you go to market or at an early stage. It helps you understand the vital aspects behind the idea, the problem it solves, how to differentiate, measure success, and your unfair advantage.
Combining the Business Model Canvas and Lean Canvas can be powerful. But the most important is to understand what you’re trying to achieve, then pick the most appropriate option or join both.
The following is a Business Model Canvas of Tesla to help you compare it with Lean Canvas.
Conclusion and key takeaways
The Lean Canvas isn’t a template to fill and forget about it. On the contrary, it’s a tool to foster collaboration and clarify your idea’s essential aspects. Also, your first model won’t be right; keep iterating until you identify a direction worth pursuing.
Product Managers won’t succeed in creating a Lean Canvas alone. You can create something that makes sense, but business stakeholders won't understand your decisions if they aren’t part of the sessions.
Collaboration beats everything.
Key Takeaways:
Lean Canvas isn’t a template but a strategic method to move ideas from draft to life
Business Model Canvas fits better running products
Lean Canvas is better for the product before going to market or early stage of the market
Business Model Canvas and Lean Canvas are powerful when combined
Collaboration is critical to succeeding with either Lean Canvas or Business Model Canvas
Bonus: Download your Google Slides Canvas for free
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