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3 Developing and articulating the business model: the lean canvas approach
Who are our key partners?
Who are our key suppliers?
Which key resources are
we acquiring from our
Which key activities do
What key activities does
our value proposition
What key resources does
our value proposition
What value do we deliver to
Which one of our
customers’ problems are we
helping to solve?
What bundles of products
and services are we offering
to each segment?
Which customer needs are
What is the minimum viable
What are the most important costs inherent to our business model?
Which key resources are most expensive?
Which key activities are most expensive?
How do we get, keep and
relationships have we
How are they integrated with
the rest of our business
How costly are they?
For whom are we
Who are our most
What are the
Business plan basics for engineers
The Business Model Canvas together with the questions that could help clarifying the key
components of a business plan at the early stages of a business
Through which channels
does our customer segment
want to be reached?
How do other companies
reach them now?
Which ones work best?
Which ones are most costefﬁcient?
How are we integrating them
with customer routines?
For what value are our customers really willing to pay?
For what do they currently pay?
What is the revenue model?
What are the pricing tactics?
Osterwalder, A., Pigneur, Y., 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons; Blank (2013).
start-ups or new product development projects where the managers need a tool for
framing their initial hypothesis and documenting their learning, as they iterate through
the early stages of their business. The lean canvas approach is more ﬂexible and rather
holistic as compared to the direct focus on writing a business plan. Rather than
engaging months of planning and research, managers accept that all they have on
day 1 is a series of untested hypotheses and, instead of writing an intricate business
plan, entrepreneurs summarize their hypothesis on the canvas. As the hypothesis get
tested and validated the canvas is used as a way to evolve the business rather than
to come up with a ﬁxed solution.
The traditional and most popular canvas is the business model canvas (BMC)
developed by Alexander Osterwalder (Osterwalder and Pigneur, 2010). Table 2.1
shows its nine building blocks together with a number of questions that could help
in the process of their formulation. The BMC provides the main structure of a business plan with a focus on ease of use, ﬂexibility, and transparency, including the key
drivers of a business: customer segments, value propositions, channels, customer
relationships, revenue streams, key activities, key resources, key partnerships, and
There are two important practical points that should be mentioned with respect to
the use of the BMC. First, the BMC is just a tool that helps the initial formulation and
the continuous reﬁnement of the business model as a key component of the business
plan. It is not the ﬁlling up of the building blocks on the canvas that will make a
business successful, but the proper managerial actions and activities corresponding
to them. Second, the BMC is not a dogmatic framework but just a starting point
that could be modiﬁed or reﬁned depending on the speciﬁc business context, technological solution, or customer base. This is why there are publications suggesting
modiﬁed versions of the canvas that could be better adapted to speciﬁc business
circumstances. Examples of such modiﬁed versions are the lean canvas (Maurya,
2012) and the business model snapshot (Furr and Dyer, 2014). Both of them focus
on providing more systematic tools to mitigate risk in new product, service, and business development. The lean canvas approach proposed by Ash Maurya (Table 2.2)
appears to be more intuitive and better suited to address the multiple uncertainties
and risks (Section 18.104.22.168) that are typical of the context of new technology
start-ups and engineering professionals in technology-based businesses. The main
objective behind its introduction was to make it as actionable as possible while staying as close as possible to the entrepreneurial context. The way to making the canvas
actionable was to focus its intended use on capturing which was most uncertain and
The lean canvas is shown in Table 2.2. It helps in deconstructing the business model
into nine distinct subparts that are then systematically tested, starting from the highest
and moving to the lowest risks. Following the road map proposed in the lean canvas
approach, it is important to emphasize one of its key assumptions: your product is not
the technological solution you are providing; your product is the business model. Ash
Business plan basics for engineers
The lean canvas (the numbering indicates the order in
which the different building blocks are usually addressed)
Top 3 problems Top 3 features
3. Unique value
Single, clear compelling Can’t be easily
message that states why copied or bought
you are different and
worth paying attention
Path to customers
7. Cost structure
6. Revenue streams
Customer acquisition costs
Life time value
Maurya, A., 2012. Running Lean: Iterate from Plan a to a Plan that Works, O’Reilly Media, Incorporated, Sebastopol, CA.
Maurya has built the road map based on the three key stages of a start-up: problem/
solution ﬁt, product/market ﬁt, and scaling. Every start-up runs through each of these
stages where risk mitigation through each stage should be the main focus of its activities. In the problem/solution ﬁt stage the focus is on ﬁnding out if there is a problem
worth solving. The ﬁrst stage can be navigated without even building a product.
Instead a demo can be developed (a screen shot, video, or a physical prototype) that
could engage customers in sharing their vision about how to solve the problem. The
demo should help the customer visualize the solution by demonstrating the unique
value proposition (UVP). During this stage, entrepreneurs attempt to answer the key
question (the existence of a problem worth solving) by using a combination of qualitative customer observation and interviewing techniques on the basis of which they
derive the minimum feature set to address the right set of problems, which is also
known as the minimum viable product (MVP). The problem/solution ﬁt is validated
when you repeatedly get the customers to accept the UVP.
During the second stage (product/market ﬁt) the key question is whether the company has built something that people want. Once there is a problem worth solving and
an MVP has been built, we need to test how well the solution solves the problem. The
ﬁrst signiﬁcant milestone is achieving market traction. At this stage, the initial plan
should start workingdthere are customers who are signing up, the company retains
them, and gets paid.
The third stage (scaling) focuses on acceleration, growth, and scaling the business
model. Before product/market ﬁt, the focus of a start-up centers on learning and pivots
(substantial changes in the initial idea). After product/market ﬁt, the focus shifts toward
growth and optimizations. In this sense, achieving product/market ﬁt is the ﬁrst significant milestone of a start-up, which greatly inﬂuences both its strategy and tactics.
The overall framework is organized around three metaprinciples: (1) documenting
your plan A; (2) identifying the riskiest part of your plan; and (3) systematically testing
your plan. Documenting plan A is a snapshot of the initial plan. Entrepreneurs start by
documenting their plan A, focusing on the identiﬁcation of a potential customer
segment and then continue sketching out their ﬁrst guess at the business model for
each customer segment, potential solution, or customer channel. When this ﬁrst step
is done, an entrepreneur will have multiple versions of plan A, which is ready to be
prioritized in terms of risk in the next step. Having developed multiple canvases,
the focus in the next step is on prioritizing where to start. The prioritizing should be
undertaken by focusing on ranking the business models in terms of lowest risk. The
objective is to ﬁnd a business model with a big enough market that can be reached,
with customers who need the product, around which a viable business can be built
The weighting criteria for prioritizing the risk are the customer pain level (the problem), the extent of reach (the channels), the price/gross margin (revenue streams and
cost structure), market size (the customer segment), and the technical feasibility (the
solution). These criteria are evaluated against the three types of risks suggested by
Maurya (2012): product riskdgetting the product right; customer riskdbuilding a
path to customers; and market riskdbuilding a viable business. The lean canvas automatically captures uncertainties that are related to risk in terms of loss of opportunity
costs and real costs. The ﬁnal result is a lean canvas that captures the key business
components that could be further tested and validated. Systematically test the initial
plan is the third step, where all assumptions made during the articulation of the business model are transformed into hypotheses that can be either validated or invalided
through running experiments with customers.
Scaling up the business
Once the business model has been developed and validated it is time to grow the business. Following a method such as the lean canvas approach the managers will get past
the early stages of growth. However, the transition from focusing on exploration to
execution of a business model will change the company in fundamental ways, which
involves new challenges.
One of the main challenges for managers of new technology-based or engineering
ﬁrms is managing the transition to growth. At this stage a start-up should have nailed
the product and the business model and many unknowns should have been clariﬁed. In
this sense, the amount of uncertainty declines and so does the reason for applying
purely entrepreneurial management practices. The focus shifts on applying more traditional management principles focusing on execution, value capture, and optimization.
However the start-up may enter a transitional phase where neither entrepreneurial nor
traditional management alone is appropriate. In order to master the scaling process the
start-up needs to blend in the two management practices as it transitions to a mature
business (Furr and Dyer, 2014).
Business plan basics for engineers
Figure 2.1 Minimum viable product (MVP) and minimum awesome product (MAP) versus
whole product solution across the technology/product adoption life cycle.
Adapted from: Furr and Dyer (2014).
The transition from a start-up to a mature business requires going through several
stages, leading to fundamental changes in the way it operates. While there are a lot of
tools available on how to develop a business, there are very few tools dealing with how
to manage the scaling process in a systematic way. There is, however, an agreement
among practitioners that the growth and scaling process can be organized around three
key areas: market, processes, and team transitions.
The main challenge for new technology ﬁrms is crossing the chasm. Geoffrey Moore
(1991) argues that the gap between early adopters and early majority provides a signiﬁcant challenge for companies because these groups are quite different and require
completely different marketing strategies. While early adopters are willing to try something entirely new, the early and late majority wants a product solution that is error-free
and full-featured. The only way to cross the chasm is to put all your eggs in one basket,
meaning that the strategy should be to identify a niche segment among the early majority and focus all efforts on developing the whole product solution by serving this
particular segment. When this particular customer niche has adopted the solution,
the ﬁrm can focus its effort on a second customer niche. The key to getting a foothold
List the tasks to
be done in order
to execute the
Assign each task
Have each team
member to write
a description of
the most critical
the links and
Figure 2.2 Scaling the process.
Adapted from: Furr and Dyer (2014).
Create a visual
diagram of the
the links and
Link tasks and
in the mass market is to use the initial customer segment as reference customers.
Thereby the ﬁrm can start shaping all marketing communications to position itself
as a market leader in order to derisk mass-market adoption. The key to successfully
redeﬁning the market or create a market leader position is to choose an unoccupied
space where there is a legitimate market need (Furr and Dryer, 2014) (Moore, 1991).
In order to attract the ﬁrst customer niche among the early majority, the ﬁrm should
focus on developing a minimum awesome product (MAP) (Furr and Dryer, 2014).
While the MVP is used for validating the core assumptions during the initial stages
among the innovators and early adaptors, the MAP is a solution that is extraordinary
on the dimensions that customers value the most (Fig. 2.1). The point is to use the
MVP to improve the key attributes of the solution that can evoke positive emotions
and thereby turn it into a MAP by focusing on the functional, social, and emotional
dimensions of the solution. While using the MAP to get the solution adopted by the
early majority, the ﬁrm can move to a second customer niche. In parallel to that the
MAP is further developed into the whole solution that could address the needs of
the main market.
Process and team scaling
As a newly created technology ﬁrm grows it will begin to see the same types of problems cropping up again and again. These issues indicate a need for standardization of
its processes and workﬂow. As the market grows, tasks and workﬂow need to be standardized in order to continually deliver a quality product (Furr and Dyer, 2014). In
order to introduce scalable and standardized processes in an organization, a simple
four-step road map can be used as a guiding tool (Fig. 2.2). The process starts by
creating a list of tasks to be done in order to execute the business model. Each of these
tasks is assigned to an individual. The objective of the next step is to create a common
understanding among the employees. Each team member has to write a job description
for the assigned task and by reviewing each of the descriptions together in the team,
people agree on how to perform certain tasks and who is responsible for what. The
third step is about visually mapping out the most critical processes in order to detect
critical linkages. The diagram will help establish a common understanding about the
most critical aspects of the processes as well as make sure that someone is assigned
the responsibility for each of the key processes. The last step is to establish key metrics
for the tasks and the processes and make sure someone is accountable for those
It is critically important for the new ﬁrm to shift the performance metrics when
scaling. While the discovery phase should be using “love metrics” such as activation,
retention, and payment, the focus should now shift to using growth metrics. Growth
metrics are focused on determining whether the ﬁrm delivers a reliable solution
with increasing economics of scale and can include more detailed measures of users
in terms of acquisition and referral (Maurya, 2012), measures of the efﬁciency of
the processes and the revenue growth (Furr and Dyer, 2014). By measuring the performance around the right metrics and reporting the results, the ﬁrm can improve its
Business plan basics for engineers
During the start-up phase the team most often consists of people who possess good
discovery skills. However as the start-up scales up, there is a need for expertise proﬁles
that can execute the business model. There could be a need therefore for the talent pool
to change. Building the team during the growth phase requires a mix of
discovery-oriented people and experts.
As the team grows, it is important to focus on creating a working culture around
which communication processes and activities are shaped. As the team grows it is
furthermore important to plan and structure how meetings should be organized in order
to secure that everyone is moving in the same direction.
The danger of getting things wrong
Even though new technology-based ﬁrms have a great potential for wealth, value, and
job creation, there is enough evidence showing that, on average, 90% of them fail.
What is the main cause of such high percentage of failures? According to the experts
at Startup Genome (https://startupgenome.co/), the failures could be related to issues
associated with premature scaling. Furr and Ahlstrom (2011) deﬁne this problem as
“spending money beyond the essentials on growing the business (e.g., hiring sales
personnel, expensive marketing, perfecting the product, leasing ofﬁces, etc.) before
nailing the product/market ﬁt.” In addition, start-ups “are doing good things but doing
them out of order. In other words, they are doing things that seem to make sense, like
investing to build the product, hiring good people to help them sell it, developing
marketing materials, and essentially doing all the kinds of things that big companies
with lots of resources do when they are executing on a known opportunity”
(Furr and Ahlstrom, 2011). The problem is that the risk associated with these investments could be justiﬁed only by extensive preexisting market research or sales data.
Instead of assessing the risks and opportunities objectively and scaling those investments accordingly, start-ups tend to rely on guesswork without really looking into the
real facts. It is true that many start-ups bring products that are new to the market; that
is, they lack substantial market research and sales data. This is, however, exactly why
they need to manage the scaling process in a more structured way. Another study has
reported the top 20 most common reasons for start-ups to fail (CB Insights, 2014).
Some of them are as follows: there was no market need; the ﬁrm ran out of cash;
it did not have the right team; it got outcompeted; it got the pricing/cost wrong;
the product design was poor; there was a need/lack of a business model; the marketing was poor; the customers were simply ignored; and so on. Interestingly, all of
these issues could be related to the ﬁrst stage (articulation and shaping of the business
model) or the second stage (the proper scaling up of the business) of the business
A business plan template
The business plan serves as the executable plan for the start-up (Faley, 2015). While
the phrase “business plan” conjures images of 60 pages of documents full of dense
charts and diagrams, the business plans of today have become a lot shorter (Blumberg,
2013; Anthony, 2014; Faley, 2015). From 60-page documents they now often come
in the form of slide decks or shorter executive summaries. Furthermore, the key of
a successful business plan in today’s rapidly changing environment is to consider
the plan as the deﬁnite pivot point of the company, which means that the business
plan should be treated as a dynamic tool by updating it as new learning emerges
Besides being an executable plan for a new ﬁrm another fundamental aspect of the
business plan is to keep everyone involved on the same page. For a start-up there are
two primary stakeholders to articulate the business plan to: investors and employees.
While investors focus on the size of the market opportunity and the likely revenue, employees are more interested in knowing the shape of their future work life (Blumberg,
2013). Two versions of the business plan can therefore be articulated: a version for investors focusing on the likely revenue of the opportunity and a version for employees
focusing on articulating the overall vision and strategy that guide all employees toward
the same goal during the initial phase.
A mini business plan for investors
Articulating a business plan to investors can be done either in a written document or by
conducting an oral investor presentation using slide decks (Blumberg, 2013). There are
several ways to structure the content of the business plan; however at this early stage
the start-up should at least be able to articulate the size of the opportunity, the competitive advantages, current status and road map from today, and the strengths of the team
Anthony (2014) proposes a structure for organizing a mini business plan, which articulates the elements of the business model and the aspects of scaling. A mini business
plan template can be downloaded at www.innosight.com/ﬁrst-mile/index.cfm. It contains the following components:
An executive summary or a pitch if presented orally to investors
The target customers and their problems
The proposed solution
The key business model elements
The plan to scale the idea
The thumbnail ﬁnancials
The critical assumptions
The proposed testing plan
The insights from the early discovery-based stages as well as the required scaling
activities could be easily articulated by using this template.
Key points in the business plan for employees
The challenges for a company in the process of scaling up are well known. Furr and
Dyer (2014) recommended using the so-called V2MOM (vision, values, methods,
Business plan basics for engineers
obstacles and measures) scaling tool to simplify the process. It is a strategic planning
tool that allows a start-up or an established company to deﬁne goals and organize ways
to execute them. The V2MOM tool ensures that everyone is moving toward the same
goal, regardless of the size of the company. The tool is therefore especially well suited
for companies placed in a rapidly changing environment where there is a need to
The articulation of a vision helps deﬁne what the company wants to do. The values
refer to the principles and beliefs that guide the company toward its vision. The
methods illustrate the actions and steps that everyone needs to take to achieve the
vision. The obstacles identify the challenges and issues that have to be overcome to
achieve the vision. The measures deﬁne the results aimed to achieve. V2MOM
therefore helps the company to deﬁne where it wants to go, what things are important,
what it will do to get there, what would prevent it from getting there, and how it knows
whether it is successful or not (Furr and Dyer, 2014).
Salesforce.com used V2MOM in their early days as part of their business plan and
is still using it to guide the overall organizational goal of today (Furr and Dyer, 2014).
The structure of the tool can therefore be used in all phases of the life cycle of an
This chapter focused on describing the basics of the business planning process in the
context of engineering professionals. One of its key contributions is the detailed discussion of the unique characteristics and challenges of technology-driven business environments that are typical of engineering professionals. One of the key characteristics
of such environments is the combination of multiple uncertainties and risks that could
potentially affect the initiation and the evolution of a newly created technology-based
or engineering business. The main challenge in addressing the multiple uncertainties
and risks is that they have completely different sources and nature. For example, there
is interplay between the uncertainties associated with the degree of newness of the
technology and the early stage of a new technology ﬁrm. Fortunately, the recent
growth of interest in the lean start-up approach, agile technology/product development, and hypothesis-driven technology entrepreneurship has resulted in some key
publications, frameworks, and models focusing on the implementation of a rigorous
scientiﬁc approach to uncertainty management.
This chapter reﬂects this trend and hopes to offer a brief introduction of how it
could be implemented within the context of the business planning process. The
business planning process consists of two major parts: articulation and development
of a viable business model, and managing the growth and scaling up of the business. The development of a viable business model is described through the lean
canvas approach suggested by Maurya (2012). The lean canvas approach is specifically designed to address the unique uncertainties and risks associated with the
development and the introduction of new products by newly created ﬁrms. It works
with a simple risk categorization focusing on product, customer, and market risks. It
allows us, however, to address any other types of risks such as the ones that are
discussed here and typical of technology-driven and engineering business
The growth and scaling up of the business is described as consisting of three major
components: market scale-up, team scale-up, and process scale-up. Our description
refers to a practical tool suggested by Furr and Dyer (2014), which should help the
operationalization of the business scale-up process in the context of engineering businesses. Without pretending to offer an exhaustive picture of the complex process of
business development and planning, the chapter is an expression of a vision that emphasizes the fact that business development and planning knowledge and skills should
become part of the culture of present-day engineering professionals.
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