In this blog post, you will learn how to skyrocket your career using the business model generation approach. Business model generation replaced traditional business planning in the startup world, and the book Business Model You explains how you can use the same principles when planning your career. So I decided to write a short summary of the book.
First we will look at why business planning doesn’t work anymore, then what the Business Model Canvas and Lean Canvas are, and in the end there is a quick summary of the Business Model Book, including the main ideas from the book. I also make some recommendations about the situations in which the book can help you the most and whether you should buy it or not.
Now let’s start with the basics of planning …
For decades, a business plan was the fundamental document that an entrepreneur had to prepare before starting a new business. Business planning was taught (and still is) at the best business schools. Banks, investors, strategic partners and all other potential stakeholders wanted to see a business plan first before getting involved in the business in any way.
I will not go into details, but a well-prepared business plan covered general information about the company, description of the business idea, market and competition analysis, marketing plan, development roadmap, intellectual property protection and defining competitive advantages, business team presentation, planned timeline for the main milestones, financial projections and other smaller chapters.
A business plan was usually a 25 – 70 pages long document that took weeks to prepare. The main problem with business planning is that 99 % of business plans are written wrong. Things never go as projected in the plan. There is a saying that no business plan survives the first contact with reality. The reason for that is that a business plan is nothing but a bunch of assumptions that are oftentimes wrong.
Especially because these assumptions are based on ego, not reality. An entrepreneur is sure that everybody will love their idea or product. They think there is a big market. They underestimate the costs and time needed to finish the product and penetrate the market. They are too big optimists about viral marketing solving everything. Then reality strikes, none of these beliefs turn out to be right and businesses fail.
The new ways of business planning
The main reason why business planning is so delicate is that the entrepreneur gets market feedback at the very end of the whole process, after already investing a lot of time and financial resources into building a product. But most new companies fail because nobody wants to buy their products, there is no market. In the process of business planning, entrepreneurs pay attention to everything else except actual potential customers.
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That’s why a new set of techniques and methodologies was needed. Out of this need, the lean startup movement was born with a set of new tools and approaches that replaced business planning and other out-of-date management principles. The basic foundation of lean and agile entrepreneurship is how to transfer market risk to the very beginning of the process of launching a company.
You do that with several innovations in how to properly start a business in today’s times. You talk to your customers first. You try to find the so-called earlyvangelists who help you develop your product. You build MVPs and try to simulate the buying process with them. All that enables you to really enter the customer’s mind. You do pivots when necessary and you follow a very specific set of innovation metrics.
But what you also do as part of the agile and lean approach is to set a series of hypotheses about your business on the business model canvas or lean canvas. Then you go “out of the building” or you conduct a series of experiments to validate or reject your hypotheses.
You constantly update your canvas based on the feedback you get from the market.
The business model canvas and lean canvas almost completely replaced business planning for high-tech startups. They do consider similar topics and issues as the business plan, but they are much more flexible, visual and updatable.
You don’t need to rewrite 50 pages of a document if one assumption is proven wrong. You can move fast, focus on the key business elements, and you can always have your canvas in a pocket.
To clarify any confusion, there are two canvases. The Business Model Canvas was the first one and it’s a more general one. It’s being used by everyone from big brands to non-profits, while the Lean Canvas was adjusted specifically for startups. I suggest you check out both of them and then use the one that fits you best, if you’re considering using a canvas for business purposes.
Business Model Canvas
Business Model Canvas was developed by Alexander Osterwalder. He wanted to build a tool with which a company’s management can very easily visually present how they will generate money. And he did that very successfully by inventing the canvas.
Diagrammed visualization, or the so-called canvas, enables you to write down key business hypotheses fast, see the connection between them, and then put them to the test and iterate business models until you find the one that works best.
By using the canvas it’s easy to describe, analyze and innovate different business models.
The whole process is called business model generation and it enables entrepreneurs and managers to innovate faster, not only on the level of their product, but also on the level of the whole business. Oh, and if you’re new to business: a business model describes how an organization creates, delivers and captures value. It’s about finding the best way to make money in the long term.
The business model canvas consists of nine elements:
- Customer Segments – Different segments an organization serves
- Value Proposition – A description of how an organization is solving a problem or satisfying a need
- Channels – How an organization reaches customers with communication, distribution and sales
- Customer Relationships – The way relationships with customers are established and maintained
- Revenue Streams – The way an organization makes money as a result of providing value
- Key Resources – Assets required to create and deliver value
- Key Activities – Main operations an organization has to perform to reach its goals
- Key Partnerships – Outsourced activities and resources acquired outside an organization
- Cost Structure – The main costs caused by the operation
For every segment, there are many details you have to consider and recommendations for writing down and testing different hypotheses. If you’re interested in learning more about Business Model Generation, I suggest you read the book.
You can download the Business Model Generation Canvas for free and this is how it looks like:
Because the new canvas approach to planning became so revolutionary, a new adjusted canvas was quickly born. In his book Running Lean, Ash Maurya updated a canvas a little bit to make it more appropriate and useful exclusively for startups.
He took the infrastructural parts out (partners, activities, resources, relationships) and replaced them with elements that are more important and crucial for new businesses (problems, solutions, metrics, unfair advantage). You can read more about the difference between the Business Model Canvas and Lean Canvas here in Ash’s blog post.
The Lean Canvas also consists of nine elements:
- Problem – Top three problems a targeted customer segment is facing
- Solution – Startup’s solution for the customer’s problems
- Key Metrics – Key activities a startup team is measuring
- Unique Value Proposition – A clear message explaining why the startup’s solution is different and worth buying instead of the competitor’s one
- Unfair Advantage – The part of business that can’t be easily copied
- Channels – The main path of how a startup gets to their customers
- Customer Segments – Targeted customers
- Revenue streams – How the business will be making money
- Cost structure – The main costs caused by the business operation
Here is how the canvas looks like (you can also download it for free):
Using the lean canvas for startups is much easier than writing a 50 pages long business plan. As an entrepreneur, you start with defining a problem you’re solving and who your potential buyers could be. Then you break down all the potential buyers into targetable segments.
In the last step, you fill the rest of the canvas with your hypotheses and then you go out of the building to test them. When you get the first feedback, you update your canvas and repeat the process many times.
The best way to use the canvas is to print it, stick it on the wall and use post-it notes to write your hypotheses down. You put post-it notes with written down hypotheses or proven facts in the corresponding segments of the canvas.
When you need to update you canvas, you can easily move things around, add new hypotheses, innovate the relations between canvas elements or do any other canvas updates. You can even use different colors of post-it notes to emphasize different iterations, the critical parts of the business model or anything else important.
Business Model You
Much like I am innovating with applying agile and lean techniques in general to personal life, Tim Clark innovated how to use the Business Model Canvas for planing a complex career decisions and maximizing your personal value creation. He came up with a brilliant idea for a canvas named Business Model You. The canvas already helped thousands of people to clarify what they want out of their career.
The idea of Business Model You is to help you with complex thinking when you want to make changes in your career. It helps you reinvent your career path by finding the best way for you as an individual to support yourself financially based on your talents, goals, needs, desires and environment.
The Personal Business Model Canvas or Business Model You Canvas also consists of nine elements:
- Who helps you – Your personal and business network that helps you and supports you in your career goals (family, friends, boss, mentors …).
- What you do – What kind of activities do you perform daily and what defines your occupation (designing, teaching, calculating, writing, managing …).
- How you help – What kind of a problem are you solving for employers/customers and how you help them achieve their goals (lower risk, better performance, stronger brand …).
- How you interact – What kind of a relationship you have with your employers/customers and how you interact with them on a daily basis (personal service, communicating online etc.).
- Who you help – What type of organizations you can help best.
- Who you are & what you have – Your talents, the type of work you like and resources you have that can help you achieve your career goals.
- How they know you & how you deliver – How can potential employer/customers find out about you, how can they hire you, the way you provide work and services, and how you make sure your employers are satisfied.
- What you get – What you get paid for, how much and what are the other benefits you enjoy.
- What you give – Soft- and hardcore costs related to performing activities, like your time, energy, stress, commuting etc.
There are several examples in the book for different occupations. I also have to emphasize that the book is about much more than just preparing a canvas. The canvas is only the first step in creating your personal business model, then the book also encourages you to reflect on who you are and identify your life purpose, how to reinvent yourself and, most importantly, how to act.
Start generating your personal business model
Business Model You has a thriving community you can join. You can download the Business Model You Canvas and a sample of the book from their website for free. They offer enough free resources for you to get started and reinvent your personal business model without any financial costs.
If you’re skeptical, invest an hour of your time and try it. Print the canvas on an A3 or as big a paper as possible, take a pack of post-it notes and start brainstorming what your personal career edge is. I did it, it’s fun and you can easily clarify many things – where you differentiate from others, how you can better use your network, who you can target as your potential employers or customers, and so on.
Here is Tim explaining how to prepare the canvas based on his own personal case:
The book will help you especially in the following cases:
- If you are looking for your first job
- If you want to make a big career change
- If you need to shape a strategy of how to get promoted at work
- If you want to play with ideas for what else you could do in your life
- If you like to play with cool career tools
Because I respect any quality intellectual work, I bought the book. I bought the audio version which isn’t the best format for this type of book. If you like doing the free canvas exercise, I strongly encourage you to buy the paperback or the Kindle version of the book. You can get both on Amazon. They also have the iPhone/iPad app version.
Have fun and reinvent your career the right way!