Business Model Canvas: The better way to start a business
BUSINESS PLANS ARE DEAD! Yes! VERY DEAD!!!
Gone
are the days when all you needed to get a business running was to carry out a
feasibility study, write a business plan and go forward with incorporation
e.t.c. By the time you are done reading this, the chance is that you will throw
away that business plan because you will realize how thoroughly unsustainable
traditional business plans have become. My goal is to introduce to you a new
way of thinking about starting a business because as you would soon realize,
business plans are DEAD!
One
of the greatest lessons I have learnt in life and indeed business is that,
"it is not what you
do but how you do it that matters" This gem is even more
relevant within the confines of the topic at hand. New businesses are faced
with great odds; a rule of thumb posits that 11 out of 12 start-ups will fail
under 3 years of incorporation. Whether or not this is accurate, the fact is
that the percentage of start-ups that get to rise above the limits to become a
true success is very low. What you may never know in truth is that although we
celebrate the near untouchable status of start-ups as in the case of Facebook,
Intuit, Twitter e.t.c, what you hardly ever get to know is the story of the
ones that fail.
For
centuries, we have been told that starting a business without a business plan
is suicidal. This is true but there's more to this. I said at the beginning of
this piece that business plans are DEAD. So what exactly does this mean? It’s
pretty simple! There is an inherent Achilles heel in most business plans. This
weakness is often responsible for the gory outcomes of most businesses that
fail. Most business plans contain untested hypothesis. Many businesses are
heavy on quantitative analysis (cash flow forecasts e.t.c) and very weak on
substance. Start ups fail for many reasons. For the most part, the framework
most people adopt for conducting a feasibility study is largely disassociated
with the blueprint. This singular factor is responsible for many failures. The
good news is that there is a better way to start a business and that’s what I
will share with you-
There
are three considerations in business:
1.
Value creation; a product
or service idea is conceived meant to create value
2.
Value delivery; the
entrepreneur transforms the idea into a valuable offering
3.
Value capture; the
consumer pays for the offering.
The
success of any business idea revolves around the velocity (the speed) and how
well the entrepreneur is able to balance and juggle the factors well. The
businesses you see doing well are those who are able to really do these three
things very well. The businesses that occupy the top segment of an industry are
those who juggle these factors better than anyone else.
The
initial process of creating a winning idea that is able to leverage
significantly on the three factors thereby creating a valuable entity is called
Business Model
Innovation. This term is the ultimate challenge of today's
business. It is what proves the point that it is not what you do but how you do
it that matters. It is what differentiates the insanely great companies from
those who barely survive. Business Model Innovation is a strategic imperative
for anyone who is interested in positioning a brand within an existing or
entirely new market. According to Bill Gates in his book Business at the speed
of light, it has become increasingly obvious that today’s business require an
agile methodology that recognises the very dynamic realities. Business Model
Innovation reiterates this philosophy in the most practical way.
While
Business Model Innovation is a very broad field of intellectual discipline,
there are various insights on how to leverage this new way of thinking. I'd
like to refer to the works of leading thought leaders such as Professor Clayton
Christensen of Harvard Business School who has done a lot of work in this area.
In this piece, I will be citing the works of Alex Osterwalder; a co-creator of
the Business Model
Canvas. The Business Model Canvas is by far the most robust and
holistic tool for today's businesses especially those who are interested in
creating a unique enterprise built on well thought-out insights. The singular
most important attribute of the Business Model Canvas is iteration which
ensures in the words of Silicon Valley veteran; Steve Blank teams to GET OUT OF
THE BUILDING! A phrase that describes the actual process of testing the
hypothesis.
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