“We don’t know what we’re doing.”
That’s a common sentiment we hear when teams dig into their ideas. It signals two things: 1) teams are committing to their projects and are plowing ahead rather than giving up; and 2) they have done enough research and customer discovery to be confused about what they’re learning.
We don’t set out to introduce doubt. But it happens, and it’s important. It’s a by-product of starting from nothing. Doubt subtly reminds students that they cannot rely solely on their own thoughts or ideas–they must work with others, and they must talk to customers.
We find that admitting you may not know what you’re doing makes it easier for you to get out of your own way.
We find reassurance through the Business Model Canvas. Many people use the Canvas at varying stages of their business. It provides clarity and helps people describe, visualize and challenge business models. For our teams, three weeks into their ideas, it helps construct the model.
We gave each team a three foot by five foot laminated copy of an empty Canvas, post-it notes and markers. The vast majority of students had never seen the Canvas, so we explained of the building blocks.
It looks daunting. Cost structures, key resources and customer relationships can be overwhelming. It’s not until students engage with the canvas do they understand it so we build a business model for a lemonade stand.
Our first value proposition was a fresh-squeezed refreshing lemonade on-the-go. When we identify our first customer segment, the beauty of the canvas appears. Are we selling to kids or to their parents? What about grandparents? Each of those three customer segments want something a little different. A parent might simply buy the lemonade to to make their kid happy.
One student suggested the lemonade was for runners in the neighborhood. Runners would certainly like a cold drink, but they may not have money with them on their run. We might have to establish a tab to serve them.
Every assumption affects the model and, at this stage, everything is an assumption.
The discussion quickly changed when we introduced the concept of a private funder, the Lemonade Stand Owner Kid’s parents. In that case, the customer is the parent and the revenue stream is a gift. What’s the value proposition? It’s not a fresh-squeezed refreshing lemonade on the go. It’s now something completely different, parental pride.
We also take quick look at how an advertising-based business model looks on the canvas. Our teams wrestle with the hybrid model where the value to a reader is completely different than the value to the advertiser. That’s clear. What isn’t always obvious are the assumptions that are built into how value to the advertiser is actually delivered.
Looking in the revenue streams box and seeing no corresponding post-it note for the advertiser customer segment is uncomfortable. It’s eye-opening to realize how much time and effort tend to be put into providing value to the consumer and how little time is put doing the same for the advertiser. The disconnect is sobering.
The Canvas forces specificity. Teams must match each customer segment to a value proposition. That combination gives the team a huge assumption that must be tested. They have to prove their great idea actually provides value to the paying customer.
Through the canvas, students discover their own assumptions and develop their own questions around those assumptions. Figuring out what to do becomes a matter of letting their customers decide.