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The Lean Canvas – Part 3

To read the first post on the Lean Canvas click here and the second click here.

This post moves on with the final three building blocks.

 

Step 7 – Key Metrics

This building block is located between the Problem and Unique Value Proposition building blocks, under Solution.

Key metrics are the numbers that tell you how your business is doing. A startup is chaotic but there are normally only a few key actions and metrics that matter.

The type and number of metrics will change and your product and business develops. The first two can be found by considering these questions:

  • What is the key customer action that drives value in your product or service as defined by your Unique Value Proposition?
  • How will you define success for you?

Step 8 – Cost Structure

This building block is located on the bottom left of the Business Model Canvas.

This is the cost of running the business for the specific customer segment. You can create a hierarchy of costs for the Value Proposition. The two questions are:

  • What are the minimum unavoidable costs?
  • Which activities and resources cost the most?
  • Costs must serve the value proposition in a direct or indirect way.

 

How to fill the Cost Structure building block

There are two approaches to cost structure:

  • Value driven
  • Cost driven

The value driven cost structure puts value first and supports a premium value proposition.

To succeed with a cost driven model you work to drive down costs with automation and outsourcing to offer a low value proposition.  

Identify the fixed and variable costs. Fixed costs do not change with sales, variable costs do. Keep in mind the economies of scale and scope. Costs will reduce with scale as you become more efficient and effective.

Although the numbers will change over time, look at calculating your breakeven point which is where revenue covers costs.

Calculate the number of paying customers needed to breakeven and for ultimate success.

Step 9 – Unfair Advantage

This building block is located between the Unique Value Proposition and the Customer Segment above the Channels. 

This is how you will defend your position against the competition. This is sometimes called your competitive advantage or referred to as the barrier to entry.

It is not easy to develop a true unfair advantage – here is a list of things that are NOT unfair advantages:

  • Being first to market
  • Less features
  • More features
  • Design
  • Passion
  • Determination

A real unfair advantage is something that cannot easily be copied or bought. Here are some examples:

  • Insider information
  • Personal authority
  • A dream team
  • Existing customers
  • The “right” celebrity endorsements
  • Community
  • Organic Search Engine Optimisation Rankings
  • Culture

Consider leaving this building block blank unless you have a strong unfair advantage.

Image from Flickr by Ben Jeffrey

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