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What is Lean Canvas: Definition and Examples

Jun 219 min read
business plan illustration

Do you find yourself in any of these situations regarding validating your product idea:

  • You try to wrap your head around all the aspects of the idea, but it’s too complex.
  • You spent weeks and months building a business plan only to realize that parts are already outdated.
  • When you share your idea with a customer or investor, your story is messy and not persuasive enough.
  • Your product team is not aligned or lacks understanding of the business model and strategic goals.

The Lean Canvas model is designed to help you address the challenges above and many more.

What is a Lean Canvas?

The Lean Canvas is an evolved version of the Business Model Canvas created by Ash Maurya. It helps describe new product ideas in a more agile and efficient way. The Business Model Canvas worked well for older organizations and products. However, a need for a more flexible approach to new products emerged. The Lean Canvas is a simple one-page tool that breaks down a business idea into its basic assumptions. It helps create a one-page business plan.

The Lean Canvas aligns with the high-level concept of "lean thinking." Lean thinking emphasizes the idea of creating successful products efficiently by reducing waste and promoting continuous learning. Another example of that school of thought is the lean startup methodology, which focuses on rapid experimentation, validated learning, and iterative product improvements.

What is the purpose of the Lean Canvas Model?

The purpose of the Lean Canvas model is to serve as the blueprint for your product. It starts as a high-level sketch. As you progress and get insights, it will change, evolve, and become more specific. Ultimately, you will have a comprehensive and exhausting representation of the idea you started with initially. This means the Lean Canvas is expected to change and to be validated continuously.

Building Blocks: What is included in a Lean Canvas?

The Lean Canvas consists of nine elements which should be filled in a particular order. Let’s take the well-known company Spotify as an example and build their Lean Canvas together. For the sake of simplicity, imagine we are in the company's early days before it has a product.

1. Customer Segments

A customer segment is a group of customers that are similar enough:

  • They need to get done the same Job-to-be-Done and have a common set of needs and wants, expected behaviors, etc.
  • The same solution will appeal to all of them.
  • They can be effectively reached with the same message and marketing channels.
  • They have "Word of mouth" between themselves. This means they can serve as solid references when buying things because they trust each other's opinions.

Example: Spotify has one prominent customer segment: music listeners — people looking for convenient access to music. For simplicity, we will only focus on music listeners as customer segments. Other customer segments like music artists and music labels are also important and shouldn’t be skipped when building the canvas for real.

The early adopters are an important customer segment. This is the segment you are in the best position to win first.

2. Customer Problems

This is a problem that your customers face. You can view it as the obstacle between your customers and what they need, want, or value. A good Customer Problem to focus on is one that:

  • Enough people care about it and are ready to pay to get it solved
  • Is not adequately addressed by any existing solution

Example: Customer Problems relate to one or more Customer Segments. In the case of Spotify, they are:

  • Music listeners want to listen to a given song without purchasing a whole album in which they are not interested.
  • People who enjoy music want easier ways to gather their preferred songs. CDs and MCs are no longer in demand due to advancements in technology.

Customer problems often relate to deficiencies in the existing alternatives, as in the example above. To learn more, checkout the The Connection Between Customer Needs, Problems & Outcomes blog post.

3. Unique Value Proposition

A Unique Value Proposition (UVP) is a single, clear, compelling message stating why you are different and worth buying over any other alternative. This is why customers choose one company over another.

UVP is all about three things: unique, valuable, and clearly communicated.

  • The UVP expresses a product's unique value, differentiating it from every available alternative solution. That differentiation must be one that the competition either cannot or does not offer today.
  • The identified uniqueness and differentiation should matter. The targeted Customer Segment(s) should value the proposition to the extent that they pay the asked price for it.
  • To quickly grab a customer's attention, you need to communicate a unique value proposition (UVP) in just a few words and within 5 to 10 seconds.

Example: Here is one possible message for Spotify’s UVP: “Listen to any song on demand without having to wait and handle individual payments.”

4. Solutions

This is a product or service that your Customer Segment(s) are willing to pay for to solve their Customer Problems. A good solution effectively addresses all important Customer Problems and delivers on the Unique Value Proposition through which you attract your target customers. If the UVP is the promise we are giving customers, the solution is how this promise will be delivered.

Example: In the case of Spotify, the solution is: “A mobile application that streams music on demand.”

5. Unfair Advantage

Unfair Advantage is the “secret sauce” of a successful business that makes it extremely difficult for someone else to replicate. You can think of it as those competitive advantages that are defensible or exclusive to your product. This block has two aspects:

  • Unfair Outcomes - What sets you apart and makes it hard for others to replicate your idea/business?
  • Unfair Capabilities - What are the hard-to-replicate internal capabilities that can help you win customers over competitors?

A strong Unfair Advantage is an asset that is:

  • Unique - a unique advantage that a company has over its competitors that is hard to be copied or acquired
  • Valuable - ties directly to the ability to produce something that your customers value very highly
  • Growing - increases in strength over time relative to competitors

Example: Spotify developed a recommendation engine based on the users’ listening preferences to increase stickiness and user loyalty. The more users use the service, the harder it is for them to switch to a different solution due to the increased value they are getting.

6. Traction Channels

A traction channel is a way to reach and engage with potential customers to generate momentum for a business.

Example: Spotify used traditional ads and strong word-of-mouth marketing to reach many music fans and become the dominant music streaming service.

7. Revenue Streams

Revenue Stream is the cash a company generates from each Customer segment. Every Revenue Stream has three components:

  • Revenue Model - the overall strategy that describes how a business monetizes its products or services.
  • Price - the amount of money a business charges for its product or service.
  • Offering - the offering you provide for the specific Customer Segment.

Example: Spotify generates revenue from monthly subscription fees and from selling ads on its platform.

8. Cost Structure

Cost Structure describes all Costs incurred to operate a Business Model.

Example: In addition to the regular R&D costs for creating a mobile application, Spotify pays royalties to music artists and shares part of their revenue downstream.

9. Key Metrics

Represent key quantifiable measures used to track the overall health and performance of your Business Model.

Example: A good metric for Spotify would be monthly active listeners.

Spotify’s Completed Lean Canvas

Here is what the completed Lean Canvas for Spotify looks like. Another customer segment is added to represent the music artists:

lean canvas example spotify

Tip: There is an excellent TV Show “The Playlist” that tells the story of Spotify where you can follow the evolution of the idea together with interesting plot twists from their history.

The specific order in which you should fill in the building blocks of the canvas doesn’t mean you cannot go back and refine previous blocks. For example, if you are currently working on Step 6 (i.e. Traction Channels), but you come across something you want to include in Step 1 (i.e. Customer Segments) you can still go back and change this block.

The order in which you fill in the blocks during the development phase is essential. This is mainly because you need to understand your customers and their problems before you move on to more complex blocks such as creating value or thinking about revenue and costs

How the Lean Canvas can be helpful to you

Once you have validated the Lean Canvas, it can serve as the foundation for many additional artifacts:

  • Knowing the ideal customer, the problem, and the value proposition simplifies creating a sales pitch deck. You will know who you are addressing, what challenges they are dealing with, and what would address those needs.

  • The Lean Canvas will help you design your marketing strategy based on the customer segments, the traction channels, and the problem. This will ensure your product reaches the right target audience at the right time and with a message that will resonate with them.

  • The Lean Canvas is an established tool for addressing critical questions in your conversation with VCs and angel investors. Especially, about who you are targeting, how the product will be monetized, and the cost of driving the revenue.

You can easily present your idea to potential new team members using Lean Canvas and bring them on board faster.

Conclusion

Starting from a blank Lean Canvas template can be daunting, especially if this is the first canvas you are working with. The Icanpreneur platform can help you kick-start your journey with detailed step-by-step processes of filling in each canvas element. The platform focuses on one element at a time, providing you with the needed context, guidance, and examples to create clear definitions. Once you finish the canvas and define your business idea, the platform will guide you through validating your assumptions. This, in turn, will help boost your confidence in your idea.

Get started by signing up for your free trial on icanpreneur.com.