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Business Model Design, for Beginners

  • Lean Startup
  • Business

What’s your occupation?

UX designer? Web developer? Digital marketer? Entrepreneur?

If you’re working as a product manager or working toward a product manager position, chances are you’ve already built up some skills in design, tech or “business.”

The parenthetical business is the scary umbrella term that, for many of us, encloses so many unknown and foreign concepts.

Like financial models.

And growth strategies.

And…did I lose you at Excel?

Most entrepreneurs I meet have a clear idea for a product they want to bring to life.

Notwithstanding the critical steps many first-time founders overlook (hint: you can’t fake value), getting your product built isn’t usually the problem.

Product on its own is not a Business

When you look at a box head on, it’s easy to forget it has six sides.

The business of product is the five other faces hidden behind your beautiful design.

Remembering not to forget that which you can’t readily see is the first step you can take to finding business success.

100pm-product-alone-is-not-business

The next step is shining a light on the scary parts of business, to see they aren’t so scary after all.

The tool I like best for this is Ash Maurya’s Lean Model Canvas.

For a complete introduction, you’d do well to visit Ash’s blog.

For a quick explanation, stick around!

First and foremost, Lean Canvas is a tool. It’s a framework for helping entrepreneurs and product people identify the building blocks of business.

It looks like this.

100pm-lean-model-canvas

Sometimes I like to think of Lean Canvas as a placemat. In fact, you’d do well to print a copy, laminate it and get practiced at the art of (erasable) business model design.

The 9 Building Blocks of Business

The Lean Canvas tool has nine sections and each one should be thought of as an essential part of your business construct.

To get started, consider the following questions for each:

  • Problem – What is the problem your product is trying to solve?

  • Customer Segments – Who are the customers / users of your product? (see also “Why Ruthless Customer Segmentation is key to Starting Up”)

  • Unique Value Proposition – What is the primary reason you are different and why is that valuable to your customers?

  • Solution – What are the top three features of your product or solution?

  • Unfair Advantage – What part of your formula cannot be copied or bought? What can you do to create a barrier to entry or prevent competitor cannibalism?

  • Revenue – How will you make money?

  • Cost – What will it cost to run your operation and execute your brilliant marketing plan?

  • Metrics – Which key activities will you measure to ensure you’re achieving your goals?

Now ask yourself, which of these sections did I leave blank or get stuck on?

At minimum, if any one or more of the sections are empty – your model is incomplete.

That’s ok. As long as you’re keeping track of what you might be missing, you can stay ahead.

The sticky parts – those sections you struggled to complete - represent the concepts you’re most ready for.

Challenge yourself to go deeper. There’s plenty of great resources online for continued study of business models.

And if you haven’t read it yet, I highly recommend you get a copy of Business Model Generation by Alexander Osterwalder.

Fun fact: Alex’s book was part of the inspiration for Lean Canvas!

Good Advice

“Once you understand business models, then you can start prototyping business models just like you prototype products” - Alexander Osterwalder

Would you like to attend a Business Model Design for Beginners Workshop here in Los Angeles? Email us and we'll notify you about upcoming events.

100 Product Managers began with a mission to interview one hundred active product managers in Los Angeles - from startups to enterprise. We didn't realize we were also pioneering the web's first consolidated and comprehensive resource for product management topics.