After my last article "Working Backwards: Amazon's Culture of Innovation", one of the readers asked the question : How Different is Amazon's Way from Lean Canvas & Business Model Canvas. We have been using Lean Canvas & Business Model Canvas. Isn't Amazon's working backwards the same as Value Proposition Canvas from Strategyzer?"
You have probably heard this umpteen times : for most startups (and innovation experiments), the business plan makes no sense right after its preparation - the main value is in the planning exercise itself. Business plans end up becoming banal wranglings with excel, dragging cells to the right to retrofit assumptions often to meet numbers. In words of Socrates, "We do not know what we do not know". Throw your business plans but not the planning exercise itself.
As a call to move away formal business plans in early innovation exercises and yet have an artifact to communicate, align and experiment, tools like canvases were born. Two of the popular tools are business model canvas and lean canvas. Amazon's Working Backwards Way does not deal with a canvas, but has similar artifacts to align all the while focusing on the customer.
Naaah....You want to try this ? How about life and death? When say someone is faced with death, and you come up with a death defying innovation with hard evidence that the innovation works. Will it succeed? Here is a story from Everett Rogers (we will reference him later):
It is the year 1601. British navy sailors were sailing to India and dying of scurvy. One captain did an experiment with lemon and orange juice and saved one of four ships he was sailing with. 168 of 270 who did NOT receive what the captain gave died due to scurvy because they did not get sufficient Vitamin C(this formed the control group). Clear results, clear benefits were observable. British navy was buying new technology in ships and guns (so it was not like they were not adopting new stuff they were innovating). It took them 198 years to adopt this death defying innovation. Too many complicated reasons, but clearly the problem-solution alone did NOT help in life and death situations for adoption. There are too many cases in the recent past to brush off this phenomenon.
So lets review the frameworks with a brief introduction to all of them.
The method is to :
I have detailed this in sufficient depth along with a takeaway, please read it further if you are interested.
Business Model Canvas, from Alexander Osterwalder (strategyzer), is a lean startup template/framework for documenting your current business model or documenting new ones.
Essentially the goal of business model canvas was to create a single reference template that could be used to describe the variety of business models. There are tonnes of patterns documented in the book Business Model Generation. If you are an entrepreneur or into innovation exercises, you should read this along with value proposition canvas. The value proposition canvas focuses on customer pains, gains and jobs to be done. Without the value proposition canvas, the business model canvas becomes an exercise in documentation.
Lean canvas was introduced in 2010 by Ash Maurya. It is a simpler canvas option for startups. Lean Canvas does a fantastic job in paring down Business Model Canvas to its bare minimum.
In early stages the biggest challenge tends to be answering the question " Are we solving the right problem?". I like this because the order of what to do first is clear - start backwards.
In short, Lean Canvas is very good for early stages of your operation when factors like key resources in Business Model Canvas are not as important YET. If your source of disruption is channel driven or resource driven, business model canvas will be required to document it.
If there is a multi-side offering or say a business model driven by some other disruption, you are better off documenting it with business model canvas.
Right and wrong. It is not ONLY about the customer problem.
To understand this I will need to take you back to 1962, when Everett Rogers documented why and how fast technology ideas spread in his work: "Diffusion of Innovations". A simpler version is "Crossing the chasm", by Geoffrey Moore.
It is proven that market adoption for successful innovations follows these curves:
Rogers defined the speed of dissemination of any innovation as a process through which (1) an innovation is (2) communicated through certain channels (3) over some time (4) among members of a social system.
1. Essentially your innovation must be useful
2. The usefulness should be observable so that it is easy to communicate through a channel
3. There is a cycle of time associated with #2
4. Across a segment that is willing to accept your innovation
Why should we care about this and what has this got to do with the frameworks?
For any new innovation you will likely find some innovators who try new stuff for the very reason that is new, then you get the early adopters who need to find it useful. Then they need to communicate. The nature of communication is determined by the communication channel.
Communication Channel Type: Inherent Speed Determines Rate of Adoption
Communication channels broadly will be of three types:
1. Interpersonal channels: Face to face or person to person communication of observable benefit
2. Mass media channels: These are channels like TV, Press etc.
3. Mass media & interpersonal: Think social networks. added to mass media. We are getting into dangerous turf now.
B2B, B2C, Complex Models and You
B2B in a nutshell
Most B2B markets have a sales cycle (think in weeks if not months) and a use cycle, the benefits are not observable immediately. Once executed there is a lock-in, a switching cost - no one wants to change the vendor immediately.
Observability of the benefits is not that easy. It takes longer for markets to develop. There is only so much one could do to influence the communication channel. These markets tend to be fragmented or have 3-5 players in the end game.
B2C: Stronger mass media communication channel
In B2C markets with strong mass-media interpersonal communication channels, where switching costs are driven by network strength, the situation is different.
How long did you last take to figure out if a consumer product was worth it? Seconds, minutes or maybe at the worst an hour. The cycle of time is low. The communication channel, and the influence due to social structure becomes important.
Why are these channels important? Observable benefits and adoption is NOT necessarily based on scientific evidence and NOT necessarily on problem-solution fit alone especially in consumer markets. They are emotional decisions designed to reduce uncertainty.
If you are in a short cycle situation where communication channel could be important & communication channel is mass-media (+interpersonal) you want to test the social segment where it will take off (think segment that will adopt) and you want to channel Amazon. In such a situation, Amazon's way makes perfect sense since you are integrating communication into your model right from the word go. That's working backwards for you.
The artifact of choice by Amazon is a press release in an extremely crisp communicative. You cannot BS your way with geek speak. As markets become more consumer-like (think cloud, SaaS where the adoption costs have come down), how the observable benefit is communicated in the shortest possible cycle becomes very important.
If you are faced with a situation where the innovation & its use is the most important, go with lean canvas. When the disruption is coming from delivery of the model - think Value prop canvas and Business Model Canvas.
In A Nutshell:
If communication channel, cycle and social factors are dominant factors, you are facing a winner takes all market - you better integrate marketing assumptions from get-go.
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