Business model canvas as process diagram

I’m really interested in how simple models help people tackle complex problems, and perhaps most importantly, help teams think about them in similar ways so they can arrive at shared interpretations of ideas. Think about the way Abraham Maslow’s Theory of Human Motivation has become such a ubiquitous way of presenting and understanding human beings’ needs. This theoretical model is probably one of the most well-known products of the social sciences, in large part due to the ubiquity of the pyramid diagram (not drawn by Maslow as far as I know) that ties each of Maslow’s domains of needs into an explicit hierarchy. Maslow’s own formulation was far less hierarchical than the pyramid diagram implies, he was at pains to point out that there are many exceptions, and that each of these domains operated independently for the most part, with the hierarchy emerging in cases of extreme deprivation (for example a man starving in the desert is likely to forget all other needs but hunger). We might think of such diagrams as fixed rules, as a final product representation of a particular theory, but I find it far more interesting to think of them as an active way of crafting ideas, as a way of reducing complexity so that people can get closer to talking about the same thing.

That’s all a roundabout way to introduce and qualify another diagram entirely, and perhaps understand why it’s authors consider it necessary. I doubt Alex Osterwalder and Yves Pigneur’s Business Model Canvas needs much introduction to most of my readers, so I’ll leave it to you to investigate if you don’t know it. I was interested to see recently that Osterwalder, together with Yves Pigneur and Alan Smith, have produced a new diagram, the Value Proposition Canvas, that aims to help users complete two key cells of the business model canvas, on the customer (why?) and the value proposition (what?). This is partially a response to Osterwalder’s work with Steve Blank on customer development and Eric Ries’ Lean Startup process. It works as a kind of supplementary diagram, as a way of zooming into these cells and creating sub-headings. With regards to the customer, it prompts users to think about jobs-to-be-done (watch this classic Clay Christensen video for an intro to that framework), customer pains and customer gains. Next, you list all your products and services and rank them for how effectively they help customers get functional, social or emotional jobs done. Finally, you describe how your products and services create value, by either relieving pains or creating gains. Once you’ve described your value proposition, you can compare it’s relative advantages to alternatives that compete to satisfy the same customer jobs. These diagrams provide a way of capturing shared assumptions that can then be iteratively tested as granularly as necessary as part of a Lean Startup process. This all helps you build a conceptual version of a Minimum Viable Product, which is a way of describing a prototype which does just what’s required to grab a toehold in the market and live-test the proposition, without breaking the bank building features and finesse that may not offer value.

What I find really interesting about this addition is that it quite consciously moves the Business Model Canvas into a much more active space. This is diagram-as-process. What is gained by creating a graphic, downloadable, printable version of what are essentially headings in what used to be called a business plan? There’s something comforting about bringing these ideas together and giving them a (literal) shape. They somehow move from theory to a product of their own, and in doing that they gain transferability. Would Maslow’s theory have become as widely known outside psychology without the pyramid to simplify and sharpen the message? I think there are very interesting implications for both how we work together as teams and also for how we communicate products and services themselves. This gets me to why I think Osterwalder, Smith and Pigneur continue to work on refining the Business Model Canvas and the importance of linking it to innovation process. This helps them convert the Business Model Canvas to process, but it also helps them simplify it, reduce it to a smaller set of core ideas, better able to travel. There are two gains to be had by importing these kind of frameworks into your thinking process. The first is that of stretching your thinking by introducing breadth that small teams may not have personal experience of. The Business Model Canvas is good at this, prompting you to think beyond the product to the operation of the business and the eco-system in which it operates, bringing together domain experts, but possibly not all the time. The second gain is from fluency in a shared language, and is more likely to be something the whole team uses regularly. It’s this ability to orient people around particular understandings that I find most interesting about this Canvas idea.

Have you used these tools in your team? Does the Value Proposition Canvas help simplify the Business Model Canvas and pull it into your process? Does bringing these ideas into a diagram-product help encourage it’s use? Are these simply complicating what are already useful and simple frameworks such as jobs-to-be-done and Lean Startup? Do these kind of processes make us lazy thinkers and encourage Mediocre Value Propositions or can they help make innovation more scientific?

You can download a poster of the Value Proposition Canvas here.