With every innovative idea comes a big question. Where do you start? Maybe you have a great idea and you’re ready to execute it, but there are a lot of things to think about before beginning a project.
In this City University session, Josh and Kyle talk about the Business Model Canvas and the process of developing an idea into a business.
Click here to listen to the video or keep scrolling to read the rest of the recap blog.
What is the Business Model Canvas?
Before you can start thinking about where to start, it’s important to understand what the Business Model Canvas is. It’s a strategic management template used for developing new business models, as well as documenting existing ones. It’s all about reflecting on your business model systematically so that you can focus on scaling your processes up incrementally.
Focusing on your business model is imperative to your success because it can help you discover your business’s processes, uncover opportunities, and build the confidence to invest. It can quickly become overwhelming when looking at all the different aspects of your business. We hear it all the time, “Where do I even start?”
The answer comes down to three main areas: understanding the problem, identifying the solution, and optimizing the process. These three areas should run parallel with each other, because they not only inform one another but the three areas are all related. Focusing on each of these areas will be a starting point for the rest of your business structure.
Understanding the Problem
The first step should be understanding the problem. It is essential to make sure there is a problem that needs to be solved — whether that’s a vitamin problem or an aspirin problem comes down to the market research that should happen before the venture kicks off.
Some important questions that can help you identify the problem and effectively build the right thing are:
- How big of a problem is this?
- How many people will experience the problem?
- How much will people be willing to pay?
As you understand of the problem your prospective customers or users experience, you will quickly see how the questions you ask and the answers provided lead into other aspect of the business model, like value proposition, cost and revenue, and beyond.
Starting with the problem often helps entrepreneurs challenge their assumptions. If you think your product or service is the solution, you have to understand the problem you’re trying to solve.
What’s the Solution?
After recognizing the problem, the next logical step would be to identify the solution. How are you going to fix the problem? It is important to have a narrow, well defined solution to fix the problem effectively.
The process involves finding a problem/solution fit. For your business to be effective, there should be both a real problem and an effective solution. You might have a problem, but no way to solve it. Maybe you feel like an idea might work, but there is no real problem that needs to be solved.
Two important questions for finding a problem/solution fit are:
- Have we identified the problem clearly?
- Is there an affordable way to solve the problem?
Once you have answered these two questions, you should have a problem/solution fit. After that, the next step is finding a solution/market fit. There may be a solution, but there needs to be a place in the market for your company.
After establishing that there is a place in the market for your solution, the rest of the business process will follow. Figuring out cost structure, your company’s message, and marketing your brand, will fall into place after finding both a problem/solution fit and a solution/market fit.
Optimizing the Process
The final step in a successful venture is optimization. When a company optimizes their business processes at the right time, they can utilize the information and data collected to gather insight about customers, improve products and services, enhance value propositions, reduce cost, and ultimately grow as a company. Continually learning from trial and error, and optimizing the process allows companies to fine-tune their business model to scale up.
If a company has already begun with development, there are still ways to optimize their business model. It isn’t too late to begin the process of backfilling areas of weakness in a business. It is critical for these types of companies to map out their business to figure out ways to improve.
For example, if a company has found success, the next step would be to consider how to improve its margins by lowering its costs. Answering the needs of their customer and the problem they need to solve can help a business to improve processes. This may also prompt companies to think through aspects of the business model they may not have considered before.
Now that you know where to start, it’s time to start getting serious about your idea.
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