One of the primary needs is to obtain customer feedback as rapidly as possible, for the least amount of cost and effort. We need a tool that enables us to engage with and iterate with potential customers quickly and easily while assessing whether an opportunity is worth pursuing. One such tool is Ash Maurya’s Lean Canvas shown in Figure 3-13, which is an adaptation of Alex Osterwalder’s Business Model Canvas:
The Lean Canvas is divided into two sections: Product and Market, with Product on the left–hand side and Market on the right-hand side. You fill in the canvas by moving between the two sections:
- Problem: Identify and briefly describe your top three problems that your product is addressing.
- Customer Segments: List who the customers are, and determine if they can be further segmented. If they can, it is recommended that you create a new canvas for each segment because other elements of the canvas will likely be different for each segment.
- Unfair Advantage: What do you have to offer that can’t be readily copied or bought?
- Solution: What is the minimal feature set that will satisfy your customers in ways that they will pay for?
- Key Metrics: What actions will users need to take that maps to acquisition, retention and revenue?
- Channels: How will you reach your customers?
- Cost Structure: What are fixed and variable costs?
- Revenue Streams: How will you generate revenue?
- Unique Value Proposition: Based on this information, what is the product’s primary differentiator and reason that it is worth buying?
Ash Maurya advises that we shouldn’t use the Lean Canvas to pitch ideas to prospective customers. At this nascent stage of the game we aren’t ready to sell prospective customers on our idea; we first need to explore and learn.
The Lean Canvas helps us to validate that a problem truly exists for a particular customer segment and how much that problem is worth solving. As we discuss the Lean Canvas with potential customers we will learn about what their real problems are and what we can do to address those problems – and that may differ from our original thinking. (Maurya, 2012) We may need to adapt – or pivot – based on what we learn.
There is another subtlety at work here. To put ourselves in a prospective customer’s shoes as we develop and evolve the Lean Canvas, we need to consider and target the circumstances that customers find themselves in.
A simple example that illustrates this point comes from a quick-service restaurant that wanted to improve the sales of its milkshake. Initial attempts centered on the product itself and customer characteristics; in other words, traditional product and market research looking at things such as price points and demographics. However none of this led to an improvement in sales or profits.
By looking for and identifying the circumstances customers were in when they purchased milkshakes, the needs and motivations of two distinct customer segments surfaced. There were the morning drinkers – commuters – who were looking for a filling, easy breakfast. And then there were afternoon consumers who were parents with children. The afternoon drinkers needed a smaller shake for two reasons:
- They wanted a snack for the kids to satisfy them until dinner time without filling them up.
- They were grabbing the shake on the go, and they didn’t want their kids to take a long time drinking the shake.
The Lean Canvas, on the other hand, allows you to capture what you think you know and immediately get out into the market to test and clarify your thinking while you still have the time and resources available to adapt. The Lean Canvas asks the essential questions and enables us to rapidly engage with prospective customers to test our thinking and discover what they truly value.
Once we’ve done this, are we ready to build a solution? Maybe. There’s one more bridge we should cross.
What are we building, and at what cost?
As we get into the details of a revolutionary offering or as we explore the evolutionary and incremental routes that the Ways to Grow matrix introduced in my last post, it is helpful to apply some additional thinking to the mix to ensure that we’re focusing our scarce resources on the right problem. We want leverage, bang for the buck.
This means that we want to throw our collective talent, thinking and effort into activities that will improve our market position while simplifying and limiting our attention in other areas. Being agile means that we shouldn’t try to be all things to all people; we want to focus as much of our attention on those things that will differentiate us as possible.
The Purpose Alignment Model (a.k.a. The Nickolaisen Model after its creator, Niel Nickolaisen) is yet another four-quadrant diagram – and a tool – to help us with this task. (Nickolaisen, 2009):
The Purpose Alignment Model classifies products and features (or business processes for that matter) as either high or low in two dimensions: Mission Critical and Market Differentiation. If something is Mission Critical, it is something that is essential to our ability to deliver as an organization. If something is Market Differentiating, then it helps us gain market share and/or enter new markets.
These two dimensions are split into four quadrants that are four types of activities to pursue: Minimal Impact, Partnering, Parity and Differentiating. We map our products or features into these quadrants using the following definitions:
Differentiating: These activities are high for both Mission Critical and Market Differentiation. Activities in this category those things that make us unique in the marketplace, allowing us to create and grow market share. Since these activities are the source of our unique value proposition, our goal should be to focus and excel at these activities, investing our time and effort to the greatest extent possible.
Parity: These activities are high for Mission Critical and low for Market Differentiation. In other words, this is where you need to keep pace with the competition in order to avoid falling behind. But that is all! The goal here is to do just enough to keep pace without over-complicating things and over-investing. Since there is no benefit at being better than others with activities in this quadrant, being good enough is sufficient. One way to achieve parity is to follow industry standards versus inventing things ourselves. If we spend too much time here, we will be pulling attention from differentiating activities.
Partnering: These activities are high for Market Differentiation and low for Mission Critical. Activities in this space are an important part of our unique value proposition, but they might not fit our specific mission. We might be a great content provider, for example, but we need help with distribution that a strategic partner can provide. We want to leverage the experience and capabilities of someone else who can do a better job than we can, creating a win/win scenario.
Minimal Impact: These activities fall into the low end of both Market Differentiation and Mission Critical. They aren’t making an impact and fall under the “Who Cares?” range of activities that tell us that our goal should be to minimize these activities as much as possible.
Wrapping Up the Business Pillar
As always, nothing remains constant; today’s differentiating is tomorrow’s parity. By continually assessing your offerings and direction using the tools and techniques that I’ve outlined in these last couple of posts and the material in this chapter in general, I’m confident that you will be responsive and adaptive to ever-changing business circumstances. An agile approach places you in a competitive position through a disciplined approach that combines thinking, discussion, feedback (a.k.a. validated learning) and employee engagement.
As you employ these tools and techniques, remember that a key expectation with agile development is that we aren’t striving to define and plan everything up front in detail. If we do, this becomes an over-investment that creates unnecessary overhead and waste. At a higher, portfolio level we need to define and articulate our overall business direction and investment decisions, being mindful that our objective is to use a just-in-time, progressive elaboration that allows us to leverage to most up-to-date information as we define and deliver on the specifics
This is the point where one or more product development teams take over. And when you finally do flow work to the product team(s), flow all of the key information in their direction. Communicate your vision (you can never do this too often) along with your investment and budget constraints and any customer/market feedback and learning that you have obtained so that they are aware of all the key business drivers. To be truly effective, the principle of transparency and visibility should be a bi-directional flow.
This brings me back to my partial definition of agile from Chapter Two:
Agility is a quality (and willingness) of the people and the organization to quickly adapt using the least amount of effort and cost when adapting to:
Changing business conditions and requirements
I’ll continue to explore and expand upon this definition as well as the House of Agile in upcoming chapters. In fact, the next chapter will add a line to this definition.
This post is a draft of content intended for an upcoming ebook: Agile Expectations: What to Expect from Agile Development, and Why. Blog posts will be organized under the “Agile Expectations” content on the left-hand side for easy reference. I welcome your comments and feedback! – Dave Moran
Brown, T. (2009). Change by Design . New York, NY: HarperCollins Publishers.
Christensen, C. M., & Raynor, M. E. (2003). The Innovator's Solution. Boston, MA: Harvard Business School Publishing Corporation.
Maurya, A. (2012). Running Lean: Iterate from Plan A to a Plan That Works. O'Reilly.
Nickolaisen, N. (2009, August 20). Breaking the Project Management Triangle. Retrieved from InformIT: http://www.informit.com/articles/article.aspx?p=1384195