Yesterday we started off sketching out our business model canvases. Today we’re focusing on customers in the business model canvas. The goal is to quickly and easily extract the essence of your business into a business model. Use that to focus your attention on where you are, and then how to change to where you need to be.
If you missed yesterdays post – it’s here.
At the end of yesterday we had a business model canvas – almost totally blank, but we’d added the main problems that you are solving. I left it there because I wanted you to let your subconscious work on them overnight.
Often we think about solutions, not problems. It’s a classic trap that many engineers and logical people jump into. Powerful business models are built around customers. When we solve their problems we do better. Selling our solutions is always harder, especially if they are not solutions to real or important problems.
Have a look at the problems you wrote down. Are they real problems? Do have evidence for them? Real hard numbers, or just stuff inside your head. Think about it a bit more.
Now let’s get started for the day.
Customers in the Business Model Canvas
Starting with customers
We’re going to head over to the right side of the canvas and think about customers. You may have one group of customers. You may have a number.
The business model canvas works well when the value you create for each customer is similar and done in similar ways. This also includes platform designs where one group of customers has synergies with another.
If you are selling petrol to consumers and armoured vehicles to customers, these are too different to go on one sheet of paper. Create two. If you are in doubt just do one business model for each customer segment to start. Simplification is everything. The smaller steps everything is broken down into, the easier it is to understand and manipulate.
If you go-to simple, that’s ok. It’s easy to add more detail. If you have too much detail it’s also ok, you just spend a bit more time being confused and trapped in thorns. You can’t get it wrong.
Who are our customer segments in the business model
Let’s choose our target customers.
If we remember – the problems that I am solving are
Old business models are not working for lots of companies in many industries because of the pace of change – technological and environmental (used broadly)
New Ventures need business models to stand out from all the other startups chasing the same opportunities.
So who are my customers?
The people who have problems with a changing competitive landscape are SME owners (lump in directors and CxOs). The people who see opportunity in a changing competitive landscape are entrepreneurs.
At this stage, the customers should be able to say ‘I have this problem’. Here’s an example
The CEO of the Columbus Dispatch says the paper’s longstanding business model just isn’t working anymore
Colombus Business First
Can your customers say that they have the problem you think they have? If not, change problems or change customers, or change the way that you say it.
The other thing to look at is how large your customers are.
‘Mums’ or ‘Working women’ are huge segments. I haven’t looked up ILO data but I’d imagine the first is about 3 billion people and the second isn’t a lot less. That’s including everyone from New York, to Kyrgyzstan, to Kuala Lumpur, across dozens of cultures, social classes, religions and mindsets.
Do all of them care about the problem? Probably not. Or at least to a greater or lesser degree. Who has the problem more? Can you narrow down the focus on them? The fewer you are targeting the more resources you’ll have to solve each one’s problem (and persuade them that you can.)
Better Definition of Customer Segments
So let’s reformulate my answer because I made this mistake as well.
SME owners in the UK Midlands who have undifferentiated business models in at threat industries.
Global technology English speaking entrepreneurs pre Series A with a TAM greater than $1billion.
I’ll highlight what’s on the canvas – because that’s way too much text to clutter it with.
A useful tip is to always put what you write on the canvas in bubbles. It seems to act as a focus and allow you to absorb and manipulate information faster. If that works for you – let’s do it now.
At the end of today’s little exercise, you should have
- checked that your problems are real
- selected your customer segments
- checked your customer segments againt the problems you are solving.
We’ll carry on tomorrow and start looking at the solution.
Bonus Tip
Bonus tip: At this point, it’s always worth trying to size your market. To do that you figure out how many customers there are in the segment. Then consider how much money they have. In the case of the SME’s, I’d go to the Office of National Statistics (ONS) in the UK and see how many SME businesses there are in the Midlands. Then I’d filter that down by the SIC (NAICS) codes that I am interested in. Then figure out their turnover. It can take a couple of hours. The maths is usually easy, finding the data requires a bit of imagination 😉
Go back to yesterdays post and start from the beginning
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