March 15th, 2017 by Eduardo Pujol
It’s Monday morning and the much-anticipated strategic planning meeting is about to start. There’s one empty chair at the table, however you don’t know who might be missing. Each of your eight peer executives is sitting in front of a carefully printed and stapled business plan that you and your team have spent the past five months drafting. You hope this 40-page pile will help the C-suite make smart decisions and come up with fresh new ideas.
Then you realize how hard it is to run a meeting with a tome like this in your hands. Everyone’s getting lost while flipping through the pages and, frustrated, you keep going back to the appendix to find the marketing section. So much value trapped, and so much time invested in a document that can’t even inform a critical meeting—this is the story of most mid-size companies, and, at some point, maybe of yours as well.
Fortunately, there’s a leaner, faster, and better way to approach business planning, strategy and innovation at your company. It’s called the “Business Model Canvas” (BMC), a tool created by Dr. Alex Osterwalder in 2008 that he then expanded in the 2010 “Business Model Generation” book, the centerpiece of the “Strategyzer Series.” Adopted as part of the Lean Startup methodology, this open-source tool provides a quick snapshot of the nine most important areas of a business, all visualized on just one page:
Startup owners around the world use this tool to support breakthrough innovations and strengthen their business models. And now, almost a decade after its creation, some of the most innovative companies in the world—including such fortune 100 giants as Microsoft, GE, Mastercard, Humana and 3M—use the Business Model Canvas as well to create value for their organizations.
Check out the grid below to understand the main differences between the typical business plan and the BMC and to get a sense of how much more effective the BMC is in many situations:
The biggest difference between these two tools is subtle but potent: the change of mindset. Typically, when executives develop a business plan, there’s a tendency to rely too heavily on a model based on fixed assumptions and constants that limit its flexibility. But in reality, we all know that the magnitude of industry changes can be more dynamic than we estimated, and markets can fluctuate unpredictably, making a 5-year financial forecast irrelevant.
But when executives use the business model canvas, they recognize that the “final” product isn’t set in stone. They know the business model will be dynamic and likely to change based upon customer feedback, market validation and changes in the industry.
Sure, the BMC lacks the level of detail that the typical business planning document features; but those details are also a burden that can force your company into walking a tight rope of a plan that you no longer want to follow exactly, while adjusting is also difficult because of the time and resource commitment required to draft a new detailed plan. On the other hand, a strategy team can draft and rework multiple BMC plans in a day, so executives can quickly tweak different sections to see how adjustments affect the big picture without getting bogged down in the details. Thus, the BMC offers a more realistic, up-to-date, and hands-on approach to the strategic planning process, which ultimately provides a more solid foundation for business decisions.
At refine+focus, the BMC became the basis of how we operate internally and externally. We use this tool to get both our team and our clients on the same page before developing strategy, to identify strengths and opportunities for our client’s companies, and to solve key problems that are keeping their businesses from growing.
Recently we held a workshop called “Better Business Planning: Meet the Business Model Canvas” at our office in Boston. The goal was to introduce the tool to a select group of entrepreneurs, business professionals and senior consultants. Here are some of the key takeaways:
While there are many proven applications of the BMC, our mission was to teach them how to use the tool to achieve a business objective, how to develop a common language for their teams, and how to activate all the agile and lean thinking originated through the BMC to create results for their organizations.
Are we saying that the typical business plan is dead? No—it may provide necessary answers when a potential investor wants to see a detailed description of your marketing strategy, management team or financial estimates, for example—but we believe it’s appropriate only for specific cases like this and shouldn’t be considered the default tool for strategic planning.
More importantly, what we are we saying is that the business model canvas is alive, and it brings a refreshing change of pace to those protracted business planning meetings. We believe the BMC’s agility and adaptability will make it perhaps the most effective tool your team can use to foster cross-functional collaboration and will maybe even bring your organization a competitive advantage. We encourage you to try the canvas today, and sit on that empty chair that nobody at your company is using during your business planning meetings.
If you want to know more about how you can use the business model canvas to create value for your business, ask a question below or send us a message using the big, bold yellow button at the top right.