I’m a huge proponent of the lean start-up approach, and the have taken significant prompts from the movement in general. I particularly like the lean canvas, so I thought it’d be a good idea to go over my approach for a lean canvas For an app.
The Lean Canvas
The lean canvas was created by Ash Maurya (influenced by Alex Osterwalder’s business model canvas) and is primarily used to quickly create business models without resorting to full blown business plans. We’re going to adapt the the lean canvas to help us quickly develop the business model for all of the ideas in our shortlist.
The lean canvas is incredibly useful and we’ll be using it in some detail here and throughout the app creation process. If you’d like to know more about the lean canvas then visit the Practice Trumps Theory Blog and/or read the Running Lean.
The canvas is useful, as it:
- Forces us to write down our business model
- Ensures we acknowledge areas that we might not have considered
- Highlights areas where we may have problems
- Helps us identify risks
The lean canvas has 9 main sections:
- Customer Segments: what customers is you app targeted at
- Problem: what problem that these customers have that you’re app will solve
- Solution: the solution you are planning
- Unique Value Proposition: A single statement that sums up your app and why people should buy / use it
- Channels: how will the app be distributed / marketed
- Revenue Streams: how will you monetize the app
- Cost Structure: whats costs will there be
- Key Metrics: how will you measure the success of your app
- Unfair Advantage: what competitive advantage do you have
And looks like this:
Its important to note 2 things – firstly the order in which I listed the sections above seems out of whack, but its done on purpose and represents a logically transition. Secondly there are some additional notations on the image – don’t worry about them now, we’ll touch on them more later.
Creating the Lean Canvases
Its important to not get overwhelmed by the lean canvases – they arent meant to be perfect, at this early stage its more important to get something down on paper. So we’ll briefly touch on each section, but in a future post I’ll do a full walk through of completing one with a working example.
First off you need a lean canvas to work on – for this you have several options:
- Use the great Lean Stack – an online tool from Spark59 for completing your canvases.
- Use a tool like Balsamiq (a lean canvas Balsamiq template is provided as part of the free App Creation Toolkit).
- Print out the canvas and just put pen (or pencil) to paper. (A printable lean canvas is provided as part of the free App Creation Toolkit).
- Print the canvas in A3 and use post-it notes in the relevant sections.
Once you’ve decided on your method, its time to start completing the lean canvas for each idea.
Completing a Lean Canvas
Completing each canvas should take less than 20 minutes, and probably even less once you get into the swing of things. We’ll step through the canvas in the order that Ash suggests and tweak things where we have to make it relevant to making an app.
We’re going to keep it at one canvas per app idea. Later we’ll probably break this single canvas into separate canvases per customer segment, but for now we’re just going to capture each customer segment on a single canvas.
An final point before we start is that its ok to leave sections blank – a blank section might indicate a risk associated with your app idea.
Its difficult to create an app if you don’t know who your customers and users are – and also understand that there is a distinction between customers and users:
A customer is someone who pays for your product. A user does not. (Ash Maurya: Running Lean)
In some cases your end user may be your customer (straight paid app), in other cases your customer could be somebody paying for advertising revenue, or providing affiliate payments.
Ensure that you target specific customer segments here, don’t just put ‘iPhone users’ as its far too broad a segment. You should think about various factors such as demographics, geographics, lifestyle, profession, attitudes etc. A good example might be ‘software entrepreneurs’ or ‘parents with teenage children’. A couple of other notes is to capture their role within the app – like ‘software entrepreneurs (readers)’, and also identify a subsegment as your early adopters such as ‘software entrepreneurs starting to make android apps’.
You will probably identify several segments and several early adopters, so just get them down and we’ll move on to the problem.
The problem section should highlight the customers pain your are addressing with your app idea, or the job you are going to make easier for your customer. There are likely to be lots so try to limit it to the most important 3 for each customer segment you listed.
Here its also a good idea to capture existing alternates – this doesn’t necessarily mean other apps that address the issue, but how your customers are currently solving the problem. For example my problem might be ‘my readers want to read my blog whilst offline’, and my existing alternatives could be RSS Offline Reader, Pocket, Instapaper, Send to Kindle and printing to paper.
The next section to complete is how you solve the problem for the customer, i.e. what solution you will deliver to make the customers life easier. Its generally a good idea to put the key feature(s) in this section too.
Its important to not get carried away here for 2 reasons:
Firstly, if your product has a long list of features from the outset its going to make it not only very difficult to deliver, but also very difficult to sell. Most potential customers are going to want to understand how your app solves their problems without reading a long list of features. If your products features go over 4 or 5 things, its probably time to scale back and look at what the actual problem is.
The second and arguably more important reason is that the solution will very likely change as soon as you get into your customer discovery section and work on your first MVP (Minimum Viable Product) and/or complete customer interviews.
You unique value proposition is a single statement that tells your customers exactly what your app is. In some respects this box seems less useful than some sections as it doesn’t seem to have anything actionable about it, but it actuall one of the most important sections of the model. As I mentioned in the solution section, potential customers will have a very short attention span – it is incredibly important to have a simple, to the point statement that sells your app to that customer.
Getting the UVP right can be quite difficult – you should fully expect to change it as your business model matures, and your understanding of your customers requirements improve. That said you should definitely complete this section, even if you fiind it difficult. A good formula I use is Dane Maxwells instant clarity headline from his copywriters checklist (definitely worth a read):
Formula = End Result Customer Wants + Specific Period Of Time + Address The Objections (Dane Maxwells Copywriters Checklist)
- Your home sold in 90 days or I’ll buy it
- Your favourite blog content available offline, in minutes at no cost.
If you cant complete the period of time, or addressing concerns then don’t worry – its not an exact science – but it definitely helps get you started.
A final part that you can complete is the high-level concept. This is a punchy short sentence that describes your product by comparing it to something your audience already knows about. Its classically used as an elevator pitch to hook people in, and leave them with a feel for what your app is, some examples:
- Instagram = Twitter for photos
- Offline Blog Reader = Dropbox for blog readers
The high level concept isn’t the most important thing and isn’t always relevant, but it can be a useful and worthwhile exercise.
Selecting and developing your channels is often the most difficult part of the business model, especially with respect to app development. The vast majority of developers who decide to give developing an app a shot are of the opinion that by building a site or uploading their app to an app marketplace, that it will be start to generate cash. Unfortunately this couldn’t be further from the truth. Competition for the top spots in app marketplaces is very tough, and gettin tougher as each week rolls on.
For this reason its incredibly important that if search engine results or the app marketplace is your primary channel, you focus on at least one other channel that can potentially bring in customers – at least in the early stages. In the early stages of your app you’ll likely be discovering what features are most important to your customers, how much they’ll pay etc – if you have no route to your customers this process will be impossible.
So consider other channels to support your primary channel:
I really like this article from the Capterra blog that compares inbound and outbound marketing: Inbound vs Outbound Marketing
Inbound Channels (pull messaging)
- Blogging & Social Media: If you have already developed a social network in the subject that you’re targeting you could leverage it, if not this will be difficult.
- SEO: For web apps, search engine optimisation has worked very well in the past, but recent changes to Google’s search engine algorithms have made it very difficult to optimise reliably. A second problem is that using white hat techniques often takes a very long time to take effect, whereas black hat techniques can work more quickly but generally provide very short term success.
- Others: Other methods such as content marketing, ebooks, webinars, infographics and white papers can help build an audience, but all will struggle to deliver customers reliably in short time frames. They could make up part of your longer term strategy, but initially
Outbound Channels (push messaging)
- Pay-per-click (PPC) Advertising: Pay per click advertising is an excellent way to target customers – the main problem is that the cost for completing PPC campaigns is often too prohibitive. If you can make it work though it can ease your way into the market.
- Cold calling: Cold calling is a great way to literally go find your customers however, for app development it is a difficult proposition, unless you are developing for a very specific set of people.
- Friends and family: A good starting point can sometimes be friends and family, but only if they’re relevant to your niche.
- Customer interviewing: If you can build a route to your final customer and perform interviews you have a great way to find out whats important to your customers, and go on to to sell your app to them.
- Others: Other methods like print advertising and trade shows are generally impractical for marketing apps.
So consider also adopting a second strategy – PPC can be a great way to generate some interest, especially in the first few weeks of launching when you have opportunity to get featured in the ‘top new apps’ sections.
Pricing structure can often be a tough question when you’re starting to make an app. There are so many free apps out there in the marketplace that your first reaction might be to give it away for free – especially when we release an MVP (more on that later). The difficulty can then result in the pricing being deferred until later. Let me tell you now that this is the wrong thing to do!
If you don’t have a route to monetising your app, you could end up wasting your time, your money and your sanity. There are so many reasons people defer pricing their app, such as:
- Its only an mvp or beta release.
- Its not finished yet.
- Nobody will pay for it.
- I don’t know what my costs are.
- I don’t know what people would be willing to pay.
None of these are a good reason to ignore your pricing strategy. Whilst you may think your product is the software you develop, it is in fact, much more than that. The product is everything from how you market it, package it, deliver it and price it. So ensure you give some thought to how you will charge, how much you can charge, one-off vs subscription or whatever strategy you adopt.
See my article for help with monetising your app.
The main things to keep in mind when considering your cost structure are:
- Amount: The actual cost amount.
- Frequency: Are the costs one-off, monthly, annually etc.
- Fixed vs Operating Costs: To they increase in line with increased customers, or are the same regardless.
So you need to include any initial costs such as tooling, costs to complete research, marketing, seo, hosting etc. Its really important to identify what you can uop front so you can work out 2 things:
- Whether your app can be profitable
- What your break even point is (e.g. I need to sell 200 apps at $2 each to break even). It is a good idea to note this break even point on your lean canvas – somewhere between the cost and revenue sections.
Whilst his is important try not to get paralyzed forecasting costs into the distant future, focus on what you know now, and what its going to take to get your out there.
Key metrics are the things that you are going to measure to understand how successful you’re app is.
At the early stages key metrics can be very difficult to come up with as you may not even really know what the app that you’re developing is. I’m currently following the pirate metrics method by Dave McClure which I highly recommend you take a look at – this uses 5 types of metric:
- Acquisition: Indicates how users find your app.
- Activation: Indicates users first experience.
- Retention: Do users continue to use your app.
- Referral: Do users refer others to your app.
- Revenue: Are you making money.
The following image describes a these 5 metric types, and although it can appear quite scary, I find it really useful when considering what my metrics might be.
If you’re creating an app for android, some of your metrics could be:
- Acquisition: New Install (number of impressions would be good but often difficult to get from the play store stats)
- Activation: Uses your app for over 1 minute
- Retention: Active installs / app usage per week
- Referral: Shares on social media / rates and reviews positively in store
- Revenue: Buys your app / makes in app purchase
The types of metric will really depend on the app you’re creating, and the customers you’re targeting.
A real unfair advantage is very difficult to identif, especially in the world of building apps. For this reason it is totally fine to leave this section blank at this stage. If you can complete this section then thats even better, but be careful what you think an unfair advantage is – it should be something that your competitors cannot reproduce.
Some things that are not unfair advantages are:
- First to market: This is rarely an advantage at all – almost no big successful business were the first to market.
- Lowest price: Somebody can always undercut you.
- Highest quality: Somebody can always produce better quality.
Some things that are unfair advantages are:
- Existing customers / contacts
- Personal authority
- Unique endorsements
- Exlcusive contracts
These are things that you could have that your competitors cannot replicate.
Once you’ve rattled through your first couple of lean canvases things should start to speed up, and it’ll become second nature. The lean canvas is a useful tool throughout the lifespan of your product, and I cannot recommend it enough. Once you’ve got your canvas(es) its back to selecting your idea, or if you’re working with just one idea it’ll be time to do customer interviews and/or design your first minimum viable product.
I’d really like to hear of your experiences with modeling your apps business models, is it something you’ve done before, something you’ll try in the future?