There have been many small startups or tech startup that have come up in the market. But then setting and starting up a business is not that easy. First, you need to have a plan and then you need to invest. After that you have to pitch an idea, show it to the investors and if they are ready then there are chances of moving forward.
How the lean startup changes everything
Many times, these startup either goes well or otherwise faces a loss, after which they don’t get much investors if the business plans are not upto the mark. But in today’s time, now one can start its company by having less risk in it and this methodology is known as “lean start-up”.And this methodology has been flooded over the markets where it is also considered as “big design up front” development. Even though this methodology is new to the market, but still it seems to take the roots in the startup world and now the business schools have started adapting skills to the improve their start-ups.
The lean start-up movement has not gone totally into the mainstream but it roughly has an impact on several companies wherein this big data movement was however not completely understood and now the companies are slowly beginning to grasp the knowledge of it and then using it very wisely. But as its practices are getting widespread and people are able to get its concept, now every venture are trying to embrace this methodology so that their chances of success are increased that ultimately leads to their improvement and growth in the market.
The Fallacy of the perfect business plan
The very first thing that every founder must do is to create a business plan and then show it to the venture so that it can provide the solutions. This plan includes at least five-year time for income, cash flow, and profits. A business plan is actually a research that needs to be done before investing and figuring out what would be needed for a proper business to bear both profits and loss accordingly. Before the entrepreneur has begun to build its product, it is essential for him/her to figure out what it takes exactly to be a start-up and then proceed further.
Once an entrepreneur knows how to set up the business then it can easily convince the investors and then start on its project in the similar style and develop it accordingly. Only after launching and developing the product, the venture gets the feedback from the customers. Sometimes the feedbacks are positive and sometimes that’s negative and then the entrepreneur again has to invest and make it all over again so that they are able to meet the demands of their customers and be successful in whatever they set up.
And when this lean start-up methodology came, it taught many things that are essential for a startup to grow. First thing in this methodology is that the entrepreneur must have good guesses and then do things out of the box. And finally, it should practice agile development that originated in the software industry. With these steps, lean startup methodology comes up as one of the most effective methods in the market.
What is Business Model Generation?
Business Model generation is unlike the lean startup, but it has a strategic management for developing new business or documenting the existing business. Here, the plan includes everything. Right from finances to customers’ demands, everything is stated so that there are fewer chances of risk. There are many handbooks available on this business model generation so that the entrepreneurs are aware of how to take the business on a next level.
It is just not for the existing companies but it is also for the start-ups so that they can get a better idea of what they want to do and how to invest on it carefully. Existing companies use this tool to make their company more advanced and have a brand name in the market while the start-ups can use it for understanding the customer’s needs and growing it according to it.
The Lean Startup and Business model generation are two tools designed to help SMEs and startups draft their business plan. Whether you are looking to launch an online or brick-and-mortar business, mastering one or both tools could prove highly useful.
Practical tool for entrepreneurs
Both methods rely on complementary analysis grids: the lean canvas and the business model canvas. “These tools are very helpful in the startup phase,” explained ManafBouchentouf, Executive Director of the Seed Accelerator at the National Bank – HEC Montréal Institute for Entrepreneurship(in French only). “They can also be used in other phases of business development.” The business model canvas provides the users with nine blocks in which to represent their organization and product or service offering (i.e.: key partners, key activities, value propositions key sources, distribution channels, customer segments, cost structure and revenue streams). If certain blocks are difficult to complete, that’s because they represent potential risks, which is why it is important to consider these aspects. Meanwhile, this lean canvas provides the exercises to help you reflect and ask questions to help you test the product or service you wish to offer and to have a better idea about what you doing.
The Lean Startup essentially focuses on the innovation of a product of service
This lean canvas is based on several on principle of repetition that is to develop an idea, build a prototype that only functions and tests it among the clients so that the product undergoes a test and makes sure that can meet the demands of the consumer. In short, this method is the most convenient way to test your product which will cost you minimum where the risk factors are less and also if it goes better then you can launch it accordingly.
Business model generation: an analysis and communication tool
. The Business Model canvas pushes your thinking a bit further by asking you to assess the key partners, resources and activities you will need to successfully deliver your product or service, as well as the costs and revenue to expect. Having an innovative business model is just as important as having an innovative product. As with the Lean Startup tool, the Business Model tool is used to assess the desirability and feasibility of a product, and its potential profitability, In addition, the simplicity of the model makes it an ideal way to communicate and promote your business model to potential partners.
Demonstrate the relevance and viability of your business idea
According to Mr. Bouchentouf, “Altogether, the two canvases, the business plan and the financial plan enable entrepreneurs to demonstrate the relevance and viability of their business idea and to establish their credibility among various stakeholders, such as investors and their financial institution.”
The data you gather will be useful for the next step, i.e., drafting your business plan, which will integrate the results of your lean and business model canvases.
SME and startup business owners could greatly benefit from taking the necessary steps to learn about the advantages offered by the lean startup and business model generation tools.
Therefore to set up a successful SME, it is always important to have these two business tools that will work for better.