Using the Business Model Canvas to improve Salesforce.com Designs

There is much conversation around how to use the Business Model Canvas (BMC) for new product development and business model iteration.  However, less attention is paid to how it can serve as a tool for requirements definition.

At LeanCog, we use the Business Model Canvas in a variety of ways, one of which is to get a clear understanding of our client’s requirements so we can design enterprise systems that meet the needs of the business and the system’s users.  Traditionally, many requirement conversations would start with “tell me about your business” conversations with a variety of business stakeholders.  Overtime, we ‘ve seen several challenges emerge from this approach:

  1. Different people use a different lexicon to describe the business, and these subtle differences would lead to future gaps or misunderstandings.
  2. Often time whiteboard conversations were unstructured and certain considerations were missed – and these requirements and resulting designs would pass all the way through business acceptance testing and into production before these use-cases were identified.
  3. Without a better tool, conversations would often devolve into using a specific technology’s architecture and terminology to explain requirements, and since most times the client was not an expert in the technology, too many assumptions were loaded into the vocabulary which the client wasn’t aware of.

However, when we use the business model canvas to describe the business, it gives us a common architecture and vocabulary for different stakeholders to share their needs.  When combined with other customer development based practices, of course, we find that this is a very useful tool for defining requirements.

We’ve done this extensively when working with salesforce.com, and here is how we’ve we’ve found it maps to the 9 building blocks of the BMC.

Business_Model_Canvas

Start with the business’s Value Proposition.  I’ve seen systems (poorly) designed where the architects never even asked this question.  They cut straight to “what is your sales/support process”, and never took the 5 minutes to understand the “why”.  Start with a discussion of the business’s core competency and competitive differentiators, and then drive to the products, and eventually to how products are sold.

If the system is to be flexible, and ultimately support the businesses goals, every other aspect of the design needs to rebase against these and be prepared to test and measure these items in the performance of the business.  Specifically though, this leads to designing the opportunity types and product relationship, CPQ flow and an object hierarchy that will support the reports and dashboards which the business is interested in.

Next, define the Customer Segments.   You’ll want to talk to representatives from sales, product, support and BD to get this right, as they’ll all have a different view of how the customers are grouped.   The defined segments may or may not result in different salesforce record types, that will be a detailed design decision, but this will result in a complete view of what type of customers will populate the system.  This is also the place to discuss customer acquisition and the appropriate way to qualify leads and progress the pipeline.

These are the two most important areas as their relationship drives all the other building blocks, so they deserve an adequate amount of discussion.  From here, we can evaluate the remaining 7 building blocks.

Customer Support:  How are customers supported?  Will that be managed via salesforce cases?  Support cloud?  Another system (if so, what feedback needs to make it back into salesforce?).  Will they need self service capabilities such as Customer Portal or Communities?  Make sure this discussion covers all products and all segments defined in the other sections.  Discuss the support requirements here, what are their SLAs, what are their goals of support, and does it contribute to any value propositions (if so, this requires a deeper dive).

Channels:  This is often an overlooked design requirement, in my experience, and why I like the BMC to help tease this out.  People often default to their primary channel when describing the business, and forget about partner sales or referrals because less of that activity is happening within the four walls of the business (by definition).  Having an explicit conversation, not just with sales, but with BD and AR is key to understanding this and making sure secondary channels aren’t just uncomfortable bolt-ons later.

Revenue:  Like channels, this is another often under-discussed aspect of system design.  Many people default to salesforce.com’s default opportunity amount and only later, after the foundation is built, do discussions around how to handle MRR, service contracts, referral agreements, expense accounting, etc…  Highlight all the companies revenue sources (again, go back to AR or someone in the CFOs organization) to make sure all of these are identified.  Rarely does the direct sales team cover all revenue streams, and so when the Head of Sales is the project sponsor, it’s not surprising why these items may be missed, but again, by using the canvas in all stakeholder interviews, you can help minimize these risks.

Costs:  In a salesforce deployment, the costs of the business traditionally have been outside the goals of the system.  However, we’ve seen more and more deployments where some form of cost accounting is starting to work its way into designs, such as tracking time worked on cases, sales compensation accounting, etc…  While many costs of the business will be outside of what is designed into a salesforce.com deployment, use this as an opportunity to get the client to think about where they will want to do this.  Cost accounting is much easier to do from the get go than to implement later on.

Key Activities:  What the business views as its key activities will provide a good starting point for use-cases and may ultimately translate to things like workflow rules, approvals, escalations, dashboards, etc…  For example, if a key activity is lead generation, then integration with an Marketing Automation Tool will be highlighted here.  If it is product development, then being able to collect customer feedback (such as using salesforce ideas) or reporting on adoption rates of new features could be key design requirements.  While some use-cases will be outside the scope of salesforce, and some will be too granular for the BMC, it will provide important insight and future review point into what the business is doing so the system can support these activities for the role that salesforce is meant to.

Key Assets:  This often is all the stuff outside of salesforce that needs to be integrated, migrated, or measured.  If the salesforce.com is designed well, it may eventually become a key asset to the business as well.  If a key asset is user data, this might highlight the importance of integration to a big data tool.  If a key asset is brand, perhaps an agency should come into to design the customer portal, or perhaps a CMS should be put on top of the portal to provide the brand experience.  Since this is what makes the company better than others in the market who are doing the same activities, it is likely to need to be taken into design considerations of all aspects of the business.

Partners:  Identifying all the partners leads to discussing integrations, partner portal requirements, report distribution etc.  Start with just covering all the partners (make sure to talk to BD, since IT or Sales are unlikely to be able to give you a comprehensive answer!).  This is often the key for area for dependency and integration conversations, as well as project teaming (since some partners may be those building other systems).

We’ve seen several benefits from taking this approach:

  1. Our conversations across different stakeholders become more consistent and efficient
  2. Change control conversations become less contentious
  3. The number of surprises at launch go way, way down.
  4. Furthermore, if you take an iterative, feedback based approach, these are a good place to capture your assumptions and priorities that you can test throughout your deployments and develop a release roadmap.

Let me know if this is helpful, and I’d love to hear your feedback if you try this approach.

Advertisements
Posted in Uncategorized | Leave a comment

Business Model Canvas v2 – Strategyzer.com

Alex Osterwalder and his team, who created the Business Model Canvas, have launched a software version called Strategyzer.com. While they previously released an iPad version of the canvas, the inability to collaborate or share cross-platform kept me, and many others, reserved to the world of Google Spreadsheets and Powerpoints on Dropbox.  However, their new product, Strategyzer.com, is a software tool that provides a SaaS based version of the canvas that not only addresses the collaboration and cross-platform issue, but adds a bunch of useful features that I previously had to create on my own.

With their recent update of Strategyzer to include the Value Proposition Designer, I thought I’d share my “first look” experience with it in case you’re considering it:

What I like:

  1. Collaboration – My Google Spreadsheet version of the BMC is now three years old…  I can finally bid it adieu.  I can add as many collaborators as I like to a project and get a much better UX.
  2. Integration with the Value Proposition Canvas – in a previous blog post, “Business Model Canvas Gluttony – Why One Is Not Enough“, I had discussed how the business model is dependent on the Value Proposition to Segment map.  For people who don’t use the canvas frequently, this is often a source of confusion on how to manage that.  Strategyzer natively integrates the two, bringing the VPs and Segments over to the VP Canvas to start working on them.
  3. Built in Hypotheses – A couple years ago, Steve Blank had suggested using different colors in the Business Model Canvas to show what is tested versus what is still a hypothesis.  Strategyzer has integrated this with an “Assessment” tool that allows you to mark each items as “Pass”, “Fail”, or “Testing”.  It then provides a dashboard to see how your progressing against these assumptions.  Not only is this more elegant, but it allows the color coding to be used to match VP / Segments identified in #2.
  4. Integrated Financials – When I was in business school, I used the canvas a lot for business plan competitions as well as venture investment competitions.  However, I always had to go back and create a separate spreadsheet to model the financials.  In the real world, many of my clients actually avoid the financials entirely during this phase of discussion.  Strategyzer includes financials natively by adding attributes to each entry which ultimately roll-up to an exportable profit/loss statement.  While financial plans are, of course, more complicated than this, it does provide some quick signposts when brainstorming on what looks attractive versus what doesn’t.
  5. Historical Changes – In Steve Blank and Bob Dorf’s book “Startup Owner’s Manual“, they talk about having a “deck” of canvases showing the changes to the model over time – the “Activity” Feature in Strategyzer preserves your changes.

What I Don’t Like:

  1. There is no free version – It would be nice if this was a freemium model where you could model your own ideas at no charge by have to subscribe to collaborate or have access to the advanced features, such as the financial export.
  2. There is no concept of “flow” – When explaining the canvas, it almost always follows a story or flow.  One post-it is added at a time to explain the relationship.  The canvas in Strategyzer has everything, but there is no way to play the canvas as a flow having one box appear after another or having arrows go from one to the next.  I think it would be a small, but helpful change to add an index value attribute that could auto build the canvas.
  3. There is no “share” feature – I foresee the Business Model Canvas becoming a corporate communication tool – like RACI or Gantt charts.  A tool that creates a common understanding and vocabulary for the business.  To use it this way though, it would be nice if there was a “share” link that would provide a private URL to a png version of the canvas that could be included in a corporate internet or to users that should have occasional “read-only” access (as opposed to collaborators added to the project).  While an export is offered, it would become outdated quickly or require hosting elsewhere – a simple URL that will always be fresh would be nice.

Overall though, it’s a pretty slick tool.  If you’re team is excited about using the Business Model Canvas, this is a logical choice.  We’re using it at LeanCog!

Posted in Uncategorized | Leave a comment

Business Model Canvas Gluttony – Why One Is Not Enough

I was first introduced to the Business Model Canvas during business school in Steve Blank‘s class.  We used it to quickly evaluate and brainstorm start-ups as part of his Customer Development process.  It appealed to my philosophy that less is more, and I found it very efficient at aligning a conversation and keeping it focused.

However,  I’ve been using it for a couple years now and find a consistent breakdown in the conversation when multiple customer segments are introduced.  The reason for this is that each segment drives unique attributes to the other building blocks on the canvas.

Consider, for example, a software start-up that is making a gamification platform.  One segment they might consider is marketers of experiential products.  The value proposition to them would be improved engagement and compliance with their product experience.  Another segment they might consider is users themselves, creating their own challenges with the value proposition being helping them achieve their personal goals.

Now consider what happens as you begin to evaluate the other elements of the canvas.  Revenue?  Advertising for end-users, licensing for businesses.  Relationship?  Self service or communities for end-users, personal for businesses…  What happens is as you go through the other building blocks, each attribute starts being stated conditionally based on the segment until the canvas becomes unusable.

Constraining the Canvas by Solution

What I’ve found effective to address this is to do one canvas for each logical grouping of Value Proposition and Customer Segment.  Start with those two boxes first, and when moving to the other boxes pay attention to someone caveatting their attribute by use-case.  When that happens, pull that value prop and customer segment onto it’s own canvas and keep that one focused on that solution.

To help bring it all back together, I use a distinct color on an attribute if it is shared across the other canvases.  So for example, if a key activity is the same no matter what value proposition is being delivered, then I might write that attribute in green so it is quickly identifiable as being shared.  This has an added benefit too if you are using the model to decide between pilots or minimum viable product features, because the solutions with shared attributes are likely to allow you to leverage your investment and quickly pivot even if that solution fails.

I’ve found the constraint of one solution per canvas to make the conversation more focused, efficient and understandable.  For one client, we had six different canvases we were maintaining at one point.  The ability to keep the relationships clean far outweighed the overhead of doing the canvas multiple times.  Give it a try and let me know how it works out!

Posted in Uncategorized | 1 Comment

Customer Development in risk averse organizations, such as non-profits

Lean start-up principles are very effective, if, well, you’re a start-up!  But how do these methodologies apply if you’re an established brand, wanting to improve your share or introduce a new product?

I recently worked with a global non-profit using many lean start-up frameworks to help them find a product-market fit on a technology they had developed.  I was very excited to use these principles where the focus wasn’t on TAM (Total Addressable Market) but instead on the impact to making the world a better place.  What a breath of fresh air!

I’ve worked with large companies before using customer development frameworks, and while I’ve had to make some modifications to fit into the corporate culture, working with a non-profit forced the issue and highlighted the key difference to me.  It can be summed up in one word – risk.

When you’re a young start-up, you’re effectively nothing and have nowhere to go but up.  However, for risk averse organizations, especially a non-profit, where your brand is based on integrity, moral principle, and constituent perception of impact – boy, does that throw a monkey wrench into things.  I quickly found my cavalier attitude towards interviews and pilots in an attempt to “Get out of the building” and create an MVP (Minimum Viable Product) was met with strong, sometimes emotionally charged, resistance.

Why?  Because many of these people have spent their career building relationships of trust that allow them to be in a privileged position in a complex relationship.  Talking to the wrong person, even if innocently brainstorming, can set expectations or raise questions about intent.  Even worse, deploying a product that is supposed to be a vehicle of that trust could at a minimum erode a relationship if it doesn’t work, or even worse destroy the brand if a bug or loophole is found that causes misrepresentation.

None of this means that customer development methodologies can’t be used in a risk averse organization, but it does mean that they need to be adapted and special attention needs to be paid to certain points.

If you’re interested in using lean start-up methodologies but are part of a large, risk averse organization and find it difficult to proceed, here are a few modifications that might help make it more palatable to your decision makers:

  • Embrace the risk: Make the downside part of the plan from the beginning.  While the most interesting opportunity might be the highest risk, your path is likely to follow the lowest risk opportunity first.  So structure the roadmap as one that connects the dots between the low risk opportunities and the end-game.  One thing we did was break down the value proposition into three different progressive levels.  While we all agreed the third level was the most valuable, it also assumed the most risk so was not going to be part of our initial pilots, but showed a path.
  • Pick the “right” Value Proposition: Start-ups have few resources, limited capability, but can build both quickly to pivot and seize opportunity.  Large companies cannot, they are entrenched in servicing their current customers (this is one of the premises of Christensen’s Innovators Dilemma).  So it is important to filter the list of potential value propositions with the ones your company is best suited to do (even if that isn’t the one that adds the most value to the market).  While this may mean a heavy partner strategy to get to the whole product for the user, or constrain the segments you serve, it will give you the best chance to succeed with minimum risk.
  • Be selective on your Customer Segments: In order to protect the brand, we decided to target customers which were established relationships with the same downside risk so that they would partner with us to pilot the product.  This partnership would mean a mutual understanding that this is a pilot, we’re all learning together, and the output would be to build confidence in the model, not the value proposition itself.  We looked for business models that were similar in goal to our technology, and focused on pilots where this could be a parallel solution to a manual process that is already trusted.
  • Give extra attention to the Customer Advisory Board: I think this is a great idea that doesn’t get enough focus in lean start-up discussions.  It formalizes the feedback process as well as creates a commitment bias for them to stick with you through challenges.  In the consideration of risk averse customer discovery, it provides the added bonus of acceptance and understanding when things might go wrong.

If you’ve been interested in applying these frameworks, but you know you’re limited on your customer access and ability to pilot (you only get “one bite at the apple”, so to speak), hopefully these points will help!  They did for us!

Posted in Uncategorized | Leave a comment

Ha – it worked! New Year’s Call Option pays off!

During business school, we talked a lot about behavioral aspects of the stock market.  Many of them require keeping pretty close to the market, and I admit, I don’t follow the market as close as I like, and certainly not enough to capitalize on the small windows of behavioral patterns of full time investors.

However, one of them stood out as being passively simple.  That is that the market traditionally sees a lift after New Year’s.  “C’mon”, I thought to myself, “if that were true, everyone would bet on it and the market would balance itself out.”  However, last year I remember people talking about this very pattern happening – so I set a calendar reminder to buys some SPY Call Options just before NYE for this year.

Despite the pending fiscal cliff, I figured a few call options to test the theory wouldn’t break the bank and so I bought some out of the money Jan 4 open SPY calls the week after Christmas.

How did it do?  See for yourself:

2013-01-02_0846

While like any investing strategy, I’m sure this won’t work 100% of the time – but I’ll be making that calendar reminder a recurring one!

Happy New Year!

Posted in Uncategorized | Leave a comment

Finally, free screen sharing! Thank you FreeConferenceCall!

As every entrepreneur knows, borrowing your buddy’s webex account for those important prospecting calls doesn’t always go well, and shelling out big bucks for an account isn’t in the budget.  While Dim Dim worked (kinda) for awhile, it got acquired by salesforce.com and left us with no free alternatives.

Well yesterday I got an invite from my freeconferencecall account introducing their new product, freescreensharing.com.  It is just like it sounds, a free webshare like webex or gotomeeting.  I tested it out, and honestly, it was pretty good.  You are provided a permanent number and link that you can paste into a calendar invite, and it’s pretty comparable to other services beyond that point.  I had some installation challenges with firefox, and the window that shows the screen share doesn’t pop to the front of the screen (the user needs to alt-tab to it or find it on their taskbar), but other than that, it worked great.  It was fast, easy, and best of all – FREE!!!

Now lets just hope they don’t block the google voice calls like they did with freeconferencecall.

 

 

Posted in Uncategorized | Leave a comment

Model, model everywhere but not a template to use…

I’ve become a big fan of the Business Model Generation book and its Business Model Canvas.  Discussing a business model is a broad topic and its easy to jump all over the place without reaching agreement or fully fleshing out one particular aspect.  The Business Model Canvas is a great framework for organizing your thoughts.  I’m not alone in this as I’m seeing constant reference to throughout the lean startup community.

Even better, Steve Blank recently mapped his customer discovery processes into the framework to help bridge the connection between those two lines of thinking.

Unfortunately though, I could find no easy templates to capture my thoughts.  The PDF provided on the businessmodelgeneration.com site is great if you can print out a large copy and get everyone in a room, but I needed something I could save and collaborate on with others remotely and potentially asynchronously.

Shockingly, I the only templates I could find on google were in ppt.  So, I built a very very very simple one in google docs so my team could work on it real time on a conference call, and come back to it at their convenience.  One of my teammates showed the template to some colleagues at a workshop he was in and they all asked for a copy.  So, I decided to clear out my data and put a version up that could serve as a template.

Here it is.

Enjoy.

Posted in Uncategorized | Leave a comment