Business Canvases, Learning and Strategy

Maurja discusses a different canvas that he created having adapted Osterwalder’s business model canvas. Following his review of Osterwalder’s text on business model generation he felt that the original model was too simplistic although concurred that the visual thinking philosophy underpinning the campus carried through to make the book well illustrated. A further important note was made regarding the learning companies make in order to become successful such as Apple and Skype. This insight was useful as it indicates the importance of the process of business model discussion and how businesses learn and evolve.

Boddy (2005) discusses the issue of strategic choice in a business. On paper the process of strategic planning and making choices can seem straight forward with their being a vision encapsulated in a business proposal. This vision is frequently translated into a business plan by entrepreneurs working with start up agencies, banks and other professional advisors and from these plans the professionals will give advice on whether the plan conveys a business that will be profitable and whether the bank or other investors will allow funding via loans, overdrafts, venture capital and such like.  Not all new start ups create a business plan and even if they do start ups often fail, often due to cash flow problems.

The actual process of strategic planning of how and why people make decisions can affect business outcomes and learning how decisions are made is important to business success. The practice of decision making may differ from the theory.

In a practical exercise for Squared Online only 1 person in 1 group had used a business canvas to underpin their proposal. In a first meeting to decide which proposal the group would run with members were unclear who had suggested each topic as the proposal heading and author were not clear. Not all members of the group were present. The initial vote did not produce a clear leader and as not all members were present there was a democratic deficit. A proposal was put forward where members would vote by email and ten marks would be awarded to the first choice and 5 to the second. Following this vote there was a leader but not all had voted although all had been asked to. Because of project management deadlines a decision had to be made. The 1st place project author did not want to progress their idea as they had established they would not own the intellectual property which was passed to the course providers. Discussion on intellectual property lawyers did not resolve the issue. The decision was made at the hangout to go with the second choice.

This process illustrates Boddy’s (2005 p224) comment that “strategies can emerge, alter and disappear sometimes very quickly”.  No discussion took place on potential profitability, turnover or any of the metrics that would be used to evaluate the ideas by Dragons. There was discussion on competing products to some of the alternative ideas.

Johnson and Scholes (2002) detail the elements of strategy as strategic analysis, choice and implementation. In choosing the project idea the organisational purpose had been defined as one with social, economic and sustainable benefits primarily to the customer but also to society, reflecting a societal marketing orientation. No formal mission statements were written. At the stage therefore of designing the business canvas strategic choices would be made and possibly some environmental analysis would occur by looking at the areas within the framework.

During the project choice start up stage learning was taking place as group members began to learn about issues affecting project choice and personal goals and ambitions in one case were more important than those of the group. Others were not present for work or leisure reasons. At this stage the members can only be described as a possible team in the making. During this session tasks were allocated to the canvas areas based on assembling and recording expressed preferences and negotiating on areas which needed covering. A spreadsheet was subsequently circulated with the recorded decisions and project management deadlines. Two people were allocated to each area of the canvas to take account of absence where there was a lack of clarity as to whether any work would be done for the group and also to encourage communication and sharing of ideas with one other before a full team meeting.

Learning took place about experience and capabilities shared by the members. The decisions were made in the absence of the project proposal owner. Already in trying to build the organisation there were dilemmas to be balanced and managed within a short defined end to the project.

No information was discussed on people’s roles accordingly to Belbin. Some members were more willing to make oral contributions and lead than others. The group is at the forming stage of development so currently there is little trust but more learning occurs as members ask questions, circulate or tweet sources to help with the task and volunteer for additional tasks in project management not highlighted in the role allocation meeting such as proof reading before submission. It is quite possible this person is a completer finisher.

It also should be considered how good a match there is between the strategic analysis part of strategy as discussed by Osterwalder and Pigyer. Osterwalder’s model has little to recommend it in terms of analysing the external business environment and competitive forces. It does however give consideration to some aspects of the internal environment in terms of resources but also is weak in this area. The model does however concentrate on some aspects of the value chain in terms of cost and value. Absent though is any form of comparative analysis, again as a surprise as a business operates in an environment not in a test tube.

The canvas fails to generate any discussion on the competitive strategies that could be considered when building a business model. Porter detailed these as low cost, differentiation and focus.

The argument returns to Maurja’s insight on how companies learn and the importance of learning in strategy. Whether or not decisions are made in practice in line with management theory and guidance is worthy of exploration. Mintzberg (1994) detailed three different perspectives on the process of strategy: planning, learning and political. Certainly the evidence of choices made to date was that a planning and prescriptive approach was initially taken to decision making but when the decision could not be resolved according to those rules the process had to be adapted. Whilst the approach followed was formalised as it did not work in practice, a fact which illustrates Mintzberg’s fallacies of strategic planning an alternative decision had to be made.

The lean canvas evolved from Maurja’s work on the business model canvas and Fitzpatrick’s Start Up Tool kit. A key strength he highlighted of his canvas is ” its ability to enable more learning versus pitching conversations”. His canvas headings are ” problem, solution, unique value proposition, key metrics, unfair advantage, customer segments, cost and revenue”, The problem conceptually he then had was if adding more areas what could be taken away to keep it as a one page summary? He argues that start ups fail because they choose the wrong product and there is not a proper understanding of the problem but provides no evidence to substantiate the claim.

Deebs, G. (2013) at Forbes.com details 13 reasons for start up failure ” a small or unscaleable idea, no competitive research, no go to market strategy, no focus, no flexibility, no passion or persistence, wrong or incomplete leadership, unincentivised or unmotivated team, no mentors or advisers, no revenue model, ever and less capital than needed and no experience of venture capitalists”.

He justifies the solution box being small to encapsulate the idea of the minimum value product. He argues there should only be one metric which is about risk. When Dragon’s evaluate a pitch they are looking at chance of revenue and profit being achieved, the amount of capital needed to get that revenue within a defined time frame, how much expertise they will have to put into the business and evaluate the risk of their investment in relation to the % equity in the business they get. Unfair advantage is about barriers to entry. By adding some boxes Maurja had to remove others i.e key partners, key activities, key resources and customer relationships”. The existing alternative section is important as this is about how the customer solves the problem today and focussing on the customer rather than the product helps to prevent a business from making myopic decisions. Customers will know what the problem is.

Running Lean is argued to be a manual for a web start up idea. The thesis is a start up is an experiment but clearly none of the external variables are controlled which is why they are analysed in a SWOT analysis. A further argument is should it be built based on the idea that you build, evaluate and learn but this is a computer approach to project management. He argues that many assumptions, leaps of faith, are made in business planning which is why figures are only forecast and this is correct. His suggestion is to break a project down into a series of experiments to determine whether those assumptions are correct which is where the setting of hypotheses comes in. The idea is that running lean is a systematic process for testing and that during that process there is a continuous feedback loop for learning. His view is that business plans are static and rigid but any plan however it is visualised has to be reviewed in the context of experience and feedback. An important point however and plus for a canvas is that as a visual representation of a plan using it facilitates discussions and learning. The question then becomes if the learning achieved following representing the idea on a canvas suggests the project is a no go, will the team choose a different project? The canvas can be used to facilitate agile development and change and preparing it is a quicker process than preparing a business plan. Given that running a business is an experience based on experiential learning the potential to make profit must be based on learning lessons and agile change.

Stokes et al (2010) discuss innovation as part of entrepreneurship. They detail innovation is about ” turning ideas into value creation” and cite Roberts’s view from 1998 that innovation is a ” successful commercial implementation and exploitation of a new idea”. Ideas do not have to be new but can involve new strategies or processes.

When considering alternatives for our business idea there appeared to be similar products on the market that would help the customer buy their clothing more cheaply. Close examination of the alternatives will enable consideration of whether something can be done differently and better than the competition.

Reflecting on Schumpter’s ideas of entrepreneurial behaviour it is not obvious that there is any new entrepreneurial behaviour unless one argues that a new web based platform is a new market. It will be interesting to see how the team responded to feedback presented about other competition and alternatives in the market. Wickham (2006 p321) talks about possible tension that may exist between the entrepreneur about ” what is and what might be” as the vision is held in this case by the idea proposer. The use of the business canvas helps to put detail on the vision. The mental image is on the proposer’s head and the process of team working requires it to be owned by the team. However Wickham ( 2006 p 327) adds that for the business to go in the right direction it has to be properly examined, refined and evaluated”. The purpose of feedback and questioning is to help focus the idea.  However, putting questions and comment to a team can be unsettling when the group is still forming. Feedback given in writing the canvas is intended to communicate possible decisions that should be made by the receivers of the information.

Below is the slideshare by Maurja.

Resources
Boddy, D, 2005, Introduction to Management, Harlow: Prentice Hall
Deers forbes.com
Mappen, lean launch lab
Maurja How to Create Your Lean Canvas
Lean stack.com
Mintzberg H, Lampbell J, Quinn J B and Gohshal S, 2003, The Strategy Process, Harlow: Pearson
Osterwalder business model generation
Stokes, Wilson and Mador,  2010, Entrepreneurship, Australia: Cengage Learning
Wickham P A, 2006, Strategic Entrepreneurship, Harlow: Pearson

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