How to test a business idea

I’ve been talking recently with a company about the definition and creation of a new product. It didn’t take long for the standard questions to arise: Who are we building for? What value will we bring? How are we unique compared to others in the market? Do the revenues justify the investment?

Sometimes people know exactly what they want to do and where they need to go, other times we are all following a hunch and need clarity on direction. Irrespective of the entry point, time to look at the toolbox and pull out the Business Model Canvas as a successful tool to structure the thought processes and discussion.

The Business Model Canvas 

The canvas is taken from Business Model Generation, one of the Strategyzer series of books. These books are an incredibly useful resource to help provide direction in business and personal thinking. They are easy to read and not expensive. Just buy them! The cost of getting something wrong will always be significantly greater than the investment in something that will move you towards your goal.

The Business Model Canvas is a tool to guide you through the steps required to define the properties of a new product, service, or business. It is not perfect (the boxes are rarely the right size and certainly in the wrong order for me!), but it makes you think and as with any tool of this type is a significantly better starting point than a blank sheet of paper!

You can download a template from the Strategyzer website. If you want to work interactively with a team and complete it online mural also have a template on their site. In certain circumstances, it can be worthwhile creating a tailored version of the canvas. I’ve adapted it twice, once to simplify and focus the content for a large product portfolio review by a group of product managers, and once when considering platform business models. I’ve also applied the canvas to the definition of internally focused products, without an external customer.

You can build the canvas in an order you like. My tip when starting is to focus on the customer first (Customer Segments), then your Value Proposition and then how you think you’ll actually make money (Revenue Streams).