From Strategy Maps to Business Model Canvas - Tools for Strategy and Innovation

Let's start by asking a simple question: why do you need a strategy anyway? The short answer is simple as well:

You need a strategy in order to have a clear definition of how you create and capture value.

Then, there are different ways to get to that understanding, to present it and to work with it for a strategy that never should remain static.

I present a couple of approaches that can be used for strategy development - not only on a company-wide level but also as a strategy for a new venture within an organization - big or small.

The list includes:

1. Strategy Maps by Kaplan&Norton
2. Customer Development by Steve Blank
3. Five Forces by Michael Porter
4. Lean Startup by Eric Ries
5. Business Model Canvas by Robert Osterwalder

Let's dive into all of those.

Strategy Maps

More accurate title of this section should be: balance score cards and strategy maps. The concept of Balanced Scorecard is mostly associated with the names of Robert S. Kaplan and David P. Norton who have outlined its details in the 1992 article: "The Balanced Scorecard – Measures That Drive Performance" which they published in Harvard Business Review and also the book The Balanced Scorecard:

The general idea behind it was that managers need to evaluate strategic progress against four groups of measures: financial, customer, internal business process, and learning and growth.

In practice however, this type of approach proved to be difficult to design and follow. Hence, the second generation of the "Balanced scorecard" called A Strategy Map. Associated again with Kaplan and Norton and their another book:

The idea was similar: to give a "blink of an eye" overview of strategic objectives, spanned across four dimensions with logical linkages between them.

About Strategy Mapping - Balanced Scorecard Institute

The Strategy Map's goal is not a granular and detailed view of the venture under way. Instead it should give an exhaustive list of the goals, spanned across four dimensions with cause and effect linkages between them.

Customer Development

The concept of Customer Development should lead you to one of the most influential figures in the Silicon Valley, Tech and the Startup ecosystem as such.

In fact, the concepts that you find in so many different influential works of Eric Ries or Alexander Osterwalder - lean startup, customer development, validation, etc. - they have all started with this man.

The name of that figure is Steve Blank and the two readings (which are indeed MUST-readings) are his famous:

and

At the center of his thought and interests was the question: what does it take to build a successful venture and how does a startup different from a legacy organization.

What was revolutionary about Blank was that he falsified and threw into the garbage the idea that a startup's success or failure has anything to do with luck, magic or an elusive founder's vision.

Instead he tried to employ a mostly scientific approach to formulating hypotheses, validating them and experimenting.

So what is Customer Development?

1. There are no facts inside the building, so get outside.
2. While outside use the scientific method to test all the hypotheses about the proposed business model. Hypothesis > design experiment > test > gather data > validate, invalidate or modify the hypothesis.
3. If you found the hypothesis wasn’t correct you could pivot i.e. modify the hypothesis.
4. The goal of the first two steps of customer development (Discovery and Validation) was to find the minimum feature set (also called the minimal viable product) that a startup could deliver.

And now for the great part: you can actually learn from him at an online courses:

How cool is that?

Five Forces Analysis and The Competitive Advantage

For many, business strategy equals Michael Porter. Professor at Harvard School of Business, author of some of the classics in that are:

You should have them read, no question about it. In particular, Five Forces Analysis of industries is something that you will meet quite frequently and which is very useful.

What this actually analyzes is: how much of the value created by you will stay with you as well:

• How much will you have to sacrifice in order to be attractive vis a vis your competitors?
• What are the switching costs for your customers?
• What are the switching costs for your suppliers?
• What are the entry barriers for new entrants - is it capital intensive business or not?
• How likely is it that your industry will be disrupted by a new technology?

All of the above boils down to one marker - ROIC. What will be the return on the invested capital - rest assured the differences among industries might be significant as this McKinsey report shows:

Once you've identified market forces governing your industry, you can start to think about positioning your company for a competitive advantage.

In Michael Porter's view, there are only two sources of competitive advantage:

1. Cost leadership - doing the same but cheaper
2. Differentiation - doing more so that your customers are willing to pay more

Both dimensions come at two generic scopes: broad or narrow target.

Michael Porter's concepts strike me as elegantly and logically written sets or arguments that seem to stand despite so many disruptions since he first published them in the 1980s. I would be ashamed not knowing them.

Lean Startup

I believe that most entrepreneurs, wannabe entrepreneurs, and business class students easily recognize the light blue color of the classic by Eric Ries:

Eric Ries claims to have started a movement of the "Lean Startup" but despite the public perception of the word "Startup", it's not about building a company. No. Not only that.

The idea that Eric Ries advocates strongly is that: entrepreneurs are indeed everywhere! They are indeed startup founders but at the same time they are also product managers, line manager, or shift managers.

And when we say "a startup" we may see a founder, a seed investor and a product but in fact we are seeing: a new venture, that started with an idea, which is developed in the environment of extreme uncertainty. And that definition may be applicable to most human activities.

Hence the five principles of the Lean Startup:

• Entrepreneurs are everywhere

The concept of entrepreneurship includes anyone who works within my definition of a startup: a human institution designed to create new products and services under conditions of extreme uncertainty. Lean Startup approach can work in any size company, even a very large enterprise, in any sector or industry. (E.Ries)

• Entrepreneurship is management

I believe "entrepreneur" should be considered a job title in all modern companies that depend on innovation for their future growth. (E.Ries)

• Validated learning

The startups exist to learn how to build a sustainable business. This learning can be validated scientifically by running frequent experiments that allow entrepreneurs to test each element of their vision. (E.Ries)

• Build-Measure-Learn

The fundamental activity of a startup is to turn ideas into products, measure how customers respond, and then learn whether to pivot or preserve. (E.Ries)

• Innovation accounting

To improve entrepreneurial outcomes and hold innovators accountable, we need to focus on the boring stuff: how to measure progress, how to set up milestones, and how to prioritize work. (E.Ries)

The Lean Startup movement has become incredibly influential the past couple of years. In one respect however, it merely echoes the arguments of Steve Blank:

Startup success is not a consequence of good genes or being in the right place at the right time. Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught. (E.Ries)

No more excuses!

Business Model Canvas

I should say: last but not least and I say it because I've been studying the concept in detail for the past couple of months. The concept that was first introduced to myself during my Stanford LEAD , Design Thinking Course.

The concept was developed by Alexander Osterwalder and Yves Pigneur and has attracted global attention but most importantly was adopted by some of the largest corporations in so many different ways.

If you haven't already, I should point you to some of the following reads:

I believe these are the three that you should have on your shelf if you want to be serious about the concept.

And what is the concept of Business Model Canvas really about?

As with most of the concepts presented here, this one is no different in a sense that it looks so simple.

There are nine building blocks, each of which seems easy to identify and name. Ha!

One thing that you should bear in mind - it's not a checklist. In fact, all of the elements that you put inside should be bound in a cause-effect relationship, to the point in which taking just one should mean destruction of the entire construct.

Not difficult enough? Try building your Business Model Canvas and incorporating the following constraints:

1. How could we earn revenue if we had to offer our best selling product/service for free?
2. Around which assets could we build a platform business?
3. How could we generate more recurring revenues?
4. How could we get others to create value for us?
5. Which strategic partners could we work with to leverage or expand our business model?
6. How could we achieve more scalability in our business model?
7. How could we dramatically increase switching costs?
8. For which segments - other than our usual could we develop and expand our business model?

There are many more that I could give you. The bottom line is this:

1. Business Model Canvas is not about making granular overview - it's about giving logical overview of how you create, deliver and capture value.
2. It's not a checklist - it's much more of a story. It needs to be consistent, and should resist "bending" and challenging.
3. You'll probably need to build many of those before getting to the one that is right.
4. Mastery comes with time and practice.

I find it the most appealing at the moment. I use it for activities as different as: go-to-market strategy, new venture building, freelance consultancy platform building.

Conclusions

In order to summarize, I should state that all of the approaches (and by no means this list is exhaustive) relate to strategy and innovation development.

In all cases the meaning of a "strategy" means the same. It's about how the value is created, delivered and captured.

All of the approaches that I presented can be used in order to achieve that goals:

1. Strategy Maps by Norton&Kaplan
2. Customer Development by S.Blank
3. Five Forces Analysis by M.Porter
4. Lean Startup by E.Ries
5. Business Model Canvas by A.Osterwalder

Learn them all, and choose the one that suits you best.