For all the “innovation” happening in the startup world, there is one area where there is frustratingly little progress: the business model.
In the accelerator programs I’ve experienced, “traction” seems to be the only metric of success. Week over week, the number of downloads or site visits needs to increase. “Growth Hackers” are hired to deploy all kinds of annoying or borderline unethical tricks to hack into users’ address books and social graphs, all with the singular objective of sustaining the holy grail of the hockey stick curve.
But is there a real correlation between these traction metrics and a healthy business?
In the Business Model Canvas, the “Revenue Streams” box is where you explore the various ways of translating the Value Proposition into cash. Most times, when I first see a startup’s canvas, the first thing listed is “advertising”. As if accumulating a large number of users or site visits then pitching ads to them were the only way to make money. It’s like if you were a restaurant chef, going through all the trouble of crafting a cordon-bleu meal for your dining guest, then jamming headphones on their ears blaring jingles as they try to enjoy your cuisine. All advertising does is piss off the user (and yes I have all kinds of ad-blockers and cookie killers on my browsers and even the bit that gets through annoys me to no end).
Advertising does not make a business. If you doubt this, just ask any newspaper owner.
Startup guru Steve Blank defines the mission of a startup as “the search for a repeatable and scalable business model”. Since we are building a business model from scratch, this is the perfect opportunity to think bigger about what value the business model should create, deliver and harvest.
Which means taking a closer look at the Value Proposition box on the Business Model Canvas, which is the foundation to derive the Revenue Streams.
In the way I coach the Canvas, I describe the Value Proposition as consisting of three parts: the Problem, the Success Criteria and the Decision Trigger.
Of course, the problem still needs to be something that is the target customer top priority to solve, something that is preventing them from accomplishing what they want to do. The success criteria refers to how the customer sees the benefits of solving this problem, how they feel their lives would be better and happier. The “decision trigger” is the primary value that will cause your customer to “pull out their credit card” and invest in your offer.
Maybe it’s time to expand the Success Criteria to include the concept of the Triple Bottom Line: People, Planet and Profit:
People: By solving this problem, what is the improvement in the lives of everyone connected near or far to your project? Look beyond the user-payor-partner circle to the larger community of stakeholders, even those who are not directly involved in the transaction but who are impacted by what you are doing.
Planet: How do you improve the quality of your environment? Reduce your own environmental footprint? Help the market segments, communities and tribes you serve improve their environment? What is the legacy you leave the planet?
Profit: What are impact and benefits that your offer creates for your users and customers? These impacts and benefits are what people are willing to invest their time, attention and money. Remember that people don’t want your product, they want the benefits.
When you hit on value propositions related to People, Planet and Profit that resonate with your market segment, then a whole new range of revenue stream options open up, where people will happily pay real money to invest in what you offer.
Startups need to get back to the root of what business is all about, creating products and services that add value to customers by making their lives better. When I consider this definition, there is no other way I can be satisfied with any other business model than one that creates a positive added value in all three P’s.
Maybe we need to add one word Steve Blank’s definition of a startup being “a project searching for a repeatable, scalable and sustainable business model”. What kinds of possibilities open up for you when you explore this other angle?
What if your new business could generate wealth AND do good?
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