23 Things Every Entrepreneur Must Know

A buddy of mine is a big-deal business professor at an even bigger deal university.  And for reasons I still don’t understand, he asked me to come in and explain to his graduate students what I have learned from spending 30 years talking to, researching and writing about entrepreneurs.

Here’s what I said.

1. The best way to predict the future is to create it.
2. The most important decision you can make is…where do you want to spend your time. You only have so much time, energy and ability to focus. That means, as much as you would like to, you can’t do everything. That’s a given. So is this: The places which receive your full attention will do better than the places that won’t. What follows from that is this: You need to make hard choices about what you will do–and what you won’t. And it is really is the important decision you can make, because everything else you do will flow from it…including the next point.
3. If you want to be a successful entrepreneur, there is no such thing as work-life balance.  I am not advocating that you spend a disproportionate part of your life working on your company.  (I am also not advocating against it.) I am simply reporting that is what the most successful entrepreneurs do. I have never found an exception.
4. The best entrepreneurs don’t come up with great ideas, they solve market needs. You and I can come up with wonderful ideas all day long but unless they satisfy a large enough need, one that can support a business, they don’t do anyone any good.
5. The one thing all successful entrepreneurs have in common is the desire to make their idea a reality. What entrepreneurs need most of all—above motivation, focus, hope, financing, marketing skills, a brilliant idea, etc.—is the will to bring their idea into existance. Unless you truly want to make something happen, the odds are nothing will. Without that desire, nothing else matters…or occurs. Your life will be filled in other ways.
6. Action trumps everything.  Stop thinking and get underway.
7. Take small, smart steps towards your goals.  Contrary to the popular press, the most successful entrepreneurs are not swing-for-the-fences, bet-everything-on-one-roll-of-the-dice  types.  They are extremely conservative.They take a small step toward their goal; pause to see what they have learned from taking that small step and build that learning into the next small step. Then they pause to see what they have learned from that second small step, build that learning in and then take another small step and so forth. They don’t take large risks.
8. If you want to build a successful company give up control. You can try to micromanage but: the business will never grow bigger than one person (you, the CEO) can handle effectively; the company won’t be able to move very quickly. Since everything will have to flow through you, you will create a bottleneck; you won’t get the best ideas out of your people.  Once they understand the company is set up so everything revolves around you, people are not going to take the time to develop their best ideas. “Why should I,” they’ll ask. “He is just going to do what he wants anyway.” And it’s exhausting.
9. Forget about working on your weaknesses, play to your strengths. This is what will make you successful in the long-run.
10. You need to be able to turn every obstacle into an asset. Yes, every single one.
11. All you need to know about marketing in exactly 30 words?Marketing, when you strip everything away, is extremely simple: You figure out who you want to sell to, and then you determine what it is that will get them to buy.
12. Here’s the only market research you need: Get your product out in the marketplace and see if it sells.
13. If you insist on doing market research anyway, here’s the one question you need to ask. Show potential customers a prototype, or describe the service you are thinking of offering and then say: ”Is this something you would buy,” and if they answer yes, ask for the order then and there. If, as the cliché goes, they are willing to put their money where their mouth is, you are probably on to something. If they aren’t, you still have work to do.
14. You must figure out how you are going to collect what you are owed.  Nobody thinks about this before they get underway and suddenly they learn first hand what they phrase “cash flow crunch” means.
15. As much as you are going to fight it you need a (really smart) advisory board.  You want a board to: give you new perspectives and ideas; to give you people to talk to and to provide honest feedback.
16. If you want to get more done faster and better…create checklists. Checklists are a wonderful way to make sure you don’t overlook anything, and that it is true whether we are talking about the best way to treat someone in the emergency room or if you are about to make a big presentation to a client you really want to land.
17. How to motivate yourself and stay motivated. Starting anything new is hard and the number of obstacles you are going to encounter can easily get overwhelming. Click on the link here for proven ideas that can keep you going.
18. If the dogs don’t like the dog food it’s bad dog food.  You don’t determine what a good product is. Only your customer does.  And if they don’t like your product, it’s a bad product. Period. In others words, the customer is always right. Darn it.
19. If the customer doesn’t like the product, there isn’t much you can do about it with pricing or promotion or positioning. Unpopular products are going to remain so. It is better to come up with a different version, than to keep trying to sell–at a discounted price–the one people don’t like.
20. If you are going to fail, and sometimes you will, fail quickly and cheaply.  Always take small steps toward your goal and pause after each one to make sure you are staying on the right track.
21. (Really) Learn from your mistakes.  You are going to make mistakes. That’s a) a given and b) okay, providing you truly understand what went wrong.
22. Creativity and innovation must be linked to a business objective. Creativity is wonderful. But creativity that isn’t tied to making money is just a hobby. It isn’t a viable business concept.
23. Get out while you still have your marbles. You never want to stay too long at the fair, even if you own the fair.

A Better Way to Think About Your Business Model

The business model canvas — as opposed to the traditional, intricate business plan — helps organizations conduct structured, tangible, and strategic conversations around new businesses or existing ones. Leading global companies like GE, P&G, and Nestlé use the canvas to manage strategy or create new growth engines, while start-ups use it in their search for the right business model. The canvas’s main objective is to help companies move beyond product-centric thinking and towards business model thinking.

To start, it lets you look at all nine building blocks of your business on one page:

Each of these nine components contains a series of hypotheses about your business model that you need to test (click or tap for a bigger version):

Nespresso, a fully owned daughter company of Nestlé, is a great example of a powerful business model. It changed the face of the coffee industry by turning a transactional business (selling coffee through retail) into one with recurring revenues (selling proprietary pods through direct channels). Here’s what their strategy looks like on the canvas (full-screen mode works best):

The canvas is one of the three key principles of the lean start-up approach. For the other two, read Steve Blank’s May 2013 article “Why the Lean Start-Up Changes Everything.”

14 Ways to Apply the Business Model Canvas

When Alex Osterwalder and Yves Pigneur wrote Business Model Generation in 2009 they couldn't have imagined all the different applications users would come up with for their Business Model Canvas. In this post I'll give you fourteen very different but very practical applications of the Business Model Canvas that we've observed first hand from our global community of practitioners.

Over the years we've observed a lot of different types of people who are using the Business Model Canvas in a lot of different types of organizations. We wrote about those learnings in a previous post where we shared our recently published research report. We shared why organizations around the world are adopting the tool and provided some general ideas for ways they are using it. We expand on those useful applications below. We focus primarily on applications we've observed from within large organizations but entrepreneurs and startups will find these ideas equally helpful. 

14 Business Model Canvas Applications

Strategic Planning/Development - One of the primary ways we've seen organizations use the BMC is in their regular strategic planning and development cycles. They use it to create a blueprint of their strategy. The BMC provides a very clear foundation and direction for the conversation at hand, whether done in a corporate offsite with the executive team or done around the board room table .

Retrospective/Outlook - When used as a strategic plan users apply the BMC to describe what they’ve done the past year and what they intend to do in the year ahead. If there are changes in the business model or entirely new building blocks to be developed then they would indicate that with color coding. An interesting trend here is that the BMC is increasingly used as a modern version of the strategic plan to co-create strategy with people from around the organization to boost alignment and buy-in.

Strategic Planning per Business Unit - In larger organizations we’ve also seen the canvas being used for strategic planning per business unit, because it gives you an overview of what the different business units are doing. The BMC works as a shared language across business units and provides you with a snapshot of your organization's business model portfolio (cf usage 4).

Dashboard - We’ve seen a couple of teams and companies start using the BMC as a dashboard. They define a set of indicators for each building block of their Business Model Canvas that they want to follow. Then they define a performance threshold for each indicator. It's on green if they are happy with the performance per indicator, turns orange if there is something to look at, and turns red if there’s a problem. For us it was interesting to see how some users hacked the canvas to "repurpose" it in a very very innovative way in order to follow the performance of their organization.

Understanding Competition - Another interesting way to use the BMC is to understand competition. By sketching out the business model of each one of your competitors you gain a better understanding of their strengths, limits, constraints, and what they can or can't do. This increased understanding of your competitive landscape will allow you to act accordingly and design a better business model.

Portfolio of Business Models - A particularly interesting area for application of the BMC is the idea of developing a portfolio of business models, ranging from improving existing business models all the way to inventing new business models. While product and brand portfolios are relatively well mastered in large organizations, business model portfolios are an entirely new phenomenon.

A business model portfolio helps you understand and highlight with which business model you are making cash today and with which business models you’re going to make cash in the future. Beyond growth and cash generation the portfolio approach also helps you understand synergies and potential cannibalization between the different business models.

Increasingly, organizations are moving away from just managing product portfolios and brand portfolios towards business model portfolios. This is still a very young field of development, but it’s a very very promising one.

A good illustration of this business model portfolio approach is Nestlé's use of it's machine and pod technology. It all started with Nespresso's innovative business model built around single portioned coffee. Today the same technology is used in its mass market coffee (Dulce Gusto by Nescafé), it's tea business (SpecialT), and even for its baby formula (BabyNes). While they all use the same underlying technology all of these businesses have different business models with potential synergies and cannibalization. 

Design, test, and build new growth engines - This application is very closely related to the original intent of the BMC outlined in Business Model Generation and refined in Value Proposition Design. Here the BMC is used to prototype alternative business models and test them with the Lean Startup / Customer Development Process. We call this the search for the right business model and value proposition.

New idea template - A lot of organizations use the BMC as a (sometimes mandatory) template to develop and/or submit new ideas. The interesting thing here is that then the ideas become comparable. This unifying lense or language allows you to compare all types of innovations ranging from process innovation and product innovation all the way to substantial business model innovation and the creation of new growth engines. Corporate incubators and accelerators in particular are huge fans of the BMC to manage the ideas of their different teams. 

Understanding customers - An incredibly interesting and innovative use of the BMC is that of companies that use the Canvas to sketch out the business models of their customers. By better understanding their customer’s business model they can develop better value propositions and/or better explain their solutions in the context of their customer's business.

For example, Ericsson, the telecom equipment manufacturer, uses a version of the BMC to better understand the network operators they are serving. Or, SAP, the German software giant, uses the BMC in their pre-sales process. Sales teams map out the customer's business model in collaboration with the customer or as a preparation for sales meetings.

Alignment/CxO/executive on boarding - While we always saw the BMC as an alignment tool, it was a surprise to us that leadership teams would use the BMC as an onboarding tool for CEOs or senior executives.

The first time we discovered this type of application it was more of an accident. We were running a business model workshop in a company that just hired a new CEO. He loved the approach because it gave him an immediate understanding of the entire organization in one workshop. Another organization in Asia started using the BMC systematically for every senior executive on boarding. They get every new hire to sketch out the company's business model. In another case a CFO used the BMC to understand the business model he was getting into when he was starting a new job. He then got the entire leadership team to run an alignment workshop with the Business Model Canvas. 

Strategy diffusion and co-creation - A very powerful way to use the BMC is in the context of strategic alignment across the organization. On the one hand it can be used for strategy diffusion or on the other hand - as I mentioned previously (cf usage 1) - for strategy co-creation to create buy-in. The canvas plays a very powerful role in strategy diffusion because it becomes the blueprint of your strategy that shows more concretely, more clearly how you’re going to implement your strategy. 

Shared language across functions - One of the biggest areas of application where we’ve seen the canvas succeed phenomenally is as a shared language across the organization. The Canvas is particularly helpful when applied across functions. People from marketing, technology, engineering, operations, finance, and so on can all work together around a BMC and have a shared language to discuss their ideas. Whether it's new ideas on the table, new businesses on the table, or new business models that are going to be developed, the Canvas becomes the central, unifying tool to center the conversation. The Canvas doesn't just provide a shared language to make conversations better, it also makes conversations more strategic, and in particular, it provides an outcome that can actually be implemented.

General alignment - The BMC helps generally with alignment because on one piece of paper we have all the essentials of the blueprint of your strategy. In a previous post we shared The Business Model Theatre video and how the Canvas is made up of a front stage and a back stage. On the front stage, the Canvas very clearly delineates how you’re creating value for customers and how that allows you to generate revenues. On the backstage the Canvas describes what resources, activities, and partners you need to create this value and how that generates costs. The BMC makes it possible for everybody to have a shared understanding of what we’re trying to achieve as an organization. It makes explicit what the pieces of your business model are, what the blueprint of your strategy is, and guides everybody to work towards that end. 

Investment decisions - Some organizations are using the BMC to make better investment decisions. Once you've sketched out a business model(s) and you understand the underlying business opportunity, you have a better understanding of where you should allocate resources. This is true both for improving existing business models to inventing entirely new business models. Of course we recognize that it’s actually easier to generate quick revenues from existing business models and harder to generate long-term revenues from new ones, but we need to allocate resources across the entire portfolio of business models. The Canvas makes business opportunities explicit and can serve as a guide to how those resources get allocated.

Mergers and acquisitions - One application that we really didn’t expect would come up is the application of using the BMC in context of mergers and acquisitions. The idea here is that you would sketch out the business models of two organizations and figure out if there is a good fit. If you do this for a couple of organizations within a specific industry you'll better understand where there are potential synergies and opportunities for integration and where more differentiating factors will cause you to run into challenges. This application can be used for large and small mergers and acquisitions as well as in settings where an organization has an internal startup and wants to acquire or merge it back into the parent company or back into an existing business unit. 

Exit strategies (IPO, acquisition) - The last application we'll provide here is using the Canvas in the context of exit strategies. When assessing the opportunity of bringing an organization to the market you can use the Canvas to determine where you are going to allocate the money, how you will create better value propositions, how you will acquire more customers, or how to decrease your costs and increase your revenues. If you aren't going for an IPO and you want to sell the company and get acquired you will want to understand if and how your organization fits with other organizations. In this case you would apply the Canvas in the same way as we’ve seen with Mergers & Acquisitions (cf usage 13).

Conclusion

It has been incredibly exciting to see so many very different applications of the Business Model Canvas. Here we've provided 14 ways to apply the Canvas and I’m sure there are many more. Hopefully this gives you a little bit of a taste and some appetite to figure out how you could apply the Business Model Canvas within your organization. 

What the Smartest People Focus On

Alexander Osterwalder is an expert on business model innovation. Here's what he has to say about your current business model -- and why it's not working.

Alexander Osterwalder knows what your business needs: A new business model. So he created a tool to help you map it out, the Business Model Canvas. The entrepreneur also co-authored Business Model Generation, a book about business model innovation that has become a global bestseller. Inc.’s Caitlin Berens talks with Osterwalder about why you should think twice about your business model and how to develop it for growth.

Why is it important to rethink your business model?

As an entrepreneur if you want to find a way to grow and to keep ahead of others you better think of the business model and not just your products and technology, like most entrepreneurs. The smartest people are focusing on products and the business model, it’s a combination of both, it’s not either-or, it’s and. The iPhone is a good example of this, it’s not just the technology Apple has, but also their business model that utilizes a double-sided market, developers, and hundreds of thousands of apps.

Where do many business models go wrong?

Too often entrepreneurs fall in love with their first business model, which is often a very simple one, make and sell. Making the wrong business model choices can put you into a niche rather than putting you into a multi-million dollar business. You can’t just depend on the product—even a great product with a poor business model can still lead a business to bankruptcy.

So how can you develop a business model for growth?

First, burn your business plan. Business plans are static documents where you describe an idea. We’re moving now toward a different way of thinking which is designing and testing business models. A business model is a dynamic model that you will change according to what you learn from the market until you figure out which model is best. So focus on the design of your business model; think through five to 20 different ones, make hypotheses, and then get out of the building and test them before you settle on one; just having something good on paper isn’t enough.

If your assumptions were wrong, change your business model and retest it until you have a feeling that something could work, then start investing. Accept that you need to fail a lot and you need to fail quickly. These little experiments will help you actually validate or invalidate your hypotheses, rather than wasting a lot of time and money.

But what if your co-founder or team is against the change?

Here’s the thing: Opinions don’t matter; people have opinions, “this is good, this is bad,” but what you really want to have is information from the market. It doesn’t matter what your co-founder thinks, it doesn’t matter what you think, it doesn’t even matter what your VC thinks; the only thing that really matters is what the market thinks. Get market data because the market is the ultimate judge. We’re moving away from opinion-based entrepreneurship toward more fact-based entrepreneurship where we have hypotheses that we test for feedback on what works and what doesn’t.

Why did you create the Business Model Canvas?

We’re only starting to learn how to really address this business model issue systematically, because “business model” is a word that everybody uses and nobody really understands it because it’s a buzzword. So I created the Business Model Canvas to help people visualize business models, discuss them, and ultimately invent better ones.

What makes it so successful? Describe it to me.

The Business Model Canvas is an approach that allows entrepreneurs to describe, challenge, and invent business models. At the very basic level people will use it as a checklist, so you write down and describe all of the components that are necessary to your business, like a strategic blueprint. This gives you a holistic view of what your business needs. It also helps you visualize other business model alternatives. The Business Model Canvas has been downloaded in the millions. People needed something to help them better discuss and visualize business models.

Do You Have What It Takes to Be an Entrepreneur?

In their book, Start Your Own Business, the staff of Entrepreneur Media, Inc. guides you through the critical steps to starting a business, then supports you in surviving the first three years as a business owner. In this edited excerpt, the authors offer some tips to help you determine if being a business owner is a smart move for you.

Before they get started, some people worry if they have what it takes to be an entrepreneur. If this is you, stop worrying. We firmly believe anyone with the desire and the initiative can be an entrepreneur.

A fundamental desire to control their own destinies ranks very high on most entrepreneurs’ lists of reasons for starting their own businesses. This need is so strong that entrepreneurs will risk family, future and careers to be their own boss. Unable to feel truly fulfilled working for someone else, these individuals can't be happy following someone else’s plan or taking orders from a boss. They’re often convinced they have a better way, or an idea that would really revolutionize their industry—or at least their little corner of it—and working within a corporate structure is simply stifling that improvement.

Through surveys and research, we know that successful entrepreneurs share some common personality traits, the most important of which is confidence not only in themselves but also in their ability to sell their ideas, set up a business and trust their intuition along the way. Small business is fiercely competitive, and it’s the business owners with confidence who survive.

Your strengths and weaknesses

It’s rare that one person possesses all the qualities needed to be successful in business.  What’s important is to understand your strengths and weaknesses. To do this, you need to evaluate the major achievements in your personal and professional life and the skills you used to accomplish them. The following steps can help: 

1. Create a personal resume. Compose a resume that lists your professional and personal experiences as well as your expertise. For each job, describe the duties you were responsible for and the degree of your success. Include professional skills, educational background, hobbies, and accomplishments that required expertise or special knowledge. When it's complete, this resume will give you a better idea of the kind of business that best suits your interests and experience.

2. Analyze your personal attributes. Are you friendly and self-motivated? Are you a hard worker? Do you have common sense? Are you well-organized? Evaluating your personal attributes reveals your likes and dislikes as well as strengths and weaknesses. If you don’t feel comfortable around other people, then a business that requires a lot of customer interaction might not be right for you. Or you may want to hire a “people person” to handle customer service.

3. Analyze your professional attributes. Small-business owners wear many different hats, but that doesn’t mean you have to be a jack-of-all-trades. Just be aware of the areas where you’re competent and the areas where you need help, such as sales, marketing, advertising and administration. Next to each function, record your competency level—excellent, good, fair, or poor.

In addition to evaluating your strengths and weaknesses, it’s important to define your business goals. For some people, the goal is the freedom to do what they want when they want, without anyone telling them otherwise. For others, the goal is financial security.

Setting goals is an integral part of choosing the business that’s right for you. After all, if your business doesn’t meet your personal goals, you probably won’t be happy waking up each morning and trying to make the business a success. Sooner or later, you’ll stop putting forth the effort needed to make the concept work.

When setting goals, aim for the following qualities:

• Specificity. You have a better chance of achieving a goal if it is specific. “Raising capital” isn’t a specific goal; “raising $10,000 by July 1” is.
• Optimism. Be positive when you set your goals. “Being able to pay the bills” isn’t exactly an inspirational goal. “Achieving financial security” phrases your goal in a more positive manner, thus firing up your energy to attain it.
• Realism. If you set a goal to earn $100,000 a month when you’ve never earned that much in a year, that goal is unrealistic. Begin with small steps, such as increasing your monthly income by 25 percent. Once your first goal is met, you can reach for larger ones.
• Short and long term. Short-term goals are attainable in a period of weeks to a year. Long-term goals can be for five, 10 or even 20 years; they should be substantially greater than short-term goals but should still be realistic.

There are several factors to consider when setting goals:

• Income. Many entrepreneurs go into business to achieve financial security. Consider how much money you want to make during your first year of operation and each year thereafter, up to five years.
• Lifestyle. This includes areas such as travel, hours of work, investment of personal assets, and geographic location. Are you willing to travel extensively or to move? How many hours are you willing to work? Which assets are you willing to risk?
• Type of work. When setting goals for type of work, you need to determine whether you like working outdoors, in an office, with computers, on the phone, with lots of people, with children, and so on.
• Ego gratification. Face it: Many people go into business to satisfy their egos. Owning a business can be very ego-gratifying, especially if you’re in a business that’s considered glamorous or exciting. You need to decide how important ego gratification is to you and what business best fills that need.

The most important rule of self-evaluation and goal-setting is honesty. Going into business with your eyes wide open about your strengths and weaknesses, your likes and dislikes, and your ultimate goals lets you confront the decisions you’ll face with greater confidence and a greater chance of success.