Lessons in the Business Model Canvas from Bob Dorf of 'The Startup Owner's Manual'

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The Business Model Canvas is prized in startup crowds for being quicker and more flexible than traditional business plans. But, it can also apply to large existing companies.

That was the lesson from Bob Dorf, co-author of "The Startup Owner's Manual," and a serial entrepreneur, investor and business consultant, as he spoke to a group of established companies and intrapreneurs in Iowa City Thursday.

Dorf, who is the keynote speaker for Friday's Hawkeye Innovation Summit, spent the week in Iowa City to lead daylong sessions for educators and existing companies on how they can use the Business Model Canvas. He teaches a weeklong Business Model Canvas course at Columbia Business School.

He shared the story of a paper mill in South America that was quickly losing revenues and preparing to lay off workers. After looking at the "key resources" square of the canvas, they started thinking about the discarded stalks from sugar canes, a biodegradable material that is abundant in the country. The company was able to create a new product, a biodegradable version of Styrofoam, using their existing paper manufacturing machinery and capabilities, and is growing again. Dorf uses the Business Model Canvas in large companies around the world, including GE.

Attendees ranged from a three-person startup to representatives from ACT.

Still, there are some challenges in applying startup principles to large companies.

"'How can I fail as fast as I can?' That's still a hard sell to a CEO," Dorf said.

I was only able to attend for part of the day, but these are my takeaways. What would you add?

1. Start customer development as soon as possible. 

“Why would you worry about the plumbing and electricity in a house you're not going to build?” he said. Generally, the right side of the Canvas deals with customers and the left side deals with resources, costs and products.

For a startup or new product within an established company, Dorf recommended starting with the small group that needs the new product or service desperately, rather than a general audience. That group can give valuable feedback, and has the potential to become a vocal advocate for the new product or service.

2. Don't "kick the can down the road" when it comes to revenue streams. 

That's what Dorf said about the freemium model that is common in software and apps today, or about giving a product away for an initial period while it is in development. Assumptions about the best price point for a new product should be tested as soon as possible. Instead of giving a product away, Dorf suggested creating a program where it costs a certain amount, but users can get it for free if they agree to give the company feedback on a regular basis. This puts the idea in their mind that the product costs a certain amount, while also gathering valuable customer information.

3. Create multiple canvases.

Dorf shared the story of a would-be entrepreneur in a remote area of Russia. The man spent six months creating and refining Business Model Canvases for every idea he could think of. He then took his six best ideas to Moscow to pitch to investors. He was able to raise a seed round and launch his business.

For companies looking for future growth opportunities, Dorf recommended considering multiple opportunities. Bring in 10 trusted people who know the business well and have them all create a few canvases.

For existing companies with multiple products and services, Dorf recommended filling out a new canvas for each different customer segment.

4. Test assumptions as soon as possible. 

Even if all nine boxes are filled out completely, the Business Model Canvas is still just a series of nine guesses. Create a prototype of the product and ask people if they would spend $20 on it; hearing "yes" isn't the same as seeing them pull out a $20 bill.

“Nothing happens in your building. You, the founder or the leader of the team, have to get in front of the customers yourself.”