Lean Startups: Using the Business Model Canvas
Introduction Disappointment flooded through team SoPOD as the last finalist was called for the International Business Model Competition. "We have a great idea and received verbal promises to pilot our product from a potential customer. Why didn't we make it into the finals?" thought Eric, co creator of SoPOD, a multi purpose liquid soap delivery system. As each finalist presented their Business Model Canvas, Eric reflected on the steps they took to advance to the semi finals in the esteemed competition. Inspiration Hits Enrolled in a Decision Making class during fall semester, Eric and his teammates were given a directive develop a new, innovative product. Pondering this difficult task while doing laundry with a Tide[R] laundry pod, Eric thought "Why can't we put shampoo in a similar pod?" The idea was so simple; why hadn't anyone thought of this before? Eric presented his idea to his team and they began to consider how a shampoo pod, or "Shampod," might have market potential in the crowded personal care industry. A few weeks into the course, the professor announced a competition on campus for undergraduate teams interested in starting a new business. This New Venture Competition required students to utilize Lean Startup Methodologies and the Business Model Canvas (Figure 1) as a tool to test their business hypotheses. With the chance to win $4,000 in prize money, Wenz jumped on the opportunity to explore how this encapsulated shampoo pod could serve as the first product in a new company. [FIGURE 1 OMITTED] Lean Startup Investigation Begins The first step in the product development process involved investigation of prior art to ensure their product did not infringe on existing patents. While Proctor and Gamble held a patent for their famous Tide Laundry Pod, this formulation did not include liquid soap intended to be used for personal care. Initial investigations suggested that a liquid soap pod was a worthwhile venture to pursue. Next, it was time to get out of the building and test their first hypothesis; airline travelers limited by Transportation Security Administration (TSA) requirements were the primary target customer. They intended to sell the Shampod at airport kiosks to travelers who were required to leave their too large plastic shampoo bottles behind. Wenz and teammate Andrew Lind conducted interviews of 35 travelers at a busy international airport to test their assumptions. While travelers indicated some interest in purchasing the product at the airport, most interviewees stated they simply use the shampoo provided at the hotel. Lessons learned from these initial interviews informed their first critical Business Model pivot: airline travelers were not their primary target customer. Disheartened, but motivated to continue pursuing the idea, Wenz and Lind brainstormed with their classmates alternative customer segments and landed on hotels. However, pivoting to a business to business distribution model presented its own challenges to the team. Wenz and Lind decided to test their new hypothesis by interviewing representatives from all major hotel chains and local hotel managers. The team connected with managers, owners, and staff members from over 30 hotels (Table 1) to inquire about their interest in a dissolvable pod that encapsulates liquid soap. Overwhelmingly, the hotels responded positively to the product concept. The team learned three important lessons from these interviews. First, sustainability was an important part of business operations for many hotels. In fact, one owner stated "If I can implement one more green solution, I can get my green seal." Second, it was clear that hotels were concerned with the amount of waste produced by using the plastic bottles. With 3.2 million occupied rooms in the United States per night, at an estimated six bottles disposed of each night, the plastic bottle waste could fill six Olympic size pools every month.