Business Innovation Graph - This is BIG

Working hard on representing business models - with the sole goal of finding bugs in them - I'm always looking for new approaches. After having used the Business Model Canvas (BMC, developed by Alex Osterwalder) and having taught it to hundreds of students, it's time for something new. First, let's recap what we have with the BMC:

• Creates common understanding in your team
• Something you will use every week
• Easy to change
• Get overview

This is all excellent. And it can be as handy as a single sheet of A4 or A3 paper. However, in the context of lean startup, I need more than the inside view of the business model. What about competition? How to represent double-sided markets well? How different customer segments? A common advice in the community is to create several BMCs for these cases. Suddenly the super-simple BMC becomes a little less simple. Another more subtle benefit of using BMC is: everybody knows it, so it's what the Unified Modeling Language (UML) is for programmers: A common vocabulary. Having said all this, here comes the 
Business Innovation Graph (BIG).

In BIG: 

1. you draw a circle around every relevant part of your business. Those should at least be the stakeholders involved, including your startup. 
2. Next connect the circles with lines, and trace where money is moving, and whats moving in exchange. 
3. Now simplify: remove all circles until only those contributing significantly to the business are left.
4. Attach monetary values or even simple equations to the arrows.
5. As a last step, translate the BIG into a spreadsheet to do a back-of-the-envelope calculation.

When doing lean startup, every arrow and every circle is now a hypothesis. What if that circle is not there? How easy do we get a replacement? What about the arrows and the monetary values? What data do we have, they are true? But this is another story, for now, this is the day BIG became public.

UPDATE 2014-07-03: Some example pictures

This is a really simple example. And here is the corresponding back-of-the-envelope calculation:

• variable costs: 
• product (-3328€/mo)
• 25 bread rolls (1,60€) = -0,064 €/roll
• 1 kg flour (-0,55 €)
• 40g yeast (-0,40 €)
• malt (-0,65 €)
• salt (ignored)
• fix costs: -12200 €/mo
• salaries (-3660€/mo)
• master baker salary 1700€ + 20% overhead / month = 2040 €
• 3 untrained sales people 450€ + 20% overhead = 3 x 540 € 
• oven (-450€)
• lasts 2 years under heavy use? = 20€/mo
• shop rent (-8500€)
• Karlsruhe Marktplatz, 200m^2, direct access to trams
• assumptions:
• baking 2000 bread rolls/day
• selling them the same day for 1,- € each = 2000€*26 = +52000,- €/mo
• open 16 hours per day, 6 days/week = 26 days/month
• profit: 52000 – 15500 = 36500 €

The obviously most relevant hypothesis are:

1) selling a bread roll for 1€
2) selling 2000 of them at this price and location
Minor, but still highly relevant assumptions:
3) It's legal to employ untrained sales people
4) A single oven is enough to bake 2000 bread rolls a day
5) many others...

Maybe a competitor would also be a highly relevant stakeholder :-)

License: CC-BY-SA, Dr. Max Völkel 2014

And thanks to Anne Siebold for the discussions that became BIG.