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3 Mental Models for Continuous Innovation

Lean Canvas + Customer Factory + Customer Forces

Before investing in any company, Warren Buffet and Charlie Munger use a latticework of mental models to evaluate the company. If it passes their tests, they move all in. Otherwise, they do nothing and wait.

Evaluating early-stage ideas is no different.

I have settled on 3 key product-agnostic mental models that I use to

  • baseline progress,
  • prioritize risks, and
  • formulate a “right action, right time” next step.

I’ll outline my key go-to mental models in this issue: Lean Canvas, Customer Factory, and Customer Forces.

Mental Model #1: Lean Canvas

This is the first mental model I use with a team, not necessarily because it’s the right one to start with but because it is the most popular — making it the easiest one.

A Lean Canvas helps deconstruct an idea into key assumptions that tell the high-level business model story.

Creating a Lean Canvas is an excellent exercise for founders to clarify their thinking and practice communicating their ideas as a business model.

In the process, you understand what they are trying to do and can apply a battery of stress tests to challenge assumptions and refine their model.

See the 7-part Lean Canvas diagnostic series.

Mental Model #2: Customer Factory

Most teams don’t have a clear and specific growth plan for their idea because they lack clear and specific metrics and goals. This is where the Customer Factory mental model comes in.

A Customer Factory helps model the key macro steps a customer takes from being an unaware visitor to a happy paying customer.

I use this model immediately after the Lean Canvas diagnostic to help teams size their ideas (test viability) and build a traction roadmap with specific metrics and goals.

Once you layer on the product’s current traction, you can help the team

  • identify the stage they are in e.g. problem/solution fit vs. product/market fit,
  • prioritize their go-to-market validation strategy,
  • communicate business model progress to stakeholders.

The model also doubles as a company-wide dashboard unlocking the real power of this model:

Once you visualize macro-metrics this way, you can use it to

  • benchmark actual conversion rates vs. the ones they modeled earlier,
  • identify key constraints (bottlenecks) in the business model,
  • align team focus on the weakest links (riskiest assumptions).

Mental Model #3: Customer Forces

What separates teams that achieve product/market fit from those that don’t are insights — seeing things others don’t.

The third and final model I use is Customer Forces.

Customer Forces is a customer behaviorial model that describes the causal forces that influence customer decisions.

While a Customer Factory describes what customers do, Customer Forces describes why.

Getting to why customers do what they do is the key to unlocking a business model.

Seeing a product through these three lenses helps test the desirability, viability, and feasibility of an idea:

Business Model Story (Lean Canvas) + Traction Roadmap and Metrics (Customer Factory) + Customer Journey Insights (Customer Forces)

These models aren’t just applicable at the outset of a project.

They can be applied throughout the product lifecycle from idea to product/market fit and scaling.

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