Day 1 Morning and Afternoon - Tony, David, Stephen Presentations

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  • Players are innovators, imitators, and downstream holders of complementary assets.Assumes “closed” innovation: innovators and imitators commercialize the innovation through products strategies.
  • If our innovations were instantly available to our competitors, would we still make money?What you can do – capabilities, competenciesThings you own – resources.
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  • Day 1 Morning and Afternoon - Tony, David, Stephen Presentations

    1. 1. Lead to Win Day 1: morning and afternoon Tony Bailetti, David Hudson, Steven Muegge Lead to Win
    2. 2. May-June 2009 Program Overview Tony Bailetti Lead to Win
    3. 3. Overview • Grass-roots • Focused on driving massive entrepreneurial activity • Job creation, talent retention • Proven • Free • Content available free to other communities • Three phases, second phase anchored on mandatory six day training program • Third phase to support selected companies Slide 3 May 19, 2009 Lead to Win
    4. 4. Day 1 Section A Section B Topic 8:30 a.m. Tony Bailetti, David Hudson (SA 404) •Program overview, requirements, upon completion •Portfolio snapshot 8:45 a.m. Tony Bailetti, David Hudson and Steven Muegge (SA 404) • Grow revenue 10:15 a.m. David Hudson Steven Muegge • Define compelling customer value proposition (SA 404) (SA 402) • Strengthen business model 11:30 a.m. Define value prop exercise Strengthen business model Work in group or individually in a breakout room (Breakout rooms) exercise (Breakout rooms) 12:00 Lunch (SA 406) 1:15 p.m. Steven Muegge David Hudson • Strengthen business model (SA 404) (SA 402) • Define compelling customer value proposition 2:30 p.m. Strengthen business model Define value prop exercise Work in group or individually in a breakout room exercise (Breakout rooms) (Breakout rooms) 3:15 p.m. Tony Bailetti, David Hudson and Steven Muegge (SA 404) • Presentations on exercises • Other factors that drive growth 5:00 p.m. Dinner (SA 406) 6:00 p.m. Jerry Everett, Dave Vicary Chuck Colford, Serge (SA 402) Lafontaine (SA 404) Learn from good and bad experiences of 2002 LTW 7:00 p.m. Chuck Colford, Serge Jerry Everett, Dave Vicary alumni Lafontaine (SA 402) (SA 404) 8:00 p.m. Departure Slide 4 May 19, 2009 Lead to Win
    5. 5. Requirements • Establish businesses that can employ a minimum of 6 talented technology individuals in Canada’s Capital Region over the next three years • Attend 100% of 6 training days • Contribute to healthy ecosystem • Deliver 10 minute max presentations on Day 3 afternoon, each to describe, but not limited to, – Offer – Target customers – Compelling customer and partner value propositions – Growth formula and business model – Ecosystems you will lever – Sales approach – Key metrics for your business • Complete assignment defined on Day 3 before Day 4 Slide 5 May 19, 2009 Lead to Win
    6. 6. Upon completion of 6 day training, you will be ready to: • Transform your ideas into compelling customer and partner value propositions more quickly • Position the right offer in an attractive target market • Integrate sales, development and funding into one compelling plan • Identify lead and strategic customers, partners and investors • Sell to these lead and strategic customers, partners and investors • Negotiate term sheets and define exit strategy • Protect your intellectual property • Build a core team • Reduce your company’s cash burn • Apply to third phase of LTW program Slide 6 May 19, 2009 Lead to Win
    7. 7. “Portfolio” Snapshot May 19, 2009 David Hudson Lead to Win
    8. 8. Safe Harbour • Based on application doc contents (to May 14) • High level only, to protect your ideas – How much you share is up to you • My interpretation (value props should improve today) • As of today (your plans will evolve, gain focus) • In the following; – “Consulting” = I bill for my time – “Service” = I bill for information/transactions/usage • Meet your LTW neighbours … Slide 8 Slide 8 Lead to Win
    9. 9. Primary Business Mix (44% hybrid) Slide 9 Slide 9 Lead to Win
    10. 10. Where You Want to Matter (“inside” consulting) (comms, open source, education, etc) Slide 10 Slide 10 Lead to Win
    11. 11. Take Away • You ALL have potential partners in the room • Certainly people to learn from/with • The mix will change – I got it wrong or you got it wrong – But you can and should choose to be part of a cluster – You can define the cluster • More to come on this – Value Proposition and Business Model streams/exercises Slide 11 Slide 11 Lead to Win
    12. 12. Drive Growth in Revenue May 19, 2009 Tony Bailetti Lead to Win
    13. 13. Drive growth in revenue Upon completion, you will know about: • Growth formulas for entrepreneurial tech startups • Basics about growth • Growth formulas that are not day 1 entrepreneurial plays And you will be able to: • Define growth formula for your startup • Get off on right start to grow revenue Slide 13 May 19, 2009 Lead to Win
    14. 14. Challenges • If you fail to grow, you will lose company or be fired by investors • Formulas, foundation, tools, processes and norms for start ups to profitably grow revenue are not well understood Slide 14 May 19, 2009 Lead to Win
    15. 15. To drive growth in revenue • Grow with discipline: • Prepare foundation to grow Define and implement • Act during steep part of growth growth formula curve to maximize market share later • Develop compelling • Grow number of net promoters market offers with strong business models • Lead to act earlier • Examine all growth alternatives • Redefine profit drivers • Drive plans to attain profitable growth, year after year • Get to stage 4 first Slide 15 May 19, 2009 Lead to Win
    16. 16. Grow with discipline: implement growth formula for startup • Systematically • Growth formula is a prescribed – Seek and exploit most and more or less invariable way attractive short term of achieving revenue growth opportunities repeatedly – Create more options for • Lodged in company’s company experience • Develop individual skills (e.g., • Benefits leadership) and organizational – Fosters discipline capabilities (e.g., agility) that – Provides strategic clarity support growth – Reduces complexity • Concurrently collaborate and – Learn through repeatability compete to improve your competitive position Manage growth with same discipline used to manage costs Slide 16 May 19, 2009 Lead to Win
    17. 17. Inventory of growth formulas Tech startups Not day 1 entrepreneurial plays • Help strong customers grow • Lever brand and then control and then expand to others channel to market • Service niche, cross sell, then • Lever hidden capabilities to fill higher order needs address higher order needs • Indirectly assault incumbents in • Compete aggressively attractive markets • Bring innovation to market • Make competition irrelevant • Steal customers from weak incumbents in mature markets Slide 17 May 19, 2009 Lead to Win
    18. 18. Grow by helping strong customers’ grow and then expand to others 1. Track strongest customers’ • Example: STMicroelectronics expansion plans and anticipate adopted its leading technology their needs in power management for 2. Deliver market offer that build microprocessors into its on your company’s and customers’ growth plans for partners’ capabilities and wireless handsets contributes to strong • Increases stickiness with customers’ growth plans stronger customers 3. Introduce market offer developed using insights gained in step 2 to new market segment 4. Expand into new geographical areas 5. Repeat 1-4 again Slide 18 May 19, 2009 Lead to Win
    19. 19. Grow by servicing niche, cross sell, then fill higher order needs 1. Deliver one market offer into • Example: Olam, a Nigerian one segment startup now based in Singapore, that grew to a $1.9 billion 2. Deliver same offer produced multinational in 13 years in different geographies into similar market segment • From securing cashews from producers to delivering 3. Introduce adjacent products marketing reports and services into same segments 4. Control channel to market 5. Fill higher order customer needs (e.g., move from selling product or service to improving customers’ economics) Slide 19 May 19, 2009 Lead to Win
    20. 20. Grow by indirectly assaulting incumbents in attractive markets 1. Target attractive market • Combine two of three approaches 2. Carve out beachhead that without confronting incumbents incumbents either find difficult to I. Lever your and respond to or choose to ignore complementors’ resources • Enter by competing based on II. Change value chain to deliver incumbents’ weakest points greater customer value • Do not directly challenge III. Secure beachhead first and incumbents, go after then expand to mainstream mainstream customers or be customers part of crowded channels • More indirect is the attack on 3. Enhance capabilities to (i) deliver incumbent, greater is likelihood of differentiated value and (ii) scale success 4. Attack incumbents’ strongholds • Formula depends on whether you by going after their customers can reconfigure value chain, find a niche or leverage existing resources Examine examples in Appendix Slide 20 May 19, 2009 Lead to Win
    21. 21. Grow by bringing innovation to market 1. Define end game • Example: Adobe Acrobat PDF – Decide on end-game you software want, implement only those • Best for innovative networked actions that will get you there products, not standalone 2. Design market offer and go to products market plan to incorporate changes quickly 3. Position offer as a complementary offer to those of most influential players and seek access to as many players as possible 4. Motivate strongest and most innovate players to switch to your offer 5. Adapt to market changes Slide 21 May 19, 2009 Lead to Win
    22. 22. Grow by making competition irrelevant 1. Recognize existing market is • Examples: Ford Model T; IBM overcrowded with competitors System 360; Apple iPod; 2. Concurrently Google maps – Differentiate to add 2X • Difficult to imitate quickly customer value – Reduce costs by 50% 3. Repeat 1-2 with another customer Slide 22 May 19, 2009 Lead to Win
    23. 23. Grow by stealing customers from weaker competitors in mature markets 1. Target weak competitor • Best for mature products 2. Offer customers of weak • Example: telecom equipment competitor a compelling capital suppliers and grow solution based on current and future solution capabilities 3. Offer package to replace competitor’s equipment – Offer includes product and services to remove, engineer and support 4. Evolve to future solution Slide 23 May 19, 2009 Lead to Win
    24. 24. Moment of truth 1. Identify your company’s growth formula 2. Is you growth formula similar or different than: – Help strong customers grow and then expand to others – Service niche, cross sell, then fill high order needs – Indirectly assault incumbents in attractive markets – Bring innovation to market – Make competition irrelevant – Steal customers from weak incumbents in mature markets Slide 24 May 19, 2009 Lead to Win
    25. 25. References • Bryce, D. J. and Dyer, J. H. (2007) Strategies to crack well guarded markets. Harvard Business Review. May: 84-92. • Chakravorti, B. (2004) The new rules for bringing innovation to market. Harvard Business Review. March: 58-67. • Chan K. W. and Mauborgne, R. (2004) Blue ocean strategy. Harvard Business Review. October: 76-84. • McGrath, G. and MacMillan, I. C. (2005) Market busting strategies for exceptional business growth. Harvard Business Review. March: 81-89. • Slywotzky, A.J. and Wise R. (2002) The growth crisis and how to escape it. Harvard Business Review. July: 5-15. • Stalk, G. Jr. and Lachenaeur, R. (2004) Hardball: Five killer strategies for trouncing the competition. Harvard Business Review. April: 62-71. • Zook, C. and Allen, J. (2003) Growth outside the core. Harvard Business Review. December: 66-73. Slide 25 May 19, 2009 Lead to Win
    26. 26. Appendix • Examples for indirect assault formula • Growth formulas that are not day 1 entrepreneurial plays Slide 26 May 19, 2009 Lead to Win
    27. 27. Examples of indirect assault formula Formula combining approaches Example II. Change value chain to reduce cost of Skype allowed users to make market offer inexpensive calls over Internet and then gained credibility and scale III. Secure beachhead of price sensitive buyers and then expand II. Reconfigure value chain in two ways: (i) Usana Health Sciences used another changed new product development industry’s new product development process and (ii) market channel process and sold via 140k distributors, not retailers I. Leverage supplier’s and partners’ existing Wal-Mart levered its shelf space and assets hub-spoke distribution system with II. Reconfigure distribution channel Cott’s capability to manufacture and distribute low cost alternatives to Coke and Pepsi Slide 27 May 19, 2009 Lead to Win
    28. 28. Examples of indirect assault formula (continued) Formula combining approaches Example I. Leverage suppliers’ existing assets Costco levered its brand, process used to attract 20 million members and II. Reconfigure distribution channel warehouses to offer premium home furnishings at a discount I. Leverage suppliers’ existing assets Toys R Us levered its brand, store III. Secure beachhead in children’s locations, relationships with real estate apparel industry developers, and its distribution capabilities to introduce Babies R Us III. Secure beachhead in shoe industry Skechers introduced a logger boot to and then expand into jogging and serve a hip crowd in 1993. Once it running shoes built organizational capability Skechers expanded into jogging and running shoes Slide 28 May 19, 2009 Lead to Win
    29. 29. Grow by levering brand and then controlling channel to market 1. Introduce product with high • Example: Nike entered golf brand recognition into a market in 1995; used same market segment formula in jogging, volleyball, tennis, soccer, and basketball 2. Dominate segment • Nike pulled away from Reebok 3. Introduce high profit margin as leader in sporting goods in products and services into 2002 segment you dominate 4. Control channel to market 5. Repeat 1- 4 in another geographical area Slide 29 May 19, 2009 Lead to Win
    30. 30. Grow by levering hidden capabilities to address higher order needs 1. Identify existing customers’ unmet • Example: McDonalds serves 48 million higher order needs (i.e., improve customers/day; Oracles has broad set customer’s economics) of horizontal and vertical application 2. Use hidden capabilities to satisfy development partners; Boeing has higher order needs installed base > 13,000 commercial 3. Strengthen hidden capabilities by airlines combining them with tangible assets, • Hidden capabilities are assets and partnerships and licensing to create capabilities developed to create and unique and profitable market position deliver core products and services and include customer and channel 4. Use market position addressing high relationships, strategic real estate, order needs to design and deliver networks and information new products and services • Low risk because you are deploying assets with which you are familiar Slide 30 May 19, 2009 Lead to Win
    31. 31. Grow by competing aggressively 1. Relative to rivals’ offers, • Examples: Toyota vs Big Three, enhance points of difference Dell vs HP, Walmart vs for which customers are Rubbermaid willing to pay and secure points of parity 2. Devastate places where rivals’ make money 3. Raise rivals’ costs (e.g., buy key supplier, release code as open source, redefine value chain) 4. Confuse rivals with fake moves 5. Attack rivals with overwhelming force Slide 31 May 19, 2009 Lead to Win
    32. 32. Customer and Partner Value Propositions May 19, 2009 Tony Bailetti, David Hudson, Steven Muegge Lead to Win
    33. 33. Define compelling value propositions for customers and partners Upon completion, you will know about: – Compelling customer and partner value propositions – Ways to define customer and partner value propositions – Value word equations And you will be able to: – Use customer value propositions to communicate an offer’s superior value and deliver superior business performance – Use partner value propositions to secure collaboration to grow – Use value word equations to make value propositions persuasive Slide 33 May 19, 2009 Lead to Win
    34. 34. Challenges • Term “customer value proposition” is used widely, but no agreement as to what it is • Unsure as to what makes one compelling • Loose talk, not backed up by evidence • Value that is intuitive but not quantified or not uniquely owned • We often talk more than we listen • We often try to put too many points on the table • Customers do not believe suppliers’ assertions • We forget our partners • Do not collaborate effectively Slide 34 May 19, 2009 Lead to Win
    35. 35. What a value proposition is NOT • All of the following are useful but are not a value proposition in themselves – Product/Technology/Service – Brand – Slogan – Ad/collateral – IPR – Secret sauce • A value proposition need not be static – May evolve as your market, customers, competitors evolve – Likely to retain core elements Slide 35 May 19, 2009 Lead to Win
    36. 36. Market offers • A market offer (offer) defines: – What is purchased – Rights over what is purchased – How it is purchased • Offers: – Get jobs done for customers – Solve problems – Satisfy needs that customers have – Reduce costs, drive revenue for your customer, or enable customers to do something they could not do before Slide 36 May 19, 2009 Lead to Win
    37. 37. Customer value • Value a company delivers to its customers is referred to as customer value and can be assessed as: Customer value = Benefits from what is purchased + Benefits from how it is purchased + Emotional benefits – (Financial + Non-financial burdens) • This is about why a customer purchases instead of what a customer purchases and fundamentally overcomes three issues – Customer does nothing – Customer does what the competition says – Customer does what you say, but not at your price Slide 37 May 19, 2009 Lead to Win
    38. 38. Partners as force multipliers • Your other stakeholders may include channels, suppliers, complementors, customers’ customers, ecosystem players, etc. • Value propositions for key stakeholders need to be as compelling as customer value propositions – E.g., a company that has a channel partner as part of its go to market strategy will need to deliver both compelling customer value and compelling channel partner value • Partners, suppliers, etc. all make choices too! – Likely competing for attention, position, priority, mindshare • Partner relationship may not be financial, so equation may deal primarily with emotional benefits Slide 38 May 19, 2009 Lead to Win
    39. 39. Partner value • Partner value = Net financial + emotional benefit – Non-financial burdens + Collaboration benefit – Collaboration burden • Collaboration benefits: – Shorter time to cash – Market entry barrier reduction – Access to customers – Operations cost reduction – Elimination of regional limitations – Makes niche markets viable – Leverages international disparities – Makes scarce skills abundant – Community/asset reuse Slide 39 May 19, 2009 Lead to Win
    40. 40. Strategy – deliberate, not accidental • Deliver superior value relative to competitors which is measurable and sustainable • Make all-in company responsible for defining compelling customer value propositions • Define customer value propositions of “resonating focus” type • Use customer value propositions to: – Communicate your offer’s superior value – Deliver superior business performance • Use value word equations to make customer value propositions persuasive • Use process and tools to demonstrate value Slide 40 May 19, 2009 Lead to Win
    41. 41. All benefits All Benefits Favorable Points of Resonating Focus Difference Consists of: All benefits All favorable points of Few points of difference customers receive difference a market whose improvement will from an offer offer has relative to deliver the greatest value next best alternative to customer Answers Why should our Why should our firm What is most worthwhile customer firm buy your buy your offer instead for our firm to keep in question: offer? of your competitor’s? mind about your offer? Requires: Knowledge of our Knowledge of our own Knowledge of how our own market offer market offer and next own market offer delivers best alternative superior value to customers compared with next best alternative Slide 41 May 19, 2009 Lead to Win
    42. 42. Favorable points of difference All Benefits Favorable Points of Resonating Focus Difference Consists of: All benefits All favorable points of Few points of difference customers receive difference a market whose improvement will from an offer offer has relative to deliver the greatest value next best alternative to customer Answers Why should our Why should our firm What is most worthwhile customer firm buy your buy your offer instead for our firm to keep in question: offer? of your competitor’s? mind about your offer? Requires: Knowledge of our Knowledge of our own Knowledge of how our own market offer market offer and next own market offer delivers best alternative superior value to customers compared with next best alternative Slide 42 May 19, 2009 Lead to Win
    43. 43. Resonating focus All Benefits Favorable Points of Resonating Focus Difference Consists of: All benefits All favorable points of Few points of difference customers receive difference a market whose improvement will from an offer offer has relative to deliver the greatest value next best alternative to customer Answers Why should our Why should our firm What is most worthwhile customer firm buy your buy your offer instead for our firm to keep in question: offer? of your competitor’s? mind about your offer? Requires: Knowledge of our Knowledge of our own Knowledge of how our own market offer market offer and next own market offer delivers best alternative superior value to customers compared with next best alternative Slide 43 May 19, 2009 Lead to Win
    44. 44. Resonating focus • Also meaning, concise and to the point • At most two or three key points – Like a good essay, a good argument • There are likely many benefits to your product or service but you must establish which are critical to the purchase decision • Concentrate on those points Slide 44 May 19, 2009 Lead to Win
    45. 45. Most of us • Need to discover these with our customers and partners – But we don’t always listen because we’re busy talking! • Every pitch is a learning experience • If you have the benefit, ensure one person from your team is actively listening – Asking questions – Probing for why – Restating and getting confirmation • Resist the temptation: “They didn’t get it” Slide 45 May 19, 2009 Lead to Win
    46. 46. Value elements Point of Element that makes Point to distance yourself difference supplier’s offer either superior from all other offers or inferior to next best alternative Point of Element with essentially Point to take off the table parity same performance or functionality as those of next best alternative Point of Element about which the  Point to counter (often contention supplier and its customers these are the competitor’s disagree regarding how its points of difference) functionality or performance compares with those of next best alternative Find significant – order of magnitude – points of difference for which customers are willing to pay Slide 46 May 19, 2009 Lead to Win
    47. 47. Make value propositions compelling Fits: Fits with customers’ and channel partners’ needs to grow and/or make pain go away Value for all Satisfies requirements and power roles: relationships of who really buys: (i) economic buyer; (ii) user; (iii) gatekeeper; and (iv) advocate Superior: Better than those of competition (order of magnitude) Demonstrable: Based on tangible points of difference that can be quantified in monetary terms Substantiated: Claims supported by evidence collected with customers and channel partners Sustainable: Sustainable for a long time Slide 47 May 19, 2009 Lead to Win
    48. 48. Use value word equations to bring sharp focus on value • Focus on points of difference • Equation that concretely demonstrates customer value proposition using words with which customers are familiar • Power reduction cost savings = [kW spent x number of operating hours per year x $ per kW hour x number of years system solution in operation] Competitor -[kW spent x number of operating hours per year x $ per kW hour x number of years system solution in operation] My Business Unit Slide 48 May 19, 2009 Lead to Win
    49. 49. Demonstrate value Pre-sale talk Post sale evidence • Promoters’ endorsements • With customer define what will • Published comparisons and be tracked, track, and document rankings results • Case histories • Value calculators • Evidence of post sale impact is • Data collected in customers’ highly valuable IP premises • Collect data from customer sites • Benefit guarantees and develop relationships while doing so • Reference accounts and data for quantified points of difference Slide 49 May 19, 2009 Lead to Win
    50. 50. Moment of truth • The ask – define the compelling value proposition for your business – Identify your (a) Customer and (b) Partner Value Props • Be brutal: at most 2-3 points each • The offer – both optional, but encouraged: – 1. Present your value prop back to the group here. • 5 minutes MAX – 2. Email me (weatherly@rogers.com) your concise value prop • Set will be shared back to all who contribute Slide 50 May 19, 2009 Lead to Win
    51. 51. References • Anderson, J.C., Narus, J.A. & Van Rossum, W. (2006) Customer value propositions in business markets. Harvard Business Review. Slide 51 May 19, 2009 Lead to Win
    52. 52. Develop Strong Business Models May 19, 2009 Tony Bailetti, David Hudson, Steven Muegge Lead to Win
    53. 53. Develop strong business models Upon completion, you will know about: • Business model, market offers and customer value • Business model strength • Elements of a business plan document And you will be able to: • Craft and articulate your business model at an early stage • Strengthen your company’s business model Slide 53 May 19, 2009 Lead to Win
    54. 54. Market offers and business models are two sides of same coin • Market offer (offer) defines: • Business model is the narrative – What is purchased and expected profit and loss – Rights over what is purchased statements that define: – How buyers purchase – Importance of getting job done, solving problem or satisfying need • Offers: – Value delivered to customers, – Get jobs done for customers BU and other key stakeholders – Solve problems – Control over or access to key – Satisfy needs that customers resources, processes, and have norms required to deliver value Companies need to come up with great market offers which have great business models; great offers are not enough Slide 54 May 19, 2009 Lead to Win
    55. 55. Customer value • Is the value a market offer delivers customers • Customer value = Benefits from what is purchased + Benefits from rights over assets purchased + Benefits from how buyers purchase + Emotional benefits – (Financial and Non-financial burdens) • Other key stakeholders may include channel partners, complementors, customers’ customers, etc. • Market offers need to be as compelling to other key stakeholders as they are to customers Slide 55 May 19, 2009 Lead to Win
    56. 56. Business model is key part of business plan, but does not replace it Business plan A. Executive summary B. Business profile C. Business environment analysis D. Market offers E. Market plan F. Business model G. Operations H. Financial statement forecasts I. Financing requirements J. Financial statements K. Appendices Slide 56 May 19, 2009 Lead to Win
    57. 57. Moment of truth • Select a market offer • Describe business model of market offer selected, i.e., provide narrative that defines: – Importance of getting job done, solving problem or satisfying need – Value delivered to customers, BU and other key stakeholders – Control over or access to key resources, processes, and norms required to deliver value • Describe customer value in terms of: – Benefits from what is purchased – Benefits from rights over assets purchased – Benefits from how buyers purchase – Emotional benefits – Financial and non-financial burdens Slide 57 May 19, 2009 Lead to Win
    58. 58. Strength of business model (Strength) Strength = W1 x Significance + W2 x Customer value + W3 x Partner value + W4 x Profit + W5 x Leverage + W6 x Intellectual property Significance = How important job to be done, problem to be solved, or need to be filled is to target customers Customer value = How much better BU’s offer is at delivering value on the elements that matter most to target customers compared with the next best alternative offer Partner value = How much better company’s go to market model is at delivering value on the elements that matter most to channel partners and complementors compared with the next best alternative go to market model Profit = How likely it is that market offer will achieve the desired revenue growth and profits over the next three years Leverage = How much better company is at leveraging key resources, processes and norms required to deliver value to customers and partners compared with the strongest competitor Intellectual How well company can protect its intellectual property for which customers or property = other licensees are willing to pay W1, W2 , … W6 = Weights that reflect relative importance and range from 0 to 9 Slide 58 May 19, 2009 Lead to Win
    59. 59. Calculate Strength and then act to improve it Target statement Importance Score Strength Weight (1 = Strongly disagree (Weight x Score) (0 to 9) 7 = Strongly agree) Target customers are convinced that it is very important Significance to solve the problem, fill the need or get job done 8 5 40 Our offer delivers more value on the three elements that Customer value matter most to our customers when compared to the best 6 3 18 alternative offer Our go to market model delivers more value that matter Partner value most to our channel partners and complementors when 6 4 24 compared to the best alternative go to market model It is very likely that the company will achieve the Profit desired revenue growth and profits over the next three 7 5 35 years Our company can leverage the key resources, processes Leverage and norms required to deliver value to customers and 3 2 6 partners much better than our strongest competitor Our company can protect its intellectual property for Intellectual which customers are willing to pay much better than our 3 3 9 property strongest competitor Sum = 132 34.9% Business model strength = (132/378) Slide 59 May 19, 2009 Lead to Win
    60. 60. Notes • Each weight reflects importance of variable, ranges from 0 to 9 • In last cell under “Strength” column, 378 is the maximum score (i.e., 9 max weight x 6 variables x 7 max score) • Rule of thumb: – Each score to be 6 or better – Strength > 85% • Objective is to strengthen business model, not argue about absolute score Slide 60 May 19, 2009 Lead to Win
    61. 61. To strengthen business model, increase 1. Significance Importance of getting job done, solving problem or satisfying need 2. Customer value Value delivered to customers, BU and 3. Partner value other key stakeholders 4. Profit 5. Leverage Control over or access to key resources, 6. Intellectual property processes, and norms required to deliver value Slide 61 May 19, 2009 Lead to Win
    62. 62. Three interlocking elements of a business model 1. Stakeholder value propositions (SVPs) 2. Profit formula 3. Key resources and processes Slide 62 May 19, 2009 Lead to Win
    63. 63. Element 1: Stakeholder value propositions Customer value proposition (CVP) addresses b) a target customer c) …with a job needing to be done d) …that can be satisfied by an offer Barriers for customers: insufficient wealth, access, skill, time… Other key stakeholders also need value propositions: • Complementors, critical suppliers, channel and distribution partners, investors, ... The best value propositions are precise Slide 63 May 19, 2009 Lead to Win
    64. 64. Element 2: Profit formula Do the numbers work to produce attractive profits? • Revenue – What is the offer? How are you paid? Prices? Volumes? • Cost structure – What does it cost to produce and deliver the offer? • Margin model – High or low margins? Volumes? Position relative to competition? • Resource velocity to achieve operations targets – Lead times, throughput, inventory turn-over, asset utilization… Tip: To get started, it may be effective to work backwards from target profits, then iterate through cost, price and volume. Slide 64 May 19, 2009 Lead to Win
    65. 65. Element 3: Key resources and processes What capabilities are needed to deliver the stakeholder value propositions according to the profit formula? • Resources – People, technology, equipment, information, relationships, brand… – Investment – Channel to the customer (How will you sell “it”?) • Processes – Design, product development, manufacturing, marketing, training, IT – Rules and metrics • Commercialization strategy – How will you capture the value created by innovation? – How will you collaborate with others? Slide 65 May 19, 2009 Lead to Win
    66. 66. Moment of truth • Select a market offer • Calculate business model strength of market offer • Identify concrete activities to strengthen market offer’s business model Slide 66 May 19, 2009 Lead to Win
    67. 67. Appendix • Who profits from innovation • Commercialization strategy • Insights about competition • Insights about profiting from innovation Slide 67 May 19, 2009 Lead to Win
    68. 68. Who profits from innovation? Classic model, adapted from Teece (1986), Pisano (2006) Complementary Assets Freely available Tightly controlled Intellectual Property Appropriability Difficult to Complementary Regime Weak capture value asset holders (IPR) from innovation capture most value Low-cost imitators soon enter De jure control (entrenched in law): patents, copyrights, standards, etc. Innovator Value capture De facto control (in practice): technology Strong captures most determined by characteristics, secrecy, tacit value power alliances knowledge, etc. Other considerations: • Stage of product/industry lifecycle (is there a dominant design?) • Asset specificity (generic, specialized, or co-specialized?) • Mode of access to complementary assets (internalize, partial ownership, contracting, partnerships, business ecosystems) Slide 68 May 19, 2009 Lead to Win
    69. 69. Complementary Assets (an incomplete list) • Brand name and company image • Supply chain logistics • Distribution and sales channels • Customer service and support • Specialized manufacturing capabilities • Deep financial pockets • Peripheral products • Switching costs • Political, regulatory and customer knowledge • Critical real estate or institutional associations • Control over raw materials or key components Slide 69 May 19, 2009 Lead to Win
    70. 70. Commercialization strategy for start-ups Adapted from Gans & Stern (2003); refinement and extension of Teece (1986) Complementary Asset Environment Do incumbent complementary assets contribute to the value proposition (VP) of the innovation? Does not contribute to VP Contributes to VP Attacker’s Reputation-based Excludability Non- advantage ideas trading Environment Excludable • Invest in complementary assets • Start-up viability depends on Can start-up • Compete with incumbents in the “market for ideas” innovation preclude niche markets effective development by an incumbent? Greenfield Ideas factory Excludable competition • Value will be distributed based • Contract with incumbents on technology leadership • Depends on bargaining power Innovation overturns the Innovation reinforces the incumbent’s asset value incumbent’s asset value Slide 70 May 19, 2009 Lead to Win
    71. 71. Start up commercialization strategy • Startups make their money selling their ideas to incumbent firms in economic environments where (i) incumbents can protect their intellectual property, (ii) entrants face high relative investment costs and (iii) brokers are available to facilitate trade • Startups compete with incumbents with products in economic environments where (i) intellectual property protection is weak and (ii) investment costs for new entrants are low • Firms that control intellectual property are more likely to pursue a cooperative strategy • VC funded firms tend to be acquired as opposed to sell licenses Slide 71 May 19, 2009 Lead to Win
    72. 72. Insights about competition • A market for ideas exists in addition to the market for products • Threat of continued R&D by incumbents reduces the license fee that a new entrant can receive and increases the patience of the incumbent, increasing the value it can appropriate from independent innovation • Higher license fee provides a higher incentive to the incumbent to engage in R&D, while higher effort by the incumbent reduces the value of the innovation that the new entrant can capture • Impatience and intensity of effort by the rival determine whether research effort will be concentrated earlier or later • When the entrant is not credible, incumbent will do more research than the entrant • If the innovation is drastic, the entrant has greater incentives to innovate and the incumbent’s R&D is a complement to the entrant’s • Low license fees decreases the incumbent’s incentive to invest in R&D, a startup’s research may be viewed as an imperfect substitute for an in-house R&D program Slide 72 May 19, 2009 Lead to Win
    73. 73. Insights about profiting from innovation • Innovators do not necessarily capture the value they create • Innovation often occurs in weak appropriability regimes, and requires specialized complementary assets to successfully commercialize • Strong appropriability regimes are rare; when they exist, innovators are more likely to capture value from innovation • Control of specialized complementary assets improves the likelihood of capturing value from innovation • Patent ownership increases willingness to cooperate • VC funding increases likelihood of acquisition • To innovate, you need right vertical, horizontal and lateral linkages • Firm boundaries are an important strategic variable for innovating firms • Firms can actively influence the IPR / excludability environment • An advantageous position does not necessarily imply a tighter appropriability regime (e.g. open source licenses or public disclosure) Slide 73 May 19, 2009 Lead to Win
    74. 74. Know Factors that Drive Growth in Revenue May 19, 2009 Tony Bailetti, David Hudson, Steven Muegge Lead to Win
    75. 75. Know factors that drive growth Upon completion, you will know about: • Growth formulas for entrepreneurial tech startups • Basics about growth • Growth formulas that are not day 1 entrepreneurial plays And you will be able to: • Define growth formula for your startup • Get off on right start to grow revenue Slide 75 May 19, 2009 Lead to Win
    76. 76. To drive growth in revenue • Grow with discipline: Define and implement growth formula • Prepare foundation to grow • Act during steep part of growth • Develop compelling market curve to maximize market share offers with strong business later models • Grow number of net promoters • Lead to act earlier • Examine all growth alternatives • Redefine profit drivers • Drive plans to attain profitable growth, year after year • Get to stage 4 first Slide 76 May 19, 2009 Lead to Win
    77. 77. Develop compelling market offers with strong business models • Align company’s offers with what customers most care about • Deliver value to customers, channel partners and company • Lever key resources required to deliver value • Create intellectual property for which customers are willing to pay Slide 77 May 19, 2009 Lead to Win
    78. 78. Prepare foundation to grow • Earn the right to grow – Attain superior operating performance – Divest what adds no value and takes attention – Increase stakeholders’ confidence in you and your business • Resolve to grow – Raise the bar – Obtain stakeholders’ commitment to growth plan – Remove obstacles • Define and validate attractive opportunities • Without foundation, firefighting dominates & growth is never attained • Need to do work before you can grow Slide 78 May 19, 2009 Lead to Win
    79. 79. Act during steep part of growth curve to maximize market share later Value Y EBDIT Revenue X Time # of customers Slide 79 May 19, 2009 Lead to Win
    80. 80. Grow number of net promoters • Net promoters= (Number of promoters – Number of detractors) • Promoter is an individual willing to publicly recommend your company to others • Make number of net promoters visible in organization • Drives customer loyalty initiatives • Find promoters and detractors on the web Slide 80 May 19, 2009 Lead to Win
    81. 81. Lead to act earlier Opportunity act to make market act to align with lead current market Clarity Time When leader exists, compelling opportunities are acted upon earlier Slide 81 May 19, 2009 Lead to Win
    82. 82. Examine all growth alternatives • Sell same product to more customers • Enter new geographies with same product • Address new customer segments by modifying existing product or technology • Introduce new products and services to existing customers • Use new channels or develop better delivery systems • Expand along value chain • Move product value to service or solution value • Acquire companies to change industry structure • Build new unrelated businesses Slide 82 May 19, 2009 Lead to Win
    83. 83. Redefine profit drivers • Align offer to what customers are willing to pay for • Examples: – Product  service or solutions – Solution  Solution with financing • Shorten time to cash • Remove, replace, reduce, redesign and redistribute • Improve people productivity and asset utilization Slide 83 May 19, 2009 Lead to Win
    84. 84. Drive plans to attain profitable growth, year after year H1 H2 H3    Sustainable growth H1 H2 H3  ○ ○ Growth plan No potential for new growth Move towards sustainable growth pattern Slide 84 May 19, 2009 Lead to Win
    85. 85. Get to stage 4 first Revenue 4 Do not get distracted getting more products out at each stage 100% 3 100% 100% Control your 100% X O 20% destiny X O 60% 2 X X O X O 12% 1 -2 -1 0 Slide 85 May 19, 2009 Time Lead to Win
    86. 86. Moment of truth 1. Describe how your start up will achieve profitable growth in revenue Slide 86 May 19, 2009 Lead to Win
    87. 87. References • Baghai, M., Coley, S., and White, D. (2000) The alchemy of growth: practical insights for building the enduring enterprise. • Barron, L. A. (2005) Openness Works! Create personal, professional and financial growth in any organization. • Hess, E. and Kazanjian, R.K. (2006) The Search for Organic Growth. • Reichheld, F. F. (2003) The number one number you need to grow. Harvard Business Review. December: 46-54. • Treacy, M. and Sims, J. (2004) Take command of your growth. Harvard Business Review. April: 127-133. • Viguerie, P, Smit, S. and Baghai, M. (2008) The Granularity of growth: How to identify the sources of growth and drive enduring company performance. Slide 87 May 19, 2009 Lead to Win

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