The path your product will take from manufacturer to customer
Will create value between organisations along that path
Added value can be done in several way’s – This session
Articulating this path to market gives investors a look at potential opportunities of your idea
Chapter 4 recap Categories, Segments, Lead customers
Who’s the customer
You should have identified targets (segments) & (ranked)
Map out the game plan
Go after each segment at the right time
Your Plan of Attack
PORTABILITY PROCESSING CAPABILITY Workstations Desktops Notebooks Handhelds PDA’s Smartphone's Predicted Growth Of the Smartphone Category Circa 2005 Recap on Category & Segments Example possible growth area Wendy Kennedy “So What Who Cares Why You”
Definers Context Compatibility Descriptors Segment Definers Commuter trains Commute time QTY travellers Demography % business travellers Context How will the customer Use the product/service E ticketing Train status monitoring Passenger internet access Descriptors Government funded Reduce operational costs Revenue generating services to Passengers on board Buying group Rail commissioners Rail engineers Procurement specialist Compatibility With existing platforms Propriety rail legacy systems Rail certification safety in all Area’s
A broad landscape of buyers looking to solve different problems
Are groups of customers who reference each other
(Teaching Hospitals – Medical diagnosis – Cardiac Care – Private Clinics)
Often called early adopters – Innovators in a segment
Often lead the way Specific
(Teaching hospitals – Private clinics)
Ford Car set up the first production line – wasn’t their idea RR
However all followed suit
New companies set up supplying production line
Raw Materials Transport Processing Forming Assembly Distribution Sales Service What’s your value chain? What are the margins in each link? Where are your competitive strengths? Where is your strategic intent? Value Chain G.Royce 2007
Adapted from Michael Porter, Competitive Advantage , Free Press, New York, 1985, p. 46 Another Example of a Generic Value Chain This could be looked at as and Ecosystem Inbound Logistics Operations Outbound Logistics Marketing & Sales Service FIRM INFRASTRUCTURE TECHNOLOGY DEVELOPMENT HUMAN RESOURCE MANAGEMENT PROCUREMENT Margin
This is about timing to go after segments
A phased approach
Investors seek mitigated risk
They like to see a disciplined plan to tackle the market
Investors like growth plans beyond one customer segment
Investors & Your Plan of Attack Adoption Curve with your phases of your path to market Worksheet 5(A) Everett M Rogers 1962
The next stage
Route and Channels
Definition of Channels of Distributions
The Route A Channel is A route taken by a product as it moves from manufacturer to end user A Channel Map Helps you see who is involved
Channel Map for a Software Vendor
A Channel Map Hosted Software Provider Enterprise Customers Small/Medium Sized Businesses Small/Medium Sized Businesses Enterprise Integrators Large Account Resellers Value Added Resellers Resellers Distribution Direct Sales Wendy Kennedy “So What Who Cares Why You”
Phases of Your Path to Market #2 #3 #1 Category Leadership Segment Attack Plan Lead Customer (Early Adopters) Name Each Target Segment Wendy Kennedy “So What Who Cares Why You”
Your Plan of Attack Lead Customer (Early Adopters) Segment Attack Plan Category Leadership Timing Timing Timing 5. 4. Measure of Success Measure of Success Measure of Success 3. 2. 1. Major Initiatives Major Initiatives Major Initiatives Top Five Customer Targets
Prove the business model
Early access partners
Visibility / Awareness
Whole product readiness
Building a channel
Major account focus
Mapping the Relationships unlocks
The Most Common Types
Relationships Map Out Relationships
Example Mobile Wireless Market
Worksheet 5(B) Access Point Cisco Cellular Wireless Satellite Bell Antenna Raysat Component Devices PDA - Centrino Mobile Equipment Cisco Equipment Integrators IBM Carriers Vodafone O2 – BT - Orange Mobile WISP O2 Vodaphone WISP O2 - BT Eircom Service Provider Workplace Operator UPS, Police Local Government Mobile Operator ? Facility Operator Starbucks Hilton Operator Mobile Workplace Emergency - Fleet Coach Mobile Hotspots Rail - Bus Car Public Hotspots Coffee Shops - Hotels Airports – Railway Etc Location Provider Specific Type of Business and Company Name Value Chain
How does the customer prefer to buy?
It may not be from you (Books – Newspapers – prepared goods – central suppliers)
How complex is you product?
Out of the box or
Does it require more – service – training – development
How scalable is your channel strategy?
Will it allow you to reach your revenue projections
How much services and support is required?
Can a third party do it
Do you enable or add value to other products in the market?
What channels are used to sell those products
What do you require from your channel members?
Consider storage, service, value added, bundling etc
How much margin can you afford to pay fore these benefits
A Channel Map Checklist Worksheet 5(C)
Some Lessons on Channel Building Lesson1
You Can’t Push on a Rope
Like markets, channels evolve over time
New ideas in early markets have fewer channel options than established ideas in mature markets
Most channel partners will see you as a risk, but …
There are always a few early-access partners seeking out innovative products
It’s All About Traction
Getting traction is the #1 goal for new ideas
Remember, you’re an unknown: Who’s willing to bet on you?
Partners can give you access to the market and visibility to customers
This won’t often mean lots of money at first – but it means credibility and traction
Witness: Intel and IBM both have histories of partnering with early-stage companies in emerging markets .
You Get What You Give
It takes time and energy to ignite a channel
Start with a few relationships and get them rolling:
Training, support, hand-holding, marketing tools
Showcase your visibility:
Press coverage, case studies, customer wins, etc.
Create a relationship you can replicate – scalability is key when channel building
Out of Sight = Out of Mind
Gaining channel mindshare matters
Strike a chord with your channel
Start with a specific project you both care about and show early wins
Find ways to work together; don’t create islands
Respect the insight into the market and customer that your channel has; then respond!
Leave Nothing to Chance
Be clear about your expectations
What is it you both want?
Do you agree on:
Investment of time, money, people
Write it down and sign it off
The real burning question is
Can your idea make money?
Business Model & Financial Forecast
Where’s the Money Profit?
Defining Your Business Model
First step to getting investor money
Mapping the direction your business will take
Give Your Business Model a Backbone
Financials NOT LOGO’S
A sample Model for Licensing
Test Drive Your Model
Back Pocket Metrics
Where’s the Money
You need to show a clear mechanism by which you will generate revenue and profits
Financial forecast of the investment that will be required
It will be influenced by
Your choice of commercialisation path
It must show the value proposition
It must show
External factors – Market/Customer readiness
Internal factors – can you support your idea
Business Model continued The business plan must show the financial opportunity and payback scenario
Value Proposition A Value Proposition Diagram 1B AMCS Ltd The Offering Key Value Features Values What is offered Market Description Competitors Domain Customers To who Selling Points Business Model Pricing How it makes money
It’s a tool used to determine if and when value can be extracted from your idea
Business Model continued Types of model Bait to hook model VOIP Free but selling premium services Flea market model for online community multiple small charges Content Portal Information in one spot – advertising fees
How will you make money ?
Skype & eBay show payback very simply September 2005
Skype & eBay show two separate methods but have joined forces to create further added value.
Yahoo & eBay strategic alliance May 2006
Investors will put in significant time into evaluating the business model
Will the business model deliver return on investment (ROI)
Research and explore differing models to find the right one for you
Defining your business model
Some types of business model for consideration
How will you make money Auction Fee from bringing buyers and sellers together Bait & Hook Something for free build customer base sell other products Bricks and Clicks Off & On value added services airlines car hire Content Portal Advertising fees - bring information together charge a fee for use Licensing Charge per user etc software Loyalty Rewards programme commitment to vendor products Subscription Rent out period of time
General business models
The multi-level marketing business model ( Referral system )
The network effects business model ( The band wagon effect )
The monopolistic business model ( Microsoft )
The cutting out the middleman model
The collective business models ( Cooperatives )
The industrialization of services business model ( McDonalds )
The low-cost carrier business model ( Ryanair )
The premium business model ( BMZ Rolls Royce )
The direct sales model ( Insurance )
The professional open-source model ( Linux )
Various distribution business models ( Supply chain )
What is the time to revenue
What’s yours and their commitment to time
How soon will you meet your financial targets
When will you be profitable
What is the growth curve
Investors will want to understand your growth plans
Do you have new markets – products – support services
You must show growth plans if you are seeking investment
Building your business model
Detailed financial forecasts is the backbone of the BP
Does the Business Plan / model translate into:-
Build the above on solid data gathered from credible industry sources
Make any assumptions realistic and logical
Give your business model backbone
Data points for building your financial forecast
Your sales assumptions
Customer interviews and competitive research
Bottom sales forecasting
Number of customers you plan to acquire and by when
Revenue per customer
Revenue forecast – by month quarter and 5 year projection
Industry research reports
Size – The number of potential target customers
Sector/industry research reports
Government web sites with industry stats
Total available market, your addressable market and annual growth rate
The Market Tips & data Sources Data Points Topic
Logical assumptions based on factors above
Check online portals for headcount costs and staffing benchmarks
A plan for how the management team will evolve
Headcount growth, including costs and timing
Industry standard ratios – find these on web sites and other sources provided by banks, consulting, management and accounting firms.
Anticipate operational expenses
Anticipate sales, general and administrative expenses
Operations, Sales, General & Administrative (SG&A) Expenses
Use assumptions to build out a year by year forecast
Number of sales reps & when they will be hired
Number of channel partners recruited and at what margins
Express these assumptions
Populate your spread sheet so you can manipulate the numbers “What if” scenarios
Cost of goods sold
Price & Cost
Express this in units and in euro
Show month, quarter, and year views
Break it down by each product
Number of new products introduced
Number of installations
Product Tips & data Sources Data Points for building financial forecasts Topic
What is the anticipated time to market?
How long will it take to commercialise your idea
What is the date and stick to it.
What should the scope of the license include?
Should it be and exclusive license or non exclusive
Should there be limits on the field of use
Should there be geographic limits on the license?
What costs need to be recouped?
What development and other costs must be considered
What is the ideal way to structure financial payment of the license? Should the financial payment included
An upfront payment for ongoing royalty stream
A minimum annual royalty which must be paid regardless of the amount of sales; or
Depending upon the amount of additional R&D required, the license may provided a royalty holiday for the first few years
What are the terms, conditions, and timelines for the agreement
Questions a model for licensing should answer
You and your team will be required to provide knowledge transfer and support. So, you need to scope out:
The costs (people and other) required to support the idea.
The time you and your team will need to spend on knowledge transfer
What access does the licensee expect to have to any improvements made to the IP
What about the newly developed but related IP and know how?
Costs (development and other) incurred to date
Money already invested in the idea
Additional investments required prior to licensing
An estimate of the currency potential based on the opportunities
What is the Licensee’s current market coverage
Will the licensee’s distribute the idea globally
Does the licensee plan to enter new markets
Path to market
What product(s) will the idea become part of
The forecasted sales volume
List prices of the final products
Can you bundle your IP with other IP to improve or increase the value?
Be sensitive to the licensee’s motivation. Ensure it is not defensive licensing
Product line fit
Who will maintain the patents? Costs?
Is the IP in good standing in the event the licensee wants to perform due diligence?
The different fields of use for the idea
The different customer segments where the idea would be used
The incremental value of the product the end customer attributes to the new idea
Customer Segment Licensing Data Points Topic
Is for the business model to be consistent with the rest of the business plan
Present the business model to trusted advisors
Face to face
Let the trusted advisors read it check it with out you present to make sure all is crystal clear
Test drive your business model
What’s your addressable market size?
What percentage of this market do you plan to own and when?
How much money do you plan to get from each customer each year?