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Startup Strategy

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Why do some startups succeed while so many do not? The answer is simple - Strategy. This presentation addresses the question by introducing several conceptual frameworks created to help …

Why do some startups succeed while so many do not? The answer is simple - Strategy. This presentation addresses the question by introducing several conceptual frameworks created to help entrepreneurs better plan and design their startup strategy.


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  • 1. PREPARED FOR WEBVISIONS BY NEAL CABAGE Startup Strategy
  • 2. INTRODUCTION Author & Speaker NEAL CABAGE Digital Product Architect •  Product manager and entrepreneur. •  Founded ProductCamp.LA and PMA.LA. •  Built and sold two startups. •  Principal authored, The Smarter Startup. neal@smarterstartup.org@NealCabage
  • 3. THE SMARTER STARTUP STRATEGY FOR STARTUPS The Smarter Startup looks at why some startups succeed while others fail. By taking a more strategic approach to entrepreneurship, founders can improve their own outcomes. Written by Neal Cabage and Sonya Zhang, PhD, and published by Pearsons/NewRiders. INTRODUCTION The Book
  • 4. CONCLUSION SmarterStartup.org We have posted in-depth articles, diagrams, and downloadable references and worksheets on our website. Everything is free to use, so check it out. www.SmarterStartup.org
  • 5. INTRODUCTION Overview Problem Statement Startup Heuristics Vision Definition Value Creation Business ModelsIntroduction We’ll establish the challenges that startups face and introduce strategic principles and frameworks to better understand and reach your startup’s objectives.
  • 6. INTRODUCTION Startup Strategy Framework
  • 7. PROBLEM STATEMENT The Great Mystery 8  in  10     Startups     Fail  in  the     First  5  yrs   WHY DO SOME SUCCEED? We’ve all met people who worked very hard to make a business succeed and yet it failed. We’ve also met people who did seemingly everything wrong and yet they succeeded. Hard work is a necessary component but it is not the entire story. WHY DO SOME NOT?
  • 8. Benjamin Franklin PROBLEM STATEMENT Conventional Wisdom Diligence is the mother of good luck. Thomas Edison Genius is one percent inspiration and ninety-nine percent perspiration.
  • 9. Benjamin Franklin PROBLEM STATEMENT Conventional Wisdom Diligence is the mother of good luck. Thomas Edison Genius is one percent inspiration and ninety-nine percent perspiration. It  is  True?  
  • 10. Diligent Negligent SuccessFailure IS HARD WORK THE ANSWER? Hard work alone is NOT a reliable predictor of success. Hard working people sometimes fail and negligent people sometimes succeed. PROBLEM STATEMENT Conventional Wisdom NOT ENTIRELY
  • 11. x   Working hard is analogous to throwing a ball hard. The velocity is an important part of reaching the target, but you cannot ignore other interactive forces like gravity and drag. Gravity   (:ming)   Direc:on   (customer  need)   What Is the Whole Story? PROBLEM STATEMENT Drag   (compe::on)   Velocity   (hard  work)  
  • 12. James Carville Political Straegist PROBLEM STATEMENT A More Strategic Approach It’s the economy STRATEGY, stupid! Why are some startups more likely to succeed?
  • 13. Startup Heuristics Startup Strategy Best Practices
  • 14. THE FUNDAMENTAL CRITERIA START HERE There are 6 fundamental criteria to consider when developing a startup concept. Every new idea should be considered from this starting point. STARTUP HEURISTICS The 6 Heuristic Categories customer   product   compe::on   :ming   financial   team   Startup   Strategy   Heuris:cs  
  • 15. STARTUP HEURISTICS The 18 Rules of Startup Strategy Startup Heuristics Finance 13. Low Sunk Costs 14. Working Capital Float 15. Economies of Scale Timing 7. Recent Innovation Enabler 8. Demand Already Established 9. No Signs of Commoditization Competition 10. Clear Market Inefficiency 11. Low Barriers to Entry 12. Differentiable Position Team 16. Subject Matter Expertise 17. Functional Competence 18. Supplier Partnerships Product 4. Customer Focused Solution 5. Low Barriers to Adoption 6. Clear Value Proposition Customer 1. Unmet Need or Desire 2. Right Size Market or Segment 3. Reliable Access to Customers © 2014 Cabage & Zhang
  • 16. WHAT’S A GOOD CUSTOMER? The ideal customer has an unmet need or desire. The size of this market should match your ability to compete and ability to deliver justify solving the problem. Validate you can control means of customer acquisition along the way. STARTUP HEURISTICS Customer Criteria UNMET NEED OR DESIRE Unsatisfied Customer Desire RIGHT-SIZE MARKET OR SEGMENT Need to Segment? Too Niche? RELIABLE ACCESS TO CUSTOMERS Diversified Channels? Gatekeepers?
  • 17. FOCUS ON HELPING OTHERS FOCUS ON CREATING VALUE Mom was right! Focus on helping others and everything else will fall into place. Find a need or desire that is not yet sufficiently addressed, where the customer is so passionate they’d happily pay for a solution. This approach is much more likely to create real value than copying an existing solution. CUSTOMER CRITERIA Unmet Need or Desire
  • 18. CUSTOMER CRITERIA Right-Size Market (or segment) BIG FISH STRATEGY PURSUE QUIET NICHES BIG MARKET STRATEGY PURSUE LARGE MARKETS Select a market to service that meets your needs and abilities. You must have enough opportunity to warrant the effort. Be weary of large markets however, if you do not have significant funds and plan to be aggressive.
  • 19. MARKET MANIPULATION GOVERNMENT, MONOPOLIES CHANNEL DEPENDENCE SINGLE POINT OF FAILURE 0 5000 10000 15000 20000 25000 30000 35000 March April May June July CUSTOMER CRITERIA Reliable Access to Customers A sustainable business requires control over customer supply. Don’t rely on a single marketing channel (Google SEO). Government or monopolistic manipulation of markets can also be challenging (Online Gambling).
  • 20. WHAT’S A GOOD PRODUCT? A good product will be a direct response to a customer need or desire. If the value is well articulated and the customer is passionate about your new solution, the reason to buy will be compelling. Consider deterrents also – are their high switch costs and is the solution easy to use and understand? STARTUP HEURISTICS Product Criteria CUSTOMER FOCUSED SOLUTION Solves Unmet Need or Desire? LOW BARRIERS TO ADOPTION Low Switch Cost, Usability CLEAR VALUE PROPOSITION Compelling Reason to Buy
  • 21. PRODUCT CRITERIA Customer Focused Solution (benefit) ADDRESS NEED OR DESIRE FOCUS ON CLEAR GOAL KEEP IT SIMPLE! DON’T AMBIGUATE THE VALUE The purpose of your product is to create value by addressing a specific need or desire. Stay Zen focused. Don’t ambiguate the value created with distracting features that aren’t aligned with the goal.
  • 22. Albert Einstein Physicist, Professor Any intelligent fool can make things bigger and more complex... It takes a touch of genius - and a lot of courage to move in the opposite direction. PRODUCT CRITERIA Customer Focused Solution (benefit)
  • 23. PRODUCT CRITERIA Low Barriers to Adoption (cost) LEARNING CURVE INVESTED TIME & NEW COSTS FINANCIAL IMPACT PRIOR INVESTMENT & NEW COSTS WORKFLOW INTEGRATION DOES IT EASILY INTEGRATE? Even if you create new value, customers may hesitate to adopt your product if they’ve already invested too much in an existing solution that is good enough, or if adopting your solution is too disruptive.
  • 24. Easy Workflow Integration Addt’l Benefits(value complex) Solves My Problem Existing Investments Learning Curve IS THE VALUE CLEAR? VALUE = BENEFIT - COST PRODUCT CRITERIA Clear Value Proposition (value) Perceived  value  must  exceed  cost.    If  you  can  clearly  describe  your  product  is  beneficial  and  a  compelling   case  for  purchasing  it,  then  you  have  created  sufficient  value  to  overcome  cost.   Theodore Levitt People don’t want quarter- inch drills. They want quarter-inch holes. cost   benefit  
  • 25. WHAT IS GOOD TIMING? Every market has a natural lifecycle driven by innovation and circumstance. Look for new demand or interest in something that wasn’t possible just a couple years ago. Be a “fast follower” into a validated emerging market rather than speculating on new opportunity. STARTUP HEURISTICS Timing Criteria RECENT INNOVATION ENABLER Was it Possible 2-5 Years Ago? DEMAND ALREADY ESTABLISHED Build It & They Might Not Come! NO SIGNS OF COMMODITZATION Shrinking Margins. More Products.
  • 26. Every market has a natural lifecycle driven by innovation and circumstance. Look for something that wasn’t possible just a couple years ago & ramp up before the market capitulates (supply > demand). TIMING CRITERIA Innovation Life Cycle Innovators (2.5 %) Early adopters (13.5 %) Early majority (34 %) Laggards (16 %) Late majority (34 %) The Golden Era The  Squeeze   ConsolidationEarly Movers Capitulation * Innovation Adoption Curve
  • 27. Opportunity to enter diminishes as the market matures. Geoff Moore suggests entering at “the chasm” after demand is validated but still early enough to ramp before the market capitulates. TIMING CRITERIA Innovation Life Cycle Innovators (2.5 %) Early adopters (13.5 %) Early majority (34 %) Laggards (16 %) Late majority (34 %) Chasm Innovation Adoption Curve Ideal point to enter a market - Geoff Moore New Entrant Opportunity
  • 28. Nicholas Carr Harvard Business Review, 2003 TIMING CRITERIA Commoditization of Technology It is difficult to imagine a more perfect commodity than a byte of data. As information technology’s power and ubiquity have grown, its strategic importance has diminished.
  • 29. $5,000,000 What cost $5 million to accomplish 12 years ago can now be done with less than $5,000. Mark Suster observed that commoditization and availability of more building blocks has radically reduced cost and risk of developing a software product. Commoditized Technology Hosting Commoditized Open Source Software Cloud Services (SaaS/PaaS) MLS  IDX/RETS  Feeds,     SendGrid  Email,  etc   WordPress  Pla=orm,   Real  Estate  Themes,   RESO  &  Placester  IDX  Plugins,     $500,000 $50,000 $5,000 A  Web/Mobile  App  
  • 30. As cost has fallen, so has the competitive barrier to entry. Competitive positioning is now the key strategic issue, not technological capability for most consumer Internet products. How do you cut through the noise? Commonplace Commodity 2000 2002 2004 2006 2008 2010 2012 2013 !" #!$!!!$!!!" %!!$!!!$!!!" %#!$!!!$!!!" &!!$!!!$!!!" &#!$!!!$!!!" !"#$%&'%()*+%)& Data From NetCraft 2013 Web Server Survey 50x  
  • 31. GOOD COMPETITIVE LANDSCAPE? Avoid being marginalized by excessive undifferentiated competition. That drives margin compression, commodi- tization and market consolidation. Look for inefficient markets where there’s still ‘play’ and find ways to develop a sustainable competitive advantage. STARTUP HEURISTICS Competition Criteria CLEAR MARKET INEFFICIENCY Stagnant or Fragmented Market LOW BARRIERS TO ENTRY Easy & Cheap to Compete? DIFFERENTIABLE POSITION Something Special or Different?
  • 32. COMPETITION CRITERIA Inefficient Market FRAGMENTED MARKET NO CLEAR MARKET LEADER NEW MARKET DEMAND EXCEEDS SUPPLY STAGNANT MARKET READY FOR DISRUPTION? When a market is efficient, a single entity captures all of the value of a market. Look instead for a market that isn’t efficient either because it is new, stagnant, or splintered (fragmented).
  • 33. Sun Tzu War Strategist, Wrote The Art of War The general who makes many calculations before battle is wise. He who knows when he can fight and when he cannot will be victorious. COMPETITION CRITERIA Low Barriers to Entry
  • 34. Avoid a fight you cannot win! A market can be much harder to enter if a competitor already has a mature offering that you must catch up to. THINGS TO AVOID •  Existing Economies of Scale •  Existing Mature Product (feature set) •  Well-Established Brand (halo) •  Price Competition COMPETITION CRITERIA Low Barriers to Entry
  • 35. SEGMENTED MARKET FOCUS ON SPECIFIC CUSTOMER LOW PRICE LEADERSHIP FOCUS ON VOLUME & COMMODITY DIFFERENTIATED PRODUCT DISRUPTIVE OR INNOVATIVE HOW ARE YOU DIFFERENT? WHAT MAKES YOU SPECIAL? COMPETITION CRITERIA Differentiable Position In order to be a desirable signal that stands out against a background of noise, you need to have a compelling value to some customers that others do not. There are 3 viable positioning strategies. Porter’s Generic Competitive Strategies
  • 36. GOOD FINANCIAL PROFILE? Look for opportunities to maximize returns without excess capital risk. Look for opportunities to start cheap and to realize higher margins through focused efforts and economies of scale. Avoid locking up too much capital. STARTUP HEURISTICS Financial Criteria LOW SUNK COSTS Up Front Capital at Risk? WORKING CAPITAL FLOAT Gap Between Payable/Receivables ECONOMIES OF SCALE Margins Increase With Volume?
  • 37. How much up-front capital must you commit to develop this product or business? Sunk capital represents risk since you don’t know if you’ll get it back, as well as opportunity cost since that money could be committed to other opportunities. FINANCIAL CRITERIA Low Sunk Costs HOW MUCH CAPITAL RISK? OPPORTUNITY COST
  • 38. Some businesses require large cash outlay every month and payment can take 3-4 months to arrive. As a result the business may need to have cash or credit to cover the gap of 3-4 months of operating costs. This is both a cost (interest) and a risk! Working Capital Float DO YOU NEED A LINE OF CREDIT? WHAT’S THE COST & RISK? Accounts Receivable 60 - 120 Day "Capital Float"Accounts Payable
  • 39. Look for opportunities where profits increase with volume (scale). Supply, development, and distribution costs all diminish on a per-unit basis when working in volume. As a result profit margins and competitive advantage both increase. Economies of Scale Quantity Profits Marginal Cost Scalable Profits
  • 40. WHAT’S GOOD TEAM FIT? Just because an opportunity exists, doesn’t mean your team is likely to succeed. Are you fit to compete? Does your team have a competitive advantage? Do you possess deep knowledge, technical skills to deliver, & access to key partners and resources? STARTUP HEURISTICS Team Fit & Fitness Criteria SUBJECT MATTER EXPERTISE Deep Knowledge of Market? FUNCTIONAL COMPETENCE Technical Skills to Deliver SUPPLIER PARTNERSHIPS Access to Materials at Good Cost
  • 41. TEAM-FIT CRITERIA The Hacker & The Hustler “The Hacker” Technical skills to design & develop a well-crafted and scalable solution. “The Hustler” Knowledge of customer or desire, and understanding of market dynamics to effectively position an offering. A team needs deep subject matter expertise and technical skills to design a solution, in order to succeed. It is difficult for a single person to be efficient at “heads up” and “heads down” work. The Functional ExpertSubject Matter Expert
  • 42. TEAM-FIT CRITERIA Supplier Partnerships Preferred Sourcing Are you able to procure supplies at competitive prices? If affiliate mktg, can you get preferred commissions? Available Data APIs Are you able to access the data or integration APIs needed to build your product? Outsourced Vendors If planning to manufacture physical products or software, do you have a quality vendor you can rely on? Consider the dependencies you may have on external sources of materials, data, and services. Do you have access to the necessary resources to deliver your product and to price competitively?
  • 43. Evaluate your startup idea across the six scorecard criteria and be mindful of the attributes described in each one. Give yourself a letter grade and then an overall score, for the idea. This provides a structured approach to evaluating the opportunity and helps to improve objectivity by accounting for a full spectrum of important criteria and reducing blind spots. Evaluating a Startup Idea Startup Scorecard Finance • Low Capital Requirement • Clear Profit Model • Economies of Scale Finance Score ______ Timing • Recent Innovation Enabler • Demand Already Established • No Signs of Commoditization Timing Score ______ Competition • Clear Market Inefficiency • Low Barriers to Entry • Differentiable Position Competition Score ______ Team • Subject Matter Expertise • Functional Competence • Supplier Partnerships Team Score ______ Product • Customer Focused Solution • Low Barriers to Adoption • Clear Value Proposition Product Score ______ Customer • Unmet Need or Desire • Right Size Market or Segment • Reliable Customer Channels Customer Score ______ Overall Score _______ SmarterStartup.org Title _____________________________________________________________________ A A B- B+ D A- B Real Estate IDX Integrated CRM
  • 44. Business Model Archetypes The 7 Fundamental Business Personalities
  • 45. BUSINESS MODEL ARCHETYPES What is a Business Model? A business model describes the rationale of how an organization creates, delivers, and captures value … Well-known business models can operate as "recipes" for creative managers.
  • 46. BUSINESS MODEL ARCHETYPES Business Models Everywhere! BRICKS & CLICKS COLLECTIVE CUT OUT THE MIDDLE MAN DIRECT SALES DISTRIBUTION MODEL VALUE ADDED RESELLER FREE IN, FREE OUT FREEMIUM AUCTION / ONLINE AUCTION ALL-IN-ONE LOW-COST BARRIER LOYALTY MONOPOLISTIC MULTI-LEVEL MARKETING NETWORK EFFECTS PRO OPEN SOURCE PYRAMID SCHEME RAZOR & BLADES SERVITIZATION OF PRODUCTS SUBSCRIPTION etcetera,  etcetera  …   There  are  many  disparate  business  models  that  were  defined  in  isola:on  but  nothing  comprehensive    that  describes  the  fundamentally  unique  paPerns  in  a  single  and  concise  framework  that  suited  our  needs.      
  • 47. Describes 7 abstract business model archetypes (fundamental personalities) from which every business model is inherited. Two prototypes (applied examples) are given for each archetype. This represents a holistic view of the possibilities. BUSINESS MODEL ARCHETYPES Business Model Archetypes Trade Product Service Marketplace Ecosystem Subscription Brokerage prototypes: • e-commerce • lead generation prototypes: • software • content prototypes: • service platform • service agency prototypes: • ad network • dropship program prototypes: • content as a service • software as service prototypes: • products market • services market prototypes: • technology platform • media platform
  • 48. Carl Jung Psychologist BUSINESS MODEL ARCHETYPES What is an Archetype? A philosophical idea, referring to pure forms which embody the fundamental characteristics of a thing. The concept is based on Carl Jung’s Personality Archetypes, describing fundamental personalities and roles that we draw from to develop our own unique personality.
  • 49. PRODUCT TANGIBLE SOLUTION SERVICE CUSTOM SOLUTION TRADE CONNECT BUYERS & SELLERS The Business Model Archetypes framework takes a step back from specific business models to say there are 7 abstract archetypes (fundamental personalities) from which every business inherits. Two prototypes (examples) are given for each archetype. This represents a holistic view of the possibilities. BUSINESS MODEL ARCHETYPES Primary Archetypes
  • 50. BUSINESS MODEL ARCHETYPES Product Archetype HALLMARKS OF A PRODUCT TRADE PRODUCT SERVICE Properties: •  Up-front Investment •  Sell for One-time Fee •  Highly Scalable Online Prototypes: •  Software Product •  Content Product Develop a tangible good and sell on a one-time fee basis (purchase or license). Requires high up-front sunk capital but is able to leverage economies of scale.
  • 51. BUSINESS MODEL ARCHETYPES Service Archetype Intangible work for a client, monetized on a per-use basis. Low sunk costs but high float cost requirements. Professionals or technicians with expert knowledge and limited capital prefer it. TRADE SERVICE PRODUCT HALLMARKS OF A SERVICE Properties: •  Intangible Value Creation •  Low Sunk / High Float Cost Online Prototypes: •  Service Agency •  Platform as a Service
  • 52. PRODUCT TRADE SERVICE BUSINESS MODEL ARCHETYPES Trade Archetype Connecting prospective buyers with a product they seek, making profit on the spread between sell price and cost of acquisition. Requires moderate capital and good sourcing connections. HALLMARKS OF TRADE Properties: •  Connect Buyers/Sellers •  Sourcing is key •  Profit from Arbitrage Online Prototypes: •  Ecommerce •  Lead Generation
  • 53. Carl Jung Psychologist BUSINESS MODEL ARCHETYPES What is an Archetype? The meeting of two personalities (archetypes) is like the contact of two chemical substances; if there is any reaction, both are transformed.
  • 54. MARKETPLACE TANGIBLE SOLUTION SUBSCRIPTION CUSTOM SOLUTION BROKERAGE CONNECT BUYERS & SELLERS Secondary Archetypes are created by combining the primary archetypes, similar to how new colors are derived by combining 2or more colors. In this way, all archetype possibilities are accounted for, starting with a model of three simple types of businesses. BUSINESS MODEL ARCHETYPES Secondary Archetypes ECOSYSTEM CONNECT BUYERS & SELLERS
  • 55. SERVICE TRADE BUSINESS MODEL ARCHETYPES Brokerage Archetype BROKERAGE   Sourcing on behalf of a client for a retainer or per- transaction fee. The client then profits from any arbitrage spread rather than the sourcing partner. HALLMARKS OF A BROKERAGE Properties: •  Trading for Clients •  Paid by retainer not arbitrage Prototypes: •  Real Estate Broker •  Ad Network
  • 56. TRADE PRODUCT BUSINESS MODEL ARCHETYPES Marketplace Archetype MARKETPLACE   Create a platform that facilitates trade, rather than actually trading. This is a network effects business that depends heavily on bringing together sufficient demand and supply. HALLMARKS OF A MARKETPLACE Properties: •  Network Effects •  Build Trade Platform Online Prototypes: •  Products Marketplace •  Services Marketplace
  • 57. SERVICE PRODUCT BUSINESS MODEL ARCHETYPES Subscription Archetype SUBSCRIPTION   Building, maintaining, and supporting ongoing use of a product, rather than a one-time sell. Customers pay a monthly subscription service and benefit from continued improvements. HALLMARKS OF A SUBSCRIPTION Properties: •  Monthly Billing •  “Freemium” Pricing •  Ongoing Updates Online Prototypes: •  Software as Service •  Content as Service
  • 58. SERVICE TRADE PRODUCT BUSINESS MODEL ARCHETYPES Ecosystem Archetype ECOSYSTEM   A mature market leader may expand as a result of success. They develop a marketplace and/or community for customers and/or service/support vendors to offer augmented solutions. HALLMARKS OF AN ECOSYSTEM Properties: •  User Community •  ISV or Dev Community •  Enhanced Product Marketplace Online Prototypes: •  Tech Platform •  Media Platform
  • 59. BUSINESS MODEL ARCHETYPES Business Model Archetypes Trade Product Service Marketplace Ecosystem Subscription Brokerage prototypes: • e-commerce • lead generation prototypes: • software • content prototypes: • service platform • service agency prototypes: • ad network • dropship program prototypes: • content as a service • software as service prototypes: • products market • services market prototypes: • technology platform • media platform Primary archetypes Review: •  Trade, Product, Service Secondary archetypes Review: •  Product + Trade = Marketplace •  Service + Trade = Brokerage •  Product + Service = Subscription •  Product + Service + Trade = Ecosystem
  • 60. Value Creation Its Not What You Think!
  • 61. Howard Schultz CEO, Starbucks VALUE CREATION Creating Value If I went to a group of consumers and asked them if I should sell a $4 cup of coffee, what would they have told me? Why would someone pay $4 for a cup of coffee from Starbucks when they can brew it at home for $0.50 per cup? Clearly there’s more to this story…
  • 62. VALUE CREATION Selling a Commodity If you sell the same commodity at two different prices, which one will the customer choose? So why would you “waste money” going to Starbucks? Cup of Coffee Cup of Coffee Maxwell House Starbucks Cost: $4.00Cost: $0.50
  • 63. VALUE CREATION Sell the Benefits NOT the Commodity Starbucks has successfully created a complex of value around a simple commodity. Comparing the coffee out of context misses the core of their value proposition. Cup of Coffee Maxwell House Starbucks Premium Coffee Value $1.00 Ease & Convenience Entertainment (desert/break) Productivity (lounge, wifi) Value $5.00 Value $1.00 Value $5.00 Benefits Complex Value! $0.50! ! Value! $12.00! !
  • 64. Take a systematic approach to identifying all the possible opportunities. You will identify a startup idea for every business model archetype, for each business vertical you are considering The Value Creation Plane VALUE CREATION Entertainment (emotional desire) Productivity (logical need) Innovation (createnewvalue) Monetization (captureexistingvalue) primary function perceivedvalue
  • 65. Starbucks repositioned their offering by creating a value complex around the coffee commodity. We’re paying $4 for the entire experience, and the commodity is only a component of it. They innovated the value and made it a more fulfilling experience. Shift the Business Function VALUE CREATION Entertainment (emotional desire) Productivity (logical need) Innovation (createnewvalue) Monetization (captureexistingvalue) primary function perceivedvalue X"cheap caffiene" Starbucks Starbucks Lounge (free Wifi, etc)
  • 66. Apple took a commoditizing technology and added an emotional connection through design and inspiration. LinkedIn found a productive application for social networking. They differentiated their products in a way that added value. Shift the Perceived Value VALUE CREATION Entertainment (emotional desire) Productivity (logical need) Innovation (createnewvalue) Monetization (captureexistingvalue) primary function perceivedvalue X Apple X LinkedIn
  • 67. Netflix has shifted from monetization of products to innovating their own content. Google has done the same by integrating enhanced content into their search results (maps, flight search, etc). They stay ahead of competition through continued innovation. Shift the Business Function VALUE CREATION Entertainment (emotional desire) Productivity (logical need) Innovation (createnewvalue) Monetization (captureexistingvalue) primary function perceivedvalue X Google X Netflix
  • 68. Vision Definition Begin With a Clear Hypothesis
  • 69. Mark Twain Author VISION DEFINITION Clarity of Vision I didn't have time to write a short letter, so I wrote a long one instead. A concise statement about a complex topic requires an investment of time and the clarity of thought. That critical analysis can reveal weaknesses in a plan, before you begin developing it. Its time to do this for your new startup.
  • 70. Provide a concise answer to each question on the worksheet. Keep them as short as possible. Then compose a 3-4 sentence elevator pitch that includes as many of the key answers as possible. Then you’ll be ready to talk to prospects! Defining a Startup Vision VISION DEFINITION
  • 71. Successful Real Estate agents, earning $100k / year 1. Phone sales & webinars 2. Conferences Real Estate IDX WordPress Themes May 9 Customer Start with a concise description of the customer segment and how you’ll reach them (channels).
  • 72. Successful Real Estate agents, earning $100k / year 1. Phone sales & webinars 2. Conferences Real Estate IDX WordPress Themes May 9 IDX System to capture & nurture online leads 1. Own don't Rent (your website) 2. Beautiful original design Value Creation Clarify the value you are creating for that customer. (Value = benefit-cost)
  • 73. Successful Real Estate agents, earning $100k / year 1. Phone sales & webinars 2. Conferences Marketing Automation CRM Software Product Real Estate IDX WordPress Themes May 9 IDX System to capture & nurture online leads 1. Own don't Rent (your website) 2. Beautiful original design Product What is the manifest solution you’re proposing that will convey new value to your customer?
  • 74. Successful Real Estate agents, earning $100k / year 1. Phone sales & webinars 2. Conferences Marketing Automation CRM Software Product WordPress Theme *Product* (not SaaS) for the DIY agent Tech disruption. First mover (the Spark API for IDX) Real Estate IDX WordPress Themes May 9 IDX System to capture & nurture online leads 1. Own don't Rent (your website) 2. Beautiful original design Competition What’s your competitive position that will enable you to provide a better or more authentic solution?
  • 75. Successful Real Estate agents, earning $100k / year 1. Phone sales & webinars 2. Conferences Marketing Automation CRM Software Product WordPress Theme *Product* (not SaaS) for the DIY agent Tech disruption. First mover (the Spark API for IDX) 1. Me (product/tech) 2. John (BizDev/Sales) 1. Spark Platorm API 2. Access to all MLS IDX Feeds Real Estate IDX WordPress Themes May 9 IDX System to capture & nurture online leads 1. Own don't Rent (your website) 2. Beautiful original design Team What are your teams credentials? What’s the reason you’ll prevail over competition in offering a compelling solution?
  • 76. Successful Real Estate agents, earning $100k / year 1. Phone sales & webinars 2. Conferences Marketing Automation CRM Software Product WordPress Theme *Product* (not SaaS) for the DIY agent Tech disruption. First mover (the Spark API for IDX) 1. Me (product/tech) 2. John (BizDev/Sales) 1. Spark Platorm API 2. Access to all MLS IDX Feeds $50,000 to build core product $50,000 line of credit Real Estate IDX WordPress Themes May 9 IDX System to capture & nurture online leads 1. Own don't Rent (your website) 2. Beautiful original design Finance What is the financial cost of developing the proposed solution? Consider the cost against potential gains.
  • 77. Successful Real Estate agents, earning $100k / year 1. Phone sales & webinars 2. Conferences Marketing Automation CRM Software Product WordPress Theme *Product* (not SaaS) for the DIY agent Tech disruption. First mover (the Spark API for IDX) 1. Me (product/tech) 2. John (BizDev/Sales) 1. Spark Platorm API 2. Access to all MLS IDX Feeds $50,000 to build core product $50,000 line of credit IDX Website/CRM software for serious RE agents to capture & nurture online leads and grow their business. Built on Wordpress so they can"own the system, not rent". First-mover advantage by integratingthe Spark IDX API which makes it possible. Real Estate IDX WordPress Themes May 9 IDX System to capture & nurture online leads 1. Own don't Rent (your website) 2. Beautiful original design Elevator Pitch Finally, develop a 3-4 sentence description of your proposed startup that concisely articulates the important points you’ve developed earlier on this worksheet. This is the 30 second pitch you can use to talk to investors and client prospects about your new startup.
  • 78. Validate Your Hypothesis
  • 79. The Lean “build, learn, measure” feedback look is fantastic for optimizing a product concept, once a customer or hypothesis is defined. Lean Feedback Loop Measure Learn Build Ideas Product Data HYPOTHESIS VALIDATION LEAN METHODOLOGY FINDING PRODUCT-MARKET FIT
  • 80. Validate Your Hypothesis HYPOTHESIS VALIDATION Test Early, Test Often PROSPECT INTERVIEWS Do They Like the Idea? Feedback? TEST MARKETING Do ‘Vaporware’ Campaigns Convert? MINIMAL VIABLE PRODUCT Users Engaging & Using Product? With a well-articulated vision ready, you can begin sharing the concept with investors and customer prospects. If the idea is well received, advance to vapor-ware test campaigns and finally to building the “MVP”.
  • 81. …But don’t just guess. Start with a well- formed hypothesis to maximize odds of finding product-market fit and to avoid the number of pivots along the way. Hypothesize, Don’t Guess PIVOT AS PROCESS HYPOTHESIS VALIDATION START WITH A HYPOTHESIS DON’T JUST GUESS
  • 82. THE SMARTER STARTUP STRATEGY FOR STARTUPS The Smarter Startup looks at why some startups succeed while others fail. By taking a more strategic approach to entrepreneurship, founders can improve their own outcomes. Written by Neal Cabage and Sonya Zhang, PhD, and published by Pearsons/NewRiders. SMARTER STARTUP The Book
  • 83. SMARTER STARTUP Created By NEAL CABAGE Digital Product Architect •  Product manager and entrepreneur. •  Founded ProductCamp.LA and PMA.LA. •  Built and sold two startups. •  Co-author, The Smarter Startup. neal@smarterstartup.org@NealCabage
  • 84. SMARTER STARTUP SmarterStartup.org The framework, including the part described here, are posted on the website, along with downloadable worksheets and reference material. Everything is free to use, so enjoy!. www.SmarterStartup.org