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New Rules for the New Internet Bubble<br />Steve Blank<br />Stanford - School of Engineering<br />www.steveblank.com<br />...
I Write a Blog  <br />www.steveblank.com<br />
This Talk is Based On<br />Business Model Generation<br />Four Steps to the Epiphany<br />Lean Startup<br />
First -What’s A Startup?<br />Five Types of Startups<br />
Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
Feed the family</li></li></ul><li>Small Business<br />Startup<br />Exit Criteria<br /><ul><li> Business Model found</li></...
Feed the family</li></li></ul><li>Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br />...
99.7% of all companies
~ 50% of total U.S. workers</li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf<br />
Large Non-Profit<br />Social Startup<br />Social Entrepreneurship Startups<br /><ul><li>Solve pressing social problems
Social Enterprise: Profitable
Social Innovation: New Stratagies</li></li></ul><li>Large Company Sustaining Innovation<br />Sustaining Innovation<br />Tr...
Known product feature needs</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />L...
New tech, customers, channels</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br /...
Acquire</li></ul>      - IP- Talent<br />      - Product<br />      - Customers<br />      - Business<br />
Scalable<br />Startup<br />Large Company<br />Scalable Startup<br />Search<br />Goal is to solve for:<br />  unknown custo...
Execute<br />Search<br />Scalable<br />Startup<br />Large Company<br />Exit Criteria<br /><ul><li> Business model found
 Total Available Market > $500m -$1B
 Can grow to $100m/year</li></ul>Scalable Startup<br />
Scalable<br />Startup<br />Large Company<br /><ul><li>Total Available Market > $500m
 Company can grow to $100m/year
 Business model found
 Focused on execution and process
 Typically requires “risk capital”</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> In contrast a scalable...
 Typically needs risk capital
 What Silicon Valley means when they say “Startup”</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />Exit Cr...
 Total Available Market > $500m -$1B
 Can grow to $100m/year</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> VC-backed scalable startups:
 13% of all public companies
 4% of total sales of all U.S. public companies ~$1 trillion</li></ul>Source: Josh Lerner, Harvard: VC and Innovation in E...
Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br ...
Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br ...
Scalable<br />Startup<br />Large Company<br /><ul><li>Business Model found
 i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />Search <br />...
Next,What’s A Founder?<br />
What You and I Saw<br />
What Michelangelo Saw<br />
What You and I Saw<br />
What Van Gogh Saw<br />
Founders See Things Others Don’t<br />
Founders See Things Others Don’t<br />Founders are Artists.<br />Actually They are Composers.<br />They Create Something F...
Founders See Things Others Don’t<br />They Build a Company By Convincing Others To See What They Do<br />
Founders See Things Others Don’t<br />The Early Employees Who Join Them <br />Are the Performers<br />
A Few Short Stories<br />
How Did We Get Here?<br />
Paths to Building a Startup<br />1970 – 1995 	build a business (revenue)<br />1995 – 2000	flip the business (concept IPO)<...
1970 – 1995Building a BusinessStartups Are Small Versions of A Large Company<br />
1970 - 1995 Building a Startup the Hard Way<br />$Millions’sto start(Proprietary hdwr/sftwr)<br />Long product dev cycle  ...
1970 – 1995  Playbook<br />
Product Introduction Model<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
Product Introduction Model<br />The Leading Cause of Startup Death<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Be...
Product Introduction Model:Two Implicit Assumptions<br />Customer Problem: known<br />Concept/Seed Round<br />Product Dev....
Tradition – Hire Marketing<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />...
Tradition – Hire Sales<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Cr...
 Hire Sales VP
 Hire 1st  Sales Staff</li></ul>Sales<br />
Tradition – Hire Bus Development<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Cre...
 Hire Sales VP
 Pick distribution   Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First   Bus Dev
 Do deals for FCS</li></li></ul><li>Tradition – Hire Engineering<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />...
 Hire Sales VP
 Pick distribution   Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First   Bus Dev
 Do deals for FCS</li></ul>Engineering<br /><ul><li> Write MRD
 Waterfall
 Q/A
Tech Pubs</li></li></ul><li>More startups fail from a lack of customers than from a failure of product development<br />
1995 – 2000Flipping A BusinessThe Dot.comBubble <br />
1995 - 2000The Dot-com Bubble<br />10’s $millions to start	(get big fast, create a brand)<br />Long product dev cycle     ...
1995 – 2000 Playbook<br />Netscape<br />
2001 – 2010Why Startups Are Not Small Versions of A Large Company<br />
2001 - 2010The Lean Startup<br />≤ $½ million to start(open source, commodity hdwr)<br />Short product dev cycle     (Agil...
Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Com...
Startups Search, Companies Execute<br />The Execution of the Business Model<br />The Search for the Business Model<br />Sc...
 Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
Metrics Versus Accounting<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<b...
 Cash Flow Statement
 Income Statement</li></li></ul><li>Metrics Versus Accounting<br />The Search for the Business Model<br />The Execution of...
 Viral coefficient
 Customer Lifetime Value
 Average Selling Price/Order Size
 Monthly burn rate
 etc.  </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
 Cash Flow Statement
 Income Statement</li></li></ul><li>Customer Validation Versus Sales<br />The Execution of the Business Model<br />Scalabl...
 Scalable
 Price List/Data Sheets
 Revenue Plan</li></li></ul><li>Customer Validation Versus Sales<br />The Search for the Business Model<br />The Execution...
 Pricing/Feature unstable
 Not yet repeatable
“One-off’s”</li></ul>Sales<br /><ul><li> Sales Organization
 Scalable
 Price List/Data Sheets
 Revenue Plan</li></li></ul><li>Engineering Versus Agile Development<br />The Execution of the Business Model<br />Scalabl...
 Waterfall Development
 QA
 Tech Pubs</li></li></ul><li>Engineering Versus Agile Development<br />The Search for the Business Model<br />The Executio...
 Waterfall Development
 QA
 Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
 Continuous Learning
 Self Organizing Teams
 Minimum Feature Set
 Pivots</li></li></ul><li>Startups Model, Companies Plan<br />The Execution of the Business Model<br />Scalable<br />Start...
 features
 customers/markets
 business model</li></li></ul><li>Startups Model, Companies Plan<br />The Search for the Business Model<br />The Execution...
 describes “unknowns”
customer needs
 feature set
 business model
 found by iteration
Plan describes “knowns”
 Known features for line extensions
 Known customers/markets
 Known business model</li></li></ul><li>2001 - 2011The Lean Startup<br />IPO market ~closed, M&A liquidity path<br />Build...
2001 - 2011 Playbook<br />Four Steps to the Epiphany<br />Many Agile Texts<br />
But We Were Still Using This<br />
No Business Plan survives first contact with customers<br />
So Search for a Business Model<br />
The Business Model:<br />Any company can be described in 9 building blocks<br />
CUSTOMER SEGMENTS<br />which customers and users are you serving? <br />which jobs do they really want to get done?<br />
VALUE PROPOSITIONS<br />what are you offering them? what is that <br />getting done for them? do they care?<br />
CHANNELS<br />how does each customer segment want to be reached? through which interaction points?<br />
CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? r...
REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurrin...
KEY RESOURCES<br />which resources underpin your business model? which assets are essential?<br />
KEY ACTIVITIES<br />which activities do you need to perform well in your business model? what is crucial?<br />69<br />
KEY PARTNERS<br />which partners and suppliers leverage your model? <br />who do you need to rely on?<br />
COST STRUCTURE<br />what is the resulting cost structure? <br />which key elements drive your costs?<br />
value proposition<br />customer relationships<br />key activities<br />customer segments<br />key partners<br />cost struc...
sketch out your business model<br />
But,Realize They’re Hypotheses<br />
9 Guesses<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />
How Do Startups Search For A Business Model?<br /><ul><li>The Search is Customer Development
The Implementation is Agile Development
The Sum is the Lean Startup</li></li></ul><li>Customer Development<br />
Customer Development<br />The founders<br />^<br />Get Out of the Building<br />
Customer DevelopmentThe Search For the Business Model<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValid...
Customer Discovery<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />St...
Test Hypotheses:<br /><ul><li>Product
 Market Type
 Competition</li></ul>Turning Hypotheses to Facts<br />
Test Hypotheses:<br /><ul><li>Problem
 Customer
 User
 Payer</li></li></ul><li>Test Hypotheses:<br /><ul><li>Channel</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Crea...
 Customer
 User
 Payer</li></ul>Test Hypotheses:<br /><ul><li>Product
 Market Type
 Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
 (Customer)
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Transcript of "Startup weekend 050611"

  1. 1. New Rules for the New Internet Bubble<br />Steve Blank<br />Stanford - School of Engineering<br />www.steveblank.com<br />Twitter: @sgblank<br />
  2. 2. I Write a Blog <br />www.steveblank.com<br />
  3. 3. This Talk is Based On<br />Business Model Generation<br />Four Steps to the Epiphany<br />Lean Startup<br />
  4. 4. First -What’s A Startup?<br />Five Types of Startups<br />
  5. 5. Small Business<br />Startup<br />Small Business Startups<br /><ul><li>Serve known customer with known product
  6. 6. Feed the family</li></li></ul><li>Small Business<br />Startup<br />Exit Criteria<br /><ul><li> Business Model found</li></ul>- Profitable business<br /><ul><li> Existing team</li></ul>< $1M in revenue<br />Small Business Startups<br /><ul><li>known customer known product
  7. 7. Feed the family</li></li></ul><li>Small Business<br />Startup<br />- Business Model found<br />- Profitable business<br /><ul><li> Existing team</li></ul>< $10M in revenue<br />Small Business Startups<br /><ul><li>5.7 million small businesses in the U.S. <500 employees
  8. 8. 99.7% of all companies
  9. 9. ~ 50% of total U.S. workers</li></ul>http://www.sba.gov/advo/stats/sbfaq.pdf<br />
  10. 10. Large Non-Profit<br />Social Startup<br />Social Entrepreneurship Startups<br /><ul><li>Solve pressing social problems
  11. 11. Social Enterprise: Profitable
  12. 12. Social Innovation: New Stratagies</li></li></ul><li>Large Company Sustaining Innovation<br />Sustaining Innovation<br />Transition<br />Scalable<br />Startup<br />Large Company<br /><ul><li> Existing Market / Known customer
  13. 13. Known product feature needs</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />Large Company<br />Disruptive Innovation<br /><ul><li>New Market
  14. 14. New tech, customers, channels</li></li></ul><li>Large Company Disruptive Innovation<br />New Division<br />Transition<br />Large Company<br />Disruptive Innovation<br /><ul><li>Build
  15. 15. Acquire</li></ul> - IP- Talent<br /> - Product<br /> - Customers<br /> - Business<br />
  16. 16. Scalable<br />Startup<br />Large Company<br />Scalable Startup<br />Search<br />Goal is to solve for:<br /> unknown customer and unknown features <br />
  17. 17. Execute<br />Search<br />Scalable<br />Startup<br />Large Company<br />Exit Criteria<br /><ul><li> Business model found
  18. 18. Total Available Market > $500m -$1B
  19. 19. Can grow to $100m/year</li></ul>Scalable Startup<br />
  20. 20. Scalable<br />Startup<br />Large Company<br /><ul><li>Total Available Market > $500m
  21. 21. Company can grow to $100m/year
  22. 22. Business model found
  23. 23. Focused on execution and process
  24. 24. Typically requires “risk capital”</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> In contrast a scalable startup is designed to grow big
  25. 25. Typically needs risk capital
  26. 26. What Silicon Valley means when they say “Startup”</li></li></ul><li>Scalable<br />Startup<br />Large Company<br />Exit Criteria<br /><ul><li> Business model found
  27. 27. Total Available Market > $500m -$1B
  28. 28. Can grow to $100m/year</li></ul>Scalable Startup<br />Execute<br />Search<br /><ul><li> VC-backed scalable startups:
  29. 29. 13% of all public companies
  30. 30. 4% of total sales of all U.S. public companies ~$1 trillion</li></ul>Source: Josh Lerner, Harvard: VC and Innovation in Energey<br />
  31. 31. Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br /> Internet and Mobile Apps<br />
  32. 32. Buyable Startup<br />Search<br />Sell<br />Scalable<br />Startup<br />$5 to 50M Acquisition<br />Goal is to solve for:<br /> Internet and Mobile Apps<br />Sell to larger company<br />
  33. 33. Scalable<br />Startup<br />Large Company<br /><ul><li>Business Model found
  34. 34. i.e. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />What’s A Startup?<br />Search <br />Execute<br />A Startup is a temporary organization used to search for a repeatable and scalable business model <br />
  35. 35. Next,What’s A Founder?<br />
  36. 36. What You and I Saw<br />
  37. 37. What Michelangelo Saw<br />
  38. 38. What You and I Saw<br />
  39. 39. What Van Gogh Saw<br />
  40. 40. Founders See Things Others Don’t<br />
  41. 41. Founders See Things Others Don’t<br />Founders are Artists.<br />Actually They are Composers.<br />They Create Something From Nothing<br />
  42. 42. Founders See Things Others Don’t<br />They Build a Company By Convincing Others To See What They Do<br />
  43. 43. Founders See Things Others Don’t<br />The Early Employees Who Join Them <br />Are the Performers<br />
  44. 44. A Few Short Stories<br />
  45. 45. How Did We Get Here?<br />
  46. 46. Paths to Building a Startup<br />1970 – 1995 build a business (revenue)<br />1995 – 2000 flip the business (concept IPO)<br />2001 – 2011 build a business (M&A)<br />2011 – 2014 flip a built business (M&A / IPO)<br />
  47. 47. 1970 – 1995Building a BusinessStartups Are Small Versions of A Large Company<br />
  48. 48. 1970 - 1995 Building a Startup the Hard Way<br />$Millions’sto start(Proprietary hdwr/sftwr)<br />Long product dev cycle (Waterfall)<br />Thousands customers (Businesses)<br />How you made Money= IPO(5 qtrsrevenue/profit)<br />No repeatable methodology(Smaller big company)<br />
  49. 49. 1970 – 1995 Playbook<br />
  50. 50. Product Introduction Model<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  51. 51. Product Introduction Model<br />The Leading Cause of Startup Death<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />
  52. 52. Product Introduction Model:Two Implicit Assumptions<br />Customer Problem: known<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br /> Product Features: known<br />
  53. 53. Tradition – Hire Marketing<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br />
  54. 54. Tradition – Hire Sales<br />Concept/Seed Round<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Organization
  55. 55. Hire Sales VP
  56. 56. Hire 1st Sales Staff</li></ul>Sales<br />
  57. 57. Tradition – Hire Bus Development<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Channel / Distribution
  58. 58. Hire Sales VP
  59. 59. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  60. 60. Do deals for FCS</li></li></ul><li>Tradition – Hire Engineering<br />Concept<br />Product Dev.<br />Alpha/Beta Test<br />Launch/<br />1st Ship<br />- Create Demand<br />- Launch Event<br />- “Branding”<br />- Hire PR Agency<br />- Early Buzz<br /><ul><li> Create Marcom </li></ul> Materials<br />- Create Positioning<br />Marketing<br /><ul><li> Build Sales Channel / Distribution
  61. 61. Hire Sales VP
  62. 62. Pick distribution Channel</li></ul>Sales<br />Business <br />Development<br /><ul><li> Hire First Bus Dev
  63. 63. Do deals for FCS</li></ul>Engineering<br /><ul><li> Write MRD
  64. 64. Waterfall
  65. 65. Q/A
  66. 66. Tech Pubs</li></li></ul><li>More startups fail from a lack of customers than from a failure of product development<br />
  67. 67. 1995 – 2000Flipping A BusinessThe Dot.comBubble <br />
  68. 68. 1995 - 2000The Dot-com Bubble<br />10’s $millions to start (get big fast, create a brand)<br />Long product dev cycle (ship beta, 1st mover adv)<br />Millions customers (1st consumer internet wave)<br />How you made money= IPO(Little/no revenue, no profits)<br />Repeatable methodology (brand, hype, flip or IPO)<br />
  69. 69. 1995 – 2000 Playbook<br />Netscape<br />
  70. 70. 2001 – 2010Why Startups Are Not Small Versions of A Large Company<br />
  71. 71. 2001 - 2010The Lean Startup<br />≤ $½ million to start(open source, commodity hdwr)<br />Short product dev cycle (Agile Development)<br />100’s millions Customers (Social networks, consumer)<br />Liquidity -M&A(revenue & network of users)<br />Repeatable methodology (Agile + Cust Dev)<br />
  72. 72. Startups Search and Pivot<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /> Business Model found by founders<br /><ul><li> customer needs/product features found</li></ul> i.e. Product/Market fit<br /><ul><li> Repeatable sales model</li></ul>- Managers hired<br />
  73. 73. Startups Search, Companies Execute<br />The Execution of the Business Model<br />The Search for the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />- Cash-flow breakeven<br />- Profitable<br />- Rapid scale<br />- New Senior Mgmt<br />~ 150 people<br /><ul><li>Business Model found
  74. 74. Product/Market fit</li></ul>- Repeatable sales model<br />- Managers hired<br />
  75. 75. Metrics Versus Accounting<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Traditional Accounting<br /><ul><li>Balance Sheet
  76. 76. Cash Flow Statement
  77. 77. Income Statement</li></li></ul><li>Metrics Versus Accounting<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Startup Metrics<br /><ul><li> Customer Acquisition Cost
  78. 78. Viral coefficient
  79. 79. Customer Lifetime Value
  80. 80. Average Selling Price/Order Size
  81. 81. Monthly burn rate
  82. 82. etc. </li></ul>Traditional Accounting<br /><ul><li> Balance Sheet
  83. 83. Cash Flow Statement
  84. 84. Income Statement</li></li></ul><li>Customer Validation Versus Sales<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Sales<br /><ul><li>Sales Organization
  85. 85. Scalable
  86. 86. Price List/Data Sheets
  87. 87. Revenue Plan</li></li></ul><li>Customer Validation Versus Sales<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large<br />Company<br />Customer Validation<br /><ul><li> Early Adopters
  88. 88. Pricing/Feature unstable
  89. 89. Not yet repeatable
  90. 90. “One-off’s”</li></ul>Sales<br /><ul><li> Sales Organization
  91. 91. Scalable
  92. 92. Price List/Data Sheets
  93. 93. Revenue Plan</li></li></ul><li>Engineering Versus Agile Development<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  94. 94. Waterfall Development
  95. 95. QA
  96. 96. Tech Pubs</li></li></ul><li>Engineering Versus Agile Development<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Engineering<br /><ul><li> Requirements Docs.
  97. 97. Waterfall Development
  98. 98. QA
  99. 99. Tech Pubs</li></ul>Agile Development<br /><ul><li> Continuous Deployment
  100. 100. Continuous Learning
  101. 101. Self Organizing Teams
  102. 102. Minimum Feature Set
  103. 103. Pivots</li></li></ul><li>Startups Model, Companies Plan<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Business Plan<br /><ul><li> describes “knowns”
  104. 104. features
  105. 105. customers/markets
  106. 106. business model</li></li></ul><li>Startups Model, Companies Plan<br />The Search for the Business Model<br />The Execution of the Business Model<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li>Business Model
  107. 107. describes “unknowns”
  108. 108. customer needs
  109. 109. feature set
  110. 110. business model
  111. 111. found by iteration
  112. 112. Plan describes “knowns”
  113. 113. Known features for line extensions
  114. 114. Known customers/markets
  115. 115. Known business model</li></li></ul><li>2001 - 2011The Lean Startup<br />IPO market ~closed, M&A liquidity path<br />Build for long term but take short term sale<br />Founders learn Lean skills<br />Focus on building customers<br />Minimum hype<br />
  116. 116. 2001 - 2011 Playbook<br />Four Steps to the Epiphany<br />Many Agile Texts<br />
  117. 117. But We Were Still Using This<br />
  118. 118. No Business Plan survives first contact with customers<br />
  119. 119. So Search for a Business Model<br />
  120. 120. The Business Model:<br />Any company can be described in 9 building blocks<br />
  121. 121. CUSTOMER SEGMENTS<br />which customers and users are you serving? <br />which jobs do they really want to get done?<br />
  122. 122. VALUE PROPOSITIONS<br />what are you offering them? what is that <br />getting done for them? do they care?<br />
  123. 123. CHANNELS<br />how does each customer segment want to be reached? through which interaction points?<br />
  124. 124. CUSTOMER RELATIONSHIPS<br />what relationships are you establishing with each segment? personal? automated? acquisitive? retentive?<br />
  125. 125. REVENUE STREAMS<br />what are customers really willing to pay for? how? <br />are you generating transactional or recurring revenues?<br />
  126. 126. KEY RESOURCES<br />which resources underpin your business model? which assets are essential?<br />
  127. 127. KEY ACTIVITIES<br />which activities do you need to perform well in your business model? what is crucial?<br />69<br />
  128. 128. KEY PARTNERS<br />which partners and suppliers leverage your model? <br />who do you need to rely on?<br />
  129. 129. COST STRUCTURE<br />what is the resulting cost structure? <br />which key elements drive your costs?<br />
  130. 130. value proposition<br />customer relationships<br />key activities<br />customer segments<br />key partners<br />cost structure<br />revenue streams<br />key <br />resources<br />channels<br />72<br />images by JAM<br />
  131. 131. sketch out your business model<br />
  132. 132. But,Realize They’re Hypotheses<br />
  133. 133. 9 Guesses<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />Guess<br />
  134. 134. How Do Startups Search For A Business Model?<br /><ul><li>The Search is Customer Development
  135. 135. The Implementation is Agile Development
  136. 136. The Sum is the Lean Startup</li></li></ul><li>Customer Development<br />
  137. 137. Customer Development<br />The founders<br />^<br />Get Out of the Building<br />
  138. 138. Customer DevelopmentThe Search For the Business Model<br />Company<br />Building<br />CustomerDiscovery<br />CustomerValidation<br />Customer Creation<br />Pivot<br />
  139. 139. Customer Discovery<br />CustomerDiscovery<br />CustomerValidation<br />Company<br />Building<br />CustomerCreation<br />Stop selling, start listening<br />Test your hypotheses<br />Continuous Discovery<br />Done by founders<br />
  140. 140. Test Hypotheses:<br /><ul><li>Product
  141. 141. Market Type
  142. 142. Competition</li></ul>Turning Hypotheses to Facts<br />
  143. 143. Test Hypotheses:<br /><ul><li>Problem
  144. 144. Customer
  145. 145. User
  146. 146. Payer</li></li></ul><li>Test Hypotheses:<br /><ul><li>Channel</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  147. 147. Customer
  148. 148. User
  149. 149. Payer</li></ul>Test Hypotheses:<br /><ul><li>Product
  150. 150. Market Type
  151. 151. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  152. 152. (Customer)
  153. 153. (Problem)</li></ul>Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  154. 154. Validate Business Model</li></li></ul><li>Test Hypotheses:<br /><ul><li>Demand Creation</li></ul>Test Hypotheses:<br /><ul><li>Problem
  155. 155. Customer
  156. 156. User
  157. 157. Payer</li></ul>Agile Development<br />Test Hypotheses:<br /><ul><li>Product
  158. 158. Market Type
  159. 159. Competitive</li></ul>Test Hypotheses:<br /><ul><li>Channel
  160. 160. (Customer)
  161. 161. (Problem)</li></ul>Customer Development Team<br />Test Hypotheses:<br /><ul><li>Channel</li></ul>Test Hypotheses:<br /><ul><li>Pricing Model / Pricing</li></ul>Test Hypotheses:<br /><ul><li>Size of Opportunity/Market
  162. 162. Validate Business Model</li></li></ul><li>The Minimum Viable Product (MVP)<br /><ul><li> Smallest feature set that gets you the most …orders, learning, feedback, failure…
  163. 163. MVP + Customer are the first two you need to nail
  164. 164. MVP is just 1 of the 9 parts of your model</li></li></ul><li>The Pivot<br /><ul><li>The heart of Customer Development
  165. 165. Iteration without crisis
  166. 166. Fast, agile and opportunistic</li></li></ul><li>How Does This Really Work?Stanford Lean LaunchPad Class<br />
  167. 167. OURCRAVE is an online social shopping platform where customers can make their own deals on products or services of their choosing with sellers who can offer them in bulk at a discounted price.<br />
  168. 168. Business Canvas #1<br />Seller: - Access to large online customer pool<br />- Bulk sales with reduced commission<br />Buyer: - Better discounts<br />- Maintainingonline buyer/seller communities and credibilityof transactions- Promotionof website and brand <br />- Powerful sellers<br />- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller:<br />Pro-sellers in Amazon and eBay who sell electronicsBuyer:<br />Online shoppers<br /><ul><li> Web & App sales </li></ul>-Online social networks<br />- Physical resources (IT infrastructure)- Existing social networks -Buyer and seller communities,- Brand awareness<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br />- Variable costs: server and traffic maintenance costs- Fixed Cost: rent, salaries <br />
  169. 169. Key Question for Business Canvass #1<br />WHO WILL BE OUR CUSTOMERS?<br />DO THEY FEEL ENOUGH VALUE? <br />
  170. 170. Seller Side Test with a fake E-MAIL<br />Give me a quote<br />for a bulk sale!<br />Electronics Sellers on Amazon/Ebay<br />FAKE CEO<br />(Steve Feiberg)<br />57%<br />showed interest<br />90%<br />sell products <br />on Amazon<br /><ul><li>56% paid 10~20% transaction fee
  171. 171. 22% paid 5~10% transaction fee
  172. 172. 78% agreed it was too much
  173. 173. 33% actually provided discount proportional to group size</li></li></ul><li>Seller Side<br />Interview with Industry Specialist (LG Electronics)<br />Main Target<br />Bestbuy<br />Target,<br />Walmart<br />25%<br />Associations of <br />RegionalBig Sellers<br />25%<br />40%<br />
  174. 174. Seller Side<br />Interview with Industry Specialist (eBay)<br /><ul><li>Smaller sellers </li></ul>Large sellers already have sufficient traffic<br /><ul><li>Older products</li></ul>Sellers may want to clear the out-of-date products with huge discount<br />
  175. 175. User Side<br />: Online User Survey<br />Power to choose products<br />Discount on products<br />Buyer community feedback<br />
  176. 176. Business Canvas #2<br />Seller: - More customer traffic<br />- Bulk sales with reduced commission<br />Buyer: - Better discounts<br />- Power to choose product deal<br />- Buyer community feedback on products and sellers<br />- Maintainingonline buyer/seller communities and credibilityof transactions- Promotionof website and brand <br /><ul><li> Powerful sellers
  177. 177. Sellers who need more traffic</li></ul>- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller:<br />Trustworthy online sellers with verifiable websitesBuyer:<br />Online shoppers who are willing to wait to get significant discounts on products<br /><ul><li> Web & App sales </li></ul>-Online social networks<br />- Physical resources (IT infrastructure)- Existing social networks -Buyer and seller communities,- Brand awareness<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br />- Variable costs: server and traffic maintenance costs- Fixed Cost: rent, salaries <br />
  178. 178. Key Question for Business Canvass #2<br />HOW CAN WE ATTRACT BUYERS?<br />CUSTOMER ACQUISITION COST?<br />
  179. 179. Buyer Demand Test<br />Best Marketing Channel for having buyers is Facebook Wall<br />: 144 Unique Visits,10 e-mail subscriptions for 3 days<br />Facebook Wall<br />Google Adwords<br />Facebook Ads<br />5%<br />0.08%<br />0.005%<br />(CTR)<br />$7.52<br />$4.88<br />$0<br />(COST)<br />
  180. 180. Business Canvas #3<br />Seller: - More customer traffic<br />- Bulk sales with reduced commission<br />Buyer: - Better discounts<br />- Power to choose product deal<br />- Buyer community feedback on products and sellers<br />- Maintainingonline buyer/seller communities and credibilityof transactions- Promotionof website and brand <br /><ul><li> Sellers who need more traffic
  181. 181. Server providers</li></ul>Established services- Online Marketing : Google/Facebook<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller:<br />Trustworthy online sellers with verifiable websitesBuyer:<br />Online shoppers who are willing to wait to get significant discounts on products<br /><ul><li> Web & App sales
  182. 182. Online social networks
  183. 183. Online advertising</li></ul>- Physical resources (IT infrastructure)- Existing social networks -Buyer and seller communities,- Brand awareness<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br /><ul><li>Variable costs: server and traffic maintenance costs- Fixed Cost: rent, salaries </li></ul>- Online ad campaigns<br />
  184. 184. Key Question for Business Canvass #3<br />HOW CAN WE ATTRACT SELLERS?<br />COOPERATE WITH SELLERS?<br />
  185. 185. Seller Contact<br />Deal with sellers failed because no group pricing or discount too low.<br />Organize Real Group Deal<br /><ul><li>Contact popular online sellers
  186. 186. 3 products: HD camera, protein drink, videogame
  187. 187. Videogame was for pre-order</li></ul>Result<br /><ul><li>Most sellers: no group discounts
  188. 188. Discounts offered < 10%
  189. 189. With shipping and tax still >= Amazon price
  190. 190. David vs. Goliath problem</li></li></ul><li>To Pivot or Not to Pivot?<br />Although dismayedat seller response, we did not give up.<br />What do do?<br /><ul><li>Deal with sellers disappointing
  191. 191. Seller problem intractable?
  192. 192. Teaching staff: Pivot or else…</li></ul>Beaten, but not defeated<br /><ul><li>Lost one battle, but not the war!
  193. 193. Only contacted larger sellers
  194. 194. Sellers need more value
  195. 195. Show them a real website</li></ul>Filter advice and stay determined!<br />No Pivot Yet<br />
  196. 196. Solution 1 : Rapid Implementation<br />Implement seller & buyer side features to give sellers fuller experience. <br />Site Upgrade Frenzy<br /><ul><li>Improved site design
  197. 197. Buyer facebook login
  198. 198. Online social networking integration
  199. 199. Seller login and registration
  200. 200. Seller bidding
  201. 201. Seller group deal creation page</li></li></ul><li>Solution 1 : Rapid Implementation<br />Humble beginnings <br />
  202. 202. Solution 1 : Rapid Implementation<br />The Real Deal <br />
  203. 203. Solution 1 : Rapid Implementation<br />Main page<br />Facebook connect<br />Deal creation by sellers<br />Bidding dialog<br />
  204. 204. Solution 2 : More seller value & spamming<br />Add value for sellers based on mentor and industry expert interviews<br />Add Seller Value<br /><ul><li>Low transaction fees
  205. 205. Customer contact information
  206. 206. Cross-selling products
  207. 207. Ad banners
  208. 208. Power to create group deal</li></ul>The Art of Spam<br /><ul><li>Massive seller e-mail campaign (16,000 in total)
  209. 209. Stanford takes notice and issues warning (oops)
  210. 210. Enumerate value propositions
  211. 211. Show live website
  212. 212. Hand out registration codes</li></li></ul><li>Seller Invitation Result<br />180 sellers<br /># of sellers who signed up<br /># of deals made by sellers<br />80 deals<br />(below Amazon price)<br />
  213. 213. Seller Invitation Result<br /># of sellers who replied to our email<br />200 sellers<br /># of sellers who made suggestions on OURCRAVE<br />50 sellers<br />
  214. 214. Seller Invitation Feedback<br />We’ve got two major pieces of feedback <br />Who will be in charge of<br />Shipping Cost & Sales Tax ?<br />There are <br />too diverse<br />Product Categories<br />
  215. 215. Business Canvas #4<br />- Maintainingonline buyer/seller communities and credibilityof transactions- Promotionof website and brand <br />Seller: - More customer traffic<br /><ul><li>Bulk sales with reduced commission</li></ul>- Access to customer contact information <br /><ul><li> Cross-sell their products.- Site advertising- Power to create deals</li></ul>Buyer: - Better discounts<br />- Power to choose product deal<br />- Buyer community feedback on products and sellers<br /><ul><li> Sellers who need more traffic
  216. 216. Server providers</li></ul>Established services- Online Marketing : Google/Facebook<br />-Payment Gateway : Paypal- Customer Service (Front side webservice) : Self- Customer Service (Product side) : Sellers- Delivery : Sellers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller:<br />Trustworthy online sellers with verifiable websitesBuyer:<br />Online shoppers who are willing to wait to get significant discounts on products<br /><ul><li> Web & App sales
  217. 217. Online social networks
  218. 218. Online advertising</li></ul>- Physical resources (IT infrastructure)- Existing social networks -Buyer and seller communities,- Brand awareness<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br /><ul><li>Variable costs: server and traffic maintenance costs- Fixed Cost: rent, salaries </li></ul>- Online ad campaigns<br />
  219. 219. Key Question for Business Canvass #4<br />Key Activities for Next Stage<br />Can we make enough money?<br />
  220. 220. Key Activity – Seller Management<br />We should manage main feedbacks from sellers by making basic function, <br />1. Convenient System<br /><ul><li>Auto Sales Tax Calculator
  221. 221. Bulk List Uploading Function
  222. 222. Notification to Sellers </li></ul> for relevant cravebags<br />2. Building credibility<br /><ul><li>FAQ List for Sellers
  223. 223. Share buyer information
  224. 224. F2F meeting with big sellers</li></ul>3. More Incentives<br /><ul><li>Cross selling Option
  225. 225. Seller Advertisement Feature</li></li></ul><li>Key Activity – Initial Advertisement<br />By price comparison site and online ads, test our early service model. Then, Crazy deals needed for jumping<br />2nd Active : Crazy Deals<br /><ul><li>20~30 % sales for Promotion Deals
  226. 226. Very very very famous products</li></ul>1st Passive : Online Ads<br /><ul><li>Google / Facebook / Yahoo Ads
  227. 227. Price Comparison Site ( very important)</li></li></ul><li>Key Activity – Encouraging Buyer’s Viral<br />We will implement incentive system for sharing deals and help buyers communicate with each other in our service<br />Incentive for sharing<br />Buyer Community<br />14%<br />22%<br />People who willing to share deals in FB*<br />People who shared deals<br />In FB*<br /><ul><li>OurCrave Point
  228. 228. Extra Discount
  229. 229. Free shipping or tax Coupon
  230. 230. Live comment on cravebags
  231. 231. Weekly Best cravebag vote
  232. 232. Youtube Ads Competition</li></ul>* OurCrave User Survey in 2/3 weeks<br />
  233. 233. Revenue / Cost Source<br />Revenue<br />Cost<br />Product Ads<br />Transaction Fee ( Main )<br />Float Money<br />Site Maintenance <br />Marketing ( Main )<br />Customer Support<br />Server/Traffic<br />/Mobie Apps<br />15% of transaction<br />Ads for buyer<br />Seller Management<br />3~5% ( paypal)<br />Outsourcing<br />20%/60days*<br />* google/groupon’s rule, we are asking sellers about this rule.<br />
  234. 234. Income Estimation<br />*<br /><ul><li>TRANSACTION FEE IS MAIN REVENUE
  235. 235. MARKETING COEST IS MAIN COST
  236. 236. BREAK-EVEN IS 3 DEALS/DAY</li></ul>*Appendix in Blogs<br />
  237. 237. Business Canvas Final<br />Seller: - More customer traffic<br /><ul><li>Bulk sales with reduced commission</li></ul>- Access to customer contact information <br /><ul><li> Cross-sell their products.- Site advertising- Power to create deals</li></ul>Buyer: - Better discounts<br />- Power to choose product deal<br />- Buyer community feedback on products and sellers<br /><ul><li> Sellers who need more traffic
  238. 238. Server providers</li></ul>Established services- Online Marketing : Google/Facebook<br />- Payment Gateway : Paypal- Customer Service (Front side webservice) : Self- Customer Service (Product side) : Sellers- Delivery : Sellers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br /><ul><li> Growing and maintaining online buyer/seller communities and credibilityof transactions- Promotionof website and brand </li></ul>- Establishing credibility<br />Multi-sided platformSeller:<br />Trustworthy online sellers with verifiable websitesBuyer:<br />Online shoppers who are willing to wait to get significant discounts on products<br /><ul><li> Web & App sales
  239. 239. Online social networks
  240. 240. Online advertising</li></ul>- Physical resources (IT infrastructure)- Existing social networks -Buyer and seller communities,- Brand awareness<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br />- float money<br /><ul><li>Variable costs: server and traffic maintenance costs- Fixed Cost: rent, salaries </li></ul>- Online ad campaigns<br />
  241. 241. Key Lessons<br />
  242. 242. Business Canvas – Week 1<br />Seller : - More customer traffic<br />- Bulk sales- Lower transaction feesBuyer : - Better discounts<br />- Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand <br />- Powerful sellers<br />- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller :pro-sellers on Amazon and eBayBuyer :Online shoppers<br />- Web & App sales <br />- Online social networks<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />Seller side:- transaction fees <br />Buyer side:- targeted ads <br />
  243. 243. Business Canvas – Week 2<br />Seller : - More customer traffic<br />- Bulk sales- Lower transaction fees- Brand name marketingBuyer : - Better discounts<br />- Power to choose product deal<br />- Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand <br />- Powerful sellers<br />- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller :pro-sellers on Amazon and eBayBuyer :Online shoppers<br />- Web & App sales <br />- Online social networks<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />Seller side:- transaction fees <br />Buyer side:- targeted ads <br />
  244. 244. Business Canvas – Week 3<br />Seller : - More customer traffic<br />- Bulk sales- Lower transaction fees- Brand name marketingBuyer : - Better discounts<br />- Power to choose product deal<br />- Buyer community feedback on products and sellers<br />- Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand <br />- Powerful sellers<br />-Regionalsellers<br />- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller :<br />Sellers on Amazon and eBayBuyer :Online shoppers who are willing to waitto get significant discounts on products<br />- Web & App sales <br />- Online social networks<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />Seller side:- transaction fees <br />Buyer side:- targeted ads <br />
  245. 245. Business Canvas – Week 4<br />Seller : - More customer traffic<br /><ul><li>Bulk sales- Lower transaction fees- Brand name marketingBuyer : - Better discounts</li></ul>- Power to choose product deal<br />- Buyer community feedback on products and sellers<br />- Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand <br />- Sellers who need more traffic<br />-Regionalsellers<br />- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller :<br />Sellers on Amazon and eBayBuyer :Online shoppers who are willing to waitto get significant discounts on products<br />- Web & App sales <br />- Online social networks<br />- Onlineadvertising<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />Seller side:- transaction fees <br />Buyer side:- targeted ads <br />
  246. 246. Business Canvas – Week 5<br />- Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand <br />Seller : - More customer traffic<br />- Bulk sales- Lower transaction fees- Brand name marketing<br /> - Access to customer contact information<br /> - Ability to cross-sell products<br /> - Site advertising<br />Buyer : - Better discounts<br />- Power to choose product deal<br />- Buyer community feedback on products and sellers<br />- Sellers who need more traffic<br />-Regionalsellers<br />- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller :<br />Sellers on Amazon and eBayBuyer :Online shoppers who arewilling to waitto get significant discounts on products<br />- Web & App sales <br />- Online social networks<br />- Onlineadvertising<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />- Online ads<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br />
  247. 247. Business Canvas – Week 6<br />Seller : - More customer traffic<br />- Bulk sales- Lower transaction fees- Access to customer contact information <br />- Cross-sell their products.- Site advertising- Power to create dealsBuyer : - Better discounts- Power to choose product deal- Buyer community feedback on products and sellers <br />- Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- promotion of website and brand <br />- Sellers who need more traffic<br />-Regionalsellers<br />- Server providers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller :<br />Sellers on Amazon and eBayBuyer :Online shoppers who arewilling to waitto get significant discounts on products<br />- Web & App sales <br />- Online social networks<br />- Onlineadvertising<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />- Online ads<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br />- float money<br />
  248. 248. Business Canvas – Week 7<br />Seller : - More customer traffic<br />- Bulk sales- Lower transaction fees- Access to customer contact information <br />- Cross-sell their products.- Site advertising- Power to create dealsBuyer : - Better discounts- Power to choose product deal- Buyer community feedback on products and sellers <br />- Platform/Networkmanagement (maintaining online buyer/seller communities and credibility)- Promotion of website and brand <br />- Sellers who need more traffic<br />- Regionalsellers<br />- Server providers<br />Established services- Online Marketing : Google/Facebook -Payment Gateway : Paypal- Customer Service (Front side webservice) : Self- Customer Service (Product side) : Sellers- Delivery : Sellers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platformSeller :Sellers on Amazon and eBay<br />Seller: <br />Trustworthy sellers with verifiable websites.Buyer :Online shoppers who arewilling to waitto get significant discounts on products<br />- Web & App sales <br />- Online social networks<br />- Onlineadvertising<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />- Online ads<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br />- float money<br />
  249. 249. Business Canvas – Week 8<br />Seller : - More customer traffic<br />- Bulk sales- Lower transaction fees- Access to customer contact information <br />- Cross-sell their products.- Site advertising- Power to create dealsBuyer : - Better discounts- Power to choose product deal- Buyer community feedback on products and sellers <br />- Platform/Networkmanagement (maintaining and growing online buyer/seller communities and credibility)- Promotion of website and brand<br />- Establishing credibility<br />- Sellers who need more traffic<br />Established services- Online Marketing : Google/Facebook -Payment Gateway : Paypal- Customer Service (Front side webservice) : Self- Customer Service (Product side) : Sellers- Delivery : Sellers<br />- Automated services- Communities of buyers and sellers- Co-creation of value through customer feedback <br />Multi-sided platform<br />Seller: <br />Trustworthy sellers with verifiable websites.Buyer :Online shoppers who are willing to wait to get significant discounts on products<br />- Web & App sales <br />- Online social networks<br />- Onlineadvertising<br />- Physical resources (IT infrastructure)- Existing social networks - Buyer and seller communities,- Brand awareness<br />- Variable costs: server and traffic maintenance costs- Fixed costs: rent, salaries<br />- Online ads<br />Seller side:- transaction fees <br />Buyer side:- targeted ads<br />- float money<br />
  250. 250. Pivot ExampleRobotic Weeding<br />Talked 75 Customers in 8 Weeks<br />
  251. 251. Our initial plan<br />Confidential<br />
  252. 252. 20 interviews, 6 site visits…We got OUR Boots dirty<br />Weeding<br />Visited two farms in Salinas Valley to better understand problem<br />Interviewed:<br /><ul><li>Bolthouse Farms, Large Agri-Industry in Bakersfield
  253. 253. White Farms, Large Peanut farmer in Georgia
  254. 254. REFCO Farms, large grower in Salinas Valley
  255. 255. Rincon Farms, large grower in Salinas Valley
  256. 256. Small Organic Corn/Soy grower in Nebraska
  257. 257. Heirloom Organics, small owner/operator, Santa Cruz Mts
  258. 258. Two small organic farmers at farmers market
  259. 259. Ag Services of Salinas, Fertilizer applicator</li></ul>Mowing<br />Interviewed:<br /><ul><li>Golf: Stanford Golf course
  260. 260. Parks: Stanford Grounds Supervisor, head of maintenance and lead operator (has crew of 6)
  261. 261. Toro dealer (large mower manufacturer)
  262. 262. User of back-yard mowing system
  263. 263. Maintenance Services for City of Los Altos
  264. 264. Colony Landscaping (Mowing service for stadiums)</li></ul>Confidential<br />
  265. 265. Business Plan Autonomous Vehicles for Mowing & Weeding<br />Dealers sell, installs and supports customer<br />Co. trains dealers, supports dealers<br />- Innovation<br />- Customer Education<br />- Dealer training<br />Mowing<br />- Owners of public or commercially used green spaces (e.g. golf courses)<br />- Landscaping service provider<br />Weeding<br />- Farmers with manual weeding operations<br />We reduce operating cost<br />- Labor reduction<br />- Better utilization of assets (eg mow or weed at nights)<br />- Improved performance (less rework, food safety)<br />- Dealers (Mowing and Ag)<br />- Vehicle OEMs (John Deere, Toro, Jacobsen, etc)<br />- Research labs<br />- Mowing Dealers<br />- Ag Dealers<br />Engineers on Autonomous vehicles, GPS, path-planning<br />Dealer discount <br />COGS seek a 50-60% Gross Margin<br />Heavy R&D investment <br />Asset sale<br />Our revenue stream derives from selling the equipment<br />
  266. 266. Autonomous vehiclesWEEDING<br />Dealers sell, installs and supports customer<br />Co. trains dealers, supports dealers<br />- Innovation<br />- Customer Education<br />- Dealer training<br />- Low density vegetable growers<br />- High density vegetable growers<br />- Thinning operations<br />- Conventional vegetables<br />We reduce operating cost<br />- Labor reduction (100 to 1)<br />- Reduced risk of contamination<br />- Mitigate labor availability concerns<br />- Ag Dealers<br />- Ag Service providers<br />- Research labs<br />- Ag Dealers<br />- Ag Service providers<br />Engineers on Machine Vision<br />Two problems:<br />- Identification<br />- Elimination<br />Dealer discount <br />COGS seek a 50-60% Gross Margin<br />Heavy R&D investment <br />Asset sale<br />Our revenue stream derives from selling the equipment<br />
  267. 267. 1 Week – 1 CarrotBot<br />Confidential<br />
  268. 268. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  269. 269. Marketing
  270. 270. Demo and customer feedback
  271. 271. Farming conventions.
  272. 272. Demo, demo, and demo!!
  273. 273. Proximity is paramount
  274. 274. Organic Farmers
  275. 275. Weeding Service Providers
  276. 276. Conventional Farmers
  277. 277. Cost Reduction
  278. 278. Remove labor force pains
  279. 279. Eliminate bio-waste hazards
  280. 280. Research Labs
  281. 281. Equipment Manufacturers
  282. 282. Distribution Network
  283. 283. Service Providers
  284. 284. IP – Patents
  285. 285. Video Classifier Files
  286. 286. Robust Technology
  287. 287. Dealers
  288. 288. Direct Service
  289. 289. Indirect Service
  290. 290. … then Dealers
  291. 291. Asset Sale
  292. 292. Direct Service with equipment rental
  293. 293. … then Asset Sale</li></ul>Value-Driven<br />
  294. 294. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  295. 295. Marketing
  296. 296. Demo and customer feedback
  297. 297. Farming conventions.
  298. 298. Demo, demo, and demo!!
  299. 299. Proximity is paramount
  300. 300. Mid/Large Organic Farmers
  301. 301. Agricultural corporations
  302. 302. Weeding Service Providers
  303. 303. Mid/Large Conventional Farmers
  304. 304. Cost Reduction
  305. 305. Remove labor force pains
  306. 306. Eliminate bio-waste hazards
  307. 307. Research Labs
  308. 308. Equipment Manufacturers
  309. 309. Distribution Network
  310. 310. Service Providers
  311. 311. IP – Patents
  312. 312. Video Classifier Files
  313. 313. Robust Technology
  314. 314. Direct Service
  315. 315. Indirect Service
  316. 316. … then Dealers
  317. 317. Direct Service with equipment rental
  318. 318. ($1,500/d; 120d/yr )
  319. 319. Low density: $1,500/d
  320. 320. High density: $6,000/d</li></ul>Value-Driven<br />
  321. 321. World Ag Expo interviews:the need is real and wide spread<br />10+ interviews at show<br />Everyone confirmed the need<br />Robocrop, UK based, crude competitor sells for $171 K<br />Revenue Stream<br />Mid to small growers prefer a service<br />Large growers prefer to buy, but OK with service until technology is proven<br />Charging for labor cost saved is OK, as we provide other benefits (food safety, labor availability)<br />Confidential<br />
  322. 322. The Business Plan Canvas Updated<br /><ul><li>Technology Design
  323. 323. Marketing
  324. 324. Demo and customer feedback
  325. 325. Farming conventions.
  326. 326. Demo, demo, and demo!!
  327. 327. Proximity is paramount
  328. 328. Mid/Large Organic Farmers
  329. 329. Agricultural corporations
  330. 330. Weeding Service Providers
  331. 331. Mid/Large Conventional Farmers
  332. 332. Research Labs
  333. 333. Equipment Manufacturer
  334. 334. Distribution Network
  335. 335. Service Providers
  336. 336. 2 or 3 Key Farms
  337. 337. Cost Reduction
  338. 338. Remove labor force pains
  339. 339. Eliminate bio-waste hazards
  340. 340. IP – Patents
  341. 341. Video Classifier Files
  342. 342. Robust Technology
  343. 343. Direct Service
  344. 344. Indirect Service
  345. 345. … then Dealers
  346. 346. Direct Service with equipment rental
  347. 347. Low density: $1,500/d
  348. 348. High density: $6,000/d</li></ul>Value-Driven<br /><ul><li> R&D
  349. 349. Bill of Materials
  350. 350. Training & Service
  351. 351. Sales</li></li></ul><li>Autonomous weeding - Final<br />Direct<br />- Provide high quality service at competitive price<br />- Innovation<br />- Customer Education<br />- Dealer training<br />- Low density vegetable growers<br />- High density vegetable growers<br />- Thinning operations<br />- Conventional vegetables<br />We reduce operating cost<br />- Labor reduction (100 to 1)<br />- Reduced risk of contamination<br />- Mitigate labor availability concerns<br />- Ag Service providers<br />- Research Institutes (eg UC Davis, Laser Zentrum Hannover)<br />- 3-4 key farms<br />Direct <br />- Alliance with service providers<br />- Eventually sell through dealers<br />Engineers on Machine Vision<br />Two problems:<br />- Identification<br />- Elimination<br />Costs for service provision<br />COGS seek a 50-60% Gross Margin<br />Heavy R&D investment <br />Service provision<br />- Charge by the acre with modifier according to weed density <br />- Eventually move to asset sale<br />
  352. 352. Why Startups Aren’t Run By Accountants<br />
  353. 353. Inventor of the Modern Corporation<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  354. 354. Inventor of the Modern Corporation<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Alfred P. Sloan<br />
  355. 355. Alfred P. Sloan<br />Scalable<br />Startup<br />Transition<br />Large Company<br />General Motors, President/Chairman<br /><ul><li> Cost Accounting
  356. 356. MIT Sloan School
  357. 357. Sloan Foundation
  358. 358. etc. </li></li></ul><li>Founder of General Motors<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  359. 359. Founder of General Motors<br />Scalable<br />Startup<br />Transition<br />Large Company<br />Billy Durant<br />
  360. 360. Billy Durant<br />Scalable<br />Startup<br />Transition<br />Large Company<br /><ul><li> Leader in horse-drawn buggy’s
  361. 361. Fired by board, starts Chevrolet
  362. 362. Regains control of GM
  363. 363. Fired by board, GM ~$3.6 billion*</li></ul>* GM Net sales in 1921 $304.5M = $3.6 Billion today<br />
  364. 364. Durant Versus Sloan<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  365. 365. Durant Versus Sloan<br /><ul><li>Dies, rich, honored and famous</li></li></ul><li>Durant Versus Sloan<br /><ul><li>Dies managing a bowling alley
  366. 366. Dies, rich, honored and famous</li></li></ul><li>Durant Versus Sloan<br />Accountant<br /><ul><li>Dies managing a bowling alley
  367. 367. Dies, rich, honored and famous</li></li></ul><li>You are here<br />Scalable<br />Startup<br />Transition<br />Large Company<br />
  368. 368. Carpe Diem<br />www.steveblank.com<br />
  369. 369. Thanks<br />www.steveblank.com<br />
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