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V2.renew your business model with the business model canvas.paul fox

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I discuss some typical errors in early business model development which can cause startups to fail before they get started. The focus is on lean startup, customer development, and the business model …

I discuss some typical errors in early business model development which can cause startups to fail before they get started. The focus is on lean startup, customer development, and the business model canvas, but I also talk about the job that needs to be done, the whole product, and trial and error (be scrappy!). I describe the case of intouch group, the first startup I worked at, to illustrate the business model canvas. Intouch raised over 40 million in venture financing, was pre-IPO, attracted over 1 million users, but ended up failing. i analyze some of the reasons why to start a discussion on some typical error patterns.

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  • 1. Page 1Renew Your Business Model with theBusiness Model CanvasPaul FoxRenew Your Business Model with theBusiness Model Canvas(some typical errors in early businessmodel development)Paul FoxAssociate ProfessorDirector, Máster en Digital EntrepreneurshipLa Salle – Universitat Ramon Llull
  • 2. Page 2Renew Your Business Model with theBusiness Model CanvasPaul FoxWho am I?• Worked for Startups: Fan Asylum, intouch Group,Vision Marketing• Intrapreneur: MCI Systemhouse (bought Apple’s datacenter when they were almost bankrupt)• Consulting: Diamondcluster - creating web businessesfor big companies• “Founder”: viajeria.com, allysguesthouse.com• Professor/Mentor: over 50 projects/year• Main Focus: Early business model development
  • 3. Page 3Renew Your Business Model with theBusiness Model CanvasPaul FoxThere are bad ideas…
  • 4. Page 4Renew Your Business Model with theBusiness Model CanvasPaul FoxAnd there are really bad ideaswww.howtobeadad.com www.montparnas.com
  • 5. Page 5Renew Your Business Model with theBusiness Model CanvasPaul FoxBut usually it’s not the idea – it’s a problemwith some part of the business modelNarrative test (the story doesn’t make sense)(Magretta (2002): Why Business Models Matter)• Stories are important, and the story needs to makesense to everybody.Success: Google has a great story for both users andadvertisers.(Potential) Failure:Groupon!• Businesses lose money• Attracts bargain shoppers• Doesn’t build loyalty
  • 6. Page 6Renew Your Business Model with theBusiness Model CanvasPaul FoxThe numbers test (the Profit and Loss doesn’t add up)(Magretta (2002): Why Business Models Matter)“Kozmo.com delivers videos, DVDs, CDs, books, andconvenience items(snacks, magazines, toiletries, householdproducts, flowers, beers etc.) to consumers within anhour, with no delivery charge and no order minimum.”Failure:"Convenience stores charge a premium for quick accessto last-minute purchases, so why charge a discount forthe ultimate convenience of home delivery?“In 2000: $120 million loss on $30 million in revenues with$35 million in delivery costs.
  • 7. Page 7Renew Your Business Model with theBusiness Model CanvasPaul FoxUsually, the problem isn’t the idea, it’s thebusiness modelwww.zebramc.com
  • 8. Page 8Renew Your Business Model with theBusiness Model CanvasPaul Foxintouch iStation 1992http://serverjs.org/mochazone/Anno1992%3AIntouchi-station/• Founded in 1990• Interactive music-samplingkiosk to try music before youbuy.• One of the largest databases ofmusic samples in the world.• Sample up to 5 tracks fromover 40,000 albums.
  • 9. Page 9Renew Your Business Model with theBusiness Model CanvasPaul FoxIntouch interfacehttp://serverjs.org/mochazone/Anno1992%3AIntouchi-station/
  • 10. Page 10Renew Your Business Model with theBusiness Model CanvasPaul Fox
  • 11. Page 11Renew Your Business Model with theBusiness Model CanvasPaul FoxIntouch facts• 50 units produced in 1993 at $50,000 each. Reaches511 by 1995.• Over $20 million in venture financing raised• Pre-IPO in 1993• 1.2 million registered users• 1995 removes kiosks from music stores
  • 12. Page 12Renew Your Business Model with theBusiness Model CanvasPaul FoxIntouch: What happened?Failed the numbers test and the narrative test(often they’re related)• Expensive hardware. Then the Internet exploded!• Expensive “artisan” recording of samples not scalable.• Story for music stores was difficult – resulted in someadditional sales, but of long tail cd’s. Made inventoryplanning more difficult• Story for music labels was all or nothing. And they saidno.– Music labels were both partners (rights to music samples) andcustomers (paying per sample).– Data showed that people bought more, but not the major artiststhe labels were promoting.– Music labels were essentially asked to pay to disruptthemselves.
  • 13. Page 13Renew Your Business Model with theBusiness Model CanvasPaul FoxFilling out a business model canvas is easy.Using it well, not so much!
  • 14. Page 14Renew Your Business Model with theBusiness Model CanvasPaul FoxKey Activities: what are the main things we’lldo every day to deliver the valueproposition(s)?
  • 15. Page 15Renew Your Business Model with theBusiness Model CanvasPaul FoxKey Resources: differentiation, or if you soldthe business, what would they be buying?
  • 16. Page 16Renew Your Business Model with theBusiness Model CanvasPaul FoxKey Partners reduce risk and add value:suppliers, distributors, advisors
  • 17. Page 17Renew Your Business Model with theBusiness Model CanvasPaul FoxValue Proposition
  • 18. Page 18Renew Your Business Model with theBusiness Model CanvasPaul FoxIdentify the job that needs to be donehttp://www.youtube.com/watch?v=s9nbTB33hbg
  • 19. Page 19Renew Your Business Model with theBusiness Model CanvasPaul FoxOnce you know the job that needs to be done,find the real problems!• “Healthy Table is an app that gives you fast, healthyrecipes for any three ingredients you have in therefrigerator”• So why is it so hard to get people to pay for this?• The job that needs to be done isn’t about findingrecipes, it’s getting a healthy meal on the table.• Who has this need? What do they do now?• Problems?– No time– Can’t cook– Need other ingredients– Lazy– …
  • 20. Page 20Renew Your Business Model with theBusiness Model CanvasPaul FoxThe Whole Product• “Easy Parking is an app that helps youfind, reserve, and pay for street parking”• Error: an app by itself may not solve the problemwww.libelium.comwww.toledoblade.comwww.streetsblog.org
  • 21. Page 21Renew Your Business Model with theBusiness Model CanvasPaul FoxSolution: Positioning Statement from GeoffreyMoore
  • 22. Page 22Renew Your Business Model with theBusiness Model CanvasPaul FoxExplain the proposition in detail• For music lovers who want to travel in style• who love to communicate and mix work andplay, anywhere, anytime• the iPhone is a smart phone AND an iPod, AND anInternet device.• that offers Apple’s legendary ease-of-use, elegance, intuitive integration, and cool.• Unlike RIM Blackberry and Palm Treo• Apple iPhone offers great quality phone calls, fasterbrowsing, music and movies, and photos that cometo life, all on a big screen in the palm of your hand.
  • 23. Page 23Renew Your Business Model with theBusiness Model CanvasPaul FoxCustomer Segments
  • 24. Page 24Renew Your Business Model with theBusiness Model CanvasPaul FoxCustomer Segments: A customer segment ispeople who share the same pain and speakthe same language – Brant CooperBe Specific!
  • 25. Page 25Renew Your Business Model with theBusiness Model CanvasPaul FoxNo, be more specificwww.gentlechortle.com
  • 26. Page 26Renew Your Business Model with theBusiness Model CanvasPaul FoxEven more specific: Personashttp://followsprocess.wordpress.com/2010/11/14/facilitating-data-driven-personas/
  • 27. Page 27Renew Your Business Model with theBusiness Model CanvasPaul FoxBut segments should not based ondemographics, psychographics, or any otherkind of -graphicsThe Lean Entrepreneur
  • 28. Page 28Renew Your Business Model with theBusiness Model CanvasPaul FoxDon’t start with 10 segments!Rank your segmentsPick one or two main onesThe Lean Entrepreneur• Depth of pain• Budget• Ease of reach• Ease of MVP (minimum viable product)• Values
  • 29. Page 29Renew Your Business Model with theBusiness Model CanvasPaul FoxYou need to focus on both the user level andthe strategic level simultaneously• Strategic Level (Business plans are verystrategy-focused).– Competitive and Market analysis– Market sizing– Operations plan– Financial analysis– Important for raising financing• Too strategy-focused: Webvan (invested $1billion in infrastructure before gettingcustomers)
  • 30. Page 30Renew Your Business Model with theBusiness Model CanvasPaul FoxYou need to focus on both the user level andthe strategic level simultaneously• User Level (Lean Startup is very user-focused)– Target really specific customer segments– Design thinking: get deep understanding of contextof use– Agile development: Test obsessively and iterate.• Too user-focused: Instagram (sold to Facebookfor $1 billion but had no revenue model)• Successful startups manage at the strategicand user levels simultaneously.
  • 31. Page 31Renew Your Business Model with theBusiness Model CanvasPaul FoxTest the Model“Get out of thebuilding.”
  • 32. Page 32Renew Your Business Model with theBusiness Model CanvasPaul FoxTest the Model“Everyone has aplan until they getpunched in theface”
  • 33. Page 33Renew Your Business Model with theBusiness Model CanvasPaul FoxGetting out of the building isn’t easy…Trial, error and the God complexhttp://www.ted.com/talks/tim_harford.html• God complex: no matterhow complicated theproblem, you have anoverwhelming belief that youare right in your solution.• Trial and error works betterthan the solutions of “littleGods” (experts).• It’s very difficult to make“good mistakes”• Fail forward!
  • 34. Page 34Renew Your Business Model with theBusiness Model CanvasPaul FoxBe Scrappy!http://www.bbc.co.uk/news/10323197"The key is being scrappy. Itsthe guys that they see an ideaand they dont know howtheyre going do it but theyregoing to try everything and justfight and claw and keepadapting, keep trying things."
  • 35. Page 35Renew Your Business Model with theBusiness Model CanvasPaul FoxThe “Now What” syndrome?• What happens when you fail?• Do you give up?• Do you try one more thing?• Do you try 10 more things?• Do you ask for help when you run out of things?• Often the difference between success and failure isyour level of SCRAPPINESS.
  • 36. Page 36Renew Your Business Model with theBusiness Model CanvasPaul FoxBe Scrappy! Keep trying stuff.What do we call this?Disappointment?The comfort zone?Vacation from Scrappiness?
  • 37. Page 37Renew Your Business Model with theBusiness Model CanvasPaul FoxConclusions• The business model canvas is easy to use, but difficult to use well.• Make sure the story makes sense for everyone, and that thenumbers add up.• Find the pain and solve real problems.• Make sure you’ve identified the real job that needs to be done.• Focus on the whole product – find partners if you need them.• Segment – start with a small segment, then find others.• Work at the strategic and user levels simultaneously.• Get out of the building and test.• Be scrappy and fail forward!
  • 38. Page 38Renew Your Business Model with theBusiness Model CanvasPaul FoxThank you!@profefox paulbfox

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