Business Idea Generation for Management Consultants & Managers

1. 1 Business Idea Generation for Management Consultants & Managers Practical guide how to come up with killer business ideas

2. 2 To build a business you need a good idea that you can explore and develop. Unfortunately, coming up with a good business idea is not easy

3. 3 Most firms and universities don’t show how to come up with a business idea. They concentrate on teaching you how to run existing business

4. 4 In this course I will show you different methods to come up with killer business ideas.

5. 5 Target Group What you will learn What you will get  Management Consultants & Business Analysts  Managers  Analysts working in Strategic Departments  Startup Founders  How to come up with business ideas by improving existing products, solving existing problems  How to build add-on business using your current business  Case studies  Ready made analyses in Excel  List of Recommended readings (articles, books)

6. 6 Jobs to be done Build on existing businessImproving existing things There are several sources from where you can get ideas for your business. We have divided them into 3 sections

7. 7 What you will see in this presentation is a part of my online course where you can find case studies showing analyses along with detailed calculations in Excel Business Idea Generation for Management Consultants $190 $19 Click here to check my course

8. 8 Improving Existing Things

9. 9 Improving Existing Things – Introduction

10. 10 It’s always a good idea not to build in vacuum but have a good starting point. You can for example improve already existing business or solve existing problem better.

11. 11 Carve out existing business Cloning 1 to 1Solve your own problem Blue OceanIdea Cloning 10 x current solution using first principals In this section we will look at how you can build a business by simply improving already existing business or solving existing problem Ride a trendFrom Free to Paid Disrupt others

12. 12 Do what you have done but on your own

13. 13 One of the easiest way to start business is to do what you have done so far but become independent. In other words do it on your own

14. 14 Consulting  Bain & Company – was created by ex BCG employees  Kolaja & Partners – was created by ex McKinsey  Alvarez & Marsal – was created by ex PwC (Coopers & Lybrand at that time) B2C Services  Restaurants  Language Schools  Beauty salons / Hairdresser B2B Services  Transportation companies  Architects & Designers  Lawyers  SaaS i.e. Zoom creator was previously developing WebEx for Cisco E-commerce  Small companies that started selling through Amazon of 3rd party products start selling their own products  Some of them also set-up their own websites FMCG  Sport equipment: Puma was founded by Rudolf Dassler who used to co-created Adidas; Nike was selling shoes made in Japan before starting his own brand  Sports drink (i.e. Polish brand Oshee started by people who worked for Foodcare – another beverage brand)  Supplements and nutrients  Yves Saint Laurent was working previously for Dior  Tom Ford was working previously for Gucci and Yves Saint Laurent This principal have been applied numerous times in many industries

15. 15 Going on your own requires low capital No license is required A lot of small / medium customers Customers can easily switch from the current solution to your solution You know how to do it better than current players You know how to do it cheaper than current players This method is great under some conditions

16. 16 Start working in a firm which you want to copy Gain experience Define what you want to specialize in Develop and improve the business plan Create your own firm  Start working and learning in company which is interesting to you  Make sure that later on you can do this on your own  Make sure there are no legal or other barriers  Learn the processes  Identify the competitive advantages  Build relationships with customers  This usually takes 2- 5 years  Using your experience define how the future business will look like  You can do exactly the same or you change the customer group, pricing, limit or expand the product range  Make sure using Excel model that the business is viable before you start it  Identify what assets, people you have to have to be profitable fast  Try to acquire them before you leave the firm  Would be greate if you can take the customers will you  Leave the current firm  Create your own firm To use this method you first have to gain experience by working for others

17. 17 Solve your own problem

18. 18 Solving your own problem is another nice way to create a business. You know very well the customers because you are a customer yourself.

19. 19 Guess the problem Research customer segments Create MVP Learn how to sell & market the product Create a scalable business  Think about problem you have or others have  Group customers by common attributes or characteristics  Conduct consumer & market research  Learn what matters to them, what is the real problem  Learn how current solutions fail and what has to be done to improve their lives  Collect the maximum amount of validated learning about customers  Create a prototype of the product (MVP) and test it on customers  Use the learnings to improve the product  You modify the product till you reach product- market-fit  Using the research test how you can sell and market the product to your customers  Create the final version of the product  Create a business that will produce and sell the product  Scale the business Most startups when they try to create a business have to go through the following process

20. 20 Guess the problem Research customer segments Create MVP Learn how to sell & market the product Create a scalable business When you are doing products for people like you 50% of the work is done because you know intimately the customer Areas that still need to be developed

21. 21 Let’s have a look at some examples of firms that have solved their own problem and by accident created a viable business Codecademy  Codeacademy was created to help people around the world gain the skills they need to find a job  The founders of the company, as students saw the potential on the US market for programming schools. One of the founder was terrible at coding so they have decided to solve his own problem  They started an online interactive platform that offers free coding classes in 12 different programming languages Airbnb  The idea of the Airbnb was created to help people who are looking for accommodation and not expensive place to stay  Two roommates came across this idea by accident. They provide a place to sleep to people who came to the design conference in San Francisco and had problems with finding a hotel  Currently, the Airbnb is one of the biggest online marketplace that connects people who want to rent out their homes with people who are looking for accommodations in that locale Amazon Web Service (AWS)  AWS is a subsidiary of Amazon that provides a secure cloud platform and infrastructure service for private and commercial users.  AWS was created first for internal need of Amazon, to deal with the hyper growth and development the company was experiencing and the need for servers.  The services was so good that they started offering it to external customers Fulfilment by Amazon  Amazon to grow their sales had to build a professional logistics and warehousing service all over the USA.  At some point Amazon decided to allow sellers to use their own warehouse infrastructure and transport to reduce costs and increase sale. This is know as Fullfilment By Amazon (FBA)  In FBA the Sellers can use Amazon network of fulfillment centers to store, pick, pack and ship customer’s orders for a predictable fee Tesla batteries  Tesla for the cars production is using electric battery cells.  Due to a problem with the availability of suitable batteries and the high prices of those batteries, Tesla has decided to start its own production of these components. Moving into own battery production helps company to control production, reduce exposure to price increases from battery manufacturers and scale production  It also is attempting to sell the batteries as a standalone product (Powerwalls)

22. 22 For this method to work certain conditions have to be met Sufficient group of customers Problem is a real pain in the ass There are quite a lot of customers willing to pay for the solution You have a way to solve this problem better than others You can reach potential customers cheaper than others Niche problem – main players will not be interested in solving it

23. 23 Carve out existing business

24. 24 Carving out a piece from an existing business is interesting option to build a new business. Usually you already have a customer base and ways to deliver value

25. 25 Let’s have a look at some examples of businesses that were created by carving out part of the business Integrated Airlines Aircraft Maintenance Handling luggage on airports Airports Management Pure Airlines Plane Leasing Cars Tiers Production Seats Production Car design Production of cooling systems Domestic Appliances Production of Engines Production of Aluminum elements Production of metal elements Drugs / Pharmaceuticals Clinical Testing Packaging Production Research Real estate Construction Supervision Design Investment Car assembling Domestic appliances assembling Wholesaling & Distribution Retail

26. 26 Usually the carving out is a 2 stage process Integrated Firm Business Unit 2 Business Unit 3 Business Unit 4 Business Unit 1 Business Unit 5 Business Unit 2 Business Unit 3 – carved out into new firm Business Unit 4 Business Unit 1 Business Unit 5 – carved out into new firm

27. 27 This option becomes interesting in the following situations The firm is huge and inefficient It provides low level of service The firm has a high cost of delivery The firm has not reached economies of scales for specific part of their business The industry requires big investments High failure rate

28. 28 Cloning 1 to 1

29. 29 One of the most interesting methods is simply to clone a successful business from the original market to a new market. You make almost exact copy of the original business

30. 30 Let’s have a look at some examples of successful cloning Original concept Original country Clone Clone country Amazon Ebay Zappos Zara (Inditex) Audible Alibaba Allegro Zalando LPP Audioteka South West Airlines Ryanair

31. 31 Cloning 1-1 is great idea to create a business but under certain conditions The new market is similar to the original market The new market is big enough to cover the required expenses The new market cannot be easily accessed by the original concept The creator of the original concept is not interested in your market There are some serious legal barriers preventing the original concept from entering The original concept requires a lot of adjustments for the new market The product requires some localization – adjustment to the new market The original concept wants to have 1- size fits all

32. 32 Cloning 1 to 1 can be done using a 5-stage process Find an idea from developed markets Check whether it would make sense on your market Adjust the business model Clone the business Scale the business on the new market  Not in every area there is a clear leader (due to consumer preferences, technology etc.)  Find this market and observe for interesting ideas and clear winners  Once you find an interesting model you should check whether you can build similar product / business on your market  The market usually should have similar customer groups and not to be too distant in development from the original market  Usually there will be some modification of the product range  You will also have to do adjustments due to difference in earnings, costs  New market may also require different method of delivery or different sales channel  Build the business after the adjustment on the new market  If needed further modify  Most modification are around customer experience, prices, further product adjustment  If the business reached product- market fit scale it as fast as possible  Your exit strategy is quite often to sell the business to the very business you have copied

33. 33 Let’s have a loot at some examples of successful cloning Original concept Original country Clone Clone country Amazon Ebay Zappos USA USA USA Zara (Inditex) Audible Alibaba Allegro Zalando LPP Audioteka China Poland Germany Spain Poland USA Poland South West Airlines RyanairUSA Ireland

34. 34 Idea Cloning

35. 35 Some business ideas are coming from an attempt to apply famous concept to a new industry. This has produced a lot of interesting businesses and can be used in wide range of industries

36. 36 This idea cloning can be described using the following formula New concept Famous formula New industry / market is for Presentationis Scootersis for Online coursesis for for Furnitureis for

37. 37 There are 4 main ways to clone an idea using this framework Idea cloning Narrow down target group Change the product Innovative Revenue Streams Change Operations Business Model  Subset of the original target group ≈ Target Group Product Pricing  Different than in the original concept  Different than in the original concept  Different than in the original concept ≈

38. 38 Let’s have a look at some examples Grindr Bumble Tinder for gay Tinder – only female users can make the first contact with male users Superhuman email Gmail with new features Macdonald with Mexican foodTaco bell restaurant / Chipotle Salad story Audible Macdonald with salads Kindle for audiobooks Spotify ITunes for music paid by subscribers in a form of a subscription Instacart Webvan for food delivery but done from local stores Narrow down target group Change the product Innovative Revenue Streams Change Operations

39. 39 Blue Ocean – How to Generate Business Ideas

40. 40 Blue Ocean is a great framework that can be used to generate business ideas by observing existing industries and looking for unsatisfied customer, non-users

41. 41 In the next few lectures we will have a look how to use it in practice Non-users 4 action framework used in Blue Ocean What is Blue Ocean Case studies of successful application of Blue Ocean 6 paths to achieve Blue Ocean

42. 42 Blue Ocean – Introduction

43. 43 Let’s have a look at a Blue Ocean Strategy  The strategy in which instead of competing in the current market segmentation you look for a niche / market where there is no competition or very less competition  In this approach you search for a business in which only a few firms operate and where there is no pricing pressure  In Blue Ocean Strategy through value innovation, diversification and low cost you try to achieve a significant and profitable growth of the company  In Blue Ocean Strategy you redefine the market and concentrate on non- users.  You try to create a center of gravity that will suck customer from other markets / niches / strategic groups Blue Ocean Strategy =

44. 44 Hotels Online services Retail Blue ocean strategy was successfully implemented by many companies from different industries Entertainment Transport B2B

45. 45 There are few main characteristics of Blue Ocean Strategy Avoid head to head competition Taping into non-users No industry boundaries Value innovation. Break the value- cost trade off Looking for high profit and growth opportunity niches Align the whole business to pursue diversifications Low costs – you do not spend money on things of little value Creates quite often entirely new markets

46. 46 Blue Ocean – Non-users

47. 47 The non-users can be divided into 3 groups Current Market First Tier Purchase only out of necessity, are on the edge of market and wait to join Second Tier Non-users that ignore your industry consciously Third Tier Non-users that have never consider your product

48. 48 Let’s have a look how this tiers look like for Yellow Tail – an Australian wine that is much simpler and cheaper drink than regular wine Wine market First Tier Occasional wine drinkers Second Tier Drinkers of easier to consume alcohols: beer, drinks Third Tier All people who drink water Yellow Tail wine – easy to drink /does not require any knowledge about wine

49. 49 There are few main characteristics of Blue Ocean Strategy Player 1 Player 3 Player 2 Player 4 Player 1 Player 3 Player 2 Player 4 Niche of Blue Ocean

50. 50 Blue Ocean Strategy – 4 action framework

51. 51 Bellowed 4 action framework which can be used to redefine and redesign the current company strategy into the blue ocean strategy Eliminate Reduce Raise Create All aspects that are not value added for company and customers Certain (not important to the customer) aspects below industry standards Additional value for the customers. Which features should be above the industry standard? Innovative products or services. Create things that the industry has never offered

52. 52 Blue Ocean Strategy – 6 paths to achieve it

53. 53 You can reach Blue Ocean by taking one of the six paths. You can look across Industry Strategic Groups Buyer Groups Complimentary Products Functional / Emotional Orientation Time Red Ocean Blue Ocean

54. 54 You can reach Blue Ocean by taking one of the six paths. You can go across Industry Strategic Groups Buyer Groups Complimentary Products Functional / Emotional Orientation Time Red Ocean Blue Ocean

55. 55 Starbucks Coffee

56. 56 0 20 40 60 80 100 Price Production costs # Food products Quality Brand Location Customer service Variety Starbucks Coffe Competitors Starbucks has been very successful in implementing blue ocean strategy Wide range of products Customer experience – selling not the coffee but rather the place to meet High product quality - ethically, sustainably grown coffee (C.A.F.E.) Value innovation High market penetration and short distance to the closest Starbucks High standard service and low prices

57. 57 The company is also innovative in many fields of its activity New flavors Happy hours Free Wi-Fi Free birthday treat Mobile ordering

58. 58 Starbucks has created strong accessibility. This is due to the fact that stores are located close to each other to make it easier for customers to buy a cup of coffee

59. 59 CitizenM

60. 60 CitezenM is an example of company that has created a new market space in hotel industry Relatively low prices High standard – they kept what is important from the 5-start hotels and removed the rest 0 20 40 60 80 100 Price Front desk Restaurants Room type Room size Room standard Location Self check in Luxury hotels Three-star hotels CitizenM Value innovation Build from premanufactured sleeping rooms

61. 61 They created an affordable luxury hotels which have a great standard - like 5- star hotels. They were many things that the have added / raised to make the experience similar to 5-star hotel High boutique standard High quality of sleeping environment Good locations Free extras

62. 62 CitizenM offers a stay in very affordable prices, like in 3-star hotels, This together with a high standard creates a big competitive advantage. To achieve this they had to eliminate or reduce some aspects No front desk No restaurants No lobby Limited room type and size Lower prices than in 5-star hotel

63. 63 Thanks to this they achieved great results Occupancy rate – 90% Labor costs – 50% lower Cost of construction – 35% lower Construction time – down by up to 50% Premanufactured sleeping rooms

64. 64 Zappos

65. 65 Zappos is one of the online retailers who decided to move into a blue oceans Low prices Value innovation New market 0 20 40 60 80 100 Price Shipping costs Costs of returns Frequency of promotions Variety Delivery speed Customer assistance Zappos Online retailers Customer experience

66. 66 Variety High delivery speed 24h customer assistance Free shipment Customer experience They created a unique online service where customer can order a batches of shoes to try them on and send them back for free if they do not fit

67. 67 Zappos was able to lower the services costs thanks to few things Long return time Close warehouse location Close relations with business partners Changing shipping cost to a marketing cost Increasing sales through returns

68. 68 10 x current solution using first principals

69. 69 One of the ways in which you can come up with new business ideas is to use the 10x framework where you resort to so called first principals. This is favorite method of Elon Musk

70. 70 There are 3 main ways in which you can improve existing business. This will help you come up with the proper business idea Improving existing business Make it faster Make it better Make it cheaper Ikea Dell MacDonald Uber Apple

71. 71 Let’s see how you can use this technique Identify what you want to improve Identify the business drivers of the business Estimate the impact of the drivers on your business Select what and how you would like to change Implement the changes  Think about whether you want your product, service to be cheaper, faster or better  Select one or up to two features you want to improve  Learn what are the drivers of your business  Identify how drivers affect your business and your results  Prepare the calculation in Excel  See what has to change in terms of each and every driver to achieve the goal of 10x the specific feature (cost, speed, customer satisfaction)  Choose a few drivers that you want to change to make your product cheaper, better or faster  Decide how you would like to change them  Implement the selected changes to your business  Remember to monitor the progress of changes during and after the implementation to be sure that you have achieved your goal

72. 72 Reduce water using 10x framework – Case Introduction

73. 73 Let’s imagine that you want to drastically reduce the usage of water. Use the 10x framework to achieve this

74. 74 You don’t know what is your water consumption currently You want to estimate both direct and indirect water consumption Direct involves bathing, drinking water, using water for cleaning A few information about the problem Indirect involves the usage of water for producing products for you

75. 75 Just as a reminder below the 10x framework that I recommend using Identify what you want to improve Identify the business drivers of the business Estimate the impact of the drivers on your business Select what and how you would like to change Implement the changes  Think about whether you want your product, service to be cheaper, faster or better  Select one or up to two features you want to improve  Learn what are the drivers of your business  Identify how drivers affect your business and your results  Prepare the calculation in Excel  See what has to change in terms of each and every driver to achieve the goal of 10x the specific feature (cost, speed, customer satisfaction)  Choose a few drivers that you want to change to make your product cheaper, better or faster  Decide how you would like to change them  Implement the selected changes to your business  Remember to monitor the progress of changes during and after the implementation to be sure that you have achieved your goal

76. 76 Reduce water using 10x framework – Drivers

77. 77 Just as a reminder you want to drastically reduce the usage of water. Use the 10x framework to achieve this

78. 78 You don’t know what is your water consumption currently You want to estimate both direct and indirect water consumption Direct involves bathing, drinking water, using water for cleaning A few information about the situation Indirect involves the usage of water for producing products for you

79. 79 The general 10x framework using first principles looks like this Identify what you want to improve Identify the business drivers of the business Estimate the impact of the drivers on your business Select what and how you would like to change Implement the changes  Think about whether you want your business to be cheaper, faster or better  Select one or up to two features you want to improve  Learn what are the drivers of your business  Identify how drivers affect your business and your results  Prepare the calculation in Excel  See what has to change in terms of each and every driver to achieve the goal of 10x the specific feature (cost, speed, customer satisfaction)  Choose a few drivers that you want to change to make your business cheaper, better or faster  Decide how you would like to change them  Implement the selected changes to your business  Remember to monitor the progress of changes during and after the implementation to be sure that you have achieved your goal

80. 80 Let’s apply it to our case study  We want to reduce water consumption expressed in liters of water  We will look at direct and indirect consumption  The main drivers affecting your water consumptions are: o Frequency of consumption o # of liters consumed / used per consumption  We will look at drivers for different categories: Bathing, Drinking water, Water used for growing vegetables, producing meat, clothing, cleaning dishes Identify what you want to improve Identify the business drivers of the business Estimate the impact of the drivers on your business Select what and how you would like to change Implement the changes

81. 81 Now let’s see what the water consumption depends on Bathing Drinking water Water used for growing vegetables Total water consumption Water used for producing meat Water used for producing clothing's Water used for cleaning the dishes Other sources +

82. 82 Now let’s see what the water consumption depends on # of times you take a bath Water usage per 1 bathing xBathing Drinking water Water used for growing vegetables Total water consumption Water used for producing meat Water used for producing clothing's Water used for cleaning the dishes Other sources +

83. 83 Now let’s see what the water consumption depends on # of days # of liters that you drink per day x Bathing Drinking water Water used for growing vegetables Total water consumption Water used for producing meat Water used for producing clothing's Water used for cleaning the dishes Other sources +

84. 84 Now let’s see what the water consumption depends on # of days Amount of vegetables eaten per day Water required to grow 1kg of vegetables x Bathing Drinking water Water used for growing vegetables Total water consumption Water used for producing meat Water used for producing clothing's Water used for cleaning the dishes Other sources +

85. 85 Now let’s see what the water consumption depends on # of days Amount of meat eaten per day Water required to produce 1 kg of meat x Bathing Drinking water Water used for growing vegetables Total water consumption Water used for producing meat Water used for producing clothing's Water used for cleaning the dishes Other sources +

86. 86 Now let’s see what the water consumption depends on # of pieces of clothing bought a month Water required to produce 1 piece x Bathing Drinking water Water used for growing vegetables Total water consumption Water used for producing meat Water used for producing clothing's Water used for cleaning the dishes Other sources +

87. 87 Now let’s see what the water consumption depends on # cleanings per month Water usage per 1 cleaning x Bathing Drinking water Water used for growing vegetables Total water consumption Water used for producing meat Water used for producing clothing's Water used for cleaning the dishes Other sources +

88. 88 Let’s have a look at the following options Currently  You use water for all needed activities  You don't make any changes to your behavior or habits Description of the options Option 1 – change of frequencies  You limit the frequency of performed activities Option 2 – change of frequencies, mix  You limit the frequency of performed activities  You change your behavior by reducing the meat and increasing the vegetables consumption Option 3 – change of frequencies, mix & method  You limit the frequency of performed activities  You change your behavior by reducing the meat and increasing the vegetables consumption  You change the bathing method by pouring less water into the bathtub or showering faster Option 4 – change of frequencies, mix, method & technology  You limit the frequency of performed activities  You change your behavior by reducing the meat and increasing the vegetables consumption  You change the bathing method by pouring less water into the bathtub or showering faster  You use brand new technologies (i.e. meat grown artificially, atomizing shower system like Nebia)

89. 89 Reduce water using 10x framework – Summary

90. 90 Just as a reminder you want to drastically reduce the usage of water. Use the 10x framework to achieve this

91. 91 You don’t know what is your water consumption currently You want to estimate both direct and indirect water consumption Direct involves bathing, drinking water, using water for cleaning A few information about the situation Indirect involves the usage of water for producing products for you

92. 92 We looked at 4 options that can help us get to the target Currently  You use water for all needed activities  You don't make any changes to your behavior or habits Description of the options Option 1 – change of frequencies  You limit the frequency of performed activities Option 2 – change of frequencies, mix  You limit the frequency of performed activities  You change your behavior by reducing the meat and increasing the vegetables consumption Option 3 – change of frequencies, mix & method  You limit the frequency of performed activities  You change your behavior by reducing the meat and increasing the vegetables consumption  You change the bathing method by pouring less water into the bathtub or showering faster Option 4 – change of frequencies, mix, method & technology  You limit the frequency of performed activities  You change your behavior by reducing the meat and increasing the vegetables consumption  You change the bathing method by pouring less water into the bathtub or showering faster  You use brand new technologies (i.e. meat grown artificially, atomizing shower system like Nebia)

94. 94 Let’s summarize what we have done  We want to reduce water consumption expressed in liters of water  We will look at direct and indirect consumption  The main drivers affecting your water consumptions are: o # of water liters consumed o Time of consumption o Frequency of consumption  We will look at exact drivers for different categories: Bathing, Drinking water, Water used for growing vegetables, producing meat, clothing, cleaning dishes Identify what you want to improve Identify the business drivers of the business Estimate the impact of the drivers on your business Select what and how you would like to change Implement the changes  The biggest impact comes from reducing meat consumption and buying fewer clothes  We would implement Option 3  Option 4 requires in most cases a cheaper technology  To get to 10x we most likely have to further reduce certain activities

95. 95 Let’s summarize what every option helps us achieve 77 30 28 23 9 Current water consumption Option 1 - change of frequencies Option 2 - change of frequencies, mix Option 3 - change of frequencies, mix & method Option 4 - change of frequencies, mix, method & technology Monthly water consumption In thousands of liters

96. 96 We can also look at the incremental impact of every option 77 47 2 5 14 9 Current water consumption Option 1 - change of frequencies Option 2 - change of frequencies, mix Option 3 - change of frequencies, mix & method Option 4 - change of frequencies, mix, method & technology Target water consumption Monthly water consumption and incremental reduction delivered by options In thousands of liters

97. 97 Let’s also look at the reduction by type of usage. The biggest impact is from reducing the meat consumption and buying less clothes 5 0 2 42 19 1 0 68 Bathing Drinking Water Water Used for growing vegetables Water used for producing meat Water used for producing clothing Water for cleaning the dishes Other sources Total Monthly reduction in water consumptions by type of usage In thousands of liters

98. 98 For more details and content check my online course where you can find case studies showing analyses along with detailed calculations in Excel Business Idea Generation for Management Consultants $190 $19 Click here to check my course

99. 99 Decrease cost using 10x framework – Case Introduction

100. 100 Let’s imagine that you are an owner of a bus company and you want to find a way to make the cost per 1 seat cheaper. Use the 10x framework

101. 101 They have 300 buses Currently they use 1-floor diesel buses They want to dominate the European market A few information about the firm To achieve that they need to lower the cost per 1 seat

103. 103 Decrease cost using 10x framework – Drivers

104. 104 Just as a reminder you are an owner of a bus company and you want to find a way to make the cost per 1 seat cheaper. Use the 10x framework

107. 107 Let’s apply it to our case study  You are the owner of a bus company that transports people from city A to B  You want to lower the cost per seat 10x  The main drivers affecting your business are: o Number of customers o Cost per km / hour o Duration or the distance of the trip  We will look at 4 main groups of costs: driver costs, fuel, maintenance cost and leasing cost Identify what you want to improve Identify the business drivers of the business Estimate the impact of the drivers on your business Select what and how you would like to change Implement the changes

108. 108 Profit from any trip will depend on 2 things: revenue and costs Profit from the trip Revenue from tickets sales Costs of the trip -

109. 109 Revenues will depend on 2 things as well: price of a ticket and number of seats Profit from the trip Revenue from tickets sales Costs of the trip x Price for 1 ticket # of seats (potential customers) % Utilization x

110. 110 We have 4 main cost positions Profit from the trip Revenue from ticket sales Costs of the trip - Cost of the driver Cost of fuel Cost of maintenance Cost of leasing +

111. 111 Let’s have a look what the cost of the driver depends on Profit from the trip Revenue from ticket sales Costs of the trip - Cost of the driver Cost of fuel Cost of maintenance Cost of leasing + Average salary per hour # of drivers # hours (duration of the trip) x

112. 112 Let’s have a look what the cost of the fuel depends on Profit from the trip Revenue from ticket sales Costs of the trip - Cost of the driver Cost of fuel Cost of maintenance Cost of leasing + Cost of fuel per 1 km # km (trip length) x

113. 113 Let’s have a look what the cost of the maintenance depends on Profit from the trip Revenue from ticket sales Costs of the trip - Cost of the driver Cost of fuel Cost of maintenance Cost of leasing + Average cost of maintenance per 1 km # km (trip length) x

114. 114 Let’s have a look what the cost of leasing depends on Profit from the trip Revenue from ticket sales Costs of the trip - Cost of the driver Cost of fuel Cost of maintenance Cost of leasing + Purchasing price of the bus # of km that the bus will be used ÷ # km (trip length) x

115. 115 In our drive to lower the costs 10x we will consider 3 scenarios Currently  For transporting people you use a standard, one-floor bus driven by gasoline Description of the options Option 1 – change bus model  You change the bus model from one-floor to two-floor bus to increase the number of potential customers  Your bus still uses gas / petrol Option 2 – change bus model and power supply  You change the bus model from one-floor to two-floor bus to increase the number of potential customers  Your also switch to electric engine Option 3 – change bus model, power supply and self driving  You change the bus model from one-floor to two-floor bus to increase the number of potential customers  Your also switch to electric engine  The bus is self-driven

116. 116 Decrease cost using 10x framework – Summary

117. 117 Just as a reminder you are an owner of a bus company and you want to find a way to make the cost per 1 seat cheaper. Use the 10x framework

119. 119 In our drive to lower the costs 10x we considered 3 scenarios Currently  For transporting people you use a standard, one-floor bus driven by gasoline Description of the options Option 1 – change bus model  You change the bus model from one-floor to two-floor bus to increase the number of potential customers  Your bus still uses gas / petrol Option 2 – change bus model and power supply  You change the bus model from one-floor to two-floor bus to increase the number of potential customers  Your also switch to electric engine Option 3 – change bus model, power supply and self driving  You change the bus model from one-floor to two-floor bus to increase the number of potential customers  Your also switch to electric engine  The bus is self-driven

120. 120 After we did the calculations in Excel we will do from the suggested changes  You are the owner of a bus company that transports people from city A to B  You would like to change your business and make it cheaper  The main drivers affecting your business are: o Number of customers o Cost of fuel o Cost of the driver o Cost of maintenance o Cost of mortgage  We have identified 3 options that help us get closer to 10x cheaper cost per seat  We will implement option 2  This will help us go down from EUR 7.4 per seat to EUR 2.3 per seat  Moving to self- driving buses will be done when the technology is available. This will help us go down to EUR 1.1 per seat  In our case implementing the change would mean ordering new buses and slowly but surely changing the whole fleet Identify what you want to improve Identify the business drivers of the business Estimate the impact of the drivers on your business Select what and how you would like to change Implement the changes

121. 121 Let’s summarize what every option helps us achieve 7,4 4,2 2,3 1,1 Currently Option 1 - change bus model Option 2 - change bus model and power supply Option 3 - change bus model, power supply and self driving Cost pe 1 seat In EUR per seat per average trip

122. 122 From Free to Paid

123. 123 An inspiration for the business you can also find in free solutions already existing on the market. They generate a sufficient demand for a paid solution as well.

124. 124 Free solutions help create initial demand. At some point the customers start looking for paid solutions with higher quality Zero demand Free solution introduced Mass demand Paid solution introduced Scaling of paid Demand # of suppliers # of paid solutions  None  None  Small  Big  Huge  Mass market  High penetration of the market  Few and mainly amateurs  Many suppliers but still amateurs  Many  Majority are still free solutions  Many  Free solutions are marginalized  Majority provided by paid solutions  None  Small  Many

125. 125 Let’s have a look at some examples Free solutions Illegally copied music Movies downloaded via torrents Paid solutions iTunes Netflix Gmail Superhuman Couchserfing Airbnb

126. 126 Ride a trend – Introduction

127. 127 Trends can change something small into unstoppable beast. That’s why you can gain a lot by spotting trends early on and creating a business around the trend.

128. 128 Let’s see how you can use this technique to generate business idea Spot a trend Identify people, industries that the trend will affect Estimate the impact of the trend Pick a business that will benefit from the trend Build the business ahead of time  Analyze the market and follow new trends that are spreading on the market  Analyze new technologies and observe the change in people's behavior  Think about potential trends that may arise  Watch what the new trends are about  Analyze who is affected by new trends industries or people (social groups, gender, age, education etc.)  Analyze the trends and estimate how it will affect the market  How will product prices change  What new services will be created?  For what products the demand will grow?  For what products the demand will go down?  Create a product  Create a business model  Find or create unfair advantage  Choose the timing – when to enter to make the most of the trend (how ahead of the trend)  Act quickly before others come up with the same idea  Scale the business as the trend will become more prevalent

129. 129 Let’s have a look at example 20 30 40 50 60 55 50 45 44 43 42 40 1 2 3 4 5 6 7 8 9 10 11 12 # of children per age In thousand

130. 130 Let’s see how you can use this technique to generate business idea – Example 1 Spot a trend Identity people, industries that the trend will affect Estimate the impact of the trend Pick a business that will benefit from the trend Build the business ahead of time  The number of kids will increase in the next few years  Big cities  Kids products (toys, feeding accessories, wipes, disposable diapers, body care products)  Services for kids  Industries supplying industries producing products and services for kids  The demand will increase 3x in the next 5 years  Chain of kindergartens  Create first 10-15 locations 2-3 years and scale as the number of kids appears on the market

131. 131 Let’s see how you can use this technique to generate business idea – Example 2 Spot a trend Identity people, industries that the trend will affect Estimate the impact of the trend Pick a business that will benefit from the trend Build the business ahead of time  Stores with baby products  Create first 2-3 locations 3-4 years ahead of the big jump in the demand  Scale fast afterwards as the number of kids increases 3x  The number of kids will increase in the next few years  Big cities  Kids products (toys, feeding accessories, wipes, disposable diapers, body care products)  Services for kids  Industries supplying industries producing products and services for kids  The demand will increase 3x in the next 5 years

132. 132 Ride a trend – What trends to follow

133. 133 When it comes to what trends to follow let’s have a look at the usual suspects Demographic trends Migration trends Macro trends (i.e. unemployment rate, inflation) Life style trends Technology adoption Trends on the job market

134. 134 Disrupt others – Introduction

135. 135 Many industries are ready to be disrupted. This was a huge source of business ideas in the last 15 years. There are still many industries in which this method can be used

136. 136 Let’s have a look under what conditions disrupting industries & incumbent players makes sense Disrupt others Expensive workers or big share of labor costs Market structure New technology or a process Stores without cashiers No code startups / Shopify / Airtable / AppSheet Zapier Uber Fitness cards like Class Pass / Benefit System Private Healthcare in Easter Europe (i.e. Luxmed) Amazon Uber Low cost business Ryanair / South West / Easy Jet Lidl / Aldi / Biedronka / Costco IKEA Ibis Budget Lack of logic Shipping container Aircraft Maintenance based on the health of the plane Healthcare instead of sick care Xerox SaaS replacing marketing specialists Telemedicine / AI instead of diagnostics Prosthesis and dentures from 3D printer

137. 137 Analyze existing mistake – Introduction

138. 138 You can learn from your own mistakes. You can also learn from other people's mistakes and turn those mistakes into a successful business

139. 139 Let’s see how you can use this technique to generate business idea Identify the mistakes Define what caused the mistakes Find solutions to problems / mistakes Build a business that is immune to historical mistakes Scale the business  Identity the mistake that other companies on the market have made  Identify the source and type of mistake  Identity the reasons of those mistakes  Was it caused by external or internal factors? Can you remove this mistake and make a successful business?  Most mistakes are caused by: high acquisition costs, lack of proper technology, lack of customers, high production costs, legal barriers  Think what can be done better  Consider actions, steps that will help fixing the mistakes that other firms did  Most solutions require: better execution, cheaper source of customers, faster delivery, cheaper production / delivery costs, innovation in the business model  Model the business using the lesson learnt form other firms’ mistakes  Check whether after implementing the solution the business makes economical sense  Estimate in Excel the profitability of the business as well as the scale it can reach  If the solution in practices removes the obstacles and the business is profitable scale it

140. 140 Let’s have a look at some examples Companies that made the mistake Myspace Snapchat Companies that learned from that mistake Facebook Instagram Hoover Dyson Webvan Instacart

142. 142 Jobs to be done framework

143. 143 Jobs To Be Done framework – Introduction

144. 144 Jobs to Be Done concept is a great tool to find a way to improve your business or create a new business. That’s why we will discuss it in this section

145. 145 Jobs To Be Done – Definition

146. 146 Let’s start with a short definition  When we buy a product we essentially hire the product to get a specific job done.  We define the “job” as the progress that the person is trying to make in particular circumstances and area  The very same job can be done by totally different products or services  Therefore, don’t fall in fall with your product and don’t look too narrowly at the competitive landscape  Be obsessed with the problem and the job that the customer hires you to do  The same product for the specific customer can perform different jobs in different circumstances Jobs To Be Done Theory =

147. 147 Let’s see the process that will help you understand the Job To Be Done for specific group of customers What progress the person is trying to achieve What are the circumstances of the struggle What are the obstacles preventing the customer from progress Are consumers making do with imperfect solutions? How customers defines a better solution?  You have to understand what are the functional, social and emotional dimensions of the desired progress  In other words how the end result should look like so the customer is happy  You have to understand the circumstances in which the struggle is happening  In other words you have to understand the specific context of the customer  When and where it happens, what is doing in the meantime and with whom  You have to understand what the customers struggles with, what obstacles prevent him from achieving the progress  In other words what is stopping him from achieving the progress he desires  You want to know whether the customers are using imperfect solutions to their problem.  Some customers will use some sort of workaround, combine 2-3 separate products or services to get the job done  There may be also some sort of compensating behavior  You should find out how customers define “quality”, in what dimensions the new product or services has to be  You should also understand the tradeoffs he is willing to make to get this better performance

148. 148 Bear in mind that the customer hires the product more than one time Big Hire First moment of truth  This is the moment when you decide to buy the product or a service in the hope that he will get the job done Little Hires Second moments of truth  This is the moment (after the purchase) when he puts the product to use and can either get the progress that he was hopping for or he main be disappointed with the result  If the disappointment is big and there is a better alternative on the horizon he will fire the product

149. 149 Jobs to Be Done – Examples

150. 150 Coffee Let’s try to define what jobs does the coffee Helps me become focused I like the taste It is an opportunity to meet people Acceptable break at work Warms me up Wakes me up

151. 151 Facebook Let’s try to define what jobs does Facebook for an average customer Stay in touch with people Efficient way to communicate I use it to kill boredomI can show off I can see what my ex- boyfriend does Gives me adrenaline boost

152. 152 Jobs to Be Done – How to use it to improve an existing product

153. 153 Let’s see the process that will help you understand the Job To Be Done for specific group of customers Understand the Jobs to Be Done Define the changes to your product Implement the changes and adjust the organization Change the positioning and the messaging Keep Focused on the Jobs to Be Done  Define what progress the customers desires, what he hires you to do with your product or a service  Try to understand also the experiences the customers seeks in order to make the progress  Analyze the functional, emotional and social dimension of their desire for progress  List the obstacles that are preventing the customer from the achieving the desired progress  Estimate what is the cost and benefit of implementing it  Decide which things you will do in the first order / what obstacles you will remove  Start one by one removing the obstacles preventing the customer from the desired progress  Change the organization of the firm to be centered around the Jobs to Be Done  Change the way you communicate with the customers  Adjust your messaging / marketing towards the job that you are solving, the progress you are helping the customer to achieve  Adjust customer experience  Make sure that you don’t try to satisfy too many jobs  Don’t dilute too much your brand by adding too many new products and services that are not linked to the main job  Design the KPI system to measure how well you do the job  Adjust your processes  Adjust your organizational chart  Pay attention to leading input KPIs

154. 154 Jobs to Be Done – How to use it to create a new product

155. 155 Let’s see the process that will help you understand the Job To Be Done for specific group of customers Understand the Jobs to Be Done Identify who is currently doing the Job Create the prototype of the product Start selling & marketing Keep Focused on the Jobs to Be Done  Define what progress the customers desires, what he hires you to do with your product or a service  Try to understand also the experiences the customers seeks in order to make the progress  Analyze the functional, emotional and social dimension of their desire for progress  List the firms that deliver the progress / do the job  Identify in what way they fail the customer  Identify the non- users that have the problem but don’t hire any product at all  Identify the workaround used by the customers  Create the prototype of the product that you can use to learn in practices with the customer  Modify the solution till you reach product-market fit – your product does the job so well that we majority of customers would be unhappy if your product disappears  Define what the customers have to fire to hire you  Adjust the positioning and the messaging to the jobs you have identify  Organize the firm around the delivery of the job much better than current alternatives  Identify and use to your advantage the push and pull forces that may support the adoption of your product  Adjust customer experience  Make sure that you don’t try to satisfy too many jobs  Don’t dilute too much your brand by adding too many new products and services that are not linked to the main job  Design the KPI system to measure how well you do the job  Adjust your processes  Adjust your organizational chart  Pay attention to leading input KPIs

156. 156 Jobs to Be Done – How to find them

157. 157 There are 5 main ways to find the Jobs to Be Done Observe jobs in your own life  Find a problem, a job that is poorly solved or not solved at all  If you observe a small number of customers most likely there will be others as well Analyze non-consumption  In this method we concentrate on people that don’t hire any product or service  In some cases it may suggest that the existing solutions are not sufficiently good so the customers choose to do nothing instead  In other words Jobs to Be Done exists but the solutions are crappy  Ask yourself a question who is not using your product and why?  You can use a top-down approach for that Analyze workarounds & compensating behaviors  In this method you analyze cases where a lot of people are using some sort of workarounds to solve their problem and achieve progress  The workaround suggests that the jobs is really important to the customer so he is using substitutes or combining together different products to get the job done Negative jobs  Look for what people DON’T want to do  People are able to pay for totally removing certain things from their life Spot unusual usage of the product  You can learn a lot by observing how customer use your product, especially if the product is used in a different way than the company has envisioned

158. 158 Let’s have a look at some examples Observe jobs in your own life Analyze non-consumption Analyze workarounds & compensating behaviors Negative jobs Spot unusual usage of the product Khan Academy Sony Walkman Airbnb hosts Kimberly-Clark & briefs (diapers for adults) Open Table ING Direct – accounts for low net worth people Procedures in Healthcare (vaccination) Udemy Teachers Podcasters / YouTuber / Bloggers Cosmetics for men Arm & Hammer – Baking Soda Arm & Hammer – Baking SodaGM – OnStar systemAutopilot in airplanes

159. 159 Who is your competitor?

160. 160 Netflix Let’s guess the main competitors of Netflix HBO GO Disney + Hulu Amazon Video Amazon Prime Other streaming platform Cable channels Traditional TV providers Traditional TV Cinema Cinema Video on demand Online platforms of traditional TV YouTube Facebook Games including Twitch Others Other online entertainment

161. 161 Coffee at Starbucks Let’s guess the main competitors of a coffee at Starbucks Tea Juice Water Shakes Other beverages at Starbucks Coffee at home Coffee at work Coffee at other places Other places for a meeting Coffee at other restaurant Vending Machine Working at home Office Co-work space Others Other places to work Cinema Restaurant Walk in the park Others

163. 163 Build on existing business

164. 164 Build on existing business – Introduction

165. 165 You have to use a bit different approach if you already have existing business and want to build on top of it new businesses.

166. 166 In this section we will talk about the following things Vertical Consolidation via M&As Build add-on business Go up or down the Value Chain Enabling Investments Build entirely new businesses Expand the brand into new categories Use existing assets in a new way Disrupt yourself Experiment with different sales channels & revenue streams Repurpose a product / Find new application to a product Turn failure into success

167. 167 Go up / down the value chain – Introduction

168. 168 The first step is to draw value chain and check the margins Transport and Warehousing FMCG producer Retail Chain Supplier 1 Supplier 2 Supplier 3 Supplier 4 Producers of raw materials and components Elements of value chain that you want to take over

169. 169 Going down the value chain / downstream usually means getting closer to the customer Transport and Warehousing FMCG producer Retail Chain Supplier 1 Supplier 2 Supplier 3 Supplier 4 Producers of raw materials and components Elements of value chain that you want to take over

170. 170 Going up / upstream means going closer to the source of materials that you use Transport and Warehousing FMCG producer Retail Chain Supplier 1 Supplier 2 Supplier 3 Supplier 4 Producers of raw materials and components Elements of value chain that you want to take over

171. 171 Go up / down the value chain – When it makes sense

172. 172 Going up or down makes a lot of sense if at least one of the below condition is met Your supplier position is very strong Your customer has high purchasing power In other part of the value chain you can get higher margins You want to block competitors You acquire players to show how to improve their businesses To increase responsiveness of your base business Too much cash that cannot be put to good use

173. 173 Go up / down the value chain – Benefit System

174. 174 Let’s see how this technique was applied by Benefit System – an operator of Fitness Card that gives you access to different fitness clubs. It is partly covered by employers

175. 175 They have been constantly increasing the number of users… 614 744 865 2015 2016 2017 Number of active sports cards users in Poland In thousands of people

176. 176 …which helped them growth 2x revenues and almost 3x EBITDA in 4 years 320 383 452 581 742 2012 2013 2014 2015 2016 Revenue of Benefit Systems S.A. In millions of PLN 40 38 55 70 119 2012 2013 2014 2015 2016 EBITDA of Benefit Systems S.A. In millions of PLN

177. 177 Let’s have a look at the Benefit System value chain… Operator of the fitness card Fitness Clubs HR Managers Developers Landlords Equipment Producers Others Producers of raw materials and components Financing Fitness Clubs Elements of value chain where Benefit System is present

178. 178 Benefit System has managed to enter other elements of the value chain Operator of the fitness card Fitness Clubs HR Managers Developers Landlords Equipment Producers Others Producers of raw materials and components Financing Fitness Clubs Elements of value chain where Benefit System is present

179. 179 Go up / down the value chain – Zara

180. 180 Before we move to analyzing the value chain of Zara let’s have a look at the supply chain of a typical fashion retailer

181. 181 Let’s have a look at Zara Value Chain Transport Transport Transport Supplier Manufacturing Warehousing Stores Consumers Transport Flow of information Design  40% of raw materials in company Conditex – Inditex subsidiary  Other raw materials come from 260 different suppliers  Important products are produced by Zara manufactures  Simple or time- consuming products are outsourced to local manufactures  Zara distributes by planes or by tracks products to almost 2 000 stores all over the word  Ready garments from manufactures are shipped back to the Zara logistics center  From there all products are distributed to Zara’s stores  Zara uses its own design team

182. 182 Vertical Consolidation via M&As – Case Introduction

183. 183 Let’s imagine that you have to help fitness card operator decide what will be the impact of M&A on his strategy to vertically integrate Fitness card operator wants to have 40% of his revenue delivered by own fitness clubs He is considering 2 options: only organic growth or M&A with organic growth Check what will be the impact of both options on Revenues, EBITDA and Market Cap

184. 184 Let’s have a look at value chain in the fitness segment Operator of the fitness card Fitness Clubs HR Managers Developers Landlords Equipment Producers Others Producers of raw materials and components Financing Fitness Clubs Elements of value chain where he is currently present

185. 185 Build add-on business – Introduction

186. 186 If you build an add-on business it means that you do not replace elements of the business model but rather add. This changes will not be marginal but will transform your business Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure New revenue stream New customer group New product

187. 187 As you may remember in building add-on businesses we said that there are 6 usual suspects Customer segment Revenue structure Channels Value Proposition – Product Key Partners esp. suppliers Relationships

188. 188 Build add-on business – Amazon

189. 189 If you build an add-on business it means that you do not replace elements of the business model but rather add. Below the usual suspects you would usually play with Customer segment Revenue structure Channels Value Proposition – Product Key Partners esp. suppliers Relationships

190. 190 Let’s see what Amazon has managed to apply this strategy Customer segment Revenue structure Channels  Added new segments of customers as they have added new products  Added people who want to publish their own books via Amazon Kindle  They have allowed Amazon to work not only as e-commerce but also as a marketplace  Logistics fee (for the FBA customers)  Advertisement fee  Revenue sharing from apps  Subscription fees – Amazon Prime, Amazon Video, Audibles  Digital distribution of products i.e. Amazon Kinde, Amazon Video,  They have entered mobile apps market  They have entered offline world Value Proposition – Product  Started with physical books but then entered also digital books (Kindle), audiobooks (Audibles) as well as all possible physical products

191. 191 Developed companies can operate multiple models under one or many companies. Have a look at Amazon SaaS E-commerce Media site2-sided market UGC B2B Service B2C ServiceRetailer

192. 192 Build add-on business – WordPress

193. 193 As we said building add-on business requires you usually to change one of the elements of your business model. Below the usual suspects Customer segment Revenue structure Channels Value Proposition – Product Key Partners esp. suppliers Relationships

194. 194 Let’s see how has WordPress managed to apply this strategy Customer segment Revenue structure  First an open source solution that enables flexibility  Second group they targeted are non-technical customers – mainly SMB with 1-stop solution – Wordpress.com  Third group they targeted are enterprise customers i.e. TechCrunch, CNN, NBC,  Fees from Wordpress.com plans  Fees from the marketplace of themes that is linked to worpdress.org  Fees from Word Ads (similar to AdWords belonging to Google) Value Proposition – Product  1-stop solution for non-technical customers – mainly SMB  E-commerce solution  Plugins Key Partners esp. suppliers  Creators of themes / plugins Relationships  Getting customers via marketplace build by them as well as Partners that build themes / plugins  Getting customers via influencers

195. 195 Let’s recap the changes done to the business model of WordPress Open source solution for blogging Open source solution for building online presence and selling 1-stop solution for non-technical customers – mainly SMB Marketplace of themes and add-ons for WordPress

196. 196 Build add-on business – Shopify

197. 197 As we said building add-on business requires you usually to play with one of the elements of your business model. Below the usual suspects Customer segment Revenue structure Channels Value Proposition – Product Key Partners esp. suppliers Relationships

198. 198 Let’s see how has Shopify managed to apply this strategy Customer segment Revenue structure Channels  From Micro firms to SMB and then to enterprises  From online to multichannel customers  Developers building apps on the bases of Shopify API  Fees from apps sold via Shopify marketplace  Shopify Experts & Shopify Partners Value Proposition – Product  Apps as add-on products  POS offline solution for customers that were acting as a multichannel (combining online and offline sales)  Buy-Buttons – enabling to sell not only from the Shopify website solution but any place i.e. WordPress blog Key Partners esp. suppliers  Developers building apps on the bases of Shopify API Relationships  Get and keep customers via Shopify Experts & Shopify Partners  Get customers via marketplace build by them as well as developers building add-ons  Get customers via content marketing

199. 199 Let’s recap the changes done to the business model of Shopify Online store for snowboards Solution to run your e-commerce – for micro firms Shopify App Store – Marketplace of apps, adds-on for Shopify Solution to run your online sales – all sizes of firms Shopify Experts & Shopify Partners Integrated solution to run your online and offline sales

200. 200 Build entirely new businesses – Introduction

201. 201 Sometimes transformation is more abrupt. You may be forced or choose to build an entirely new business on top of what you already have New businessYour original business

202. 202 This happens usually due to following reasons…. You need the new business to be successful in the current business Your supplier sucks Your customer sucks There is no sufficient capacity available Owing the business will give you unfair competitive advantage You want to develop skills that can be applied to your current business

203. 203 This happens usually to following reasons…. You need the new business to be successful in the current business Your supplier sucks Your customer sucks There is no sufficient capacity available Owing the business will give you unfair competitive advantage You want to develop skills that can be applied to your current business

204. 204 How to expand the brand – Introduction?

205. 205 Let’s have a look at milk producer that wants to expand its product range Leader in milk 2nd place in butter 25 products considered

206. 206 There are things you should consider when selecting the right products to be developed within the same brand Is the product consistent with the current brand? Does it require the same distribution? Do you have strong players on the market you enter? What is the potential of the market? Are there customers who already think that you have the product? What is the growth rate of the market for the product?

207. 207 How to expand the brand – Case Solution

208. 208 After we have gone through research we got the following results. This suggest that we should start with yoghurt and yellow cheese 0 50 100 150 200 250 300 350 0 0,5 1 1,5 2 2,5 3 Market size In mln USD Attractiveness (1-Low;3-High) Cheddar Cottage cheese Yoghurt Milk Desserts (i.e. Monte) Yellow (swiss) cheese Ice cream Feta

209. 209 Enabling Investments – Introduction

210. 210 In many cases your demand is limited by something that you cannot control directly. In such cases you may be interested in enabling investments

211. 211 Enabling investments help you drive the demand or sales by removing the main bottleneck – lack of the demand 1 2 3 4 5 6 7 8 9 10 Market size Your capacity Market size and your capacity

212. 212 Enabling investment can be done in different places depending on where the bottleneck is Enabling Investments Demand side Supply side Distribution side Increase the demand from current customers Increase the number of potential customers Find new applications for your products Kill substitutes Increase throughput of bottlenecks Increase the availability of required resources and materials Increase availability of potential employees Increase the throughput of the distribution system Create your own distribution – existing channels Create your own distribution – new channels

213. 213 Enabling Investments – Examples

214. 214 Let’s have a look how Tesla was doing enabling investments to support the sales of its cars

215. 215 Let’s have a look how Tesla managed to apply this strategy Enabling Investments Demand side Supply side Distribution side Convince governments and regulators to support electric cars usage Develop infrastructure to facilitate the use of electric cars, e.g. supercharger network Invest in solar production capacity (Solar City, Powerwall, Solar Roofs) Provide car insurance for Tesla cars Build the cars from a scratch to simplify it Eliminate a large number of intermediaries and create own components for the car Build own factory for batteries Own retail chain to sell cars Service centers combined with sales centers Tesla Rangers – mobile technicians who can service vehicles from your house Automate the work in the factories (fewer employees needed)

216. 216 Disrupt Yourself

217. 217 Disrupt Yourself – Introduction

218. 218 Do what you do but better Expand TransformGo niche Disrupt yourself

219. 219 If you have a nice cash generating business you are unfortunately running the risk of being disrupted by some new comer operating in different business model Taxi / Cabs Combustion car producers  Mailing the DVD  No late fees  Streaming  Better value proposition  Lower Price  No friction in usage  Totally new design from a scratch  Value proposition pretty close to the existing solutions  Emotional value appealing to certain segments  Self-driving feature  Software that helps you constantly improve the product  Infrastructure that supports electric cars How the businesses were disrupted?

220. 220 You can immune yourself against disruption by….disrupting yourself. This however may have dire consequences 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

221. 221 In short term you may be loosing a lot of money 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

222. 222 Once you find the new business model you not only gain what you have lost….. 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

223. 223 … but you also start taking more and more market share from competitors that did not adjust to new business model 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

224. 224 Do what you do but better Expand TransformGo niche Disrupt yourself Change the business model Intrapre- neurship M&A potential competitors Copy competitors that may disrupt you

225. 225 Change the business model – Introduction

226. 226 Sometimes when you change the business model you will not gain anything in the short term but rather protect what you have from external disruption Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure Model A Model B

227. 227 Moreover in order to survive you have to disrupt yourself even further and change the model in such a manner that it has nothing to do with the original one Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure Model B Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure Model C

228. 228 Moreover in order to survive you have to disrupt yourself even further and change the model in such a manner that it has nothing to do with the original one Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure Model C Key partners Key activities Key resources Relationships Channels Value proposition Customer segments Cost structure Revenue structure Model A

229. 229 There are a few examples of such a behavior  Build a Kindle – after creating fulfilment centers to ship fast physical books they have invested heavily in Kindle that did not need the infrastructure  They have moved to totally free product (after being bought by Facebook. This killed the payment that created the valuation of WhatsApp)  A Facebook introduced the calling in their main product  This was done as a move against WeChat that by offering the free calls could take away customers both from Facebook and WhatsApp. How did they change their business model to disrupt themselves? WhatsApp + Facebook Amazon

230. 230 Intrapreneurship – Introduction

231. 231 Intrapreneurship is a great source of disruption  Is the act of behaving like an entrepreneur while working within a large organization  Entrepreneurship within corporate world Intrapreneurship =

232. 232 Intrapreneurship can be a successful way to find ways to disrupt yourself, provided certain rules are followed Autonomy Separate budget Freedom to be often wrong Judged on the basis of the long run results Proper mix of people (not necessary related to mother company) Permission to kill core business Decentralized decision making

233. 233 Intrapreneurship – Google

234. 234 Google has been very successful in implementing intrapreneurship programs in their organization. They encouraged employees to spend 20% of their work time on its own projects. Thanks to that they were able to create many well-known products Google Gmail Google Maps Google News AdWords Google Glasses AdSense

235. 235 Below you can find practices which were used by the Google in order to encourage employees to take part in intrapreneurship program Employees can choose the project on which they would like to work Access to courses and professional trainers Organization support for internal enterprises Rewards for team members Teams are more like profit centres than cost centres

236. 236 Intrapreneurship – Apple

237. 237 Apple is a business which was born out of intrapreneurship inside a big company Apple iPhone iCloud iPod iTunes Mac

238. 238 Intrapreneurship – 3M

239. 239 3M Post-it note Masking Tape Waterproof (Wet and dry) Sandpaper The 3M is also an example of the company which supported the intrapreneurship programs inside the organization. Employees could spend their 15% time working on new projects

240. 240 M&A potential competitors – Introduction

241. 241 M&As are a fast way to disrupt yourself. It has plenty of advantages You tame potential significant competitor that could have killed your business M&A is a fast method of creating alternative business models Acquihire Diffusion of knowledge from bought company to your current business You de-risk your business model against future trends Acquired firm can be used to kill competition

242. 242 M&A potential competitors – Altassian

243. 243 Altassian is a M&A machine 2 IT guys built on the side their own issue tracker called Jira 2002 2004 2007 M&A They created a new dev team collaboration platform — Confluence Altassian buys Cenqua, which made 3 developer tools — Fisheye, Crucible, and Clover. These tools filled the gaps in Atlassian’s product offerings Atlassian raised $60 M for M&A 2010 2012 Atlassian acquired and integrated into its main products the hosted private chat service Hipchat Atlassian combined all of their Git- based services under the Bitbucket brand 2015 IPO – starting market cap $ 5.8 B Atlassian acquired Statuspage, which allows businesses to keep users updated about the status of their online services 2016 2017 Acquisition of Trello – a simpler version of Jira for Project Management. It cost them $425 M Organic growth

244. 244 Let’s recap the changes done to the business model of Altassian thanks to M&A Simple tool for tracking tasks for Developers Complicated tool for tracking tasks for developers Simple tool for tracking tasks for All Integrated solutions that makes the life of developer easier

245. 245 M&A potential competitors – Adobe

246. 246 Adobe released PostScript. The software could control output devices like laser printers from personal computers 1983 1987 1993 M&A Adobe released Illustrator, and a year later Photoshop Adobe released Acrobat, a suite of applications for creating and viewing files in a new way. Adobe has come up with the pdf format Adobe acquires its main competitor Aldus (PageMaker) 1994 1996 Adobe released PhotoDeluxe as an “easier to use” version of Photoshop Adobe released Acrobat 4.0, an important set of updates and feature additions that skyrocketed sales for corporate users 1999 2003 Adobe bundled all of their products together in the Adobe Creative Suite to unify their branding and start tying their products together Adobe acquired a competitor, Macromedia – owner of an easier- to-use Photoshop competitor called Dreamweaver and a platform for animations and video players called Flash 2005 2008 Adobe released a webtop version of Photoshop called Photoshop Express. This was designed as a consumer product to be really easy to learn and use Adobe acquired the top enterprise analytics company Omniture. It allowed to offer web analytics, measurement, and optimization technologies to Adobe product users 2009 2013 Adobe released Creative Cloud (CC) to replace Creative Suite. From now on it would only be available for purchase through a subscription-based service Organic growth 2015 Adobe Stock – a microstock agency that is part of Adobe Creative Cloud has acquired one of its competitors - Fotolia Adobe was busy not only with organic growth but also acquisitions

247. 247 If we would like to observe their journey we could sum it up in the following manner Software allowing printing Integrated text and image processor Adobe Illustrator Acrobat, a suite of applications for creating and viewing files on any device and system Adobe Creative Cloud – integrated solution in the cloud Photoshop, a photo editing tool Adobe Stock - stock agency

248. 248 Copy competitors that may disrupt you – Introduction

249. 249 If you cannot buy the competitor sometimes you have to copy him to stay relevant for your customers. A great example is Facebook strategy towards Snapchat Snapchat becomes popular Facebook tried to buy Snapchat Facebook started to copy some Snapchat features Facebook copied the features into its main product Snapchat user growth went drastically down  Snpachat was established in 2011  Very fast it become number one social media used by teenagers and college students  Snapchat launched Snapchat Stories in October, 2013.  Instagram launched Instagram Stories in August 2016.  WhatsApp launched an update to WhatsApp Status in February 2017 that incorporated features which resembled Snapchat Stories.  Messenger Day (a copy of Snapchat Stories) launched in March 2017  Few weeks later Facebook launches the Stories clone in the Facebook app  Facebook tried to create a clone of Snapchat (Poke) which was a failure  It offered $ 3 billion for Snapchat in 2013  The offer was declined and Snapchat prepared for IPO  In March 2017 Instagram Stories had already more active users than Snapchat  Till August 2017 Snap has lost 51% of its valuation from IPO (In less than 6 month shareholders of Snap lost $16 B)  In the same time Facebook shareholders gained 21% ($89 B)

250. 250 Copy competitors that may disrupt you – When you have to do it

251. 251 On many occasions copying the competitor is a must Your competitor grows very fast among segments that are important to you The competitor has refused the M&A offer You want to defend a cash generating business You have sufficient competence to copy You can copy successfully fast the competitor After copying you will still remain attractive to your current customers

252. 252 Use existing assets in a new way

253. 253 One of the ways to generate new businesses is to put to use existing assets. This is usually a pretty fast way to generate additional cash and maybe create a new business

254. 254 Let’s have a look at some examples Old shopping malls  Retail  Fast services  Cinema Previous usage Old hangars  Storing planes  Repairing planes Merchandising team  Putting into order products only of 1 brand R&D department in pharmaceutical firm  Checking quality  Performing tests  Providing R&D only for 1 firm  Museum  Offices  Housing  Amusement parks  Offices  Venue for events  Putting into orders products of all brands for a specific retail chain or location  Providing R&D for other brands New usage Free production capacities  Production of only 1 brand  Production of private labels for other firms  Production of second brand from the same firm

255. 255 You can put to use different types of assets that you firms has Psychical assets Organized team / Business unit Other business assets Facilities (office, factories, land) Tools Machines Sales Team R&D Team Warehouse Employees Infrastructures Inventory Free Production Capacity Brand Other psychical assets Data Content Production Employees Maintenance Team

256. 256 Experiment with different sales channels

257. 257 By changing sales channels you can reach new customers or create different business models. Sales channel may require sometimes change in the product and your policies

258. 258 Let’s have a look at some examples Apple  3rd party retail chain Typical sales channel  Own retail chain  E-commerce New sales channel Tesla  3rd party retail chain  Own retail chain  E-commerce Fitness clubs  B2C  B2B – reach HR manager with sales force selling the fitness as employee benefits and perks Software  Salesforce / direct sales  Freemium model  Content marketing & Inbound Sales  Digital paid marketing Games  Retailer  Digital distribution  Platform 3rd party  Own digital distribution platform  In-app sales (via other games owned)  Emailing & Loyalty program Cakes  Retail chains  Own franchising restaurants

259. 259 Entering new sales channels has a lot of benefits New revenue streams e.g. Apple You increase the number of customer within your reach (catchment area) Some channels may have lower costs than the ones you are currently using Some sales channels have a higher efficiency Some sales channels have a higher retention

260. 260 Experiment with different revenue streams

261. 261 Another way to generate new businesses is to change the revenue stream. This may mean how you charge your customer and for what you charge him

262. 262 Let’s start with a short definition  The way you charge your customer for a service or a product  Here you also should define what you charge him for  Revenue streams will impact your revenues Revenue streams =

263. 263 In the next lectures we will explore this idea in more details Revenue streams for milk – case study When to use specific revenue streams? Innovative selling / revenue streams – Introduction Case studies

264. 264 Innovative selling / revenue streams – Introduction

265. 265 1-off / lump sum payment Instalments Subscription Payment / fee per usage Payment / fee per result Payment / fee per effort Free Freemium Free Trial Penalty There are many potential ways in which you can claim your money

266. 266 Revenue streams for milk

267. 267 The best way to understand things is to start with an interesting example. Imagine that you want to drink milk. Let’s see how the farmer can get the money back

268. 268 1-off / lump sum payment Instalments Subscription Payment / fee per usage Payment / fee per result  Customer pays up-front for all the milk he will drink over the course of his life  Alternatively he buys the cow and can milk the cow as long as the death does not tell them and the cow apart  You can drink milk as much as you want until the cow dies.  Every moth you pay installment which is a fraction of the cow’s value.  After you pay off the whole value (last instalment) you drink for free  You pay every month a set fee.  Within this fee you can drink as much as you want milk  You can get out of the agreement anytime you want  You pay for the glass of milk you have drunk. You can go to the farmer anytime you want and rink milk.  If you don’t drink you don’t have to pay  You pay for the glass of milk only if your thirst was quenched  If this did not happen you do not pay for this glass of milk Let’s have a look how the customer would have to pay for the milk in the case of different revenue streams models

269. 269  You have an agreement with the farmer that he gives you max 2 glass as he believes that this should quench you thirst. Usually, it is the case  You pay him fixed amount for that  You drink for free as much as you want. You can even bath in the milk  The farmer is secretly making photos of you drinking milk and using it to promote his YouTube, Facebook and Instagram account  You can have for free 1/3 of the glass of milk  Everything above that you have to pay  For 1 week you can drink the milk for free but afterwards you have to start paying  If you don’t drink at least 7 glasses a milk a week you will have to pay a penalty Payment / fee per effort Free Freemium Free Trial Penalty Let’s have a look how the customer would have to pay for the milk in the case of different revenue streams models

270. 270 When to use specific revenue streams?

271. 271 Let’s have a look under what conditions and in what industries you should use the specific revenue stream model 1-off / lump sum payment  The most often used model, especially when the price is low, customer like to change the supplier a lot  This is similar to one-night stand, so strength of the brand is crucial  If you have a strong brand that matters a lot for your customer this model is for you  Mainly used in FMCG, some SMCG, small services When to use Examples Instalments  This model is often used with expensive items  Going from lump sump to installments usually drastically change the customer base size  Mentally much easier to swallow than 1-off payments  Great model for SMCG: TV sets, computers, furniture, houses Subscription  Holly Grail of startups  It is often used for services that you will repetitively use over long period of time: mobile phone, health insurance, SaaS, Video on- demand  Gives you huge predictability of revenues and you concentrate on value and content and less on marketing

272. 272 Let’s have a look under what conditions and in what industries you should use the specific revenue stream model Payment / fee per usage  This model is used when you are not able to predict the usage  You set the price per unit of usage (i.e. time, natural unit, number of uses etc.) in a contract and then the payment is based on usage  Widely used i.e. for electricity, water etc. When to use Examples Payment / fee per result  Here as a customer you want to buy the specific result. You are not interested in the effort  Widely used in B2B especially in the services  In advertisement the result can be view (CPM), clicks (CPC), lead (CPL), sale (CPS) Free  Very often used in 2-sided markets and UGC when 1-side has a free access and the other one covers all costs  Usually requires great number of users  Still you collect money somehow to support you: fees for advertisement, fees for access, donations etc.

273. 273 Let’s have a look under what conditions and in what industries you should use the specific revenue stream model Freemium  This model goes usually hand in hand payment per usage or subscription  Can be treated as a selling tactic  Often used for digital goods especially software (SaaS)  Very popular with the mobile apps especially games where you create virtual economy When to use Examples Free trial  This model goes usually hand in hand with payment per usage or subscription  Can be treated as a selling tactic  Often used for digital goods especially for B2C market i.e. video on demand Penalty  Penalty are used heavily as a part of other contracts  Can be used also in cases when you want to motivate people to obey certain rules based on behavior contracts  Heavily used by the government, education and in many apps

274. 274 Ryanair

275. 275 B2C Services Acquisition Activation Retention Revenue Referral Dynamic pricing and no so low prices Unbundling Charge for everything Alternative revenue stream Ryanair has been also very creative on the revenue side

276. 276 Legimi

277. 277 Legimi has managed to capture more of e-book market by innovative approach to revenue Acquisition Activation Retention Revenue Referral SaaS / 2-sided market They keep traditional sales per piece Subscription models with limits to consumption Free trial E-book reader – like Kindle

278. 278 Dollar Shave Club

279. 279 DollarShaveClub disrupted the whole industry by introducing subscription instead of irregular purchases Acquisition Activation Retention Revenue Referral FMCG From lump sump to subscription From retail chain sales to direct- to-consumer distribution 3 subscription plans Free handle (no entry barriers) You can manage the plan (frequency, when to receive}

280. 280 Canva

281. 281 Canva contrary to majority SaaS in this space is shying away from subscription and you can buy specific elements Acquisition Activation Retention Revenue Referral SaaS Freemium Payment / fee per usage Fixed fee per element SaaS

282. 282 Turn failure into success / Recycle

Business Idea Generation for Management Consultants & Managers

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