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The digital startup implementation handbook 2018

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All what Founders, Mentors and Investors need to know to better design and implement a business model for their digital startup. The eBook contains practical insights on the digital economy, and provides a didactic set of instruments that could be played with an exclusive role game www.mudircards.com

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The digital startup implementation handbook 2018

  1. 1. 1
  2. 2. Table of contents Foreword 3 Acknowledgement 4 1 - A conceptual Framework for digital Startup 5 1.1 - The advent of the digital Era 6 1.2 - The digital startup Business Model 9 1.3 - The MUDIR CARDS For business modelling 11 1.4 - Value chain and strategic positioning 17 1.5 - Getting a Dominating position in the supply chain 20 2 - Implementing a digital startup 22 2.1 - Implementing a business model is a steeplechase 23 2.2 - Key consideration for the innovation riders 24 2.3 - Navigating far away to capture value 25 2.4 - The case of deep tech startup 28 2.5 - Orbiting with a deep tech startup 32 2.6 - Digital deep tech startup capability 33 2.7 - Approaches for building and operating DTS Capabilities 34 2.8 - The 4, 3, 2 Canon law 35 3 - The Backpack for tech entrepreneur 42 3.1 - Orbiting with a deep startup 43 3.2 - Actionable activities for business growth 44 3.3 - Cash flow for value 45 3.4 - Managing human capital 46 4 - In conclusion 48 4.1 - Technology is not the only competitive advantage 49 4.2 - Succeeding is in Fact Anticipating Failure 50 4.3 - The Charter of an exemplary tech entrepreneur 51 Appendix 52 2
  3. 3. Foreword The way we create companies has been changing significantly over the last years. Information technologies have made it much easier and stimulated the creation of an increasing number of startup, but it has also induced a higher number of failures. Witnessing the end of the so-called Industrial Era and the advent of a new information-based economy, Mondher Khanfir has had the opportunity to launch several startup and compare their experiences, first as an entrepreneur, then as an angel investor. In an attempt to author a didactic book, these are the main lessons he dedicates to the new generation of Tech Entrepreneurs. This guidebook targets professionals and researchers who are considering the opportunity to launch a digital business as well as top executives and investors who are concerned by the Digital Startup. Not pretending to be exhaustive, this book succinctly and schematically provides: ● Practical information on key concepts defining a digital business ● Different tools to understand the models operating in the global marketplace ● Practical means to assess a business model’s soundness to successfully implement a Digital Startup The case of Deep Tech Startup is particularly covered. Innovators who are aiming to valorize their own technology or scientific research outcomes, will improve their understanding of the risks related to the strategic planning and startup implementation, wich a highlight on the main challenges they will face in their entrepreneurial journey, all the way from the lab to the market. Although this guide is a reflection on experiences and an illustration of the best conditions for a successful implementation of a Digital Startup Business Model, the content and advice contained in this book only enlightens the way tech entrepreneurs can better grasp a startup development trajectory, and help them save time and avoid falling into common traps. Finally, this book has no binding character and cannot substitute expert consulting in specific areas, such as intellectual property, legal aspects, finance, etc. 3
  4. 4. Acknowledgment My thanks go to Walid Triki, Khalil Chaffai, Omar Yaacoubi, Salmine Sassi and Sami Bouguezzi for their reviews, to Sami Jaidane for his precious contribution, and to Michael A Blumer, who patiently edited this content, which will be used, I hope, as a practical basis for the orientation and thinking of new entrepreneurs and designers within the digital economy. My appreciation goes also to Nesrine Mazghouni and Marcus Antonius Casel from the GIZ office in Tunisia, who believed in this work and sponsored its publication. Mondher Khanfir 4
  5. 5. Part I A CONCEPTUAL FRAMEWORK FOR DIGITAL STARTUP 5
  6. 6. 1.1 - The Advent of the Digital Era The information society is rising through the dissemination of digital services that can be directly or indirectly associated with traditional economic activities such as agriculture or manufacturing. Digital activities are based on the use of information and communication tehcnologies. They represent an important growth relay for mature economies but also for developing ones. Most of the data in the world has been generated over the last few years, thanks to Internet-based companies. The data is more powerful then ever before, it is now, more than the basic raw material, the data is the service, is the value, and even the currency ! The digital economy is the consequence of the commercialization of knowledge, were data is becoming the main assets valorized by companies and goverments. It can only develop in an enabling business environment and under public policies favorable to innovation and entrepreneurship. The advent of the digital era is accompanied by the proliferation of digital services, which can be splitted as follows: 6 Infrastructure Services: Which are the economic activities that provide a plateform (physical or intangible) for the interconnection of value chains Support Services: The activites that allow the execution of services according to established standards, to ensure the quality or the conformity of the digital services provided. Business Services: All the possible activities that deliver services to end customers through a mastered and formal capacity along with a specific value chains.
  7. 7. The Startup Rush Traditional large operators are experiencing limitations in their conventional information systems, usually acquired at a high cost yet not really cost effective, and which represent an adversity to digitization and innovation, often with technology that has not been developed specifically for evolving needs and a logic of global supply chain. Presented as the "Eldorado" of prosperity, the Digital Economy is the object of all covetousness. Thousands of startup are born every day, in the four corners of the world, and just as many die without finding the good “lode". The rise of the knowledge-based economy offers infinite possibilities for new services to back up conventional industrial channels. Internet-based applications and current cloud-based software, for example, have become affordable for the masses, and their use intuitive. As a result, the large traditional operators aspire to broaden their catalog through digital services or at least through digital means. Additionally, more and more large organizations are now developing incubation or acceleration programs inside their business, which allows them to form a set of innovative projects, that can be acquired in case of confirmed interest. A new way to adapt to rapid changes in technology offerings and customer needs, while controlling R&D costs, will be to follow the digital startup industry. There is a general trend in strategic sectors such as Finance or Energy that encourages the emergence of new digital entities in order to benefit from their capacity to innovate. This is supported by the multiplication of ideation, incubation, and acceleration programs, with a worldwide race to attract the most innovative projects and startup. 7
  8. 8. What is a Digital Startup ? According to Steve Blank and Bob Dorf, "The Startup is a temporary organization designed to search for a repeatable and scalable business model." We can add that it usually needs one or several rounds of fundraising before generating revenue. They are initially operated by a handful of founders and financed by angel investors. Usually, startup spend more on income as they work to develop, test, and market their ideas. A startup is called digital when its main assets are linked to technological investments. Its value proposition is based on at least one of the following characteristics: Digital Startup are contributing to and feeding off of technological changes at the same time. Innovative services are generally provided by Digital Startup, that are keen to experiment with new products or services; and consequently, they need several rounds of financing to solidify the project’s relevance and develop their market shares. 8
  9. 9. 1.2 - The Digital Startup Business Model A business model describes the rationale of how an organization creates, delivers, and captures value. For the simplest businesses, we can design and implement them on the basis of Alexander Osterwalder’s Business Model Canvas. To design and develop a Digital Startup Business Model, technology is required, but it doesn't necessarly represent the competitive advantage. Only few business models will be profitable and thrive. The winners don't appear to be based on the most sophisticated technology, knowing that delivering technology as a service is different from delivering services based on technology. 9 Graph 1 : Startup Classification Source: The Digital Startup Implementation Handbook 2018
  10. 10. A First Initiation with the Business Model Canvas (BMC) The launch of a digital startup will consist of developing a specific business model to deliver value to a target segment (its DNA code in a way) based on formally identified investment opportunities, through creating a specific business focus, able to capture customers in a market with a sustainable revenue stream, and that will justify an acceptable return on investment for founders and investors. The use of Alexander Oscarwalder’s Business Model Canvas (BMC) could be a first step in learning how to model the visible features of a startup. For a more elaborated business model supported by technology innovation, the BMC shows some limitations. Starting from the observation that the Business Model design is an iterative process, we crafted an exclusive tool for the design and implementation of Digital Business Models. 10 Graph 2 : Business Model Canvas Source: Business Model Canvas of Alexander Oscarwalder
  11. 11. 1.3 - The MUDIR CARDS® for Business Modeling We describe here MUDIR Cards®, an exclusive tool for Tech Entrepreneurs, that has been developed, on the basis of various experiences of startup creation. The MUDIR Cards® is based on five steps with an interactive check-in in action, monitoring each step of achievement. The design & implementation of a startup business model is a long process that starts with a formal value proposition and a preliminary strategy supported by one or several founders, that should be challenged by the ecosystem. The business modeling will be nurtured under a dual perspective, from entrepreneur’s view and investor’s view. The approach should be based on developing/asserting the different stages of a startup creation value chain, through an iterative process, which determine rules and control points. MUDIR Cards® stands for Mobilize, Understand, Deploy, Implement and Review, as summarized below. This tool could also be played online on www.mudircards.com 11 The MUDIR CARDS® Stages Graph 3: The MUDIR Cards® Source: The Digital Startup Implementation Handbook 2018
  12. 12. The MUDIR CARDS ® Stage 1: Setting the Stage The first step "Setting the stage" targets to build up a shared vision and a first strategic plan with a supportive project team. It will be achieved when the entrepreneur will reach the deliverables of each milestones of the graph 4 below. 12 Graph 4: The MUDIR Cards® Setting the stage Source: The Digital Startup Implementation Handbook 2018
  13. 13. The MUDIR CARDS ® Stage 2: Incepting The second step "Incepting" targets to craft a feasibilitty study. It will be achieved when the entrepreneur will reach the deliverables of each milestones of the graph 5 below. 13 Graph 5: The MUDIR Cards® Incepting Source: The Digital Startup Implementation Handbook 2018
  14. 14. The MUDIR CARDS ® Stage 3: Engaging The third step "Engaging" targets to develop a strategic plan with revenue stream model.It will be achieved when the entrepreneur will reach the deliverables of each milestones of the graph 6 below. 14 Graph 6: The MUDIR Cards® Engaging Source: The Digital Startup Implementation Handbook 2018
  15. 15. The MUDIR CARDS ® Stage 4: Extending The fourth step "Extending" targets to produce a prototype with a project execution plan. It will be achieved when the entrepreneur will reach the deliverables of each milestones of the graph 7 below. 15 Graph 7: The MUDIR Cards® Extending Source: The Digital Startup Implementation Handbook 2018
  16. 16. The MUDIR CARDS ® Stage 5: Monitoring The fifth step "Monitoring" targets to live an innovative experience and to consolidate the learning loop. It will be achieved when the entrepreneur will reach the deliverables of each milestones of the graph 8 below. 16 Graph 8: The MUDIR Cards® Monitoring Source: The Digital Startup Implementation Handbook 2018
  17. 17. 1.4 - Value Chain and Strategic Positioning A value chain is a high-level mapping that describes the different economic activities that transform Science and Technologies into a product or a service that cover a market demand. One of the objectives of the value chain is to illustrate the activities, which add value when producing and bringing commercial goods to the market. The series of activities within the value chain could be categorized into primary and secondary ones. These latter are based on support processes delivering value to internal customers. Whereas primary activities are based on business processes directly reaching the final customers. Primary activities mainly cover inbound supply chain, operations, sales and marketing, distribution and after-sales service. The way each organization is positioned in the global value chain will impact its primary activities that are supposed to provide the right product, with the expected quantity and quality, at the best price where a demand exists. When starting up a company, the entrepreneurs should know which value chain they are investing in, who are the main actors, and how to position it to ensure the optimal competitive advantage 17 Graph 9: The Generic Value Chain Source: The Digital Startup Implementation Handbook 2018
  18. 18. The Concept of Supply Chain The supply chain is a series of operations and transactions undertaken by one or more organizations to deliver a product and/or a service to end-users. We call it global supply chain when the scope covers the suppliers of suppliers reaching the customers of customers. For each value chain, there are different supply chains and locomotives. Each organization involved in a supply chain has to align with the strategy of the leading actor, also called the "supply chain locomotive” in order to contribute to the creation of an effective and efficient global performance. The Digital Supply Chain is defined as a series of operations or transactions executed through automated processes to manage information flows along with the goods and services production. The "supply chain locomotive” is the one that shows the highest influence in the supply chain deployment, and who usually imposes the rules of cooperation and transaction standards, meaning most of the time the pricing policy. Generally, it controls the execution of at least the following activities along the supply chain: - The attraction and acquisition of potential customers - Planning and monitoring the physical and non-physical flows - Developing or investing in the technology required to master the supply chain - After-sales service and customer relationship management 18 Graph 10: Supply Chain Model. Source: The Digital Startup Implementation Handbook 2018
  19. 19. Redefining the Value Proposition through Digitization Choosing the right positioning is a simultaneous exercise with the choice of business model. For a Digital Startup, it requires a thorough knowledge of the forces acting on the market and a proven ability to compete. In the case where the target value chain lends itself well to digitization, it is possible for a startup to produce additional added value, and to play a pivotal role through information technology, either: - to better cover an explicit need, by bringing new services made possible by communication and cooperation between the traditional players in the sector. This is the case, for example, of Groupon for "spot" sales or PayPal that facilitates online payment. - to stimulate an implicit need by creating a parallel, autonomous digital channel capable of capturing the value of end-customers and taking advantage of the availability of capabilities on the market. This is the case, for example, with UBER, which produced a transport network without taxis, or Airbnb with its chain of housing without hotels. 19 Graph 11: Start-up value proposition Source: The Digital Startup Implementation Handbook 2018
  20. 20. 1.5 - Getting a Dominating Position in the Supply Chain There are a number of factors that could influence a dominating position in the supply chain, that should be considered for each startup as performance determenants: Market Traction: The potential, or demand, of the technology or the way we use the technology to provide a solid platform for multiple markets Flexible and Extensible Capacity: Connecting different companies’ capacities to cover the needs over time and in all places Intellectual Property Protection: The right to use with no risk the technology supporting the delivery of the services through electronic platforms and proprietary tools Secured Transaction: Mastering and securing the tracking of all operations and in particular, the payment process Regulatory and Business Environment: Legal framework and regulatory constraints could impact the strategy and even jeopardize the viability of the business 20
  21. 21. Business Model Risk Map: We can suggest here a list of 12 dimensions proposed for scoring the risk level of a business model attractiveness (0 for low and 100 for very high). To check its reliability and consistency and to minimize surprises, it is worth to set up a contingency plan in case the risk level becomes unacceptable. 1- Sustainable Business Model 2 - Legal Aspects 3 - Value Proposition 4 - Supply Chain Partners Dependencies 5 - Growth & Scalability Potential 6 - Organic v/s Heavy Marketing Spending This is an example of risk scoring with a visual map of the risk distribution as shown in the following graph called RISK map. This exercise is very important to understand the critical points in the business model implementation. There is a double interest in doing such an assessment. The first one is to measure and compare the different levels of risk that is inherent to the business, in order to prepare a contingency plan. The second interest is to see how the strategy execution is evolving over time and how it impacts each dimension of risk, with the perspective to prepare a repositioning of the startup, or a business model pivoting. 21 Graph 12: The Risk Map Source: The Digital Startup Implementation Handbook 2018
  22. 22. Part II IMPLEMENTING A DIGITAL STARTUP 22
  23. 23. 2.1 - Implementing a Business Model is a Steplechase As seen in the previous chapter, startup business modelling covers many dimensions of risk and needs several iterations before being ready for a smooth implementation. Each startup has its own trajectory, which follows 3 main constraints summarized as follows: - To make it right: as a new comer and change-agent in the digital market. This can be done out of a desire to bring innovation, create an evolution in the market, or simply to change things up and breathe new life into the industry. - To make it legal: The business should respect the law and comply with business rules, and in many cases, to stimulate the regulatory framework update to fit the quick changes in the global market - To make it sustainable: The adoption of new business model or adapting the model to ensure growth and scalability The digital startup trajectory will take on 9 steps that are schematized as shown in the following graph. 23 Graph 13: Digital Startup trajectory Source: The Digital Startup Implementation Handbook 2018
  24. 24. 2.2 - Key Considerations for the Innovation Riders The first thing to know is in which arena the innovation race will happen. We usually distinguish 3 types of innovation: Efficiency Innovation Produces the same product or service cheaper, such as cloud data centers that are replacing the physical IT infrastructure. Sustainability Innovation Turns good products into better ones, such as the electrical car. Disruptive Innovation Transforms expensive, complex products into affordable and simple ones, such as the shift from the fiduciary money to cryptocurrency. This is a check list with relevant questions for the innovation racers’ preparation that they need to consider before engaging in the competition: - What is the market opportunity my innovative venture is addressing? - What is the proposed value proposition I will fight the competition with? - Is my innovation based on a proprietary technology? If not, how would it be protected? - How long will my commercial product or service need to reach the market? - Who are my targeted first clients? Who are the strategic partners I need to engage with my venture? - If I create a startup, how much money will I burn through before reaching the market? - Once I created my startup, how much money I will need to reach the breakeven point ? The way these questions are raised and answered determines the survival of any innovative project. 24
  25. 25. 2.3 - Navigating the Distance to Capture Value The Digital Startup is the vessel that entrepreneurs steer by tangible and intangible equipment to navigate far in the market open seas and discover the way of innovation. Without experience, no one can master the innovation road. A deep knowledge of the actors, rules, and processes is usually required before considering to conquer a specific thread or value chain. The road map of Digital Startup will draw attention to squaring off the circle of digital innovation. Depending on the targeted commercial value proposition, digitizing the processes will also need a customization strategy, followed by a targeted advertising campaign that will bring monetization. 25 Graph 14: Squaring the Circle of the Digital Innovation Source: The Digital Startup Implementation Handbook 2018
  26. 26. How to Address a Market Opportunity 1) A Business Case in the Agrifood Value Chain Value proposition example: Bringing blockchain technology to traceability process in a bio agri- food supply chain. Scrutunizing the Opportunity Value Brought Impact Digitize Automating the data flows collection traceability Managing a database with reliable information of the origin, the inputs influencing the quality of food, and ensuring the bio label. Customize Developing mobile application affordable for farmers Standardizing the data exchange protocol and setting up a collaborative platform in the supply chain Advertise Exposing technology and certifying the traceability system Attract attention of final consumers to validate traceability label Monetize Licensing the use of the technology Expanding the business and reaching a return on investment (ROI) 26 Farming Processing Packagingand Collecting and storing - Marketing - Packaging - Derivative - Traceability - Genomic - Biopesticides - Irrigation - Environnement - Energy - Biomass - Labeling - Green Teck - Products Distribution - Franchising - Advertising - Forecasting Graph 15: Agrifood Value Chain Source: The Digital Startup Implementation Handbook 2018
  27. 27. 2) A Business Case in the Transportation Value Chain A new startup’s business model based on technology dictates early positioning strategy and affects the current commercial value chain. Value proposition example: UBER is the smartest way to get around, one tap and a car comes directly to you. Your driver knows exactly where to go, and payment is completely cashless ! Scrutinizing the opportunity Value Brought Impact Digitize Easing the taxi reservation process Matching in real time the available capacity of private drivers with transportation needs Customize Cost reduction and trip optimization Reach the cost-driven category of clients Advertise Viral marketing added to feedback of users’ experience Enrich the users’ community and promote the service Monetize Commission on each transaction Expanding the business and reaching a return on investment (ROI) 27
  28. 28. 2.4 - The Case of Deep Tech Startup Deep Tech Startup (DTS) are startup which business is built around unique, differentiated, protected or hard to reproduce, technological or scientific breakthrough. For instance, a startup that uses Big Data, Artificial Intelligence, or machine learning could be defined as a DTS, only if it relies on its own R&D, building its competitive advantage on advanced applied sciences that it produces itself. Creating a Deep Tech Startup has major societal significance, especially when it comes to promoting innovation and human progress. It is the result of strategy and collaborative process aimed to fuse the constituent parts of a business, providing the ability to develop an economic model that fits the target market and generate value in a sustainable manner. The junction between the idea and the project initiator thrives along a value chain, which if all the conditions for success are met, enables the creation of an innovative business. The DTS is a Digital Startup that includes in its asset a formal and protected Intellectual Property. 28
  29. 29. IP Value Stream and Asset Inception Process The Deep Tech Startup is a budding company that relies on an IP value stream that devotes its asset base. We’ll focus now only on the digital category of what is called Deep Tech Startup (DTS). Asserting the IP rights: Discussions with financial partners will quickly revolve around the exploitation of the IP. As long as it is not protected, IP has no value. In this regard, local skills in patent drafting and development of IP are often felt to be missing. This is especially true as the inventor’s industrial contribution is not easy to assess, at first glance, without industrial feedback. However, the legal environment recognizes more and more in-kind contributions. A patent may be assessed by a common agreement between shareholders and its value indexed on its future cash flow. This implies, of course, the intervention of a qualified contributions auditor. 29 Graph 16: Value Stream Source: The Digital Startup Implementation Handbook 2018
  30. 30. Deep Tech Startup Assets When considering a value proposition based on an innovation, we can distinguish between two possible options: one where an unsolved problem is addressed, and another that captures a partially addressed need. This will define the conditions under which the Startup will implement its business model and strategy. The DTS development will begin once the first assets are created and organizational capacity is formed, with the ability to see, understand, and act in an uncertain environment. More specifically, innovative startup need to be connected to researchers and strategic partners. So, a DTS is a combination of assets gathered to produce a specific capacity that are active on a regular basis along the value chain, addressing a targeted market opportunity. Each asset, in particular the ones that are based on Technology, are generally developed by an R&D team. Nevertheless, the researchers need the collaboration of the marketing team to anticipate the technical and economic feasibility of the proposed innovation and to figure out the actual market acceptance (“proof of relevance”) of the new product (good or service) in advance. Thus, the competitive advantage of a DTS will rise on knowledge and scientific findings that are converted into tangible and intangible assets. 30
  31. 31. Asserting a Competitive Advantage based on Intangibles When crossed with market regulation, we can differentiate 4 typologies of innovations as shown in the above graph with former startup who are now leading their markets. The business model is characterized by a unique combination of assets that were incepted according to the market responsiveness and appetite. Each category of DTS will face different reactions from market forces; and this will influence the assets inception process at the following 3 stages: The Testing During this phase, the innovator has a Minimum Viable Product (MVP) or a prototype of his product to test the market acceptance or the users’ adoption. The prototype is validated through documented tests; and in case of business creation, they are confirmed by professionals within an incubator or a technology transfer center, whether private or public. The Branding At this stage, the Startup is created after having a good appreciation of the market forces in game. The challenge is to appreciate the branding investment along with the intellectual property aspects to be protected. This is supposed to be part of the business plan and covered by budget requirements according to an initial investment plan. The Dedicating When the two previous stages are achieved, the Startup will contract with its first major customers who will provide the exposure and dedicate its capacity to generate traction and market appetite. 31
  32. 32. 2.5 - Orbiting with a Deep Tech Startup We saw how DTS creation relies on assets development or acquisition. This requires investments to be incorporated in the DTS capital throughout its life. To survive, the DTS need cash flows of revenues or capital to develop or acquire the necessary assets (tangible and intangible) in regard to a potential return on investment. This is represented schematically in the following chart, which describes the investment versus risk curve. Validating the Risk Curve At each step of the creation process, the need for funding increases significantly. It is estimated that it multiplies 5 to 10 times from one stage to another. This explains the necessity for Startup to participate in several round-table meetings with investors in order to acquire equity capital. DTS that survive are those who prove the value of IP is evolving at the same rate as funding requirements. The brightest and successful entrepreneurs will identify and control the process of value creation or even destruction that provides a greater overall benefit or "risk profile" throughout the startup’s life. Creating an innovative DTS remains an uncertain path, full of risks and challenges that only a limited number of successful businesses will experience. This trajectory can be summed up in three great moments in the life of innovative startup, namely: Priming, Launching and Development, and potentially even reaching the level of Unicorn! 32 Graph 17: Investment versus Risk curves. Source: The Digital Startup Implementation Handbook 2018
  33. 33. 2.6 - Digital Deep Tech Startup Capability The capability of an organization is a complex mix of a variety of actionable sources of knowledge and experiences. Some are subtle and intangible, such as inventions. Others are embodied in equipment, machinery or infrastructure, while others are carried by human skills. Digital Startup Business Model implementation is a long process that requires patiently building up and synchronizing 3 sets of capabilities. Cognitive Capability: It’s the ability to see, understand, and meet market demand. It covers Artificial Intelligence needed to carry out and execute real-time data collection, machine learning, problem solving, and permanently screening the internal and external factors that impact the company strategy. Technological Capability: It mainly includes the technologies supported by hardware and software, which are developed by the Startup and designed to deliver (alone or integrated to other technologies) the value proposition through a specific business model. Organizational Capability: It’s the Startup's ability to manage human resources effectively, including employees, contractors or freelancers, in order to execute its strategy, and gain an advantage over competitors. In a Digital DTS, organizational capabilities focus on the learning loop and how to manage knowledge as a key asset. A performing Digital DTS additionally needs to develop a strong culture that gives meaning to its actions. This relies on rituals and management practices, completed with a collaboration and communication rules. 33 Graph 18: Startup capabilities. Source: The Digital Startup Implementation Handbook 2018
  34. 34. 2.7 - Approaches for building and Operating DTS Capabilities A capability is a set of unit capacities that compounds the DTS business model. The later implementation will happen only when those 3 capabilities are fully connected and effective. A Question of Talent ... Understanding the meaning of connected capabilities, is making the parallel with a human being systems: ... to interconnect and work in symbiosis. A Question of Metrics .... Performing global capabilities, is translating those elements into coherent metrics: ... to have the same understanding and perception of the reality. 34
  35. 35. 2.8 - The 4, 3, 2 Canon Law Each Digital Startup is unique and has a special journey. Knowing that all startup are confronted by a set of rules and laws that are more or less independent from their environment and tends to eradicate them or at least slow down their growth. Keep in mind the 4 ,3 ,2 Canon Law and be prepared for a long and tedious path to success. The 4 Proofs A project is mainly identified as an opportunity that has been structured by one or several promoters sharing the same vision and committed to a same project. The effective implementation of the project depends on the following: ● The adequacy between the promoter(s) and the project, and perseverance (which constitutes the prime factor of success) ● The realism of the planning with a good appreciation of the risks ● The resources mobilized to implement the project Inventing can be a job while entrepreneurship is a vocation that requires a broad spectrum of technical and human skills. An entrepreneur needs training and specific workouts to manage the complexity of an innovation project, to predict and anticipate risks, and to equip by appropriate means in order to win and meet dynamic market needs. The team’s learning and relevance to the project scope is a decisive success factor. 35
  36. 36. Experience shows that it is not the brightest inventions that generate compelling innovations, even less actual products in the market. Successful businesses are rather a combination of different capabilities, and the strongest stake remains the way they are connected to deliver the best value to the market, with a performing management that can quickly adapt the strategy execution to the reality of the market. This is the result of a tedious process of experiences and proofs we call the commercialization cycle. 36 Graph 19: The commercialisation cycle. Source: The Digital Startup Implementation Handbook 2018
  37. 37. Proof of Feasibility In the case of an innovative project where the expected competitive advantage relies on an “invention”, it is often necessary to go through a preliminary phase called “feasibility phase” or “proof of relevance”. During this phase, the project team must gather all the elements to validate the technical and economic feasibility of the innovation and anticipate the market potential. Some techniques are employed to assess the IP value stream in regards to its expected impact on the market and its sustainability in an uncertain and ever-changing business environment. During discussions with potential partners, “leaks” may occur. The idea exists but prototyping is on hold. The product has not yet taken shape. All the project contacts represent vulnerabilities through which a hostile takeover may occur. The project is extremely vulnerable at this stage. The idea could be stolen while it is still in gestation. As soon as technical drawings, circuits, or functionalities are formalized, a confidentiality agreement must be signed before exchanging any technical data. Meetings with partners or providers must be documented in written reports, where the authorship of every improvement made is recognized. It is necessary to legally formalize all exchanges on the invention or the project so that they can be enforceable against third parties. 37 Graph 20: The MUDIR Cards® Feasibility Study Source: The Digital Startup Implementation Handbook 2018
  38. 38. Proof of Concept After documenting and validating the preliminary outcomes of the previous stage, proceed to analysis with the help of experts and professionals. The switch from the lab to the field is a delicate operation, and it’s not always good to push a “prototype” or a “beta version” of an innovative product or service to the market without taking some cautions and selecting the right addressees. - Create a target list of potential users and select the first customers. Those who will be the monitored are called “addressees”. - To make an effective choice, a foresight activity should target the key customers or users needed to approach it, in accordance with the objectives and scope of the strategic plan. - The targets to be monitored must be defined ahead of time, adding the expansion of the monitoring perimeter accordingly. The most knowledgeable entrepreneurs will choose to go through an incubator or an accelerator that will help to mobilize an adequate assistance, including access to funding. The proof of concept finality is to produce a first tangible result that proves, not only the market acceptance of the new product, but also the team’s abilities to manage the product delivery and quality services. It’s a way to build trust with the first partners and investors. 38 Graph 21: The MUDIR Cards® Proof of Concept Source: The Digital Startup Implementation Handbook 2018
  39. 39. Proof of Positioning When the project reaches this stage, the Startup is supposed to have developed a formal commercial strategy, with a clear vision of the market segment to be addressed with its new product or service, relying on a clear competitive advantage that will be tested in the market. The first achievements will prove or disapprove the market traction and scalability. This first contacts with the market forces lead in general to a new repositioning to make sure that the product will be sold and not the other way around. The commercial potential of the innovation is always subject to validation by the market. We can therefore have an anticipation with a pool of partners and field professionals that are able to provide guidance on business strategies for the sustainable expansion of the project. Identifying Priorities and Information Selection Criteria: The selection criteria indicators are the innovative capabilities. Start by defining the axis and the priorities, then rank them to establish the right order and a list of targeted themes. Next, each theme should unfold into several research questions (what is the practical information expected for each theme?) 39 Graph 22: The MUDIR Cards® Proof of Positioning Source: The Digital Startup Implementation Handbook 2018
  40. 40. Proof of Scalability Developing an Action Plan for the Dissemination of Information The most important step is to set up a monitoring action plan for the dissemination of information that includes: - Identifying addressees according to the type of information requested - Selecting the search tools - Saving results - Spreading information to the targeted scope of work. First contact with the market is an invaluable source of information useful for the viability of the Startup. -Take into account the requirements of the market, the standards, and practices of the actors -This is where you fine-tune the size of investments -This is where the profit-margin, long awaited by investors, can be reached with a good strategy and scalability plan 40 Graph 23: The MUDIR Cards® Proof of Scalability Source: The Digital Startup Implementation Handbook 2018
  41. 41. The 3 Death Valleys A Startup is permanently fighting to survive under hostile environment and uncertainty. There are 3 occasions where the Startup might die while looking for its business model implementation. We call them the 3 Death Valleys. The No Information Death Valley By practicing strategic foresight, the startup can have access to decisive information on the technological, legal, business, and marketing levels. Thanks to this relevant information, the company can carry out better planning and decision-making processes. The No Capital Death Valley In order to secure an adequate financial support, it is important for a startup to follow a funding process that can be gradually implemented through different financial support instruments. Before embarking, it is necessary to determine how much funding is required and where it will come from. There are many factors to consider in determining how much funding is necessary for investment and for operations. The No Traction Death Valley After positioning in the right market type, it is essential for the startup to choose the adequate positioning strategy, especially in a constantly changing environment as the tech sector. The 2 Moments of Truth There are two special moments in the life of a startup: the first sales transaction, and reaching the breakeven point. Often neglected and uncelebrated, these moments are true survival tests for startup. A delay in any of them can make the dream melt away and could even cost bankruptcy. The first milestone gives credit to the Startup on its ability to sell and take a share in the market. The second milestone is the stage where the company will start to become less dependent on investors and develop its own cash flow. It is the consecration of the growth curve. 41
  42. 42. Part III : The backpack for Tech Entrepreneur 42
  43. 43. 3.1 - Orbiting with a Deep Tech Startup To start a journey, a Tech Entrepreneur will need a roadmap, referring to the previous chapters, in addition to the necessary equipment and provision to reach his destination alive. The difficulty is how someone who has never travelled or affronted venture risk will be able to plan this journey and prepare his/her backpack accordingly. Looking for a path to start a digital business in an uncertain world requires a reliance on others’ knowledge, an adoption of proven tools to master the trajectory, and a creation capability to compound intangible assets, value, and even deconstruction in order to rebuild them. Most likely, these are the most decisive equipment pieces a Tech Entrepreneur will need to find the path of success for his Digital Startup through actionable activities to manage such as: 43 Graph 24: Timelines of a Deep tech startup Source: The Digital Startup Implementation Handbook 2018
  44. 44. 3.2 - Actionable Activities for Business Growth Once the project of the startup implementation begins, entrepreneurs will have to identify and formalize the required relationship with stakeholders. Tech Entrepreneurs must show a capacity to build trust with associates, investors, partners, employees, customers and suppliers, and more importantly, turn it into commitments for actions. Digital Startup growth will depend on the way management builds and combines capacities, and to which extent the new business will impose new rules that could produce results or impact the ecosystem. Based on field observations and in reference to the works of Eric Ries, who states in his book “Lean Startup”, there are 3 stages in a startup’s life (creation, building, administrating). We can assert that the successful businesses are progressing from one stage to another thanks to hard work and energy, with an iterative execution of actionable activities that induce a spiral of progressive impacts, represented as following: 44 • Leading the market by innovating • Contracting with stakeholders to deal with transparency • Planning the strategy • Executing the strategy with an aligned organization • Evaluate the strategy results • Improving the performance by capitalizing on knowledge Graph 25: Virtuous spiral for business growth management. Source: The Digital Startup Implementation Handbook 2018
  45. 45. 3.3 - Cash Flows for values From a systemic point of view, a Digital Startup could be defined as a black box that is crossed over by 3 types of flows: Physical, Information, and cash. The last two could merge in case of full crypto-economy. To cover the operations cycles, the Digital Startup need investments flows, represented in the next chart. Assessing Needs, Raising and Allocating Capital Expenditures (CAPEX) Capital expenditures are the finances that a startup utilizes to purchase equipment, goods, technology or products needed to expand the company's capability to deliver value. These purchases can include intangibles, like software, patents or know-how. The asset purchased may be a new asset or something that improves the productive life of a previously purchased asset. Planning and Engaging Operating Expenses (OPEX) An operating expense covers the startup activities to run the business. It’s usually planned in the financial plan, and, in contrast to capital expenditures, operating expenses are fully tax- deductible in the year they are made. Operational expenses make up the bulk of a company's regular costs, and includes fixed and variable charges. Once they enter the building phase, a very common reflex in startup management is to look how to make the most of operational related activities in correlation with variable costs rather than fixed ones. 45 Graph 26: Cash Flows Values Source: The Digital Startup Implementation Handbook 2018
  46. 46. 3.4 - Managing Human Capital The decision-making process’ effectiveness is the main concern of human capital. To consolidate the growth phase, a Digital Startup must align its human resources (internal and external) through a flexible and proactive organization, backed by a strong cross-functional management. The way the digital startup considers its human capital has a direct impact on the way it will capture critical signals, even very small, from its environment, and the manner it will capitalize on knowledge. Expanding human resources management to human capital development is key to implement a sustainable growth strategy. 46 Graph 27: Community Relationship Management Source: The Digital Startup Implementation Handbook 2018
  47. 47. Retain Contributors Execution of activities is essential for the survival and development of any organization, business or innovation project. Before collecting and processing strategic information, it is necessary to define them formally by specifying the sources, the contributors, their commitments, the frequency of control, and the key performance indicators to achieve in the target market. Attracting Talents A Digital Startup is a talent-based organization. The managers and employees are the first pillar. The business culture and the values are the second pillar - that gives meaning to the challenges the team must attempt. The partners’ resources are the third pillar, who help the Digital Startup to face the changing business environment in which it moves. Building up a Strong Community A community of supporters, strategic partners, early adopters is key to enter the market, and then to take a step back and learn from experience, before trying again. The community power is in the way we ask for contribution. It becomes an invaluable source of information as well as an exchange platform that could provide expertise in a friendly atmosphere 47
  48. 48. Part VI : In Conclusion 48
  49. 49. 4.1 - Technology is Not the Only Competitive Advantage In the current move towards a digital economy, startup’ creation becomes the pillar of a new industry, based on knowledge and innovation, and which is not only dependent upon internal factors but also on the ecosystem actors' reaction. Launching a successful Digital Startup requires ultimately having access to the appropriate resources, and we hope this guide will serve as a useful one. By sharing some important insights and knowledge on digital business incubation, we hope that we will help Tech Entrepreneurs overcome the challenges and make their tedious journey less confusing. Knowing that the conceptual framework for a Digital Startup is neither frozen nor rigid, everyone is called to find his/ her own path and establish new rules and practices for business. Finally, a Digital Startup is created on the basis of a specific innovation. But breakthrough technology needs a profitable business model, that includes a vehicle for value production and a channel to place it in the marketplace. Like a genetic chain, the business model has to ensure sustainability and scalability. 49 Graph 28: Digital Startup DNA Source: The Digital Startup Implementation Handbook 2018
  50. 50. 4.2 - Succeeding is in Fact Anticipating Failure Digital Startup have been the hype success story of the last decade. Some exceptional Digital Startup have succeeded in changing the rules in some markets. Yet, for every successful startup, countless others fail, sometimes mysteriously and often unnoticed. Many failure causes are obvious once we confront them. The best response to the risks of failure for startup founders is to manage them very well, anticipating their occurrence. A deep understanding of what is behind the missteps comes down to operating out of confidence in competence, not ego, which leads towards the explanation for the loss or a gap in one or more of these elements: - Market Forces and Traction - Customer Needs and Segmentation - Cash and revenues - Team and their Passion - The Business Model and Rationale The obstacles for Digital Startup growth are many. In addition to the reaction of the current “Guardians of the Temple” for the targeted value chain, a Digital Startup also must deal in particular with legal constraints that will dissipate resources and could even dissipate market appetite. Digital Startup should not rely only on classical marketing theories but also on the 7 Ps of the Marketing Mix : 1.Product - 2.Place - 3.Price - 4.Promotion - 5.People - 6.Processes - 7.Physical Evidence There is an 8th P for Digital Startup It’s about policy & regulatory framework that allows the 7 previous Ps to be ensured, and to enable business growth. Remember that creating a disruptive innovation could also take its promoter to the court. In reality, whether a digital innovation succeeds or perishes, when one Digital Startup dies, new Tech Entrepreneurs are revealed. 50
  51. 51. 4.3 - The Charter of an Exemplary Tech Entrepreneur Behind each story of Digital Startup there are men and women who are the birth fathers and mothers of the business model and who bear the quality of success and the capacity to learn very fast. This equates to a proven wealth creation capacity but also the generosity to share it. Promoting a Digital Startup requires a lot of will and tenacity to produce wealth as well as human progress. Entrepreneurs who thrive share common traits, generally Emotional Intelligence rather than technical skills, which proves again that entrepreneurship is based on cognition and leadership. The latter combined with ethics will give a larger sense to every Tech Entrepreneur concerned by impact investment and sustainable success. 1. Share your vision and focus on the value that you bring to the market 2. Persevere without stubborness and carefully build your reputation 3. Invest in both your core business and the conductive environment for its development 4. Identify and patiently observe the key players in your target market 5. Continually learn, fail fast, and adapt your strategy 6. Be accountable to your partners and demanding to yourself 7. Manage with rigor and be flexible to changes 8. On a regular basis, collectively assess the risks and update your contingency plan 9. Manage the gaps and look for alliances to compensate them 10. Stay patient, honest and right in front of difficulties 51
  52. 52. Appendix 52
  53. 53. About the Author Mondher Khanfir is an Impact Investor with more than twenty years in business consulting and has a lengthy experience in entrepreneurship and innovation. He has authored several articles on private sector development, science, technology and innovation policies, and has led many strategic projects for governmental and international institutions. He is very active within the entrepreneurial ecosystem in Africa and led several initiatives with Carthage Business Angels (CBA), a pioneering angel investor network in Tunisia, and more recently with Tunisia Africa Business Council. Moreover, he promoted the launch of a private seed fund to support innovative startup in the early stage, along with the creation of the first private business incubator in North Africa, Wiki Start Up, which provides a various set of incubation and acceleration programs dedicated to African startup. Mondher Khanfir has an engineering degree from “Arts & Métiers ParisTech” in France. He partook in a special training program on Entrepreneurship & Innovation Management at Rensselaer Polytechnic Institute, New York, USA. He also holds an Executive MBA from the Mediterranean School of Business in Tunis as well as a Corporate Governance Certificate from the International Finance Corporation (World Bank Group). 53 Mondher KHANFIR Impact Investor & Entrepreneur Policy Advisor & Strategist Co-Founding Member & Program Architect at Carthage Business Angels Co-Founder at Wiki Start Up Co-Founding Member & Vice President at Tunisia Africa Business Council
  54. 54. About Carthage Business Angels Carthage Business Angels, CBA, is a non-for-profit organization and the first angel investors network in Tunisia focused on entrepreneurship and presented as a 3E Agency: Entrepreneurial Ecosystem Enabler. Thus, since its inception in 2010, CBA supported and co-implemented several incubation and acceleration initiatives. The association is backed by the leading private business Incubator Wiki Start Up, and has helped the publication of several studies and policy papers covering themes like Access to Finance and capital market Development, Innovation and technology transfer, business incubation, Research Base spin-off generation. Carthage Business Angels is well recognized as an Executive Partner, Business Support Organisations, and Service provider to the Entrepreneurial Ecosystem, as it has co-implemented several programs in partnership with international institutions like GIZ, USAID or AFD. Website: www.cba.tn 54
  55. 55. About Wiki Start Up Wiki Start Up is the first private business incubator launched in Tunisia in 2011. It delivers cutting edge services Platform for Entrepreneurs and Investors. It fosters the creation of innovative startup by providing a complete innovation oriented ecosystem and by facilitating their access to expertise, specific business development tools, fundings and crucial connexions to an international professional network enabling rapid growth. Wiki Start Up mission is to: * Assist high potential entrepreneurs to structure their innovative projects through dedicated incubation programs * Build up a business environment and bring specific expertise to innovators * Ensure a privileged access to investors Wiki Start Up has also incepted the first pre-seed fund in Tunisia, CapitalEase Seed Fund, and contributed to the funding of many Digital Startup during their prove of concept and prototyping phase. Website: www.wikiStartup.tn 55

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