2. What did you do?
ā¦what did you learn???
ā¦ā¦.so what will you do now?
Welcome Back ļ
3. TO DO TODAY
1. Revise your idea based on market insights and
feedback from interviewees.
2. Create the first version of your business model by
filling out the canvas below
3. Present the business model to your buddy team
and get feedback
4. Delegate tasks to everyone in the team (What will
you do between now and next session)
20. Donāt just rely on advertisement!!!
CPM = ācost per 1000 impressionsā
= cost per 1000 times that an add is viewed on your website =
CPM = 1$ to 4$
38. Problem Interview
- Learn about the early adopterās problems
- Donāt talk about your solution
Solution interview
- Not a pitch to sell your product ā focus on learning
- Confirm the MUST-HAVE PROBLEM
- Use a Demo to test if your solution is what the user wants
- Test pricing
What should we ask?
40. Shut up and listenā¦
Donāt defend yourself ā just listen
Write down the insights you getā¦
Feedback is a gift!
41. āWhether you think you can, or you think you canāt - youāre right!ā
- Henry
Ford
Henrik Scheel
henrik@startupxp.com
www.linkedin.com/in/henrikscheel
Facebook.com/startupexperience
www.StartupExperience.com/AEP
Good luck with your entrepreneurial journey!
Editor's Notes
(Market segmentation, Business Model Generation and introduction to LEAN Startup Methodology, interviewing 2.0)
Solution interviews?
Okay my friends, now itās time to get REAL. In the previous stages you have worked on an idea, now we will turn that idea into a viable business. itās time to think through all the details of your idea and start testing if you are actually right about all your assumptions ā have you really understood the core problem? Does the user like your idea? What will it cost to build your product? We will now introduce a powerful framework called The Business Model Canvas. The canvas is one of the most popular tools that startups use to sketch out their ideas in order to get a complete overview of the whole business. The canvas can be used to identify potential threats and see new opportunities, it will help you get a better understanding of the entire value chain of your business and help you build a strong competitive advantage.
*Before giving this presentation please spend 5 minutes looking through this video by Steve Blank and feel free to use some of his examples: http://www.youtube.com/watch?v=teURBW6qnRY
The worldās largest taxi firm, Uber, owns no cars.
The worldās most popular media company, Facebook, creates no content.
The worldās most valuable retailer, Alibaba, carries no stock.
And the worldās largest accommodation provider, Airbnb, owns no property.
Something big is going on.
*Ask how they are doing, if they have any questions and if they got some good feedback from their buddy teams..
As you can see they business model canvas is a great tool for prototyping and describing your business. It can also be a powerful tool to understand your competitors and create competitive advantage. Some companies use the canvas to sketch out the business model of their competitors and thereby gain new insights about how to differentiate their products and services from those of their competitors.
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Whereas traditional innovation has been around a service of a new product
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You can also innovate around your business model. You need to create a good business model around your products, otherwise you will never be able to make money in a sustainable way.
Good example is Apple ā when they created the Ipod.. The innovation with the Ipod wasnāt just a nice new gadget, the real innovation was that Jobs managed to convince the music industry to hand over their business model to Apple and allow Apple to take a 30% cut every time a song is sold through iTunes.
I will now introduce three generic business models for your inspiration.
The first one is called The Bait and Hook model. The concept is that you throw out the bait and try to hook the customers.. The bait is one type of products that you sell very cheaply to the customers in order to get their attention and afterwards be able to sell more products at a higher margin (where you earn more money).
*explain the drawingā¦
Your company is on the left hand side.. You can see how you have a one-time transaction with the customer where you sell one type of products at a low margin.. And then afterwards your customers will continue to buy another type of products from you where you earn a higher margin.
*ask the students: Can you think of any companies that use the bait and hook model?
*typical examples: games (buy the game for $1 and then buy more upgrades in the game), buy a car and then you need to pay for ongoing service, Cell phones you buy with a 2-year plan, playstation/Xbox where you buy the console very cheap and then you spend a lot of money on games that fit your console..
A classic example is how Gillette makes money.. Their customers on the right hand side are males age 16-99 who need a good shave.
In this model you can see that Gillette has two different products ā the razor handle that they sell very cheaply to the customers in order to hook the customers and then make the customers pay loads of money on overprized razor blades for the rest of their livesļ pretty smart right!
Freemium is a business model by which a product or service (typically a digital offering such as software, media, games or web services) is provided free of charge, but a premium is charged for advanced features, functionality, or virtual goods
The business has two different customer segments ā group 1 who are non-paying customers (users), and group 2 who are paying customers.
In a freemium business the vast majority of your customers will be freemium users (non-paying), but over time you are hoping that an increasing number of users will convert and become paying customers.
As you can imagine you will typically need a lot of funding to start a freemium business since the revenue doesnāt start coming in until your users over time see enough value in your product to convert and become paying customers. The paying customers can of course take advantage of the additional features you offer to those who pay (premium account) but most people will probably be happy just using the free version of your product, which is ok!
Can you think of examples of companies that use the freemium model?
*fx. Many web services like Dropbox (online storage), free online games where you can get more levels if you pay (angry birds),
Another classic example of freemium is SKYPE. They offer free VOIP (voice Over Internet Protocol) to most users *ask how many use skypeā¦ then ask how many pay for Skype?
Some users convert into paying customers if they also want to use Skype to call cell phones or access wifi hot spots in airports and that is the way Skype make money.
The last model I want to present is the connection platform. It is also the most complex model to understand because the company is serving so many different customers and users. The economic logic is that you get a ton of users to use your platform and because you now own a lot of relevant data you can charge some customers who wants to gain access to your freemium users.
Here is a model where you as a company are providing value to group 2 and 3 without getting anything in return, but because you have all these users on your platform you can serve group 1 who are willing to pay you money to gain access to your freemium users ā typically through targeted advertisement or by getting access to your data.
Can you think of any business that use this model?
*Fx. Most social networks like LinkedIn, Instagram, and Facebook
The example here is Facebook *ask how many who use Facebook, then ask how many who pay to use Facebook?
*Point out that Facebook provides value to all their users without charging them.. But because they now have 900M users, they can earn a lot of money from advertisement by selling data and provide targeted adds on their platform.
So thatās it.. Any questions about the three models?
I hope this inspired you to come up with some new ideas.. See you can use some components from these three models.
Some of you might consider advertisement as a way to create revenue for your business.. That is of course okay, but does any of you know how online advertisement work?
When you visit a website, you often see video ads and other advertisements that -- if clicked on -- direct you to another webpage. These are CPM ads and they take the form of clickable advertisements and commercials for webpages. CPM means "cost per 1,000 impressions" --- that is, the set rate each advertiser pays per 1,000 times a customer views that advertiser's CPM ad on a publisher's webpage. Advertisers and publishing networks pay varying rates for CPM ads but generally the price is between $1 and $4 per 1,000 impressions.
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So you obviously you need A LOT OF USERS before you start earning any significant revenue from adds
The estimated annual medical cost of obesity in the U.S. was $147 billion in 2008 U.S.
You have now sketched out the very first version of your business model, but itās important to know that there can be many alternative models that might work even betterā¦
During the past stages of the process we have tried to understand the userās core problem and we have come up with a great idea that we think can help solve this problem.. But itās important to remember that all we have really done is sit here in this room and come up with a lot of assumptions (guesses) about the user ā we now need to realize that there is no truth in this room, only guesses!
The only way to make sure we are right about all our assumptions is to go out of the building and talk to the potential users of your product or service! This process is what we call Customer Development and it is one of the absolute most important parts of being an entrepreneur and innovator ā cause as weāve mentioned before ānobody will pay you to solve a non-problemā ā you need to understand the real pain point before you can find the right solution.
In corporations we tend to build MAXIMUM viable products..
When you are done with the user description template we will make use of our buddy teams during the first #Watering hole session. The watering hole is were all the animals meet on the savanna do drink peacefully together. Just like the animals we will meet up with our buddy team and help each other to improve our problem statement and user understanding. An important part of being an entrepreneur is to network and meet people who can give you good feedback on your ideas. During the camp you can use your buddy team to get valuable feedback on your ideas. It is always good to try to present your thoughts to someone else and then get their input. Remember that ideas are cheap ā itās only execution that matters.. So the benefit of getting feedback when you share you ideas always exceed the risk of somebody stealing your idea..
