Business Model Workshop: the Tao of Startups

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First lecture in a workshop on business model generation and technology startups. Focuses on the overall philosophy and the structure and nature of business models.

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Business Model Workshop: the Tao of Startups

  1. 1. Business Model WorkshopThe Tao of Startups Keith McGreggor Director of VentureLab @ ...
  2. 2. two parts
  3. 3. Part OneWhat We Used to Believe What We Now Know
  4. 4. Part TwoBusiness Model Generation
  5. 5. but first...
  6. 6. a startup story...
  7. 7. ANSEL
  8. 8. 1996
  9. 9. 50 Kbs
  10. 10. slow
  11. 11. ANSEL technologysuperior image compression
  12. 12. 40+ pitches to VCs20+ revisions to business plan
  13. 13. $0
  14. 14. TeamMarket Opportunity Business Model Technology
  15. 15. TeamMarket OpportunityBusiness Model Technology
  16. 16. ANSELCEO Keith McGreggor
  17. 17. Success consists of going from failure to failurewithout loss of enthusiasm. - Winston Churchill
  18. 18. idea
  19. 19. idea UltraWidgets
  20. 20. about startups ...
  21. 21. NASDAQ 5000 4000 3000 2000 10001996 1998 2000 2002 2004 2006 2008 2010 2012
  22. 22. $1,000,000,000,000
  23. 23. we know something now that we didn’t know before ...
  24. 24. we know something now that we didn’t know before we know how to build startups
  25. 25. we know something now that we didn’t know before engineer we know how to build startups
  26. 26. What’s A Company?
  27. 27. A business organization which sellsa product or service in exchange for revenue and profit
  28. 28. A bit of history...
  29. 29. Dutch West India Company 1620
  30. 30. 1856 - First Org Chart
  31. 31. 1908
  32. 32. Tools for the 20th Century“Century of the Corporation”
  33. 33. ... but what about startups?
  34. 34. Startups are a Smaller Version of a Large Company
  35. 35. Startups are a Smaller Version of a Large Company
  36. 36. Startups are something else.
  37. 37. What’s A Startup?
  38. 38. A temporary organization designed to searchfor a repeatable and scalable business model
  39. 39. A temporary organization designed to searchfor a repeatable and scalable business modelStartup ≠ Company
  40. 40. business plan vs.business model
  41. 41. business plana place to collect all of your (current) hypotheses and your rationale for them
  42. 42. business plan cover page table of contents executive summary business description business environment analysisa place to collect all of your industry background (current) hypotheses and competitor analysis your rationale for them market analysis marketing plan operations plan management summary financial plan attachments and milestones
  43. 43. business model a place to describe how all ofthe pieces of your plan fit together
  44. 44. business modelthe rationale of how an organization creates, delivers, and captures value
  45. 45. what we used to believewhat we know now
  46. 46. What We Used to BelieveStart with an Operating Plan and Financial Model
  47. 47. All I Need to Do is Execute the Plan
  48. 48. All I Need to Do is Make the Forecast
  49. 49. Step 1. Write Business PlanStep 2. Make 5-year ForecastStep 3. ???Step 4. PROFIT!
  50. 50. All I Need to Do ...
  51. 51. as a general rule...Business Plan =FICTION
  52. 52. No Business Plan survives first contact with customers
  53. 53. Crystal ball...2007 2012
  54. 54. Planning > Plan
  55. 55. What We Used to Believe We Built Startups by Managing Processes Product Management + Waterfall Engineering
  56. 56. Product Introduction Model Concept/ Product Dev. Alpha/Beta Launch/Seed Round Test 1st Ship
  57. 57. Tradition – Hire Marketing Concept/ Product Dev. Alpha/Beta Launch/ Seed Round Test 1st Ship - Create Marcom - Hire PR Agency - Create DemandMarketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding”
  58. 58. Tradition – Hire Sales Concept/ Product Dev. Alpha/Beta Launch/ Seed Round Test 1st Ship - Create Marcom - Hire PR Agency - Create DemandMarketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build SalesSales • Hire 1st Sales Staff Organization
  59. 59. Tradition – Hire Bus Development Concept Product Dev. Alpha/Beta Launch/ Test 1st Ship - Create Marcom - Hire PR Agency - Create Demand Marketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build Sales Channel / Sales • Pick distribution Distribution Channel Business • Hire First • Do deals for FCSDevelopment Bus Dev
  60. 60. Tradition – Hire Engineering Concept Product Dev. Alpha/Beta Launch/ Test 1st Ship - Create Marcom - Hire PR Agency - Create Demand Marketing Materials - Early Buzz - Launch Event - Create Positioning - “Branding” • Hire Sales VP • Build Sales Channel / Sales • Pick distribution Distribution Channel Business • Hire First • Do deals for FCSDevelopment Bus DevEngineering • Write MRD • Waterfall • Q/A • Tech Pubs
  61. 61. Waterfall / Product Management Execution on Two “Knowns” Requirements Product Features: known Design Implementa1on Verifica1on Customer Problem: known MaintenanceSource: Eric Rieshttp://startuplessonslearned.blogspot.com
  62. 62. Waterfall / Product Management Execution on Two “Knowns” Requirements Product Features: known Design Implementa1on Verifica1on Customer Problem: known MaintenanceSource: Eric Rieshttp://startuplessonslearned.blogspot.com
  63. 63. What We Used to Believe Hire and Build aFunctional Organization
  64. 64. Founders run a Customer Development TeamNo sales, marketing and business development
  65. 65. Startups are not a smaller version of a large company
  66. 66. startup early growth
  67. 67. startup early growth You are NOT here here
  68. 68. It all begins with a search. The search for a business model
  69. 69. You, as founder of a startup: Vision Hypotheses who are the customers? a product with how do we price it?a set of features how do we create demand? what is the sales channel? where do we build it? how do we finance it?
  70. 70. Your job, as founder of a startup: Vision Hypotheses who are the customers? a product with create business models iteratively how do we price it?a set of features refinehow do we create demand? and test / your hypotheses what is the sales channel? where do we build it? how do we finance it?
  71. 71. search for execution ofbusiness model business model startup early growth Business model found Cash-flow breakeven Product / Market fit Profitable Repeatable sales model Rapid scaling Managers hired Senior mgt. hired
  72. 72. Business Model Generation infrastructure offer customers activities relationships partners value segments prop. resources channels financial cost structure revenue streams
  73. 73. business modelinfrastructure offer customersresources segmentsactivities value relationshipspartnerships proposition channelsfinancial cost structure revenue streams
  74. 74. business model infrastructure offer customers activities relationshipspartners value segments prop. resources channels financial cost structure revenue streams
  75. 75. business model infrastructure you creating who are offer customers value for? activities relationships valuepartners who is important? segments prop. resources grouped into one or channels more segments financial make conscious decision cost structure / ignore, revenue streams who to serve then understand need
  76. 76. business model infrastructure offer customers what value do describe the products and you deliver? relationships servicesactivities thatpartners value for a create value which problem segments are you helping specific customer prop. channels solve? resources perhaps more than one proposition which needs financial are you cost structure satisfying? revenue streams
  77. 77. business model communicate with and infrastructure offer customers reach a segment to deliver value activities relationships marketing, distribution, valuepartners and sales segments prop. resources channels how do customers want to be reached? financial which channels work best? cost structure how integrated are they? revenue streams
  78. 78. business model clarify type of relationship infrastructure offer customers to establish with each segment activities relationships acquisition, retention, and valuepartners upselling segments prop. resources channels what relationship do the customers expect? financial which are established? how much do they cost? cost structure revenue streams how integrated are they?
  79. 79. business model infrastructure offer customerscash generated from each what value are they customer segment willing to pay for? activities relationships what/how do they pay? value what would they prefer?transactional or recurringpartners segments prop. how much contribution? resources channels financial cost structure revenue streams
  80. 80. business model infrastructure offer the most customers assets important physical, financial, activities relationships intellectual, or humanpartners value owned or segments leased prop. resources channels what resources do the value propositions, financial distribution channels, customer relationships, or cost structure revenue streams revenue streams require?
  81. 81. business model infrastructure offer what you do customers production, problem activities relationships solving, platforms,partners value networking segments prop. resources channels what activities do the value propositions, financial distribution channels, customer relationships, or cost structure revenue streams revenue streams require?
  82. 82. business model infrastructure offer customers network of suppliers and partners activities strategic relationships alliances, coopetition,partners value ventures, buyer-seller joint segments prop. resources who are your key suppliers? channels what resources do you receive? which activities do they perform? financial cost structure optimization, risk streams revenue reduction, acquisition
  83. 83. business model infrastructure all costs incurred to offer customers operate the model cost-driven / value-driven activities relationships calculate after defining fixed / variable costspartners activities, andvalue resources, segments scale / scope economies partnerships prop. resources channels financial cost structure revenue streams
  84. 84. business model infrastructure offer customers activities relationshipspartners value segments prop. resources channels financial cost structure revenue streams
  85. 85. practical examples
  86. 86. example infrastructure offer customers partners activities value prop. segments lovemark hardware relationships record design switchingcompanies marketing costs seamless mass music market experience OEMs resources retail stores people brand channels site hardware web content own stores agreements software cost structure financial revenue streams online store people sales some music hardware revenue manufacturing marketing revenue
  87. 87. example infrastructure offer customerspartners activities value prop. segments platform management relationships services targeted ads advertisers expanding search web surfers reach ? monetizing content content owners resources search channels internet platform cost structure financial revenue streams keyword auctions platform costs FREE
  88. 88. example infrastructure offer customers partners activities value prop. segments development relationships large base free of maintenance basic free service users resources small base premium of service paying channels internet platform users cost structure financial revenue streams free basic servicesfixed cost of service cost of servicecosts for premium for free users costs users paid premium services
  89. 89. exercise: creating a business model
  90. 90. the Canvas infrastructure offer customers activities relationshipspartners value segments prop. resources channels financial cost structure revenue streams
  91. 91. for further reference ...
  92. 92. Alexander Osterwalder & Yves Pigneur

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