Game Changing Business Models - V2! - with case examples - Competitive Advantage for Startups

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Developed for the Harvard Innovation Lab workshop series on Startup Secrets.

This is part 3 of the 5 part series by Michael J Skok on how to get competitive advantage as a startup.

Michael's slides are the agenda for the workshop, and are NOT self contained. For fuller coverage of the slides, visit Michael's website http://www.mjskok.com/

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  • Building communities is not simple Scratch your own itch
  • Market share
  • Market share
  • Market share
  • Strategies that enable Multipliers and Levers to work together around your CORE are the real winners
  • Create valuable products and services around the CORE of Drupal
  • But it has to be win/winOEM, relies on upsell
  • Could you find a larger strategic partner who needed you to complete their “whole product” AND that had channels to reach your target customers AND that multiplied your go to market value and effectiveness?
  • Game Changing Business Models - V2! - with case examples - Competitive Advantage for Startups

    1. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model HiHi Harvard innovation lab #innovationlab @mjskok #startupsecrets www.mjskok.com START UP SECRETS An insider’s guide to unfair competitive advantage Disruptive Business Models to build Value MICHAEL J SKOK North Bridge Venture Partners twitter: @mjskok mjskok.com 1
    2. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secrets - Series • Sep 11: Perfect Pitch • Oct 11: Value Proposition • Oct 16: Company Formation • Nov 13: Business Model • Dec 4: Go-To-Market Strategy 2
    3. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Introductions & Case Examples • Established – Google • Startup – Acquia – Demandware • Not for profit – One Laptop Per Child – Diagnostics For All (on the web) 3
    4. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Agenda 1. Finding a Disruptive Business Model 2. Focusing on CORE differentiation 3. Multiply and Leverage it with innovation 4. Designing for high value Other side of the coin – GTM – next session - Eg Segmentation, Channels etc 4
    5. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com 5 #innovationlab @mjskok #startupsecrets Business Model: How do you make money? What is your model for • Creating • Delivering • Harnessing VALUE? 5
    6. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Tonight Let’s get creative and think specifically about startups! 6
    7. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Business Model as a Disruptor • Why? – Time to market – Market adoption – Sustainability • Connecting the dots for you as a founder … – Spend – Cash efficiency – Your ownership – Valuation 7
    8. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Perfect Startup Storm Disruptive Business Model Disruptive New Market Technolog & GTM y 8
    9. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets How can your Business Model… • Change the game? • Rewrite the rules? New Game • Cause an innovator’s dilemma New playing field New boundaries • Be as disruptive New rules as your technology? YOU choose players 9
    10. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Ex 1: Symantec - 20 years ago (!) Symantec Antivirus for Mac (SAM) Best seller – Licensed Product Norton Antivirus for PC (NAV) How to change the game Best seller – Subscription Service 10
    11. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Results? • Dramatic! • Game changing – Flipped the model on it’s head • Competitors caught off guard – Predictable profitable business model • Led to solution leadership vs. battle: “Data Security” – Customer need met more effectively – More value extracted – 1.5x product / seat => 2.6x 11
    12. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Ex 2: European Software Publishing • Off balance sheet Publisher of US products – Investment in Management, Sales, Marketing, Support, Translation & Localization • Acquired back by US corp when profitable – Pooling of interest – Non dilutive – Growing earnings 12
    13. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Results? • Win/win/win – Customers = better local product, support, services – Publishers = accelerated, off balance sheet setup of profitable business – Shareholders = 97X return on original investment • Non technology disruptive business model – Economies of scale – Pooling of interests (tax) – Time shifting expense => Accretive outcome 13
    14. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Sample Models • Shared ownership (Zipcar) • Flash sales (Vente Privee) • Crowd sourcing (uTest) • Lead Gen (Mint.com) • Virtual goods/currencies (Tapjoy) • Combinations – Acquia -OSS, SaaS – AirBnB - Commission on P2P rentals – Demandware - SaaS, success based rev share – Groupon - broker, revshare – Spotify -adbased, freemium 14
    15. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Business Model- Sample Questions • Process or Product? • Software or Services? • Open or Proprietary? • Content or Data? • Freemium or Premium? • Subscription or License? 15
    16. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets What is your CORE value? First key question Your Capabilities Of CORE Focus on it! Really Exceptional Value 16
    17. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Cut to the CORE! Where is your CORE value? • Software/other technology • Data • Content • Service, support COR • User network E Disruptively monetize it! – To your competitive advantage – Where are others most vulnerable? 17
    18. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Google – Ex 1 Apps • Google Apps vs. Microsoft office – What is the C.O.R.E for each ? • Software, Data, Advertising ? • Don’t compete head-on – MS Office = enterprise market – Google Apps = consumer market – Free vs $500 license – Simple vs Complicated – 80% solution vs Professional Tool 18
    19. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Google - Competing with Market Leaders How can you compete with a market leader who has 80% to 90% market share? 1. Don’t compete head-on 2. Innovators Dilemma – go for low end 3. Disruptive technology, business model, or market approach 4. Examples: Gmail, Google Apps, Chrome 19
    20. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Google – Ex 2 - Mobile • Apple vs. Google – What is the C.O.R.E for each ? • Hardware, Software, Content ? • Others in Ecosystem – Samsung, HTC • Alternative approaches – Amazon 20
    21. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Android vs iPhone Who is winning? Why? Is technology the difference? Apple, Google, & Microsoft strategies – Always play to your strength – Apple Mac, Google Search, Microsoft Windows 21
    22. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Android vs iPhone Disrupt the market leader – Apple disrupted carriers and manufacturers • Verizon, Sprint, Nokia, Motorola, RIM, Symbian – Android allowed them to fight back Disruptive business model – Android is free – Advertising business model – Search, Maps, Local, Wallet, YouTube 22
    23. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Business Models Matter ! Don Dodge Google dondodge@google.com 23
    24. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Creating Value 24
    25. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Co-creating Value • Be Open and Extensible (eg Software APIs) – Enabling external multipliers to your value – Building on yourself – Eating your own cooking – Being your own customer • Open Source – Leverage through community – Make the customer the product manager • Scratching their own itch 25
    26. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Co-creating Value • Be Open and Extensible (eg Software APIs) – Enabling external multipliers to your value – Building on yourself – Eating your own cooking – Being your own customer • Open Source – Leverage through community – Make the customer the product manager • Scratching their own itch 26
    27. Dries BuytaertFounder and project lead Drupal Co-founder and CTO Acquia http://buytaert.net :: @Dries
    28. 1 out of 50 websites in the world10,000+ modules300,000+ downloads/month1.5M unique visitors/monthFREE
    29. Open Source is not just a software license, it is also a development model 1,000 people contributed to Drupal 7
    30. Open SourceCollaborationCommunity Innovation
    31. Drupal and Open Source is a catalyst for- “Creative destruction” Changes how we develop “Creative Destruction” software- Changes how we build websites- Changes a multi-billion dollar industry- Open Source enables business model innovation Joseph Schumpeter Joseph Schumpenter,- Bonus: allows to do well, Economist, 1883-1950 and do good
    32. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Delivering & Capturing Value 33
    33. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Multipliers & Levers Multiply and Leverage your CORE Multipliers: Levers: • Increase revenue • Reduce time • Increase reach • Reduce costs • Increase coverage Multipliers • Reduce resources Levers CORE 34
    34. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Drupal, Open Source Multiplies AND Leverages CORE•Multipliers: •Levers:• Added functionality • Community• Community reach development • Community marketing Multipliers Levers CORE 35
    35. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Multipliers & Levers Examples in Software Multiplier Examples: Lever Examples: • Sales & Marketing • Sales & Marketing – Tiered Pricing – Web – Freemium – Inside – Channel partners – Inbound • Product – Viral – Slippery products * • Product, Support Multipliers – “Russian Doll” – Offshoring Packaging * CORE Levers – Outsourcing – Technology stacks – Crowdsourcing – Co-creation * – Technology stacks * Covered herein 36
    36. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Get Multipliers & Levers working together! • Strategies that enable Multipliers and Levers to work together around your CORE are the real winners 37
    37. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Acquia Mary Jefts, CFO Fastest growing software company in the US 38
    38. Acquia At A Glance• Provider of cloud-based solutions/support for enterprises using the open source product, Drupal• 2000+ customers• 250+ employees• 150% 4 year CAGR• Global operations• Highly predictable and repeatable model• Land and expand strategy PROPRIETARY AND CONFIDENTIAL - do not redistribute
    39. Acquia Business Model• Drupal is FREE• It is also Open Source• So how do you make money from FREE and Open IP? 1. Create valuable products and services around the CORE of Drupal 2. Use FOSS as multiplier and a lever in R&D, sales and marketing
    40. Acquia products around Drupal CORE Professional Drupal Services Training Drupal Enterprise Site Factory Gardens Acquia Managed Deployments Cloud Acquia Drupal Management Suite Network CONTENT COMMUNITY COMMERCE
    41. Free and Open Source Software (FOSS)• As a multiplier AND a lever - in R&D, sales and marketing Example Multipliers: Example Levers: • Upsell value added • Target installed base products & services • Expand usage through • Cloud & SaaS partners Multipliers Levers CORE
    42. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Strategic Partnership EG: “Whole Product” Strategic Partnership Multipliers: Levers: • Increase revenue • Reduce time to market through fuller Services • Reduced dev costs solution Multipliers Application s Lever • Increase reach CORE Database through their sales Storage force, channel etc. • Credibility Integrate your CORE into their technology stack 43
    43. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets What makes a partner strategic? • Symbiotic multipliers & levers (win-win) + Product + Distribution + other • 1+1 > 2 in joint market leverage – Ousting competitors, driving share • Can create potential exit 44
    44. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets An ideal ideal (win-win) Strategic Partner Example What You Get What They Get • Complete your • Competitive advantage “WHOLE Product” • Interested ARPU - Increase Value (LTV) • Time to Market • Channels to reach YOUR target customer - Reduce Selling Cost (CAC) • Credibility 45
    45. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Devil in the Deal tails For example • Co-sell – who is incented? • Resell – who is supporting? • OEM – what is your upsell? Traps to Avoid! • Co-dependent risk • Dependence on other startups 46
    46. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets One more thing… 47
    47. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Designing for success… • Product feeds the business model… – User experience – Supportability – Maintenance, updates (= lifecycle) – Upgrades – Upsells • Leads to 2 startup secrets – Russian Dolls & SLIPPERY products 48
    48. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Friction Free, SLIPPERY products • Simple • Low to no initial cost Gain • Installs easily Pain • Proves value quickly • Plays well with others Think of how this improves • Easy to use the Gain/Pain Ratio in our Value Proposition • ROI is obvious Workshop • Y customers can’t live without it 49
    49. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets What makes Drupal SLIPPERY? • Simple: Update your site from the browser • Low to no initial cost: free • Installs easy: Windows/Mac installers + SaaS • Proves value quickly: Distributions + Start using immediately • Plays well with others: Lots of integrations with other platforms • Easy to use: Web-based • ROI is obvious: Better, faster, cheaper • Your customers can’t live without: flexibility and 50
    50. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Build a Russian Doll! • Multi purpose strategy – Packaging – Pricing – Distribution – And more … 51
    51. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Incent Free 52
    52. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Freemium … Limited Free 53
    53. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets OEM Solution… Personal Limited Free 54
    54. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Premium … Workgroup Personal Limited Free 55
    55. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Sales enabler … Corporate Workgroup Personal Limited Free 56
    56. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Adoption … Enterprise Corporate Workgroup Personal Limited Free 57
    57. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Russian Doll Packaging “Addiction before Adoption” Gives you, your partners & your customers: • Digestible starting point • Upsell Options • Channel Flexibility … and more 58
    58. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Russian Doll Packaging “Addiction before Adoption” Acquia example = increasing LTV “Land & Expand” Upsell LTV On- / Cross $400 board Sell $300 $200 Acquire $100 $0 59
    59. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Putting it all together Create, Deliver & Harness Value 60
    60. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Basic Startup Model • Lifetime Value of Customer (LTV) • Cost of Acquiring Customer (CAC) LTV ~3x > CAC Multipliers Levers CORE 62
    61. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets % of Revenue spent… • Example: – Phases of a software company Development Target Gross Margin 80% R&D 100%+ 15% Sales & Marketing 10% G&A 45% Profit (Loss) -100% 20% 63
    62. Target Business Model - Demandware 2010 Q4 2010 2011 Q4 2011 Target Revenue 100% 100% 100% 100% 100% Cost of Revenue 40% 36% 35% 28% 30% Gross Margin 60% 64% 65% 72% 70% R&D 17% 14% 20% 15% 12% Sales and Marketing 30% 27% 35% 30% 25% G&A 11% 9% 11% 11% 8% Operating Income 3% 15% (1)% 16% 25% (Loss) Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 65
    63. Target Business Model: Acquia 62% 62% 61% 51% 53% L/T Model 48% 53% 43% based on 48% 29% 29% 44% 21% 21% 19% 19% 25% profitable 43% 50% 15% subscription 43% 65% 45% 45% 44% 44% 35% based 19% 19% 14% 14% 11% 11% 11% 11% 10% software company
    64. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets What makes for a GREAT business model? • Repeatable • Scalable – with leverage • Profitable / Sustainable • Predictable • Valuable 67
    65. Highly Predictable and Repeatable FinancialModel• Today: - 70% of all bookings are renewable subscriptions - 30% are consulting services (key differentiator) - 85%+ annual renewal rate for non-project work• Long-term Model: - 80% renewable subscriptions - 20% consulting services - 90% annual renewal rate for non-project work
    66. Overall Result: Disruptive Business Modelfor Acquia’s Continued Growth New Existing Customers CustomersNew Geographies Cross-sell Up-sell New Partners New Sites New Verticals New Products Potential M&A
    67. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets What makes you valuable? Many factors, but some play more of a role than others in your business model… (with thanks to Goldman Sachs) 70
    68. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model Hi www.mjskok.com #innovationlab @mjskok #startupsecretsValuations – SaaS2013 Revenue Multiples Median 5.2x 2012-2013 Revenue Growth 71
    69. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model Hi www.mjskok.com #innovationlab @mjskok #startupsecretsValuations – SaaS2013 Revenue Multiples Median 5.2x 2012-2013 Revenue Growth 72
    70. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Valuations – SaaS 73
    71. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Valuations – SaaS 74
    72. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets An important refinement • Retention • Upsell 75
    73. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Retention 76
    74. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Upsell 14 x leverage! 77
    75. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Basic Startup Model • Lifetime Value of Customer (LTV) • Cost of Acquiring Customer (CAC) LTV ~3x > CAC Multipliers Levers CORE 78
    76. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets The Model Refined – Enabling Retention & Upsell • Lifecycle Value of Customer (LCV) • Cost of Acquiring & Re-Engaging Customer (CARC) Multipliers Levers Up-sell CORE Re-Trial 79
    77. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Re-engagement Costs • Must be included in CARC • Example: – Support – Customer Service – Professional Services 80
    78. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Connecting it to Gain/Pain • They are two views of the same principle: – Customer view = Gain/Pain – Vendor view = LCV/CARC Multipliers Levers Up-sell CORE Re-Trial 81
    79. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Build for a long lifetime… 82
    80. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets A typical product lifecycle But it doesn’t have to be this way ! Long, costly (CAC), slow payback, EXTENDED lifetime value (LTV)See Try Buy Fly Die 83
    81. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Adding Retention and Upsell Extended Up-sell Lifecycle Re-Trial Long, costly (CAC), slow payback, EXTENDED lifetime value (LTV)See Try Buy Fly Die 84
    82. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model Hi www.mjskok.com #innovationlab @mjskok #startupsecrets A disruptive & valuable lifecyle Subscription SaaS On demand Self service Up-sell Extended Extended Up-sell Re-Trial Lifecycle Lifecycle Re-TrialOpen sourceWeb short, low cost (CARC), quick payback, extended lifecycle value (LCV) See Try Buy Fly Die 85
    83. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Applied to Software 1990+ 2010+ • Installed by IT  Web based • Customized  Self service • Infrequent upgrades  On demand, SaaS • Proprietary  Open Source • License  Subscription Subscription SaaS On demand Self service Extende Extende d Up-sell d Re-Trial Up-sell …a fundamentally disruptive & more valuable Open source Lifecycl e Lifecycl e Web business model short, low cost (CAC), quick payback, EXTENDED lifetime value (LTV) 86
    84. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Case example – Demandware (NYSE:DWRE) See the full case example here http://www.mjskok.com/resources/business-modelDemandware is presented as an example of a company that leveraged it’s SaaS technology disruption with a fundamentally different business model to it’s competitors, creating innovation on demand for it’s customer and making partners out them with a shared success model. 87
    85. Demandware business model – simplified summary Create: Development plus LINK partnerships – Traditional R&D with leverage from LINK partners for whole product Deliver: SaaS – On Demand Commerce Innovation NOT Infrastructure Harness: % of GMV payment – Shared success with customers Copyright 2012 Demandware, Inc. – CONFIDENTIAL | 88
    86. Commerce Innovation. Not Infrastructure.See the full case example herehttp://www.mjskok.com/resources/business-model
    87. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Summary • Disruptive Business Model – as significant as Technology • Focus on CORE differentiation • Multiply and Leverage it with innovation like:- – Co-Creation – Strategic Partners – Russian Doll Packaging – And Friction Free, SLIPPERY products • Design for high value using LCV & CARC 90
    88. Harvard innovation lab : Michael J Skok : Startup Secrets : Business ModelHi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secrets - Series • Sep 11: Perfect Pitch • Oct 11: Value Proposition • Oct 16: Company Formation • Nov 13: Business Model • Dec 4: Go-To-Market Strategy 91
    89. Harvard innovation lab : Michael J Skok : Startup Secrets : Business Model HiHi Harvard innovation lab #innovationlab @mjskok #startupsecrets www.mjskok.com START UP SECRETS An insider’s guide to unfair competitive advantage Business Model MICHAEL J SKOK North Bridge Venture Partners twitter: @mjskok mjskok.com 92

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