2014 Business Models and Innovation by Chris Burry

European Innovation Academy:
Business Models
Chris Burry, Co-CEO
US Market Access Center

© US Market Access Center Inc. 2014
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We return to my favorite question

We know you don’t want to be this guy….
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Many different “formal” definitions:
 The totality of how a company selects its
customers, defines and differentiates it offerings,
defines the tasks it will perform itself and those it
will outsource, configures its resources, goes to
market, creates utility for customers and captures
profits. (Slywotzky 1996)
 The design of key interdependent systems that
create and sustain a competitive business. (Mayo
and Brown 1999)
So What is a Business Model?
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 A statement of how a firm will make money and
sustain its profit stream over time. (Stewart and
Zhao 2000)
 The blueprint of how a company does business.
(Osterwalder et al. 2005)
 Who is your customer, what does the customer
value, and how do you deliver value at an
appropriate cost? (Peter Drucker)
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How are you going to make money
and
keep making more money every year?
(Burry 2014)
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Business Model Innovation
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Source:
Hutch Carpenter

Technical Innovation – The list is endless
1. The Microprocessor
2. Random Access Memory
3. Non-volatile memory
4. The Internet
5. Ethernet
6. Global Positioning System (GPS)
7. GSM
8. HTTP
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“Bricks
and
Clicks”
Distribution Innovation – eCommerce
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“Old
School”
Store
Front
e-commerce
“Amazon and
Friends”
Google
Shopper
Express

Process Innovation – The Toyota Way
1. long-term philosophy,
2. the right process will produce the right results,
3. add value to the organization by developing
your people, and
4. continuously solving root problems drives
organizational learning.
Give me some other examples…..
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 Let’s watch a video of the launch of iTunes
 Look for the types of innovation expressed here
I want to take a detour
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iTunes Launch 2003
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“Old School Thinking”
 Come up with an idea
 Write a 96 page business plan
 Re-work 5-6 times
 Share with investors
 Pray that it all works
But can you predict the future?
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Not a Business Plan, But a Business Guess
In 2008 Kleiner Perkins Canfield & Byers held a
roundtable meeting with early stage founders1
 66% of the founders present admitted that their
‘Plan A’ had failed
 On averaged, the founders were on ‘Plan D’
And these were the entrepreneurs
who had been funded!!!!!!
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1. John Mullins;Randy Komisar. Getting to Plan B: Breaking Through to a Better Business Model (Kindle Locations 15-18). Kindle Edition.

Business Model vs. Cash Runway
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You are using up money…. until
Business Model Changes Over Time
Plan
A
Plan
B
Plan
C
Plan
D
Plan
E
Wall

A Better Way
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Lean
Manufacturing
Principles
Agile
Software
Development
Customer
Development
“Lean Startup”

According to Ash Maurya:
 The true product of an
entrepreneur is NOT the
solution, but a working
business model;
 The real job of an
entrepreneur is to
systematically de-risk that
business model over time.
The Job of the Entrepreneur
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Documenting Your Business Model Discovery
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Business Model Discovery
1. Document
Assumptions;
2. Identify Risk;
3. Test with Customers;
4. Learn;
5. Adjust;
6. Repeat.
The Right Process Yields the Right Results
© USS Market Access Center Inc. 2014
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The Build – Test Learn
Loop
Customer Development
Product Development

Using the Lean Canvas (My order)
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1. Customer Problem – You should all have this
done by now
2. Customer Segments – This comes from your
customer persona from last week
3. Unique Value Proposition – I talked about this
last week. What is the benefit / value you are
creating for your customers? This is not a feature
list….
4. Solution – What does your product do (features)?
This is what you do, not how you do it.
Using the Lean Canvas – A Walk Through
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5. Unfair advantage – This is often really difficult to
come up with… and if you can’t it is a red flag for
the long-term success of your startup.
For many startups today, the only long-term
advantage is to get really big and get really big
really fast. Groupon is an example of this.
6. Revenue Streams – How are you going to make
money? This is also know as your “revenue
model.” 2-3 sources of revenue are ok. 10
different sources…. Well that’s a problem.
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9. Channels – How do you acquire your customers:
o Direct sales
o On-line
o Value added resellers
o Consulting firms
o OEMs
o Partners
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Things to remember….
 It is a tool…. Nothing more
 It isn’t a rigid formula to follow
 What you put down matters, where you put it
matters far less
 It is about figuring out the largest risks to your
business and developing a plan for how to mitigate
those risks
Using the Lean Canvas
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Bringing it all together
Source: How #bmgen and #custdev fit perfectly « Business Model Alchemist
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So how can we use this to reduce risk?

… A Systematic Discovery Process
Illustration source: Running Lean, Ash Maurya
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Some more thoughts from Ash…
1. Build a frame around learning, not pitching. In a
pitch, since you’re doing most of the talking, it’s very
easy for customers to pretend to go along with what
you’re saying or outright lie to you.
2. Create a script. You need to bound the conversation
around specific learning goals.
3. Start with people you know. Finding people to
interview can be challenging at first. Start with
people you know that fit your target customer
profile.
Some Advice on Customer Development
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4. Take someone along with you.
5. Record your learning. Talking to customers is a
form of qualitative learning and unless you strive
for objectivity, it’s easy to gather just enough
answers (or morph answers) to convince yourself
you are on the right path.
Create a pattern and habit of learning
Some Advice on Customer Development
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In 1971, a new airline started flying in the United
States with a very different business model,
Southwest Airline.
 First only flew to 3 cities in Texas
 Today it carries more passengers inside the US
than any other carrer
 3rd most admired companies in the US
 Most profitable airline in the US
So Let’s Do an Example
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The business model pioneered by Southwest has
been copied and modified by
 In Europe – EasyJet, Ryanair, Wizz
 Canada – WestJet
 Mexico – Volaris
 Southeast Asia – Air Asia, Nok, Cebu Pacific
 Southwest Asia – Pegasus
 Australia – Jetstar
So Let’s Do an Example
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Take 5 minutes and come up with the
 Customer Problem
 Customer Segment(s)
 Solution
 Unique Value Proposition
 Channels
Let’s do an Example
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Let’s Connect
US Market Access Center
10 South Third Street, 3rd Floor
San Jose, CA 95113
Our Headquarters
facebook.com/usmarketaccess
@usmarketaccess
linkedin.com
Groups – US Market Access Center
San Francisco
Palo Alto
San Jose
+1 (214) 673-5187
Phone
cburry@usmarketaccess.com
Email
Chris Burry
Co-CEO
Contact
www.usmarketaccess.com

2014 Business Models and Innovation by Chris Burry

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