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Creating
Start-Up
Success 101
AlexOsterwalder.com               SteveBlank.com
@business_design                  @sgblank
Contribution by Alan Smith @thinksmith
this presentation combines two global bestsellers




                                    +


BusinessModelGeneration.com                   StevenBlank.com/books.html
So what makes for a
successful start-up?
Start with a brilliant
founder like...
Mike, 34
Stanford
Alumnus
he used to be an...
Experienced
Exec
All his operating
experience built up
some...
...outstanding
credentials!
One day Mike has...
A “killer”
product idea!
A “killer”
product idea!
he’s really
passionate about it
Mike’s experienced.
He knows how to test his
idea using...
...market
research
The research looks good!
Mike moves forward, and
writes a fantastic....
Creating Start-Up Success
Great!
Based on the credentials,
research, and plan, Mike has
secured the final piece...
...VC Funding!
Money in hand,
Mike get’s started on
...building his
      start-up.
He makes the headlines
of every major...
Creating Start-Up Success
... and is invited to give...
...keynote talks
Mike and his
start-up are
   on a roll!
How likely is his
business to
succeed?
Despite the experience,
research and plan...
...Mike
slipped up.
Let’s help Mike
with 5 things he
 didn’t know.


                   29
1    No business
    plan survives
         the first
        customer
         contact.
Sticking to a planning
document works for a
known future, not for a
start-up context.

Plan’s fail in start-ups.
2    It’s the
    business
     model,
     stupid.
Hey Mike, your plan was
to build a company, but
did your plan include a
Business Model?
Creating Start-Up Success
“A business model describes
the rationale of how an organization
creates, delivers, and captures value”
Here are the 9 building blocks of
a business model:
CUSTOMER SEGMENTS




which customers and users are you serving?
which jobs do they really want to get done?
                                              images by JAM
VALUE PROPOSITIONS




 what are you offering them? what is that
  getting done for them? do they care?
                                            images by JAM
CHANNELS




how does each customer segment want to be reached?
         through which interaction points?

                                                images by JAM
CUSTOMER RELATIONSHIPS




what relationships are you establishing with each segment?
       personal? automated? acquisitive? retentive?

                                                      images by JAM
REVENUE STREAMS




  what are customers really willing to pay for? how?
are you generating transactional or recurring revenues?
                                                     images by JAM
KEY RESOURCES




which resources underpin your b.model?
      which assets are essential?

                                         images by JAM
KEY ACTIVITIES




which activities do you need to perform well in
       your b.model? what is crucial?

                                                  images by JAM
KEY PARTNERS




which partners and suppliers leverage your model?
           who do you need to rely on?

                                                    images by JAM
COST STRUCTURE




what is the resulting cost structure?
which key elements drive your costs?

                                        images by JAM
key       value          customer
            activities   proposition       relationships




     key                                               customer
partners                                               segments




     cost                                              revenue
structure         key                                  streams
            resources                  channels

                                                       images by JAM
“Hmm, interesting so
  what do I make of
              that?”
use it as a tool to...
sketch out your business model
building
 block
building
     block                building
               building
                block      block




building
 block
building
                       block                                            building
                                                                         block

                                 building
                                  block                                                       building
                                                        building
building                                                 block                                 block
 block

                                                                   building
                                                                    block

                          building
                                                                              building
                           block
                                                                               block




                                            buildin
                                                    g
           building                          block                                 building
            block                                                                   block
This tool is called the
Business Model Canvas
(download with instructions at
www.businessmodelgeneration.com/downloads)
3     Take time
        to think
        through
     alternative
    possibilities.
the same technology, product, or service
can have numerous business models
Creating Start-Up Success
try sketching out alternative
business models by asking
yourself...
transactional vs.          product vs. service        scale vs. scope
recurring revenues
                                                   blue ocean vs. red
niche market vs.                                              ocean
                             direct sales vs.
mass market                   indirect sales
                                                         personal vs.
capital expenditure vs.                                   automated
                             open vs. closed
partnership
                                                       disruptive vs.

      difficult questions
                          human intensive vs.           incremental
acquisition vs. retention system intensive
                                                tailor-made vs. mass
                           physical vs. virtual           production
one customer segment
vs. another
                          copyright vs. copyleft    fixed vs. variable
paid vs. free                                                   costs

distributed vs.            in-sourcing vs. out-       advertising vs.
centralized                     sourcing                        sales
only make a first choice after prototyping
and thinking through several models...
Creating Start-Up Success
OK. You’ve got your model,
but you’re not done yet...
4   Your business
     model idea is
      just a set of
      hypotheses.
a business model might look great on
paper...

                  building
                   block

                                                                 building
                      buildin                                     block
                                g block
   building
    block
                       block
                                           building
                                            block




                                                                                                ... but be
                                                                                buildin
                                                                                 block g

                                                      building
                  building                             block
                   block




       building
        block
                                build
                                 blocing
                                      k
                                                                  buildin
                                                                   block g

                                                                                           honest that it’s
                                                                     buildin
                                                                      block g
... just a set of hypotheses

        guess                guess
          guess
                  guess                guess
guess
                           guess
         guess                guess

             guess
  guess                          guess
...so you need to get out of the
building and...
test each hypothesis
(e.g. with customers)
this business model testing process is
called Customer Development

customer            customer     customer    company
discovery           validation    creation    building


            pivot
two different phases...
search

customer            customer     customer    company
discovery           validation    creation    building


            pivot
                                      execution
and it starts with...
... verifying
every
hypothesis




  customer              customer     customer    company
  discovery             validation    creation    building


                pivot
test your hypotheses


        product
       market type
       competition
test your hypotheses


                       problem
                       customer
                         user
                        payer
test your hypotheses




              channel
test your hypotheses

                                       demand
                                       creation
                                                     problem
 channel               product
                                                     customer
(customer)           market type
                                                       user
(problem)            competition       channel
                                                      payer



                   validate business       pricing
                         model             model
to accomplish this you will need a special
and agile ...
customer
development
team
A team that ...
... gets out of the
building!
... to test and adapt your model
             agile business
                 model                        demand
              adaptation                      creation
                                                             problem
  channel                       product                     customer
(customer)                    market type                      user
 (problem)                    competition                     payer
              customer
             development                      channel
                team



                          validate business       pricing
                                model             model
you need to adapt the
business model until
you can prove it works




customer            customer     customer    company
discovery           validation    creation    building


            pivot
“How do I prove
a business
model works?”
One example of “proving” is
concluding the ...
... sales of a “minimum viable
feature set”
This adaptation process is called ...
the pivot




customer            customer     customer      company
discovery           validation    creation      building


            pivot

  (repeat * until proven)
so do you have any “factual” proof?
Congratulations!
You finished the search
process!
So don’t ever forget ...
5
    Don’t build your
     company, until
     you’ve verified
      your Business
              Model
or you’ll risk ...
Burning your cash while
searching for a working
business model
execution is not search
execution follows search
Build when you’ve found
your model
only then execute:
scale your marketing



customer            customer     customer    company
discovery           validation    creation    building


            pivot
                                       execution
and build your org
                                         structures



customer            customer     customer    company
discovery           validation    creation    building


            pivot
                                       execution
1   No business plan survives the
    first customer contact.

2   It’s the business model, stupid.

3   Take time to think through
    alternative possibilities

4   Your business model idea is
    just a set of hypotheses.

5   Don’t build your company,
    until you’ve verified your
    Business Model
you can read more about business models and the
customer development process here:




                                   +


BusinessModelGeneration.com                  StevenBlank.com/books.html
Good
Luck!
BusinessModelGeneration.com StevenBlank.com/books.html
AlexOsterwalder.com         SteveBlank.com
@business_design            @sgblank

Contribution by Alan Smith @thinksmith

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