Business models - Delivering value to your customers, your partners and yourself > Catarina Maia


Published on

Startup Pirates @ Porto
Business models - Delivering value to your customers, your partners and yourself
Porto, 31st August 2011
Catarina Maia

Published in: Business

Business models - Delivering value to your customers, your partners and yourself > Catarina Maia

  1. 1. Business models Delivering value to your customers, your partners and yourself Porto, 31st August 2011 Startup Pirates Catarina Maia 1
  2. 2. Today’s agenda• When not to write a business plan • and what to use if you’re not writing one: introduction to business models• When to write a business plan • and what to include besides your business model 2
  3. 3. Am I a pirate?ABOUT ME 3
  4. 4. 4
  5. 5. 5
  6. 6. Are these overrated?BUSINESS PLANS 6
  7. 7. The holy grail of the business plan• Satisfy everyone (investors, directors, founders, managers)• Remains unattainable and mythological • Set of beliefs, assumptions and “unknowns” 7
  8. 8. Why a business plan may not be the right tool to use• Technology proliferation• Competitors proliferation and speed• “Build it and they will come” approach is not your case• Unknown problems 8
  9. 9. When not to write a business planDEALING WITH UNKNOWN PROBLEMS 9
  10. 10. The product development stack Product Alpha/Beta Concept/Seed Launch/1st ship development testing • Create Marcom • Hire first sales staff • Build sales materials • Hire PR Agency organization • Create positioning • Early buzz • Create demand • Launch event • “Branding” 10
  11. 11. Why does this not work for unknownproblems? 11
  12. 12. Customer development as a process tovalidate business-related information Customer Customer Customer Company discovery validation creation building 12
  13. 13. An “operational view” to customerdevelopment 13
  14. 14. Some concept definitions in customer development• MVP: a product with the fewest number of features needed to achieve a specific objective, and users are willing to “pay” in some forms of scarce resource• Product-market fit • Customers are willing to pay for the product • Customer cost of acquisition < sales price • Market is large enough to support a business• Pivot: change an element(s) of your customer-problem-solution hypothesis or business model, based on learning 14
  15. 15. Main points in customerdevelopment• Formulate and test your hypothesis• Understand your business model• Get out of the building• Compile, Measure, Test• MVP testing• Compile, Measure, Test II 15 Learn fast, your death clock is ticking!
  16. 16. Getting around withBUSINESS MODELS 16
  17. 17. Business models “A business model describes the rationale of how an organization creates, delivers, and captures value” 17
  18. 18. Main areas of business• Customers• Offer• Infrastructure• Financial viability 18
  19. 19. Nine basic building blocks Customer Value Channels Customer segments propositions relationships Revenue Key Key Key Cost streams resources activities partnerships structure 19
  20. 20. Customer segments (CS)For whom are we creating value?Who are our most important customers? • Different groups of people or organizations an enterprise aims to reach and serve • Customer groups are separate segments if: • Their needs require and justify a distinct offer • They are reached through different distribution channels • They require different types of relationships • They have substantially different profitabilities • They are willing to pay for different aspects of the offer • E.g.: mass market, niche market, segmented diversified, multi-sided markets 20
  21. 21. Value propositions (VP)What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve?Which customer need are we satisfying?What bundles of products and services are we offering to each CS?• Describe the bundle of products and services that create value for a specific CS• Solve a customer problem or satisfy a customer need• E.g.: newness, performance, customization, “getting the job done”, design, brand/status, price, cost reduction, risk reduction, accessibility, convenience/usability 21
  22. 22. Channels (CH)Through which channels do our CS want to be reached? How are we reaching themnow?How are our Channels integrated? Which ones work best? Which ones are morecost-efficient? How are we integrating them with customer routines? • Communication, distribution and sales Channels = company’s interface with customers • Channel phases • Awareness: Raising awareness among customers about a company’s products and services • Evaluation: Helping customers evaluate a company’s VP • Purchase: Allowing customers to purchase specific products and services • Delivery: Delivering a VP to customers • After sales: Providing post-purchase customer support • E.g.: Own vs partner channels, indirect vs. direct channels (sales force, web 22 sales, own stores, wholesaler)
  23. 23. Customer relations (CR)What type of relationship does each of our CS expect us to establish andmaintain with them?Which ones have we established? How costly are they?How are they integrated with the rest of our business model? • Relationships can range from personal to automated, and may be driven by the following motivations: • Customer acquisition • Customer retention • Boosting sales (upselling) • Influence the overall customer experience 23 • E.g.: Personal assistance, self-service, automated services, communities, co-creation
  24. 24. Revenue streams (RS)For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? Howwould they prefer to pay? How much does each Revenue Stream contributeto overall revenues? • Two main types of Revenue Streams: • Transaction revenues from one-time customer payments • Recurring revenues from ongoing payments to deliver the VP, or provide post-purchase customer support • Pricing mechanisms: fixed menu pricing vs. dynamic pricing • E.g.: asset sale, usage fee, subscription fee, lending/renting/leasing, licensing, brokerage fee, advertising 24
  25. 25. Key resources (KR)What Key Resources do our VP require? Our DistributionChannels? Customer Relationships? Revenue Streams?• KR allow a company to create and offer a VP, reach markets, maintain relationships with CS, and earn revenues• KR can be owned or leased by the company, or acquired from key partners• E.g.: physical (manufacturing facilities, machines, systems, distribution networks), intellectual (PI, customer databases), human, financial (credit lines) 25
  26. 26. Key activities (KA)What Key Activities do our VP require? Our DistributionChannels? Customer Relationships? Revenue streams?• KA are the most important actions a company must take to operate successfully• As KR, KA allow a company to create and offer a VP, reach markets, maintain relationships with CS, and earn revenues• E.g.: production, problem solving (knowledge management, continuous training), platform/network (platform promotion, service provisioning) 26
  27. 27. Key partnerships (KP)Who are our Key Partners? Who are our key suppliers?Which KR are we acquiring from partners?Which KA do partners perform? • Main motivations for partnerships: • Optimization and economy of scale • Reduction of risk and uncertainty • Acquisition of particular resources and activities • E.g.: Strategic alliances between non-competitors, coopetition (strategic alliances between competitors), joint ventures to develop new businesses, buyer-supplier relationships to assure reliable supplies 27
  28. 28. Cost structure (CS)What are the most important costs inherent in ourbusiness model? Which KR are most expensive?Which KA are most expensive?• Creating and delivering value, maintaining CR and generating revenue all incur costs• E.g.: fixed costs (salaries, rents), variable costs, economies of scale, economies of scope 28
  29. 29. 29
  30. 30. Left canvas - EFFICIENCY Right canvas - VALUE 30
  31. 31. The Business Model Canvas 31
  32. 32. Using the Business Model Canvas with CustomerDevelopmentBLINK TRAFFIC 32
  33. 33. Blink Traffic • 8 week project for Stanford’s ENG 245 Lean Launch Pad • Initial product idea: Mobile application providing crowdsourced, real time traffic map in developing countries(Full presentation at 33
  34. 34. Business Canvas 1
  35. 35. Business Canvas 1
  36. 36. Business Canvas 2
  37. 37. Business Canvas 2
  38. 38. Business Canvas 3
  39. 39. Business Canvas 3
  40. 40. Business Canvas 4
  41. 41. Business Canvas 4
  42. 42. Final Business Canvas
  43. 43. Winning combination• Learn fast• Iterate• Implement• Test 43
  44. 44. So… when should youWRITE A BUSINESS PLAN? 44
  45. 45. The right reasons to write a business plan• Due-diligence stage when raising money• When you are dealing with a “build it and they will come” product• The writing process can generate a strong, cohesive team – and figure out who you don’t want to work with• Writing makes the team consider issues that had been overlooked• Writing uncovers holes in the founding team 45
  46. 46. Keep it clean• 20 pages• One person writes it• Bind it with a staple• Simplify your financial projections (2 pages)• Include key metrics (number of customers, resellers, locations)• Include the assumptions that drive your financial projections• Don’t forget your executive summary (2 pages max.) 46
  47. 47. What to include• Your business model should be enough to pitch an investor• Team: skills you have, skills you need to recruit; track record• Financial analysis• External environment • Market forces (e.g. switching costs, market issues) • Macroeconomic forces (e.g. global market conditions, economic infrastructure) • Industry forces (e.g. competitors, new entrants, substitute products and services) • Key trends (e.g. regulatory trends, societal and cultural trends)• Implementation roadmap• Risk analysis 47
  48. 48. Some words of advice• Your projections will fail • Validate your assumptions as thoroughly as you can• The best way you can show that people will be interested in your product, is to show they are paying for it• Ideas are worthless, execution is key• Learn fast, learn often• Don’t mention the word “patent” more than once (in a presentation)• Don’t ask investors to sign NDAs• Investors invest in people 48
  49. 49. Readings and resources• • The website• eneration_preview.pdf • 72 page preview of the book• • Presentations by Alexander Osterwalder• • Lean LaunchPad at Stanford… • … and a lot more, including Customer Development• • Eric Ries’ “Lean Startup concept”, combining Customer Development with Agile Methodologies• • Brant Cooper’s high tech and Customer Development• 49 • Ash Maurya adapted the Business Model Canvas for IT, in his “Running Lean” book
  50. 50. Thank you! 50