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Startup 101: finding your business model

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Workshop at TiE Bangalore.

Whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit: it thus reflects management's hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit.

This workshop will help entrepreneurs identify and validate their business model - which is a basis for a sound business plan. It will combine theoretical inputs with hands-on work, enabling experiential learning and validation of concepts introduced.

Concepts such as "Business Model Canvas" and "Minimum Viable Product / Service" will be explored. And participants will have an opportunity to use these techniques in developing and evolving their own business concepts.

If you are an entrepreneur looking at validating your business idea, or looking at scaling your business you could gain from this workshop. Also if you are a manager managing a business in an enterprise and want to expand or diversify you will have many take away's for your need.

Take away's from the workshop:
Development of an initial business model
Understanding of what constitutes the "Minimum Viable Product / Service" for the business
Validation / refinement of the business model with actual customer feedback
Develop foundation for a sound business plan.

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Startup 101: finding your business model

  1. 1. TiE Workshop Startup 101:Finding your business model Pallav Barah Nagarjun Kandukuru Krishnan Natarajan Manish Govind Pillewar
  2. 2. Objective A guidebook for startups Experiential, hands on learning Value derived is through your effort
  3. 3. AgendaFriday Oct 5 Oct 6 - 12 Friday Oct 129:30 – 10:00 Customer investigation – in the 9:30 – 10:30Welcome / agenda / introductions field Retrospective10:00 – 10:30 10:30 – 1:00Startup models Team presentations10:30 – 11:00 1:00 – 2:00Business Model Canvas (BMC) & Lunchexamples11:00 – 1:00 2:00 – 3:00Exercise: BMC Guest speaker: VC1:00 – 1:30 3:00 – 3:30MVP & examples Summary / wrapup1:30 – 2:30Lunch2:30 – 4:00Exercise: MVP4:00 – 5:00Best practices for customer investigation5:00 – 5:30Networking
  4. 4. Startup models
  5. 5. Story of the $23 million startup
  6. 6. Cautionary tale
  7. 7. 1998 1998 1998 1999 1999 2000 2000 Mar Jun Oct Jan Sep March JunAnalytics No investor Shift to Start Launch Shut down Liquid-platform traction E-commerce company web site ation for Telecom
  8. 8. 2 focus group sessions Telecom carrier No customer contact negotiations 1998 1998 1998 1999 1999 2000 2000 Mar Jun Oct Jan Sep March JunAnalytics No investor Shift to Start Launch Shut down Liquid-platform traction E-commerce company web site ation for Telecom
  9. 9. Who was that entrepreneur?
  10. 10. Traditional start-up model Build product Big-BangDevelop concept Build product Alpha /test Alpha beta Customer test Launch after Shipment Get funding and offering Market test 3 yearsWrite business plan Build the product Test / fix Ship / fix Planning / collateral PR / plan launch Launch / Demand gen. Initial sales rep Build sales team / selling
  11. 11. “Big Up Front Design”Develop concept Build product Build product Alpha /test Alpha beta Customer Big-Bang Get funding and offering test Market test Shipment LaunchUnbridled False sense of Rude Resetting Predictableenthusiasm security awakening expectations disaster
  12. 12. Traditional start-up practices aren’t working 90-95% of new ventures fail to meet projections
  13. 13. Story of the Rs. 500 start-up
  14. 14. Who is this legendary entrepreneur? Karsanbhai Patel Nirma
  15. 15. How do you compete with a Rs. 200cr brand? Answer: Start on a bicycle!
  16. 16. Lessons from Karsanbhai and Nirma Start small, but with a strong vision Clear value-prop for untapped segment Constantly validate all assumptions in the market Iterate and learn
  17. 17. Finding your business model
  18. 18. 2 stages of start-ups Search ScaleFocus on Focus onExperimentation ExecutionSource: “Startup Owner’s Manual”, Blank & Dorf
  19. 19. When to use this approachAppropriate Limited value New markets / new product Established categories Bootstrap businesses Capital intensive industries Disruptive businesses Established businesses Examples: web, mobile Examples: retail store, car company
  20. 20. Search Principle # 1: Business Model Canvas KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS PROPOSITION KEY RESOURCES CHANNELS COST STRUCTURE REVENUE STREAMSSource: “Business Model Generation”, Osterwalder & Pigneur
  21. 21. Search Principle #2: Minimum Viable Product Minimum + Viable Fertile area for new products Minimum ViableToo-basic products Incumbentno one wants products
  22. 22. Excel competitor: Minimum Viable ?
  23. 23. Minimum Viable ?
  24. 24. Minimum Viable Product for Google Docs Value prop
  25. 25. Search Principle #3: Focus on exploration Ideas Learn Build Minimize the total time through the loop Data Offering Measure
  26. 26. How it all fits togetherAgile software development
  27. 27. Business Model Canvas
  28. 28. What are the children carrying? Godrej ChotuKool
  29. 29. Vision: “Refrigeration for rural India” KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES PROPOSITION RELATIONSHIPS SEGMENTS R&D ThroughMicrofinance PR retailers Indianinstitutions Advertising Economical, households effective, with incomeSarpanchs portable KEY of RESOURCES cooling CHANNELS Rs.10,000/m solution o whom Frugal Rural retailers Village traditional engineering (constraints of electricity, ambassadors refrigerators experts space, cost don’t serve solved) COST STRUCTURE REVENUE STREAMS Factory, raw material, SG&A Unit sales
  30. 30. Competitive BMCs vs.
  31. 31. FlipkartKEY KEY VALUE CUSTOMER CUSTOMERPARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS PROPOSITION KEY RESOURCES CHANNELSCOST STRUCTURE REVENUE STREAMS
  32. 32. Flipkart: “Online shopping for all Indians” KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS • Supply chain optimisation PROPOSITION Through email, onlinePublishers • Delivery optimisation chat and database • Urban Indian • SEO marketing • Convenience book lovers • Auto recommendations • Wide selection • Cheaper • Internet- • Trust (CoD) connected KEY people with no RESOURCES CHANNELS credit cards • Delivery staff Web • Technology • First-time capability online shoppers COST STRUCTURE REVENUE STREAMS Book sales Technology, warehouses, deep discounts
  33. 33. CrosswordKEY KEY VALUE CUSTOMER CUSTOMERPARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS PROPOSITION KEY RESOURCES CHANNELSCOST STRUCTURE REVENUE STREAMS
  34. 34. Crossword: “The best browsing experience” KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS • Sourcing PROPOSITION In store, Crossword• Publishers • Visual merchandising club• Franchisees • Urban Indian • Book reading sessions• Shopper’s Stop • Browsing book lovers • Crossword Literary (parent co) Award experience • Instant gratification • Companies KEY • Stationery RESOURCES CHANNELS buyers • Real estate • Store • Phone • Casual mall • Web visitors • Institutional COST STRUCTURE REVENUE STREAMS • Book sales • Coffee Real estate, cost of inventory • Advertising • Trinkets
  35. 35. Mid Day: “Evening gossip companion” KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS • Brand building PROPOSITION • Distribution • Transactional • Mumbai• PTI, AP etc. • Deep multi-year • Newsgathering English- high-touch • Light speaking mass • Improving ABC numbers relationships market entertainment in key demographics after/during a busy • Office-goers day • Commuters KEY • “2nd newspaper” CHANNELS RESOURCES Advertisers + • Journalists • Mumbai-wide • Railway platforms Agencies: reach of readers in • Kirana shops • Mass market • Salespeople with a relaxed context • Mumbai media-planning in a unique time • Direct • Classified knowhow window • Discount COST STRUCTURE REVENUE STREAMS • Retail offtake (5%) Newsroom, newsprint • Advertising (95%)
  36. 36. Summary: why BMCs are important Elevator pitch – quick summary Maximize time from your mentors/advisors Compare with your competitors The foundation for your business plans / planning
  37. 37. Exercise:Develop BMC / vision statement
  38. 38. Vision statement KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS PROPOSITION KEY RESOURCES CHANNELS COST STRUCTURE REVENUE STREAMS
  39. 39. Minimum viable product
  40. 40. MVP example #1: Demo video
  41. 41. MVP example #2: Balsamiq mockup
  42. 42. MVP example #3: Mock brochure “A lot of technology entrepreneurs, confuse shipping and selling. They are two distinct and separate activities. You don’t need a product to try to sell something. Immerse yourself with prospective clients; understand where their pain points are.” - Greg Gianforte, serial enterpreneur
  43. 43. Definitions• Version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort• Anything that helps validate a market for your product
  44. 44. Hard for customers to visualise Easy for customers to visualise Ask Commission Mock Balsamiq Demo Realfriends/ex market brochure mock-up video product perts researchEasy to implement, early Hard to do, late learninglearning
  45. 45. Making your own MVPMarket risk Execution risk
  46. 46. MVP template Identify the #1 market-facing risk for your idea Design 1-week experiment that will help you validate the idea, keeping in mind the risk Define success criteria for the experiment
  47. 47. Steve Jobs v. Steve Blank Vision is important; so is validation
  48. 48. Exercise:Develop MVP
  49. 49. MVP Differentiating features / capabilities: • 1 • 2 Features for viability: • 1 • 2
  50. 50. Best practices: customer investigation “There are no facts inside the building”Source: “Startup Owner’s Manual”, Blank & Dorf
  51. 51. Customer discovery Assignment ✔ Docu ✔ Document Test Test Proceed ment hypothesis problem solution (or pivot)
  52. 52. Customer discovery objectives Talk to minimum 10 prospects Validate problem
  53. 53. Finding customers Target list of 30+ (to get 10) - Identify specific personas Sources: • Email contacts / Friends and family / Social media: Linkedin, Facebook/Quora / Warm Introductions Pitch: • Communicate your idea in 10 seconds or less • “Want to ask for you advice – this is not a sales pitch” • “Have been asked to talked to you by TiE” Should be able to get useful input in 15 min.
  54. 54. Interview principles Customers are interested in their problem, not necessarily your solution Ask customers to describe problem(s) in their own words Focus on behavior, not preconceived ideas / statements Be inquisitive, don’t challenge Ask open-ended questions Observe the environment of the customer
  55. 55. Interview questions Poor questions: • “Do you think this is a good idea?” • “Do you like this (proposed) solution?” • “Would you buy this product?” • “How much would you pay for this?” Good questions: • “How do you currently deal with this problem?” • “What alternatives have you considered?” • “How much does this problem cost you today?” • “Would you pay Rs. 1 crore to solve the problem?”
  56. 56. Suggestions on how to probe Walk me through the last time you faced this problem. What was the impact on you? How did you feel about the situation? How frequently do you encounter this problem? When the problem occurs, how critical / urgent is it? How are you currently solving the problem? What do you like / dislike the current solution? Ask the “Why” behind the “what”.
  57. 57. What to observe Time spent talking about a particular issue Observe their body language and expressions “Yes” means no; “Where can I buy it?” means maybe; “Here’s $20 dollars” means yes.
  58. 58. Concluding Thoughts Take notes (as quickly as possible) Be prepared to find new problem(s) Thank them Ask for introductions
  59. 59. Wrap up
  60. 60. Acknowledgementshttp://theleanstartup.com/ www.businessmodelgeneration.com www.steveblank.com
  61. 61. Thank you!knataraj@thoughtworks.com nag@thoughtworks.compallavb@thoughtworks.commpillew@thoughtworks.com
  62. 62. TiE Workshop:Best practices and practical principles for startups (Day 2) Pallav Barah Krishnan Natarajan Manish Govind Pillewar
  63. 63. AgendaFriday Oct 5 Oct 6 - 12 Friday Oct 129:30 – 10:00 Customer investigation – in the 9:30 – 10:30Welcome / agenda / introductions field Retrospective10:00 – 10:30 10:30 – 1:00Startup models Team presentations10:30 – 11:00 1:00 – 2:00Business Model Canvas (BMC) & Lunchexamples11:00 – 1:00 2:00 – 3:00Exercise: BMC Guest speaker: VC1:00 – 1:30 3:00 – 3:30MVP & examples Summary / wrapup1:30 – 2:30Lunch2:30 – 4:00Exercise: MVP4:00 – 5:00Best practices for customer investigation5:00 – 5:30Networking
  64. 64. Retrospective How were you able to find customers? How many assumptions on the BMC were validated? How many BMC assumptions were invalidated? What were your biggest surprises? Was this approach useful?
  65. 65. Thank you!knataraj@thoughtworks.compallavb@thoughtworks.commpillew@thoughtworks.com

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