Business Model Innovation, Value Proposition and CANVAS

Business Modelling

Prof. dr. Roberto Biloslavo

EnovaKoper, 21st of June, 2017

Schedule

Day Time Lecture Topic

June 21st

09.30-11.00

11.00-11.15

11.15-11.45

11.45-12.30

Business Model & Innovation

Break

Business Model Canvas & The Lean Startup approach

Work in teams

Objectives:

• Learn to differentiate between search and execution process

• Learn to differentiate between business strategy and business model

• Learn how to design a BM canvas

• Learn how to define and execute pass/fail experiments to validate or

invalidate assumptions about selected BM

• Learn to find and reach out to potential customers

Literature:

• Alexander Osterwalder, Yves Pigneur (2010): Business Model

Generation

• Eric Reis (2011): The Lean Startup

• Steve Blank, Bob Dorf (2012): The Startup Owner's Manual: The Step-

By-Step Guide for Building a Great Company

• Alex Osterwalder et al. (2014): Value Proposition Design

• Steve Blank (2013): Why the Lean Start-Up Changes Everything (HBR)

Business Model, Strategy & Innovation

What Business Model is

“A business model is the way in which a company

generates revenue and makes a profit from company

operations”

Business Model & Strategy

7

SOCIETY

PROCESSESRESOURCES PRODUCTS

Governance

Growth strategy

Productivity strategy

Mission

Vision

ORGANIZATIONAL MODEL

The problem and the “traditional” solution

The competitive environment

is characterized by:

• Uncertainty;

• Discontinuity;

• Crisis.reduce

COSTS

increase

PROFIT

COMPETITIVE STRATEGY:

or

precise

market space

In a

Innovative solution as a resolution ofthe paradox

The competitive environment

is characterized by:

• Uncertainty;

• Discontinuity;

• Crisis.

INNOVATIVE STRATEGY:

and

with a

reduce

COSTS

increase

PROFITS

newmarket space

newValue

proposition

In a

… giving a different answer to

the following questions:

what

who

how

are our customers

and markets?

do we offer them?

can we do it effectivelyand efficiently?

which are our suppliersand partner?

with what means do wecompete?

why do we exist and whichis our ambition?

The reconfiguration of the Business Model

SOCIETY

PRODUCTSPROCESSESRESOURCES

reduce

COSTS

increase

PROFITS

newValue

proposition

newmarket space

strategic alliances

supplying

channels

organization

design

commercial

channels

strategic alliances

outsourcing relationships

with

customers

valuenetwork

Technology Push Innovations

11

Technology Push

Innovation:

They derive from

technologic research

and are usually

radical

MISSIONAND

VISION

CLIENTI

PRODUCTSPROCESSESRESOURCE

S

newvalue

proposition

newmarket space

strategic alliances

supplying channels

organization

design

commercial channels

strategic alliances

outsourcing relationships

with

customers

value

network

12

Market Pull

Innovation:

They derive from

customers needs and

desires and are

usually incremental

Market Pull Innovations

MISSIONAND

VISION

PRODUCTSPROCESSESRESOURCE

S

newvalue

proposition

newmarket space

strategic alliances

supplying channels

organizationdesign

strategic alliances

outsourcing relationships

with

customers

value

network

commercial channels

13

Design Driven

Innovation:

Meaning innovations

that lead to redefine

the products meaning

and are either

incremental or

radical

Design Driven Innovation

MISSIONAND

VISION

PRODUCTSPROCESSESRESOURCE

S

newvalue

proposition

New market space

strategic alliances

supplying channels

organization

design

strategic alliances

outsourcing relationships

with

customers

value

network

commercial channels

14

Strategic Innovation Strategic

Innovation:

Business model innovations that lead to

“change the rules of the game” and are

always radicalMISSION

ANDVISION

PRODUCTSPROCESSESRESOURCE

S

newvalue

proposition

newmarket space

strategic alliances

supplying channels

organization

design

strategic alliances

outsourcing relationships

with

customers

value

network

commercial channels

Red vs. Blue Ocean Strategy

Source:

www.derekhendrikz.com

COST

VALUE

ELIMINATE

What factorsgiven for granted,

can beeliminated?

CREATE

What factors havenever been offeredin the sector and could be created?

DECREASE

What factors can be reduced below

the sectorstandard?

INCREASE

What factors can be increased abovethe sector standard?

STRATEGIC INNOVATION

Strategic Innovation

Osterwalder’s Business Model

Canvas

Key Questions for Value Proposition

• Problem Statement: What is the problem?

• Ecosystem: For whom is this relevant?

• Competition: What do customers do today?

• Technology / Market Insight: Why is the problem

so hard to solve?

• Market Size: How big is this problem?

• Product: How do you do it?

Lean Startup

What’s a Startup?

A temporary organization designed to search for a

repeatable and scalable business model

• Each word has meaning

– Temporary

– Search

– Repeatable

– Scalable

– Business Model

Startups versus existing companies

• That startups begin with a series of unknowns (mostly)

– They Search

• That existing companies deal with execution of knowns

(mostly)

– They Execute

• The insight is that management tools built to execute do

not work in search

• Early stage ventures need their own tools

Startups are Not Smaller Versions of a Large

Company!

What We Used to BelieveAbout

Strategy

Start With an Operating Plan

and Financial Model

Planning before Plan

Planning comes before the plan

BUT

Business Model vs. Business Plan

• We are not saying NO to a business plan

• We are saying, “not first”

• Plans are static - Models are dynamic

• Planning comes before the plan

What We Used to BelieveAbout

Process

Classical Product Introduction Model

Concept/Seed Round

Product Dev. Alpha/Beta Test

Launch/1st Ship

Customer Problem: known

Product Features: known

Waterfall - Execution on Two “Knowns”

Requirements

Design

Implementation

Verification

Maintenance

Source: Eric Ries

http://startuplessonslearned.blogspot.com

BUT… More startups fail from

a lack of customers than from a

failure of product development

Agile Development

Customer development

Problem: unknownSolution: unknown

Customer Development Engineering

ScaleCompany

CustomerDiscovery

CustomerValidation

CustomerCreation

Hypotheses, experiments, insights

Data, feedback, insights

+

What We Used to BelieveAbout

Organization

Hire and Build a Functional Organization

Founders run a Customer Development Team

No sales, marketing and business development

Key Principles of Lean Startup Methodology

• Eliminate uncertainty and “Get out of the building” – Startups are

initially filled with hypotheses of the real world. These are just

guesses that must be validated by customers interacting.

• Work smarter not harder – Every startup is an experiment that

attempts to answer the following question; "Should this product be

built?" and "Can we build a sustainable business around this set of

products and services?" Thereby working smarter and with less

market risk.

• Develop an MVP – The first step is to figure out the problem that

needs to be solved and then develop a minimum viable product

(MVP) to begin the process of learning as quickly as possible.

• Validated learning – startups want to learn how to build a successful

business model why entrepreneurs should validate all facts with

empirical data generated from customers.

From Guesses To Facts

Overview of the Customer Discovery Process

Overview of the Customer Validation Process

The Minimum Viable Product (MVP)

• Smallest feature set that gets you the most …

- learning, feedback, failure, orders, …

- incremental and iterative

• It is not a prototype

• It is not a deployable version with the fewest features

• It is what enables a test of a hypothesis

• It may be a drawing, a slide, a wireframe,

clickable workflow, etc…

Define Minimum Viable Product – Physical

• First, test your understanding of the problem (pain)

• Next test your understanding of the solution (gain)

– Proves that it solves a core problem for customers

• The minimum set of features needed to learn from

earlyvangelists

- Interviews, demos, prototypes, etc

- Lots of eyeball contact

Define the Minimum Viable Product –Web/Mobile

• NOW build a “low fidelity” app for customer feedback

– tests your understanding of the problem

• LATER build a “high fidelity” app tests your

understanding of the solution

– Proves that it solves a core problem for customers

– The minimum set of features needed to learn from

earlyvangelists

- Avoid building products nobody wants

- Maximize the learning per time spent

Four Types of Markets

• Clone Market

– Copy of a U.S. business model

• Existing Market

– Faster/Better = High end

• Resegmented Market

– Niche = marketing/branding driven

– Cheaper = low end

• New Market

– Cheaper/good enough, creates a new class of product/customer

– Innovative/never existed before

Clone Market Existing Market Resegmented

Market

New Market

Market Type determines:

Rate of customer adoption

Sales and Marketing strategies

Cash requirements

Market Type

Existing Resegmented New

Customers Known Possibly Known Unknown

Customer Needs

Performance Better fit Transformational improvement

Competitors Many Many if wrong, few if right

None

Risk Lack of branding, sales and distribution ecosystem

Market and product re-definition

Evangelism and education cycle

Examples Google Southwest Groupon

Market Type - Existing

• Incumbents exist, customers can name the mkt

• Customers want/need better performance

• Usually technology driven

• Positioning driven by product and how much value customers place on its features

• Risks:– Incumbents will defend their turf

– Network effects of incumbent

– Continuing innovation

Existing Market Revenue Forecast

Existing Market

Market Type – Resegmenting Existing

• Low cost provider (Southwest)

• Unique niche via positioning (Whole Foods)

• What factors can:

– you eliminate that your industry has long competed on?

– Be reduced well below the industry’s standard?

– should be raised well above the industry’s standard?

– be created that the industry has never offered? (blue ocean)

Resegmented Market Revenue Forecast

Market Type – New

• Customers don’t exist today

• How will they find out about you?

• How will they become aware of their need?

• How do you know the market size is compelling?

• Which factors should be created that the industry has

never offered? (blue ocean)

New Market Revenue Forecast

New Market Sales Curve

Strategy Canvas

Source: www.derekhendrikz.com

How Big is the Pie?Total Available Market

Total Available Market

• How many people would want/need

the product?

• How large is the market be

(in $’s) if they all bought?

• How many units would that be?

How Do I Find Out?

• Industry Analysts – Gartner, Forrester

• Wall Street Analysts – Goldman, Morgan

How Big is My Slice?Served Available Market

• How many people need/can use product?

• How many people have the money to

buy the product

• How large would the market be (in $’s)

if they all bought?

• How many units would that be?

How Do I Find Out?

• Talk to potential customers

Served Available

Market

TotalAvailableMarket

How Much Can I Eat?Target Market

• Who am I going to sell to in year 1, 2 & 3?

• How many customers is that?

• How large is the market be

(in $’s) if they all bought?

• How many units would that be?

How Do I Find Out?

• Talk to potential customers

• Identify and talk to channel partners

• Identify and talk to competitors

TotalAvailableMarket Target

Market

ServedAvailableMarket

Get Out of the Building

Why Get Out of the Building?

Interview Strangers not Friends

Disarm Polite Behaviours

Ask about Pains & Needs not Features

Are You Talking to Relevant Customers?

Confirm What You Heard

How to …

Gain Customers Insight?

– Sample questions:− “Can you tell me the story about that?”

− “And then what happened?”

− “Why [or how] did you do that?”

− “What did you love [or hate] about that?”

− “If you could wave a magic wand, what would it be like?”

− Tell me about an experience when ...

− What are the best/worst parts about ...

− Can you help me understand more about ...

project cycle management (pcm)

burcu kiper

what is a project?

as a series of activities aimed at bringing about clearly specified

objectives within a defined time- period and with a defined budget.

idea project implementation

features of a project?

includes an analysis process to solve problems

clear objectives

clear target(s)

intervention to a problem

innovation / a new perspective

brings about change

develops output(s)

how does project management help us?

goal clarity and measurement

coordination of resources

time & cost saving

meeting deadlines

project cycle management (pcm)

a methodology for -preparation -implementation -evaluation of projects based on logical framework approach (LFA)

describes -management activities -decision-making procedures during the life cycle of a project (key tasks, roles and responsibilities, key documents and decision options)

logical framework approach

*a tool for project management

*was developed in ‘60s by US International Development Agency

*has 2 main phases

Analysis & Planning

analysis stageStakeholder analysis: who are the target groups, beneficiaries? whose problems will be addressed? Problem analysis: what are the key problems constraints and opportunities?

Analysis of objectives: what will be the objectives?

Analysis of strategies: what will be the strategy of the project?

analysis stage

stakeholder analysis

*to identify possible partners & target groups *to identify those who could be negatively effected by the project for creating a risk management strategy *tools for stakeholder analysis: SWOT analysis, stakeholder analysis matrix, Venn diagrams and Spider diagrams etc.

problem analysis

a cause and effect relationships between these problems main tool: "problem tree"

analysis of objectives*what do we want to achieve with this project? (objectives) *how can we achieve these objectives? (means) *turn problems in the problem tree into “positive statements”

analysis of objectives*what do we want to achieve with this project? (objectives) *how can we achieve these objectives? (means) *turn problems in the problem tree into “positive statements”

analysis of strategieshow? based on the capacity, nature and

the expertise of the organization why? to demonstrate reasonable and

achievable objectives

European Funding Opportunities