why business models matter
TRANSCRIPT
Building a product is NOT “the product”
of your startup. Your Business Model is “The Product”.
Ash Maurya
What is Business Model?Business Model simply answer those Qs:
Who is your customer?
What does the customer value?
How do you deliver value at an appropriate cost?
Peter Drucker
Why Business Model?
Fast Instead of taking weeks or months, you can outline multiple business models in an afternoon.
Why Business Model?
Concise Because your business model has to fit on a single page, you have to pick your words carefully and get to the point. This is great practice for distilling the essence of your business.
Why Business Model?
Portable A single-‐page business model is much easier to share with others, which means it will be read by more people and be more frequently updated.
The Model • Models not only help in the process of planning and construction of new structures, but also in the understanding the design of existing structures.
• The Goal is simple: Increase our understanding of the real world objects while eliminating the unimportant details.
The Business Model Canvas
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Value PropositionsCustomer Relationships
Customer Segments
Distribution Channels
Revenue StreamsCost Structure
Key Resources
Key Partners
Key Activities
• Who are your most important users and customers?
Who are our most important customers? • Mass Market • Niche Market • Segmented • Diversified • Multi-‐sided Platform
1. Customer Segments
For each Customer Segment:
▪ What is their PAIN?
▪ What is the GAIN for them to solve their?
2. Value Proposition
3. Distribution Channels
How do you deliver this value?
• Through which Channels do our Customer Segments want to be reached?
• How are our Channels integrated? • Which ones work best? • Which ones are most cost-‐efficient?
4. Customer Relationships
How do you
GET,
KEEP, and GROW
your customer base?
How do you build a loyal and enthusiastic tribe around your offer?
5. Revenue Streams
How do you generate cash from each customer segment?
• For what value are our customers really willing to pay? For what do they currently pay?
• How are they currently paying? How would they prefer to pay?
6. Key Resources
What infrastructure and resources do you need to deliver what you promise?
● tools, space, locations ● personnel (﴾qualifications, in-‐house or sub)﴿ ● licenses, intellectual property ● supplies (﴾components, assemblies)﴿ ● financial requirements
8. Key Partners
Partners • Suppliers • Developers • Distributors • Investors • Collaborators • Affiliates
Competitors Alternatives
How does each partner help or hinder the business model?
9. Cost Structure
What are the critical elements of the cost structure?
● Fixed costs
● Variable costs
● Resource, activity, partner costs
● Infrastructure, operational, cost of sales
● Payroll costs, benefits, bonus structure, taxes
● What are the risks, the unknowns?
The Business Model Canvas
Value Propositions
Customer Segments
Distribution Channels
Revenue StreamsCost Structure
Key Resources
Key Partners
Key Activities
Two drills on Amazon…
(c) 2012 Mary Caravella 8
Black & Decker SSL20SB 20-Volt MAX Smart Select Lithium Ion Drill/Driver with extra battery
DEWALT DCD760KL 18-Volt 1/2-Inch Cordless Compact Lithium-Ion Drill/Driver Kit (includes second battery)
$118.05 $179.99
Two drills on Amazon…
(c) 2012 Mary Caravella 9
} SmartSelect Clutch; Choose your project icon and drill automatically adjusts power and speed for optimal results
} Gear indicator; 2-speeds indicates high or low setting
} 20-volt MAX Lithium batteries deliver extended run-time
} High torque motor delivers 175-Inch-pounds
} Ergonomic design for improved comfort and control
} Lightweight design (4.0 lbs) minimizes user fatigue
} Dual speed range 0-500/0-1700 rpm delivers optimal performance
} LED worklight provides increased visibility in confined spaces
} Compact track saw batteries (DC9181) are compatible with the existing system of DEWALT 18v power tools produced since 1996
} Compact size (8.2-inch) allows users to fit into tight spaces;
$118.05 $179.99
Two different brands for two different targeted markets with different problems to be solved or goals to be achieved
(c) 2012 Mary Caravella 10
Why does he choose specific products/services?
(c) 2012 Mary Caravella 12
Because they help me •Do something (Functional) •Express myself with others (Social) •Experience something enjoyable (Psychological)
Why does he choose specific products/services?
(c) 2012 Mary Caravella 13
I need… •A drill I can use for everything •Assurance I am buying a reliable product
Why does he choose specific products/services?
(c) 2012 Mary Caravella 14
Because they help me •Improve my business (Functional) •Market my business (Social) •Avoid risks (Psychological)
(and I’m a person too!)
Why does he choose specific products/services?
(c) 2012 Mary Caravella 15
I need… •Tools I can use all day • Rugged • Compatible power
supplies •Tools that show I’m a professional (and make me feel like one) • Distinctive styling
consistent with me
Your product is a tool to help customers create value for themselves. The more you understand customers and what they value the more likely you will create value
(c) 2012 Mary Caravella 16
} Functional value: helps solve a problem or achieve a goal
} Social value: connects with or distinguishes from others; expresses something about self to others
} Psychological value: interesting, enjoyable, anxiety-reducing, satisfying
(c) 2012 Mary Caravella 17
Now that we better understand WHY people choose what they do, we turn to HOW they do it
(c) 2012 Mary Caravella 19
Problem Vs. Unique Value Proposition?
Problem box is intended to capture the top problems customers face in their environments
UVP is the marketing promise you make to them that stems from the intersection of the Problem and
(﴾your)﴿ Solution boxes.
Example
On a job board site:
A job seeker’s problem: “Getting noticed by a prospective employer”.
Job board service to offer solutions like “professionally designed resume templates”.
but the UVP might be “Land your dream job in 60 days or less”.
Where do competitors go on the Lean Canvas?
Your true competition is NOT who you think they are, but who your customers think they are.
Unique Value Proposition Vs. Unfair Advantage?
UVP is to capture a customer’s attention
Unfair Advantage is to deter copy cats and competitors.
Example
UVP: “Connect and share with the people in your life.”
UA: Large network effects.
On Facebook:
Validating The Canvas
Everything on you put on your canvas is a HYPOTHESIS.
You must VALIDATE every element through -
• Discovery (your own data)
• Research (other people’s data)
• Testing (simulation, MVP)
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Create your own
http://leanstack.com/lean-‐canvas/
http://businessmodelgeneration.com/canvas/bmc
https://canvanizer.com/choose-‐canvas
Books to Read‣ The Four Steps to the Epiphany ‣ Lean Startup ‣ Playing To Win ‣ Understanding Michael Porter ‣ Good Strategy, Bad Strategy
Thank You@KareemSamara
Social Media Trainer Founder & CEO of
Social Business Kits SBKits.com