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

1. Business models
Delivering value to your customers, your partners and yourself
Porto, 31st August 2011
Startup Pirates
Catarina Maia
1

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
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3. Am I a pirate?
ABOUT ME 3

4. 4

5. 5

6. Are these overrated?
BUSINESS PLANS 6

7. The holy grail of the business plan
• Satisfy everyone
(investors, directors,
founders, managers)
• Remains unattainable and
mythological
• Set of beliefs, assumptions
and “unknowns”
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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
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9. When not to write a business plan
DEALING WITH UNKNOWN PROBLEMS 9

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”
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11. Why does this not work for unknown
problems?
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12. Customer development as a process to
validate business-related information
Customer Customer Customer Company
discovery validation creation building
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13. An “operational view” to customer
development
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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
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15. Main points in customer
development
• Formulate and test your hypothesis
• Understand your business model
• Get out of the building
• Compile, Measure, Test
• MVP testing
• Compile, Measure, Test II
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Learn fast, your death clock is ticking!

16. Getting around with
BUSINESS MODELS 16

17. Business models
“A business model describes the rationale of how an organization
creates, delivers, and captures value”
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18. Main areas of business
• Customers
• Offer
• Infrastructure
• Financial viability
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19. Nine basic building blocks
Customer Value Channels Customer
segments propositions relationships
Revenue Key Key Key Cost
streams resources activities partnerships structure
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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. 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
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22. Channels (CH)
Through which channels do our CS want to be reached? How are we reaching them
now?
How are our Channels integrated? Which ones work best? Which ones are more
cost-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. Customer relations (CR)
What type of relationship does each of our CS expect us to establish and
maintain 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
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• E.g.: Personal assistance, self-service, automated services,
communities, co-creation

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? How
would they prefer to pay? How much does each Revenue Stream contribute
to 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. Key resources (KR)
What Key Resources do our VP require? Our Distribution
Channels? 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. Key activities (KA)
What Key Activities do our VP require? Our Distribution
Channels? 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. 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
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28. Cost structure (CS)
What are the most important costs inherent in our
business 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
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29. 29

30. Left canvas - EFFICIENCY Right canvas - VALUE
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31. The Business Model Canvas
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32. Using the Business Model Canvas with Customer
Development
BLINK TRAFFIC 32

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 http://www.slideshare.net/sblank/blinktraffic-
e245-final-presentation)
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34. Business Canvas 1

35. Business Canvas 1

36. Business Canvas 2

37. Business Canvas 2

38. Business Canvas 3

39. Business Canvas 3

40. Business Canvas 4

41. Business Canvas 4

42. Final Business Canvas

43. Winning combination
• Learn fast
• Iterate
• Implement
• Test
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44. So… when should you
WRITE A BUSINESS PLAN? 44

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
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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.)
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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. 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
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49. Readings and resources
• http://www.businessmodelgeneration.com/
• The website
• http://www.businessmodelgeneration.com/downloads/businessmodelg
eneration_preview.pdf
• 72 page preview of the book
• http://www.slideshare.net/Alex.Osterwalder/presentations
• Presentations by Alexander Osterwalder
• http://steveblank.com/
• Lean LaunchPad at Stanford…
• … and a lot more, including Customer Development
• http://www.startuplessonslearned.com/
• Eric Ries’ “Lean Startup concept”, combining Customer Development with Agile
Methodologies
• http://market-by-numbers.com/
• Brant Cooper’s high tech and Customer Development
• http://www.ashmaurya.com/ 49
• Ash Maurya adapted the Business Model Canvas for IT, in his “Running Lean” book

50. Thank you!
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