The Business Model Canvas and MVP

Opportunity (Ex. cont'd)

$$/Customerx X #customers: $10 X 10,000,000 customers = $100 M

Revenue Streams (3 Key Things)

1. Customer value divided by the "goodness factor" 2. Verify that you CAN extract your revenue 3. Don't get hung up on the details

Cost Structure (Is your business more)

Cost Driven? - Leanest cost structure/low price value proposition/maximum automation/extensive outsourcing Value Driven? - Focused on value creation/premium value proposition

Revenue Streams (Questions)

Don't get hung up on details! What value are your customers willing to pay? 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?

Revenue Streams

How your customer rewards your for the value you create Reflective of the value provided (Ideally) quantifiable

Revenue Streams (Fixed Pricing)

List Price Product Feature Dependent Customer Segment Dependent

Can I make profit? (Ex.)

Revenue/Customer = $10 Direct Cost (cost to deliver value) = $3 Direct Margin = $7 $7 x 10,000,000 customers = $70 M Fixed Cost Overhead

Value/Customer Focus

Right half of BMC: Half of Value Proposition Customer Relationships Customer Segments Channels Revenue Streams

How to estimate revenue (Ex.)

Value realized by customer: $100 Goodness Factor: 10x Estimated Revenue: $100/10=$10

Key Activities (Questions)

What activities do your Value Proposition require? Our distribution channels? Customer relationships? Revenue streams?

Cost Structure (Questions)

What are the most important costs inherent in our business model? Which key resources are most expensive? Which key activities are most expensive?

Key Resources (Question)

What key resources do your Value Proposition require? Our distribution channels? Customer relationships? Revenue streams?

Customer Relationships (Questions)

What type of relationship does each of our customer segments expect us to establish and maintain with them? Which ones have we established? How are they integrated with the rest of our BMC? How costly are they?

Key Partners (Question)

Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from partners? Which key activities do partners perform?

Channel Phases

1. Awareness: how do we raise awareness about our company's products and services? 2. Evaluation: how do we help customers evaluate our organization's value proposition 3. Purchase: how do we allow customers to purchase specific products and services? 4. Delivery: how do we deliver a value-proposition to customers? 5. After sales: how do we provide post-purchase customer support?

Value Proposition (3 Key Things)

1. Value prop defined for ea. customer segment 2. Quantify value ($$, time, other) 3. Must be relative to competing solutions (Goodness Factor)

What do we know just from Customer Segments, Value Proposition, and Revenue Streams?

1. We understand our customer (in detail) 2. We understand how (& why) they benefit from what we are doing 3. We understand whether there is enough left for us to make this worthwhile 4. We understand what we don't understand

Revenue Streams (Types)

Asset Sale Usage Fee Subscription Fee Lending/Renting/Leasing Volume Dependent Licensing Brokerage Fees Advertising

How do you use the Business Model Canvas

BMC is the cornerstone of your internal business plan BMC needs to be as specific as possible (the more quantification the better) (Initially) focus on customer segments and value proposition Develop it in order presented in class Prioritize risks and unknowns BMC is an evolving task, not one time task BMC should be visible to entire team

Business Model Canvas

Based on nine building blocks, the business model canvas is an entrepreneurial tool that enables entrepreneurs to test hypotheses as they design, develop, articulate, challenge, invent, and pivot their strategic business model. The building blocks referenced above include (left to right, top to bottom): Key Partners Key Activities Value Proposition Customer Relationships Customer Segments Key Resources Channels Cost Structure Revenue Streams

Value Proposition (Questions)

Detail is important! What value do we deliver to the customer? Which one of our customer's problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment? Which customer's needs are we satisfying?

Customer Segments (Questions)

Detail is important! Who are we creating value for? Who are our most important customers?

Cost Structure (Sample Characteristics)

Fixed Costs (Salaries, Rent, Utilities) Variable Costs Economies of Scale Economies of Scope

Cost/Company Focus

Left half go BMC: Key Partners Key Activities Half of Value Proposition Key Resources Cost Structureua

Customer Segments (Types)

Mass market Niche market Segmented Diversified Multi-sided platform

Revenue Streams (Dynamic Pricing)

Negotiation (Bargaining) Yield Management Real Time Market

Value Proposition (Characteristics)

Newness Performance Customization "Getting the job done" Design Brand/status Price Cost (reduction) Risk (reduction) Accessibility Convenience/usability

Key Partners (Motivations for Partnerships)

Optimization & Economy Reduction of Risk & Uncertainty Acquisition of Particular Resources & Activities

Customer Relationships (Examples)

Personal Assistance Dedicated Personal Assistance Self Service Automated Services Communities Co-Creation

Key Resources (Types)

Physical Intellectual (Brand, Patents, Copyrights, Data) Human Financial

Key Activities (Categories)

Production Problem Solving Platform/Network

How to use MVP as a tool?

Risk: investment or consumer interest - Kickstarter campaign - A signup form - Landing page test - Video launch - Facebook ads Risk: value or adoption - Wizard of Oz - Test market Risk: technical - Prototype: focus on specific technical risk

Scientific Method Applied to Business

Sketch out Hypothesis (Use Scientific Method/BMC) Test Hypothesis (Discover, Develop, Pivot) Measure Results (Discover, Develop, Pivot) Quick, Responsive Development (agile) (Short Repeated Cycles) Validate the need, solution, and business model (iteratively)

Example of MVP

Storyboards: helps you understand the use case Landing Pages: helps you asses (and drive) demand Demo Videos: great for market research Wizard of Oz: excellent to confirm value proposition Pre-Sales: a customer willing to pay for your product is the best metric

Minimum Viable Product

That version of a new product which allows a team to collect the maximum amount of validated learning (about customers) with the least effort

Channels (Questions)

Through which channels do our customer segments want to be reached? How are we reaching them now? How are our channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines?