Iarossi Business Model Canvas

What is a Lean Startup?

- a human institution designed to create a new product or service under conditions of extreme uncertainty -Startups aren't trying to precut the future, but create it -The goal is to create a sustainable business in uncertainty -You need to be able to support yourself and keep customers coming -Uncertainty means risk...how do you make the startup less risky? -Ask the question: Should we build this? Not how do we build this? -It goes back to the issue of going back and validating that what they learned today confirmed that they should continue creating this product. -Apply a scientific method to answer the question -Goals: To answer, should we build this? is progress sufficient to keep going?

Three Methodologies at the foundation of a Lean Startup

-Business Model Canvas -Agile Development -Customer Development

Five Activities Key to Building An Entrepreneurial Venture Are:

-Creation of the value proposition (what are you going to provide to the customer? benefits? -Talent acquisition and management (how are you going to get people to come work?) -Customer aquisition (Who is going to buy your product?) -Capital aquisition (have enough money? go outside funding if needed) -Product Development (go from fast prototyping to getting to a minimally viable product)

Entrepreneurial Process: Behaviors that impede the process

-Deer in Headlights (getting overwhelmed and impeding a teams ability to achieve a goal) -Dog chasing his tail ( a lot of activity but no real progress) -Squirrel in the middle of the road (no direction. no sense of where to go)

Execution side of the Business Model Canvas?

-Key Activities -Key Resources -Key Partners -Cost Structure

Processes of Emergence from Scholarship

-Path dependence -Effectuation -Path Creation

Data collection methods for customer validation

-survey -focus group -one-on-one meetings -passing out demos or samples -research -pilot program

Unbundled Business models

Being everything to everybody vs. using experts and focusing in house on core competency. -3 types of businesses coexist as separate in one organization: Product innovation, customer relationship management, infrastructure management. Outsourcing noncore competencies and relying on strategic partners. EX: Telco outsourced wires and tours to someone else were just good at customer relationships

Multisided Platform Model

Brings two interdependent groups together - you can't have one without the other. This is where you often look at a user who might not pay and a customer. iTunes having to convince artists to sell their songs for a dollar. BUT would not be able to even do that if they were not able to convince their customers to have the software

Antilog

Business models from others that you do not want to emulate "glamour donuts" Learn from their mistakes and don't repeat them

Startup Runway

Complete as many picots as necessary before running out of runway

Customer Discovery Process is a four step process:

Customer discovery leads to customer validation. At this point, pivot and go back to customer discovery if need be. Discovery and validation are part of the search mode. Once you get customer validation, you will move to customer creation and then company building.

Define Agile Development

Employ an incremental and iterative approach. You don't just build the whole thing at once, you do it in bits and pieces. Raise money in smaller milestones. Build it and make sure it works, then add on to that.

What is a business model

How an organization CREATES, DELIVERS, AND CAPTURES VALUE

Innovator/Inventor vs Entrepreneur

Inventors come up with cool ideas because they want to solve the absence of a problem needing to be fulfilled. The ENTREPRENEUR wants to do things different and not to follow graphs and charts.

Path Creation (Processes of Emergence from Scholarship)

Its a process of continuous improvement and completely focus on innovation. Participants come and go, sometimes unexpectedly and in a manner that can constrain or enable future action. "Generate functionality" by cultivating the unexpected. Yet, don't overwhelm the market with newness. EX: Apple with the PDA and people were still trying to figure out desktop computers.

Define Key Activities of the Business Model Canvas

Key activities- Look at revenue streams again?...

Management vs. Entrepreneur

MANAGERS like to move resources around and do not like to do things differently. They are structured. ENTREPRENEURS want to do things different and not to follow graphs and charts

Market size ( TAM, SAM, TM)

Market size- new product to existing market, or brand new product to new market. EX: Building an app TAM- Total addressable market- total world with smart phones SAM- served addressable market- those with iPhones TM- Target market- english speaking iPhone users in the US

OODA Loop

OBSERVE: be aware whats going on, observe first than act ORIENT: Develop a change, figure out options, if options are okay than decide DECIDE: Once you have decided look back at the environment ACT: If nothing changes act upon the option *the individual/team with the quickest cycle and most cycles has the advantage over the competitors

Freemium Model

One segment in this model gets a free ride and one segments pays a premium. Nonpaying usually gets less features supported by the paying customers. EX: Pandora

Customer Discovery phases:

Phase 1: State hypothesis and draw BMC Phase 2: Test the problem Phase 3: Test the solution Phase 4: Verify or pivot

Define Revenue Steams of the Business Model Canvas.

Revenue Steams- when talking about how value is created and delivered, this category focuses on the capture. What are the ways you can sell your product? What are customers willing to pay for something? What do they currently pay? How do they pay? Do they pay for the product over 9 months or do they pay for it immediately. Is there a flat fee or is it a subscription? Do you pay per product or need a deposit? You have to tie in your value proposition and customer segment here to determine the best way to capture the value.

Effectuation (Processes of Emergence from Scholarship)

Start with what they got in hand already. When the unexpected occurs, turn it into opportunity. The risk is little, and fail is cheap. Don't risk anymore than you can afford to lose)

Define Business Model Canvas

Summarize the hypotheses you want to test.. A startup is an experiment

Open Business Models

The key to value creation is to collaborate with people. We're not good at innovating, but we can make products that other people make better. EX: iBeacon came out of apple but they sold it to another corporate venture capitalist to develop on their own

Define Value Proposition of the Business Model Canvas.

Value Proposition- What are the benefits? What's the offering? What're the features? What is it that you're doing different than what the market is currently using or doing? What's the unique thing that differentiates you from them? Which one of our customer problems are we solving? Are we creating delight for our customers? What needs are we satisfying? Usually this is where you start.

What are the two types of Metrics

Vanity and Actionable

What's the purpose of an MVP?

With an MCP you can finally test your idea in the market. before you could only show people the idea, but with the MCP you're getting people to use it and pilot it. Don't build it out fully-let the customers tell you what else they want. In some markets, the concept of an MCP isn't working and thats because sometimes we only have one chance to make a good impression. If people aren't wowed initially, they won't come back. This happens in the consumer industry with business to business. Is the market forgiving and excited because the product is different? Or will they neglect it forever because it didn't work the first time? Its not easy to change behavior.

Life Cycle Model (causes someone to do something differently)

You go through prescribed stages which include growth, maturity, and decline, and then you die...

Multiple Pivot Strategy

ZOOM-IN: Shoe company changes from shoes to just creating the laces that everybody loves. ZOOM-OUT: people say that they'd like it more if services x, y, and z were included in the product.

Define Path dependence (Processes of Emergence from Scholarship)

when you start off in a new organization, doing something brand new or in a new way, there are a lot of different options initially. You have to narrow your practices and start reducing over time. However if your competition is operating differently but you keep going down the same path, the competition can find your way to do what you're doing better by adopting practices. Companies end up getting stuck, and at that point innovation ceases. This is called lock-in.

Process of New Venture Emergence from Practice

-Pilot It (find the early adopters to test out the product) -Nail It (get it into the hands of the next person higher up) -Scale It (allow it to grow big) -Milk It (don't settle, introduce something new)

Data collection methods for customer validation

-Survey -Focus Groups -One-on-one meetings -Passing out demos and samples -Research -Pilot Program

The Lean Principles and Process

-Validated Learning (Lean startup is about validating your learning. Learn something thats empirically based and then incorporate it in your business model and design of your product. - Build-Measure-Learn: build idea, make it. Take it to market and see if people will like it. Collect and analyze that data. Then we learn. Is it worth going forward? Between learning and building, we decide whether we pivot or preserve. This is similar to OODA loop. -Innovation Accounting: we'll talk about metrics, dashboards, monitoring the outcome of an experiment

What are on the value side of the Business Model Canvas?

-Value Proposition -Customer Segments -Customer Relationships -Channels -Revenue Streams

What are the 9 components of the Business Model Canvas?

-Value Proposition -Customer Segments -Customer Relationships -Channels -Revenue Streams -Key Activities -Key Resources -Key Partners -Cost Structure

Define Dashboard

A way to present all of the metrics and show where you are (in relation to KPIs, the goal, etc) EX: Google Analytics, Google site traffic, etc

Define Customer Validation

After verifying your model, nothing validates a hypothesis better than a signed order. (Get out and sell it) -make sure that we understand how they buy the product, what they pay for it, how to market to them, and how to engage them in a sale.

Define Customer Development

Apply rigor and discipline to develop repeatable customer acquisition process. You don't want just one customer coming once, you want them coming back multiple times. You don't have a good idea unless the customer says that you have a good idea. Get out of the building.

Define Channels of the Business Model Canvas

Channels- This refers to how you get your value proposition into your customer's hand. The method that the customer accesses your product is important here. If you decide that you want to post something on Facebook and thats how you're going to reach the customer, you'l miss a lot of people. Maybe you want to use e-commerce and sell online- but still, how will you access the customer and educate them? Also, its important to consider where customers actually buy this category of product. Do they buy it because someone knocks on their door? That's the way we need to sell it to them, if thats what they like. Or maybe they hate when people knock on their doors, so we'll sell the value prop online instead. Does the customer use an intermediary? If customers buy all of the products through distributors but you don't want to use distributors, thats going to be a problem. Some customers would just rather buy direct through, if they don't want to deal with a broker.

Define Customer Relationship of the Business Model Canvas

Customer Relationships- How are we showing our customers love? How do we draw them in and keep them in? How do we give the customers highly customized assistance? Or would customers rather have an automated service where they can do everything themselves? You've got to figure out when looking at the value prop and customer segment what kind of relationship do they expect-fast and cheap, customized and personalized, a community of other people to be connected to. The customer will really love the product if you incorporate into the product what you've said. Make the customer part of the creation process.

Define Customer Segments of the Business Model Canvas.

Customer Segments- Who is it that you're serving? Who're we creating value for? Who are our most impertinent customers? Are we providing something that's for everyone or something thats just for a niche market? This is a product for ...people who are just into home improvement. Or is this product for... companies that use delivery trucks. Who's the specific market? Or are there multiple markets? Perhaps multi-sided platform? The difference between the customer and the user is that the customer is the one who actually pays for it. You could be using a consumer market or an industrial market. Im buying light bulbs from GE but I'm not buying huge turbines, like they provide. They have an industrial and consumer market. Value proposition may be different for each customer segment.

Define Actionable Metrics

Demonstrate cause and effect, provides detail on customer behavior. Ex: number of downloads of your product/ people who register with your product- of they people who download the product, how many end up signing up? From these things you can start drilling down and creating projections. With a retail store, its not about foot traffic but its about how many people test drove a car.

Define Cost Structure of the Business Model Canvas

How much does it cost to carry out this business model that we have just created? What things are most expensive? What costs are the most important?

Define Key Resources of the Business Model Canvas

Key Resources- What are they assets, expertise, and distribution channels necessary? You may need people with lots of talent; hire lots of people with no talent. How are we going to get people in here, train them , and get them on the phone 24/7.

What is a business plan?

Outline for the business. How you will deliver and capture value- financial projections- management and employee roles. They are a bunch of guesses * business plans work for execution known markets if you can predict the outcome for proven strategies.

Define Key Partners of the Business Model Canvas

The issue is that a company isn't going to be good at EVERYTHING. We shouldn't try to do everything. We may have an interesting channel but we don't want to buy planes and trucks to deliver it. There are tons of transportation companies out there though you can negotiate a deal with- FedEx. This will help you deliver your value. For a small company, you probably don't want to do the accounting functions on your own and it would be better to hire someone to do those for you. There are people you can contract with who can be your partners in delivering your product or service. Your suppliers can be key in helping you actually develop your product- use them to help you find cheaper, better new ways to do things. Have them help create the competitive advantage for you. Once you understand these things, you can understand.

Teleological Model (causes someone to do something differently)

This is a goal driven model. Change is caused by people trying to reach a certain goal. If you don't reach then you'll start the cycle again and try to reach it. New way of doing and old thing.

Dialectic Model (causes someone to do something differently)

This refers to conflict; its change that is driven by conflict or confrontation. When there are opposing views, we try to resolve that which requires change to occur.

Define Earlyvangelists

Those early adopters of your product.service. They're aware of a problem and have a need. They have money to spend on a solution. They're patching together some solution (that's not idea) so that when you come to them with an elegant and simple solution they already know they're willing to pay for it and will test it, not caring if there are bugs.

Define Pivot

a structured course correction designed to test a fundamentally new hypothesis about product, strategy, and engine of growth. This is not an incremental change, it's a major course correction. *Is progress sufficient to keep going (PRESERVE)? OR is a "fundamental transformation" required (PIVOT)

Define Vanity Metrics

high level, top line, perception of success. Ex: number of page views on a website- this gives us almost no information because we don't know what they did when they were looking at our site. If our goals is to make sales, what does that tell us about sales? Similarly, if a ton of people walk into your store, that doesn't mean that any of them bought anything.

Analogs

ideas to integrate or adapt form companies that came before you; positive role models. The ideas you want to integrate that someone else has done well. It does not have to be from your same industry.

The Long Tail Model

large number of niche products in low volume vs. small number of products at high volume. EX: EBAY, YOUTUBE, LEGO.

False Business Model/Opaque Model

the customer thinks they're doing one thing but actually its unrelated. The customer may not actually be aware of what the revenue source is for the business model. Sometimes they are used purely to collect data on you.

Define Minimally Viable Product (MVP)

the simplest version of a product that can be put together to allow someone to test-specifically early adopters. This allows someone to test it so they can give you feedback. these people that you're going after are normally okay with there being bugs in it because they're excited about the new product and want to help you build it.

Evolutionary model (causes someone to do something differently)

this is about the fact that change is driven by competition for resources. If you're running low on a certain energy source then you might develop a new technology.