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Maria Nikolou, PhD, MBA
Senior Programme Manager
Entrepreneurship Centre,
Saïd Business School
28th October 2014
Business Model Canvas
and Lean approach
2
General facts and ideas…
Start-ups are NOT just smaller
versions of large companies!
3
Start-ups search for business models
NOT execute known business models.
4
‘A start-up is a temporary organization design to
search for a business model.’
- Steve Blank
5
vs
Business model
6
Business model
? 7
Business model
8
• Write a business plan
• Pitch it to investors
• Assemble a team
• Develop a product/service
• Introduce a product
• Start selling
Launching a business…
9
• Write a business plan
• Pitch it to investors
• Assemble a team
• Develop a product/service
• Introduce a product
• Start selling
Launching a business…
10
Old way:
• Elaborate planning
• Intuition
• Up front investment
in development
New way:
• Experimentation
• Customer feedback
• Iteration or pivot
Higher risk Lower risk
Process of starting a company
Lean Start-up approach
Lean start-up
9
13
14
‘It is like driving at night in the fog. You can
only see as far as your headlights but you
can make the whole trip that way.’
- E. L. Doctorow
15
There’s no ABC process16
A start-up is a pile of assumptions.
The faster you bounce these assumptions off the
market, the faster you will progress.
What is progress?
17
Progress is:
Learning from the customers. ✓
Not building stuff and planning in isolation. ✗
18
The Number 1 thing you need in order to have a
business is:
CUSTOMERS!
19
20
You CANNOT plan under uncertainty
so you need a way to search and
acquire data.
21
Launch fast and iterate…
“If you are not embarrassed by the first
version of your product, you have launched
too late.”
- Reid Hoffman
22
Tools and methods
Business Model Canvas
Summarize your hypothesis
Customer development
Understand your customers
Minimum Viable Product
Be agile and launch fast
23
Business Model Canvas
A. Osterwalder & Y. Pigneur
25
26
You sell your value proposition….
27
Value propositions are not just a list of features:
It is how you create joy or alleviate pain!
To a customer segment….
28
It is better to have multiple specific customer segments
than a generic one.
Who you reach through some channel….
29
Channels:
- How they hear about your product?
- Where they will actually buy it?
You want to create an ongoing relationship
to create retention and lock-in….
30
- How do you make sure they choose your product again next time?
- How do you increase lock-in and retention?
That’s how you make money…
31
Revenue Stream;
- What value are your customers paying for?
- Where is your revenue coming from?
The left side of the canvas…
32
Innovation on the left side of the canvas is about managing
the costs.
It is how you create your value proposition.
What is the activity
so strategically
core to your
business that you
would never
outsource it?
To create the value proposition, you do certain Key Activities
To create value proposition…
33
What are the core activities required to deliver your
value proposition?
You do certain key activities.
Using your key resources…
34
Key resources are what others will need to replicate in
order to compete with you;
- What makes your business unique?
Anything you don’t do yourself…
35
Your company has certain core competencies used to create and deliver the value proposition. Everything else can be outsourced.
You get from a partner.
• Print it out and put it on the wall
• Use different colour post-its for each customer
segment; explore lots of possibilities
• Then focus on one customer segment and fill the rest
of the canvas.
• Use as few sticky notes as possible; refine & reduce
• Focus on quick communication, not perfect
representation
Tips on using the canvas
Changing something changes everything.
You can’t think about any one part without
thinking about the rest.
37
External environment
Rivalry
among
existing
competitors
Bargaining power
of suppliers
Threat of new
entrants
Threat of
substitutions
Bargaining power
of buyers
Michael Porter’s five forces analysis
Case Study: Google
Why do
Chrome and Android matter so
much to Google?
Searchers
Find
anything Searchers
Find
anything Searchers
?
Find
anything Searchers
.000X / search
So who is paying?
Find
anything Searchers
.000X / search
Find
anything Searchers
.000X / search
Advertisers
Find
anything Searchers
.000X / search $ / click
Advertisers
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Measurable
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Measurable
Any budget
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Measurable
Any budget
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Those are the basics
but
how do they get and keep users?
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Seems weak.
When the answer seems
suspicious, keep looking.
When you searched for something today,
why did you use Google?
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
The default? Where?
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Browser
partnerships
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Browser
partnerships
$X00 M / year
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Browser
partnerships
$X00 M
/ year
Why do
Chrome and Android matter so
much to Google?
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Browser
partnerships
$X00 M
/ year
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Browser
partnerships
$X00 M
/ year
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default Mozilla’s
Firefox
Apple’s
Safari
Browser
partnerships
$X00 M
/ year
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
$X00 M
/ year
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
$X00 M
/ year
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
$X00 M
/ year
Build a
browser
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
$X00 M
/ year
Build a
browser
35%
browser
share
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
$X00 M
/ year
Build a
browser
35%
browser
share
Our own
browser
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
$X00 M
/ year
Build a
browser
35%
browser
share
Our own
browser
Phone
default
search
Find
anything Searchers
Advertisers
.000X / search $ / click
Cost-
effective
advertising
Big audience
It’s the
default
$X00 M
/ year
Build a
browser
35%
browser
share
Our own
browser
Phone
default
search
iOS
etc...
The business model holds the answer;
If Google didn’t win with Chrome
and Android…
they would be forced to spend a
fortune on partnerships
(and might even lose their whole
business)
Customer Development
&
Minimum Viable Product (MVP)
Customer Development
Save your time and energy…before you build
anything:
89
Find customers (early adopters)
and
confirm their intend to buy.
90
Talk to people
How do you know it’s bad data?
Compliments
That’s a great idea! I love it!
Generic comments
I usually… I always…
Ideas
You should include feature X and Y and …
Common knowledge
Data you could find through desktop research
Demographics
91
Why conversations go wrong…
When we ask people about our idea:
92
We feel
like we’re
being
scientific
But really,
we’re just
fishing for
kind
words
93
I have this awesome idea for a
business that I’ve been
working on for months…
Do you like it?
Because:
they don’t have a strong opinion about it,
they don’t want to discourage you,
they don’t want to keep talking about it for
another hour…
94
If you pitch your idea,
most people will lie to you!
Why?
What you DON’T need:
Formal meetings
Business cards
Interview scripts
To pay people
An hour or more
95
What you DO need
1.To know what
you want to learn
2.To ask about
their life
What you need to do:
Know what information you need to know.
Pick customers you have easy access to and have a
casual conversation.
Don’t start a conversation by talking about your idea.
Don’t try to convince them that your idea is great.
Talk about their lives; ask about facts: past actions not
future one!
Listen more and talk less.
96
Remember…
“No idea survives its first encounter
with the customer!”
-Steve Blank
97
The simplest product you can build to
test a critical hypothesis of your
business.
98
Minimum Viable Product (MVP)
I have a crazy product idea and the
manufacturing process is expensive.
How do I test it?
100
Summary
Use the Business Model Canvas to:
Organize your thinking
Map the different aspects of your business
Track your hypothesis
How do you convert hypothesis into facts?
Talk to potential customers;
Design experiments
Run tests
Gather data
101
What do you do when the hypothesis
don’t match the reality?
You pivot:
change one or more business model
components and try again!
102
“It is not the strongest of the species
that survives nor the most intelligent but
the one most responsive to change”.
- Charles Darwin
103
104
Questions?
105
Thank you!
Useful references
The lean start-up by Eric Ries
Business Model Generation by Alex Osterwalder and Yves Pigneur
Business Model Canvas Explained
http://www.youtube.com/watch?v=QoAOzMTLP5s
The Mom Test: How to talk to customers & learn if your business is a
good idea when everyone is lying to you; by Rob Fitzpatrick.
FounderCentric; http://www.foundercentric.com/
Crowdfunder; http://www.crowdfunder.co.uk
KickStarter; https://www.kickstarter.com/?ref=nav
Wobble Bowls by Speechless Studios;
https://www.kickstarter.com/projects/speechless/wobble-bowls-by-
speechless-studios
106