Business Model Innovation
Gigi WangBoard Member & Chair Emeritus, VLAB
Future Enterprise Webinar
24 November 2015
About Me
Born in Taiwan, grew up in US
Stanford University BS/MS Engineering, UC Berkeley MBA
Started career at 3 Fortune 100’s – Exxon, Pepsi, AT&T
Moved to founding or early stage teams of start-ups –InterNex (acquired), Pacific Internet (IPO, NASDAQ),Ascend (acquired), UptimeOne, QALA (acquired), Runa(acquired for $70m, 2013), and several FAILURES
Currently:
o Board Member/Chair Emeritus, MIT/Stanford VentureLab (VLAB)
o Industry Faculty, UC Berkeley Center for Entrepreneurship
o Managing Partner, MG-Team, entrepreneurship & innovation, international biz development consulting
How to make money!!??? Not just generate revenues, but be a profitable business.
From Value Proposition to Value Extraction.
Many historical business models to reference.
Historical: Buy, License Software, Rent, Advertising…
Innovative models catch investors’ attentions.
Innovative: Transforms processes, identifies new revenue
The Digital World enables a whole new realm.
Business Models
Market Trends
1950’s 1960’s 1970’s 1980’s 1990’s
Mass
production,
speedy service
Aggregation Specialization,
door-to-door
transportation
Built to order,
just in time
manufacturing,
direct to
consumer sales
Internet
revolution,
consumers as
storefronts,
online booking
Market Trends New Business Models
1950’s 1960’s 1970’s 1980’s 1990’s
Mass
production,
speedy service
Aggregation Specialization,
door-to-door
transportation
Built to order,
just in time
manufacturing,
direct to
consumer sales
Internet
revolution,
consumers as
storefronts,
online booking
New types of companies emerged…1950’s 1960’s 1970’s 1980’s 1990’s
Identify Who Has the $$
• Plant-based organic pesticide
for worms developed by Chao
Yang Technology University in
Taiwan
• Farmers had no money, and
couldn’t afford it
• CYUT identified the tea
companies as the buyers who
then provided it to the farmers
to use
Basic Business Math
PROFITS = REVENUES - COSTS
Business Model Challenges
• In 1998, no obvious way for “free” Internet Search to make money.
• The invention of Google Adwords changed everything.
• Adwords generates majority of Google’s revenues.
• In 1992, HP LaserJet III printer cost >$2000
• HP made money from the hardware margin
Business Models Can Change
Recurring revenue has longer lifetime value
• In 2015, HP printer cost < $100
• HP makes money on repeated sales of ink
Nothing is Really “Free”
Who are the Customers?
User
Buyer
Partner
Make It Easy to Collect $$
Overcoming Barriers to Adoption
• Wholesale Solar sells solar power systems to homes.
• Big up-front costs to customer ($50K) –huge barrier to adoption.
• Solar City overcame barrier to adoption with:
• Buy option OR
• Lease option which is $0 down, monthly lease price less than price of energy than from utility. SolarCity revenue from lease AND revenue from excess solar generated energy sold back to utility.
Free Accelerates Adoption
Premium Price for Full Product
Collaborative Consumption
• People can rent their homes, apartments, or rooms to anyone else
• Across 190 countries, over 15 million nights have been booked
• Rent your car when you’re not using it (and make $$)
• Services handles payment and insurance elements
Crowdsourcing
In a world with too little
time, too few resources, harness the power of the “crowd”
… for Content, Processes, Brainpower, and Funding, more…
Let the Crowd Evaluate
• Crowd/ community
provides ratings for
the buyers and sellers
• People choose to
make a transaction or
not based on ratings
• eBay no longer has to
provide the services to
hold funds in escrow
til product is received
satisfactorily (Reduces
COSTS)
User Generated Content
Crowdsource Brain-Power
Crowd Funding
Monetizing Data
Shopping app for deals…by merchants, by location, and more
Business model is NOT traditional referral fee or revenue share
BK is packaging and selling aggregate consumer data
Transaction-based to Data-based
Google – All About Collecting Data
Google services are all free (or are they??). Nothing is free in this world…
They are collecting our behavior data, analyzing it, and then monetizing it, primarily by delivering targeted advertising.
Selling Data is Not A New Concept
• Safeway Stores
originally installed bar
code scanners for
inventory control.
• Then, started
aggregating data,
analyzing it, and selling
it as market research as
early as 1990.
Skin Vision – database of cancers
Largest melanoma
Database worldwide
• Portfolio of >100K
downloads
• >1.000 professionally
diagnosed pictures of
Suspicious moles
• Monetizing data
Licensing Tech vs Selling Licenses
• Bell Labs developed holographic storage solutions
• Licenses technology to Akonia
– One-time, monthly, yearly
• Akonia is the startup launching the commercial product to the market
• Norton has developed an anti-virus software
• Sells licenses to users
– Yearly, multi-package license
• Provides recurring revenue
Paid to Work or Play@!!?
$1800/month
$2000/month
Play games Make money!
Berkeley Method of Entrepreneurship
Come join the BMOE Bootcamp @ UC Berkeley (January 11 – 14, 2016)http://scet.berkeley.edu/bmoe-bootcamp/
Gigi WangBoard Member, MITEF/Stanford Venture Lab
Industry Fellow, UC Berkeley Sutardja Center for Entrepreneurship
Managing Partner, MG-Team LLC
THANK YOU!
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