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Business ModelingNYU SternInnovation
4.6.2016
by Jen van der MeerNYU ITP
Reason Street
Intro to the Business Model Canvas
Starting a company is hard
More fail than succeed
US business deaths now outnumber business births
We make it seem too easy
Or that you can just wish your way or grind your way into success
Most companies do not survive
More than 50% close within the first five years
When companies fail
All reasons for failure point to a lack of customer need
Why did they fail?“No product market fit” “Didn’t listen to customers”
“Ran out of cash”
“Solving for a want to have, not a need to have”
“No market need”
“Never found a business model”
“Customers didn’t want to pay for it”
From autops.io and CB Insights Founder Post Mortems - Top 20 Reasons Why Startups Fail
Question: Have you ever failed, big time?
If so - why do you think you failed?
And here’s the thing about failure
We used to do this the harder way
Leading Entrepreneurship Training
Ideas
Build
Product
Measure
Data
Learn
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Lean Startup Business Model Canvas
Customer Segments
What is a Startup? (according to 3 w.m.)
“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.” – Eric Ries
“A startup is a company designed to grow fast.” –Paul Graham. Y Combinator.
“A startup is a temporary organization designed formed to search for a scalable repeatable business model.” – Steve Blank.
“”Most startups change their business model multiple times. A scalable startup is a special class of startup – world class team, large vision, large target market, passionate belief and a reality distortion field.”
Are you ready?
What are your assumptions?
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
Let’s take a tour:
Choose: Uber
Airbnb Warby Parker
Other?
Your Turn
What are your assumptions?
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
Who are Your Customers?
You Can’t Target Everyone
“Serve a unique customer segment”
“Target a specific niche”“Aim for your most
profitable segment” “It’s better to dominate a micro segment than to aim
for everyone and hit nobody”
“Define your Archetypes”
Context:
#stillathome #notanadultyet
Name: Peyton
Age: 24
Job: Jr. Designer
Priorities Pay off college loan Apartment Independence Freedom Bike to work
Interests: Roller derby Raising money for breast cancer Jewelry making
Pains: Can’t seem to save At breakeven/loss each month Bad credit rating
Fears + Secrets: Afraid of getting rejected for an apartment Really likes mom’s support
Customer Persona
Persona
The money question: which one first?
Context:
#stillathome #notanadultyet
Name: Peyton
Age: 24
Living with Mom at home
Goals: Independence Freedom Apartment Bike to work Pay off college loan
Interests: Roller derby Raising money for breast cancer Jewelry making
Pains: Can’t seem to save At breakeven/loss each month Bad credit rating
Fears + Secrets: Afraid of getting rejected for an apartment Really likes mom’s support
Context:
Name: Percy
Age: 28
Lives w/ Roomates
Goals:
Interests: Church volunteer
Pains:
Fears + Secrets:
Name: Peyton
Age: 24
Living with Mom at home
Name: Peyton
Age: 24
Living with Mom at home
Context:Goals:
Interests: Church volunteer
Pains:
Fears + Secrets:
Context:Goals:
Interests: Church volunteer
Pains:
Fears + Secrets:
Persona
Pain (!)
Pain is a shortcut
Scratch your own itch
Pains, gains, jobs to be done
From: Business Model Canvas, Value Proposition Design, Alexander Osterwalder, The Innovators’s Solution, Clay Christensen and Michael Raynor
The pain point secret:Plans Known needs
Behavior
Plans
Values
Known needs
Behavior
Norms
Assumptions
Taboo Beliefs
Unknown Needs
Go deeper
What are your assumptions?
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
Value PropositionMy company is developing
company name defined offering
to help
And here’s how we prove it
to solvetarget customer segment defined problem or pain
our secret sauce, and proof point
For next time: test your assumptions and talk to people
Repeat Repeat Repeat
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
Customer Relationships
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
EarCre CapCre
Customer RelationshipsWhat are the main goals of customer relationships?
Get
Keep
Grow
(And let the mismatched ones go)
The FUNNEL(s)
Customer Relationships
CAC Vs. LTV
VC shorthand / gibberish for: does it cost you less to get customers than all the money you are going to get from that customer? And by how much?
CAC vs. LTV
Customer Acquisition Cost
Lifetime Value
The magic accelerator: The Viral Loop
The viral co-efficient: the average number of invitations sent by each existing user times the conversion rate of invitation to new user. The viral coefficient is referred to as the K value.
CAC vs. LTV
Lean Analytics, Alistair Croll, Benjamin Yoskovitz
SAAS CUSTOMER LIFECYCLE
Earn ReferralCreate Value Capture ValueCreate Interest
Test value before you even begin making your product
Where to Start:
Jen van der Meer Reason Street Revenue Steps
ReferralActivation ConversionAcquisition
Where to Start:
Jen van der Meer Reason Street Revenue Steps
Channels describe all your customer interfaces through which you reach your customer
segments, communicate with them and through which you deliver your value propositions.
Channels
Customer Channels
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
EarCre CapCre
First Easy Decision
Channel
Pro
duct
Physical
Phy
sica
l
Bits/Virtual
Channels: More Complex NowPhysical Sales Digital Sales
Direct sales through salesforce OEM Systems Integrator DealerDistributetoretailerValueaddedresellersSelltodistributorAggregatorOther
Direct sales through web Direct sales through mobile Direct sales through mobile Sales through app store In game or in app purchases Direct sales on the dark web Direct sales on virtual reality
Targeting blogs (get written up)Publicity / PRUnconventional PRSearch engine marketing Online ads (social, display, blogs)Offline ads Search engine optimizationContent marketingEmail (build your own list)Referral marketing Engineering marketing (microsites, widgets)Affiliate ProgramsEducational marketing (webinars)Existing platforms (app store, FB)Trade showsOffline eventsSpeaking engagements Community building
Traction Channels
Testing to Learn Your Advantage Traction: quantitative evidence of
customer demand. - Naval Ravikant
“many startups experimented with multiple channels until they found the
ones that worked”
most founders pick the channel with which they are already familiar
“it’s hard to predict a traction channel that will work best”
- Gabriel Weinberg and Justin Mares
Traction ChannelsMarketing Channels Sprint 1 Sprint 2 Sprint 3
Targeting blogs (get written up)Publicity / PR xUnconventional PRSearch engine marketing xOnline ads (social, display, blogs) xOffline ads
Search engine optimizationContent marketing
Email (build your own list) x x xReferral marketing xEngineering marketing Affiliate ProgramsEducational marketing (webinars) xExisting platforms (app store, FB)Trade shows
Offline eventsSpeaking engagements xCommunity building
The Backstage!
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
The Money. Last.
Business Model Canvas
Key Partners Key Activities Value Propositions
Customer Relationships
Channels
Revenue StreamsCost Structures
Key Resources Key Channels
Customer Segments
How to Validate: Get Out!
Plug:
ITP Business 101.1 (lean startup)
www.reasonstreet.co