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By MONDHERKHANFIR
Impl ement at i onHandbook 2017
Published by
In collaboration with
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ForewordThe way we create companies has been changing significantly over the last several years.Information technologies have made it much easier and stimulated the creation of an increasingnumber of startups, but it has also induced a higher number of failures.
Witnessing the end of the so-called Industrial Era and the advent of a new information-basedeconomy, Mondher Khanfir has had the opportunity to launch several startups and compare theirexperiences, first as an entrepreneur, then as an angel investor. In an attempt to create adidactic book, these are the main lessons he dedicates to the new generation of TechEntrepreneurs. This guidebook targets students and researchers who are considering theopportunity to launch a digital business as well as top executives and decision-makers who areconcerned by the Digital Startup.
Not pretending to be exhaustive, this book succinctly and schematically provides:
● Practical information on key concepts defining a digital business● Different tools to understand the models operating in the global marketplace● Practical means to assess a business model’s soundness to successfully implement a
Digital Startup
The case of Deep Tech Startups is particularly covered. Tech entrepreneurs and innovators whoare aiming to ascribe value or validity to their own technology or scientific research outcomes,will improve their understanding of the different dimensions of the risks related to the strategicplanning and implementation phases, with a highlight on the main challenges they will face intheir entrepreneurial journey, all the way from the lab to the market.
Although this guide is a reflection on experiences and an illustration of the best conditions for asuccessful implementation of a Digital Startup, the content and advice contained in this bookonly enlightens the way tech entrepreneurs can better grasp a startup development trajectory,and help them save time and avoid falling into common traps. Finally, this book has no bindingcharacter and cannot substitute expert consulting in specific areas, such as intellectual property,legal aspects, finance, etc.
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Acknowledgments
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My thanks go to Walid Triki, Khalil Chaffai, Omar Yaacoubi, Salmine Sassi and Sami Bouguezzifor their reviews, to Sami Jaidane for his precious contribution, and to Michael A Blumer, whopatiently edited this content, which will be used, I hope, as a practical basis for the orientationand thinking of new entrepreneurs and designers within the digital economy.
My appreciation goes also to Nesrine Mazghouni and Marcus Antonius Casel from the GIZ officein Tunisia, who believed in this work and sponsored its publication.
Mondher Khanfir
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Part I
A CONCEPTUAL FRAMEWORK
FOR
DIGITAL STARTUPS
The Advent of the Digital Era
The information society is rising through the dissemination of digital services that can be directlyor indirectly associated with traditional economic activities such as agriculture or manufacturing.
The information tools are computers, servers, and software; the main raw material is data. Mostof the data in the world has been generated over the last few years, thanks to Internet-basedcompanies.
Digital activities are based on the use of information and communication technologies. Theyrepresent an important growth relay for mature economies but also for developing economies.
The digital economy is the consequence of the information society, in which knowledge has risenas the main asset that enables the production, distribution, and use of information. It can onlydevelop in an enabling business environment and under public policies favorable to innovationand entrepreneurship.
The advent of the digital era is accompanied by the proliferation of digital services, which canbe grouped as follows:
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The Startup RushTraditional large operators are experiencing limitations in their conventional information systems,usually acquired at a high cost yet not really cost effective, and which represent an adversity todigitization and innovation, often with technology that has not been developed specifically forevolving needs and a logic of global supply chain.
Presented as the "Eldorado" of prosperity, the Digital Economy is the object of all covetousness.Thousands of startups are born every day, in the four corners of the world, and just as many diewithout finding the good “lode".
The rise of the knowledge-based economy offers infinite possibilities for new services to back upconventional industrial channels. Internet-based applications and current cloud-based software,for example, have become affordable for the masses, and their use intuitive. As a result, thelarge traditional operators aspire to broaden their catalog through digital services or at leastthrough digital means.
Additionally, more and more large organizations are now developing incubation or accelerationprograms inside their business, which allows them to form a set of innovative projects, that canbe acquired in case of confirmed interest. A new way to adapt to rapid changes in technologyofferings and customer needs, while controlling R&D costs, will be to follow the digital startupsindustry. There is a general trend in strategic sectors such as Finance or Energy that encouragesthe emergence of new digital entities in order to benefit from their capacity to innovate.
This is supported by the multiplication of ideation, incubation, and acceleration programs, with aworldwide race to attract the most innovative projects and startups.
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What is a Digital Startup ?According to Steve Blank and Bob Dorf, "The Startup is a temporary organization designed tosearch for a repeatable and scalable business model." We can add that it usually needs one orseveral rounds of fundraising before generating revenue. They are initially operated by a handfulof founders and financed by angel investors. Usually, startups spend more on income as theywork to develop, test, and market their ideas.
A startup is called digital when its main assets are linked to technological investments. Its valueproposition is based on at least one of the following characteristics:
● An automated business processes through the use of hardware and software.
Ex.
● The exploitation of data to produce services.
● The delivery of online services, whether or not associated with commercial
● The permission of transactions through secured platforms.
Digital Startups are contributing to and feeding off of technological changes at the same time.Innovative services are generally provided by Digital Startups, that are keen to experiment withnew products or services; and consequently, they need several rounds of financing to solidify theproject’s relevance and develop their market shares.
Goods or other services.
Ex.
Ex.
Ex.
The Digital Startup Business Model
A business model describes the rationale of how an organization creates, delivers, and capturesvalue. For the simplest businesses, we can design and implement them on the basis of AlexanderOsterwalder’s Business Model Canvas.
To design and develop a Digital Startup Business Model, technology is required, but it doesn'tnecessarly represent the competitive advantage.
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Only few business models will be profitable and thrive. The winners don't appear to be based onthe most sophisticated technology, knowing that delivering technology as a service is differentfrom delivering services based on technology.
Source: The Digital Startup Implementation Handbook 2017Graph 1: Startup Classification
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A First Initiation with the Business Model Canvas (BMC)
The launch of a digital startup will consist of developing a business model (its DNA code in away) based on formally identified investment opportunities, through creating a specific businessfocus that is able to produce or capture customer value in a market with a sustainable revenuestream that will justify an acceptable return on investment for founders and investors.
Using the Alexander Osterwalder's Business Model Canvas could be a first step in learning howto model the feature of a startup.
For a more elaborate business model, the BMC shows a lot of limitations. The BM design is aniterative process; and we propose a tool for tech entrepreneurs that is the result of many fieldobservations and startups.
Graph 2: Business Model CanvasSource : Business model Canvas of Alexander Oscarwalder
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The MUDIR Cards ®
Source : The Digital Startup Implementation Handbook 2017Graph 3 : The MUDIR Cards ®
The MUDIR CARDS ® for Business Modeling Design Process
The design of a startup business model starts with a formal vision and a preliminary strategythat should be challenged. The business modeling will be nurtured by a dual approach based ondeveloping/asserting the different stages of a startup creation value chain, through an iterativeprocess, with determined rules and control points.
We propose here MUDIR Cards®, an exclusive tool for Tech Entrepreneurs, that has beendeveloped, on the basis of different experiences of startup creation. The MUDIR Cards® is basedon five steps with an interactive check-in action, measuring each step of achievement.
Summarized below is the MUDIR Cards®, which could also be played online on:www.mudircards.com
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The MUDIR CARDS ® Stage 1: Setting the Stage
The first step "Setting the stage" targets to build up a shared vision with a supportive projectteam. It will be achieved when the entrepreneur will reach the deliverable of each milestones Mo-bilize, Understand, Deploy, Implement, Review, as described below.
Graph 4 : The MUDIR Cards® Setting the stageSource : The Digital Startup Implementation Handbook 2017
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The MUDIR CARDS ® Stage 2: Incepting
The second step "Incepting" targets to craft a feasibilitty study. It will be achieved when the en-trepreneur will reach the deliverable of each milestones Mobilize, Understand, Deploy, Implement,Review, as described below.
Graph 5 : The MUDIR Cards® InceptingSource : The Digital Startup Implementation Handbook 2017
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The MUDIR CARDS ® Stage 3: Engaging
The third step "Engaging" targets to develop a strategic plan with revenue stream model. It willbe acheived when the entrepreneur will reach the deliverable of each milestones Mobilize, Under-stand, Deploy, Implement, Review, as described below.
Graph 6 : The MUDIR Cards® EngagingSource : The Digital Startup Implementation Handbook 2017
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The MUDIR CARDS ® Stage 4: Extending
The fourth step "Extending" targets to produce a prototype with a project execution plan. It willbe acheived when the entrepreneur will reach the deliverable of each milestones Mobilize, Under-stand, Deploy, Implement, Review, as described below.
Graph 7 : The MUDIR Cards® ExtendingSource : The Digital Startup Implementation Handbook 2017
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The MUDIR CARDS ® Stage 5: Monitoring
The fifth step "Monitoring" targets to live an innovative experience and to consolidate the learningloop. It will be acheived when the entrepreneur will reach the deliverable of each milestones Mo-bilize, Understand, Deploy, Implement, Review, as described below.
Graph 8 : The MUDIR Cards® MonitoringSource : The Digital Startup Implementation Handbook 2017
Value Chain and Strategic Positioning
A value chain is a high-level mapping that describes the different economic activities thattransform Science and Technologies into a product or a service that cover a market demand.
One of the objectives of the value chain is to illustrate the activities, which add value whenproducing and bringing commercial goods to the market. The series of activities within the valuechain could be categorized into primary and secondary ones. These latter are based on supportprocesses delivering value to internal customers. Whereas primary activities are based onbusiness processes directly reaching the final customers. Primary activities mainly cover inboundsupply chain, operations, sales and marketing, distribution and after-sales service.
The way each organization is positioned in the global value chain will impact its primaryactivities that are supposed to provide the right product, with the expected quantity and quality,at the best price where a demand exists.
When starting up a company, the entrepreneurs should know which value chain they are investingin, who are the main actors, and how to position it to ensure the optimal competitive advantage.
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Source: The Digital Startup Implementation Handbook 2017Graph 9: The Generic Value Chain.
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The Concept of Supply Chain
The supply chain is a series of operations and transactions undertaken by one or moreorganizations to deliver a product and/or a service to end-users. We call it global supply chainwhen the scope covers the suppliers of suppliers reaching the customers of customers.
For each value chain, there are different supply chains and locomotives. Each organizationinvolved in a supply chain has to align with the strategy of the leading actor, also called the"supply chain locomotive” in order to contribute to the creation of an effective and efficientglobal performance.
The Digital Supply Chain is defined as a series of operations or transactions executed throughautomated processes to manage information flows along with the goods and services production.
The "supply chain locomotive” is the one that shows the highest influence in the supply chaindeployment, and who usually imposes the rules of cooperation and transaction standards,meaning most of the time the pricing policy. Generally, it controls the execution of at least thefollowing activities along the supply chain:
- The attraction and acquisition of potential customers
- Planning and monitoring the physical and non-physical flows
- Developing or investing in the technology required to master the supply chain
- After-sales service and customer relationship management
Source: The Digital Startup Implementation Handbook 2017Graph 10: Supply Chain Model.
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Redefining the Value Proposition through Digitization
Choosing the right positioning is a simultaneous exercise with the choice of business model. Fora Digital Startup, it requires a thorough knowledge of the forces acting on the market and aproven ability to compete.
In the case where the target value chain lends itself well to digitization, it is possible for astartup to produce additional added value, and to play a pivotal role through informationtechnology, either:
- to better cover an explicit need, by bringing new services made possible bycommunication and cooperation between the traditional players in the sector. This is the case, forexample, of Groupon for "spot" sales or PayPal that facilitates online payment.
- to stimulate an implicit need by creating a parallel, autonomous digital channel capableof capturing the value of end-customers and taking advantage of the availability of capabilitieson the market. This is the case, for example, with UBER, which produced a transport networkwithout taxis, or Airbnb with its chain of housing without hotels.
When a Digital Startup produces a significant change in the supply chain, itcould take over the role of the “locomotive” and delude leadership fromtraditional actors.
Source: The Digital Startup Implementation Handbook 2017Graph 11: Start-up value proposition.
Getting a Dominating Position in the SupplyChain
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There are a number of factors that could influence a dominate position in a supply chain, thatshould be considered for each startup as performance elements:
Market Traction: The potential, or demand, of the technology or the way we use the technology toprovide a solid platform for multiple markets
Flexible and Extensible Capacity: Connecting different companies’ capacities to cover the needsover time and in all places
Intellectual Property Protection: The right to use with no risk the technology supporting thedelivery of the services through electronic platforms and proprietary tools
Secured Transaction: Mastering and securing the tracking of all operations and in particular, thepayment process
Regulatory and Business Environment: Legal framework and regulatory constraints could impactthe strategy and even jeopardize the viability of the business
During the business modeling phase, the implementation strategy shouldtake into account these 5 elements of success: Traction, Capacity,Intellectual Property, Secured Transaction and Regulatory.
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Business Model Risk Map:
A list of 12 dimensions is proposed for scoring the risk level of a business model attractiveness(0 for low and 100 for very high) in order to check its reliability and consistency and tominimize surprises, by pivoting to setting up a contingency plan in case the risk level is judgedacceptable.
1- Sustainable Business Model
2 - Legal Aspects
3 - Value Proposition
4 - Supply Chain Partners Dependencies
5 - Growth & Scalability Potential
6 - Organic v/s Heavy Marketing Spending
This is an example of risk scoring with a visual map of the risk distribution as shown in thefollowing graph called RISK map.
7- Connecting Capabilities
8 - Visibility & Predictibility
9 - Customer Lock-in
10 - Gross Margin Levels
11- Intellectual Property Protection
12 - Customer Concentration
Source: The Digital Startup Implementation Handbook 2017
This exercise is very important to understand the critical points in the business modelimplementation. There is a double interest in doing such an assessment. The first one is tomeasure and compare the different levels of risk that is inherent to the business, in order toprepare a contingency plan. The second interest is to see how the strategy execution is evolvingover time and how it impacts each dimension of risk, with the perspective to prepare arepositioning of the startup, or a business model pivoting.
Graph 12: The Risk Map
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Part II
IMPLEMENTING A DIGITAL STARTUP
Implementing a Business Model is aSteelchase
As seen in the previous chapter, startup business modelling covers many dimensions of risk andneeds several iterations before being ready for a smooth implementation. Each startup has itsown trajectory, which follows 3 main constraints summarized as follows:
- To make it right: as a new comer and change-agent in the digital market. This can be done outof a desire to bring innovation, create an evolution in the market, or simply to change things upand breathe new life into the industry.
- To make it legal: The business should respect the law and comply with business rules, and inmany cases, to stimulate the regulatory framework update to fit the quick changes in the globalmarket
- To make it sustainable: The adoption of new business model or adapting the model to ensuregrowth and scalability
The digital startup trajectory will take on 9 steps that are schematized as shown in the followinggraph.
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Source: The Digital Startup Implementation Handbook 2017Graph 13: Digital Startup trajectory.
Key Considerations for the Innovation Riders
The first thing to know is in which arena the innovation race will happen.
We usually distinguish 3 types of innovation:
Efficiency Innovation
Produces the same product or service cheaper, such as cloud data centers that are replacing thephysical IT infrastructure.
Sustainability Innovation
Turns good products into better ones, such as the electrical car.
Disruptive Innovation
Transforms expensive, complex products into affordable and simple ones, such as the shift fromthe fiduciary money to cryptocurrency.
This is a check list with relevant questions for the innovation racers’ preparation that they needto consider before engaging in the competition:
What is the market opportunity my innovative venture is addressing?
What is the proposed value proposition I will fight the competition with?
Is my innovation based on a proprietary technology? If not, how would it be protected?
How long will my commercial product or service need to reach the market?
Who are my targeted first clients? Who are the strategic partners I need to engage with myventure?
If I create a startup, how much money will I burn through before reaching the market?
Once I created my startup, how much money I will need to break even?
We’ll come back again to these questions because they are very crucial for the survival of anyinnovative project
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Navigating the Distance to CaptureValue
The Digital Startup is the vessel that entrepreneurs steer by tangible and intangible equipment tonavigate far in the market open seas and discover the way of innovation.
Without experience, no one can master the innovation road. A deep knowledge of the actors, rules,and processes is usually required before considering to conquer a specific thread or value chain.
The road map of Digital Startup will draw attention to squaring off the circle of digital innovation.Depending on the targeted commercial value proposition, digitizing the processes will also need acustomization strategy, followed by a targeted advertising campaign that will bring monetization.
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Source The Digital Startup Implementation Handbook 2017
Graph 14: Squaring the Circle of the Digital Innovation.
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How to Address a Market Opportunity
1) A Business Case in the Agrifood Value Chain
Scrutunizing theOpportunity
Value Brought Impact
DigitizeAutomating the data flowscollection traceability
Managing a database with reliable information of theorigin, the inputs influencing the quality of food, andensuring the bio label.
CustomizeDeveloping mobile applicationaffordable for farmers
Standardizing the data exchange protocol and setting up acollaborative platform in the supply chain
AdvertiseExposing technology andcertifying the traceability system
Attract attention of final consumers to validatetraceability label
MonetizeLicensing the use of thetechnology
Expanding the business and reaching a return oninvestment (ROI)
Source: The Digital Startup Implementation Handbook 2017
Value proposition example: Bringing blockchain technology to traceability process in a bio agri-food supply chain.
Graph 15: Agrifood Value Chain.
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2) A Business Case in the Transportation Value Chain
A new startup’s business model based on technology dictates early positioning strategy and af-fects the current commercial value chain.
Value proposition example: UBER is the smartest way to get around, one tap and a car comesdirectly to you. Your driver knows exactly where to go, and payment is completely cashless !
Scrutinizing theopportunity
Value Brought Impact
Digitize Easing the taxi reservation processMatching in real time the available capacity of privatedrivers with transportation needs
CustomizeCost reduction and tripoptimization
Reach the cost-driven category of clients
AdvertiseViral marketing added to feedbackof users’ experience
Enrich the users’ community and promote the service
Monetize Commission on each transactionExpanding the business and reaching a return oninvestment (ROI)
The Case of Deep Tech Startups
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Deep Tech Startups (DTS) are startups which business is built around unique, differentiated,protected or hard to reproduce, technological or scientific breakthrough. For instance, a startupthat uses Big Data, Artificial Intelligence, or machine learning could be defined as a DTS, only ifit relies on its own R&D, building its competitive advantage on advanced applied sciences that itproduces itself.
Creating a Deep Tech Startup has major societal significance, especially when it comes topromoting innovation and human progress. It is the result of strategy and collaborative processaimed to fuse the constituent parts of a business, providing the ability to develop an economicmodel that fits the target market and generate value in a sustainable manner. The junctionbetween the idea and the project initiator thrives along a value chain, which if all the conditionsfor success are met, enables the creation of an innovative business.
The DTS is a Digital Startup that includes in its asset a formal and protected Intellectual Property.
Examples
Source: The Digital Startup Implementation Handbook 2017
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IP Value Stream and Asset Inception Process
The Deep Tech Startup is a budding company that relies on an IP value stream that devotes itsasset base. We’ll focus now only on the digital category of what is called Deep Tech Startup(DTS).
Asserting the IP rights:
Discussions with financial partners will quickly revolve around the exploitation of the IP. As longas it is not protected, IP has no value. In this regard, local skills in patent drafting anddevelopment of IP are often felt to be missing.
This is especially true as the inventor’s industrial contribution is not easy to assess, at firstglance, without industrial feedback. However, the legal environment recognizes more and morein-kind contributions.
A patent may be assessed by a common agreement between shareholders and its value indexedon its future cash flow. This implies, of course, the intervention of a qualified contributionsauditor.
Graph 16: Value Stream
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Deep Tech Startup Assets
When considering a value proposition based on an innovation, we can distinguish between twopossible options: one where an unsolved problem is addressed, and another that captures apartially addressed need. This will define the conditions under which the Startup will implementits business model and strategy.
The DTS development will begin once the first assets are created and organizational capacity isformed, with the ability to see, understand, and act in an uncertain environment. Morespecifically, innovative startups need to be connected to researchers and strategic partners.
So, a DTS is a combination of assets gathered to produce a specific capacity that are active on aregular basis along the value chain, addressing a targeted market opportunity.
Each asset, in particular the ones that are based on Technology, are generally developed by anR&D team. Nevertheless, the researchers need the collaboration of the marketing team toanticipate the technical and economic feasibility of the proposed innovation and to figure out theactual market acceptance (“proof of relevance”) of the new product (good or service) in advance.
Thus, the competitive advantage of a DTS will rise on knowledge and scientific findings that areconverted into tangible and intangible assets.
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Asserting a Competitive Advantage based on Intangibles
When crossed with market regulation, we can differentiate 4 typologies of innovations as shownin the above graph with former startups who are now leading their markets. The business modelis characterized by a unique combination of assets that were incepted according to the marketresponsiveness and appetite.
Each category of DTS will face different reactions from market forces; and this will influence theassets inception process at the following 3 stages:
The Testing
During this phase, the innovator has a Minimum Viable Product (MVP) or a prototype of hisproduct to test the market acceptance or the users’ adoption. The prototype is validated throughdocumented tests; and in case of business creation, they are confirmed by professionals withinan incubator or a technology transfer center, whether private or public.
The Branding
At this stage, the Startup is created after having a good appreciation of the market forces ingame. The challenge is to appreciate the branding investment along with the intellectual propertyaspects to be protected.
This is supposed to be part of the business plan and covered by budget requirements accordingto an initial investment plan.
The Dedicating
When the two previous stages are achieved, the Startup will contract with its first majorcustomers who will provide the exposure and dedicate its capacity to generate traction andmarket appetite.
Orbiting with a Deep Tech Startup
We saw how DTS creation relies on assets development or acquisition. This requires investmentsto be incorporated in the DTS capital throughout its life.
To survive, the DTS need cash flows of revenues or capital to develop or acquire the necessaryassets (tangible and intangible) in regard to a potential return on investment. This is representedschematically in the following chart, which describes the investment versus risk curve.
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Source: The Digital Startup Implementation Handbook 2017
Validating the Risk Curve
At each step of the creation process, the need for funding increases significantly. It is estimatedthat it multiplies 5 to 10 times from one stage to another. This explains the necessity forStartups to participate in several round-table meetings with investors in order to acquire equitycapital. DTS that survive are those who prove the value of IP is evolving at the same rate asfunding requirements.
The brightest and successful entrepreneurs will identify and control the process of value creationor even destruction that provides a greater overall benefit or "risk profile" throughout thestartup’s life.
Creating an innovative DTS remains an uncertain path, full of risks and challenges that only alimited number of successful businesses will experience. This trajectory can be summed up inthree great moments in the life of innovative startups, namely: Priming, Launching andDevelopment, and potentially even reaching the level of Unicorn!
Graph 17: Investment versus Risk curves.
Digital Deep Tech Startup Capability
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The capability of an organization is a complex mix of a variety of actionable sources ofknowledge and experiences. Some are subtle and intangible, such as inventions. Others areembodied in equipment, machinery or infrastructure, while others are carried by human skills.
Digital Startup Business Model implementation is a long process that requires patiently buildingup and synchronizing 3 sets of capabilities.
Cognitive Capability: It’s the ability to see, understand, and meet market demand. It coversArtificial Intelligence needed to carry out and execute real-time data collection, machinelearning, problem solving, and permanently screening the internal and external factors thatimpact the company strategy.
Technological Capability: It mainly includes the technologies supported by hardware andsoftware, which are developed by the Startup and designed to deliver (alone or integrated toother technologies) the value proposition through a specific business model.
Organizational Capability: It’s the Startup's ability to manage human resources effectively,including employees, contractors or freelancers, in order to execute its strategy, and gain anadvantage over competitors. In a Digital DTS, organizational capabilities focus on the learningloop and how to manage knowledge as a key asset.
A performing Digital DTS additionally needs to develop a strong culture that gives meaning to itsactions. This relies on rituals and management practices, completed with a collaboration andcommunication rules.
Source: The Digital Startup Implementation Handbook 2017Graph 18: Startup capabilities.
Approaches for building andOperating DTS Capabilities
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A capability is a set of unit capacities that compounds the DTS business model.
The later implementation will happen only when those 3 capabilities are fully connected andeffective.
A Question of Talent ...
Understanding the meaning of connected capabilities, is making the parallel with a human beingsystems:
A Question of Metrics ....
Performing global capabilities, is translating those elements into coherent metrics:
... to interconnect and work in symbiosis.
... to have the same understanding and perception of the reality.
The 4, 3, 2 Canon Law
.
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Each Digital Startup is unique and has a special journey. Knowing that all startups areconfronted by a set of rules and laws that are more or less independent from their environmentand tends to eradicate them or at least slow down their growth.
Keep in mind the 4 ,3 ,2 Canon Law and be prepared for a long and tedious path to success.
The 4 Proofs
A project is mainly identified as an opportunity that has been structured by one or severalpromoters sharing the same vision and committed to a same project.
The effective implementation of the project depends on the following:
● The adequacy between the promoter(s) and the project, and perseverance(which constitutes the prime factor of success)
● The realism of the planning with a good appreciation of the risks
● The resources mobilized to implement the project
Inventing can be a job while entrepreneurship is a vocation that requires a broad spectrum oftechnical and human skills.
An entrepreneur needs training and specific workouts to manage the complexity of an innovationproject, to predict and anticipate risks, and to equip by appropriate means in order to win andmeet dynamic market needs. The team’s learning and relevance to the project scope is adecisive success factor.
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Experience shows that it is not the brightest inventions that generate compelling innovations,even less actual products in the market. Successful businesses are rather a combination ofdifferent capabilities, and the strongest stake remains the way they are connected to deliver thebest value to the market, with a performing management that can quickly adapt the strategyexecution to the reality of the market.
This is the result of a tedious process of experiences and proofs we call the commercializationcycle.
Source: The Digital Startup Implementation Handbook 2017Graph 19: The commercialisation cycle.
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Proof of Feasibility
In the case of an innovative project where the expected competitive advantage relies on an“invention”, it is often necessary to go through a preliminary phase called “feasibility phase” or“proof of relevance”.
During this phase, the project team must gather all the elements to validate the technical andeconomic feasibility of the innovation and anticipate the market potential. Some techniques areemployed to assess the IP value stream in regards to its expected impact on the market and itssustainability in an uncertain and ever-changing business environment.
During discussions with potential partners, “leaks” may occur. The idea exists but prototyping ison hold. The product has not yet taken shape. All the project contacts represent vulnerabilitiesthrough which a hostile takeover may occur. The project is extremely vulnerable at this stage. Theidea could be stolen while it is still in gestation.
As soon as technical drawings, circuits, or functionalities are formalized, a confidentialityagreement must be signed before exchanging any technical data. Meetings with partners orproviders must be documented in written reports, where the authorship of every improvementmade is recognized. It is necessary to legally formalize all exchanges on the invention or theproject so that they can be enforceable against third parties.
Source: The Digital Startup Implementation Handbook 2017
Graph 20: The MUDIR Cards® Feasibility Study
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Proof of Concept
After documenting and validating the preliminary outcomes of the previous stage, proceed toanalysis with the help of experts and professionals. The switch from the lab to the field is adelicate operation, and it’s not always good to push a “prototype” or a “beta version” of aninnovative product or service to the market without taking some cautions and selecting the rightaddressees.
- Create a target list of potential users and select the first customers. Those who will be themonitored are called “addressees”.
- To make an effective choice, a foresight activity should target the key customers or usersneeded to approach it, in accordance with the objectives and scope of the strategic plan.
- The targets to be monitored must be defined ahead of time, adding the expansion of themonitoring perimeter accordingly.
The most knowledgeable entrepreneurs will choose to go through an incubator or an acceleratorthat will help to mobilize an adequate assistance, including access to funding.
The proof of concept finality is to produce a first tangible result that proves, not only the marketacceptance of the new product, but also the team’s abilities to manage the product delivery andquality services. It’s a way to build trust with the first partners and investors.
Source: The Digital Startup Implementation Handbook 2017Graph 21: The MUDIR Cards®. Proof of Concept
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Proof of Positioning
When the project reaches this stage, the Startup is supposed to have developed a formalcommercial strategy, with a clear vision of the market segment to be addressed with its newproduct or service, relying on a clear competitive advantage that will be tested in the market.The first achievements will prove or disapprove the market traction and scalability. This firstcontacts with the market forces lead in general to a new repositioning to make sure that theproduct will be sold and not the other way around.
The commercial potential of the innovation is always subject to validation by the market. We cantherefore have an anticipation with a pool of partners and field professionals that are able toprovide guidance on business strategies for the sustainable expansion of the project.
Identifying Priorities and Information Selection Criteria:
The selection criteria indicators are the innovative capabilities.
Start by defining the axis and the priorities, then rank them to establish the right order and a listof targeted themes. Next, each theme should unfold into several research questions (what is thepractical information expected for each theme?)
Source: The Digital Startup Implementation Handbook 2017Graph 22: The MUDIR Cards®. Proof of Positioning
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Proof of Scalability
Developing an Action Plan for the Dissemination of Information
The most important step is to set up a monitoring action plan for the dissemination ofinformation that includes:
- Identifying addressees according to the type of information requested
- Selecting the search tools
- Saving results
- Spreading information to the targeted scope of work.
First contact with the market is an invaluable source of information useful for the viability of theStartup.
-Take into account the requirements of the market, the standards, and practices of the actors
-This is where you fine-tune the size of investments
-This is where the profit-margin, long awaited by investors, can be reached with a good strategyand scalability plan
Source: The Digital Startup Implementation Handbook 2017Graph 23: The MUDIR Cards®. Proof of Scalability
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The Three Death Valleys
A Startup is permanently fighting to survive under hostile environment and uncertainty.
There are 3 occasions where the Startup might die while looking for its business modelimplementation. We call them the 3 Death Valleys.
The No Information Death Valley
By practicing strategic foresight, the startup can have access to decisive information on thetechnological, legal, business, and marketing levels. Thanks to this relevant information, thecompany can carry out better planning and decision-making processes.
The No Capital Death Valley
In order to secure an adequate financial support, it is important for a startup to follow afunding process that can be gradually implemented through different financial supportinstruments.
Before embarking, it is necessary to determine how much funding is required and where it willcome from. There are many factors to consider in determining how much funding is necessaryfor investment and for operations.
The No Traction Death Valley
After positioning in the right market type, it is essential for the startup to choose the adequatepositioning strategy, especially in a constantly changing environment as the tech sector.
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The 2 Moments of Truth
There are two special moments in the life of a startup: the first sales transaction, and reachingthe breakeven point. Often neglected and uncelebrated, these moments are true survival tests forstartups. A delay in any of them can make the dream melt away and could even cost bankruptcy.
The first milestone gives credit to the Startup on its ability to sell and take a share in the mar-ket.
The second milestone is the stage where the company will start to become less dependent on in-vestors and develop its own cash flow. It is the consecration of the growth curve.
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Part III :
The backpack for TechEntrepreneur
To start a journey, a Tech Entrepreneur will need a roadmap, referring to the previous chapters,in addition to the necessary equipment and provision to reach the destination alive.
The difficulty is how someone who has never travelled or affronted venture risk will be able toplan this journey and prepare his/her backpack accordingly. Looking for a path to start a digitalbusiness in an uncertain world requires a reliance on others’ knowledge, an adoption of specifictools to master the trajectory, and a creation to compound intangible assets, value, and evendeconstruction in order to rebuild them.
Most likely, these are the most decisive equipment pieces a Tech Entrepreneur will need to findthe path of success for his Digital Startup through actionable activities to manage such as:
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Orbiting with a Deep Tech Startup
Graph 24: Timelines of a Deep teck startup
Source: The Digital Startup Implementation Handbook 2017
Actionable Activities for Business Growth
Once the project of the startup implementation begins, entrepreneurs will have to identify andformalize the required relationship with stakeholders. Tech Entrepreneurs must show a capacityto build trust with associates, investors, partners, employees, customers and suppliers, and moreimportantly, turn it into commitments for actions.
Digital Startup growth will depend on the way management builds and combines capacities, andto which extent the new business will impose new rules that could produce results or impact theecosystem. Based on field observations and in reference to the works of Eric Ries, who states inhis book “Lean Startup”, there are 3 stages in a startup’s life (creation, building, administrating).We can assert that the successful businesses are progressing from one stage to another thanksto hard work and energy, with an iterative execution of actionable activities that induce a spiralof progressive impacts, represented as following:
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• Leading the market by innovating
• Contracting with stakeholders to dealwith transparency
• Planning the strategy
• Executing the strategy with an alignedorganization
• Evaluate the strategy results
• Improving the performance bycapitalizing on knowledge
Graph 25: Virtuous spiral for business growth management.Source: The Digital Startup Implementation Handbook. 2017
Actionable Activities for Managing CashFlows
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From a systemic point of view, a Digital Startup could be defined as a black box that is crossedover by 3 types of flows: Physical, Information, and cash.The last two could merge in case of full crypto-economy.To cover the operations cycles, the Digital Startup need investments flows, represented in thenext chart.
Assessing Needs, Raising and Allocating Capital Expenditures (CAPEX)Capital expenditures are the finances that a startup utilizes to purchase equipment, goods, techno-logy or products needed to expand the company's capability to deliver value. These purchasescan include intangibles, like software, patents or know-how. The asset purchased may be a newasset or something that improves the productive life of a previously purchased asset.
Planning and Engaging Operating Expenses (OPEX)An operating expense covers the startup activities to run the business. It’s usually planned in thefinancial plan, and, in contrast to capital expenditures, operating expenses are fully tax-deducti-ble in the year they are made. Operational expenses make up the bulk of a company's regularcosts, and includes fixed and variable charges. Once they enter the building phase, a very com-mon reflex in startup management is to look how to make the most of operational related activi-ties in correlation with variable costs rather than fixed ones.
Source The Digital Startup Implementation Handbook 2017Graph 26: Cash Flows Value
Actionable Activities for Managing HumanCapital
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The decision-making process’ effectiveness is the main concern of human capital. To consolidatethe growth phase, a Digital Startup must align its human resources (internal and external)through a flexible and proactive organization, backed by a strong cross-functional management.
The way the digital startup considers its human capital has a direct impact on the way it willcapture critical signals, even very small, from its environment, and the manner it will capitalizeon knowledge.
Expanding human resources management to human capital development is key to implement asustainable growth strategy.
Source: The Digital Startup Implementation Handbook 2017Graph 27: Community Relationship Management
Retain Contributors
Execution of activities is essential for the survival and development of any organization, businessor innovation project. Before collecting and processing strategic information, it is necessary todefine them formally by specifying the sources, the contributors, their commitments, thefrequency of control, and the key performance indicators to achieve in the target market.
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Attracting Talents
A Digital Startup is a talent-based organization. The managers and employees are the first pillar.The business culture and the values are the second pillar - that gives meaning to the challengesthe team must attempt. The partners’ resources are the third pillar, who help the Digital Startupto face the changing business environment in which it moves.
Building up a Strong Community
A community of supporters, strategic partners, early adopters is key to enter the market, andthen to take a step back and learn from experience, before trying again.
The community power is in the way we ask for contribution. It becomes an invaluable source ofinformation as well as an exchange platform that could provide expertise in a friendlyatmosphere
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Part VI :
In Conclusion
Technology is Not the Only CompetitiveAdvantage
In the current move towards a digital economy, startups’ creation becomes the pillar of a newindustry, based on knowledge and innovation, and which is not only dependent upon internalfactors but also on the ecosystem actors' reaction.
Launching a successful Digital Startup requires ultimately having access to the appropriateresources, and we hope this guide will serve as a useful one. By sharing some important insightsand knowledge on digital business incubation, we hope that we will help Tech Entrepreneursovercome the challenges and make their tedious journey less confusing. Knowing that theconceptual framework for a Digital Startup is neither frozen nor rigid, everyone is called to findhis/her own path and establish new rules and practices for business.
Finally, a Digital Startup is created on the basis of a specific innovation. But breakthroughtechnology needs a profitable business model, that includes a vehicle for value production and achannel to place it in the marketplace. Like a genetic chain, the business model has to ensurescalability.
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Source: The Digital Startup Implementation Handbook 2017Graph 28: Digital Startup DNA
Succeeding is in Fact Anticipating Failure
Digital Startups have been the hype success story of the last decade. Some exceptional DigitalStartups have succeeded in changing the rules in some markets. Yet, for every successful startup,countless others fail, sometimes mysteriously and often unnoticed.
Many failure causes are obvious once we confront them. The best response to the risks of failurefor startup founders is to manage them very well, anticipating their occurrence. A deepunderstanding of what is behind the missteps comes down to operating out of confidence incompetence, not ego, which leads towards the explanation for the loss or a gap in one or moreof these elements:
- Market Forces and Traction- Customer Needs and Segmentation- Cash and revenues- Team and their Passion- The Business Model and Rationale
The obstacles for Digital Startup growth are many. In addition to the reaction of the current“Guardians of the Temple” for the targeted value chain, a Digital Startup also must deal inparticular with legal constraints that will dissipate resources and could even dissipate marketappetite.
Digital Startup should not rely only on classical marketing theories but also on the 7 Ps of theMarketing Mix :
Product - Place - Price - Promotion - People - Processes - Physical Evidence
There is an 8th P for Digital Startups
It’s about policy & regulatory framework that allows the 7 previous Ps to be ensured, and toenable business growth. Remember that creating a disruptive innovation could also take itspromoter to the court.
In reality, whether a digital innovation succeeds or perishes, when one Digital Startup dies, newTech Entrepreneurs are revealed.
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The Charter of an Exemplary TechEntrepreneur
Behind each story of Digital Startup there are men and women who are the birth fathers andmothers of the business model and who bear the quality of success and the capacity to learnvery fast. This equates to a proven wealth creation capacity but also the generosity to share it.
Promoting a Digital Startup requires a lot of will and tenacity to produce wealth as well ashuman progress. Entrepreneurs who thrive share common traits, generally EmotionalIntelligence rather than technical skills, which proves again that entrepreneurship is based oncognition and leadership. The latter combined with ethics will give a larger sense to every TechEntrepreneur concerned by impact investment and sustainable success.
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1. Share your vision and focus on the value that you bring to the market
2. Persevere without stubborness and carefully build your reputation
3. Invest in both your core business and the conductive environment for its development
4. Identify and patiently observe the key players in your target market
5. Continually learn, fail fast, and adapt your strategy
6. Be accountable to your partners and demanding to yourself
7. Manage with rigor and be flexible to changes
8. On a regular basis, collectively assess the risks and update your contingency plan
9. Manage the gaps and look for alliances to compensate them
10. Stay patient, honest and right in front of difficulties
Appendix
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About the Author
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Mondher Khanfir is an Impact Investor with more than twenty years in business consulting andhas a lengthy experience in entrepreneurship and innovation. He has authored several articles onprivate sector development, science, technology and innovation policies, and has led many strate-gic projects for governmental and international institutions. He is very active within the entrepre-neurial ecosystem in Africa and led several initiatives with Carthage Business Angels (CBA), a pio-neering angel investor network in Tunisia, and more recently with Tunisia Africa Business Council.Moreover, he promoted the launch of a private seed fund to support innovative startups in the ear-ly stage, along with the creation of the first private business incubator in North Africa, Wiki StartUp, which provides a various set of incubation and acceleration programs dedicated to Africanstartups.
Mondher Khanfir has an engineering degree from “Arts & Métiers ParisTech” in France. He par-took in a special training program on Entrepreneurship & Innovation Management at RensselaerPolytechnic Institute, New York, USA.
He also holds an Executive MBA from the Mediterranean School of Business in Tunis as well as aCorporate Governance Certificate from the International Finance Corporation (World Bank Group).
Mondher KHANFIR
Impact Investor & Entrepreneur
Policy Advisor & Strategist
Founding Member & Program Architect
at Carthage Business Angels
Co-Founder & CEO at Wiki Start Up
Founding Member & Vice President
at Tunisia Africa Business Council
About Carthage Business Angels
Carthage Business Angels, CBA, is a non-for-profit organization and the first angel investorsnetwork in Tunisia focused on entrepreneurship and presented as a 3E Agency: EntrepreneurialEcosystem Enabler. Thus, since its inception in 2010, CBA supported and co-implemented severalincubation and acceleration initiatives.
The association is backed by the leading private business Incubator Wiki Start Up, and has hel-ped the publication of several studies and policy papers covering themes like Access to Financeand capital market Development, Innovation and technology transfer, business incubation, Re-search Base spin-off generation.
Carthage Business Angels is well recognized as an Executive Partner, Business Support Organisa-tions, and Service provider to the Entrepreneurial Ecosystem, as it has co-implemented severalprograms in partnership with international institutions like GIZ, USAID or AFD.
Website :www.cba.tn
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About Wiki Start Up
Wiki Start Up is the first private business incubator launched in Tunisia in 2011. Its delivers cut-ting edge services Platform for Entrepreneurs and Investors. It fosters the creation of innovativestartups by providing a complete innovation oriented ecosystem and by facilitating their access toexpertise, specific business development tools, fundings and crucial connexions to an internatio-nal professional network enabling rapid growth.
Wiki Start Up mission is to:
* Assist high potential entrepreneurs to structure their innovative projects through dedicated incu-bation programs
* Build up a business environment and bring specific expertise to innovators
* Ensure a privileged access to investors
Wiki Start Up has also incepted the first pre-seed fund in Tunisia, CapitalEase Seed Fund, andcontributed to the funding of many Digital Startups during their prove of concept and prototypingphase.
Website: www.wikiStartup.tnAdress: Carthage Center,Rue du Lac Constance1053 Les Berges du Lac Tunis
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BM: Business ModelBMC: Business Model CanvasCapex: Capital ExpenditureDTS: Deep Tech StartupIP: Intellectual PropertyIPO: Initial Public OfferingOPEX: Opérations expenditurePPP: Public Private PartenershipR&D: Research and DevelopmentROI: Return on InvestmentVC: Venture Capital
Glossaire
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