Renew Your Business Model with the Business Model Canvas

Renew Your Business Model with the
Business Model Canvas
(some typical errors in early business
model development)
Paul Fox
Paul Fox
Associate Professor
Director, Máster en Digital Entrepreneurship
La Salle – Universitat Ramon Llull
Renew Your Business Model with the
Business Model Canvas
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Who am I?
• Worked for Startups: Fan Asylum, intouch Group,
Vision Marketing
• Intrapreneur: MCI Systemhouse (bought Apple’s data
center when they were almost bankrupt)
• Consulting: Diamondcluster - creating web businesses
for big companies
• “Founder”: viajeria.com, allysguesthouse.com
• Professor/Mentor: over 50 projects/year
• Main Focus: Early business model development
Paul Fox
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There are bad ideas…
Paul Fox
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And there are really bad ideas
www.howtobeadad.com www.montparnas.com
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But usually it’s not the idea – it’s a problem
with some part of the business model
Narrative test (the story doesn’t make sense)
(Magretta (2002): Why Business Models Matter)
• Stories are important, and the story needs to make
sense to everybody.
Success: Google has a great story for both users and
advertisers.
(Potential) Failure:
Groupon!
• Businesses lose money
• Attracts bargain shoppers
• Doesn’t build loyalty
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The numbers test (the Profit and Loss doesn’t add up)
(Magretta (2002): Why Business Models Matter)
“Kozmo.com delivers videos, DVDs, CDs, books, and
convenience items (snacks, magazines, toiletries,
household products, flowers, beers etc.) to consumers
within an hour, with no delivery charge and no order
minimum.”
Failure:
"Convenience stores charge a premium for quick access
to last-minute purchases, so why charge a discount for
the ultimate convenience of home delivery?“
In 2000: $120 million loss on $30 million in revenues with
$35 million in delivery costs.
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Usually, the problem isn’t the idea, it’s the
business model
Paul Fox
www.zebramc.com
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intouch iStation 1992
Paul Fox
• Founded in 1990
• Interactive music-sampling
kiosk to try music before you
buy.
• One of the largest databases of
music samples in the world.
• Sample up to 5 tracks from
over 40,000 albums.
http://serverjs.org/mochazone/Anno1992%3AIntouchi-station/
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Intouch interface
http://serverjs.org/mochazone/Anno1992%3AIntouchi-station/
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Paul Fox
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Intouch facts
• 50 units produced in 1993 at $50,000 each. Reaches
511 by 1995.
• Over $20 million in venture financing raised
• Pre-IPO in 1993
• 1.2 million registered users
• 1995 removes kiosks from music stores
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Intouch: What happened?
Failed the numbers test and the narrative test
(often they’re related)
• Expensive hardware. Then the Internet exploded!
• Expensive “artisan” recording of samples not scalable.
• Story for music stores was difficult – resulted in some
additional sales, but of long tail cd’s. Made inventory
planning more difficult
• Story for music labels was all or nothing. And they said
no.
– Music labels were both partners (rights to music samples) and
customers (paying per sample).
– Data showed that people bought more, but not the major artists
the labels were promoting.
– Music labels were essentially asked to pay to disrupt
themselves.
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Filling out a business model canvas is easy.
Using it well, not so much!
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Key Activities: what are the main things we’ll
do every day to deliver the value
proposition(s)?
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Key Resources: differentiation, or if you sold
the business, what would they be buying?
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Key Partners reduce risk and add value:
suppliers, distributors, advisors
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Value Proposition
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Identify the job that needs to be done
http://www.youtube.com/watch?v=s9nbTB33hbg
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Once you know the job that needs to be done,
find the real problems!
• “Healthy Table is an app that gives you fast, healthy
recipes for any three ingredients you have in the
refrigerator”
• So why is it so hard to get people to pay for this?
• The job that needs to be done isn’t about finding
recipes, it’s getting a healthy meal on the table.
• Who has this need? What do they do now?
• Problems?
– No time
– Can’t cook
– Need other ingredients
– Lazy
– …
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The Whole Product
• “Easy Parking is an app that helps you find, reserve,
and pay for street parking”
• Error: an app by itself may not solve the problem
www.libelium.com
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www.streetsblog.org
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www.toledoblade.com
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Solution: Positioning Statement from Geoffrey
Moore
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Explain the proposition in detail
• For music lovers who want to travel in style
• who love to communicate and mix work and play,
anywhere, anytime
• the iPhone is a smart phone AND an iPod, AND an
Internet device.
• that offers Apple’s legendary ease-of-use, elegance,
intuitive integration, and cool.
• Unlike RIM Blackberry and Palm Treo
• Apple iPhone offers great quality phone calls, faster
browsing, music and movies, and photos that come
to life, all on a big screen in the palm of your hand.
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Customer Segments
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Customer Segments: A customer segment is
people who share the same pain and speak
the same language – Brant Cooper
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Be Specific!
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No, be more specific
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www.gentlechortle.com
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Even more specific: Personas
http://followsprocess.wordpress.com/2010/11/14/facilitating-data-driven-personas/
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But segments should not based on
demographics, psychographics, or any other
kind of -graphics
The Lean Entrepreneur
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Don’t start with 10 segments!
Rank your segments
Pick one or two main ones
• Depth of pain
• Budget
• Ease of reach
• Ease of MVP (minimum viable product)
• Values
The Lean Entrepreneur
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You need to focus on both the user level and
the strategic level simultaneously
• Strategic Level (Business plans are very
strategy-focused).
– Competitive and Market analysis
– Market sizing
– Operations plan
– Financial analysis
– Important for raising financing
• Too strategy-focused: Webvan (invested $1
billion in infrastructure before getting
customers)
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You need to focus on both the user level and
the strategic level simultaneously
• User Level (Lean Startup is very user-focused)
– Target really specific customer segments
– Design thinking: get deep understanding of context
of use
– Agile development: Test obsessively and iterate.
• Too user-focused: Instagram (sold to Facebook
for $1 billion but had no revenue model)
• Successful startups manage at the strategic
and user levels simultaneously.
Paul Fox
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Test the Model
“Get out of the
building.”
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Test the Model
“Everyone has a
plan until they get
punched in the
face”
Paul Fox
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Getting out of the building isn’t easy…
Trial, error and the God complex
http://www.ted.com/talks/tim_harford.html
Paul Fox
• God complex: no matter
how complicated the
problem, you have an
overwhelming belief that you
are right in your solution.
• Trial and error works better
than the solutions of “little
Gods” (experts).
• It’s very difficult to make
“good mistakes”
• Fail forward!
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Be Scrappy!
http://www.bbc.co.uk/news/10323197
Paul Fox
"The key is being scrappy. It's
the guys that they see an idea
and they don't know how
they're going do it but they're
going to try everything and just
fight and claw and keep
adapting, keep trying things."
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The “Now What” syndrome?
• What happens when you fail?
• Do you give up?
• Do you try one more thing?
• Do you try 10 more things?
• Do you ask for help when you run out of things?
• Often the difference between success and failure is
your level of SCRAPPINESS.
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Be Scrappy! Keep trying stuff.
Paul Fox
What do we call this?
Disappointment?
The comfort zone?
Vacation from Scrappiness?
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Conclusions
• The business model canvas is easy to use, but difficult to use well.
• Make sure the story makes sense for everyone, and that the
numbers add up.
• Find the pain and solve real problems.
• Make sure you’ve identified the real job that needs to be done.
• Focus on the whole product – find partners if you need them.
• Segment – start with a small segment, then find others.
• Work at the strategic and user levels simultaneously.
• Get out of the building and test.
• Be scrappy and fail forward!
Paul Fox
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Business Model Canvas
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Thank you!
@profefox paulbfox
Paul Fox
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