6 gates to business model profitability for startups and investors: visually organize, manage, and...

6 GATES TO BUSINESS MODEL PROFITABILITY

Visually Organize, Manage, and Test Ideas for Improving Business Model Profitability

#4ROD. Dr. Rod King. [email protected] & hGp://businessmodels.ning.com & hGp://twiGer.com/RodKuhnKing

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Problem-‐SoluQon Fitness

Value ProposiQon Fitness

Product-‐Market Feasibility

Revenue Model Feasibility

Resource-‐Based Feasibility

BUSINESS MODEL ADVANTAGE

25 INVESTOR QUESTIONS (IQs) for BUSINESS MODEL PROFITABILITY



1. Problem-‐SoluQon Fitness 1.1 What is the main physical/intellectual/emo=onal/spiritual task or Job To Get Done for the customer segment (archetype)? 1.2 What are the top 3 problems, challenges, constraints, barriers, or trade-‐offs before/during/aKer the Job To Get Done? 1.3 What are features of the product/service/business model that resolve the top 3 problems or trade-‐offs of the targeted customer segment (archetype)?

2. Value ProposiQon Fitness 2.1 What is the Value Proposi=on for the customer segment (archetype)? 2.2 How likely, on a scale from 0 (not likely) to 10 (highly likely), would customers purchase product/service based on the Value Proposi=on? 2.3 How is the Value Proposi=on similar to that of compe=tors? 2.4 How is the Value Proposi=on different from that of compe=tors? 2.5 How does the (minimum viable) ad/product/service/business model embody or reflect the Value Proposi=on? 2.6 To what extent does the Value Proposi=on help engage, acquire, and retain targeted customers?

3. Product-‐Market Feasibility 3.1 What hierarchy of jobs or tasks does the product/service help the targeted customers to do? 3.2 What is the minimum viable market size, value, share, and growth rate for the product/service? 3.3 What is the minimum viable product/service for delivering the primary func=onality, benefit, or delight to the targeted customers? 3.4 What is the level of compa=bility between main func=onality of the product/service and the customer’s core jobs to get done? 3.5 Through what channels and rela=onships would the product/service be delivered to the targeted customers? 3.6 What are customer experiences as well as level of loyalty (Net Promoter Score) for the product/service?

4. Revenue Model Feasibility 4.1 How does the business make money: What are minimum revenue streams and volume of revenue for the business? 4.2 How does the business increase revenue as well as customer value (experience) and loyalty? 4.3 What are alterna=ve means such as profit, revenue, and business model pa\erns by which the business can increase (recurring) revenue?

5. Resource-‐Based Feasibility 5.1 What physical/intellectual/emo=onal/spiritual resources and competences of the business model are valuable, rare, inimitable, and non-‐subs=tutable? 5.2 What is the cost structure as well as cost of resources for (a minimum viable) business model?

6. Business Model Advantage 6.1 What is the profit margin (Return On Investment) for the business model? 6.2 What are the compe==ve strategy and tac=cs (including switching costs and network effects) for the business model? 6.3 What is the trade-‐off of the compe==ve strategy or business model? 6.4 How disrup=ve and scalable is the business model? 6.5 How does the business con=nuously discover and solve Big Urgent Market Problems (BUMPs) especially in an environment of great uncertainty?

Lean Business Model Canvas A One-‐page Tool for Visually Organizing and Managing Responses to

The 25 Investor QuesEons for Business Model Profitability

TOPICS FOR STORY OF LEAN BUSINESS MODEL CANVAS

HolisEcally Document, Present, and Manage OrganizaEonal Success (Failure) in Business and Life


Lean Business Model Canvas = Lean Canvas + Business Model Canvas

Lean Canvas Business Model Canvas

q  Problem

q  SoluQon

q  Key Metrics

q  Profit (Value)

q  Cost Structure

q  Revenue Streams

q  Value ProposiQons

q  Channels

q  Customer Segments

q  Unfair Advantage

q  Key Partners

q  Key Resources

q  Key AcQviQes

q  Customer RelaQonships

Problem Finding & Solving/Performance Management Business Model VisualizaEon, Resources, and Viability


Problem Pain: (Un)Known

RED OCE

AN BLU

E OCEAN

SoluQon Gain: (Un)Known

Business Model

Business Model

Before

AWer

Key Metrics

Lean Business Model Canvas

Source: Based on Business Model Canvas -‐ hXp://en.wikipedia.org/wiki/Business_Model_Canvas & Lean Canvas -‐ hXp://pracEcetrumpstheory.com/2012/02/why-‐lean-‐canvas/

Job To Get Done/Experience (Journey: Strategy/Execu=on)




RED OCE

AN BLU

E OCEAN


Business Model

Business Model

Before

AWer

Busine

ss M

odel

(System)

Key Metrics


Source: Based on Business Model Canvas -‐ hXp://en.wikipedia.org/wiki/Business_Model_Canvas & Lean Canvas -‐ hXp://pracEcetrumpstheory.com/2012/02/why-‐lean-‐canvas/

VALUE CREATION (Enterprise Engine)

VALUE DELIVERY (Customer Growth Engine)

VALUE CAPTURE/SHARING (Value Engine)

KP

KA VP CR CS C$ P$

KR CH R$

BUSINESS MODEL ENVIRONMENT (Compe==ve/Unfair Advantage)





RED OCE

AN BLU

E OCEAN


Business Model

Business Model

Before

AWer

Key Metrics E: Engagement; Experience A: Acquisi=on; Ac=va=on R: Reten=on; Referral; Revenue

q  Big/clunky music players

q  Complex: difficult to use

q  Small song storage

q  Ultra-‐portable digital music player

q  Simple: easy to use

q  Large song storage

Listen to music (at home/work/outdoors)

Apple’s Lean Business Model Canvas for the Classic iPod (2001)





RED OCE

AN BLU

E OCEAN


Business Model

Business Model




KP KA VP CR CS C$ P$

KR CH R$

BUSINESS MODEL ENVIRONMENT (Compe==ve/Unfair Advantage) Digital Hub/Ecosystem including iTunes

Before

AWer

Busine

ss M

odel

(System)














RED OCE

AN BLU

E OCEAN


Business Model

Business Model




KP q  Record

companies q  Original

Equipment Manufactu-‐rers

KA q  Hardware/

SoKware Design q  Marke=ng &

Sales

VP “A Thousand Songs in Your Pocket” Seamless Music XP iPod Hardware

CR Online/Face-‐to-‐Face; Lock-‐in

CS Luxury Spo\er: Listen to music everywhere

C$ q  Staff/Employees q  Manufacturing/

Infra’ q  Marke=ng &

Sales

P$ q  High Profit

Margin q  Extraordinary

Profit q  Luxury Spot

Strategy

q  Pain: Low q  Delight: High q  Value: High

KR q  Staff/Employees q  Brand/Culture q  IP q  Infrastructure: IT

CH Apple.com; Big Retailer/ iTunes Store; Retail stores

R$ q  iPod Hardware q  iTunes q  Commissions

BUSINESS MODEL ENVIRONMENT (Compe==ve/Unfair Advantage) Digital Hub/Ecosystem including iTunes

Before

AWer

Busine

ss M

odel

(System)












Apple’s 6 GATES TO BUSINESS MODEL PROFITABILITY for the Classic iPod



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Problem-‐SoluQon Fitness

Value ProposiQon Fitness

Product-‐Market Feasibility

Revenue Model Feasibility

Resource-‐Based Feasibility

BUSINESS MODEL ADVANTAGE

Digital Music Player

51 PaGerns for Business Model DisrupQon & Profitability

Dr. Rod King. [email protected] & hGp://businessmodels.ning.com & hGp://twiGer.com/RodKuhnKing

ENTERPRISE ENGINE

CUSTOMER GROWTH ENGINE

VALUE ENGINE

delivers

requires

drives

requires

Product/Value ProposiQon

Channels & RelaQonships

Customer/Job-‐To-‐Get-‐Done

require(s)

require(s)

Inputs/Partners

Internal Resources

Processes/AcQviQes

require(s) affect(s)

require(s) deliver(s)

Cost (Pain)

Revenue (Delight)

PROFIT (VALUE)

requires

drive(s)

delights

delight(s)

delight(s)

(Problem

-‐Solu=

on Fit; Produ

ct-‐M

arket F

it)

Job-‐To-‐ Get-‐Done

Create Value Deliver Value Capture/Share Value

BUSINESS MODEL STORYBOARD Visualize the Building Blocks and NormaEve Logic of a Business Model

#VPGen. Dr. Rod King. [email protected] & hGp://businessmodels.ning.com & hGp://twiGer.com/RodKuhnKing

ENTERPRISE ENGINE Value CreaEon (Reduce Cost)

CUSTOMER GROWTH ENG. Value Delivery (Increase Rev.)

Inputs/Partners

Internal Resources

Processes/AcQviQes

Product/Value ProposiQon

Channels & RelaQonships

Customer/Job-‐To-‐Get-‐Done

Cost (Pain)

Revenue (Delight)

PROFIT (VALUE)

BUSINESS MODEL STORYBOARD (Building Blocks)

VALUE ENGINE Value Sharing (Increase Profit)


ENTERPRISE ENGINE: Value CreaEon (Reduce Cost)

CUSTOMER GROWTH ENGINE: Value Delivery (Increase Revenue)

Inputs/Partners q Co-‐crea=on; Social Media q Open Source Collabora=on q Crowd-‐funding/sourcing q Frac=onaliza=on/Co-‐owner q  Investor/Sponsor/Donor q Mergers & Acquisi=ons

Internal Resources (Physical/Intellectual/EmoEonal/Spiritual Resources) q Creator; Broker; Landlord q Peer-‐to-‐Peer Planorm q Facilitated Network q Patents (“Fences”; Barriers)

Processes/AcQviQes q Opera=onal Excellence; JIT q Automa=on (Self-‐service/DIY) q Gamifica=on; Digitaliza=on q Ecosystem Management q Problem Solving; Consul=ng q Compe==ve Strategies

Product/Value ProposiQon q Asset Sale/Direct Sale q Product Leadership/Extension q Used/2nd Hand Product; Bargain q Customiza=on (Value Factors) q Bundling/Unbundling q Product/SoKware as a Service

Channels & RelaQonships q Offline/Online; (In)direct Sale q Franchise; Licensing; Affiliates q Distributor; Disintermediator q Ad Network; Brand Mul=plier q Aggrega=on/Disaggrega=on q Auc=on/Reverse Auc=on

Customer/Job-‐To-‐Get-‐Done q Customer In=macy/Loyalty q B2B; B2C q Long Tail; Community (Hub) q Two-‐sided Market (Segments) q Mul=-‐sided Market (Planorm) q Luxury/Mass Market/Niche

Cost (Pain) q Outsourcing; Specializa=on q Group Deals q Lending/Ren=ng/Leasing q Cross-‐subsidiza=on q Frac=onaliza=on/Co-‐owner

Revenue (Delight) q Pre-‐payment; Amor=za=on q Discount; Dynamic Pricing q Razor Blade (“Bait & Switch”) q Usage Fee; Subscrip=on Fee q Tiered Payment; Freemium q Dona=on; Free

PROFIT (VALUE) q Shared Value (Profit) q Transient Compe==ve Adv. q Sustainable Compe==ve Adv. q Red Ocean; Low Cost/Margin q Blue Ocean; Luxury Spot q Disrup=on/Lean Spot

VALUE ENGINE: Value Sharing (Increase Profit)

51 BUSINESS PROFIT PATTERNS (Strategic Choices for Business Model Profitability)


Inputs/Partners q Co-‐crea=on; Social Media q Open Source Collabora=on q Crowd-‐funding/sourcing q Frac=onaliza=on/Co-‐owner q  Investor/Sponsor/Donor q Mergers & Acquisi=ons

Internal Resources (Physical/Intellectual/EmoEonal/Spiritual Resources) q Creator; Broker; Landlord q Peer-‐to-‐Peer Planorm q Facilitated Network ü  Patents (“Fences”; Barriers)

Processes/AcQviQes ü  Opera=onal Excellence; JIT q Automa=on (Self-‐service/DIY) q Gamifica=on; Digitaliza=on ü  Ecosystem Management q Problem Solving; Consul=ng ü  Compe==ve Strategies

Product/Value ProposiQon ü  Asset Sale/Direct Sale ü  Product Leadership/Extension q Used/2nd Hand Product; Bargain q Customiza=on (Value Factors) q Bundling/Unbundling q Product/SoKware as a Service

Channels & RelaQonships ü  Offline/Online; (In)direct Sale q Franchise; Licensing; Affiliates q Distributor; Disintermediator q Ad Network; Brand Mul=plier q Aggrega=on/Disaggrega=on q Auc=on/Reverse Auc=on

Customer/Job-‐To-‐Get-‐Done ü  Customer In=macy/Loyalty ü  B2B; B2C q Long Tail; Community (Hub) q Two-‐sided Market (Segments) q Mul=-‐sided Market (Planorm) ü  Luxury/Mass Market/Niche

Cost (Pain) ü  Outsourcing; Specializa=on q Group Deals q Lending/Ren=ng/Leasing q Cross-‐subsidiza=on q Frac=onaliza=on/Co-‐owner

Revenue (Delight) q Pre-‐payment; Amor=za=on q Discount; Dynamic Pricing q Razor Blade (“Bait & Switch”) q Usage Fee; Subscrip=on Fee ü  Tiered Payment; Freemium q Dona=on; Free

PROFIT (VALUE) q Shared Value (Profit) q Transient Compe==ve Adv. q Sustainable Compe==ve Adv. q Red Ocean; Low Cost/Margin ü  Blue Ocean; Luxury Spot ü  Disrup=on/Lean Spot

Apple’s PROFIT PATTERNS for Classic iPod (2001)

ENTERPRISE ENGINE: Value CreaEon (Reduce Cost)

CUSTOMER GROWTH ENGINE: Value Delivery (Increase Revenue)

VALUE ENGINE: Value Sharing (Increase Profit)