value developmet workshop: session 2 - building a business model
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“Startups operate under conditions of extreme uncertainty.”Eric Ries
“A startup is a temporary organization used to search for a repeatable and scalable business model.”Steve Blank
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“Startups operate under conditions of extreme uncertainty.”Eric Ries
Increase odds of success through rapid experimentation
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“Startups operate under conditions of extreme uncertainty.”Eric Ries
Identify risksDefine experimentsExecute and measureAnalyzeRepeat
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The Lean Canvas focuses on Risk
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Risk
Problem
Solution
Unfair advantage
Key metrics
Customer segments
Channels
Value Proposition
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Let’s get to work ☺
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Customer segments
1. Who are the customers? List all potential segments
2. Can they be further segmented? Try to be as focused as possible
3. Who are the users?4. Who would be the early adopters within the
customer segments?
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The problem
1. What are the 3 main problems your customers have?
2. Are they aware of the problem?3. Do they want the problem to be solved?
Back your assumptions with evidence: talk to customers!
“A problem well stated is a problem half-solved.”
– Charles Kettering
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Unique value proposition
What’s your promise to your customer?- Distill it to a single statement that depicts the problems
you’re addressing- What would amaze your customer and make him/her
want to hear more?
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Unique Value Proposition:
A tool, for video distributors, which will enhance videos in order to facilitate information search by making its content more accessible.
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Unique Value Proposition:
Making videos searchable
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The solution
What is the minimum feature set (MVP) that demonstrates the UVP up above?- List the top 3 components of your solution
Back your assumptions with evidence: talk to customers!
“Perfection is achieved, not when you havenothing left to add, but nothing left to take away”
– Antoine de Saint-Exupery
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Unfair advantage
What are your advantages? (that would cause other players fail)- Good examples: network effect, unique IP, loyal customer base, brand and reputation, disruptive business model
- Bad examples: first-mover, size, price
“A true unfair advantage is something that cannot be easily copied or bought”-- Jason Cohen
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Cost structure
List out all your fixed and variable costsMust include:- Customer acquisition cost (CAC)- Average cost of service (CoS)
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Revenue streams
Identify your revenue modelExamples: Subscription, freemium, license fee. Outline back-of-the-envelope assumptions:- Lifetime value (LTV)- Recurring revenue (RR), average recurring revenue (ARR)
- Gross margin- Break-even point
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Channels
Which free and paid channels you can use to reach your customer?
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Key metrics
1. What are the main metrics (and what is the single macro metric or goal) that drives what you do?
2. Which experiments you will run to optimize the metric?
Note: every experiment should formulate a falsifiable hypothesis which requires you to identify a metric you’ll use to measure success or failure
“A startup can only focus on only one metric. So you have to decide what that is and ignore everything else”-- Noah Kagan
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Bonus slides
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Metrics - 5 Steps to Success
User acquired (a sign up in SaaS)
The user uses your product, indicating a good first visit
The user continues to use the product, indicating she likes it
The user pays you
The user likes your product so much he refers other new users
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Example of Conversion Metrics
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Define the Metrics for Your Product
Metric What does this metric mean, in relation to your product?
Current state
Acquisition (x signups / month)
Activation
Retention
Revenue
Referral
2. Choose one to optimize through experiments
1. Define the top metrics
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Cheat sheet