why business models matter

Business Model

@KareemSamara

Why Business Models Matter

Building a product is NOT “the product”

of your startup. Your Business Model is “The Product”.

Ash Maurya

What is Business Model?Business Model simply answer those Qs:

Who is your customer?

What does the customer value?

How do you deliver value at an appropriate cost?

Peter Drucker

Business Model Canvas

Why Business Model?

Fast Instead of taking weeks or months, you can outline multiple business models in an afternoon.

Why Business Model?

Concise Because your business model has to fit on a single page, you have to pick your words carefully and get to the point. This is great practice for distilling the essence of your business.

Why Business Model?

Portable A single-‐page business model is much easier to share with others, which means it will be read by more people and be more frequently updated.

The Model • Models not only help in the process of planning and construction of new structures, but also in the understanding the design of existing structures.

• The Goal is simple: Increase our understanding of the real world objects while eliminating the unimportant details.

The Business Model Canvas

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Value PropositionsCustomer Relationships

Customer Segments

Distribution Channels

Revenue StreamsCost Structure

Key Resources

Key Partners

Key Activities

1. Customer Segments

1Customer Segments

• Who are your most important users and customers?

Who are our most important customers? • Mass Market • Niche Market • Segmented • Diversified • Multi-‐sided Platform

1. Customer Segments

2. Value Proposition

Value Proposition2

For each Customer Segment:

▪ What is their PAIN?

▪ What is the GAIN for them to solve their?

2. Value Proposition

3. Distribution Channels


3

3. Distribution Channels

How do you deliver this value?

• Through which Channels do our Customer Segments want to be reached?

• How are our Channels integrated? • Which ones work best? • Which ones are most cost-‐efficient?

4. Customer Relationships

Customer Relationships 4

4. Customer Relationships

How do you

GET,

KEEP, and GROW

your customer base?

How do you build a loyal and enthusiastic tribe around your offer?

5. Revenue Streams

Revenue Streams 5

5. Revenue Streams

How do you generate cash from each customer segment?

• For what value are our customers really willing to pay? For what do they currently pay?

• How are they currently paying? How would they prefer to pay?

6. Key Resources

Key Resources

6

6. Key Resources

What infrastructure and resources do you need to deliver what you promise?

● tools, space, locations ● personnel (﴾qualifications, in-‐house or sub)﴿ ● licenses, intellectual property ● supplies (﴾components, assemblies)﴿ ● financial requirements

7. Key Activities

Key Activities7

7. Key Activities

What major activities (﴾deliverables)﴿ must be produced – when and by who?

8. Key Partners

Key Partners

8

8. Key Partners

Partners • Suppliers • Developers • Distributors • Investors • Collaborators • Affiliates

Competitors Alternatives

How does each partner help or hinder the business model?

9. Cost Structure

Cost Structure9

9. Cost Structure

What are the critical elements of the cost structure?

● Fixed costs

● Variable costs

● Resource, activity, partner costs

● Infrastructure, operational, cost of sales

● Payroll costs, benefits, bonus structure, taxes

● What are the risks, the unknowns?

The Business Model Canvas

Value Propositions

Customer Segments


Revenue StreamsCost Structure

Key Resources

Key Partners

Key Activities

Lean Startup

What Most Startups Want to Build

What They Should Build First

Eventually Build This

“People don’t want ¼” drill bits,

they want ¼” holes”

(c) 2012 Mary Caravella 7

Two drills on Amazon…


Black & Decker SSL20SB 20-Volt MAX Smart Select Lithium Ion Drill/Driver with extra battery

DEWALT DCD760KL 18-Volt 1/2-Inch Cordless Compact Lithium-Ion Drill/Driver Kit (includes second battery)

$118.05 $179.99

Two drills on Amazon…


} SmartSelect Clutch; Choose your project icon and drill automatically adjusts power and speed for optimal results

} Gear indicator; 2-speeds indicates high or low setting

} 20-volt MAX Lithium batteries deliver extended run-time

} High torque motor delivers 175-Inch-pounds

} Ergonomic design for improved comfort and control

} Lightweight design (4.0 lbs) minimizes user fatigue

} Dual speed range 0-500/0-1700 rpm delivers optimal performance

} LED worklight provides increased visibility in confined spaces

} Compact track saw batteries (DC9181) are compatible with the existing system of DEWALT 18v power tools produced since 1996

} Compact size (8.2-inch) allows users to fit into tight spaces;

$118.05 $179.99

Two different brands for two different targeted markets with different problems to be solved or goals to be achieved


Three DIMENSIONS of customer needs


} Functional } Social } Psychological

Why does he choose specific products/services?


Because they help me •Do something (Functional) •Express myself with others (Social) •Experience something enjoyable (Psychological)



I need… •A drill I can use for everything •Assurance I am buying a reliable product



Because they help me •Improve my business (Functional) •Market my business (Social) •Avoid risks (Psychological)

(and I’m a person too!)



I need… •Tools I can use all day • Rugged • Compatible power

supplies •Tools that show I’m a professional (and make me feel like one) • Distinctive styling

consistent with me

Your product is a tool to help customers create value for themselves. The more you understand customers and what they value the more likely you will create value


} Functional value: helps solve a problem or achieve a goal

} Social value: connects with or distinguishes from others; expresses something about self to others

} Psychological value: interesting, enjoyable, anxiety-reducing, satisfying


Now that we better understand WHY people choose what they do, we turn to HOW they do it


Common Questions about Lean Startup

Problem Vs. Unique Value Proposition?

Problem box is intended to capture the top problems customers face in their environments

UVP is the marketing promise you make to them that stems from the intersection of the Problem and

(﴾your)﴿ Solution boxes.

Example

On a job board site:

A job seeker’s problem: “Getting noticed by a prospective employer”.

Job board service to offer solutions like “professionally designed resume templates”.

but the UVP might be “Land your dream job in 60 days or less”.

Where do competitors go on the Lean Canvas?

Your true competition is NOT who you think they are, but who your customers think they are.

Unique Value Proposition Vs. Unfair Advantage?

UVP is to capture a customer’s attention

Unfair Advantage is to deter copy cats and competitors.

Example

UVP: “Connect and share with the people in your life.”

UA: Large network effects.

On Facebook:

Validating The Canvas

Everything on you put on your canvas is a HYPOTHESIS.

You must VALIDATE every element through -

• Discovery (your own data)

• Research (other people’s data)

• Testing (simulation, MVP)

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One More Thing

67

Create your own

http://leanstack.com/lean-‐canvas/

http://businessmodelgeneration.com/canvas/bmc

https://canvanizer.com/choose-‐canvas

http://leanstack.com/lean-canvas/

http://businessmodelgeneration.com/canvas/bmc

https://canvanizer.com/choose-canvas

Books to Read‣ The Four Steps to the Epiphany ‣ Lean Startup ‣ Playing To Win ‣ Understanding Michael Porter ‣ Good Strategy, Bad Strategy

Thank You@KareemSamara

Social Media Trainer Founder & CEO of

Social Business Kits SBKits.com

[email protected]

mailto:[email protected]

why business models matter

Small Business & Entrepreneurship