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CUSTOMER CENTRICITY
CEMEC BRAZIL
Bob Caspe
The International Entrepreneurship Center
Entrepreneurial Action
2
This Afternoon’s Lecture
Randomness and its impact on the startup
Midsized Company GrowthChallenger Sales ModelWhy 2nd products often fail
Eco System Analysis Common to both - Partnerships
Why?
Why do So Many Entrepreneurial Startups Fail?
Why do Entrepreneurial Startups that have a Successful First Product Fail with their Second Product?
Conclusion
You must consider the random distribution of outcomes when planning your approach to solving a problem.
Therefore, Business Plans, when Starting are Mostly a Waste of Time Because Errors in Early Steps Will Invalidate Later Steps
There’s a saying in golf:
Zero percent of “short putts” go in! This raises the importance of survival,
namely surviving long enough to reach success. More on this later.
Conclusion
As a Small Startup you are influenced much more by Random External Events than by your own planning and actions.
Therefore, Business Planning is a Waste of Time for the Startup
One must Consider New Opportunities and Disasters Likely and Have a Plan for Including their Occurances.
Finding Success
Startup success is learning to balance the process of survival with the process of growth.
Therefore, Having a Plan for Survival (which means cash flow) so that you can Live Long Enough to Stumble Upon Success is Part of Being in a Startup.
Laura Buxton10 Years OldBrown HairTall for age
Laura Buxton10 Years OldBrown HairTall for age
England – a true story…
Same Outfits
Distribution of home runs for batters with an average of 40 h.r. per year
40 61
Given the numberof players that had the skill to hit an average of 40 home runs per year in the league, the odds were that 1 every 20 years would hit 61 home runs!
Conclusions
You can’t necessarily learn by studying another company’s success how do find your own.You would need to study the losers too in
order to see which variables really matterThe environment is constantly changing so it
might not be relevant anyway Therefore, Action Trumps Study. Just
Do It and Learn from Your Mistakes.
Conclusions
When creating a new entrepreneurial ventureBusiness Plans are a waste of timeCase study analysis doesn’t help
Maybe you should invest the $100k in your business instead of your MBA?
Find the Shortest Path to Profitability
Conclusions
For Startups your future is greatly affected by random events and consider it in your planning.
For Startups random events are dominant in determining your future.
Manage your cash flow so that you live long enough to allow good luck to have a chance to help you.
Why do 2nd Products Often Fail?
Let’s Examine why 1st Products Succeed Then Let’s see what’s different
Evolution of Selling
The Pitch The Question The Consultancy
Because Technology Became Too Complicated for the Customer
The Need to Help the Customer Redefine Their Own Business Model
The Challenger Sale
Requires A Multi-talented Sales PersonThe Entrepreneur –
○ Technical Skills○ Communication Skills○ Decision Authority
First Study the Customer’s Business Model
Recommend Changes Based Upon Technical Innovation
First Product Success
The Founder and Entrepreneur brought a multitude of talents to the customer and created a solution through:
Studying the Customer’s Business Model
Making Recommendations Based Upon Technology
Gathering the Resources to Make it True
Why do Customers Need You?
The Innovators Don’t Want to Work for Them as Employees
Stability Requires Slowing Innovation Corporate Measurements Impede Risk
Taking SEC Rewards Acquisitions
Then, Upon Success
The CEO Hires a Sales Force But, Unfortunately they are not equal to
the Founder in being Multi-SkilledIf They Were They Would Start Their Own
Business! So, Sales Don’t Happen And, Worse, the CEO goes and makes
a second product without involving a customer
Two Alternative Paths
Productize and Find a “Less Skilled” Channel
The IBM Method of Team SellingInterfaces to the Customer’s Business at
Many LevelsConvenes to Create a Solution Sale
The Challenger Process
Learn the Customer’s Business Model Apply Your Own Innovation to Their
Model Teach the Customer how to Improve
Their Business Model with Your Help.
Teacher Student
Strategic Alignment
First, Learn the Customer’s Strategic Goal as Stated by the CEO
Then, Convert your Pitch so that it Aligns with the CEO’s Strategy
Finally, Modify your pitch slightly for each constituent so that it aligns with their own specific strategy as well.
Evaluating Your Assets
When you StartThe Founder’s Skills – technology, selling
After you found some SuccessYour Customer BaseYour Intangible AssetsYour Tangible Assets
Most Startup’s Dilemma
Create an Idea Write the business plan Raise Venture Capital Execute the plan Retire with fabulous wealth
Your ideas stink
The Plan is Useless
Deal with the Devil
Random events willDerail your plan
Unlikely
Entrepreneurial Thinking
Saras D. Sarasvathy – article on “What makes entrepreneurs entrepreneurial?”
Causal• Create an idea• Write a plan• Finance the plan• Execute the plan
Effectual• Who do I know?• What do I know?• What can I achieve?
Choosing a Method
What percentage of your assets are used by the process of planning?
What risk is implied in the plan?Errors in the outcome of individual steps in
the plan with invalidate the plan quickly Are the Resources that are required by
the plan actually available?
Short Term vs Long Term
The Importance of Moving to Self Sufficiency
Focusing on Short Term Transactions Adjusting Focus to the Longer Term as
Success and Stability are Achieved
Define the Ideal Customer Has lots of money Is in a growing market Is rational about their purchase process
Implies B2B – it’s all about profit! Has a problem that they want to fix Has a boring product that is
indistinguishable from other products Is representative of lots of other
customers
Venture Capitalist Jim Goetz: “It's `Shocking’ that startups are ignoring a $500 Billion Market represented by B2B. There have been 56 IPOs for B2B versus 23 for Consumer in the last 10 years.”
Business Insider 2012
Review the Steps
1. Work your Network.
2. Perform interviews & find pain points.
3. Create Transaction Models that monetize the value of eliminating the pain.
4. Find a solution that fixes the problem.
5. Confirm that the transaction model can be replicated.
Strategic Partnerships
A Path to Minimizing Risk and Increasing Your Probability of Success
A Way to Reduce Dilution A Way to Increase the Speed of Market
Penetration
Assumption
Competitive Pressures Have Eliminated the Opportunity to “Take the Time” to Develop a Sales & Marketing Process
Therefore, We Must Find Another Approach
Market Ecosystems
Who is your customer? Who can be your customer? Where do you have maximum leverage?
Finding the Largest Amplifier
Software & Hardware to reduce the cost of commercial A/C operationNetwork Management of A/C Operation
Their Market Experience Cell towers represent 2% of all
utility useAll have A/C to Cool Radios
First sales to AT&T (40,000 towers)Potential to save $40M/yearEvaluation phase
Second Sales to AT&T Delayed. Why?
What is an alternative strategy?
Examining the Eco-System Network Providers – Sell Cell Usage Utilities – Sell Electricity Cell Tower Manufacturers – Sell Towers Cell Tower Maintenance – Sell Service A/C Manufacturers – Sell A/C Units
For Each..
How big is the market segment? How many competitors are there? How disruptive is the technology? What can the benefit be for exclusivity? What are the potential calls to action? What are the potential barriers to close? What are “their” strategic goals? Test..
Reassessing the Value
With First Installations20% A/C Units were MalfunctioningImproper Installations were frequent
Network Connection ValueEarly Failure IndicationMalfunction Indication“Killer App” – Pays for infrastructure
eCurve Ecosystem in the US
Entity NumberImpact
TypeImpact
MagnitudeBarrier
Network Providers 5 Save $40M each Risk
Utilities 50 Save ? ? (future) Political
Tower Manufacturers
2 Grow $200M Low
Tower Servicers 2 Grow $1B Low
A/C Manufacturers
2 Grow $200M Tech
Value StatementsEntity Value Statement
Network Providers Reduce your utility costs
UtilitiesReduce the need to add capacity by gaining direct
control of equipment in the field
Tower ManufacturersGain market share by offering a tower that is more
efficient to operate
Tower ServicersGain market share by offering reduced utility cost
and early failure detection
A/C ManufacturersGain market share by offering a unit that uses less
power
One Partnership Story
Basic Contract Terms$3.2M Deposit100,000 cameras@$100/camera-$32 deposit/camera
Sound Vision
Olympus America
Channel
End Customer
CMOS Cameras
$3.2M Loan
Olympus Japan
Why did Sound Vision do this deal? Why did Olympus do this deal? What were the risks to SVI? What were the risks to Olympus? How do you structure this deal?
Questions
The IMAP Process
Identify the Ecosystem Affected by your product
Select the Maximum Leverage Entry Points
Engage with the Right Partners and Structure a Deal
What is the WORST hand in Poker? The Second Best Hand You Spend All of the Money but There’s
NO Return With New Product Introductions It Can
Be the Same Story You Must Do the Market Analysis Before
You Invest the Money
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