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Innovation & Business Models. Minder Chen, Ph.D. Professor of Management Information Systems Martin V. Smith School of Business and Economics CSU Channel Islands E-Mail: [email protected] Web site: http://faculty.csuci.edu/minder.chen/. A Starting Point of Innovation. - PowerPoint PPT Presentation
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Innovation & Business Models
Minder Chen, Ph.D.Professor of Management Information Systems
Martin V. Smith School of Business and EconomicsCSU Channel Islands
E-Mail: [email protected] site: http://faculty.csuci.edu/minder.chen/
Business Model - 2 © Minder Chen, 1996-2014
A Starting Point of Innovation
A customer friction is a (re)discovered of relevant and often unmet needs in a recognizable situation from a target group.
– Adapted form http://www.innovationexcellence.com/blog/2011/07/08/solve-customer-frictions/
Business Model - 3 © Minder Chen, 1996-2014
Persona• A persona is an archetype of
an organization’s typical customer, and is defined primarily by a customer’s goals when interacting with the products. They are not real people, but are used to represent real users during the design process.
• Products generally have a “cast” of personas, ranging from 3 to 8, one of which is considered the primary persona. These are best presented as narratives. Providing a persona with real characteristics:
• Name• Age• Photo• Candid quotes• Personal information• Work environment• Computer proficiency• Motivation for using the product• Information-seeking habits• Personal and professional goals
• Evokes a strong sense of empathy in the project team
• Eliminates the need to design for an abstract, elastic “user group” whose goals and needs are not fully understood
• Facilitates user-centered design – the focus is now on the goals of your typical customer rather than the project team
Source: The ABCs of Personas: Design for People, Design for Success
and (link)
Business Model - 4 © Minder Chen, 1996-2014
Think
Do
Empathy
Opportunities
Insight
New business ideas
Prototype
Feel
Look, listen and try it out
with our persona
(source: link)
Design Thinking with Personas
Personas are more then just demographic information, a persona needs to capture the person’s behaviour, belief and philosophy, and more importantly their motivation or intentions.
Business Model - 5 © Minder Chen, 1996-2014
Three Attributes of User Experiences
Business Model - 6 © Minder Chen, 1996-2014
The Three Lenses of Human-Centered Design
People
Technology
Read “Design Thinking” at HBR at Download PDF
Business Model - 7 © Minder Chen, 1996-2014
Elevator Pitch Our business [list name] will deliver [list key deliverables] to [list key beneficiaries] to enable them to [list key benefits]. The business is headed by [list founder and key executives, investors, and advisors] that have [list key background and qualifications]. The business [will launch/was launched] on [date] and we [will begin/began] delivering [first product or service] on [date]. We expect to prove our business model and achieve profitable growth on [date] and anticipate that the terminal value of the business will be [list anticipated value], which represents a [list return] to investors. The total cost to achieve this goal will be [total cost], which includes the following key cost categories [list]. We have currently received [list dollars of funding secured to date] from the following sources [list]. We anticipate receiving the remainder of the funding by [date] from [list sources]. The key risks for the project are [list risks]. These risks will be managed by [list key approached to managing each risk].
• Source: Applegate and Saltrick, “Developing an Elevator Pitch for a New Venture.”
Business Model - 8 © Minder Chen, 1996-2014
Elevator Pitch • Elevator Pitch – What is it?
– In the time it takes to ride an elevator from the 1st to the 10th floor – explain the gist of your business idea to a stranger!
– An elevator pitch conveys the businesses’ key features and rationale in a clear, concise way so that it can be communicated easily to others
• Who is the primary audience?– Potential investors, customers, suppliers, partners, employees– Anyone who has or could have a stake in your business
• Why does it matter?– Communicate – What, why, how, where and when– Teaser to generate interest – the upfront hook!– Share a coherent vision of the firm’s goals and high level strategy
for achieving these goals– And, last but not least - Raise $$$!– Plus, it might be your only shot!
http://nuvc.innuvation.org/Elevator_Pitch_Workshop_v2.ppt
Business Model - 9 © Minder Chen, 1996-2014
Key Issues
• Overview of the problem your business will solve and opportunity it will address– Why does this problem matter?
– How severe is it?
– How big is the opportunity?
– How fast is it growing?
– Why has it not been solved yet?
– Why can you solve it when others could not?
• What value is being created?
• Who are the primary beneficiaries? – Think about who is capturing the value
– Consider that some groups may capture more than others – these represent the ideal first customers
Business Model - 10 © Minder Chen, 1996-2014
Products/Services and Competitors
• What are the products and services that you will deliver to solve the problem
• How do these products and services meet the unsolved market problem?– Do they immediately solve the entire problem?
– Or what is the product and service “path” for getting there?
• Who are the competitors and why are your products and services superior?– Focus on direct competitors
– Consider segmenting direct competitors by type
– Why, where and how does each competitor or type fall short?
Business Model - 11 © Minder Chen, 1996-2014
Revenues and Resources
• How do you plan to generate revenues– Short term– Longer term if there is a twist or kicker
• Hit the high points of your business model– Profitability – Leverage – As revenues and size increases, do gross
and/or operating margins improve?– Scale efficiencies - how do the mechanics and economics
of your business model scale
• What are the resources required?– Money – Capital intensity?– Time – core development, unique product versions for
different customer types, distribution channel build, etc– Team background and expertise – what are the critical
competencies of the team?
Business Model - 12 © Minder Chen, 1996-2014
Teaser and Vision
• Teaser to pique interest– Punchy, crisp and clearly articulated
– Incentivizes stakeholders to care by logically presented the case for how the business benefits them
– Delivered with confidence but not cockiness
– Should leave them wanting to hear more about the details at a later date
• Communicate a common vision and goals– Everyone on the same page, working toward the
same goal
– Minimize non-productive activities, speeds up time to market
Business Model - 13 © Minder Chen, 1996-2014
Raising Money
• Raise $$$– Distilling the essence of your business idea into a
few critical points reflects well on you
– Strong elevator pitch results in more favorable assessment of your talents by potential backers» VCs would rather back a Grade A management team with a
Grade B product than vice versa
– Decisions to proceed forward with due diligence are often made on the basis of the elevator pitch and the accompanying follow up conversation by seasoned VCs
Business Model - 14 © Minder Chen, 1996-2014
Cash Flow
How
What
Who
Source: Alexander Osterwalder & Yves Pigneur, Business Model Generation (Preview version), 2009.
Watch this video
Business Model - 15 © Minder Chen, 1996-2014
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Describe a Business Model: 9 Building Blocks
OfferOffer
Cost Structure
Cost Structure
CustomerRelationships
CustomerRelationships
CustomerSegmentsCustomerSegments
Competencies, Activities, Resources
Competencies, Activities, Resources
Partner NetworkPartner Network
RevenueStreamsRevenueStreams
Distribution Channels
Distribution Channels
Key Issues To Solve
Key Issues To Solve
Source: Describe and Improve your Business Model
WhoWhatHow
How Much?
Business Model - 16 © Minder Chen, 1996-2014
Reverse Engineering Facebook’s Business Model with Ballpark Figures
http://www.businessmodelalchemist.com/
Business Model - 17 © Minder Chen, 1996-2014
Source: “Why the Lean Startup Changes Everything“ HBR 2013
Business Model - 18 © Minder Chen, 1996-2014
Business Model - 19 © Minder Chen, 1996-2014
The Use of the Business Model Canvas
• Describe
• Discuss
• Design
• Challenge
• Improve
• Innovate
• Invent
• Pivot
• Choose
Your Business Model
Business Model - 20 © Minder Chen, 1996-2014
TAM
http://aiti.mit.edu/media/programs/india-bms-summer-2013/materials/step_4_calculate_the_tam_---trepreneurship_101.pdf
Business Model - 21 © Minder Chen, 1996-2014
TAM, SAM, and TM
• Total Addressable/Available Market
http://en.wikipedia.org/wiki/Total_addressable_market
Business Model - 22 © Minder Chen, 1996-2014
Customer Value Canvas
• http://www.businessmodelgeneration.com/downloads/value_proposition_canvas.pdf
• http://www.franciscopalao.com/english/value-proposition-canvas-get-to-know-your-customers-and-improve-your-value-proposition/
Business Model - 23 © Minder Chen, 1996-2014
Business Model with Lean Launch Pad
Test Hypotheses:•Problem•Customer•User•Payer
Test Hypotheses:• Demand Creation
Test Hypotheses:• Channel
Test Hypotheses:• Product• Market Type• Competitive
Test Hypotheses:• Pricing Model / Pricing
Test Hypotheses:• Size of Opportunity/Market• Validate Business Model
Test Hypotheses:•Channel•(Customer)•(Problem)
Customer Development Team
Agile Development
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