Entrepreneurship Education Experience - Bob Caspe (Aula 2)

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

Entrepreneurial Startups

FailureSuccess

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Why?

Why do So Many Entrepreneurial Startups Fail?

Why do Entrepreneurial Startups that have a Successful First Product Fail with their Second Product?

Problem 1

Chaos

Dave Pelz

Putting

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.

Bob’s Flying School

Crashes Safe Landings0123456789

10

Influences on a Safe Landing

Random Events

Pilot Skill &Equipment Reliability

Business School Startups

Failure Success0123456789

10

Small Company Instability

Large Companies Small Companies

Random Turbulence

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.

RobertBrown

1827

Pollen Grain

Coal Dust

Brownian Motion

“Life is what happens to you while you’re busy making plans.”

A Drunkard’s Walk

Success

Customer Interactions

Competitors Actions

skill

The Drunkard’s Walk

Insert video of Leonard Mlodnow or Talib

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.

Problem 2

SelectiveAnalysis orSurvivor’s Bias

Laura Buxton10 Years OldBrown HairTall for age

Laura Buxton10 Years OldBrown HairTall for age

England – a true story…

Same Outfits

Over 200 Social Networks

Influences Hitting a Home Run

Random Events

Skill

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!

In Business

All of these DIE

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 Team Sale

Team Member

Team Member

Team Member

Team Member

VP MFG

CEO

IT

CIO

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

An Alternative Approach

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

Inverting the Creative process

PRODUCT

CUSTOMER

TRANSACTION

Customer Centricity

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

Define the Ideal Transaction Large Deal Value Large Margin Simple Delivery

Define the Ideal Product

Whatever The &!#$@ They Want! that eliminates the pain…

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.

Exercise – Design a Business

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

A Complete CompanyComponent

IPManufacturingBrand EquityAsset StrengthDistribution

Assumption

Competitive Pressures Have Eliminated the Opportunity to “Take the Time” to Develop a Sales & Marketing Process

Therefore, We Must Find Another Approach

Your CompanyComponent


The Ideal PartnerComponent


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

Innovative Manufacturer Brand

Channel

End Customer

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

Let’s take a break