Business model canvas_steve_blank_cleantech_open_academy_2012

How to Fail Less

Business Models and Customer Development

Steve Blankwww.steveblank.com

@sgblank

What We Used to Believe

Search Versus Execution

Startups are Smaller Versions of Large Companies

What We Now Know

Search Versus Execution

Startups SearchLarge Companies Execute

What We Used to Believe

Strategy

All I Need to Do is Execute the Plan

Plan MeetsFirst ContactWith Customers

All I Need is the 5- Year Forecast

Previous 5-Year Plans

All I Need to Do is Make the Forecast

What We Now Know

Strategy

Planning comes before the plan

Business Models

Business Models

Business Model Hypotheses

Search

Strategy

Execution

Operating Plan +Financial Model

What We Used to Believe

Process

We Built Startups by Managing Processes

Product Management

+

Waterfall Engineering

Product Introduction Model

Concept/Seed

Round

Product Dev.

Alpha/Beta Test

Launch/1st Ship

Product Introduction Model

Concept/Seed

Round

Product Dev.

Alpha/Beta Test

Launch/1st Ship

Customer Problem: known

Product Features: known

Waterfall / Product ManagementExecution on Two “Knowns”

Requirements

Design

Implementation

Verification

Maintenance

Source: Eric Rieshttp://startuplessonslearned.blogspot.com

Customer Problem: known

Product Features: known

Waterfall / Product ManagementExecution on Two “Knowns”

Requirements

Design

Implementation

Verification

Maintenance

Source: Eric Rieshttp://startuplessonslearned.blogspot.com

What We Now Know

Strategy

More startups fail from a lack of customers than from a failure of product development

Customer DevelopmentA Search Strategy

Business Model Hypotheses

Strategy

Process Customer &Agile Development

Operating Plan +Financial Model

Product Management& Agile Development

Search Execution

What We Used to Believe

Organization

Hire and Build a Functional Organization

What We Now Know

Organization

Founders run a Customer Development Team

No sales, marketing and business development

Business Model Hypotheses

OrganizationCustomer

Development Team, Founder-driven

Customer Development,Agile Development

Operating Plan +Financial Model

Product ManagementAgile or Waterfall Development

Functional Organization by Department

Search Execution

Strategy

Process

Business Model Hypotheses

Strategy

OrganizationCustomer DevelopmentTeam, Founder-driven

ProcessCustomer Development,

Agile Development

Search

Business Model Hypotheses

StrategyOperating Plan +Financial Model

OrganizationCustomer DevelopmentTeam, Founder-driven

Process Customer Development,Agile Development

Product ManagementAgile or Waterfall Development

Functional Organization by Department

Search Execution

Part 2

Business Models and

Customer Development

What’s A Startup?

A temporary organization designed to search

for a repeatable and scalable business model

A temporary organization designed to search

for a repeatable and scalable business model

A temporary organization designed to search

for a repeatable and scalable business model

A temporary organization designed to search

for a repeatable and scalable business model

A temporary organization designed to search

for a repeatable and scalable business model

A Startup aims to become a company

What’s a Business Model?

© 2012 Steve Blank

Value Proposition

What Are You Building and For Who?

© 2012 Steve Blank

Customer Segments

Who Are They?

Why Would They Buy?

© 2012 Steve Blank

Channels

How does your Product Get to Customers?

© 2012 Steve Blank

Customer Relationships

How do you Get, Keep and Grow Customers?

© 2012 Steve Blank

Revenue Streams

How do you Make Money?

© 2012 Steve Blank

Key Resources

What are your most important Assets?

© 2012 Steve Blank

Key Partners

Who are your Partners and Suppliers?

© 2012 Steve Blank

Key Activities

What’s Most Important for the Business?

© 2012 Steve Blank

Cost Structure

What are the Costs and Expenses

© 2012 Steve Blank

But,Realize They’re Hypotheses

9 Guesses

Guess Guess

Guess

Guess

GuessGuess

Guess

GuessGuess

Customer Development

Test the Problem, Then the Solution

Customer Development

The Minimum Viable Product

Customer Development

The Pivot

Customer Development is how you search for the model

How Does This Really Work?

Lean LaunchPad Class

National Science Foundation Innovation Corps Program May 23, 2012

Red Ox’s Electrochemical Desalination Cell 1. desalinates brine, a waste product from oil & gas and other

industries2. generates electricity quietly and3. produces bulk inorganics that can be sold as commodities.

André Taylor (PI) David Kohn (EL) Tom Livingston (IM)

Total Contacts: 96

82

Problem:Saline brine.

What is it?Water that is saltier than sea water.

It is produced as a waste product of many industrial processes.

Why is it a problem?

Saline brine is:1. Environmentally harmful 2. Heavily regulated3. Costly to treat and dispose of.

84

What we thought

1. Desalination

Photo 1: Kay Bailey Hutchison desalination plant in El Paso Tx.

2. Oil and gas production

Photo 2: a hydraulic fracturing site near Morgantown Pa.

85

What we did:

What we learned:

1. Desalination

Photo 1: Kay Bailey Hutchison desalination plant in El Paso Tx.

2. Oil and gas production

Photo 2: a hydraulic fracturing site near Morgantown Pa.

Key Partners Key Activities

Key Resources

Value Propositions

Customer Relationships

Customer Segments

Channels

Revenue Streams

Cost Structure

-Turns waste cost into revenue-Decreased input costs / volatility-Quiet electricity on-site

-Inland and coastal desalination plants-Industrial brine producers-Hydrofracking operations

-Inland and coastal desalination plants-Industrial brine producers-Hydrofracking operations

-B2B marketing-Service agreements-Licensing arrangements

-Service-Customization-Link to value add in industrial ecosystem-Improve public image

-R & D-Engineering customization

-People-Intellectual property

-Royalties from licenses-Service contracts-Engineering consulting fees-Strategic Partnerships

-Chemical sales-Electricity sales-REC sales-Brine treatment contracts

-People-R & D –Prototyping-Legal fees (IP, Licensing, Regulatory)

-Manufacture / Capital-Operation and maintenance-Sales and Marketing

-Manufacturers-Utilities-Regulators-Utility Commissions

-Learn regulatory landscape-Foster relationships with stakeholders-Hiring & retention

-Chemical distributors-Chemical Producers

-Chemical distributors-Chemical End Users-Chemical Producers

-Utilities-Fuel Cell Mfgs

-Decreased liability-Better public image-Decreased permitting time

-Brand-Relationships with stakeholders and partners

-CO2 sequestration-Energy efficiency-DOESN’T CAUSE EARTHQUAKES

Key Partners Key Activities

Key Resources

Value Propositions

Customer Relationships

Customer Segments

Channels

Revenue Streams

Cost Structure

-Turns waste cost into revenue-Decreased disposal costs-Decreased input costs / volatility-Quiet electricity on-site

-Water Treatment for Hydrofracking (Especially Produced Water)-Inland and coastal desalination plants-Industrial brine producers

-Inland and coastal desalination plants-Industrial brine producers-Hydrofracking operations

-B2B marketing-Possibly distributors/ conferences-Service agreements-Licensing arrangements

-Service-Customization-Link to value add in industrial ecosystem-Improve public image

-R & D-Engineering customization

-People-Intellectual property

-Royalties from licenses-Service contracts-Strategic Partnerships

-Chemical sales-Electricity sales-REC sales-Brine treatment contracts

-People-R & D & Prototyping-Legal fees (IP, Licensing, Regulatory)

-Manufacture / Capital-Operation and maintenance-Sales and Marketing

-Manufacturers -Membrane Mfgs-Utilities-Regulators-Engineering firms

-Know regulatory landscape-Foster relationships with stakeholders-Hiring & retention

-Chem. distributors-Chemical Producers

-Chemical distributors-Chemical End Users-Chemical Producers

- Electric Utilities (for energy efficiency investments)

-Decreased liability-Better public image FOR CLIENTS-Decreased permitting time ?

-Brand-Relationships with stakeholders and partners

-DOESN’T CAUSE EARTHQUAKES

-Other frac water treatment startups

Deep well injection

Photo 4: a small deep well injection rig

Evaporation Pits

Photo 5 : a typical wastewater evaporation pit

Traditional methods to dispose of saline brine include:

Thought: Problem in the Marcellus

Texas:~50,000 Class II Disposal Wells (at least 80% for enhanced recovery)

Pennsylvania: 8 Class II Disposal Wells

Price for water treatment ~60x higher than we thought!

Well OwnerService

Providers(Fracking,

Onsite recycling)

Technology Developers / Vendors

Regulators(Water Rights,

Disposal, Permitting)

Primary Treatment

Facility

Secondary Treatment Contractor

Engineering Firms

Disposal Companies

Produced Water

Reuse to Frac

Another Well

Disposal

Discharge

Primary Treatment

Tertiary Treatment

Dilution with

Freshwater

Must be drinking

water quality

How high can they

go?

Current state of the art are evaporators

and crystallizers

This is where we fit in

Flowback Water

First 30 days of production

Medium TDS

~5-20 % of injected

Produced Water

Produced over well’s

operating life (4-30 years)

Very high TDS (usually

100,000 ppm or higher)

~5-20 % of injected

Drilling Water

Water from drilling muds used to drill

well

High TSS

Small quantity, weird stuff in it

Class II Wells

Primary and

Tertiary Treatment

Cost of Disposal ($/bbl)

0.50-1.50 10.00-12.00

5.00-6.00

Transport Cost

($/bbl)

4.00-16.00 2.00-4.00 1.00-4.00

Total($/bbl)

4.50-17.50 12.00-16.00

6.00-10.00

“Moe! don’t throw out that brine!”

North American Produced Water

MarketTAM: $5 bn/yrSAM: $3 bn

Target: $0.5 bn

Our projections:~ $21 million/year revenues from one 10,000 barrel per day plant<5% of current treatment and disposal in PA

Produced Water

Reuse to Frac

Another Well

Disposal

Discharge

Primary Treatment

Tertiary Treatment

Dilution with

Freshwater

= ~$1/bbl/hr

Storage

Treatment

Salt Processin

g

Drop-Off

101

1. Market risk: increasing reuse lowers disposal rate

2. Technology risk 3. Unable to sell into chemical markets

Risks

Key Partners Key Activities

Key Resources

Value Propositions

Customer Relationships

Customer Segments

Channels

Revenue Streams

Cost Structure

-Turns waste cost into revenue-Decreased disposal costs and volume-Decreased transport costs-Decreased input costs / volatility and freshwater volume-Quiet electricity

-Water Treatment for Oil and Gas (Especially Produced Water)-Service Providers for Oil and Gas-Oil and Gas Owner/Operators

-Hydrofracking operations-Service providers for oil and gas industry-Oil and Gas Owner/Operators

-B2B marketing-Possibly distributors/ conferences-Oil &gas well service providers/ manufacturers

-R & D-Engineering customization

-People-Intellectual property

-Royalties from licenses-Service contracts-Strategic Partnerships

-Chemical sales-Electricity sales-REC sales-Brine treatment contracts

-People-R & D & Prototyping-Legal fees (IP, Licensing, Regulatory)

-Manufacture / Capital-Operation and maintenance-Sales and Marketing

-Manufacturers -Integrators-Membrane Mfgs-Engineering firms

-Know regulatory landscape-Foster relationships with stakeholders-Hiring & retention

-Chemical distributors-Chemical End Users-Chemical Producers

-Better public image for clients-Decreased permitting time

-Brand -Relationships with stakeholders and partners

-Doesn’t Cause Earthquakes

-Other frac water treatment startups

-Make it easy for them to get rid of their waste-Brand = good PR

-Environmental Groups/Regulators

103

Key Partners Key Activities

Key Resources

Value Propositions

Customer Relationships

Customer Segments

Channels

Revenue Streams

Cost Structure

-Decreased disposal costs and volume-Decreased transport costs-Valuable Coproducts-Quiet electricity

-Service Providers for Oil and GasWater Treatment for Oil and Gas (Especially Produced Water)-Oil and Gas Owner/Operators

-Service providers for oil and gas industry-Oil and Gas Owner/Operators RESEACH ARMS

-Chemical Distributors-Oil &gas well service providers and water treatment companies

-R & D-Engineering customization

-People-Intellectual property

-Royalties from licenses-Service contracts-Strategic Partnerships

-Chemical sales-Electricity sales-REC sales-Brine treatment contracts

-People-R & D & Prototyping-Legal fees (IP, Licensing, Regulatory)

-Manufacture / Capital-Operation and maintenance-Sales and Marketing

-Manufacturers -Membrane Mfgs-Engineering firms

-Know regulatory landscape-Foster relationships with stakeholders-Hiring & retention

-Chemical distributors-Chemical End Users-Chemical Producers

-Better public image for clients-Decreased permitting time

-Brand -Relationships with stakeholders and partners

-Doesn’t Cause Earthquakes

- Produced Water Treatment companies

-Make it easy for them to get rid of their waste-Brand = good PR

-Environmental Groups/Regulators

Why Do We Do This?

Additional Resources

• I-Corps class summary: http://steveblank.com/2012/03/26/the-national-science-foundation-innovation-corps-what-america-does-best/• I-Corps team presentations: http://www.slideshare.net/sblank/tagged/i-corps• Resources for startups: http://steveblank.com/tools-and-blogs-for-entrepreneurs/• Books for startups: http://steveblank.com/books-for-startups/• Additional resources: http://steveblank.com/slides/