Ideation, business models; and how and where to start

Ideation, business models; and how and where to start

By Saberi Marais

Introductions

• Innovus

• Me

– About.me/saberi

– I know my strengths

www.strengthsfinder.com http://sf1.strengthsfinder.com/HomePage.aspx

Fact: Entrepreneurship is about you and your team! It is not only about: • Your idea/ technology/ opportunity • How much money you have, will raise,

what car you will eventually drive • Your business model/ Business plan

It is about: • How you

• Make/ source • Take advantage of • Execute- make decisions • Handle risk Regarding your opportunity/ place of work/ idea/ technology • If you work according to your

strengths, you’ll be happier and more effective.

http://www.strengthsfinder.com/

http://sf1.strengthsfinder.com/HomePage.aspx

Outline

• Introduction: Background and rationale

• Idea and customer development process

– Customer discovery

• Business model canvas

– Customer validation

– Customer creation

– Company building

References

• Steve Blank and Bob Dorf’s: The Startup Owner’s Manual: The step-by-step guide for building a great company

Every tech developer & business developer should refer to this book. Especially for the South African context.

References

• Alexander Osterwalder and Yves Pigneur’s: Business model generation

References

• Eric Ries’: The lean startup

References

• Harvard Business review articles:

– “Why the Lean Startup changes everything” by Steve Blank

– “What entrepreneurs get wrong” by Onyemah, Pasquera and Ali

Introduction: Background and rationale

Traditional startup process

Identify idea/

opportunity

Write a business

plan

Raise funding

Receive funding and execute

• Assemble a team

• Develop product

Introduce the product

to the market &

start selling

Success? Failure?

The model that we’re used to and that’s been promoted

Traditional process

Identify idea/

opportunity

Write a business

plan

Raise funding


• Assemble a team

• Develop product


to the market &

start selling

Success? Failure?

Right place at the right time OR Informed and guided by research & development OR Solution for a call for proposals, etc…

Traditional process

Identify idea/

opportunity

Write a business

plan

Raise funding


• Assemble a team

• Develop product


to the market &

start selling

Success? Failure?

Static plan that captures your idea and assumptions. Excel model IS BRILLIANT! Because it makes you an overnight millionaire.

Traditional process

Identify idea/

opportunity

Write a business

plan

Raise funding


• Assemble a team

• Develop product


to the market &

start selling

Success? Failure?

Assemble a team of designers, sales, marketing. Developers write many lines of code. Factories run overtime building you prototype.

Traditional process

Identify idea/

opportunity

Write a business

plan

Raise funding


• Assemble a team

• Develop product


to the market &

start selling

Success? Failure?

Introduce the product to market. Secure supply agreements with retailers or distribution companies and watch the volume sales.

Traditional process

Identify idea/

opportunity

Write a business

plan

Raise funding


• Assemble a team

• Develop product


to the market &

start selling

Success? Failure?

Depending on how the market reacts, you either make a success or failure… What happens when you fail? How do you know what went wrong? Which of your assumptions are invalid? Obligations to funders and shareholders?

Traditional process

Identify idea/

opportunity

Write a business

plan

Raise funding


• Assemble a team

• Develop product


to the market &

start selling

Success? Failure?

Research by Shikar Gosh (HBS): Failure rate of startups is 75%!!! Does the model meet our needs?

Where do we start? I was sitting where you are now, thinking to myself:

“This information (accompanying the traditional model and process) is great. But where do I actually start? What do I do next to apply the information? How does it slot into my execution plans? Do I focus on product development? Should I raise funding now? Later? When? What do the funders want to hear?”

Because deep down I knew I needed more guidance. Not only information.

Entrepreneurial process is second nature to some people, but what about the rest…?

Constraining factors for startup growth • High cost for first customer acquisition and

getting a product wrong

• Long technology development cycles

• Few people with appropriate risk appetite to form and execute a startup

• Structure of funding industry – Innovation chasm

– Access to appropriate funding schemes

– Knowledge and experience of the funders

• Number of people capable of building startups and lack of entrepreneurial ecosystems to sustain the companies

Source: Onemeyah et al

Wrong assumptions linked to the traditional process:

1. Startups are smaller versions of larger companies

1. Existing companies execute established business models, and innovate them from time to time to remain competitive

2. Startups explore suitable business models to take advantage

3. Existing companies have management structures and roles that are limiting to startups


2. The numbers and strategy in my business plan are the key means of conveying the underlying value in my business to raise funding

1. A plan is an untested series of hypotheses that need validation

2. Need to demonstrate that your solution is needed, then need to quantify that need to demonstrate that you are delivering value


3. The only means of determining the success of a startup is if the financials look good and the opportunity and deal terms meet investors’ requirements

1. Need to start with validated hypotheses and sound, executable business model

2. Need an informed plan to execute resulting strategy

3. Need to prove that you are delivering value to your customer, staff and eventually shareholders

We need an alternative model and process • To help Founders validate their vision and take advantage of ideas/

opportunities

– In a structured, iterative process

– Validation of real customer problems and needs

– Confirmation of assumptions of features

• To reduce wasting resources in the execution of your plan:

– Time: founders, investors, suppliers and customers

– Energy and pain: Founder’s and your investors

– Money: Founder’s, FFF and those of your investors

– Resources: material, customers, suppliers

• To reduce the number of unknown risks and reduce the impact of known and unknown risks

Cash is king to startups • Cash flow

Assumptions:

– You are selling whatever your service or product offering is to customers

• You have met someone’s need or solved a problem

• You know how to reach your customer: marketing, channels and promotion

– Your variable costs (materials, marketing etc) are lower than your sales price, and therefore you are making a profit

– Your total costs are less than you revenue so that you are making a profit

The alternative is embedded in:

The Lean Startup method

It favors:

1. Experimentation over elaborate planning

2. Early customer feedback over intuition

3. Iterative design and development over big design upfront

It allows you to focus on developing solutions and problems that are needed.

The principles and process underlying Lean

1. State your hypotheses in a model (Business Model Canvas)

2. Test your hypotheses by getting out of the building/ making the appropriate effort

1. Engage potential users, customers, partners to build rapport and obtain feedback on

1. Elements of your business model: features, pricing, distribution channels, resources, revenue

2. Focus on nimbleness and speed

3. Determine what your minimum viable product is with your immediate customer feedback

3. Agile development (from software development)

1. An iterative and incremental product development process that eliminates wasted time and resources

Starting with the end in mind is great, however… • People often recommend back-tracking from the end point or

vision to know what they should do to start

• What if you actually need to validate whether you should head in the direction of your vision at all?

• You need to determine : • If the end that you have envisaged is relevant. Does anyone care about

your solution?

• If the plan you have mapped to reach your vision can be achieved.

• Can you do it alone? Who else do you need?

• You may gather some valuable information throughout the validation process that adds to the feasibility of your plan

Alternative model incorporating Customer Development

Identified idea/

opportunity

Customer discovery

Customer validation

Customer creation

Company building

Pivot

Search, Learn, Build and refine BM

Execute, ramp up BM. What you’re doing:

Gains Gains

Pivot Pivot

Transition

Gains

Pivot

Gains

Pivot

Purpose: Reduce cost and wasted

resources Take advantage of validated

business model

The crux of Blank and Dorf’s book


Identified idea/

opportunity

Customer discovery

Customer validation

Customer creation

Company building

Pivot

Proof of concept/ early stage funding/ grant-type funding

Growth/ ramp-up funding. More “traditional” funding sources

Funding:

Gains Gains

Pivot Pivot

Transition

Gains

Pivot

Gains

Pivot


Identified idea/

opportunity

Customer discovery

Customer validation

Customer creation

Company building

Pivot

Proof of concept/ early stage funding/ grant-type funding

Growth/ ramp-up funding. More “traditional” funding sources

Funding:

Gains Gains

Pivot Pivot

Transition

Gains

Pivot

Gains

Pivot

Spending: Lean principles. Boot strapping.

Minimal expenses phase.

Once you’ve confirmed everything -> increase burn rate

to launch into market.


Identified idea/

opportunity

Customer discovery

Customer validation

Customer creation

Company building

Pivot

Provisional patent claim validation phase More the final application filing territory,

because the innovation has been validated

IP protection:

Gains Gains

Pivot Pivot

Transition

Gains

Pivot

Gains

Pivot

The later you can file the better, but before publication or your competitors or testing

Customer development process

Customer discovery

• Based on Founders’ vision and business model hypotheses

• Validate business model hypotheses, value proposition

Customer validation

• Research and validate the proposed VP

• Verify the business model is repeatable & scalable

• Min viable product

• Introduce to select few/ specific customers

• Pivot or proceed?

Customer creation

• Start of execution

• Building end-user demand & drives it into identified sale channels

• Scale sales

Build a company

• Transition the organization from startup to a company

• Executes a validated, scalable business model

Customer discovery: Goals

• Goal 1: Converting the founders’ initial hypothesis about the market and customers into facts.

• Goal 2: Test your understanding of the customer’s problem and determine if your proposed solution is relevant. > Establish proof of concept.

Build a relationship with customer segments: gain insights from their feedback.

“Customers don’t behave like your business plan.” Blank

Customer discovery

Steps

• Step 1: State the hypotheses

– 9 parts of business model canvas

– Write 1 pager briefs of each of them

• Step 2: Test the problem

– How important is the problem? How big can it become?

– Testing the components of the business model as well

– Gain deep insight into the customer’s workflow, organization, product needs and update your canvas.

Customer discovery

Get out of the building! Make an

effort!

Steps

• insight into the customer’s workflow, organization, product needs and update your canvas.

• Step3: Test the solution – Present your value proposition (product, pricing,

features) and minimum viable product to customers

• Step 4: Pivot or proceed? – Stop and assess the results:

• Customer’s problems or needs and their reaction • Confirm that the VP solves problems, passions or needs • Determine the sizeable volume of customers • Learned what customers are prepared to pay • What the expected revenues should be and what sort of

return you could get • Go / No go decision

Customer discovery

Business model canvas

• Alexander Osterwalder

• Definition of a business model:

– “It describes the rationale of how an organization creates, delivers and captures value.” Osterwalder

• To sketch out your hypotheses across 9 components of your business model

• Based in design thinking. The canvas facilitates planning, collaboration and discussion.

• www.businessmodelgeneration.com

Customer discovery

http://www.businessmodelgeneration.com/

Customer discovery

Source: Business Model Generation


How to use it:

• Use it as a customer discovery scorecard to track progress in developing a viable business model

• It’s a static snapshot of the business at a point in time

• As a result, you will have many versions as you learn and pivot, so keep track of them

• Look for insights and emerging strategies

• As you develop hypothesis, your business model becomes multi-dimensional

Customer discovery


How to use it:

• Read it from right to left

• It is suppose to be a macro-level snapshot of your business, the finer detail &/ questions &/ leads will follow through using the canvas

• Use post-it notes. Color pens. Tell stories about your hypotheses.

• Describe your organization, your competitors and enterprises with separate canvases.

Customer discovery

BMC: Customer segments

• Defines for whom you are going to create value, reach and serve

• Customers must want or need your product or service

• A company cannot survive without profitable customers for long

• Look for common needs, behaviors & attributes

– They need different offers

– They are reached through different distribution channels

– They need different types of relationships

– They have significantly different profitabilities

– They will pay for different aspects of your offering

• Make a conscious decision about which customer segment to serve, which to ignore and why

Customer discovery

BMC: Value proposition • The bundle of products and services that create value for a

specific Customer Segment

• The VP is why the customer selects you over your competition

• It solves a customer problem or satisfies a need. Which are those needs?

• Compete on • Newness

• Performance

• Customization

• You “get the job done”

• Design

• What is the minimum viable product that the customer will be interested in?

Customer discovery

• Brand/ status • Price • Cost reduction • Risk reduction • Accessibility • Convenience

Design your VP and your CS hypotheses Customer discovery

Source: www.businessmodelalchemist.com


Design your VP and your CS hypotheses Customer discovery

http://bit.ly/10TenJ7 Source: www.businessmodelalchemist.com


BMC: Channels

• How do you communicate and reach your Customer Segment?

• Through which channels do they expect to be reached? Which ones work best? Which ones are the most cost efficient?

• How do your competitors reach their CS?

• There is no point in having a Value Proposition if your customer doesn’t know about it.

Customer discovery

BMC: Channels

• Communication, distribution and sales channels are a company’s interface with their customer.

• These are points of contact that play a role in your customer experience.

• 5 Phases of Channels – Awareness

– Evaluation

– Purchase

– Delivery

– After sales

Customer discovery

BMC: Customer Relationship • How do we acquire, keep and grow customers?

• Clarify the types of relationships you want/ have to establish with specific customer segments

• Personal, Automated, self service?

• What does your customer segment expect???

• Motivated by – Acquiring customers

– Retaining them

– Growing customer segments

– Boosting sales by upselling to them

• What costs are involved in acquiring, retaining and growing customer segments?

Customer discovery

BMC: Revenue streams • The cash you make from each customer segment

• For which value are customers willing to pay?

• For what do they currently pay?

• Profit= revenues- costs

• What is the revenue model?

• Generate revenue streams with their own pricing, auctioning, market dependent factors, volume factors or yield management factors

• 1s off transaction or recurring revenue from the same customer?

• What are your pricing tactics?

Customer discovery

BMC: Revenue streams

• The cash you make from each customer segment

• For which value are customers willing to pay?

• For what do they currently pay?

• Profit= revenues- costs

• What is the revenue model?

• What are your pricing tactics?

Customer discovery

BMC: Revenue streams

• Options:

– Asset sales

– Usage fee

– Subscription fee

– Lending/ renting/ leasing

– Licensing

– Brokerage fees

– Advertising

Customer discovery

BMC: Key resources

• What assets do you need to make your VP and business model work?

• Enables you to – Create and offer your VP

– Reach customers through channels

– Maintain relationships with CSs

– Earn revenues

• Can be a combination of

– Physical

– Financial

– Intellectual

– Human

Customer discovery

BMC: Key partnerships

• The network of suppliers and partners to make a business model work

• Partnerships to optimize business models, reduce risk, acquire resources

• Types – Strategic alliances between non-competitors

– Cooperation: strategic partnerships btw competitors

– JVs to develop new business

– Buyer- supplier relationships to assure reliable supplies

Customer discovery

BMC: Key partnerships

• Ask: – Who are your partners?

– Who are your key suppliers?

– Which KR are you acquiring from partners?

– Which KA do partners perform?

Customer discovery

BMC: Cost structure • What are the most important costs of your business model?

• Which key resources are most expensive?

• Which key activities are most expensive?

• Is your model – Cost driven

– Value –driven

• With the following characteristics: – Fixed costs

– Variable costs

– Economies of scale

– Economies of scope

Customer discovery

Example Business Model Canvas Customer discovery


Business model patterns

• Un-bundling business models

• The long tail

• Multi-sided platforms

• Free as a business model

• Open business model

3 core business types:

1. Customer relationship business

2. Product innovation business

3. Infrastructure business

Are driven by differences in economics, competition and culture 3 types may co-exist within a single company, ideally they are “unbundled” into separate entities To avoid conflicts or undesirable trade-offs

Unbundling business models

Product innovation

Customer relationship management

Infrastructure management

Economics Early market entry. Charge premium prices. Speed is key.

High cost of customer acquisition. Economies of scope are key.

High fixed costs. Large volumes are essential to achieve low unit costs.

Competition Battle for talent. Low barrier of entry. Small players thrive.

Battle for scope. Battle for scale.

Culture Employee centered.

Highly service- orientated. Customer comes first mentality.

Cost cutting focused. Predictable. Efficient.

Unbundling business models

Un-bundling business model

• It’s about selling less of more.

• Offer a large number of niched products, each of which sell relatively infrequently

• They require low inventory costs and strong platforms to provide the niched content to buyers

• Contributors to the growth of Long Tail business models: - Decrease in cost of technology eg. Recording music

- Democratization of distribution. Internet access

- Falling search cost to connect supply with demand. Serach engines, user ratings, communities of interest have added to the easy.

The Long Tail

The Long Tail

• At least one substantial Customer Segment is able to continuously benefit from a free-of-charge offer

• Non-paying customers are financed by another part of the business model or by another Customer Segment

Relies on certain principles:

• The demand for FREE will always out-number the demand generated from selling items at any price point

• Examples

- The “Bait” and “Hook” model

- The Freemium model

Free business models

Example of Free business model: Bait and Hook

Free business model: Redhat


Customer discovery

•Based on Founders’ vision and business model hypotheses

•Validate business model hypotheses, value proposition

Customer validation

•Research and validate if customers actually care.

•Research and validate the proposed VP

•Verify the business model is repeatable & scalable

•Min viable product


•What market type are you dealing with?

•Pivot or proceed?

Customer creation

•Start of execution

•Building end-user demand & drives it into identified sale channels

•Scale sales

Build a company

•Transition the organization from startup to a company

•Executes a validated, scalable business model

Minimum viable product • A strategy used for fast and quantitative market testing of a product or product

feature, popularized by Eric Ries (author of The Lean Startup)

• Product has sufficient features to allow it to be demonstrated, an no more.

• It is not a minimal product, but a strategy to assist in the eventual sale of the product

• Released to a subset of customers, e.g. early adopters or industry

• Customer must understand the value and use of the product

• They must give you feedback

• Strategy to:

– Avoid building products that customers don’t want

– Maximize information about the customer and their needs

• It is part of a customer development methodology

Customer discovery

http://en.wikipedia.org/wiki/Eric_Ries

http://en.wikipedia.org/wiki/Eric_Ries

Minimum viable product

• Demonstrate the value in your technology in the most tangible form possible, where enable someone else to see the value in it

– Illustrated diagrams or 3D models

– Process diagrams

– 3D printing of your initial designs

– Animations or videos

Customer discovery

• When is it sufficiently demonstrated?

– Could be caught in a vicious development cycle and never reach the market

– Use of time and money

– Limits can be guided by performance metrics or industry standards

– Aim to attract client or

end-user feedback

in the process

Proof of concept/ demonstration

Develop

Validate

Design Test

Re-design

Customer discovery

Pivots: it’s the Founder’s call so do it right

• Concept coined by Eric Ries

• Are integral to the customer development process and a contributor toward learning, innovating startups

• Pivoting is when you change a fundamental part of the business model. For example:

– Incorrect pricing strategy

– Misunderstood customer needs/ problem

• Pivots are not failures, they are learning opportunities

– Embrace that startups fail regularly

– Experiments that you design will fail

• Traditional companies were rigid to the prospect of making mistakes and pivoting resulting in the firing of people!

• Operating in (chaos + speed + pivots) = SUCCESS!

Customer discovery

More on pivots

• Behavior that will lead you to not pivoting:

– Not seeing the bigger picture. Your perspective and focus is too close to the job-at-hand.

• Step back and gain perspective of feedback you are getting,

– Innovation/ Product infatuation. “Product love” limits your ability to see the wood from the trees. You deem the innovation or product an extension of yourself and your abilities. You ignore feedback on:

• Execution: what you can realistically achieve with what you have available.

• Your execution strategy.

Source: Inc.com http://bit.ly/13zylbC

Enabling pivots to work for you

• Make change part of your company culture

– Accept and communicate change. It does not diminish your stature as a leader and people won’t lose confidence in you. The opposite is true.

• Don’t go it alone

– Those around you can give you guidance, perspective and coaching. Don’t surround yourself with “yes” men.

• Leverage and listen

– Your network, co-workers, advisory board members and other leaders. Formally and informally.

Source: Inc.com http://bit.ly/13zylbC

Customer Validation

• Proves existence of a set of customers

• Confirms customers will accept the MVP

• Serious, measurable purchase intent among customers. How?

– Tests sales to convince customers to hand over money

– Online software: no. of plays, no. of uses

– Letters of intent or demand for a minimum volume

• Aims to prove there is product: market fit

Customer Validation

Customer Validation

• Proves that the business model tested and iterated has a repeatable , scalable BM that can deliver volume of customers needed to build a profitable business model

• During Customer validation: – Company tests its ability to scale:

• Product

• Customer acquisition

• Pricing and

• Channels

– Develop a sales road map for the market it identifies and targets

Customer Validation

Customer Validation

• Sales road map relies on information confirmed in your business model and builds on it

– Value proposition

– Customer segments

– Customer relationships

– Channels

– Revenue model

Customer Validation

Customer Validation

• Sales road map answers:

– Who influences a sale and who recommends it?

– Who is the decision maker?

– Who controls the budget for the product you are selling?

– Length of a sale? No.’ of sales calls?

– What is the profile of the early buyers/ Early evangelists of a product?

• It is not the same as employing a sales force.

• Test your MVP by asking customers if they’ll place orders for it

Customer Validation

Customer Validation Steps

1. Prepare to sell

2. Sell to “EarlyVangelists”

3. Develop positioning

4. Pivot or Proceed?

Founders must lead the sales validation team to get further insights into their choice of business model. Only Founder can make a call to Pivot or Proceed.

Customer Validation

Customer Validation Steps “Earlyvangelists” or early adopters

• Small subset of users or customers

• Will make a “leap of faith”. They will buy &/ use unfinished, untested products and give you feedback about it

• Characteristics:

– They want to be “the first” for the sake of gaining a competitive edge of bragging rights

– They have or understand the problem or need you want to solve

– They are actively searching for a solution

• Will spread the good news, often virally, about your product/ service to their circle of influence

• One potential mistake is to give heavily discounted alpha or beta products because then expectations of price are set

Customer Validation

Transition move/ Escape velocity

• Transition move is when you make the leap from (Customer discovery + Customer validation) to (Customer creation + Building a company)

• It is a major move based on:

– You have established a profitable business model

– Customers give you repeatable business

• It requires honest reflection on whether you have a scalable, profitable business

• These are the qualifiers for the move onto Customer creation!

• Are you going to spend significant money to sale the business?

– Relies on the facts that you have gathered thus far

Customer validation

Transition move/ Escape velocity

1. Assemble date

2. Validate business model

3. Validate financial model

4. Re-validate business model

5. Pivot or Proceed?

Metrics that matter in the decision:

1. Value Proposition

2. Customer relationships and the associated costs

3. Market type and attractiveness, number of units sold

4. Cost structure

5. Channel and associated costs of sales

6. Revenue streams and selling prices

7. Burn rate

8. Cash flow positive? Over what time period?

Customer validation


Customer discovery

•Based on Founders’ vision and business model hypotheses

•Validate business model hypotheses, value proposition

Customer validation

•Research and validate if customers actually care.

•Research and validate the proposed VP

•Verify the business model is repeatable & scalable

•Min viable product


•What market type are you dealing with?

•Pivot or proceed?

Customer creation

•Start of execution

•Building end-user demand & drives it into identified sale channels

•Scale sales

Build a company

•Transition the organization from startup to a company

•Executes a validated, scalable business model

Customer creation

• After initial sales success, company now accelerates the production and supply of its product/ service to its customer

• Increase the monthly spend (burn rate) to create end-user demand

• Then driving the demand to the sales channels from you BM

Customer creation

Customer creation

• The market type a company decides to address is very important because it influences their strategy

• Different market types have different revenue curves and urn rates.

• Market characteristics and dynamics dictate entry and execution

• Market types 1. New product to an existing market

• Marketing relatively easy • Users can describe the market and what matters most to

them • New entrant has a significant VP to what is existing out

there. • Users, the market and competitors are known • Competition entails comparing the product on features with

competing products

Customer creation

Customer creation

• Market types

2. New product into a new market

• Company involves customers in the creation of the product

• Or significant change in costs to create a new segment of users

• Product is probably unknown to users/ customers so getting feedback is challenging

• Key is not competing, but understanding if there is a large enough customer base and if they can be convinced to buy your product

• Be cautious to spend significantly on marketing and promotion in this type at first.

Customer creation

Customer creation • Market types

3. New product into an existing market : • Existing companies are missing an opportunity that

you can take an advantage of

• “Blue Ocean Strategy” by Kim and Mauborgne

• Re-segment that market as a low-cost entrant (competing on price) – Are there customers who will buy a “good enough” product at

a lower price?

• Re-segment the market as a niche entrant – Is there a market segment that will buy a new product

designed to address more specific needs?

– Is the niche sizeable enough?

Customer creation

Customer creation

• Market types

4. Cloning a successful business model in another territory

• When an existing business has been proven in one country but hasn’t been introduced in another

• Be careful of Trademark infringement.

Customer creation

Build a company

• Established a validated business

• Delivering to a sizeable customer segment

• Now it looks more like a company and less like a startup

– The guesses/ hypotheses have been confirmed and being taken advantage of

• Might mean a change of management

• Typically have to appoint the traditional roles of a business

• Business is now more focused on process and consistency

Build a company

Findings from HBR: Onyemah, Pequera & Ali

• Interviewed entrepreneurs in Hong Kong, Kenya, Mexico, Nigeria, UK & US

• Findings 1. What entrepreneurs regret doing:

• Starting late

• Failing to listen to what prospective clients thought of their idea or product. Their passion and ego made them respond negatively to feedback.

• Offering discounts too early as result of pressure from VC and themselves to make early sales

• Making early sales to a “soft” client base: family and friends

• Failing to seek strategic buyers. Can the buyer give you valuable usage feedback? Can they open new doors for you?

Findings from HBR: Onyemah, Pequera & Ali

• Findings

2. Getting past “gatekeepers” issues

• Being able to articulate your value proposition for a sale

• When entrepreneurs made a sale, they didn’t focus on the accounts receivable from debtors

• Being able to handle the following objections from customers regarding: – Efficacy

– Credibility

– Size of the company

– Price

– Switching costs

Customer’s objection Issue Proposed solution

Efficacy Skepticism of new products to deliver on their VP.

Offer free trial samples

Credibility Age, Gender, Personal background or experience level.

Tout partners or board members with solid industry reputations.

Size of the company How do you ease prospective clients’ concern about the fact that you’re a small company?

In small companies customers deal with the CEO, not a sales rep. Small companies can focus on product quality and value.

Price Prospect will push your price boundaries! Early customer discount

Counter the prospect’s cost:benefit reasoning toward discounts

Switching costs Prospects change in routines, procedures, systems or relationships to switch to you product/ service

Sell the upside of switching: save costs over a period, save pain that they have or may develop

In Conclusion • Get out of the building! That is where the facts are. Not at your desk. Pick

up the phone. Make skype calls.

– Reality from ZA is that our TAM, SAM and Target Markets are not necessarily here. We need valuable networks to reach info.

• Strike a balance between your Passion(Vision) and Objectivity

– Both can be used to convince others of the opportunity

– Passion: pulls you through the challenges

– Objectivity: your reality check for decisions

• Decisions must be based on fact, not faith

• Be creative in sourcing solutions to meet customer challenges.

• Don’t be afraid to experiment. Design your experiments well and test them to validate your hypotheses.

In Conclusion

• Failure is an integral part of the search. If you are afraid to fail in a startup, you are destined to fail.

• Make continuous iterations and pivots.

• Focus your efforts. Fast decision making. The iron is HOTTT! Strike!

• Communicate and share learnings. Soundboard them with your team, mentor or coach.

• Customer development starts with the customer’s buy-in.

• Don’t lose the passion. Be comfortable with uncertainty, chaos and change. Embrace it.

In Conclusion

• If your funders want a business plan, give it to them. The customer development process will give you facts to justify your assumptions in the plan. A plan is a good tool to align your thoughts and give you focus.

• Business models are dynamic, and evolve as you pivot and make iterations.

• Keep track of your progress. Step back and re-evaluate.

• Preserve cash while searching for a repeatable and scalable business model. Once these have been established, spend it!

Please connect with me

• Twitter: @_saberi

• LinkedIn: Saberi Marais

“A rising tide raises all boats.” JKF.

Ideation, business models; and how and where to start

Business

unbundling

business model

min viable

growing customer

minimum viable

profitable

business model

traditional