BUSI 701 Artistic Entrepreneurship . Class 8 Business Model. Videos: Danger 1 / 2 Google Makes Money Google Strategy. Midterm Check-In. Get specific More research Be prepared for group sessions. Risk Aversion. When was the last time you… …tried a new route home?
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BUSI 701Artistic Entrepreneurship Class 8 Business Model Videos: Danger 1 / 2 Google Makes Money Google Strategy
Midterm Check-In • Get specific • More research • Be prepared for group sessions
Risk Aversion When was the last time you… …tried a new route home? …went to a new restaurant? …said hello to a stranger in an elevator? How many of you order the same thing every time you go to your favorite restaurant?
Risk Aversion Risk aversion explains… …why all popular music sounds the same. …why all morning show sets look the same. (the window, the hooting audience, the jolly weatherman…) …why all talk shows look the same. (the desk, the format of standup and then interviews, the band) If it works, copy it!
Risk Trying something truly NEW is the riskiest of all. The newer and riskier your business, the longer your business plan will need to be. There is no insurance policy for a new venture. (Insurance is paying now to reduce risk.)
Paying to Reduce Risk Insurance Volvo Building codes
Vernon’s Razor • Value Proposition • Market Potential • Return • Team • Competitive Advantage • Business Model • Customer Pain Defining Opportunity Minimizing Risk
Business Model • How you will build an organization to redistribute the value you create • To “monetize” value you must identify best customer from value network • Reduce risk by using known models
Business Model • Startup capital • Scalability • Margins • Revenue model • Simplicity
Startup Capital • Startup capital: the less money we risk up front, the less risky our venture is • VCs call this “capital intensity” • The trick with startup capital is balancing the need to maximize our opportunity while also reducing our risk • Find ways to validate idea before scaling big • Often directly linked to scalability
Scalability • How easily you can replicate your success so that you can create even more value • Less infrastructure = higher scalability • Service vs. product business • Hard to scale talented people • Ideally you have a ready-to-use product • Outsource non-essential tasks
Margins • Simply: how profitable is your enterprise • Sales minus cost (COGS) • Ideally you take a commodity, add value and sell at a significant markup Video: Facebook generating revenue
Revenue Model • How you charge your customers (or monetize your value) • Flat price, subscription, installation, add-ons, etc. • One-time vs. recurring • Razor/Blade, Printer/Cartridge
Simplicity • Simple “value transactions” are preferred • Beware “house of cards” structure before value is created • Critical mass • Buy-in from multiple constituencies • Usually you can copy other good, simple business models Video: Kawasaki Model
Ideal Business Model • Startup capital: LOW • Scalability: EASY • Margins: HIGH • Revenue model: RECURRING • Simplicity: SIMPLE
“Countdown to Product” Article • Reaching customers • Differentiating your product • Pricing • Selling • Distribution • Support • Customer satisfaction Customers drive model video By Vivek Wadhwa
“Freemium” Article • Product stands out • Upsell strategy from the start • Once free, always free • One click away • No bugs • Harness collective intelligence • Keep improving for stickiness • Range of revenue • Time revenue to cover cost Video: charge for service By Katherine Heires