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Simon Entrepreneurs Presents Articulating Your Concept and Constructing Business Model Prototypes Instructor: Adam Bates ( adam.bates@simon.rochester.edu ) "Smart people (like smart lawyers) can come up with very good explanations for mistaken points of view.“ - Richard P. Feinman

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Presentation Transcript
slide1

Simon Entrepreneurs

Presents

Articulating Your Concept and Constructing Business Model Prototypes

Instructor: Adam Bates (adam.bates@simon.rochester.edu)

slide2

"Smart people (like smart lawyers) can come up with very good explanations for mistaken points of view.“

- Richard P. Feinman

slide3

Purpose of the Workshop

  • Support ideas with fact and demonstrated results
  • Introduce a “Scientific” approach
    • Identify a need/issue in a market
    • Make educated assumptions
    • Prove/disprove them in an objective manner
  • Provide frameworks for:
    • Articulating your idea and validating market demand for it
    • Constructing your business model and validating its underlying assumptions
  • Answer questions:
    • Is my idea a viable business opportunity?
    • Am I ready and able to play a role in its implementation? If so, what is that role?
slide4

Workshop Format

  • Introduce concepts and questions you need to answer
  • Provide practical guidance in doing so through examples and introduction of resources you can tap into
  • Will require independent research that you'll need to coordinate on your own
  • Reach out to instructor and/or Simon Entrepreneurs with questions
slide5

Iterative Ideation

Brilliant Idea

Brick Wall

Eventually Leads to…

Research

Breakthrough!!

slide6

Business Model Prototype

  • Need early focus, but…
  • Solution: develop 2-3 business model prototype designs
    • Market potential, risks, viability, key assumptions and issues
  • Goal is to find the optimal business model
    • Optimal business model = highest reward/risk ratio
slide7

What exactly is a business model?

  • More succinctly: “How you gonna make money”
  • - Lil John (2008)
slide8

Components of a business model

Don’t get caught up in the terminology…just try to get a feel for how to connect the dots between you, your partners & suppliers, and your customers

Infrastructure

* core capabilities: The capabilities and competencies necessary to execute a company's business model.

* partner network: The business alliances which complement other aspects of the business model.

* value configuration: The rationale which makes a business mutually beneficial for a business and its customers.

Offering

* value proposition: The products and services a business offers.

Customers

* target customer: The target audience for a business' products and services.

* distribution channel: The means by which a company delivers products and services to customers. This includes the company's marketing and distribution strategy.

* customer relationship: The links a company establishes between itself and its different customer segments. The process of managing customer relationships is referred to as customer relationship management.

Finances

* cost structure: The monetary consequences of the means employed in the business model. A company's DOC.

* revenue: The way a company makes money through a variety of revenue flows. A company's income.

Source: http://en.wikipedia.org/wiki/Business_model

slide10

What is the critical need?

  • Is there a known or accepted problem? For example:
    • “Many service and retail businesses want to provide an experience that is enhanced with just the right music. However, dealing with administration of performance royalties is a hassle, and non-compliance can result in fines.”
slide11

What is your hypothesis?

  • What do you think will satisfy the need or solve the problem? For example:
    • “By packaging customizable, performance-rights-compliant music into a single service, businesses can have the music they want and not have to worry about royalty payments.”
    • (It also doesn’t hurt that <company> already has contractual relationships with tens of thousands of these potential customers and they can undercut their competition’s cost structure through an Internet-based service)
slide12

Articulation of the business idea (1): Say it simply

  • Now bring it all together:
    • “OSA provides an online music delivery service targeting retail and service outlets. Its product also includes administration of performance rights royalties, removing this ‘hassle’ from its customers. Using an Internet-based distribution and service mechanism, OSA not only provides a more customizable solution than competitors, but it is also able to do so at dramatically lower costs.”
slide13

Articulation of the business idea (2): Draw it.

  • If you can’t draw it, you can’t sell it.
  • a few examples…

Product Sketch

Web page mockup

Service Diagram

Nightclub Promotional Flyer

slide14

Summary of Assignments

  • Answer the questions:
    • What is the critical need?
    • What is my hypothesis for addressing that need?
  • Sketch out 2-3 business model prototypes.
  • Articulate your business idea simply.
  • Draw/depict your product or service.
  • Know your industry and be able to summarize it with an overview statement and current trends.
slide15

Resources to build the knowledge base

  • Where do you learn about your industry?
    • http://www.library.rochester.edu
      • click “Databases”, then “Business”
      • Many to choose from depending on industry, but “NetAdvantage Industry Surveys” and “Marketline” provide good overviews
      • “Lexis Nexis” is a good source for trends
    • Do some Googling
    • http://finance.yahoo.com -> provides company and industry information
    • Look at competitors websites and annual reports
  • Where do you learn about consumers?
    • Encyclopedia of Associations
    • American Demographics: http://adage.com/americandemographics
    • More Googling and above-mentioned databases
    • Direct contact, surveying, and prototyping -> this is the topic of the next workshop
slide16

Appendix

A couple of aids to ideation

knowledge base first thinking through the venture with using four knowledge groups
Knowledge Base FirstThinking through the venture with using four knowledge groups
  • General Business Knowledge - an understanding of conventional business functions: Marketing, finance, operations, people topics, business law and accounting.
  • General Entrepreneurship Knowledge –Specialized information within each functional base.
  • Opportunity-Specific Knowledge- Knowledge of existing industry gaps based on observations and research
  • Venture-Specific Knowledge- Functional knowledgeneeded to understand key variables that influence outcomes. (Food & Beverage, Broadcasting, Thixo)

Learning curves are costly and may result in venture failure

d i v e model
D.I.V.E. Model
  • Discover an industry gap that is not being delivered or is delivered poorly
  • Innovate a venture solution that may respond to the gap
  • Validate your hypothesis through research and make clear, defined assumptions
  • Evaluate the findings and engage in planning
why you why now
Why you? Why now?
  • Who needs it?
  • Why do they want it?
  • What’s better?
  • Who gives it to them now?
  • How do they get it?
  • What could change?
  • When could I deliver?
  • How could I deliver?
s c a m p e r
S.C.A.M.P.E.R.

Isolate the challenge or subject you want to think about.

Ask SCAMPER questions about each step of challenges and see what new ideas emerge.

  • S Substitute
  • C Combine
  • A Adapt
  • M Modify/ Magnify
  • P Put to other uses
  • E Eliminate
  • RRearrange
scamper questions
SCAMPER Questions
  • What procedures can I substitute?
  • How can I combine prospecting with another procedure?
  • What can I adapt to the website to make it user friendly?
  • How can modify existing hair salons to improvethe experience?
  • What can I magnify to impress consumers about Eastman?
  • What other uses can be applied to the widget?
  • Should we eliminate packaging from deodorant?
  • Could we rearrange schedules to accommodate more part-time students.
  • One manufacturer substituted plastic for metal, added color and produced multi-colored paper clips so that papers could be color-coded, applying another use!