Designing a Customer-Centric Business Model

[Music]
[Music]
thank you very much for coming everybody
I want to say that the most important
thing we're going to do tonight is to
try to give you a chance to figure out
what your business model is and D just
gave me a perfect intro he said he's not
sure why he's here well most of you
probably aren't why do you need a
business model that's a really really
good question now by the end of this
evening I hope you will answer that for
yourselves now what is a business model
that's what I want to get to this
evening and I'm going to give you the
agenda up front so you have a sense of
it we're going to talk about a few key
Concepts number one of which is how do
you focus on the absolute essence of
what you do that's what we call a call
and then how do you multiply that to
Market in a way that's very efficient
and also get leverage from it in a way
that it is ultimately going to become
sustainable for you so that you can
operate your business for the Long Haul
and you'll learn five initials rsvpd
and by the end of this evening you
should be able to say to yourself okay
if I have an rsvpd model you're great
well how are you going to remember those
initials
when was the last time you went to an uh
invitation to something and you didn't
RSVP
it's never a good thing to do so you
just remember it that way you're going
to be able to figure out a great
business model by just rsvping it great
so
we've already asked this question but I
want you to all write down one thing now
that I've told you that we are going to
Define what's important about a business
model one thing that you think it might
be just write it down for yourself this
is for you not for anybody else just
write down one thing
so is anybody from HBS here by the way
okay lots of HBS students that means I'm
doubly challenged tonight because
there's Harvard students from all over
the campus all the different schools
here tonight and some of them haven't
had the benefit that you've had of going
through business school and learning
some of the fundamentals of why business
models are important so I'm immediately
going to bridge for you guys with the
rest of the Harvard schools so when you
go to HBS for those of you don't
you will learn something from a great
Professor Tom eisenmann and many others
something called the diamond and he
describes the business model in terms of
a customer value proposition a go to
market model a technology technology and
operations model and a cash flow formula
so as we are in a business school you're
probably going well what are those
things so I'm going to make it super
easy for the rest of you one two three
and four in iLab terms tonight we're
going to talk about how you create
deliver make money and do all of this
sustainably
and therefore the MBA students should
walk out of here going okay I know how
to go about building a business model
you guys should all feel like you've
been fully introduced to it and can also
do the same that's my challenge to
myself tonight
great so what is this framework that
we're talking about this thing that can
help you create and deliver value to
your customer and make money and keep
that sustainable it turns out it's a lot
of different pieces and so I'm really
only going to cover three of them
tonight this creating and delivering
will be the bulk of it but making money
we're not going to get to tonight we'll
give you the essence of it but we will
have it in a follow-up class doing it
sustainably we will talk about tonight
but again all of these elements are
covered in startup Secrets classes in
more depth uh going forward so I'm going
to give you a sneak preview of those
those of you are going to be coming to
Future classes we will cover a lot of
these in the startup secret workshops
going forwards so the the particular one
that I get excited about is next
workshop and the reason is it's the one
that covers this customer value prop or
how you create this value
and it's a whole Workshop unto itself
and it is the most fundamental piece of
a startup because if you haven't got the
right value prop in other words if
you're not solving a real meaningful
problem or addressing a great
opportunity there's no point doing
anything else because the number one
reason startups fail is
they're not creating value for anybody
who cares about it it's not a big enough
or meaningful enough opportunity or it's
not a significant enough problem that's
worth solving that's the number one
reason things fail so we're actually
going to tackle that next Workshop but
what I'm going to do is get you settled
in with a really fun way to think about
it regardless of any of this uh of
what's on the board
how many of you think that your
technology or your idea or your service
is really a breakthrough it's disruptive
yep in the back
my name is Maria and I'm building a
digital health and Ed Tech business that
is centrally helping people take charge
of their health
I'll say so Maria thank you first of all
for doing something that's as important
as health addressing Health what is it
that you think is breakthrough about it
um
I think
the
the actual business is targeting
non-consumers of the Health Market as of
currently
as in I'm not targeting what the Health
Care system is targeting I would say
okay very good so you've seen what you
might call a white space where there's
something that's not being addressed and
you think you can fill it by serving
consumers is that right
okay great
so even if your idea was terrible
which it isn't
if it was terrible we would hope tonight
to be able to get you to a place where
the business model you come up with is
itself a breakthrough
and here's the thing that most people
don't really recognize when they think
about business models it can be at least
as impactful if not more impactful than
your technology or your Marketplace
and so what I want you to do is to think
of tonight how can you end up with such
a disruptive business model that people
go wow I need to go work with Maria
because the way she's approaching this
enabling me as a consumer to get access
to the healthcare I want is such a
breakthrough that even if our service
isn't Innovation I would want to deal
with her does that make sense Maria so
that's why business models are really
exciting because they do give you that
potential
and by the end of this evening I
hopefully you will start to think that
way so here's a way to start approaching
it that way so Maria and all the rest of
you
imagine that I gave you a completely new
game tonight
so let's start with one you all know
who's played Monopoly
okay what if I said Monopoly was about
how much money you lose
you'd all go well you're crazy it's all
about how much money I win and the
properties I get that's the idea that we
want to come up with we want to come up
with a game that nobody's ever played
before or even if they have we changed
the rules and so now it's your game your
rules guess who's got the best chance of
winning
you you do if you write the game and the
rules you have the best chance of
winning of anybody
and by the way especially if you change
them in the middle which is what my
brother always used to do to me no no
kidding I really love him it's my
younger brother is a lot younger than me
it's always great but the point is this
is what actually business is about too
people do this all the time they do
change the rules also sometimes the
rules get changed on you but that's not
what you want you want to create the
game you want to cause an innovator's
dilemma if you can the late Clayton
christensen's great book is a wonderful
way to get a handle on this because
that's all what what it's all about and
this business model approach can be as
disruptive as technology
so what's an example of this so I'm sure
none of you pay attention to virus these
days
this is a long time ago so I'm going to
have to go backwards believe it or not
there wasn't even virus software 20
years ago because we didn't have viruses
they didn't exist they first came out
really got prominent actually on the
Macintosh and I happen to be working at
Symantec which was the first antivirus
Solution on the Macintosh and it was a
great business we used to sell package
software believe it or not in boxes
through retailers and people would pay a
lot of money for it that's how old I am
it's embarrassing but it's true all
right now the piece that's not
embarrassing is that we figured out a
really disruptive business model that
changed the game completely
and actually when Norton Antivirus for
the PC came out which is we owned Norton
too it wasn't a good product at all in
fact everybody's product was better than
ours that we could tell Dr Solomon and
then McAfee and all these other people
had much better Solutions so this was
pretty embarrassing for us you know the
Press would literally come up to our
stands at exhibitions and go see if you
can detect this virus and the answer
would be Oh shoot no you know so what do
you do you've now got this product
that's not great a Mac product by the
way was very good and we can't even
detect the viruses because we're not
keeping up with them we rewrote the
rules we said we're not going to sell
software and remember this is a long
long time ago so there weren't such
things as SAS models it didn't even
exist as a term there weren't things
like subscriptions things that you've
all got used to like downloading an app
and doing in-app purchases that's
subscription type model that didn't
exist
but what happened was pretty interesting
we literally ended up completely
disrupting that business and the results
were really fascinating
we took out two competitors within a
year they just were gone
and we ended up serving the customer
better because guess what customers
don't want software what do they want to
stop
viruses it's just a protection for them
all they really cared about was the
notion that something somewhere would
just make sure they didn't have to worry
about viruses
and so by selling them that service and
then creating much much more importantly
behind the scenes the subscription model
that said we would pay for the the
people in Ireland it was mostly where we
developed this to sit there and get
ahead of all the signatures of the
viruses before they happen or create
bases to even predict them and by
selling that as a service everybody won
we serve the customers better we started
to be way ahead of the viruses we ended
up creating a basis for them to say okay
I'm paying for this for a reason because
I saw 10 new viruses came out last week
and I didn't get any of them this is
like going to the doctrine being saying
being able to say look I don't know what
the next covet is but give me the shot
in advance that's what our subscription
service did
do you think people would pay for that
hell yes not only do they pay for it but
it actually changed the game totally it
ended up increasing the price of our
products that we were selling by 50 per
seat and then better still we realize
wow why are we selling all these other
things like backup and Norton utilities
and all these other tools that were
really about one thing which was
securing your data we just started
selling a data subscription service that
got us 2.6 times the revenue and profit
within some number of years I can't
remember the exact number but the point
is completely changed the games and it
was all business model and remember
where I started which is we had a worse
product
that's why I wasn't meaning to be
belittling to Maria I'm sure she's got
an excellent product but even if she
didn't just as we didn't you can have a
disruptive business model that can
change the game and set you off on the
right direction so that's why this
evening is important it's one of the
reasons
okay so what are some of these models
you will know these companies I would
imagine so how many of you have used for
example Netflix or Spotify
I use both a bit too much
so what is their model anybody anybody
who raised their hand or anybody else
who didn't what is their model
it's subscription yeah what else is it
it's a what
a library yes so it's got content in it
what else about it
do you pay for it all up front
no that's the subscriptionator of it how
do you get value from it
like when you're watching Netflix what
value are you getting
pleasure yeah it's pure joy but how do
they measure that
from how often you watch yes
um I've already been
with Swatch they pattern basically
watches everything yeah they're going to
say that oh you seem to be enjoying this
movie so much
maybe will you share your um what's it
called login details with before they
change they now
you know
so Abby is smart enough to have raised a
whole bunch of things so first of all
she started talking about for example
are we getting pleasure out of this
and they know that by how often we watch
and that turns translates into Data and
that data helps them you didn't mention
it yet but we'll we'll see it
recommendations right why do you go back
to Netflix because hopefully they
recommend something that you actually
really like so they can also sell that
for ads
and they haven't yet to date
but that changed now if you haven't
already noticed it it changed for a
reason because their stock price
plummeted when they started losing
subscribers and they couldn't compete
with all the other services that had
come out and so they said shoot we need
a great to be able to compete so they
introduced this other aspect of their
business model
so what I'm trying to do here is
illustrate for you you don't even
realize it when you're watching a movie
that actually there's a business model
behind this that keeps Netflix in
business and if there isn't guess what
they're not sustainable so they don't
meet that key criteria which is
ultimately the Outlast their competitors
and be the surviving winner
so you've got to think about this stuff
even though sometimes it's like not
obvious
so now how do I help you guys
well first thing I'm going to get you to
do and this time
I'm going to get you as a group to pick
one person in the group who's working on
a business so it could be yourself for
example and you get everybody around you
and you say Okay I want to know what is
an example of a business model I could
use doesn't mean I have to have to be
the right one and to get you going
is it a process or a product
so if it's a process for example to get
people Healthcare then it's probably
something you'll sell as a service is it
software or is it service so for example
um Clint remind me is that is your
product a software product or is it a
service a better described as a service
okay so can you just describe not
everybody was here last time you were
here what does City bricks do yeah sure
we're trying to give aspiring homeowners
access to investing in their local
housing market while they're saving up
for a down payment okay that sounds very
much like a service to me rather than
something you're going to go sell them
software physically because that's not
what they care about
okay great so content or data so who
thinks they have something that's data
for example
that they're selling
remember Netflix didn't say that they
were selling data oh sorry they were
acquiring data they just did it in the
background yeah go ahead
I'm operating a Marketplace for data so
literally that perfect so your product
is data awesome and then finally how
could you realize this would you do this
with an open uh Source type model or
proprietary freemium or premium
subscription or license we're going to
talk about that later so I'm not going
to say you have to do this now but be
thinking about that as you pick the
first thing so go to the whiteboards
I'll give you you really don't need more
than a couple of minutes just pick one
person first of all and then brainstorm
quickly about what do you think would be
the best starting point at the core of
your business model all right have fun
okay everybody did really really well
just to be clear so I didn't see any
team not get going once we started
letting you quiz each other and so any
one of you want to volunteer otherwise
I'll just pick somebody to talk about
what you did and how you went through
the thinking
great off you come Lisa yeah
yeah grab the board come to the board
and talk about it great
um okay so this is uh my business time
credit I'm nanga don't say the D the
business that I'm building is using
generative AI to translate accounting
tables and into written form like memos
and documents I worked in public
accounting for seven years it's very
boring work that a computer can do now
um so that's the product and it is
obviously software and so we went back
and forth a little bit whether it's data
or content I think we ended up with data
because like the more you use it the
more the ml like learns and like the
products the actual memos and written
reports it end up more improving in
terms of tone
um yeah perfect so let's let's give
first of all a warm round of goes
and you had a great team obviously so
you can sit don't worry so longer
actually has a very clear idea of what
she's doing which is awesome she knows
who she's doing it for she knows what
she's selling them which is potentially
software or data but is that the
business model
what does anybody think
because there's a difference next week
we're going to talk about what you're
doing and that value prop but what's the
business model without you answering how
could we help nonga so she's doing
something terribly important this boring
work that's done in accounting is now
going to be done by generative AI that's
fabulous it's gonna I'm gonna stop
making this up but free up people's time
potentially give them much more accurate
results and all sorts of good things
come from that how should she make a
business model out of that anybody want
to volunteer
Vivian
in my understanding a business model
also includes like an Excel table that
addresses how big the market is how much
people would pay for it how many of them
would pay for it how often
that is an important aspect that's
sizing your Market that's something
we'll talk about in the go to market
session but how's she going to make
money remember what we said we want to
figure out how we create value we
deliver value how we do that on a
sustainable basis Etc
anybody any ideas about what manga
should do in that regard we need an MBA
student to step in here you guys have
studied this
how about yourself
uh for a business model um I guess you
identify me doing a customer segment yep
um as well as uh products like pathway
or uh
okay let's pick that one how should she
sell it through what channel since uh
we're all going to be interested to
figure out how she can get this to the
customer as fast as possible and as
cheaply as possible any ideas and then
we'll allow us yeah go ahead you can go
to accounting firms great that's all I
want to hear so you already
just learned the secret to this class
which is I don't actually teach you
anything all the people in this room are
great peers who you can learn all this
stuff from so you don't need me I really
seriously mean this one of the most
important things you could get out of
the startup Secrets classes is meeting
each other and quizzing each other about
how do you do these things so you two
need to talk and now tell us how you're
thinking about it
um so yes it would be if I would start
with accounting firms and charge a
per user
user it would be price and there would
be like a basic and premium no premium
but in terms of like the Enterprise
tiering
um
yeah that's awesome that's the plan
fabulous not sure why you're in the
class because you're way ahead of it
it's really great honestly that's
exactly what we're trying to do trying
to tease this out for you and separate
things like what your product is versus
how you sell it get it to Market and
indeed how you're going to charge for it
and make money from it so you're in
great shape I'm going to take one more
because I want to make sure that there's
an opportunity to get through the rest
of the material anybody else really
dying to bring those up and also
challenge us to get some value to it add
some value to it yup in the back
all right so yeah the product is coffee
in a tea bag
um this is a product or one from Whole
Foods if anybody is interested in trying
it and uh that's a product our business
model is we link we buy the coffee
directory from farmers in Kenya and we
sell it to Coffee buyers directly coffee
buyers get direct traceability to
Farmers farmers get instant payment
they're paid more so that's the business
model and yeah we have all these other
benefits it's locally sourced more money
for Farmers higher quality coffee
organic we are trying to improve the
domestic consumption of coffee in Kenya
because coffee is very expensive in
Kenya so not everybody can afford it so
yeah those are the benefits
where's the round of applause for
zipporah that's brilliant
foreign
so anybody think that we could help
Zapora in any way I felt like she was
doing great but is there anything you
think hey zipporah for what you're doing
is something I would want to call out
that's at the core of your business
model that is what you're doing that's
the essence of it
what
what do you think
anybody want to take a shot at this like
if you were going to sell one thing yeah
go ahead
uh one thing about coffee is really the
extraction process so how are you going
to sell that to Coffee people that are
really into coffee uh when you're
suddenly get into tea bags because to
them this is like the enemy you know tea
versus coffee so how are you combining
the both of them
um you don't have to answer I want to
just make sure so what do you think that
should do in the business model how
should that come out in the business
model
I think she should highlight that like
why this is a premium product compared
to the what we have on the market the
regular coffee the
um
the pots or like for example if you have
a fancy machine then how is this
Superior to that just to answer that
question like why I should use this
product as opposed to using the regular
product on the market so that has to be
highlighted in the business model
sir that's a fabulous example again of
where I would sit down challenge each
other have that discussion and it's very
interesting because your premium pricing
immediately caused people to say so why
and so your business model somehow has
got to be supporting that and also
making sure that you're making money and
being able to improve the supply chain
that you've got but fantastic job thank
you very much all right well done
so like I said the beauty of this group
is that you're all smart enough to be
able to help each other so what I'm
going to do is provide some Frameworks
now so you can have the discussions
amongst each other
so let's get going on that so first of
all if you haven't already taken away
this this key message and you've already
hopefully heard me espouse it and I gave
the example with Symantec and Antivirus
and going subscription all these things
are what adds up to the perfect storm
for a startup you obviously want the
Breakthrough technology you obviously
want to be able to discover some new
market like consumers in healthcare or
for example some different kind of way
to get coffee to people but in the end
if that can become a disruptive business
model that in of itself is so
significant you have the perfect storm
because nothing's better than being in a
place where nobody else is with a
product that nobody else has got and
being able to sell it in a way nobody
else can be that's like wow we're in a
great place so that's what we're trying
to get you to and that's why this is so
important
so
back to what this business model is it's
about how you create deliver and make
money and then do that sustainably let's
get on to the create piece question
number oh please do yeah on the Venn
diagram so I guess I've been looking
mainly at things in like energy and
climate space B2B and in that one I
guess some of the advice I've received
is don't don't don't change all the
circles right if you have a new
technology definitely don't disrupt the
business model or the way you're
delivering it don't disrupt it yeah I
mean if you have a new disruptive
technology I guess like very well said
very well said so lasers bring out an
extremely important point which I want
to make on two levels first of all not
every one of these things is an answer
like there is no right answer to all
these things so in certain circumstances
you're going to have such a disruptive
technology that the last thing you want
to do is change everybody's way of
buying it because already you've got too
much disruption so you don't want to
jump five steps at once for example
because you fall down the stairs
but what's important and what you're
saying is how you judge this is at the
end of the day about what your product
is and who's buying it and how they will
consume it best so remember the title of
the search this session is the
customer-centric business model
so now Lisa how could you find out
whether you are disrupting too much at
once
bingo so you don't need me to answer
this question in fact I'm the worst
person to answer it your most important
guide to anything you do is your
customer
period end of story doesn't matter
whether it's your value prop your
business model or your distribution or
anything else that you get to work on so
don't take anything for granted what I
said at the beginning is what I really
care about this is the second key point
is I'm here to bring you to think about
the right things not to give you answers
so none of these things I'm telling you
are answers that just Frameworks who
don't get the right questions so
zippora's thinking is so good I think
she's way down the track on this but I'm
really glad that we got a challenge too
okay but how's she positioning this now
honestly it's great you're getting
challenged that here because this is
safe but really what you want to do is
go and ask your customers so why would
you pay a premium if I could do all
these things to improve the supply chain
why would this be something you would
engage and pay money for does that make
sense
does that answer your question okay
great
so next class we're going to take apart
the value prop statement and at the
highest level it's what do you do
uniquely well for who that's the
customer value prop on the other side of
this board it is this segment here and
you probably spent some time on that in
the mba's course already but what we'll
do next week is talk about how do you
actually get it down to its absolute
minimum Essence so that you could get in
an elevator for example and Pitch it
so that's next week but
I've got good news for you we're going
to cheat this week we're going to give
you the advantage before we even get
there we're going to tell you what the
most important thing in this is
and it's what I call the call
and we really want to focus on it
tonight so
what is the call well as I've already
told you I was a terrible student so
everything has an acronym
so the acronym for this
is it is your capability of really
exceptional value
it's the thing that when somebody says
they will say because X
and ideally it'll be like one word
like incredible experience so it's the
taste
that would be for example uh if you
would if you're selling a food product
or maybe if it's Netflix it's the
recommendations or you pick it but it
should be something that is so easy for
you to test with customers that whenever
they think of you they say yup that's
what you guys do you're just excellent
at bringing better taste giving better
recommendations finding me the next
piece of music I wouldn't have found on
Spotify whatever it is so exploration or
Discovery would be the word for Spotify
by the way that's why I use Spotify
because I'm too old to find good music
so I just go on Spotify and ask all
right so what do we do to cut to the
court I'm going to give you some
examples and uh challenge you at the
same time anybody want to say what is at
the core of Harvard University
Prestige anybody else have a different
word
why did you come here
education what else
access
oh this is awesome great so great good
news Harvard's got lots of words
and you're all here for a reason so I
don't need to challenge that one anymore
let's go to somewhere a little bit more
interesting how many of you use Reddit
quite a few of you okay I'm gonna pick
somebody who hasn't talked gentleman in
the back with glasses
why do you use Reddit I don't really
like red audience today but I think one
of the things that they do very well
being able to share
so I'm going to challenge you a little
bit you don't like it but do you use it
yeah why one one word why
uh
I think the people and the community
great done okay so I could have given
you a different answer it might have
been not the people it might have been
the actual content itself it doesn't
matter what it is but you got to the
core eventually right it wasn't well I
love the user interface
it actually sucks in my opinion but
that's a whole nother story the point is
that there's something in all these
products or services that is at the core
of why you use it okay anybody use buy
Patagonia stuff I happen to be wearing
my Harvard Patagonia fleece earlier this
evening that was given to me so I can't
answer go ahead
uh I mean they have a promise of a
better Supply
okay great anybody else do it for a
different anybody else wear Patagonia or
buy Patagonia yeah
because of the style great so we've got
style supply chain what else
was actually a culture culture say more
about that I always saw Patagonia as the
specific brand associated with a certain
type of people and community so it's
almost like it embodied a certain
culture whether it was the finance bro
the VC bro but that whole so so it was
kind of like okay so a Patagonia
sleeveless vest okay you get you gotta
get that as part of the look fabulous
okay so listen to all this this great
feedback here uh I will say that that's
one of the things that uh Drew Claire
who helps me with startup secrets she
produces all this great content so thank
you Claire uh she put this in here
because she thought we should have
something that's about social missions
actually a lot of people buy Patagonia
because of the social Mission or the
culture or what it represents because
you can buy the same clothing from all
sorts of different places and sometimes
cheaper I mean you could go to REI and
buy you know five different other kinds
of alternatives to Patagonia but a lot
of people buy it because of the culture
of the social Mission behind it not
because of the supply chain but by the
way you're not wrong everybody has their
own reasons for doing things but you get
into the point here where I hope you
understand anybody not feel that they
understand what I'm talking about when I
say core now your capability of really
exceptional value and please ask me any
questions
yep go ahead Maria
since so far we've seen that the core is
such a a diverse response
um
and you were saying that it's the first
thing that people think about so
um essentially what I'm getting at is
like
if you
um as a Founder think the core of your
business is one thing many of your
customers think will think that the core
of your business isn't something else so
Innovation we just accept that like
diversity because even with our room
here there were so many different cores
so is that okay
and how can we leverage that diversity
of course in the business model
so let's draw this like this
because Maria's asking a great question
let's say your Market's here you're
sitting in the middle of it here and
you've got all these customers telling
you all these different things all over
the place somebody in this room tell me
whether that matters or not and what you
should do about it
anybody wanted to help Maria with it
answering that question does it matter
that you all came up with different
reasons for buying Patagonia
is going to be the protagonist of a
brand it has to have more than one core
because you're appealing to uh Target
yes but we need it to be attracted to
different to different desires yep and
so on purpose you design something that
will appeal to different people in
different levels
okay different desires for different
people
and somebody had their hand up at the
back so I want to capture you my name is
knuckle and I think what she pointed out
to sounds like a
problem where you want to understand
your brand positioning and you want to
convey your idea in the best possible
Manner and you know truly through market
research or knowing your position in the
market in the best possible Manner and
stick to that you know position and
portray that because ultimately as we
saw although initially customers said
something else but at the code there is
one particular reason why they are
buying into it like apple it's not just
the phone it's it's about the feeling
so I guess it doesn't matter what others
might be saying which might be a noise
but it's better that how we understand
where we are positioned okay very very
good now just because of time I'm going
to stop at two View and because next
session we're going to ask answer a lot
of these questions but what I want to
recognize this group
uh is that you are doing a great job of
describing why
business model is not one thing it's not
just your value prop and how you get
positioned to the marketplace it's
sometimes actually how people are going
to find you and buy you and indeed how
you will actually make money from them
and also how you will in process in the
process of supplying for example your
coffee make money yourself it's all
these elements
therefore all I was really trying to get
to was one thing here which is you still
can't monetize everything
like if Netflix decided they wanted to
monetize their recommendations as well
as their data as well as their
advertising as well as their content
that would be a very messy business in
the end you have to pick something that
is at the core of what you're going to
monetize for your business model that's
all this exercise is about but what
you're raising and I do not want to in
any way shape or form stop this great
thinking is all sorts of things that are
about actually your customer value prop
and that's what we're going to talk
about next session now I'll give you a
little guide to this because it's this
Claire and I challenged ourselves
we took too long on it last time we did
the session so we will put this in the
workbook for you it turns out there is a
trick to this though when you're a
startup of one like you're one person
trying to build your business and you
have thousands potentially millions of
customers even and they all pull you in
different directions what happens to
your energy
it's diluted it's get dissipated it's
pulled in all sorts of different
different directions how's your business
going to do
not great you have to pick something and
we call this a minimum viable segment an
mvs
and it's where everybody has the same
need so if everybody has the need for a
faster supply chain for their coffee or
for a culture that is the basis on which
they buy things or with a better means
for a consumer to get access to health
care that single need if it's the same
across a set of customers is where you
want to focus and that we call a minimum
viable segment we will put that
explanation up in the workbook for you
and we'll give you some examples of it
so you can go look at it because it's
honestly the basis on which this
conversation works for both of these
points which is you do need Focus
because otherwise you'll never make any
impetus but your brand or your customer
value proposition might be recognized to
your point with positioning that people
say well apples lots of things to me
but what does it actually stand for when
you buy a product some people will say
privacy other people will say usability
doesn't matter those are brand
attributes they're a different set of
things can you monetize usability yeah
you probably can can you monetize
promise privacy probably well what does
Apple actually monetize
a complete integrated stack from top to
bottom that you can rely on that's what
I would say for example anyway great
conversation let's keep going so I want
to get through the material we have got
through the most important thing which
is an understanding of how you cut to
the core and now I'm going to give you a
chance to see this in action
so great news the company I'm about to
introduce you is called tetracytes was
started right here in the iLab and with
students who are In This Very Room at
one of the iLab one of the startup
secret sessions and they actually came
up with an idea that's really incredibly
obvious which is that scientific
instruments all over the world lack
connectivity you can't actually get the
data off them people all over the world
in Labs today still go and take readings
from these instruments and they hand
write them into their notebooks or maybe
electronic notebooks crazy right this is
like everything's connected these days
no it's not
tens and hundreds of thousands of
instruments are not so they were
addressing an emerging pain and the
first thing they did was
they created a hardware device it's like
this was the uh back six or seven years
ago where everything was iot
so they created a box sounded great
I remember back in the launch lab over
there going into the inventory room
looking at that hardware and thinking oh
my God
all the different versions lots of
expense of inventory Etc so I can tell
you fast forward that was not the right
uh thing to monetize
and that's just giving you that answer
right off the bat
it actually nearly killed the company
actually to be clear the whole first
round that they raised flushed on the
train caused the founders huge
challenges they ended up having
unfortunately one founder fell out gone
so this is how badly business models can
mess you up the good news is
they live to tell the tale and because
they figured out what the right business
model is and I'm going to let you try to
do it for them so now you know that iot
and Hardware is not their business model
let me tell you some of the other pain
points the customers had they really
struggle with basic things still
required hardware for this by the way to
detect when instruments failed
they also really struggled to get the
data in a form that they could use so I
just told you you'd obviously don't want
to handwrite this stuff
and they realized that if they could get
this data in a form that they could
store and sometimes it's huge amounts of
data any of you working in bio
yeah how big is a DNA data record
s so imagine taking tens to hundreds of
gigabytes you can't write that stuff
down but you've got to store it
somewhere and they have it what's called
in a temporal form which means over time
they need to check the DNA so now
imagine thousands of records of tens to
hundreds of gigabytes you don't store
that on your floppy Drive well those
don't exist anymore but CDs or or your
hard drive that just you're gonna run
out of space on your iPad for sure right
so where might they put that
Cloud okay somebody's starting to think
good
so what is the right business model for
tetriscience and I'm going to give you a
big clue
this is the diagram
that they came up with when they
realized they could connect everything
to everything
so now they've figured out they could do
that
so now as a group
take a minute or two I'll give you two
minutes to think what would you pick as
the data as the business model excuse me
for tetrascience and you might use some
of the principles you're already going
through just think well what's at the
core of their business opportunity and
then how might they monetize it
I'm hearing really good discussion about
what it is in fact this table is in such
big debate that there is a four to one
vote against a particular viewpoint
so we're actually going to go right
there so
Alan you said Hardware tell us why you
said Hardware the mic's right there
the core of that value proposition is
hardware and that's what they should
monetize because you want to get the
data into the cloud you need to be able
to connect from the instrument to the
cloud so you need that standard solution
to because you have so many instrument
providers it will be really difficult
challenging for each of them to build a
solution to connect to get their data
into cloud in the first place so you are
standardizing that part fantastic answer
I really agree with that absolutely
agree with it you guys what do you think
uh so so we were thinking uh software uh
either like a standard standardized
Cloud solution or uh Marketplace uh to
connect the people who produce the data
and and use it okay so as you can tell
we have fun and four of you said that
right okay so let's just put this to the
test in the room Hardware we have one to
four
for software show of hands everybody
thinks Hardware
it's just you and me cheapest we're in
deep trouble
really are the rest of you asleep hands
up those of you think software
anybody's hands not up you've definitely
had too much pizza
all right great so there's an
overwhelming belief it's software
all right what if I said none of your
are right
in terms of where the company went where
would you go
so over here we had some good thinking
going on do you guys want to say what
you came up with
so we were kind of debating what to
think about in terms of Hardware versus
software and I thought about like a
Garmin versus a whoop which is just like
an athletic device and they each have
their own
um I guess apps or whatever where all
the data goes and there's no way to
really just connect both of those into
to like compare them together I guess
um so that's kind of where we were
struggling to figure out a solution but
I think the concept of having
um one Hardware that is I I think like
Oracle maybe would be a good example of
that
um in terms of what was it about Oracle
that you thought was an example in terms
of their Hardware products
um that I guess it's like it's very hard
to switch
um to a similar product
um
I don't know I was struggling this is
the kind of thing this is hard just to
say it's really really hard does anybody
have an idea thank you by the way for
digging in on that I think a lot of
things you're talking about are the
right things to debate when you're
trying to figure out your business model
because it's not easy and what did I
just tell you if we get it wrong causes
you to almost implode as a business
found a Fallout all sorts of challenges
it was literally a couple of years
written off because we couldn't figure
that out uh anybody have a different
View
so our group actually thought about
essentially what you have there is a
problem of you initially thought
connectivity but it's actually data
management so we were thinking of a
platform like a SAS platform for
Enterprise where you are leveraging apis
and you're trying to build like an
ecosystem for this data to start sitting
somewhere so you can connect producers
on the one side versus consumers of the
data and any other people who help with
analyzing the data in between
we needed you on the founding team of
tetra science you would have saved us
years and millions of dollars if you had
been able to help this team understand
that
so not only is in tato turning out to be
right for tetriscience but at the core
of this and we they by the way this they
you know in a very basic way describe
this as spaghetti because that's what it
looks like this bowl of spaghetti has at
the core of it the ultimate need that
the customer has which is to get at the
data
it doesn't matter how it gets there they
couldn't care today whether they created
the hardware to connect it or whether
the instrument manufacturer did and in
fact your point and tattoo about the
ecosystem if they kept producing the
hardware they would have ended up
competing with all the instrument
manufacturers who themselves need to
create the connectivity so instead they
made an ecosystem to the exact word you
used and all those people are partners
to them
and on the other side of it the people
who want to use that data the Pharma
biopharma companies that they've focused
on so they picked biopharma as their mvs
those people don't care about how the
data gets there either all they care
about is that they have a data pipeline
another great word you used that puts it
in the form normalized for them and in
fact makes it literally that usable to
them that they think of it as
Switzerland
so in the middle of this they've become
an envied leader because they connect
all the data to all the places it might
get used and provided in a normalized
form I'm dramatically simple like this
business has skyrocketed triple triple
double double it's probably going to be
one of the fastest companies to reach
100 million dollars in less than five
years
after being Nearly Dead
one reason business model
makes sense
any questions
okay let's keep moving
sir I've got great news for you you only
need to start where we've already been
we already had Lisa explain to us that
she had something she wanted to test
start with your customer
so take a moment just as a group and
write one thing that you think
that your customer needs just one thing
so I'm giving you 30 seconds it
shouldn't take more than that
so what did this table come up with
oh
um the main thing was personalization
personalization okay great so what is it
about personalization that is going to
be valuable to your customer not you to
them
um I think health is a personal journey
and that's perfect stop right there well
done of course it is
health is a personalized Journey
fantastic who else what do we have over
here Abby
like um with some representation perfect
so why is representation what the
customer really needs
the customers are actually students
because what court is all about is is a
service
for students to have teachers who
actually look like them especially in
public schools in the US especially if
you have students in your class who are
not Americans so how can they have Role
Models representation proper
representation in schools and we picked
representation perfect what I love about
Abby's um one word there is that cohort
is trying to deliver this education to
people who need to be represented by the
people who are teaching them it's like
the teacher is themselves so they can
understand what the student needs is
that right Abby
perfect and it wasn't me it came up it
was you so and you've got a great name
for it too so now you understand what I
mean by figuring this out actually isn't
that hard if you can get from the
customer standpoint okay Claire we're
back to your table they figured it out
yet
all right what is it
all right it's basically a faster
evaluation time for the data set they're
looking at so the the turnaround time
from when they want the data to be able
to actually get their hands on the data
that's their biggest problem great and
and were you describing this for cold
press AI perfect okay so it's turnaround
time
Perfect all right you guys are doing
great so
we've got to the place now where on the
second piece of the business model and
that is okay we figured out how to
create the value but how do we deliver
this value and what is the thing that's
going to make that powerful and
disruptive
what we're going to try to do is think
about around your core what is it that
you can do
to actually get a multiplier that will
take your value higher and a lever that
will take your costs lower and it starts
to address this issue of how do we get
to make money uh in the cash flow
formula for those in the MS MBA classes
or how do you make your operations model
effective so it can be sustainable
so
what we want to do is think about that
core that word that you all came up with
that key thing or for example if you
want to think about tetrascience how
they actually decided to take the data
and create the ecosystem around it that
would give the people on both sides of
it the instrument manufacturers and then
the biopharma companies the usage of
that data in an effective way so the two
techniques are for multipliers we want
to increase Revenue
if you just sold a dollar for a dollar
you wouldn't make any money just to stay
at the office we want to increase reach
we want to get to more people that's
part of the go to market we want to
increase coverage when people buy your
coffee we want them to drink it lots of
times a day or when people buy your
health care you don't want them just
buying them as individual you want them
telling friends about it and so it
spreads virally for example those are
all multipliers that takes up for those
of you are interested in these things
your lifetime customer value your LTV is
often called
or or on the other side we want to
reduce the time it takes you so you just
gave a great example if we can reduce
for your customers the time it takes for
them to get the data that's huge value
to them you're nodding your head so I
think it must be right and we obviously
want to make sure that for you while
you're doing that you're reducing your
costs as well as the customers costs of
actually using your product and anytime
you're reducing things like resources
whether it's people time energy Etc
that's a lever
and if you're doing that around the core
you're going to increase the value the
ultimate value that the customer
receives and you're increasing your
ability to be a sustainable business so
even if you have a non-profit this is
important too because even if you're
just delivering a service that you don't
want people to pay for you've got to be
able to sustain your business in order
to be able to keep delivering that
service
all right so
let me tell you how you designed that
first off your product needs to feed the
business model so the user's got to have
an experience that they love
so I've asked this question before but
I'm going to ask it again because it's
so real how many of you downloaded an
app on your phone
hopefully all of you okay good how many
of you have deleted one within the same
period of you know within like five
minutes of deleting it
okay clearly not either a good
experience or a good value honestly that
happens all the time I mean it's it's
part of experimentation so remember that
when you're thinking about designing
your value you want people to have a
great experience of it right away
it leads to four startup secrets that
I'm going to walk you through and you
can design these from the get-go you
don't even need to have a product you
can start with for example literally
your paper prototype and start thinking
about this
the first is my favorite
so a long time ago I used to call this
a startup secret called slippery and
it's basically the same essence which is
that we want to make something simple to
use and install
we wanted to make it low to no initial
cost
instant and ongoing value
and then make sure it plays well in the
ecosystem with everything else around it
now I just said a lot but actually it's
all brain dead simple and if you think
about that app experience you had it
clearly was simple to use and install or
simple to install at least you just
click to download it but it may not have
been simple to use that may have been
one of the reasons you uh you know threw
it away I see a lot of you nodding your
heads was it delivering instant value
well clearly not you threw it away
time to value is incredibly important it
doesn't matter whether it's a service or
a product or whether it's data if it
gives you instant value you're going to
keep it and then finally plays well in
the ecosystem if you have to change your
phone to use the app do you are you
going to use it
I don't think so
there are things that already exist so
this is to your point Lisa you don't
want to change too much if it's
disruptive to adopt something it's not
going to work
so I often say a startup secret that
comes up lots of times is the best value
props actually highly disruptive
but non-disruptive to use
and for example if you are building a an
Enterprise product these days you don't
build it on
stacks of Hardware that you run under
your desk which is how it was 20 years
ago you build it in a container and you
just deploy it to AWS or your favorite
cloud provider
that's incredibly non-disruptive to do
and it gets you huge benefits so this is
what you're looking for you're looking
for products that have a slip which is
now turned into a term that's become
popular 15 years later called Product
LED growth so if you want to go and
investigate more about this how do you
make products that are slippery that are
really friction free and how they they
can help you with product lab growth yep
go ahead and donga
um I was just wondering for example for
enterprise software what the value would
be for example having an API model
versus something that can just be
instantly downloaded where there might
be a little bit more friction but it
might also reduce churn because it's a
little bit more personalized and then
also a little bit more integrated that
way wow you came up with a whole bunch
of things again and I've thrown your
board away but that's okay
um we will put it over here that are all
great questions so I'm going to answer
some of them later just to make sure
that I keep the class on track but you
said apis
and you said for example how do you
reduce churn
and there was one other thing you said
um so it would be more personalized and
a little bit more integrated I imagine
integrated yep integrated personalized
these are all good things
so some of them I will answer
next week
one of them I'll just answer right now
to give you a sense of this so if you're
selling an API are you selling that to a
developer or are you selling that to an
end user
algae Department
grading it okay so I'm going to give you
two examples of companies that have
played in this world one that was
extremely successful one that failed and
what I want you to take out of it is
well what would you do
so anybody know twilio
okay twilio actually it's not doing
terribly well at the moment of the stock
market but incredibly successful story
of an API first company in fact many
people would say they kind of led the
API economy not really true Amazon did
years before but they started selling
everything they did but they sold it to
developers apis because developers don't
actually want a product that's finished
because then they've got no job
State the obvious right so you wouldn't
sell it to a developer end users don't
know how to program
so would you sell them an API
they don't know what to do with it so
you just got to be very clear what your
audience is who your customers who your
buyer is and what they want to buy and
what problem you're solving for them
developers love apis because it gives
them the ability to get a multiplier on
their experience and build things
quicker that's why Trulia took off I'm
actually not going to mention the name
of the company because I'd rather be
embarrassing for them but a company that
we have backed so I'm admitting this the
nature of venture capital is you pack
things some let's go wrong students came
up with a brilliant API in the
healthcare World it failed terribly
because Healthcare developers didn't
actually have any clout they're not the
people who hold the budget in healthcare
and so even though they love the product
they couldn't get anybody else to pay
any attention to it or give them budget
for it because they just wanted a
solution the healthcare provider said I
just want the solution give me the
workflow give me the process give me
anything but I don't want to develop to
go for six months and and customize this
so what I hope you to realize takeaway
from that is one simple thing it's about
the audience back to the customer first
and it's about what are you giving them
that gives them a solution to a problem
that's really significant to them that
they can immediately use back to slip
simple for them low to a note initial
cost instant and ongoing value for them
and it plays well in their ecosystem how
does a slip make sense
great all right thank you good question
so hopefully you wrote something down
that's useful to you and you'll use
after the workshop
and now second startup secret how you
price and package this is incredibly
important
so if every app you wanted to try on the
App Store
cost a thousand bucks
I didn't need to even say anymore
it usually is free right the first thing
they do is say download it but what they
don't tell you in a lot of instances
that oh when you start using it by the
way there's an in-app purchase I see a
lot of you nodding your heads okay it's
true with online banking too by the way
oh Free banking no fees everything else
how do they make money
interestingly lots of different ways
sometimes it's on your data even though
they don't tell you that
sometimes it's on referring you so it's
lead generation of getting you onboarded
with their Bank sometimes it's on the
back end with the credit card that they
then sell you that you do pay for
there's all sorts of ways that people do
this but to start off with it's
attractive when somebody says free
so how you price and package is
important it's often by the way true
that when you figure this out it's a
series of steps you take
and I encourage you to think about where
do you want to start and how will you
get to a place where you ultimately
delivering value and being paid for it
that's what the business model is really
all about
so
next key example is a very easy one
anybody use wistia by any chance if
you're in marketing you do
so
um clad you want to describe what wistia
does
it's essentially a platform for hosting
videos so they make it really easy for
marketers who don't have a videographer
and their team but want to use and
promote video content to just upload
stuff and you see how they've tiered out
their pricing they do it based on the
number of videos that you store so the
more stuff you create the more you end
up paying them great thank you class so
I I was hoping that one of you would use
it but thank Claire is thankfully the
customer in this case it's drawn people
like Claire in for a simple reason which
is there's no cost to start trying to
use it if you have a great experience of
it then you can play for the POS the
plus piece if it really takes off it
gets viral adoption you might have for
example a work group that uses it and
they pay the pro subscription and if
your whole Enterprise takes it then you
start paying a lot more for it that's a
classic strategy go ahead Sephora can
you do the same thing
or
great question what does anybody else
think in the class
yeah go ahead Lisa I feel I feel the
bundling or like bundling or
if I won't get one if it feels a little
different because there's still a cost
to initial entry whereas this one it's
almost like a it's like if your coffee
had a taster like for two weeks you can
get free cups of coffee at the kiosk in
Kenya like it's the free entry that I
feel like is different in this model
versus the other ones which are more
about cross-selling or upselling or
great so zippur I know that wasn't a
complete answer to your question but
it's a good start to the thinking so
bundling as it turns out is a whole
science into itself we will put a link
in the workbook to uh one of the people
who has a fantastic view on bonding has
done a great video on it it's a guy
called shashir mahotra in fact he's the
uh founder of of uh Coda the what the
workbook is built in and he also used to
run YouTube before that and he's an
expert at this so rather than me try to
half answer your question I will say the
following incredibly important question
there's no right answer there's lots of
times when bundling can make lots of
sense but you have to think about it as
a separate science in this but great
question it's absolutely the kind of
thing you should be thinking about
all right
next startup Secret
if you can co-create stuff so in other
words not just build it on your own but
co-create it with other people you can
create tremendous win-wins so how many
of you know what open source software is
before I explain that all okay so about
half the class
so the notion of Open Source software is
very very simple which is that anybody
can build a piece of this code and put
it in an open repository so that anybody
can look at it anybody can adapt it and
anybody can use it any way they want I'm
I'm grossly simplifying
why did open source get started because
people realize that actually it's a lot
easier if I have the problem to design a
nightmare developer to design the
solution myself why why do I have to go
pay some other giant company to do that
if I'm a coder I'll just develop it and
guess what if I want people to keep
adding to it I'll say hey take a look at
this see if you think we should do
something better and pretty soon
hundreds of thousands in fact millions
of people have contributed to open
source projects all around the world the
one I happened to back was called Drupal
which is became the largest Enterprise
software content management system so
it's actually used by everybody from
Sony at one extreme to NBC at The Other
Extreme to the White House at another
extreme pretty much every website that
that is out there at real scale for
example the Olympics the Grammys Etc is
all built on Drupal but it's all open
source it's all free the founder of it
dries is a brilliant guy who was solving
his own problems it turns out in his
dorm room he decided he needed to be
able to share information with a friend
over literally what wasn't even ethernet
a cable and he created his Dutch uh or
actually Belgium he created what
effectively was a basis to share
information and then it became sharing
it on websites and then it became Drupal
and you know literally there are now
tens of thousands of modules that are
built for Drupal that everybody around
the world who's a Drupal developer
contributes to but it's free
how would you make money out of that
go ahead you start with the free service
people or the developers use the open
source structure that exists today and
then for some Enterprises you can start
uh offering things like they would
develop like the cloud storage Etc as a
service and you monetize a part of what
you can do for free but you just add
convenience and charge for the
convenience that's exactly what he did
they figured out how to give away the
software and then create the services
around it that made it for example
secure reliable scalable they eventually
put it in the cloud and what Drupal
became is a cloud service for anybody to
create any website at any scale and it
literally is used as I said by for
example every major artist Harvard uses
it for example everybody uses it as a
service to be able to get their content
their website there it's now media and
their experience so they call it
experience management up and running but
what's the win-win in it
I'll go backwards
who created it
everybody did
so a huge startup secret if you can tap
a community for example you're going to
get into Healthcare right is there a
community around Healthcare
for sure there is imagine if you could
tap the community that could help you
create your product would that be a good
thing
absolutely
uh who else has something that they
think they could tap a community to help
them build their solution
yeah go ahead Charles
working on developing a line of products
that for the first
um objective is to work on sex education
and Reproductive Rights and so we we are
going to develop a line of products that
are biodegradable have embedded embedded
biotech and they're going to be so
affordable that low income and strained
in individuals can buy them sounds like
a great product now how is the community
going to help you do that so we need
experts on product design
and also Health
experts because we don't only want to
develop a pad or of tampons but like a
complete line of products for that so
what's great about what you're thinking
is look there's a lot of elements to
these products and that you know
everything to do with health and safety
but also really important for population
control for certain governments probably
have a basis for actually wanting that
product kind of products there's lots of
people who could contribute to this need
and you're going to get them involved in
a community to help you build your
product is that what you're thinking
yeah I was thinking of an ecosystem yeah
okay so I'm going to make sure that
Cheryl doesn't get um literally like
curtail tonight by asking if you guys
would actually spend a bit of time with
Cheryl afterwards what would you
recommend to her to do to get the
community engaged around this need
because there must be many of you who've
experienced this who've said okay this I
wish I had a better biodegradable much
more you know low cost or something that
for example might appeal to low income
how could you contribute to that what I
will say is as follows which is it's
really important that this word win-win
it's it's two words I guess
um is there for your community to work
so the reason that for example Drupal
took off or any rope and source project
takes off is that the person who has the
problem wants to solve it so you're
going to have to find the person that's
in the medical world for example or in
the bio World by um in the a world
that's just solving this problem for
that wants to solve this problem that
will contribute to your community
it has to be a win-win otherwise they
won't engage it can't be just your need
if you keep asking that you need help
that won't work but if you can get them
to say but I want to solve this problem
so I'd like to contribute then you're on
the basis to get going on a win-win that
makes sense it's not as easy as saying I
just want to start a community
you have to find this win-win
I see lots of people nodding do you
still have your question
I'm developing a new pre-workout and I'm
on a on the varsity rowing team
um and I think I have a certain problem
with like getting more endurance
um in whatever way so I created a
product but wanted to ask other teams
like what they would want in a product
so I sent out a survey to all the other
varsity teams
um and kind of like cross-reference
different sports and like what they
wanted to come up with an ultimate
solution that kind of would cover a lot
of different sports so it wasn't I guess
me kind of created it more of like
Harvard Athletics was helping me Create
It Fabulous so what Meredith did is
really smart to go and get a win-win you
need to find out who else cares about
the problem and if they care enough
about it like there are other rowers or
their other athletes and they're in the
same Community as you Harvard for
example and they would like to solve
that problem too there you have the
beginnings of something that could
become a community and I bet that they
would love to contribute to it it's
going to help them
so great great example thank you very
much
so win-win doesn't always work but I
gave you an example here because I
really want to make sure you understand
it's actually something that can play
out in different ways not just in
aqueous open source example but via
strategic Partnerships too so I'm almost
going to guarantee that
none of you have what we call a whole
product
what I mean by that is you're going to
be a piece of the puzzle so I'm going to
pick on cold press AI because I think
you have a very good example of this so
you're going to get your data to people
faster it's the essence of the value
prop right
what are they going to do with it
are they just going to say great I've
got the answer there
they're going to train their models with
it Yep they're going to train their
machine learning models okay and who has
those models do you have them one day
hopefully right now it's just it's on
the customers to find another provider
okay perfect so this is a perfect
example of what I'm describing now which
is that in order for cold press AI to
have a whole product they're going to
need a lot of things so first of all you
need a cloud provider yeah okay and then
as you said someday you hope to have
models but you don't today so you need a
partner for those models and I'm going
to go one step further even when they've
got all that what are they going to use
it for
deploy it and use it in features on
their web on their applications
so there's something they're going to
use this for doesn't matter whether
that's a healthcare application one
extreme or a consumer application or
something else right
this is the notion of a whole product so
you can't actually be successful for
your customer to run X application with
AI and data in it until you get all
these pieces together you get the cloud
the storage your product to get it there
faster the models that make it useful
and then it integrated into some
application so good news
these two people need you
and actually because of that they'll
help you get to Market and they'll help
you find customers and they'll help you
build the success of those customers and
they'll be a great multiplier for you to
get to Market as well as a lever they'll
reduce your cost because you're not
having to build all that stuff
so strategic Partnerships are incredibly
important and the first thing I
recommend you do is think about the
end-to-end solution what we call the
whole product and where do you fit in
the ecosystem and who could you partner
with
and by the way it's not optional because
if you just keep trying to sell your
little feature or your little functional
your little product and there are all
these other things that the customer
needs it won't work
but generally speaking by the way if you
found a real need to solve are you at
the end of this there will be people out
there who are solving some part of it
and they'll be delighted that you come
in and say I can make it faster for you
better cheaper Etc
make sense any questions on that one
good yeah whatever the community that
that win-win exists is like the
community of a competitor what do you
think I don't know
really
you're very smart you've been here
before so I've got to challenge you back
what would you do like I'll be
successful obvious example a competitor
has a form people on that form talk
about stuff that is needed yep that is
not being provided perfect so like but
you can't
I don't know like because there your
competitors can lock you out of there
for example it's hard to engage in there
oh true so you've got a Potential Threat
and an opportunity the threat is that
the competitors lock you out the
opportunity is that you're identifying
things that they're not doing
so you you've got to play that with the
classic skill of an entrepreneur and say
I can see this competitor over here
that's coming up against me cannot solve
this problem so an example might be
they're an on-premise solution you're
the first people are going to do it in
the cloud
and by the way That's a classic thing
that's happened for the last 10 years
and it's still going on people are
figuring out how to decimate old
solutions that were Legacy Enterprise
based on-premise by coming up with Cloud
versions of it that's the whole SAS
movement
another example let's stick with cold
press AI is almost every application is
probably going to get reinvented with AI
that's just my view of the world so the
good news is you could go along to
anybody who's got an application and say
hey we could AI enable your application
wow that's pretty cool because now
they're not in the Old Guard you're
enabling them as a partner to come into
the Forefront of what people want which
is more intelligent applications that
have better data that are faster
delivering the solution to their problem
make sense
makes sense to you
great all right
next one is what I call the three UPS so
think about this as teeing up if you're
looking for something a solution to have
a great go to market experience
so it turns out for your product to get
adopted is just the beginning
you are always going to want to improve
it right so you're going to want to
update it
that sometimes is just for security
fixes and things like that then you're
going to upgrade it you're going to
upgrade it when for example new
capabilities are needed or new
technologies like AI come along or you
want to make it mobile
Etc so those are the upgrades and then
guess what you're selling into some
particular function so let me pick one
of the teams here
uh Lisa you actually haven't talked
about your Solutions where do you start
with food print
trying to provide environmental
information information
on groceries to Consumers Based on data
not marketing so easily comparable
environmental information about the food
you consume and buy all right so I know
nothing about your business
but I can think of three ups for you
what might they be
so how might you update your solution
how might you upgrade it and how might
you upsell it
so somebody's already bought it
and anybody wants to help Lisa please
join in this is a chance to really get
somebody going yeah so I guess one one
thing I've been playing with is if
someone has already kind of in this case
imagine like a online browser extension
that goes in and if you buy groceries
online when you get to the basket it
suggests alternatives to switch out your
products that have lower environmental
footprint so in this case there's a
range of products that then gets
recommended and that's certainly like an
like a I guess like an upgrade version
where you could say well those products
that are being recommended right now
they're not they're not kind of they're
not paying any commission but that's
pretty valuable if people actually swab
it into their basket so there might be
an upgrade there perfect so I'm going to
let you off the hook with coming up with
all three of them but that was fabulous
no seriously people buy her product and
they're figuring this out with their
groceries the first thing I would say
that you you pointed out is you can give
them an upgrade that makes
recommendations for them great you could
sell that if people really value it
they'll pay for it that's both going to
help you sell more because you're
solving more of the problem because
people want recommendations to find
better products but it's also going to
increase value for you so that's a
classic upgrade by the way the things I
thought of were pretty obvious which is
you're going to constantly update the
data right the data was out of date
you're dead so you need this you you
need that you and then the upsell one
would this apply to cpg as much as
groceries
yeah so you could
say I mean it's like a different value
chain and less frequent purchasing so
it's not exactly clear how the like
human nudging behavior would work but
absolutely like the idea that we should
know the environmental footprint of any
anything we buy and of extensis or
Universal so
there's both an update an upgrade and a
huge potential set of upsells that could
be done and guess what I did I only did
one thing I kept the customer the same
because if the customer is the same here
this is why we always talk about this is
customer-centric value propositions and
you can keep updating upgrading and
upselling them you have a fantastic
business model so that's the secret and
guess what it plays with what we've
already talked with which about which is
if you make it really slippery for
people to just land and expand to get
their first customer and then you keep
updating upgrading and upselling them
you build ultimately a moat meaning a
defensibility around you that is
tremendously valuable that's by the way
how every social network works I might
come up with a fantastic new Social
Network tomorrow and let's say you will
love posting photos I'm guessing that
some of you do and I said I've got a way
easier way we've got we've figured out
this slip for you to just instantly
download this thing but
bad news you've got to invite all your
friends before it's actually of any
value to you
you're not gonna do it that's the value
the value is that somebody did a really
good job of building whatever social
network you like whether it's tick tock
or Instagram or pick your favorite of
building that Network to the point where
they've got huge defensibility even if
their features aren't that good they
keep bringing you in sucking you up in
there
and their ecosystem effectively so
somebody had a question I saw a raised
hand yep go ahead Clint is it fair to
say that both update and upgrade are
about user customer retention whereas
upsell is about increasing the the value
per user yeah yeah you haven't have it
exactly right and by the way there's no
reason why all of that can't be true so
remember my virus subscription example
that was just updates we actually didn't
change the product at all all we did was
send you virus updates all the time so
that you had the latest signature the
latest virus before it even hits you we
don't have to change anything about the
product we did ultimately end up
upgrading it because people had
different ways in which they wanted to
monitor it for example and they want to
see well how many viruses did I get and
they wanted an analysis of that and then
the people who were actually in the IT
department said well I want to track
whether it's happening in certain
regions Etc so the lots of ways these
things happen and then we upsold them I
think I told you this by 2.6 x by
upgrading this functionality to being
data security for everything so it
wasn't just virus it was data backup and
it was improving your performance of
your PCS at the time Etc except very
very compelling business model startup
secret basically just think of three
upping everything and you have a great
basis so what I've been doing here is
quietly building what we started out
talking about is multipliers and levers
around your core
and anything that you can do to do that
whether it's create whole product
strategic Partnerships or for example
find ways to make your product more
friction free in the slip model or price
and package it so it has pull you're not
pushing it but customers demanding it
because it's so easy it's so uh
efficient for them to download it's free
for them to try or how you co-create it
with a community that makes it a real
win-win or ultimately what we just
talked about which is three upping it so
it has a long life cycle and to Clint's
point you can keep selling and getting
more value for it
that's it you just got four startup
Secrets very quickly all around
increasing your lifetime value for your
customers and reducing your cost of
acquisition
it's a fun thing to play this game and I
encourage you to just work on it very
simply starting with this core as I said
so we're nearly at the end here and what
I want to do is give you a chance to
just for a moment brainstorm on this as
uh your own Venture could be a
multiplier or a lever for your table
but jump in everybody this is your
chance to just brainstorm with each
other
I hear great discussion going on so top
right what do we have this table said
increased reach will be there one
multiplier a lever and and what is it
that your customer is going to benefit
from that
so our customer I had I didn't clarify
before our customer is a low-income
consumer in Kenya at the moment they
can't afford coffee fresh coffee so
they're going to benefit because of
access so it's going to be affordable to
them and convenient fabulous Sephora I
actually don't need anybody else's
answer tonight you just you expose the
exact same thing no it's perfect
seriously because the next slide is
you're designing this for your customers
so what's great about what you answered
right right away was that yeah you want
to get increased reach but why does your
customer benefit and you just said it
access are you getting that reach the
low-income people that couldn't have got
access to this coffee can now get access
to it fabulous again we need a round of
applause here that was just superb
so we just came perfectly to the end for
the session by bringing it all the way
back to what I said was we need to
design customer-centric models so things
that benefit the customer I'm going to
give you just a quick flip through what
will be on the portal and that is how
you do this so what you do the secret to
it is following the customer Journey
which is actually when they first engage
with you all they have is a problem and
they spend a lot of time and it costs
them money to basically figure out what
Solutions are out there they buy it then
they have to implement it then they have
to get trained on it then they test it
then they roll it out then they measure
whether it's working then they optimize
it and only at some point do they go you
know what we've got enough value from
this thing that we should keep buying it
we should go through the three out
process
so this is a whole journey that I
encourage you to figure out and Clint
you asked about this all of that you're
trying to increase the dollars you're
taking over the lifetime of your
engagement with the customer and the
more that they engage with you the
longer they engage with you the higher
your lifetime value which is going to
make your business model much much
better
and obviously on the other side of this
the question Zapora just nailed this so
I don't really need to tell you but
you're going to be answering questions
for your customers like why is this
better for them does it save the money
just like support is saying it does or
does it save them time like you're
saying it does in terms of how you get
the data to them or what's the margin
Improvement in their business not yours
you've got probably plenty of examples
of where you've been proving the
customers ultimate business model
themselves by how what you're selling to
them so these things are the things that
make this a customer-centric model and
for examples of these things think about
Airbnb
they're helping homeowners utilize their
home they're getting paid money that
they wouldn't have otherwise got wow
what about for example Salesforce why
would you sell Salesforce is a good
model well pretty obviously people are
getting better utilization out of their
sales people if they're more in touch
with their customers they have better
relationships with them they can sell
more to them sort of basic stuff but at
the same time this stuff is what drives
businesses
so I won't ask you this question just
because of time but I would leave you to
think about it which is what's the one
thing that makes your business
profitable that your customer also gets
profit from or benefit from if you can
identify that this is the key to having
a great sustainable business model that
last thing I was talking about it's
sustainable because it's not just you
who's succeeding it's your customer
you're making successful that's what
makes for a great business model
so to bring it all together
this is the sustainable part it's what
you're going to do to make your customer
successful in the long run with all the
different facets of the business model
that you've built
there's one phrase I said it to you at
the beginning you're going to remember
if you can get a great business model
it's going to be like that invitation
you're going to RSVP to it
it's going to be something that becomes
repeatable in other words the customers
will keep buying it'll become scalable
because not only they keep buying it but
you can keep operating it at a
profitable basis
and importantly it's valuable along the
way because the way in which you're
actually creating that might be very
effective for example from a community
or you're making it very easy to sell
through Partners Etc and it's disruptive
because you're doing something that
nobody else could do
so open source disrupted for example
many traditional software Stacks or the
ad model disrupted all the traditional
software Stacks so Google for example
gives its apps away it caused Microsoft
to have a stock price that was a dial
turn for nearly a decade while they
tried to catch up and compete
that's what business models do they're
that disruptive and ultimately it
becomes defensible because you build a
motor around it with things like your
network
and that's what's so exciting about an
RSVP model
and obviously the bottom line of this is
it's for you and your customer if you
design this right
so thank you for listening the summary
of all this is going to be up online but
you just learn four startup secrets you
learn how to figure out how to build
those around the core of what you're
doing and your design and you've learned
how to design an RSVP model that will
create a very disruptive and defensible
business for you real pleasure having
you here I only have one question for
you now do you now understand why a
business model is important for you as a
founder
that was incredibly quiet
okay good so I'll connect the dots for
you in one way you probably didn't think
of if you have a smart business model
it'll make you spend less you'll be very
cash efficient you'll have better
valuations you'll have lower dilution
that'll give you higher ownership and
the bottom line is you'll have a much
bigger outcome as a founder this
directly impacts your bottom line
outcome
let's figure out how to do great jobs
with it thanks a lot really appreciate
it
[Music]
thank you