Simon Entrepreneurs Presents Articulating Your Concept and Constructing Business Model Prototypes

1. Simon Entrepreneurs Presents Articulating Your Concept and Constructing Business Model Prototypes Instructor: Adam Bates (adam.bates@simon.rochester.edu)

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

3. 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?

4. 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

5. Iterative Ideation Brilliant Idea Brick Wall Eventually Leads to… Research Breakthrough!!

6. 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

7. What exactly is a business model? • More succinctly: “How you gonna make money” • - Lil John (2008)

8. 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

9. Example Prototype – OSA online music service

10. 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.”

11. 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)

12. 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.”

13. 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

14. 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.

15. 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

16. Appendix A couple of aids to ideation

17. 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

18. 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

19. 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?

20. 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

21. 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!