Design a Piano Business Model

Workout Describe a Piano Like Musical Instrument Potential customer set Attributes Channels Business model Define a business model: That produces revenue by satisfying customer demand i.e., that meets the ‘Framing’ challenge That can be argued to have high expected ROI (where expected revenues significantly exceed expected costs) i.e., that meets the ‘Venture Capital’ challenge

Three Challenges Framing Venture Capital Communication

The Framing Challenge What Is the Real Business Problem? Accurately define your customers and what motives them Properly framing a problem in terms of the reality of the situation and the objectives of the organization is an important step in the decision-making process. Mental frames act to channel our thinking and are important tools to help navigate complex decisions

The Venture Capital Challenge What is your business worth, and why? Your new venture competes in two markets: Product Financial How will you tie this to your business model tying narrative to numbers What are the activities, operations and products? What are the significant environmental influences? major competitive forces outside management control How does value flow through your business model? What is the Net Present Value of future activities

The Communication Challenge Provide a ‘lead in’ which will ‘hook’ your listener (the elevator pitch) Provide a brief ‘sales pitch’ presenting the major components of your innovation and business Consider what parts you most want to emphasize about the business model Describe your business in one paragraph (equivalent to the 25 second pitch) Numbers Behavioral model and capabilities required Strategy model Investment Risk A summary financial analysis to show risk and ROI for the project Answer your investors question: Why should I give you My money?"

Activity #1: Identify your Customer Commercialization is about creating a customer ‘Quiz’ to identify your customer: Who? … is with customers while hey use the product & How much influence do they have If we could arrange it, who would we want the customer to be with … What? … Do our customers experience when the use the product … needs provoked our offering What else? … might customers have on their minds When? … do our customers use this .. Where? … are our customers when they use this How? … do customers learn to use the product ..

Activity #2: Select a Product or Service Select a Product or Service that you are interested in marketing via Internet business models This is mainly about determining your Core Capabilities Capabilities =Assets + Competences Money is important Innovation  Utility  Commercial value Talk about your opportunity register (OR) Your repository of alternative ideas that can be pulled up at any time If a particular idea isn’t working

Ways of Describing Attributes Common descriptive attributes are: substance, structure, color, shape, texture, sound, taste, odor, space, and density. Common process attributes are: marketing, manufacturing, selling, function, and time. Common social attributes are: responsibilities, politics, and taboos. Common price attributes are: cost to manufacturer, wholesaler, retailer, and consumer. Common ecological attributes are: positive or negative impact on the environment. For example: The attributes of a pencil might be listed as: used for writing, yellow, lead, eraser, sharp, hexagonal, has printing on it, and is cylindrical

Identify the 3 most important features Specify the particular customer choices you are offering in your product or service (no more than three) as Identify the discriminators and energizers What differentiates your product from competitors’ in the customer’s minds? List the three features that are important to the target customer, and rank them from most to least important. Basic Discriminator Energizer Positive Nonnegotiable Differentiator Exciter Negative Tolerable Dissatisfier Enrager Neutral So What? Parallel

Activity #3: Make a Profitable Business Define how you will measure the usefulness or attractiveness of each of these features to the target customer. This performance metric should be a numerical measure Draw a value map describing your companies proposed business model, and provide some indication of the costs and revenues that will flow into and out of the business. Define your product’s top competitor in each of these 3 features Are these companies profitable? How big (approximately) is their business? Why is your product better? Think: Low-cost or Differentiated Products?

Activity #4: Define Your Channels Consumption Chain Analysis Works from the premise that opportunities for differentiating your product from others lurk at every step and decision that your customers take From the time they first become aware of their need for your product or service To the time thy finally dispose of the remnants of the used up product Product differentiation is the secret to high revenue

Customer Relationship Management (CRM) Determine the main steps in consumption Each step on the consumption chain has an attribute map You should only list the 3 or 4 most important steps These will determine whether the potential customer proceeds to the next step (good) Or leaves the consumption process (not good)

Activity #5: Describe the Business Model and Entrance Strategy Start with a compelling story Part of selling your strategy / investment Tying Narrative to Financial Numbers Strategy becomes less philosophy More performance and outcome What activities, operations and products are within the ‘scope’ of the valuation analysis? (Bubbles: depends on audience) What are the significant environmental influences? (Boxes: major competitive forces outside management control) How does value flow through the relevant scope of the analysis? (Arrows: value metric)

Market Entrance Strategy What are the major competitive forces molding managerial strategy which add to, or take away from ‘Value’? What ‘levers’ (strategy drivers) can management pull to influence value added? What is the functional relationship between value and the strategy drivers? (Define the ‘Strategy Model’) What are the major technologies relevant to managerial strategy which add to, or take away from ‘Value’?

Activity #6: Complements Make a list of Complementary assets, skills or other attributes that are not controlled by you, but are required to make your product salable

Required The project will comprise the following: Work in groups of three to four 25 second ‘elevator pitch’ 10 minutes to walk through the activities that will define your e-business model Use the whiteboard to emphasize points, draw graphs, etc. Feel free to present on PPT from your laptops.

Required: Meet the Challenges Framing What Is the Real Business Problem? the reality of the situation and the objectives of the organization Venture Capital Your new venture competes in two markets: (1) Product; (2) Financial What are its activities, environmental influences, operations and products? How does value flow through your business model? What is the NPV of future activities Communication Provide a ‘lead in’ which will ‘hook’ your listener (the elevator pitch) Provide a brief ‘sales pitch’ presenting the major components of your innovation and business Consider what parts you most want to emphasize about the business model Answer your investors question: Why should I give you My money?"