Prof. Yechiam Yemini (YY) Computer Science Department Columbia University (c)Copyrights; Yechiam Yemini; Lecture 5: From Innovation To Business Planning: Innovation to Business Version: /20/05

(c)Copyrights; Yechiam Yemini; The Process: From Concept To Value Plan/quantify opportunity  Exponential change factor  Value creation opportunity  Innovative tech required  Products to deliver value  Building market edge Plan to deliver value  Create a business model  Analyze & quantify the market  Define products/services  Define the competitive value  Plan marketing/sales strategy  Team: who will execute what  Finance: quantify value creation Innovation PlanExecutionBusiness Plan

(c)Copyrights; Yechiam Yemini; Example 1: Palm 1.Identify exponential change factor  Exponential growth in mobile-computing market 2.Identify the new value creation opportunity  User pain: carrying our personal bits  Pocket-HW vendors: platform to deliver personal apps 3.What key technology innovation is needed?  Handwritten input+ max display within constraints  Push-button synchronization 4.Which products could deliver this innovative value?  A HW/SW platform 5.What strategy can build a competitive edge?  Key challenge: building co-opetitive marketing

(c)Copyrights; Yechiam Yemini; Example 2: Napster 1.Identify exponential change factor  Exponential growth in # of Internet users storing media content 2.Identify the new value creation opportunity  User pain: getting (paying?) for media content  Content owners: protect IP & expand revenues 3.What key technology innovation is needed?  P2P distribution of media  (Protecting IP + revenues through P2P distribution) 4.Which products could deliver this innovative value?  A P2P platform (+ IP mgmt + revenues mgmt) 5.What strategy can build a competitive edge?  Key challenge: capture share of users and of providers  (An alternative: creating electronic multi-level distribution)

(c)Copyrights; Yechiam Yemini; The Business Plan Plan to deliver value  Create a business model  Analyze & quantify the market  Define products/services  Define the competitive value  Plan marketing/sales strategy  Team: who will execute what  Finance: quantify value creation Innovation PlanExecutionBusiness Plan

(c)Copyrights; Yechiam Yemini; What Is A Business Model? The following slides are based on presentation by Darlene Mann of ONSET Ventures Markets & Customers Products & Services Distribution Channels Financial Engine Net $ Architecture and operations to create and deliver value

(c)Copyrights; Yechiam Yemini; How To Create A Business Model? The following slides are based on presentation by Darlene Mann of ONSET Ventures Opportunity Value Proposition Distribution Strategy Financial Model Market Budget Buyer Problem $ $ Technology Product Company Business $ $ $ $ $ $

(c)Copyrights; Yechiam Yemini; Markets/Customers: Why/How Will They Buy?  Profile & Segmentation  Key Pain-points Quantify problem in $$’s Window of opportunity (immediacy)  Location of $$’s  Competition The following slides are based on presentation by Darlene Mann of ONSET Ventures Markets & Customers Products & Services Distribution Channels Financial Engine Net $

(c)Copyrights; Yechiam Yemini; Product/Services: What do you offer?  Whole product definition  Value & pricing  Cost to customer/company  Add-on/future products The following slides are based on presentation by Darlene Mann of ONSET Ventures Markets & Customers Products & Services Channels of Distribution Financial Engine Net $

(c)Copyrights; Yechiam Yemini; Distribution: How Do You Reach Them?  Channel strategy: direct/indirect  Marketing strategy: Positioning & branding sales support Partnering  Implementation cycles The following slides are based on presentation by Darlene Mann of ONSET Ventures Markets & Customers Products & Services Channels of Distribution Financial Engine Net $

(c)Copyrights; Yechiam Yemini; Financial Engine: How Do You Monetize Value?  Pricing & revenues model  Sales & implementation cycles  Cost structure and margins  Investment requirements Capital and time required Comparables & exit strategies The following slides are based on presentation by Darlene Mann of ONSET Ventures Markets & Customers Products & Services Channels of Distribution Financial Engine Net $

(c)Copyrights; Yechiam Yemini; The Five Questions (Mayfield)  Do you have a team that delivers?  Is your product/service a vitamin or a painkiller?  Do you know your users?  Who are your competitors?  How far will this money take you?

(c)Copyrights; Yechiam Yemini; Creating A Business Plan  Executive summary  Market environment  Products & technology  Management team  Sales & Marketing plan  Product R&D plan  (Manufacturing & operations)  Financial Plan

(c)Copyrights; Yechiam Yemini; The Business Plan Do’s (Ian Ritchie )  There’s a great new growth market  We’ve got just the thing for it  Its the kind of thing that a small player can sell well  The growth potential is such that we can go public/be acquired  We’ve got/can get lots of technical/managerial/marketing experience  12 pages or less, and very easy to read

(c)Copyrights; Yechiam Yemini; The Market Goal: identify & quantify the opportunity  Define the target users  Identify & quantify the “pain” you will cure  Identify the market segments  Size the market  Identify competition and analyze competitive factors  Establish statistical & anecdotal market validation

(c)Copyrights; Yechiam Yemini; Products & Technology Goal: identify the unique value you will create  Describe the product Focus on the unique painkiller edge What technology edge will you develop  What is the value proposition to your users? Develop an “elevator pitch”  How will you build & sustain competitive distinction?  Establish anecdotal validation of traction

(c)Copyrights; Yechiam Yemini; Sales & Marketing Goal: define sales & marketing strategy  How do you plan to distribute your products?  What is your pricing strategy?  How do you plan to support & grow sales?  What is your positioning strategy?  What marketing relationships will you develop?

(c)Copyrights; Yechiam Yemini; Financial Plan Goal: quantify costs/revenues and capital-needs (Controlling growth & time to reach break-even)  Start with a revenues model  Expense model  Capital needs Time “..breaking (even) is a hard to do..” $ TTM