High Growth Business‘Entrepreneurship’

© 2008-2011 Innovation Intelligence LLP

1. Challenges facing Entrepreneurs2. Formula for Succcess 3. The Role of the Business Model4. Good and Bad Business Models5. How we Work With Entrepreneurs

Challenges facing Entrepreneurs

75% OF COMPANIES FAIL

ONLY 1% OF BUSINESS PLANS SUBMITTED TO A VC GET FUNDED

1% OF START-UPS PROVIDE 40% OF NEW JOBS AND ARE

CONSIDERED HIGH GROWTH

fail in 1st year

fail in 2nd year

fail in 3rd-4th year

fail in 5th-8th year

fail in 9th-10th year

Did you know that...?

Formula for Success

Steering Towards High Growth – (Seed Phase)

Actions to Succeed

• Competitor analysis• Trend analysis• Market analysis• Macro economic analysis• Create a business plan• Customer analysis• Test market with product or service

Common Causes of Failure

• Poor value proposition• Insufficient customer demand• Failure of business concept against current market place• Failure to gain market acceptance

Steering Towards High Growth – (Start-Up Phase)

Common Causes of Failure

• Failure to anticipate market trends• Not listening and adapting to customers• Underestimate financial requirements• Underestimate time-to-market

Actions to Succeed

• Validate profit formula • Test the market with fully developed product• Build team• Decide if business is viable or not• Adapt business from customer feedback• Update business plan with robust costs and timings

Steering Towards High Growth – (Growth Phase)

Actions to Succeed

• Develop efficient internal management systems• Utilise resources efficiently• Analyse position in the marketplace and innovate where necessary

Common Causes of Failure

• Poor execution and management• Difficulty stabilising product or service quality• Unable to finance cash flow• Loss of financial support or investment

Steering Towards High Growth – (Expansion Phase)

Common Causes of Failure

• Overspending• Lack of market research when entering new markets• Moving into adjacent unrelated business• Poor return on investment

Actions to Succeed

• Study business operating environment • Market research prior to growth• Check operational efficiency

Steering Towards High Growth – (Established and Aging Phase)

Actions to Succeed

• Monitor market changes • Re-evaluate business model• Innovate products and services

Common Causes of Failure

• Lack of Innovation / Market complacency• Unrecognised environmental changes• Unsuccessful new products or services• Lack of focus on whole business model

The Role of the Business Model

A Well Researched Business Model Safeguards Success

Value Proposition

• Central to the business model, the

Customer Value Proposition is the

product and service offering that

Customers buy because it satisfies a

job they want to get done.

• The CVP is made up of practical needs and emotional wants

Central to the Business Model Is…

• Customers - The customer groups buying the

value proposition

• Customer Relationship - The links a company

must establish between itself and its different

customer segments

• Channels - Describes the various means

the company touches and delivers value

to the customer

• Revenue Streams - Describes the way a

company makes money through a variety

of revenue flows

The Part of the Business Model Visible to Customers

The Internal Infrastructure Part of the Business Model

• Key Activities - The principle activities

required to deliver the customer value proposition

• Key Resources - The physical, intellectual,

human and financial resources to deliver the

customer value proposition

• Cost Structure - The principle costs required to

deliver the customer value proposition

• Key Partners - The network of cooperative

agreements with other companies necessary to

efficiently offer and commercialise value

Actions by Constituent Part of the Business Model to Ensure Success

• What Projects, Initiatives or Tasks are required to build and deliver a durable value proposition to customers?

• Is it cost effective or strategically better to perform these tasks internally or source from a partner?

• How is value leveraged from these activities? For example is there overlap with multiple customer types or is intellectual property being built?

• Are these activities being performed in a way that can be efficiently channelled to the market?

Actions

- Identify the tasks necessary to efficiently build the value proposition- Assess how these fit with the overall company objectives- Decide which activities are to be performed internally and which should be outsourced- Ensure costly activities can be leveraged to maximise income streams

Key Business Activities

What key resources are required to deliver the durable value proposition?

• Physical – What equipment is required?

• People – What will the company structure look like? What skills should be recruited internally and what ones are most effective to have as partners?

• Financial – What sources of funds are available? What assets need to be procured and when? What working capital is required?

• Intellectual – What brands, copyrights, patents and trademarks should be use to protect the investment?

• How are resources combined for best effect?

Key Internal Resources

Actions

- Purchase or lease suitable equipment for delivering the value proposition- Identify necessary human skills for the business and plan when these will be required- Ensure financial planning is robust- Use intellectual property to safeguard business investments where possible.

These are the main costs to the business necessary to deliver the value proposition

• Cashflow is a common cause of business failure so ensure costs are forecasted

• Is there a contingency budget for unexpected costs?

• There must be enough money spent to ensure the value proposition retains its durability

• Has the business looked at ways to reduce costs to ensure maximum competitiveness?

Principal Business Costs

Actions

- Ensure an up to date cashflow forecast exists complete with contingency depending on the exposure to risk - Ensure the business is properly financed and money is spent to deliver a credible value proposition- Look at ways to reduce or spread costs

• Win-win partners• Reduce risk and cost• Increase speed to market thus reducing the negative effects of overheads• Bring in specialist skills to enhance the value proposition and raise credibility for business development• Channels to market can be developed more cost effectively with partners• Be mindful through partnering not to be building competitors

Key External Partners

Actions

- Plan which partners will add most value, reduce risk and provide the greatest leverage opportunities for growth- Consider the value proposition for partners- Do a cost-benefit analysis of using partners as opposed to recruiting the skills internally- Be sure not to be training competitors. - Use suitable contracts to protect interests

The value proposition consisting of practical needs and emotional wants must satisfy the job the customer wants doing, for them to purchase

• Have you identified the emotional needs such as status, novelty, aesthetics?

• How does your value proposition compare with competitors

• What criteria do your customers use to measure your value proposition? This is important so you don’t spend money on things your customers don’t appreciate

• What are the core competencies of the product or service and what are the differentiating characteristics?

• What are customers willing to pay?• Can you add more value by rearranging your

key activities, resources and partners?• Are you sure the value proposition will

remain durable?

Customer Value Proposition

Actions

- Design your value proposition to suit customer jobs-to-be-done using the criteria that they value- Compare the value propositions of competitors and be clear how you offer better value and that customers are willing to pay for it - Build more value by resource arrangement

Customer Research

• Do you know your customers?

• Do you need different business models for your different customer groups?

• What are our most important and most profitable segments?

• Is the business exposed to a particular segment or product offer?

• Do you understand how your customers calculate the value in your offer?

• Are your customer groups discrete or do you have interlinked groups?

Actions

- Segment customers but not using old fashioned demographics, instead use new criteria to segment- Understand revenue by customer group - Make sure you understand what it is that customers value about your offer - Develop marketing plan to suit the portfolio of business models for customer groups

• What physical and digital links would you like to link your customers to your company?

• What kinds of relationships are cost effective to establish?

• What are the most effective relationships that reinforce your brand image and enhance the overall value proposition

• Are there new technologies that can provide services of added convenience

• Do you know how the market is changing and what customers will soon expect?

• Is the benefit worth the cost?

Customer Relationship Management

Actions

- Assess the minimum level of customer links expected for the price customers are paying- Consider the different types of relationship management and choose those that provide value for money and which reinforce existing activities - Keep track of technologies so you can show your customers that you innovate

• Do we have control over our channels or do channel partnerships pose an exposure risk?

• How are the customer segments aligned with market channels?

• Can we leverage off complementary channels?

• Does a clear channel architecture exist?

• What are the most cost effective channels?

• What channels are the easiest to service?

• What channels offer the greatest potential for future development plans?

• How is the performance of each market channel being measured?

Market Channels

Actions

- Research and identify cost effective channels to market - Devise channel strategies for different customer groups and geographical markets- Leverage channel marketing where possible- Measure the cost vs. benefit of different market channels

• What and how are customers paying for competitor products?

• What type of charging model is most appropriate to satisfy customer needs and at the same time enhance the value proposition

• Can multiple revenue streams be generated?

• Is the business using technology to maximise its ability to create new revenue streams?

• Are the revenue streams future proofed?

Revenue Streams

Actions

- Analyse different revenue models - Maximise the number of revenue streams but ensure the costs of managing these are properly assessed before launch - Different customer groups and product types may not be ready for ‘new’ revenue models- Protect revenue models where possible

Examples of Good and Bad Business Models

Differences Between Success and Failure

• Failure to innovate• Unable to protect intellectual

property• Failure to see competition on the

horizon• Ignoring new technologies• Value proposition lacking durability• Customer needs not answered• Failure to recognise macro

environmental changes

• Personalisation for local markets• Customer experience• Service convenience• Ethical responsibilities • Leverage new technologies• Clear and concise customer

value proposition• Well chosen key partners

How We Work With Entrepreneurs

IIG Services

Research and Training• Business Modeling Do-it-Yourself kit• Business Model Workshops• Online Library of Fast Growth Business Model Case Studies

Business Development• Business Plan Development for Launch and Investment• Strategic Business Development Support• Business Partnership / Management Support

Research and Training

Business Modeling Do-it-Yourself kit• Presentation, A0 chart and booklet explaining how to innovate a business model

Business Model Workshops• Closed and Open Workshops on business model innovation as an introduction and for specific industry sectors or profit models. Range from ½ day to 2 days.

Online Library of Fast Growth Business Model Case Studies• Membership to a large online case study library of over 120 cutting edge fast-growth business models covering multiple industry sectors

Business Development

Business Plan Development for Launch and Investment• Assist with business plan development and critique to minimise financial exposure• Assist with finding suitable investment partners

Strategic Business Development Support• Analyse each element of the business model to ensure the system can deliver high growth• Analyse and design a suitable profit model• Ensure the value proposition accurately satisfies the customer jobs-to-be-done• Ensure the business model has the durability necessary to attract external finance• Highlight business models of successful competitors or those ripe for transfer from other sectors

Business Partnership / Management Support• Provide assistance to the board on strategic management, business development and planning

Network

International Views on Business Model Innovation

I am an ENTREPRENEUR (..) I am starting a new venture in the fast food industry and BUSINESS MODEL INNOVATION has enabled me to identify and approach the customer problems in a different way.

Nassar Hayat , London, United Kingdom,Entrepreneur

MODELS enable scale, and anything that enables scale has to be constantly tweaked to the evolvingDYNAMICS of the market. We look at markets like India and China and the DIVERSITY of marektplace and the pace at which the demographics themselves shift

makes it an absolute measure for BUSINESS MODELS to be able to evolve, innovate - to survive.

Vijay ANand , Chennai, India, Entrepreneur and head an Incubation Centre

Generating BUSINESS MODELS is a great tool for business discussion, making it possible to identify what's the most important set of information for you to understand the way a business works. It's a GREAT SYNTHESIS TOOL.

Rafael Shoiti Ozaki, São Paulo, Brazil,Entrepreneur and engineer for Plataforma Tecnologia

BUSINESS MODELS are the essence of doing business. Taking an idea into a WORKING BUSINESS MODEL and then putting it into practice is great FUN.

Martin Oltegen, Lund, Sweden, Change Management Consultant and Entrepreneur

For companies in search of growth,

BUSINESS MODEL INNOVATION can both address customer needs and keep competitors at bay. As the economy starts moving again, that may well be

the key to success.

FORBES, USA

The key success of every business is BUSINESS MODEL. When I invest in stock market, the most important thing for ANALYZING is BUSINESS MODEL.

Permsak Jukmongkonchai , Bangkok, Thailand,Investor

Opportunities for BUSINESS MODEL

INNOVATION are right in front of every organization. But to pursue them, executives have to RETHINK their CORE beliefs about thewho, what and how of their business.

Ann Baxter, DELOITTEDeloitte Research, Global Director

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