Renew Your Business Model with the Business Model...

Renew Your Business Model with the

Business Model Canvas Paul Fox


Business Model Canvas

(some typical errors in early business

model development)

Paul Fox

Associate Professor

Director, Máster en Digital Entrepreneurship

La Salle – Universitat Ramon Llull



Who am I?

• Worked for Startups: Fan Asylum, intouch Group,

Vision Marketing

• Intrapreneur: MCI Systemhouse (bought Apple’s data

center when they were almost bankrupt)

• Consulting: Diamondcluster - creating web businesses

for big companies

• “Founder”: viajeria.com, allysguesthouse.com

• Professor/Mentor: over 50 projects/year

• Main Focus: Early business model development



There are bad ideas…



And there are really bad ideas

www.howtobeadad.com www.montparnas.com

http://www.howtobeadad.com/

http://www.montparnas.com/articles/oops-award-for-bad-product-design-2009/



But usually it’s not the idea – it’s a problem

with some part of the business model

Narrative test (the story doesn’t make sense)

(Magretta (2002): Why Business Models Matter)

• Stories are important, and the story needs to make

sense to everybody.

Success: Google has a great story for both users and

advertisers.

(Potential) Failure:

Groupon!

• Businesses lose money

• Attracts bargain shoppers

• Doesn’t build loyalty



The numbers test (the Profit and Loss doesn’t add up) (Magretta (2002): Why Business Models Matter)

“Kozmo.com delivers videos, DVDs, CDs, books, and

convenience items (snacks, magazines, toiletries,

household products, flowers, beers etc.) to consumers

within an hour, with no delivery charge and no order

minimum.”

Failure:

"Convenience stores charge a premium for quick access

to last-minute purchases, so why charge a discount for

the ultimate convenience of home delivery?“

In 2000: $120 million loss on $30 million in revenues with

$35 million in delivery costs.



Usually, the problem isn’t the idea, it’s the

business model

www.zebramc.com

http://www.zebramc.com/tag/business-model-canvas/



intouch iStation 1992

http://serverjs.org/mochazone/Anno1992%3AIntouchi-station/

• Founded in 1990

• Interactive music-sampling

kiosk to try music before you

buy.

• One of the largest databases of

music samples in the world.

• Sample up to 5 tracks from

over 40,000 albums.



Intouch interface

http://serverjs.org/mochazone/Anno1992%3AIntouchi-station/



Intouch facts

• 50 units produced in 1993 at $50,000 each. Reaches

511 by 1995.

• Over $20 million in venture financing raised

• Pre-IPO in 1993

• 1.2 million registered users

• 1995 removes kiosks from music stores



Intouch: What happened?

Failed the numbers test and the narrative test

(often they’re related)

• Expensive hardware. Then the Internet exploded!

• Expensive “artisan” recording of samples not scalable.

• Story for music stores was difficult – resulted in some

additional sales, but of long tail cd’s. Made inventory

planning more difficult

• Story for music labels was all or nothing. And they said

no.

– Music labels were both partners (rights to music samples) and

customers (paying per sample).

– Data showed that people bought more, but not the major artists

the labels were promoting.

– Music labels were essentially asked to pay to disrupt

themselves.



Filling out a business model canvas is easy.

Using it well, not so much!



Key Activities: what are the main things we’ll

do every day to deliver the value

proposition(s)?



Key Resources: differentiation, or if you sold

the business, what would they be buying?



Key Partners reduce risk and add value:

suppliers, distributors, advisors



Value Proposition



Identify the job that needs to be done http://www.youtube.com/watch?v=s9nbTB33hbg

http://www.youtube.com/watch?v=s9nbTB33hbg



Once you know the job that needs to be done,

find the real problems!

• “Healthy Table is an app that gives you fast, healthy

recipes for any three ingredients you have in the

refrigerator”

• So why is it so hard to get people to pay for this?

• The job that needs to be done isn’t about finding

recipes, it’s getting a healthy meal on the table.

• Who has this need? What do they do now?

• Problems?

– No time

– Can’t cook

– Need other ingredients

– Lazy

– …



The Whole Product

• “Easy Parking is an app that helps you find, reserve,

and pay for street parking”

• Error: an app by itself may not solve the problem

www.libelium.com

www.toledoblade.com www.streetsblog.org

http://www.libelium.com/

http://www.toledoblade.com/Technology/2013/03/06/Toledo-parking-meters-now-accept-smart-phone-payments.html

http://www.streetsblog.org/2012/01/18/city-tests-out-parking-sensors-but-so-far-just-for-space-finding-app/



Solution: Positioning Statement from Geoffrey

Moore



Explain the proposition in detail

• For music lovers who want to travel in style

• who love to communicate and mix work and play,

anywhere, anytime

• the iPhone is a smart phone AND an iPod, AND an

Internet device.

• that offers Apple’s legendary ease-of-use, elegance,

intuitive integration, and cool.

• Unlike RIM Blackberry and Palm Treo

• Apple iPhone offers great quality phone calls, faster

browsing, music and movies, and photos that come

to life, all on a big screen in the palm of your hand.



Customer Segments



Customer Segments: A customer segment is

people who share the same pain and speak

the same language – Brant Cooper

Be Specific!



No, be more specific

www.gentlechortle.com

http://www.gentlechortle.com/category/drawing/



Even more specific: Personas

http://followsprocess.wordpress.com/2010/11/14/facilitating-data-driven-personas/



But segments should not based on

demographics, psychographics, or any other

kind of -graphics

The Lean Entrepreneur



Don’t start with 10 segments!

Rank your segments

Pick one or two main ones

The Lean Entrepreneur

• Depth of pain

• Budget

• Ease of reach

• Ease of MVP (minimum viable product)

• Values



You need to focus on both the user level and

the strategic level simultaneously

• Strategic Level (Business plans are very

strategy-focused).

– Competitive and Market analysis

– Market sizing

– Operations plan

– Financial analysis

– Important for raising financing

• Too strategy-focused: Webvan (invested $1

billion in infrastructure before getting

customers)



You need to focus on both the user level and

the strategic level simultaneously

• User Level (Lean Startup is very user-focused)

– Target really specific customer segments

– Design thinking: get deep understanding of context

of use

– Agile development: Test obsessively and iterate.

• Too user-focused: Instagram (sold to Facebook

for $1 billion but had no revenue model)

• Successful startups manage at the strategic

and user levels simultaneously.



Test the Model

“Get out of the

building.”



Test the Model

“Everyone has a

plan until they get

punched in the

face”



Getting out of the building isn’t easy…

Trial, error and the God complex

http://www.ted.com/talks/tim_harford.html

• God complex: no matter

how complicated the

problem, you have an

overwhelming belief that you

are right in your solution.

• Trial and error works better

than the solutions of “little

Gods” (experts).

• It’s very difficult to make

“good mistakes”

• Fail forward!



Be Scrappy!

http://www.bbc.co.uk/news/10323197

"The key is being scrappy. It's

the guys that they see an idea

and they don't know how

they're going do it but they're

going to try everything and just

fight and claw and keep

adapting, keep trying things."

http://www.bbc.co.uk/news/10323197



The “Now What” syndrome?

• What happens when you fail?

• Do you give up?

• Do you try one more thing?

• Do you try 10 more things?

• Do you ask for help when you run out of things?

• Often the difference between success and failure is

your level of SCRAPPINESS.



Be Scrappy! Keep trying stuff.

What do we call this?

Disappointment?

The comfort zone?

Vacation from Scrappiness?



Conclusions

• The business model canvas is easy to use, but difficult to use well.

• Make sure the story makes sense for everyone, and that the

numbers add up.

• Find the pain and solve real problems.

• Make sure you’ve identified the real job that needs to be done.

• Focus on the whole product – find partners if you need them.

• Segment – start with a small segment, then find others.

• Work at the strategic and user levels simultaneously.

• Get out of the building and test.

• Be scrappy and fail forward!



Thank you!

@profefox paulbfox

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