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Designing a Customer-Centric Business Model

Apr 16, 2024
Thank you very much everyone for coming. I want to tell you that the most important thing we're going to do tonight is try to give you the opportunity to figure out what your

business

model

is and D just gave me a perfect introduction and said I'm not sure why you're here, well the Most of you probably aren't, why do you need a

business

model

? That's a very, very good question now at the end of this afternoon. I hope you answer for yourself now, what is a business model? That's what I want to get to tonight and I'm going to give you the agenda from the beginning so you have an idea, we're going to talk about some key concepts, number one of which is how to focus on the absolute essence of what you do, that's what we call a call and then how do you multiply it in the market in a way that is very efficient and also get leverage in a way that will ultimately be sustainable for you so that you can operate your business? for the long haul and you will learn five rsvpd initials and at the end of tonight you should be able to say to yourself okay, if I have an rsvpd model, you're cool, how are you going to remember those initials?
designing a customer centric business model
The last time you attended an invitation to something and you didn't RSVP, it's never a good thing to do, so just remember it that way, you can discover a great business model just by RSVPing. We've already asked this question, but I want everyone to write down one thing now that I told you we're going to define what's important about a business model, one thing that you think could be just write it down yourself. This is for you, not anyone else, just write one thing, so by the way, is there anyone from HBS here? Okay, a lot of HBS students, that means I have a double challenge tonight because there are Harvard students from all over campus and from all the different schools here tonight. and some of them haven't had the benefit that you have had of going to business school and learning some of the fundamentals of why business models are important, so I'm going to immediately bridge that for you to the rest of the Harvard schools.
designing a customer centric business model

More Interesting Facts About,

designing a customer centric business model...

So when you go to HBS, those of you who don't, you will learn something from the great professor Tom Eisenmann and many others, something called a diamond and that describes the business model in terms of a

customer

value proposition, a commercialization, a technology. technology and operations model and a cash flow formula. Since we're in a business school, they'll probably do well, what are those things? So I'm going to make it super easy for the rest of you, one, two, three and four in terms of iLab. Tonight we're going to talk about how to create, deliver, make money, and do all of this sustainably, and so MBA students should walk out of here and say, "Okay, I know how to build a business model." I know it completely and I can also do the same.
designing a customer centric business model
That's my challenge to myself tonight. Great, so what is this framework we're talking about? This can help you create and deliver value to your

customer

and make money and keep it sustainable. Turns out it's a lot of different pieces, so I'm really only going to cover three of them tonight. This creation and delivery will be the biggest part, but we're not going to make money tonight, we'll give it to you. The gist of this, but we'll have it in a follow-up class. We'll talk about doing it sustainably tonight, but again, all of these elements are covered in the Startup Secrets classes in more depth.
designing a customer centric business model
In the future, I will give you a sneak peek of those of you who will be attending future classes. We'll cover a lot of these in the secret startup workshops in the future, so the one I'm particularly excited about is the next workshop and the reason is that it's the one that covers this customer value proposition or how this value is created and It is a complete workshop in itself and it is the most fundamental piece of a startup because if you do not have the right value proposition, in other words, if you are not solving a real problem, a significant problem or addressing a great opportunity there is no point in doing anything else. because the number one reason startups fail is that they're not creating value for anyone who cares, it's not a big or significant enough opportunity or it's not a significant enough problem to be worth solving, that's it. the number one reason things fail, so we're going to address the next workshop, but what I'm going to do is get you into a really fun way of thinking about it, regardless of all of this, uh, what it's happening. on the board, how many of you think that your technology, your idea or your service is really a breakthrough, is it disruptive?
Yes, back, my name is Maria and I'm building a digital health and edtech business that centrally helps people take charge. of your health, I will say it Maria, thank you first of all for doing something that is as important as addressing health. What do you think is a great advance in this regard? I think the real business is targeting non-consumers in the healthcare market. At the moment, I'm not focusing on what the healthcare system is targeting. I would say okay, great, so you've seen what you might call a blank space where there's something that's not being addressed and you think you can fill it. serving consumers is like that, okay, great, so even if your idea was terrible, which it's not, if it was terrible, hopefully tonight we can get you to a place where the business model that you come up with is in itself a great advance and here it is.
What most people don't really recognize when they think about business models can be at least as impactful, if not more, than your technology or your Marketplace, so what I want you to do is think tonight about how you can end up . with such a disruptive business model that people say, wow, I need to work with Maria because the way she approaches this, allowing me as a consumer to get access to the healthcare I want, is such a breakthrough that even if our service It is not innovation. I would like to deal with her, does that make sense?
Maria, that's why business models are really exciting because they give you that potential and I hope that by the end of this afternoon you'll start thinking that way, so here's a way to start getting closer. It's that way, so Maria and the rest of you imagine that I gave you a whole new game tonight, so let's start with one that everyone knows who played Monopoly. What if I said Monopoly is about how much money they lose? well you're crazy, it's all about how much money I make and the properties I get, that's the idea we want to have, we want to create a game that no one has played before or even if they have, we change the rules. and now it's your game, your rules guess who has the best chance of beating you.
If you write the game and the rules, you have a better chance of winning than anyone else and by the way, especially if you change them in the middle, which is what my brother always used to do to me no, no kidding, I really love him, it's just that my younger brother is a lot younger than me, it's always cool, but the point is this is what the business is really about, people do this all the time, they change. the rules too sometimes the rules change you but that's not what you want you want to create the game you want to cause an innovator's dilemma if you can the great book by the late Clayton Christensen is a wonderful way to handle this because that's all what it's about and this business model approach can be as disruptive as technology, so what is an example of this?
I'm sure none of you pay attention to viruses these days. This was a long time ago so I'm going to have to go back, believe it or not, antivirus software didn't even exist 20 years ago because we didn't have viruses, they didn't exist, they first came out and became prominent on the Macintosh and it turns out that I I'm working at Symantec, which was the first antivirus solution for the Macintosh and was a big deal. We used to sell software packages, believe it or not, in boxes through retailers and people would pay a lot of money for it.
That's how old I am. It's embarrassing, but it's true now. What's not embarrassing is that we discovered a really disruptive business model that changed the game completely and in fact when Norton Antivirus for PC came out, which we also owned, it was not a good product at all, in fact, the product of all it was. better than ours, we were able to tell Dr. Solomon and then McAfee and all these other people who had much better solutions, so this was quite embarrassing for us, you know, the press was literally coming up to our booths at exhibitions and I was going to see if this virus could be detected. and the answer would be Oh, no, you know, so what do you do?
Now you have this product that is not great. By the way, a Mac product was very good and we can't even detect viruses because we are not up to date. with them we rewrote the rules, we said we would not sell software and remember this was a long time ago, so SAS models did not exist, it did not even exist as a term, there were no things like subscriptions things that everyone is used to, like downloading a app and making in-app purchases, that's a subscription type model that didn't exist, but what happened was pretty interesting, we literally ended up completely disrupting that business and the results were really fascinating.
It took out two competitors in a year, they just disappeared and we ended up serving the customer better because guess what, customers don't want software, they want to stop viruses, it's just a protection for them. The only thing they really cared about was the notion that something somewhere would simply make sure they didn't have to worry about viruses, and thus selling them that service and then creating much, much more importantly, behind the scenes, the subscription model that said we would pay for people in Ireland, was mainly where We developed this to sit down and get ahead of all the signatures of the viruses before they happen or create bases to even predict them and by selling it as a service everyone won, we served better to customers, we started to get so far ahead of the viruses that I ended up creating a basis for them to say, "Okay, I'm paying for this for a reason because I saw 10 new viruses come out last week and I didn't get any of them.
This is like going to the doctrine that says power Say, look, I don't know what the next wish will be, but give me the opportunity in advance That's what our subscription service did. Do you think people would pay for that hell? Yes, not only did they pay for it, but it actually changed the game completely. We ended up raising the price of our products that we were selling by 50 per seat and then, better yet, we realized why we're selling all these other things like backup and Norton utilities and all these other tools that were actually about one thing that was to secure your data, we just started selling a data subscription service that generated us 2.6 times revenue and profit in a few years.
I don't remember the exact number, but the point is that games changed completely and everything was a business model and I remember where it started and that is that we had a worse product, that's why I didn't want to put Maria down. I'm sure she has a great product, but even if she didn't, like us, you can have a disruptive business model that can change the game and point you in the right direction, that's why tonight is important, it's a Of the reasons, okay, what are some of these models? You know these companies, I imagine, how many of you have used, for example, Netflix? o Spotify I use both too much, so what is your model?
Someone who raised their hand or someone who didn't? What is your model? What is your subscription? Yes, what else is it? It's a library. Yes, then it has content. What else is there? Do you pay for everything up front? No, that's the subscriber. How do you get value from it? For example, when you watch Netflix. What value do you get? Yes, it is pure joy, but how do you measure that from how? you often watch yeah, um, I've been with Swatch before, they basically watch everything, yeah, they're going to say that, oh, it looks like you're really enjoying this movie, maybe you'll share your um, what's it called, starting details of session before they change.
Now they know, so Abby is smart enough to have brought up a lot of things, so first of all she started talking about, like, are we enjoying this and they know it by how often we look and that it translates into data and that data helps them, you didn't mention it yet, but we'll see, recommendations, why are you coming back to Netflix? Because hopefully they recommend something you really like so they can sell it as advertising too. Not yet to date, but that changed now, if you haven't noticed yet, it changed for a reason because their stock price plummeted when they started losing subscribers and couldn't compete with all the other services that had come out, so who said we need a big shoot to be able to compete, so they introduced this other aspect of their business model, so what I'm trying to do here is illustrate to you, you don't even realize when you're watching aThe important thing in this is what I call the call and we really want to focus on that tonight, so what is the call?
Well, like I already told you, I was a terrible student, so everything has an acronym, so the acronym for this is is your truly exceptional courage capacity, is what when someone says, they will say because X and ideally it will be like a word like an incredible experience, so it's the taste that it would be, for example, if you did it if you were selling. a food product or maybe if it's Netflix it's the recommendations or you choose it, but it should be something that is so easy to try with customers that every time they think of you they say yes, that's what you do, you're just great in bringing better taste, giving better recommendations, finding me the next piece of music that I wouldn't have found on Spotify, whatever it is, so exploration or discovery would be the word for Spotify, by the way, that's why I use Spotify because I'm too old to find good music, so I just go on Spotify and say, okay, so what do we do to go to the court?
I'm going to give you some examples and uh. challenge you at the same time, anyone wants to say what is the core of Harvard University's prestige, someone else has a different word, why did you come here? education, what more access, oh, this is amazing, great, very good, good news, Harvard has a lot of words and you. We are all here for a reason, so I no longer need to challenge that. Let's go somewhere a little more interesting. How many of you use Reddit? Some of you okay, I'll pick someone who hasn't spoken. Gentleman in the back with glasses Why do you use Reddit?
I don't really like the red audience nowadays, but I think one of the things they do very well is being able to share, so I'll challenge you a little. I don't like it, but do you use it? Yes, why one word? Because? I think the people and the community did very well, so I might have given you a different answer. It might not have been the people, it might have been the content itself. It doesn't matter what it is, but in the end you got to the core, right, it wasn't good. I love the UI, in my opinion it actually sucks but that's another story.
The point is that there is something about all of these products or services that is the core of why you use it, okay, anyone uses buying things from Patagonia. I happen to be wearing my Harvard Patagonia fleece this afternoon that they gave me so I can't answer, go ahead I mean they have the promise of a better Supply okay cool someone else does it for a different person someone else wears Patagonia or buy Patagonia, yeah, like that, it's cool, so we have a style supply chain, what else was actually a culture? Culture says more about that.
I always saw Patagonia as the specific brand. associated with a certain type of people and community, so it's almost like he embodied a certain culture, whether it was the finance bro, the VC bro, but all of that, then, it was like okay, so a vest Patagonia sleeveless, okay, you understand it, you have to understand it. as part of the fabulous look, okay, listen to all these great comments here. I will say that's one of the things that Drew Claire, who helps me with startup secrets, produces all this great content, so thank you Claire, she put this up. here because he thought we should have something about social missions, actually a lot of people buy Patagonia because of the social mission or the culture or what it represents, because you can buy the same clothes in all kinds of different places and sometimes cheaper, I want say.
You could go to REI and buy, you know, five other different types of Patagonia alternatives, but a lot of people buy them because of the social mission culture behind it, not because of the supply chain, but by the way, don't worry. you are wrong has its own reasons for doing things, but you get to a point where I hope you understand that no one feels like they understand what I'm talking about when I say central, now your ability has really exceptional value and please ask me any questions, Yes, go ahead. Go ahead Maria, so far we have seen that the core is a very diverse response, and you said that it is the first thing that people think about, so, essentially, what I am referring to is whether you, as a Founder, think that The core of your business is one thing that many of your clients think will think that the core of your business is nothing else, so at Innovation we just accept that as diversity because even with our room here there were so many different cores, what?
Alright? How can we take advantage of that diversity, of course, in the business model? So let's draw this like this because Mary is asking a big question, let's say your market is here, you're sitting in the middle here and you have all these customers telling you everything. these different things everywhere someone in this room tells me if that matters or not and what they should do about it. Someone wanted to help Maria by answering that question, does it matter? that all of you came up with different reasons to buy Patagonia. To be the protagonist of a brand, it has to have more than one core because you're appealing to uh Target, yes, but we need it to be attracted to different desires, yes, and then you purposely design something that appeals to different ones. people on different levels okay different desires for different people and someone had their hand raised in the back so I want to capture you my name is Knuckle and I think what she pointed out sounds like a problem you want to understand the positioning of your brand and You want to convey your idea in the best possible way and you truly know it through market research or knowing your position in the market in the best possible way and you stick to that position that you know and portray it because , ultimately, as we saw, although initially customers said something. more, but in the code there is a particular reason why they are buying it like Apple: it's not just the phone, but the feel, so I guess it doesn't matter what others may be saying, it could be noise, but it is better than how we understand where we are positioned okay, very good now just for the sake of time I will stop at two Views and because in the next session we are going to answer many of these questions, but what I want to recognize is this group uh is what you are doing great job describing why the business model is not one thing, it's not just your value proposition and how you position yourself in the market, but sometimes it's actually how people will find you and buy from you and in fact , how will you actually do it. making money off of them and also how you're going to do that in the process of supplying your coffee, for example, making money yourself, are all of these elements, so all I was really trying to get at was one thing here, which is that you can't monetize everything yet, like If Netflix decided that it wanted to monetize its recommendations, as well as its data, its advertising and its content, that would be a very complicated business in the end, you have to choose something that is the core of what you are doing. monetize for your business model, that's what this exercise is about, but what you're bringing up and I don't in any way want to stop this great thinking is all kinds of things that actually have to do with your value to the customer and that's what Now let's talk about the next session.
I'll give you a little guidance on this because Claire and I challenged ourselves. We took too much time last time we did the session, so we'll put it in the workbook. However, it turns out that there is a trick to this when you are a startup, like if you are one person trying to build your business and you have thousands, potentially millions of customers even and they all pull you in different directions, what happens to your energy is diluted, dissipated, pulled in all sorts of different directions, how will your business fare? It's not great, you have to choose something and we call this a minimum viable segment and it's where everyone has the same need, so if everyone needs a faster supply chain for their coffee or a culture that is the basis on which they buy things or with better means for a consumer to have access to medical care, that only need if it is the same in a set of customers is where you want to focus and what we call minimum viable segment we will put that explanation in the workbook for you and we'll give you some examples so you can see because, honestly, it's the foundation that this conversation is built on.
It works for both points, that is, you need focus because otherwise you will never get any momentum, but your brand or your customer value proposition could be recognized at your point with a positioning that people say, well, it seems like a lot of things to me. , But what does it mean? It actually means that when you buy a product some people will say privacy other people will say usability doesn't matter those are brand attributes they are a different set of things can you monetize usability? Yes, you probably can. Can you monetize the privacy promise? Probably fine.
What does Apple really monetize? A complete top-to-bottom integrated stack you can rely on. That's what I would say, for example, anyway. Great conversation, let's move on, so I want to go over the material that we have, most importantly, which is an understanding of how you get to the core and now I'll give you a chance to see this in action. It's great news that the company I'm about to introduce to you called tetracytes was started right here at the iLab and with students who are in this very room at one of the secret iLab startup sessions and they actually came up with an idea which is really incredibly obvious: scientific instruments around the world lack connectivity, you can't actually get data from them, people.
Today, laboratories around the world still go and take readings from these instruments and write them down by hand in their notebooks or perhaps in electronic notebooks. It's crazy, it's like everything is connected nowadays, no, it's not tens and hundreds of thousands of instruments. They were addressing an emerging problem and the first thing they did was create a hardware device. It's like this was six or seven years ago when everything was iot, so they made a box that sounded great. I remember I was in the launch lab there. I walked into the inventory room, looked at that hardware and thought, oh my gosh, all the different versions, a lot of inventory expenses, etc., so I can tell you it wasn't the right thing to monetize and that's just giving you that answer right away.
It actually almost killed the company, in fact, just to be clear, the entire first round they raised on the bandwagon caused huge challenges for the founders who ended up having, unfortunately, one founder fall out, that's how business models They can ruin you. The good news. Do they live to tell the tale and why did they discover what the correct business model is? I'm going to let you try to do it for them. Now that you know that IoT and Hardware are not their business model, let me tell you something. Of the other pain points that customers had, they really struggled with basic things, they still required hardware for this, by the way, to detect when instruments failed, they also had a lot of difficulty getting the data in a form that they could use, so just I told them that I obviously don't want to write this stuff by hand and they realized that if they could get this data in a form that they could store and sometimes it's huge amounts of data, any of you working in biology, yeah, what How big is a DNA data record?
So imagine. Taking tens or hundreds of gigabytes, you can't write those things, but you have to store them somewhere and they have it temporarily, which means that over time they need to check the DNA, so now let's imagine thousands of records of Tens to hundreds of gigabytes, you don't store them on your floppy drive, well, they don't exist anymore except CDs or your hard drive. You're bound to run out of space on your iPad, so where could they put them? that cloud, okay, someone is starting to think well, so what is the right business model for tetriscience?
I'm going to give you a big clue. This is the diagram that they came up with when they realized they could connect everything to everything, so now I've figured out that they could do that, so now, as a group, take a minute or two. I'll give you two minutes to think about what you would choose as data as a business model. Excuse the tetrascience and you could use some of the principles that You're already going through that, just think carefully about what the core of your business opportunity is and then how you could monetize it. I'm listening to a very good discussion about what is, in fact, this table in a debate so large that it is a four to one ratio. vote against a particular point of view, so let's go there, so Alan, you said Hardware, tell us why you said Hardware, the microphone is there, the core of that value proposition is the hardware and that's what that they should monetize because you want to get the data to the cloud, you need to be able to connect from the instrument to the cloud, so you need that standard solution, because you have so many instrument providers that it will be really difficult for each of them.They create a solution to connect and get your data in the cloud in the first place, so they are standardizing that part, fantastic answer.
I really agree with that, absolutely agree with that, guys, what do you think? So we were thinking about software, either as a standardized off-the-shelf solution in the cloud or in the Marketplace. to connect the people who produce the data and use it, okay, as you can see, we had fun and four of you said that, okay, so let's put this to the test in the room. Hardware, we have one to four for software demo. hands, everyone thinks Hardware, it's just you and me, the cheapest one, we are in serious trouble, really the rest of you are asleep. hands up, those of you think that the software, anyone's hands, no, definitely, you've had too much pizza, okay, great, so there's an overwhelming belief.
It's software, okay, what if I said that none of you are right in terms of where the company went? debating what to think about in terms of hardware versus software and I thought about a Garmin versus a whoop, which is like a sports device and each one has its own apps I guess, or whatever, where all the data goes and there's no way to It really just plugs the two together to compare them together, I guess that's where we were struggling to find a solution, but I think the concept of having a hardware, I mean, I think Oracle would maybe be a good example of that, in terms of what you had Oracle that you thought was an example in terms of their hardware. products um, I guess it's very difficult to change um to a similar product um, I don't know, I was struggling, this is the kind of thing, this is difficult, just saying, it's really very difficult, does anyone have an idea?
Thanks for the way you delved into that. I think a lot of the things you're talking about are the right things to discuss when you're trying to figure out your business model because it's not easy and what did I just tell you if we get it? The bad thing is that we almost imploded when a company found a Fallout, all kinds of challenges, they were literally a couple of years canceled because we couldn't figure it out. No one has a different view, so our group really thought about essentially what you have there. Initially you thought it was a connectivity issue, but it's actually about data management, so we were thinking about a platform like a SAS platform for enterprises where you leverage APIs and try to build an ecosystem so that this data start to be stored somewhere so that you can connect the producers on the one hand with the consumers of the data and anyone else who helps analyze the data in the middle.
We needed him on the founding team of Tetra Science. He would have saved us years and millions of dollars if he could have. help this team understand that not only is tato turning out to be suitable for tetriscience, but it's also the core of this and we, by the way, you know in a very basic way they describe it as spaghetti because that's what it looks like . spaghetti dish has at its core the fundamental need that the customer has, which is to get the data, it doesn't matter how it gets there, today they don't care if they created the hardware to connect it or if the instrument manufacturer did it and, in fact, your point and tattoo on the ecosystem, if they continued producing the hardware they would have ended up competing with all the instrument makers who themselves need to create the connectivity, so they created an ecosystem with the exact word you used and everything. those people are partners with them and on the other hand, the people who want to use that data, the pharma and biopharmaceutical companies that they have focused on, which is why they chose biopharmaceuticals as their mvs, those people don't care how they get there the data there. or the only thing they care about is that they have a data pipeline, another great word that you used that puts it in normalized form for them and, in fact, makes it literally so usable for them that they think it's Switzerland, so in between From this I have become an envied leader because they connect all the data to all the places where it could be used and provided in a normalized form.
I'm dramatically simple, like this business has skyrocketed triple triple double double it's probably going to be one of the fastest companies. reach 100 million dollars in less than five years after being Almost Dead, one reason the business model makes sense, any questions, okay let's move on sir, I have good news for you, you just need to start where We've already been, we already had Lisa. Explain to us that she had something she wanted to try. Start with your client, so take a moment as a group and write down one thing that you think your client needs only one thing, so I'm giving you 30 seconds, it shouldn't take. more than that, so what came up with this board?
Oh, um, the main thing was personalization, personalization is okay, great, so what is it about personalization that will be valuable to your customer, not you to them? I think health is a personal journey and that's a perfect stop right there well done, of course, it's health, it's a fantastic personalized journey, who else what do we have here? Abby likes it, um, with some perfect representation, so why is representation what the client really needs? The clients are actually students because what cut is everything? About this is a service for students to have teachers who really look like them, especially in US public schools, especially if you have students in your class who are not American, then how can they have a Adequate representation of role models in schools?
And we choose the representation. Perfect, what I love about Abby, one word, is that the cohort is trying to provide this education to the people who need to be represented by the people who teach them, it's like the teacher is themselves so they can understand what the student needs, is that right? Abby, perfect and it wasn't me that came up, it was you, and you have a great name for it too, so now you understand what I mean by figuring this out, it's actually not that hard if you can get it from the client. point of view, okay Claire, we're going back to your table, they solved it, but okay, what is it?
Okay, basically it's a faster evaluation time for the data set that they're looking at, so the response time from when they want the data to be able to get their hands on the data, which is their biggest problem. Great, and were they describing this for cold-press AI? Perfect, okay, then it's time to figure it out. Perfect, okay, you guys are doing great, so now we get to the place where the second piece of the business model is and okay, we figured out how to create the value, but how do we deliver this value and what is it? will make it so powerful and disruptive?
What we're going to try to do is think about around your core, what can you do to get a multiplier that will increase your value and a lever that will reduce your costs? And it starts to address this question of how we can make money on cash flow. formula for those in MS MBA classes or how to make your operations model effective so that it can be sustainable, then what we want to do is think about that core, that word that you all invented, that key thing or, for example , If they want. To think about tetrascience, how they decided to actually take the data and create the ecosystem around it that would give people on both sides, the instrument makers and then the biopharmaceutical companies, to use that data in an effective way. , so both techniques are for multipliers we want to increase revenue, if you only sold a dollar for a dollar, you wouldn't make money just by staying in the office, we want to increase reach, we want to reach more people, that's part of the objective of going to the market we want.
To increase coverage when people buy your coffee, we want them to drink it many times a day or when people buy their healthcare, you don't want them to buy it individually, you want them to tell their friends and so it spreads virally. . For example, those are all multipliers that take up for those of you who are interested in these things, your lifetime customer value, your LTV is often called or on the other hand, we want to reduce the time it takes them , so you just set a great example if you can reduce for your clients the time it takes them to get the data that is of great value to them, you nod your head, so I think that must be right and obviously we want to make sure that while doing so, you are reducing your costs as well as customers' costs for using your product, and any time you are reducing things like resources, whether it be people, time, energy, etc., that is a lever and if you do in the core, you're going to increase. the value, the maximum value that the customer receives and you are increasing your ability to be a sustainable business, so even if you are a non-profit, this is also important because even if you are just providing a service that you don't want the people who pay for you have to be able to sustain your business to be able to continue providing that service, so let me tell you how you designed that, first of all, your product has to feed the business model so that the user has to have an experience that they love, So I've asked this question before, but I'm going to ask it again because it's very real.
How many of you downloaded an app on your phone? I hope everyone is well. How many of you have deleted it? one within the same period that you know within about five minutes of deleting it, okay, clearly it's not a good experience or a good value, honestly, that happens all the time, I mean, it's part of experimentation, So remember that when you're thinking about

designing

your value you want people to have a great experience right away. This leads to four startup secrets that I'll walk you through and you can design from scratch, you don't even need to have a product that you can Start, for example, literally with your paper prototype and start thinking about this.
The first one is my favorite, so a long time ago I used to call this a startup secret called slippery and it's basically the same essence, which is that we want to make something simple to use. and install we wanted it to have little or no upfront cost, instant and ongoing value and then make sure it works well in the ecosystem with everything around it. I just said a lot of things, but it's actually all very simple and if you think about it. experience with the app you had, it was clearly easy to use and install or simple to install, at least just click to download it, but it may not have been easy to use, that may have been one of the reasons you threw it away To the trash, I see.
Many of you nodded your heads. Did it offer instant value? Well, they clearly didn't waste it. Time to value is incredibly important. It doesn't matter if it is a service or a product or if it is data. If it gives you instant value. I will keep it and it will eventually work well in the ecosystem. If you have to change your phone to use the app, are you going to use it? I don't believe it. There are things that already exist, so this is your point, Lisa. you don't want to change too much if it's disruptive to adopt something, it's not going to work, that's why I usually say that a startup secret that comes up many times is the best value is actually highly disruptive but not disruptive to use and for example, If you are creating an enterprise product these days, you don't build it on hardware stacks that you run under your desk, like you did 20 years ago, you build it in a container and just deploy it to AWS or your favorite. cloud provider that is incredibly non-disruptive and gives you huge benefits, so this is what you are looking for, you are looking for products that have a slip that has now become a term that has become popular 15 years later called Product LED growth , so if you want to do more research on this, how do you make slippery products that are truly frictionless and how can they help you with product lab growth?
Yeah, go ahead, donga um. I was wondering, for example, for companies. software what would be the value, for example, having an API model versus something that can be downloaded instantly, where there might be a little more friction but it might also reduce churn because it's a little more personalized and also a little more integrated. That way, you came up with a bunch of things again and I threw away your board, but that's okay, we'll put them here, they're all great questions, so I'll answer some of them later just to make sure I keep the class on track, but you said apis and you said, for example, how it reduces attrition and there was another thing you said, um, so that it would be more personalized and a little more integrated.
I imagine integrated, yes, integrated, personalized. It's all good stuff so I'll answer some of them next week, one of them I'll answer right now to give you an idea of ‚Äč‚Äčthis, so if you're selling an API, are you selling it to a developer or are you selling it to them? to an end user from the Algae Department who rates it well, so I'll give you two examples ofcompanies that have played in this world, one that was very successful and one that failed, and what I want you to take away from it is, well, what would you do? do it, someone knows, twilio, okay, twilio, it's actually not doing very well right now in the stock market, but it's an incredibly successful story of an API first company.
In fact a lot of people would say that they kind of led the API economy, it's not really true that Amazon did it years before, but they started selling everything they made, but they sold it to apis developers because the developers didn't really They want a finished product because then they don't have a job. State the obvious right so you don't sell it to a developer, end users don't. I don't know how to program, so would you sell them an API? They don't know what to do with it, so you have to be very clear about who your audience is, who your customers are, who your buyer is, what they want to buy and what problem. you're solving for them, developers love apis because it gives them the ability to get a multiplier on their experience and build things faster, which is why Trulia took off.
I'm not actually going to mention the name of the company because I'd rather be embarrassed for them, but it's a company that we've backed, so I admit that the nature of venture capital is to package things. Some of us are going to make mistakes. The students came up with a brilliant API in the world of healthcare. It failed horribly because the healthcare developers didn't actually do it. They have influence, they are not the people who have the budget in healthcare, and even though they love the product, they couldn't get anyone else to pay attention or give them a quote because they just wanted a healthcare solution.
The vendor said, I just want the solution, give me the workflow, give me the process, give me anything, but I don't want to develop it for six months and customize this, so I hope you realize it's a simple thing. about the audience back to the customer firstand it's about what are you giving them that gives them a solution to a problem that is really important to them and that they can use immediately to get back on the slide simple for them, low upfront cost to a note, instant and ongoing value to them and that works well in their ecosystem, how does a slip make sense?
Great, very good, thank you, good question, so I hope you wrote something that is useful to you and that you can use after the workshop and now the second startup secret, how you value and package this is incredibly important, so if each application you wanted to try in the App Store, it cost a thousand dollars. He didn't even need to say anything else. It's usually free. The first thing they do is tell you to download it, but what they don't tell you in many cases is that. When you start using it, by the way, there is an in-app purchase.
I see many of you nodding your heads. That's okay, it's also true with online banking. Oh, free banking, no fees, everything else, how do they make money? Interestingly, in many different ways. sometimes it's in your details, although they don't tell you that sometimes it's about recommending you, so it's lead generation to get you on board with your bank, sometimes it's on the back of the credit card that they then give you. They sell and you pay. There are all kinds of ways people do this, but to start, it's attractive when someone says free, so price and package are important.
By the way, it's often true that when you realize this, there are a series of steps you need to take that I recommend. You have to think about where you want to start and how you will get to a place where you ultimately deliver value and get paid for it. That's what the business model is really about, so the next key example is very easy. Anyone can use wistia. There's some chance that if you're in marketing, you're doing it with the intention of describing what wistia does. It's essentially a video hosting platform, so they make it really easy for marketers who don't have a videographer and their equipment but want to use them and promote video content just to upload stuff and you see how they've split their pricing.
They do this based on how many videos you store, so the more things you create, the more you end up paying them. Excellent class of thanks, so it was. hoping that one of you will use it, but thanks to Claire being the client, in this case it attracted people like Claire for one simple reason: there is no cost to start trying to use it, if you have great experience then you can . play for the POS, the positive piece, if it really takes off, you get viral adoption. You might have, for example, a workgroup that uses it and they pay for the professional subscription, and if your entire company accepts it, then you'll start paying a lot more for it. a classic strategy, go ahead, Sephora, can you do the same?
Or a great question, what does anyone else in the class think? Yeah, go ahead Lisa, I feel like I feel the bundling or I like bundling or else I'll get one if it feels a little different. because there is still a cost for initial entry, whereas this is almost like your coffee has a trial for two weeks, you can get free cups of coffee at the kiosk in Kenya, like it's free entry which I feel is different . in this model versus the other ones that are more about cross-selling or up-selling or cool, so zippur. I know that wasn't a complete answer to your question, but it's a good start to thinking, so it turns out that grouping is quite a science. itself we will put a link in the workbook to one of the people who has a fantastic view on bonding has made a great video about it.
She is a guy called shashir mahotra in fact, she is the founder of Coda, the workbook. it's built in and he also used to run YouTube before that and he's an expert at this so instead of trying to half answer your question I'll say the next incredibly important question, there is no right answer, there are many times to group It can generate many things. It makes sense, but you have to think about it as a separate science in this big question, it's absolutely the kind of thing you should think about in the next startup. Secret if you can co-create things, in other words, not just build it on your own, but co-create it with other people, it can create huge benefits for everyone, so how many of you know what open source software is before you explain to them that everything is fine, about half of the class, so the notion of open source software is very, very simple, which is that anyone can create a piece of this code and put it in an open repository so that Anyone can see it, anyone can adapt it, and anyone can use it however they want.
I am greatly simplifying why open source appeared? It started because people realize that it's actually a lot easier if I have the problem of

designing

a nightmare developer to design the solution myself, why do I have to pay another giant company to do it? If I'm a programmer, I'll just develop it and guess what if I want people to keep adding things. I'll say, take a look at this, see if you think we should do something better and pretty soon hundreds of thousands, in fact millions of people have contributed to open source projects. Around the world, the one I backed was called Drupal, which became the largest enterprise software content management system, so it's actually used by everyone from Sony on one end to NBC on the other end and the White House on the other end, almost all of them. website that is available at full scale, for example, the Olympics, the Grammys, etc., everything is built in Drupal, but everything is open source, everything is free.
The founder of it is a brilliant guy who was solving his own problems. It turns out that he is in his bedroom. He room decided that he needed to be able to share information with a friend literally over something that wasn't even an Ethernet cable and created his uh Dutch or actually Belgium. It created what was effectively a foundation for sharing information and then it became sharing it on websites and then it became Drupal and there are literally now tens of thousands of modules created for Drupal that every Drupal developer around the world contributes to. the world, but it's free, how would you make money with that?
Go ahead and start with the free services people or the developers use the open source structure that exists today and then for some companies you can start offering things like they would develop, like cloud storage and so on. , as a service, and you monetize a part of what you can do for free. but he just adds convenience and charges for convenience, that's exactly what he did. They figured out how to give away the software and then build the services around it that made it, for example, secure, reliable, scalable, eventually put it in the cloud and what Drupal became.
It's a cloud service so anyone can create any website at any scale and it's literally used by, like I said, for example, every major artist. Harvard uses it, for example, everyone uses it as a service to be able to get their content, their website is there now. the media and their experience, that's why they call it experience management in operation, but what is the mutual benefit? I'll go back, who created it, everyone did it, big startup secret, if you can tap into a community, for example, you'll get in healthcare, is there a community around healthcare? Imagine if you could tap into the community that could help you create your product.
It would be an absolutely good thing. Who else has something they think they could use to help them? build your solution, yes, go ahead, Charles is working on developing a line of products that, first of all, the goal is to work on sexual education and reproductive rights, so we are going to develop a line of products that are biodegradable and that have biotechnology incorporated. They are going to be so affordable that low-income and struggling people can buy them. Sounds like a great product. How is the community going to help you do this? So we need product design experts and also health experts because not only do I want to develop a sanitary pad or tampons, but I like a whole line of products for that, so the good thing about what you're thinking is that there are a lot of elements in these products and that you know everything that has to do with health and safety, but also really. important for population control for certain governments you probably have a basis for really wanting those types of products, there are many people who could contribute to this need and you will involve them in a community to help you build your product, that's what you're thinking , yeah, I was thinking about an ecosystem, yeah, okay, so I'm going to make sure that Cheryl doesn't limit herself literally tonight by asking you if you would spend a little time with Cheryl afterwards, what would you do?
I recommend that you get the community involved in this need because there must be many of you who have experienced this and said, "Okay, I wish we had a better biodegradable product and a lot more, you know, low cost or something that For example, you could appeal to low income, how could you contribute to that? What I will say is this, it's really important that this word is a win-win, it's two words, I guess it's there to make your community work. , so the reason why, for example, Drupal took over or any rope and source project takes off is that the person who has the problem wants to solve it, so you'll have to find the person who is in the medical world, for example, or in the biological world for um in the world a that's just solving this problem because you want to solve this problem that will contribute to your community it has to be beneficial for everyone otherwise they won't get involved it can't just be your need if keep asking who needs help they win It doesn't work, but if you can get them to say "I want to solve this problem, so I would like to contribute", then you will be on the basis to start win-win, that makes sense, it's not as easy as say "I." I just want to start a community, you have to find this win-win thing.
I see many people nodding. Do you still have your question? I'm developing a new pre workout and I'm on the varsity rowing team um and I think. I have a bit of a problem getting more stamina, anyway, so I created a product, but I wanted to ask other teams what they would want in a product, so I sent out a survey to all the other college teams and something like that. cross-referenced different sports and they liked it so they wanted to find a definitive solution that covered many different sports, so it didn't happen that way. I guess I created it more like Harvard Athletics was helping me create it fabulous.
So what Meredith did is really smart to achieve a win-win situation. You need to find out who else cares about the issue and if they care enough as if there were other rowers or their other athletes and they were in the same community. Like you, Harvard, forexample, and they would like to solve that problem too. There you have the beginning of something that could become a community and I bet they would love to contribute. Will help them. That's a great example, thank you very much. So win-win doesn't always work, but I gave you an example here because I really want to make sure you understand that it's actually something that can be developed in different ways, not just in the watery open source example, but also through partnerships. strategic.
I'm going to almost guarantee that none of you have what we call a complete product. What I mean by that is they're going to be a piece of the puzzle, so I'm going to go with cold press AI because I think they have a really good example of this, so you're going to get your data to people faster, it's the essence of the value proposition, what are you going to do with them? They're just going to say great. I have the answer there. they're going to train their models with it Yes, they're going to train their machine learning models, okay?
Who has those models? Hopefully one day you will have them now. It is up to customers to find another supplier. Okay, perfect, so this one is perfect. An example of what I'm describing now is that for cold-pressed AI to have a complete product, they're going to need a lot of things, so first of all you need a cloud provider, yeah, okay, and then like you said, someday I hope to have models, but today you don't, so you need a partner for those models and I'm going to go one step further, even when they have all that, what are they going to use it for?
Implement it and use it in features on their website. in their applications, so there is something that they are going to use this for, it doesn't matter if it's a healthcare application on an end or a consumer application or something else, this is the notion of a complete product, so you can't actually be successful for your customer to run application and then integrate it into some application. Good news, these two people need you and, in fact, that's why they're going to help you get to market and they're going to help you find customers and they're going to help you build the success of those customers and they're going to be a huge multiplier for you. to get to market, in addition to being a lever, they will reduce your costs because you won't have to create all that, so strategic partnerships are incredibly important and the first thing I recommend you do is think about the end-to-end solution. what we call the full product and where do you fit into the ecosystem and who you might partner with and by the way, it's not optional because if you keep trying to sell your little feature or your little functional product, and there are all these other things that the customer needs no They will work, but generally speaking, by the way, if you find a real need to solve, in the end there will be people out.
There are those who are solving part of the problem and they will be happy for you to come and say: I can do it faster for you, better, cheaper, etc. It makes sense, any questions about that, well, yes, whatever the community is in which that mutual benefit exists. a competitor's community, what do you think? Don't know. You really are very intelligent. You've been here before, so I have to challenge you again. What would you do?. I will be successful. Obvious example that a competitor has. a form, people on that form talk about things that are needed, yes, that are not provided, perfect, so, but you can't, I don't know, because your competitors can leave you out, for example, it's difficult to participate there.
Oh right, so you have a potential threat and an opportunity. The threat is that competitors will leave you out. The opportunity is that you are identifying things that they are not doing, so you have to play that with classic skill. from an entrepreneur and says, "I can see that this competitor here that's facing me can't solve this problem, so an example could be that they are an on-premise solution; you are the first people who will do it in the cloud and through the way that's a classic thing that's happened over the last 10 years and is still going on, people are figuring out how to decimate the old solutions that were Legacy Enterprise based on-premises by creating cloud versions, that's the whole SAS movement. , another example.
Let's stick with cold AI: almost every application will probably be reinvented with AI. That's just my view of the world, so the good news is that you can approach anyone who has an application and say, "We can enable it. AI for your application." That's great because now that they're not in the Old Guard, you're allowing them, as partners, to move to the forefront of what people want, which is smarter applications that have better data and that deliver the solution to your problem more quickly. It makes sense to you. Alright, next is what I call the three UPS, so think of this as if you are looking for a solution to have a great marketing experience so that your product gets adopted. it's just the beginning, you're always going to want to improve it properly, so you're going to want to update it, which is sometimes just for security fixes and things like that, then you're going to update it, you're going to update it. when for example new capabilities are needed or new technologies like AI come out or you want it to be mobile etc. those are the upgrades and then guess what you are selling in some particular feature so let me pick one of the teams here um, Lisa. you haven't really talked about your Solutions, where do you start with food printing trying to provide environmental food information to consumers?
Based on data you don't market such easily comparable environmental information about the food you eat and buy, so I don't know anything about your business, but I can think of three advantages for you, what they might be, how you could upgrade your solution, how you could upgrade it and how I could upsell it so that someone has already purchased it and someone wants to help Lisa please join in on this. opportunity to really get someone going yeah, so I guess one thing I've been playing with is if someone has already done it, in this case imagine like an online browser extension that goes in and if you buy groceries online when you get to the cart. suggests alternatives to change their products that have a lower environmental footprint, so in this case there is a range of products that are then recommended and that is certainly like an improved version, where you could say well, which products are recommended.
Right now they're not, they're not paying any commission, but that's pretty valuable if people actually put it in their basket, so there could be a perfect upgrade, so I'll let you off the hook. think of all three, but that was fabulous. No, seriously, people buy your product and they are solving this with their purchases. The first thing I would say that you pointed out is that you can give them an update that makes recommendations for they are great, you could sell them, if people really value it, they will pay for it, that will help you sell more because you are solving more of the problem, because people want recommendations to find better products, but it will also increase the value.
By the way, that's a classic update, by the way, the things I thought of were pretty obvious, which is, you're going to constantly update the data. The data was outdated. You're dead so you need this, you need that and then. the upselling one, this would apply to both CPG and grocery, yes, so you could say it's like a different value chain and less frequent purchases, so it's not exactly clear how human nudging behavior would work, but I absolutely like the idea that we should know the environmental footprint of anything we buy and from extensis or Universal, so there is both an upgrade and a huge potential set of upsells that could be made and guess what I did.
I only did one thing: I kept the customer the same because if The customer is the same here, that's why we always talk about customer-

centric

value propositions and you can keep updating them, updating them and selling them. You have a fantastic business model so that's the secret and guess what plays into what we already have. I talked to which one about which one is if you make it really slippery for people to just land and expand to get their first customer and then you keep updating them, upgrading them and selling them, ultimately you build a moat, which means a defense to your around that is tremendously valuable, that is because of how all social networks work.
Maybe tomorrow I'll come up with a cool new social network and let's just say they'll love posting photos. I guess some of you will love it and I told you I have a much easier way to do it. I've discovered this paper so you can download it instantly, but bad news, you have to invite all your friends before it really has any value to you, you're not going to do it, that's the value, the value is that someone did it. a very good job building any social network you like, be it tick tock or Instagram, or choose your favorite to build that network to the point where they have a great defense, even if their features are not that good, they still attract you.
You are there and its ecosystem effectively, so someone had a question. I saw a hand raised, yeah, go ahead Clint, is it fair to say that both upselling and upselling are about customer retention, while upselling is about increasing value per user? I haven't understood this exactly well and by the way there is no reason why all of that couldn't be true, so remember my virus subscription example which were just updates, we didn't actually change the product at all, the only thing What we did was send you viruses. it's updated all the time so it has the latest signature, the latest virus before it even hits it, we don't have to change anything about the product, we ended up updating it because people had different ways they wanted to monitor it.
For example, they want to see how many viruses I got and they wanted an analysis of that and then the people who were actually in the IT department said, well, I want to track if it's happening in certain regions, etc., so the many ways that These things happen and then we sold them. I think I told you this 2.6 times when updating this functionality to be data security for everything so that it wasn't just a virus but a backup of data and improved the performance of your PCS at that time etc. except a very very compelling business model startup secret basically just think of three to improve everything and you'll have a great foundation so what I've been doing here is quietly building what we started talking about are multipliers and levers around your core and everything you can. do to do that, whether it's creating full-product strategic partnerships or, for example, finding ways to make your product have less friction in the sliding or pricing model and packaging it for appeal.
You're not pushing it, but customers are demanding it because it's so easy. it's very efficient for them to download it, it's free for them to try it or how you co-create it with a community that makes it really beneficial for everyone or ultimately what we just talked about, which is three increases so that it has a long life . cycle and to Clint's point you can continue to sell and get more value for it, that's it, you just got four startup secrets very quickly to increase your lifetime value for your customers and reduce the cost of acquisition.
It's fun to play this game and I. I encourage you to work on it very simply starting with this core, like I said, so we're almost at the end here and what I want to do is give you the opportunity to, for a moment, brainstorm this like your own company would. . Be it a multiplier or a lever for your table, but everyone participate, this is your opportunity to exchange ideas with each other. I hear a lot of discussion, so top right, what do we have on this table? He said there will be greater reach there will be a multiplier per lever and and what is your client going to benefit from that?
So, our client I had, I didn't clarify before. Our client is a low-income consumer in Kenya, right now they can't afford to drink coffee, freshly brewed coffee, so they're going to benefit because of the access, so it will be affordable for them and convenient and fabulous Sephora. I actually don't need anyone else's response tonight, you're just laying out the exact same thing, no, it's perfect, seriously, because the next slide is you're designing this for your clients, so the good thing about it you responded right away. was that yes, you want to get more reach, but why does your client benefit and you just said that access is getting that reach for low-income people who couldn't have had access? this cafe can now have access to it fabulous again, we need a round of applause which was just excellent sothat we came perfectly to the end of the session by returning to what I said: we need to design for the client. models focused on things that benefit the customer.
I'm going to give you just a quick look at what's going to be on the portal and this is how you do this, so the secret is to follow the customer journey, which is actually when they first engage with you, all they have is a problem and they spend a lot of time and it costs them money to basically figure out what solutions there are, they buy them, then they have to implement them, then they have to train on them. They test it, then they implement it, then they measure if it's working, then they optimize it and only at some point do they realize that we have enough value from this that to keep buying it, we should go through all three. process, so this is a whole journey that I encourage you to discover and Clint, you asked about this, all of that you're trying to increase the dollars that you're taking over the life of your customer engagement and the more they interact with you, the more they interact with you, the higher your lifetime value will be, which will make your business model much better and obviously on the other side of this, the Zapora question just nailed this down so I don't really need to tell you. , but you will answer questions for your customers, like why is this better for them, does it save them money as support says or does it save them time as you say in terms of how to get the data for them or what is the room for improvement in their business, not yours.
You probably have many examples of where you've been demonstrating to customers the ultimate business model for themselves through what you're selling them, so these things are what make this a customer-

centric

model and as examples of these Things, think about Airbnb, they're helping homeowners use their home, they're paying them money they wouldn't have gotten otherwise. What about, for example, Salesforce? Why would you sell Salesforce? a good model, obviously people are making better use of their sales staff if they are more in contact with their customers, have better relationships with them, can sell them more basic things, but at the same time these things are what drives companies, so I won't ask you this question just because of lack of time, but I would let you think about it: what is it that makes your business profitable and that your client also makes profits or benefits from, if you can identify it? that this is the key to having a great sustainable business model.
The last thing I was talking about is that it's sustainable because it's not just you who is successful, it's your customer who you make successful, that's what makes a great business model successful, so putting it all together. This is the sustainable part, it is what you are going to do to make your client successful in the long term with all the different facets of the business model that you have built. There is a phrase that I told you at the beginning. I'm going to remember that if you can get a great business model, it's going to be like that invitation that you're going to RSVP to, it's going to be something that's going to become repeatable, in other words, customers are going to keep buying it, it's going to become scalable because not only do they keep buying it. , but you can still use it profitably, and more importantly, it's valuable along the way because the way you're actually building it can be very effective, for example from a community, or you're making it very easy . selling through Partners Etc and it's disruptive because you're doing something no one else could do, open source disrupted for example many traditional software stacks or the advertising model disrupted all traditional software stacks so Google for example , gives away its apps, caused Microsoft to have a stock price that was a dial turner for almost a decade as they tried to catch up and compete, that's what business models do, they are so disruptive and ultimately, It becomes defensible because you build an engine around it with things like your network and that's what's so exciting about RSVPing. model and obviously the bottom line of this is that it's for you and your client, if you design it right, so thanks for listening the summary of all of this will be available online, but you're just going to learn four starting secrets, you're going to learn how to figure out how to to build them around the core of what you're doing and your design, and you've learned how to design an RSVP model that will create a very disruptive and defensible business for you.
It's a real pleasure to have you here. Now I just have one question for you. Do you now understand why a business model is important to you as a founder that was incredibly silent? Okay, so I'll connect the dots for you in a way you probably haven't thought about. If you have a smart business model, it will. it will make you spend less, it will be very cash efficient, it will have better valuations, it will have lower dilution giving you greater ownership and the bottom line is that you will have a much higher result as a founder, this directly impacts your bottom line, let's find out how do excellent jobs with it.
Thank you so much. I really appreciate it. Thank you.

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