[Music] [Music] thank you very much for coming everybody I want to say that the most important thing we're going to do tonight is to try to give you a chance to figure out what your business model is and D just gave me a perfect intro he said he's not sure why he's here well most of you probably aren't why do you need a business model that's a really really good question now by the end of this evening I hope you will answer that for yourselves now what is a business model that's what I want to
get to this evening and I'm going to give you the agenda up front so you have a sense of it we're going to talk about a few key Concepts number one of which is how do you focus on the absolute essence of what you do that's what we call a call and then how do you multiply that to Market in a way that's very efficient and also get leverage from it in a way that it is ultimately going to become sustainable for you so that you can operate your business for the Long Haul and you'll
learn five initials rsvpd and by the end of this evening you should be able to say to yourself okay if I have an rsvpd model you're great well how are you going to remember those initials when was the last time you went to an uh invitation to something and you didn't RSVP it's never a good thing to do so you just remember it that way you're going to be able to figure out a great business model by just rsvping it great so we've already asked this question but I want you to all write down one
thing now that I've told you that we are going to Define what's important about a business model one thing that you think it might be just write it down for yourself this is for you not for anybody else just write down one thing so is anybody from HBS here by the way okay lots of HBS students that means I'm doubly challenged tonight because there's Harvard students from all over the campus all the different schools here tonight and some of them haven't had the benefit that you've had of going through business school and learning some of
the fundamentals of why business models are important so I'm immediately going to bridge for you guys with the rest of the Harvard schools so when you go to HBS for those of you don't you will learn something from a great Professor Tom eisenmann and many others something called the diamond and he describes the business model in terms of a customer value proposition a go to market model a technology technology and operations model and a cash flow formula so as we are in a business school you're probably going 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 iLab terms tonight we're going to talk about how you create deliver make money and do all of this sustainably and therefore the MBA students should walk out of here going okay I know how to go about building a business model you guys should all feel like you've been fully introduced to it and can also do the same that's my challenge to myself tonight great so what is this framework that we're talking about this thing that can help you create and
deliver value to your customer and make money and keep that sustainable it turns out it's a lot of different pieces and so I'm really only going to cover three of them tonight this creating and delivering will be the bulk of it but making money we're not going to get to tonight we'll give you the essence of it but we will have it in a follow-up class doing it sustainably we will talk about tonight but again all of these elements are covered in startup Secrets classes in more depth uh going forward so I'm going to give
you a sneak preview of those those of you are going to be coming to Future classes we will cover a lot of these in the startup secret workshops going forwards so the the particular one that I get excited about is next workshop and the reason is it's the one that covers this customer value prop or how you create this value and it's a whole Workshop unto itself and it is the most fundamental piece of a startup because if you haven't got the right value prop in other words if you're not solving a real meaningful problem
or addressing a great opportunity there's no point doing anything else because the number one reason startups fail is they're not creating value for anybody who cares about it it's not a big enough or meaningful enough opportunity or it's not a significant enough problem that's worth solving that's the number one reason things fail so we're actually going to tackle that next Workshop but what I'm going to do is get you settled in with a really fun way to think about it regardless of any of this uh of what's on the board how many of you think
that your technology or your idea or your service is really a breakthrough it's disruptive yep in the back my name is Maria and I'm building a digital health and Ed Tech business that is centrally helping people take charge of their health I'll say so Maria thank you first of all for doing something that's as important as health addressing Health what is it that you think is breakthrough about it um I think the the actual business is targeting non-consumers of the Health Market as of currently as in I'm not targeting what the Health Care system is
targeting I would say okay very good so you've seen what you might call a white space where there's something that's not being addressed and you think you can fill it by serving consumers is that right okay great so even if your idea was terrible which it isn't if it was terrible we would hope tonight to be able to get you to a place where the business model you come up with is itself a breakthrough and here's the thing that most people don't really recognize when they think about business models it can be at least as
impactful if not more impactful than your technology or your Marketplace and so what I want you to do is to think of tonight how can you end up with such a disruptive business model that people go wow I need to go work with Maria because the way she's approaching this enabling me as a consumer to get access to the healthcare I want is such a breakthrough that even if our service isn't Innovation I would want to deal with her does that make sense Maria so that's why business models are really exciting because they do give
you that potential and by the end of this evening I hopefully you will start to think that way so here's a way to start approaching it that way so Maria and all the rest of you imagine that I gave you a completely new game tonight so let's start with one you all know who's played Monopoly okay what if I said Monopoly was about how much money you lose you'd all go well you're crazy it's all about how much money I win and the properties I get that's the idea that we want to come up with
we want to come up with a game that nobody's ever played before or even if they have we changed the rules and so now it's your game your rules guess who's got the best chance of winning you you do if you write the game and the rules you have the best chance of winning of anybody 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 my younger brother is a lot younger than me it's always
great but the point is this is what actually business is about too people do this all the time they do change the rules also sometimes the rules get changed on 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 late Clayton christensen's great book is a wonderful way to get a handle on this because that's all what what it's all about and this business model approach can be as disruptive as technology so what's an example of this so I'm sure none of
you pay attention to virus these days this is a long time ago so I'm going to have to go backwards believe it or not there wasn't even virus software 20 years ago because we didn't have viruses they didn't exist they first came out really got prominent actually on the Macintosh and I happen to be working at Symantec which was the first antivirus Solution on the Macintosh and it was a great business we used to sell package software 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 all right now the piece that's not embarrassing is that we figured out a really disruptive business model that changed the game completely and actually when Norton Antivirus for the PC came out which is we owned Norton too it wasn't a good product at all in fact everybody's product was better than ours that we could tell Dr Solomon and then McAfee and all these other people had much better Solutions so this was pretty embarrassing for us you know the Press would literally come up to our stands at
exhibitions and go see if you can detect this virus and the answer would be Oh shoot no you know so what do you do you've now got this product that's not great a Mac product by the way was very good and we can't even detect the viruses because we're not keeping up with them we rewrote the rules we said we're not going to sell software and remember this is a long long time ago so there weren't such things as SAS models it didn't even exist as a term there weren't things like subscriptions things that you've
all got used to like downloading an app and doing in-app purchases that's 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 we took out two competitors within a year they just were gone and we ended up serving the customer better because guess what customers don't want software what do they want to stop viruses it's just a protection for them all they really cared about was the notion that something somewhere would just make sure they didn't have to worry about
viruses and so by selling them that service and then creating much much more importantly behind the scenes the subscription model that said we would pay for the the people in Ireland it was mostly where we developed this to sit there and get ahead of all the signatures of the viruses before they happen or create bases to even predict them and by selling that as a service everybody won we serve the customers better we started to be way ahead of the viruses we ended up creating a basis for them to say okay I'm paying for this
for a reason because I saw 10 new viruses came out last week and I didn't get any of them this is like going to the doctrine being saying being able to say look I don't know what the next covet is but give me the shot in advance that's what our subscription service did do you think people would pay for that hell yes not only do they pay for it but it actually changed the game totally it ended up increasing the price of our products that we were selling by 50 per seat and then better still
we realize wow why are we selling all these other things like backup and Norton utilities and all these other tools that were really about one thing which was securing your data we just started selling a data subscription service that got us 2.6 times the revenue and profit within some number of years I can't remember the exact number but the point is completely changed the games and it was all business model and remember where I started which is we had a worse product that's why I wasn't meaning to be belittling to Maria I'm sure she's got
an excellent product but even if she didn't just as we didn't you can have a disruptive business model that can change the game and set you off on the right direction so that's why this evening is important it's one of the reasons okay so what are some of these models you will know these companies I would imagine so how many of you have used for example Netflix or Spotify I use both a bit too much so what is their model anybody anybody who raised their hand or anybody else who didn't what is their model it's
subscription yeah what else is it it's a what a library yes so it's got content in it what else about it do you pay for it all up front no that's the subscriptionator of it how do you get value from it like when you're watching Netflix what value are you getting pleasure yeah it's pure joy but how do they measure that from how often you watch yes um I've already been with Swatch they pattern basically watches everything yeah they're going to say that oh you seem to be enjoying this movie so much maybe will you
share your um what's it called login details with before they change they now you know so Abby is smart enough to have raised a whole bunch of things so first of all she started talking about for example are we getting pleasure out of this and they know that by how often we watch and that turns translates into Data and that data helps them you didn't mention it yet but we'll we'll see it recommendations right why do you go back to Netflix because hopefully they recommend something that you actually really like so they can also sell
that for ads and they haven't yet to date but that changed now if you haven't already noticed it it changed for a reason because their stock price plummeted when they started losing subscribers and they couldn't compete with all the other services that had come out and so they said shoot we need a great 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 for you you don't even realize it when you're watching a movie that actually there's a business model behind this
that keeps Netflix in business and if there isn't guess what they're not sustainable so they don't meet that key criteria which is ultimately the Outlast their competitors and be the surviving winner so you've got to think about this stuff even though sometimes it's like not obvious so now how do I help you guys well first thing I'm going to get you to do and this time I'm going to get you as a group to pick one person in the group who's working on a business so it could be yourself for example and you get everybody
around you and you say Okay I want to know what is an example of a business model I could use doesn't mean I have to have to be the right one and to get you going is it a process or a product so if it's a process for example to get people Healthcare then it's probably something you'll sell as a service is it software or is it service so for example um Clint remind me is that is your product a software product or is it a service a better described as a service okay so can
you just describe not everybody was here last time you were here what does City bricks do yeah sure we're trying to give aspiring homeowners access to investing in their local housing market while they're saving up for a down payment okay that sounds very much like a service to me rather than something you're going to go sell them software physically because that's not what they care about okay great so content or data so who thinks they have something that's data for example that they're selling remember Netflix didn't say that they were selling data oh sorry they
were acquiring data they just did it in the background yeah go ahead I'm operating a Marketplace for data so literally that perfect so your product is data awesome and then finally how could you realize this would you do this with an open uh Source type model or proprietary freemium or premium subscription or license we're going to talk about that later so I'm not going to say you have to do this now but be thinking about that as you pick the first thing so go to the whiteboards I'll give you you really don't need more than
a couple of minutes just pick one person first of all and then brainstorm quickly about what do you think would be the best starting point at the core of your business model all right have fun okay everybody did really really well just to be clear so I didn't see any team not get going once we started letting you quiz each other and so any one of you want to volunteer otherwise I'll just pick somebody to talk about what you did and how you went through the thinking great off you come Lisa yeah yeah grab the
board come to the board and talk about it great um okay so this is uh my business time credit I'm nanga don't say the D the business that I'm building is using generative AI to translate accounting tables and into written form like memos and documents I worked in public accounting for seven years it's very boring work that a computer can do now um so that's the product and it is obviously software and so we went back and forth a little bit whether it's data or content I think we ended up with data because like the
more you use it the more the ml like learns and like the products the actual memos and written reports it end up more improving in terms of tone um yeah perfect so let's let's give first of all a warm round of goes and you had a great team obviously so you can sit don't worry so longer actually has a very clear idea of what she's doing which is awesome she knows who she's doing it for she knows what she's selling them which is potentially software or data but is that the business model what does anybody
think because there's a difference next week we're going to talk about what you're doing and that value prop but what's the business model without you answering how could we help nonga so she's doing something terribly important this boring work that's done in accounting is now going to be done by generative AI that's fabulous it's gonna I'm gonna stop making this up but free up people's time potentially give them much more accurate results and all sorts of good things come from that how should she make a business model out of that anybody want to volunteer Vivian
in my understanding a business model also includes like an Excel table that addresses how big the market is how much people would pay for it how many of them would pay for it how often that is an important aspect that's sizing your Market that's something we'll talk about in the go to market session but how's she going to make money remember what we said we want to figure out how we create value we deliver value how we do that on a sustainable basis Etc anybody any ideas about what manga should do in that regard we
need an MBA student to step in here you guys have studied this how about yourself uh for a business model um I guess you identify me doing a customer segment yep um as well as uh products like pathway or uh okay let's pick that one how should she sell it through what channel since uh we're all going to be interested to figure out how she can get this to the customer as fast as possible and as cheaply as possible any ideas and then we'll allow us yeah go ahead you can go to accounting firms great
that's all I want to hear so you already just learned the secret to this class which is I don't actually teach you anything all the people in this room are great peers who you can learn all this stuff from so you don't need me I really seriously mean this one of the most important things you could get out of the startup Secrets classes is meeting each other and quizzing each other about how do you do these things so you two need to talk and now tell us how you're thinking about it um so yes it
would be if I would start with accounting firms and charge a per user user it would be price and there would be like a basic and premium no premium but in terms of like the Enterprise tiering um yeah that's awesome that's the plan fabulous not sure why you're in the class because you're way ahead of it it's really great honestly that's exactly what we're trying to do trying to tease this out for you and separate things like what your product is versus how you sell it get it to Market and indeed how you're going to
charge for it and make money from it so you're in great shape I'm going to take one more because I want to make sure that there's an opportunity to get through the rest of the material anybody else really dying to bring those up and also challenge us to get some value to it add some value to it yup in the back all right so yeah the product is coffee in a tea bag um this is a product or one from Whole Foods if anybody is interested in trying it and uh that's a product our business
model is we link we buy the coffee directory from farmers in Kenya and we sell it to Coffee buyers directly coffee buyers get direct traceability to Farmers farmers get instant payment they're paid more so that's the business model and yeah we have all these other benefits it's locally sourced more money for Farmers higher quality coffee organic we are trying to improve the domestic consumption of coffee in Kenya because coffee is very expensive in Kenya so not everybody can afford it so yeah those are the benefits where's the round of applause for zipporah that's brilliant foreign
so anybody think that we could help Zapora in any way I felt like she was doing great but is there anything you think hey zipporah for what you're doing is something I would want to call out that's at the core of your business model that is what you're doing that's the essence of it what what do you think anybody want to take a shot at this like if you were going to sell one thing yeah go ahead uh one thing about coffee is really the extraction process so how are you going to sell that to
Coffee people that are really into coffee uh when you're suddenly get into tea bags because to them this is like the enemy you know tea versus coffee so how are you combining the both of them um you don't have to answer I want to just make sure so what do you think that should do in the business model how should that come out in the business model I think she should highlight that like why this is a premium product compared to the what we have on the market the regular coffee the um the pots or
like for example if you have a fancy machine then how is this Superior to that just to answer that question like why I should use this product as opposed to using the regular product on the market so that has to be highlighted in the business model sir that's a fabulous example again of where I would sit down challenge each other have that discussion and it's very interesting because your premium pricing immediately caused people to say so why and so your business model somehow has got to be supporting that and also making sure that you're making
money and being able to improve the supply chain that you've got but fantastic job thank you very much all right well done so like I said the beauty of this group is that you're all smart enough to be able to help each other so what I'm going to do is provide some Frameworks now so you can have the discussions amongst each other so let's get going on that so first of all if you haven't already taken away this this key message and you've already hopefully heard me espouse it and I gave the example with Symantec
and Antivirus and going subscription all these things are what adds up to the perfect storm for a startup you obviously want the Breakthrough technology you obviously want to be able to discover some new market like consumers in healthcare or for example some different kind of way to get coffee to people but in the end if that can become a disruptive business model that in of itself is so significant you have the perfect storm because nothing's better than being in a place where nobody else is with a product that nobody else has got and being able
to sell it in a way nobody else can be that's like wow we're in a great place so that's what we're trying to get you to and that's why this is so important so back to what this business model is it's about how you create deliver and make money and then do that sustainably let's get on to the create piece question number oh please do yeah on the Venn diagram so I guess I've been looking mainly at things in like energy and climate space B2B and in that one I guess some of the advice I've
received is don't don't don't change all the circles right if you have a new technology definitely don't disrupt the business model or the way you're delivering it don't disrupt it yeah I mean if you have a new disruptive technology I guess like very well said very well said so lasers bring out an extremely important point which I want to make on two levels first of all not every one of these things is an answer like there is no right answer to all these things so in certain circumstances you're going to have such a disruptive technology
that the last thing you want to do is change everybody's way of buying it because already you've got too much disruption so you don't want to jump five steps at once for example because you fall down the stairs but what's important and what you're saying is how you judge this is at the end of the day about what your product is and who's buying it and how they will consume it best so remember the title of the search this session is the customer-centric business model so now Lisa how could you find out whether you are
disrupting too much at once bingo so you don't need me to answer this question in fact I'm the worst person to answer it your most important guide to anything you do is your customer period end of story doesn't matter whether it's your value prop your business model or your distribution or anything else that you get to work on so don't take anything for granted what I said at the beginning is what I really care about this is the second key point is I'm here to bring you to think about the right things not to give
you answers so none of these things I'm telling you are answers that just Frameworks who don't get the right questions so zippora's thinking is so good I think she's way down the track on this but I'm really glad that we got a challenge too okay but how's she positioning this now honestly it's great you're getting challenged that here because this is safe but really what you want to do is go and ask your customers so why would you pay a premium if I could do all these things to improve the supply chain why would this
be something you would engage and pay money for does that make sense does that answer your question okay great so next class we're going to take apart the value prop statement and at the highest level it's what do you do uniquely well for who that's the customer value prop on the other side of this board it is this segment here and you probably spent some time on that in the mba's course already but what we'll do next week is talk about how do you actually get it down to its absolute minimum Essence so that you
could get in an elevator for example and Pitch it so that's next week but I've got good news for you we're going to cheat this week we're going to give you the advantage before we even get there we're going to tell you what the most important thing in this is and it's what I call the call and we really want to focus on it tonight so what is the call well as I've already told you I was a terrible student so everything has an acronym so the acronym for this is it is your capability of
really exceptional value it's the thing that when somebody says they will say because X and ideally it'll be like one word like incredible experience so it's the taste that would be for example uh if you would if you're selling a food product or maybe if it's Netflix it's the recommendations or you pick it but it should be something that is so easy for you to test with customers that whenever they think of you they say yup that's what you guys do you're just excellent at bringing better taste giving better recommendations finding me the next piece
of music 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 ask all right so what do we do to cut to the court I'm going to give you some examples and uh challenge you at the same time anybody want to say what is at the core of Harvard University Prestige anybody else have a different word why did you come here education what else access
oh this is awesome great so great good news Harvard's got lots of words and you're all here for a reason so I don't need to challenge that one anymore let's go to somewhere a little bit more interesting how many of you use Reddit quite a few of you okay I'm gonna pick somebody who hasn't talked gentleman in the back with glasses why do you use Reddit I don't really like red audience today but I think one of the things that they do very well being able to share so I'm going to challenge you a little
bit you don't like it but do you use it yeah why one one word why uh I think the people and the community great done okay so I could have given you a different answer it might have been not the people it might have been the actual content itself it doesn't matter what it is but you got to the core eventually right it wasn't well I love the user interface it actually sucks in my opinion but that's a whole nother story the point is that there's something in all these products or services that is at
the core of why you use it okay anybody use buy Patagonia stuff I happen to be wearing my Harvard Patagonia fleece earlier this evening that was given to me so I can't answer go ahead uh I mean they have a promise of a better Supply okay great anybody else do it for a different anybody else wear Patagonia or buy Patagonia yeah because of the style great so we've got style supply chain what else was actually a culture culture say 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 it embodied a certain culture whether it was the finance bro the VC bro but that whole so so it was kind of like okay so a Patagonia sleeveless vest okay you get you gotta get that as part of the look fabulous okay so listen to all this this great feedback here uh I will say that that's one of the things that uh Drew Claire who helps me with startup secrets she produces all this great content so thank you Claire uh she put this in here because she thought we
should have something that's 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 clothing from all sorts of different places and sometimes cheaper I mean you could go to REI and buy you know five different other kinds of alternatives to Patagonia but a lot of people buy it because of the culture of the social Mission behind it not because of the supply chain but by the way you're not wrong everybody has their own reasons for doing things but
you get into the point here where I hope you understand anybody not feel that they understand what I'm talking about when I say core now your capability of really exceptional value and please ask me any questions yep go ahead Maria since so far we've seen that the core is such a a diverse response um and you were saying that it's the first thing that people think about so um essentially what I'm getting at is like if you um as a Founder think the core of your business is one thing many of your customers think will
think that the core of your business isn't something else so Innovation we just accept that like diversity because even with our room here there were so many different cores so is that okay and how can we leverage that diversity of course in the business model so let's draw this like this because Maria's asking a great question let's say your Market's here you're sitting in the middle of it here and you've got all these customers telling you all these different things all over the place somebody in this room tell me whether that matters or not and
what you should do about it anybody wanted to help Maria with it answering that question does it matter that you all came up with different reasons for buying Patagonia is going 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 to different desires yep and so on purpose you design something that will appeal to different people in different levels okay different desires for different people and somebody had their hand up at the back so I
want to capture you my name is knuckle and I think what she pointed out to sounds like a problem where you want to understand your brand positioning and you want to convey your idea in the best possible Manner and you know truly through market research or knowing your position in the market in the best possible Manner and stick to that you know position and portray that because ultimately as we saw although initially customers said something else but at the code there is one particular reason why they are buying into it like apple it's not just
the phone it's it's about the feeling so I guess it doesn't matter what others might be saying which might be a noise but it's better that how we understand where we are positioned okay very very good now just because of time I'm going to stop at two View and because next session we're going to ask answer a lot of these questions but what I want to recognize this group uh is that you are doing a great job of describing why business model is not one thing it's not just your value prop and how you get
positioned to the marketplace it's sometimes actually how people are going to find you and buy you and indeed how you will actually make money from them and also how you will in process in the process of supplying for example your coffee make money yourself it's all these elements therefore all I was really trying to get to was one thing here which is you still can't monetize everything like if Netflix decided they wanted to monetize their recommendations as well as their data as well as their advertising as well as their content that would be a very
messy business in the end you have to pick something that is at the core of what you're going to monetize for your business model that's all this exercise is about but what you're raising and I do not want to in any way shape or form stop this great thinking is all sorts of things that are about actually your customer value prop and that's what we're going to talk about next session now I'll give you a little guide to this because it's this Claire and I challenged ourselves we took too long on it last time we
did the session so we will put this in the workbook for you it turns out there is a trick to this though when you're a startup of one like you're 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 it's diluted it's get dissipated it's pulled in all sorts of different different directions how's your business going to do not great you have to pick something and we call this a minimum viable segment an mvs and it's where
everybody has the same need so if everybody has the need for a faster supply chain for their coffee or for a culture that is the basis on which they buy things or with a better means for a consumer to get access to health care that single need if it's the same across a set of customers is where you want to focus and that we call a minimum viable segment we will put that explanation up in the workbook for you and we'll give you some examples of it so you can go look at it because it's
honestly the basis on which this conversation works for both of these points which is you do need Focus because otherwise you'll never make any impetus but your brand or your customer value proposition might be recognized to your point with positioning that people say well apples lots of things to me but what does it actually stand for when you buy a product some people will say privacy other people will say usability doesn't matter those are brand attributes they're a different set of things can you monetize usability yeah you probably can can you monetize promise privacy probably
well what does Apple actually monetize a complete integrated stack from top to bottom that you can rely on that's what I would say for example anyway great conversation let's keep going so I want to get through the material we have got through the most important thing which is an understanding of how you cut to the core and now I'm going to give you a chance to see this in action so great news the company I'm about to introduce you is called tetracytes was started right here in the iLab and with students who are In This
Very Room at one of the iLab one of the startup secret sessions and they actually came up with an idea that's really incredibly obvious which is that scientific instruments all over the world lack connectivity you can't actually get the data off them people all over the world in Labs today still go and take readings from these instruments and they hand write them into their notebooks or maybe electronic notebooks crazy right this is like everything's connected these days no it's not tens and hundreds of thousands of instruments are not so they were addressing an emerging pain
and the first thing they did was they created a hardware device it's like this was the uh back six or seven years ago where everything was iot so they created a box sounded great I remember back in the launch lab over there going into the inventory room looking at that hardware and thinking oh my God all the different versions lots of expense of inventory Etc so I can tell you fast forward that was not the right uh thing to monetize and that's just giving you that answer right off the bat it actually nearly killed the
company actually to be clear the whole first round that they raised flushed on the train caused the founders huge challenges they ended up having unfortunately one founder fell out gone so this is how badly business models can mess you up the good news is they live to tell the tale and because they figured out what the right business model is and I'm going to let you try to do it for them so now you know that iot and Hardware is not their business model let me tell you some of the other pain points the customers
had they really struggle with basic things still required hardware for this by the way to detect when instruments failed they also really struggled to get the data in a form that they could use so I just told you you'd obviously don't want to handwrite this stuff 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 bio yeah how big is a DNA data record s so imagine taking tens to hundreds of gigabytes you can't write that stuff
down but you've got to store it somewhere and they have it what's called in a temporal form which means over time they need to check the DNA so now imagine thousands of records of tens to hundreds of gigabytes you don't store that on your floppy Drive well those don't exist anymore but CDs or or your hard drive that just you're gonna run out of space on your iPad for sure right so where might they put that Cloud okay somebody's starting to think good so what is the right business model for tetriscience and 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 they've figured out they could do that so now as a group take a minute or two I'll give you two minutes to think what would you pick as the data as the business model excuse me for tetrascience and you might use some of the principles you're already going through just think well what's at the core of their business opportunity and then how might they monetize it I'm hearing really good discussion about
what it is in fact this table is in such big debate that there is a four to one vote against a particular viewpoint so we're actually going to go right there so Alan you said Hardware tell us why you said Hardware the mic's right there the core of that value proposition is hardware and that's what they should monetize because you want to get the data into the cloud you need to be able to connect from the instrument to the cloud so you need that standard solution to because you have so many instrument providers it will
be really difficult challenging for each of them to build a solution to connect to get their data into cloud in the first place so you are standardizing that part fantastic answer I really agree with that absolutely agree with it you guys what do you think uh so so we were thinking uh software uh either like a standard standardized Cloud solution or uh Marketplace uh to connect the people who produce the data and and use it okay so as you can tell we have fun and four of you said that right okay so let's just put
this to the test in the room Hardware we have one to four for software show of hands everybody thinks Hardware it's just you and me cheapest we're in deep trouble really are the rest of you asleep hands up those of you think software anybody's hands not up you've definitely had too much pizza all right great so there's an overwhelming belief it's software all right what if I said none of your are right in terms of where the company went where would you go so over here we had some good thinking going on do you guys
want to say what you came up with so we were kind of debating what to think about in terms of Hardware versus software and I thought about like a Garmin versus a whoop which is just like an athletic device and they each have their own um I guess apps or whatever where all the data goes and there's no way to really just connect both of those into to like compare them together I guess um so that's kind of where we were struggling to figure out a solution but I think the concept of having um one
Hardware that is I I think like Oracle maybe would be a good example of that um in terms of what was it about Oracle that you thought was an example in terms of their Hardware products um that I guess it's like it's very hard to switch um to a similar product um I don't know I was struggling this is the kind of thing this is hard just to say it's really really hard does anybody have an idea thank you by the way for digging in on that I think a lot of things you're talking about
are the right things to debate 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 wrong causes you to almost implode as a business found a Fallout all sorts of challenges it was literally a couple of years written off because we couldn't figure that out uh anybody have a different View so our group actually thought about essentially what you have there is a problem of you initially thought connectivity but it's actually data management so we were thinking of a platform like a
SAS platform for Enterprise where you are leveraging apis and you're trying to build like an ecosystem for this data to start sitting somewhere so you can connect producers on the one side versus consumers of the data and any other people who help with analyzing the data in between we needed you on the founding team of tetra science you would have saved us years and millions of dollars if you had been able to help this team understand that so not only is in tato turning out to be right for tetriscience but at the core of this
and we they by the way this they you know in a very basic way describe this as spaghetti because that's what it looks like this bowl of spaghetti has at the core of it the ultimate need that the customer has which is to get at the data it doesn't matter how it gets there they couldn't care today whether they created the hardware to connect it or whether the instrument manufacturer did and in fact your point and tattoo about the ecosystem if they kept producing the hardware they would have ended up competing with all the instrument
manufacturers who themselves need to create the connectivity so instead they made an ecosystem to the exact word you used and all those people are partners to them and on the other side of it the people who want to use that data the Pharma biopharma companies that they've focused on so they picked biopharma as their mvs those people don't care about how the data gets there either all they care about is that they have a data pipeline another great word you used that puts it in the form normalized for them and in fact makes it literally
that usable to them that they think of it as Switzerland so in the middle of this they've become an envied leader because they connect all the data to all the places it might get 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 to reach 100 million dollars in less than five years after being Nearly Dead one reason business model makes sense any questions okay let's keep moving sir I've got great news for you you only need
to start where we've already been we already had Lisa explain to us that she had something she wanted to test start with your customer so take a moment just as a group and write one thing that you think that your customer needs just one thing so I'm giving you 30 seconds it shouldn't take more than that so what did this table come up with oh um the main thing was personalization personalization okay great so what is it about personalization that is going to be valuable to your customer not you to them um I think health
is a personal journey and that's perfect stop right there well done of course it is health is a personalized Journey fantastic who else what do we have over here Abby like um with some representation perfect so why is representation what the customer really needs the customers are actually students because what court is all about is is a service for students to have teachers who actually look like them especially in public schools in the US especially if you have students in your class who are not Americans so how can they have Role Models representation proper representation
in schools and we picked representation perfect what I love about Abby's um one word there is that cohort is trying to deliver this education to people who need to be represented by the people who are teaching 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 it came up it was you so and you've got a great name for it too so now you understand what I mean by figuring this out actually isn't that hard if you can get from the customer
standpoint okay Claire we're back to your table they figured it out yet all right what is it all right it's basically a faster evaluation time for the data set they're looking at so the the turnaround time from when they want the data to be able to actually get their hands on the data that's their biggest problem great and and were you describing this for cold press AI perfect okay so it's turnaround time Perfect all right you guys are doing great so we've got to the place now where on the second piece of the business model
and that is okay we figured out how to create the value but how do we deliver this value and what is the thing that's going to make that powerful and disruptive what we're going to try to do is think about around your core what is it that you can do to actually get a multiplier that will take your value higher and a lever that will take your costs lower and it starts to address this issue of how do we get to make money uh in the cash flow formula for those in the MS MBA classes
or how do you make your operations model effective so it can be sustainable so what we want to do is think about that core that word that you all came up with that key thing or for example if you want to think about tetrascience how they actually decided to take the data and create the ecosystem around it that would give the people on both sides of it the instrument manufacturers and then the biopharma companies the usage of that data in an effective way so the two techniques are for multipliers we want to increase Revenue if
you just sold a dollar for a dollar you wouldn't make any money just to stay at the office we want to increase reach we want to get to more people that's part of the go to market we want to increase coverage when people buy your coffee we want them to drink it lots of times a day or when people buy your health care you don't want them just buying them as individual you want them telling friends about it and so it spreads virally for example those are all multipliers that takes up for those of you
are interested in these things your lifetime customer value your LTV is often called or or on the other side we want to reduce the time it takes you so you just gave a great example if we can reduce for your customers the time it takes for them to get the data that's huge value to them you're nodding your head so I think it must be right and we obviously want to make sure that for you while you're doing that you're reducing your costs as well as the customers costs of actually using your product and anytime
you're reducing things like resources whether it's people time energy Etc that's a lever and if you're doing that around the core you're going to increase the value the ultimate value that the customer receives and you're increasing your ability to be a sustainable business so even if you have a non-profit this is important too because even if you're just delivering a service that you don't want people to pay for you've got to be able to sustain your business in order to be able to keep delivering that service all right so let me tell you how you
designed that first off your product needs to feed the business model so the user's got 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 so real how many of you downloaded an app on your phone hopefully all of you okay good how many of you have deleted one within the same period of you know within like five minutes of deleting it okay clearly not either a good experience or a good value honestly that happens all the time I mean it's it's part of
experimentation so remember that when you're thinking about designing your value you want people to have a great experience of it right away it leads to four startup secrets that I'm going to walk you through and you can design these from the get-go you don't even need to have a product you can start with for example literally your paper prototype and start thinking about this the first 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 to make it low to no initial cost instant and ongoing value and then make sure it plays well in the ecosystem with everything else around it now I just said a lot but actually it's all brain dead simple and if you think about that app experience you had it clearly was simple to use and install or simple to install at least you just click to download it but it may not have been simple to use that may have been one of the reasons you uh you know threw
it away I see a lot of you nodding your heads was it delivering instant value well clearly not you threw it away time to value is incredibly important it doesn't matter whether it's a service or a product or whether it's data if it gives you instant value you're going to keep it and then finally plays well in the ecosystem if you have to change your phone to use the app do you are you going to use it I don't think so there are things that already exist so this is to your point Lisa you don't
want to change too much if it's disruptive to adopt something it's not going to work so I often say a startup secret that comes up lots of times is the best value props actually highly disruptive but non-disruptive to use and for example if you are building a an Enterprise product these days you don't build it on stacks of Hardware that you run under your desk which is how it was 20 years ago you build it in a container and you just deploy it to AWS or your favorite cloud provider that's incredibly non-disruptive to do and
it gets you huge benefits so this is what you're looking for you're looking for products that have a slip which is now turned into a term that's become popular 15 years later called Product LED growth so if you want to go and investigate more about this how do you make products that are slippery that are really friction free and how they they can help you with product lab growth yep go ahead and donga um I was just wondering for example for enterprise software what the value would be for example having an API model versus something
that can just be instantly downloaded where there might be a little bit more friction but it might also reduce churn because it's a little bit more personalized and then also a little bit more integrated that way wow you came up with a whole bunch of things again and I've thrown your board away but that's okay um we will put it over here that are all great questions so I'm going to answer some of them later just to make sure that I keep the class on track but you said apis and you said for example how
do you reduce churn and there was one other thing you said um so it would be more personalized and a little bit more integrated I imagine integrated yep integrated personalized these are all good things so some of them I will answer next week one of them I'll just answer right now to give you a sense of this so if you're selling an API are you selling that to a developer or are you selling that to an end user algae Department grading it okay so I'm going to give you two examples of companies that have played
in this world one that was extremely successful one that failed and what I want you to take out of it is well what would you do so anybody know twilio okay twilio actually it's not doing terribly well at the moment of the stock market but incredibly successful story of an API first company in fact many people would say they kind of led the API economy not really true Amazon did years before but they started selling everything they did but they sold it to developers apis because developers don't actually want a product that's finished because then
they've got no job State the obvious right so you wouldn't sell it to a developer end users don't know how to program so would you sell them an API they don't know what to do with it so you just got to be very clear what your audience is who your customers who your buyer is and 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 quicker that's why Trulia took off I'm actually not going to
mention the name of the company because I'd rather be embarrassing for them but a company that we have backed so I'm admitting this the nature of venture capital is you pack things some let's go wrong students came up with a brilliant API in the healthcare World it failed terribly because Healthcare developers didn't actually have any clout they're not the people who hold the budget in healthcare and so even though they love the product they couldn't get anybody else to pay any attention to it or give them budget for it because they just wanted a solution
the healthcare provider said I just want the solution give me the workflow give me the process give me anything but I don't want to develop to go for six months and and customize this so what I hope you to realize takeaway from that is one simple thing it's about the audience back to the customer first and it's about what are you giving them that gives them a solution to a problem that's really significant to them that they can immediately use back to slip simple for them low to a note initial cost instant and ongoing value
for them and it plays well in their ecosystem how does a slip make sense great all right thank you good question so hopefully you wrote something down that's useful to you and you'll use after the workshop and now second startup secret how you price and package this is incredibly important so if every app you wanted to try on the App Store cost a thousand bucks I didn't need to even say anymore it usually is free right the first thing they do is say download it but what they don't tell you in a lot of instances
that oh when you start using it by the way there's an in-app purchase I see a lot of you nodding your heads okay it's true with online banking too by the way oh Free banking no fees everything else how do they make money interestingly lots of different ways sometimes it's on your data even though they don't tell you that sometimes it's on referring you so it's lead generation of getting you onboarded with their Bank sometimes it's on the back end with the credit card that they then sell you that you do pay for there's all
sorts of ways that people do this but to start off with it's attractive when somebody says free so how you price and package is important it's often by the way true that when you figure this out it's a series of steps you take and I encourage you to think about where do you want to start and how will you get to a place where you ultimately delivering value and being paid for it that's what the business model is really all about so next key example is a very easy one anybody use wistia by any chance
if you're in marketing you do so um clad you want to describe what wistia does it's essentially a platform for hosting videos so they make it really easy for marketers who don't have a videographer and their team but want to use and promote video content to just upload stuff and you see how they've tiered out their pricing they do it based on the number of videos that you store so the more stuff you create the more you end up paying them great thank you class so I I was hoping that one of you would use
it but thank Claire is thankfully the customer in this case it's drawn people like Claire in for a simple reason which is there's no cost to start trying to use it if you have a great experience of it then you can play for the POS the plus piece if it really takes off it gets viral adoption you might have for example a work group that uses it and they pay the pro subscription and if your whole Enterprise takes it then you start paying a lot more for it that's a classic strategy go ahead Sephora can
you do the same thing or great question what does anybody else think in the class yeah go ahead Lisa I feel I feel the bundling or like bundling or if I won't get one if it feels a little different because there's still a cost to initial entry whereas this one it's almost like a it's like if your coffee had a taster like for two weeks you can get free cups of coffee at the kiosk in Kenya like it's the free entry that I feel like is different in this model versus the other ones which are
more about cross-selling or upselling or great so zippur I know that wasn't a complete answer to your question but it's a good start to the thinking so bundling as it turns out is a whole science into itself we will put a link in the workbook to uh one of the people who has a fantastic view on bonding has done a great video on it it's a guy called shashir mahotra in fact he's the uh founder of of uh Coda the what the workbook is built in and he also used to run YouTube before that and
he's an expert at this so rather than me try to half answer your question I will say the following incredibly important question there's no right answer there's lots of times when bundling can make lots of sense but you have to think about it as a separate science in this but great question it's absolutely the kind of thing you should be thinking about all right next startup Secret if you can co-create stuff so in other words not just build it on your own but co-create it with other people you can create tremendous win-wins so how many
of you know what open source software is before I explain that all okay so about half the class so the notion of Open Source software is very very simple which is that anybody can build a piece of this code and put it in an open repository so that anybody can look at it anybody can adapt it and anybody can use it any way they want I'm I'm grossly simplifying why did open source get started because people realize that actually it's a lot easier if I have the problem to design a nightmare developer to design the
solution myself why why do I have to go pay some other giant company to do that if I'm a coder I'll just develop it and guess what if I want people to keep adding to it I'll say hey 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 all around the world the one I happened to back was called Drupal which is became the largest Enterprise software content management system so it's actually used by everybody
from Sony at one extreme to NBC at The Other Extreme to the White House at another extreme pretty much every website that that is out there at real scale for example the Olympics the Grammys Etc is all built on Drupal but it's all open source it's all free the founder of it dries is a brilliant guy who was solving his own problems it turns out in his dorm room he decided he needed to be able to share information with a friend over literally what wasn't even ethernet a cable and he created his Dutch uh or
actually Belgium he created what effectively was a basis to share information and then it became sharing it on websites and then it became Drupal and you know literally there are now tens of thousands of modules that are built for Drupal that everybody around the world who's a Drupal developer contributes to but it's free how would you make money out of that go ahead you start with the free service people or the developers use the open source structure that exists today and then for some Enterprises you can start uh offering things like they would develop like
the cloud storage Etc as a service and you monetize a part of what you can do for free but you just add convenience and charge for the convenience that's exactly what he did they figured out how to give away the software and then create the services around it that made it for example secure reliable scalable they eventually put it in the cloud and what Drupal became is a cloud service for anybody to create any website at any scale and it literally is used as I said by for example every major artist Harvard uses it for
example everybody uses it as a service to be able to get their content their website there it's now media and their experience so they call it experience management up and running but what's the win-win in it I'll go backwards who created it everybody did so a huge startup secret if you can tap a community for example you're going to get into Healthcare right is there a community around Healthcare for sure there is imagine if you could tap the community that could help you create your product would that be a good thing absolutely uh who else
has something that they think they could tap a community to help them build their solution yeah go ahead Charles working on developing a line of products that for the first um objective is to work on sex education and Reproductive Rights and so we we are going to develop a line of products that are biodegradable have embedded embedded biotech and they're going to be so affordable that low income and strained in individuals can buy them sounds like a great product now how is the community going to help you do that so we need experts on product
design and also Health experts because we don't only want to develop a pad or of tampons but like a complete line of products for that so what's great about what you're thinking is look there's a lot of elements to these products and that you know everything to do with health and safety but also really important for population control for certain governments probably have a basis for actually wanting that product kind of products there's lots of people who could contribute to this need and you're going to get them involved in a community to help you build
your product is that what you're thinking yeah I was thinking of an ecosystem yeah okay so I'm going to make sure that Cheryl doesn't get um literally like curtail tonight by asking if you guys would actually spend a bit of time with Cheryl afterwards what would you recommend to her to do to get the community engaged around this need because there must be many of you who've experienced this who've said okay this I wish I had a better biodegradable much more you know low cost or something that for example might appeal to low income how
could you contribute to that what I will say is as follows which is it's really important that this word win-win it's it's two words I guess um is there for your community to work so the reason that for example Drupal took off or any rope and source project takes off is that the person who has the problem wants to solve it so you're going to have to find the person that's in the medical world for example or in the bio World by um in the a world that's just solving this problem for that wants to
solve this problem that will contribute to your community it has to be a win-win otherwise they won't engage it can't be just your need if you keep asking that you need help that won't work but if you can get them to say but I want to solve this problem so I'd like to contribute then you're on the basis to get going on a win-win that makes sense it's not as easy as saying I just want to start a community you have to find this win-win I see lots of people nodding do you still have your
question I'm developing a new pre-workout and I'm on a on the varsity rowing team um and I think I have a certain problem with like getting more endurance um in whatever way so I created a product but wanted to ask other teams like what they would want in a product so I sent out a survey to all the other varsity teams um and kind of like cross-reference different sports and like what they wanted to come up with an ultimate solution that kind of would cover a lot of different sports so it wasn't I guess me
kind of created it more of like Harvard Athletics was helping me Create It Fabulous so what Meredith did is really smart to go and get a win-win you need to find out who else cares about the problem and if they care enough about it like there are other rowers or their other athletes and they're in the same Community as you Harvard for example and they would like to solve that problem too there you have the beginnings of something that could become a community and I bet that they would love to contribute to it it's going
to help them so great 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 it's actually something that can play out in different ways not just in aqueous open source example but via strategic Partnerships too so I'm almost going to guarantee that none of you have what we call a whole product what I mean by that is you're going to be a piece of the puzzle so I'm going to pick on cold press AI because I think you have
a very good example of this so you're going to get your data to people faster it's the essence of the value prop right what are they going to do with it are they just going to say great I've got the answer there they're going to train their models with it Yep they're going to train their machine learning models okay and who has those models do you have them one day hopefully right now it's just it's on the customers to find another provider okay perfect so this is a perfect example of what I'm describing now which
is that in order for cold press AI to have a whole product they're going to need a lot of things so first of all you need a cloud provider yeah okay and then as you said someday you hope to have models but you don't today so you need a partner for those models and I'm going to go one step further even when they've got all that what are they going to use it for deploy it and use it in features on their web on their applications so there's something they're going to use this for doesn't
matter whether that's a healthcare application one extreme or a consumer application or something else right this is the notion of a whole product so you can't actually be successful for your customer to run X application with AI and data in it until you get all these pieces together you get the cloud the storage your product to get it there faster the models that make it useful and then it integrated into some application so good news these two people need you and actually because of that they'll help you get to Market and they'll help you find
customers and they'll help you build the success of those customers and they'll be a great multiplier for you to get to Market as well as a lever they'll reduce your cost because you're not having to build all that stuff 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 whole product and where do you fit in the ecosystem and who could you partner with and by the way it's not optional because if you just keep trying to sell your little feature or
your little functional your little product and there are all these other things that the customer needs it won't work but generally speaking by the way if you found a real need to solve are you at the end of this there will be people out there who are solving some part of it and they'll be delighted that you come in and say I can make it faster for you better cheaper Etc make sense any questions on that one good yeah whatever the community that that win-win exists is like the community of a competitor what do you
think I don't know really you're very smart you've been here before so I've got to challenge you back what would you do like I'll be successful obvious example a competitor has a form people on that form talk about stuff that is needed yep that is not being provided perfect so like but you can't I don't know like because there your competitors can lock you out of there for example it's hard to engage in there oh true so you've got a Potential Threat and an opportunity the threat is that the competitors lock you out the opportunity
is that you're identifying things that they're not doing so you you've got to play that with the classic skill of an entrepreneur and say I can see this competitor over here that's coming up against me cannot solve this problem so an example might be they're an on-premise solution you're the first people are going to do it in the cloud and by the way That's a classic thing that's happened for the last 10 years and it's still going on people are figuring out how to decimate old solutions that were Legacy Enterprise based on-premise by coming up
with Cloud versions of it that's the whole SAS movement another example let's stick with cold press AI is almost every application is probably going to get reinvented with AI that's just my view of the world so the good news is you could go along to anybody who's got an application and say hey we could AI enable your application wow that's pretty cool because now they're not in the Old Guard you're enabling them as a partner to come into the Forefront of what people want which is more intelligent applications that have better data that are faster
delivering the solution to their problem make sense makes sense to you great all right next one is what I call the three UPS so think about this as teeing up if you're looking for something a solution to have a great go to market experience so it turns out for your product to get adopted is just the beginning you are always going to want to improve it right so you're going to want to update it that sometimes is just for security fixes and things like that then you're going to upgrade it you're going to upgrade it
when for example new capabilities are needed or new technologies like AI come along or you want to make it mobile Etc so those are the upgrades and then guess what you're selling into some particular function so let me pick one of the teams here uh Lisa you actually haven't talked about your Solutions where do you start with food print trying to provide environmental information information on groceries to Consumers Based on data not marketing so easily comparable environmental information about the food you consume and buy all right so I know nothing about your business but I
can think of three ups for you what might they be so how might you update your solution how might you upgrade it and how might you upsell it so somebody's already bought it and anybody wants to help Lisa please join in this is a chance to really get somebody going yeah so I guess one one thing I've been playing with is if someone has already kind of in this case imagine like a online browser extension that goes in and if you buy groceries online when you get to the basket it suggests alternatives to switch out
your products that have lower environmental footprint so in this case there's a range of products that then gets recommended and that's certainly like an like a I guess like an upgrade version where you could say well those products that are being recommended right now they're not they're not kind of they're not paying any commission but that's pretty valuable if people actually swab it into their basket so there might be an upgrade there perfect so I'm going to let you off the hook with coming up with all three of them but that was fabulous no seriously
people buy her product and they're figuring this out with their groceries the first thing I would say that you you pointed out is you can give them an upgrade that makes recommendations for them great you could sell that if people really value it they'll pay for it that's both going to help you sell more because you're solving more of the problem because people want recommendations to find better products but it's also going to increase value for you so that's a classic upgrade by the way the things I thought of were pretty obvious which is you're
going to constantly update the data right the data was out of date you're dead so you need this you you need that you and then the upsell one would this apply to cpg as much as groceries yeah so you could say I mean it's like a different value chain and less frequent purchasing so it's not exactly clear how the like human nudging behavior would work but absolutely like the idea that we should know the environmental footprint of any anything we buy and of extensis or Universal so there's both an update an upgrade and a huge
potential set of upsells that could be done and guess what I did I only did one thing I kept the customer the same because if the customer is the same here this is why we always talk about this is customer-centric value propositions and you can keep updating upgrading and upselling them you have a fantastic business model so that's the secret and guess what it plays with what we've already talked with which about which is if you make it really slippery for people to just land and expand to get their first customer and then you keep
updating upgrading and upselling them you build ultimately a moat meaning a defensibility around you that is tremendously valuable that's by the way how every social network works I might come up with a fantastic new Social Network tomorrow and let's say you will love posting photos I'm guessing that some of you do and I said I've got a way easier way we've got we've figured out this slip for you to just instantly download this thing but bad news you've got to invite all your friends before it's actually of any value to you you're not gonna do
it that's the value the value is that somebody did a really good job of building whatever social network you like whether it's tick tock or Instagram or pick your favorite of building that Network to the point where they've got huge defensibility even if their features aren't that good they keep bringing you in sucking you up in there and their ecosystem effectively so somebody had a question I saw a raised hand yep go ahead Clint is it fair to say that both update and upgrade are about user customer retention whereas upsell is about increasing the the
value per user yeah yeah you haven't have it exactly right and by the way there's no reason why all of that can't be true so remember my virus subscription example that was just updates we actually didn't change the product at all all we did was send you virus updates all the time so that you had the latest signature the latest virus before it even hits you we don't have to change anything about the product we did ultimately end up upgrading it because people had different ways in which they wanted to monitor it for example and
they want to see well how many viruses did I get and they wanted an analysis of that and then the people who were actually in the IT department said well I want to track whether it's happening in certain regions Etc so the lots of ways these things happen and then we upsold them I think I told you this by 2.6 x by upgrading this functionality to being data security for everything so it wasn't just virus it was data backup and it was improving your performance of your PCS at the time Etc except very very compelling
business model startup secret basically just think of three upping everything and you have a great basis so what I've been doing here is quietly building what we started out talking about is multipliers and levers around your core and anything that you can do to do that whether it's create whole product strategic Partnerships or for example find ways to make your product more friction free in the slip model or price and package it so it has pull you're not pushing it but customers demanding it because it's so easy it's so uh efficient for them to download
it's free for them to try or how you co-create it with a community that makes it a real win-win or ultimately what we just talked about which is three upping it so it has a long life cycle and to Clint's point you can keep selling and getting more value for it that's it you just got four startup Secrets very quickly all around increasing your lifetime value for your customers and reducing your cost of acquisition it's a fun thing to play this game and I encourage you to just work on it very simply starting with this
core as I said so we're nearly at the end here and what I want to do is give you a chance to just for a moment brainstorm on this as uh your own Venture could be a multiplier or a lever for your table but jump in everybody this is your chance to just brainstorm with each other I hear great discussion going on so top right what do we have this table said increased reach will be there one multiplier a lever and and what is it that your customer is going to benefit from that so our
customer I had I didn't clarify before our customer is a low-income consumer in Kenya at the moment they can't afford coffee fresh coffee so they're going to benefit because of access so it's going to be affordable to them and convenient fabulous Sephora I actually don't need anybody else's answer tonight you just you expose the exact same thing no it's perfect seriously because the next slide is you're designing this for your customers so what's great about what you answered right right away was that yeah you want to get increased reach but why does your customer benefit
and you just said it access are you getting that reach the low-income people that couldn't have got access to this coffee can now get access to it fabulous again we need a round of applause here that was just superb so we just came perfectly to the end for the session by bringing it all the way back to what I said was we need to design customer-centric models so things that benefit the customer I'm going to give you just a quick flip through what will be on the portal and that is how you do this so
what you do the secret to it is following 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 are out there they buy it then they have to implement it then they have to get trained on it then they test it then they roll it out then they measure whether it's working then they optimize it and only at some point do they go you know what we've got enough value from
this thing that we should keep buying it we should go through the three out process so this is a whole journey that I encourage you to figure out and Clint you asked about this all of that you're trying to increase the dollars you're taking over the lifetime of your engagement with the customer and the more that they engage with you the longer they engage with you the higher your lifetime value which is going to make your business model much much better and obviously on the other side of this the question Zapora just nailed this so
I don't really need to tell you but you're going to be answering questions for your customers like why is this better for them does it save the money just like support is saying it does or does it save them time like you're saying it does in terms of how you get the data to them or what's the margin Improvement in their business not yours you've got probably plenty of examples of where you've been proving the customers ultimate business model themselves by how what you're selling to them so these things are the things that make this
a customer-centric model and for examples of these things think about Airbnb they're helping homeowners utilize their home they're getting paid money that they wouldn't have otherwise got wow what about for example Salesforce why would you sell Salesforce is a good model well pretty obviously people are getting better utilization out of their sales people if they're more in touch with their customers they have better relationships with them they can sell more to them sort of basic stuff but at the same time this stuff is what drives businesses so I won't ask you this question just because
of time but I would leave you to think about it which is what's the one thing that makes your business profitable that your customer also gets profit from or benefit from if you can identify that this is the key to having a great sustainable business model that last thing I was talking about it's sustainable because it's not just you who's succeeding it's your customer you're making successful that's what makes for a great business model so to bring it all together this is the sustainable part it's what you're going to do to make your customer successful
in the long run with all the different facets of the business model that you've built there's one phrase I said it to you at the beginning you're going to remember if you can get a great business model it's going to be like that invitation you're going to RSVP to it it's going to be something that becomes repeatable in other words the customers will keep buying it'll become scalable because not only they keep buying it but you can keep operating it at a profitable basis and importantly it's valuable along the way because the way in which
you're actually creating that might be very effective for example from a community or you're making it very easy to sell through Partners Etc and it's disruptive because you're doing something that nobody else could do so open source disrupted for example many traditional software Stacks or the ad model disrupted all the traditional software Stacks so Google for example gives its apps away it caused Microsoft to have a stock price that was a dial turn for nearly a decade while they tried to catch up and compete that's what business models do they're that disruptive and ultimately it
becomes defensible because you build a motor around it with things like your network and that's what's so exciting about an RSVP model and obviously the bottom line of this is it's for you and your customer if you design this right so thank you for listening the summary of all this is going to be up online but you just learn four startup secrets you learn how to figure out how to build those 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 real pleasure having you here I only have one question for you now do you now understand why a business model is important for you as a founder that was incredibly quiet okay good so I'll connect the dots for you in one way you probably didn't think of if you have a smart business model it'll make you spend less you'll be very cash efficient you'll have better valuations you'll have lower dilution that'll give you higher ownership and the bottom line is you'll have a much bigger outcome as a founder this directly
impacts your bottom line outcome let's figure out how to do great jobs with it thanks a lot really appreciate it [Music] thank you
