Gennaro Cuofano's Blog, page 211

Why Digital Marketing Matters For A Commercial Real Estate Business [An Entrepreneur’s Success Story]

I didn’t realize it back in 2011 when I launched my company, but getting started was actually much easier than what came next. At the time, I had years of experience under my belt in real estate and finance, so I was uniquely positioned to form a tech disruptor, SquareFoot, to bring transparency and technology to an otherwise opaque and outdated process. My vision was clear, and the opportunity sat right there in front of me. The problem that emerged? I didn’t realize how much of a challenge it would be to attract and to recruit people to come to us to pay for our services.

The startup mentality

When you work at the bigger players in commercial real estate – and really true of all traditional industries – the business tends to flock toward you. However, when I part of a small group of people with a startup mentality, a small budget, and little brand recognition, I had to figure out how to get my name out there and to reel in the right people who we had in mind at launch. If they didn’t know they were supposed to be coming to us, we didn’t have a chance to get them to sign up.

Intent as a powerful business weapon

So I did what I often do when I have to solve a problem – I Googled it. There, online, I stared at a plethora of resources available to bring me up to speed on Marketing 101. Whether my business focused on real estate or another discipline, the rules around the basics to inbound marketing were the same: Introduce and make something people are searching for, and delight them with what they discover on your site, and you can take your company to the moon far more effectively than without the digital support.

Going digital in a traditional industry can bring a competitive advantage

I realized quickly that I had something that people would want to see, sift through, and spend time with. In that era, we saw a rise in transparency around residential listings, giving people all over the country a chance to click through and to learn about what homes were selling in their own areas and what prices those properties could command. It gave everyone a chance to become experts, for free. I suspected that if someone did something similar for commercial listings that it would be met with similar glee by the right people looking to learn more. All small business owners like me want to be more informed, not less, when making critical decisions such as which office space they’ll take on for their teams.

The successful transition to digital-first

Sure enough, I guessed right. Not only did people want to see what was available, but they’d also reach out to us when they find a space that suited them. I was able to rather seamlessly build a quality funnel to bring people to our site and then to turn over those high-intent leads to our capable brokers to go show the spaces and then to close the deals. I didn’t become an expert at all of the digital marketing by any means, but it was my willingness to acknowledge and then to address my shortcomings that helped drive clients to us, especially in the beginning. Over time, our growth and success were tied directly back to the openness I had to learn more about building and then optimizing an inbound-driven process. This was entirely new for the industry at the time.

The value of UX

As I read more about how to create a ‘sticky’ site experience for site visitors, I also recognized there was a chance to better inform the (existing, prospective) client about what to expect and also a little bit of clarity around industry jargon. We incorporated a company blog to give people more access to ideas and a quick education about the basics. In this way, I was able to take what I knew – commercial real estate – and to apply it to an area I was growing into – digital marketing. It was the fusing of those two ideas that set us apart and made us a go-to source for more than just those who wanted to visit available spaces this or next week. We invested in long-tail SEO and marketing, and I was intrigued enough to be at the forefront of those conversations with staffers in charge of executing on this strategy.

Key takeaway

For business owners setting out now for the first time to disrupt their industries, I would recommend thinking along similar lines. I recall that feeling of underwhelming by early results and overwhelm of having to invest in my own education before cranking it up a notch. However, it’s that acknowledgment and investment in myself that I tie back to the company’s taking off. Companies cannot live in a vacuum; they must meet and accommodate where the client lives and what they hope for. The best thing to keep in mind is that many traditional industries remain in the dark about the value of and the opportunity for competing with organic search as a key lever for success. SquareFoot is a new kind of commercial real estate company, but it got that way from adopting a marketing-first mentality. To achieve that, I had to become a marketer first.

Other business resources:

What Is Business Model Innovation And Why It MattersWhat Is a Business Model? 30 Successful Types of Business Models You Need to KnowThe Complete Guide To Business DevelopmentBusiness Strategy: Definition, Examples, And Case StudiesBlitzscaling Business Model Innovation Canvas In A NutshellWhat Is a Value Proposition? Value Proposition Canvas ExplainedWhat Is a Lean Startup Canvas? Lean Startup Canvas ExplainedWhat Is Market Segmentation? the Ultimate Guide to Market SegmentationMarketing Strategy: Definition, Types, And ExamplesMarketing vs. Sales: How to Use Sales Processes to Grow Your BusinessWhat is Growth Hacking?

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China Business Trends And New Business Models With Rebecca A. Fannin

For today’s session, we have with us Rebecca A. Fannin who is the founder, editor at Silicon Dragon Ventures, public speaker, and writer for NBC and author of an incredible book which is called Tech Titans Of China.

What drove your interest in Chinese tech giants in the first place?

Rebecca A. Fannin: When I started going to China as a journalist and I met many of the leading entrepreneurs like Jack Ma and Robin Lee and the story was really exciting and I just kept covering it as a journalist and writing many articles and then that led to my first book, Silicon Dragon, and then my latest book Tech Titans Of China.

Can you tell us a bit more about the current scenario for China’s tech giants?

Rebecca A. Fannin: One of the companies that I write about in the book is Pinduoduo which is in the social commerce space. So social commerce is a business model that originated in China and it combines social networking and coupons and groups and buying online.

It’s very popular in China and even in the rural areas are now… We don’t really have that model in the Western world yet. So I think that this is one of the tech innovators that has come out of China.

Now also I would Xiaomi the smartphone maker in that league as well as a tech innovator because they have combined their apps, investing in startups that become part of their whole ecosystem and their whole smartphone brand which has gone global, where they’ve gone international outside of China and so at a very low price.

So Xiaomi belongs in that league as well. There are several others that I write about in the book. Of course, we can’t ignore the mobile payments companies, which are so much more advanced in China and elsewhere such as Alipay and WeChat Pay that is just universally used in China, cash is gone.

Super apps are another invention out of China that combines all kinds of functions of an app into one app. We don’t really have anything like that in the Western world either.

What other Chinese tech companies are your following?

Rebecca A. Fannin: Definitely ByteDance. ByteDance is the maker of TikTok which is hugely popular now. That whole 15-second video app was really popularized in China and by ByteDance.

So I think that this idea of an entertaining, very short, self-created video that can be shared easily is an idea that’s traveled very fast and has taken off big time in the U.S. and it’s a new model that we didn’t have before.

At least it wasn’t popularized before in other markets and including the U.S. but now TikTok is showing the way. An interesting thing about TikTok as well is that there’s the uncensored version for the U.S. market.

Now there is another version of TikTok which is available in China and of course in China, as we know, the internet is censored. So it’s censored in China but the Tik Tok version in the U.S. is a different model.

Is Facebook TikTok’s copy enough as a counterattack?

Rebecca A. Fannin: Facebook’s copy is called Lasso and it’s really only accessed through Facebook so it hasn’t gained the traction that TikTok has and I think Facebook basically copied it entirely and that’s pretty well known.

I wrote about this whole TikTok phenomenon in an article, a really very comprehensive article in Harvard Business Review. So if your listeners wanted to take a look at that, it might be interesting for them (you find it here).

Where are Chinese tech companies investing right now?

Rebecca A. Fannin: They have been investing heavily in AI, artificial intelligence, both Baidu and Alibaba. Baidu very aggressively going into AI and autonomous vehicles and Alibaba is getting into AI as well. So I think that is probably the binary area that both of them are investing in heavily.

I think mobile payments are another area that both of them have invested heavily in as well. So Baidu not really e-commerce so much, but that’s the forte for Alibaba. So each one of them kind of has their own area.

Baidu with search originally, Alibaba with e-commerce originally and Tencent with gaming and messaging. Now what’s interesting about these tech titans is how they’ve powered up and gotten into all kinds of new sectors today and they have become these giants that go across many industry sectors and they’ve also gone outside China.

First looking pretty much in the U.S. and investing heavily in U.S. tech companies and tech startups. But now not so much given the whole issues around the oversight of China investments in the U.S. by Washington DC and also the capital’s restrictions on Chinese money going outside China.

So now what you’re starting to see is these tech titans are moving more money and investing more heavily into Southeast Asia. So that’s a new trend to watch.

China is also investing a lot in India, right?

Rebecca A. Fannin: India is a huge market and there’s a lot of activity now focused on India. China’s deal-making is down. The numbers are down and now India is having a real surge of venture capital investment and startup activity.

So I think it’s India’s time coming up, which has been coming for a long time and I wrote about that in my second book, Startup Asia, which was published back in oh 2011 and I highlighted that trend then, but now we’re starting to see this really happen, that India is becoming a force in the global innovation scene and taking its place.

Is there any template China is using to invest in India?

Rebecca A. Fannin: There’s a huge push by the Chinese tech titans to go outside of China and into Southeast Asia and into India and many of the business models are being copied.

For instance, the model of ride-sharing, the model of bike-sharing, mobile payments, e-commerce. A lot of these areas are getting copied. India is innovating in its own right and making its own localized apps and versions.

But these business models of e-commerce, social commerce, ride-sharing, they’re all being copied and these tech titans are helping to make that happen because they’re acquiring local companies in these regions in Southeast Asia, in India, and then helping those companies to scale up even further.

Why mini-programs are so important to understand the rise of super apps?

Rebecca A. Fannin: That’s something developed by WeChat. It’s really a mini shop within WeChat so that you can have a branded store and the user’s own WeChat can just go directly to that branded store and shop there.

So that’s an interesting development as well and it’s like walking down the main street in the past and being able to go into this store or that store. But it’s very innovative in that you’re on an app and you don’t even have to leave that app. It’s embedded within the app.

I guess it’s like the equivalent, the real-world equivalent would be a shopping mall where you enter the shopping mall and then you have all these choices. But yeah, it’s a little bit more than that because you’re adding in tech as well.

Are there examples of US companies that successfully entered China?

Rebecca A. Fannin: There’s probably more failures than successes in the tech world, but yeah well Apple has been successful in China. It’s a big company, a big U.S. company. eBay failed in China.

Amazon failed in China. LinkedIn is trying very hard in China and has gained some traction. Starbucks is using a new model to keep its place in China.

It’s been the leading brand, but now it has Luckin Coffee very much competitive with it in China and that’s again, another business model that came out of China.

The whole idea of coffee on the run ordered by your mobile app and instant delivery. So now Starbucks is copying that model in China.

What about companies that failed to enter the Chinese market?

Rebecca A. Fannin: An example of a company that really didn’t quite make it in China is Uber. Now Uber was acquired, its business was acquired by Didi, a local Chinese company that’s the leader in ride-sharing and interestingly enough then the same thing happened to Uber in Southeast Asia. Its business was grabbed up.

Gennaro Cuofano: I think the interesting part… I’m not sure if I remember correctly, but I was looking at the financials of Uber not long ago and I think Uber held like a joint venture in China but they kept some controlling parts of the joint venture.

Rebecca A. Fannin: Yeah, they’ve got an investment stake in Didi, the local Chinese company, in Didi Plus.

Are there upcoming China’s tech giants?

Rebecca A. Fannin: ByteDance is certainly, they have been very aggressive and innovative. I think Pinduoduo the same thing. It already went public. Pinduoduo already went public, ByteDance is not public yet.

Xiaomi has a lot more runway to grow internationally. I think DJI the drone company is already the world leader in drones. It’s been very promising. It’s not public yet and the growth of that company and the innovations out of that company based in Shenzhen have been remarkable.

Are there any business people in China you suggest following?

Rebecca A. Fannin: The fellow who was behind Xiaomi, Lei Jun, is a super angel investor and a serial entrepreneur. I would put him high up. There’s hard to find somebody who could be the next Jack Ma, but there are definitely a lot of innovators coming up with new ideas and business models in China that are gaining traction.

But, you know, the big personality people like a Jack Ma, not so many of those because entrepreneurs tend to be, especially tech entrepreneurs, tend to be sitting, coding, Like, they like to code, they like to… They’re engineers, they’re not celebrity type personalities. So yeah, it’s kind of difficult to pinpoint one person that I think is like a superstar tech titan coming up. But maybe Lei Jun although he’s probably already made it.

Do you have any suggestions for anyone who is willing to start a business with dealing as well with China?

Rebecca A. Fannin: To start off you need to go there first of all and see for yourself what’s going on and then make the right connections and have the right partner on the ground. So yeah that’s very, very important, to know the market and to work with people who know the market locally.

You must, must localize and you must adapt to the market and you must be able to work very quickly and implement things, new ideas, before competitors and keep ahead.

You have to be able to work really hard and work pretty much around the clock to compete with these Chinese entrepreneurs who are workaholics.

Final remarks

Rebecca A. Fannin: let me point people to Silicon Dragon and our events that we do, Silicon Dragon Ventures. We publish a weekly newsletter and we host events in global hubs and our next one will be in Sydney, March 25th and then we will also be in Los Angeles with a VIP dinner.

But we are out there in the community covering what’s happening editorially and I enjoy writing about this whole tech boom and what’s happening in emerging markets, and I’ve been doing this for more than 15 years now and set up Silicon Dragon in 2010 as its own media business with events and our media platform with a newsletter and a podcast.

So it’s been fun and I enjoy it. You know, you asked me in the beginning how I got into this. It was mainly through following the venture capital money from Silicon Valley into these emerging markets, primarily China and India in the early days and I’ve just been following it ever since and writing the stories and meeting the people.

Gennaro Cuofano:

Yeah, following the money, you can find interesting stuff. So, follow the money…

Rebecca A. Fannin:

Absolutely.

Other business resources:

What Is Business Model Innovation And Why It MattersWhat Is a Business Model? 30 Successful Types of Business Models You Need to KnowWhat Is A Heuristic And Why Heuristics Matter In BusinessWhat Is Bounded Rationality And Why It MattersThe Complete Guide To Business DevelopmentBusiness Strategy: Definition, Examples, And Case StudiesBlitzscaling Business Model Innovation Canvas In A NutshellWhat Is a Value Proposition? Value Proposition Canvas ExplainedWhat Is a Lean Startup Canvas? Lean Startup Canvas ExplainedWhat Is Market Segmentation? the Ultimate Guide to Market SegmentationMarketing Strategy: Definition, Types, And ExamplesMarketing vs. Sales: How to Use Sales Processes to Grow Your BusinessWhat is Growth Hacking?

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YouTube Advertising Cash Machine Is An Over 15 Billion Business In 2019

[image error]YouTube Advertising Machine Is Worth More Than $15B In 2019
Founded in 2005 by former PayPal co-workers (Chad Hurley, Eric Skaggs, Jawed Karim, Martin Pauer, and Steve Chen) YouTube was acquired for almost $1.7 billion in 2006 by Google. YouTube Ads is a $15 billion advertising business as of 2019.

ADVERTISING
PAID MEMBERSHIP
As part of Google (Alphabet), YouTube contributes to Google advertising revenues. Advertising is the primary driver of Alphabet’s Google’s revenue, and it added over $15B.

As Alphabet’s CEO, Sundar Pichai highlighted in its press release:

“Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet…I’m really pleased with our continued progress in Search and in building two of our newer growth areas — YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate…In 2019 we again delivered strong revenue growth, with revenues of $162 billion, up 18% year over year and up 20% on a constant currency basis…To provide further insight into our business and the opportunities ahead, we’re now disclosing our revenue on a more granular basis, including for Search, YouTube ads and Cloud.”

[image error]In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.



[image error]Google generated over $116 billion from advertising revenues in 2018, which represented 85% of its total revenues. Of those revenues over 70% came from traffic via Google’s main properties (Google search engine, YouTube, Gmail, and others). Google’s main properties are monetized primarily via a cost-per-click mechanism. Network members’ sites are primarily monetized on a cost-per-impression basis. Google also spent over $26 billion in 2018 to sustain its traffic on both its properties and as a revenue-share mechanism with its network members (AdSense and AdMob).



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How Does Google Make Money? It’s Not Just Advertising! How Does PayPal Make Money? The PayPal Mafia Business Model ExplainedHow Does WhatsApp Make Money? WhatsApp Business Model ExplainedHow Does Facebook Make Money? Facebook Hidden Revenue Business Model ExplainedMarketing vs. Sales: How to Use Sales Processes to Grow Your BusinessThe Google of China: Baidu Business Model In A NutshellAccenture Business Model In A Nutshell Salesforce: The Multi-Billion Dollar Subscription-Based CRMHow Does Twitter Make Money? Twitter Business Model In A NutshellHow Does DuckDuckGo Make Money? DuckDuckGo Business Model ExplainedHow Amazon Makes Money: Amazon Business Model in a NutshellHow Does Netflix Make Money? Netflix Business Model Explained

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Revenue Models: The Advanced Guide To Revenue Modeling

Revenue modeling is a process of incorporating a sustainable financial model for revenue generation within a business model design. Revenue modeling can help to understand what options make more sense in creating a digital business from scratch; alternatively, it can help in analyzing existing digital businesses and reverse engineer them.

What is a business model?



[image error]A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A business model is a holistic framework to understand, design, and test your business assumptions in the marketplace.



What is a revenue model?



[image error]A revenue stream is one of the foundational building blocks of a business model, and the economic value customers are willing to pay for the products and services offered. While a revenue stream is not a business model, it does influence how a business model works and delivers value.

For the sake of this guide, we’ll look at a key distinction: symmetrical vs. asymmetrical in several contexts. Remember that all classification methods have flaws and we can only take them into account as long as they help us better tune an existing business model.

I decided to use this classification, but any alternative classification works as long as we are able to grasp and understand the possibilities we have in terms of business model design.

Symmetrical vs. Asymmetrical business models



[image error]In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Business models can be of various types. For that matter, there might be as many business models as the companies we have in the marketplace. In this guide, we’ll use as reference symmetry vs. asymmetry to distinguish across two main business models categories.

In this particular case, we’ll look at revenue modeling by keeping a key distinction between symmetry and asymmetry from three different perspectives.

Cash: who pays the bill?

In many cases, platform business models success depends upon two key players:

Users: who don’t pay for some or all the services offered by a platform (on the user-side), but they help the platform build it’s a core assetCustomers: who pay for the services offered (on the customer-side) to take advantage of the core asset of the platform

In such a business model, the platform assembles the anonymized data of its users who get a free service in exchange.

The assembled data gets processed (by the platform AI and algorithms) and it’s used to scale the platform, build a valuable core asset that can be financed by a set of customers willing to pay for it.

Asymmetrical: users ≠ customers

The asymmetry here stands in the fact that users and customers are two separate entities (asymmetrical cash model: users ≠ customers).

Think of how Google sells ads to companies, while its core products are all free to users.

Symmetrical: users = customers

Thus, in a cash symmetrical revenue model, users and customers are the same entity (symmetrical cash model: users = customers).

Think of how Netflix‘s users are also its customers.

Information: does the user know how the platform make money?

If there is information asymmetry it means there is one of the parties which knows more than the other side.

Asymmetrical: hidden revenue generation



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In a hidden revenue generation model, the users of the platform ignore how it makes money while the platform knows a lot about its users.

Symmetrical: revealed revenue generation



[image error]Netflix is a subscription-based business model making money with three simple plans: basic, standard, and premium, giving access to stream series, movies, and shows. The company is profitable, yet it runs on negative cash flows due to upfront cash paid for content licensing and original content production.

In a symmetrical model, revenue generation is revealed, thus enabling the customers to know what they get for the service paid.

Scale: does the platform retain its margins as it scales?

Scale is the ability of a company to grow exponentially while keeping its margins grow with the platform’s revenues.

Symmetrical and Linear: margins tighten as the platform scales

In a linear symmetrical revenue model as the platform scales its margins tighten up, thus reducing the profitability of the platform.

Asymmetrical and Non-linear: margins keep growing as the platform scales

In a non-linear asymmetrical revenue model as the platform scales margins keep growing, thus keeping the platform highly profitable.

Other business resources:

What Is Business Model InnovationWhat Is a Business ModelWhat Is A HeuristicWhat Is Bounded RationalityWhat Is Business DevelopmentWhat Is Business StrategyWhat is BlitzscalingWhat Is a Value PropositionWhat Is a Lean Startup CanvasWhat Is Market SegmentationWhat Is a Marketing StrategyWhat is Growth Hacking

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Business Glossary: The Advanced Business Terms For Entrepreneurs

The FourWeekMBA Business Glossary guides you through a set of key concepts to leverage on to build a valuable company and a sustainable business model.

The continuous quest to problem-solving in the real world

Entrepreneurship is about solving problems by leveraging on markets’ feedbacks to develop products with high potential which people want and desire.

Entrepreneurs then must understand some of the tools they can leverage to build valuable companies able to capture some of the value delivered through their products and services and build sustainable business models.

[image error]Entrepreneurship is a continuous quest for real-world problem-solving. The success of a business is measured by how well you helped people solve those problems. While entrepreneurs can rely on methodologies, systems, and processes, they also need to know when to revert to instinct and leverage on their experience.
Read the full guide on What Is Entrepreneurship



Business modeling as a toolbox

One of the conceptual tools that entrepreneurs can leverage is a business model or a framework that helps them identify the key building blocks that by time to time a company is built upon.

Business modeling is useful to build valuable companies but also to observe existing companies in several industries to understand what parts of those companies can be borrowed.

By assembling those parts, and mixing them together with tinkering and experimentation that is how entrepreneurs can build a sustainable advantage.

[image error]A business model is a framework for finding a systematic way to unlock long-term value for an organization while delivering value to customers and capturing value through monetization strategies. A business model is a holistic framework to understand, design, and test your business assumptions in the marketplace.
Read the full guide on What Is a Business Model



Business design rather than business planning

In the times in which capital is easily available companies put up hundreds of pages of business plans just to discover the next day how useless they were.

While in the past using business planning made more sense. In the current times also companies with substantial capital injections need fast validation from the market to build something sustainable.

Thus, where in the past massive capital injections would be used as moats, capital without a sustainable business model won’t last long (see the most recent and exemplary WeWork case, but also at the rise of the dot-com bubble the Webvan case). Therefore, a company that wants to build something valuable needs to master business model design.

Business model design is not about scatch on a piece of paper, but that is about experimentation.

[image error]Business design enables organizations to deliberately craft a business model to prove sustainability in the marketplace by validating the building blocks of a business model. The business designer can help an organization to build a viable business model by readily testing its riskiest assumptions against the marketplace.
Read the full guide on Business Design



Business experimentation rather than business theory

Business experimentation is the key ingredient also when a company has massive capital injections because that strikes a balance and feedback loop which keeps companies grounded.

In short, a company that just uses capital to grow, without testing whether its growth is sustainable in the marketplace will need a reality-check sooner or later.

For that matter, a company built on the ground-up with a continuous loop with the marketplace can grow organically and yet exponentially.

[image error]Business experiments help entrepreneurs test their hypotheses. Rather than define the problem by making too many hypotheses, a digital entrepreneur can formulate a few assumptions, design experiments, and check them against the actions of potential customers. Once measured, the impact, the entrepreneur, will be closer to define the problem.
Read the full guide on What Is a Business Experimentation



Continuous iteration and market feedback loop

Therefore, the key to build a sustainable business model is about having a continuous feedback loop between vision (where you want to be in a decade from now), key customers (representing your ideal market at any given time), and offered value proposition.

[image error]Define the problem you’re going to solve, then define the customers for which the problem will be solved. Next, identify the customer and the problem. After that, define a set of possible solutions. After, define a set of possible monetization strategies for that solution, test, and choose your business model.
Read the full guide on How to design a create model



Customer is the key investor

When your key customers love so much your product to make it grow organically and exponentially, that is when you hit the home run! What venture capitalists like to call Product-Market Fit.

[image error]Marc Andreessen defined Product/market fit as “being in a good market with a product that can satisfy that market.” According to Andreessen, that is a moment when a product or service has its place in the market, thus enabling traction for the company offering that product or service.
Read the full guide on Product-Market Fit



Revenue modeling as a validation tool

For that matter, revenue modeling is very important in building a sustainable business model. Revenue modeling is about building revenue streams which are in line with the long-term vision of the brand.

[image error]A revenue stream is one of the foundational building blocks of a business model, and the economic value customers are willing to pay for the products and services offered. While a revenue stream is not a business model, it does influence how a business model works and delivers value.
Read the full guide on Revenue Streams



Beyond core functions and into psycho-logic

Mastering a core value proposition is a key step and the glue which keeps the whole business model together. Value can be seen from several perspectives, and it’s not just about functionality. In many cases, that is about psychology, what Rory Sutherland calls psycho-logic.

[image error]A value proposition is about how you create value for customers. While many entrepreneurial theories draw from customers’ problems and pain points, a value can also be created via demand generation, which is about enabling people to identify with your brand, thus generating demand for your products and services.
Read the full guide on Value Proposition Design



Business model innovation as a competitive advantage

When all the things above are met, business model innovation becomes a propeller that drives long-term advantage.

[image error]Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Read the full guide on Business Model Innovation



Brand equity as a lasting asset

When business model innovation is achieved, and a sustainable business model is built, a company can also leverage its brand equity as an additional long-term advantage.

[image error]The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.
Read the full guide on Brand Equity 

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What Is Bundling And Why It Matters In Business

Bundling is a business process where a series of blocks in a value chain are grouped to lock in consumers as the bundler takes advantage of its distribution network to limit competition and gain market shares in adjacent markets. This is a distribution-driven strategy where incumbents take advantage of their leading position.

Bundling vs. Unbundling

Usually, when a company has gained monopoly power it will use bundling to make consumers get its whole set of products and lock them, by levering on their existing distribution networks (Microsoft Windows is an example).

Unbundling instead is a business process where a series of products or blocks inside a value chain are broken down to provide better value by removing the parts of the value chain that are less valuable to consumers and keep those that in a period in time consumers value the most.

What is an example of bundling?

As Microsoft became a tech giant throughout the PC era, it managed to build such a strong distribution network, to be able to lock in consumers in the PC market for decades. Indeed, Microsoft bundled its Windows in computers before they got purchased.

Thus, encouraging manufacturers to push Microsoft’s products.

A business model primarily built on bundling if abused by a monopolist can turn into anti-competitive behaviors.

Other key business concepts:

What Is UnbundlingWhat Is Business Model InnovationWhat Is a Business ModelWhat Is A HeuristicWhat Is Bounded RationalityWhat Is Business DevelopmentWhat Is Business StrategyWhat is BlitzscalingWhat Is a Value PropositionWhat Is a Lean Startup CanvasWhat Is Market SegmentationWhat Is a Marketing StrategyWhat is Growth Hacking

The post What Is Bundling And Why It Matters In Business appeared first on FourWeekMBA.

What Is Unbundling And Why It Matters In Business

Unbundling is a business process where a series of products or blocks inside a value chain are broken down to provide better value by removing the parts of the value chain that are less valuable to consumers and keep those that in a period in time consumers value the most.

What does unbundling mean in business?

Usually in business, depending on the context, companies might gain a competitive advantage by either bundling or unbundling some of the activities within a value chain.

Usually, when a company has gained monopoly power it will use bundling to make consumers get its whole set of products and lock them, by levering on their existing distribution networks (Microsoft Windows is an example).

Unbundling is the opposite process when a newcomer enters a traditional and established industry by removing the parts of the value chain less valuable to consumers and only capture the monetizable and highly valued part (think of how Amazon unbundled retail stores).

What are some examples of bundling?



[image error]Bundling is a business process where a series of blocks in a value chain are grouped to lock in consumers as the bundler takes advantage of its distribution network to limit competition and gain market shares in adjacent markets. This is a distribution-driven strategy where incumbents take advantage of their leading position.

Some examples of bundling comprise:

Microsoft Windows on PCs

As Microsoft became a tech giant throughout the PC era, it managed to build such a strong distribution network, to be able to lock in consumers in the PC market for decades. Indeed, Microsoft bundled its Windows in computers before they got purchased.

Thus, encouraging manufacturers to push Microsoft’s products.

Bundling if abused by a monopolist can turn into anti-competitive behaviors.

Google Chrome on Android Devices

One of the most successful Google’s acquisition has been Android, which enabled the company to stay on top of the game throughout the mobile devices era. In this context, some Google products (such as Google Chrome) are bundled by default within hardware Andoird devices.

This enables Google to keep also a competitive advantage in its core business model, as the company can capture the whole data pipeline.

When does bundling lose its impact?

When a technological wave loses traction, bundling becomes ineffective. Indeed, when a new technological wave comes in, products that before dominated it become obsolete, thus opening the space for new companies to take over the distribution pipelines.

For example, as the PC era is deteriorating Microsoft is quickly losing its bundling power with the Windows products.

Another example is how – when the mobile era will end – the Google business model will lose its bundling power.

Bundling can last decades depending on how long a specific technology is popular, and for how long a company can keep its dominant position.

What are some examples of unbundling?

Unbundling becomes extremely appealing when a whole industry has been built on the building logic. Therefore, the player able to come in, identify the most valuable part of the value chain for the consumer and offer it at a more convenient price (thus breaking the trade-off between value and cost at the core of a blue ocean strategy) unbundling becomes a powerful force.

[image error]A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.



Apple’s iTunes unbundled albums

When Apple introduced iTunes it unbundled the CDs and albums. You no longer needed to buy an entire CD to listen to the single song you wanted. Therefore Apple‘s iTunes unbundled CDs by offering single songs at $99 cents.

Amazon’s e-commerce unbundled retail

When Amazon enabled consumers to buy at convenient price and selection on its platform it started to unbundle retail. In short, on Amazon, you could pick only what you wanted the most, by navigating through several online stores at once. This process is still ongoing and a powerful force.

Google unbundled newspapers

When Google indexed the whole web, it enabled readers to pick articles from several websites without having to go through part of them that they might have found less interesting (classified ads, job boards and so on). Therefore, in a way, Google worked as an unbundling force toward the publishing industry.

When does unbundling make more sense?

If you are a newcomer in an industry where unbundling can guarantee strong growth, that can serve as a competitive advantage. As existing players that control the market might be too slow, ineffective and in a conflict of interest with their own consumers, the unbundled has a great opportunity to take over.

Bunding and unbundling in continuous conflict and balance

It’s interesting to notice how bundling and unbundling might be tied to how companies evolve. When a company took over an industry that becomes mature, eventually the company that once leveraged on unbundling to take over an industry, it will become the one who bundles to leverage on its distribution network.

At that stage, newcomers surfing the wave of an emerging and fast-growing industry can use unbundling as a core business strategy.

Other business concepts:

What Is Business Model InnovationWhat Is a Business ModelWhat Is A HeuristicWhat Is Bounded RationalityWhat Is Business DevelopmentWhat Is Business StrategyWhat is BlitzscalingWhat Is a Value PropositionWhat Is a Lean Startup CanvasWhat Is Market SegmentationWhat Is a Marketing StrategyWhat is Growth Hacking

The post What Is Unbundling And Why It Matters In Business appeared first on FourWeekMBA.

What Is Entrepreneurship? The Continuous Quest To Real-World Problem-Solving

Entrepreneurship is a continuous quest for real-world problem-solving. The success of a business is measured by how well you helped people solve those problems. While entrepreneurs can rely on methodologies, systems, and processes, they also need to know when to revert to instinct and leverage on their experience.

Entrepreneurship as a continuous quest

The game of science is, in principle, without end. He who decides one day that scientific statements do not call for any further test, and that they can be regarded as finally verified, retires from the game.

Karl R. Popper

There is a lot of discussion around how entrepreneurship can leverage on the scientific method to uncover important problems in the real world.

There is one issue though, not many understand the difference between science and scientism, and what part of science is actually useful to entrepreneurs; and what’s the part that is harmful instead.

Thus, I want to make a bit of clarity around the topic.

One thing to understand about science is that it is a quest that never ends.

With that in mind, as an entrepreneur, you help to define the key problems that customers face, better and better and as a result, the business gains traction.

But rather than do that theoretically, or make too many assumptions, the key advantage of an entrepreneur is that the real world becomes a lab to test those assumptions and define and fine-tune the problem around your key customers.

It’s like a never-ending loop, where who gets smarter at fine-tuning the core problem during a time period will also build the most valuable company.

Entrepreneurship as the courage to test untested hypotheses

The man who is striving to solve a problem defined by existing knowledge and technique is not, however, just looking around. He knows what he wants to achieve, and he designs his instruments and directs his thoughts accordingly. Unanticipated novelty, the new discovery, can emerge only to the extent that his anticipations about nature and his instruments prove wrong. . . . There is no other effective way in which discoveries might be generated.

Thomas S. Kuhn, The Structure of Scientific Revolutions

Markets values untested hypotheses. Of course, there is a sweet spot between hypotheses that are too wildly untested and those who are outside the status quo who can get you far.

As an entrepreneur, you get to choose the kind of bets you want to take but as you grow bets that seemed impossible become bearable; and the more you can take the chance to test untested hypotheses the more you might gain a competitive advantage.

Entrepreneurship as problem-solving in the real-world

Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve.

Karl Popper , The Logic of Scientific Discovery

[image error]Where scientists use labs to test their hypotheses through experimentation. Entrepreneurs build business model experiments to test their business ideas in the real world.

Karl Popper is one of the most influential figures of the 20th century. In his works, he formalized the scientific methodology not as a method of positive discovery, but rather as a method of falsification.

That means the theory is scientific only if it can be refuted.

In short, a theory to be scientific in the first place needs to be falsifiable or to be proven wrong. If it isn’t it can’t be called scientific. Therefore, knowledge doesn’t proceed positively, but rather via negativa (by proving what’s wrong not what’s right).

Thus, knowledge might just produce theories that displace the previous, where the new theory is slightly better than the prior but never true in absolute terms. Indeed, a new theory that will falsify the previous will be the new accepted model.

In this article, the assumption is that you’re starting from scratch, therefore there is no business yet. You will need to lay the foundation of the first three building blocks that will help you build a solid company:

Problem SolutionMonetization

Once those three building blocks will generate a positive feedback loop, that is when you’re ready to move forward and build the remaining blocks:

Value propositionDistribution and growth channels

In short, instead of moving with a theoretical approach where we clearly define our value proposition. We let the value proposition be defined by the people that use our product or service: our customers.

And as our customers come in we’ll master the places where they hang out, be them physical places or digital platforms. And as we do we’ll build a solid distribution strategy.

But for now, let’s focus on the first three building blocks: problem > solution > monetization and back to the problem.

Don’t stress too much on understanding right now the problem, because the real world will help you tune it. And tests and experiments can help you – with time – to master it.

One way for us to uncover real problems is through revealed preferences.

For instance, sustainable monetization in business matters not because we need to make money at all cost, but because it informs us about the real preferences people have around our business.

That is because a cash payment from your customers is the best trust signal you can get for a bootstrapped organization which reveals the preferences of your most important investors: customers.

Why business model design matters



[image error]1957 Walt Disney Productions Archive

Business model design, business engineering, and design thinking have become key ingredients of digital companies’ long-term success. But how do you build a business model that is prone to work?

It is tempting to imagine that you scatch down on a piece of paper a business model, you execute it and explosive organic growth is guaranteed. However, that almost never happens.

Beyond a few rare successful companies that managed to get to product-market fit quickly (those who win the lottery). The process of business model design, execution, testing, and iteration is a long journey which, in some cases can last years.

If you look at companies like Tesla, Uber, Slack and many others. While those companies achieved exponential growth, thanks also to their business models. Those same models are still in a process of evolution and tweaking to prove to work in the very long-term.

Thus, it is important to understand that to build a successful business model you will need a lot of testing, experimentation, and continuous iteration.

In short, unless you might have stumbled randomly on the most successful business model that will make you a billionaire. For all us human beings, there is no shortcut around a process and loop of experimentation in business modeling and it all starts by formulating a few basic tentative hypotheses.

Business model tentative hypotheses

When starting out with business model design it’s easy to draw into too many details, look at too many building blocks and assume that you need to know all beforehand.

In reality, the least assumptions you make, and the more those assumptions are specific and can be tested, the more you would be setting the ground for building a successful business model.

So where do we start? We need to take into account five key elements to validate the idea and move toward the first sustainable business model:

Tentative Problem hypothesis: what might be the core problem my potential customers are experiencing?Solution hypothesis (and demo design): what’s the core solution I can provide to them? Can I draft a demo of that potential solution to see if there is enough interest in the product/service offered?Experiment design: how can a test quickly and cheaply whether the core problem fits the core solution?Expectation and duration: how long will I run it? And what makes it successful?Measure: stop or iterate. Did it work? If not was there a clear sign it didn’t work? Or is there some ambiguity?

Case study: Subscription-Based Magazine Business Model With Curated Newsletter

For the sake of helping our potential customers formulate the problem not in words but in actions (payments or specific actions), we’ll start by formulating a key tentative hypothesis:

Problem Hypothesis: there is a potential audience that needs curated content in the vertical of historic fiction.Solution Hypothesis (and demo design): I will provide a curated newsletter in the format of the magazine which talks about historic fiction (be very specific). It will be delivered weekly at a price of $9.99. Experiment design: I will build a landing page announcing the magazine coming up soon by driving traffic from guest posts and some paid ads to have people submit their email. I will also A/B test two potential CTAs, one with the email subscription and the other for the pre-order of the magazine.Expectation and duration: I expect to run this campaign for a month to drive about 10,000 people on the landing page. The campaign will be successful if 5% of people landed will subscribe or 1% of people landed will pre-order the service.Measure: On the landing page I had a 3% conversion rate of subscribers (ambiguous). On the landing page, I had 5% of subscribers (successful). On the landing page I had 0.2% of pre-orders (failed).

If the experiment failed badly you have a clear outcome. If it was successful, you also had a good signal of it working.

If it was ambiguous it is your shot to keep testing if you believe in the project. Thus, do not leave it all up to the process, but keep some intuition, and instinct to it.

Randomness and errors

Truth emerges more readily from error than from confusion.

Thomas S. Kuhn, The Structure of Scientific Revolutions

Having a single process, or method to deal with the real world makes you a weak entrepreneur.

Instead, if your success is measured to solve real-world problems, it is important to have an adaptive toolbox, a set of methodologies and heuristics that can help you deal with different scenarios and circumstances.

At the same time, you want to keep a small part of that whole process random. That’s because a bit of confusion and messiness can actually help stumble upon serendipitous opportunities that a clear, defined process would have not uncovered.

Instinct and guts

As an entrepreneur while methodologies and processes might help automate systems when they start working out.

When those systems stop working, when real-life scenarios become extremely ambiguous, you need to figure things out again. That calls up for instinct, intuition, and guts.

As an entrepreneur, you want to cherish your ability to turn to those weapons when those times come. And go back to methodologies, processes, and systems when things do work out until they don’t.

Other business resources:

What Is Business Model Innovation And Why It MattersWhat Is a Business Model? 30 Successful Types of Business Models You Need to KnowWhat Is A Heuristic And Why Heuristics Matter In BusinessWhat Is Bounded Rationality And Why It MattersThe Complete Guide To Business DevelopmentBusiness Strategy: Definition, Examples, And Case StudiesBlitzscaling Business Model Innovation Canvas In A NutshellWhat Is a Value Proposition? Value Proposition Canvas ExplainedWhat Is a Lean Startup Canvas? Lean Startup Canvas ExplainedWhat Is Market Segmentation? the Ultimate Guide to Market SegmentationMarketing Strategy: Definition, Types, And ExamplesMarketing vs. Sales: How to Use Sales Processes to Grow Your BusinessWhat is Growth Hacking?

The post What Is Entrepreneurship? The Continuous Quest To Real-World Problem-Solving appeared first on FourWeekMBA.

How To Create A Business Model In Seven Steps

Define the problem you’re going to solve, then define the customers for which the problem will be solved. Next, identify the customer and the problem. After that, define a set of possible solutions. After, define a set of possible monetization strategies for that solution, test, and choose your business model.

A business model design in seven steps

Time needed: 1 day.

How to create a business model in one day and seven simple steps

Define the problem you’re going to solve

At this stage, you need to start by looking at the problem you’re going to solve. It can be a functional problem, but also an emotional problem depending on the product and business model you’re creating. Limit the choice to up to three key problems your product and service will solve.

Define the customers for which the problem will be solved for

Who are the people that are experiencing that problem? Define a set of three types of customers maximum for the problems you defined in step one. Ideally, for each problem will be matched a customer type. At the same time, the same customer type might experience multiple problems. Or one problem can be experienced by different customers’ types.

Define the key customer and the key problem

You need to choose one among the top three customer types identified and one or more of the top three problems identified, where you’ll focus your attention. A business model can evolve in many different ways, and narrowing down the course of action can lead to better execution and experimentation of the business model. Thus, at the end of this step, you’ll have one key customer or alternatively one key problem to focus on.

Define a set of possible solutions

List up to ten solutions that the problem can be solved with. From those ten, narrow down the three which can be implemented with ease, without too many financial resources or time resources (this is a one-day business model) and among these three, pick one!

Define a set of possible monetization strategies for that solution

For the solution you picked, and the customer type, you’ll have defined a product or service. For that product or service define the maximum of five possible monetization strategies. Keep the two which can be quickly tested.

Test and choose

Test the product and its monetization strategy and see which worked.

You have your business model

Based on the key customer, key problem, the solution you provide, and the monetization model defined you have your business model!

The most valuable asset any organization has is its business model. Indeed, that is the way all the moving parts of the organization fit together to create a value chain.

The aim of the value chain is value creation for several players in that industry, market and so on. The business model is not static, it changes and evolves along with the scale of the organization. The type of business model you designed for your company will not work if your company scales. You’ll need to rethink and redefine it.

This is even more evident with companies that are trying to innovate. When those organizations create a new technology or an innovative approach to existing industries, it is critical to understand who are the players involved in that industry and how you’re creating value for them. In this blog, we covered business models of many organizations. For instance, Google massive success is strictly connected to its business model.

The company managed to create a balance between several players in the publishing and information industry where each of those players gets back some value (economic and not) from having a relationship with Google.

Where do you start when it comes to creating a business model?

Related: What Is a Business Model? 30 Successful Types of Business Models You Need to Know

It’s all about business model design

The primary aim of a business model is to create a sustainable chain, able to unlock value for several players in a market, industry or niche. Therefore, this value chain will start from a value proposition, a promise you make to the key players and partners in that market, industry or niche depending on where you start.

For instance, when PayPal started out it didn’t look to dominate the whole market. It started from a niche. As Pether Thiel put it in his book, Zero to One:

The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets—a part of their founding narrative.

Indeed, PayPal began from identifying its most valuable partner, what at the time they called “power user.” That was a choice driven by its business model design.

Therefore, instead of focusing on generically offering a service for everyone, PayPal focused on acquiring and attracting as much power users as possible. Those power users were mostly on another platform that had already scaled up: eBay. Thus, PayPal focused all its effort on acquiring those power users from eBay, fast!

Only after PayPal had drafted, tested and validated a clear value proposition for a small, yet a critical group of power users, it could move on to take larger and larger segments of that market.

What is a value proposition?

At its most basic level, a value proposition is a promise you make as an organization to deliver something (either monetary or advantage) to a critical player you have in our industry. For instance, when Google started it showed right away it was capable of offering 10x search results, at a faster speed and more relevant to users. However, had Google kept its search engine primarily focused on providing paid results, it would not have taken off.

Instead, Google focused on offering relevant paid results but also a bunch of organic results. In short, Google managed to index and rank the web pages from blogs, journals, news sites and any other website that made those pages available to Google for its index.

In exchange for that content, Google offered back visibility as qualified traffic toward those sites. Indeed, search engines back then (at the end of the 1990s) were not focused on offering quality traffic. Thus, most of the audience you got back to your site might have been quite relevant for your business. Google instead, with its dominant search engine allowed publishers, businesses (small and large) to gain customers.

That sealed an implicit deal “Me (Google) will send you qualified traffic that helps you grow your business if you (publisher, business or whoever publishes on the web) offer me your content to be indexed.”

We might call that an implicit contract, that is the beginning of a value chain. In fact, from this sort of contract part of the Google business model has been built. Imagine the scenario where Google was not attractive enough to provide qualified traffic to content producers. They would have stopped offering their content for free by blocking access to the search engine. Instead, they allowed Google to index their pages because the visibility they got was too attractive.

A business model is also about how you make money but how you make money isn’t your business model

One of the biggest misconceptions of the business model is to confuse it with the monetization strategy or the revenue model of the company. While this is an essential piece of the puzzle, it is just one of the components of a successful business model.

In this blog, we’ve discussed at great length how companies make money as a way to start the discussion of a business model. However, a business model implies the understanding of

operations, customer acquisition and retention, supply chain management, and the cost above and revenue aspects

According to the business model you designed over the years for your organization there will be a piece that plays a more critical role compared to others. For instance, a vital component of the Coca-Cola business model is its distribution strategy. For other companies like McDonald’s, the key to its business model success is the heavy franchised restaurants that helped the company scale up all over the world.

Each company will develop a unique model among the many types of business models which is what makes it thick in the long run!

What principles should I follow to create and design a business model?

Developing a deep understanding of your business model implies asking a few critical questions. For instance, some of those questions might be:

What value do I offer my potential customers? Or what problem do I solve with my product/service?
How do I charge my customers?
What does my acquisition cost look like?
What channels can I tap into to find my ideal customer?
Did I create a predictable revenue stream? If not what can I do to generate that?

Your business model will be based on a few critical assumptions about who your customers are, how your product or service should look like, what are the favorite channels to reach them and a few others.

Those assumptions will be tested as soon as you start kicking off your operations. Your main concern should be just that. You need to check those assumptions as quickly as possible. Steve Blank has identified 17 principles in his Customer Development Manifesto:

There Are No Facts Inside Your Building, So Get Outside
Pair Customer Development with Agile Development
Failure is an Integral Part of the Search for the Business Model
If You’re Afraid to Fail You’re Destined to Do So
Iterations and Pivots are Driven by Insight
Validate Your Hypotheses with Experiments
Success Begins with Buy-In from Investors and Co-Founders
No Business Plan Survives First Contact with Customers
Not All Startups Are Alike
Startup Metrics are Different from Existing Companies
Agree on Market Type – It Changes Everything
Fast, Fearless Decision-Making, Cycle Time, Speed and Tempo
If it’s not About Passion, You’re Dead the Day You Opened your Doors
Startup Titles and Functions Are Very Different from a Company’s
Preserve Cash While Searching. After It’s Found, Spend
Communicate and Share Learning
Startups Demand Comfort with Chaos and Uncertainty

I suggest you read this manifesto over and over again. This should be the first step!

What tools can you use to design and create your business model?

One of the most used tools to design and create a business model have revolved around the customer development manifesto above. However, it is essential to keep in mind that this manifesto was the fruit of an era where venture capital had become scarce compared to the dot-com bubble at the end of the 1990s.

Those tools for business modeling have been developed in that context. Thus, those are not a one-size-fits-all toolbox but rather work better in a context where capital is scarce, and you need to test your business model assumptions as quickly as possible. In that context three primary tools are:

Business model canvas
Lean startup canvas 
Customer development canvas 

Those tools can be used by entrepreneurs in the phases of the business model generation:

map the business model hypotheses
test these hypotheses with customers feedback 
iterative this process

The result will be an incremental development of a product that will reach a minimally viable version. The better the product, based on customers feedback, the larger the audience it will reach.

Lean makes sense when capital is scarce and when you need to keep burn rates low. Lean was designed to inform the founders’ vision while they operated frugally at speed. It was not built as a focus group for consensus for those without deep convictions.

Is the lean startup still a valuable model?

As Steve Blank has pointed out on an HBR article entitled “Is the Lean Startup Dead?“

I realized it was time for a new startup heuristic: the amount of customer discovery and product-market fit you need to find is inversely proportional to the amount and availability of risk capital.

In other words, the more risk capital that is available on the market the least the lean startup model might work. Reason being, if you have a massive risk capital, you won’t need to test all your assumptions.

Quite the opposite, you’ll need to execute them fast. Also, one of the primary logic of the lean startup is to burn cash at the slowest rate possible, while evolving (so-called pivoting) your business model.

If money is not an issue, then why go for the lean startup?

Steve Blank went further:

Rather than the“first mover advantage”of the last bubble, today’s theory is that “massive capital infusion owns the entire market.”

Therefore, if you secured a massive injection of money, then your aim might be primarily toward growth, rather then profits. In that context, the lean startup might not work!

Are capital moats sustainable?
[image error]The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.

When a company or startup has a substantial capital allocate for growth, that is when this injection can become a short-term competitive advantage.

However, as companies finance growth through artificial injection of capital, those also become extremely risky, because many of the assumptions underlying the business model can’t be tested organically, thus leaving the company’s foundations weak.

An example of this excess of use of capital as competitive moat has been WeWork, which has proved one of the most disastrous business endevoir of the last decade.

Thus, capital moats and technological moats need to be balanced with careful business model testing and organic validation in the marketplace!

Other business resources:

What Is Business Model Innovation And Why It Matters
What Is a Business Model? 30 Successful Types of Business Models You Need to Know
What Is A Heuristic And Why Heuristics Matter In Business
What Is Bounded Rationality And Why It Matters
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
Blitzscaling Business Model Innovation Canvas In A Nutshell
What Is a Value Proposition? Value Proposition Canvas Explained
What Is a Lean Startup Canvas? Lean Startup Canvas Explained
What Is Market Segmentation? the Ultimate Guide to Market Segmentation
Marketing Strategy: Definition, Types, And Examples
Marketing vs. Sales: How to Use Sales Processes to Grow Your Business
What is Growth Hacking?

The post How To Create A Business Model In Seven Steps appeared first on FourWeekMBA.

Business Experimentation: How To Test Digital Business Ideas

Business experiments help entrepreneurs test their hypotheses. Rather than define the problem by making too many hypotheses, a digital entrepreneur can formulate a few assumptions, design experiments, and check them against the actions of potential customers. Once measured, the impact, the entrepreneur, will be closer to define the problem.

Define the problem by suspending the “why”



[image error]Where scientists use labs to test their hypotheses through experimentation. Entrepreneurs build business model experiments to test their business ideas in the real world.

The most difficult, yet rewarding part for entrepreneurs is to understand the problem or a need existing in the marketplace. In short, the success of the product and the business model, in the long run, will be the side effect of how well a company solves a specific problem.

Problems usually have both functional, and psychological elements. Therefore, defining a problem adequately means solving for both functionality, and psychology.

But how do you get hold of a problem? One way to start is to ask why as many times as possible, thus drilling more and more into the problem. This is at the foundation of the five whys analysis.

While I like this approach for theoretical problem, if we have a business model which we want to test in the marketplace, let use experiments to gather quick feedbacks by the people we want to serve.

In short, we’ll formulate a few hypotheses around a problem then test that out, thus using a feedback loop to inform on whether we’re on the right path to solve the problem!

Thus, leaving the “why” suspended while we let the market tell us if we’re moving in the right direction.

Imagine the case you want to start a digital business model and test the monetization strategy for your publishing business. You have an existing audience but you’re not sure about what monetization strategy makes sense.

Do you survey them?

Not a good idea! What about formulating a few hypotheses and test whether they will pay for it?

Case study: subscription-based magazine

For the sake of helping our potential customers formulate the problem, we’ll start by formulating a few hypotheses:

Hypothesis 1: my audience needs a curated weekly newsletter Hypothesis 2: my audience needs a set of premium resourcesHypothesis 3: my audience needs a weekly group coaching session

Rather than go back and theorize about what our audience needs, let’s test our hypotheses.

Experiments: what, how, when

Defined the key hypotheses, for each of them define a key experiment. We want the experiment to be well defined, in terms of:

How is the experiment structured? (process)What outcome do I expect from the experiment? (expectation)When will the experiment be deemed successful? (duration)

Connected to each of the hypotheses above craft your experiment:

Experiment 1: how: I’ll use a pop-up form triggered on the homepage that explains how the newsletter works with a simple CTA to subscribe. what: each subscription will be deemed as a successful action. On a test of a 1000 people, 20 subscribers (2%) will make the experiment successful. when: the experiment will last a week from now. Experiment 2: how: I’ll use a dedicated landing page accessible from the main menu that shows the cover and intro of the book coming out with a simple CTA to purchase it. what: each purchase will be deemed as a successful action. On a test of a 1000 people, 20 purchases (2%) will make the experiment successful. when: the experiment will last a week from now. Experiment 3: how: I’ll use a dedicated landing page accessible from the main menu that shows how the group coaching session will work with a simple CTA to purchase it. what: each purchase will be deemed as a successful action. On a test of a 1000 people, 10 purchases (1%) will make the experiment successful. when: the experiment will last a week from now.



Don’t track, measure for impact and traction

Once set up the process, expectation, and duration be patient and let the experiment run till the end to prevent stopping it too soon.

Once you have enough data to draw any conclusion also use your instinct. For instance, if experiment number one provided better results but you feel like it won’t be as successful in the long-run, compared to say experiment three.

You might want to give a few other runs.

Key takeaways

You can spend hours making assumptions about what your customers want, or you can formulate a few practical hypotheses and test them out.

While entrepreneurs get rewarded in the long-term for uncovering important business problems, often times this process of problem discovery requires a lot of experimentation, tinkering, and willingness to question our own assumptions.

One of the most effective ways is through a process of problem discovery made of looking at what your customers really do which connects to the concept of revealed preferences.

If you can uncover those unspoken truths from your customers or from the marketplace that is how you build an extremely valuable business in the long run!

Other business resources:

What Is Business Model Innovation And Why It MattersWhat Is a Business Model? 30 Successful Types of Business Models You Need to KnowWhat Is A Heuristic And Why Heuristics Matter In BusinessWhat Is Bounded Rationality And Why It MattersThe Complete Guide To Business DevelopmentBusiness Strategy: Definition, Examples, And Case StudiesBlitzscaling Business Model Innovation Canvas In A NutshellWhat Is a Value Proposition? Value Proposition Canvas ExplainedWhat Is a Lean Startup Canvas? Lean Startup Canvas ExplainedWhat Is Market Segmentation? the Ultimate Guide to Market SegmentationMarketing Strategy: Definition, Types, And ExamplesMarketing vs. Sales: How to Use Sales Processes to Grow Your BusinessWhat is Growth Hacking?

The post Business Experimentation: How To Test Digital Business Ideas appeared first on FourWeekMBA.