Gennaro Cuofano's Blog, page 218

September 24, 2019

How To Start A Business: From Idea Validation To Traction

I’ve devoted years of my life, putting together all the materials and resources that have helped me along the way of becoming a digital entrepreneur and head of business development for a tech startup.

I thought it just made sense to document those things along the way so that I could form a more in-depth understanding by writing about it, and you, my reader, could gain insights and expertise, without spending hours and hours of research.

In this post, I’m assembling all the resources you need to get going with a business if you’re ready to leap becoming a digital entrepreneur. I suggest there are four key areas when starting your business, which we’ll group under the acronym of MOVE, standing for:

Mindset
Operations
Velocity (momentum)
and Execution

Each of those areas needs to be mastered to design, launch, and iterate a successful business. This isn’t a size fits all model, neither the only one possible. But it is a model that can help you.

Let’s look at each of them.

Mindset

When starting a business, in particular, a digital business, you should have a 10X mindset. The reason is you might be starting a venture in a competitive space; none knows your brand, you might be missing the budget to grow it steadily.

Thus, you need to think and act smart. You can’t rely on conventional wisdom, or already walked paths. While business best practices will be your baseline, you will need to have a growth mindset, where each action you take needs to be measured and deemed successful if it gives you massive traction.

Never run out of ideas

[image error]

A common belief is that ideas only come to creative people. In reality, we all have a flow of creativity wired in our minds. We just need to develop the right mindset, and for that reason, the guide below can help you achieve just that:

Why anyone can be creative
Getting into the Flow process
Creativity can be manufactured

Acquisition of creativity and interest

Curiosity and interest
Cultivating flow
Habits of strength

Mastering your internal traits
Apply your creative energy

Problem finding
Divergent thinking
Choosing a special domain

Funneling ideas

Don’t be scared to throw 99% of your ideas
Are you passionate about it? Or are you willing to put together the team that might be passionate about it?
Idea validation: Is there a market demand?

If you heard that ideas are overrated in business, that’s correct. That doesn’t mean ideas are not important.

But just that in business you will never know whether an idea will work in the real world, until you don’t test it. That is why it’s critical to have a framework to test ideas quickly; keep those that work and that have the potential to become your next business!

Find your sweet-spot

[image error]

Starting a successful business is not an easy thing to do, as most startups fail in the first years of operations. For that matter, you need to have the resources to get going the first stage and have things take off as quickly as possible.

However, in many cases, a startup will really take off and become a mature and successful organization in at least 5-10 years from its inception. That requires a huge amount of stamina, passion, and resources to get going.

Therefore, in many cases, to launch a successful business, it is important to balance two dimensions:

Personal dimension: are you passionate about the business you’re stating? The problem it is solving? Or about managing the team that will solve that problem?
Financial dimension: is there a market ready to respond to your potential product? If not, do you have enough financial resources to get going until there will be a market-ready for your product?

Those two dimensions are critical to launching a successful company. Passion (either for the business or the team that will manage it) is critical to get going for the long-run and even when things seem not to work out.

The financial dimension is critical, either to enable your business to gain traction (if there is a defined, existing market to start with). Or to be able to get going even when the market is not ready yet. Think of the case of a high tech product, based on new technology. You will need funding to make sure you will bring that product to market effectively.

The third dimension, which is about feasibility is less important compared to the two above.

When you do balance those dimensions, you are on the right path.

Look for the blue ocean
[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.

It’s easy to start a business in a crowded space. It doesn’t take to much searching or tinkering. You just need to look at what others are doing and fo for it. That’s the reason why everyone wants to start her own restaurant, even if it will hardly make any money.

And if you need to start a business as a means to give you the financial resources for you and your family that is fine.

However, if you have the option to build the kind of business you want, you might want to search for your blue ocean. A blue ocean is an uncontested space where you can build your business and become the key player.

Find your niche

[image error]

Another common mistake when starting a business is the complete lack of definition of what kind of business you want to build and how you want to be recognized. In short, call it as you like, positioning, targeting, niche, or whatever.

What matters is to find your perspective. Building a successful business is about telling your side of a story, finding your unique perspective. What is that you do that makes you different, why would people both buy from you in the first place?

Pretotype
[image error]Pretotyping is a mixture of the words “pretend” and “prototype” and it is a methodology used to validate business ideas to improve the chances of building a product or service that people want.

Another huge, and common mistake many entrepreneurs or aspiring entrepreneurs make when starting a business is to focus on technicalities instead of asking the most important question: do people want this?

In short, idea validation is extremely important. You can use several frameworks for that, as the lean canvas. Or you can use a technique called pretotype, which I covered with Alberto Savoia on the interview on the blog.

Iterate up to market-fit

[image error]

When you get into the process of quickly validating your ideas, to get passed the most difficult stage; where you need to find that moment when customers finally get what you’re offering them, at the point that you need to barely explain what you’re selling, as they will buy with limited friction.

Businesspeople calls this product-market fit. Once again, the definition is not important. What matters is that you pass that stage to build a valuable business, quickly.

Operations

In a digital business, setting up the operations doesn’t necessarily mean to build up physical facilities. Instead, that is about drafting a business model that will allow you to be competitive in the marketplace.

This process isn’t a one-time thing. Indeed, before your business model would take off, you’ll need to iterate it over and over again.

When will your business model be competitive? Primarily when it has reached:

Recurring, sustainable income
Flywheel effects
And fat margins

In short, the right business model will be able to have a built-in monetization strategy that generates income, based on repeatable processes, that are sustainable in the long run.

Also, your business model will need to leverage on a flywheel effect, where monetization powers up your brand, rather than diluting it. In other words, when you start making money, that monetization needs to reinforce your brand, so that more people will want to deal with your company.

As your brand gains momentum, you can leverage it to enjoy higher and higher margins. When you enjoy fat margins (there isn’t a fixed percentage, but it depends on the industry and competition), that’s when you’ve mastered the operational part.

In general, the more the gap between revenues and costs increases (revenues grow faster than costs), the more you’re on the right path to building a long-term competitive advantage.

Stay lean

[image error]

Unless you got enormous funding for your business, you want to follow a lean methodology approach. This will help you to stay in business for as long as possible while tuning your business for the market.

Stay focused
[image error]Back in the 1970s, Intel was among the most respected and admired companies in Silicon Valley. During that time Intel’s CEO, Andy Grove, was the man who managed to drive organizational change.
Andy Grove did that via a goal-setting process called OKRs or objectives and key results. Where the objective is the direction, toward which the organization needs to be in the medium term.
And the key results are milestones, things that allow the company to get there. Those key results need to be easily trackable, understandable and shared across the company.

While you will be tempted to test many things out, and you do want to test many of them. You still want to keep a focus on 2-3 key objectives that can have a massive impact on your business.

Stay fast and frugal

Speed is critical in business and you need to be very quick, especially when you’re starting things out because in order for them to gain traction it will initially take a lot of push.

This business plan will help you to come up with a business model to test in the marketplace:

Velocity and Momentum

At this stage, before you go to the execution stage, it is crucial you know what distribution channels you can tap into. For that matter, you need to prioritize on the acquisition or growth channel that might work best, based on the strategy you picked.

Instead of trying to tap into all the possible distribution channels, mastering one, in the short run is probably the most effective strategy in many cases.

For that matter, you need to understand whether you might want to leverage business development, growth marketing, traditional sales, and marketing or else.

Switch on the engines of growth
[image error]In the Lean Startup, Eric Ries defined the engine of growth as “the mechanism that startups use to achieve sustainable growth.” He described sustainable growth as following a simple rule, “new customers come from the actions of past customers.” The three engines of growth are the sticky engine, the viral engine, and the paid engine. Each of those can be measured and tracked by a few key metrics.

Once all the conditions above are met, you need to push on growth. Eric Ries points out that you have, usually, three engines of growth you can leverage on.

Growth framework
[image error]Growth hacking is a process of rapid experimentation, coupled with the understanding of the whole funnel, where marketing, product, data analysis, and engineering work together to achieve rapid growth. The growth hacking process goes through four key stages of analyzing, ideating, prioritizing and testing.

It’s very important that at this stage, you have a growth framework in place to pass the several stages of growth you need to build a sustainable company.

Execution

When you start executing, that is when you will be able to gather critical feedback to understand whether or not you’re moving in the right direction. This is the essential part of the MOVE model.

In this phase, you need to gather feedback on several areas:

Is the business gaining momentum? Remember, momentum will be judged on unconventional, two-fold, or 10X growth basis
Does the market like my business model? You can decide that by growth or profitability or both
How effective is my strategy? Is the real world validating it or do I need to go back and tweak my business model?
What distribution channel is working so far? You need to double down on what’s working
Am I spending too much time theorizing? If so, go back to the execution phase to gather more feedback from the marketplace!

Key takeaway

When you start moving, you also need to make sure you’re going in the right direction. That is why, in the execution phase, you need to reconsider whether what you’re doing is helping you achieve the 10X growth you were looking for at the beginning of the MOVE model.

Or whether your business model generates growing margins. Or yet, whether you need to leverage network effects to enhance growth. Moving back and forth in the MOVE model might help you gain traction to generate a long-term competitive advantage!

Key resources:

Moonshot Thinking: When Growth Marketing Becomes All About The 10X Rule
How to Write a One-Page Business Plan
30 Successful Types of Business Models You Need to Know
Value proposition canvas
Business model canvas
Lean startup canvas
Blitzscaling canvas
Business model navigator
FourWeekMBA business model framework
Value Mix
The Complete Guide To Business Development
SEO Hacking Guide
Growth Marketing Guide
Marketing vs. Sales
Business Strategy Guide

The post How To Start A Business: From Idea Validation To Traction appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 24, 2019 17:23

September 23, 2019

6 Proven Revenue Generation Strategies

The sheer number of business models available these days is just wacky. According to Beth Comstock (Former GE Chief Marketing Officer and Vice-Chair), “Business model innovation is constant in this economy.

You start with a vision of a platform. For a while, you think there’s a line of sight, and then it’s gone. There’s suddenly a new angle.”

There are profitable businesses making money off of centralizing online takeaway orders, from arranging peer-to-peer lift sharing, and even from showing user-uploaded videos.

This article offers some of the broadest online business models that have taken hold since the early 00s. These are the most popular business models that are proving time and time again to make a profit.

Buying Leads Rather Than Chasing Them

Put in simple terms, if you are selling something such as a service, you can invest all of your marketing budgets into advertising and a sales department and take the traditional business model route.

Or, you can remove your sales department completely and simply buy leads from a company. Your website converts the lead, and money is made. Some may think of this as outsourcing, but it isn’t, it is more like shopping for potential customers.

For example, if you are selling lending services, then you may buy leads and convert them. The savings you make on not having to pay for a sales department or run an advertising campaign is massive. Plus, if one leads company keeps sending bad leads, you can chop and change to another one as quickly as you like.

Give Something Away For Free So People Come Back For More

This is probably better known as the free cookie method, or whatever colloquial name you have for it. In short, the homely baker lady stands outside her cookie shop and hands out cookies for free, and people love them so much that they run inside and buy a bag of five of them.

If you are using this business model in any form, be it online or offline, then your giveaway items must be worth something or you are simply wasting money.

Many childcare companies use this technique by having people sign up online for free pregnancy packages that are full of free stuff with the hopes the parent will continue to buy with the branded company.

Plumbing services have been known to give away free sink unblockers with their business names on so people remember them during emergencies. Language learning classes allow people to sign up and receive their first 10-lesson course for free before being given the option to buy the other lesson courses.

Give Something Away For Free And Get Revenue From Advertisers

In terms of online business models, this is not the most profitable by a long shot, but it is certainly the most common.

Many websites are doing it from YouTube to bloggers. You give your website viewers something that keeps them coming back, and you hope they click on your adverts so that you earn a little money from their clicks.

If you are even luckier, you will be paid extra because the clicker made a purchase with whatever advertiser was on your website.

[image error]

Source: jeffbullas.com

The Freemium Model And In-App Purchases Model

Popularized by gaming apps, you give the game away for free, but people must pay if they want to upgrade. Good-quality developers will create fantastic free games where a user can grind their way into a premium level or grinding their way so that they can earn the items that are otherwise paid for. Doing this helps to popularize the game due to word-of-mouth marketing and positive reviews.

There are many problems with the freemium and in-app purchases models, such as pay-to-win, shoddy development values aimed to rinse money out of players, and unfair terms and conditions that force people to give up too much of their personal data in order to play a game.

Still, freemium and in-app purchases models seem to work well for some companies.

Recurring Subscription Payments

Though there are plenty of down-and-dirty methods relating to the recurring subscription payments model, the most nefarious-without-being-scammy is hosting subscriptions and domain subscriptions.

The model is “We will offer you this great price if you pay for a longer period, and then charge an awful price when you finally renew.”

Another classic is to charge you a fair price for your domain, and then when you popularize the domain, they charge a mini fortune to renew in the future. They get away with this not-so-nice behavior because changing hosting companies is a massive upheaval and hassle.

On the other hand, there are plenty of nefarious-and-scammy subscription services out there such as with Equifax, TransUnion, and Experian.

They tell you that you are owed a free credit report, they sign you up, and then start charging after the trial period while making sure it is viciously difficult to unsubscribe.

The same goes for tax-back companies that offer to get you money back but are actually signing you up for a subscription. If you take the subscription route, then be ethical.

Revenue As A Percentage Of Each Transaction

There are companies that centralize takeaway services. They have a single website where they host the menus to many different takeaways in the local area.

The user puts his or her postcode into the system, and the takeaways that will deliver to that house are shown on the website.

The user makes a purchase, and the order is sent to the takeaway company that then pays a portion of the revenue earned to the centralized takeaway service.

That is just one way that the revenue-as-a-percentage business model works. Taxi services use this system, and Amazon and eBay use a similar system because they charge their sellers are a percentage of the revenue their sellers make.

Money transfer and money exchange companies do a similar thing except that they are charging a percentage from the sender, which is not the same as charging another company for the revenue it makes.

Conclusion – Profitable Business Models through proven revenue geneartion strategies

Some say that the Amazon business model has always been the same, even when they were only selling books, but the truth is that it has changed and warped dramatically over the course of its life.

It didn’t start out an online giant, it didn’t start out with a streamlined delivery service, or its own warehouses, or its own media entertainment system, and it certainly didn’t start out with the aim of popularizing ebooks.

Business models change all the time because it is a business’s job to change according to shifts and not shift according to change.

Other business resources:

What Is a Business Model? 30 Successful Types of Business Models You Need to Know
The Complete Guide To Business Development
Business Strategy: Definition, Examples, And Case Studies
What Is a Business Model Canvas? Business Model Canvas Explained
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
How To Write A Mission Statement
What is Growth Hacking?
Growth Hacking Canvas: A Glance At The Tools To Generate Growth Ideas

The post 6 Proven Revenue Generation Strategies appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 23, 2019 11:42

September 22, 2019

How Does Shopify Make Money? Shopify Business Model In A Nutshell

Shopify is an e-commerce platform enabling merchants to commercialize their products via a monthly subscription fee, and additional services provided by the platform.

Its core business is subscription-based, even though in 2018 the company made over 50% of its revenues from another stream called merchant solutions.

Shopify Mission

Our mission is to make commerce better for everyone, and we believe we can help merchants of nearly all sizes, from aspirational entrepreneurs to large enterprises, and all retail verticals realize their potential at all stages of their business life cycle.

That is how Shopify emphasizes the core mission within its financial statements.

Shopify focuses primarily on small and medium-sized businesses, by offering several levels of subscription plans. The most popular is the plan that costs less than $50 per month.

However, as we’ll see the enterprise accounts are those driving the gross merchandise sales on the platform.

Inside Shopify Subscription Business

[image error]

Three primary plans are at the core of Shopify subscription-based offering running with a 14-days free trial.

Most merchants subscribe to the Basic and Shopify plans.

At the same time, the majority of Spotify gross merchandise volume (the $ amount of products sold within the platform) come from merchants paying for the Advanced Shopify and Plus Shopify plans.

And as reported by Shopify also the retention of the highest-priced tier (Shopify Plus) is higher, compared to the lowest tiers.

Shopify Plus is a service thought for enterprise customers, with larger volumes, which is several times more expensive than the advanced plan.

Shopify Plus is for merchants with higher-volume sales and it offers additional functionality, scalability, and support requirements, including a dedicated Merchant Success Manager.

That comprises brands like Unilever, Kylie Cosmetics, Allbirds, and MVMT. Shopify has around 5,300 enterprise accounts as of 2018, which are a key driver of both the company’s subscription and merchant revenues.

Enterprise contracts are also way more stable as the enterprise clients usually sign an annual or multiyear contract. And those plans automatically renew, unless notice of cancellation by the enterprise account.

Merchant Solutions

Those consist of additional services offered on top of the platform.

Shopify merchant solutions primarily make money from payment processing fees from Shopify Payments, transaction fees, Shopify Shipping, Shopify Capital, referral fees from partners, and sales of point-of-sale (“POS”) hardware.

As pointed out on its financial statements Shopify Payments is a fully integrated payment processing service that allows merchants to accept and process payment cards online and offline and is also designed to drive higher retention among merchant subscribers.

According to the company two-thirds of its merchants have enabled Shopify Payments.

Other services comprise:

Shopify Shipping which allows merchants to select from a variety of shipping partners to buy and print outbound and return shipping labels and track orders directly within the Shopify platform.
Shopify Capital where eligible merchants secure financing and accelerate the growth of their business by providing access to simple, fast, and convenient working capital. In short, Shopify purchases a designated amount of future receivables at a discount or make a loan The merchant in remits a fixed percentage of their daily sales until the outstanding balance has been remitted.
Shopify POS a mobile application that lets merchants sell their products in a physical or retail setting.

In short, Shopify uses the merchant solutions revenues (which are higher than the subscription revenues in 2018) to have a higher retention rate for its subscription basis, which renews on a recurring basis.

Some of those key solutions (like Shopify Payments and Capital) sustain merchants activities, thus strengthening its core business.

A Technology Platform

Shopify defines its platform as a multi-tenant cloud-based system engineered for high scalability, reliability, and performance.

Shopify is hosted primarily on cloud-based servers. According to the company the key attributes and values of the Shopify platform can be summarized in:

Security
Scalability (to sustain spikes of traffic especially on large merchants e-commerces)
Reliability
Performance
Deployment (the software automatically updates, thus not creating maintenance costs for merchants)

Why The Ecosystem Matters

Open source has played a critical role in Shopify’s growth. Indeed, one of the key elements that make Shopify a compelling platform is given by its rich ecosystem of app developers, theme designers and other partners (digital and service professionals, marketers, photographers, and affiliates).

[image error]

Shopify KPIs

Key performance indicators are a few metrics that matter to the business and depending on the kind of business those might vary.

For instance, usually for a SaaS or subscription-based business, the key metric is the MRR or monthly recurring revenues. That’s because the core business is based on creating a recurring customer base.

For a platform hosting third-parties products and services, a key metric is called gross merchandise volume (GMV), or the $ volume of products sold through the platform by third-party sellers, or merchants.

Since Shopify is a hybrid between a subscription-based platform offering additional services, the company uses MRR and GMV as two key performance indicators (KPIs).

[image error]

It is important to highlight that among the two, the GMV needs to be evaluated in accordance with the growth of the subscription base.

In short, Shopify core business is subscription-based, and its merchant solutions are a key ingredient to sustain the growth of the customer base, thus making the subscription service more valuable, by reducing the churn.

Let’s now break down the key elements of Shopify.

Key takeaways

Shopify is a platform business model as it enables third-parties merchants to commercialize their products on its cloud-based e-commerce.
The company’s core business is a subscription-based service.
The company’s most popular plans are those below $50, at the same time subscription revenues are also driven by enterprise accounts, which pay substantially higher fees compared to the standard tiers available on Shopify.
Those enterprise accounts also have a higher retention rate and are more stable as they are usually signed on a yearly or multi-annual basis and they make up most of the gross merchandise volume on the platform.
In 2018, Shopify made most of its money (over 55%) from merchant related services, which is another Shopify revenue stream. Don’t be fooled. That revenue stream comprises services (Shopify Payments, Capital, POS and more) which enable Shopify to provide a higher value to its subscribers, thus making its subscription plans more valuable.
That is why when looking at Shopify’s key metrics (MRR and GMV) it is important to read the latter (GMV) as the input that enables the former (MRR) to grow over time.
Indeed, Shopify is willing to sustain the higher cost of sales on its Merchandise Revenues, thus a lower profit margin, as it is a strategic side of the business which helps sustain and grow the subscription-based revenues and customer base.

Business resources:

Other business model analyses:

How Does WhatsApp Make Money? WhatsApp Business Model Explained
How Does Google Make Money? It’s Not Just Advertising!
The Google of China: Baidu Business Model In A Nutshell
How Does Twitter Make Money? Twitter Business Model In A Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Does Pinterest Work And Make Money? Pinterest Business Model In A Nutshell
Seven Amazon Statistics That Break Down Its Business Model
Fastly Enterprise Edge Computing Business Model In A Nutshell
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained
How Does PayPal Make Money? The PayPal Mafia Business Model Explained
How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained

The post How Does Shopify Make Money? Shopify Business Model In A Nutshell appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 22, 2019 16:16

Inside Shenzhen Digital Economy With Johan Nylander

For today’s session, we are here with Johan Nylander, which is a China correspondent, award-winning author of Shenzhen Superstar.

With Johan, we’ll look at the key ingredients that made Shenzhen successful.

What drove you to research Shenzhen tech landscape?

Johan Nylander: I can explain why I became so fascinated in the city. When I moved with my family to Hong Kong eight years ago, back then I remember my new friend used to warn us about Shenzhen.

He said, “Don’t go there. It’s a dirty, polluted factory town. It’s really dangerous. You cross the border and they will steal your kidney. You can get lung cancer.” I thought, “Wow, sounds exciting.”

So, I started traveling there on and off, and I realized that my friends in Hong Kong, they were wrong about the city. There were a lot of really exciting things happening there, it was way more developed than people in Hong Kong had realized.

And especially when it came to tech startups over the years, I started traveling to Shenzhen more and more regularly when I was doing stories for international media about the technology scene in China.

And after a few years, I realized that my gosh, Shenzhen is really the epicenter of the world when it comes to tech development, especially hardware and the integration between hardware and software. I had to tell the world about this. So, yes. I wrote up the book. Yes, that’s the simple answer.

Is Silicon Valley in trouble now that Shenzhen is becoming a key player in the global digital economy?

Johan Nylander: I would not say that Silicon Valley is in trouble. I think if you look at tech development, both hardware and software, I see it more like both are rising. There are really clever people in Shenzhen, really clever people in Silicon Valley, in Tel Aviv, in Stockholm and other startup ecosystems.

And what I see is that everybody’s gaining from great collaboration. Then, the second part of my answer is that Silicon Valley has some tremendous advantages. I mean, we’re really good at software; software development, business development, branding.

The strength in Shenzhen comes from manufacturing, it comes from software. And I think when the greater things are happening is when you take the strengths of Silicon Valley and you merge it with strengths of Shenzhen in IoT, for example. So, I think both of them can benefit from collaboration.

Will Shenzhen economy become also a key player in the software space?

Johan Nylander: Shenzhen and south China is famous for hardware. It comes from the factory world, manufacturing. But then, you have companies like Tencent. Tencent is, as I’m sure you already know, the world’s biggest gaming company.

It’s also the company behind the WeChat app. WeChat app is… You could say it’s the app of all apps. It’s one of the most interesting internet companies in the world right now. And that’s 100% software-driven company. So, you also have a trend in software and new very exciting software products coming out of Shenzhen.

How did Shenzhen rise to the top?

Johan Nylander: The story behind the city is tremendously fascinating. I mean, it’s the world’s fastest-growing city. I mean, the story has been told and told again but 40 years ago, it was nothing there except rice fields, small fishing villages.

Today, the city’s home to up to 20 million people, depending on how you count. It’s home to some of the biggest technology companies on the planet. And it all happened because Shenzhen was the first region where you could trade free or more free in China.

It was the first economic experiment zone. And that really kicked off, first with factories, and now eventually more in startups, software companies. And it’s been a gradual, gradual development.

And what I find interesting is, the city keeps on developing. It’s not that it went through a stage and now, it plateaued.

In terms of economic growth, it’s still on 8% a year but even more interesting, I see how the companies are modernizing. It’s like they’re changing all the time. It’s become a new species.

Why is it important to understand China in terms of clusters?

Johan Nylander: That’s actually a very important thing to point out, and I’m glad you brought it up. As you said in Europe and America when you look at China, [inaudible 00:08:38] one country but it’s a lot of different provinces.

So, the provinces are sometimes as unequal as different countries in Europe. And as you said, China Inc is run by three superclusters. One is around Beijing, up in the north-east. The second one is around Shanghai, at the Yangtze River Delta.

And the third one, the one that we are focusing on here, is the Pearl River Delta, it’s where Shenzhen is, Hong Kong, Guangzhou. Today, China is trying to rebrand this region as the Greater Bay area.

And it’s very fascinating, all these three clusters, they are tremendous powerhouses. And they have mainly overlapping features, but they also have features that are different from each other.

What’s unique with Pearl River Delta is, traditionally it had a more international approach. Partly because you have… It’s far away from Beijing, and you have Hong Kong which is more international. So, perimeters also help… It’s been catering for the world. And these three clusters are basically driving all of the economic hubs of China. So, that’s a very important thing to point out.

What companies most represent the rise of Shenzen?

Johan Nylander: So, the Pearl River Delta, it was the first part of China where you had international companies moving in. And also the local companies to grow quickly. You had a tremendous amount of capital flooding into the border the early ’80s, from Hong Kong, from Japan, from Taiwan.

Foxconn is a good example, the maker of iPhones and the maker of computers and mobile phone for the other companies. It’s very typical. You have Huawei, the world’s biggest telecom giant. It’s also very typical.

A lot of mobile phone companies, a lot of manufacturing and… So, I think that’s typical of this region. And now, today you have tons of hardware startups. You have tons of accelerators moving into Pearl River Delta.

And very often, specializing in hardware startups. One of the most interesting trends that I see is that you have so many American hardware startups that are taking advantage of these accelerators in Shenzhen.

They spend a few months in these accelerators, they learn how to find components, they learn how to do prototyping and they learn how to do manufacturing, and then also how to go to market.

So, you have a constant stream of American and European [inaudible 00:12:37] startups coming to Shenzhen, taking part in the accelerator programs. Again, I think you have small companies with big dreams. They come to Shenzhen, and then the… To make their dreams come true.

Why is it important to understand the Shenzhen entrepreneurial mindset?

Johan Nylander: it’s a good question because a lot of people when they think about China, they think everything is cheaper and low cost is most important. But when I spoke to hardware startups, they would say like, okay, the things are cost-efficient, it’s good. But the most important is speed.

So, to understand Shenzhen you also need to understand that the city is surrounded by other cities. So, even if Shenzhen is a white-collar city with innovation and finance, it’s surrounded by traditional factory towns like Dongguan, Foshan.

But you still have factories where you can produce this. So, if you’re a startup with a limited budget and you really need speed, you can find your component in Shenzhen quickly. You get in the car and one hour later, you’re down by the factory floor.

So, you can start manufacturing or prototyping more or less the same afternoon. More or less. If you compare it to a startup in America, if you need to ship it to China to do prototyping, the transportation is going to take you two weeks. And then, to get back, another one or two weeks. And then, when we need to make any changes, okay, we need to ship it again two weeks and back again, two weeks.

Here, if you are located in Shenzhen, you can take a taxi down to the factory floor and talk to the local engineers at the factories and collaborate with them how best to proceed. So, speed is crucial. And again, as I said, when I talk to these hardware startups, the speed is tremendous and very important. And you do have that here.

Where would you need to start if you wanted to build a business in Shenzen?

Johan Nylander: This is one of the most important thing because if you’re interested in Shenzhen, where do you start? It’s a city of up to 20 million people. Where do you start? So, the advice I always give is that get in contact with the local accelerators.

And if that’s not suitable, there are a lot of interesting co-working spaces. And the co-working spaces in Shenzhen, often they also work as… I mean, they’re very social. They will always help you to get in contact with the investors.

So, they must help you to get in contact with the suppliers, businesses to collaborate with. You can always contact both Invest in Hong Kong and Invest Shenzhen. Then, one of the great things with Shenzhen right now is that they really promote the city for international investors.

So, even in the city, you have special free trade zones, with a lot of incentives from the government; cash incentives and you can get free office space, you get free apartments, you can get free kindergarten… And this is all run by local incentive programs.

But again, it’s really hard to know where to start. So, I would start by maybe contacting Invest Shenzhen and Invest in Hong Kong or… I mean, go there just on a holiday trip and check out the place. There’s a lot of co-working spaces, maker spaces, accelerators.

What are some of the biggest risks to be aware of doing business in China?

Johan Nylander: If you took the business in China, there’s a lot of risks. Some would say it’s more risks than advantages. It’s not an easy market. I mean, depending on your business. I mean, first of all, it’s politically sensitive, and then you can have trouble.

It could be difficult to get your money out because of capital control. There’s naturally IP theft. It’s forced technology transfer. You will have all of your data based on local servers, and these local servers might be open for your competitors to take all your data.

There’s a tremendous amount of corruption in the country. It’s easy to get caught up in bribery. I think if you speak to anyone who’s been doing business in China, they would say it comes with a lot of headaches.

I mean, just this detail that you don’t have free open internet. If you want to check your Gmail account or check your Facebook, you need to a VPN and often, VPN doesn’t work. I mean, China comes with a tremendous amount of opportunities, it’s a very lucrative market but it’s also one of the world’s toughest markets.

It’s hard or I would say, almost impossible if you’re a small company to think that you can just go to China, with such and such a shop and tap into the system.

But one thing about the greatest advantages is also that your next-door neighbor is Hong Kong. Hong Kong, as you know, is part of China but it has its own political and legal system. You heard of the expression; one country, two systems.

So, what a lot of companies from the West are doing is that instead of setting up your company in mainland China, you set it up in Hong Kong. Again, I met several European and American companies.

What they do is that you set up your local company in Hong Kong, you do all your hardware innovation and R&D and manufacturing and prototyping in China, but you keep your software development in Berlin or in New York, the way to deliberate and keep your business interest safer.

And also, Hong Kong has no capital control. It’s functioning, rule of law basically based on independent values. So, again, I would recommend people to use Hong Kong as a stepping stone when you enter China.

I lived in Hong Kong for eight years and at the moment, it’s rather turbulent, if you put it like that. But they want countries whose system is according to the agreement with the United Kingdom, it will maintain for 50 years till 2047.

So, until then, we can more or less be certain that you will have stability in terms of rule of law, in terms of your capital and your IP will be safe in Hong Kong. I don’t feel worried living and doing business in Hong Kong. I still feel totally fine and safe in… The music is still playing but yes, of course, it is turbulent in Hong Kong and you should take it under consideration.

What’s coming next for Shenzhen?

Johan Nylander: It’s a good question. I don’t see the city slowing down. The economy is still marching on, with 8%. With the tariffs, the US tariffs, it’s a problem for some of the companies like with Huawei. It might be tough to manufacturing.

I still think that the local economy in China is still going to continue strong, and Shenzhen as a city is going to lead the way in China. It’s the most progressive, it’s the most innovative. It’s the smartest city in the country, and it continues to attract talent, not just from all over China but from all over the world.

It’s becoming more of a metropolis. I still enjoy going there, but what worries me is that China is getting more heavy-handed, more totalitarian if you want.

And if they start to take away those liberties that were the creation of Shenzhen to start with, if they tried to control things more into detail, I think that will be trouble for the city. But I still think that Shenzhen has enough momentum to continue to be the role model of China going forward.

What are you working next?

Johan Nylander: I’m always penning new books. At the moment, I’ve been stuck by the desk for newspapers about the trade wars and about the demonstrations in Hong Kong. But I have some new books in the pipeline, that I’m writing at the moment.

They will be on the same theme as about the rise of Asia. It’s about the gravity of economy and innovation is moving towards the east, and this trend that I feel is very strong and it’s a very convincing trend. So, my future books will be on these topics.

Vizologi: A Business Model Tool To Enhance Your Business Strategy

This is a new format of FourWeekMBA. Once in a while we invite founders or team members of great business tools out there to describe and guide us through the use of their products. In this article, Pedro Trillo, founder fo Vizologi will give us an in-depth overview of the tool and what you can do with that!

It seems obvious, but we are in a change of era, we are not talking about a digital transformation that comes from technological developments.

We are talking about profound changes that are taking place within society.

When communicating, when working, when it comes to relating, when doing business. Everything is changing!

Pointing to the reference in Larry Keeley’s book, “Ten types of innovation,” there are three main modules within the activity of a company where change can be measured.

The first refers to configuration, the second to product proposal or service, and the third to customer experience.

It should be noted that by the trend when we talk about innovation in a company, all the effort is concentrated in product development.

Logically, a large part of the investments are dedicated to the development and innovation of the product or service.

[image error]

When in fact the practice demonstrates the opposite, for each dollar that is invested in the innovation of the business model, configuration and strategy, the ROI received increases between 4 and 5 times the initial investment.

[image error]

On the opposite, the returns of significant investments in product innovations are barely offset.

Then try to invest time and some money in the evolution of your business model, rather than focus only on the development of the product, it will be the key to success.

What is Vizologi? More than a business model generation tool

Vizologi is a technological start-up dedicated to market intelligence and the design of business models. They develop technology based on “Data Science” through an online tool, in which, based on combinations of successful business strategies, you can create a unique and differential business model.

Vision: Inspire business models not yet written.

Mission: Positive global impact through the free access and democratization of business strategy knowledge for any citizen of the world.

What is the value proposition of the business model innovation tool?

Vizologi is composed of two differentiated blocks, on the one hand, the website https://vizologi.com that came to light on October 17, 2017, which offers access to a free marketplace of more than a thousand different companies, including Fortune 500, the most innovative companies, according to MIT, and many cases of successful start-ups.

On the other hand, there is the first release of the web app called Vizo, a business market intelligence tool, which includes a strategic business model builder.

In the medium and long term, it points to a roadmap that links with machine learning mechanisms, as well as cognitive processes of generative Artificial Intelligence.

[image error]

Who are the users of the business model generation tool?

The web application covers different targets and audiences.

Business analysts, innovation consultants, and business strategists, to help them in market research, as well as the generation of new business lines.

Business school students, to help them in the strategic evaluation of the market environment, the process of making deliverables of their business project (Canvas, SWOT, Forecast, etc.), consultation tool, business strategy, and resolution for exercises.

Entrepreneurs, to help them in the definition, validation, and creation of the business model.

Universities, as a business intelligence tool within the education environment.

Students participate effectively in the market launch of a technological tool, acquiring practical and applicable knowledge in their future companies and projects.

In the same way, they will develop innovation process skills with the application of the lean start-up methodology.

Companies and startups such as Autodesk or Square use the business model tool to identify trends, anticipate changes in the market, and create new unique and creative value propositions.

How does this business model tool work?

The workflow to follow in the web application follows three logical steps.

The first refers to the exploration of the data of the tool in which the strategic information of companies is accessed.

The second to the discovery of innovative business models that inspire, and finally, the third step refers to the construction and combination from different companies to create a unique and creative business model.

Exploration

An immersive experience where you interact with data about markets and business intelligence.

Discovery

As soon as you acquire the knowledge about the different business strategies, you will discover new insights.

Combination

Once checked the different business models and companies that are inspiring you, you will be able to create a new project based on the companies that inspired you.

Transforming these business models and combining the information, you will achieve a unique and creative business model.

Product Overview – More than a business model analysis tool.
Premium data:

The dataset is composed of more than 1500 companies, including the Fortune 500, the most innovative companies, according to MIT lists, and many cases of start-ups.

[image error]

Cognition as a Service:

A neural network with premium data from companies belonging to 47 different sectors, intertwined with more than 200 different business models, graph theory, market interconnection, and pattern recognition using Machine Learning technics in the context of Data Science and Data visualization.

The neural network is designed to offer answers to strategic market questions such as:

How many industry sectors is the subscription business model applied?

What is the most popular and busy business pattern? What is the trend with proven market companies and successful business models?

What is the impact of Blockchain companies concerning traditional Banking?

How is Big Data being applied in the Agriculture sector?

How many Fortune 500 companies have the Open Innovation process implemented? How do they apply it, and what channels do they use?

How are Chinese conglomerate companies organized to close a circular economy?

What degree of digitalization do insurance companies have under a Global point of view?

In how many sectors have the so-called Sharing economy been applied? Where are the opportunities to expand this disruptive new pattern?

What new business models have appeared in the last ten years?

What is the oldest business pattern in recent history?

How has it been reinvented digitally? What is the difference between Sotheby and eBay?

What has happened observing the timeline of the last 50 years in the retail sector?

Data analytics:

The data analytics tool serves to study trends in the market, as well as to investigate which are the most popular and low-risk business models in a given industrial category.

With this information, the user can analyze and understand where the market gaps are so that a disruption occurs.

Search engine & filters:

Through an efficient and straightforward search engine, you can search for information using search terms such as blockchain, retail, fintech, farming, education, bicycle, and so on.

Filters help to select data and sort content.

There are six different filter categories, by sector, by 47 different industry categories, by 200 different business model patterns, by 18 world regions, and also by date and by company name.

Playlists creation:

As soon as you start exploring the business strategy information of the companies that include vizologi, the need will appear to save the companies that you like most in a list.

Then the functionality of creating lists, allows you to save companies within these lists, later you can access these listings at any time to check the content.

On the other hand, you can use the lists when you open a project.

Portfolio management:

Manage your project innovation portfolio, create different projects in which you are working with the different innovation lines of your company.

Design different business model options for the same project of your startup company, test and modify the different options.

Business model generation tool:

Create a business model canvas online, vizologi includes a constructor module where you can edit, modify, or delete the post-its of the nine modules of your canvas.

Following in logical order to fill in the data of the business model canvas online, start by:

Business model canvas template

[image error]

1st Customer segments:

Study and analyze very well what your customer profile is going to be. Who are you going to offer in value, what are your problems, what kind of tasks you do in your day to day, in what context your client lives and works.

2nd Value Proposition:

Define what is the problem of your client that you are fixing.

Consequently, create and develop the solution to the identified problem, create that differential value for which your client will pay.

3rd Distribution Channels:

Think about what media you are going to use to reach your customers, where you are going to find them, how you are going to offer them those first contacts, through which platforms you are going to communicate.

4th Customer Relationships:

Evaluate how the relationship with your client will be, what type of link you will create between the value that your company offers to your final customers, what type of contacts are going to be made and how communication will develop with the client.

5th Key Activities:

Lists the main tasks that have to be performed in the company, from the most general to the most specific, think about sales, human resources, marketing, operations, IT, customer service.

6th Key Resources:

Identify which are the main resources you need in the company to be able to offer the value proposition to your clients, human resources, technical resources, physical resources, virtual resources, etc.

7th Key Partners:

Think about who you will need to develop your value proposition, which are the main agents involved in the success of your business.

Who has to help you to build and deliver your company’s products and services?

8th Cost Structure:

Analyze what your cost structure is going to be, identify the fixed costs, and anticipate the variable costs, as long as you take into account the taxes to be paid in your country.

9th Revenue streams:

Confirm how you are going to monetize the value proposition of your business model.

Where the cash flows are going to enter, what are the different ways of converting your value into money.

SWOT analysis:

Think about the strengths of your business model, which is what differentiates you from others.

Analyze the opportunities that are presented in the market, take into account the weaknesses that your business has and how they can attack your competition.

Finally, think about threats that are presented in the market, make the forecast that risks can endanger your business.

Exportation and sharing:

Create business strategy reports, download your business model canvas or your SWOT, and finally export your innovation portfolio projects, using the look of the infographic & feel or directly in PowerPoint format PPTX.

Examples of business models created with vizologi

Mamby was born as the Pinterest Latino who pays you to share content on the platform; it mixes blockchain with social media. This business model was created by the combination of the business models from four companies, Pinterest, Instagram, Reddit, and Brave.

[image error]

DIY IKEA

As part of IKEA’s digital transformation process, they are expected to make a clear commitment to the online world to attract the present and future of the so-called Millennial consumers. These digital natives who consume and buy preferably through digital media put significant importance in the personalization of products in the face of the purchase decision.

The Swedish company wants to take advantage of the digital world’s opportunity to save on the high costs of its traditional Brick and Mortar Stores model.

Revise its manufacturing process towards a new one that is more sustainable, and attract new international talent from designers who want to work for IKEA.

Vizologi

Vizologi is a “tech-geek” business model design company.

The mission of the company is to inspire the business models not written yet, so they democratize free access to knowledge about business strategy for every citizen in the world.

A combination of different companies inspired the business strategy of vizologi, Strategyzer, and IDEO, thanks to their standardization and innovation methodology.

Quid influenced through data analytics products to augment your human capabilities.

Quora emphasized the importance to democratize access to knowledge and expertize.

Netflix motivated the creation of a long tail strategy monetized through a premium subscription.

As well as, Brave brings the opportunity to remove ads while earning Basic Attention Tokens at the same time.

Comparison between 6 online business model canvas tools.
Strategyzer Vs Canvanizer Vs Vizologi Vs BMfiddle Vs Lienzo Vs Canvasbm
Strategyzer:

Strategyzer, the company founded by Alex Osterwalder (the inventor of the business model canvas methodology) brings you a collaborative web application composed by a module of an online business model canvas tool, where you can create and edit online your canvas with your team.

Website: strategyzer.com

Type: Collaborative and online business model canvas tool.

Software features:

Unlimited canvases.
Business model generation tool.
Digital, editable and online value proposition.
Collaborative edition.
Projects portfolio.
Chat.
Notes.
Data exportation.
Revenue stream estimator.
High-security level.

Pricing: $25/month per user. $300/year per user.

Canvanizer:

The tool was born within a coworking, in order to bring entrepreneurs and simple a useful online business mode canvas where you can edit and modify the post-its with other people that is part of the project. Apart from the business canvas template, you can find different recognized templates within the strategy market.

Website: canvanizer.com

Type: Collaborative and online business model canvas tool.

Software features:

Different business strategy templates. Business Model Canvas, Lean Canvas, Service Design Canvas, etc.
Digital, editable, and online business model canvas.
Collaborative edition.
Projects portfolio.
Multilanguage.
Different views.
PDF and PNG exportation.
Low-security level. The free version of the software publishes directly on the Internet the content of your business model canvas.

Pricing: It’s freemium with several options depending on workspaces and team members:

FREE access to a restricted version.
$25 per year, one workspace, up to 10 team members.
$75 per year, three workspaces, up to 50 team members.
$250 per year, ten workspaces, up to 50 team members.

Vizologi:

It is the most advanced business model canvas tool compared with their primary competence.

It mixes business modeling with data science in superior user experience.

On the one hand, it brings you a free and open business model canvas marketplace, including more than 1500 examples of business models, that you can review and download through their website.

On the other hand, it offers you a premium web application that differs from the others above.

Including a business intelligence data visualization tool to help answer the business strategy questions of your market towards reducing risks.

Besides, you can create your online business model canvas along with the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, exporting your canvas projects in JPEG and PPTX formats.

Website: vizologi.com

Software features:

Premium data including more than 1500 companies belonging to 47 industry sectors, and including the latest disruptive trends (Big Data, Blockchain, Artificial Intelligence, 3D Printing, …)
Cognition as a Service (Business intelligence data trained with Machine Learning algorithms, and visualized through graphs theories).
Data analytics
Search engine & filters
Playlists creation
Unlimited project portfolio management.
Business model analysis tool.
Business model validation tool.
Editable SWOT analysis.
JPEG and PPTX exportation.
Share projects with your colleagues.

Pricing:

FREE 7 days trial.
FREE website that includes more than 1500 examples of business model canvases ready to download.
Premium web application available through monthly and yearly subscriptions:
Monthly subscription: $19 monthly fee per user.

Yearly subscription:$108 annual commitment ($9/month per user).

Lienzo.biz

Lienzo proposes a very economical proposal of $5 per month to be able to edit a simple digital and collaborative business model canvas.

Website: lienzo.biz

Type:

Collaborative and online business model canvas tool.

Software features:

Online business model canvas tool.
Multilanguage.
Responsive (desktop, mobile, and tablet).

Pricing:

FREE to create just one canvas.
Premium option for unlimited canvas ($5 month)

Bmfiddle

A free and online solution, which includes the edition of the business model canvas. It is a limited edition and aimed at those users who want to create a digitalized business model canvas.

Website: bmfiddle.com

Type:

Online business model canvas tool.

Software features:

Business model innovation tool.
Drag and drop.
Exportation.

Pricing:

FREE

Canvasbm

It’s a free and simple online business model canvas tool that you can edit.

Website: canvasbm.com

Type:

Online business model canvas tool.

Software features:

Business model generation tool.
PDF exportation.

Pricing:

FREE

Other business resources:

The post Vizologi: A Business Model Tool To Enhance Your Business Strategy appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 22, 2019 03:58

September 20, 2019

What Is An Organizational Structure And Why It Matters

An organizational structure allows companies to shape their business model according to several criteria (like products, segments, geography and so on) that would enable information to flow through the organizational layers for better decision-making, cultural development, and goals alignment across employees, managers, and executives.

Understanding the organizational structure of a company allows understanding how decisions are made. It is also a powerful tool for executives to shape their organization toward desired goals and long-term objectives. For that sake, designing a proper organizational structure also allows the execution of a company’s business model.

Based on the organizational structure the company will also have a different shape.

For instance, some organizations are typically hierarchic, which imply a top-down approach of information flow and definition of roles.

Theoretically, the organizational structure is critical for several reasons. Some of them might be:

Definition of roles within the organization, so that each employee knows its place and where she belongs.
Goals alignment that makes groups of people work in coordination to achieve common business objectives.
Culture development based on the shape of the organization.
Productivity via a system meant to use the people part of the organization in the best possible way.
Efficiency in the use and allocation of resources within the organization.
Better decision-making process by allowing the flow of information within and across the several departments.

Lacking an organizational structure might make it difficult for the organization to grow efficiently.

It might make it difficult for employees to understand their place in the organization. It might make it difficult for managers and executive to have a big picture of the company.

It might make it difficult for owners and shareholders to understand who’s accountable for what.

Traditionally, one of the critical differentiators of an organizational structure is about centralized vs. decentralized. Wherein a centralized organization the information flows from the top to the bottom of the organization linearly.

In a decentralized organization, companies try to remain more agile and flexible via nonlinear information flows, where multiple touchpoints allow information to travel across the several parts of the organization.

Typically organizational structure can be categorized based on several parameters and priorities.

Based on the parameters and preferences the organization will take into account, it will also get shaped by these. More specifically an organizational structure can be organized in:

Functional organizational structure

It is a type of organization where people are grouped according to their area of professional competence and specialization. Typically this kind of organization is very bureaucratic and has a top-down approach.

This implies that each department will have his manager or director. This kind of organization allows employees to specialize at best in specific functions. However, it will also limit their flexibility.

While most traditional companies run this kind of organizational structure, many startups that need to make sure its small teams remain flexible and adaptable might opt for a different structure, where people are incentivized to form cross-functional teams

Divisional organizational structure

It is a type of organization where groups are organized according to the projects, or products the company focuses on.

This structure is more flexible to the hierarchical organization, as each division will run almost as an independent business, that has independent control over resources and money spent. Each division working as an independent organization can be grouped by product line but also geography

Matrix organizational structure

It is a type of organization that blends elements of a functional and divisional structure. While it sounds appealing in theory, it might be hard to implement.

As it might make people report to several bosses within the same organization and the communication flow might become too challenging as this might also generate confusion in the executive and management

Flatarchy organizational structure

It is a type of organization born from the startup way of acknowledging more independence and autonomy to employees, where they are closer to the chain of command, and the decision-making process.

This type of organization still benefits from hierarchies, but it flattens them by generating an adaptable model for organizations. While this kind of approach might work well with small and medium size organizations, it might be difficult to implement for quite large organizations

Other types of organizational structures

Other types of the organizational structure might also be based on several factors. For instance, in between the hierarchical and flatarchy, there might be several levels of organizations based on how loose are those hierarchies.

Also how far employees are from top management and how freely the information flows. Besides whether employees are involved in the decision-making process.

Choosing the kind of structure of your organization is very important, as based on that your company will be able to achieve a long-term objective, create a culture that fits those goals and it makes employees happy and efficient.

Other resources for your business:

What Is a Business Model? 30 Successful Types of Business Models You Need to Know
What Is a Business Model Canvas? Business Model Canvas Explained
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
How to Write a One-Page Business Plan
The Rise of the Subscription Economy
How to Build a Great Business Plan According to Peter Thiel
What Is The Most Profitable Business Model?
The Era Of Paywalls: How To Build A Subscription Business For Your Media Outlet
How To Create A Business Model
What Is Business Model Innovation And Why It Matters
What Is Blitzscaling And Why It Matters
Snapshot: One Year Of “Business Model” Searches On Google In Review
Business Model Vs Business Plan: When And How To Use Them
The Five Key Factors That Lead To Successful Tech Startups
Top 12 Business Ideas with Low Investment and High Profit
Business Model Tools for Small Businesses and Startups

How To Use A Freemium Business Model To Scale Up Your Business

The post What Is An Organizational Structure And Why It Matters appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 20, 2019 17:46

How To Increase Twitter Followers Organically

In today’s digital age, your ability to get your company’s name out there is reliant on people’s perception of you. Social media now plays a massive part in that, and it can make or break a business, depending on how well people relate to you and the content you put out.

After all, unless you can provide a uniquely valuable experience for your readers and followers, chances are they won’t keep coming back.

The key is to create the sort of content that provides value to those in your niche. This demonstrates your expertise on the topic and also builds goodwill with them, because you are providing them with something of value without asking much, if anything, in return.

So how can you create content that more people will be apt to find relatable and share with others? The following are some of the biggest and easiest tactics you can utilize to quickly improve your company’s online reputation and get more followers on social media.

Provide Value

The amount of value you provide is one of the most important factors in the online community’s perception of your business. When you don’t create content that people find valuable, it’s unlikely that you’ll be able to see long-term growth.

The reputation your business has for competence is tied to everything that you do and everything that people do with your business.

Because of this, it’s also unlikely that your word of mouth marketing will be successful, which will inevitably mean fewer eyes on the products and services you provide, fewer clients, and less revenue.

The most valuable type of content will differ depending on your target audience. To determine what your ideal followers would view most positively, it’s important to get to know them.

This can be done with things like online polls, a look at your competitors’ content, and the most frequently asked questions in your sales cycle.

All of these can give significant insight into your target audience and help you build up the number of followers on your social media channels.

Even better, employing tactics like these are free, which means it costs you nothing to distribute content that can get you more followers on platforms like Twitter, Facebook, Instagram, and even YouTube.

Don’t Buy Followers

No matter what you do, DON’T buy followers. This is a bad idea for many reasons, but there are two major ones.

First, it perpetuates the idea that your company is inauthentic. This is because most, if not all, of the followers you buy will be fake accounts, not real people, meaning your business couldn’t bring in that number on its own.

And although your new high follower count may seem great at first, it would have long-term consequences for both your company’s reputation and its ability to bring in revenue.

People don’t want to invest in inauthentic businesses that do shady practices, and your goal as a company should be to build trust, NOT destroy it. And of course, buying followers is against Twitter’s terms of service, meaning you run the risk of having your account banned.

It’s not a One Way Road

Whenever you’re trying to grow your Twitter following, remember it isn’t a one-way road. Just as much as you want to speak to your audience, they want to speak to you. Thankfully, there are all sorts of helpful tools you can use to get this done.

There are all sorts of different ways you can use polls on Twitter to provide valuable insights and interactivity not only to your audience but for your own business as well.

There are other ways to include your follower’s voices in the conversation as well. Anytime you have an in-person event or something like a webinar, you can invite them to tweet about it, perhaps even starting a hashtag that can get others involved – and thus earn you even more followers.

This kind of interactivity is critical to success on Twitter. While some people may like a lecture, most don’t. It is good to remember that Twitter is not a college classroom.

While everyone might be here to learn something, they want it to be in the sort of environment where they can openly and easily express their own opinions on things.

Be Patient

Putting all of these tactics into practice can have a huge impact on your follower count and long-term growth potential.

Some will take effect immediately, but not all of the results will be fast and easy. It takes patience and consistency to grow your social media following, no matter which platform you choose to target.

This patience will be rewarded in the long run when your Twitter following really starts to build upon itself. It will be one of the most valuable marketing tools for your brand, and best of all, it can be completely free.

This will be the reward that your business reaps for putting in the hours and the investment to grow an organic Twitter following. Whatever you do, just don’t try to shortcut the process, as this will inevitably backfire. What are you waiting for, go forth and market!

Social media resources:

TikTok Business Model: The Rise Of Creative Social Media Powered By AI
How To Integrate TikTok In Your Digital Marketing Strategy

Other business resources:

Business model analyses:

How Does Google Make Money? It’s Not Just Advertising!
The Power of Google Business Model in a Nutshell
How Does DuckDuckGo Make Money? DuckDuckGo Business Model Explained
How Amazon Makes Money: Amazon Business Model in a Nutshell
How Does Netflix Make Money? Netflix Business Model Explained
How Does Spotify Make Money? Spotify Business Model In A Nutshell
DuckDuckGo: The [Former] Solopreneur That Is Beating Google at Its Game

How Does Facebook Make Money? Facebook Hidden Revenue Business Model Explained

The post How To Increase Twitter Followers Organically appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 20, 2019 14:08

September 18, 2019

The Amazon Leadership Principles Crafted By Jeff Bezos

When a company scales up at the size of Amazon, culture becomes extremely important as it works as a glue to keep aligned a large number of people. According to Amazon financials, the company had 647,500 full-time and part-time employees as of December 31, 2018.

To give you a bit of context, this is the size of cities like Boston, Las Vegas or Detroit. And this is just counting the full-time or part-time employees of the company. If we count the induced employment created by Amazon (suppliers, businesses, and services built on top of it), we might well go over the few million people.

At this size, it gets exponentially more complex to keep people operating for a common purpose or a set of shared goals that fit the company’s objectives.

To be sure, a company with a hundred thousand employees is not a thousand times more complex than a company with a thousand employees. Instead, when we talk about people and their relationships, things get nonlinearly more complex.

Thus a company of a hundred thousand employees is many many times over a thousand times more complex than a company with a thousand employees.

For that matter, culture might become critical for a few reasons.

Culture as a survival mechanism

It’s hard to prove any causal relationship between culture and success of an organization. And we tend to point to organizations which turned out to be successful. It can easily be that if we were to look for companies that went bankrupt, which seemed to follow the same principles. Therefore, culture carries some hidden benefits for the companies that survived thanks to certain principles. But the survival might be due to hidden aspects which are hard to understand consciously.

Culture with a via negativa approach

Rather than look at culture as something that you do that makes you successful. We can look at it via negativa. In short, what some successful companies are doing to avoid screw-ups as they scale.

As Amazon scaled to the tech giant, we know today, it went through quite some bad historical times. From the dot-com bubble, when the company lost more than 90% of its value from its peak, yet it survived.

For that matter, before going to the principles, Amazon has today, I want to jump to the hardest time for Amazon historically. The reason is Amazon hasn’t always been a lean company, following a sustainable business playbook.

Yet it learned the hard way a new model that would enable it to make it through the hardest time and to become the tech giant we know today.

Amazon during the dot-com bubble

[image error]

As you can notice above, Amazon managed to survive the dot-com bubble. While its revenues grew from 1997 to 2001 as a result of the aggressive expansion, the company’s losses mounted.

During that time, Amazon’s employee base grew from 158 to 614. That was a time when management, leadership, and culture started to play a critical role in Amazon’s success.

Indeed, if we were to break down or have a theory around what makes a company able to scale, just like an onion, there is the core which is represented by a must-have product or a service which obsesses over customer experience.

To gain further traction, the company needs a strong business model. And as it scales, culture might become extremely important. Thus, it might look something like that:

[image error]

That is why, as Amazon scaled up and as it started to expand its products aggressively. Indeed, by 2001, Amazon not only had expanded its selection away from books and into many other categories.

But it had also opened up its platform to third-party sellers which helped further grow Amazon customer base, by following the Amazon flywheel model:

[image error]

At the time, Amazon also strategically opened to third-party sellers to enhance its brand. In other words, where today Amazon might host third-party sellers which might be primarily small businesses.

Back in the 2000s, Amazon opened up to brands like Toysrus.com, Inc., Target Corporation, Circuit City Stores, Inc., the Borders Group, Waterstones, Expedia, Inc., Hotwire, National Leisure Group, Inc., Virgin Wines, and others which further amplified Amazon‘s brand.

If you could buy something from Target on Amazon, you would trust its brand more easily.

The third-party seller strategy started to work. And it showed how Amazon was leveraging on a platform business model to enhance its brand and business.

The third-party seller services strategy revolved around three core ones:

Merchant@amazon.com Program: here third party seller could offer their products on Amazon, either in its online stores or in a co-branded store on the Amazon site, or both. And they could also fulfill those thorough products Amazon by paying the company a fixed fee. Companies like Target and Toysrus were part of it.
Merchant Program: with which the third-party seller had its own URL and Amazon provide the option of providing fulfillment-related services on behalf of the third-party.
Syndicated Stores Program: which represented third-party seller’s e-commerce websites were offering products available on Amazon, which product were fulfilled by Amazon and the company paid commission to syndicated store.

In that period, as Amazon started to scale its employees base, it significantly strengthened the management team.

In the annual letter of 2001, Jeff Bezos highlighted:

When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.

And he continued:

Why focus on cash flows? Because a share of stock is a share of a company’s future cash flows, and, as a result, cash flows more than any other single variable seem to do the best job of explaining a company’s stock price over the long term.

Therefore, even though Amazon did survive the dot-com bubble, the business model which would enable the company to make it through the first phase of scale-up was drafted around the beginning of the year 2000, right at the bottom of the dot-com bubble.

In short, even though Amazon emphasized so much on cash flows, during the dot-com, the company was burning a substantial amount of cash. And Amazon itself still saw the web as a distribution platform, rather than a business model enabler.

Therefore, Amazon‘s survival through that period was nonetheless due to a bit of lack. However, as Jeff Bezos led Amazon through that period, he kept pushing the company to a new business model.

Amazon.bomb becoming a platform

To have an idea of how gloomy was the scenario. As the Guardian highlighted in June 2000, in an article entitled “Amazon.bomb:”

Analyst Ravi Suria highlighted Amazon‘s “weak balance sheet, poor working capital management, and massive negative operating cashflow – the financial characteristics that have driven innumerable retailers to disaster through history.” It was a day during which Amazon‘s shares lost 20% of their value, and 51m of them changed hands. A company worth about $40bn (£25bn) just before Christmas had ended the day worth $12bn (£7.5bn), and things did not improve during trading yesterday.

At those comments, Jeff Bezos replied at the time:

Three years ago our stock was $1.50 a share, today it’s $30-something. There have been many, many days when our stock has gone up 20% in a day” – that laugh again – “and if stocks can go up 20% in a day, they can go down 20% in a day. All internet stocks are volatile, including Amazon.com… we are nowhere near running out of cash, and we are not at all worried about it.

And he was right. Even though the company had burned a few hundred million in cash in 2001. It had managed to get a long-term loan of over six hundred million back in 2000, right before the explosion of the dot-com bubble. Thus, guaranteeing enough cash to go through that bad period.

[image error]

Indeed, as of 2001, Amazon still had over five hundred millions of cash sitting in its bank account.

To understand how bad Amazon reputation might have been at the time, an article dated April 26, 2001, by Doug Casey, author of “Crisis Investing,” highlighted:

I’ve said several times that Amazon is a cinch for bankruptcy, certainly Chapter 11 (a reorganization) and maybe even Chapter 7 (a liquidation), although I consider the latter a bit of a long shot.

The lessons Amazon learned during the dot-com bubble

What can we learn from this story?

Quite a bit of luck when hard times hit is critical.
Amazon managed to secure enough cash to survive long enough to its business model to be fully viable and scalable.
The company kept pushing on growth, and it changed its business model as it went through the crisis. In short, Amazon in 2000 finally expanded its e-commerce and made it more as a platform business, which will be the basis for Amazon success in the decades to come.
Jeff Bezos kept a strong focus on the operations even through a period which it was highly distracting.
When new technologies are becoming mass adopted, companies need to think about it as a new playground where the rules of the business game can be rewritten.
Throughout the dot-com era, Amazon changed the playbook. It went from a cash-burning machine, and it transitioned into a lean organization. Although we give the lean startup principles as given today, they were not so back then.

Not by chance, I mentioned luck as the first factor, but learning fast, changing playbook accordingly, are also crucial to Amazon survival.

Let’s look now at the amazon guiding principles.

Amazon guiding principles

Let’s look now at the Amazon fundamental principles that drove and drive the company:

Customer Obsession
Ownership
Invent and Simplify
Are Right, A Lot
Learn and Be Curious
Hire and Develop the Best
Insist on the Highest Standards
Think Big
Bias for Action
Frugality
Earn Trust
Dive Deep
Have Backbone; Disagree and Commit
Deliver Results

Customer Obsession

Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

This mindset shift is critical. It’s essential to understand the playground and who’s playing. But the focus and obsession should never move away from customers. And customer obsession is not just about doing what customers want.

It’s about finding out new ways to serve them, which they don’t even know yet exist. This is important as many companies out there praise them as “following customers needs” as they build products and services that do affect the bottom line.

But following the bottom line alone is short sited. As a company leading in industry, for how small it can be, you need to have a vision of how you want things to be. Thus, drive your customers through and toward that vision!

Ownership

Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job.”

Long-term thinking has been ingrained in Amazon thinking for a long time. However, as we saw, the playbook which brought Amazon to become a tech giant was implemented in 2000, when Amazon was struggling in the short term.

As the company still had a few million dollars at the bank, it also knew it had to slow down the rate of burning that cash. That is why operational efficiency became an essential element of Amazon‘s growth.

Short-term cash coming from the operation efficiency would help Amazon finance its short-term growth, that was at the core of Amazon cash machine. In short, Amazon learned that long-term vision, together with short-term cash flows, made a massive difference.

Invent and Simplify

Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long periods of time.

Invention and experimentation have also been at the core of the company’s culture. Throughout the years, Amazon did make many (at hindsight) foolish investments, that although looked brilliant at the time (take the case of Pets.com).

Yet in the process, it also produced a few huge winners.

Are Right, A Lot

Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.

Beliefs can help us go through complex scenarios. But in certain instances, they might limit hour ability to grow. Thus, it becomes critical to be able to revise those beliefs when they turn out to be off.

Learn and Be Curious

Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.

Experimentation and exploration are critical to any company’s success. Once again, it doesn’t matter if you’re a small startup or a tech giant, you need to make bets.

Hire and Develop the Best

Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.

For Amazon leadership highlights coaching and development of other people within the organization.

Insist on the Highest Standards

Leaders have relentlessly high standards — many people may think these standards are unreasonably high. Leaders are continually raising the bar and drive their teams to deliver high quality products, services, and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.

Improving the bar and setting higher and higher standards it’s not an easy game. Yet essential to stay on top.

Think Big

Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.

Communicating vision is key not only internally, to align employees and key stakeholders. But also to show to your customers where you’re going.

Imagine the case I’m building an e-learning platform and as one of my first customers, you can see my vision of having it become the best platform on earth you will stick around to help me shape my vision.

Bias for Action

Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.

This is an extremely important point: speed and reversibility.

As we stress more and more on making a data-driven decision, we end up in an analysis paralysis scenario. On the opposite spectrum, as we prioritize on speed, we end up killing our company for an excess of it.

Thus, a sweet spot is speed, and reversibility can help. For that you can use the speed-reversibility matrix:

[image error]

Frugality

Accomplish more with less. Constraints breed resourcefulness, self-sufficiency, and invention. There are no extra points for growing headcount, budget size, or fixed expense.

As we’ve seen Amazon fully transitioned to this playbook in the 2000s when it lived hard times thor the dot-com bubble.

Earn Trust

Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.

Dive Deep

Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdote differ. No task is beneath them.

Have Backbone; Disagree and Commit

Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.

Deliver Results

Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.

Amazon must-reads articles:

Amazon Business Model
What Is the Receivables Turnover Ratio? How Amazon Receivables Management Helps Its Explosive Growth
Amazon Case Study: Why from Product to Subscription You Need to “Swallow the Fish”
What Is Cash Conversion Cycle? Amazon Cash Machine Business Model Explained
Why Is AWS so Important for Amazon Future Business Growth?
Amazon Flywheel: Amazon Virtuous Cycle In A Nutshell
Amazon Value Proposition In A Nutshell
Why Amazon Is Doubling Down On AWS
The Economics Of The Amazon Seller Business In A Nutshell
How Much Is Amazon Advertising Business Worth?
What Is the Cost per First Stream Metric? Amazon Prime Video Revenue Model Explained
Jeff Bezos Teaches You When Judgment Is Better Than Math And Data
Alibaba vs. Amazon Compared in a Single Infographic
Amazon Mission Statement and Vision Statement In A Nutshell

Other business resources:

The post The Amazon Leadership Principles Crafted By Jeff Bezos appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 18, 2019 15:36

The Speed-Reversibility Decision-Making Matrix

The speed-reversibility framework is a simple matrix for decision-making to understand when to analyze scenarios before making decisions. And when moving extremely fast instead.

As you dive into the entrepreneurial world, you might struggle to make things work. And as that happens, you start looking for resources online to help you out throughout that process.

Chances are you’ll stumble on an article about making a sound decision by using data, and you turn to a data-science degree, instead of focusing on growing your business.

For that sake of that, a simple matrix like the speed-reversibility matrix can help you out.

And we’ll start from three simple principles.

When do you need data?

In a world where data is available anywhere, it’s easy to draw in that. Thinking you always need data to back up any decision. In reality, in many cases, your guts, your vision, and your deep understanding of the kind of business you want to build might be your sharpest tools.

In general, for a short-term decision quantitative analyses, data might help you tune processes. When it comes to long-term vision, you might want to rely on your guts.

Understanding optionality and reversibility

As an entrepreneur, you’re not trying to be right most of the time. You instead should make sure to be right once and profit a lot from it. While avoiding the risk of massive failure.

For the sake of it, you need:

Optionality: the leverage to have multiple options when a scenario is unraveling.
And reversibility: the ability to survive if the worst-case scenario might materialize.

When you’re missing both these elements, you already know that data can help better understand what you’re doing even if it slows down the decision-making process.

Assessing the worst-case scenario

Another key element is about evaluating the worst-case scenario. What would happen if things would turn out extremely bad?

Would this scenario be reversible? Would this imply a complete failure? Would I sacrifice all the progress made so far?

Based on these elements, you might have four decision-making options.

Slow-decision making mode

When the worst-case scenario looks pretty grim, and that can’t be reversed. You better gather as much data as possible about what you’re about to do.

Indeed, it doesn’t matter how large will be your payoff. If things will turn bad, you might have too much to lose.

Gradual rollout mode

When the worst-case scenario doesn’t look bad, yet it’s not reversible, you might still want to analyze. And gradually roll out the decision, rather than fully commit to it.

Multiple experiments mode

When the worst-case scenario is highly risky, but it can be reversed. You want to perform as many small experiments as possible.

Fast mode

When the worst-case scenario doesn’t seem to be risky at all. And it is reversible. You can move at full speed. In that case, you won’t need data. Rather the data will come to you as a result of execution.

In this mode, you can have as much fan as possible.

Thus, the question might be, “how do I find a low-risk worst-case scenario, which is reversible?”

Other business resources:

The post The Speed-Reversibility Decision-Making Matrix appeared first on FourWeekMBA.

View more on Gennaro Cuofano's website »

Like • 0 comments • flag

Published on September 18, 2019 15:00

September 12, 2019

What Is Continuous Innovation And Why It Matters

That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business.

Continuous innovation therefore is a mindset which requires a shift in how products and services are developed and delivered.

As the digital age enabled easier access to products and service, it becomes critical to have a continuous feedback, to quickly iterate on a product to create the best version of it.

What customers crave for.

In this scenario, continuous innovation becomes the baseline. And it requires, first of all, a mindset shift.

On FourWeekMBA I had Ash Maurya explain why continuous innovation matters so much. Let’ start from there!

Continous innovation as a set of mindsets

[image error]

Source: blog.leanstack.com

As Ash Maurya has highlighted continuous innovation is a set of mindsets moving along ten key principles:

Love the problem not the solution

Talking about problem-solution fit Ash Maurya highlighted how:

One of the biases that that many entrepreneurs fall run into is this premature love of the solution. Like the first principles in science, you almost have to deconstruct an idea. We have to start with the basics. In this case, when we look at our business, we have to break it down into customers and problems.

If you don’t have the right customers who are trying to get sorted and problem solved, and no matter what solution you build, it doesn’t matter because we know that unless you’re solving a problem, customers are not going to use it.

This is a common mistake, happening especially in the startup world, where it becomes easy to focus on providing technical solutions rather than focusing on the problem those might solve.

That is why you need to make sure to understand the problem first.

What problem are you solving? For whom? What alternatives are the people for which you will solve the problem using? Why and what can you do way better than existing alternatives?

Those are the right questions. Yet, many still focus on how to build a feature, product, and service without validating or understanding what problem is solving in the first place.

As Ash Maurya further highlighted when I interviewed him on FourWeekMBA:

They’re not going to pay money. Even if you can reach them.Even if you have a patent or an unfair advantage, it doesn’t matter at the end of the day because your customers don’t care.So that is the way we logically break it down, but that innovator’s bias is one of those sneaky things.

Keep that in mind!

A business model is the product

In a world driven by technology, it’s easy to think of technological innovation and business model innovation as two analogous concepts.

However, while technological innovation often focuses on the technical solution in its own sake. Business model innovation is about creating scalable companies and repeatable businesses able to create value by solving problems for customers, consumers, users, all the while creating value, in terms of financial resources for other investors and stakeholders.

In short, business model innovation aligns several interests, both monetary and not monetary for several players at once.

That is why it is such a powerful concept. It requires a deep understanding of the conflicting interests at play while keeping them aligned.

In a digital era, where technologies become commoditized as they get to the mainstream, what’s left is business model innovation.

That is why Ash Maurya highlights that the business model is the product. That is what creates a competitive advantage.

Traction is the goal

It might sound strange, yet one thing that aligns both investors and customers (often) is traction.

That is particularly true for platform business models and those products which gain value as more users, customers, and people in general start using them.

Imagine the case of a platform like Airbnb, that has no traction. How can you make sure there will be the right room or home in the place you’re about to visit?

Unless it keeps gaining traction to have a wide variety of guest and hosts, how can customers be sure the platform will be valuable over time.

And as the platform gains traction and it sustains that, it becomes valuable for investors too!

Right action, right time

As Ash Maurya highlighted in a 2016 post entitled “My 3 Biggest Lessons on Entrepreneurship (so far):”

“At any given point in time, there are only a few key actions that matter. Focus on those and ignore the rest”.

When you’re building a business, the way you decide to spend your time is the most important decision you make.

Thus, deciding on what to focus, but most of all on what not to focus that is key.

Give yourself permission to scale

This comes from the fact that a startup launching might worry too much on reaching the largest number of people possible.

That is a massive mistake. I can’t stress that enough and that is why I wrote about niche marketing and microniches.

Before you can scale, you need to find your first customers, and you need to define them very well and start reaching them early on!

Which connects to the next point.

Tackle riskiest assumptions first

As Ash Maurya highlighted in the FourWeekMBA interview on continuous innovation:

I sometimes like to call that permission to scale, so whether you’re a startup, whether you’re a corporate, we have to realize that products go through a life cycle, and rather than trying to rush to get to scale prematurely and then making a lot of mistakes and getting overwhelmed with risk, if we instead give ourselves permission to scale, start with smaller numbers of customers and users and more systematically roll it out, it makes the process more manageable. It helps us tackle the riskiest assumptions first.

There are several risky assumptions depending on the business you’re building. For instance, if you’re launching something that might not be technically complex, then the riskiest assumption is whether people might want that or not, so monetization becomes important.

If you can monetize it means there is a need for that product and use case. Thus, you can move to the feasibility risk. But even if you’re thinking to build a technically complex product, you might want to check whether there is a use case for it.

Unless you’re doing pure research, or you have a lot of funds allocated for the sake of technological innovation alone.

But once again, if we’re talking about business model innovation, you need to understand whether people are waiting for that problem to be solved.

For instance, when I interviewed Alberto Savoia he told the story of how IBM changed its course when it realized

Many many years ago IBM thought “we want everyone to have personal computers,” but there was no way (think about this is like 1980) that most people are going to learn how to use a keyboard. In those days who used a keyboard? Secretaries, programmers, and writers. So they thought, we need people to be able to operate the computer without using the keyboard, just by using speech to text into a microphone. Of course, they could not build the technology, they could not build the prototype for years because the technology was not there, computers were not fast enough…

…Now, this was not possible, the technology wasn’t there, so they could not have built a prototype. So what happened, in the room next door, instead of a computer that actually did all this processing, there was a human being, one of those people who know how to type very fast, got the input through the headphone, typed it on their keyboard, and so to the users it looked as if there was a working prototype, but there wasn’t…

…They learned very quickly and they got very valuable data that, while Text-To-Speech may be interesting, they better focus on accepting the fact that people will have to learn a keyboard. And, surprisingly enough, 40 years later we’ve all learned how to use keyboards even though, arguably, they are not a very efficient way of using a computer.

Think 10X

Ash Maurya 10x approach looks at what he calls a staged rollout or a place in which rather than opening to anyone you open to a set let’s say ten people first. A hundred. Then a thousand.

In this way you gradually scale, allowing enough feedback to avoid to kill your own product, too soon.

Make evidence-based decisions

As we flow into the ocean of data, that is among the most difficult things to accomplish.

The way you can gather evidence is by avoiding potential biases first. Understanding that most of what you’ll look at will be biased. Thus, you need to be aware of those biases and expose them to avoid falling into the trap of making decisions based on perception.

Validate qualitatively, verify quantitatively

This connects with the previous points. For instance, early on if you’re launching a product, it’s important to validate qualitatively by speaking to the first customers you get.

As the number of people accessing your product might grow, you can start looking at data which starts to having significance to understand how people consume your product or service.

Remove failure from your vocabulary

That is probably the hardest mindset to develop.

As none like to fail. However, if we have a model to build a business, we can develop a process to fail as well. So that each failed attempt and experiment will work as feedback.

If you just move the logic from personal (I failed) to procedural (the experiment designed through this process failed) you can definitely gain a better perspective!

Gennaro Cuofano's Blog

Gennaro Cuofano's profile
5 followers