Bus modelsandvaluegeneration

Business Models and Value Generation
Patterns of Value from User-Generated Content & Networks
Darius Dunlap
Managing Partner
360c
Copyright Darius Dunlap, cc-by
Sunday, October 6, 13
All Slides CC-BY Darius Dunlap.
For detail, see CreativeCommons.org

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Darius Dunlap
360c.co
@dariusdunlap

A startup is a temporary
organization in search of a
scalable, repeatable,
proﬁtable business model...
Steve Blank
The Startup Owner’s Manual:
A step-by-step guide for building a great company

Introducing
The Business Model Canvas

Alexander Osterwalder
alexosterwalder.com
businessmodelgeneration.com

Alexander Osterwalder
alexosterwalder.com
businessmodelgeneration.com
Business Model Innovation is about Creating Value

What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
For whom are we creating value?
Who are our most important customers?
What type of relationship does each of our Customer
Segments expect us to establish and maintain with them?
Which ones have we established?
How are they integrated with the rest of our business model?
How costly are they?
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we offering to each Customer Segment?
Which customer needs are we satisfying?
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
Day Month Year
No.
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.
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Fine Print.
We print it BIG!

“At the outset, the startup
business model is a canvas
covered with ideas and guesses,
but it has no customers and
minimal customer knowledge.”
Steve Blank
You don’t know. You are Probably Wrong.
The Customer is the Key
[next - Not a new idea...]

“With respect to the deﬁnition of business
purpose and business mission, there is
only one such focus, one starting point.
It is the customer.”
Peter F. Drucker
This is not a new idea. But now represents new possibilities...

Iterate until you Validate — Then Build.
Customer
Discovery
Customer
Validation
Customer
Creation
Company
Building
Pivot!
Customer Development
Business Model Canvas
But you can’t just make it up.
Business Model Canvas — think through the implications

What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?
Through which Channels do our Customer Segments
want to be reached?
How are we reaching them now?
How are our Channels integrated?
Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?
For what value are our customers really willing to pay?
For what do they currently pay?
How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?
For whom are we creating value?
Who are our most important customers?
What type of relationship does each of our Customer
Segments expect us to establish and maintain with them?
Which ones have we established?
How are they integrated with the rest of our business model?
How costly are they?
What value do we deliver to the customer?
Which one of our customer’s problems are we helping to solve?
What bundles of products and services are we offering to each Customer Segment?
Which customer needs are we satisfying?
What Key Activities do our Value Propositions require?
Our Distribution Channels?
Customer Relationships?
Revenue streams?
Who are our Key Partners?
Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
What Key Resources do our Value Propositions require?
Our Distribution Channels? Customer Relationships?
Revenue Streams?
Day Month Year
No.
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License.
To view a copy of this license, visit http://creativecommons.org/licenses/by-sa/3.0/
or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
Create and re-create your canvas.
Keep thinking about it.
Keep iterating

Stay focused...
“A business model describes
the rationale of how an organization
Creates, Delivers, and Captures Value”
Darius Dunlap
So let’s talk about Creation of Value

Product Value
• I have a product
• You Want the Product
• We Make A Deal
• Everyone is Happy
Utility
Fashion
Entertainment

The world is made of Circles
And we think in straight lines
Peter M. Senge
The Fifth Discipline:
The Art & Practice of the Learning Organization
The Linear Transaction is only the beginning of the story

Think Different Types of Value Generation
Look at your customer and your product from different perspectives.
(etching by M.C. Escher, in case you didn’t know.)

Users Create Value
For Themselves
• Stuﬀ They Create
• Stuﬀ They Curate
[The Trautwine engineering manual is from my Great-Grandfather, and represents an old-
technology product that helps its owner create new value. ]

Value Users Generate
For Each Other
• Stuﬀ They Share
• Ideas & Discussion
• Remixing & Reuse
Sharing...
Connecting...
Generating New from the Old.

Value Multipliers
• Data Analysis Generates
New Value
• Curation & Discovery
It’s valuable to me that Amazon knows to le me know that Dave Eggers has a new book!

Utility Value
• Some Speciﬁc Useful Function
• “Sent a Fax”
Customers want what it does, ongoing.

Transactional Value
• Enabled the User to complete a
transaction
Paypal is another example.
Now, Square.

Records Value
• User generated information
kept as a record
• Information ABOUT user’s
creations or activity, kept as a
record
“Meta-Data”
Data about Data.

Accumulated Value
• Gathered information
accumulates and soon has its
own value as a collection
• Especially true when enabled
by powerful utilities for search
and context.
When my pile of stuff reaches some critical mass,
Now worth more than the direct utility value
of saving a note or clipping.

Network Value
• User building and deﬁning a
network
• Facebook Friends
• LinkedIn Colleagues
• Google+ Circles
Ref. Mike Elgin’s discussion of Facebook’s “Monopoly on Everybody”

Efficiency Value
• Tools and resources as part of a
workflow
Efficiency comes from working as part of a bigger workflow.
[Screen snap from Editorial, an iPad text editor with workflow tools, and a python interpreter.]

Algorithmic Value
• My Data
• Our Data
• Everybody’s Data
Data Graph by Asymco - www.asymco.com
(Doesn’t really have anything to do with the point of the slide,
but Horace is brilliant.)

Interaction Value
• Algorithmic Prediction
• Surfacing Trends
• Activity Spikes
• Connection Flight
• Dynamics Graph
• The Changing Graph of
Information Flows
Interaction between people and among groups
creates it’s own data ﬂow and
value potential

Collective Value
• Content Swarms
• Content Connections
Flow of content and the
data about that ﬂow...

"What the customer buys and considers
value is never a product.
It is always utility, that is, what a product
or a service does for the customer.”
Peter F. Drucker
If you haven’t, just read all the Drucker you can ﬁnd.

Think, Adapt, Innovate...
Black To Move...
Honinbo Shusaku vs. Inoue Genan Inseki
(1846)
You can’t anticipate every customer need, or every competitor’s move...
Black is about to make a surprising and highly effective move that white did not anticipate.
Known as “the ear-reddenning move”, as Inseki’s ears ﬂushed red when Shusaku placed his
next stone.

What Value are you
Creating?
What are you making Possible?
Think big about what is possible.

What Value are you
Creating?
Who are you Disrupting?
Amazon was thinking bigger than just “sell books at a discount.
Extra credit: Find and read Jeff Bezos’ letter to investors, from each Amazon Annual Report.
Great example of clear thinking and excellent business writing.

What Value Are You
Creating?
What’s your legacy?
That little thing you’re making... ?
Does anyone really care?
[photo: Palo Alto Apple Store, shortly after Steve Jobs’ passing. cc-by Darius Darius]

Thank You!
Darius Dunlap
Managing Partner
360c.co
@dariusdunlap
darius@360c.co
All Slides CC-BY Darius Dunlap.
For detail, see CreativeCommons.org

Basics
More slides on Customer Development
and Lean Startup

Iterate until you Validate
Customer
Discovery
Customer
Validation
Customer
Creation
Company
Building
Pivot!
Business Model Canvas

Getting out of the building means
acquiring a deep understanding
of customer needs and combining
that knowledge with incremental
and iterative product development
Steve Blank

BMG
Basics
More slides on Business Model Generation

Business Model Canvas can be Changed!
Some people change the model around

Does the relationship go the other way?

Some people change the model around
Customer Development Canvas (@TriKro)

But stay focused...
A business model describes
the rationale of how an organization
Creates, Delivers, and Captures Value

Homework: Sketch at least 3 different Models!
Only make a ﬁrst choice after prototyping and sketching
through several alternative models

Homework: For each variant Model...
Identify critical hypotheses...
What, if not true, will kill the business model?

Remember...
Execution is not search
Execution FOLLOWS Search

Thank You!
Darius Dunlap
Managing Director
@dariusdunlap
darius@dunlaps.net

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