2016 Innovation Roundtable Keynote by Michael Skok

Proprietary and Confidential@mjskok startupsecrets.com@underscorevcCopenhagen Innovation Roundtable
START UP
SECRETS
An insider’s guide to unfair competitive advantage
Hi
Copenhagen Innovation Roundtable Keynote
Tweet questions to: @mjskok #startupsecrets
startupsecrets.com
November 2016
Michael J Skok

Innovation
Hi

Proprietary and Confidential@mjskok startupsecrets.com@underscorevcCopenhagen Innovation Roundtable @mjskok startupsecrets.com@underscorevcCopenhagen Innovation Roundtable
Startup Secrets - Tasters
Our agenda today includes some small samples from the Startup Secrets
series:
 Value proposition - Fundamentals
 Products to companies – Friction free, “slippery” products
 Business model - Basics
For the full details of these and other workshops see:
startupsecrets.com / twitter: @mjskok
@mjskok startupsecrets.com@underscorevcCopenhagen Innovation Roundtable

If you want to build a billion dollar
business…
Start with a MULTI billion dollar problem
@mjskok @underscorevc startupsecrets.comCopenhagen Innovation Roundtable

E.G. eCommerce…
Market:
eCommerce:
• $4.7 trillion
• ~7% penetrated
• Growing in mid teens
Problem:
“Under siege”, Disruptions
• Offline -> Online
• Physical -> Digital
• Mobile -> Omni Channel
@mjskok @underscorevc startupsecrets.comCopenhagen Innovation Roundtable

STARTUP EXAMPLE:
DEMANDWARE

7Copyright 2012 Demandware, Inc. – CONFIDENTIAL |
Demandware is at the Confluence of
Three Significant Markets
$317 Billion
$12 Trillion
Global Retail
$10 Billion
Global eCommerce
16%
CAGR
(‘10 – ’15)
Global SaaS
18%
CAGR
(‘10 – ’15)
Data Reflects 2010
Source: Gartner (Global SaaS Market) and Euromonitor
(Global Retail and Global eCommerce)

Demandware Delivers the Best of Both Worlds
A Unique and Better Approach to eCommerce
The Best of
Both Worlds
Build and Run Internally
The Pros:
 Control
 Customization
The Cons:
 Costly
 IT-Constrained
 Performance/Security
 Responsibility
 Slow Pace of Innovation
✗
Outsource / ASP
The Pros:
 Less Hassle
 No Infrastructure
The Cons:
 Inflexible
 No Merchant Control of
Merchandising
 Limited Customization
✗

Leading Brands Choose Our Model
‘08
16 17 19 23 28 32 38 40 46 53 60 69 75 78
91
101110
124
137
39 39 43 50
60
70
95 104
123
143
175
215
237
253
321
361
402
445
517
Customers
Websites
‘12‘09 ‘10 ‘11

LARGE COMPANY EXAMPLE:
AMAZON

Amazon’s problem?
 Internal software projects were taking too long
• Causing competitive issues
• Internal scaling challenges
• Reinventing the wheel
 If they could solve it for themselves, could it solve it for others?
 Andy Jassy / AWS team were a level 8 problem solver.
• What level will you be?
http://www.startupsecrets.com/amazon

www.startupsecrets.com
VALUE PROPOSITION
(excerpt)

Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution
Agenda - Define
13@mjskok startupsecrets.com@underscorevc

 Unworkable
 Unavoidable
 Urgent
 Underserved
Problems worth solving
are usually 4U …
Problem

 Broken business process
 Consequences ?
If the consequences are costly or painful,
so much the better.
E.g. who gets fired if this doesn’t work?
Unworkable

 Accounting
 Regulation
Is the problem so fundamental you can’t
avoid it and just have to comply?
Unavoidable

 Relative to other needs …
 Priority
• Determines resources allocated
If you’re not at the top of the list, are you at least in the top 3?
If not will you get moved up or down over time and why?
Urgent

 You will compete in a zero-sum game
 Finite:
• $
• Time
• People
• Attention
Underserved – Business…

Examples…
• Social
– Find
– Connect
– Communicate
– Meet
– Share
– Entertain
– Date
Needs…
• Social
• Security
• Physical
• Economic
• Recognition
• Responsibility
• Achievement
• Growth
Underserved – Unmet Needs,
Consumers…

Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution
Agenda - Evaluate

Is it “blac” & white?
 Blatant
 Latent
 Aspirational
 Critical
Blatant
Latent
Aspirational Critical
Blatant
Critical
Qualify the problem

 The gain delivered to the customer
vs.
 The pain and cost for the customer to adopt
“Gain/Pain ratio"
Gain Pain

• Revenue
• Cost savings
• Time
• People
• Competitive advantage
• Reputation
• Etc..
Gain
Gain Pain

• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – eg TCO
Pain
Gain Pain

• Switching costs?
• Default = do nothing
• Alternatives?
• Good enough =
good enough!
• RISK on a startup
Inertia,
RISK
Inertia
Gain Pain

What’s the right ratio?
Inertia,
RISKGain Pain

Customer view = Gain/Pain
• Revenue
• Cost savings
• Time
• People
• Reputation
• Etc.
• Inertia
• Alternatives?
• Good enough =
good enough!
• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – e.g.TCO
Inertia,
RISKGain
Pain
27@mjskok startupsecrets.com@underscorevcCopenhagen Innovation Roundtable

“An order of
magnitude”
Customer view = Gain/Pain
Inertia,
RISK
Gain
Pain
>10
• Revenue
• Cost savings
• Time
• People
• Reputation
• Etc.
• Inertia
• Alternatives?
• Good enough =
good enough!
• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – e.g.TCO

PRODUCTS TO COMPANIES
(excerpt)

How do you take away the pain,
and reduce friction?
… make it SLIPPERY
(Reduce the Pain in
the Gain/Pain Ratio)

• Simple
• Low to no initial cost
• Installs easily
• Proves value quickly
• Plays well with others
• Easy to use
• ROI is obvious
• Your customers can’t live without it – it’s stickY
Friction Free, SLIPPERY products

Simple

Microsoft Sony
Which is better?

Microsoft, Sony Apple
Neither! = Less is More!

 Simple ≠ Easy !
 Simple often means complex technology
that makes your product “magic”
 Simplification Innovation
(search algorithms in the cloud)
Simple ≠ Easy to do

features are the enemy of function
functionality can overwhelm users
applicability is all that ultimately matters
Less is More…

BUSINESS MODEL
(excerpt)

New Market
& GTM
Disruptive
Business Model
Disruptive
Technology
@mjskok @underscorevc startupsecrets.com
Perfect Startup Storm
38

How can your Business Model…
 Change the game?
 Rewrite the rules?
 Cause an innovator’s dilemma
 Be as disruptive
as your technology?
New Game
New playing field
New boundaries
New rules
YOU choose players
@mjskok @underscorevc startupsecrets.com 39

 Shared ownership (Zipcar)
 Flash sales (Vente Privee)
 Crowd sourcing (uTest - Applause)
 Lead Gen (Mint.com)
 Virtual goods/currencies (Tapjoy)
 Combinations
• Acquia - OSS, SaaS
• AirBnB - Commission on P2P rentals
• Demandware - SaaS, success based rev share
• Groupon - broker, revshare
• Spotify -adbased, freemium
Sample Models

 Process or Product?
 Software or Services?
 Open or Proprietary?
 Content or Data?
 Freemium or Premium?
 Subscription or License?
Business Model – Sample Questions

Your
Capabilities
Of
Really
Exceptional
Value
Focus on it!CORE
First key question
What is your CORE value?

Where is your CORE value?
 Software/other technology
 Data
 Content
 Service, support
 User network
Disruptively monetize it!
• To your competitive advantage
• Where are others most vulnerable?
COR
E
Cut to the CORE!

 Google Apps vs. Microsoft office
• What is the C.O.R.E for each ?
 Software, Data, Advertising ?
 Don’t compete head-on
• MS Office = enterprise market
• Google Apps = consumer market
• Free vs $500 license
• Simple vs Complicated
• 80% solution vs Professional Tool
- Ex 1 Apps

How can you compete with a market leader who has 80% to 90%
market share?
1. Don’t compete head-on
2. Innovators Dilemma – go for low end
3. Disruptive technology, business model, or market approach
4. Examples: Gmail, Google Apps, Chrome
– Competing with Market Leaders

BUSINESS MODEL
& PRODUCT
(example)

Frictionless, SLIPPERY
= fastest growing software companies
See: “Addiction before Adoption & Absorption”
@mjskok startupsecrets.com@underscorevc

ADDICTION
(Free, Open Source)
Delight,
ADOPTION
Upsell
ABSORBTION
$0
$50
$100
$150
$200
$250
$300
$350
$400
LCV
Frictionless, SLIPPERY
= fastest growing software companies
“Addiction before Adoption & Absorption”
@mjskok startupsecrets.com@underscorevc

OK, BUT NOW WHAT ABOUT
ME ?!
(LEADING GLOBAL INNOVATORS)

You: Large Global 1000 Innovator…
50
• Resources
• Brand
• Credibility
• Distribution
• Etc…
• Speed, agility

David: Startup…
51
• Speed, agility
• Resources
• Brand
• Credibility
• Distribution
• Etc…

Innovate!
 Get out!
• Not just technology
• Business Model,
GTM etc
 There is no failure,
only learning
• #nofailure
• #onlylearning
 What can I learn from
you?
52
Evaluate Build
Gain Pain Value
Define
Ideas
Problem
Solution

Thank you for listening.
But what can we learn from you?
I’ve shared a small sample of some of the Startup Secrets …
 Value proposition - Fundamentals
 Products to companies – Friction free, “slippery” products
 Business model - Basics
startupsecrets.com
twitter: @mjskok / @underscorevc

START UP
SECRETS
An insider’s guide to unfair competitive advantage
Hi
Copenhagen Innovation Roundtable
Tweet questions to: @mjskok #startupsecrets
startupsecrets.com
November 2016
Michael J Skok

2016 Innovation Roundtable Keynote by Michael Skok

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