Speaker: Don Duval, Vice President, Business Services, MaRS Using a case study example, Don discusses the importance of understanding and refining your business model in order to grow your business and maintain a sustainable competitive advantage in the marketplace. Part of the MaRS CIBC Presents Entrepeneurship 101 lecture series: http://www.marsdd.com/ent101

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2. Building a Better Business Model
Wednesday, November 4th, 2009
MaRS Discovery District

3. Objectives
There are three key learning objectives for today’s
presentation:
1. Appreciate the importance of clearly defining and
understanding your business model
2. Understand the components of a typical business
model framework
3. Leverage the learning’s from a case study example
and apply and test the concepts with your
businesses

4. What is a Business Model?
“A business model describes the rationale of how an
organization creates, delivers, and captures value”
“Description of means and methods a firm employs to
earn the revenue projected in its plans. It views the
business as a system and answers the question, "How
are we going to make money to survive and grow?"
“The architecture for the product, service and information
flows.”

5. Why is this an important discussion?
• A lot of companies, early or later stage, assume that having
an interesting product or service will simply “sell itself”
• Without a roadmap and an understanding of how your
business will make money and how you will operate…what
do you have?
“A potentially great product or
service…not a business”

6. Why Business Models Matter…
Company
• Pets.com was a short-lived online business that sold
pet accessories and supplies direct to consumers over
the Internet
Model
• Discount direct-to-consumer sales of pet supplies
Results
• Successful marketing and advertising
• Uncertain market size; limited market research
• Lost money on nearly every sale
• Went from an IPO (Nasdaq) to liquidation in 268
days
• In June 2008, CNET named Pets.com as one of the
greatest dotcom disasters in history

7. Why Business Models Matter…
Company
• Twitter is a free social networking and micro-
blogging service
Model
• Twitter has a number of “experiments” in progress
that could turn into revenue streams: search,
Ecommerce, marketing, applications, etc.
Results
• Twitter has raised US$157 million from venture
capitalists (~$100M last month)
• Meager revenues through advertising
• Projected to have 18M users by the end of 2009
• Partnered with Microsoft to begin indexing and
offer search functionality to tweets

8. Why Business Models Matter…
Company
• Multinational technology corporation that develops,
manufactures, sells, and supports personal computers
and other computer-related products.
Model
• Combination of direct-to-consumer sales and just-in-
time manufacturing
• Unparalleled success in matching product offerings to
consumer demand
• No R&D investment; not technology innovator
Results
• Gains early access to its partners' most innovative
products and components
• Tests the market using a combination of its web site
and direct-to-consumer sales – to push what comes
next!

9. Business Model Components
Infrastructu Looked at collectively
Offering Customer
re to determine
appropriate business
model to ensure
Financial everything fits
together!
Infrastructure – our core strengths, competencies, and partners
that are necessary to execute the business model
Offering – our products and services that we offer
Customer – who are our customers and how do we get our offering
to them
Financial – how we make money and how we manage our costs

10. Case Study Example

11. Company Snapshot
• Founded in 2002 in Toronto, Ontario by two former
management consultants
• Mission statement was to offer an array of strategic and
tactical operations and supply chain solutions
• Target customers were growth oriented distribution and
product oriented business greater then $250M in revenue
• Started during challenging market conditions
• Tech bubble
• Enron
• September 11th, 2001
• Was “acquired” in 2007 by US firm to make inroads into the
Canadian market

12. Our Infrastructure
Infrastructu
Offering Customer
re
Financial
• Strong strategy and operations background working with Global
1000 companies throughout North America
• Strong understanding of competitors and key differentiation
opportunities
• Relatively good connections and network
• Warm customer pipeline
• Two person “show” therefore recognized challenges around
implementation or large scale projects

13. Our Offering
Infrastructu
Offering Customer
re
Financial
• Initial offering was focused on consulting opportunities with
“warm” clients
• Focused on operational assessments, supply chain strategy,
network modeling, strategic sourcing and procurement, and
organizational design
• Typically short engagements – two to three month strategy
projects
• Offering delivery model attempted to minimize time and cost of
sales
• Limited implementation capabilities

14. Our Customers
Infrastructu
Offering Customer
re
Financial
• Customer acquisition was driven nearly entirely by our existing
connections and rolodex
• Limited “cold calling”
• Focus was on repeat sales with existing customers; build strong
relationships with key decision makers within each customer
• Not a transactional relationship – focus on partnering and
supporting our customers achieve their goals
• High degree of focus on customer satisfaction, testimonials,
referrals, etc.

15. Our Financials
Infrastructu
Offering Customer
re
Financial
• Project-based work, both hourly and fixed fee
• Traditional consulting model
• Careful management of costs

16. Refining the Business Model
Continuously asked
Infrastructu
Offering Customer ourselves questions…
re
Financial
1. How can we expedite and expand our presence in the
marketplace?
2. Are there solutions that we develop for one customer that we can
leverage for others (reduce cost of delivery)
3. How can we acquire more customers and maintain longer
relationships with existing customers?
4. Are there any creative revenue models we should consider that
would better meet the needs of our customers?

17. Expedite Growth
1. How can we expedite and expand our presence in
the marketplace?
Where we were… Where we are going…
• No distribution partner • Two main distribution
partners
• No business • Leverage “connectors”
development support
• Team of two • Build team
So what?

18. Leverage Offerings
2. Are there solutions that we develop for one customer that we
can leverage for others (reduce cost of delivery)
Where we were… Where we are going…
• Purely service-based • Technology and service
organization solution
• Unrealized in-house • Confidence to develop other
technology skills technology solutions
So what?

19. Acquire More Customers
3. How can we acquire more customers and maintain longer
relationships with existing customers?
Where we were… Where we are going…
• Traditional fee for service • “Free” assessment to
model define opportunity
• Focused only on client • Leverage “hall pass” and
sponsor relationship build multiple relationships
So what?

20. Creative Revenue Models
4. Are there any creative revenue models we should consider
that would better meet the needs of our customers?
Where we were… Where we are going…
• Traditional project-based • Mixed model? License
fee for service model technology? Keep it
combined with service
offering?
So what?

21. Why Business Models Matter
Over a 12 month period…
1. Doubled the size of our team
2. Enhanced our offering to include both a technology
and service
3. Developed strategic sales and distribution
partnerships with two leading organizations
4. Offered a defined “freemium” solution with a 2 to 3
week “investment” to define the work
So What?
Increased sales funnel value by 300%, increased revenues
by 300%, and increased profit / free cash flow by 400%
The trend continued!

22. Summary
1. Appreciate the importance of clearly defining and
understanding your business model
- Look smart and confident about your business!
- How can you improve if you don’t know how your operate
today?
- How can you clearly articulate your competitive
differentiation?
- Why will your model work if its failed for others in the
past? (e.g. pets.com)
Once you have drafted all the elements of your business model,
map it out to help you see whether it all fits together

23. Summary
2. Understand the components of a typical business
model framework
Infrastructure – our core strengths, competencies, and partners
that are necessary to execute the business model
Offering – our products and services that we offer
Customer – who are our customers and how do we get our offering
to them
Financial – how we make money and how we manage our costs
3. Using a case study example, apply and test the
concepts with your businesses