cairo business modeling workshop

Faculty of Commerce

Global Entrepreneurship Week event of FCCU and Aalto University

The HEI ICI — Project Entrepreneurship Capacity Building between Faculty of Commerce Cairo

University and Aalto University School of Business

Workshop: “How ideas become opportunities - First steps of creating your own business model”

Workshop Team:

Vera Haataja

Povilas Valiauga

Steffen Farny

Norris Krueger

Workshop Objective

Introduce the ‘business model’ concept

Demonstrate the value of ‘ideation’

Build your first own business model – Tool: Canvas

THIS WORKSHOP IS FOR YOU AND YOUR

PERSONAL DEVELOPMENT

Workshop Agenda

1. What is entrepreneurship?

2. What is your idea for venture creation?

3. How can you build an executable business model?

Passion for entrepreneurship?

• Why are you here?

• Why are you interested in entrepreneurship?

• What motivates you?

• Are you already entrepreneurs or know someone who

is?

STEP 1 - ENTREPRENEURSHIP

What is Entrepreneurship?

6

Individual or

Organizational?

Business, for-

profit?

Sources: Gartner 1988; Zahra 1991; Austin et al. 2006

Traits /

Characteristics?

Actions &

Behavior?

7

• “Entrepreneurship is the creation of organizations. What differentiates entrepreneurs from non-entrepreneurs is that entrepreneurs create organizations, while non-entrepreneurs do not”

-- (Gartner 1988, p.47)

• It involves “the processes of discovery, evaluation, and exploitation of opportunities; and the set of individuals who discover, evaluate, and exploit them” -- (Shane & Venkatamaran 2000, p.218)

• entrepreneurial opportunity an opportunity to engage in entrepreneurial action seeking to profit by introducing new goods or services -- (Companys & McMullen 2006)

It depends…various related definitions

Source: Howard Stevenson, HBS

Pursuit of opportunity without regard to resources controlled

Various types of entrepreneurship

• Corporate entrepreneurship: “those activities that enhance a company's ability to innovate, take risk, and seize opportunities in its markets. It centers on creating new business by penetrating new markets, pursuing new business, or both”. -- (Zahra 1991, 259)

• Intrapreneurship: “entrepreneurship within existing organizations”. Involves new business venturing, innovativeness, self-renewal, and proactiveness. -- (Antoncic & Hisrich 2001, p. 495)

• Social entrepreneurship: “entrepreneurial activity with an embedded social purpose” -- (Austin et al. 2006, p. 1)

• International entrepreneurship: “the identification and exploitation of opportunities for international exchange” -- Ellis (2011)

8

Six types of ventures…small

9

Lifestyle Startup

Small Business Startup Social Startup

Driven to Make a Difference • Improve society

• Social cause

• Profits not main driver

• E.g. development banks, microlending

Work to live their passion • Work only with what they like

• Enough money “just to pay bills”

• E.g. chocolatiers, bakers, restaurant, etc.

Work to feed the family • Known product

• Known customer

• Notable but low revenues

• Consulting, construction co’s.

…and not so small

10

Scalable Startup

Large Startup

Buyable Startup

Born to flip • Grow to attract buyer

• Cost efficient for buyers

• Reduced time to market for buyer

• Funding $100k - $400k

• To be sold for tens of millions +

Born to be big • Want to revolutionize “the world”

• Visionary ideas

• Funding rounds tens of millions

• Grow into large corporations

Innovate for survival • Part of life cycle

• Not good at disruptive innovations

• Fund or buy startups

Venture type contributes to differences

in the creation process • Entrepreneur’s goals

• Opportunity process

• Ideation & Innovation

• Business Model

• Social venturing

• Financing

• Growth & Development

11

Entrepreneur’s goals

• Pursue a passion?

• Job independence or second

source of income?

• ”Thrill of creation” ?

• Make an impact ”leave your

mark” ?

12

Opportunity process – an overview

Both supply and demand exist and

the opportunity exists in bringing

them together

e.g.: Buying a franchise

Creation

Entrepreneurial opportunity

Either supply or demand is known,

and the opportunity exists in coming

up with the “matching side”

e.g. New software applications

Neither supply nor demand exist, one or both have to be created

and economic inventions (marketing, finance, etc.) need to be created

for the opportunity to come to life. The creation of new markets.

e.g. U-haul; Netscape

Source: Sarasvaty et al. 2005

Making opportunities happen: Causation

& Effectuation

14

M1

M2

M3

M4

M5

M1

M2 M3

M4

M5

Given Goal

Given Means

Given Means

Imagined

Ends

Source: Sarasvaty et al. 2005; Read et. Al 2010;

Causation Logic Effectual Logic

- Selecting between a given set of means to

achieve a pre-determined goal

- Presumes a market’s existence and ample

resource and process availability

- Begin with the end in mind & generate

alternatives

- Imagining new possible ends using an existing set

of means

- No assumptions about a market’s existence

- Starts with entrepreneur’s own knowledge,

resources, networks, affordable loss, and goes from

there

Aalto Ecosystem

Aalto Design Factory (Aalto DF)

• What is Aalto DF?

STEP 2 - IDEATION

Ideation & Innovation varies from

venture to venture

Ideation: ”the first in a linear series of progressive

activities to form a new business”

”Consciously engaging in an ongoing complex, cyclical,

and recursive social process of problem solving and

learning, which is integral to and inseparable from the

larger cycle of innovation and new business formation”

18

Source: Gemmel et al. 2011

Any idea yet? – No worries!

1. Finding a team

2. Finding an idea

3. Building an idea

4. Learning to get feedback

STEP 1 - FINDING A TEAM

Match-Making PART 1

Prepare your introduction card (post-it)

1. NAME

2. TWO SKILLS or EXPERTISE

3. TWO of your PASSIONS/HOBBIES/STUFF YOU LOVE

4. A DREAM

5 min

Match-Making PART 2 – SPEED-MEETING

In a nutshell:

1. Sit down

2. Talk and listen for 1 minutes

3. Stand up and repeat with the next person when the whistle blows

Suggested conversation topics:

1. Yourself:

Educational background, work history, skills/specialties, ambitions

Why am I here?

STEP 2 - FINDING AN IDEA

Ideation Topic

• Based on the features and skills of our team members,

what sort of entrepreneurial concept can we come up

with?

• What is the best thing that we could do together?

• What sort of idea can mix positively the

nature/skills/passions of this group of individuals?

(Service or product, digital or concrete, for-profit or

non-profit, big or small…)

Ideation Round 1: “Quantity is Quality”

1. Individual exercise

2. 5 minutes to write down as many ideas as possible

about the ideation topic.

3. Idea quota to aim at: 15

4. After the time is up, choose your favorite 3 ideas to

share with the team (10min)

DECIDE ON 1 IDEA – pick the best elements

from each idea and merge them

5 min

STEP 3 - BUILDING ON AN IDEA

CONTEXT MAPS Context Mapping is

a mapping

technique for

capturing emergent

conversation

themes in complex

problems to show

integrated context.

IDEAL

Ideation Round 2: “Narrowing”

• Build a context map for an idea that you would like to

build a business model on (10min)

STEP 4 - LEARNING TO GET FEEDBACK

- postponed until later -

STEP 3 – BUSINESS MODEL CREATION

What do you think is a business model?

• Video: Osterwalder

Venture formation starts with the search

for a business model

• What is a business model?

– describes how an organization rationalizes the way it captures, creates, and delivers value

• Why it is important?

– Clarifies the makeup and interlacing of fundamental elements needed by any organization: customers, offer, infrastructure, and financial viability

• How is it developed?

34

Source: Osterwalder & Pigneur, 2010

Developing your Startup’s business model

35

Source: www.businessmodelgeneration.com

Business model differences

37

} 46

VP CR

CH

CSKP KA

KR

R$C$

Value Propositions

38

• What problem are you solving?

• What need do you satisfy?

• Is your product/service aligned with customer

needs?

• Is value based on:

– Newness

– Performance

– Price

– Design, etc.

BE SPECIFIC! What do you sell? What do people buy from you?

Source: Osterwald & Pigneur, 2010

Customer Segments

• What groups or organizations of customers are you trying to reach?

• Try to be as specific as possible

– “all consumers” (mass market) may be your end goal, but perhaps not at the beginning…

• Is your market..?

– Mass – Niche – Segmented – Diversified – Multi-sided

39

What is the imitability, available of substitutes, competition,

and potential market(s) size(s)? Source: Osterwald & Pigneur, 2010

Customer Relationships

• What venues will you use to service and preserve customer relationships?

– Shop?

– Online?

– Call center?

• How will you monitor/respond to your customers?

• Customized/personal experience?

• Customer satisfaction?

40

Customer relationships are driven by the intended effect


Key

Partners Key

Activities

Value

Propositions

Customer

Relationsihps

Key

Resources Channels

Cost

Structure

Revenue Streams

Customer

Segments

Online retail

shopping

Fulfillment by

Amazon

Amazon web

services

Customized online

profiles &

recommendations

Global

consumers (NA,

EU, Asia)

Developers &

companies

Individuals and

companies that

need fulfillment


Workshop exercise (10 min)

Talk with your teammates and:

1. Identify all possible benefits/solutions that your idea could/does

generate

2. Who / which groups of people could/do use or benefit from your

idea?

3. In which various ways will you communicate with & relate to your

customers how do you get their commitment?

(Integrate your stakeholder feedback from last week’s assignment)

If you have multiple ideas, do a separate set for each

Customer driven business models

43

Customer

Discovery

Customer

Validation

Customer

Creation

Company

Building

Source: Adapted from Startup Owners Manual by Steve Blank & Bob Dorf

pivot

Search Execute

Opportunity

& B-model

Assessment

iterate

startup “regular” firm

Paying customers help validate the business model

Getting to and servicing customers

channels

44

• Clearly define how your startup will acquire and retain customers:

– Sales channels

– Distribution channels

– Post-sales channels

– Partnerships

- Cannot rely on ”going viral”

- Evaluate credibility to achieve growth

- Gives a glimpse of cost structure rationale

Source: Venture Formation Course, Aalto Ventures Program 2011

Revenue Streams

45

• Generated from successful customer

commitments

• The type and ”quality” of revenue

stream is important:

– Asset sale

– Usage fee

– Subscription-based

– Lease

– Licensing, etc.

Customer-generated revenues is the most convincing evidence

of a working business model Source: Business Model Generation by A. Osterwalder and I. Pigneur

Key

Partners Key

Activities

Value

Propositions

Customer

Relationsihps

Key

Resources Channels

Cost

Structure

Revenue Streams

Customer

Segments

Online retail

shopping

Fulfillment by

Amazon

Amazon web

services

Customized online

profiles &

recommendations

Global

consumers (NA,

EU, Asia)

Developers &

companies

Individuals and

companies that

need fulfillment

Amazon.com

Affiliates

Sales margins

Fulfillment

handling fees


Web services



4. How does your product/service get to customers?

a. Web sales? Shops? Distributors?

5. How do you earn revenues? Is there more than one

way?

a. add-on services? Customer support? After sales

servicing?

If you have multiple ideas, do a separate set for each 47

Key Resources

• What are your venture’s most important assets? – People? – Technology?

– Intellectual property?

– Physical resources (e.g. superior IT infrastructure, etc.)

– Etc.

• Are these owned, leased, outsourced?

• How will you get needed but missing resources?

48

Key resources support the rest of the business model

Key Activities

• Key activities are the most important actions your

organization takes to:

– deliver value propositions

– Attract & retain customers

– earn revenues

– etc.

• They help identify core strengths and your venture’s

value-add

– Design?

– Technology development

49

Key activities link resources with the rest of the business model

Key Partners

• Who will help you capture and deliver your value propositions?

• Which suppliers do you need? Who are the most important?

• Buy? Make? Lease?

• Time to market?

• Would any strategic partnerships help you?

– Joint Ventures

– Strategic alliances

– Coopetition

– “preferred” status / relationships

50

Cost Structure

• Defines the most important costs related to the other blocks of your business model

• Low cost structures are more important to some business models than to others

• Despite common knowledge, it is not always about the lowest cost

– It’s about the most efficient way to achieve your value props

• How do you operate?

– Cost or value driven?

– Fixed versus variable costs?

– Economies of scale and/or scope?

51

Key

Partners Key

Activities

Value

Propositions

Customer

Relationsihps

Key

Resources Channels

Cost

Structure

Revenue Streams

Customer

Segments

Online retail

shopping

Fulfillment by

Amazon

Amazon web

services

Customized online

profiles &

recommendations

Global

consumers (NA,

EU, Asia)

Developers &

companies

Individuals and

companies that

need fulfillment

Logistics

Partners

IT & S/W Dev.

& Maintenance

IT

infrastructure

Global

fulfillment

infrastructure

Amazon.com

Affiliates

Affiliates

Marketing

Technology

and content

Fulfillment


Fulfillment

Sales margins

Fulfillment

handling fees

Web services



6. What are the most crucial resources within your team and your

venture?

a. Specific know-how? Geographical knowledge?

7. What are the most important activities your venture does or will

need to do to create your value propositions?

8. Who are your most important partners?

a. Distributors? Merchandisers?

9. What are your most substantial elements of cost?

If you have multiple ideas, do a separate set for each

FEEDBACK/ Ideation exercise (15 minutes)

Using sticky notes:

• Go around all other teams’ canvases and analyze them

– See if you get a clear picture of what the venture does,

who its customers/end users are, what tools they are

using to achieve their goals

• Provide specific feedback and/or ask questions about

each of the 9 elements

• Two types of evaluators: “Good cop / Bad cop”

single point per sticky note

Customer

Relationsihps

The Business Model Canvas

Key

Partners

Key

Activities

Value

Propositions

Customer

Segments

Key

Resources Channels

Cost Structure Revenue Streams

Designed by: Date: Iteration #

Who are our Key Partners?

Who are our key suppliers?

Which Key Resources are we

acquiring from partners?

Which Key Activities do partners

perform?

MOTIVATIONS FOR

PARTNERSHIPS:

Optimization and economy

Reduction of risk and uncertainty

Acquisition of particular resources and

activities

What Key Activities do our Value

Propositions require?

Our Distribution Channels?

Customer Relationships?

Revenue streams?

CATEGORIES

Production

Problem Solving

Platform/Network

What Key Resources do our Value

Propositions require?

Our Distribution Channels? Customer

Relationships?

Revenue Streams?

TYPES OF RESOURCES

Physical

Intellectual (brand patents, copyrights,

data)

Human

Financial

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?

CHARACTERISTICS

Newness; Performance; Customization;

“Getting the Job Done”; Design;

Brand/Status; Price; Cost Reduction;

Risk reduction; Accessibility;

Convenience/Usability

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?

EXAMPLES

Personal assistance; Dedicated Personal

Assistance; Self-Service; Automated Services

Communities; Co-creation

For whom are we creating value?

Who are our most important

customers?

Mass Market; Niche Market;

Segmented; Diversified; Multi-sided

Platform

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?

channel phases:

1. Awareness: How do we raise awareness about our

company’s products and services?

2. Evaluation: How do we help customers evaluate our

organization’s Value Proposition?

3. Purchase: How do we allow customers to purchase

specific products and services?

4. Delivery: How do we deliver a Value Proposition to

customers?

5. After sales: How do we provide post-purchase

customer support?

What are the most important costs inherent in our business model?

Which Key Resources are most expensive?

Which Key Activities are most expensive is your business more:

Cost Driven (leanest cost structure, low price value proposition, maximum

automation, extensive outsourcing) Value Driven ( focused on value creation,

premium value proposition)

SAMPLE CHARACTERISTICS:

Fixed Costs (salaries, rents, utilities)

Variable costs

Economies of scale

Economies of scope

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?

TYPES:

Asset sale; Usage fee; Subscription Fees; Lending/Renting/Leasing;

Licensing; Brokerage fees; Advertising; fixed pricing; List Price; Product

feature dependent; Customer segment dependent; Volume dependent;

dynamic pricing; Negotiation( bargaining); Yield Management; Real-

time-Market

www.businessmodelgeneration.com

THANKS

Global Entrepreneurship Week event of FCCU and Aalto

University

The HEI ICI — Project Entrepreneurship Capacity

Building between Faculty of Commerce Cairo University

and Aalto University School of Business

• Search for a credible assessment of:

– Customer segments

– Market size

– Achievable market share

– Competition

– Scalability

Understanding your playing field

57

Source: Venture Formation Course, Aalto Ventures Program 2011

- Is the market sufficiently (forgivingly) large?

- Are the assumptions about achievability realistic?

- Is there a potential for money here?

Key

Partners Key

Activities

Value

Propositions

Customer

Relationsihps

Key

Resources Channels

Cost

Structure

Revenue Streams

Customer

Segments

Online retail

shopping

Fulfillment by

Amazon

Amazon web

services

Customized online

profiles &

recommendations

Global

consumers (NA,

EU, Asia)

Developers &

companies

Individuals and

companies that

need fulfillment

Logistics

Partners

IT & S/W Dev.

& Maintenance

IT

infrastructure

Global

fulfillment

infrastructure

Amazon.com

Affiliates

Affiliates

Marketing

Technology

and content

Fulfillment


Sales margins

Fulfillment

handling fees

Web services