GTBMR credit equity home line by jolinmilioncherie

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									                  GTBMR

          Get The Business ModelRight
So the harder you work, the more money you make!

Business Modeling in the 21st Century—Integrating
   the Internet into the DNA of your Enterprise

         The Complete Business Model
GTBMR


  “You Can Think Your Way to Wealth a lot Faster than
            You can Work your Way There”

Dr. Bruce M. Firestone, B. Eng. (Civil), M. Eng.-Sci., PhD.
                    Founder, Ottawa Senators
   Entrepreneurship Ambassador, Telfer School of Management
                       University of Ottawa
                 Executive Director, Exploriem.org
        Real Estate Broker Century 21 Explorer Realty Inc.
     Columnist, Ottawa Business Journal and EQJournal.org
        Author, Quantum Entity, Entrepreneurs Handbook II
                           @ProfBruce
GTBMR
Academic Background:

-Ph.D. in Urban Economics from the Urban Research
Unit of the Australian National University, Canberra
-Master of Engineering-Science (Traffic and
Transportation/Operations Research), University of
New South Wales, Sydney
-Bachelor of Civil Engineering, McGill University,
Montreal
-Professional Real Estate Brokerage Courses
-Also attended: Harvard University (Finance),
University of Western Ontario (Economics) and Laval
University, Quebec City (French)
-High School, Ashbury College, Ottawa: graduated
1967, age 15
  GTBMR
Former Positions:

-Former Director and Vice-Chair, Canadian Internet
Registration Authority (CIRA)
-Former Executive Vice-President, Business
Development, Momentous Corporation
-Served on National Hockey League's Board of Governors
-Founding Director, Ottawa Art Gallery (Arts
Court/Firestone Family Group of Seven Collection)
-Past Director, Terrace Corporation
-Former Publisher, Ottawa Business News
-Consultant, Bureau of Management Consulting, Supply
and Services Canada
-Operations Research Engineer, Metropolitan Waste
Disposal Authority, Sydney, Australia
-Research Scholar, Australian National University,
Canberra
GTBMR
Business Courses Taught:

-Entrepreneurialist Culture
-Small Business Management
-Advanced Business Models (MBA)

Architecture Courses Taught:

-City Planning and Organization—Enterprise of the City
-Design Economics
-Real Estate and Development
GTBMR
Awards and Memberships:

-Awarded Canada 125 Anniversary Honorary Medal
-Member, Stanley Cup Monument Committee
-Member, Commercial Services Division, Ottawa Real Estate Board
-Honourary Member, Beta Gamma Sigma, International Honour Society
for Collegiate Schools of Business, March 2008
-Exemplary Course Designation, Design Economics, Canada Architectural
Accreditation Committee, 2004
-Winner, Educator of the Year Award, OCRI EduGala, Ottawa, 2002
-Member, Ottawa Commonwealth Games 2014 Bid Committee
-Member, Community Budget Advisory Team, City of Ottawa
-Member, Kanata Economic Development Task Force
-Member, Ottawa International Airport Authority Planning Committee
-Founding Member of CIRA's (Canadian Internet Registry Authority)
Marketing and Branding Committee
-Member, NHL Executive Advisory Committee, NHL Expansion
Committee, NHL Marketing and Public Relations Committee
-Member, Ottawa 67s Advisory Board, 1998/99
GTBMR
The Entrepreneurs Handbook II:
GTBMR
Projects:

-Scotiabank Place
-Ottawa Senators
-West Terrace (KWCP)
-Briarbrook
-Robertson Mews
-Dunrobin Lake, Dunrobin Village
-Blue Heron Storage
-Mallorn Centre
-Royal Bank Pavilion
GTBMR
Charities and Not-For-Profits Supported:

-Christie Lake Kids
-Exploriem.org
-Trees for Hope
-Minor Hockey
-Muscular Dystrophy
-Ottawa Senators Foundation
-National Capital Alpine Ski Team
-Ottawa Rotary Club
-CHEO Foundation


Personal: Married with five children, one grandson
Personal Interests: Past Chair, Bruce M. Firestone Atom Invitational Hockey
Tournament, Red Pine camper
Sports: running, tennis, sailing, paddle tennis, skiing, hockey, ultimate, yoga,
canoeing, dragon boat racing, hang gliding
Hobbies: reading, writing, inventing, creating, starting new enterprises, city-
building, educating, collecting Canadian and American art
GTBMR
Entrepreneur Funnel:

ECQ Test  EQJournal.org  Entrepreneurs Handbook  ADM3396
Entrepreneurialist Culture  Magic from a Hat Lecture Series 
BMG, Business Model Generator 
www.Twitter.com/ProfBruce  YouTube Channel  Urban Dictionary
(Prof Bruce and ProfBruce)  Elevator Pitch Competition  Business
Model Competition  Wes Nicol Business Plan Competition  EIEF
Competitions  MBA6298A Advanced Business Models  Telfer
School of Management Entrepreneurship Concentration  Startup
Garage  Research Funding  LearnByDoing.ca (Early Stage
Funding and Mentoring)  MiniOffice.org (Office Space/Business
Incubator)  IRAP  Exploriem.org Bootstrap Awards and Adawe
Tradeshow  Institute of
Entrepreneurs  IOE3100 Entrepreneurialist
Culture  IOE5100 Startup DNA
GTBMR
     Why do People become
        Entrepreneurs?
a.   Can’t get other work?
b.   Hate their boss?
c.   Be their own boss?
d.   Work fewer hours?
e.   Make more dough?
f.   To create more interesting work for
     themselves than others can create for
     them?
GTBMR
     Why do People become
        Entrepreneurs?
a. Money is secondary
b. Because humans with big brains and
   opposable thumbs are driven to be
   creative and change environment around
   them
GTBMR
Would I have had the opportunity to work
   on:
a. the Ottawa Senators/Palladium (now
   Scotiabank Place)
b. 1,200+ homes
c. dozens of office buildings + shopping
   centres
d. Exploriem.org, OBJ, Quantum Entity,
   IOE if I had stayed with GOC?
GTBMR
Entrepreneur skill set:
  -bootstrap/self-capitalize
  -take initiative
  -do everything in parallel
  -innovate
  -ability to sell
  -not easily discouraged
  -business modeling, GM, SM, building cashflow, etc…

Relevant to Intrapreneurs too!

Intrapreneurs have skill set of entrepreneurs but don’t like
   risk profile of entrepreneurs.
GTBMR

Who gets the promotion/green lite?

• Robert w/ new project costing $10m to develop
  + 2 yrs of R&D

• Amanda w/ new project costing $10m to develop
  + 2 yrs of R&D but she has:
      -3 launch clients
      -$2.5 m each of dev. capital
      -1st 6 months of products.

Amanda’s project – green lited and she gets the
 next promotion!
GTBMR
This skill set needed in
not-for-profits/GOC/NGOs/even charities.

-Sens foundation: 80% out/20% admin
  >$50m (cash and in-kind) as of 2010.
  80% efficient

People like to give to charities that are efficient (CLK,
  Salvos) so they need a quality business model too.

Intrapreneurs need to make 97% of decisions by
   themselves and 3% with others and know which is the
   right 3%
-no one has time to baby-sit you anymore
GTBMR
The ‘complete’ entrepreneurs skill set A to Z:

  a pre-disposition to it;
  b. supportive family and friends;
  c. education and training;
  d. finds the right mentor(s);
  e. good timing/able to see opportunity and seize it;
  f. focus, effort and check, check, check everything and
  everyone;
  g. creativity and innovation/adds differentiated value to
  their highly workable business models;
  h. openness to new ideas;
  i. willingness to change;
  j. ability to discover new ideas in the process of doing;
GTBMR
The ‘complete’ entrepreneurs skill set A to Z:

 k. high energy;
 l. tolerance for risk and stress;
 m. acceptance of outside best practices;
 n. ability to compartmentalize;
 o. ability to sell ideas, products and services/a
 good negotiator and a sympathetic understanding
 of human nature;
 p. leadership skills and vision;
 q. figure things out as they go;
 r. dump the losers and keep the winners (know
 when to quit and when to stay in the race);
 s. self motivated and able to prioritize;
GTBMR
The ‘complete’ entrepreneurs skill set A to Z:

 t. team player and not afraid to hire up/utilizes the
 skills of each member of the team to the
 maximum;
 u. impeccable warrior (such as never drink and
 think);
 v. not easily discouraged/confident;
 w. able to juggle many tasks and hats at one
 time;
 x. goal setter and a finisher—able to complete
 things and execute expertly;
 y. commitment and passion;
 z. a good sized storehouse of luck.
GTBMR

Entrepreneur characteristics?
•   visionary
•   vain
•   creative
•   proud
•   angry
•   impatient
•   driven
•   rebellious
•   lonely
GTBMR
                         • Look at list
Entrepreneur             • Someone you’d like to
characteristics?           spend a lot of time with?
                         • Probably not!
                         • Leaders are exhausting
•   good psychologists     people
•   manipulative         • Look again
•   emotional            • We try to socialize these
•   risk taker             characteristics out of our
•   inspirational          kids
•   charming
•   forceful
•   changeable/ADD
•   moody
•   sensitive
•   funny
GTBMR

   How to build a new business (for
   entrepreneurs ) or a new
   Division/Product/Service for existing
   businesses (intrapreneurs) in 10 Steps:

1. Select the right idea/get a good mentor
2. GTBMR – get the biz model right so the
   harder you work the more money you
   make (i.e., not Pets.com)
3. Add some DV, differentiated value: Pixie
   Dust/Innovation
GTBMR
4. Create a compelling value
    proposition/build cashflow/keep your
    cash conversion cycle low or negative
5. Self-capitalize/bootstrap (so you own it
    and not a VC)
6. Use smart marketing/ GM+SM + Earned
    Media
7. Mass customize/make it scalable
8. Find launch clients/sell, sell, sell
9. Execute expertly/ideas are not enough
10. Set goals and make your own rules
GTBMR
1- Select the right idea E.g.: GradeATechs.com

-2x U of O students / 2x CU Students
-5 ideas: each one worse than the one before
- “Silent alarm clock”
- No competition/never before tried/first mover –
  all over-rated
- Maybe you have no competition because it’s a
  bad idea
- If it is a good idea, you WILL have competition
- Grade A Techs value prop:
  - A. explain in less than two minutes
  - B. be compelling
GTBMR
-Virus/can’t print/can’t log on/can’t install software/…
-unplug your tower/get in car/go to “Mom & Pop” repair
   shop/2 weeks & $150/not ready yet/another week
   $200/return home/plug in/works fine but they wiped your
   hard drive
OR
-GAT.com comes at appointed hour to your house or biz/fix
   it same day on-site, guaranteed for $125
-600m PCs in N.A.
 x30% don’t work
 180m customers
-NerdsOnSite.com
-Google was not 1st search engine but was most trusted

-GAT.com > $10m/yr
GTBMR
2- Get the Business Model Right

-Biz model is the engine of the biz
-it is not a biz plan
-it is a 1-pg graphical depiction
-it goes into (at least 2 dimensions either side:
   clients’ clients and suppliers’ suppliers)
-IT DESCRIBES A FULL BUSINESS
   ECOSYSTEM
-what do the clients of your clients want?
-GASnet is the “brain” of the biz (matches techies
   to clients, contract billing, orders, supplies,
   software, hardware)
-Sympatico/Rogers/others hate doing the ‘last mile’
GradeATechs.com
GTBMR
3- Reverse out the work

-the Internet is the most important new invention of the last
    50 years
-it is where electrification was at same stage, 20 yrs in
-create custom outputs from standard inputs (e.g. new age
    virtual home builder and Dell)
-reverse out the work to customers and suppliers (e.g.
    Reddit.com and Threadless.com)
-match making (e.g. suppliers of customers at the Spa:
    manicurists, pedicurists, massage therapists,
    hairstylists…)
-mass communicate at ~ no cost (Twitter, FB, blog, Skype,
    email, IM, messaging,…)
-Crowd sourcing (e.g. Reddit voting on stories/links,
    Threadless voting on designs)
GTBMR
-relational d-base (e.g. Amazon’s: “See what
  other people who bought this
  book/CD/video/etc also bought?”)
   Increased order size and overall volume
-user generated content by customers (and
  suppliers) e.g.: YouTube, Twitter, FB,
  Reddit, Digg & Threadless (suppliers:
  artist community submit t-shirt designs
  voted on by customers)
GTBMR

Virtual home builder:
-tried in 2000 to get home builders to do this
-very conservative industry
-put lots available and designs online in a
   physics engine together w/ all
   options/finishes
-allow everyone to use physics engine
GTBMR
-go online: choose lot, design, fit-up, finishes
  (carpet, tile, kitchen cabinets, lighting
  package, plumbing fixtures, etc.)
-put cash register online too
-consumer can see what granite or concrete
  counter tops add to cost
-can fool around for 30+ hours
-then hit “submit” button
GTBMR
Homebuilders fear putting prices online –
 their competitors might find out!
    Ever heard of “Secret Shoppers?”

-Put CPM (schedules) online: let customers
  see where their home is at and let
  suppliers see too when they’re needed for
  Footing and Foundation, framing, roofing,
  windows, electrical, plumbing, insulation,
  dry wall, paint, carpet, cabinets,…
GTBMR
-As more options are available, more users will visit the
  site, as more users visit the site, more suppliers come
  onboard and you have a virtuous cycle




-Now “Best Homes 4 U” is enjoying network effects
-Suddenly, the flow of cash could reverse direction w/
  suppliers becoming advertisers and sponsors
GTBMR
• In the modern economy, the answer to the
  question of ‘Who pays whom?’ isn’t always
  obvious.
• Should a cable company pay ABC
  because ABC has the content, shows like
  Diane Sawyer and Primetime News?
• Or should ABC pay the cable company
  because it has the feed and access into
  millions of homes?
  GTBMR
• Steve Jobs understood importance of this before he launched
  iPhone
• He insisted that AT&T give him share of subscriber monthly
  revenues
• He used Apple’s brand to leverage unprecedented concessions
  from AT&T
• He ‘might’ give them exclusive two year window to keep iPhone
  from competition (Verizon)
• Might get a share of app sales and revenues/iTunes downloads/iOS
  ads
• So he revolutionized yet another industry’s biz model
• Cell phone manufacturers went from selling a ’shrink wrapped’
  gadget for a one-time payment in a brutally competitive market that
  was racing to the bottom to an industry with multiple sources of
  revenues, some of which are recurring: the holy grail of techdom.
GTBMR
• Imagine how much harder Steve Jobs and Apple
  would have to work and how much lower their
  productivity as measured in revenue per
  employee would be without recurring revenues
  from iPhone app sales and revenues,
  advertising revenues on their mobile platform,
  downloads of paid content from iTunes and a
  share of their carriers’ subscriber fees?
• From a simple question and a tweaking of their
  business model flow great benefits. The harder
  they work, the more money they make and, in
  Apple’s case, this relationship has become
  geometric.
• Estimated 288% p.a. IRR from the iPhone–
  greatest tech product profit generator ever?
GTBMR

• You can see why Sam Palmisano (now former
  CEO of IBM) has said he spends a great deal of
  his time (40%!) tweaking IBM business models
• I felt a long time ago that Nortel missed a great
  opportunity to add more services (and more
  stable revenue streams) to their hardware sales
  by changing its business model to include
  operating and maintaining the complex switches
  they sold to their clients
• After all, who knew these machines better than
  NT?
• Made room for Len Anderson and Kanata’s
  Renaissance Repair
GTBMR
• NT leadership focused more on high margin tech sales
  than the less glamorous business of fixing and
  maintaining stuff
• Meanwhile IBM and later HP recognized that by selling
  more services not only would they enjoy counter-cyclical
  revenues streams but they would have a huge leg up on
  the next round of hardware sales
• By providing outsourcing, they became trusted advisors
  to their clients, sat on the ’same side of the table’ as their
  clients and could spec their own equipment to fix or
  augment client networks that they now knew better than
  their own clients did
• They missed it and now they are dead
• It’s a shame for all their stakeholders including Canada
  and the blame lies squarely on the shoulders of their
  leadership
GTBMR
More about Best Homes 4 U:
-Allow lawyers access for e-closings
-Allow lenders access for e-funding
-Now if your WS attracts 10,000s of visitors,
  you can get your suppliers and your
  suppliers’ suppliers to pay for ads so more
  people will buy higher-end products
  (chandeliers, beveled mirrors, granite,
  counter tops, home theatre,…)
-more options => more people => more
  options => more people…
GTBMR
-In a virtuous, self-reinforcing cycle (Google
  is also an example of Network Effects)
-30+ hours in Design Centre with clients can
  become just 60 minutes
-Imagine the productivity increase for
  homebuilder sales staff, lawyers,
  mortgage lenders, the GC, the foreman
  (Worst problem? Homebuyer questions
  about when this or that happens..),
  suppliers, trades, subs, …
GTBMR


Also, customer satisfaction increases since:

a) they get EXACTLY what they want,

b) they feel they had a hand-in its creation
   (like Aunt Jemima Pancake Mix: just add
   eggs and milk).
GTBMR

•   The folks who bring you this pancake mix
    famously had an erroneous insight years
    ago—they thought that by adding powdered
    eggs and milk to their mix and eliminating the
    instructions “Just add eggs and milk”, they
    could save the busy consumer time and sell
    more product
•   It turned out that homemakers liked adding
    ‘real’ eggs and milk: first, they thought it was
    healthier that powdered eggs and milk and,
    second, they wanted to be involved in ‘making’
    their kids’ breakfasts
GTBMR

•   For most kids, you are what you do for them
•   By taking this away, sales went down not up
•   Best Homes 4 U, by involving the consumer in
    the design of their own home are catering to a
    deep seated need in humans to ‘buy-in’
•   This is a powerful lesson for tech—giving
    consumers the power to customize products
    and services is big business. For example, Dell
    is currently using Threadless.com’s platform to
    allow artists to submit and prospective
    customers to select winning designs for laptop
    covers
GTBMR
GTBMR
4- Create a Compelling Value Prop/CCC low
  or negative
GradeATechs.com had a compelling value
  propostion. Now let’s look at the CCC:
GTBMR
-The CCC is calculated as follows:

CCC = ART + INVT – APT

Where:

•   ART is Accounts Receivable at Year End multiplied by days of the year
    divided by Annual Sales
•   INVT is Inventory at Year End multiplied by days of the year divided by
    COGS, Cost of Goods Sold
•   APT is Accounts Payable at Year End multiplied by days of year divided by
    COGS

The actual calculation of CCCs are surprisingly complex and so I put a
   spreadsheet online to help you with this:
   http://www.dramatispersonae.org/BusinessModels/CashConversionCycleM
   easurement.xls
You may prefer using our CCC calculators in your browser, so we also put
   them up for you at:
   http://sheet.zoho.com/public/profbruce/cashconversioncyclemeasurement
 GTBMR
E.g.. Acme Promotional Products: “One Product Model”

1x sale of $300.00 (Branded Pens)
COGS = $200.00
1/3 is paid to their supplier of Branded Pens when order
  is placed -66.67
ACME asks for and receives a 50% down payment or
  deposit when sale is made.
Therefore, you have:
AR = $150 (50% of $300)
INV = 0
AP = $133.33 ($200 – 66.67)
GTBMR




Therefore, Acme’s cash position increases as
sales increase
VERY IMPORTANT for entrepreneurs
GTBMR
-Fuel industries
-Fortune 100 Client list
-$1.0m orders
-CCC is >180 days
=>cash decreases as sales increase
-untenable biz model
-went from 10% down and balance >
  completion/delivery + 30days to:
  30% down, 2x 30% progress payments only +
  10% (their profit) > complete/delivery + 30days
-now CCC is negative and FI is doing very well.
GTBMR
You can read more about this at:
  http://www.eqjournalblog.com/?p=2257
  and http://www.eqjournalblog.com/?p=610

-Cash Conversion Cycle, CCC
-How the CCC Affects Your Internal Rate of Return
-The Power of Leverage to Work for You and Against You
-Effectively Manage your Enterprise by Measuring your
  Cash Position
GTBMR
5- Self Capitalize

-why?
-VC-funding is hard to get and takes a lot of time
-also, you may end up losing control of your business
-VC funded biz are just large biz w/ 0 revenues
-power comes from having real clients/real cashflow
-if you do go for financing and you do it at the mezzanine
    stage, you’ll have more leverage
-Maple Leaf Design and Construction
Brain Saumure, B. Arch (CU and SOA)
Fred Carmosino, B. Com (Sprott)
-No serfdom for Brian: wanted to be his own boss
because he could create more interesting work for
himself than others could create for him
-Started with $0
GTBMR

 What is cheaper? Debt or Equity?

 Debt.

 What is cheaper than debt?

 Bootstrap Capital (e.g.: Trade Credit,
 Deposits,…)

 They’re FREE!
GTBMR
GTBMR
Sources of BC:

• Home Equity
• Trade (or Supplier) Credit
• Consulting
• Deposits/retainers
• Launch clients/pre-sales
• Receivables factoring
• Soft capital (Mom, Dad, Rich Uncle Buck)
• Credit cards (be wary)
• Trading (up)
• Government grants (IRAP, SR&ED)
• SBL (Small Biz Loans)
• Sponsorships
• Ads
• Patents and royalties
• Financial leasing
+ much more
GTBMR
More Examples:

Internic.ca

-Pixie Dust = its name
-Lawyers, patent agents and TM/copyright specialists
  and speculators know “Internet Nickname”
-CIRA releases dot-ca
-“Gold” rush
-DOC sues in Canada for “Intermic.ca” (owned
  “Intermic.com” in USA)
-Rob Hall had GOC protection (Federal incorp. of
  “Internic.ca Corp.”) and TM of name in Canada
GTBMR
-DOC loses (DOC controls the Internet –
  13x root servers around the world.)
-Rob sets up multiple channels to ping
  CIRA’s server (DAC, Internic, others –
  all accredited).
-80,000 dot-ca backordered
75% success rate
-60,000 domains at $50/yr (then) x 2 yrs
-$6m in cash in < 72hrs
GTBMR
Pool.com

 -Snap names $60/backorder up front
 -Pool.com: “free to backorder/only pay if
 successful”
 -Several million backorders port over to
 Pool.com
 -e.g. if you have Manchester.ca and want
 Manchester.com, if Manchester.com deletes
 from VeriSign registry, Pool.com will get the
 domain for you.
 -$60 if successful or highest bid (when >1
 backorder)
 -Again multiple channels against VeriSign server
 GTBMR




Make money while you lie on a beach!
GTBMR
6- Use smart marketing/GM, SM, Blogosphere…
E.g., Ottawa Business News (now OB Journal):
-wanted to bring paper boxes into Ottawa (1st to do
  so in 1980s)
-Need political cover
GTBMR
-Positive T.V. coverage and radio coverage
  (earned media)
-1st in N.A. to “save” people from Parking
  Tickets

    “Entrepreneurs would rather ask for
    forgiveness than beg for permission.”

-if we ask city of Ottawa <, they would either:
   (a) say “no” or (b) convene a committee
GTBMR
…which would meet for two years, then say ‘NO’.
  (Ottawa Citizen#, G+M#, “Ordinary” citizens##)
[# Entrenched competitors don’t want to give you a
  hand up.]
[## Would argue “visual pollution”]
-Paper boxes are cheap advertising (GM –
  “Substitute brains for money”) – 24/7billboards!

So, we dropped 120 paper boxes on Ottawa
  sidewalks overnight.
      …all h__l breaks loose
GTBMR
Lawyer letter threatens us

-We are ready w/ Phase 3 of the plan:
  We write back citing Canadian Charter of Rights
  and Freedom (introduced by PM Pierre
  Trudeau) FREEDOM OF THE PRESS
-More political cover
-This backs the city off immediately

Phase 4: suggest to Mayor, license the boxes at
  $50/yr/box
GTBMR

-Politicians love money and power.
Mayor agrees! …(@ $75/box/yr)
-$=power
-5,000 paper boxes @ $75/yr
                 =$375,000/yr new revenues
                              for the City
GTBMR
Costs to city = $0.00
Nicer car for the Mayor + Chauffeur!
-OBN (now OBJ) 120 boxes @ $75 ea.
  G+M, OC, FP etc: 4,880 boxes @ $75ea.
Force larger competitors to spend big $ to
  defend their turf
 =Vietnam vs. USA (TOOTH TO TAIL
  RATIO)
GTBMR
7. Mass customize/Make It Scalable

- Virtual homebuilder can produce an
  almost unlimited # of combinations of
  lot/design/finishes from a list of standard
  inputs because the work is reversed out to
  homebuyers who can spend unlimited
  amounts of time on the physics engine
  and virtually build their own homes.
-Totally scalable and, in fact, Network
  Effects take place
GTBMR
Nine things the Internet Allows for the 1st Time in
    Recorded History:

1.   Create custom outputs from standard inputs.
     Mass Customize Products and Services
(http://www.dramatispersonae.org/CustomeOutputsFromSt
     andardInputs.htm)
GTBMR
Mass Customize

•For the 1st time in 10,000 years of trading history, humans can now mass
customize products and services

•Service business can become scalable enterprises– never before possible
GTBMR
Primitive Village

•Ugh and Nnn in the 10th Millenium BC
•The families of Ugh and Nnn decide to co-locate to form a village, at first,
for the protection of both
•After awhile, they decide that Nnn concentrate his time on producing flint knives
while Ugh focuses on hunting
•After co-location and specialization, the GDP has increased to
seven antelopes and six sets of flint knives each month
 GTBMR
Primitive Village

• The formation of the new village results in a phenomenal increase in well
being
• So much so that this first village is producing goods surplus to their needs
• Sets up the possibility of trading with a third family, the family of Zll,
• Expert in producing textiles (animal skins) resulting in a further substantial
Increase in value for the emerging regional economy
• This simple example demonstrates why the ‘more pie for me’ doesn’t
necessarily mean less for you
(Went from custom inputs/custom outputs (lone tribe)  semi custom
inputs/semi custom outputs (primitive village/skill sharing/artisans) 
mass production (Henry Ford and the Model T)  mass customization:
with each change, huge improvements In human welfare)
GTBMR

Moral Underpinning of the Entrepreneur:

Priority # 1: TAKE CARE OF YOUR BUSINESS
Priority # 2: SO IT CAN TAKE OF YOUR FAMILY
Priority # 3: SO YOUR FAMILY CAN TAKE CARE OF YOU
Priority #4: SO YOU DON’T BECOME A BURDEN ON
   YOUR FELLOW HUMAN BEING OR SOCIETY
Priority #5: SO YOU CAN HELP YOUR FELLOW HUMAN
   BEING
Priority #6: SO THEY CAN HELP YOUR BUSINESS

This is the ethics rationale underpinning Adam Smith’s
  Invisible Hand and all entrepreneurship itself
GTBMR
2. Reverse out the work to clients and suppliers.
(http://www.dramatispersonae.org/GTBR/GettingTheBusinessModelRight.htm)

3. Embed your enterprise in a networked business
    ecosystem made up of your clients, your suppliers
    and yourself plus your clients’ clients and
    suppliers’ suppliers
(http://www.eqjournalblog.com/?p=581)

4. Match making—directly connecting your clients to
    your suppliers making service industries scalable
    for the first time ever
(http://www.dramatispersonae.org/TheInternetIsEatingAHoleInTheGlobalE
      conomy.htm)
  GTBMR
5. Mass communicate planet-wide through social media
and other Internet tools at almost no cost
(http://www.dramatispersonae.org/EntrepreneurialistCulture/FutureVision.htm)


6. Crowd sourcing (using the Internet as intermediary)
means relying on the wisdom of the crowd to, for example,
pick and vote on stories for Digg.com or t-shirt designs for
Threadless.com
(http://www.eqjournalblog.com/?p=1541)


7. Relational data base allows you to mine your customer
(or supplier) interactions so you can ask, if you are
Amazon (for example) questions such as: “Would you like
to see what other people who bought this book (CD, video,
etc.) also bought?” Increases average order size and volume
of sales.
(http://www.eqjournalblog.com/?p=1541)
GTBMR
8. User generated content, a form of reversing out the
   work to customers or suppliers, underpins the
   business models of YouTube.com, Reddit.com,
   Threadless.com, Facebook, Twitter and many other
   Web 3.0 enterprises.
(http://www.eqjournalblog.com/?p=1541)

9. Network effects are created when, for example, a
   virtual homebuilder’s website becomes the go-to
   place for design options a client can choose from.
• As more visitors use the physics engine of the site to
   calculate what the costs are for their new home and all
   selected options, more suppliers of household goods
   (kitchen cabinets, plumbing fixtures, lighting packages,
   counter tops, tile, carpet, home theatre, etc.) will want to
   be on the site (and pay to be on the site) which will
   encourage yet more visitors (i.e., prospective
   homebuyers) to use it in a virtuous cycle, each
   reinforcing the other. Google is an example of this effect
   as well.
(http://www.eqjournalblog.com/?p=692)
  GTBMR
                Crowd Sourcing

  In the case of Threadless, their marketing from Day
  One has been confined to a limited repertoire
  including:

1. Some paid ads on Facebook, Digg and Twitter
2. A voting system that their community uses to select
   winning designs for Tees submitted by independent
   artists
3. Using unpaid models for their Tees drawn from their
   employees and consumers, many of whom have
   friends that blog, Tweet, FB and vote on the matter
  GTBMR
              Crowd Sourcing

4. Extensive social comment on the whole
process

5. More recently, other companies such as Dell
and Alpargatas use (and pay to use)
Threadless’ voting system and community to
select winning entries for the design of PC
covers and sandals.

Here is Threadless’ Biz Model, circa 2010:
•The cost for each design they produce is quite low: they
pay the successful, independent artist $2,000

•But they test many designs at the same time by way of
their voting system so the cost per design is much lower
than this and, happily, they can be quite sure that
designs that are approved by their customers for
production will also likely be bought by them
•This year, other companies such as Dell and Alpargatas
are paying the company to use their crowd sourcing
system to select winning designs for PC covers and
sandals

•This obviously helps Dell sell more computers and
Alpargatas sell more shoes but it also helps Threadless:
a) spread the word about what they do and b) turn their
crowd sourcing business model into a platform which
can be widely applied to other industries
•This is an efficient and effective, early 21st Century
Business Model. It shows that you can put a ‘marketing
engine’ in front of your business that works, in a highly
energetic way, independently of your enterprise

• Tony Greco and Greco Lean and Fit Centres use their
charitable foundation (The Foundation to Fight Obesity
in Children) as a kind of stalking horse marketing for
their fitness centres

•Involvement in the Foundation by kids and their parents
to fight childhood obesity is almost certainly going to
lead to adult participation in Greco fitness programs—
either by the kids when they grow up or by their parents
dealing with fitness issues themselves
•The Threadless and Greco examples show how the marketing
dimension of a business can itself be a ‘profit centre’ or, at least,
cost neutral

•For Threadless, other companies will pay to use it and their
stakeholder group will do much of their marketing work for free

•For Tony Greco, the amount of earned media he receives for his
Foundation is remarkable

•If you are planning on going into marketing as a career or you are
thinking, as an Intrapreneur, of building a new division for an
existing firm or you are an entrepreneur, your job security/your
next promotion/your business success will be mightily enhanced if
you can turn your marketing costs neutral or negative
•Postscript: Threadless might even be able to turn part
of their supply chain (the design side) into a profit
centre

•Artists and corporations might pay them to have their
designs featured and voted upon in a sponsored
process much as Digg and Twitter allow sponsored
links and tweets, which, for authenticity sake, are
clearly identified as sponsored links and tweets

•For a budding artist, what is it worth to them to see
one of their designs voted on and (hopefully) chosen
by the Threadless audience? Could be quite a career-
booster. Turning your supply chain into a profit centre?
Harry Houdini would be proud of today’s biz modelers
•Postscript 2: In the above biz model, I show the business in a
square in the middle of the ecosystem and above it, a brain. The
brain is a crucial part of a modern business model. It is the part
that matches customers and suppliers, in this case, to vote on
designs

•In other models, the brain matches suppliers and clients as, for
example, in a spa where suppliers are hairstylists, massage
therapists, manicurists, pedicurists etc. Clients can pick out
which services they want and which suppliers they would like to
book with and suppliers can book which clients they want and
how busy they would like to be

•In both cases, the model allows the enterprise to reverse out
much of the work to their suppliers and customers
GTBMR
GTBMR
8- Find Launch Clients/Sell/Sell/Sell

If you can’t sell your:
   ideas/leadership/suppliers/staff/clients/customers/
   boss/BOD
…you can’t be an entrepreneur or intrapreneur.

9- Execute

You have to be able to execute – ideas are not
  enough.
-Won NHL franchise to Ottawa, what do you do?
  (a) Party all night?
  (b) Return from Palm Beach to Ottawa, organize a
  season tix drive, collect $22m in cash in 10 days
  nearly two years before opening night?
GTBMR
10 – Set your goals


  If you are a downhill skier, do you
  want to race before or after your
  toughest competitor?
GTBMR
• You want to race 2nd!
• Human beings are incredible at
setting goals, internalizing them
and meeting them (N = ?)
• Our 1st year Sens team set
a democratic goal of > 22 points
• We even released it to the media
• Why?
• To get buy-in from players, coaches, media,
  community and because the worst team
  EVER (the 1972 Washington Capitals) got 21
• We ended the year with 24 points!
GTBMR
• N=3
• You need a minimum of 3 pre-launch clients
• Why?
• Because you can always fool one client, maybe two
  into buying your product or service but probably not
  three
• And also because every biz model ever conceived
  changes when it comes into contact with RL
• Your launch clients will provide you with FREE
  launch capital and FREE mentoring

    “Follow the fastest (least effort) route to revenue and
    form an early (and lasting) attachment to the customer ,”
    Sir Terence Matthews (a ‘Terry’ism’)
    (See: Sir Terence Matthews’ Ten Guiding Principles For a Successful Launch of your Next
    Startup, http://www.eqjournalblog.com/?p=780)
Founding Ottawa Senators– A Community
 Effort

• Team moved to St Louis in 1933
• OOB in 1934 during Great Depression
• Bring Back the Senators circa 1987 to 1992
• 15,000 PRNs at $25 each
• Two at a time!
• 500 Corporate Sponsors at $500 each
• 32 Original Corporate Sponsors @ $15,000
  each
• Without Community Support: no Ottawa
  Senators!
Ottawa Senators
Founding Ottawa Senators– A Community
 Effort

• 120 Supporters in Palm Beach
• Ottawa Fire Dept Marching Band– strangely
  silent during our presentation
• “You’ll never, ever get a franchise in…
  Ottawa”
• Frank Finnegan to John Ziegler: “You give
  those boys from Ottawa a chance!”
• Without Community Support: no Ottawa
  Senators!
Founding Ottawa Senators– A
 Community Effort

• “It’s like the Canada-Russia hockey series
  of 1972– we’re counting on you!” Lydia
  Leeder
• Now that’s pressure!
• Our plan was to have our own press
  conference and then say:

 “We’ll be back!”
Founding Ottawa Senators– A Community
 Effort

• Won Franchise on Dec. 6, 1990
• Collected in ten days before Xmas that year
• One lone CA counting $22 million in cash
  from Season Ticket Sales cash at 3 am!
• Media Rights– Chum
• Arena Management Rights– Ogden
• Beer Rights– Molson
• TV Rights– Baton Broadcasting
• Without Community Support: no Ottawa
  Senators!
Twitter Nation– Build Your Community

• Wish the Internet was where it’s at today
  when I was 20!
• Outward facing
• Give me a place to stand and with a lever I
  will move the Earth, Archimedes
• 1,665 Followers
• Imagine 166,500 or 1,665,000 Followers
• Platform for Occupy Movement/Arab Spring
• LET FREEDOM RING, Martin Luther King
Twitter Nation– Build Your Community

• Not what are you doing
• What are you THINKING
• Hashtag– community created symbol
• Used these since 1992!
• Ask and answer for all
• Begin cross conversations
Twitter Nation– Build Your Community

• Faces count!
• Use this:


Not this:
 Loose Button– Build in a Community

• Ray Cao and Aditya Shah—both engineers
  from University of Waterloo
• What do they know about hair/make
  up/clothes?
• Practically nothing
• What do they know about analytics and
  metrics?
• A lot!
Loose Button– Build in a Community

• Suppliers: L’Oreal, Moroccan Oil,
  Dermalogica, etc
• Employ agencies to go into malls to hand
  out samples
• How much data ddi they collect?
• Pretty much nothing
• Enter LooseButton.com and Luxe Box
Loose Button– Build in a Community

• Matching clients (98% female) with supplier
  products
• Value proposition in < 5 seconds:

 “We’re the Netflix of the beauty products
 industry but with e-Harmony for brains”
Loose Button– Build in a Community

• Every consumer who signs up completes
  profile letting LooseButton.com know
  what type of products interested in
• Once a month, Luxe Box delivered by
  CPC
• Travel-size samplers from suppliers they
  are interested in
• Form of mass customization—every Luxe
  Box can contain different products
  matching individual consumer interests
  with right type of supplier products with a
  few surprises on the upside thrown in
 Loose Button– Build in a Community

• Clients paying $12 per month ($10 if they
  sign up for a year) to receive their monthly
  try-before-you-buy Luxe Box
• Filled with samples that LB’s suppliers
  provide them for FREE
• But wait more cleverness here
• Suppliers like L’Oreal and Moroccan Oil
  PAY to be included in Luxe Box
• LB is in enviable position of being paid not
  only by clients but suppliers too!
 Loose Button– Build in a Community

• Negative cost marketing—organizations
  are PAYING to market Luxe Box for
  them…
• Globe and Mail, Chatelaine and other
  publications buy Luxe Box subscriptions (at
  around 80% of retail price) to give to loyal
  customers
• Extending LB’s reach and increasing
  growth rate as well
• Clients around 10,000 now
 Loose Button– Build in a Community

• Tough business to knock off until Internet
  can download mini portions of makeup
  and beauty potions!
• Plans for other Boxes—perhaps another
  line focused on Men’s products, possibly a
  foodie version
• Intentionally called their first Box
  something different from company name
  so they could conquer other verticals later
Loose Button– Build in a Community

• Not much to change in biz model
• Except add social layer over the whole
  thing and a NOT-FOR-PROFIT
  dedicated to say Health and Fitness
• Follow/follower model is powerful one
  which knits the community more closely
  together and makes it even tougher to
  knock off
• Integrate Twitter API and allow
  customers and suppliers to follow top
  influencers in their ecosystem on a more
  coherent basis than just stumbling onto
  one of their YouTube videos
 Loose Button– Build in a Community

• LB biz model:

1. get paid by consumers
2. get paid by suppliers
3. plus other organizations pay them to
   market their product for them
4. while forming an intelligent community
   that is hard to knock

Amazing!
 Loose Button– Build in a Community

• Business models today not just about making money
• Enterprises that are all about money seem to have none
  and those that are about building insanely great
  products and services plus make a contribution to
  society seem to have it all
• This is Gen Y (and Steve Jobs) phenomenon

 NOW GO OUT AND BUILD YOUR COMMUNITY–
 BE PART OF SOMETHING BIGGER THAN
 YOURSELF

 THIS IS WHAT MAKES LIFE SPECIAL!
                Summary

• Basic BM: your clients usually on the RHS
  (Right Hand Side), your business in
  middle and your suppliers are on LHS
• Products and services flow from left to
  right—from your suppliers to you where
  you add value and then through you to
  clients and customers
• Usually, money flows in opposite
  direction: from clients to you and then
  from you to suppliers
                Summary

• Orthogonal dimension in model—a
  marketing dimension
• Where you demonstrate that you can
  acquire clients and customers in cost
  effective manner
• At least two dimensions deep on either
  side
• Discover new relationships
• Look at entire biz ecosystem
                Summary

• One page pictogram (flowchart)
• Spreadsheet showing value
  proposition for a single customer or
  client
• Second spreadsheet provides financial
  model of your enterprise—firm can see
  impact each additional client has on top
  line and test sensitivity of top line to
  changes in variables
               Summary

• Value proposition for clients and their
  impact on your business (which is
  measured in your financial model) are
  mirror images of each other
• You should score your business model
  using our Business Model Scoring Test:
  http://www.dramatispersonae.org/Busines
  sModels/BusinessModelScoringTest.htm
                Summary

• Guerrilla Marketing and Social
  Marketing have to be part of your
  business model
• Test your GM using another online tool
  we developed:
  http://www.dramatispersonae.org/Guerrilla
  MarketingAndFinance/BMGGuerrillaMark
  etingTest.htm
               Summary

• Take online ECQ Test to find out more
  about your entrepreneurial ability:
  http://www.dramatispersonae.org/ECQTe
  st/ECQ(ns)TestAuto.htm
                 Summary

• If you need to run Super Bowl
  commercials before you can get your first
  client, your new enterprise is unlikely to
  be successful
• Similarly, there are business models that
  do not easily lend themselves to
  entrepreneurial startups
• Perhaps they need enormous amounts of
  capital that simply can not be raised by
  entrepreneurs
                Summary

• So business models we are looking for
  use Bootstrap Capital to start their new
  enterprises
• To succeed, a startup does not
  necessarily have to find a never-before-
  tried-idea
• Perhaps the reason it has never been
  tried is that it is a bad idea
                Summary

• So business models we are looking for
  use Bootstrap Capital to start their new
  enterprises
• To succeed, a startup does not
  necessarily have to find a never-before-
  tried-idea
• Perhaps the reason it has never been
  tried is that it is a bad idea
• But at minimum you need to have
  differentiation: ‘Pixie Dust’
                Summary

• Make sure that ‘the harder you work the
  more money you will make’
• Does your Cash Conversion Cycle
  work?
• What good is a fast growing business if
  you go broke in the process?
                 Summary

• If you build leverage into your business
  model, a means to multiply the force
  exerted by your own efforts, time and
  brains, you will have a greater opportunity
  to succeed
                Summary

• Leverage in your business model comes
  primarily from ten sources:

 i. great HR,
 ii. using OPM,
 iii. forced savings,
 iv. innovation,
 v. capital equipment,
                Summary

• Leverage in your business model comes
  primarily from ten sources:

 vi. location,
 vii. network effects,
 viii. marketing channels that reduce the
 problem from one to many to one to a
 few,
 ix. branding, co-branding, co-opetition and
 co-creation,
 x. inflation.
                   Summary

• Here is what the Oracle of Omaha had to say
  on the issue of HR
• It may take a few seconds for the lesson to
  become clear

 “In looking for people to hire, you look for three
 qualities: integrity, intelligence and energy. And
 if you don’t have the first, the other two will kill
 you. You think about it; it’s true. If you hire
 somebody without [integrity], you really want
 them to be dumb and lazy,” Warren Buffett.
                Summary

• Leverage using OPM is increased when
  the project’s or business’ rate of return is
  higher than money you borrowed. Or
  when you use bootstrap capital, say, trade
  credit, where a supplier gives you credit at
  low interest or no interest to buy from
  them or a customer gives you a deposit
  on an order on which you pay no interest,
  you are then leveraging your own efforts
  and capital with theirs.
               Summary

• You also get leverage when other people
  are paying off your debts. This happens
  when, for example, you own rental
  property. Every time a tenant pays their
  monthly rent and you pay off some of the
  principal using their rent, you experience
  a form of forced savings and a wealth
  effect.
                  Summary

• Steve Jobs proved that you can think your way
  to wealth a lot faster than you can work your
  way there
• That’s big-time leverage…from ideas
• Having top notch capital equipment provides
  greater leverage for your employees and means
  higher productivity
• You also get leverage from your location and
  your brand
• In real estate terms, if you occupy a particular
  location, it obviously means that no one else
  can, so make it a good one
               Summary

• Some people think that great brand is nice
• It’s essential
• Strong brand creates trust and trust
  creates opportunity to sell
• Brand is BIG leverage
• Co-branding can add even more leverage
  for you
               Summary

• Most obvious example of network effects
  is facsimile machine
• I was actually one of the first people in
  Ottawa to get one
• Problem?
• What if you had no one to send a fax to?
               Summary

• Or other fax machines worked on different
  standard…
• Standards create leverage
• Network effects are apparent in Apple’s
  app store, Google’s search engine
  algorithm, Skype’s video calling, in fact,
  anything that verges on becoming a
  standard can also create the potential for
  network effects to take hold
              Summary

• Leverage is generated in Business
  Models that manage to reduce one to
  many marketing problem to one to a few
• For example, by developing sales
  channels that include resellers
• Amy Yee’s EventBots business:
  http://dramatispersonae.org/StartupDNA/e
  vent-bots-biz-model-redesign-march-
  2011-notes.pdf
                  Summary

• Essentially, practically everyone on the planet
  will have at least one event in their lives that
  they will want to record; e.g., weddings!
• EventBots is marketing to 7 billion people/not
  very practical
• Instead, we worked on a model that would see
  EventBots selling to Wedding Planners, Event
  Managers, Hotels, Convention Centres,
  Marketing Agencies and Media Companies,
  political organizers, anyone who might want to
  record in a meaningful way some event they
  host or organized
• Builds plenty of leverage in Amy’s model
               Summary

• Marketing efforts generate leverage for
  you when you use a non-linear selling
  model too
• Selling multi year contracts instead of
  annual
• Selling in pairs
               Summary

• If you are in an industry that is
  experiencing price inflation, you are
  benefiting from asset value increases
  without putting in any effort of your own
• More ‘free’ positive leverage for you
• That is why it is almost always better to
  enter into buoyant sectors where ‘all boats
  are rising’
                   Summary

• Overlay a social layer on top of biz models to
  create a coherent community around each
  enterprise– more leverage (e.g.
  LooseButton.com’s makeup evangelists on
  YouTube)
• Provide for a separate way of giving back to
  society through not-for-profit organization bolted
  onto the biz model (e.g., Tony Greco’s
  Foundation to Fight Childhood Obesity)
                 Summary

• Online tool, BMG (Business Model Generator)
  to help you get started
• Landing page is at:
  http://www.dramatispersonae.org/BusinessMod
  els/BusinessModelGeneratorLandingPage.htm
  and actual Generator is
  at: http://www.dramatispersonae.org/bmg/
• Works best with IE
• Help you get started
• But take what you have learned by using it and
  what you have learned here and develop
  something much better!
              Summary

• “Your competitors can copy what you are
  doing now but what they can’t know and
  can’t copy is what you are going to do
  NEXT…”

 -student entrepreneur Daniel Beauchamp

								
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