Lecture Notes: Understanding and Building Effective Business Models

Introduction

• Objective: Help you understand and build a sustainable business model.
• Importance: Identify what your business model is and why it is essential.
• Agenda: Cover key concepts such as identifying core value, making an efficient go-to-market strategy, and leveraging for sustainability.

Key Concepts

What is a Business Model?

• Focus on the essence of what you do: Identifiable core value.
• Efficient go-to-market strategy: Efficient multiplication and leverage of core value.
• Five Initials: RSVPD (Repeatable, Scalable, Valuable, Disruptive, Defensible).

Harvard Business School Framework

• Diamond Framework by Tom Eisenmann:
  • Customer Value Proposition
  • Go-to-Market Model
  • Technology and Operations Model
  • Cash Flow Formula
• Simplified Framework: Create, Deliver, Make money, Sustainability.

Creating Value

Core (Capability of Really Exceptional Value)

• Ensure the core is significant and relevant to the customer.
• Examples:
  • Harvard: Prestige, Education, Access.
  • Reddit: Community, Content.
  • Patagonia: Social Mission, Culture, Style.

Customer Value Proposition (CVP)

• What you do uniquely well for whom.
• Focus on the Minimum Viable Segment (MVS): Find customers with the same underlying need.

Delivering Value

Framework for Creating Value

• Products must deliver instant, ongoing value, and integrate well with existing solutions.
• Multiplier strategies: Increase revenue, reach, and coverage.
• Lever strategies: Reduce costs in time, people, and resources.

Techniques

• Slip (Product-Led Growth): Make it simple, low cost, and valuable instantaneously. Ensure other systems accept it easily.
• Price and Package: Offer stages of products and extract value progressively.
• Co-Create with Communities: Leverage user contributions for mutual benefits. Example: Open Source Software.
• Whole Product Solution: Partner strategically to form a complete product or service offering.

Making Money

Business Model Experience

• Update, Upgrade, Upsell (Three Ups): Enhance customer experience while retaining and extracting more value.
• Example discussed: Netflix’s evolution in business models and customer engagement.

Example: Tetrascience

• Transitioning from failed hardware model to a successful data connectivity and normalization model with SaaS approach.
• Value delivery model shift from “IoT Hardware” to “Cloud Data Service.”

Ensuring Sustainability

Framework for Sustainability with R.S.V.P.D Model

• Repeatable: Consistent customer engagement, continuous value delivery.
• Scalable: Ability to manage and expand operations efficiently.
• Valuable: Offer significant, ongoing value proposition to customers and partners.
• Disruptive: Changing the existing market dynamics significantly.
• Defensible: Building a moat through unique capabilities and network effects.

Summary

• Key Takeaways: Develop a sustainable business model focusing on core value, right customer engagement, and efficient delivery methods.
• Evaluating Customer-Centric Models: Always focus on creating and delivering value to ensure a long-term sustainable business.

Final Thought

• A smart business model enhances cash efficiency, better valuations, lower dilutions, and a higher outcome for founders.

Recommended Actions

• Engage with peers: Discuss and brainstorm business model ideas using provided frameworks.
• Apply the learned models: Ensure your venture's core value aligns with delivering and sustaining market needs.

End of Notes.