Business 101.1 NYU ITP: Values, Value Proposition, and The Future of Business

We recently covered competing value proposition mental models as they relate to The Business Model Canvas and Lean Startup.

We also took a pause to uncover the core motivations, values, and inherent friction in starting a social purpose-driven company.

And customer relationships, customer channels, and running your first test:

 

The Future of Your Job: Will You be Automated, or Augmented?

Data Intelligence, Cognitive Bias, and Emerging Tech  

You don’t always realize at the moment of a new technology’s introduction that it was designed to take your job.

Early Bloomberg Terminal

I remember my early career working as an analyst grunt on Wall Street. To learn my job, I would compete with other analysts on a fun game called merger practice. We’d be expected to create a fully merged Profit and Loss statement for two merged companies in 15 minutes, or less.

I had to work between machines. I’d look at the Bloomberg terminal’s company data, piped real time through some sort of non-Internet based system. I’d toggle my head over to my PC, where I’d copy the numbers into Excel to show how two companies would merge together. We’d issue reports fast, faster than other analysts. That was our edge.

Then one day, it was all connected. Market data piped right into Microsoft Excel. It was a true human-centered achievement. Hooray. Time saved. Lives better. I no longer had cramps from all of that neck rotating.

In fact, soon I would not be needed. Who needs a grunt to merge companies fast when that can now be done with a button?

I was lucky. I self-selected out of Wall Street and found myself in more creative and swashbuckling environments like tech startups and design firms and then my own companies after that. I do business modeling for a living, but insist on all of the fuzzy work that needs to happen with humans before we make spreadsheets. I stayed just ahead enough of technology to keep me from being replaced by a button.

Just this week, I saw some tech that called me back to those analyst days, and made me hopeful for data analysts, everywhere.

I was judging the startups at Strata Hadoop World in NYC, the data conference.

At Strata, everyone is an amateur behavioral economist. Humans have bias. Humans aren’t rational. Humans also don’t scale as fast as machines.  In the tutorials and main stage shows, everyone is trying to learn how to use the tools of data science to design human fallibility out of the system.

Startups are focused on delivering automation, to scale faster. Reproducibility was a  big theme, because of all of the pesky human error.

For example, Compellon, the startup who came in second place, seeks to overcome what it calls the trial and error approach to data analytics. The company’s analysis engine aims at eliminating the traditional analytics method of testing data against multiple statistical models. The promise from Compellon: “Not a statistician? Not a problem. Compellon 20|20 was built to deliver answers for business professionals with or without data science skills.”

There’s an equal and opposite trend happening at Strata Hadoop and the edges of technology culture. Tim O’Reilly, the CEO of O’Reilly which runs that Strata conference series, has called innovators to augment humans. “Don’t Replace People. Augment Them. If we let machines put us out of work, it will be because of a failure of imagination and the will to make a better future.”

At the Startup Showcase, a company called Virtual Cove is augmenting financial traders. Virtual Cove is creating mixed reality (augmented reality, virtual reality) to let you see thousands of data points at one time. “In contrast, Virtual Cove’s approach lets your mind absorb combinations simultaneously.  This way, the lock simply opens, insight intuitively revealing itself.”

Once you put on the headset, you can see the entire Nasdaq stock market and 100 of the top companies, each with hundreds of data points. You can get a sense of the visualization in this 2-D image below – but the real benefit is being able to walk around and quickly take in all of that information.

The founder, Bob Levy, points out that that humans have skills that are hard to reproduce in machines. The role of the trader has been decimated by the rise in algorithmic trading. Code and software and data have replaced humans, because they move faster. But the ability to quickly take in sensory data in 3-D form and process all of that information visually could be our saving grace.

Where else could this go? Could we move beyond augmenting our analytical brains and tap into our human desire to feel, to express, to play?

Having had the pleasure of playing with Tilt Brush on the HTC Vive, I could envision a future virtual trading floor of traders hurling iridescent company stock sculptures at each other to make a trade.

I could see a future annual shareholders meeting, with community activists and eco-activists parading their data sculptures of impact in front of the company’s financial performance review.

What do you see as the future of data intelligence? Do you see machines gunning for your job? Are you at risk of being automated, or will you benefit from tech and data-driven augmentation? How are you playing with new technology make a better future?

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Lean Validation for Social Impact + Design Entrepreneurs

There’s something social impact founders and design entrepreneurs have in common  – a shared allergy/yuck factor when asked to make business models. We try to dispel that myth – business modeling as an iterative act of emergent and divergent discovery, pattern association, and everything fun.

 

Data Driven Business – Data Case Studies at Strata+ Hadoop

Looking forward to emceeing Data Case Studies at Strata+Hadoop on Tuesday.

From banking to biotech, retail to government, nonprofit to energy, every business sector is changing in the face of abundant data. Driven by competitive pressures and rising consumer expectations, firms are getting better at defining business problems and applying data solutions.
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Companies like BBC, Walmart, GE, Merck and NGOs like Datakind and the DOT will share hard-won lessons, painful mistakes, and clever insights. We’re introducing a new Tutorial Day track packed with case studies, where you can hear from practitioners across a wide range of industries.

We call this track Data Case Studies. In a series of 12 half-hour talks aimed at a business audience, you’ll hear from household brands and global companies as they explain the challenges they wanted to tackle, the approaches they took, and the benefits—and drawbacks—of their solutions. If you want practical insights about applied data, look no further.

Join us at Strata+ Hadoop.

Personas, TAM/SAM/TM

Business 101.1 for ITP, Gallatin, Journalism, School of Professional Studies.

You’ll find the current team formation topics and people as of today 9/19/2016.

Contact Jen or Josh with any team changes – or reflect your changes next week.

6 core teams and recent changes in direction:

Fragrances Uber for Yoga

Prisons Social Community for Designers

Ergonomic Furniture

Assistive Tech – Colostomy Bag Assistive Tech, also Mental Health Provider Finder for LGBTQ

Fashion Social Enterprise

Social Listening Metrics Tattoo Artist Match

See you all next Monday

 

NYU ITP Business 101.1 Innovation + Entrepreneurship

NYU ITP Fall Semester

This course is about understanding the levers that drive business, and learning how to turn them into your favor.

You will learn through experience and work in teams to develop a concept from the generation of an idea to launch or market test. 

ITP NYU

Warning: the course involves a field work commitment of 5-6 hours per team per week. Much of the work of business model innovation is done outside of the classroom, in direct observation and conversation with your potential customers. The primary focus of the course is the work of developing your network capital – building connections with potential customers, partners, investors, and subject matter experts to help define opportunities that the concept is designed to solve, and early stage product development. A strong component of individual leadership development is built into the course- for students to identify your core values, and to work in teams to co-create a vision for your project, or your business.

We’ll bring the best thinking and methods from MBA school, Lean Startup, Design Thinking, Business Model Canvas, Innovation Accounting, Social Impact Entrepreneurship, Leadership Development, and Agile Methodology.

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Business Models and Entrepreneurial Strategy at Parsons The New School for Design

Excited to teach a revised and redesigned version of Lean at Parsons The New School for Design’s BBA program.

Parsons

Here’s the syllabus:

BUSINESS MODELS AND ENTREPRENEURIAL STRATEGY

Course Code: PUDM4322 CRN: 7370 | Section: A

Instructor: Jen van der Meer

 

Fall / 2016

Monday / 9:00 AM

Location: 6 East 16th Street, Room 1108

Course Description

This course prepares students with a hypothesis-driven approach to company formation. Students will work in teams to generate a business concept, and then validate business model risks in direct collaboration with customers. This course is offered in conjunction with the Senior Project studios and allows the students to compare and analyze different business models and strategies for their Senior Project concepts. Students develop storytelling and financial skills to lead early stage companies from concept through launch.

Open To: Open to: BBA in Strategic Design and Management students; Seniors only; others by permission of BBA in Strategic Design and Management program.

Pre-requisites: Co-requisite(s): PUDM 4120 Senior Project 1. Pre-requisite(s): PUDM 3409 Financial Management

Learning Outcomes

By the successful completion of this course, students will be able, at an introductory level, to:

  1. DEMONSTRATE FAMILIARITY WITH hypothesis-driven innovation methodologies practiced in “real world” startup environments (Lean Startup, Business Model Canvas development, Minimum Viable Product/Proposition).

  2. DEMONSTRATE FAMILIARITY WITH presentation and storytelling skills necessary for early stage startup strategy, team formation, and capital raising.

  3. DEMONSTRATE FAMILIARITY WITH financial literacy, learning the basic building blocks of innovation accounting, generating financial assumptions and forecasts, marketing sizing, term sheets, and capitalization tables.

  4. DEMONSTRATE COMPETENCE IN developing realistic business model evolution scenarios, and ability to create, analyze, combine business model archetypes.

  5. DEMONSTRATE COMPETENCE IN business model validation: the practical strategy of identifying unique customer segment(s) and an early stage value proposition through real world customer discovery interviews and early stage prototype tests.

Course Outline

Business Models and Entrepreneurial Strategy

Week
Date
Class Theme and Activities
Assignment Due
Week 1
Aug 29
Class intro / concept formation
(None)
Week 2
Sep 12
Team formation, intro to the Business Model Canvas (BMC) and customer discovery
Early stage company concepts
Week 3
Sep 19
Customer discovery, customer validation, Market Size Analysis (Total Addressable Market, Served Addressable Market, Target Market or TAM, SAM, TM)
Company BMC analysis results
1 Business model archetype analysis
Week 4
Sep 26
Value, value propositions, and the purpose of business, team forms initial BMC hypothesis v 1.0, team develops customer interview plan
Team BMC 1.0, TAM, SAM,TM
1 Business model archetype analysis
Oct 3
No Classes – Rosh Hashanah
Week 5
Oct 10
Personal value, motivation, vision, and team, team continues to plan customer interviews
Customer discovery interview results, BMC 2.0
2nd Business model archetype analysis
Week 6
Oct 17
Customer relationships, channels, initial value proposition test
Competition, disruptive innovation theory. Innovation accounting
Customer discovery interview results, BMC 3.0 + Lessons learned
3rd Business model archetype analysis
Week 7
Oct 24
How to analyze
Customer discovery interview results, BMC 4.0
4th Business model archetype analysis
Week 8
Oct 31
Midterm: validated “front stage” of the business model, competitive analysis, initial value proposition
Midterm presentations, including BMC 5.0
Week 9
Nov 7
“Back stage” of the business model: Resources, Activities, Partners
Customer discovery interview results, BMC 6.0
5th Business model archetype analysis
Week 10
Nov 14
The money: revenues, costs, how to create financial scenarios 3 years out
Business model scenarios
Unit economics
3 year financial assumptions
7th Business model archetype analysis
Week 11
Nov 21
Investment strategy, cap tables, term sheets
Validated unit economics
8th Business model archetype analysis
Week 12
Nov 28
Turning customer discovery insights into a Minimum Viable Product
Draft cap table, term sheet, investment plan
9th Business model archetype analysis
Week 13
Dec 5
Storytelling and pitch clinic, how to create a “teaser” presentation and a longer form presentation for investors, employees, partners
MVP sketch
Week 14
Dec 12
Pitch practice
Short form presentation
Week 15
Dec 19
Lessons Learned – Final
Long form presentation

 

Assessable Tasks

 

The students will work in self-formed teams to simulate the experience of developing a startup from scratch.

Key tasks, all as group work:

 

  • Presentations: weekly presentation of lessons learned, updated Business Model Canvas versions based on customer interview findings, formulation of new hypotheses to test (over 10 weeks).
  • Field research: customer discovery interviews (at least 30 interviews per team or until key business model hypotheses are sufficiently validated).
  • Financial analysis and industry analysis: market sizing (total addressable market, served addressable market, target market estimations.
  • Value proposition test and test results for midterm
  • Financial scenario development, calculating and validating unit economics, investment strategy, cap table, term sheet
  • Pitch development and delivery.
  • Final lessons learned presentation.

Final Grade Calculation

10% participation in class, giving constructive feedback to your peers

30% progress in customer validation, customer interviews

20% midterm validation test and presentation

20% financial analysis, scenarios, and projections

20% final pitch and lessons learned

Extra Credit Policy

No extra credit

Required Reading

Textbooks may be purchased (new or used), rented, or downloaded through standard sources such as Amazon, Barnes & Noble, or Chegg. Be sure to use the ISBN number in order to ensure that you are ordering the correct edition.

Book available on directly from the publisher:

Lean Analytics, Alistair Croll and Ben Yoskovitz, 2013

Articles, Papers:

The End of Competitive Advantage, by Rita Gunther McGrath, HBR, 8, 2013.

What is Disruptive Innovation? By Clayton Christensen, Michael E. Raynor, and Rory McDonald, HBR, December 2015

A Friedman Doctrine–; The Social Responsibility of Business is to Increase Its Profits, by Milton Friedman, The New York Times, 9, 1970. (paywall)

The Founder’s Dilemma by Noam Wasserman, HBR, 2008

The Role of the Business Model in Capturing Value from Innovation: Evidence from Xerox Corporation’s Technology Spinoff Companies Henry Chesbrough and Richard S. Rosenbloom, Oxford University Press, 2002

Why the Lean-Startup Changes Everything, by Steve Blank, HBR, 2013

Recommended Reading

The following two books are recommended for your reference and for help in writing and conducting research:

Business Model Generation, Alexander Osterwalder and Yves Pigneur

Talking to Humans, Giff Constsable and Frank Rimalovski (fre download)

Interviewing Users: How to Uncover Compelling Insights, Steve Portigal, 2013

Traction: How Any Startup Can Achieve Explosive Customer Growth, Gabriel Weinberg, 2015

The Founder’s Dilemma, Noam Wasserman, 2013

Value Proposition Design, by Alexander Osterwalder

Resources

Lean LaunchPad videos on Udacity by Steve Blank

Lean Startup video by Eric Reis

 

6 Signs the Future Will Not Be Advertised

Photo Credit: Dragan

Steven Spielberg’s 2002 movie Minority Report was for many dark and dystopian. Tom Cruise’s character walks through an invasive screen-lined lobby bombarded by ads. When a camera identifies him with a retinal scan, a dancing 3-D video calls out to him, “John Anderton! You could use a Guinness right about now.”

Some would say that future is already here, but will advertising keep encroaching on our lives like that?

Here are six signals that show a potential future without advertising and one giant reason we should celebrate.

1/ Ad Blockers on the Rise

In her her 2016 Internet Trends report, KPCB Partner Mary Meeker reported that ad spending is at all time highs, but ad blocker use is growing, faster. Ad blocker users grew to 420 million, up 94% from last year. Growth is global, and the leading ad blocking countries are China, India, and Indonesia.

From: KPCB Mary Meeker Internet Trends Report

2/ Subscription Streaming Accelerates

Music, TV, and movie subscription streaming services continue to grow. 46% of all US households have access to a streaming video on demand service,according to Nielsen.IFPIfound that there were 68 million streaming music subscribers in 2015, up 45% from 2014. The most popular streaming services, Netflix and Amazon Prime, both offer completely ad-free experiences.

3/ Fraud is Big Business in Digital Ads

Have you bought digital ads for your latest campaign, and wondered why performance was so low? One culprit could be fraud in digital ads. In the most recent Bot Baseline Report predicts that advertisers will lose $7.2 billion globally to fraud bots in 2016. The study deployed detection tags to measure “bot fraud,” or non-human traffic. While direct media buys had lower fraud, ad formats such as programmatic video ads had 73% more non-human traffic than the study average.

4/ Media Companies Hunt for Models Old and New

The decline in print advertising has decimated the newspaper and magazine industry. The companies that survive are shifting their focus to the future, or back to the subscription model of the past.

The New York Times’s new Public Editor, Liz Spayd described the company’s shift to focus building an audience of paying subscribers, who already generate more than half of the company’s revenue.

The NYC Media Lab is on the hunt for new business models made possible by new technology. Justin Hendrix, the Lab’s Executive Director, says, “The rise of defensive user behaviors like installing ad blockers has created a context for experiments with business models for media that look beyond advertising.”

5/ Advertising Forces a Tradeoff

If you live inside of a company dependent on advertising for revenues, then you know the perils of a business model with inherent trade-offs and frictions. You are constantly having to balance the needs of your audience with the needs of your advertisers, and if you make one side too happy, the other side is not happy. This is true for any advertising-driven company, from Google to The New York Times to a YouTube vlogger.

The best public example is Facebook, who is always adjusting the pendulum to favor advertisers vs. users and then back again. In June, Facebook limited news and other advertising updates to “focus on friends and family.” Just yesterday, Facebookannounced they would disguise ads to fight ad blockers — essentially forcing advertising on ad-blocking users. You can track these shifts backwards and forwards on a quarterly basis — they are always searching for the right tradeoff between giving their users what they want and monetizing those users with advertising.

6/ Advertising is No Longer Cool

The young and hungry entrepreneurs of tomorrow are favoring other business models over advertising. In the early days of the internet, the idea was to build an audience first, monetize later. Monetize later typically meant earn money through advertising.

From: TheMacro.com

At Y Combinator, one of the leading startup incubators, applications for ad-supported business ideas are at a historic low. New companies are seeking revenue through more popular business models such as Software-as-a-Service.

Why We Should Celebrate a Future Without Advertising

If the company founders of Silicon Valley can’t see advertising in their future, maybe this is the strongest signal of all. We’ll live in a science fiction future fantasy of a calm, focused life, free from the distractions of advertising.

Better yet, perhaps this hunt for the better business model will direct more innovation to better alignment between customer needs and value created. 100% focus on pure customer engagement, with no advertiser trade-off, may be the strongest position in the long run.

So what do you do if you’re dependent on advertising in your business model? Start thinking of business modeling as a verb, not a noun. Don’t fret, or bury your head in the sand. Begin the path towards business model innovation. Try to envision new models, experiment new ways to create and capture value, and co-create with your current and future customers. You may just find out that other models out there are better for your business.

Jen van der Meer is the Founder of Reason Street. Jen is on a mission to decode business jargon and distracting panic that keep us trapped in old ways of thinking, and explain business potential in human terms. You can explore the Business Model Library, read If You Have Innovation in Your Job Title, The Non-Linear Growth Competency Gap, The Day the Business Model was Born, and Models that We Live By.

Can You Define Your Strategy on One Page?

Here’s a roundup of one page strategy tools our opinion of which tools work best.

BMC

The idea of the one page strategy tool has been around since the 1880s when French managers sought to see the world beyond mere financial and accounting metrics. The rise of Business Model Canvas and other tools like it take visual strategy out of the wonky heads of MBAs and into the hands and sketches of teams with diverse skills and perspectives. The tools are most popular in organizations faced with uncertainty and complexity. If you need to tap the diverse skills and expertise in a team-based approach to define the future, try a strategy canvas tool on for size.

We start with the Business Model Canvas and conduct a roundup of other tools we’ve seen in startup, non profit, and corporate innovation settings. We’ve eliminated any tools with paywalls under the assumption that a paywall is a bad business model for strategic thought leadership!

The Business Model Canvas 

Osterwalder, 2009 available at Strategyzer.com

Business model innovation is a fairly recent concept in strategy circles, going back 20+ years ago in sync with the Netscape IPO. Suddenly, seeing the future potential of a fast growing company became more complex, with more options, combinations, and possibilities.

Back then, it didn’t make sense to invest the time and effort to develop a full business plan for every possible combination. We tended to choose one directional path, write a long form plan, and march forward. Often, founders would end up marching to their quick demise following the illusion that a plan was a roadmap, or playbook.

Fast forward to the present day. Business model innovation is popular in startup circles, but also in corporate innovation, nonprofits, and social impact entrepreneurship. The magical tool: The Business Model Canvas, by Alexander Osterwalder and Yves Pigneur.

BMC for UberThe Business Model Canvas Canvas includes all 9 building blocks and is based on Osterwalder’s PhD thesis – Business Model Ontologies (don’t click on the PhD thesis link unless you are an extreme business model geek with hours to spare).

The Canvas enables you to see your business model potential as something sketchable, involving sticky notes, and Sharpie pens. Design thinking meets a whole company view. Osterwalder encourages a sketch and prototype approach, and to use the Canvas in group meetings to create a shared language and understanding about business model options.

The Business Model Canvas is best used as an iterative tool, to create shared understanding and document team learning. Osterwalder’s strategy firm, named Strategyzer, and Steve Blank’s Lean LaunchPad curriculum both use the Canvas to test and validate assumptions over time.

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Admit it, No One Likes Failure

But there is Joy in Trying

Miss

In Silicon Valley, failure is “accepted, even encouraged.”

Not according to my sample size of Uber drivers.

I’m in San Francisco today, where Uber drivers are the new bartenders, and represent potential bellweather for what’s really going on in the Bay Area. From a sample size of 4 Uber drivers, representing an average of 200 rides each, I learned that the primary themes discussed with their rides were bankruptcy, lack of funding, or fear of running out of cash. If you can’t tell the truth to your investor or fellow co-working-space co-workers, then maybe the dark confessional of the Toyota Camry is your only outlet.

Let’s face it, we really don’t want to fail, but we do want to learn.

Perhaps we just need a few more words to describe failure, so that we know what we’re talking about.

The Failure Learning Curve:

Failure of Not Trying

Let’s start with a true form of failure: the failure to not even try. All would agree that there is cowardice in not showing up.

Ooops

Did you make an oops? A clumsy blunder? Did you swing, and miss? Well then fear not – we all do, and in fact this is the kind of mistake we should celebrate. See Ben Zander coaching a young cellist to say “how fascinating!” with each flub rather than wince and shut down emotionally.

Starting at the 11 minute mark in this video:

Disqualify

Did you try something, expecting a specific outcome, but you found out you were wrong? Well that’s reason to celebrate. You have invalidated your assumptions. The next time you present your results to your team, make sure to include all of the assumptions you have dutifully disqualified – proof that you are saving time and focusing your energy on more promising paths. Answer the most important question – what insights do you have now that you didn’t before, and what did you learn?

“An inventor fails 999 times, and if he succeeds once, he’s in. He treats his failures simply as practice shots.” ~Charles F. Kettering

Strike Out

Did you uncover a big opportunity, an opening to go big or go home? But then did you swing big and strike out? This is the kind of failure embraced by many in Silicon Valley. Investors are taking big risks, and are willing to let nine out of ten porfolio companies fail in order to see one company get exponentially substantial returns.

When you play on this particular game board, you will be asked to speed up your product timelines, spend more on marketing and sales, and go for the ultimate prize: being the winner that takes all in the category you are creating. If you strike out under these conditions, well they were worth the effort.

The Epic Failure

Did you build a giant business plan, model out five year financials, and burn through millions or even billions of dollars without vetting the risks? Did you march your team forward refusing to listen to your customer or to market signals? Did it take you many months to get your first version to market, only to attract few customers  at launch? Well then, that is failure. It’s epic failure. Feel the shame.

If you are recovering from a major failure and get back on that learning curve as you try again. You will have to shift from the false comforts of planning through Powerpoint, and learn how to cultivate new business models. Allow yourself a few more moments of “oops” this time, focus your efforts and disqualify bad ideas, and hunt down the bigger opportunities. And you’ll have much more fun.