In fact, the business model means something different to each company. We include a rather complex history in this concept. In fact, the business model is what your product is all about. Because not only do you need to make, for example, an application, some portal or a new device, but also take into account who the product is aimed at business modelas well as which channels to sell it through and which ways to communicate service support to new users.
Often a company may have zero earnings but it grows in value and is very interesting to investors. The way Twitter used to be, when it had a large audience, it monetized poorly, brought in little money, but the key asset was without investors and made up for the empire to grow.
When we talk about the business model we need to understand: on What market the company is operating in; what customer segment the company is focused on; what problem the customer segment is going to solve; what analogues the company is trying to replace with its product; what analogues exist in the market; how the company will earn in this market; how it forms revenue and expense parts and what competitive advantage it can develop to dominate this market and take all users under itself.
Let’s imagine you’re doing a food delivery startup. It’s quite a popular activity in the Russian market, especially when everyone has heard that Mail is buying a huge number of start-ups in that segment. Nevertheless, when we enter the food market, consumers have a pressing problem – they need to eat, somehow, to break their appetite, completely satisfy their hunger or just buy food. They are faced with a huge number of alternatives: they can cook their own food, they can eat in a café, they can go to a restaurant and eat gourmet food, they can order home delivery or a chef.
And each of these options, of course, is presented in different price segments where there are already n-th number of players. And it is quite interesting that part of the segments is likely to be unoccupied, because, for example, doing a chef delivery service like UberChef, in which you can choose a chef and call him to your home to cook haute cuisine, in this scenario is not appropriate, because it targets a low target segment on which you cannot earn.
And it’s quite interesting that some of the segments are likely to be unoccupied, because, for example, doing a chef home delivery service like the UberChef app, where you can choose a chef and call him home to cook haute cuisine, in this kind of scenario is not appropriate, because it is aimed at a low target segment that you cannot make money on. A startup focuses on some segment from that market and tries to compete somehow between other companies and all new, known or unknown startups.
To do this effectively, you have to fight for the consumer who chooses one thing when they make a purchase at a certain point in time. In other words, you can’t order food from completely different categories if you just need a meal.
You need to get the consumer to choose your product among all the possible zoo of solutions.
Accordingly, your business model needs to look at and develop a competitive advantage that will allow you to dominate this market.
The competitive advantage is what you do differently relative to all these decisions. Competitive advantage, of course, must solve customers’ problems, namely quickly and cheaply. It can do this in a way that you and your company will spend fewer resources on solving customer problems than your competitors.
Actually, to get to the competitive advantage, there is a fairly simple formula for a business model. To become a market leader you need to create a unique service for a large audience that needs this service, so that this service could be implemented without significant costs, such as logistics or production, and this service could easily be scaled up to the whole world.
First of all, before you bring the data about customer segments and their problems to Lean Canvas, we advise the following: firstly, just on a piece of paper or in any written form try to draw the following chain: what is the customer segment and its description of the portrait, what is its problem, then try to digitize this problem in numbers, metrics or other indicators that can be measured, write alternative solutions it has and what does not satisfy it in these solutions, and then enter it in our table.
When we try to compare your business model with your competitors, you should always remember that competitors always sell their products to the same customers as you do, so you need to be clear about which customer segment you will be selling to. Namely, try to make your product offerings as targeted as possible to a specific group of people or companies. Why is this important? Because often companies in the marketplace make a very fuzzy customer proposition that targets all types of companies. By targeting and targeting your offer, you will be able to gradually select niche customer groups, slowly capturing the market. Either during problem interviews or while identifying customer segments and their similarities, try to refocus your product on similar customer segments, in other words, those that have the same problem but in a different industry.
Coming back to the independent travel planning service, we would single out the following client segment – independent travellers who travel themselves from 2 to 5 times a year and go for a fairly long period of time from 1 week. And among them, you can identify specifically a group of people for whom the problem will be relevant, that is, people who have recently gone on a trip or went just once, thereby enjoyed the planning and travel, but they found it expensive. What are the problems they have: firstly, it is the time they spend on planning trips, because it is long, unclear, requires skills to understand a lot of information; secondly, often during the itinerary they miss a nth number of attractions that they have passed, missed or some they did not know about; thirdly, it is expensive, because when we plan by ourselves, we often use, for example, taxi to get from airport to hotel, and you can walk from the same airport a few meters and take another mode of transport cheaper Accordingly, how we try to solve these problems – we search indefinitely for hotels on booking.com, watch reviews, read the Vinsky forum as an example of the experiences of independent travelers like yourself, book tickets or other ways to travel. Thus the problem is not solved, at least no cool service has been found that could solve the problem.
The next block is the value we’re trying to communicate to our customer segment and what’s cool about our product.
That is, how or with what your product solves a customer problem. To understand and formulate a value proposition you need to engage in Customer Development – this is trivial stuff, but as a result of this process you will understand what is truly valuable and what is not, what makes the user respond immediately to your words and say, “Who can I take money to for a potential service so you can solve my problem”.
And the interesting thing is, what is the value proposition? This is the wording or reason why your product is worth the user’s attention. That is, in fact, what makes your product stand out from everyone else around it.
A good example of this is the CRM search of an online store, for example. When we type it in Yandex, it comes out a bunch of different ads, and each of them is aimed at a particular customer segment. For some customers it is important to integrate with various services, for others it is important to train their staff on how to use the service, for others it is important to manage sales. You can see from the picture that each CRM has some kind of value proposition, for example, Megaplan improves business in 7 days, one hundred percent security, implementation 15 minutes. Others do not see how long it will take to implement, so it seems that if you install Megaplan, then everything will be cool and fast, but in fact it is not, because you need to go through the process of training employees and much more. But nevertheless, this value proposition stands alone against the rest.
In addition, your value proposition should include hooks – motivators for your customer segment, in other words, buttons that by clicking on which the customer will pay attention to your product and also want to use it again and again. We want to recommend a great book called “Hooked” ( or “Hooked”). This book is about motivators and those very hooks, how to create products, find elements in your product that will entice users, but also keep them in your product.
The main thing to remember is that Customer Development is an ongoing process. It’s equally good at the product creation stage, when you only have an idea and your task is to create a product for a limited amount of money so that someone will need it. This process is also good at the mature stage of the company, when you need to create additional value on current customers to stand out among competitors.
Back to our table, our travel service. We have tried to formulate a unique absolute offer for our example: we will let you plan a unique individual tour at a low price, i.e. at the price of a package tour. In general, everyone wants to get great service, to plan everything at once, to see the end result of your trip at once, and no one wants to pay a lot of money. So you can try to formulate your value proposition in this way.
The next point is the decision. What solution you offer and how your product is implemented, how the customer problem will be solved and how your product will create an advantage over the rest of the competitors’ alternatives.
Often companies try to create something super innovative, filled with obscure, new, modern technology, using such super cool technology – the internet. As a result, everyone is focused on the creation of pitch, on the creation of the technology itself, forgetting that they have customers for whom it doesn’t matter how your product solves their problems, for the video genes these problems should be solved stupidly.
So it’s important to understand and articulate, even to yourself, what your product does in the form of a common elevator pitch, that is, your company helps that customer segment solve a problem with some technology or some solutions. This kind of pitching allows your head to figure out what you can do in one extension. And it will also be clear to the customers themselves what your service is all about. Most importantly, this form of pitching allows investors to understand what you do and try to get them interested in it. If you cannot formulate a description of your problem or a description of what you are doing in two to three sentences, you need to reformulate before you can understand that you are doing something difficult or incomprehensible.
The solution we offer for our service. It will automatically build a route according to the set points and the type of recreation chosen, that is, people can choose different cities that they want to visit and the type of holiday, for example, beach holidays, according to these criteria service will show all the nearest cool beaches, if they roam around the attractions, the service will show around these points the most interesting places. In addition, it should show and find the most optimal types of transport between these points: buses, trains, planes. Accordingly, the integration between all local conditional transport systems will be blurred.
The next point is the channels.
Channels consist of several things. First, they raise consumer awareness about your company, what products or services you sell, that is, this certain prelude where the consumer learns from the channels that there is such-and-such product with such-and-such value proposition that is supposed to solve their problem. Through channels, people buy goods or services. The most interesting thing is that through the channels you and the consumers get feedback on the products, on how they are used, post-sales service is provided, service is provided.
What’s important to understand when we look at channels. For starters, where do clients reside, in which channels. They are easier to get from contextual advertising or closed communities, so they are in the darkness, or specialized forums, where you can get only by invitation. Of all the channels, you need to be able to single out the most effective ones, like Instragram. It’s effective and companies can pull 100 clients a month from there. At the same time you don’t understand how to influence it, how to control it, because you can’t get more clients out of it. At some stage, when you have little sales, this channel can be quite effective, but as soon as the company reaches some significant point in terms of revenue and number of customers in the tens of thousands, it seems this channel will change its purpose, if before it was a driver of sales, then it can reorient to maintain the company image, or as a window of feedback or an opportunity to tell your customers about the new pitches. The most important thing is which channels are most efficient in terms of scaling, whether they are finite or not. Can you sell infinitely much on these channels, or at some point they will be effective, and then the capacity of these channels will be greatly reduced, and you will not be able to accept more than your competitors.
In order to compete effectively with the channels you need to: understand which channels you need to use at the beginning of the company, promotion companies, and which can be used to get your first followers. Often, to the first followers, the first customers, it is normal if you use channels where all the attraction will come only from you – direct sales, cold calls, advertising on television. Any channels to try to get first customer contacts, make first sales and gather all the customers you need to talk to about handling feedback.
There is an opinion that to conduct your first problem interview don’t go to your inner circle, don’t go to your relatives because they will lie. It’s fine when you go to the inner circle and try to sell your solution, but here you need to understand that really these people have the problem that this product solves, or they don’t. If so, it’s a good client, especially they will be able to advise you of people already in their inner circle who they know and have the same problem. Very well, when you have a partner with strong traffic, the example mail.ru, which is trying through its large traffic monetize and make profitable all services that he buys (Deliveryclub) and so on. He has already reached his limit of earning on his traffic, it remains to increase the margin of his business due to the fact that those companies that he buys will make money on his traffic with his product . In channels, it is important to understand what hacks can be done. In order to work with hacks in channels, you first need to know where customers live and how they behave. There was a company in the accelerator that sold software to companies for construction. She found out that the key client segment often flies by air, and so she put up a billboard advertising her service on the Ekaterinburg-Koltsovo highway. And having spent about 30 thousand in a month, the profit turned out to be 1.5 million annual recurring revenue. Accordingly, there’s only khaki. And you can use the channels not only online but also offline. If you’ve noticed, all online services are not squeamish about advertising offline, hang billboards, sticker cars, in order to attract traffic from offline. This is a very interesting strategy, because very few online services are advertised because they believe that if they do online services, the customers are there online. But it doesn’t always work. In our example there is a high competition in online channels ( booking, Aviasails), so you need to do some content-history on advertising, make cool posts on Instagram, Facebook, attract audience to the content that is really cool to plan their own travel and you can do it through our service. It’s very cool to have blogs, various websites.
In our example there is a high competition in online channels ( booking, Aviasails), so you need to do some content-history on advertising, make cool posts on Instagram, Facebook, attract audience to the content that is really cool to plan their own travel and you can do it through our service. It’s very cool to have blogs, various websites.
The next important thing is to see how our business is going to live, how we are going to plan expenses and income.
It is necessary to model roughly the economics of the product to understand where and at what point we will have a breakeven point, at what point and at what number of users our business will pay off.
At the very beginning you need to understand, even if you are building a supposedly free service, exactly how you will earn to build a product strategy, that is, what you will be focusing on. When you say that we will make money on advertising, you still need to try to test – for what advertisers will pay and at what audience they will pay, which will be interesting for them. Here too, it is important to try to do something and model. And if the advertiser won’t pay, you can try another monetization model, such as maintaining a subscription and collecting data from regular users for access to premium content on the same information site. It’s also very important to start selling in the early stages, because a sale and the first money paid by the user, especially for a product that doesn’t exist, is a confirmation that your product is really needed by someone. And the best part is that price is also part of your product.
The example of two perfectly ordinary bottles of mineral water begs the question “They don’t seem to be any different, but what can we say about each one?” It turns out that for two completely faceless bottles, the presence of price, namely the difference in prices, immediately indicates that the products are completely different. So the price for your product can be some subject of positioning, where more expensive is perceived by people as a product with more quality. And if it’s cheap, there seems to be something wrong with it.
This is where we go from price to how we’re going to make money. There are a large number of earnings, but there are 5 types of models to minimize your product, these are subscription, transactional model, commission, freemium, advertising. These are the basic models from which others are built.
There are about 40 monetization models that have emerged because people need to make money somehow while covering expenses.
The first model is transactional, where users pay money for a product or service provided, for example, they paid money for a haircut, or developed a boxed version of a website and got paid. When you bought a cucumber at the market from a grandmother for 5 rubles, and sold it in an expensive store for 10 rubles. Accordingly, this model often implies that the products are not protected in any way from subsequent use.
Such models are actively developed in the market , the usual sale of goods and services. The Russian Post operates on a model where you pay for each service rendered – stamp, parcel post. That’s how the same manufacturers of some device work, that’s one of their models.
Naturally, at some point you may come to the point where it seems that if you are selling your product or service to a customer, this induction model has a risk that he will take it and copy it and start distributing it himself. That’s why this model – the license – came into being. This is that you provide a product or service under certain rules of the game, under certain terms of contract, that the user undertakes not to distribute it beyond his computer, he undertakes so that he is the only user of the computer. And companies are defending the story one way or another. It’s often said that if you’re paying for a license, keep an update that allows you to use the product correctly.
A large number of companies work on this model, like antivirus, and Microsoft office used to work, 1C also licenses all its copies, and people pay for licenses. And then it is understood that there are clients, they buy once, and we have nothing more to gain from it, i.e. the lifetime of a client is quite small.
That’s why companies are moving to a model – subscription. It’s the dream of any company when a customer pays for the continuous use of a product without owning it, but only gets access to it, and it’s good if it’s through the Internet, i.e. the company has all kinds of power and authority over the way he uses the product. Subscription differs from the license in that it is cheaper than the annual license, but here there is a risk that the user has bought, and after a month realized that the product is not his and he is not interested in continuing to cooperate with the company as a user. At the same time it seems that the cost of attraction for the client is the same. You have attracted the same client, you have sold a subscription to one and he appeared after a month, he paid a small part, and you have sold a license to another, he paid a lot for a year or some time, but he didn’t appear again. So when we work with subscriptions, it’s important to understand how we know how to control the value of our product and how we know how to properly qualify customers so they fall off less and how to maximize revenue per customer. So a subscription-based company has the task of first figuring out how to extend the life of the user, and only then pump up the base and make new sales. Namely, how the user lives and what needs to be done to make it at least pay off, and at most bring in a lot of profits from one company.
There are a lot of subscription-based services, such as Hh for subscription access to its base, online games, food delivery.
Often companies work on the freemium model, where the key value is given for free, and for everything else, if the user wants additional privileges, he pays cash. With such a model, it is imperative that the analog item you provide for free solves the user’s problem, if it does not, the user will not think of paying you extra money.
How many companies are operating? Quite a few, they are dating services, where the basic functionality is free, and all additional pitches can pay either a subscription or one-off purchases. A lot of games work on this system, mailchimp also works on this model. It’s interesting that clouds like googledisk, yandex.disk, work under this system, and they know exactly what space usage limit they need to set. Google did such a thing where first you could get 2gb for free, then 5gb, and now 15gb. In today’s environment, 2-5gb is just to scatter over other drives, or transfer somewhere, but when you have 15gb of very valuable information piling up, there comes a point where Google tells you that your disk space is full – pay for it. And it has the right to inform you not when your limit comes to an end, but much after.
There is a commission model where you take commission or money on that different side of that market as a two-way model. For example, when you give users access to a huge number of hotels, as Bookings does, charging a commission of 10-15% of the total check from the company. There’s a reverse commission, recall rbnb, takes its share of the commission already on the buyer side, or an upgrade to that story when the marketplace begins.
There are a lot of such companies, such as Yandex, Uber, taxis and all the aggregators that work on such a system, except for Maxim taxi, which is the largest dispatch centre in Russia, where the maximum number of orders, compared to the rest. They charge a fixed amount specifically for each order.
If you have an information portal try to monetize the traffic that your product generates, meaning you will be selling customers to advertisers, either to interested parties or to the data of those customers, which is very common.
It is used by all the major search engines, a huge number of games, their own plugins to display ads, and monetize their audience, often with the development of technology there are new advertising formats, such as the company Fibrum, an application for virtual reality glasses, there are also advertising formats, if the user interacts with them .
Yes, you have generated revenue, or rather, when you tried to choose a monetization model, you need to understand what your average check will be, and exactly how the customer will live. If your product has a production cost, for example, you sell some product, to produce it you need to spend funds and resources, and here it is important to count the gross profit, namely the check, because this is the basis for calculating your economy.
When we’re trying to compete in terms of revenue of your monetization model, you have to remember about that differentiation exclusively of your competitors, that is how the water bottles example was. See what kind of monetization model you can choose, and the interesting thing is that the model is also some hypothesis worth testing.
We also have some expenses. These are costs of personnel, development and marketing, they can be reduced in various ways, try to give the costs to the same partners, trade on dropshipping, rather than buying a certain class, as many online stores do.
You can have some non-competitive advantages, such as access to a cool computing infrastructure, or the Pope in the administration of a presentation that significantly reduces a lot of things.
Using our plan as an example, we will charge a 10% commission on every transaction made through our service with an average check of $200 for your trip. That said, there are team costs, minimal marketing and services fees, and an Azure grant application, so it’s free for now. Thus, to cover all costs , we need to earn and attract 525 customers a month, but it seems that this is not enough, the question of how much is it achievable, most likely yes, but in the long run, and while we will run up to it, we need something to live on, or have money, we do the company at their own expense, or have an investor who also believes in the idea and is willing to support. But it seems that such an example suggests that something needs to change in the business and monetization model, or increase the average bill, so that there were fewer customers, but profits were greater, or change the monetization, such as advertising, provide access to these orders, service companies, so they bought them, you can arrange a travel agency and independently earn even more.
There are some key metrics in business that show whether everything in the business is going well, whether everything is going right.
And often it is important to describe and outline the marketing funnel, which consists of targeted actions that users perform to make the magic happen and they buy. These actions can be in the standard user acquisition funnel, or you can draw a chain of actions that leads users from introduction to your service to a specific target action, ie a purchase, how he signs up, which screens he goes to, how he creates some movement, how he makes a decision, how your email marketing system works and in the end how to make him buy your product. In B2C it’s a funnel, and in B2B there are stages of the transaction that the company conducts, and it works the same way there. How do I bind the individual step? To start with, you have to work through the stages just like in the funnel, each stage includes when customers come to you, then you have to figure out what kind of customer this is, i.e. qualify him, identify his problem, the budget for solving this problem, how target user is for you, then convince him that your solution is good for him and that it will solve his problem. For B2C it could be some kind of demo for him to try to interact with your service, and for B2B it could be the same demo. The key solution is for the user to catch the insight that this is how this product solves my problem. From there, it all depends on how interested he is in implementing and solving the problem as soon as possible.
Going back to Metrics, this also applies to B2B, they consist of the following steps: 1) How you find users and how they find you, i.e. attraction: 2) How people get their first experience with your product, how they see the value, i.e. what the user has to do to understand whether it is worth using this product further or to stop, so all games have training, in the processes of some kind of training; 3) how you bring users back, what needs to happen for the user to come back to your product the next day, either as a reminder or time to realize the need for your product; 4) How you make money and how you influence the sale, i.e. what is the decision chain for the customer to buy, either you just show the buy button or you bill where there are shoals. In this process, there’s often a situation where a company came in, showed a product where you could register and use and they showed very cool metrics of how many users register, start using the product, poor return rate, where 50% of users have registered and after 2 months they’re still sitting on the product. And the problem arises – they’re not buying. But they’ve been sorting out the users’ problems and they’re willing to pay. And when we start to analyze the product itself, it turns out that there is no trivial button to buy. The last point is how users come back to your product and how they recommend your product or service to their friends and acquaintances. In which cases you should always ask about how your product was found. Manual history, that is, when there is no way to contact, then you need to directly set the task in the PSM to fill in a specific field where the user came from, as he found. There is a Kol-Tracking system which associates the phone on your site with a visit, like the Aloka service. Here you can decide as a programmer, or individually. One company broke the funnel and managers can’t move a customer further down the funnel until they fill out all the critical information for that, which is where they came from, what potential pain they have, what their budget is, who the contact person is, whether that contact person is making a decision. Once these fields are filled in, they are allowed to move on, if they don’t fill in the field they are fined, if they are in a stage for a long time they are also fined because it seems they are not doing their job and can’t give an answer.
What is an example of key metrics in our example. 1- engagement, this is the number of registrations on our service, the number of activations, 2- how many people create itineraries on their trip, 3- how many people returned to their itinerary and continued to do something, 4- how many people called their friends to our service to plan together, 5- how many people bought. These key metrics, for example, on weekly basis will tell you what’s going on in business, main thing is to limit test these metrics by weeks or months, because in each time interval you will fix different hypotheses about different channels, different audience will come to you, main thing is not to mix, for example, you were working first week with Facebook audience, people came to you, involved – 100, bought – 1, and next week you started to test advertising, came -100, bought -50, so average came 200, and to If we test different channels it is possible to test if you have working analytics, if it is possible to understand clients from different channels. there is a cool service called Sexymap, it allows you to create a map of your site, traffic flow and look who came from where, who with what conversion rate is pushed down the funnel and who buys.
When you start digging into metrics, there’s always some key metric, at a particular time period, that affects how successful your business is, how well you’re able to make money, that affects customer success, accordingly affects your success. If the customer is happy, he gets value, it means your business gets money. Early on it can be the number of key actions a customer has taken, for example, in the early days of Facebook a key metric that the company has influenced and wanted to influence that has subsequently brought it career growth is how many friends each new user adds in their first three days of being there. Why were they influenced by it? It turned out that those people who add at least 4 friends in the first three days, they then come back at least once within a month and stay in the service, increasing the growth. If they add less than 4 friends, they then leave the service and don’t show up again. The more friends, the more news in the feed, the more they start watching this feed being updated, correspondingly increasing their engagement Facebook service gets to grow more audience, more interest from advertisers, more inventory for advertisers, thereby earning more money.
Once we understand that there are some metrics that qualitatively impact users, other monetization models emerge that upgrade existing ones and allow companies to earn a lot. For example, Nespresso, which make coffee machines. These machines are sold once and then get people hooked on an endless number of purchases of these capsules for them. If you buy a coffee machine for cheap, and the number of capsules they subsequently buy increases the price of all that equipment. Dandy used to work as well, Sega when it produced consoles, then it sold cartridges, it also works with iPhone, it produces devices that are some infrastructure base, they sell apps on that story, countless, developers get access to iPhone users, androids, with Apple and Google earning a commission.
There is a model and lead generation where companies start selling and take no commission, but can sell Leads, and to multiple vendors at once. And that’s just the success of any lead generation services, meaning they all give suppliers far more Leads than they can recycle. Thus, the supplier is always interested in contacting this service, the same Yandex, he gets a stable channel for selling Leads. And that is how Yandex Taxi was connected when they first entered the market, no one wanted to install them, buy them from taxi fleets, then they said that if you connect to our system, we give you customers for free, and you work according to their established rules. Naive taxi parks connected to Yandex and it gave them a huge number of orders, which they could not always handle, respectively taxi parks realized that there will always be orders, they feed them, Yandex brings them 90% of the revenue, so there was no need for others, and these same taxi parks began to work only in Yandex. Then Yandex said that 30% of orders go to me, and here the hopelessness, because taxi companies have no alternatives, because their marketing, they have turned off, thus becoming dependent on Yandex.
Now a little example. Imagine that you are developing an online game for a large number of users. What additional monetization options beyond the standard subscription can be implemented? Game content, merchandise, other games from the company. A key metric in all online games is how users return to the game. And now began a model of monetization, online game producers teach users the game, pumping, that they are not upset, when they kill and it also pay money. There is a service for tanks, etc..
Now let us tell the story of one company which was making software for managing taxi fleets which worked with aggregators. What model did this company have.
They had special rates, i.e. the company helped taxi fleets operate these cars and they said that if you had a lot of cars, you would pay 30 thousand rubles, if not very much, then 15 thousand rubles, if very little, then 10 thousand. They weren’t reselling Linds, they were just helping the cab companies run it. And they were making $900,000 from that whole set. That said, they had a sales cycle of about 3 months, because taxi fleets are such a business on the brink of survival. Only large taxi fleets, with a large number of cars and their own dispatcher’s office, could make money in this market. Taxi parks did not want to pay a lot of money, and for them 30 thousand a month is quite a tangible amount, in fact the owner himself made the decision of whether to pay this money from his pocket or not. Because he felt that amount was significant, and yet he didn’t see the value in the solution itself until that solution was being implemented to his base. They thought about what needed to be done. Then they started counting the economics and looking at how such companies work.
And what did it turn out to be. On the same volume of customers, they began to earn a lot more, and for the owners, as it turned out, such economics became clear, because they began to lose not from their pocket, but from each order within the margin of error. And the most interesting thing is that due to such monetization it became easier for the company to find new customers, they began to have a different idea that they give only 1.5 rubles from each order, rather than 30 thousand from their pocket. Some psychological motive. The guys played up the economics, looked at which key metric affects out business, they went into a different profile.
So we’re getting to the last block, which is benefits. In fact, often when we’ve filled in all the other blocks, we may not understand what your company’s competitive advantage is. And often the benefits are confused with what makes a company different from the rest, but not what makes it really better than the rest. The advantage is not your cool newfangled design, but what you do much better for customers relative to other alternatives.
The advantage may be some unique process or technology that you have. In fact, the advantage can also be the way you’ve built your business model, the way you’ve built interaction among all these blocks. So, to make it all work and allow you to make a lot of money. Often the advantage can be some key asset that you have accumulated over time. If you talk in the early stages, you should have an understanding of how that asset will be shaped. A very striking example than Robot Viru, where Everyone is positioning the Viru robot as a very cool tech startup, and in fact, its technology is very simple. But the key advantage is 2 million conversations, i.e. they entered the market once with their robot, had 2 million conversations on the basis of which they can train the neural network for infinite time. And the interesting thing is that these conversations are in a very narrow segment of interviewing candidates. There is no other company in the world that has a similar asset. This is exactly the technological advantage, i.e. neural network + asset.
Very often some process that one thinks can be automated and solved with technology can be repeated by hand. And often it can be cheaper, because in fact the technology, the development and support of the technology can be much more expensive than hiring a huge number of people who will do product recognition for a dollar, for example. There are products that , for example, allow you to recognize products on store shelves, such as trax. The guys provide retailers and manufacturers with information about products that are on the shelves through a mobile app. Conventionally, they claim that they have a super cool recognizer, the trick is that the picture and there gives out different statistics what goods are missing, what is in stock, based on the recognition of products. But in February or so at Trax on the service are technical issues, so the product is very slow, updated data, and in fact in India, some national holiday and his staff just do not work.So most of the recognition of these employees do by hand.
Once we’ve built a business model, it’s worth thinking about the risks of a successful operation. 1- Product risk – are you making the right product, is it solving a cool problem, or is it not significant at all. 2- Consumer risk – you can make a cool product, it can solve a cool problem, but you have no idea if you’re selling it to the right people, through the right channels. 3- business model risk – market risk, is it possible to build a good business with the current product, with the current customer segment, it can solve problems that a large number of people have, but they use some alternatives and are not willing to pay for it, respectively there is no potential for monetization and good business can not be built on it.
To go further we need to answer questions regarding each risk. 1- Problem interviews allow us to screen out low-cost problems early on, to understand that there is no problem, and at this stage it is very important to assess the market, i.e. the past market. 2 – MVP (minimum product that you make) can solve the problem, and there is no problem it solves, it is not, you have to do something, whether it is manual or not, it is important that it matches your product in the future, and it must solve this problem and should work even without you; 3- it must work and solve a statistically significant amount, it must be confirmed that for this product at MVP ready to pay, that is often a story that here we made some product, it is not fully ready, it has limited fu Accordingly, it needs to be brought up to the point where they will pay for it. In the beginning, confirm the MVP works, that it solves the problem, but not in a large number of users, on a close circle, through manual sales, through those people you can run for the fastest.
Then test the channels on a statistically significant volume, see where the users live, where they can be found and how much these channels can be scaled.
Once you’ve found that, see what alternatives there are among which solutions you argue for the user. To see how the user chooses solutions among alternatives, what their budget is, how much they are willing to pay, and most importantly, how mashed potatoes are used to paying in this market. Very often in the U.S. market there is – trial two three weeks, and then begins collecting money from users. And as part of the market risk, you need to decompose your income relative to your cost coverage, see what monetization model to choose so that you both make money and earn out the fastest, and to get to the break-even point, see how quickly you can get there.
Author of the material: Alexander Skurikhin