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Class 10

Class 10. Business Models & Strategy. Office Hour: Ｔｕｅｓ： 13:30-15:00 VBL 2F 電話 285-3630. Class Schedule. 4/15( 火 )16:10-17:40 ① Intro to Venture Business & Industry Analysis 4/22( 火 )16:10-17:40 ② Intel Case Study 5/13( 火 )16:10-17:40 ③ Sales & Marketing

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Class 10

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  1. Class 10 Business Models & Strategy NBC1 2008, (c) 2008　Jay A. Smith

  2. Office Hour: Ｔｕｅｓ： 13:30-15:00 VBL 2F 電話285-3630 Class Schedule 4/15(火)16:10-17:40 ① Intro to Venture Business & Industry Analysis 4/22(火)16:10-17:40 ② Intel Case Study 5/13(火)16:10-17:40 ③ Sales & Marketing 5/27(火)16:10-17:40 ④ Sales & Marketing Case Study 6/3 (火)16:10-17:40 ⑤ Marketing Project Presentations 6/10(火)16:10-17:40 ⑥ Ideas and Innovation 6/17(火)16:10-19:20 ⑦⑧Product & Service Presentations / Finance & Accounting 6/24(火)16:10-17:40 ⑨ Finance & Accounting (continued) 7/1 (火)16:10-17:40 ⑩ Business Models & Plans 7/8 (火)16:10-19:20 ⑪⑫Elevator Pitches / Investment & Valuation 7/15(火)16:10-17:40 ⑬ Presentation Workshop & Review 7/22(火)16:10-19:20 ⑭⑮Presentations 2 Classes Final Report: Team Business Plan Paper By July 29 (火）　 nbc1@bizsmith.com NBC1 2008, (c) 2008　Jay A. Smith

  3. Model Driven Pro-Forma P&L Strategy Implication: Get More Members Sooner NBC1 2008, (c) 2008　Jay A. Smith

  4. Key Expenses • Cost drivers (what factors affect costs) • People: Staff Salaries (full-time, part-time), contractors… • Things: Supplies, parts, equipment, facilities… • Activities: Manufacturing, Selling, Marketing/Advertising, R&D… • Relative size? Importance? • How predictable? How will they change over time? • How flexible, adaptable? • Types: • Variable (changes directly to volume) • Semi-variable (increases in step-wise fashion) • Fixed (do not change with volume of sales) • Non-recurring (unusual or infrequent expenses) NBC1 2008, (c) 2008　Jay A. Smith

  5. Sample Pro-Forma Cash Flow Forecast From 6月 • Depreciation: accounting method to expense cost of an asset. “Non-cash” expense NBC1 2008, (c) 2008　Jay A. Smith • Run-rate: Annualized business size at any given time. 11月run-rate= 644 x 12 = 7,728

  6. Money Potential Profit Reward Losses & Investments Time Breakeven Breakeven • How much does company need to sell to cover its costs • Revenue = Costs Profit/loss = 0 Money Potential Profit Reward Losses & Investments Time NBC1 2008, (c) 2008　Jay A. Smith

  7. Using Breakeven • Sense of risk • How many customers do I need? • Compare to market size (what %) • Compare to market share (what %) • Is my pricing right? • Are my costs too high? NBC1 2008, (c) 2008　Jay A. Smith

  8. Variable & Fixed Costs • Variable Costs: • Increases directly with each product sold (unit volume) • Materials, parts, (assembly), commission, shipping • Fixed Costs • Does not change with volume (# of units) produced • Management salaries, rent, R&D, buildings, equipment, marketing • Breakeven • # units sold x contribution per unit = fixed costs • After breakeven, contribution becomes profit NBC1 2008, (c) 2008　Jay A. Smith

  9. Margin Contribution Contribution = Revenue – Variable Costs Price to customer Price to Channel Variable Cost Cost NBC1 2008, (c) 2008　Jay A. Smith

  10. Breakeven Examples NBC1 2008, (c) 2008　Jay A. Smith

  11. Product/Service Customers COMPANY Money Business Model • How do we make our profit? • We sell _____ to ______ • How do we provide/add value? • How do we help customers? • Our _____ does ______ for customers? inputs NBC1 2008, (c) 2008　Jay A. Smith

  12. Toyota Total Cost of Ownership (TCO) What value do we provide to customers? Quality car, reliable, stylish, good mileage, easy finance • TCO of: • Copy Machine: • Computer: • Ink-Jet Printer: NBC1 2008, (c) 2008　Jay A. Smith

  13. Coca-Cola: Company Actions • Purchases Ingredients (caramel, sugar…) • Mixes them up in secret way • Adds water • Puts in cans and bottles – with distinctive marks • Ships them around the country/world • Puts them were they are purchasable/needed • Keeps them cold (or hot) Value Chain Inbound Logistics > Operations > Outbound Logistics > Marketing/Sales > Service NBC1 2008, (c) 2008　Jay A. Smith

  14. Coca-Cola: Customer Viewpoint • Drink in container • Variety of drinks • Convenience • Refreshment • Anything else? NBC1 2008, (c) 2008　Jay A. Smith

  15. Park 24Business Model Adds Value in 2 Ways NBC1 2008, (c) 2008　Jay A. Smith

  16. Dual Opportunity – Value 2 Ways • Model: Rent land + charge for convenient parking • Primary Opportunity – Parking Demand • Convenient parking • 74 million vehicles in Japan • 11 million rental spaces needed • Only 5 million rental spaces available • 6 million space gap • Secondary Opportunity – Space Supply • End of real estate bubble • More properties reasonably available • Strategy- Grow fast and preempt valuable spaces • Times only has 76,000 spaces so far As of 2006 NBC1 2008, (c) 2008　Jay A. Smith

  17. Product/Service Customers COMPANY Money Product/Service User COMPANY Other Service Money Sponsor 3rd Party Business Model NBC1 2008, (c) 2008　Jay A. Smith

  18. Toyota McDonalds Amex Uniqlo Amazon Value Chain Expertise Inbound Logistics > Operations > Outbound Logistics > Marketing/Sales > Service What are we really good at? NBC1 2008, (c) 2008　Jay A. Smith

  19. Finding a good business model • Unfair advantage (Dentsu, Microsoft) • Sustainability (hard to copy, preempt) • Market failures • poor information (Yahoo Auction) • old methods (Skype) • incomplete/hard to use products (hybrid cars) • Think about what could/should be changed NBC1 2008, (c) 2008　Jay A. Smith

  20. Great Business Model Characteristics • Proprietary product (Microsoft Windows) • Branded/brand building (Google, Coca-Cola, Gucci) • Repurchase/“Razorblades” (Bic, HP Printers) • Habit forming (Philip Morris) • Scale-reinforcing (Yahoo Auction/eBay) • Pre-emptive (Yahoo Auction/eBay) • Unfair Advantage (Microsoft DOS, IE, Media Player) • High Switching Costs (MSWindows, Office, email) • Leverage Outsiders (Microsoft SEs, Publishers) Goal: Sustainable Competitive Advantage NBC1 2008, (c) 2008　Jay A. Smith

  21. Business Model Characteristics NBC1 2008, (c) 2008　Jay A. Smith

  22. Prior Homework • Start thinking about a business idea to develop during the rest of the course • Visit the websites of 2 companies that interest you and/or related to a business idea you are thinking about. Look at their company information sections. What are their revenue sources? NBC1 2008, (c) 2008　Jay A. Smith

  23. Business Models of Selected Companies • How does company make money? • What is key way(s) company adds value? NBC1 2008, (c) 2008　Jay A. Smith

  24. Office Hour: Ｔｕｅｓ： 13:30-15:00 VBL 2F 電話285-3630 Revised Class Schedule 4/15(火)16:10-17:40 ① Intro to Venture Business & Industry Analysis 4/22(火)16:10-17:40 ② Intel Case Study 5/13(火)16:10-17:40 ③ Sales & Marketing 5/27(火)16:10-17:40 ④ Sales & Marketing Case Study 6/3 (火)16:10-17:40 ⑤ Marketing Project Presentations 6/10(火)16:10-17:40 ⑥ Ideas and Innovation 6/17(火)16:10-19:20 ⑦⑧Product & Service Presentations / Finance & Accounting 6/24(火)16:10-17:40 ⑨ Finance & Accounting (continued) 7/1 (火)16:10-17:40 ⑩ Business Models & Plans 7/8 (火)16:10-19:20 ⑪⑫Elevator Pitches / Investment & Valuation 7/15(火)16:10-17:40 ⑬ Presentation Workshop & Review 7/22(火)16:10-19:20 ⑭⑮Presentations 2 Classes Final Report: Team Business Plan Paper By July 29 (火）　 nbc1@bizsmith.com NBC1 2008, (c) 2008　Jay A. Smith

  25. Homework for Classes 11 & 12 • Investors & Valuation • Elevator Pitch NBC1 2008, (c) 2008　Jay A. Smith

  26. Elevator Pitch • Think of an idea to fix a problem in the world or expand a new opportunity • Energy, water, air, heat, pollution, forests, oceans, acid rain, noise • Humans, animals, plants, rocks • Housing, transportation, communication, information, knowledge • Government, corporations, communities, schools, associations, family • Entertainment, information, education, religion, arts, sports, beauty • War/weapons, hunger, homelessness, shelter, healthcare • Love, fear, vanity, lust, jealousy, hate, curiosity, • Whatever bothers you • Whatever you are really interested in • Money, jobs • Space, time • Life, wisdom, fun, happiness, joy • Make it your business NBC1 2008, (c) 2008　Jay A. Smith

  27. Today’s Global Challenges • Pollution • Hunger • Oil Shortage • Population Growth • Military Spending • Population Aging • Religious Fundamentalism • China Rising (supplier, consumer, politics,military) • Other __________ NBC1 2008, (c) 2008　Jay A. Smith

  28. Japan Issues • Economic Recession • Government Bureaucracy • Small land area/population • Oil Shortage • Population Aging • China Rising (supplier, consumer, politics, military) • Broadband • Wireless • Humidity • Other __________ NBC1 2008, (c) 2008　Jay A. Smith

  29. Finding an opportunity • Replace old way with new technology (Skype) • Incomplete/hard to use products • (hybrid cars) • Think about what could/should be changed • Look at early adopters/adapters of products • Find a customer with a problem to be solved • Market failures/poor info (Yahoo Auction) NBC1 2008, (c) 2008　Jay A. Smith

  30. Landmine Detecting Plant • Aresa BioDetection • Denmark • www.aresa.dk • Genetically-modified plant (thale) turns brown in Autumn if there is a landmine(地雷) or other explosive underground (NO2) • 100 million unexploded landmines around the world (BBC) NBC1 2008, (c) 2008　Jay A. Smith

  31. Individual Elevator Pitch 7/8 (火)30-45 second “pitch” (every person) • Pitch Content (ENGLISH): • Opportunity/problem being solved • Target market/customer • Product/service to be created • Value being created • Why it is better than competition • Business model (how firm will make money) • Anything else unique that will capture attention/interest • Pitch Goal: Get enough interest for a meeting • Choose the most interesting parts • Business idea to use for rest of the class NBC1 2008, (c) 2008　Jay A. Smith

  32. Start Pitching • 30 sec (soft stop) • 45 sec (hard stop) • 1 summary sentence – “hook” • Who / produces What / for Whom • Company/ Product / Customer Market • No PC or powerpoint • 2 questions from class/instructor NBC1 2008, (c) 2008　Jay A. Smith

  33. 1 Sentence “Hook” - Catch Phrase • Most interesting part • Captures listeners attention, interest • Has some value/connection for listener (investor) Examples: • We combine LCDs & Solar panels to provide light for millions of people in the dark • We make cars for blind people. • We use nanotechnology to double fuel efficiency • We work on the other big “silicon” application NBC1 2008, (c) 2008　Jay A. Smith

  34. A Generic Pitch [company name] provides [product/solution] to [target customer segment] enabling them to [key benefits]. Our product has the key advantage of [advantage] The business is led by [key people] who have [these appropriate backgrounds]. We start(ed) business [when] and plan to deliver our first products [month/year]. Our revenue is based on [revenue streams] We expect to become profitable in [year]. We have raised over [amount] from [key investors, types] NBC1 2008, (c) 2008　Jay A. Smith

  35. A Sample Generic Pitch 1) [WonderCar] provides [automobiles] to [blind car owners] enabling them to [more comfortably and safely enjoy their driving experience]. 2) Our product has the key advantage of [being custom tailored to blind car owners] 3) The business is led by [Steve and Dave Wonder] who have [backgrounds in business development, industrial design and human factors for the visually impared]. 4) We start(ed) business [this past January] and plan to deliver our first products [in the fall of next year]. 5) Our revenue is based on [sales to automakers, customizing houses and end users] 6) We expect to become profitable in [2007]. 7) We have raised over [$2.4 million] from [friends, family, Walden Ventures, the Ray Charles Foundation, and the U.S. Department of Transportation.] NBC1 2008, (c) 2008　Jay A. Smith

  36. Example Landmine Plant Pitch Aresa Biotech will provide genetic botanic solutions to governments and non-profit agencies enabling them to more effectively and safely deal with the problem of old weapons. Our product has the key advantages of safety, cost, ease of use and speed. The business is led by a team who have backgrounds in genetic engineering, government contracting, and U.S. Army. We started business in 2004 and plan to deliver our first products after tests are completed this year. Our revenue is based on government and NPO contracts We expect to become profitable in 2006. We have raised over $250,000 from NPO foundations and government organizations NBC1 2008, (c) 2008　Jay A. Smith

  37. Books チップに組み込め!―マイクロエレクトロニクス革命をもたらした男たち byT.R. リード ザ・ゴール ― 企業の究極の目的とは何か byエリヤフ ゴールドラット 「ネットワーク経済」の法則―アトム型産業からビット型産業へ…変革期を生き抜く72の指針 by カール シャピロ &ハル・R. ヴァリアン 知識創造企業by 野中 郁次郎 (著), 竹内 弘高 民芸　柳祖悦　Ｓｏｅｔｓｕ Yanagi 対訳 ブレイク詩集―イギリス詩人選〈4〉 岩波文庫 ウィリアム ブレイク Axis Magazine WWW www.dreamgate.gr.jp www.ideo.com 日経デザイン http://nd.nikkeibp.co.jp/nd/index.shtml www.Axis.co.jp www.digital-dime.com economist.com http://japan.cnet.com www.wirelesswatch.jp www.bfi.org Suggested Readings NBC1 2008, (c) 2008　Jay A. Smith

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