Transcript Entrepreneurship and Building a Business Week 5

Week 5
Technovation
Lesson: Entrepreneurship
Agenda
• Topics:
–Introduction to Entrepreneurship
–Building a Business
• Parts of a Business Model
• Case Study: Angry Birds
• Activity
–Business Model
Can you recognize these
entrepreneurs?
You’re Right!
Steve
Jobs
Oprah Winfrey
Mark Zuckerberg
Mary Kay Ash
Do you know any female
entrepreneurs?
Sandy Jen is is a cofounder of Meebo, a
social media platform
Robin Chase is a cofounder and former CEO
of Zipcar
Caterina Flake is the
founder of Flickr and
Hunch
Gabrielle "Coco"
Bonheur Chanel
founded Channel
Think-Pair-Share:
What does it take to be an entrepreneur?
• What do you think are the personal
characteristics of an entrepreneur?
• What do you think it would take for you to
become an entrepreneur when you are
older?
Think-Pair-Share
What does it take to build a
profitable business?
Elements of a business plan:
1. Value Proposition
2. Market Size
3. Revenue Streams
4. Cost structure
5. Distribution Channels
Value Proposition
• What value do we deliver to the customer?
• Which one of your customer’s problems are you
helping to solve?
• Value propositions look like this: for (target customer)
who (statement of the need or opportunity)
(product/service name) is (product category) that
(statement of benefit).
• For example: For people without cars who
occasionally need a car to run errands Zipcar is a car
rental service that allows them to easily get a nearby
car to use
Market Size
• You want to build a business where
there are enough people who would
buy the product to make you $$$
–Who are all the people and
organizations for which you are
creating value?
• These can be both paying and nonpaying customers.
Market Size: Examples
– Zipcars’ potential market is all people in
the US with drivers licenses who don’t
have cars and live near a Zipcar location
– Google Search’s potential market is both
all people with computers and
smartphones that need to find data on
the web (non-paying) and advertisers
that want to put adds online (paying)
Profit = Revenue - Cost
• Profit is the extra money that you have made,
accounting for any costs incurred, at the end of the
day
• Lemonade stand example:
– If you sell 20 cups of lemonade for $0.50 each,
and each cup of lemonade cost you $0.10 (for
the paper cup, lemons, and sugar) …
– What is your revenue?
– What is your cost?
– What is your profit?
Revenue Streams
• To be a business, you have to make money...
The question is from whom, and how?
• Possible revenue streams
– Paid apps: many apps cost money to download
• Some of these have both a free version supported by
advertising, and a paid version with no ads
– Advertising: some apps are free to use but the app maker
gets money from advertisers (ex. Words with Friends)
– In-game purchases: some apps have bonus items within
the game that can be purchased with real money (ex. Farmville)
Cost Structure
• What are the most important costs in your
business?
– One cost could be the cost of programming
resources, although If programming by
yourself, that cost would be your own time
– If you were to turn this app into a real
business, what else would you have to pay
for?
• Marketing, so that people know about your application
• Costumer Service, in case your customers need help
• Others?
Distribution Channels
• How are you reaching your
customers?
• Which ones work best? Which are
the most cost-efficient?
Case Study: Angry Birds
• Angry Birds – a mobile phone
application puzzle game
Think-Pair-Share: Angry
Birds
• Value proposition: What value do
they bring to users?
• Market: Who is their market?
• Revenue streams: How do they make money?
• Cost structure: What does the Angry Birds company
(Rovio) have to spend money on?
• Distribution channels: How do they distribute their
app? (Where are all the different places where you can
download/play Angry Birds?)
Think-Pair-Share
Angry Birds: Value for
users
• Angry Birds frees people from boring
situations and provides
entertainment
Angry Birds: Market Size
• Users that have a suitable device and are
looking for entertainment through games
• Users can play Angry Birds on iPhone,
Android, Windows phones, or on the internet
• By making themselves available on
different platforms, Angry Birds can
reach a very large part of their market
Angry Birds Revenue
Streams
1. Advertising: People download the free
app onto their phones
2. Paid application: People can download
the ad-free version for $0.99
3. In-app purchase: Users can pay $0.99
for the Mighty Eagle to pass certain levels
4. Angry Bird merchandise: At this point,
they make more $ from merchandise than
the game
Angry Birds Cost
Structure
• The game took $ 122,880 to program in total
• Pay a cost to platforms:
– Facebook, App Store, Android, Chrome web
store, Google Play, Blackberry App World
• Operations:
– Rent for office building
– Raw materials for merchandise
– Salaries for Employees
– Computers and Development Software
Source: http://www.wired.co.uk/magazine/archive/2011/04/features/how-roviomade-angry-birds-a-winner?page=all
Angry Birds Distribution
Channels
• December 2009, Angry Birds hit the
App Store
• Apple App Store, Android Market,
Angry Birds Website, Facebook
platform, Roku platforms
• Stores for Angry Bird merchandise
Summary of a Business
Model
• Value Propositions
– What value do you deliver to the customer?
• Market Size
– Needs to be enough people who will buy your app to make $
• Revenue Streams
– If your app will be paid, how much will you charge for it?
– If you will have in-app purchases, what will you sell and how much will
they cost?
• Cost structure
– What are the most important costs in your business?
• Distribution Channels
– How are you getting your product to customers?
Activity: Business Model
• In your workbook, write down the following:
– What is your target market?
– How big is your market?
– What will your revenue streams be?
• If your app will be paid, how much will you charge for it?
• If you will have in-app purchases, what will you sell and how
much will they cost?
– Cost Structure?
– Distribution Channels?
Record your ideas in page 19
of the workbook
Task List
• Complete the business model for
your app. You’ll need it for your
business plan.
• Continue to work on the functionality
of each individual screen in your
prototype, starting with the easiest
components.