Transcript GTBMR - DramatisPersonae.org

GTBMR
Get.The.Business.Model.Right.
So the harder you work, the more
money you make!
GTBMR
“You Can Think Your Way to Wealth a lot Faster than
You can Work your Way There”
Dr. Bruce M. Firestone, B. Eng. (Civil), M. Eng.-Sci.,
PhD.
Founder, Ottawa Senators
Entrepreneur-in-Residence, Telfer School of Management,
University of Ottawa
Executive Director, Exploriem.org
Real Estate Broker and Mortgage Broker
Century 21 Explorer Realty Inc., Brokerage
Columnist, OBJ and EQ Journal
GTBMR
Academic Background:
-Professional Real Estate Brokerage Courses
-Ph.D. in Urban Economics from the Urban Research
Unit of the Australian National University, Canberra
-Master of Engineering-Science (Traffic and
Transportation), University of New South Wales,
Sydney
-Bachelor of Civil Engineering, McGill University,
Montreal
-Also attended: Harvard University (Finance),
University of Western Ontario (Economics) and Laval
University, Quebec City (French)
-High School, Ashbury College, Ottawa: graduated
1967, age 15
GTBMR
Former Positions:
-Former Director and Vice-Chair, Canadian Internet Registration
Authority (CIRA)
-Former Executive Vice-President, Business
Development, Momentous Corporation
-Served on National Hockey League's Board of Governors
-Founding Director, Ottawa Art Gallery (Arts Court/Firestone
Family Group of Seven Collection)
-Past Director, Terrace Corporation
-Former Publisher, Ottawa Business News
-Consultant, Bureau of Management Consulting, Supply and
Services Canada
-Operations Research Engineer, Metropolitan Waste Disposal
Authority, Sydney, Australia
-Research Scholar, Australian National University, Canberra
GTBMR
Business Courses Taught:
-Entrepreneurialist Culture
-Small Business Management
-Advanced Business Models (MBA)
Architecture Courses Taught:
-City Planning and Organization- Enterprise of the City
-Design Economics
-Real Estate and Development
GTBMR
Awards and Memberships:
-Awarded Canada 125 Anniversary Honorary Medal
-Member, Stanley Cup Monument Committee
-Member, Commercial Services Division, Ottawa Real Estate Board
-Honourary Member, Beta Gamma Sigma, International Honour Society
for Collegiate Schools of Business, March 2008
-Exemplary Course Designation, Design Economics, Canada Architectural
Accreditation Committee, 2004
-Winner, Educator of the Year Award, OCRI EduGala, Ottawa, 2002
-Member, Ottawa Commonwealth Games 2014 Bid Committee
-Member, Community Budget Advisory Team, City of Ottawa
-Member, Kanata Economic Development Task Force
-Member, Ottawa International Airport Authority Planning Committee
-Founding Member of CIRA's (Canadian Internet Registry Authority)
Marketing and Branding Committee
-Member, NHL Executive Advisory Committee, NHL Expansion
Committee, NHL Marketing and Public Relations Committee
-Member, Ottawa 67s Advisory Board, 1998/99
GTBMR
The Entrepreneurs Handbook:
Read it for FREE online at http://www.enhandbook.com/
Buy a Hard Copy on Lulu.com at
http://www.lulu.com/product/paperback/the-entrepreneurshandbook/14848132
GTBMR
Projects:
-Scotiabank Place
-Ottawa Senators
-West Terrace
-Briar Brook
-Robertson Mews
-Dunrobin Lake, Dunrobin Village
-Blue Heron Storage
-Mallorn Centre
-Royal Bank Pavilion
GTBMR
Charities and Not-For-Profits Supported:
-Christie Lake Kids
-Exploriem.org
-Trees for Hope
-Minor Hockey
-Muscular Dystrophy
-Ottawa Senators Foundation
-National Capital Alpine Ski Team
-Ottawa Rotary Club
-CHEO Foundation
Personal: Married with five children
Personal Interests: Past Chair, Bruce M. Firestone Atom Invitational Hockey
Tournament, Red Pine camper
Sports: running, tennis, sailing, paddle tennis, skiing, hockey, ultimate, yoga,
canoeing, dragon boat racing, hang gliding
Hobbies: reading, writing, inventing, creating, starting new enterprises, citybuilding, educating, collecting Canadian and American art
GTBMR
Entrepreneur Funnel:
ECQ Test  EQ Journal  Entrepreneurs Handbook (Read
free online or buy hardcopy) --> ADM3396 Entrepreneurialist
Culture  Magic from a Hat Lecture Series  BMG, Business Model
Generator  www.Twitter.com/ProfBruce  YouTube Channel 
Urban Dictionary (Prof Bruce and ProfBruce)  Elevator Pitch
Competition  Business Model Competition  Wes Nicol Business
Plan Competition  EIEF Competitions  BMIC Mobile App
Competition  MBA6298A Advanced Business Models  The Telfer
School of Management Entrepreneurship Concentration  IP Store 
Startup Garage  Research Funding  LearnByDoing.ca (Early
Stage Funding and Mentoring)  MiniOffice.org (Office
Space/Business Incubator)  IRAP  Exploriem.org Bootstrap
Awards and Adawe Trade Show  Institute of
Entrepreneurs  IOE3100 Entrepreneurialist
Culture  IOE5100 Startup DNA
GTBMR
Why do People become
Entrepreneurs?
Can’t get other work,
Hate their boss,
Work less hours,
To create more interesting work for themselves
than others can create for them,
e. Money is secondary,
f. Because humans with big brains and
opposable thumbs are driven to be creative
and change the environment around them?
a.
b.
c.
d.
GTBMR
Answers: d and f
Would I have had the opportunity to work on:
a. the Ottawa Senators/Palladium (now
Scotiabank Place)
b. 1,200+ homes
c. dozens of office buildings + shopping
centres
d. OBJ, etc. if I had stayed with GOC?
GTBMR
Entrepreneur skill set:
-bootstrap/self-capitalize
-take initiative
-do everything in parallel
-innovate
-ability to sell
-not easily discouraged
-business modeling, GM, SM, building cashflow, etc…
Relevant to Intrapreneurs too!
Intrapreneurs have skill set of entrepreneurs but don’t like
risk profile of entrepreneurs.
GTBMR
Who gets the promotion/green lite?
• Robert w/ new project costing $10m to develop
+ 2 yrs of R&D
• Amanda w/ new project costing $10m to develop
+ 2 yrs of R&D but she has:
-3 launch clients
-$2.5 m each of dev. capital
-1st 6 months of products.
Amanda’s project – green lited and she gets the
next promotion!
GTBMR
This skill set needed in
not-for-profits/GOC/NGOs/even charities.
-Sens foundation: 80% out/20% admin
>$50m (cash and in-kind) as of 2010.
80% efficient
People like to give to charities that are efficient (CLK,
Salvos) so they need a quality business model too.
Intrapreneurs need to make 97% of decisions by
themselves and 3% with others and know which is the
right 3%
-no one has time to baby-sit you anymore
GTBMR
How to build a new business (for
entrepreneurs ) or a new
Division/Product/Service for existing
business (intrapreneurs) in 10 Steps:
1. Select the right idea/get a good mentor
2. GTBMR – get the biz model right so the
harder you work the more money you
make (i.e., not Pets.com)
3. Add DV, differentiated value: “Pixie
Dust”/Innovation”
GTBMR
4. Create a compelling value
proposition/build cashflow/cash
conversion cycle: low or negative.
5. Self-capitalize/bootstrap (so you own it
and not a VC)
6. Use smart marketing/ GM+SM “Earned
Media”
7. Mass customize/make it scalable
8. Find launch clients/sell, sell, sell.
9. Execute expertly/good ideas are not
10. Set goals and make your own rules.
GTBMR
1- Select the right idea E.g.: GradeATechs.com
-2x U of O students / 2x CU Students
-5 ideas: each one worse than the one before
- “Silent alarm clock”
- No competition/never before tried/first mover –
all over-rated
- Maybe you have no competition because it’s a
bad idea
- If it is a good idea, you WILL have competition
- Grade A Techs value prop:
- A. explain in less than two minutes
- B. be compelling
GTBMR
-Virus/can’t print/can’t log on/can’t install software/…
-unplug your tower/get in car/go to “Mom & Pop” repair
shop/2 weeks & $150/not ready yet/another week
$200/return home/plug in/works fine but they wiped your
hard drive
OR
-GAT.com comes at appointed hour to your house or biz/fix
it same day on-site, guaranteed for $125
-600m PCs in N.A.
x30% don’t work
180m customers
-NerdsOnSite.com
-Google was not 1st search engine but was most trusted
-GAT.com > $5m/yr
GTBMR
2- Get the Business Model Right
-Biz model is the engine of the biz
-it is not a biz plan
-it is a 1-pg graphical depiction
-it goes into (at least 2 dimensions either side
(clients’ clients and suppliers’ suppliers)
IT IS A FULL BUSINESS ECOSYSTEM
-what do the clients of your clients want?
-GASnet is the “brain” of the biz (matches techies
to clients, contract billing, orders, supplies,
software, hardware)
-Sympatico/Rogers/others hate doing the ‘last mile’
GradeATechs.com
GTBMR
3- Reverse out the work
-the Internet is the most important new invention of the last
40 years
-it is where electrification was at same stage, 20 yrs in
-create custom outputs from standard inputs (e.g. new age
virtual home builder and Dell)
-reverse out the work to customers and suppliers (e.g.
Reddit.com and Threadless.com)
-match making (e.g. suppliers of customers at the Spa:
manicurists, pedicurists, massage therapists,
hairstylists…)
-mass communicate at ~ no cost (Twitter, FB, blog, email,
IM, messaging,…)
-Crowd sourcing (e.g. Reddit voting on stories/links,
Threadless voting on designs)
GTBMR
-relational d-base (e.g. Amazon’s: “See what
other people who bought this
book/CD/video/etc also bought?”)
Increased order size and overall volume
-user generated content by customers (and
suppliers) e.g.: YouTube, Twitter, FB,
Reddit & Threadless (suppliers: artist
community submit t-shirt designs voted on
by customers)
GTBMR
Virtual home builder:
-tried in 2000 to get home builders to do this
-very conservative industry
-put lots available and designs online in a
physics engine together w/ all
options/finishes
-allow everyone to use physics engine
GTBMR
-go online: choose lot, design, fit-up, finishes
(carpet, tile, kitchen cabinets, lighting
package, plumbing fixtures, etc.)
-put cash register online too
-consumer can see what granite or concrete
counter tops add to cost
-can fool around for 30+ hours
-then hit “submit” button
GTBMR
Homebuilders fear putting prices online –
their competitors might find out!
Ever heard of “Secret Shoppers?”
-Put CPM (schedules) online: let customers
see where their home is at and let
suppliers see too when they’re needed for
Footing and Foundation, framing, roofing,
windows, electrical, plumbing, insulation,
dry wall, paint, carpet, cabinets,…
GTBMR
-As more options are available, more users will visit the
site, as more users visit the site, more suppliers come
onboard and you have a virtuous cycle
-Now “Best Homes 4 U” is enjoying network effects
-Suddenly, the flow of cash could reverse direction w/
suppliers becoming advertisers and sponsors
GTBMR
• In the modern economy, the answer to the
question of ‘Who pays whom?’ isn’t always
obvious.
• Should a cable company pay ABC
because ABC has the content, shows like
Diane Sawyer and Primetime News?
• Or should ABC pay the cable company
because it has the feed and access into
millions of homes?
GTBMR
• Steve Jobs understood the importance of this
before he launched the iPhone
• He insisted that AT&T give him a share of its
subscriber revenues
• He used Apple’s brand to leverage
unprecedented concessions from AT&T
• He ‘might’ give them a share of app revenues.
• So he revolutionized yet another industry’s biz
model:
• Cell phone manufacturers went from selling a
’shrink wrapped’ gadget for a one-time payment
in a brutally competitive market that was racing
to the bottom to an industry with multiple
sources of revenues, some of which are
recurring: the holy grail of techdom.
GTBMR
• Imagine how much harder Steve Jobs and Apple
would have to work and how much lower their
productivity as measured in revenue per
employee would be without recurring revenues
from iPhone app sales and revenues,
advertising revenues on their mobile platform,
downloads of paid content from iTunes and a
share of their carriers’ subscriber fees?
• From a simple question and a tweaking of their
business model flow great benefits. The harder
they work, the more money they make and, in
Apple’s case, this relationship has become
geometric.
GTBMR
• You can see why Sam Palmisano (CEO of IBM)
has said he spends a great deal of his time
tweaking IBM business models
• I felt a long time ago that Nortel missed a great
opportunity to add more services (and more
stable revenue streams) to their hardware sales
by changing its business model to include
operating and maintaining the complex switches
they sold to their clients.
• After all, who knew these machines better than
NT?
GTBMR
• NT leadership focused more on high margin tech sales
than the less glamorous business of fixing and
maintaining stuff.
• Meanwhile IBM and later HP recognized that by selling
more services not only would they enjoy counter-cyclical
revenues streams but they would have a huge leg up on
the next round of hardware sales.
• By providing outsourcing, they became trusted advisors
to their clients, sat on the ’same side of the table’ as their
clients and could spec their own equipment to fix or
augment client networks that they now knew better than
their own clients did.
• They missed it and now they are dead.
• It’s a shame for all their stakeholders including Canada
and the blame lies squarely on the shoulders of their
leadership.
GTBMR
More about Best Homes 4 U:
-Allow lawyers access for e-closings
-Allow lenders access for e-funding
-Now if your WS attracts 10,000s of visitors,
you can get your suppliers and your
suppliers’ suppliers to pay for ads so more
people will buy higher-end products
(chandeliers, beveled mirrors, granite,
counter tops, home theatre,…)
-more options => more people => more
options => more people…
GTBMR
-In a virtuous, self-reinforcing cycle (Google
is also an example of Network Effects)
-30+ hours in Design Centre with clients can
become just 60 minutes
-Imagine the productivity increase for
homebuilder sales staff, lawyers,
mortgage lenders, the GC, the foreman
(Worst problem? Homebuyer questions
about when this or that happens..),
suppliers, trades, subs, …
GTBMR
Also, customer satisfaction increases since:
a) they get EXACTLY what they want,
b) they feel they had a hand-in its creation
(like Aunt Jemima Pancake Mix: just add
eggs and milk).
GTBMR
•
•
The folks who bring you this pancake mix
famously had an erroneous insight years
ago—they thought that by adding powdered
eggs and milk to their mix and eliminating the
instructions “Just add eggs and milk”, they
could save the busy consumer time and sell
more product.
It turned out that homemakers liked adding
‘real’ eggs and milk: first, they thought it was
healthier that powdered eggs and milk and,
second, they wanted to be involved in ‘making’
their kids’ breakfasts.
GTBMR
•
•
•
For most kids, you are what you do for them.
By taking this away, sales went down not up.
Best Homes 4 U, by involving the consumer in
the design of their own home are catering to a
deep seated need in humans to ‘buy-in’.
This is a powerful lesson for tech—giving
consumers the power to customize products
and services is big business. For example, Dell
is currently using Threadless.com’s platform to
allow artists to submit and prospective
customers to select winning designs for laptop
covers.
GTBMR
GTBMR
4- Create a Compelling Value Prop/CCC low
or negative
GradeATechs.com had a compelling value
propostion. Now let’s look at the CCC:
GTBMR
-The CCC is calculated as follows:
CCC = ART + INVT – APT
Where:
•
•
•
ART is Accounts Receivable at Year End multiplied by days of the year
divided by Annual Sales
INVT is Inventory at Year End multiplied by days of the year divided by
COGS, Cost of Goods Sold
APT is Accounts Payable at Year End multiplied by days of year divided by
COGS
The actual calculation of CCCs are surprisingly complex and so I put a
spreadsheet online to help you with this:
http://www.dramatispersonae.org/BusinessModels/CashConversionCycleM
easurement.xls
You may prefer using our CCC calculators in your browser, so we also put them
up for you at:
http://sheet.zoho.com/public/profbruce/cashconversioncyclemeasurement
GTBMR
E.g.. Acme Promotional Products: “One Product Model”
1x sale of $300.00 (Branded Pens)
COGS = $200.00
1/3 is paid to their supplier of Branded Pens when order
is placed -66.67
ACME asks for and receives a 50% down payment or
deposit when sale is made.
Therefore, you have:
AR = $150 (50% of $300)
INV = 0
AP = $133.33 ($200 – 66.67)
GTBMR
Therefore, Acme’s cash position increases as
sales increase
VERY IMPORTANT for entrepreneurs
GTBMR
-Fuel industries
-Fortune 100 Client list
-$1.0m orders
-CCC is >180 days
=>cash decreases as sales increase
-untenable biz model
-went from 10% down and balance >
completion/delivery + 30days to:
30% down, 2x 30% progress payments only +
10% (their profit) > complete/delivery + 30days
-now CCC is negative and FI is doing very well.
GTBMR
You can read more about this at:
http://www.eqjournalblog.com/?p=2257
and http://www.eqjournalblog.com/?p=610
-Cash Conversion Cycle, CCC
-How the CCC Affects Your Internal Rate of Return
-The Power of Leverage to Work for You and Against You
-Effectively Manage your Enterprise by Measuring your
Cash Position
GTBMR
5- Self Capitalize
-why?
-VC-funding is hard to get and takes a lot of time
-also, you may end up losing control of your business
-VC funded biz are just large biz w/ 0 revenues
-power comes from having real clients/real cashflow
-if you do go for financing and you do it at the mezzanine
stage, you’ll have more leverage
-Maple Leaf Design and Construction
Brain Saumure, B. Arch (CU and SOA)
Fred Carmosino, B. Com (Sprott)
-No serfdom for Brian: wanted to be his own boss
because he could create more interesting work for
himself than others could create for him
-Started with $0
GTBMR
What is cheaper? Debt or Equity?
Debt.
What is cheaper than debt?
Bootstrap Capital (e.g.: Trade Credit,
Deposits,…)
They’re FREE!
GTBMR
GTBMR
Sources of BC:
• Home Equity
• Trade (or Supplier) Credit
• Consulting
• Deposits/retainers
• Launch clients/pre-sales
• Receivables factoring
• Soft capital (Mom, Dad, Rich Uncle Buck)
• Credit cards (be wary)
• Trading
• Government grants
• SBL (Small Biz Loans)
• Sponsorships
• Ads
• Parents and royalties
• Financial leasing
+ much more
GTBMR
More Examples:
Internic.ca
-Pixie Dust = its name
-Lawyers, patent agents and TM/copyright specialists
and speculators know “Internet Nickname”
-CIRA releases dot-ca
-“Gold” rush
-DOC sues in Canada for “Intermic.ca” (owned
“Intermic.com” in USA)
-Rob Hall had GOC protection (Federal incorp. of
“Internic.ca Corp.”) and TM of name in Canada
GTBMR
-DOC loses (DOC controls the Internet –
13x root servers around the world.)
-Rob sets up multiple channels to ping
CIRA’s server (DAC, Internic, others –
all accredited).
-80,000 dot-ca backordered
75% success rate
-60,000 domains at $50/yr (then) x 2 yrs
-$6m in cash in < 72hrs
GTBMR
Pool.com
-Snap names $60/backorder up front
-Pool.com: “free to backorder/only pay if
successful”
-Several million backorders port over to
Pool.com
-e.g. if you have Manchester.ca and want
Manchester.com, if Manchester.com deletes
from VeriSign registry, Pool.com will get the
domain for you.
-$60 if successful or highest bid (when >1
backorder)
-Again multiple channels against VeriSign
server.
GTBMR
Make money while you lie on a beach!
GTBMR
6- Use smart marketing/GM, SM, Blogosphere…
E.g., Ottawa Business News (now OB Journal):
-wanted to bring paper boxes into Ottawa (1st to do
so in 1980s)
-Need political cover
GTBMR
-Positive T.V. coverage and radio coverage
(earned media)
-1st in N.A. to “save” people from Parking
Tickets.
“Entrepreneurs would rather ask for
forgiveness than beg for permission.”
-if we ask city of Ottawa <, they would either:
(a) say “no” or (b) convene a committee
GTBMR
…which would meet for two years, then say ‘NO’.
(Ottawa Citizen#, G+M#, “Ordinary” citizens##)
[# Entrenched competitors don’t want to give you a
hand up.]
[## Would argue “visual pollution”]
-Paper boxes are cheap advertising (GM –
“Substitute brains for money”) – 24/7billboards!
So, we dropped 120 paper boxes on Ottawa
sidewalks overnight.
…all h__l breaks loose
GTBMR
Lawyer letter threatens us
-We are ready w/ Phase 3 of the plan:
We write back citing Canadian Charter of
Rights and Freedom (introduced by PM
Pierre Trudeau) FREEDOM OF THE
PRESS
-This backs the city off immediately.
Phase 4: suggest to Mayor, license the
boxes at $50/yr/box
GTBMR
-Politicians love money and power.
Mayor agrees! …(@ $75/box/yr)
-$=power
-5,000 paper boxes @ $75/yr
=$375,000/yr new revenues
for the City
GTBMR
Costs to city = $0.00
Nicer car for the Mayor + Chauffeur!
-OBN (now OBJ) 120 boxes @ $75 ea.
G+M, OC, FP etc: 4,880 boxes @ $75ea.
Force larger competitors to spend big $ to
defend their turf
=Vietnam vs. USA (TOOTH TO TAIL
RATIO)
GTBMR
7. Mass customize/Make It Scalable
- Virtual homebuilder can produce an
almost unlimited # of combinations of
lot/design/finishes from a list of standard
inputs because the work is reversed out to
homebuyers who can spend unlimited
amounts of time on the physics engine
and virtually build their own homes.
-Totally scalable and, in fact, Network Effects
take place
GTBMR
Nine things the Internet Allows for the 1st Time in
Recorded History:
1.
Create custom outputs from standard inputs.
Mass Customize Products and Services
(http://www.dramatispersonae.org/CustomeOutputsFromSt
andardInputs.htm)
GTBMR
Mass Customize
•For the 1st time in 10,000 years of trading history, humans can now mass
customize products and services
•Service business can become scalable enterprises– never before possible
GTBMR
Primitive Village
•Ugh and Nnn in the 10th Millenium BC
•The families of Ugh and Nnn decide to co-locate to form a village, at first,
for the protection of both
•After awhile, they decide that Nnn concentrate his time on producing flint knives
while Ugh focuses on hunting
•After co-location and specialization, the GDP has increased to
seven antelopes and six sets of flint knives each month.
GTBMR
Primitive Village
• The formation of the new village results in a phenomenal increase in well
being
• So much so that this first village is producing goods surplus to their needs
• Sets up the possibility of trading with a third family, the family of Zll,
• Expert in producing textiles (animal skins) resulting in a further substantial
Increase in value for the emerging regional economy
• This simple example demonstrates why the ‘more pie for me’ doesn’t
necessarily mean less for you
(Went from custom inputs/custom outputs (lone tribe)  semi custom
inputs/semi custom outputs (primitive village/skill sharing/artisans) 
mass production (Henry Ford and the Model T)  mass customization:
with each change, huge improvements In human welfare)
GTBMR
Moral Underpinning of the Entrepreneur:
1.
2.
3.
4.
5.
Take care of yr business
So yr business can take of yr family
So yr family can take care of you
So you do not become a burden on yr fellow human being or the State
So you are in a position to help yr fellow human being which in turn helps
you take care of yr business
GTBMR
2. Reverse out the work to clients and suppliers.
(http://www.dramatispersonae.org/GTBR/GettingTheBusinessModelRight.htm)
3. Embed your enterprise in a networked business
ecosystem made up of your clients, your suppliers
and yourself plus your clients’ clients and
suppliers’ suppliers
(http://www.eqjournalblog.com/?p=581)
4. Match making—directly connecting your clients to
your suppliers making service industries scalable
for the first time ever
(http://www.dramatispersonae.org/TheInternetIsEatingAHoleInTheGlobalE
conomy.htm)
GTBMR
5. Mass communicate planet-wide through social media
and other Internet tools at almost no cost
(http://www.dramatispersonae.org/EntrepreneurialistCulture/FutureVision.htm)
6. Crowd sourcing (using the Internet as intermediary)
means relying on the wisdom of the crowd to, for example,
pick and vote on stories for Digg.com or t-shirt designs for
Threadless.com
(http://www.eqjournalblog.com/?p=1541)
7. Relational data base allows you to mine your customer
(or supplier) interactions so you can ask, if you are
Amazon (for example) questions such as: “Would you like
to see what other people who bought this book (CD, video,
etc.) also bought?” Increases average order size and volume
of sales.
(http://www.eqjournalblog.com/?p=1541)
GTBMR
8. User generated content, a form of reversing out the
work to customers or suppliers, underpins the
business models of YouTube.com, Reddit.com,
Threadless.com, Facebook, Twitter and many other
Web 3.0 enterprises.
(http://www.eqjournalblog.com/?p=1541)
9. Network effects are created when, for example, a
virtual homebuilder’s website becomes the go-to
place for design options a client can choose from.
• As more visitors use the physics engine of the site to
calculate what the costs are for their new home and all
selected options, more suppliers of household goods
(kitchen cabinets, plumbing fixtures, lighting packages,
counter tops, tile, carpet, home theatre, etc.) will want to
be on the site (and pay to be on the site) which will
encourage yet more visitors (i.e., prospective
homebuyers) to use it in a virtuous cycle, each
reinforcing the other. Google is an example of this effect
as well.
(http://www.eqjournalblog.com/?p=692)
GTBMR
Crowd Sourcing
In the case of Threadless, their marketing from Day
One has been confined to a limited repertoire
including:
1. Some paid ads on Facebook, Digg and Twitter
2. A voting system that their community uses to select
winning designs for Tees submitted by independent
artists
3. Using unpaid models for their Tees drawn from their
employees and consumers, many of whom have
friends that blog, Tweet, FB and vote on the matter
GTBMR
Crowd Sourcing
4. Extensive social comment on the whole
process
5. More recently, other companies such as Dell
and Alpargatas use (and pay to use)
Threadless’ voting system and community to
select winning entries for the design of PC
covers and sandals.
Here is Threadless’ Biz Model, circa 2010:
•The cost for each design they produce is quite low: they
pay the successful, independent artist $2,000.
•But they test many designs at the same time by way of
their voting system so the cost per design is much lower
than this and, happily, they can be quite sure that
designs that are approved by their customers for
production will also likely be bought by them.
•This year, other companies such as Dell and Alpargatas
are paying the company to use their crowd sourcing
system to select winning designs for PC covers and
sandals.
•This obviously helps Dell sell more computers and
Alpargatas sell more shoes but it also helps Threadless:
a) spread the word about what they do and b) turn their
crowd sourcing business model into a platform which
can be widely applied to other industries.
•This is an efficient and effective, early 21st Century
Business Model. It shows that you can put a ‘marketing
engine’ in front of your business that works, in a highly
energetic way, independently of your enterprise.
• Tony Greco and Greco Lean and Fit Centres use their
charitable foundation (The Foundation to Fight Obesity
in Children) as a kind of stalking horse marketing for
their fitness centres.
•Involvement in the Foundation by kids and their parents
to fight childhood obesity is almost certainly going to
lead to adult participation in Greco fitness programs—
either by the kids when they grow up or by their parents
dealing with fitness issues themselves.
•The Threadless and Greco examples show how the marketing
dimension of a business can itself be a ‘profit centre’ or, at least,
cost neutral.
•For Threadless, other companies will pay to use it and their
stakeholder group will do much of their marketing work for free.
•For Tony Greco, the amount of earned media he receives for his
Foundation is remarkable.
•If you are planning on going into marketing as a career or you are
thinking, as an Intrapreneur, of building a new division for an
existing firm or you are an entrepreneur, your job security/your
next promotion/your business success will be mightily enhanced if
you can turn your marketing costs neutral or negative.
•Postscript: Threadless might even be able to turn part
of their supply chain (the design side) into a profit
centre.
•Artists and corporations might pay them to have their
designs featured and voted upon in a sponsored
process much as Digg and Twitter allow sponsored
links and tweets, which, for authenticity sake, are
clearly identified as sponsored links and tweets.
•For a budding artist, what is it worth to them to see
one of their designs voted on and (hopefully) chosen
by the Threadless audience? Could be quite a careerbooster. Turning your supply chain into a profit centre?
Harry Houdini would be proud of today’s biz modelers.
•Postscript 2: In the above biz model, I show the business in a
square in the middle of the ecosystem and above it, a brain. The
brain is a crucial part of a modern business model. It is the part
that matches customers and suppliers, in this case, to vote on
designs.
•In other models, the brain matches suppliers and clients as, for
example, in a spa where suppliers are hairstylists, massage
therapists, manicurists, pedicurists etc. Clients can pick out
which services they want and which suppliers they would like to
book with and suppliers can book which clients they want and
how busy they would like to be.
•In both cases, the model allows the enterprise to reverse out
much of the work to their suppliers and customers.
GTBMR
GTBMR
8- Find Launch Clients/Sell/Sell/Sell
If you can’t sell your:
ideas/leadership/suppliers/staff/clients/customers/
boss/BOD
…you can’t be an entrepreneur or intrapreneur.
9- Execute
You have to be able to execute – ideas are not
enough.
-Won NHL franchise to Ottawa, what do you do?
(a) Party all night?
(b) Return from Palm Beach to Ottawa, organize a
season tix drive, collect $22m in cash in 10 days
nearly two years before opening night?
GTBMR
10 – Set your goals
If you are a downhill skier, do you
want to race before or after your
toughest competitor?
GTBMR
• You want to race 2nd!
• Human beings are incredible at
setting goals, internalizing them
and meeting them (N = ?)
• Our 1st year Sens team set
a democratic goal of > 22 points
• We even released it to the media
• Why?
• To get buy-in from players, coaches, media,
community and because the worst team
EVER (the 1972 Washington Capitals) got 21
• We ended the year with 24 points!
GTBMR
•
•
•
•
N=3
You need a minimum of 3 pre-launch clients
Why?
Because you can always fool one client, maybe two
into buying your product or service but probably not
three
• And also because every biz model ever conceived
changes when it comes into contact with RL
• Your launch clients will provide you with FREE
launch capital and FREE mentoring
“Follow the fastest (least effort) route to revenue and
form an early (and lasting) attachment to the customer ,”
Sir Terence Matthews (a ‘Terry’ism’)
(See: Sir Terence Matthews’ Ten Guiding Principles For a Successful Launch of your Next Startup,
http://www.eqjournalblog.com/?p=780)