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Business Model Innovation > Yeah > Flashcards

Yeah Flashcards

1
Q

A/B Testing (or “split testing”)

A

Testing two different versions to see which is more effective

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2
Q

Backward Integration

A

A form of vertical integration that involves the purchase of suppliers

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3
Q

Burn Rate

A

Rate at which a venture is spending its capital

usually expressed in cash burned per month

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4
Q

Business Model

A

“The rationale for how an organization creates, delivers, and captures value” (Osterwalder)

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5
Q

Business Model Innovation

A

New or different idea or method in business modeling

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6
Q

Cannibalization

A

Reduction in the value of one product due to the release of a new product by the same company

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7
Q

Commoditization

A

Lack of meaningful differentiation among goods (leading ventures to compete on price and not brand, and usually thin profit margins)

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8
Q

Customer Development

A

Four-step process to organize the search for a scalable, repeatable, and profitable business model:

  1. customer discovery
  2. customer validation
  3. customer creation
  4. company building
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9
Q

Debt Financing

A

Borrowing money with a promise to repay the amount borrowed, plus interest

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10
Q

Disintermediation

A

The removal of intermediaries in a supply chain

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11
Q

Economies of Scale

A

The cost of producing each unit decreases as the volume of production increases

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12
Q

Fixed Costs

A

Costs that do not vary with a change in the amount of goods produced

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13
Q

Forward Integration

A

A form of vertical integration that involves taking control of distributors

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14
Q

Franchising

A

A form of business organization in which a firm (franchisor) licenses its trademark and business methods to others (franchisees) in exchange for a fee and royalties

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15
Q

Freemium

A

A business model that provides basic services for free but requires payment for premium services (free + premium)

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16
Q

Gross Profit

A

Revenues minus cost of goods sold (called “gross margin” when expressed as a percentage of total revenues)

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17
Q

Initial Public Offering (IPO)

A

When a company issues shares to the public for the first time

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18
Q

Inventory

A

Raw materials and products waiting to be sold

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19
Q

Lean Startup

A

A startup that relies on validated learning, scientific experimentation, and iterative product releases to gain valuable customer feedback and measure progress (Ries)

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20
Q

Long Tail

A

Products that are in low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters (if the store or distribution channel is large enough)

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21
Q

Market Capitalization

A

Total market value of all of a company’s outstanding shares

multiply the # of total shares by the current share price

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22
Q

Multi-Sided Platform

A

Economic platform having multiple user groups that provide each other with network benefits

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23
Q

Minimum Viable Product

A

The smallest group of features that will elicit significant customer feedback (Blank)

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24
Q

Network Effect (or “network externality”)

A

Impact (positive or negative) that one user of a good or service has on the value to other people

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25
Q

Operating Expenses (also called “overhead”)

A

Expenses incurred in carrying out an organization’s day-to-day activities but not directly associated with production

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26
Q

Pivot

A

“A structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth” (Ries)

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27
Q

Product/Market Fit

A

Being in a good market with a product that can satisfy that market (Andreessen)

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28
Q

Scalability

A

A company’s ability to add significant revenue and not be constrained by its own structure and resources

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29
Q

Supply Chain

A

Network created amongst different companies producing, handling and/or distributing a specific product (from the supplier to the customer)

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30
Q

Switching Costs

A

Costs a consumer incurs due to changing suppliers or products

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31
Q

Upselling

A

Inducing the customer to purchase more expensive items, upgrades, or other add-ons

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32
Q

Value Chain

A

Activities by which a company adds value to a product, including production, marketing, and after-sales service
(Value-chain analysis looks at every step a product takes, from raw materials to the eventual end-user, to deliver maximum value for the least possible total cost.)

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33
Q

Value Proposition

A

Promise of value to be delivered to customers (The “job to be done” for the customer)

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34
Q

Variable Costs

A

Costs that vary with a change in the amount of goods produced

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35
Q

Vertical Integration

A

When a company expands its business into areas that are at different points on the production path (e.g., when a manufacturer acquires its supplier or distributor)

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36
Q

Viral

A

Self-replicating due to customer referrals

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37
Q

Working Capital

A

Cash available for day-to-day operations (Formula: WC = current assets minus current liabilities)

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38
Q

What is the Alternate Definition of Business Model?

A

“How the company creates value for its customers, employees, suppliers, communities, and financiers.”

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39
Q

What is the goal when making a BM, according to Scott Anthony?

A

Seeking the magical intersection of a problem that matters, a solution that delivers, and numbers that work.

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40
Q

Name 7 ways in which BMs can be important

A
  1. Understand venture as a whole & how elements fit
  2. Create more value for customers
  3. Deliver more value to customers and users through effective channels
  4. Capture more value through profits and growth
  5. Drive innovation in the venture (and industry)
  6. Optimize production and operational processes as well as partnerships
  7. Identify and test your assumptions and hypotheses… to reduce failure rates
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41
Q

Name and give examples of 10 shorthand terms for business models

A 
Auction - eBay
Bricks & clicks - Elgiganten(.se)
Direct sales - Oriflame
Disintermediation - Dell
Franchise - 7-eleven
Freemium - Spotify
Low-Cost Carrier - Ryan Air
Loyalty - Ica Maxi (bonuskort)
Network Effect - Facebook/Yelp
Tied Products - iPod/iTunes
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42
Q

How does Joan Magretta define the BM?

A

“Business models describe, as a system, how the pieces of a business fit together.”

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43
Q

Describe the components of Dell’s BM

A 
Innovative supply-chain management
\+
Direct sales
\+
Built-to-order computers
=
Business model innovation
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44
Q

What does Joseph Schumpeter mean with “creative destruction”?

A

“The process of industrial mutation that incessantly
revolutionizes the economic structure from within,
incessantly destroying the old one, incessantly creating a new one….”

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45
Q

Define “sustaining innovation”

A

Innovation targeting demanding, high-end customers with better performance than what was previously available

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46
Q

Define “disruptive innovations”

A

Innovations that disrupt the trajectory by introducing products & services that are not as good as currently available products but offer other benefits: simpler,
more convenient, less expensive

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47
Q

Who created “The innovator’s dilemma”?

A

Clayton Christensen

48
Q

What does the theory of disruptive innovation explain, simply put?

A

It explains how, under certain circumstances, the mechanism of profit-maximizing resource allocation causes well-run companies to get killed.

Basically, a venture’s successes and capabilities can become obstacles in the face of changing markets and technologies

49
Q

How does clayton Christensen summarize the innovator’s dilemma?

A

“In doing what they must do, every company prepares the way for its own disruption. This is the innovator’s dilemma.”

50
Q

Which are the two types of disruptions (Christensen)

A

1) New-market disruption

2) Low-end disruption

51
Q

Describe new-market disruption

A

Competing with ‘nonconsumption’ because new-market disruptive products are so much more affordable to own, and simpler to use, that they enable a whole new population of people to begin owning and using the product, and to do so in a more convenient setting.

52
Q

Describe low-end disruption

A

New ideas that grow by picking off the least attractive of the established firms’ customers.

53
Q

Where in the product lifecycle do you need to “cross the chasm”?

A

Between early adopters and the early majority

54
Q

How do HBR summarize “big bang disruptions”?

A

Now entire product lines—whole markets—are being created or destroyed overnight. Disrupters can come out of nowhere and instantly be everywhere. Once launched, such disruption is hard to fight.

We call these game changers “big-bang disrupters.” They don’t create dilemmas for innovators; they trigger disasters.

55
Q

Which are the building blocks of the business model canvas?

A
  1. Customer Segments
  2. Value Propositions
  3. Channels
  4. Customer Relationships
  5. Revenue Streams
  6. Key Resources
  7. Key Activities
  8. Key Partnerships
  9. Cost Structure
56
Q

Which are the four higher-level steps in filling in the business model canvas?

A
  1. Customers
  2. Offer
  3. Infrastructure
  4. Financial Viability
57
Q

Which are the five pre-canvas steps?

A
  1. Team Composition: Is our team sufficiently diverse to
    generate fresh BM ideas?
  2. Immersion: Which elements must we study before generating BM ideas?
  3. Innovations: What innovations can we imagine for each business model building block?
  4. Criteria Selection: What are the most important criteria for prioritizing our BM ideas?
  5. Canvas Prototyping: What does the BM Canvas look like for each short-listed venture that we’re considering?
58
Q

Describe the difference between organization-centric BM design and customer-centric BM design

A

-

59
Q

Name seven ways to segment

A 
Geographic
Demographic
Psychographic
Behavioral
Customer type
Pain
Passion
60
Q

Who said “Customer is the wrong unit of analysis. It’s the job” concerning value propositions?

A

Clayton Christensen

61
Q

What is the definition of a value proposition?

A

A promise of value to be delivered to customers

and the belief from the customer that value will be experienced

62
Q

Describe the value proposition canvas

A

Customer side (on the left, based on observations):
• Gains
•Pains
•Jobs

Product side (on the right, based on design):
• Gain creators
• Pain relievers
• Products/services

63
Q

What is the typical start-up mistake relating to channels?

A

Forgetting to account for how much of the value will be captured by channels (e.g. by the retailers you sell food to)

64
Q

Name five types of customer relationships

A
  • Self-service
  • Automated
  • Personal assistance
  • Communities
  • Co-creation
65
Q

Name six criteria for segment scoring

A
  • Depth of pain or passion
  • Budget (ability & willingness to pay)
  • Market size
  • Ability to reach (Sales, Distribution, Communications Channels)
  • Time to MVP
  • Fit with founder values and vision
66
Q

Customer groups represent separate segments if…

A
  1. Their needs require and justify a distinct offer
  2. They are reached through different distribution channels (e.g., retail stores vs. online stores)
  3. They require different types of relationships
  4. They have substantially different profitability
  5. They are willing to pay for different aspects of the offer
67
Q

Name seven types of revenue streams

A
  • Asset (product) sale
  • Usage fee
  • Subscription fee
  • Lending/renting/leasing
  • Licensing
  • Brokerage/matchmaking fees
  • Advertising
68
Q

Define cost-based and value-based pricing

A

Cost-based pricing:
Take the product’s costs and add a mark-up percentage (ignores customer)

Value-based pricing:
Estimating what consumers are willing to pay based on perceived value

69
Q

Name four types of resources

A
  • Physical
  • Intellectual
  • Human
  • Financial
70
Q

Key activities should satisfy the requirements of…

A

– Value Propositions
– Channels
– Customer Relationships
– Revenue Streams

71
Q

What is on the “business model checklist”?

A
  1. Mastered the context? (done your homework?)
  2. Gone outside the building and conducted customer interviews?
  3. Know your channel economics?
  4. Mapped the BMs of key partners and competitors?
  5. Drafted financial projections?
72
Q

Name the five types of financial drivers

A
  1. Revenue Model
  2. Gross Margin Model
  3. Operating Model
  4. Working Capital Model (CCC)
  5. Investment Model (upfront requirements, financing method, etc)
73
Q

Describe the stages of customer development

A
  1. Customer Discovery (Are there customers who want the product?)
  2. Customer Validation (Earn first revenue by selling your early product - OR PIVOT and go back to step 1)
  3. Customer Creation (Launch a startup, but the lean way)
  4. Company Building (Gear up to cross the chasm from early adopters to early majority)
74
Q

What are the four types of markets?

A
  • Existing
  • Re-segmented (low cost/niche)
  • New
  • Clone
75
Q

Which are the primary aims of the lean start-up?

A
  1. Improve success rate of innovative products

2. Design capital-efficient startups

76
Q

Which are the five lean start-up principles?

A
  • Entrepreneurs are everywhere (anyone who works with new products and services under conditions of extreme uncertainty)
  • Entrepreneurship is management (success can be engineered by following the right process)
  • Validated learning (experiment!)
  • Build-measure- learn feedback loop (and accelerate it!)
  • Innovation accounting (metrics, priorities)
77
Q

Which are the five steps in the lean start-up?

A
  1. Identify assumptions, risks, & initial ”leaps of faith” of venture idea & vision
  2. Test venture idea & specific hypotheses with MVP
  3. Use ”innovation accounting” & actionable metrics
    to evaluate results
  4. Decide to pivot or persevere
  5. Identify & tune ”engine of growth”
78
Q

Which are the steps in the lean feedback loop?

A 
BUILD (--> product)
•MVP
•Small batches
MEASURE (--> data)
•A/B testing
•live monitoring
LEARN (--> ideas)
•" five why's"
•"customer advisory board"
79
Q

Name four key innovation accounting metrics

A

Customer Acquisition Cost
Customer Lifetime Value
Churn rate
Viral Coefficient

80
Q

What was the awesome quote about MVP?

A

“If you’re not embarrassed by the first version of your product, you’ve launched too late.”

81
Q

Name six types of MVPs

A
  • Regular
  • Explainer video
  • Landing page (pre-order)
  • Wizard of Oz (fake automation)
  • Concierge (offer manual service that mimics product)
  • Disguised (tweak existing)
82
Q

Which are Paul Graham’s six steps “before the start-up?

A
  1. Are counterintuitive
    - only trust instincts about people
    - you only need advice that surprises
  2. Require expertise
    - NOT in startups, but in your customers
  3. Are not a game
    - there are no shortcuts, only doing
  4. Are all-consuming
    - you have A LOT to learn through doing
  5. Just try
    - there’s no way to tell if it’s right for you
  6. Don’t look for ideas
    - learn about things and problems that matter, with people you like
83
Q

Summarize the “Cambrian explosion” article

A

Cheap ubiquitous digital building blocks

  • -> global explosion of digital startup ecosystems
  • -> software is eating away at structures from the analog age
  • -> this may foreshadow far-reaching business world deveopments
84
Q

Which are Steve Blanks “six types of startups”?

A
  • Lifestyle startups (to live your passion)
  • Small business startups (to feed the family)
  • Scalable startups (born to be big)
  • Buyable startups (to be sold for 5-50MUSD)
  • Large company startups (innovate or evaporate)
  • Social startups
85
Q

How does Steve Blank define the business plan

A

“An operating document describing strategies addressing the ‘knowns’”

86
Q

What was the Steve Blank quote about testing BMs?

A

“Unless you have tested the assumptions underpinning your BM, it’s just an exercise in creative writing”

87
Q

How does Christensen explain that established companies usually can innovate, but not disrupt?

A
  1. When times are good, investments in untried things seem unnecessary
  2. When times are bad, you don’t have time to let new concepts grow and become profitable at their own pace
88
Q

Which are the six essential elements of Clayton Christensen’s theory?

A
  1. Tech progresses so quickly customers can hardly make use of it. Tech upgrades are simply a given.
  2. Companies earn attractive profits by stretching up-market
  3. Innovations that improve incumbents’ margins are “sustaining” rather than disruptive.
  4. Incumbents win in the “sustaining” department, even if they aren’t first.
  5. Disruptions target unattractive/ambiguous markets that are not prioritized by incumbents until it is too late
  6. New business who want to grow should try to disrupt
89
Q

How can disruptions grow to rival incumbents, in time?

A

By first taking root in a new value network in an emerging market, and then improving technologically faster than users’ expectations increase, meaning its possible to satisfy more demanding consumers.

90
Q

Why do corporate incubators tend to fail, according to Steve Blank??

A

Because they treat innovation as an exception rather than as an integral part of the business

91
Q

Why do incumbents suck at being innovative, according to Steve Blank?

A

Because their entire structure is based on execution, which increases efficiency but stifles innovation

92
Q

How does Chesbrough suggest that companies change to facilitate BM innovation?

A
  • Adopt an effectual attitude
  • Encourage experiments and failure
  • Plan for uncertainty and discovery
  • Identify internal leaders for BM change
93
Q

Which are the key points of Christensen’s “innovators solution”?

A
  1. Markets should be defined according to circumstances where purchasing decisions are made
  2. Use the circumstance as the analysis unit (instead of the customer)
  3. Don’t think the customer’s world is structured the same way you aggregate data

–> observe people and try to see what jobs they are trying to get done

94
Q

What are Justin Fox’s observations regarding bundling and unbundling?

A
  1. Companies often take down an incumbent by unbundling, then start bundling themselves = profitable
  2. Companies often bundle because it allows you to grow while focusing on your core business
95
Q

What is Steven Blanks advice on finding the right founders?

A

Focus on the left side of the canvas!

List critical activities –> which HR do they require?

Is it an integral part of company’s success? (if no –> outsourcing is an option)

96
Q

What are Nir Eyals observations about network effects?

A
  1. Network effects are nice but they don’t guarantee the BM
  2. Network effects that generate growth can not necessarily be monetized - marketplaces often fail to capture the value they provide
97
Q

Which are Osterwalder’s seven questions for assessing business model design?

A
  1. How much do switching costs stop your customers from churning?
  2. How scalable is your BM?
  3. Does your BM produce recurring revenues?
  4. Do you earn before you spend?
  5. How much do you get others to do the work?
  6. Does your BM provide built-in protection from comptetitors?
  7. Is your BM based on a game-changing cost structure?
98
Q

Which are Osterwalder’s three basic questions for BM assessment?

A
  1. Does the value proposition get your customers’ job done?
  2. How many people have similar jobs to get done?
  3. Is the job important enough for them to spend?
99
Q

Which are Kraaijenbrink’s “three shortcomings of the canvas”?

A
  1. It excludes strategic purpose
  2. It excludes competitors (which makes the value proposition hard to assess)
  3. It mixes levels of abstraction, leading some elements to get too much attention
100
Q

Osterwalder says competition is not part of the BM. So what is it?

A

IT IS A PART OF THE ENVIRONMENT

101
Q

What are Mullin’s suggestions for “making the customers your VCs”?

A
  1. Bring buyers and sellers together
  2. Get customers to pay upfront before production
  3. Paid in advance + subscription
  4. Take in unwanted goods and sell them
  5. Release products that build on the success of previous products
102
Q

What is Chris Fox’s core message about viral business models

A

Virality isn’t something you tack on at the end, it’s at the core of your BM

103
Q

What are Osterwalder’s three recommended tools for “burning your business model”?

A

Use the canvas to design the BM

Use customer development methodology to test your BM

Use the lean startup methodology for rapid prototyping

104
Q

Which are the three typical BM pitfalls according to Osterwalder?

A
  1. Falling in love with your first idea
  2. Not listening to customers hard enough
  3. Not testing your MVP hard enough
105
Q

Which are Ries’ key points of customer development?

A
  1. Get out of the building
  2. Determine the market type
  3. Find the market for the product as specified
  4. Go through the four customer development stages
106
Q

Why do many startups fail according to Eric Ries?

A
  1. The allure of a “solid plan”, “thorough research”, etc

2. Belief that chaos will sort things out –> management is key

107
Q

Which six things are wrong about the lean startup model according to Michael Sharkey?

A
  1. It focuses in features, not products
  2. It burns out the team with unnecessary testing
  3. Lean products are by definition not deep –> not easy to love
  4. Is discourages investment in long-term architecture
  5. It’s too focused on acquisition (“building a company around a few features only to be bought is plain wrong”)
108
Q

Grace Ng suggests five pitfalls in running lean startup experiments. What are they?

A
  1. Testing the wrong thing
  2. The MVP is bloated
  3. Testing is not quantified, so no one is accountable
  4. You are asking to sell, not to understand
  5. Not knowing what a real “pivot” is
109
Q

How is the canvas tweaked to become the lean canvas?

A
  • Key partners –> problem
  • Key activities –> solution
  • Key resources –> key metrics
  • Customer relationships –> unfair advantage
110
Q

What does Ash Maurya suggest for systematic BM iteration?

A
  1. Document your plan A
  2. Identify the riskiest parts of the BM
  3. Choose tactics that maximize SPEED, LEARNING and FOCUS
111
Q

What is Ash Mauryas quote about getting out of the building?

A

“Life is too short for building something that nobody wants”

112
Q

What are Ash Mauryas tips for talking to customers?

A
  1. Build the team around learning, not pitching
  2. Create a script
  3. Start with people you know
  4. Take someone along with you
  5. Record your learnings (keep it objective!)
113
Q

What are Jason Cohen’s examples of false “competitive advantages”?

A
  • Specific features
  • Number of features
  • Patents
  • “Better at SEO/social media”
  • Passion
  • Expertise/education
  • Work ethic
  • Low prices
114
Q

What is the core message of Norbert Haehnel’s article on BMs and company values?

A
  • BM innovation is an opportunity to reimagine your values

* The values need to be in the canvas. Soft variables should affect the hard ones.

115
Q

What is the core message of Steve Blank’s “It’s time to play moneyball”?

A

Investments should not be based on the team, the powerpoint and the demo.

They should be based on the business model’s repeatability.

By quantifying the developments of the canvas, customer development and agile engineering, startups could compete on “investment readiness level” rather than the typical three factors.

Business Model Innovation (1 decks)

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