Jumpstart by Mike Nyenes

Mike Nyenes

JUMPSTART

Business builder And Accelerator

A practical guide to Entrepreneurship and enterprise creation

For Valerie-Anne and Roxanne.

Disclaimer ©Michael Nyenes “Customer Development” is a term coined by Steve Gary Blank. “Lean Startup” is a term Trademarked by Eric Ries. Product & Market Development, Inc. claims a Trademark for “Minimum Viable Product”. All other trademarks and copyrights are the property of their respective owners.

Table of Contents

Disclaimer Foreword Acknowledgements Who should read this book? Preface Introduction Section 1 – Product to Market fit Chapter 1 - Customer pain or Market need Chapter 2 – Product development and Technology Chapter 3 – Market Segmentation

Section 2 – Market and Sales Development Chapter 4 – Your competition Chapter 5 – Developing your Income strategy Chapter 6 – Addressable Market and Sales strategy

Section 3 – Business Process Development Chapter 7 – Supply Chain Development Chapter 8 – Developing the distribution channels Chapter 9 – Developing strategic partnerships Chapter 10 – Project planning Chapter 11 – Defining Funding requirements and strategy 5

Chapter 12 – Team members Chapter 13 – Developing a 3 year financial projection Chapter 14 – Coping with regulations and certification Chapter 15 – Environmental Impact Chapter 16 – Exporting and global expansion

Section 4 – Exposure and Promotion Chapter 17 – Business description Chapter 18 – Pitching Chapter 19 – Executive summary Chapter 20 – The final word

Foreword This is simple. You find an intense need; find a product to satisfy that need, go through validating the product, and the 20 step process that validates the entire business model—and you’re there. Or are you there? Grasping the 20 steps of the DeBarsy Model is easy; the challenge lies in implementing them. The model is much more than a “canvas;” it is a logic flow that you have to follow and adhere to. A mistaken commitment to the traditional startup process is going to lead to failure. Entrepreneurs fail because they passionately believe in their idea and then follow conventional wisdom on how to build the business—and it fails Most entrepreneurs assume that customers will buy their product and they just have to build it and customers will buy. You have to “get out of the building" and validate, validate and validate before you even build the product. Entrepreneurs innovate, customers validate. You will find it is a rigorous, analytical, integrated process. It will demand from you critical, implicative, inferential thinking. This ability may be found today in fewer and fewer people, but you need to be one of those people. It takes brutal intellectual honesty. Too much money leads to failure because it diverts from focusing on customers—and again customers validate. On the surface these steps may appear simple, but entrepreneurs forget, skip or bungle. I can promise that if you follow the logic flow faithfully, you will be successful. We have been helping start-ups this way for years. If you ever have a problem in implementing the model on you own, please go back to the steps of the book and consult with your mentor Keep moving forward—but intelligently. Paul deGive.

Acknowledgements This book is based on my personal experiences which have been influenced by many publications and practitioners over the last 25 years as a business development professional and recently mentoring business start-ups in the Global Cleantech Innovation Programme in South Africa. The Global Cleantech Innovation Programme is where the influence of the DeBarsy 20 element Business Model came about and my realisation that this is the process that I have been searching for, all these many years as a Practitioner. To him I owe many thanks and the others as well. The content was made possible by the revolutionary thinking of people who have contributed in some way to the awakening that building a business or a product requires specific processes and approaches. Many have contributed concepts and elements which have been the foundation or enlightenment of the entire spectrum of the Startup revolution and made it possible to develop a process for entrepreneurship, which is able to be taught and learned by those involved in start-up businesses around the world today. Here are a few sources that have inspired me and guided me in my quest to find the ideal process for training and assisting entrepreneurs to find and build a business. In the chronological order, as I understand it: •

Crossing the chasm written by Geoffrey A. Moore – 1991;

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Blue Ocean Strategy written by W. Chan Kim and Reneé Mauborgne – 2006;

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The four steps to Epiphany written by Steve Blank – 2006;

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The Lean Startup written by Eric Ries – 2009;

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Getting to plan B written by John Mullins and Randy Komisar - 2009;

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Business Model Generation written by Alexander Osterwalder & Yves Pigneur, - 2010;

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Value Proposition Design written by Alexander Osterwalder, Yves Pigneur, Greg Bernarda & Alan Smith – 2010;

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Lean Canvas – developed by Ash Maurya 2010;

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Running lean – written by Ash Maurya – 2010;

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The entrepreneurs guide to customer development – Brant Cooper & Patrick Vlaskovits2010;

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Presentation secrets of Steve Jobs written by Carmine Gallo – 2010;

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Pitch anything written by Oren Klaff – 2011;

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The start-up owner’s manual written by Bob Dorf & Steve Blank – 2012;

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Why the Lean start up changes everything written by Steve Blank – 2013;

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Cleantech Open – 2012;

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Lean UX written by Jeff Gothelf – 2013;

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Talking to Humans written by Giff Constable - 2014

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Lean Customer Development – written by Cindy Alvarez – 2014;

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Global Cleantech Innovation programme – GEF/UNIDO/Cleantech – 8 countries since 2014,

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DeBarsy Business development model © – Paul DeGive – 2014.

And it is my belief that whoever desires to understand the process and the intricacies of a start-up and to teach others how to build a business from an original idea to a successful scalable business should read the works stated above to appreciate the evolution and process that has brought us to this point. The list given is but a summary of the many contributions to this topic and is not intended to be exhaustive. I am convinced, you will appreciate the combination that is presented here as an end to end process rather than as individual concepts.

Who should read this book?

This book is intended as a practical guide and workbook for those who wish to become business owners or to improve a current business. Anyone who had an idea for a business and did not know where to start, they now have a process they can follow, to get that business up and running. Those who attempted to create a business and failed will also benefit. There are those who would like to start a business because they can see there is a welldefined process and it could be an alternative to their current employment or unemployment. Those entrepreneurs who have a business but would like to start a new business and wish to expedite the process. Those who already have a business and would like to expand into a different market or introduce a new product, irrespective of the size of the current venture. The business consultants, trainers and mentors, business development officers, programme managers and advisors who run incubators, accelerators, government development agencies and privately funded programmes and competitions and anyone who deals with enterprise creation, early stage ventures and product or market development. There are a huge amount of incentivised entrepreneurial promotional and developmental programmes worldwide who would benefit from the approach and processes described in the book. All the pitching dens and competitions participants and judges would also find value in the structure and content of the pitches and the extent to which they can see the logic and validated content of the slides and information presented.

Preface Let us bake a cake. Most of us have seen a cake being mixed and have a rough idea of the ingredients. How difficult can it be? A few cups of flour, half a cup of sugar, two eggs, a dollop of butter, a pinch of salt and a teaspoon of vanilla essence. We mix all the ingredients together in a bowl with a cake mixer. Pre-heat an oven to say 190o C. When the mix is nice and fluffy we place it in a cake tin which has been treated with a releasing agent. Place the cake tin containing the cake mix in the oven for 1 or 2 hours. That should be sufficient. Iâ&#x20AC;&#x2122;m not sure how the cake will turn out, but it should be tasty and edible. All of the above are assumptions and there is no way of knowing if the cake will be good, so we may have to experiment a bit to get it right

Or perhaps we need to find a suitable recipe and collect the specified ingredients in the correct quantities. Then follow the method described in the recipe whilst adding the ingredients in the correct order and even mixing certain portions separately first. After having heated the oven to a specific temperature then bake the cake for a determined time. This way we have a much better chance of success even if we have never baked a cake before. A repeatable, relatively risk free, recipe. A recipe we can learn and remember and bake over and over again with confidence. Maybe we can change the way the cake is decorated, to suit different occasions. This means that the experimentation has to a large extent already been done and we have some assurance that we will have a successful cake.

I intend to provide a recipe that will provide the entrepreneur with a step by step guide and a simple process of establishing a business, starting with an idea and building it into a sustainable, profitable and scalable business. Most of us have also seen the dreadful statistics for new enterprise failures and the associated reasons put forward for this phenomenon. I always ask the question â&#x20AC;&#x153;What is the solution?â&#x20AC;? It is relatively easy to identify the issues or the problems but a lot harder to provide solutions. We can bemoan the cries and failures but surely there must be a way to overturn these issues and re-write the statistics to read about the enormous success rate of new ventures and a renewed confidence in small businesses.

From my standpoint what has been lacking has been a well-defined process of enabling new ventures to find the markets, develop products and to build sustainable and scalable business models to enable them to survive and grow. I appreciate the huge contributions of the innovators mentioned in the previous section but, for me, none has provided a complete model. Here we have used the concepts and thinking of so many to combine them into an end to end process.

I have used the many of these elements as the basis of this book to provide the entrepreneurs and mentors a seamless guide to applying the elements and associated processes to take one from idea generation to a working and financially sound business model. I am a strong believer in the concept of an end to end process. We have many good concepts that have been developed over the last 25 years but for me there was still no defined process which provided an end to end solution. These concepts are great, but we need to stitch them together and create a seamless and logical process that can take one from the start of the process and build all the elements into a complete business model. In the same way as a manufacturing assembly line requires. All the components need to be delivered to the assembly line and there needs to be a specific station where each component is incorporated into the product. In that manner the product progresses from the beginning of the assembly line and systematically additional components are added until the last station where it will be tested and packaged for the end user and ready for shipment or as a subassembly ready for inclusion in another assembly process elsewhere on another production line.

What I propose here is a combination of all the great ideas and concepts that have been developed over the last 25 years and assembled them into an end to end process which can be taught to trainers and entrepreneurs. In this way we are able to train ordinary people to become entrepreneurs through a well-defined process. Once we have internalised this process it can be applied to any business idea and developed into a new venture. I have tried to describe each step of the process in the simplest terms to cater to as broader audience as possible. Am I crazy, of course I am? 12

In addition to the process is the terminology and vocabulary developed by so many and also applied in this book: •

Lean start;

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Early adopters;

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Earlyvangelists;

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Segmentation;

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Validation;

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Specificity;

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Hypothesize;

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Beachhead segment;

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Adjacent segment;

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Addressable Market;

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Market Type;

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“Non-traditional” Business Models;

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Positioning;

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Product – Market Fit (Customer pain vs Solution or Customer – Market need – Solution);

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Minimum Viable Product (MVP);

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Pivot;

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Iteration;

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Getting out of the Building;

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Customer development;

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Product development;

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Company building or Business building;

Introduction Start-up success can be engineered by following the right process, which means it can be taught. Entrepreneurship is about mastering this process and being able to manage the process from beginning to end, over and over again in several iterations. The traditional manner to start a business is to create a business plan which consists of a number of assumptions, we have a plan fraught with errors and doomed to failure. If one is to compare a Business Plan to a Business Model in practical terms. If a Rocket is the Business Plan and a car is the Business Model, we can start to compare the methods of operation and identify the differences between the two. The rocket requires all steps to be finely tuned and set prior to launch, much the same way we start a business with a business plan. A small error in calculation or assumption can steer the rocker thousands of miles off course. Driving a car requires very little set up prior to driving but requires millions of inputs and corrections to reach the desired destination, much the same way a business model is developed. Instead of making complex plans that are based on a lot of assumptions you can make constant adjustments by taking the wheel and driving your idea to a successful business venture. Actually drafting a business plan requires a huge amount of effort which ultimately is a waste of time and money, primarily because most of the assumptions in the business plans are leaps of faith. If they are factual it could lead to huge success, if they prove to be false, total failure. As a start-up we have limited or no resources at our disposal and cannot afford any waste.

A Business Model defines every step of the value chain that is required from raw material to satisfied customer in a replicable, scalable and profitable business. And all the parts of the strategy necessary to deliver a product to a customer and make money from it. This will require flexibility, tenacity, resourcefulness, ability to fail fast and learn quickly, iterate and pivot if needed. It means we have to adapt or die. Business models allow us to develop our business all the time until we find the exact model for the time being. It’s a constant state of flux that gives us the advantage. When Muhammed Ali came on the scene many of the heavyweight boxers were slow and flat footed, much like a business plan, he introduced the concept “float like a butterfly and sting like a bee” in that he was lean, agile, fast and mobile with the ability to adapt quickly, such as a Business model. He changed the boxing scene forever. We expect today’s enterprises to be lean, agile, fast and mobile and able to adapt quickly. Business plans do not give the lean, agile, fast and mobile features to a business, but 14

a business will allow them, demand them and thrive on them.

Important to note is that a start-up can be a new venture of a corporation or an individual. Size is not important. The same process applies to all new ventures. In every case the organisation is striving to realise an added value to customers, whether it be a product or service. What is important to note is that Chapters 1 - 3 are the Product/Market fit and Chapters 4 - 6 are the Marketing and Sales Development and Chapters 7 - 16 are the Business Process Development and Chapters 17 - 20 are Exposure and Promotion. So for existing enterprises it might be that the some parts are already in place and only a new product is being added as per Chapters 1 - 3. Of vital importance to this process is validation. To understand and to become the expert of the business we need to talk to customers and get their expectations and needs. This will require us to get out of the building and talk to the potential customers, suppliers, markets, partners and channels first hand through face to face contact or experimentation. This will highlight specifics and create deep first-hand knowledge of customers, markets, suppliers, partners and channels. Business model validation as a process or methodology that will validate the entire business model and get the start-up investment ready. It’s a logical, systematic, analytical multivariate process that eliminates chance. It also replaces the haphazard “roll of the dice” process normally associated with start-ups. It de-risks the investment for funders and investors by providing a well vetted opportunity for funding and investment. It gives the entrepreneurs and investors a logical model by which to assess the start-up’s progress and investment readiness. As with any process there are a number of specific requirements which are fundamental requirements which one should have in place prior to departure. Below is a random list of basic requirements: 1. Please keep in mind that the processes and chapters have been described in a generic fashion to cover as many business ideas and sectors as possible. I have avoided focusing on any specific type of business such as retail, services or software. In your validation process these will clearly have an influence on the way you need to approach clients, partners and the types of questions you need to formulate to determine the Customer pain or market opportunity. 15

2. Ensure you have a good filing system. You will need to do a huge amount of research for your endeavour and this will require you to assemble information for each chapter and for your slide deck which will support your pitch to funders or partners. Essentially, you will need to be an expert, or become an expert in the field or sector in which the business you are building will operate. Electronic data retention would be an ideal tool to replace or support a paper based system.

3. You will need to have access to a slide presentation software to enable you to build your slide deck. This is essential. The skill required to update and adjust this slide show and have various versions will be a big advantage. This will imply:

4. Access to a computer will be an absolute necessity for the slide deck development and for research and this means access to the internet. Many of us take this for granted but where these resources are scarce it will require you to make an effort to get access via internet café or similar.

5. I recommend access to BBC or YouTube for viewing the BBC programme “Dragons Den” and “Shark Tank”. It will be useful to see how investment pitches are performed and see what the good and bad pitches look like and the results. It will also give an insight into the way funders get deals done and what portion of the business you will need to offer and the types of roles the funders can play in your business. Early stage funders are not just a source of money, they should add value in some way too by contributing to the team.

6. Access to pitching dens or competitions. It will be very useful to pitch publicly and get scorecards, comments and feedback to enable you to refine your pitch before you pitch to investors. This will help you with confidence and feedback on what you are doing poorly and what you need to do to rectify and improve your slides. A valuable activity would be to attend pitching sessions in your area as an observer to gain additional insights.

7. Get access to a Mentor or an Advisor who is familiar with validation, iterating, pivots and the other activities, terminology and vocabulary used in this process.

8. If possible it would be a great help if you could enter an accelerator or a competition which uses this approach to get guidance from experts and organisers and to meet entrepreneurs who are also building a business on the same level as yourself so that you have a chance to share knowledge and experiences.

9. You will need to develop interviewing skills and your business will require you to do interviews and consult a minimum of 100 people in developing your business. It will require you to conduct interviews and surveys amongst your target market on an ongoing basis and the number could easily escalate to hundreds if not thousands.

10. Remember this is your business idea and will be your business, and you are the entrepreneur and it will depend on you to contribute the effort in order to make it a success. You will need to go the extra mile to see it all the way through to a fully operational and profitable business.

Lastly, the book is divided into sections and chapters. The first three sections divide each chapter into 4 components, namely: 1. The description of the topic with guidance and instruction to provide understanding of the concept and the tasks associated. 2. The Hypothesis you have as a point of departure. What you think the answer is from brainstorming with your team. I suggest you do the hypothesis for Chapters 1-10 as a starting point to capture your initial assumptions of your product, market and how you intend to go about selling that product. It will be useful later to see where you started from and where you eventually settled. 3. The validation that is required for you to either confirm your hypothesis or to iterate the idea and to perhaps pivot or possibly start again. Remember it is the Entrepreneur

that innovates but it is the customer that validates. You will need that validation soonest! 4. The slide that you will need to construct to convey the message to the partners, funder, audience at a pitch or to clients.

Pitching is an art you will need to learn, and it requires three very important components. Your presentation of the information about your business, your deck of slides that will assist you to paint the picture and the quality content captured in those slides. If any one of these is off, the pitch might not be as rewarding as you had planned. The work done on the 17 Chapters will assist in developing the slide content.

Your presentation and the confidence with which you present will be due to the quality of the validation and information you have gathered for each chapter.

Chapter 18 is about Pitching. Chapter 19 is about the Executive summary. Chapter 20 is for the final word.

Section 1 â&#x20AC;&#x201C; Product to Market fit

Chapter 1 Customer pain or Market need 1. The Customer pain or market need your product or service addresses. How big or how costly is the Customer pain or the market need. Be specific. How will your product or service reduce the Customer pain or the market need or the cost? The common understanding is that if you have a clever idea and develop that into a marketable product that you will make a lot of money. However, the success of such an approach has been proven to be disastrous. Most businesses formed from this approach fail as can be seen from the statistics shown in graph 1. In some sectors of industry this constitutes all new businesses or 100% failure.

Graph 1. 19

As can be seen from the graph that most failures result from a product for which there is no need, and secondly the enterprise ran out of cash. In the fourth category they got outcompeted. Now to me if a business ran out of cash it implies there were no sales, or due to no market need for the product. Outcompeted indicates poor understanding of the market opportunity. Ultimately it is an indication that you developed a product in isolation from the customer, and where the customerâ&#x20AC;&#x2122;s pain, market needs, market desires and market preferences were not considered.

As is always mentioned statistics can be deceiving, and the above stats I believe can be very misleading. It does not give an indication of those who actually could not get past the idea and start working on the business simply because they had no way of knowing where to start or what process to follow. Essentially these are the â&#x20AC;&#x153;non start-upsâ&#x20AC;? or failure to launch and we have no sense of what that number could be. It might be significant. Perhaps we have a lot more ideas out there that have not been tested or not taken further than an idea due to those issues.

= Figure 1

The assumption is that BIG Ideas result in huge financial rewards. This approach result in disappointment and failure.

= Figure 2 The issue here is that we have not tested the market to identify a need, an opportunity or a gap into which we will sell our product. The approach we have taken is to forget the old adage that â&#x20AC;&#x153;The customer is Kingâ&#x20AC;?. So we are going to turn this around and find a market gap, market opportunity or Customer pain first before we find a product that will fit the Customer pain.

For example: A client came to see me recently and she had been working on her product for some time. The product is an herbal dietary supplement. It is harvested from a tree, and a number of different products can be produced from the plant material. The leaves can be dried and used in the form of tea as a drink or the dried leaves can be packaged in capsules and bottled and taken orally as a supplement. The seeds can be pressed to extract the oil, which is mainly used in the cosmetics industry. The trees had been cultivated and were now of sufficient size to begin harvesting the leaves and seeds to produce the products. The trees had taken about three years to mature.

Her initial request was that we assist by having her products tested. In the agency I work for we get numerous such requests, but we do an assessment prior to assisting clients to understand the needs and issues that require remedial action. The product she had developed accompanied her and were on display. She bemoaned the fact that sales had been impossible to achieve and one client had requested the extracted oils be tested before they would consider a purchase. 21

I questioned her to understand which testing was required. Was it a purity test, moisture content test, testing to a particular standard or to a specification they would provide? The client did not know what test was required as she had not asked the client for those details. I was quite amazed that the discussion around the testing was concluded and the nature of the testing was not established.

Further enquiry proved that the capsules had also not been a success with clients either and upon inspection I discovered that the bottle was a clear plastic and the capsules were also clear providing me a view of the dried leaves inside the capsules. I am not an expert on supplements but I am quite sure I had never witnessed anything along those lines on a shelf in the local pharmacy or drug store. I also noticed that the label on the bottle had no bar code included.

As you will now be aware, it is clear that this person has not been to validate her idea with her prospective clients. If she had taken the time to make the basic interviews and build a relationship with these prospects by enquiry and investigation to achieve an understanding of the requirements and expectations of products of this nature before she purchased the bottles, capsules and the labels. It would have been far better for her to understand the requirements for supplying the seed oil extract, whether it be testing or other requirement before attempting to sell the product. I had another encounter with a client who was looking to establish a Lodge in a rural setting. The meeting was arranged by a partner organisation responsible for tourism. It took some arranging of our diaries to finally meet. The person arrived at the meeting and requested we develop a business plan for the Lodge. My enquiry was initially to establish what was the nature of his plan and requested him to give us a rundown on the idea. He promptly rolled out a building plan for the facility, which essentially was a boutique hotel. I started to ask some basic questions about the market, available land and the environment where this facility was to be established. Firstly, I established that there was no electrical connection within 2 kilometres and no idea of what it would cost to establish a connection, there was no water on site and had no idea what it would cost to drill a borehole, and he had no idea about the occupancy rates of the other accommodation facilities in the immediate area and whether they were making money. 22

He was aware of a casino resort some 10 kilometre away, but was not sure of the occupancy rate for the resort. Again it was clear that the entire idea was encapsulated in the building plan he had drawn up. And no further validation had been done. I was not going to do any further enquiries until he had made the necessary basic validation of the market need for such a facility. If the surrounding venues were running at an occupancy rate of 80 to 90% then it would be something to consider. Obviously a lot more information will be required before any building project could be considered. These examples are quite normal for many start up endeavours, and considering the failure rate one should not be surprised. Before we build anything. Before we invest in anything we should do the validation. In this approach we will ignore the product and focus primarily on the market, the client, the Customer pain experienced or the market opportunity available. At this point in the process your product is of no value. We need to test the market by validating your hypothesis. â&#x20AC;&#x153;Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young.â&#x20AC;? â&#x20AC;&#x201C; Henry Ford.

Do not try to sell your product or service at this stage!

2. Hypothesis. Record your initial idea and what you believe to be a valid market for your product in your set of assumptions for each of the first 10 questions. We will return to this set of assumptions after we have fully validated the market in section 3. This way you will be able to compare where you started this quest to where you ultimately landed.

3. Validation. Do the research by talking to people about the Customer pain or the market need that they experience and what are they prepared to pay for a solution. 23

This approach requires you to “Get out of the Building” and to determine what people are experiencing in regard to the Customer pain, market need or frustration. Ideally, we want to find a serious amount of Customer pain, market need or frustration not a mosquito bite type Customer pain, rather a shark bite Customer pain. The bigger the Customer pain the more likely we have a viable market opportunity. You might ask, “Why do I need to talk to people about Customer pain, market need or frustration?” This process is referred to as Customer Development and you need to find out what potential customers are experiencing and what their market needs are. What are the customer requirements you need to satisfy in order to enter the market successfully?

What is important to note that this validation activity is not just for start-ups with no products, it is just as useful for enterprises who already have customers and existing products and, who would like to introduce a new product to their portfolio?

The concept of validation or customer development stems from the lean approach which states that we need to find out from potential customers what their needs are before we build anything. In other words we can have an idea, but before we develop that idea we test it against our customers and learn to change our minds about what is correct before we build. In a way we fail fast and learn more. This allows us to make changes to our idea and to test the new idea with our customers. In this way we do not need to modify the product we already built. We do not need build a product yet and that is the lean aspect of the approach. We are learning without building a product and instead we are talking to potential customers and getting a detailed idea of what the correct product is to build. We can get to a point where we are very specific about the details and features of the product. This is a very generic description of the process, but the purpose is that we need to do the learning on paper or in a minimalistic approach before we spend heaps of money on a product or service the market does not need and will not buy.

In some instances nothing would be just too little. In a balanced scorecard strategy 24

meeting colleagues of mine identified an online service as an aspect we need to add to our enterprise development services. A number of meetings and planning sessions were held to plan and strategize the new online platform. In an unrelated meeting the question of the online platform got raised and a debate ensued about the needs of the organisation versus the needs of our clients. I raised my concern by proposing a minimal viable product approach. There were a few confused stares around the table until I explained. Why not build a platform with only our most basic need developed. Our basic need is for a client to register with us as our CRM software system process is initiated by a registered client. Leave all other services or tools we offer and had discussed off of the online service and let the clients dictate what other aspects of enterprise development they expected to find on the platform, or what services they expected to find from a government agency responsible for enterprise development. In that way we would not build a platform with features that we had decided upon but rather those that the client deem necessary for them. This is a lean approach as we would not develop anything until prompted by the client to develop a specific feature. We can save a lot of resources by not developing features we devised, which the clients might never use. Conversely, we might not develop features which the client would really need or like to use.

Obviously, like most things today, customer development or validation is a skill and something we need to practice to get better and become more skilled. In essence we need to begin listening to the voice of the customer. This takes practice and is counterintuitive. We need to take the position that everything we know is wrong. We need to learn from scratch. Start to listen instead of talk. Hear what the market is saying.

Who to talk to and what to ask in your specific instance is critical to getting the correct feedback. If you approach the wrong people then all the questions you ask will derail your validation. If you talk to the correct people but ask the wrong questions then you will clearly get the wrong answer. So you need to be listening very carefully when you start the process with people for instance, start with people you know. But do not talk about the product, talk about the Customer pain. Once you get some ideas from the closest to you then you can begin to increase the circle you talk to and get them to recommend people who have the same Customer pain. Part of the learning process here 25

is to about finding the correct people to talk to in your market and to learn to ask the correct questions. The process is all about the discovery of the right people, their Customer pain and market needs, the right questions, better questions, customer perceptions and needs. The correct people to talk to would be those you believe are in the market you intend to address and would be able to express an opinion on the customer pain or market need. Cindy Alvarez in her book â&#x20AC;&#x153;Lean Customer Development ÂŠâ&#x20AC;? gives an example of how to find the user experience rather than just customer choices and preferences. She indicated that a retail food outlet had milkshakes as 40% of their early morning sales. They decided to interrogate the market to see how to increase those sales and began asking customers what their ideal milkshake would be. They had many inputs and began adding the new choices to the menu. After some time they again visited the early morning sales statistics to find they had not changed the buying pattern of their customers or increased the sales of milkshakes in any way. This time they engaged some assistance and started to question customers about their experiences and some really interesting information emerged. Customers were mostly commuters and were on their way to work during the rush hour and had not eaten breakfast. They were concerned that they would be hungry by 10am, and wanted to have a boost to last them until lunch time break. Because they were commuting, they only had one hand free, and a milkshake was the most convenient and nutritious option to fit that combination. The lesson here is that it is not about your product but rather about the customer experience and market need. I suggest you read her book as it gives insights into the customer development process with some good examples and guidelines. Important to note is to ask the correct questions to get to the Customer pain or the market need and not to focus on the solution.

The interview process can be daunting, but if you start the process with people who you know have the market need you plan to solve, it can ease the burden. Those who you originally assumed would be buying your products. If you find these are not the quite the right people to talk to, then the discussion should direct you to the right people. In market segments we will talk about the communication between people who operate in 26

a specific market segment. You will need to get into those circles, attend the same conferences, attend the forum meetings and get to know the movers and shakers in that segment and introduce yourself. That way the ice is broken for later interviews about the Customer pain. If you want to be an expert in a particular segment of the market you will need to be familiar with those people too. You will not break into a market where you are not known by a single person. Get out of your building and invade their space. That is where the Customer pain is, that is where the market is, that is where your market opportunity resides. Customer pain can also be described in layers â&#x20AC;&#x201C; There is the global Customer pain, maybe there is a country Customer pain, or even the district Customer pain and obviously the specific customer pain. We need to be able to describe all the layers that are specific to our product or technology.

Once you have a detailed understanding of the macro, intermediate and micro Customer pain or market need, you will need to do identify the value of the market opportunity. Identify the extent of the market need and to quantify the Customer pain. If the opportunity is so small that sales will be hard to find, how can you make a viable business out of that Customer pain. If the Customer pain is a shark bite Customer pain and there is a massive market opportunity then you have a quantifiable market to plunder. This will require you to determine the cost of the Customer pain, the cost of the current solution, the wasted time, the amount of effort this Customer pain requires to by-pass and the financial implications and to determine if you can provide a cost effective solution.

4. Slide number 2. ( I will explain why not number 1) What is the global Customer pain? What is the micro Customer pain? Quantify the Customer pain in monetary terms. Try to represent the Customer pain graphically or in a picture.

Keep it brief 27

Remember that your pitch needs to be less than 10 minutes for a full pitch and shortened to 6 minutes if needed. Sometimes it might be required of you to do an elevator pitch which as the name indicates, in the time it takes to ride up or down a few levels in an elevator.

Figure 3

29 Figure 4

Chapter 2 Product and Technology. 1. What is your product? What is the benefit and who will benefit? How does it address the Customer pain or the market need and what is different from the competition or alternatives. Clearly from the discussion that has gone before, the product is the last thing you need to be developing if you have not validated the Customer pain, market need or gap in the market. So, if you have not followed the process described in Chapter 1, you should not do product development. Does your technology provide a competitive advantage? Is it your own technology or can anyone obtain this technology? If you claim to be the originator of a specific technology, you will need to understand the notion of developed technology. It will require you to determine the origins of the technology you employ. If you were previously employed, founded or were a partner in another business or studied at a university where you were exposed to or worked on technology of a similar nature or in the realm of similarity, it could be that they (The Previous employer, partner or university) will see some value in having contributed or somehow co-developed or even assisted you in the development or somehow funded the research which led to your development. So it is imperative to ensure you have total freedom to utilise the technology without any prior art claims being made against you. If you developed this technology or system have you got proof of concept, Prototype, working model, or operational versions. Has this been validated/tested/verified independently?

What is your technology? Is it of significant value for you to patent the technology or the unique elements within the technology? Do you have the available funds to finance a costly patent application? Are you willing to disclose your â&#x20AC;&#x153;secret sauceâ&#x20AC;? via the 30

patent which will only afford you protection for a limited period, say 15 years?

Alternatively, one can keep significant technology a trade secret which will afford you unlimited protection whilst the secrecy holds. This implies a number of steps which you will need to take to protect the secrecy. Firstly, limit the number of people who have knowledge of the specific secret technology. Secondly, it will also require everyone who is privy to the technology or is somehow involved with the business to be subject to non-disclosure agreements. Ensure you have researched the requirements for an NDA well to cover all aspects of the scope, exclusions and the length of enforcement. Be sure to include all founders and yourself in the requirement for NDA’s. The best approach would be for all founders to meet and sign the NDA’s together, including yourself, as a show of solidarity in achieving the business objectives and a non-biased approach. This then opens the door for all employees and future employees to be subject to NDA’s as well, without bias. Obviously a trade secret is not based purely on people signing NDA’s. It will require measures and controls to ensure the secret is not disclosed in any way. You will need to take the necessary precautions and reasonable efforts to maintain the secrecy. When you employ staff to work at developing new technology it is important to specify what their role is in relation to the company and make sure contractual steps to assignment employee invention.

Other aspects of intellectual property relate to Copyrights © which can protect products such as software and written works and provide protection for life plus 50 years in most jurisdictions. This will only apply where the material is unique and can be proven to be exclusively own creation. Be sure to make reference to material that you have made use of from others or obtain permission to use their material to avoid plagiarisms and subsequent claims. Furthermore, Trademarks ™ and Registered Trademarks® can apply to logo’s and pay off lines and slogans by adding the ™ symbol an unregistered Trademark and ® for registered Trademarks. Beware of other trademarks that exist and could sometimes subconsciously have inspired your logo or pay off line. Do the necessary searches and validate the authenticity of your Trademark before you go public as this might infringe 31

on others rights.

If you are using existing technology, is it freely available and what is the cost? Are you experienced in the use of this technology or will you need to acquire those skills?

2. Hypothesis. Create your idea of the product as a starting point before you validate the Customer pain. This should be the product that originally gave you the idea to start a business. Or perhaps this is a new idea for a product you had before the validation process began on an existing business.

Make your hypothesis regarding the uniqueness of your technology and if you have any rights regarding the IP. If you have no unique technology, hypothesise regarding your ability to leverage your technology to beat the competition.

3. Validation. Identify the key features that relieve the Customer pain you have validated in the previous element. This means that you have made the necessary changes to the product due to market Customer pain or opportunity identified by your validation efforts by talking to clients. Perhaps you have made a number of iterations to achieve the Product – Market fit.

If there is no direct correlation between the Customer pain and the product you will need to make the necessary changes to achieve the Product – Market fit. It could be that your original hypothesis is completely off the Customer pain and you will need to pivot, in other words you might need to re-think the product to upgrade or modify your offering to achieve that direct correlation to the Customer pain. “Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.” – Steve Jobs.

What we need to establish is that the key minimum features of your product match the 32

micro Customer pain experienced by the target market and buyers. Anything less and we have a product where there are no market need and subsequently no buyers. Refer back to graph 1. “Failure is simply the opportunity to begin again, this time more intelligently.” – Henry Ford.

Without Product-Market fit you have no business and there is no point in progressing to the next 18 Chapters. The next Chapters in the business model development are all dependent on the Product-Market fit. When you have established the Product – Market fit and you are confident that the minimum feature set of your product is a direct match to the Customer pain you have validated previously, then we can unpack the product further.

How will your product relieve the Customer pain and what is the value proposition? If you have correctly quantified the Customer pain then you need to identify what the value of your product as a Customer pain reliever. There needs to be a discount for those with the Customer pain and you need to calculate the saving and other benefits that occur when you relieve the Customer pain. You need to provide a tourniquet for the shark bite to stop the bleeding and medication to kill the Customer pain. Unpack those benefits and quantify them to create that “Must have solution” for those with the Customer pain.

Another key aspect that needs to be identified is the remaining Customer pain which your product is unable to relieve at this stage. It could be that the legacy solution only remedies a small part of the Customer pain, say 25%. Your solution is solving a huge amount more of the Customer pain, say 75%. The remaining 25% is the further development that you are able to do once your product has been accepted into the market and you are able to fund the development which will increase your ability to solve 95% of the Customer pain. Version 7 for example. And later still you may be able to develop the product further to remedy 100% of the Customer pain, in version 10. It 33

might be that by the time you reach a later stage the Customer pain might have shifted and you begin to lose ground to the Customer pain and need to catch up. All these new versions or iterations will be driven by continued validation and customer interviews and surveys

Are alternatives available and how is your product able to perform better. Make sure you are familiar with the legacy solutions and their effectiveness. It is essential that you become the expert in all the solutions available and the pros and cons of each. Evaluate their ability to solve the same Customer pain you intend to solve. Ask the customer to give you feedback about the legacy solution so that you get a client perspective on what works and what does not. Do not make the same mistakes they have made. Learn from your competition.

They say a fool makes the same mistakes over and over again. A clever person learns from his own mistakes. A genius learns from others mistakes. Validation ensures you do not make mistakes.

Have you developed new technology? Have you made Intellectual Property searches on Google to give some indication of freedom to operate? Is there a similar technology available in the market or in your google search? How close is that similar technology to your IP? Have you approached a Patent Attorney to start the process of registering your IP? Is your technology freely available, and do you need a license to operate with it or is it public domain?

All these questions need to be validated and identified specifically so that there are no obstacles to your utilisation or operations. A client of mine developed a radio-active absorbing button for use in mines. The product was the only solution available to determine the amount of radiation absorbed by miners underground. It took 3 years of testing and accreditation to be approved as a provider of screening services for mines. The protection for his product came in the form of a long and costly testing and accreditation process. He had a monopoly and was confident that it would last at least 3 years before another product could enter the 34

market once they began the accreditation process. The most well-known example is Coca Cola, where the recipe of the syrup is a trade secret and has been protected on that basis for more than 100 years successfully.

Obviously if you have no unique or specialised technology, then you need to evaluate the systems and processes you use to determine what is unique, fresh and inventive. You will require some super productivity, clever process or system to give you that competitive edge over the competition, and maybe you need to consider the value of that uniqueness and find ways to shield it from public view or competitor scrutiny.

4. Slide. Identify the Product – Market fit. Identify the quantity of Customer pain the product will relieve. Give an indication of the cost of the Customer pain or market need in terms the audience will comprehend. How much money, wasted time, frustration, lost income, lost customers, the extra miles travelled and how you will solve these Customer pains, market needs and market opportunities. You will be required to demonstrate that the value proposition is beneficial to the customer as the amount of Customer pain experienced or remains after the legacy solution is applied allows you to extract an additional 30% to 50% value and profit out of the market. This will indicate that there is potential for your business even if the legacy solution remains active in the market. Therefore, each feature of the Customer pain identified should be counteracted by a feature of your product. So make sure the audience sees the match between the Customer pain and the solution you provide.

Also you will need to indicate at what stage is the development of the product. Do you have a proof of concept? – Theoretical or tested? Do you have a prototype? – Is it customer validated? Is the product already developed? – Do you have a pilot or being shipped? Do you have a sample of the product on hand to use a focal point to your presentation, not to use as a demo, just a focal point? 35

If possible make a graphical representation of you technology or process and identify where the unique technology resides. Do this on a separate slide. You will not be expected to disclose your â&#x20AC;&#x153;secret sauceâ&#x20AC;?. You do not need to disclose the specific details of the secret, but can use a black box approach in your graphics to show where it resides in the process. If you have a service or retail business then the innovation that you have in your process which sets you apart from the competition, as your secret sauce or ingredient.

Chapter 3 Market Segmentation. 1. Can you define the market for your product or service? Are you able to segment your market into well-defined groups? Does each group experience the Customer pain or market need the same way? Can you offer a specific product or service that addresses the Customer pain or market need for each group?

Who will be your pilot customer? Do you have a customer who is the first user of your product or service? Identify the person or group who will be the first buyer or pilot customer. Why will they be the first and what specific features will prompt them to be the first buyers or pilot customer?

After the pilot and beachhead customers who will be the next segment of the market to address? What are the 2nd and 3rd groups that will buy your product or service? What is different about the specific Customer pain or market need that they are experiencing and what makes them attracted to your product or service?

This is our ultimate objective and will require all the traction, credibility and references we can muster. It will also require a serious re-think on many aspects of the business which together with the following four Chapters will determine success or failure.

2. Hypothesis. Identify the segments you believe are your target market.

Who will be your first customer in the Beachhead segment and why?

Identify your adjacent segments. There could be a number of different segments. From the discussion in the first market segment topic we would have made an assumption about who we believed was the early majority clients on our radar.

3. Validation. From the validation you conducted in Chapter 1 â&#x20AC;&#x201C; Customer pain or Market need, you should be able to identify the various segments of the market that share the same Customer pain. Additional validation may be required to identify the following criteria of each segment you have validated: - Like minded actual or potential clients; - In the same activity or product group; - With the same degree of Customer pain, needs or wants; - Who reference each other or communicate in some way when making buying decisions. Attend the same trade fairs, conferences, subscribe to industry journals or belong to the same industry associations - Preferably in a defined geographical location.

So when validating these market segments you need to be specific and detailed so that we can identify the biggest Customer pains and thereby offer a significant result or saving with your solution. Here we need to find the varying grades of the Customer pain and separate the easiest market to penetrate and those that will require more muscle, credibility and a track record. The more detailed your understanding of the various market segments, the easier it will be to plan the go to market strategy

Figure 5 38

Keep in mind, that you have no traction, no credibility, no references and no track record which will allow you to operate at the early majority level. If you see the market as Geoffrey A. Moore depicts it, as a normal distribution, and from left to right we can identify the various categories in a market progression as per Figure 5. We need to realise that to enter a market directly in the early majority would be nigh impossible from many perspectives. We need to pilot amongst the innovators and focus on the beachhead amongst the early adopters to build credibility and get some traction prior to crossing the chasm into the mainstream market of the early majority.

As stated earlier, we need to be the expert in the sector and market segment we are operating in. Getting to know the market segments and the role players, the dynamics, industry organisations and forums, publications and associated means of communication and build contacts, credibility, partners and markets is a key element of entrenching oneself and your business in that market. This validation, research, investigation and enlightenment is crucial to your success and a lack of this will lead to your failure.

As you unearth the information about the broad market segments it would do you well to start identifying the sub-segments that exist. It would be useful to be able to break the segments into the smallest sub-segments as this will lead you to potential pilot clients and perhaps a market where you can achieve you first sales. Once again the specificity of your validation will be a driver of identifying that low hanging fruit.

So Validate, validate, validate.

Once again it will be useful to revisit your hypothesis and compare what your assumptions were against the validated data.

The next two chapters of the business model development are sub-segments of this validation and are critical to your successful entry into a the marketâ&#x20AC;&#x2122;

We have done the market validation in the in Chapter 1 and the previous Chapter and 39

from that it should be clear where you intend to land in the market and establish your beachhead. Obviously we need to understand what it will take to get that first sale or our pilot customer.

A pilot customer might not be in the beachhead segment and is willing to pay to learn as it were, by providing access to his facility in order to validate your solution and will often be able to assist with the development of the solution. It might result in a partnership of great value, and will require specific attention and management.

If we have done a thorough job of validating the market segments and drilled down into the sub-segments and identified potential customers who have the biggest Customer pain then we can start to court that client directly, firstly, by validating their specific Customer pain and providing your solution as the specific Customer pain reliever.

The beachhead will need to provide certain opportunities that allow you to dominate that sub-segment. It must provide a group of clients who all suffer the same specific Customer pain and preferably are geographically bound. This makes it easy to access all of them without expending scarce resources. It also ensures then when you secure one they will all eventually buy, in a bowling ball scenario as depicted in figure 6. If you hit the crucial number 1 pin and moments later the 3 pin all the other pins will fall as well.

Figure 6 40

Success is linked to the industry communication that exists as mentioned before, which will allow the Customer pain relief experienced to be spread by your first client to the other potential customers in the beachhead segment. This action needs to result in you dominating that sub-segment of the market.

This domination of the market sub-segment is critical traction to build your credibility, track record and reference sites before moving to the adjacent market segments. This will require a serious re-think and validation as you will ultimately cross the chasm into the mainstream market of early majority, which we will cover in the next Chapter.

After the Beachhead, this would be the most likely segments where we can gain traction. The validation in these segments and those closely related will be the defining factor in the long term success of the enterprise. Validation should be targeted to all players in this segment as all contribute to the segment. This could include channels of distribution, raw material suppliers and customers to determine and confirm the Customer pain experienced in the identified adjacent segments. Once again I stress the importance of being totally familiar with all aspects of your target market. A very important aspect of this market is the concept of a whole product. At this juncture, in the growth of the business, we need to be in a position to provide a complete solution to our target market. This will require partnering on aspects of what I call an â&#x20AC;&#x153;end to endâ&#x20AC;? product, which could require collaborating with other suppliers who are able to add elements to provide a total solution rather then you attempting to supply a single component and expecting the client to find the other elements to build a solution. This could result in collaboration with a number of other establishments to provide a completely packaged solution.

Other partners could be distributors or installers, who will be agents or work with your product. All these aspects of the Customer pain and expectations need to be validated before you cross that chasm. Having validated all the components that are essential to enter the adjacent market 41

segments it is assumed that by this point your product has reached a stage where it has achieved stability and can be shipped in requisite volumes with confidence. The failure to deliver as promised at this stage can be permanently damaging to your business. The news of your market needs will travel faster than the relief you hoped to provide. So if you are still in prototype stage or doing primary product development do not plan to enter the adjacent segment.

Points to validate to ensure you maintain the product to market fit: Does the specific Customer pain of the beachhead segment shift at all when validating the adjacent segments? Will you need to make iterations to your product of there is a shift? Will that shift in Customer pain require some new strategic partners to deliver a whole product? Is there a greater sense of pricing or is the current pricing structure still relevant? Can your Income strategy continue to service you in the adjacent segments or will you need to make some small or a significant change to the model? Will your current channels of distribution extend to these adjacent segments or will you need to find new channels to supplement the current channels? Are there different competitors in these segments and how do they compare to the competitors you beat out of the beachhead segment? Have you done a new competitor analysis based on these new competitors?

If any of the questions apply to you, then it will require additional validation to give you additional confidence you have the right product to market fit for the adjacent segments. It may be useful to do this validation on a regular basis, to maintain that confidence, to determine the new entrants into the market and where you are positioned going forward. Are you in a position to continue your march to dominate the 1st adjacent, 2nd adjacent and the subsequent segments?

4. Slide. Your Market Segmentation slide need to depict the general market that you have validated and how you break it down into the various segments and sub-segments. 42

Once again industry experts and funders in this sector will most likely have this information and you will be validating what they know. They will be able to see that you are aware of the details by showing them that you have done your market validation and are an expert in this field.

Who is in your beachhead segment and why will they buy? How many clients in that sub-segment? What differentiates them from others in that market and what is being used to solve the Customer pain currently and at what cost? What saving will your solution provide?

Following on from the beachhead segment the next logical segment will be the 1st adjacent and 2nd adjacent segments. Provide a logical flow from the pilot customer to beachhead segment to the 1st adjacent segment and to the 2nd adjacent segment and how it will be achieved. The logical progression is essential to clarity of purpose. If the logic is lost in this progression then the value of the slide and pitch will be reduced significantly. More importantly you will need to understand the progression and be able to articulate the logic when you make the presentation. It needs to be part of the story from who has the Customer pain and how your solution fits to how you will dominate the beachhead segment and the jump into the adjacent segments.

Section 2 â&#x20AC;&#x201C; Market and Sales Development

Chapter 4 Your competition. 1. Who are your direct competition? Who are those indirect competitors? Who has a similar product or service that will be targeting the same groups as you? Apart from price what are the decision making factors for making your product more favourable than theirs? Complete a matrix of your competitors and all the factors influencing the buying decision. When you did your Customer pain validation and identified the current solutions it would be wise to include those legacy solutions as competitors as well. They are the currently entrenched providers and you will need to unseat then in order to enter and dominate that market. If you have not done a thorough analysis of the competition it could result in your inability to penetrate the market successfully. Create a comprehensive list of all the competition and all the features that are relieving the Customer pain to some degree. Other aspects of the competition could be the revenue strategy or the technology. A good example would be Uber vs metered taxis. Not only does Uber have a different revenue model but the app also provides a technological advantage. So when you evaluate the competition you need to account for aspects other than the direct Customer pain. Maybe the disruptive nature of your offering could provide you with a clear advantage that would be almost impossible to surpass.

2. Hypothesis. Create a table of the competitors and what you believe are the features of their products which address the Customer pain. Of course price is a factor and plays a big role but is dependent on the cost of the Customer pain and how well the Customer pain is taken care of. What are the competitive features you provide others do not provide?

3. Validation. It is essential to be brutally honest and critically aware of the value of our offering in 44

light of the competition. If possible you should have purchased product from all your competitors and evaluated your product in comparison. I recall my export awareness training where the instructor advised us to visit the country to which you plan to export. Buy the competitorsâ&#x20AC;&#x2122; products and understand what makes them the market leaders or currently entrenched products. This will give you an opportunity to evaluate the brands, the quality and the reason for domination. If your product is more focused on the Customer pain then it must be due to a feature of your product that performs better than theirs. Ultimately you need to understand the best features of the competitor products and what separates your product from those.

What features of your product are easily copied and how will that strengthen the competitorâ&#x20AC;&#x2122;s product. What protects your product from being copied, are there barriers to protect you. Is it your Intellectual Property or is there some other mechanism you have devised to give you a clear and distinct march on the competitors?

Having validated all the competitor information it would be prudent to rate your product against theirs and determine market domination potential on that basis.

If you have different competitors in the beachhead segment compared to the adjacent segments or in each adjacent segments then it would be useful to identify the segments and the competitors in each segment in your table and how the features of each differs.

For instance, in my village these are the competitors, in the nearby town these are the competitors and in the nearest city these are the direct competitors. To grow the business into these areas each will provide another level of competition.

Another critical element in the competitor space is the current buying habits of the target market. It could be that your perception is that you have no direct competitors, but the money you plan to extract from the customers is being spent on another aspect of their business. It might be really difficult to get them to change their spending habits and channel those funds your way. This could be the hidden competitor and will require some innovative validating to identify.

4. Slide. Create a table where you can identify the relevant and most important features for that specific segment that address the Customer pain specifically and rate them.

Be brutally honest as the audience and funders may be aware of who the players are and could find you wanting if you missed critical features or competitors.

Chapter 5 Developing your Income strategy. (Pricing, mark-up and margins) 1. For any business to survive and thrive it will need to generate an income, and make a profit. In order to do that it will need a financial structure and mechanism to charge its customers for the product or service. This financial structure we call a model, much the same as the structure of the business we call the business model. How we make money will be dependent on what and where we sell the product or service.

A typical model is a franchise, where others buy the business model to sell the same product or service as you originally did. They pay an upfront fee to buy the model which could consist of all the branding and marketing designs as well as the means to sell the product. Often they pay a monthly royalty for services such as advertising and promotions. Typically these models range from food outlets to business services and even maintenance services, which create a large network of the same brand owned by different people.

Other models could include rental of equipment such as photocopiers and telephone systems, leasing of equipment and full ownership are also very common. When we view the internet there are a huge array of models such as monthly subscriptions, online purchases and services and the array of products and services is almost endless.

Each model has it pricing structure and its margins. What is important in any business is to establish those pricing structures and margins. Obviously cost based structures and margins are useful but there are market driven pricing structures and margins which are not cost driven. Cost driven models are often based on the ability to maintain business at the lowest possible price to market. Whereas, market driven pricing is based on what the customer is willing to pay based on the level of Customer pain endured, and the need for a solution. The bigger the Customer pain and the associated cost the higher the customer would be willing to pay, below that Customer pain cost threshold. When doing the Customer pain validation one would need to identify the cost associated with that Customer pain and in chapter 1 we spoke of identifying the Customer pain and the cost or waste associated with the Customer pain. At this point 47

we need to exploit the frustration or waste the Customer pain is generating, so part of that customer development the quantifying of the Customer pain, waste and frustration will begin to give us an indication of where the price could be. Remember there are also costs associated with the current solution, which might not relieve the Customer pain as efficiently as our solution, so there will still be Customer pain that remains and the cost of the current solution and the value of the remaining Customer pain could exploited. What that level is should be validated as part of that customer discovery and development process. What can the customer afford to pay is also a real trigger for the pricing? At the end of the day you need to be offering them a cheaper option than the current cost based on the quantifiable Customer pain. If your pricing cannot offer the cheaper option then you have a serious problem. You will need to go back to chapter 1 and do additional validation and perhaps you need to iterate your product offering or pivot to a better solution. Another aspect of the pricing structure is to understand what cost of acquiring customers will be. If you chase a customer for 6 months for a huge deal, then the cost of acquisition could be extremely high, but small sales of the hundreds per day could have a very different cost structure. Do not focus on the obvious costs only but costs you might not have encountered yet. Costing can be useful to determine the break even and margins, but cost based pricing is perhaps not the best approach to sales. That being said, there are many markets where price sensitivity is the innovation or the driver. Be aware of where you reside in this environment.

How the structure will operate should also form part of that validation process by talking to those who have the Customer pain to understand how they currently pay to relieve the Customer pain and what method would work better. This could result in a financial model which is the innovation your business needs to break into the market in a disruptive manner. The example previously mentioned in Chapter 7 - Competition is the Uber taxi model where a new financial model coupled with mobile technology completely changed the metered taxi environment. Metered taxiâ&#x20AC;&#x2122;s only gave you the cost of travel once you arrived at your destination based on the meter cost per distance travelled and required a cash payment. Uber provides a quote up front and bills your credit card. Same trip, different model. There are other differences, but the financial model is the point here. 48

Another model is the Tesla vehicle sales model where Tesla owns all the outlets where all other car manufacturers have dealerships which are owned independently, are branded as the manufacturer but just sell and maintain their products on their behalf. Starbucks coffee stores is another example where all stores are owned by the company and all the coffee products are produced in-house to their own requirements. Another model is where a new player entered an existing market with a low cost version such as the airline industry with the entry of budget airlines. The cost of the ticket is cut to half the current normal airline tariffs but the frills are dispensed with as well. No free meals or drinks and if you want the meal or drinks you will need to pay for them separately. If you want to reserve a specific seat that will cost you too. Similarly there are also premium airline seats available as well. Nowadays you can fly first class which is very expensive, but you get the full treatment, porcelain crockery, silver cutlery, Champaign and a sleeper seat. This is also a new revenue model designed for the high rollers. Other aspects of the model will include issues of make or buy. Will you manufacture all the components and products yourself or will you contract out the manufacturing to a third party. Will you finance the purchase of the products or will clients need to arrange their own financing to purchase. Ultimately, you will need to identify a model which complements the product â&#x20AC;&#x201C; market fit that your value proposition offers. A revenue model that will provide a suitable model to enable you to scale and sufficient to help you cross the chasm when you get there. A model which in itself is just as innovative as the Customer pain reliever is.

Some examples of Income models are: - Production Model, example paper, firewood, gas and fuel; - Manufacturing Model, example computers, cars and cellular phones ; - Construction Model, examples are houses, bridges and multi-story office buildings ; - Leasing or rental Model, example land, buildings and cars can be rented or leased; - Advertising Model, example advertising space in media or billboards; - Commission Model, examples brokers and auctioneers; - E Commerce Model, example of online financial transactions; - Fee for service Model, example of payment of a service delivered; - Licensing Model, example of media and patent holder allowing use of their rights; 49

- Software Licensing Model, example of software sold with a license allowing users to operate the software; - Shareware Model, example of where users are allowed to copy and share software; - Donationware Model, example of software distributed and a request for donation is the payment model such as Wikipedia; - Nagware Model, example of software that constantly nags you to pay a license fee; - Crippleware Model, example of software that has severe restrictions on its functionality until a license is purchased; - Freemium Model, example of software and gaming where premium features are available for a fee; - Mark-up Model, example where product is purchased and a price increase is charged for onward sales; - Retail Model, example of sales of goods through various channels; - Wholesale Model, example of bulk goods sales through warehouses; - Brick and Mortar Retail Model, example of a physical store selling goods; - Mail Order Model, example of a catalogue of goods distributed to potential customers who can order from the catalogue and have the goods delivered to the local post office; - E-Tail Model, example of promotions done by e-mail subscription and orders done online for goods delivered by courier to the home; - Subscription Model, example of security services, internet connectivity and cellular phone contracts; - Franchise Model, example of take away outlets and other branded stores where there is an existing brand being purchased;

Of course this list is not exhaustive and it may be that you have an entirely new model in mind or a combination of models.

2. Hypothesis. In your original financial model of how you would sell your product and earn the revenue.

3. Validation. What is the Income strategy for your first segment, and what will be changing in other segments? Will you make or buy, license or franchise. Maybe others will make it initially until you can do so yourself. Will you charge a royalty or sell it outright. Will your client rent to buy? These are all questions which should be part of the conversations you had with clients to determine what they were willing to pay to relieve the Customer pain, and how the payment would suit the solution. Be sure to factor theses essential questions into the validation process. It should not be all about what constitutes the Customer pain but about how the customer is to acquire the Customer pain reliever or solution you hope to provide.

Figure 7 Yappo revenue model

Figure 8 Walmart Revenue model

4. Slide. Describe what you believe to be the most suitable model for delivering value to your customer and how to extract the best value out of the deal. Pricing will need to be a key driver and how the pricing will be structured and how that will ensure your ongoing success in the market.

Chapter 6 Addressable market and Sales strategy 1. Many would automatically assume that the addressable market would be the world. We are most definitely not considering dominating the world market in three years. So first off this is time based, normally three years, and is realistic based on the validation done in previous chapters. How big is each segment of the market? Can you quantify the value in the various segments of the market as you have identified them in Chapter 3 â&#x20AC;&#x201C; Market Segments? Local, regional and national? Create a bottom up sum of the markets from the beachhead and then add the relevant adjacent segments with a view to what you could achieve in the given time.

Figure 9

In the figure above one can get an idea of the concept of the addressable market as a market divided into segments and each element is a sub-segment of the addressable market.

How will you create awareness of your product or service amongst the beachhead customers? And how will you expand this effort to the adjacent segment clients. The marketing effort must propel you from your pilot customer to the beachhead customers and to your 2nd, 3rd and subsequent adjacent market clients.

What are the influence points in the customer buying process and who are the influencers in the buying process. Essentially you need to find the person who have the money, the authority, the necessary influence and the need or suffer from the specific Customer pain. These are the ultimate focus, but unfortunately, more often than not these are different people within an organisation and leaves you to work primarily with the influencer and whoever they introduce you to in the organisation. It therefore requires you to do multiple pitches to create a pool of knowledge within that company to raise the awareness and have agreement from all afore mentioned people. The acronym I like use in this situation is M.A.I.N. which represents Money, Authority, Influence and Need. Essentially you need to identify the budget, the person who will authorise the expenditure, who can influence those with authority and budget and finally the part of the business or customer who has the need or the specific Customer pain or market need you can solve.

If you are in a retail environment and dealing with a shopper, this might not be such a massive sell. Obviously the degree to which this applies will be governed by the type of business you are building and the need to satisfy a particular group of customers, as opposed to individual customers.

2. Hypothesis. How much of the market can you capture in 3 years.

Who will buy and why will they buy and how will you reach those buyers? 54

3. Validation. To identify the addressable market you need to focus on a time frame rather than the size of the market. Take a three year window and determine how much of the beachhead plus the adjacent segments you could dominate in that period. It would be useful to get an idea of how long it takes to make a sale and how many clients in the beachhead. Determine how many customers in the beachhead segment. The sum of the time it takes to make a sale multiplied by the number of customers would give a good indication of how long it would take to dominate the beachhead segment. If you take less than three years to dominate the beachhead segment then continue. Apply the same logic to the 1st adjacent segment and each subsequent segment to fill the three year window period. This will give a guide as to how much of your market can be dominated in the three year window. This will tie in with the Chapter 8 - Income strategy and pricing and in the Chapter 16 - 3 year projection to be constructed later in.

You need to identify the specific people who will purchase your product or service in the beachhead and how you will reach them. Each type of business will require a different strategy and tactics when embarking on a marketing and sales strategy. Each will require from your validated Customer pain feeling customers what method will suit the client and how practical is that for your particular business. Some businesses will require a sales force who need to cold call, others require will depend on a call centre to make contact, some will need Google AdWords or some other online advertising mechanism. Often it will depend on how the current solution is being sold or delivered which will give some insight into what base you need and then you can devise an innovation to simplify or improve that process. So you could iterate the current go to market strategy of the competition and create an innovative marketing and sales model. All these elements need to be considered. Once again we need to find a system or process which separates us from the competition and delivers a Customer pain relieving solution, so do not rely purely on your product or service to provide the relief. How you market and sell as well as deliver the solution could all become part of the solution or the market disruption. Ultimately you need to solve the dilemma of how you will reach the 10th -100th -500th 55

1000th -10000th -1000000th customer in a scalable, repeatable and predictable marketing and sales model.

If your product or service creates a totally new market you will need to create a demand for your product and establish new ways to attract customers and to sustain a market. These might require innovative or experimental methods until you find or develop a model which is scalable and sustainable

Much has been written about marketing and sales metrics to gauge the effectiveness of your marketing effort. One will need to develop the necessary metrics for the measurement of the successful or not so successful effort and the reasons for either. It may be that one of your Board of advisors is a marketing specialist that will be able to guide and assist with the best approach to the marketing and sales metrics and ultimate successful execution.

4. Slide. Your slide should be that realistic section of the market that you can dominate in a three year period. Show the time frame required to dominate the beachhead, and the time frame to dominate each of the segments to give a total of 3 years. Very important about the addressable market is this is not the world. It is those markets that you are able to sell into in a reasonably short time frame of 3 years. The â&#x20AC;&#x153;Getting to market and Sales strategyâ&#x20AC;? slide will give a brief description of the validated effort required to reach the buying customer and make the sales on a consistent and repeatable manner.

Describe the ability you have to attract clients and what tools you have to use in that effort. Most likely you will be using the avenues that your clients use to communicate such as industry forums, trade fairs, magazines and blogs Some examples of Getting to market strategy tools are presented in figures 10 and 11 56

Figure 10

Figure 11

Section 3 â&#x20AC;&#x201C; Business Process Development

Chapter 7 Developing the Supply Chain. 1. The key to developing the Supply Chain is to realise that you cannot go it alone. You will need to integrate your business into networks that already exist. These networks on a basic level include water, electricity, sanitation and other utilities. When looking at your business operations it will be necessary to integrate your operations into the networks of suppliers. What will it take to produce your product or service? What are the logistics required to source and produce your product or service firstly, for the beachhead and subsequent segments? As we will discuss in Chapter 18 â&#x20AC;&#x201C; Environmental Impact this is an opportunity to identify the best possible materials and resources for the production of your product or service, whilst you develop your product.

On the supply side the product or service development will rely on the sources of the materials, labour, utilities and other inputs. These will need to be identified and validated to provide the best value proposition, material mix, local sources and labour inputs to be successful.

2. Hypothesis. Theorise on the materials required to produce your solution

3. Validation. One needs to consider all the aspects of the value chain. What are the steps you take to get your product or service to the customer? The supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion and all the logistics management activities.

The validation of these supply chains is linked to the product or service which dictates two basic elements, which are: - the goods and services needed to produce your product or service; - the development cycle where you decide which materials, processes, tools and resources will be best suited in the creation of the product or delivery of the service.

This will require talking to the various entities in all of these facets of the value chain to identify the most suitable, functional, practical, appropriate and logical goods and services required to execute your business. Once you have validated all these components of the value chain, you will have a better idea of the cost structure that will be associated with the product or service.

It is worth noting that the validation will be more detailed than interviews compared to those of the customer development process. Here we require quotations and definite cost and delivery lead times. Do the suppliers keep stock or do they only make on order. Are there cheaper alternatives. Do we have other suppliers closer to our location? How often do you deliver in this area? Do we need to arrange our own transport? What is the batch size? Will it be cheaper, easier or faster to make or buy? Do we need to buy in bulk or can we buy parts as and when we need them, and what is the storage and cost implications for each?

Essentially you will need to determine and cost the entire value chain and validate each item in the entire supply chain, bill of material, execution effort and the entire delivery network requirement based on a variable cost. To produce a single item would cost this much, to produce ten items would cost this much and to produce one hundred items would cost this much. If we need to produce one hundred items what would need to change, have we the capacity, or we need to produce 10 000 a day to remain within the cost structure to be viable. Itâ&#x20AC;&#x2122;s a lot to consider, but it needs to be properly validated to ensure you are aware of everything associated with the value proposition and the product market fit.

Are there influencers in the supply chains that will provide you an added competitive edge in the market? They may have market domination for companion products which could supplement your effort, by using their brand and product as a door opener.

4. Slide. The slide needs to fairly brief and describe the basic logistics for the supply side. Identify any influencers that exist in the supply chains such as piggy backing on leaders in fields who are able to provide you with a whole product solution. You will also be solving a Customer pain or market need for them as well.

Chapter 8 Developing the Distribution Channels 1. The key to developing the distribution channels is to realise that you need assistance to deliver your product or service firstly, to the beachhead and later the adjacent segments? As we will discuss in Chapter 18 â&#x20AC;&#x201C; Environmental Impact this is an opportunity to identify the best resources for the delivery of your product or service, whilst you continue develop your product.

On the delivery side is the warehousing, distribution and in many cases the point of sales logistics all need to be identified, considered and validated.

2. Hypothesis. Theorise on the logistics required to deliver your solution

3. Validation. One need to consider all the aspects of the extended value chain of the finished goods. What are the steps you take to get your product or service to the customer? Consider the delivery network and all the logistics management activities required.

Various intermediaries such as delivery services, wholesalers, retailers, agents, hosting services, marketing and advertising agencies, logistics management, installation and servicing all serve the distribution channels.

The validation of these channels is linked to the product or service which dictates basic processes or logistics required for the distribution or delivery of the product or service.

This will require talking to the various entities in all of these facets of the extended value chain to identify the most suitable, functional, practical, appropriate and logical goods and services required to execute your business. Once you have validated all these components of the value chain, you will have a better idea of the cost structure that will 62

be associated with the product or service.

It is worth noting that the validation will be more detailed that interviews compared to those of the customer development process. Here we require quotations and definite cost and delivery lead times. If we deliver to you how fast will it get to the client? What is the cost for warehousing? For a month, a week?

What will a quarter page advert cost in this industry newsletter or magazine? How long does it take to install the system? In what range can we deliver and install in a day? If we need to install outside that zone, what are the additional costs?

Essentially you will need to determine and cost the entire extended value chain and validate each item in the entire delivery network requirement based on a variable cost. To deliver a single item would cost this much, to deliver ten items would cost this much and to deliver a hundred items would cost this much. If we need to deliver a hundred what would we need to change Itâ&#x20AC;&#x2122;s a lot to consider, but it needs to be properly validated to ensure you are aware of everything associated with the value proposition and the product market fit.

Are there influencers in the channels that will provide you an added competitive edge in the market? They may have market domination for companion products which could supplement your effort, by using their brand and product as a door opener.

4. Slide. The slide needs to fairly brief and describe the basic logistics for the delivery side.

Identify any influencers that exist in the channels such as piggy backing on leaders in fields who are able to provide you with a whole product solution. You will also be solving a Customer pain or market need for them as well.

Chapter 9 Developing strategic partnerships. 1. Once again it is absolutely essential that you realise it is not possible to go it alone. Strategic partnerships are an amazing way to gain traction, to gain credibility in the market place and to stretch your budget. A great example is Uber and Google maps. Without a map system, the Uber concept would not function. There are many such examples and too many to mention here. But these partnerships can take a number of different formats and do not necessarily need to be formal contracts. Some will however need to be formal contracts, such as your funders will need to have every aspect of the relationship documented and approved by both parties.

Who will you need to make these products/services a reality? Have you identified the suppliers, raw materials and resources needed to create the product or service and deliver to clients? Who are these partners and what are their roles in your business and are there alternatives?

2. Hypothesis. Theorise on the materials and logistics required to produce and deliver your solution and those companies who have a strategic connection to your offering.

3. Validation. In much the same vein as the development of the supply chains and distribution channels, the strategic partners will fit into the value chain or in the enterprise building domain. In the enterprise building domain you would have the funders, advisors, mentors and services not related to the value adding of the product or service.

Clearly those in the value chain can easily become strategic partners and would be those partners which would enable you to supply a whole product. In many cases you might be able to supply a component, but would rely on other manufactured components to complement and complete the system. To give an example, one could be a manufacturer and installer of solar panels, but the system would require batteries and 64

an inverter and perhaps some other technologies as well. To piggy back on the different suppliers as a team or partnership would be a strategic relationship where their sales drive your sales and your sales drive their sales and you essentially feed off each otherâ&#x20AC;&#x2122;s sales efforts. Another example could be a wedding planning cluster. The wedding planner partnering with a hair and nails salon, a wedding venue, a florist, a wedding dress maker, a tailor, a candle maker and a DJ for the music. Each one of the partners does their own marketing throwing the net a lot wider than each member of the cluster individually could. When one makes a deal others will be able to get the referrals and benefit from the deal also, and so would the client. These types of arrangements can be beneficial to the partner and the clients and prove to accelerate the entire group credibility and traction with each reaching their goals quicker.

Therefore to maximise your effort, and that of your strategic partner it needs to be beneficial relationship for both parties and one could take the joint effort a bit further with shared branding and advertising. In your supply chain and value proposition it would be useful to be local agent for some of the technology that you use so that you get a dealer discount and in that way have strategic partners that save you money on input costs. You could even make money on the agency sales by adding a dealer markup on those products.

Not to labour the point, you need to pursue all potential avenues that could result in you partnering or having a mutually beneficial relationship with another company. It could be that they are also searching for those relationships and when you engage them it creates that synergy you both seek.

Of course and once again I stress the fact that validation is about engaging the potential suppliers, partners and those who have the products and services you need and to find the Customer pain in each of those areas and to extract maximum value out of each relationship, whilst adding value to them in the process. Mutually beneficial relationships are key to gaining that traction, credibility and the fast track to success. 4. Slide. Indicate the strategic partnerships you have or who you plan to engage and the areas 65

where you believe strategic partners would benefit you in the future. Indicate how you plan to woo them. Do not populate this slide with the logos of potential partnerships without having detailed the benefits both they and you will derive from this partnership. The value to each is an important aspect to highlight to show the audience that you have validated and confirmed such a partnership.

Chapter 10 Project planning. 1. Obviously this will be part of the business building phase and not the initial Customer pain validation, customer development and product development phase. Once the initial phases have been progressed to a degree where the business can begin to operate as more than just ideas, it will be prudent to start putting plans in place for the next weeks, months and years. These plans will most likely be very basic to begin with and become more detailed and specific with each round of validation for each of the 20 Chapters. At some point you will need to have some very specific timelines and goals to achieve. These need to be assigned to a team member who is best suited and skilled to execute according to the plan. Details of the team and skill sets will be discussed in more detail in â&#x20AC;&#x153;Chapter 16 â&#x20AC;&#x201C; Teamâ&#x20AC;? The use of a Gantt chart or project management tool would be useful to help plan the way forward and to manage the progress. The more complicated the technology and product development and perhaps the go to market plans are, the more detailed and specific the project planning and management required. Responsibilities for key tasks will need to be assigned and executed. Weekly meetings with the key team members with the assigned responsibilities will be necessary to ensure time lines and goals do not slip. Create your Gantt chart or project plan that captures the critical milestones that you need to accomplish for the next 18 months. Include the chapters of the business model as well as Prototype or product development, customer validation, sales, team member recruitment, production and manufacturing and state the funding required for each step. Figure 12 is an example of a simple project plan which can be developed in Microsoft Excel It can be seen that there are various tasks which can be listed and progress indicated by the % complete. Because it is Microsoft Excel, columns and rows can easily be changed, added and removed. Colours can be customised as needed.

Figure 12 2. Hypothesis. Quite early on in the development of the business one can create the hypothesis of what you believe to be the time lines for the various Chapters required to create a scalable and profitable business. As the project progresses it will be likely that you will need a more structured and detailed plan. Keep your hypothesis as a quick check of where you started and what you original assumed would be the complexity and ease with which you could build this business.

3. Validation. Each element that is validated will contribute to the critical milestones or disrupt the achievement of the milestones. Use the validation of the other 18 Chapters of the model to refine and build your project plan and to gauge the progress of the entire organisation based on the individual projects for each line item on your Gantt chart. Clearly there will be dependencies and as the validations get more refined and detailed so will the number of line items and dependencies.

4. Slide. Each slide must have sufficient detail to contribute ultimately to the project plan you have developed and it must be depicted in your slide in a high level format, perhaps even grouped together where possible to give a brief but logical and relevant picture of the progress you envisage for the next 18 months or so. It could be you just itemise the few most important milestones that are critical to the overall project and speak to the less important. Do not put a Gantt chart on the slide. Only do a slide for a Gantt chart if that is the focus of a particular presentation

Chapter 11 Defining funding needs and strategy. 1. Specify sources of funding you have identified. Remember Banks and the like will most likely only fund existing businesses. Developmental institutions and grant funding might be one source, Angel funders will fund prior to product validation and Venture capitalists require a working, validated product prior to funding. You might need a number of funders to assist at various stages of the growth such as product development, prototype and production. What is also very important are the types of funding needed and this will determine who you will need to approach. Types of funding requirements are: - Seed funding; - Grant funding; - Government incentives; - Angel funding; - Venture Capital funding; - Equipment and machinery; - Working capital; - To complete a contract; - For expansion; - To buy a building; - To buy out your partner; - To fund exports or imports; - Or to buy a franchise. Each different type of funding will have specific requirements and this will therefore require a specific strategy and the appropriate validation. Once you have identified the type of funding you will be targeting, you need to identify who the funders are in that category and what each requires and the typical clients they fund. What are the time frames for funding to ensure making application at the right time to ensure you get funded when the funds are required.

2. Hypothesis.

3. Validation. Many small businesses send applications to every conceivable funder they have ever heard of with the hope of getting success. This is wasteful and most often not effective. Get a list of funding opportunities from your industry federation, or government agency who generally have a database of incentives, grants, development funding, soft loans and venture capital institutions. Each funder will have a set of minimum criteria that you must meet in order to qualify to apply. If you do the validation in a structured manner and identify the specific funders that are specific to your needs and research the requirements fully, your chances of success are clearly increased. We know there are funders that do vehicle financing and they are no good for any other funding needs, some banks do not do start-up funding and will not fund you if you are a start-up. So the old adage of â&#x20AC;&#x153;Horses for Coursesâ&#x20AC;? applies, and in funding even much more so. A critical element in the funding spectrum is the stage that your business is at, as funders might be specific to a stage of business or product maturity. Another very critical aspect of Venture Capital funding is the appetite for funding. Typical VC funders get 2800 applications, interview 1000 prospects, conduct due diligence on 100 and fund only 20. Basically they can pick and choose, which means that those perceived to have the best chances of success are funded. Firstly those businesses that are in the sector, technology and product group that they prefer and have previously funded will be the most successful. Clearly that implies that the validation has been done well and factually correct, the pitch is logical and specific, and the entrepreneurs can articulate the business with confidence and are knowledgeable in their business and sector will have the very best chance of success. For Venture capital funding you will need to do specific validation to see how applicable this is for you and if any VC are funding your sector and product. A useful approach to funding is the concept of drip funding. Many applications for a huge initial funding requirement is very scary for investors due to the increased risks. But if you can develop a well-planned drip funding model for small amounts over a long period with specific milestones to unlock each small amount of funding. You will need to unpack the funding requirements for each milestone with specific spending requirements. This approach could allow investors to track your 71

progress to milestones and release funds accordingly. In the process you build credibility by achieving the milestones and growing the business in a structured and well-orchestrated manner, which will allow the funding to flow for each milestone reached. So instead of funding in the tens of millions up front, the funds could be released in the thousands or hundreds of thousands per milestone reached. This way the risks for the funder are greatly reduced and the pressure is on you to deliver the next milestone. Most funding for building construction is done in this manner. Do the validation to determine the validity for you. This will require “Element 13 - Project planning” to be thoroughly validated, achievable and realistic. Another means of funding is “boot strapping” or to grow the business organically. I have always maintained that to measure progress of small businesses one should never use profit a metric. Profits are often the funders of the growth in many businesses without a loan or outside funding. Often the growth is 15%, and I ask “where did the funding for the growth come from”? It must have been the profits, right. This is perhaps the surest way of growing your business. You should not grow faster than the profits will allow. This can also be a driver of efficiency in the business, instead of funder’s money pouring into the coffers you will need to be innovative and search for means to reduce waste in all forms and increase productivity. Do the validation to determine the applicability for you. Yet another increasingly popular means of funding is Crowd Funding. It is a unique way of attracting funding and can be executed in a number of ways, either as a donation, an investments in the venture, a loan or pre-selling products. It might not be applicable to all sectors or types of businesses, but for those that can benefit it has its own requirements. Clearly there is a marketing effort that will need to be part of the crowd funding approach to make your case to attract potential investors and get them to commit. Once again there are a number of success stories and a huge number of not so successful requests for funding. I would suggest you do the necessary investigation to see what has worked and what failed. Some aspects you need to be aware of if you choose crowd funding: - There are a number of crowd funding providers and each has some unique attributes which you will need to be familiar with before you commit to a specific crowd funding initiative; - There are also some very important country requirements too; 72

- Developing a campaign takes months and requires resources to execute; - It is important to get the campaign design right with video and marketing: - the campaign should be product focussed and not on the company; - Could be used as part of the validation process, but could also elicit negative feedback or results. Do the validation to determine what is right for you. 4. Slide. Your slide should identify the funding needs, the types of funding being targeted and the reason that each particular funder or funding model has been identified and what you hope to achieve with each type of funding you will access. It could be that you will need an array of different funding for different aspects of the growth path you portray.

Chapter 12 Team members. 1. The team is by far the most valuable asset in the business. All other Chapters in the business model depend on the founder/s and the other team members. Each stage of the business require specific skills and these may be in short supply especially when you have no funds to hire the requisite skills. Other means of acquiring skills critical to the ongoing development of the business model will need to be devised. But this will require a careful assessment of what skills you have and those that are required. There are two categories of skills that you need to be aware of as point of departure, those that are permanent and those that are only required to execute a defined task with a limited duration. Each will require a different approach and compensation can be offered in a variety of ways for each group. One should avoid hiring family and friends simply because they are available, and often very willing to help. This could cause a dilemma when the skills they are able to provide do not match the skills you require. The reality is that you should hire only for the skills that you identify as critical to mission objectives, no emotion, no freebies and no charity cases. Hire the correct people in order to acquire the necessary skills of those who have the personality traits of like-mindedness, motivation and ability to execute without supervision which will enhance the team cohesiveness and focus. The idea is to develop a cohesive team with the correct skill set for the tasks that need executing in order to progress the business from a start-up to a fully functional and profitable one. Some believe that an advisory board is one way of recruiting the skills that are needed without hiring. The advisory board will be compensated from equity rather than payroll. The same approach of identifying and recruiting the requisite skills needs to be executed when identifying possible advisory board members. Advisory board members ned to be recruited because they are able to contribute to: - technical skills for product development advice; - business skills for business strategy advice; - customer skills for direction on product features and value proposition; - industry skills for domain experience; - sales skills for counselling on sales tactics and demand creation; 74

- policy skills to provide guidance on regulatory changes that directly impact the business; - international skill to provide support on entry into new growth markets.

The advisory board members need to be recruited for a specific role in the company. They should be able to challenge the processes and decisions made and provide direct and honest feedback. You will need to protect the business with the necessary NDAâ&#x20AC;&#x2122;s for the advisory board members. You need to be clear on the benefits the advisory board gain such as meals, stipends or equity. Try to keep the board quite small at around 3 to 6 members. There needs to be a good channel of communication with the advisors so that the roles are not compromised, and this is a discipline that needs to be maintained. Errors to avoid when forming and operating with an advisory board: - Ensure that you keep ongoing communication and keep the advisors engaged in the roles you need; - Do not recruit advisors on reputation or for big names; - Beware of conflicting advice or too much advice; - Individual advice versus group dynamics; - Too much informality and familiarity, keep it professional; - Once again look at short and long term needs when appointing advisors.

As you grow the need will arise for the formation of a Board of Directors and this will become a requirement a soon as you have equity partners who have acquired shares through investment in the business. The formation, structuring, function and operation of a Board of directors will come with its own set of challenges. The following pointers are important to note when planning your board: - make sure you have the right chairman who is able to run a tight ship and make sure the correct decisions are made; - get 3 or 4 independent directors on the board which includes the investors, too many will be detrimental, and only have a few executives; - the board should consist of 5-8 members; - the board should provide leadership and oversight; - board members should contribute around 5 hours a month to matter of the business; 75

- board members should serve on at least one committee; - attend quarterly board meetings; - prepare for and participate in board meeting and committee meetings; - beware of any conflict of interest of board members; - should have the necessary qualifications and executive experience, leadership qualities, integrity, credibility and passion for the mission of the company in order to contribute in a meaningful manner; - as far as is possible maintain the trust between the chairman, board members and with the CEO and founders.

Moving on to the teams required for the various phases of enterprise development. The team for customer discovery might not be long term and make use of temps, advisors and mentors, however, the sales team might be a more long term team. The team could be the biggest cost item and will be a challenge to make payroll each month. It will be quite important to identify the right package for the sales team, will it be a commission only, basic plus commission or a fixed income. The validation process and type of industry will make a contribution in this regard.

The number of direct reports could be around 10 -20. For a CEO that would be a lot less Ideally the number should be 5 â&#x20AC;&#x201C; 7 Hard metric tasks Cohesive team Other areas

How much do you expect them to be of value from an equity? Hire slowly â&#x20AC;&#x201C; Fire fast. Know your business well so that the hires can have guidelines on what to do and how to do it and you know how much time it should take. Must do reference checks to do 360 Degree view diligently.

2. Hypothesis.

3. Validation. Create a skills matrix of skills necessary for the stage at which the business is at and add the current team members skills set to the matrix. This way you are able to identify the key market and product skills gaps needed for the next 18 months and determine strategically how you will fill the gaps, advisors, consultants or hires. The clarity on this issue will allow you to focus on getting the correct people for fill the gaps.

4. Slide. Who are your team members? What skills do you lack to achieve your milestones? How will you find those skills and how will you compensate them? With equity/share options etc.?

Chapter 13 Developing a 3 year financial projection. 1. This should be high level projection detailing the projected revenues from the beachhead and adjacent segments, key elements of your total cost structure, your nett profit/loss, any guaranteed injections of funds and your nett cash position for the next 3 years. At some point early on in the business building process one needs to have a good sense of what the customer needs based on the validated Customer pain, and what it require to deliver that solution. This should be converted into a monetary variable and the 3 year projection constructed from that validated information. Keep in mind that a business in a money making machine and even if you are an engineer or a scientist or something of that nature you will still need to develop a financial view of all the elements of the company. All the efforts made in creating a solution for the Customer pain must in the end realise a profit and a 3 year projection will clearly indicate at which point outside funding will be required, when you expect to break even and when you anticipate the company will begin to generate a profit. This is not a hypothetical exercise. This is the life blood of the business and will require detailed attentions and management. There are a wealth of tools available to assist in creating the financial scenarios that are described above. The basic elements of a P & L are a spreadsheet and with a few formulae one can create a solid and credible financial plan. Clearly this is just a beginning and sooner rather than later one will need to develop a detailed accounting and management system for the finances. Ensure that you create three different scenarios for your own benefit. An optimistic, realistic and pessimistic scenario. More often than not a pessimistic scenario will be a good dose of reality and spur you on to find where you are lacking momentum and what can be done to improve the situation or to do better. It should be a case of expect the worst and plan for better, rather than hope for the best. Financial scenario planning tools are a great way of modelling and testing scenarios. If I can reduce this expense by 2% how will that impact my bottom line? If I increase selling price by 1, 5% what will that do to profitability? If I get a 30 days to pay on that 78

account with a supplier, how will that impact my cash flow? If I reduce the cost of sales by 3% how will that benefit me? There is a huge amount of scenario testing and financial modelling one can do to find the right revenue and financial model for your business and about how you set the financial rules for the operation. If you take into account the factors described in Chapter 8 â&#x20AC;&#x201C; Income strategy(s) , income streams and Chapter 18 â&#x20AC;&#x201C; Environmental Impact , and start to determine the effect of all these elements together with this element and testing combinations and scenarios, one could develop a model which is not only highly profitable but highly desirable. This could create a business which will be sought after as a trading and strategic partner and opening doors to additional markets. Below is an example of an Excel spread sheet used to create a 3 Year projection. It is pretty basic but is just a starting point for your financial management system. In Figure 13 there is an example of a 3 Year projection Excel spread sheet to give an idea of the basic requirements.

Figure 13 79

2. Hypothesis. Do the basic calculations of costs and income to see if you can see value in what you plan to sell.

3. Validation. If you have spoken to the suppliers, strategic partners and to your channels of distribution to determine the costs of building your product. Speak to the go to market and sales expectations to determine the cost of client acquisition, which depending on your business and product could be a significant amount. Remember also consider the marketing effort that will feed your sales pipeline, such as advertising and promotions. Getting the product to the customers is another cost to be considered. Will you ship via courier, will you have a physical store or deliver to a distribution point, and all of these will be expenses. If your cost of sales is truly a variable cost what about the fixed costs? All need to be accounted for and all need to be quantified in order to make a realistic and meaningful projection. The optimistic and realistic scenarios will be driven primarily by the forecasted sales volumes and associated variable costs. Therefore your break-even point will be dependent on how the sales volumes mitigate the fixed costs.

4. Slide. Create a small table to indicate the COS, Fixed costs and sales to determine the profit or loss for each of 3 years. Show at which point you reach break-even and at which point you will reach profitability. If profitability will be reached outside the 3 year window explain why. Funder will be especially keen to hear when they can get their money back or when you can realistically begin to service a loan.

Please avoid a huge jump in sales from one year to another unless you have a contract or other verifiable commitment, as this is usually indicative of a dream scenario rather than a realistic scenario

Chapter 14 Regulations and Certification. 1. Define the applicable regulations that could impact on the business going forward. A legal review is essential to keeping in line with all the by-laws and regulations which could have a negative impact on your business in the future. Clearly every aspect of todayâ&#x20AC;&#x2122;s life is regulated in some way and business or companies are not spared. In most if not all countries there are laws and regulations pertaining to the registration, operation, trading, and financial management of a business. A huge amount of regulation regarding shareholding, share trading, investment, dividends and taxation. There are many industry standards and requirements which might be law or controlled by sector governing bodies and associations. Laws and government regulations can also be cascaded to regional, provincial, district, county and municipal level and each may have an impact on what you make, how you operate, where you operate or what you are permitted to do in regard to smoke, effluent and waste for instance. If you are moving into new markets or territories then there might be and most likely will be aspects of law and regulations which will be impacting on your business in those new areas. Over and above the law and regulations is also the question of standards. There are a large array of international standards and specifications maintained by various bodies such as ISO, IEC, ILO, UN and WHO. See figure 14. These contain compliance requirements which are voluntary and statutory. Some are regional such as the EU requirements and standards. Others are dictated by trade agreements between countries or trade zones. It would be useful to know what will impact of the organisations and what plans are in place to ensure and provide proof of compliance and certification as appropriate.

Figure 14

2. Hypothesis. Make a list of the laws and regulations you feel might impact on your business. 3. Validation. A legal review is a sure fire way of determining the laws that are applicable to a business and more specifically to your particular industry. If you plan on trading with 82

other countries or states it would be necessary to validate all the requirements of your home region and the trading partners regions as well. Your trading partnerâ&#x20AC;&#x2122;s assistance might be useful to speed up the process. 4. Slide. Give a brief outline of the specific industry regulations that will have specific and profound impact on your business and how do you go about showing compliance.

Chapter 15 Environmental impact. 1. Over and above the financial benefits your company will create are there any social and environmental benefits created? The concept of a triple bottom line is a financial accounting concept that expands the notion of a profitable sustainable business financially to include the social cost and environmental cost savings a business can create. It consists of a Financial Bottom line, which is a universal business concept, a Social bottom line and an environmental bottom line. Often this is referred to as people, planet and profit. The triple bottom line. Some expand the concept to include purpose as the fourth element to create the Quadruple bottom line, to have - people, planet, profit and purpose then as the four elements, with purpose being mostly from a community upliftment perspective.

The point of departure is that if one considers the three or four elements in your awareness, strategy and planning then in the long run you will accrue benefits far beyond just profits and sustainability. These elements can indeed secure additional business from those who subscribe to this mind set and seek to do business with likeminded enterprises. It will mean saving in many aspects of the business including recruitment, raw materials, transport, waste management and credibility. People, is a focus on the social equity aspect of our business to ensure beneficial practices towards labour, community and stakeholders in the region where we operate our enterprise. Planet, is a focus on the sustainable environmental practices that we engage in during the execution of our business activities in the way we consume, use and treat the natural heritage of the planet. Profit, is obviously the focus on the sustainability of the business and its ability to continue to pay for and support its shareholders, suppliers, staff and customers for the long term. Generating and utilising cash in the most appropriate manner.

More especially a new or recently established business has the ability to incorporate these elements into the design of the company right from the start through firstly awareness and later as strategy and planned activities. To be more aware of your 84

footprint in all aspects of the business will result in saving and benefits in the long term. Early on in the establishment of a business the profitability will be the key driver, but awareness of the triple/quad bottom line will ensure that we begin to focus on how to do business in such a manner so as to maximise the benefits of better product design, less energy consumption, use of more natural light, use of local common materials, local staff, bulk deliveries, where possible use of alternate energy sources. Many of these aspects are choices and more sustainable than the high end glamourous or rare options. Often they provide immediate savings. The options available to make this beneficial to the company are so numerous that the list would be too long to contemplate. In addition, every business might find different ways to execute this concept based on the individual circumstances, location, product group, industrial sector and many more factors.

Figure 15

2. Hypothesis. Did you have an idea of the type and number of aspects that could contribute to the bottom line in any way, prior to validation?

3. Validation. Identify the climate or social impact of the product or service and the production thereof and the possible side effects of the application or use of the product or service and required safety aspects that should be in place. Identify the 10 most beneficial and 85

rewarding aspects and focus on the one or two you can immediately achieve without surrendering too much to the business building effort

4. Slide. List the 5 or 10 aspects you have validated as having a positive outcome for the business and identify those few that you can address in the short term and what you believe the benefits will be.

Chapter 16 Exporting and Global expansion 1. This element is intended for those who have a business model which is scalable and can be replicated in additional markets, whether they be the next town, city, district, state, country and then the world. If so thenâ&#x20AC;Ś..

So your original dream was to start a business and make a fortune. Well is you have followed all the steps to this point then you should be getting quite close to achieving your dream. By now you have dominated the beachhead segment, gone after the first adjacent segment and conquered the second adjacent segment and maybe even a few more segments. You deserve a gold star, but wait, there are a few steps you need to complete before you conquer the world. To be a major player in any market you will need to have crossed the chasm and reinvented your product and business. To satisfy the early majority, you will need to scale up and become a global player. This could take a few years to achieve. Dominating the home market is your reference point but it will require a new set of validations for each successive market that you enter. You will need to start from a new baseline for each successive country. Obviously if you are web based product or service that might be a lot easier than if you have consumer products which are to be sold in a retail environment. Each has its own set of challenges. Volumes in your home market should always be considered the bread and butter income and the further expansion as the cherry on the cake and as such should never impact on the home market or damage it in any way. Therefore, one needs to consider current volumes and your ability to supply additional markets. Often the next state or country could be a doubling of your current volumes, and so for each successive state or country. Options exist in providing productive capacity, by having third party manufacturers instead of investing the capital to increase your own capacity. It could be you will need additional server capacity to handle the traffic or additional vehicles to service other areas. Maybe you need additional plant and equipment at each new site you establish. Whatever your business model, it will require a well devised plan to determine the best mode to serve the new markets. 87

Identify any aspects/benefits of the product/service which could have a potential global impact and how have you validated this potential. This could be the key to attracting funders.

2. Hypothesis. Your original idea was to export to the entire world, ok maybe not so much. Capture your hypothesis and later down the road we can see what your dream was and where you eventually landed up being.

3. Validation. Once you decide to venture further afield it will require you to validate each new market and it would be best to visit those markets and to gather the information first hand. As we have promoted throughout the book it is your responsibility to identify the Customer pain and provide a solution and in a new market it will be just as important if not more important to continue the practice of validating the market before you commit resources to an unknown market. For clarity or refresher refer back to Chapter 1 once again to start that validation process by seeking the Customer pain. We are getting close to achieving the original dream, itâ&#x20AC;&#x2122;s not a good time to ignore the rules and risk everything on a â&#x20AC;&#x153;Hail Mary Prayerâ&#x20AC;? or a stab in the dark because we failed to do the validation. The validation here is very similar to an existing company wanting to introduce a new product into an existing market which they dominate and not doing the validation. New countries have many different cultures and market requirements different to those you have been operating in. One brand is well entrenched in you context but in another market it might be there are already products or brands which use that name or pay off line, so it would be useful to be aware of that.

Figure 16

The Apple â&#x20AC;&#x153;iPhoneâ&#x20AC;? is a well-known trade mark in most countries but in China it is already in use by another company Xintong Thiandi which had a registered trade mark to brand their leather goods, and Apple was forced to discontinue the use of that name there. It seems the validation was not specific in that regard and this resulted in a costly market failure. See figure 16.

As mentioned in a previous chapter it might be a useful exercise to visit the intended market and purchase examples of competitorâ&#x20AC;&#x2122;s products or of similar products to evaluate the restriction and compliance marks and other indicators on labelling and packaging if that is specific to your products. Another way is to inspect similar equipment and machinery at vendor premises to identify the labels and restrictions and to enquire as to compliance and market barriers to entry. For instance many countries have restrictions on packaging material and a ban on certain types such as polystyrene. Food stuff must have nutritional information on labels and safety printing on plastic bags for smothering awareness for children and small parts awareness for children 89

choking and a host of others that need validation over and above the client specific Customer pain. Be aware of all these factors prior to building or shipping product anywhere outside your validated and successful market zone.

4. Slide. Share your validated Customer pain and value proposition for the new markets. Clearly this might not apply to all business ventures

Section 4 â&#x20AC;&#x201C; Exposure and Promotion

Chapter 17 Business Description. This is essentially the first element potential funders would like to see but is placed last in this list so that all aspects of the business have been properly validated, researched and specifically and sufficiently clarified before you try to describe the business. It could be a graphical representation of your business.

It should originally describe what you think you were expecting to be when you had the original business idea.

Only document what your business does from a value adding perspective. In other words describe how your processes that you perform at a high level. Design, R & D, Manufacturing, production, installation, servicing, maintenance, sales are the typical activities which are to be used. Introduce yourself and those with you and what role you represent in the company.

Slide. In the beginning we started the discussion with the Customer pain or Market need and indicated it would be slide 2, simply because this is actually your first slide. Make sure you start your slide deck with the business description as the first slide.

Describe the above details in brief together with the name of the presenter with your company logo.

Start with your validated information from each of the previous chapters and develop the 20 slides and boil it down during your trial pitches to enable you to find which information best fits together and creates a nice flow to your pitch.

Chapter 18 Pitching. 1. Pitching is a skill essential to any business venture. Whether you are pitching your idea to potential founders, making your first pitch to a potential pilot customer, potential funders and your first beachhead customer, or those you need for your first adjacent segment. This is an essential business tool you need to master. Learn to pitch in 30 seconds (Elevator Pitch with no slides), 3 minutes (No slides), 6 minutes and 10 minutes. Each has a place and each could be needed for different opportunities. Knowing the audience is also a factor to keep in mind. Do the research to know who the audience is and what their personal tastes, likes and pet hates are. Visit their websites, check what businesses they run and what personal interests they have. Incorporate that knowledge into your understanding and speak to the best points.

The pitch consists of three major elements: - What you say. Firstly, using the power of a good story is the best way to connect with the audience. Please note the slides are not a teleprompter to make sure you remember the words. The audience may forget the content of your slides but they will remember a compelling story. If you frame your message in such a way as to connect emotionally with each individual is the key to a good story. To be slick and have the pitch presented with all those elements you will need to practice twice as much as you thought was necessary. Secondly, the body language throughout the presentation is very important and you will need to video record yourself or pitch to your mentor, founders or other critical audience to get useful feedback to enable you to fine tune your pitch and ensure you have it spot on. Be aware of your actions whilst presenting such as eye contact, hand movements, reading your slides, turning your back on the audience and highlighting each line of text with a laser pointer. Lastly, be sure to know what you need to say for each minute during the presentation. If you need to get prompts from the slides or read the slides, it will affect your confidence and reduce the impact. Knowing your slides and speech to ensure a nice consistent flow will add tremendous value to your pitch.

- The validated business information contained in your slides. When you have done a good job of validating all aspects of your business and can summarise that into your 20 slides you will have a good slide deck. The information must be accurate, specific and flow in a logical sequence flowing from one element to the next. The logic must allow the audience to follow the sequence of events such as this is the Customer pain, here is our solution and this is the beachhead because of ABC and the adjacent due to 123. The logical flow of the slides must obviously follow the logical speech you have perfected. Each slide must have a point and you need to make the point before moving on

- The structure and layout of your slide deck. Firstly, the theme on your slides, which sets the colour of the background, the colour of the text and the font used. Stick to colours that have a good contrast such as light background with dark text or dark background with light text. One colour or pattern for the background throughout and one colour for the text. For instance a dark red text on a dark purple background will not show as well as a white background with black text. Try to view your slides from a distance as the audience would see it when you were presenting will give you a validated customer view of your slides. The amount of text and graphics per slide is vital. Keep text to a minimum and make graphics simple and effective. Try to show processes in a simple end to end format which is clear and uncluttered. Avoid animation due to the fact that you will not always be in control of the slide deck when presenting and another person might not be familiar with all the technicalities of your animation. It often happens that you are out of sync with your slides and get confused and start to lose the rhythm of you practiced pitch. Also avoid video inserts as they often fail to launch and consume important seconds if not minutes while you wait for them to reveal themselves. Remember you might not be operating your own equipment at the pitch and will need to rely on unfamiliar people and equipment which might fail you and impact on your pitch. The trick is to keep the slides simple, crisp and uncomplicated. Do not try to impress the audience with your super PowerPoint skills and ultimately end up making a hash of your critical pitch.

Pitching also a skill you can acquire by practice. You can pitch to the mirror and video 93

camera, but the experience that public pitching gives is invaluable. Enter a pitching competition as these are becoming more frequent and widely spread these days. You will find that many of these events are attended by funders and investors looking for opportunities and if you make a top class pitch one might surprise you with an unexpected offer.

So finally, in summary. Most often the slickest presentation on the day is the one which is well-researched, well-structured, well-rehearsed and well-oiled pitch. This approach will give you the confidence you need to pitch with purpose, and help you make that all important deal It is vital that all these elements work well together.

When you get really good at your pitch, it may be useful to create a 10 slide deck for your final version of the pitch. This is where you would summarise or whittle the 20 slides down to half of the original deck.

This would clearly require a different assembly of the points to have the following 10 slides:

- Title and overview - The market need statement - The solution provided - Market size and growth expectations - Competitor analysis - Technology - Product - Business Model - Team - Financials

It might still take the 10 minutes to make the pitch and you would keep the original speech but only now you would go with the 10 slides. Generally, if you have 10 slides the pitch is expected to last only five or six minutes and the 20 slide deck for the 10 94

minute pitch. If you are planning a 3 minute pitch such as those seen on Dragons den, then it would be better to forgo the slides and rather take a demo product or poster to convey the message.

Chapter 19 Executive summary. To create a summarised one page description of the business as a prelude to a meeting or as an introductory script to potential investors, partners, board of director candidates and advisory board members. It is essentially a brief of what is contained in the slide presentation

Validation. The information contained in an Executive summary of this nature is a distilled version of all the information we have collected in the Chapters previously described which has been validated. This is not the Executive summary one would generally find in a business plan consisting of three or four pages which is normally placed at the beginning of that business plan for those who choose not to read the business plan. As previously explained, a business plan should come much later in the life of a company, once it has a track record and has created a historical record which can be used as a reference point for further growth and prospects.

Document. This is a one page document only and if absolutely could contain a graphic or picture of the product or business model on the second page.

Chapter 20. The final word

So you have followed all the steps above and your business has started or you might even have reach the break-even point or beyond. You have made it. Really? What happened to the internet dial up connection? – It has been improved so that we even have mobile internet connections today. What happened to the Audi Quattro? – It’s an old model car now. We even have autonomous driving now. What happened to the Nokia 2110, the brick phone of the 1990’s? – It’s the smart phone of today. All these cutting edge technologies and products have been replaced a number of times with even better products and the current products will be improved in the months and years to come.

If you think your business is sorted because you went through the process once or twice, wrong! Your competition are still validating and will continue to do so and pass you by in a short while.

You will need to go back to Chapter 1 - Customer pain and Market need and begin your customer validation all over again with better questions, better insights and more refined understanding of the Customer pain and how the Customer pain has shifted. You will need to adapt your solution again to find the sweet spot again to address the remaining Customer pain or the shifted Customer pain and re-align your technology to suit. This is not a once off process, it’s an ongoing process to continually refine, update and align with the market to create anew that product – market fit, as I indicated in the first paragraph of the Introduction.

Remember to build the dream with validated, specific and brutally honest customer insights, over and over again to stay ahead of the competition. The competition will copy you and catch up if you stop for one minute. 97

You have the recipe, now use it over and over again, or you now have the process, keep at it.

And Remember. There are three types of people in this world, those who make things happen, those who just let things happen, and those who wonder what the heck happened. Which one are you?

About the author: Mike Nyenes spent the first half of his working life in a manufacturing environment working his way up from trainee mechanical engineer to ultimately achieving the level of Factory Manager due mainly to his ability to resolve process and system challenges. Mike then entered the world of management system consulting in 1998 and later established and operated a Manufacturing Advisory centre (MAC) and has spent the last 11 years in small enterprise development as a Practitioner and Mentor. Mike has always excelled at problem solving by providing innovative solutions and embraces the mantle of â&#x20AC;&#x153;change agentâ&#x20AC;?. He is a subscriber to the concept of continuous improvement. Mike is married to Valerie-Anne and they have a grown up daughter, Roxanne. He lives with his wife on a farm in the bushveld of South Africa. Mike is an avid birder and bird photographer.

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