1. Idea pitch and business model

Subject title Idea pitch and business model

Purpose of the activity The aim of the session is to acquaint the participants with the methods of quick presentation of an idea and creation of a business model, developing the skill to generate and shape a business idea at the same time managing time efficiently.

Duration 2–3 hours.

Location and tools Chairs, projector, flip chart, writing tools, large paper sheets.

Number of participants 10–30 participants.

Acquaintance/ team building methods Participants freely allocate in space and are invited to walk there freely. The leader establishes different speeds: very slow, very fast, medium speed, and so on. He/she can also come up with some creative speeds: space speed, rocket speed, rest speed, learning speed. This will encourage participants to look creatively at the task. At some point, the leader suddenly says “STOP”, and, upon hearing this sign, each participant looks into the eyes of one of the participants he/she sees first at that moment, and those two participants who looked at each other at that moment keep telling one another about themselves for one minute. Then the participants start moving again. Participants hear the “STOP” signal several times and thus get the opportunity to talk to 3–4 different participants. This method is a great introduction to the topic of idea pitch.

Practical tasks

PART I. AN IDEA PITCH Task no. 1

Participants are invited to write an Elevator Pitch of their project and share it with all participants, carefully following the time. The entire presentation should be no longer than 90 seconds. To make it easier for the participants, they can get acquainted with the first presentations of world-famous companies.

Task no. 2

In the next phase, participants are invited to contact their friends and acquaintances and present their idea in an analogous Elevator Pitch format. Do the listeners understand everything? What questions do they raise? Depending on the results, participants are invited to supplement the presentation text.

Task no. 3

Finally, participants are invited to call their grandmother, grandfather, or other senior representative they know and give their presentation for the third time. Does this time the listener also understands everything? One of the key aspects of an idea pitch success is its simplicity and lightness when understanding the idea. Participants are invited to refine the existing idea for the third time.

PART II: BUSINESS MODEL CANVAS

The group of participants is divided into smaller groups of 4–5 people, in which everyone is invited to create a canvas of their created business model according to the presented theory.

End of session reflection methods Participants are invited to freely share their experiences, lessons learned, perceptions and observations that they experienced during the session and that they will apply in the future.

THEORETICAL INFORMATION

PART I. AN IDEA PITCH

Imagine that you had to come up with a brilliant business idea. Perhaps, you already have a prototype of implementation of that idea. In order to implement a project to the fullest, to create a product, to start selling and promoting it, you need money. And here you enter the elevator of the business centre, you press the button to the 100th floor and at the very last moment another person enters the same elevator. For your success, this person turns out to be one well-known investor with whom you have long been looking for an opportunity to meet. And behold, there are two of you in the elevator, this person cannot get away from you anywhere, and you have about 3 minutes during which you have the opportunity to present your idea in a way that you would be invited to another meeting. And especially that after 3 minutes this person would want to invest in your idea.

This quick presentation is called an Elevator Pitch or an Elevator Speech. This is a short description of an idea, product, or service that explains its concept.

At first glance, the task does not seem difficult, but most business developers get confused when trying to present their idea, forget to say the most important things, and present only its secondary functions. So if, during that short time when you are taking the elevator, you fail to present your idea clearly, the investor is unlikely to understand what your product is and what it is about. In that case, the potential investor will be happy to finally get out of the elevator to escape from you and won’t want to invite you to an extra meeting. To prevent this from happening, the short presentation in the elevator needs to be thought through carefully without missing a single detail. Even if someone wakes you up in the middle of the night, you need to be able to present your idea easily and pleasantly.

And in order to make the above-mentioned short presentation of the project easy to understand for others, we will present a business model development method that will help to understand and formulate the essential parts of the idea structure.

PART II. BUSINESS MODEL

Why is it important to create a business model for your project?

1. This is the very first sketch of a business idea that does not require any significant time and financial input. It is needed to investigate all possible alternatives and choose the most appropriate strategy option for project development.

2. You do not need several weeks to develop a business model, as it is formulated and described in about twenty minutes.

3. The obtained result provides an opportunity to quickly and efficiently present your business model to internal and external stakeholders (investors, partners).

4. The business model provides an opportunity to model separately each individual product/service which is intended to be placed on the market. 5. The development of a business model has a positive effect on the integrity of the team, as all team members are involved in the formation of the product strategy and therefore, they are likely to be more involved in the implementation of the product/ service in the market.

It is important to remember that the business model is an everyday tool. It is not so that a business model is created once and operates throughout the entire life of the business. It is just commendable when the model is constantly improved, supplemented and adapted to the realities of the time market.

Another term that is important to know when starting a business model is MVP (Minimum viable product), a product that has minimal but sufficient features to meet the needs of early-adopter consumers. The main task is to get feedback from customers/consumers in order to successfully continue to develop the product in the future. Gathering information from MVP feedback is in most cases significantly cheaper than creating a product with a large number of sophisticated features.

This makes it possible to reduce risks and costs in the event that a product proves to be less effective and marketable than it initially seemed.

Recommended books on this topic are listed below. 1. Easy option: Eric Ries “The Lean Startup”

2. More complex option: Steve Blank “The startup owner’s manual”

We will complete the Lean Canvas business model. This is a simplified version of business models for start-up entrepreneurs. This version looks as indicated below. provide feedback. They will no longer be an abstract category of customers, but specific people. It is best to discover them as soon as possible and invite them to try a product that is still completely “fresh” or, more usefully, discuss the model with them even before creating the product. Phase 2. A problem that is being addressed Often, business developers start their business by thinking about what they can create, what innovations to offer. However, the implementation of a business idea should be viewed from a slightly different perspective. From the very beginning, it is important to have a thorough overview and understanding of what the

2

Problem

4

Solution

7

Key metrics

8

Cost structure

5

Unique value proposition

9

Unfair advantage

6

Channels

3

Revenue streams

1

Customer segments

Phase 1. Customer segments We first determine our customer segments. At first you will want to declare: “Everyone needs my product.” Unfortunately, this is the most common mistake. Even if you are planning a large expansion, it is worth starting from a smaller scale. The more precisely the customer segment of a product is defined, the better and more purposefully it will be possible to understand and solve their problems. And so the product itself will be the more successful. It is better to start with one segment by gradually expanding it than to dedicate a product to everyone and thus make it inconvenient for everyone.

It should be clarified immediately whether the two types of customers coincide or not, i.e., those who use the product (users) and those who pay for it (customers). Let’s imagine that a product is being created for children, but parents pay for it. In this case, you will need several different coloured pens to complete all the information for both categories. We now move on to the lower part of the first chapter, which is named as “Early adopters” or the first participants. They are the most important people because they will be the first to try out the product and client’s problem and pain are being addressed and only then what specific strategies will be taken in order to address them. If we do not find the problem ourselves, we return to the first phase, in which we described the first participants and users. We go to these people and ask their opinions. If we see that the problems and pains of different customer segments are different, then we create a separate model for each segment. This will be much more purposeful and sharp than trying to fit everything into one model. In this way, it may become clear that different products will have to be developed for different customer segments. The next step in this matrix is the existing alternatives. The customer problem did not occur here and now. It has existed before, which means it has been addressed in some way. This means recognizing that you will have to compete with these alternatives to solutions by appropriating someone’s customers. We describe the existing competitors.

Phase 3. Source of revenue

A product is designed not only to implement an idea, but also to make money. We need to figure out how we are going to do that. We need to create a model and test

how realistic the idea is. A comparison of competitors will help in this process. We defined them in the previous phase, so now it is possible to compare and understand why our proposal will be interesting for alternatives that already exist. And again, the ideas available can be discussed with the aforementioned early-adopter participants, consumers. Are they willing to pay defined amounts for solving their problems?

Phase 4. We move on to the solution

And here we finally move on to our favourite part: what exactly do we offer? We describe the key strategies and options for the proposed solution, considering what we have described above. How exactly will we address these problems and pains?

Phase 5. Unique offer In the next phase, it is important to formulate in one sentence, based on your proposed decision, what makes your product or service unique and and how does it differ from the one that is offered by your competitors. It is important to define the essential, key differences and that the full description would not exceed 140 characters.

Phase 6. Sales channels

We now move on to how customers will learn about a new product. And here, customer segmentation and first customers will play a key role. What communication channels do they use? In what ways do they make decisions?

Phase 7. Key quantitative indicators It is important to measure any success and progress. It is worth setting up in advance the criteria according to which the project will be assessed. The first key calculation is the minimum success criteria. What goals need to be achieved in order to say that the project is a success?

In order to create minimum success criteria, we need to set the following goals: • How the product will be refined within three years?

• What the financial result will be within three years

Phase 8. Cost structure

We have already decided what we create and how we distribute it. We can now decide on the cost structure. In this case, it is important to separate two blocks.

• Primary costs for the creative process.

• Regular costs for development.

Once the cost structure has been created and completed, the three blocks can be analysed together: revenue and costs’ flows as well as planned targets. Are they correlated? Do we really achieve the planned targets by having the costs and revenues that we expect? How many customers do we need to have?

Phase 9. A veiled advantage We live in a rapidly changing world where technology is so advanced that anything can be easily copied. If you create the best product, what can stop others from copying it in three or six months? It is best to think in advance about some kind of security barrier. You can use a variety of options – large customer base, patents, licenses, brand, high price. This should be something that will not allow competitors to quickly repeat your accomplishments. This is the most difficult phase of all. In most cases, we finally realize that everything can be copied and repeated. So all you have to do is run faster than the others to always stay ahead.