The Power of Revisiting

I made a mistake. You see I understood the concept of bootstrapping a business, from an intellectual standpoint that is. I understood that if you want to bootstrap you need to look at what you have and look at where it gives you strength; I understood you needed to realize that you can’t play the same game the big guys are playing, you know the captains of industry. I wrote a business plan for a class, and one of the requirements was to ensure that the business could prove viable and it could hire more than two people full time. I wrote that plan, but in my heart I knew my business couldn’t be that plan at least not yet. Gig Theory in its paper incarnation was a business that would have its own brick and mortar location by the beginning of year three. It was a business that, as written, would require millions of naira (almost 43 million) to get to the point of making an impact on entrepreneurs. But it was also a business that was playing in a league that it didn’t need to play to fulfill its mission. The organization didn’t need a building to fulfill its mission, it just needed a platform.

The platform I created initially was built with the paper incarnation of Gig Theory in mind. And by the time the platform was created, at quite an expense, I realized that keeping up with the platform would take more than I could give, and hiring people to fill the gaps that I couldn’t would put us out of business faster than we could gain traction and start making impact, revenue, or net assets. My partner had to remind me that the goal was sustainability, not size or image.

I recently read The Bootstrappers Bible, a manifesto by Seth Godin that I recommend everyone who is interested in entrepreneurship to read. One of the takeaways was to sit with one’s business plan/business model at least once every three months. I did that, and while it resulted in me putting aside the initially expensive but beautiful platform; it also helped me move to a beautiful and cheaper (on a cost basis) platform that was easier for me to manage.

Lesson:

  • When you are going from paper to real life (plan to implementation) you need to look at what you are currently capable of. Usually the plan is a representation of the final point, or what you consider to be the final point, of your business. When you start, depending on your level of resources, you might need to start a bit different or like I did just smaller.

A Discourse on Value

…when Customers choose an organization, they are more interested in the Value they’ll receive… ~ Business Model You1.

 

My first foray into the business world was participating in a business plan competition as part of my senior project in the final year of my university. There were eight competitors, and we came in at a not-so-shabby number four. Looking back now I realize there were a lot of things that we didn’t fully understand – financial statements, building an organizational team, and value. But the most important thing was value. We thought since our product offering was cheaper than all else that was available on the market, our customer would jump at the chance to pay us whatever little money we were asking for. We were wrong.

The simplest definition of value that I have seen so far is WIIFM (What is in it for me?) Value propositions answer the all-important question that customers have –

What is in it for me? ~ Via Jump Start Your Business Brain by Doug Hall

Answering this question requires that your business has a solid understanding of the problem your offering is trying to solve. Such understanding helps pick a customer segment that you can easily/profitably cater to. The determination of whether or not you can cater to a segment is based on the other business model components i.e. can you garner the key resources, conduct the key activities, and acquire the key partnerships required to fully serve that segment. Understanding your problem also helps you define the best solution that will help you deliver on your value proposition.

One thing I have learned since my fourth place finish is that one shouldn’t confuse value with either low cost or with features. Customers want a tangible benefit, one that if they apply it to their lives would make a marked difference to them. To give an example, I love to read books and to read them one has to buy them. When I was younger and much broker, I had a deal with a young man who sold books at a street corner in the Garage in Ikorodu. I paid him 20 naira to borrow a book that I returned and he could still sell at the same price since it was a used book to begin with.

The feature: The ability to borrow books

The benefit: read more books for less money

Thinking of just the feature didn’t fully convey the value that I would get from using his service; yes it said I could borrow books, which was great, but nothing was said about the monetary terms of that arrangement.

The benefit on the other hand didn’t mention anything about borrowing books. How I got the books, borrow or buy, wasn’t important to me, what was important (my problem) was that I had access to a lot of books at the prices that fit my budget. The interesting bit of this story is that 10 years later I still remember this man and the solution he provided for me. Can you say that your customers will remember you ten years on?

Whatever business you are choosing to go into, take the time to understand the problem and the customer having the problem; this will help you offer them value in the way of a great product or service.

Footnotes

  1. Book by Tim Clark, in collaboration with Alexander Osterwaleder and Yves Pigneur

From the Business Model Canvas to the Business Plan – Part 2

 

Going from the Canvas to the Plan

Going from the Canvas to the Plan

Customer Segments

Having the right customer listed in the customer segment canvas block requires having an understanding of the problem that you are trying to solve. The customer segment you choose is closely related to the industry analysis section of your business plan. The industry analysis helps you understand if your product (solution) is a good fit with the problem of the customer segment you have picked i.e. if you have chosen the right customer segment.

This is also where you determine if your solution will fall into the need or want category. Information that can help determine this includes income information on your target customer segment and what they currently spend their money on (if that information is available). This information helps determine if the solution is something that your customer segment is able and willing to pay for. 

Your industry includes several players. First there are your potential customers (as discussed above) and your competitors. Your competitors are the people/organizations that provide solutions that are currently being used to alleviate the problem you are solving, so these will be substitute products. Note that the substitute products don’t always have to come from the same industry; to use a simplistic example a pen and paper can be substituted for a word processing program if the problem is a writing related issue. This section of the plan shall include an analysis of how your solution (offering) stacks up when weighed against the other solutions out there (the competition). The prevailing way of conducting this analysis is the use of a SWOT analysis.

This section also involves analyzing the macro environment. The macro environment has other players that include, but are not limited to, suppliers and government regulators that interact with the market in which your offering competes. To determine whether you can profitably serve the customer segment, you need to have an understanding of this environment. You need to know what the emerging trends are with respect to the population in the area you are planning to serve, the regulatory environment, personal preferences, technology et al.

With the business model canvas you defined a group of people that you believe you would be best able to serve, the industry analysis takes it a step further as this is where you do the research to determine the environment that you will be working in to ensure that you can serve these people. An easy way to look at what this section does for you is this, it answers the question:

What is the market and competitive environment and is it worth my while to dive in?

Value Proposition

The value proposition canvas block is a benefit summary of your offering. And your offering is described in more detail under the description of venture and marketing plan: product sections of your business plan. These sections of your business plan essentially define the physical form (either good or service) that your value proposition will take.

Your value proposition should be expanded in the description of venture section by:

  • Describing the physical characteristics/features that allow you to deliver value with your offering
  • Describe how these characteristics translate into the benefits that you are promoting to the customer in the form of your value proposition.

Another section that is influenced by the value proposition is the product section of your marketing plan. Under the marketing plan you clarify what actually goes into making the product. When writing the marketing plan you want to ensure that all the product related marketing plan activities are directly related to communicating your value proposition to your customer segment. You want to discuss “the quality of components or materials, style, features, options, brand name, packaging, sizes, service availability, and warranties.”1.

Having the value proposition defined before you start writing the product section of your venture description and marketing plan is crucial because it helps you focus on the things that you need to do to communicate that value proposition with the product and not just your communication message. Information from this section will feed into your production/operations plan as all these aspects will determine the production processes as well as your operations.

Channels

As defined earlier, channels canvas block includes how you get your value proposition to your customer. This canvas block will help you define your distribution systems (marketing plan: distribution) and how you promote your products (marketing plan: promotion) to the customer for them to buy them.

The distribution section of the marketing plan details out the finer points of how you are going to get your product to your customer. Distribution systems can either be direct or indirect; they can also be owned by you or by somebody else. The question to consider is:

Do you sell it to a wholesaler who then sells it to a retailer who then sells it to the customer; or do you sell directly to the customer yourself?

Then there is promotion. How do your customers know about your great new offering that can solve the problem that they have been struggling with? Promotion channels can include direct mail campaigns, advertising campaigns, or the more accessible social media campaigns.

Customer Relationships

The customer relationships canvas block defines part of your operations plan and marketing plan: promotion. Both these sections of the business plan detail out what actions need to be taken to ensure that you can start and maintain the desired customer relationships that you outlined in your canvas.

In the operations plan, your customer relationships help define what kind of customer service programs that you need to implement from customer acquisition to retention.

With promotions, understandably the purpose of your customer service isn’t to push particular products onto the customer, but it could have that residual effect. How? Well what does a customer do when they have had an expectation-exceeding interaction with a company? The expectation is that they would pass this news on to their friends. You can either hope for this outcome or you can design your customer relationship systems specifically to motivate satisfied customers to talk to their friend’s about your offering. Also you need to determine what structure such systems will take i.e. automated vs personal relationship.

Revenue Streams

The revenue stream canvas block define the parts of your business model that earn you money. This is tied into the description of venture, the pricing portion of your marketing plan (marketing plan pricing), and the financial plan.

In the description of venture, you can give a high level description revenue streams listed on your business model canvas. A note on identifying revenue streams: obviously you should make money from your offering (value proposition: product/service), but you can also make money from your channels and customer relationships. For instance if you have an owned distribution system, you can choose to offer access – for a price of course – to people who would derive value from that offering. If you do decide to do something along these lines, you need to ensure that doing so does not compromise your core business. An example of this is Amazon – they used their expertise in developing web infrastructure to launch a cloud service to business. You could also make money from your customer relationships: one way you could do this is offer basic customer support for free and then a more advanced customer support basis for people who are willing to pay for it.

The pricing portion of the marketing plan details how much you will charge for these revenue generating blocks and also give a breakdown of how these prices. You will also need to give an economic basis for the prices and the expected demand i.e. the total revenue projections that you are making based on these prices.

Finally the financial plan will have to include your revenue streams and help show that these revenues can cover costs and the business can be profitable after a given period of time.

  1. Robert D. Hirish, Michael P. Peters, and Dean A Shepherd, the Eight Edition.

LOF4: Is There Another Way?

Today’s learning on Friday is a question. It’s one that has been nagging me for a while, and I thought you might have the answer that has eluded me so far. Recently on my way back from work in dense Luanda traffic, it was hard not to notice the street vendors selling everything from car visors and cashews to travel adapters and medicine. I couldn’t help but wonder is there another way? Another way for these people to make a living with the education level that they have now and the resources they have access to. Is there a way for them to make a living without having to go from car to car trying to sell customers on their dusty products, underneath the driving heat, running between cars trying not to get hit?

How to Take Criticism

I’m currently reading a book called Uncertainty by Jonathan Fields. The basic premise of the book is that uncertainty, risk, and criticism form the triad that is the basis for any creative endeavor. The word creative doesn’t restrict the endeavor to the arts; it can include every endeavor that involves charting an unbeaten path. Today I faced off with one of the triad, criticism. I wouldn’t say I won or we have become best friends, but we definitely moved from a relationship filled with animosity to one with a healthy level of tension.

Here’s the story:

I have been dabbling in web design for four years and recently decided to dive headlong into it. My first top-down piece of work was a point of pride for me and I shared it with my partner to say “look what I did, now pat me on the back.” He took one look and said “it doesn’t look professional.” The impostor gremlin crept up and wanted to fight back to defend my amazing bit of work, but I had the presence of mind to put her on time out for a minute. I put her out long enough to ask what “ doesn’t look professional” meant. At the end of the conversation (aka exercise) I came out with some actionable feedback – feedback that I could actually use to get better.

Moral:

Whenever you get criticism, take some time to dig at the root of it. Ask the person giving it why they thought it was so important to share their criticism of you or your work. Probing can reveal some actionable steps that would help you get better on the path you are treading, and it can also reveal whether you should listen to the critic or not. A good indication that you shouldn’t listen is if they can’t come up with a concrete reason why you should listen to them, and this reason shows itself in the way of actionable steps. Getting actionable steps/feedback help you improve your work and develop a healthier relationship with criticism. I’m not implying that you would love criticism once you start probing; I’m saying that you would develop that healthy tension between hating it and learning to use it to get better at your work/life. Healthy tension is a good thing as it leads you to your goal because you are constantly learning. And whatever goal you have, criticism can be your friend when it is constructive i.e. when you can act on it/grow from it.

One Foot in Front of the Other

Have you watched a fairy tale lately when you see the princess going from a wimpy kid to a swashbuckling pirate in the space of 1 hour and 15 mins? Do you remember the ones that talk about love conquering all in the long run? You know the “prince charming saves the princess in the end” stories. How about those success stories about those overnight successes called the entrepreneurs we admire? You know who I am talking about – Bill Gates, Paul Allen, Steve Jobs, The Zuck (Mark Zuckerberg).

Well what we don’t get in the 1 hour and 15 minutes is that while they are able to fit those transformations in that convenient time period, it takes much much longer for the princess to find her sword hand. Also you know prince charming finding snow and kissing her? Well she might have been waiting for years and years. Oh let’s not forget the entrepreneurs, those guys were working at it for long before they became famous. In the age we live in when people’s lives are summarized in 140 characters or less, it is so easy to romanticize the success and happiness that we see broadcast on TV. In the reality called our lives it usually takes so much longer to get to the peak point that we are aiming for, so what do we do – well we tend to get down on ourselves.

This post is a reminder to all of you like me who think that overnight successes are the norm and it should be happening to you, or that your fairy should come to its conclusion in the same amount of time it takes to watch Snow White and the Seven Dwarfs. It is a reminder that the people that we see out there doing their thing have been working at it for years. It is a reminder that the success they have now is a result of incremental tasks, the little ones that a lot of us tend to ignore, and not huge breakthroughs. It is a reminder to us all that we need to enjoy the process because even though it hasn’t happened yet, everything that we are doing right now is working to get us one step closer to where we want to go. The difference between “overnight success stories” and our stories is that those guys kept going. They kept putting one foot in front of the other, despite setbacks or realizations that they have been doing things wrong all along. Such realizations didn’t result in them giving up, it was just a sign that they needed to chart another course to the destination they aspired to. What separates these people from us mere mortals is courage, and I’m not talking the prince, princess, or pirate kind. I’m talking about the type of courage that keeps you putting one foot in front of the other despite seemingly insurmountable odds; the type of courage that allows you to stare at all the work you have done for the last ten years and throw it in the trash because you just realized that you made a wrong assumption at the beginning that renders it all unusable; the type of courage that allows you to pick up from the correct assumption instead of giving up on your goal altogether.

As a woman, and a feminist, I have heard so many times that the evil of fairy tales is that they teach women that they need to wait for a prince charming to save them. I think a bit differently now. While that concept is not false, I think the true evil of fairy tales is that they give us a false idea of what it takes to get to our happy place, wherever that is. So chuck all that and adopt “the one foot in front of the other” type of courage.

To summarize in the words of Eddie Cantor:

It takes 20 years to become an overnight success

With that said, let’s get to work folks!

From the Business Model Canvas to the Business Plan

Crafting a business model canvas is a good precursor for writing a full blown business plan. But what is the relationship between the business model and the business plan?

Well a business model helps you tell the story of how your business will make money. It is a high level document that can be seen as the blueprint for every business document that comes next from the business plan to an investor pitch. The business plan on the other hand goes into much more detail on how your business will run. It discusses areas that are not touched upon in the business model like the form of your organization.

Table 1 shows the relationship between the business model and the business plan.

Business-Model-Plan-Update

Table 1: Correlations between the Business Model and the Business Plan

This post assumes that you have a business model canvas drafted and want to use it to craft your business plan. To start this series I’m going to describe how the business model canvas can help you write and manage your business plan.

Writing:

The idea of the business model canvas is to map out your business in a short period of time. During that period, the goal is not to edit out ideas because they seem impossible; the goal is just to write down what you want your business to do based on the information that you have right now. The advantage of this is that you are not bogged down with the details and you are able to stay creative and engaged in the process. Another advantage to this is that you can quickly prototype your business idea and critique later; it’s similar to brainstorming for, but for an entire business entity.

A business plan on the other hand cannot be written in one sitting. The process requires research and critical thinking. The business model canvas can make the plan writing process easier because it helps you divide up the writing process for each section of the business plan. Looking at the table you know where to go for the top level ideas for your industry analysis: your customer segments. It’s not that cut and dried for other sections – for example the Marketing Plan, which obtains information from just about all the canvas blocks – but it’s a good place to start

Managing:

A business plan is a living document i.e. it needs to grow and change with your business. Majority of the changes that are made to a business are easier to articulate on the canvas than on a plan. Apart from being easier to articulate, the plan helps you determine quickly if the change will be in line with the rest of your business model e.g. ensure that the change you are looking to make will not impede on your ability to deliver on your value proposition or another canvas block.

Here is a hypothetical situation: Consider that you are a retailer with a focus on selling apparel to a demographic that traditionally buys high end products at bargain prices and are approached by Fendi to carry their products. While this might be exciting on the outset, a quick consult with our business model might tell you that selling $1000 purses at full price will not appeal to your customer segment i.e. it might not be the best choice for you. If Fendi is offering prices that will allow you to sell at closeout prices that are similar to the other products that you carry, you might want to consider the proposal. Further analysis will be done before the final decision is made, but having a way to quickly look over the proposal can help you determine if you want to look into it on a deeper level. Also mapping the change on your canvas will help you know what sections of the business plan will be affected.

This week was all about explaining how it works, check back next week for Part 2 on how to actually apply it.

Business Plans: To Plan or Not to Plan

I took a business planning class not long ago; it was a very engaging class that helped me think through all the aspects of running Gig Theory and the structure allowed me to come out on the other end of four months with a business plan and a partner pitch. But even before the class was over parts of the plan were shelved for later use, and this fact is what leads me to ask the question that is the title of this article.

The idea for Gig Theory started in a group of journals, and the information from those journals helped create a four-page word document on a 15 hour plane ride. All the other plans that came about for this organization originated from that document and they all built on each other sequentially from the idea assessment to the pitch. The business model was written based on the value offered and the customer segment that would benefit most from this value; the solution sprung from my personal experience of taking classes and having a professor who distilled relevant knowledge from the multitude out there and the support I got from both him and my classmates; the channel evolved out of my knowledge of the capabilities of web-based platforms and so on.

All the other plans came from using the business model as a guide for writing. Based on this I am tempted to say that one doesn’t need a business plan and one can do it with a business model canvas.

BUT

The business plan forces you to think through the details of the model. The business model is more of a view of the forest while the business plan takes you down to the trees; this metaphor just means that the plan goes into more detail than the model such as the industry environment in which you will be operating and more explicit detail on how to deliver your value proposition, what you will need to deliver it, and the estimated costs and benefits of operating per the plan.

In the beginning of this article I said that even before I started implementation phase, parts of the plan for Gig Theory were put on ice; but this was only because I looked at the plan that I had drawn up and made changes based on my present realities i.e. my full-time work commitments alongside my school workload. Those who say not to plan might be looking at it from the perspective that the business plan is a rigid document, but it isn’t. The plan should evolve with your business. There are some core parts that I believe should stay the same like the values that your company operates on, but outside of this everything else is open for crossing out, adding to, or subtracting from.

Short Answer:

TO PLAN

LOF3: Co-Renting

This particular night started with a communal meal at a great Lebanese restaurant and migrated to a bar and finally to a club. The fascinating thing about the night was that two of the three places we went to were sharing the space with another kind of business – a concept called co-renting. In this situation the arrangement involved using a space for a specific purpose during the day, and totally transforming the space for use by another business by night. As we drove up to the bar, I noticed that the main gate had a sign for the Ministry of Agriculture, and as I walked in I noticed an array of arts and artifacts. The club was the same, it wasn’t just a club as there was theater seating by the dance floor. It turned out that it is a movie theater as well. This arrangement reminded me of an article in Entrepreneur Magazine called Share the Wealth that goes into a bit of detail on operating businesses with a coherent theme out of a common space.

Question: Do any of you currently or plan to employ any creative arrangements for obtaining the space to run your business out of? If so please share below and if not let’s brainstorm a few right now?

How Do You Define Success?

Growing up I had certain ideas on what success was, some of them were:

  • Being a doctor, lawyer, engineer, accountant, or something equally important like a college professor.
  • Having a ton of money,
  • Marrying well

These ideas were deeply entrenched and helped guide what I decided to do for a career. I chose to become an engineer because I liked to fix things and I thought that was really the only way to make a living doing so; at the time I made this choice I didn’t realize that the things I liked to fix were more situations and social problems than bits of metal. It wasn’t till a few years into my program that the whole “being the female engineer and making a ton of money at it deal” didn’t really work for me. In the spirit of finishing what I start, I carried on and even got a job in the field. The money I made was parlayed into discovering what I loved; I bought books on business, innovation, and creativity and I thoroughly enjoyed devouring them. I started a course on entrepreneurship, and as they say the rest is history.

A lot of us have predefined success in ways that have nothing to do with what we really want out of life, and a lot of times when we realize it isn’t what we wanted all along we believe it is too late or that course-correcting would mean that we have wasted a good chunk of our lives.

No experience, no education is ever wasted because it helped you get to where you are today, wherever that is.

Sometimes we are of the opinion that knowledge is wasted when it isn’t used in the way it was intended i.e. the convential way. But that isn’t always true as some of the most amazing innovations can come from unrelated fields, see behavior one. Shifting gears is also inherently entrepreneurial:

“Following the rules is fine for army captains and cops, but not for entrepreneurs.” ~ Amy C. Casper, Editor-in-Chief Entrepreneur Magazine

I would like to expand this last quote to say that it is not just for entreprenuers, but for everyone who wants to life a fulfilled life. Life is too short to live by somebody else’s rules for success. So the questions stands:

What is success for you?

What do you want to do?

What is your picture of success and what is required of you to get there?

These questions are too important to leave to someone else – society, family, friends, or anyone else – to answer. If you are wondering on the marrying well bit, luckily I was smart enough to define that part for myself and was blessed with the sense to define what marrying well meant, so I did.