INITIAL BUSINESS MODEL CANVAS

1

How Do You Develop a Business Model?

What is a Business Model?

• In Lecture 1, we said “the heart of a business model is product-market fit”

• Now we can say, “a business model is” – A value proposition that satisfies a need or solves

a problem for a customer segment

– A plan to enter or create a market for attracting, persuading, selling to, and retaining the customer segment

– A plan for how to build the product or service delivers the value proposition(s)

2

How do you Find a Business Model? • The startup makes better and better guesses about the

elements of the business model

• Start with guesses about customer segment and value proposition

• Go on with guesses about the rest of the market – customer relationships, channels, revenue streams, costs, suppliers, etc. etc. etc.

• Always be willing to refine your guesses

Invalidate Guesses Until They’re Right! • Scientific method

– Make a hypothesis

– Test the hypothesis

– Sharpen the hypothesis

• How can you prove a hypothesis right or wrong? – Ultimate test is repeat sales to customer segment

– Not possible at first • Ask the customers and other market players to help you

– Can never prove a hypothesis right, can only prove it wrong

3

Step 1:

Guess Guess

Guess

Guess

Guess

Guess

Guess

GuessGuess

Step 1: State your Guesses

DC I-Corps

Step 2:Step 2: Test the Problem

DC I-Corps

4

Better Performance

3D immersive sound

Higher gaming scores

More realism

Reduced ear fatigue

Pinpoint sounds

Better Performance

3D immersive sound

Higher gaming scores

More realism

Reduced ear fatigue

Pinpoint sounds

Problem Solving

Refine and improve 3D audio algorithms

Problem Solving

Refine and improve 3D audio algorithms

Intellectual Property

Proprietary knowledge, brand, patents, trade secrets,

Intellectual Property

Proprietary knowledge, brand, patents, trade secrets,

Audio experts, software developers Audio experts, software developers

PC GamersPC Gamers

PC Game Developers

Audio Middleware Companies Audio Middleware Companies

IP License Fee to UMDIP License Fee to UMD

Software development tools Software development tools

Audio & Software Engineers Audio & Software Engineers

Audio Middleware Companies Audio Middleware Companies

SW License, Per Title, Per Seat for Plug-in SW License, Per Title, Per Seat for Plug-in

Personal Assistance and Self- service

Small support staff, emphasize web support

Personal Assistance and Self- service

Small support staff, emphasize web support

Game Engine CompaniesGame Engine Companies

Note changes from last iteration

Insights DriveStep 3: Iterate or Pivot

DC I-Corps

Rinse and Repeat

Customer Development is a never-ending process, even when your startup (if you’re lucky) turns into a business

5

Main Points

• Testing turns guesses into facts

• Facts drive the business model

• You need to test hypotheses with customers and others

• The process never ends