Startup Manufactory Business Model & MVP Development
Introduction
Humans are an extremely inventive species. Unlike animals, over thousands of years people have constantly strive for improvement by developing tools and designing solutions to tackle problems.
Whether it’s hammerstones or Bitcoin, humans also make the tools and solutions they create available to others in order to generate an income.
This commercial activity solves a problem in itself but requires both a business idea and a business model.
Business Idea vs Business Model
Business Idea vs Business Model
A business idea is only an idea
Business Idea vs Business Model
A business model is the execution of a business idea
Business Idea vs Business Model
There are novel ideas, innovative ideas, disruptive ideas or simple copycat ideas.
In all cases, generating an idea is usually the starting point of a business.
Keep in mind that, whatever the idea is, it needs to create value.
Business Idea vs Business Model
A good starting point when trying to formulate a business idea is to look at the pyramid of needs. This was developed by the US psychologist Abraham Maslow in 1943.
In his paper A theory of human motivation (1943) Maslow theorised that there are at least five sets of motivational goals, which he classifies as basic human needs.
Maslow’s hierarchy of needs
Maslow’s hierarchy of needs
Self-actualisation
Travelling
Spiritual services
Art & Music
Self-improvement
Philanthropy
Maslow’s hierarchy of needs
Esteem needs
Education
Sports
Military
Politics
Social engagement
Competing
Maslow’s hierarchy of needs
Belongingness and love
Family & Friends
Social media
Clubs
Interest groups
Associations
Movements
Maslow’s hierarchy of needs
Safety
Accommodation
Peace
No Covid-19
Health and safety,
Security
Insurance
Maslow’s hierarchy of needs
Physiological
Food & Fluids
Rest
A house
A fire
Safety
People’s needs are all the same all over the world
What is a business model?
In a hot country, a seller, let’s call him Pablo, comes up with the business idea of selling water at a busy beach to people looking to satisfy their physiological need of thirst.
What is a business model?
The business model Pablo decides to go for is purchasing water bottles for a certain price from a shop and then retailing those bottles for a higher price at the beach.
What is a business model?
This business model is retail. Since the retail price for the customer at the beach would be higher than the purchase price for Pablo at the shop he would be left with a ‘cut’ representing his profit.
What is a business model?
Buys Water Bottle |
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Sells Water Bottle |
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Profit Water Bottle |
|
What is a business model?
However, Pablo soon finds that the people at the beach are not interested in purchasing his plain water bottles because they bring their own bottles of water.
Despite the market rejecting his business model, he decides to stick with the original business idea but to change the model.
What is a business model?
Pablo mixes the water with lime juice and ice cubes and offers the finished product to the people at the beach.
Now, the new business model is production in combination with retail.
What is a business model?
Finally, the people at the beach buy Pedro’s ready-made drinks and he is in business.
He has achieved what is called the product-market fit.
What is a business model?
Buys Water Bottle |
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Buys Lime |
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Sells Lime 2x Juice |
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Profit Lime Juice |
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The Four Factor Value Matrix
F | N |
B | S |
The Four Factor Value Matrix
Frequency | Need |
Barriers | Scale |
The Four Factor Value Matrix: Frequency
Frequency describes how often a customer uses your product or service. Are the customers buying coffee every single day or are they buying a car every 10 years? In order to generate profits you need to sell your product as frequently as possible to your customers.
The Four Factor Value Matrix: Need
Need describes whether your product or service satisfies a basic human need. Looking at the Maslow Pyramid of Needs you can easily work out which product or service that may be. Are you selling food for which there is no substitute or luxury handbags which can be replaced with cheaper ones.
The Four Factor Value Matrix: Barriers
Barriers describe two different kinds of barriers: Firstly, your product or service need to remove barriers for your customers. For example, a mobile phone allows for long distance communication. So a mobile phone removes the barriers of distance. A credit card allows for cashless payment. So a credit card removes the barrier of having to find an ATM and taking out cash first before making a purchase.
The second barrier you need to create as a barrier to entry for your competition. How can you structure your product or service to keep your competition out of your market?
The Four Factor Value Matrix: Scale
Scale describes your ability to scale your product or service. Are you running an online business that can be scaled globally like Instagram? Or are you running a bakery that has its catchment area covering the neighbourhood only? Are you running a platform like Amazon with millions of products available or are you running a specialised platform selling fishing rods only?
Many thanks for your attention!
Matt Kuppers | CEO & Founder
Ⓒ Startup Manufactory Ltd 2016
matt@startumanufactory.com
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