Step (1)- Define & validate the business concept (problem-solution fit)
Action 1- Define customer segment: Who is your targeted customer segment? Identification of the target segments should provide clear details on who they are and how to reach them.
Action 2- Describe market: Brief description on the target market (or launching market) including, main players & their market shares, products & services, selling prices, competition structures, market size, market growth, weaknesses, strengths and key issues for further consideration.
Action 3- Define problem: What is the pressing problem that your invention (or product) will intend to solve? How the existing problem has been handled? Who are the main competitors or suppliers? What are the shortfalls with current suppliers? Why do you think that this project’s problem is a compelling one for the target customers? Provide a digging information on chosen problem.
Action 4- Problem testing: What is the evidence of acceptance collected from a group of customer segment about your accurate selection & definition of the problem? is your defined problem accepted by large group of customers? and what are the evidences? Provide full details on customers’s feedback to confirm acceptance to your definition & selection of the problem.
Action 5- Define solution: What is your intended solution? Brief description on how do you intend to solve the pressing problem? why you think that your solution will have acceptance and impact on target segments? what are the shortfalls with existing solutions and how your solution is differentiated from those existing ones? Provide full details on intended solution and why it is the best option to solve the problem.
Action 6- Problem-solution fit: What is the evidence of acceptance collected from a group representing the customer segment about your solution-problem fit? Evidences will be accepted based on the level of reliability and consistency factors. Provide full information on evidences collected from sampled customers accepting your proposed problem-solution fit.
Action 7- Arrange prototype: What is the prototype of your solution? Draw first a simple sketch for the solution and then develop a physical prototype, that will be used for further investigation with target segments. Make the prototype as simple and informative as possible to study the following actions.
Action 8- Craft unique value propositions: What are the unique value propositions for your solution and why they are unique and how they are well protected and difficult to be copied or imitated? the best way to craft value propositions is to measure the benefits of your solution that target customers experience based on making them feel better or reduce time and cost required to perform a job.
Action 9- Define Product: What is the initial specifications for your product? Clear definition of the product including specifications, designs, using manual, ..etc must be provided. The best way to define a new product is to list product’s specifications in a simple brochure (offline and online).
Key outcomes: Business concept is defined and tested.
Step (2)- Define & validate the product-market fit
Action 1- Define product What is the product’s specifications, benefits, functions, inputs, outputs, etc. At this stage and based on stage 1 above, a product definition can be refined with more details. Provide definition of the new product.
Action 2- Product testing– Begin with a prototype and initial product definition (listing features, functions & benefits) based on experimental testing results including scientific or laboratory test and IP approval. Then, you try to get this initial product definition validated or tested with the potential customers and reiterate this process till your reach into a Minimum Viable product MVP. The best way to develop a new product and test it is to apply the agile product development which is based on iterative processes to learn customer experience and define business and engineering functions.
Action 3- Define market– Define in brief the launching market in terms of: size estimation, main suppliers & their market shares, nature of alternative or substituted products or services, prices structure, competition structure, distribution channels, ..etc. This also includes listing of weaknesses, strengths, threats and opportunities for the new business. Provide full information on launching market and considerations for further studying and actions.
Action 4- Estimate production cost– Try to estimate the production cost ( £/ a product) based on direct cost assumptions. This estimated cost will be the basis for initial pricing and selling offering for testing purposes. provide basis for estimating the production cost and considerations for further studying and actions.
Action 5- Develop commercial offering: Try to define the initial commercial offering consisting of basic information (or assumptions) on the product description, unique value proposition, selling model (license, products,..etc), selling prices and distribution channels. At this stage, this type of information is difficult to assume and thus it will be considered as subjective for testing and learning purposes.
Action 6- Product/market fit: Arrange your product with commercial offering, test it with potential customers and get evidences that they will buy it. Provide full evidences on customers’s feedback and decide whether to accept or pivot.
Key outcomes: The product-market fit is defined and validated. Simply, it is achieved when your new product is accepted by a large group of customers, who are considering your product as a compelling product (must buy) and buying it.
Step (3)- Define the business model
Action 1- Write the customer segment or profile
To write the customer profile, you will need to collect information on your customer segment consisting of the following:
- Decide on people (if your business on a business-consumer market) and business (if business-business market) or mixed segments.
- Personal information (age, gender, location,..).
- Educational information.
- Business background & considerations (if business to business)
- Professional information (their profession/job).
- Job aims (what target customers are trying to achieve in their life relevant to your business idea and can be classified as professional, social and emotional). Provide full information on perspective job aiming that potential customers are trying to perform relevant to your new product.
- Pains (undesired outcomes in doing jobs, obstacles and risk of failure).
- Gains ( Required, expected, desired and unexpected).
- Priorities (customer’s priority of listing for the jobs, pains, gains).
- Requirements to buy your product (design, function, price,…).
- Motivation and fear factors.
- Hobbies & interests.
- What makes them special and identifiable.
- Others relevant information to their decision to buy your product/service.
Action 2- Calculate the total market size
There are three distinctive methods to estimate the size of a market, as per the following:
- The bottom-up approach, where consumers are counted and consumption are estimated. An example of this approach is the per-capita-approach of estimating a market. Example: market is selected, population is estimated for one million and each consumed 3 kgs of hygienic papers a year then the total market size of this market is estimated as 3 million kgs of hygienic papers a year.
- The top-down approach, where estimating of a market begins from a macro primary statistics with certain assumptions and end up with estimating the market size. Example: market is selected, public statistics shows total spending for consumable items was 1 billion dollar, then assumed 2% of this spending budget is directed to hygienic paper, then market estimate is $ 10 million a year.
- The supply approach, where you will estimate the production and apparent consumption as a proxy for estimating the market size. Example: market is selected, annual production of hygienic paper is estimated for 3 tons, net imports is estimated for 1 ton a year, beginning stock is estimated for 0.5 ton, then total market size is estimated for 3.5 tons a year.
The benefits for estimating the market size are that it will enable you to test feasibility, set sales plans and evaluate scalability.
Action 3- List your product’s specification
Create a visual representation of your product. You will need to focus on the benefits of your product and how it acts as pain reliever and gain creator. The best way to list specification of a product as through a brochure. Try to make it simple, easy to access and visible to potential customers for validity and improvement.
Action 4- Define & quantify the core value proposition
Explain why your business can provide customers with a solution that other business cannot nearly as well. Also explain why customer buy your product not other products and what makes your product offering special and hard to imitate.
Determine how the benefits of your product turn into value that a customer gets out of your product. Calculate in quantitative way how your product benefit the customer as on to make him better, faster and cheaper. By doing this exercise, you will be able to easily convince customers to buy your product. This exercise will also help to further develop the product to better fit the needs of the customers.
Action 5- Explain the distribution channels
Explain how to sell your product or service to your target customers. Is it going to be through agents, distributors, direct or mixed. The key considerations for choosing the right channels are those related to the best suitable channels that fit the target customers, level of knowledge in the target market, dedication of sales, cost of distributions and others.
Action 6- Customer relationships
Explain how to launch the product, get the new customers, retain them and grow them. You will need to define key assumptions on how to achieve all of the customer relation deliverables. The key strategies will be increasing awareness, loyalty and growing customers.
Action 7- Revenue streams
Explain how to sell your product (license, product,…etc), price your product (license fees, product price,..etc), credit facilities, cash flow projections, conversion rates, prospective & leads & deals generations, sales projections and others.
Action 8- Chart your competitive position
Evaluate the competition market structure and define your target positioning. To chart your competitive position, you will need to define top two competitive basis ( i.e. price and quality) and define your level of offering for these two basis. These competitive basis are varied depends on the nature of the product, competition structure, customer priorities and others. Show how well your product meets the target customer’s top priorities. Show how well the target customer’s top priorities are met by existing products in comparison with your product. Analyze whether the market opportunity you have chosen fits well with both your core and customer’ priorities. Visualize how your product in comparison with other competitors meet the customer’s top priorities.
Action 9- Partners
Explain which partners that you will need to partner with to bridge gaps in your facilities to produce, market, distribute and selling the product.
Action 10- Key activities
Explain your action plan to create the business, get enough funds, hire team, launch the business, manage operations and achieve sales & production plans.
Action 11- Key resources
Explain resources required to create and operate the business. Resources are assets, human, money and intangible assets (patent,IP). It should be clearly estimating the resources required and how to acquire them.
Action 12- Cost structure
Explain the production cost (variables and fixed) to produce the set products. It should clearly estimate the cost of a product produced (£/ product), projection of production cost, classification of costs (variables and fixed) and funding structures.
Key outcomes: The business model is defined.
Step (4)- Validate the business model
Action 1- Identify key assumptions
Assumptions defined on the business model above will be the key subjects for validation. In addition to the identifying the assumptions, a criteria for approving the testing of each assumption should be roughly identified.
Action 2- Identify your next 10-20 customers
Identify at least 10 potential customers who fit the customer profile. Contact them to validate their similarity to your customer profile and evidence their willingness to buy your product. You will also interview them based on a set of questions & assumptions, collect their answers and to validate the assumptions of the business model.
Action 3- Test key assumptions
Decide on potential customers to interview and test your key assumptions. Set a plan for testing, conduct a test, collect information and analyze them. Based on evidencing information collected from the potential customers, assumptions can be validated and business model can be refined.
Action 4- Refine the business model
Upon the outcomes of the action 3 above, the assumptions of the business model will be removed and replaced with another set, modified and refined.
Action 5- Re-Define the Minimum Viable Business Product MVBP
Integrate your assumptions into developing a MVBP and test it before commercialization. The MVP should be defined, prototyped, tested and made it ready for the product-market test.
Key outcomes: The business model is validated and MVBP is developed.
Step 5- Plan for creation of the business
After successful completion of the stages: problem-solution fit, product-market fit and business model testing, the plan should be focusing on creating the business and supporting scalability.
This step encompasses the following actions:
Action 1- Manage team work: Form the founding team and distribute responsibilities and authorities. This also includes hiring key head counts required to successfully deliver the creation of business stage. This also includes appointing board of directors to advise the management of the business for the next levels.
Action 2- license and formalize the business: including the licensing, article of association and any other legal requirements to formalize and create the business. This also includes acquiring an office to manage the business.
Action 3- Raise seed funds: including evaluating the business and estimating the capital for the next phase. This includes approaching angel networks, venture capital and other sources to raise seed fund against the investment cost.
Action 4- Identify and communicate the business: including the vision, mission, goals, high-level strategy and the company & product market positioning.
Action 5- Arrange the business governance: where policies, procedures, work instructions and forms, including who and what to do to carry out the business activities are well defined.
Action 6- Articulate the business strategy: where mission, vision and strategic directions are well defined. Also strategic objectives, action plan and control are clearly defined.
Action 7-Business planning: Targets and actions plan and control are well defined over a period of one year.
Action 8- budgeting: the budget required to carry on the activities of the business over a one year time will be arranged. It will also describe the funding options.
Action 9- Launch the business: including setting up a plan for launching the business and control of execution.
Action 10- Pilot commercialization: include acquiring the storage and production factory facilities or outsource production and pilot commercialization.
Key outcomes: The business is successfully created, launched and operated.
Step 6- Plan for scaling-up a business
A business scale-up is realized if a growing revenue is evidenced. Growth can be reached as through paid growth ( i.e. advertising and promotional campaigns) or sticky growth (i.e. sales agreement or recurring revenues) or referral growth (i.e. refer another customer to switch in and buy your products). In order to achieve the business growth, plans for a growth should tackle the following activities:
Action 1- Have the right & talented people (team): this includes appointing and managing talented team capable to manage the scalability phase and take the business to next levels.
Action 2- Raise fund (money): this includes re-evaluating the business, estimating the cash flow requirements for the next phase (i.e. 5 years) and funds required. Funds can be raised through approaching angel networks, venture funds, online crowdfunding and other sources. Raising fund will be successful if the business is successful, scaled up and supporting evidences are acquired.
Action 3- leadership: this includes leading the business to plan and achieve scalability, including managing people, money, technology platform, innovation, production, marketing & sales and sustainability.
Key outcomes: The business scale-up is successfully planned and set up.
Call for Action:
You please feel free to feed me back with your comments and suggestions. Should you need a training or mentorship or advising assistance on your startup business, You please contact us. For more details, you visit our website http://www.growenterprise.co.uk.
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Prepared by Munther Al Dawood
Enterprise Development Services