The following is a guest post from Ajitkumar M. Degaonkar, curator of the India – Pune Startup Digest. This is Part One of a 2-part series.
Let’s take up this target business model and customer development, but before we even begin, one of the first questions I tend to ask is:
What is a company?
What is it that I’m trying to actually start? For this post, I think we ought to just use the definition.
“A company is a business organization with sales, a product or service in exchange for revenue and profit.”
Explicitly for the purpose of this post, I’m eliminating nonprofits. Let me be clear, you could use the business model canvas and customer development to go through the process for nonprofits, but actually having some goals that are fairly concrete revenue and profit allows us to measure whether we’re succeeding and failing in very clear ways and then we adjust to the question.
What is a startup?
I spent years on four startups and I never could have given you a definition off the top my head of what a startup is.
I always thought a startup was where we have free food, where there is a great, small team, or where you could bring your dog and whatever. I never quite understood the purpose of a startup, so I’m going to give you Steve Blank’s definition of what it is you’re actually doing.
“A startup is a temporary organization design to search for a repeatable and scalable business model.”
Now let’s go back and look at parts of the sentence because this is pretty important.
Number one is temporary. The goal of a startup is not to be a startup. A startup actually aims to bring you a company. Well that’s kind of interesting because, if you really think about it, at least if you’re a web mobile startup, there is no such thing as a 10-year-old startup. There’s a two-year-old startup attached to an eight-year-old failure. A startup is a temporary organization and what are you supposed to be doing?
Well, while you think it might be built on the product, or maybe if you are thinking harder, it might be to get customers, but actually it’s not.
A startup is designed to search for people. Well, that’s kind of interesting.
What is it that I’m supposed to be searching for?
Let’s see. Number one, you want to search for something that’s repeatable and repeatable means the same thing that works on Monday, works on Wednesday, and works on Friday, and works next week, and works the next month. I want to find sales, marketing, and engineering processes that are repeatable.
I also want to find them scalable. Scalable means that I put a dollar in and I get two dollars out, or I put a dollar in and maybe I get 10 dollars out. But I better not be losing money on a continual basis or I’m called an out-of-business startup. Okay, I know I’m searching for something repeatable and scalable, but…
What is it that I’m searching for?
What you’re searching for is the business model and that business model search will be the focus of my next post.
One of the interesting things about a startup is how is your company going to be organized?
What we now know is the most efficient way to think about all the pieces is by a business model. And so the next question is… Steve just told me think about a business model, but what is a business model?
What are all the pieces? Well let’s take a look.
“A business model is how a company creates values for itself while delivering products or services for its customers.”
In the old days we thought about how to organize a company around functional organizations. We thought a company was about its sales department or its engineering department and you would draw a work chart, but now we’re going to draw a very different diagram.
These above all are the pieces of business. These 9 components describe any company from the world’s largest to a startup beginning its business.
Business Model Generation, by Dr. Alexander Osterwalder and Dr. Yves Pigneur
Value Proposition Design, by Dr. Alexander Osterwalder, Dr. Yves Pigneur and Alan Smith
Startup Owners Manual, by Steve Blank and Bob Dorf
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