AULET Generating Exponential Revenue Gro...

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Generating Exponential Revenue Growth HCT MIT Entrepreneurship Conference Dubai, United Arab Emirates September 20, 2006 Bill Aulet, Senior Lecturer and Entrepreneur in Residence MIT Entrepreneurship Center One Amherst Street, E40-196 Cambridge, MA 02142 USA phone: +1-617-253-8653 fax: +1-617-253-8633 e-mail: aulet@mit.edu http://entrepreneurship.mit.edu

Desired Outcomes of Presentation : 

Desired Outcomes of Presentation Increase understanding of the different types of customers when starting or growing a business Increase understanding of the steps and elements of Entrepreneurial Sales & Marketing Implementation Framework Close Out Summary of Key Points Questions and Answers and Dialogue Outline: Customer Taxonomy Implementation Review Close

Upfront Caveat : 

Upfront Caveat This lecture will focus on technology-based enterprises Similar to the types of companies that spin out of MIT Bias is also towards: Product-based Rational ROI-based procurement process Hardware and/or software This is based on my experience Does not mean the information is not relevant elsewhere but there will be more customization required

Executive Summary : 

Executive Summary Customer Alignment

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Customer Taxonomy Implementation Framework Close Proposed Outline:

Recommended Reading Material : 

Recommended Reading Material Geoffrey Moore, Inside the Tornado, Chapters 1-3, pages 1-61. Dorf and Byers, Technology Ventures: From Idea to Enterprise, sections 11.8 and 11.9, pages 247-252.

Technology Adoption : 

Technology Adoption Diagram from Dorf & Byers, Technology Ventures, p. 248

Technology Adoption Over History : 

Technology Adoption Over History

Category of Adopters : 

Category of Adopters Diagram from Dorf & Byers, Technology Ventures, p. 248

The Chasm : 

The Chasm Diagram from Dorf & Byers, Technology Ventures, p. 249

Value of Model : 

Value of Model Must know what type of prospect/customer you are dealing with All customers are good at the right time* Identify the type of the prospect/customer and treat them accordingly What do they care about? Technological Enthusiasts ? Technology – yes, Ease of Use, Price - no Visionaries ? Quantum Leap Possible, Ego – yes, Risk, Price – no Pragmatists/Early Majority ? ROI and Risk – yes, Technology – no Conservatives/Late Majority ? Risk, ROI, Ease of Use, Left Behind – yes, Tech - no Skeptics/Laggards ? Rationality – no, forgetaboutit… Know the risks with each group – e.g., Visionaries want customization Valuable way to gauge your true market adoption The Chasm exists between Visionaries and Early Majority If successfully crossed, should have exponential revenue growth

Strategy to Cross the Chasm : 

Strategy to Cross the Chasm Diagram from Geoffrey A. Moore, Inside the Tornado, p. 25

Successfully Crossing the Chasm : 

Successfully Crossing the Chasm Diagram from Geoffrey A. Moore, Inside the Tornado, p. 38

How to Chose Beachhead Segment : 

How to Chose Beachhead Segment Is the target customer well funded and are they readily accessible to our sales force? Do they have a compelling reason to buy? Can we today, with the help of partners, deliver a whole product to fulfill that reason to buy? Is there no entrenched competition that could prevent us from getting a fair shot at this business? If we win this segment, can we leverage it to enter additional segments?

Success Leads to New Industry : 

Success Leads to New Industry Successfully executed, beachhead market success leads to unfair advantage in next markets First pin helps to knock down next pins and then you are in the Tornado Result is a new industry that you dominate Examples: PeopleSoft: HR ? Client/Server Business Systems Lotus Notes: Actng & Consluting Firms ? Groupware Apple: Desktop Publishing ? Easy to Use PC Sun: CASE/CAD ? Technical Workstation Documentum: Pharma Reg Submissions ? Pharma Work Flow Manager & Reg Submissions for Other Industries

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Customer Taxonomy Implementation Framework Close Outline:

Overview: Implementation Framework : 

Overview: Implementation Framework It is a process Start at step #1 and don’t try to jump in later It is a dynamic process so you may have to go back to previous step as you get more information It is impossible to overstate how important it is to understand your customer in all dimensions Once this understanding is gained, then a great deal of analysis still comes into play Included in this analysis is the Customer Taxonomy just discussed Gut feel & instincts will be relevant but don’t let them get the better of you – analyze customer data The elements of a marketing plan are well defined

Simplified Implementation Process : 

Simplified Implementation Process 1. Understand founders’ interests, goals and assets 2. Understand whether tech push or market pull 3. How will we choose to compete 4. Detailed work to build market/product plans Brainstorming & Analysis Analysis Exit Strategy

Understand Your Starting Point : 

Understand Your Starting Point Honest evaluation of founders’ Interests, Goals and Assets Do not short circuit Interests = Passions Goals Personal Financial Time frame Assets include: Technology/Intellectual Property Skills Knowledge/Rollodex/Credibility Financial Resources

Understand Your Company’s Genesis : 

Understand Your Company’s Genesis Generally two types Technology Push iRobot Google Market Pull SolidWorks Dell Computer Important to know what you are In either case, as the company matures, it moves to the middle

Know Your Initial Raison d’Être:How You Will Compete : 

Know Your Initial Raison d’Être:How You Will Compete Product Innovation Customer Intimacy Low Price

Build Detailed Market/Product Plan : 

Build Detailed Market/Product Plan Make a first pass Actively engage in market place and win customers Understand the taxonomy of your customers Understand engagements you did not win Incorporate their feedback Continually refine market/product plan Process

Marketing Plan Elements : 

Marketing Plan Elements Target Customer Overall Risk Assessment Business Model and Pricing

Business Model and Pricing : 

Business Model and Pricing Now ready to decide on Business Model… and not before What are your financial resources? What are your stockholders’ expectation? What is your exit strategy? What are the customer needs and expectations? What and when is the best way to monetize? Weighing all the items now you determine your business model OTC plus maintenance Subscription model Consumables Web services advertising-based model Different sources for revenue Then you determine price Also determine discounting policy Value-based pricing Truisms Twice the price, half the volume Easier to bring prices down Understand full costs

New Business Model Examples : 

New Business Model Examples Dell Computer Google Datatel Electronics Store Parking Meters Hewlett Packard Advice: Do not short circuit the discussion on business model. Once set, it is hard to change.

Reality of Entrepreneurial System : 

Reality of Entrepreneurial System Founders’ values, goals, skills, interests and core competencies Entrepreneurial Marketing Target customers Product Definition Value Propositions Business Model Sales Prospects ? customers Customize Feedback New opportunities Engineering Build it IP Feedback New opportunities Finance Measure & Track Resource allocation Productivity Plan & Analysis Feedback

Final Steps in Market Plan : 

Final Steps in Market Plan Need to have a business model to optimize monetization of products Output includes detailed marketing and financial models Market segment sizes Quantifying the Value Proposition Resources required Sales costs and cycle Pricing Revenue and profitability by product, geography and channel Impact on overall financial statements/cash flow Sensitivity analysis A point person in charge All needs to be checked regularly for consistency with: Exit strategy Company values Company interests Flexibility and dynamic incorporation of new data, as appropriate, is key

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Customer Taxonomy Implementation Framework Case Study Close Usual Outline:

Lessons Learned : 

Lessons Learned This is a process (hypothesis ? test ? refine) Process works in that it gives you the best chance for success but it is not a guarantee or a silver bullet Marketing is real, real hard Nothing is more important – if it is not right, you can not fix it else where Don’t invest heavily until you have a solid marketing plan Alignment is key – and this is interactive and dynamic (always keep in mind the exit strategy and don’t let it float) Make sure the market(s) you chose allow you to meet your overall goals There are many paths to success – chose one and stick with it Keep the Main Thing the Main Thing When opportunity knocks, don’t be emotional and make sure you are always open to rational business discussions that will help you achieve your goals sooner, with less risk and/or at a high level

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Customer Taxonomy Implementation Framework Close Outline:

Desired Outcomes of Presentation : 

Desired Outcomes of Presentation Increase understanding of the definition of entrepreneurial marketing Increase understanding of the role of entrepreneurial marketing Increase understand of how to effectively implement this function in their new enterprise Increase understanding of the different types of customers when starting a business Increase understanding of the steps and elements of Entrepreneurial Marketing Implementation Framework Real World Case Study Close Out Summary of Objectives Questions and Answers and Dialogue

Executive Review : 

Executive Review Customer Alignment

Generating Exponential Revenue Growth : 

Generating Exponential Revenue Growth Good entrepreneurial marketing and sales is not a spectator sport!!!

THANKS! : 

THANKS! to reach Bill Aulet, email toaulet@mit.edu