The Institute for Innovation
and Entrepreneurship at UTD
Leveraging the power of ideas and technology to create new ventures and add economic, social and cultural
value to our community
Alcatel-Lucent AT&T University
Creating Value for the Customer;
Capturing Value for the Entrepreneur and Investors
Creating and Capturing Value
Agenda
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Introduction of Topic (10 mins)
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Brief Self-Introduction by Panelists (10 mins)
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Moderated Panel Discussion (20 mins)
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Questions from the Audience (20 mins)
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Creating and Capturing Value
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Dr. Joseph C. Picken – Executive Director, The Institute for Innovation
and Entrepreneurship at UT Dallas
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Brendon Mills – Serial Entrepreneur:
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Senior Advisor - ATEME (Telecommunications)
GM, VP Mobile Video Business Unit - RGB Networks (Telecommunications)
CEO, Founder, RipCode, Inc. (Internet Industry)
CEO, Founder, GENBAND, Inc. (Telecommunications)
George Mavromaras – Serial Entrepreneur
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Partner, Texas App Consulting Group (Mobile App Development)
CEO, Founder, Mavro, Inc. (Medical Spanish Guide)
3
The Importance of the Business Concept
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Defining and clearly articulating a viable business concept
is the essential first step for any entrepreneur
The business concept addresses two key questions:
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How will the venture create value for a customer?
How will the venture be organized to generate profits and
capture economic returns for the entrepreneur and investors?
An attractive and viable business concept is essential:
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To attract employees, key advisors and initial customers
To raise investment capital
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The Entrepreneurial Process
Customer
The business model defines the
Need or
mechanism of an exchange: the
Problem
value created for the
customer and
the return of a reciprocal value
from the customer to the firm.
For the firm to earn a profit, the
reciprocal value must be greater
Exit the
than the cost to the firm of creatVentureto the
ing the value delivered
customer
Typically, a successful exit
is required to fully capture
the value created by the
venture for the benefit of
the entrepreneur and his
investors
Create
Value
(value
proposition)
The creation of real value
for a real customer is the
essential first step.
The value created for the
customer is described by
the value proposition
The
Business
Superior
Solution to
Concept
Problem
Capture
Value
(strategy &
business
model)
Execute
the Plan
Building a sustainable
business is all about the
processes and priorities
of execution within the
framework of a viable
business concept
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Creating Value for the Customer
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The entrepreneur’s initial challenge is to create customer value:
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We must understand what the customer needs and values and then define
an offering that meets those needs better than the next best alternative
You must adopt the customer’s point of view. The entrepreneur usually
sees what the product will do (functionality); the customer sees (or
imagines) what the product will do for him (utility).
Key question: What is the customer’s “job-to-be-done”?
The entrepreneur must then deliver a solution that solves the
customer’s problem better than that customer’s next best
alternative. To do so, you must understand:
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How the customer solves the problem today. What his alternatives are.
How satisfied or dissatisfied is he with the current solution?
How the customer will have to change his behavior to utilize your
solution. How willing the customer is to change his behavior, and what
factors may inhibit behavioral change.
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Capturing Value for the Entrepreneur
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You must then determine how to deliver the solution in a
manner that captures a portion of the value created for the
entrepreneur and his investors
Capturing value requires a business model and a strategy that ensure
sufficient profits to provide a fair return on the investment (of
time and resources) required to create the business
A business model consists of four interlocking elements that
describe how the business works to create and capture value:
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Customer Value Proposition
Profit Model (economics of the business)
Key Resources
Key Processes
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The Four Box Business Model
Framework
Describes how a
company creates value
for a given set of
customers at a given
price
Defines the way the
company will capture
value for itself and its
shareholders in the
form of profit
Customer Value Proposition
 Target Customer
 Job to be done – important need
or problem to be solved for the
target customer
 Offering – a solution that solves
the problem or satisfies the need
Profit Formula
Key Resources
The means by which
the company delivers
value to the customer
The
which
and means
itself –by
enabling
the
the company
enterprisedelivers
to fulfil
value
to the
the CVP
andcustomer
profit
and
itselfin a repeatformula
able, scalable fashion.
 People
 Technology, products
 Equipment
 Information
 Channels,
 Partnerships,
alliances
 Brand
 Revenue model
 Cost structure
 Margin model
 Resource velocity
Key Processes
 Processes
 Rules & metrics
 Norms
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Business Model Development:
An Iterative Process
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Mullins and Komisar argue that no venture succeeds based on
the original business plan (Plan A):
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The ventures that succeed are those that recognize (and are
willing to admit) that Plan A isn’t working:
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There are just too many assumptions and leaps of faith
Some (or many) of them will be wrong and must be revised
Test and and modify key assumptions about the market, the opportunity,
and the competition, and…
Move to Plan B (or C or D), before they run out of money
Google didn’t make money on Plan A, or Plan B, or Plan C –
they iterated their business model until they finally stumbled
upon Plan D, which finally worked.
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Two Very Different Approaches
Plan A
Start with a Novel
Product/Service Idea
Plan B
Develop a Winning
Business Concept
Develop a Winning
Business Concept
Write a Comprehensive
Business Plan
Find Venture Capital
Funding
Start with a Novel
Product/Service Idea
Pitch it again and again –
Iterate and Refine the Idea
or
Business
Model
Business
Strategy
Design the Product
“Try it, iterate it until you
get it right, then build a
repeatable, scalable
business process”
Get Rich – Retire Early
Build a Company Capable
of Sustained & Profitable
Growth
Hire the “A” Team
“Try it, iterate it until you get it right,
Leverage Resources – use
Build thethen
Productbuild a repeatable, scalable
Bootstrap Financing
business process”
Take Orders
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Key Questions to Be Addressed
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Creating Value for a customer
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How did you discover the customer need around which you
built your business?
How did you validate that need?
How was the idea iterated and refined as you went forward?
Capturing Value for the entrepreneur and investors
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What was your original business model concept? Did it work?
How did your business model evolve as your business grew?
What triggered the changes in your model?
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