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1 GTBMR Get.The.Business.Model.Right. So the harder you work, the more money you make!

2 “You Can Think Your Way to Wealth a lot Faster than You can Work your Way There” Dr. Bruce M. Firestone, B. Eng. (Civil), M. Eng.-Sci., PhD. Founder, Ottawa Senators Entrepreneur-in-Residence, Telfer School of Management, University of Ottawa Executive Director, Exploriem.org Real Estate Broker and Mortgage Broker Century 21 Explorer Realty Inc., Brokerage Columnist, OBJ and EQ JournalOBJ GTBMR

3 Academic Background: -Professional Real Estate Brokerage Courses -Ph.D. in Urban Economics from the Urban Research Unit of the Australian National University, Canberra -Master of Engineering-Science (Traffic and Transportation), University of New South Wales, Sydney -Bachelor of Civil Engineering, McGill University, Montreal -Also attended: Harvard University (Finance), University of Western Ontario (Economics) and Laval University, Quebec City (French) -High School, Ashbury College, Ottawa: graduated 1967, age 15 GTBMR

4 Former Positions: -Former Director and Vice-Chair, Canadian Internet Registration Authority (CIRA) CIRA -Former Executive Vice-President, Business Development, Momentous CorporationMomentous Corporation -Served on National Hockey League's Board of Governors -Founding Director, Ottawa Art Gallery (Arts Court/Firestone Family Group of Seven Collection)Arts Court/Firestone Family Group of Seven Collection -Past Director, Terrace Corporation -Former Publisher, Ottawa Business NewsOttawa Business News -Consultant, Bureau of Management Consulting, Supply and Services Canada -Operations Research Engineer, Metropolitan Waste Disposal Authority, Sydney, Australia -Research Scholar, Australian National University, Canberra GTBMR

5 Business Courses Taught: -Entrepreneurialist CultureEntrepreneurialist Culture -Small Business Management Small Business Management -Advanced Business Models (MBA)Advanced Business Models Architecture Courses Taught: -City Planning and Organization- Enterprise of the CityCity Planning and Organization- Enterprise of the City -Design EconomicsDesign Economics -Real Estate and DevelopmentReal Estate and Development GTBMR

6 Awards and Memberships: -Awarded Canada 125 Anniversary Honorary Medal -Member, Stanley Cup Monument CommitteeStanley Cup Monument Committee -Member, Commercial Services Division, Ottawa Real Estate Board -Honourary Member, Beta Gamma Sigma, International Honour Society for Collegiate Schools of Business, March 2008Beta Gamma Sigma -Exemplary Course Designation, Design Economics, Canada Architectural Accreditation Committee, 2004 -Winner, Educator of the Year Award, OCRI EduGala, Ottawa, 2002Educator of the Year Award -Member, Ottawa Commonwealth Games 2014 Bid Committee -Member, Community Budget Advisory Team, City of Ottawa -Member, Kanata Economic Development Task Force -Member, Ottawa International Airport Authority Planning Committee -Founding Member of CIRA's (Canadian Internet Registry Authority) Marketing and Branding Committee -Member, NHL Executive Advisory Committee, NHL Expansion Committee, NHL Marketing and Public Relations Committee -Member, Ottawa 67s Advisory Board, 1998/99 GTBMR

7 The Entrepreneurs Handbook: Read it for FREE online at http://www.enhandbook.com/http://www.enhandbook.com/ Buy a Hard Copy on Lulu.com at http://www.lulu.com/product/paperback/the-entrepreneurs- handbook/14848132 http://www.lulu.com/product/paperback/the-entrepreneurs- handbook/14848132 GTBMR

8 Projects: -Scotiabank Place -Ottawa Senators -West Terrace -Briar Brook -Robertson Mews -Dunrobin Lake, Dunrobin Village -Blue Heron Storage -Mallorn Centre -Royal Bank Pavilion GTBMR

9 Charities and Not-For-Profits Supported: -Christie Lake Kids -Exploriem.org -Trees for Hope -Minor Hockey -Muscular Dystrophy -Ottawa Senators Foundation -National Capital Alpine Ski Team -Ottawa Rotary Club -CHEO Foundation Personal: Married with five children Personal Interests: Past Chair, Bruce M. Firestone Atom Invitational Hockey Tournament, Red Pine camper Sports: running, tennis, sailing, paddle tennis, skiing, hockey, ultimate, yoga, canoeing, dragon boat racing, hang gliding Hobbies: reading, writing, inventing, creating, starting new enterprises, city- building, educating, collecting Canadian and American art GTBMR

10 Entrepreneur Funnel: ECQ TestECQ Test  EQ Journal  Entrepreneurs Handbook (Read free online or buy hardcopy) --> ADM3396 Entrepreneurialist Culture  Magic from a Hat Lecture Series  BMG, Business Model Generator  www.Twitter.com/ProfBruce  YouTube Channel  Urban Dictionary (Prof Bruce and ProfBruce)  Elevator Pitch Competition  Business Model Competition  Wes Nicol Business Plan Competition  EIEF Competitions  BMIC Mobile App Competition  MBA6298A Advanced Business Models  The Telfer School of Management Entrepreneurship Concentration  IP Store  Startup Garage  Research Funding  LearnByDoing.ca (Early Stage Funding and Mentoring)  MiniOffice.org (Office Space/Business Incubator)  IRAP  Exploriem.org Bootstrap Awards and Adawe Trade Show  Institute of Entrepreneurs  IOE3100 Entrepreneurialist Culture  IOE5100 Startup DNAEQ JournalonlinehardcopyEntrepreneurialist Culture Business Model Generator www.Twitter.com/ProfBruceYouTube ChannelProf Bruce Elevator Pitch CompetitionBusiness Model CompetitionWes Nicol Business Plan CompetitionEIEF CompetitionsBMIC Mobile App CompetitionAdvanced Business ModelsEntrepreneurship Concentration IP Store Startup GarageResearch FundingLearnByDoing.ca MiniOffice.orgExploriem.orgBootstrap Awards and Adawe Trade ShowInstitute of EntrepreneursEntrepreneurialist CultureStartup DNA GTBMR

11 Why do People become Entrepreneurs? a.Can’t get other work, b.Hate their boss, c.Work less hours, d.To create more interesting work for themselves than others can create for them, e.Money is secondary, f.Because humans with big brains and opposable thumbs are driven to be creative and change the environment around them? GTBMR

12 Answers: d and f Would I have had the opportunity to work on: a.the Ottawa Senators/Palladium (now Scotiabank Place) b.1,200+ homes c.dozens of office buildings + shopping centres d.OBJ, etc. if I had stayed with GOC? GTBMR

13 Entrepreneur skill set: -bootstrap/self-capitalize -take initiative -do everything in parallel -innovate -ability to sell -not easily discouraged -business modeling, GM, SM, building cashflow, etc… Relevant to Intrapreneurs too! Intrapreneurs have skill set of entrepreneurs but don’t like risk profile of entrepreneurs. GTBMR

14 Who gets the promotion/green lite? Robert w/ new project costing $10m to develop + 2 yrs of R&D Amanda w/ new project costing $10m to develop + 2 yrs of R&D but she has: -3 launch clients -$2.5 m each of dev. capital -1 st 6 months of products. Amanda’s project – green lited and she gets the next promotion! GTBMR

15 This skill set needed in not-for-profits/GOC/NGOs/even charities. -Sens foundation: 80% out/20% admin >$50m (cash and in-kind) as of 2010. 80% efficient People like to give to charities that are efficient (CLK, Salvos) so they need a quality business model too. Intrapreneurs need to make 97% of decisions by themselves and 3% with others and know which is the right 3% -no one has time to baby-sit you anymore GTBMR

16 How to build a new business (for entrepreneurs ) or a new Division/Product/Service for existing business (intrapreneurs) in 10 Steps: 1.Select the right idea/get a good mentor 2.GTBMR – get the biz model right so the harder you work the more money you make (i.e., not Pets.com) 3.Add DV, differentiated value: “Pixie Dust”/Innovation” GTBMR

17 4. Create a compelling value proposition/build cashflow/cash conversion cycle: low or negative. 5. Self-capitalize/bootstrap (so you own it and not a VC) 6. Use smart marketing/ GM+SM “Earned Media” 7. Mass customize/make it scalable 8. Find launch clients/sell, sell, sell. 9. Execute expertly/good ideas are not 10. Set goals and make your own rules. GTBMR

18 1- Select the right idea E.g.: GradeATechs.com -2x U of O students / 2x CU Students -5 ideas: each one worse than the one before -“Silent alarm clock” -No competition/never before tried/first mover – all over-rated -Maybe you have no competition because it’s a bad idea -If it is a good idea, you WILL have competition -Grade A Techs value prop: -A. explain in less than two minutes -B. be compelling GTBMR

19 -Virus/can’t print/can’t log on/can’t install software/… -unplug your tower/get in car/go to “Mom & Pop” repair shop/2 weeks & $150/not ready yet/another week $200/return home/plug in/works fine but they wiped your hard drive OR -GAT.com comes at appointed hour to your house or biz/fix it same day on-site, guaranteed for $125 -600m PCs in N.A. x30% don’t work 180m customers -NerdsOnSite.com -Google was not 1 st search engine but was most trusted -GAT.com > $5m/yr GTBMR

20 2- Get the Business Model Right -Biz model is the engine of the biz -it is not a biz plan -it is a 1-pg graphical depiction -it goes into (at least 2 dimensions either side (clients’ clients and suppliers’ suppliers) IT IS A FULL BUSINESS ECOSYSTEM -what do the clients of your clients want? -GASnet is the “brain” of the biz (matches techies to clients, contract billing, orders, supplies, software, hardware) -Sympatico/Rogers/others hate doing the ‘last mile’

21 GradeATechs.com

22 3- Reverse out the work -the Internet is the most important new invention of the last 40 years -it is where electrification was at same stage, 20 yrs in -create custom outputs from standard inputs (e.g. new age virtual home builder and Dell) -reverse out the work to customers and suppliers (e.g. Reddit.com and Threadless.com) -match making (e.g. suppliers of customers at the Spa: manicurists, pedicurists, massage therapists, hairstylists…) -mass communicate at ~ no cost (Twitter, FB, blog, email, IM, messaging,…) -Crowd sourcing (e.g. Reddit voting on stories/links, Threadless voting on designs) GTBMR

23 -relational d-base (e.g. Amazon’s: “See what other people who bought this book/CD/video/etc also bought?”) Increased order size and overall volume -user generated content by customers (and suppliers) e.g.: YouTube, Twitter, FB, Reddit & Threadless (suppliers: artist community submit t-shirt designs voted on by customers) GTBMR

24 Virtual home builder: -tried in 2000 to get home builders to do this -very conservative industry -put lots available and designs online in a physics engine together w/ all options/finishes -allow everyone to use physics engine GTBMR

25 -go online: choose lot, design, fit-up, finishes (carpet, tile, kitchen cabinets, lighting package, plumbing fixtures, etc.) -put cash register online too -consumer can see what granite or concrete counter tops add to cost -can fool around for 30+ hours -then hit “submit” button GTBMR

26 Homebuilders fear putting prices online – their competitors might find out! Ever heard of “Secret Shoppers?” -Put CPM (schedules) online: let customers see where their home is at and let suppliers see too when they’re needed for Footing and Foundation, framing, roofing, windows, electrical, plumbing, insulation, dry wall, paint, carpet, cabinets,… GTBMR

27 -As more options are available, more users will visit the site, as more users visit the site, more suppliers come onboard and you have a virtuous cycle -Now “Best Homes 4 U” is enjoying network effects -Suddenly, the flow of cash could reverse direction w/ suppliers becoming advertisers and sponsors GTBMR

28 In the modern economy, the answer to the question of ‘Who pays whom?’ isn’t always obvious. Should a cable company pay ABC because ABC has the content, shows like Diane Sawyer and Primetime News? Or should ABC pay the cable company because it has the feed and access into millions of homes? GTBMR

29 Steve Jobs understood the importance of this before he launched the iPhone He insisted that AT&T give him a share of its subscriber revenues He used Apple’s brand to leverage unprecedented concessions from AT&T He ‘might’ give them a share of app revenues. So he revolutionized yet another industry’s biz model: Cell phone manufacturers went from selling a ’shrink wrapped’ gadget for a one-time payment in a brutally competitive market that was racing to the bottom to an industry with multiple sources of revenues, some of which are recurring: the holy grail of techdom. GTBMR

30 Imagine how much harder Steve Jobs and Apple would have to work and how much lower their productivity as measured in revenue per employee would be without recurring revenues from iPhone app sales and revenues, advertising revenues on their mobile platform, downloads of paid content from iTunes and a share of their carriers’ subscriber fees? From a simple question and a tweaking of their business model flow great benefits. The harder they work, the more money they make and, in Apple’s case, this relationship has become geometric. GTBMR

31 You can see why Sam Palmisano (CEO of IBM) has said he spends a great deal of his time tweaking IBM business models I felt a long time ago that Nortel missed a great opportunity to add more services (and more stable revenue streams) to their hardware sales by changing its business model to include operating and maintaining the complex switches they sold to their clients. After all, who knew these machines better than NT? GTBMR

32 NT leadership focused more on high margin tech sales than the less glamorous business of fixing and maintaining stuff. Meanwhile IBM and later HP recognized that by selling more services not only would they enjoy counter-cyclical revenues streams but they would have a huge leg up on the next round of hardware sales. By providing outsourcing, they became trusted advisors to their clients, sat on the ’same side of the table’ as their clients and could spec their own equipment to fix or augment client networks that they now knew better than their own clients did. They missed it and now they are dead. It’s a shame for all their stakeholders including Canada and the blame lies squarely on the shoulders of their leadership. GTBMR

33 More about Best Homes 4 U: -Allow lawyers access for e-closings -Allow lenders access for e-funding -Now if your WS attracts 10,000s of visitors, you can get your suppliers and your suppliers’ suppliers to pay for ads so more people will buy higher-end products (chandeliers, beveled mirrors, granite, counter tops, home theatre,…) -more options => more people => more options => more people… GTBMR

34 -In a virtuous, self-reinforcing cycle (Google is also an example of Network Effects) -30+ hours in Design Centre with clients can become just 60 minutes -Imagine the productivity increase for homebuilder sales staff, lawyers, mortgage lenders, the GC, the foreman (Worst problem? Homebuyer questions about when this or that happens..), suppliers, trades, subs, … GTBMR

35 Also, customer satisfaction increases since: a)they get EXACTLY what they want, b)they feel they had a hand-in its creation (like Aunt Jemima Pancake Mix: just add eggs and milk). GTBMR

36 The folks who bring you this pancake mix famously had an erroneous insight years ago—they thought that by adding powdered eggs and milk to their mix and eliminating the instructions “Just add eggs and milk”, they could save the busy consumer time and sell more product. It turned out that homemakers liked adding ‘real’ eggs and milk: first, they thought it was healthier that powdered eggs and milk and, second, they wanted to be involved in ‘making’ their kids’ breakfasts. GTBMR

37 For most kids, you are what you do for them. By taking this away, sales went down not up. Best Homes 4 U, by involving the consumer in the design of their own home are catering to a deep seated need in humans to ‘buy-in’. This is a powerful lesson for tech—giving consumers the power to customize products and services is big business. For example, Dell is currently using Threadless.com’s platform to allow artists to submit and prospective customers to select winning designs for laptop covers. GTBMR

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39 4- Create a Compelling Value Prop/CCC low or negative GradeATechs.com had a compelling value propostion. Now let’s look at the CCC: GTBMR

40 -The CCC is calculated as follows: CCC = ART + INVT – APT Where: ART is Accounts Receivable at Year End multiplied by days of the year divided by Annual Sales INVT is Inventory at Year End multiplied by days of the year divided by COGS, Cost of Goods Sold APT is Accounts Payable at Year End multiplied by days of year divided by COGS The actual calculation of CCCs are surprisingly complex and so I put a spreadsheet online to help you with this: http://www.dramatispersonae.org/BusinessModels/CashConversionCycleM easurement.xls You may prefer using our CCC calculators in your browser, so we also put them up for you at: http://sheet.zoho.com/public/profbruce/cashconversioncyclemeasurement GTBMR

41 E.g.. Acme Promotional Products: “One Product Model” 1x sale of $300.00 (Branded Pens) COGS = $200.00 1/3 is paid to their supplier of Branded Pens when order is placed -66.67 ACME asks for and receives a 50% down payment or deposit when sale is made. Therefore, you have: AR = $150 (50% of $300) INV = 0 AP = $133.33 ($200 – 66.67) GTBMR

42 Therefore, Acme’s cash position increases as sales increase  VERY IMPORTANT for entrepreneurs

43 -Fuel industries -Fortune 100 Client list -$1.0m orders -CCC is >180 days =>cash decreases as sales increase -untenable biz model -went from 10% down and balance > completion/delivery + 30days to: 30% down, 2x 30% progress payments only + 10% (their profit) > complete/delivery + 30days -now CCC is negative and FI is doing very well. GTBMR

44 You can read more about this at: http://www.eqjournalblog.com/?p=2257 and http://www.eqjournalblog.com/?p=610 http://www.eqjournalblog.com/?p=2257http://www.eqjournalblog.com/?p=610 -Cash Conversion Cycle, CCC -How the CCC Affects Your Internal Rate of Return -The Power of Leverage to Work for You and Against You -Effectively Manage your Enterprise by Measuring your Cash Position GTBMR

45 5- Self Capitalize -why? -VC-funding is hard to get and takes a lot of time -also, you may end up losing control of your business -VC funded biz are just large biz w/ 0 revenues -power comes from having real clients/real cashflow -if you do go for financing and you do it at the mezzanine stage, you’ll have more leverage -Maple Leaf Design and Construction Brain Saumure, B. Arch (CU and SOA) Fred Carmosino, B. Com (Sprott) GTBMR

46 -No serfdom for Brian: wanted to be his own boss because he could create more interesting work for himself than others could create for him -Started with $0

47 GTBMR What is cheaper? Debt or Equity? Debt. What is cheaper than debt? Bootstrap Capital (e.g.: Trade Credit, Deposits,…) They’re FREE!

48 GTBMR

49 Sources of BC: Home Equity Trade (or Supplier) Credit Consulting Deposits/retainers Launch clients/pre-sales Receivables factoring Soft capital (Mom, Dad, Rich Uncle Buck) Credit cards (be wary) Trading Government grants SBL (Small Biz Loans) Sponsorships Ads Parents and royalties Financial leasing + much more GTBMR

50 More Examples: Internic.ca -Pixie Dust = its name -Lawyers, patent agents and TM/copyright specialists and speculators know “Internet Nickname” -CIRA releases dot-ca -“Gold” rush -DOC sues in Canada for “Intermic.ca” (owned “Intermic.com” in USA) -Rob Hall had GOC protection (Federal incorp. of “Internic.ca Corp.”) and TM of name in Canada GTBMR

51 -DOC loses (DOC controls the Internet – 13x root servers around the world.) -Rob sets up multiple channels to ping CIRA’s server (DAC, Internic, others – all accredited). -80,000 dot-ca backordered 75% success rate -60,000 domains at $50/yr (then) x 2 yrs -$6m in cash in < 72hrs GTBMR

52 Pool.com -Snap names $60/backorder up front -Pool.com: “free to backorder/only pay if successful” -Several million backorders port over to Pool.com -e.g. if you have Manchester.ca and want Manchester.com, if Manchester.com deletes from VeriSign registry, Pool.com will get the domain for you. -$60 if successful or highest bid (when >1 backorder) -Again multiple channels against VeriSign server. GTBMR

53 Make money while you lie on a beach!

54 6- Use smart marketing/GM, SM, Blogosphere… E.g., Ottawa Business News (now OB Journal): -wanted to bring paper boxes into Ottawa (1 st to do so in 1980s) -Need political cover GTBMR

55 -Positive T.V. coverage and radio coverage (earned media) -1 st in N.A. to “save” people from Parking Tickets. “Entrepreneurs would rather ask for forgiveness than beg for permission.” -if we ask city of Ottawa <, they would either: (a) say “no” or (b) convene a committee GTBMR

56 …which would meet for two years, then say ‘NO’. (Ottawa Citizen#, G+M#, “Ordinary” citizens##) [# Entrenched competitors don’t want to give you a hand up.] [## Would argue “visual pollution”] -Paper boxes are cheap advertising (GM – “Substitute brains for money”) – 24/7billboards! So, we dropped 120 paper boxes on Ottawa sidewalks overnight. …all h__l breaks loose GTBMR

57 Lawyer letter threatens us -We are ready w/ Phase 3 of the plan: We write back citing Canadian Charter of Rights and Freedom (introduced by PM Pierre Trudeau) FREEDOM OF THE PRESS -This backs the city off immediately. Phase 4: suggest to Mayor, license the boxes at $50/yr/box GTBMR

58 -Politicians love money and power. Mayor agrees! …(@ $75/box/yr) -$=power -5,000 paper boxes @ $75/yr =$375,000/yr new revenues for the City GTBMR

59 Costs to city = $0.00 Nicer car for the Mayor + Chauffeur! -OBN (now OBJ) 120 boxes @ $75 ea. G+M, OC, FP etc: 4,880 boxes @ $75ea. Force larger competitors to spend big $ to defend their turf =Vietnam vs. USA (TOOTH TO TAIL RATIO) GTBMR

60 7. Mass customize/Make It Scalable - Virtual homebuilder can produce an almost unlimited # of combinations of lot/design/finishes from a list of standard inputs because the work is reversed out to homebuyers who can spend unlimited amounts of time on the physics engine and virtually build their own homes. -Totally scalable and, in fact, Network Effects take place GTBMR

61 Nine things the Internet Allows for the 1 st Time in Recorded History: 1.Create custom outputs from standard inputs. Mass Customize Products and Services (http://www.dramatispersonae.org/CustomeOutputsFromSt andardInputs.htm)http://www.dramatispersonae.org/CustomeOutputsFromSt andardInputs.htm GTBMR

62 Mass Customize For the 1st time in 10,000 years of trading history, humans can now mass customize products and services Service business can become scalable enterprises– never before possible

63 GTBMR Primitive Village Ugh and Nnn in the 10th Millenium BC The families of Ugh and Nnn decide to co-locate to form a village, at first, for the protection of both After awhile, they decide that Nnn concentrate his time on producing flint knives while Ugh focuses on hunting After co-location and specialization, the GDP has increased to seven antelopes and six sets of flint knives each month.

64 GTBMR Primitive Village The formation of the new village results in a phenomenal increase in well being So much so that this first village is producing goods surplus to their needs Sets up the possibility of trading with a third family, the family of Zll, Expert in producing textiles (animal skins) resulting in a further substantial Increase in value for the emerging regional economy This simple example demonstrates why the ‘more pie for me’ doesn’t necessarily mean less for you (Went from custom inputs/custom outputs (lone tribe)  semi custom inputs/semi custom outputs (primitive village/skill sharing/artisans)  mass production (Henry Ford and the Model T)  mass customization: with each change, huge improvements In human welfare)

65 GTBMR Moral Underpinning of the Entrepreneur: 1.Take care of yr business 2.So yr business can take of yr family 3.So yr family can take care of you 4.So you do not become a burden on yr fellow human being or the State 5.So you are in a position to help yr fellow human being which in turn helps you take care of yr business

66 2. Reverse out the work to clients and suppliers. (http://www.dramatispersonae.org/GTBR/GettingTheBusinessModelRight.htm)http://www.dramatispersonae.org/GTBR/GettingTheBusinessModelRight.htm 3. Embed your enterprise in a networked business ecosystem made up of your clients, your suppliers and yourself plus your clients’ clients and suppliers’ suppliers (http://www.eqjournalblog.com/?p=581)http://www.eqjournalblog.com/?p=581 4. Match making—directly connecting your clients to your suppliers making service industries scalable for the first time ever (http://www.dramatispersonae.org/TheInternetIsEatingAHoleInTheGlobalE conomy.htm)http://www.dramatispersonae.org/TheInternetIsEatingAHoleInTheGlobalE conomy.htm GTBMR

67 5. Mass communicate planet-wide through social media and other Internet tools at almost no cost (http://www.dramatispersonae.org/EntrepreneurialistCulture/FutureVision.htm)http://www.dramatispersonae.org/EntrepreneurialistCulture/FutureVision.htm 6. Crowd sourcing (using the Internet as intermediary) means relying on the wisdom of the crowd to, for example, pick and vote on stories for Digg.com or t-shirt designs for Threadless.com (http://www.eqjournalblog.com/?p=1541)http://www.eqjournalblog.com/?p=1541 7. Relational data base allows you to mine your customer (or supplier) interactions so you can ask, if you are Amazon (for example) questions such as: “Would you like to see what other people who bought this book (CD, video, etc.) also bought?” Increases average order size and volume of sales. (http://www.eqjournalblog.com/?p=1541)http://www.eqjournalblog.com/?p=1541 GTBMR

68 8. User generated content, a form of reversing out the work to customers or suppliers, underpins the business models of YouTube.com, Reddit.com, Threadless.com, Facebook, Twitter and many other Web 3.0 enterprises. (http://www.eqjournalblog.com/?p=1541)http://www.eqjournalblog.com/?p=1541 9. Network effects are created when, for example, a virtual homebuilder’s website becomes the go-to place for design options a client can choose from. As more visitors use the physics engine of the site to calculate what the costs are for their new home and all selected options, more suppliers of household goods (kitchen cabinets, plumbing fixtures, lighting packages, counter tops, tile, carpet, home theatre, etc.) will want to be on the site (and pay to be on the site) which will encourage yet more visitors (i.e., prospective homebuyers) to use it in a virtuous cycle, each reinforcing the other. Google is an example of this effect as well. (http://www.eqjournalblog.com/?p=692)http://www.eqjournalblog.com/?p=692 GTBMR

69 Crowd Sourcing In the case of Threadless, their marketing from Day One has been confined to a limited repertoire including: 1.Some paid ads on Facebook, Digg and Twitter 2.A voting system that their community uses to select winning designs for Tees submitted by independent artists 3.Using unpaid models for their Tees drawn from their employees and consumers, many of whom have friends that blog, Tweet, FB and vote on the matter

70 GTBMR Crowd Sourcing 4. Extensive social comment on the whole process 5. More recently, other companies such as Dell and Alpargatas use (and pay to use) Threadless’ voting system and community to select winning entries for the design of PC covers and sandals. Here is Threadless’ Biz Model, circa 2010:

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72 The cost for each design they produce is quite low: they pay the successful, independent artist $2,000. But they test many designs at the same time by way of their voting system so the cost per design is much lower than this and, happily, they can be quite sure that designs that are approved by their customers for production will also likely be bought by them.

73 This year, other companies such as Dell and Alpargatas are paying the company to use their crowd sourcing system to select winning designs for PC covers and sandals. This obviously helps Dell sell more computers and Alpargatas sell more shoes but it also helps Threadless: a) spread the word about what they do and b) turn their crowd sourcing business model into a platform which can be widely applied to other industries.

74 This is an efficient and effective, early 21st Century Business Model. It shows that you can put a ‘marketing engine’ in front of your business that works, in a highly energetic way, independently of your enterprise. Tony Greco and Greco Lean and Fit Centres use their charitable foundation (The Foundation to Fight Obesity in Children) as a kind of stalking horse marketing for their fitness centres. Involvement in the Foundation by kids and their parents to fight childhood obesity is almost certainly going to lead to adult participation in Greco fitness programs— either by the kids when they grow up or by their parents dealing with fitness issues themselves.

75 The Threadless and Greco examples show how the marketing dimension of a business can itself be a ‘profit centre’ or, at least, cost neutral. For Threadless, other companies will pay to use it and their stakeholder group will do much of their marketing work for free. For Tony Greco, the amount of earned media he receives for his Foundation is remarkable. If you are planning on going into marketing as a career or you are thinking, as an Intrapreneur, of building a new division for an existing firm or you are an entrepreneur, your job security/your next promotion/your business success will be mightily enhanced if you can turn your marketing costs neutral or negative.

76 Postscript: Threadless might even be able to turn part of their supply chain (the design side) into a profit centre. Artists and corporations might pay them to have their designs featured and voted upon in a sponsored process much as Digg and Twitter allow sponsored links and tweets, which, for authenticity sake, are clearly identified as sponsored links and tweets. For a budding artist, what is it worth to them to see one of their designs voted on and (hopefully) chosen by the Threadless audience? Could be quite a career- booster. Turning your supply chain into a profit centre? Harry Houdini would be proud of today’s biz modelers.

77 Postscript 2: In the above biz model, I show the business in a square in the middle of the ecosystem and above it, a brain. The brain is a crucial part of a modern business model. It is the part that matches customers and suppliers, in this case, to vote on designs. In other models, the brain matches suppliers and clients as, for example, in a spa where suppliers are hairstylists, massage therapists, manicurists, pedicurists etc. Clients can pick out which services they want and which suppliers they would like to book with and suppliers can book which clients they want and how busy they would like to be. In both cases, the model allows the enterprise to reverse out much of the work to their suppliers and customers.

78 GTBMR

79 8- Find Launch Clients/Sell/Sell/Sell If you can’t sell your: ideas/leadership/suppliers/staff/clients/customers/ boss/BOD …you can’t be an entrepreneur or intrapreneur. 9- Execute You have to be able to execute – ideas are not enough. -Won NHL franchise to Ottawa, what do you do? (a) Party all night? (b) Return from Palm Beach to Ottawa, organize a season tix drive, collect $22m in cash in 10 days nearly two years before opening night? GTBMR

80 10 – Set your goals If you are a downhill skier, do you want to race before or after your toughest competitor? GTBMR

81 You want to race 2 nd ! Human beings are incredible at setting goals, internalizing them and meeting them (N = ?) Our 1 st year Sens team set a democratic goal of > 22 points We even released it to the media Why? To get buy-in from players, coaches, media, community and because the worst team EVER (the 1972 Washington Capitals) got 21 We ended the year with 24 points! GTBMR

82 N = 3 You need a minimum of 3 pre-launch clients Why? Because you can always fool one client, maybe two into buying your product or service but probably not three And also because every biz model ever conceived changes when it comes into contact with RL Your launch clients will provide you with FREE launch capital and FREE mentoring “Follow the fastest (least effort) route to revenue and form an early (and lasting) attachment to the customer,” Sir Terence Matthews (a ‘Terry’ism’) (See: Sir Terence Matthews’ Ten Guiding Principles For a Successful Launch of your Next Startup, http://www.eqjournalblog.com/?p=780)http://www.eqjournalblog.com/?p=780 GTBMR


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