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Transcript of Lead To Win Bootcamp - Day 1
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Welcome to Lead to Win
Lead to Win
October 25, 2011
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Day 1
Janice Singer & Deborah Dexter (IRAP)
Welcome
Tony Bailetti (Carleton)
Program overview, portfolio snapshot & blueprint to growth
Lead to WinSlide 2
Tom Duxbury (Wesley Clover)
Running on a shoestring
Corien Kershey (Magnitude Partners)
Segment & target market segments
Tony Bailetti (Carleton)
Day 3 opportunity reviewsDay 1 takeaway messages
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Welcome
LTW for Women to:
• Increase number and success of women owned business in National Capital Region (NCR)
Lead to WinSlide 3
• Make the NCR the premier location for women to start businesses
• Create an ecosystem of growth oriented women entrepreneurs in the NCR
• http://ltw-women.ca/home
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Program Overview
Lead to WinSlide 4
October 25, 2011
Tony Bailetti
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Highlights of LTW
• Become largest source of technology and knowledge jobs in Canada’s Capital Region
• Community driven• First phase selects right people and opportunities to which we can add value
Lead to WinSlide 5
which we can add value • Second phase is six day Opportunity Development Program, cuts in Day 3 and 6
• Each business in Phase III to generate a minimum of 6 knowledge/technology jobs in next three years
• Fourth phase for businesses with more than 6+ jobs and wish to lead a target market globally
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Lead to Win
Company founders get:• Stronger business opportunity quickly
• Knowledge to establish and grow successful business
• Confidence, encouragement
Region gets:• 6+ good paying jobs per company over 3 years
• Healthy ecosystem to launch and grow successful businesses
Lead to WinSlide 6
• Confidence, encouragement and motivation
• Access to large and diverse business network
• Foundation to sell to first customers, raise funds and attract talent
businesses
Free to founders
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Ottawa-Gatineau experience
1 2 3
4 5 6
4 wks
Jun 09
Aug 09
Nov 09
Mar 10
Jun 10
Nov 10
Nov11
Total
Applicants 82 66 98 69 41 49 52 457
Day 1 accepts 62 46 55 49 35 29 41 317
Lead to WinSlide 7Slide 7
Opportunity development
Deal development
4 5 6
75 start-ups active as of October 15, 2011
Day 4 accepts 51 35 44 37 22 18 207
Admitted to Phase 3 (passed Day 6)
Founders 39 27 34 26 14 13 153
New startups 30 19 21 18 11 11 110
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Ottawa-Gatineau start-up groupings
1. Content2. Hardware & systems3. Health services & technology 4. Hosted services5. Mobile applications
Lead to WinSlide 8Slide 8
5. Mobile applications6. Services, consulting & applied technology7. Software applications 8. Social & collaboration9. Intellectual property10.Specialty (do not fit in any group above)
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Strategic Associates
Lead to WinSlide 9Slide 9
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Criteria to enter Phase III
1. Offer solves significant problem or pain to identifiable target customers
2. Offer delivers more value to target customers when compared to alternatives
3. Company provides good value to channels and go-
Lead to WinSlide 10
3. Company provides good value to channels and go-to-market partners
4. Can generate 6 knowledge jobs in region 5. Sound financial plan for company and founders6. Develops options for growth in region7. Core team has what it takes to deliver objectives
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Points of difference that add value to participants
• Experienced entrepreneurs and risk-sharing service providers deliver Phase II
• Expert and diverse reviewers provide substantive feedback on business opportunity multiple times
Lead to WinSlide 11
multiple times• Focused on reducing time to cash from first customers
• Uses ecosystem approach to launch and grow companies
• Immediate application to venture
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Points of difference that add value to Canada’s Capital Region
• Success = number of local knowledge jobs created + amount of capital attracted
• Large number and high diversity of volunteers• Stakeholders set strategy
Lead to WinSlide 12
• Stakeholders set strategy• Content is freely available for use by others• Platform on which to grow other initiatives
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Blueprint to growth
Lead to WinSlide 17
October 25, 2011
Tony Bailetti
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Agenda
• Two distinct functions of entrepreneurs
• Four key skills
• Blueprint to grow revenue
Lead to WinSlide 18
• Growth formula
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Distinct functions of entrepreneurs
1. Responds to existing or future profit opportunities, all of which consists of price differentials
P1 P2 Sales of:
Lead to WinSlide 19
2. Acts to move away or destroy her/his present state– Seeks autonomy– Authors relationships– Makes declarations
Resources & processes
Decisions to employ resources & processes
Expects P2 > P1
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Four key skills
• Make decisions when future is unknowable• Identify, create, shape, develop and refine opportunity
• Acquire and combine resources
Lead to WinSlide 20
• Acquire and combine resources• Champion customer adoption of your firm’s products, services, solutions, processes
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Blueprint to grow revenue
Revenue for 6+ jobs
Get house in order
Secure commitment
Close deals
• Raise bar• Divest what adds no value• Get legal, cash, IP & personal affairs right • Act based on results/facts
• Implement growth formula
Lead to WinSlide 21
for 6+ jobs commitment• Create mind share around offers & “why” company does what it does• Lever talent, technology & resources worldwide• Lower cost of customer acquisition & go to market• Skills
• $• Access/reach• Time
• Implement growth formula• Increase # & diversity of players that make money when you sell • Develop differentiators for which customers pay• Keep pace delivering value to customers & players• Select right competitors• Embrace customers’ changes
Overcome consumption barriers
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Overcome four barriers that constrain consumption of your market offer
Skills • Make offer easy to consume• Provide simple rules for non-experts to solve problems themselves using your offers
$ • Reduce price & cost structure• Help customers & partners make money
Lead to WinSlide 22
Access/reach • Make offer available in locations & contexts where customers want to consume them
Time • Reduce time to consumption• Reduce latency & delays
Good structure to order benefits from consumption of your offer
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Define & implement growth formula
Growth formula• A guide to replicate & guide behaviour that makes a company money
Benefits • Makes it easier to make decisions that deliver growth
• Provides strategic clarity
Lead to WinSlide 23
money• Ties & aligns work of people
• Lodged in company’s experience
• Provides strategic clarity • Reduces complexity • Learn through repeatability• New employees become productive faster
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Inventory of growth formulas for small companies
1. Help strong customers grow2. Bring innovation to market as complementary offer
to strong players’ offers 3. Apply good technology developed by others to
different markets 4. Sell services to niche first & then develop & sell
Lead to WinSlide 24
4. Sell services to niche first & then develop & sell product
5. Demonstrate offer works, sell to first customers, & identify profitable business model at the price first customers are willing to pay
6. Demonstrate that offers provides value to users & economic benefits to customers & can be delivered at a profit
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Inventory of growth formulas (continued)
7. Make competition irrelevant by concurrently delivering 2X the value at half the cost
8. Sell to narrow niche, cross-sell, then fill higher order needs
9. Sell to customers in mature markets abandoned by
Lead to WinSlide 25
9. Sell to customers in mature markets abandoned by incumbents
10.Fill gaps that occur when migrating from an old to new system
11.Resell services in geographies that are too expensive for other service providers
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Lead to Win
Running on a Shoestring
Lead to WinSlide 26
Running on a ShoestringOctober 25, 2011
Tom DuxburyEntrepreneur in Residence, Wesley Clover
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Running on a Shoestring
• Upon completion, you will know about
• The Zen of a cash-conserving mindset
• What needs to be done to get up and running from Day 1
Lead to WinSlide 27Slide 27
• What needs to be done to get up and running from Day 1
• What can wait
• Common pitfalls
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Agenda
• Getting Operational
– The Basics
– Philosophies
Lead to WinSlide 28Slide 28
– Philosophies
– The Nuts and Bolts
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The Basic Flow
Team works together for ‘sweat equity’ & future considerations
Team works together for minimal pay, attracts others
Early prototypes,customer interest
Team fully operational,
Customers,revenue
Lead to WinSlide 29Slide 29
attracts others
- Your Cash+Friends,Family- IRAP, etc -Angels+other seed
cash- IRAP, etc
operational, starts to look normal
First major financing
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Philosophy of Lean for Startups
• Conserve cash– Cost avoidance or deferral
• Work smarter– Minimize wasted time+effort
Lead to WinSlide 30
– Minimize wasted time+effort
• Focus on what matters now– Customers+funding
= prototypes, engagements, referrals
Slide 30
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10 Bootstrapping Startup-Life-Hacks
Lead to WinSlide 31Slide 31
From Ben, Craig, Adam via MaRS
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Lead to WinSlide 32Slide 32
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Lead to WinSlide 33Slide 33
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Lead to WinSlide 34Slide 34
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Lead to WinSlide 35
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Lead to WinSlide 36Slide 36
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Lead to WinSlide 37Slide 37
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Lead to WinSlide 38Slide 38
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Lead to WinSlide 39Slide 39
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Lead to WinSlide 40Slide 40
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Lead to WinSlide 41Slide 41
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It’s all about runway
Lead to WinSlide 42
• The more you have, the easier to get off the ground• Cash is not just King – it’s the lifeblood• Cash/Burn rate = Time to Live
– You need more cash , or lower burn rate, or ideally both
Slide 42
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Basic Shoestring Principles
• Value creation with the lowest possible cash outlay– Buy (new) only as a last resort- be creative and open– E.g. team members provide own laptops, cellphones, etc. initially
• Negotiate everything against the ‘day when you get big’
Lead to WinSlide 43
• Negotiate everything against the ‘day when you get big’
• Don’t be afraid to ask for what you want or help you need– A little humbleness goes a long way– Your infectious enthusiasm will win over converts– Network Network Network
Slide 43
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Negotiating Basics
• Treat everything as an asking price– E.g. Leases, salaries, software licences, payment terms
• Understand the BATNA for both sides– Best Alternative To a Negotiated Agreement– Startups have surprising leverage
Lead to WinSlide 44
– Startups have surprising leverage– Do not go too far: the outcome has to work for all parties
• Many vendors offer considerable concessions to new companies– Cost of customer acquisition high– Pay forward: once established, a vendor tends to stay in
• “If you can’t find the fool in a deal, it’s probably you”Slide 44
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Getting Running: The To-Do List
1. Mobilize a team and method for work2. Basic incorporation3. Assemble basic corporate tools4. Build a corporate presence5. Focus on the next milestone
Lead to WinSlide 45
5. Focus on the next milestone
Slide 45
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Mobilizing the Team
• Work together when possible– Home offices work surprisingly well– Borrowed/shared office space– Many companies are coffee shop based initially- that’s OK
Lead to WinSlide 46
• Ensure co-workers have attitude and commitment– People may hold other jobs; set expectations– Shared enthusiasm for the mission is key
• Seek out diverse expertise– Someone just like you is probably one too many– Looking for creative sparks
Slide 46
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Mobilizing on a shoestring (2)
• Guerilla recruiting good people…– Twitter/Facebook/LinkedIn– Online web forums, user/discussion groups– Friends & Colleagues (the weaker the ties the better)– Investor references
Lead to WinSlide 47
– Networking organizations and events• eg. LTW, TON, OTI, Ottawa Clusters, OCRI
• Job sites an option but costly (e.g. Monster, Workopolis)– Professional recruiters rarely appropriate at this stage
• Convene an advisory board– They will help for the positive association
Slide 47
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Basic Incorporation
• Should you incorporate now?– Pros:
• Bona fide entity for opening bank accounts, transactions• Can issue shares• Can enter agreements, e.g., NDAs, assignment of IPRs• Limited liability to you
Lead to WinSlide 48
• Limited liability to you• Taxes may be lower• Prestige: easier to raise money, attract customers
– Cons:• Some expense and housekeeping
• The pros outweigh the cons for all serious startup ventures ( == LTW candidates)
Slide 48
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Basic Incorporation (2)
• Decide on a unique name– Often the hardest part but most fun!– Do your own search: NUANS, Google– Avoid obvious confusion with typos– Check out online synonym, name generators!
Lead to WinSlide 49
– Never buy Your_favourite_name.com from someone
• No need for complexity– it all can (will) be changed• Costs online – $300-700• You can do this yourself… or some lawyers will defer the fees in exchange for future business
Slide 49
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Basic Incorporation (3)
• Keep a minute book– Director’s register– Member’s register– Securities register– All corporate bylaws
Lead to WinSlide 50
– Minutes of company meetings– Copies of any forms filed with the government
• No obligation for a corporate seal, but nice to own
• Request a business number from CRA– You must start charging GST over $30,000 in revenue
Slide 50
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Shoestring Banking
• Open a Corporate Bank account– Shop around for rates– Meet your Business Advisor – a big ally– Bring your Articles of Incorporation– Nominate a treasurer
Lead to WinSlide 51
– Consider who has signing authority (2 is safer)– Consider who gets banking cards (full access limited)– You might photocopy the starter cheques instead of buying numbered
– Initial deposit will probably be your own!
• Open a Paypal account as a payment option
Slide 51
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Assemble Basic Tools
• Reuse templates for– NDAs– Assignment of IPRs– Offers of employment– Share subscription agreements
Lead to WinSlide 52
– Promissory Notes– Get these from your personal network, cyberspace or (deferred payment) lawyer
Slide 52
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Open Source Seed Documents
• http://www.marsdd.com/entrepreneurs-toolkit/Topics/Sample-funding-documents.html
– Term sheet– Subscription agreement
Lead to WinSlide 53
– Subscription agreement– Articles of amendment– Shareholder’s agreement– Founder’s agreement– Independent contractor agreement
Slide 53
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Finance Operations 101
• Keep all receipts!• Customize a standard expense form• Do your own bookkeeping or find someone willing to take it on– Keep a detailed spreadsheet, or buy an accounting package
Lead to WinSlide 54
– Keep a detailed spreadsheet, or buy an accounting package (eg, Simply Accounting, Quickbooks) < $200
• Do not get over focused on this aspect– Maintain records + pay bills on time = good enough
• Do not think about hiring a CFO yet – there are many options– Smart bookkeepers– Virtual CFOs
Slide 54
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Guerrilla Marketing
• Gaining mindshare can be virtually free– Online forums, LinkedIn Experts– Speaking engagements– Blogs, online newsletters– Twitter/Facebook fans
Lead to WinSlide 55
– Submit print articles, commentary– Community events– Drive traffic to your website every chance– Paint your car, etc
• Consider Google Adwords later
Slide 55
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The Basic Corporate Presence
• Corporate Phone– VoIP - eg. Vonage Entrepreneur plan, OneConnect, Skype Out
– Should have a central phone number– not your cell
Lead to WinSlide 56
• Email– Google Apps– free for first 50 users– includes calendar, mobility, intranet
• Web domain name registration, hosting– Many low cost providers, eg. GoDaddy
• Business Cards – moo; uprinting; vistaprint; zazzleSlide 56
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Common Pitfalls
• What worked before in an established company… needs to be the same now– e.g., private cubicles… instead of open working space– e.g., bias for deep thought… instead of bias for action– e.g., ISO, TQM, Six Sigma, waterfall processes.. instead of lightweight
Lead to WinSlide 57
lightweight– “There is nothing so useless as doing efficiently that whichshould not be done at all.” *
• Not thinking of cash alternatives– e.g., hiring…instead of contracting for short term needs
Slide 57
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Common Pitfalls
• Focusing too much on the inside semantics…– e.g. Structure, processes, documentation– Your job is to create an adaptable learning machine
• And not enough on the outside…
Lead to WinSlide 58
• And not enough on the outside…– Customers, opportunities, products, relationships– Sales are what makes everything else possible
“A business exists to create a customer” *
* Peter Drucker
Slide 58
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Select and Target Market Segments
Lead to WinSlide 60
Corien KersheyMagnitude Marketing/Magnitude Partners
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Topics
• Segment the Market• Create Segment Profiles • Identify Critical Flaws• Assess Variables• Select Target Segment
Lead to WinSlide 61
• Select Target Segment
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Segmentation Divides Markets into Addressable Chunks
• Segmentation separates potential customers into groups according to different buying criteria– Mobile Knowledge does not address all possible uses of GPS
Lead to WinSlide 62
• They focus on managing taxicab resources
– Spartan does not address all possible uses of on-demand DNA testing• They focus on genetic testing for metabolizing Plavix
– Corel tried to address everybody when they bought WordPerfect• They failed.
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Target Segment is The Chunk That You Can Dominate
• A startup has a much better chance of success if it focuses on a single, unserved or underserved segment that they can dominate fast
• The target segment is the one that gives you the best chance to dominate– Shopify is building success by focusing on small companies or individuals looking for easy, low-cost e-commerce solutions
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individuals looking for easy, low-cost e-commerce solutions – Lululemon built success at first by focusing on wealthy urban women who invested in yoga and gym memberships
– DELL built early success by selling computers to the price-sensitive and convenience-sensitive home/home business market
• These were unserved or underserved segments before• Of all the possible segments that were available, these came out on top after analysis of qualifying criteria
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Choosing a Target Segment is Critical to Success
• In general, studies show that between 70% and 90% of all startups will fail in the first two years
• Most startups fail as a result of poor segmentation and targeting practices
Good Knowledge of the Market and Single-
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Good Knowledge of the Market and Single-Minded Focus are the Number One
Reasonsfor Startup Success
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Model Illustrates Startup Challenge
Applies to product categories, NOT to companies
A mature product in a mature
Compete
Refine
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Introduction of the product andearly buyers
Growth of sales as the product starts to gain acceptance by the larger market
mature product Educate
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The Challenge Is to Avoid THE GAP – the Graveyard of Startups
A mature product in a mature
Compete
Refine
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Introduction of the product andearly buyers
Growth of sales as the product starts to gain acceptance by the larger market
mature product Educate
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Let’s Look At This Another Way
Most unwary startups look at their entire addressable market and then take pot
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and then take pot shots in the hope of hitting something good
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Ready, Fire, Aim Doesn’t Work
• Most common start-up error is to attack a number of segments to see which will work best– Often no “whole product” is ever delivered to one market
– Resources are distributed among too many
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– Resources are distributed among too many segments and sales, marketing, development is done poorly
– No segment can be dominated fast– Defenses are weak and competitors can breach the segment walls easily
– The people who buy your product first because it’s either cool or they have a red-hot issue do NOT reflect the majority of your market
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Segment 4
Segment 3
Beachheads Provide Defendable Points of Attack on the Addressable Market
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Segment 2
Segment 1
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To Mix Our Metaphors: A Beachhead Builds the Bridge Across THE GAP
• Focus limited resources to establish leadership in a single segment
• Gives strategic sales direction even in the very early market
• Leadership in a single segment helps build credibility with– Analysts and media
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– Analysts and media– Investors– The pragmatic majority market– Employees– Board
• Everyone, from consumers to high-tech companies, prefer to buy from segment leaders
• Reduces the risk of failure – go find another beach• Much better chance of being first in the “mind”
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Seven Steps to Successful Segmentation for Startups
• Step 1: Determine where you really, honestly are within the startup life cycle
• Step 2: Regardless of Step 1, create as broad a definition of an addressable market as possible and then break it down in to all possible sub-segments. Even if your idea is based on a target segment, it’s probably still too big
• Step 3: Create customers profiles for all remaining sub-
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• Step 3: Create customers profiles for all remaining sub-segments
• Step 4: Assess profiles again critical flaws criteria and eliminate those that fail
• Step 5: Assess remaining profiles against selection variables continuously until top segment remains
• Step 6: Test target segment against SWOT and performance goals
• Step 7: If no segment apparent, repeat process
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Stage 1: How to Know You’re Really Selling to Friends – The Very Early Stage
• New company or technology with first product still in development or at early release stage
• Angel, seed or small first round financial situation• No customers or small set distributed widely across different vertical or horizontal markets who are often friends, acquaintances, people you’ve done business
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friends, acquaintances, people you’ve done business with before
• Sales are growing but VERY slowly• In the case of tech startups, buyers are technology people within customer organizations
• Product “story” revolves around the “coolness” or innovation factor – much market educating to do
• Sales-led with little marketing communications effort
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How to Know You’ve Run Out of Friends and You’re on the Edge of The Gap
• Sales growth has slowed• Starting to see some competition perhaps that seem to be doing better than you are
• You have to product changes every time to close a deal• Prospective customers fail to understand the product’s “technology” story or don’t understand why it’s different or better
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or better• Buyers are not coalescing around any particular vertical or horizontal market
• Getting more investment in proving very difficult• Often many partners and resellers signed up but little or no results
• Struggling to identify product roadmap and technology roadmap
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Step 2: Define the Total Addressable Market and Then Narrow Down
• Brainstorm the possible broad applications for your technology OR brainstorm the possible sub-segments within the segment you have defined
• Build hierarchies for each one until you have multiple “application trees”– Vertical waterfalls
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– Vertical waterfalls– Cross-horizontal segments – vertical cuts on horizontal technologies
– Suppliers and channels– Think in terms of the buyer, NOT the organization
• Layer reasonably but go at least four deep if possible
• Some startup ideas will have many applications or uses: others will have a more limited application scope
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Use Variables/Qualities to Determine Segments – Business Marketing Factors
Environmental influences:
• Level of primary demand• Economic outlook for the
industry and the company• Cost of money – interest rates
and cost of borrowing• Supply conditions – scarcity and
Organizationalinfluences:
• Company objectives – profit maximization, budget constraints• Policies and procedures
governing purchasing• Organizational structure –
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• Supply conditions – scarcity andreliability of supply
• Rate of technological change• Political and regulatory
developments• Competitive environment
• Organizational structure –impact on buying centre dynamics• Systems – evaluative criteria for
purchase decisions
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Use Variables/Qualities to Determine Segments – Business Marketing Factors
Interpersonal influences:
• Authority to make the buying decision• Status – impact of the purchase on
buyer’s status in the organization• Empathy – seller’s relationship with
Individual influences:
• Age• Education• Job position• Personality
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• Empathy – seller’s relationship with buyer• Persuasiveness
• Personality• Risk factors – fear of making a
poor decision or choice and the consequences of that choice
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Good Segmentation Narrows the Focus and Leverages Resources
Anyone Who Needs to Locate Anything that Moves and that is Big Enoughto Carry a Receiver and That is Outside for Any Length of Time
GPS Segmentation Example
Vehicles People Animals Cargo Icebergs
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Trailers PlanesCars Rail Cars Earth Movers Ships
LivestockPressTankTankersDry CargoReefersContainer
Freezer Refridge
High Perish Low Perish
Flowers Produce Meat
Indies Carriers Corporates
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Topics
• Segment the Market• Create Segment Profiles• Identify Critical Flaws• Assess Variables• Select Target Segment
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• Select Target Segment
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Create Segment Profiles
• Upon completion– You will know about
• Using customer profiles to understand segments
– You will know how • To create a profile of a typical customer in a segment• To determine the customer’s pain point
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• To determine the customer’s pain point• To create a before/after picture of the customer’s pain after adopting your solution
• To focus on the customer as an individual rather than as a company
• To determine the potential value of your solution to the customer and the segment
• To group segments into related segments
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You Can’t Really Know What the Beach Looks Like Till You Get There
• Beachheads have no ‘hard data’ • Company has little or no experience with the beachhead target segment
• No similar products are serving that segment• No credibility with which to gain information directly from pragmatists in segment
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from pragmatists in segment• Very early buyers are different from the more pragmatic, sceptical majority market and cannot be used as models
• High-level market size projections are generally untrustworthy and erroneous
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Step 3: Create Multiple Target Customer Profiles
• In most startups, the product is looking for a target segment– Usually begun with a technology bias– Were this not true, far fewer startups would fail– Even when the idea is based on a target segment, the segment is initially too big to be an effective beach head
• With little useful and specific market data available,
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• With little useful and specific market data available, turn to building a profile of the potential customer– “informed intuition” rather than “analytical reason”
• Be wide and ranging in your approach– Current early customers, lost deals, profiles in related categories, your own experience, ask friends and family for ideas, brainstorm, look at related companies and their history, read analyst reports
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Define the Prospect’s Current Problem with These Questions
• What problem causes the pain or frustration? Sketch a scenario in which the customer attempts a task and feels pain as a result.
• How does the customer try to cope with the problem now?
• What is causing the problem? What is interfering
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• What is causing the problem? What is interfering with a speedy solution? What goes wrong and why?
• How much money is the customer losing, either in additional costs or lost revenue? Quantify the pain.
• Who is the individual who feels the pain first and how does it “waterfall” up or down?
• Who else feels the pain? The customer’s customers? Suppliers? Partners? Investors?
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Profile Example – Pain Scenario
Frustration Point
Costs
Their Pain Your SolutionFleet mgrs misplace 5% of loadedproduce reefers due to admin anddriver problems
Avg. value of lost or spoiled cargo is $250K -- $12 million total for avg carrier + high ins. rate
Characteristic
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Current Solution
Stakeholders
Cause
Insurance pays 75% of value and rest is written off as tax loss. Some use cell to check on drivers.
Produce distributors; supermarket owners; truck drivers; insurance company; carriers
Many trailers being managed at once:Inadequate admin techniques; careless reporting by drivers; late loads
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Align Your Product to Their Problems With These Questions
• Define the customer’s changed situation– How does the customer approach the task differently?
– Is the pain removed or is it lessened. For whom? – Are new problems introduced as a result of your solution?
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solution?– Is your solution better than any other way the customer had of solving the problem? Why?
– How does your solution remove the pain? – How much money will the customer gain as result of your solution, either as cost savings or increased revenues?
– Can you determine a time frame for payback?
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Profile Example – Solution Scenario
Frustration point
Costs
Their Pain Your SolutionFleet mgrs misplace 5% of loadedproduce reefers due to admin and driver problems every year
Avg. value of lost or spoiled cargo is $250K -- $12 million total for avg carrier + high ins. rate
By using GPS, fleet mgrscan locate trailers before cargospoils
Cost for avg carrier including services is$3 million, providing customer paybackin one quarter and savings of $10.5 M/yr
Characteristic
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Stakeholders
Cause
Insurance pays 75% of value and rest is written off as tax loss. Some use cell to check on drivers
Produce distributors; supermarket owners; truck drivers; insurance company; carriers
Many trailers being managed at once:Inadequate admin techniques; careless reporting by drivers; late loads
Problem is solved easilyCurrent solution
Distributors incented to use GPS-able carriers; driver morale improves; insurance easier and cheaper to get; insurance push?
Root causes difficult to eradicate causebased on human error: GPS-enablingsolves problem faster and cheaper than changing behaviours
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Create Groups According to Similarities
• Be creative and open in building profiles
BUT• Unless you have unlimited time and money, rationalize all the profiles into segment groups– Out of 50 or so profiles, about 10 segments will likely coalesce
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coalesce– Look for key similarities
• Vertical markets• Common problems and pain points• Similar economic impacts• Similar groups of users
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Topics
• Segment the Market• Create Segment Profiles • Identify Critical Flaws• Assess Variables• Select Target Segment
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• Select Target Segment
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Identify Critical Flaws
• Upon completion– You will know about
• What the binary criteria are for success in a segment
– You will know how • To assess segment customer profiles against each criteria
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criteria• To eliminate immediately segments in which you stand little chance of success
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Step 4: Assess Profiles Against Critical Flaws
• Assess each profile against 4 key criteria that can “make or break” your chance of succeeding in that segment
• Ask and answer a series of questions and rate the answers on a binary scale of yes or no. Include a sentence or two on why.
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sentence or two on why.• Eliminate any that fail and set aside all related segments
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Do They Have a Reason to Buy?
• You may think it’s great, but will the customer?• Is the financial impact of the problem severe enough to drive the need of a solution– There are lots of problems that pragmatists will live with rather than take a risk that could have worse consequences
• Of all possible ways of solving the problem, is yours the obvious choice from the point of view of
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the obvious choice from the point of view of– Total cost – including “whole product,” installation, services, training and adoption costs
– Speed to implement– Ease of use and adoption– Maintenance and support– Stability of technology and company
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What Do They Actually Need to Buy to Solve the Problem?
• Is it practical to deliver the “whole product”?• Do you have the right partners to deliver the “whole” product?
• How well established are those partnerships?• Can you establish the right partners and be productive with them in the time frame needed to
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productive with them in the time frame needed to enter and dominate that segment early and fast?
• Who do you need to partner with and is it reasonable to assume that they will come on board with you?
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Who Else Can They Buy From?
• Has someone else beat you to the beachhead?– If yes, reconsider or develop a second-entry strategy
• Are there barriers to entry that protect you in that segment for sufficient time?
• Are there players in related product categories that can move into your space quickly?
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can move into your space quickly?• Is there potential confusion among categories within similar segments?
• Is the segment characterized by a “single vendor” approach?
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Can They Buy?
• Does the segment have a ‘target customer’ who has buying power?– Is there a single person who feels the most pain?– Is that pain tied to revenue loss or additional costs?– Does the buyer have a budget for the “whole” product?
• Is the financial pain felt by someone with buying authority?
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authority?• Trying to fix bad segmentation with smart selling doesn’t work– Lots of effort spent identifying and winning sponsors and champions
– Endlessly long sales cycle– Uncommitted budgets– Uncommitted management ready to cut projects on a whim
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Binary Answers to Critical Flaw Criteria
Criteria Yes No Reason
Segment: Produce Reefer Location for Carrier Companies
Compelling reason to buy √
5% of trailers misplaced, 3% stolenCarrier liable for both, loss per avg. $275K/yr; customers punish carriers with high loss
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Deliver whole product √ Make entire receiver; partnership with mounting
and antenn partners; have installation partners
Buyer with economic power √
Risk managers and CFO feel greatest financial pain; drivers docked for misplacement
No competition Cell-based communications services provide location within acceptable margin of error whereservice available
√
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Topics
• Segment the Market• Create Segment Profiles • Identify Critical Flaws• Assess Variables• Select Target Segment
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• Select Target Segment
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Assess Variables
• Upon completion, – You will know about
• What assessment variables are important to selecting a target segment beachhead
• How each of those variables can affect your success
– You will know how
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– You will know how• To rate each customer segment profile against the assessment variables
• To determine your ability to overcome shortcomings or change your ability to satisfy the requirement
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At What Price Will They Buy At?
• Can you deliver the “whole product” at a price that is consistent with the segment’s budgets?
• Is the price commensurate with the customer’s financial loss?
• Is there enough margin in the price to ensure all levels in the channel are adequately compensated?
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levels in the channel are adequately compensated?• Can you deliver the “whole product” at a price that will win share rapidly without going under?
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How Are They Going to Buy?
• Do you have the right sales channel to reach that segment?
• If not, can you establish timely relationships with the right channel partners/
• Do you have any expertise with the segment or the dominant vertical in the segment?
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dominant vertical in the segment?• Do you have or can you obtain someone with the right rolodex to take you into the segment quickly?
• Can you compensate everyone in the channel sufficiently to keep their interest and loyalty?
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Why Should They Buy From You?
• Is the segment reachable?– Is there a set of communication vehicles that can reach them?
– Do you have the resources to market adequately?– Will the channel participate in tactical marketing?
• Do you have any credibility with this segment?
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• Do you have any credibility with this segment?– Can you deliver a “whole product” and can you commit to it?– Can you build credibility fast enough to hold back bigger players in associated product categories?
• Can you talk their talk?
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Is the Segment Small Enough?
• Large segments are usually heavy with competition• Choose a segment that is small enough for you to penetrate to a critical mass and dominate– This means capturing 50% of market share measured as dollars and units
– Can you capture 50% with the resources available to you?
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– Can you capture 50% with the resources available to you?– Can you service 50% without burning out?
• Choose a segment that is large enough to meet your revenue projections– If 50% of the segment won’t meet forecast, dump it
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Will the Segment Survive?
• Is the segment at risk for its own survival?• Are there signals that the segment is failing in terms of– Product category adoption rates growing or failing– Financial stability– Competitive saturation
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– Competitive saturation
• Can you estimate the remaining lifespan of the segment?
• Does the segment exhibit innovation characteristics or is it know for technological conservatism?
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Can You Identify Lead Customers?
• Does the segment have identified buyers who have a history of innovation and early adoption?
• Have they deployed their early buys or kept them in the lab?
• Do they have the support of their organizations?• Have they a history of championing early technologies publicly?
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technologies publicly?• Is there one or two organizations that feel the pain more acutely?
• Will they participate in the design, development, test process?
• Are they open to an over-time payment model?• Do they have credibility among potential investors?
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Are There Adjacent Segments That You Can Jump To?
• Beachhead segment is the “head pin” in the bowling alley
• What close segments are a natural segue? Refer back to the application trees.
• Are they likely to still be available?
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• Are they likely to still be available?• At what point can you begin to attack the next segment?
• Are there enough close segments to achieve breakeven and profitability over time?
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Step 5: Rate Remaining Segments According to Variables
• Rank each variable on a scale of one to five• Rank all segments and eliminate weakest 50%
– Use totals as an overall indication– Weight variables according to your flexibility or ability to change your situation• e.g. software has much more flexibility on pricing
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• e.g. software has much more flexibility on pricing• e.g. no existing channels but ability to establish the right partnerships
• e.g. offered technology will increase segment stability
• Repeat ranking exercise until top one or two segments revealed
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Ranking Example
Segment: Produce Reefer Location for Carrier Companies
Criteria Rank Weight Reason
5
Channels
Price
Final
5 25No established price, dev is capitalized,direct sales, 90% software margin, 1 year runway
4 4 16Preferred direct model, upfront cost high, greater risk, no proliferation, totalcontrol
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Segment Size
Innovators
4 4 16control
5 1 5
5 2 10
Segment size large to achieve 50% penetration and domination; no ability to change; potential to narrow segment
Trucking industry conservative; satellite technology accepted; 2 known innovative risk managers
Totals 56
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Topics
• Segment the Market• Create Segment Profiles • Identify Critical Flaws• Assess Variables• Select Target Segment
Lead to WinSlide 106
• Select Target Segment
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Select a Target Segment
• Upon completion,– You will know about
• The final tests before selecting a beachhead• The importance of a SWOT analysis• The importance of a financial goal• The importance of performance goals
Lead to WinSlide 107
• The importance of performance goals• The importance of assessing risk of failure
– You will know how• To apply a SWOT analysis to the target segment• To establish performance goals
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Step 6: Rate Final Segment Against Final Criteria – Can You Win It?
• Undergo a SWOT exercise in relation to segment– Involve all internal stakeholders and decision makers– Rate chances of success against corporate weaknesses and strengths
– Assess segment honestly against core competencies• Technology bias• Marketing ability
Lead to WinSlide 108
• Marketing ability• R&D ability
• Build one and two year financial models to assess revenue potential, profitability, share, growth
• Can you live with the risk of failure– What is the cost of failure?– Can the company survive?
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Establish Performance Goals
• Set in quantifiable measures – Define the performance dimension e.g. absolute share, increase in share, revenue
– Define the index – units, dollars, percentage– Target – 50% share, $1 million in revenue, breakeven– Time – within a year, a quarter, a month
Lead to WinSlide 109
– Time – within a year, a quarter, a month
• Ensure that goals are compatible and not mutually exclusive– High share goals do not live with high profitability– High revenue goals do not live with short time frames– Taking competitor’s share does not live with increased penetration
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And the Winner Is!!
• Critical that everyone buys in• Deal with subversion early and quickly• Promote a “disagree and commit” philosophy• Establish short-term tactical goals to ensure meeting overall product performance and corporate goals
Lead to WinSlide 110
• Begin planning for the next segment as you attack the beachhead– Understand sooner rather than later your next steps should you win
– And should you lose
• Speed is critical to keep competition at bay and win mindshare and real share
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Day 3 opportunity reviewsDay 1 takeaways
Lead to WinSlide 111
Day 1 takeaways
October 25, 2011
Tony Bailetti
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Day 3 opportunity reviews
• Criteria and process to assess opportunities set by representatives of nine LTW Strategic Associates– Part A - scoring
1. CUSTOMER VALUE2. COMPETITIVE3. PARTNER VALUE
Lead to WinSlide 112
3. PARTNER VALUE– Part B - opportunity’s readiness for Day 4: Operations– Part C - substantive feedback to opportunity proponents
• Scoring of 1/2/3– Green: OK– Yellow: OK with a specific action– Red: Considerable work still required
• Reds are not invited to join Days 4-6
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Reviewers
1. Consumer products• Line Brabant (LINE
International)• Chris Cope (City of Ottawa) • Dan Istead (Fed Government) • Christine McCrady (RBC)• Jonathan Wells (Carleton)
3. Internet services A• Hanan Anis (uOttawa)• Mark Antaya (Investors) • Rob Collins (YearOne Labs) • Llynne Plante (IRAP)
Lead to WinSlide 113
• Jonathan Wells (Carleton)
2. HW & SW products• Peter Carbone (PJCI)• John Fielding (OCE)• Farzi Khazai (Tech Gemini)• Raina Sharma (BDC)• Stoyan Tanev (U Southern
Denmark)
4. Internet services B• Elizabeth Gilhooly (Nuvance)• Claude Haw (VentureCoaches)• Harriet Waterman (IRAP)• Michael Weiss (Carleton)
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Reviewers
5. Services• David Hudson (Carleton)• Saad Bashir (City of Ottawa) Fiona Gilligan
• (Fiona Gilligan)• Sophia Leong (Industry
6. Special• Diane Isabelle (National Research Council)
• Karen Letain (ETIS Technologies)
• Steven Muegge (Carleton)
Lead to WinSlide 114
• Sophia Leong (Industry Canada)
• Steven Muegge (Carleton)• Ian Scott (City of Ottawa)
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Process
• Presentations are made only to panel of reviewers• 20 minutes is allocated to each opportunity. 20 minutes is a hard limit.• Lead reviewer is responsible for:
– Distributing / collecting Opportunity Assessment Forms– Assigning ID codes to reviewers to guarantee reviewer anonymity– Keeping time and smooth running of the reviews
Lead to WinSlide 115
– Keeping time and smooth running of the reviews– Ensuring forms are properly completed– Dealing with issues – Improving the opportunity assessment process
• Each reviewer rates each opportunity independently before the next group/individual is allowed into the room
• If reviewers and opportunity proponents wish to exchange cards, arrange follow ups, etc.; they should do so during lunch or the social and not take time away from the assessment process
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Suggested time allocation
• Up to Review Panel
• We suggest– Set up time and niceties: 2 minutes– Presentation: 10 minutes
Lead to WinSlide 116
– Presentation: 10 minutes– Q & A: 5 minutes– Day 3 Opportunity Assessment form completion: 3 minutes
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Day 1 takeaways
Lead to WinSlide 117