Lecture 6
16th October 2012

Tonight I arrived a full hour early, planning to assist David with hanging the various charts around the room, grabbing a quick coffee and leaving space for a little quiet reflection time before the lecture kicked off.

To my astonishment, there were already students in the room, beavering away on their syndicate projects!!   By 6pm the room was alive with conversation as students chatted about the week that was, about how their projects were unfolding, and about how they were coping with what feels like an insurmountable workload.

A Commentary on the Commentary

David opened the evening by commenting on the weekly reflections.  The students are now providing feedback to one another and it seems they are doing an outstanding job.  David congratulated the students on the quality of their coaching and (with the benefit of reading all the reflections) noted two emerging themes:

  • The question ‘do we pivot?’ is looming large for many.  The anxiety lies in the apparent lack of time to return to the drawing board, given we are now half way through the course.  David’s advice?   Clinging to a bad idea will drain your energy. If you need to pivot, do so in the knowledge that your learning experience will be enriched by your decision.
  • The sheer size of the task at hand feels daunting.  And an encouraging response : You may not have a flawless business plan, but what you can have is an honest approach to the task.  It is, it seems, perfectly acceptable to admit that you don’t have all the answers.  Not a bad maxim for life I should think!

Would you take their money?

In the context of a discussion around future guest speakers, one of the students requested a presentation from a Venture Capitalist (VC).  David is quick to inject a dose of reality.  It is estimated that there is around $250 million in Venture Capital funding currently available in Australia.  And investors are looking for mature, sophisticated opportunities that can be exited in a 3 – 4 year time frame.

And of course they are seeking to maximise their outcomes.  Funding is typically provided on the condition that milestones are achieved; failure to do so may result in dilution of owners equity; start up projects often take longer than envisaged; the likelihood of hitting milestones is low.  In all, it seems like a brutal model that requires a particularly thick skin (and perhaps a hard heart?).

And I am left thinking there has to be a better way.  Perhaps Daniel May’s insight of Lecture 4 is a salutary reminder : You want an investor to have a stake in the initiative.  You want someone who says ‘Here’s how you might want to think about your life’.  It’s not just about making money.

It’s never too late to change your mind!

Three syndicates presented tonight, two of whom have undergone significant pivots.  I’m impressed by their willingness to abandon previous ideas (or to ‘kill the baby’) in favour of exploring something as yet unproven.

  • Ugotwot is a new project, unveiled this week by Sangeetha, previously part of the Drone Zone team.  Ugotwot is an on-line community, aimed at students, enabling location specific  buying and selling of student essentials such as text books, bicycles and furniture.
  • The Reliable Ratings  team has now tested a number of hypotheses, discovering that 94% of their survey participants trust recommendations of family and friends over internet ratings, invalidating an early core premise.   The learning has given rise to a new concept : ‘friendsnet’, a personal search engine.
  • The initial offering of the MaxMyRate team placed immense importance on a competitive interest rate.  The results of their research :  price is not the dominant driver of an investment decision.  Loyalty to a primary bank and constraints in switching banks prove to be substantial complicating factors.   Further, they do not yet have an appealing offering to financial institutions.

Three very different presentations, two representing major pivots.  Time to keep calm and continue testing?

Garbage or Gold?

And now to what proved to be a very humorous exercise.

David explained that Venture Capitalists will scan a business plan, often deciding whether to review (or not) in a matter of seconds.  (Apparently you get just seconds to earn the right for a Venture Capitalist to spend the next minute on your plan!!)

David handed out business plans developed in previous years and invited the students to take 90 seconds to make a reject/review decision.  Take a look at what they found…

Funnily enough, a number of the plans so harshly rejected by students have become successful businesses!

By way of conclusion, David makes an interesting observation : you can invest in something that is a failure, or you can fail to invest in something that is a success.  The latter is of course the preferred alternative!

What are you really looking for?

And now to an analysis of the plans.  (Which I suspect may be a not too subtle attempt by David to have the students build a laundry list of what constitutes a compelling business plan and what they may wish to avoid.)

So if you are currently building a business plan, herewith the list of positives…

  • Include a succinct statement of the whole idea
  • Provide clarity around funding needs
  • Demonstrate the capability of the management team
  • Be honest about the challenges
  • Data should be well researched and clearly (ideally graphically) presented
  • Include a Business Model Canvas
  • Financial data (Cash Flow, Profit and Loss) should be thorough
  • Clearly define and segment the target market
  • Explain both the psychology and the logic behind the offering
  • Show that you have defensible Intellectual Property

And what to avoid?

  • Burying ideas in the detail thus making the reader’s job hard
  • Failure to demonstrate the capability of the management team
  • Failure to explain social impact or benefit of the business
  • Excessive wordiness, ‘fluff’
  • Ambitious, unrealistic numbers
  • Reliance on an unrepresentative sample
  • Reliance on ‘top down’ numbers
  • Reliance on technology which may prove to be a constraint

There you have it!  And I can’t help but wonder whether David performs this exercise at the same point in the course every semester and whether the student observations are largely the same each time.  And I wonder why it is that we are quick to critique yet slow to embrace the learnings?  Therein lies a challenge for each of us.

So Why Aren’t You Listening?

David recounted a story of a consulting engagement he participated in some years ago whilst in the US.  His firm’s client was a health insurance provider seeking to sell health insurance products to younger people.  Despite a plethora of (very expensive) research (which seemed not to be providing the necessary insights) young people were simply not signing up.

Amid protests from the client (who felt they’d spent enough on research), David’s team revisited the customer, concerned that the client’s mental model of the customer world may have been erroneous.  Adopting an ethnographic approach to listening, the consulting team discovered that health insurance was suffering from a serious image problem.  Young people saw it as something that their grandparents may need,  and connected it with death.  It was certainly not a topic they wanted to contemplate, and definitely not something they were going to spend their money on!

Listening deeply, David’s team saw the link between protection (as provided by insurance products) and doing amazing and exciting things (as young people do!).  And so began a transition which resulted in insurance being associated with a highly desirable life style.  Not a bad outcome!

Listen to David tell the story…

A very powerful example of the importance of understanding the customer problem at a deeper level.

One Customer Experience : Three Stages, Six Attributes

A quick change of pace from the anecdotal to the conceptual.  David presented a model of the Customer Experience, based on the work of Larry Keeley, of Chicago based Doblin Consulting.

The model presents Customer Experience as a multi faceted concept, comprising three stages, each with an entry and exit point (Attraction, Engagement and Extension).

Spanning the three stages of the experience are six attributes, which give shape to the more emotional (heart) and less rational (mind) aspects of the experience:

  • Defined – is it obvious?  does it hang together?
  • Fresh – is it novel? does it startle and amuse?
  • Immersive – do you feel it?  does it energise you?
  • Accessible – can you try it?  is it easy to get to?
  • Significant – does it make you think? grow?
  • Transformative – do you feel different?  might others think you’ve changed?

Take a look at the slide below by way of example.  In a baseball game the transformative attribute comes from a sense of belonging.

 

Part of the design of the customer experience requires consideration of these attributes – in particular where might you want the highest impact of each?

The key takeaway – you need to capture the heart before you can change the mind.  I suspect companies like Apple, Disney, Cirque du Soleil know (and do) this so very well.

The students were then asked to overlay the model, plotting the ‘highs’ onto their own projects.  It was a quieter, more reflective discussion than usual, as they pondered the design challenge.

David’s Turn to Really Listen

As this evening’s lecture drew to a close, David did something unexpected. He invited the students (his ‘customers’) to provide him with feedback on the course thus far, asking them to identify what they want from the remaining lectures.

Listening intently, David undertook to respond, without guaranteeing change.  An interesting array of  comments that demonstrate a thirst for learning…

  • We love the opportunity to apply theory, particularly significant frameworks, to our emerging businesses in the classroom;
  • We only see the outcomes of the group learnings, not the process that went into it.
    (Blogger’s bemused note : that’s what the Start Ups pages are for!!)
  • We sit in the same seats and talk to the same people each week.  We need to cross pollinate and seek wisdom from a broader pool;
  • We want more ‘real entrepreneurs’ to critique our presentations or to provide feedback to the syndicate groups;
  • We are finding the workload very intense.

Take a look at some of the student comments…

I await with interest David’s responses!

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