Workshop 2: Business Planning
Version: 1.01 3/9/04
Planning: From Innovation to Business
Prof. Yechiam Yemini (YY)
Computer Science Department
Columbia University
(c)Copyrights; Yechiam Yemini; 2004
The Business Plan
Plan to deliver value
 Create a business model
 Analyze & quantify the market
 Define products/services
 Define the competitive value
 Plan marketing/sales strategy
 Team: who will execute what
 Finance: quantify value creation
Innovation Plan
Business Plan
(c)Copyrights; Yechiam Yemini; 2004
Execution
2
Developing A Business Model
Architecture and operations to create and deliver value
Products &
Distribution
Markets &
Services
Channels
Customers
Net $
Financial
Engine
The following slides are based on presentation by Darlene Mann of ONSET Ventures
http://haas.quimbik.com/files/DarleneMann.ppt
(c)Copyrights; Yechiam Yemini; 2004
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How To Create A Business Model?
Technology
Product
Opportunity
$
$
$
Company Business
$
$
$
Value
Proposition Distribution
Strategy
Financial
Model
Market
Problem Buyer
$Budget $
The following slides are based on presentation by Darlene Mann of ONSET Ventures
http://haas.quimbik.com/files/DarleneMann.ppt
(c)Copyrights; Yechiam Yemini; 2004
4
Defining The Value Opportunity
Market: medical patients, health-care industry
Problem: organizing, accessing and using patient info
Technology: inexpensive, personal, mobile storage
Product: personal medical records (PMR) system
Technology
Opportunity
Market
Product
Value Proposition
Problem
(c)Copyrights; Yechiam Yemini; 2004
5
Maximizing Customer Creation


Drive plans from customer/revenues creation
Who/what/why/how/how-much
1.
2.
3.
4.
5.
6.
Who are our first customers?
What will they buy?
Why: what quantified value will it deliver?
How much will they pay?
How will we reach them?
How will we overcome barriers?
(c)Copyrights; Yechiam Yemini; 2004
6
Markets/Customers: Why/How Will They Buy?
Profile & Segmentation
Key Pain-points
Quantify problem in $$’s
Window of opportunity (immediacy)
Location of $$’s
Competition
Products &
Distribution
Markets &
Services
Channels
Customers
Net $
Financial
Engine
The following slides are based on presentation by Darlene Mann of ONSET Ventures
http://haas.quimbik.com/files/DarleneMann.ppt
(c)Copyrights; Yechiam Yemini; 2004
7
Value-Based Segmentation
 Products have different value to different segments
Who needs this pain-killer; how badly..
 Quantify value: of key features to key segments…
(c)Copyrights; Yechiam Yemini; 2004
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The Market
Goal: identify & quantify the opportunity
Define the target users
Identify & quantify the “pain” you will cure
Identify the market segments
Size the market
Identify competition and analyze competitive factors
Establish statistical & anecdotal market validation
(c)Copyrights; Yechiam Yemini; 2004
9
Product/Services: What do you offer?
Whole product definition
Value & pricing
Cost to customer/company
Add-on/future products
Products &
Channels of
Markets &
Services
Distribution
Customers
Net $
Financial
Engine
The following slides are based on presentation by Darlene Mann of ONSET Ventures
http://haas.quimbik.com/files/DarleneMann.ppt
(c)Copyrights; Yechiam Yemini; 2004
10
Whole Product Definition
 The PMR PDA
 Goal: max revenue and market capture
 E.g., patient-based model: $50 per month all inclusive
o PDA + SW + Storage module (iPOD-like)
o Backup, universal access, security & privacy protections, information services…
 PMR interface adapters:
 Goal: max deployment.. free to labs/hospitals/physicians...
o Ideally: PC SW only solution
 PMR backend services:
 Goal: max outsourcing and market support
o Enable record mgmt, billing and other medical care info services…
o Build market support by distributing products over the PMR platform
(c)Copyrights; Yechiam Yemini; 2004
11
Products & Technology
Goal: identify the unique value you will create
 Describe the product
Focus on the unique painkiller edge
What technology edge will you develop
 What is the value proposition to your users?
Develop an “elevator pitch”
 How will you build & sustain competitive distinction?
 Establish anecdotal validation of traction
(c)Copyrights; Yechiam Yemini; 2004
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R&D Plan: Scheduling Resources
 Design release schedule per key components
 E.g.,
Release 0.1
XXXX
Design
API
Coding
integration testing
Resources: 1 project leader + 2 developers
Release 0.1
YYYY
Market study
Design
Coding
Resources: 1 product mgr, 1 developer
(c)Copyrights; Yechiam Yemini; 2004
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Estimating Expenses
 Payroll
 Mgmt
 R&D
 Marketing
 Sales
 Operations
 G&A
 Rent/utilities/communications…
 Services: legal, accounting…
 Equipment…
…
 Operations costs
…
(c)Copyrights; Yechiam Yemini; 2004
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How To Create A Business Model?
Technology
Product
Opportunity
$
$
$
Company Business
$
$
$
Value
Proposition Distribution
Strategy
Financial
Model
Market
Problem Buyer
$Budget $
The following slides are based on presentation by Darlene Mann of ONSET Ventures
http://haas.quimbik.com/files/DarleneMann.ppt
(c)Copyrights; Yechiam Yemini; 2004
15
Distribution: How Do You Reach Them?
Channel strategy: direct/indirect
Marketing strategy:
Positioning & branding
sales support
Partnering
Implementation cycles
Products &
Channels of
Markets &
Services
Distribution
Customers
Net $
Financial
Engine
The following slides are based on presentation by Darlene Mann of ONSET Ventures
http://haas.quimbik.com/files/DarleneMann.ppt
(c)Copyrights; Yechiam Yemini; 2004
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Distribution: How Do You Reach Them?
 Focus on key segment (s) then expand
 Distributors: bootstrapping distribution…
 Medical information service providers
 Physicians, radiology labs…
 Mass market: PDA vendors…PALM, iPOD….
 Interface adapters: through HW vendors & direct…
 Marketing strategy: partner with competitors
 PMR as an attachment to extend medical info systems…
 PMR as a function-specific PDA …:)tax-deductible? MP3 music..
 Team with hospitals/insurance/drug-companies…
(c)Copyrights; Yechiam Yemini; 2004
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Sales & Marketing
Goal: define sales & marketing strategy
How do you plan to distribute your products?
What is your pricing strategy?
How do you plan to support & grow sales?
What is your positioning strategy?
What marketing relationships will you develop?
(c)Copyrights; Yechiam Yemini; 2004
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Financial Engine: How Do You Create Value?
Pricing & revenues model
Sales & implementation cycles
Cost structure and margins
Investment requirements
Capital and time required
Comparables & exit strategies
Products &
Channels of
Markets &
Services
Distribution
Customers
Net $
Financial
Engine
The following slides are based on presentation by Darlene Mann of ONSET Ventures
http://haas.quimbik.com/files/DarleneMann.ppt
(c)Copyrights; Yechiam Yemini; 2004
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The Financial Engine
 Revenues:
 PMR units: #patients*[$600-$100]
 Patient record mgmt: #patients*$500
 Insurance billing: bill-amount*4%
…….
 Costs:
R&D:
Data center:
Marketing/sales:
G&A:
(c)Copyrights; Yechiam Yemini; 2004
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Financial Plan
Goal: quantify costs/revenues and capital-needs
(Controlling growth & time to reach break-even)
Start with a revenues model
 Expense model
“..breaking (even) is a hard to do..”
 Capital needs
$
TTM
(c)Copyrights; Yechiam Yemini; 2004
Time
21
Validating: Traction is Key!!!!!
Learning costs grow exponentially fast…
Validate all hypotheses with market
 Patients; physicians; labs; hospitals; insurance
companies; medical info vendors…
 Industry mavens…
 Identify key assumptions; quantify; validate…
(c)Copyrights; Yechiam Yemini; 2004
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Creating A Business Plan
 Executive summary
 Market environment
 Products & technology
 Management team
 Sales & Marketing plan
 Product R&D plan
 (Manufacturing & operations)
 Financial Plan
(c)Copyrights; Yechiam Yemini; 2004
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The Five Questions (Mayfield)
Do you have a team that delivers?
Is your product/service a vitamin or a painkiller?
Do you know your users?
Who are your competitors?
How far will this money take you?
(c)Copyrights; Yechiam Yemini; 2004
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The Business Plan Do’s
(Ian Ritchie www.coppertop.co.uk )
There’s a great new growth market
We’ve got just the thing for it
Its the kind of thing that a small player can sell well
The growth potential is such that we can go public/be
acquired
We’ve got/can get lots of
technical/managerial/marketing experience
12 pages or less, and very easy to read
(c)Copyrights; Yechiam Yemini; 2004
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