- Write down their initial hypotheses for the 9 components of their company's business model (Who are the customers? What's the product? What's the value proposition, distribution channel? etc.)
- Come up with ways to test each of the 9 business model hypotheses
- Decide what constitutes a pass/fail signal for the test. (At what point would you say that your hypothesis wasn't even close to correct?)
- Consider if the business is worth pursuing? (Give us an estimate of market size)
- Start the team's blog/wiki/journal to record their progress during for the class
AutonomowAutonomow's business was a robot lawn mower. Off to a running start, they not only wrote down their initial business model hypotheses but they immediately got out of the building and began interviewing prospective customers to test the three most critical assumptions in any business: Value Proposition, Customer Segment and Channel. Their hypotheses when they first left the campus were:
- Value Proposition: Labor costs in mowing and weeding applications are significant, and autonomous implementation would solve the problem.
- Customer Segment: Owners/administrators of large green spaces (golf courses, universities, etc.) would buy an autonomous mower. Organic farmers would buy if the Return On Investment (ROI) is less than 1 year.
- Channel: Mowing and agricultural equipment dealers
In one week talking to customers, Autonomow's first hypotheses started to shift: "For mowing applications, we talked to the Stanford Ground Maintenance, Stanford Golf Course supervisor for grass maintenance, a Toro distributor, and an early adopter of an autonomous lawn mower. For weeding applications, we spoke with both small and large farms from 40 to 8,000+ acres."
"We got some very interesting feedback, and overall interest in both systems," reported the team. "Both hypotheses (mowing and weeding) passed, but with some reservations (especially from those whose jobs they would replace!) We also got good feedback from Toro with respect to another hypothesis: selling through distributor vs. selling direct to the consumer."
Class feedback: be careful they didn't make this a robotics science project and instead make sure they spent more time outside the building.
To see the slide deck, click here.Personal Libraries Personal Libraries proposed to help researchers manage, share and reference the thousands of papers in their personal libraries. "We increase a researcher's productivity with a personal reference management system that eliminates tedious tasks associated with discovering, organizing and citing their industry readings," wrote the team. What was unique about this team was that Xu Cui, a Stanford postdoc in Neuroscience, had built the product to use for his own research. By the time he joined the class, the product was being used in over a hundred research organizations including Stanford, Harvard, Pfizer, the National Institute of Health and Peking University. The problem is that the product was free for end users and few Research institutions purchased site licenses. The goal was to figure out whether this product could become a company. The Personal Libraries initial hypotheses were:
- We solve enough pain for researchers to drive purchase
- Dollar size of deals is sufficient to be profitable with direct sales strategy
- The market is large enough for a scalable business
To see the slide, click here.Agora Cloud Services The Agora team started with the observation that companies are increasingly looking to cloud computing to reduce their IT infrastructure costs, and but they fear being solely dependent on Amazon Web Services as their only cloud vendor. They observed that a) there's an excess supply of CPU hours available for resale, and b) cloud computing providers are no longer differentiating on the product side. Therefore they will offer a cloud computing "unit" that Agora will buy from multiple cloud vendors and create a marketplace for trading. The Agora initial core hypotheses were:
- Enterprise customers will be willing to purchase hosting capacity in a marketplace
- Excess capacity exists, and potential sellers are incentivized to sell and willing to take the required steps
- Virtualization technology can be developed that is safe, secure and interoperable between different seller machines
- Not just a product, a complete service (installation, rebates, finance when necessary)
- Reduce the manufacturing cost.
- Cool and Sustainable symbol ("Prius" status)
The Week 2 Lecture: Value Proposition
Our working thesis was not one we shared with the class. We proposed to teach entrepreneurship the way you would teach artists: deep theory coupled with hands-on experience, guided by seasoned, accomplished artists.
Our lecture this week covered Value Proposition -- what problem will the customer pay you to solve? What is the product and service you were offering the customer to solve that problem?
To see the slides, click here.
Next week, each team tests their value proposition hypotheses (their product/service) and reports the results of face-to-face customer discovery. Stay tuned.