Todays Agenda

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Generating Exponential Revenue Growth
HCT MIT Entrepreneurship Conference Dubai, United
Arab Emirates September 20, 2006 Bill Aulet,
Senior Lecturer and Entrepreneur in Residence MIT
Entrepreneurship Center
One Amherst Street, E40-196 Cambridge, MA 02142
USA phone [phone] fax
1-617-253-8633 e-mail aulet_at_mit.edu
http//entrepreneurship.mit.edu
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Desired Outcomes of Presentation

• Increase understanding of the different types of
  customers when starting or growing a business
• Increase understanding of the steps and elements
  of Entrepreneurial Sales Marketing
  Implementation Framework
• Close Out
• Summary of Key Points
• Questions and Answers and Dialogue

Outline

• Customer Taxonomy
• Implementation Review
• Close

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Upfront Caveat

• This lecture will focus on technology-based
  enterprises
• Similar to the types of companies that spin out
  of MIT
• Bias is also towards
• Product-based
• Rational ROI-based procurement process
• Hardware and/or software
• This is based on my experience
• Does not mean the information is not relevant
  elsewhere but there will be more customization
  required

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Executive Summary

• Customer

• Alignment

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Proposed Outline

• Customer Taxonomy
• Implementation Framework
• Close

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Recommended Reading Material

• Geoffrey Moore, Inside the Tornado, Chapters 1-3,
  pages 1-61.
• Dorf and Byers, Technology Ventures From Idea to
  Enterprise, sections 11.8 and 11.9, pages
  247-252.

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Technology Adoption
Diagram from Dorf Byers, Technology Ventures,
p. 248
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Technology Adoption Over History
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Category of Adopters
Diagram from Dorf Byers, Technology Ventures,
p. 248
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The Chasm
Diagram from Dorf Byers, Technology Ventures,
p. 249
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Value of Model

• Must know what type of prospect/customer you are
  dealing with
• All customers are good at the right time
• Identify the type of the prospect/customer and
  treat them accordingly
• What do they care about?
• Technological Enthusiasts ? Technology yes,
  Ease of Use, Price - no
• Visionaries ? Quantum Leap Possible, Ego yes,
  Risk, Price no
• Pragmatists/Early Majority ? ROI and Risk yes,
  Technology no
• Conservatives/Late Majority ? Risk, ROI, Ease of
  Use, Left Behind yes, Tech - no
• Skeptics/Laggards ? Rationality no,
  forgetaboutit
• Know the risks with each group e.g.,
  Visionaries want customization
• Valuable way to gauge your true market adoption
• The Chasm exists between Visionaries and Early
  Majority
• If successfully crossed, should have exponential
  revenue growth

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Strategy to Cross the Chasm
Diagram from Geoffrey A. Moore, Inside the
Tornado, p. 25
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Successfully Crossing the Chasm
Diagram from Geoffrey A. Moore, Inside the
Tornado, p. 38
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How to Chose Beachhead Segment

• Is the target customer well funded and are they
  readily accessible to our sales force?
• Do they have a compelling reason to buy?
• Can we today, with the help of partners, deliver
  a whole product to fulfill that reason to buy?
• Is there no entrenched competition that could
  prevent us from getting a fair shot at this
  business?
• If we win this segment, can we leverage it to
  enter additional segments?

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Success Leads to New Industry

• Successfully executed, beachhead market success
  leads to unfair advantage in next markets
• First pin helps to knock down next pins and then
  you are in the Tornado
• Result is a new industry that you dominate
• Examples
• PeopleSoft HR ? Client/Server Business Systems
• Lotus Notes Actng Consluting Firms ?
  Groupware
• Apple Desktop Publishing ? Easy to Use PC
• Sun CASE/CAD ? Technical Workstation
• Documentum Pharma Reg Submissions ? Pharma Work
  Flow Manager Reg Submissions for Other
  Industries

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Outline

• Customer Taxonomy
• Implementation Framework
• Close

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Overview Implementation Framework

• It is a process
• Start at step 1 and dont try to jump in later
• It is a dynamic process so you may have to go
  back to previous step as you get more information
• It is impossible to overstate how important it is
  to understand your customer in all dimensions
• Once this understanding is gained, then a great
  deal of analysis still comes into play
• Included in this analysis is the Customer
  Taxonomy just discussed
• Gut feel instincts will be relevant but dont
  let them get the better of you analyze customer
  data
• The elements of a marketing plan are well defined

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Simplified Implementation Process
Exit Strategy
1. Understand founders interests, goals and
assets
Brainstorming Analysis
2. Understand whether tech push or market pull
3. How will we choose to compete
Analysis
4. Detailed work to build market/product plans
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Understand Your Starting Point

• Honest evaluation of founders Interests, Goals
  and Assets
• Do not short circuit
• Interests Passions
• Goals
• Personal
• Financial
• Time frame
• Assets include
• Technology/Intellectual Property
• Skills
• Knowledge/Rollodex/Credibility
• Financial Resources

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Understand Your Companys Genesis

• Generally two types
• Technology Push
• iRobot
• Google
• Market Pull
• SolidWorks
• Dell Computer
• Important to know what you are
• In either case, as the company matures, it moves
  to the middle

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Know Your Initial Raison dÊtreHow You Will
Compete
Product Innovation
Customer Intimacy
Low Price
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Build Detailed Market/Product Plan

• Make a first pass
• Actively engage in market place and win customers
• Understand the taxonomy of your customers
• Understand engagements you did not win
• Incorporate their feedback
• Continually refine market/product plan
• Process

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Marketing Plan Elements
Target Customer
Overall Risk Assessment
Business Model and Pricing
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Business Model and Pricing

• Now ready to decide on Business Model and not
  before
• What are your financial resources?
• What are your stockholders expectation?
• What is your exit strategy?
• What are the customer needs and expectations?
• What and when is the best way to monetize?
• Weighing all the items now you determine your
  business model
• OTC plus maintenance
• Subscription model
• Consumables
• Web services advertising-based model
• Different sources for revenue
• Then you determine price
• Also determine discounting policy
• Value-based pricing
• Truisms
• Twice the price, half the volume
• Easier to bring prices down
• Understand full costs

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New Business Model Examples

• Dell Computer
• Google
• Datatel
• Electronics Store
• Parking Meters
• Hewlett Packard

Advice Do not short circuit the discussion on
business model. Once set, it is hard to change.
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Reality of Entrepreneurial System
Founders values, goals, skills, interests and
core competencies

• Entrepreneurial Marketing
• Target customers
• Product Definition
• Value Propositions
• Business Model

• Sales
• Prospects ? customers
• Customize
• Feedback
• New opportunities

• Engineering
• Build it
• IP
• Feedback
• New opportunities

• Finance
• Measure Track
• Resource allocation
• Productivity
• Plan Analysis
• Feedback

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Final Steps in Market Plan

• Need to have a business model to optimize
  monetization of products
• Output includes detailed marketing and financial
  models
• Market segment sizes
• Quantifying the Value Proposition
• Resources required
• Sales costs and cycle
• Pricing
• Revenue and profitability by product, geography
  and channel
• Impact on overall financial statements/cash flow
• Sensitivity analysis
• A point person in charge
• All needs to be checked regularly for consistency
  with
• Exit strategy
• Company values
• Company interests
• Flexibility and dynamic incorporation of new
  data, as appropriate, is key

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Usual Outline

• Customer Taxonomy
• Implementation Framework
• Case Study
• Close

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Lessons Learned

• This is a process (hypothesis ? test ? refine)
• Process works in that it gives you the best
  chance for success but it is not a guarantee or a
  silver bullet
• Marketing is real, real hard
• Nothing is more important if it is not right,
  you can not fix it else where
• Dont invest heavily until you have a solid
  marketing plan
• Alignment is key and this is interactive and
  dynamic (always keep in mind the exit strategy
  and dont let it float)
• Make sure the market(s) you chose allow you to
  meet your overall goals
• There are many paths to success chose one and
  stick with it
• Keep the Main Thing the Main Thing
• When opportunity knocks, dont be emotional and
  make sure you are always open to rational
  business discussions that will help you achieve
  your goals sooner, with less risk and/or at a
  high level

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Outline

• Customer Taxonomy
• Implementation Framework
• Close

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Desired Outcomes of Presentation

• Increase understanding of the definition of
  entrepreneurial marketing
• Increase understanding of the role of
  entrepreneurial marketing
• Increase understand of how to effectively
  implement this function in their new enterprise
• Increase understanding of the different types of
  customers when starting a business
• Increase understanding of the steps and elements
  of Entrepreneurial Marketing Implementation
  Framework
• Real World Case Study
• Close Out
• Summary of Objectives
• Questions and Answers and Dialogue

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Executive Review

• Customer

• Alignment

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Generating Exponential Revenue Growth

• Good entrepreneurial marketing and sales is not a
  spectator sport!!!

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THANKS!
to reach Bill Aulet, email toaulet_at_mit.edu