Hi, I’m Lionel Fray
So you want to start up a new business? Capitalize on an idea you have? Make a positive difference? Realize a dream? Make some money, maybe a lot of money?
Well, that’s just great. My hat is off to you.
As Henry J. Kaiser, the American industrialist, once said, what you need to do is simple: find a need and fill it.
Have you found a need? Can you think of a way to fill it? Great!
But I’d like you to pause for a moment to give some additional thought to this idea, because, as you may know, the odds of succeeding are against you. Somewhere around 90% of startups fail. And of the 10% that avoid failure, only a small portion succeed, and a very small portion of those really succeed.
So let me suggest you do something that will improve your chances—create a ValueMap that will serve as a lens for you and your partners to look at your venture from a different perspective. In doing this, you are likely to see some things you might otherwise not have thought of. You might even get an AHA! that could make all the difference between success and failure. And later, you could use that same lens—which will describe your business model–to show stakeholders, like prospective funders and strategic partners, what you are trying to do and why they should get on board.
To give you a feel for this, I’m going to show you a ValueMap lens of a particular startup.
Back in 2011, Mike Dubin met with Mark Levine at a party where they started talking about the high cost of razor blades. And they also shared some of the frustrations they felt some mornings when they ran out of blades and had to run out to get some more. And then in their conversation, they got a big AHA!—a possible way to eliminate these frustrations by making use of new technologies and using a different distribution channel.
(slide 2) So here’s a ValueMap diagram of the razor blade industry at that time. Razor blade producers made blades, sent them to distributors who passed them on to retailers, mostly drug stores, where the customers came and bought them. So you can see how values flowed in several steps to reach the men who shave. Now of course the men paid for them, and the money flows went back upstream to the originators of the razor blades.
At the time, Gillette was the dominant player in the market with an 80% market share. Over the years, they had gradually added multiple blades to their razors, more and more of them in cartridges, along with special coatings that they claimed improved shaving. And they also had increased their prices which by then had reached $3 to $4 for a single six-bladed razor head like this (show pic)
So in ValueMap terms what Mike and Mark were talking about was a negative value flow—a flow that detracts from the value being delivered to the men who shave. It included….. (read).
And the AHA! they got was seeing that that negative value flow itself was a need that they could fill with a different, innovative way to get blades to customers.
How? (Slide 3 con.) By creating a supply that provided the same values (show) but was delivered periodically in a different way and at a lower cost—an entirely different business model–and by using the internet not only to make the arrangements and payments, but also to get the message to shavers that their frustrations, which we see as negative value flows, had been avoided. (step through). To do that, they formed their startup: Dollar Shave Club
And this is what they delivered to the customer.
The other important element of the business model that this arrangement created was a direct contact to and from the customer. (show)
Finally, to kick it off, Dubin, who took on the job of CEO of Dollar Shave Club, made a video that was put on the internet via YouTube. Here it is. (show video—1 minute, 33 secs.)
As it happened that video went viral and rapidly generated thousands of inquiries and initial sales.
So now I have a question for you: If you were an investor, seeing this disruptive business model and the initial results from the video, would you have invested in this startup?
Well, if you had, you would have made a good decision. The company grew rapidly, achieved an almost 20% market share, raised several rounds of financing to do that, and exited in 2016 by its sale to Unilever for $1 billios. Yes it was one of the rare startup supersuccesses—a fabled unicorn! Hell of a story, huh?
So while I don’t promise you such a supersuccess, I hope you saw how the ValueMap showed how that business model worked. And I suggest that to improve your odds, build yourself a ValueMap for your startup.
Part 2 of this Nest will help you do that. But before you go to it, if you haven’t already done it yet, you might find it helpful to review Nests #2 to #6 to get a little more familiar with the ValueMap concepts and mechanics.