In February 2015, Unitec New Zealand held an entrepreneurship workshop. Unitec used the “Disciplined Entrepreneurship, 24 Steps To A Successful Start-up” book which was written by Bill Aulet, a senior lecturer at the MIT Sloan School of Management, as the principle reference. A part of the workshop was held in Guatemala and was organised by MIT. I was curious about this MIT workshop in Guatemala so I decided to attend the workshop and considered its fee as a long-term investment.
Unfortunately, I had a personal situation (my husband was made redundant after working for almost 19 years) that needed my attention. Hence, I did not complete the workshop at Unitec and I took my time to complete my reading. Therefore, I will record my thoughts about Bill Aulet’s book and my experience attending the workshop at Unitec.
Disciplined Entrepreneurship, 24 Steps To A Successful Start-up
Bill Aulet divides the 24 Steps into six themes.
The six themes are:
1. “Who Is Your Customer?”
a. Market Segmentation
b. Select a Beachhead Market
c. Build an End User Profile
d. Calculate the Target Addressable Market (TAM) Size for the Beachhead Market,
e. Profile the Persona for the Beachhead Market, and Identify Your Next 10 customers.
2. “What Can You Do For Your Customer?”
a. Full Life Cycle Use Case,
b. High-Level Product Specification,
c. Quantify the Value Proposition,
d. Define Your Core,
e. Chart Your Competitive Position.
3. “How Does Your Customer Acquire Your Product?”
a. Determine the Customer’s Decision-Making Unit (DMU),
b. Map The Process to Acquire a Paying Customer
c. Map the Sales Process to Acquire a Customer.
4. “How Do You Make Money Off Your Product?”
a. Design a Business Model,
b. Set Your Pricing Framework,
c. Calculate the Lifetime Value (LTV) of an Acquired Customer,
d. Calculate the Cost of Customer Acquisition (COCA).
5. “How Do You Design & Build Your Product?”
a. Identify Key Assumptions,
b. Test Key Assumptions,
c. Define the Minimum Viable Business Product (MVBP),
d. Show That “The Dogs Will Eat The Dog Food”.
6. “How Do You Scale Your Business?”
a. Calculate the TAM Size for Follow-on Markets
b. Develop a Product Plan.
Let me discuss the six themes from my perspective. FYI, I am not an expert but I do have related knowledge and experience so I am trying to be as objective as possible in writing down my opinion.
In the first theme, Bill Aulet provides a method to create a new venture, from how to obtain an idea, how to form the founding team, how to access the needs from potential customers and how to determine the target market. It is basically using a primary market research to define your beachhead, to build an End User and your Persona, and to identify your 10 Customers, including the usage of bottom-up and top-down analysis to calculate the TAM.
The primary market research is the key information to help us making decision. Hence, it should be well conducted so we can produce a useful and accurate (if possible) information to enable us developing our product and to determine which customer who will use and pay for our product.
In the second theme, I believe the Full Life Cycle Use Case is similar to understand our target customer behaviour especially the customer’s value chain and what obstacles we are going to deal with. Then, we tailor our product specification to match the customer’s needs. We create our product benefits by features so customers can relate the visual product benefits to their current systems and needs. Hence, it would be easier for us to quantify the value proposition by converting the visual benefits into tangible metrics that align with our customer’s high priorities. Therefore, we can define our core by differentiating our product value to others. In other words, “how we do it and what you get from us” will differ us to other competitors.
In the third theme, we will determine how our customers acquire our product by understanding how the customer makes a decision to purchase and who influences that decision to buy and pay for our product. Then, we map the process to acquire a paying customer, from initial contact to final payment. Before we create that map, we should comprehend the customer’s buying process and the length of sales cycle. We need to build foundation for the Cost of Customer Acquisition (COCA) calculation, and identify the hidden obstacles that we are going to face in selling our product and getting paid. We need to remember that the sales process will drive the cost of obtaining customers and will impact on the business profit. When we map the sales process, we should consider the most effective and efficient method to minimise the COCA.
In the fourth theme, we consider our customer’s perspective of how they want to acquire our product and to pay us. What we want to know is “how much value the customer gets from our product?” We also need to consider the market competition and distribution channel when designing our business model. Then, we set our pricing framework based on our Quantified Value Proposition and Business model. The objective of our pricing framework is to calculate Life Time Value of an Acquired Customer (LTV) and COCA.
The LTV is a present net value of our revenue during a short-term period, usually five years. In other words, how much net profit our product will generate from year 0 to year 5 in dollars. If you have not studied finance or investment, I suggest you may have problems to calculate the LTV. I think it is best to ask a professional to do the calculation. However, we need to understand what the figures means to our profit and what factors that drive the value of our LTV so we understand the risks and find solutions to minimise our risks.
The COCA is the costs to acquire a customer over short-term, medium-term and long-term period. Our sales process will determine COCA. Yes, we want to minimise COCA but what we need to do is to determine an effective and efficient COCA over time periods. This can be difficult to achieve if we do not understand what factors that drive COCA. Bill Aulet suggested a Top-down perspective to calculate COCA. A Top-down perspective is to tabulate aggressive sales and marketing expenses over a time period then, divided by total number of new customer we acquired within that time period. I suggest we consult a professional with COCA knowledge to determine the factors that drive our COCA.
This fourth theme is about how we make profit from our business by identifying the underlying factors that influence our LTV and COCA.
In the fifth theme, we design and build our product by identifying and breaking down our key assumptions based on our primary market research, our gross margin, our “lighthouse” and “linchpin” customers’ list and the Decision-Making Unit (DMU). Then, we validate our key assumptions. Afterward, we define our Minimum Viable Business Product (MVBP) by integrating our assumptions into a system test to understand if our customer will use our product and pay for it. The objective of this MVBP is to find out whether our product provides value to the customer or not. In this theme, we want to show that “The dogs will eat the dog food”. In other words, we want to show to our investors or stakeholders that customers will use and pay for our product because they get the value of our product.
In the final theme, we want to expand our business. It is about creating a growth strategy for our product. When we develop our product plan, we need to calculate the TAM for follow-on markets and establish the MVBP to suit the follow-on markets.
I cannot provide more detail information about the six themes, as I do not want to breach the copyright. I think this “Disciplined Entrepreneurship” book is good to have and read, whether you are a student, an employee or an entrepreneur wannabe. Unless you have a business background and understand the basic information systems, I think you may need to form a discussion group to learn more about the 24 Steps. It will benefit you to invite people, who have the relevant expertise, to discuss the 24 Steps. Alternatively, you can look for a similar entrepreneurship workshop that Unitec holds.
Entrepreneurship Workshop at Unitec
The workshop at Unitec provided opportunities to apply the 24 Steps method into practise. It was about creative thinking process. It was about interaction among team members. We had our mentors to be consulted when we did not understand an issue. We had guess speakers who shared their experience in starting a business etc.
I found the workshop was interesting because I was challenged to be more open-minded, kept my positive thinking and “can do” attitude. I think the most interesting part is dealing with teamwork, especially when defining what product we were going to create and what value of product we could offer to target customers so they would use and pay for it.
When I am writing down this article, I take a step back and observe my experience attending that workshop. I have to admit that it was the most challenging teamwork that I ever had in my life. I think the story would be different if we were paid to do the project so we could make it as our top priority. What I learn from that workshop is that I need to be more patient and tolerant when dealing with people who have their own learning pace, interest and priority. Overall the workshop is a good place to learn and collaborate with people from different backgrounds.
As my financial situation has changed, I will be busy looking for a job. It will be very difficult to get a job, as I do not have New Zealand experience. However, I keep trying. I will update my blog next year when I want to discuss my trading performance on Trademe.
I confirm that I am not paid to write this article.