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Hands On Business Modeling

Lesson 17 from: Value Pricing & Business Models for Creative Entrepreneurs

Tara McMullin

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Lesson Info

17. Hands On Business Modeling

Lesson Info

Hands On Business Modeling

As Jake (mumbles) mentioned, we're going to be hands on, hands on for the next three segments. Which means you need to have your work books out. And it also means that I would suggest having some blank pieces of paper, or maybe printing out a couple more copies of the spread sheets that we did earlier in the day, that are in about the middle part of your work book. You might wanna print off a couple more of those pages, just so you can have those questions ready at hand. Speaking of those questions, let's review this again real quick. So, remember this little guy, he's standing in for our business model. Because having a great business model is like having a healthy body. So, he's our healthy body. Or she. It could be a she, I guess, it's gender neutral. (laughs) So the first question we're gonna look at in business modeling, and hands on business modeling, is what will this help my customers accomplish? We wanna know, what's the function of what we're trying to create? What's the core...

value of what it is that we're trying to create? What it is that we're offering for our customers. Then we need to know, who are we designing this value for? Who do we wanna help make this change? Who do we wanna help make feel better, different, more, easy, convenient, whatever? Who are we designing it for? How will we approach our relationships to them? Or our relationship to them. This is a big opportunity for you to diversify your business model. If you look at the different ways you can be in relationship with your customers and clients, you can look at new ways you can offer value and deliver value to them. So we're gonna talk more about relationships. What does the solution look like? I'm gonna talk more in just a minute about why we wait til question four to even think about what this product or service could look like. Cause I wanna help you be creative about it. I don't want you to be stuck in a rut. I don't want you to be stuck thinking like, well, I'm this kind of business, so I have to do x, y and z. Absolutely not. This is your opportunity to get creative. So we're gonna answer these three questions first, before we ever figure out how we're gonna deliver that value. Then we need to get people talkin' about this. We need to get people to know about what it is that we have to offer for them. So we're gonna examine marketing and sales channels with the question, how will we let them know about it. And then, finally, we need to figure out how much this bad boy costs, right? How much does it cost to us? How much could it cost to the customer? And does that make sense? Cause that's another question we have to continually ask ourselves in our business model. Does this all make sense? And remember, all of these questions have to work together in a cycle. All of these questions have to kind of work together in a system, just like your body's systems work together. Your circulatory system, your nervous system. They work together individually, all their different parts, and they work with all the different systems in your body to create a business that really flows, really moves, really helps you get out of that micro business earning plateau. But for this segment, we're gonna concentrate on the first two questions. So in each of the next three segments, we're gonna break this bad boy down into two questions at a time. I'm gonna give you context for looking at each question. And then I'm also gonna give you exercises to work through. And I'm gonna work through these questions with people in the studio audience, and hopefully we can figure out how to work with some of you online, as well. So you should be able to get lots of different examples from this section. And remember, I find it very, very helpful to pay attention to examples outside of my industry. So say we've got a jewelry designer up here, and you're a life coach and you might be tempted to tune out. I hope not, but you might be tempted. I would challenge you to try and draw the connections between whatever business is sitting up here and your business. It doesn't matter if they're completely different industries, if they're completely different models. There's something to be learned in thinking outside of the box of your industry. So, we're gonna really concentrate on trying to get some diversity up here, get a lot of different examples so that you can make some really fresh, new, creative connections. So the questions we're gonna focus on today are, what will this help my customers accomplish? And, who am I designing this product for? What am I helping my customers accomplish and who am I designing it for? These are kinda the crux questions of developing any new product or service. And that leads me to one more final point before we start digging into this. These questions, or the way you're examining this for yourself, whether in your work book, or whether on a sheet of paper, you can use this to examine the products and services that you're already offering. Maybe you will start to see opportunities that you haven't seen before. But you can also use this process to brainstorm new opportunities. So you might take this first question and think of it one, in terms of maybe your best selling product. Or a product that's not selling as well as you think it should be. And you can use this first question to maybe think about one of those needs that you know your customers are asking for, or one of those opportunities that you identified earlier, and use that question to consider what could you offer. So, this exercise has the ability to go both ways. You can evaluate what you already have and look for new opportunities there. And you can use these exercises to look for new opportunities. To see what new products or services you might be able to create. Alright? So, we're gonna start with the first question. What is this gonna help my customers accomplish? Way too often, way too often, clients come to me with a preconceived notion of what they need to create next. Well, I'm a life coach and I've been working with clients one-on-one, and so I know now that I need to create an e-course. Or I'm an information mark and I've been working in e-courses, and I know now I need to write an e-book. Well, that's not necessarily helpful. What's the e-book gonna be about? Why are you writing this e-book? Why is such an important question. Why is this product the right thing for you next? And if the only answer you have to that is, well, cause that's what so and so did, and they look successful. Or that's what this business did, and they seem to have it together. That's not a good enough answer. When you focus on those preconceived notions of what products need to come next, or what services need to come next, you're building your business format first instead of function first. A format first business model is inherently flawed. Because it's not focused on value. It's focused on, you know, checking off the boxes. And customers don't wanna check off the boxes. They don't understand that you're following some preconceived system, or some assumptions that you've made. They've got questions that they want answered, and they want you to come up with innovative solutions to those questions. They know how they wanna feel, and they want you to come design products that help them feel that way. They don't care about the format of how you do it. What they care about is that that value gets accomplished. So a format first business is not value focused. A, come on, a function first business model is focused on value. And when you're focused on value, it's really hard to go wrong. When you're answering someone's question. When you are helping them get better sleep at night because they're not so worried. When you're easing a particular frustration. When you're helping them save money, lose weight, get the guy, get the girl. Whatever it is, whatever's valuable to them at that moment, whatever it is that they want. When you're helping someone do that, no matter what the product looks like, you're gonna have customers. You're gonna have someone that wants the answer to that question. Who needs the solution to that problem. It's a lot easier to lead function first than it is format first. Make sense? Good, I'm getting some happy nods. Okay. So, here's a question that you can use to further develop your answer to the what is this going to help my customers accomplish. This is what I'm calling the ultimate value question. How will my customer's experience be different because they used this product or service? How will my customer's experience be different because they used this product or service? I know I come back to jewelry an awful lot, but it's because there's lots of jewelry designers out there. And often jewelry designers, like Susan said earlier, think of their product as a want instead of a need. So you know, one product that has dramatically changed my experience of waking up in the morning and getting dressed is my Megan Auman jewelry. Yesterday I had on Megan Auman leggins, today it's Megan Auman jewelry. Which is generally what I am wearing. (laughs) Part of the way that my experience has changed because of this product is that one, I worry less about what I'm going to wear. I know that I can have a fairly boring wardrobe, and that when I throw on one of her big, make a statement everyday pieces, I'm gonna make a statement. I'm gonna look good. I can wear a white t-shirt and jeans, and still look super put together. Because that's what her jewelry is designed to do. It's designed to change my experience of getting dressed in the morning. It's designed to change my understanding of how I look, how I feel. That's what that product is designed to do. That's the function of that product. That's how it changes my experience. So here's some questions that you can ask yourself when you're brainstorming, how do I wanna help change my customer's experience? How do I wanna help change my customer's experience? What can you teach your customer? We all have things we can teach our customers. Now, and I should say, some of these may pertain more to your business and then other questions may pertain less to your business. But humor me. Think about all of them. What do you have to teach your customers? What will they know how to do because they use your product or service? How will their frustration be eased? You can think about the opposite way, too. What kind of frustrations are your clients or prospects going through right now? And how can you make that frustration a little bit easier for them? How will the frustration be eased? How will your customers just feel different? How will they feel different? Like I mentioned my Megan Auman necklace makes me go from feeling eh, meh, about my outfit to, I look good. Right? That is a big change in feeling. That is a lot of value. So how will your customers feel different because they use your product or service? Here's another really good one. What desire will be fulfilled because of your product or service? I desire to look good. I also desire to look professional. I also desire to look kinda hip and young, maybe. (laughs) And my Megan Auman jewelry helps me do that. What desires do your customers have? And how can you help them fulfill those desires? What will your customers be able to accomplish now, that they couldn't accomplish before, because of your product or service? What will your customers be able to accomplish now, that they couldn't before, because of your product or service? All five of these questions, you can use to find the inspiration for your next great offer. You can use these questions to find the motivation to create your next best selling offer. When you can answer these questions first and foremost, it's so much easier to sell what it is that you've got goin' on. It's so much easier to position what it is that you've got going on. It's so much easier to tell a story about it. I'm a big fan of before and afters. And we've got a before and after exercise later on. But, you know, I really like to think about, what's my customer's story in the before. And what's my customer's story in the after. How can I tell them about how my product is gonna help them get from where they are now to where they want to be, which is the after. And even better, how can I paint them a picture of the after that's even better than what they have in mind. That is a well designed product. That is a lot of value. That makes it so much easier to sell. Remember in the last segment we talked about making it easy for customers to buy. What it is about us. What it is about the way we relate to our customers that makes it easy. How easy can you make it to make a sale? I think all of us should have a goal in our businesses making it as easy as possible for people to buy from us. For people to identify with our products. As easy as possible to tell people about it. If a business, if a product or a service answered these questions for you, if they gave you some answer to these questions you've been looking for, would you tell other people? Absolutely. So I think you can start to see already, right here, in these bullet points, this is the beginning of setting that business model system in motion. Already, we're beginning to talk about who these customers are, how you can make them aware of your product. So you're starting to get those answers to your marketing and sales questions. Right here in the very first question when you start function first. So when you start, (laughs) when you start building a business model with the answers to those questions, you are building a business model function first. You're building a business that customers inherently understand what it is that you can help them do. Why it is that you should do business with them. As an example of this, as a message that I see very function first for a business, I am a huge fan of Evernote. I am an Evernote-evangelist. I use it for pretty much everything. I love me some Evernote. On Evernote site, at least the last time I checked, which was very recently, the headline of their site was, remember everything. Remember everything. That's function. That tells me this is value. That's value I want. The worst thing to me is forgetting something. I have a good memory, and so when I forget something it really, really, really bothers me. A lot. And I'm getting older, and I am finding I don't remember things as easily as I use to. So this is probably why I'm such an Evernote-evangelist. But Evernote really does help me remember everything. It's on every device that I have. You know, I can walk around with my iPhone. I can be on my iPad at night. I can be on my computer in my office. And when I come up with a great idea, which you know happens at the weirdest times, I pop it into Evernote. Or maybe it's just a blog post that I came across that I wanna be able to reference later, pop it in there. I come up with a story for a blog post, something that I wanna reflect on for my audience, pop it into Evernote. I can remember everything. What better reason to use that product? I don't care what the product is. If you tell me I can remember everything, I will use that product. Right? It's not the format of the product that's important. It doesn't say, here's an app that can help you remember stuff. It tells me the answer to one of these questions. Remember everything. That's awesome, right? I love that, they are so good. And I highly recommend Evernote. And I am not paid by the Evernote corporation. (laughs) So, this is of super importance right now. Especially if you're starting to brainstorm new products, or reimagine how you could offer old products. Don't worry about how you're going to deliver the value that you've just identified. Don't start with the delivery mechanism, right? The delivery mechanism is the design of the physical product. It's the development of the service package or the information product. Don't worry about how you're gonna deliver that value. Starting there is a mistake. Concentrate on the value you're going to create. Remember when I said business models are the system by which you create, deliver and exchange value? And I said creating value is about the change that you help your customers make. It's about what you help them accomplish. It's what you help them learn. That's what we're focusing on right now. What are you doin' for these awesome people? Alright? Next thing we're gonna focus on is the customer. We're gonna move on to question two. And we're comin' back, don't worry. Examples abound. (laughs) So we need to determine who this value is for. Now these questions really work hand in hand. It's really hard to answer question one without having a good answer for question two. It's also really hard to answer question two without having a pretty good answer for question one. So try and think about these two things overlapping. I thought about switching the order, but it wasn't gonna work for me. So we're gonna move on to question two, which is, who's looking to make this change right here, right now? Who's looking to make this change right here, right now? So if value is all about changing your customer's experience, who's looking to make that change? And the right here, right now is important, too. It's not helpful for you to develop a product for a need that someone's gonna have three months from now. You want to really focus on who it is that wants to buy this now. Who it is that really wants to buy this now. What are they aware of? What do they know? What is it that's nagging at them? What's the set of information that they have that's causing them to go looking for that value right here, right now? So let's examine some questions with this. My favorite customer question is, who is staying up late at night Googling this problem? We all do it. We may be shopping for something like jewelry, like clothing, like home decor, like a house. Or, we might be Googling questions. Googling frustrations. How do I learn how to do this? How could I do this more easily? What is the answer to this question? What is the meaning of life? Right? We all stay up late Googling, I mean this is what I do when I cannot sleep. I am up, I've got things on the mind, I've got things on my brain. That's why you can't sleep, right? So you're thinking about all sorts of stuff. You're thinking about the things that are causing your problems, causing you frustrations. So I'm on my phone and I'm Googling at night. And, which is causing me to get even less sleep, right. But, so what could you imagine your right customer putting into Google late at night? And who is that person that's Googling it? Googling is a very funny word, by the way. (audience laughs) So who's staying up late Googling this? What emotional attachment do these people have? Cause remember, this question about customers is not just about demographics. Yes, it's great to know if your customer is a female who lives in a major city, who is between the ages of 35 and 45. Sure, that stuff is important and it's very helpful. But there's all these other layers. There's all this other emotional information, social information, just human information. The stuff about us as individuals that make us us, right? If you can figure out that kind of information about your customers, you can create much more compelling messages. Much more compelling stories. Much more compelling marketing. So think about things like their emotional attachment to something. You know, so my emotional attachment to the problem of getting dressed in the morning is I feel kinda frustrated when I don't like the way I look, right? I feel frumpy, it makes me feel less confident in other ways. And being able to figure out that problem, being able to come up with a solution to that so that I'm feeling the way I always wanna feel, means that I can feel more confident. Feel more professional. Feel more put together. Feel more beautiful, awesome, right? So what is your customer's emotional attachment to what it is that you're valuing? Yes? I have a question. Yeah. So going through these question that you're putting out, how should I think about it when the end user's not the buying user? So the parents are buying the product, service that I provide for their daughters. Okay, so what you've got going on here, and this is a great question cause I have a feeling it pertains to a lot of other people. You need to think about what's important to each layer of the conversation. So, you're selling directly to parents? Yes. Are you also selling to like, schools or organizations? Yes. Okay, and then you've also got the kids that are actually involved? Yes. So the kids are the end user, and so I would start with the kids. Why would, if the kids had money, why would they buy this? Why would this be important to them? From their perspective, because when you start from their perspective then you have, you can more easily have conversations with the parents about how they're going to have a conversation about the kid. Right, because it's not, like, you might be able to convince the parent to buy because the parent convinced the kid to go. Okay, so they're all sorts of things. Especially when you're dealing with kids. But yeah, so I'd start with the kids first. And then pull back and say, why is this important to the parents? What does this mean for them? What emotional attachments do they have? You actually need to do this work three times, essentially for each product. It totally is worth it. And then you need to pull back further, and think about the schools or the organizations that you're selling to. The people that are going to be buying in there. What's important to them? Who do they need to impress? What outcome are they emotionally invested in? Okay? And then when you have all three layers of that information, you're gonna have really rich conversations with the decision makers in each of those groups. Because most kids, actually, right, they care what their parents think. They care what their teachers think. You know, when you're trying to set up kids for success, one of the things they want out of success is for their parents to be proud of them, right? So you need to have conversations on all three levels. And you need to be able to make those relationships work between all three levels. Okay. Okay? So yeah, anyone who's building a business model where the end user is not necessarily the person paying, needs to be able to do this work for all the different levels of that transaction. Lots of different conversations here. Yes, it's complicated. But you can really make it easier on yourself, and you can dramatically shorten the learning curve here. Because that's normally what's happens with your kind of business, is it's not that it's not a good value proposition, It's not that it's not a good idea. It takes you a really long time to get the sales process down. Kay? Alright, what else are they looking for? You know, we may have one question in mind, we may have one outcome in mind. But what else are your customers looking for? Are there other outcomes they'd like to have? Are there other feelings they'd like to have? What's the whole story? What's the whole story? What other purchases have they made? Most of the time when a customer comes to us, we are not their first destination. They have tried to solve this problem before, and they haven't been able to. They've tried to read the book, they've tried a course, they've tried to ask their friends, they've tried, ya know, all sorts of different things. So try and figure out all the different ways your customer has tried to solve this problem, make this change, learn this skill, before. Because when you know that, you know better, you know, what they're looking at. What stories they're telling themselves. And that helps you make more of a connection with them. What are they talking about with their friends and family? What are they talking about with their friends and family? Don't just think about what your customers are saying to you. Customers are funny. They want to make us, they want us to think that they're smart. They want us to think that they've got it all together, that they know what they're doing, that they know what they're talking about. Okay? They're gonna try and tell you what you want to hear, or what they think you want to hear. Alright? Not always, but a lot of the time. So instead, ask them, or listen for, what they're saying to their friends and family. And you know what, social media is a phenomenal place to do this. We actually have access to what our friends, to what our prospects are potentially saying to their friends and family. They're saying it on Facebook. They're saying it on Twitter. All these places where, ya know, they know you're there. But they don't know you're listening. Because they assume you're broadcasting. They assume you're promoting, promoting, promoting. Tweeting, tweeting, tweeting. But they don't know that you're sitting there thinking about them. Listening. And so that's a place they're not necessarily trying to show up looking smart. Or trying to show up looking like they have all the answers. It's often a place where they're a little bit more vulnerable. You know, yeah, we all have facades that we put on in social media, but those facades come down every so often. And if you are paying attention, that's information you can use. Not in a slimy way. In a, I wanna help you and I need the right answers, way. I need to know what you're really thinking. I need to know what you're really saying. You know, if you remember back to the very first segment today I started off with the, does this sound familiar. You say this or you do this because you think this, which means you feel like that. That's all from me listening. It's all from me looking on social media, or going to a conference and listening to people talk about what they need, what they're looking for, what their actual problems are, what their actual frustrations are. So if it resonated with you, you can do the exact same thing with your customers. Think about what they think, what they do, what they say, and how they feel. Alright, last question in the who wants to make change category is, what would making this change actually mean to them? What would this mean to them? Let me give you an example that might hit home. Making the change of setting up a proper business model, pricing your work appropriately so that it serves your customers. What would that mean for you? Why are you here? Because it would mean you'd go from a struggling business owner to a successful business owner. A thriving business owner. You're here because what this information means to you, the reason you took these three days of your time to invest it here with me, is because you are assigning meaning, deep meaning, to the change between being a struggling business owner or a starting out business owner to becoming a thriving business owner. So what is it that the change means for you, for your customers? Go back to the jewelry example. This jewelry means to me that I have a reputation of looking cute. (laughs) Of looking good. Of looking put together. That's outrageous for me. I live my whole life in sweats and jeans. And to have something so simple change my reputation, change the way people think of me. That means a lot to me. It means I'm indebted to this brand. It means I am loyal to this brand. It means I would tell everybody about it on live television. (laughs) That meaning is so deep and profound for me on something as simple as a necklace. So just like we said last segment, don't ever underestimate the value of what you do for your customers. Don't ever underestimate the meaning of what it is that you do to your customers. And really seek to understand what that meaning is. Seek to understand what they meaning is. There's a book called Design-Driven Innovation by a guy named Roberto Verganti, and he talks about the innovation of meaning. And how we take products and we can assign new meaning to them depending on how we design them. And one example from that book is the Alessi brand. It's an Italian design brand, and they've created these little kitchen accessories that are, they're all different fun little characters or little shapes. They all have like, smiles or they're animals. They're adorable and they're awesome. And the idea is that for people who spend a lot of time in the kitchen, the kitchen is a playground. And for Alessi's customers, they wanted to give their customers toys to play with in their playground. So they radically innovated the meaning of a strainer, a nutcracker, a can opener. So that now these aren't just items of function, but they're items that have this meaning of, you're playing. You're having fun in the kitchen. We know this is what you like to do, so we're gonna help you do it. And that says a lot about the customers who buy those things. It says a lot about their values. It says a lot about the questions they ask. It says a lot about how they approach cooking in general. How they approach their meals. How they approach their family. So you need all that customer information to be able to create products that are that innovative. That are that unique. And that are that, gosh, insanely easy to buy. I want one, right? Alright, so that's how, those are some ways that you can really think about who you're designing this for. And not just who on a demographic level, but who on a very deep, social, human level.

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