What is your business model

Today I was working with a business model alternatives for one specific software company. The business is very international and existing network is truly global consisting of research organizations, content providers and different type of customers. Part of the strategy work has been a task to critically evaluate our business model. All in all this company is very much knowledge driven, which sets the scene in our future coming decision making.

I found this following article in HBR quite useful for my own thinking:

https://hbr.org/2014/11/what-airbnb-uber-and-alibaba-have-in-common

When Facebook acquired the messaging service WhatsApp for $19 billion in the spring of 2014, the question on everyone’s mind was, does the service really merit a valuation of almost 20 times projected revenues?

WhatApp’s valuation may be extreme, but huge gaps between revenues and valuation are increasingly common. Cloud-based sharing service Dropbox received venture capital funding at a valuation of $10 billion, or 40 times revenues. Airbnb.com raised funding at a valuation of $10 billion, which would make it worth nearly 20 times its revenues — and worth more than Hyatt Hotels or Wyndham Worldwide. Taxi-replacement service Uber is currently raising funding and is expected to see a valuation of $30 billion, estimated to be more than 15 times revenues. Most recently, Alibaba’s IPO raised funds at a value approximately 10 times revenues.

These companies represent a new trend in the types of business that investors prefer. Leaders of more traditional companies are left wondering why these upstarts merit such high valuations. Are they more profitable? Do they see faster growth? Do they have higher return on assets and lower marginal costs?

Our answer is yes — to all of the above.

In collaboration with Deloitte, we examined 40 years of financial data for the S&P 500 companies to see how valuations trends have evolved along with business models and emerging technologies. Our research led to three key findings.

1. There are four business models

To begin, we searched for a simple way to characterize the different types of business that were engaging the hearts and minds, and pocket books, of investors. Because today’s highly valued, fast growing businesses can be found in almost every industry, we quickly moved past standard industrial classifications and developed a new framework based on business model, which is the principal way an organization invests its capital to generate and capture value.

The four models are:

  • Asset Builders: These companies build, develop and lease physical assets to make, market, distribute, and sell physical things. Examples include Ford, Wal-Mart, and FedEx.
  • Service Providers: These companies hire employees who provide services to customers or produce billable hours for which they charge. Examples include United Healthcare, Accenture, and JP Morgan.
  • Technology Creators: These companies develop and sell intellectual property such as software, analytics, pharmaceuticals, and biotechnology. Examples include Microsoft, Oracle, and Amgen.
  • Network Orchestrators. These companies create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, and Visa, Uber, Tripadvisor, and Alibaba.

We applied this business model framework to our dataset, the S&P 500 Index companies from 1972 to present, in order to see how the four models performed over time.

Our business model classification and analysis yielded some surprising results. Network Orchestrators outperform companies with other business models on several key dimensions. These advantages include higher valuations relative to their revenue, faster growth, and larger profit margins.

 

 

The Future of Venture Capital – A White Paper

This blog was worth of reading. I really need to share these thoughts with you.

http://rubicon.vc/the-future-of-venture-capital-a-white-paper/

The true rock stars of this industry are the entrepreneurs not the VCs. A good VC knows how to seduce them.

The main point about the future of venture capital is that VCs must add value. To raise capital VCs need a highly differentiated strategy. They can either be a dynasty raising fund eleven or fund fifteen like a Sequoia or NEA or they must have highly differentiated value added strategies and roles in the market. Absent a solid differentiated strategy, VC manager teams will struggle to raise a VC fund. Absent a differentiated strategy a VC will miss out on the best deals and fail to become one of the greats. Even if some VC team manages to raise capital in order to get into the best deals, they will need to climb to the top of a crowded heap of VCs trying to get their fund money into the very best deals at sensible valuations. Almost anyone can overpay. Make no mistake – CEOs of the top startups have a choice of which investors to take money from.

Any decent VC firm must have at least one true and experienced entrepreneur as an active general partner running the fund. The days of the European investment banker turned VC by simply removing his tie and putting on grandpa blue jeans are numbered. How can they succeed at getting into the very best deals? Simple – add value to each deal. Demonstrate that value when trying to invest into the deal everyone wants to get into.

Thanks to: 

Mindset for the start-up entrepreneur

I found a very nice article to be shared from HBR.

BY: Nilofer Merchant

“I am such a big failure. I can’t believe that I’ve made this mistake and it’s cost me months and months of time.  I might never recover…What an idiot to not see that one coming.” On and on, he went. In distress, my colleague was clearly suffering because of a recent fiasco.

Seeking counsel, he had come to me supposedly to problem solve. But all he could focus on was how this incident made him a failure. I got frustrated listening to him. Not at his words, but at how vicious he was being to himself. In the end, my advice was not as cogent and articulate as I had intended — I used a popular vernacular term for bovine droppings — but I stand by it.

Talking to yourself like you are worthless is not helpful. Yes, mistakes  mean you might be in hot water, or that there is a lesson to learn. But there is a huge cost to telling your story in such a limiting way. You give away your power. When you define your “I” as what I call a “weak I” you

Sometimes it’s less important to know how to learn specific things, than how growth itself works. You cannot change anything unless first you believe in your ability to drive change. That’s what lets you start to engage ideas, problem solve, enlist others, and focus your energy. In other words, to have an impact, you need to think of yourself with a “strong I”, not a “weak I.”

Most of us talk to ourselves in ways we’d never talk to anyone else. More than likely, you are unkind to yourself when you’ve had a failure. You expect yourself to “get it right” — every single time. More often than not, you hold yourself responsible for the whole of the failure. You believe you should have seen it coming. As if somehow you can actually control everything. But, let me ask you – would you speak to someone else this way? Would you talk to them in an unforgiving, demanding, and invalidating way? Likely not. Were you to say it to someone else, you would almost see him or her shrivel up from the inside. A label given to another person can transform a person’s sense of self and their ability to contribute and create. So can a label you give to yourself.

This is a not about self-help, though it might help you. This is an opportunity to talk about the role of narrative power, through the form of “weak I” and “strong I,” and how it affects our entire economy.

Talent of all sorts is valuable to an organization only when people feel free to bring their differences to work. But all too often, difference is not seen, nor valued. Instead, our difference makes us unseen. I myself fell for this, when someone powerful told me “as a brown woman, the likelihood of you being seen in the world is next to nothing.” I wrote about that experience in a piece on cultural bias. But what I didn’t share then is how much it formed a new weaker narrative in my mind. The “you’ll never been seen” narrative changed my power from a “strong I” to a “weak I” because of the societal group I belonged to. I was a mess for many months. When I didn’t get the role I wanted on a particular board of directors, I thought to myself, “Yes, there! That’s proof that he’s right!” And I started to step back, to stop trying, to deny my own creativity. I had so easily adopted his frame of the world, as my own. It was disempowering, and debilitating.

When I share this personally awkward story in public, I do it to point out a truth about unlocking our economy. New ideas and sources of innovation are abundant. Right, in fact, in front of us — and often hidden in plain sight.

The problem is when those who do not see (the ideas right in front of them,but different than what they expect), believe this means the unseen is not actually there. The argument goes – for example– if there were strong women leaders, OF COURSE we’d see them, maybe even put them on our board. We can’t see them so, of course, they must not exist. (As Claire Cain Miller pointed out of Twitter’s all-male board, this is ridiculous.) Or, when Amazon CEO Jeff Bezos list of favorite books includes only books written by men, some folks online posit that women must not have written important works. To which one might want to look up circular logic.

The debate that often arises when the topic of not-seeing comes up is this:  Maybe the people — those not being seen  — haven’t not done enough, accomplished enough, or tried hard enough. And unfortunately, this “not enough” narrative plays to some fears on the part of the people not being seen. Me, included. I convince myself that this is something I can control with an action plan. It’s just a matter of jumping a higher hurdle. The thinking goes… once that is done, then I  will finally be seen.

But that puts the power of your being seen in someone else’s hands, doesn’t it?

What if the first step in being seen is learning to see ourselves? What if, in our desire to fit in and be seen, we have forgotten how first to belong to ourselves? The more you believe in yourself, the less you need others to do it for you. This doesn’t mean that I deny the role of structural power or cultural power that limit many from being unseen. To make all power about the individual is to privatize power, and to imply that if an entire group of people is unseen, or less seen, that it’s somehow “their fault.” (I’m reminded of the term for bovine droppings, again!)

Yes, it is hard to silence that inner critic — especially if outer critics are also chiming in. If you can’t silence it, make peace with it. I have a standing appointment with fear, where I listen to it and make a plan based on what I learn. In return, fear has learned manners and keeps quiet until our next appointment, thus allowing me to get to work.

You can’t ask other people to make a “weak I” go away. Only you can live your life. And only you have lived the life you’ve lived thus far, only you can have the dreams you choose to have. By asking someone else to validate that, you are not only giving away your power, you asking someone to validate something that they can’t possibly understand. Each of us is standing in a spot only we are standing in; it’s a function of our history and our vision. Until you own this spot – your onlyness — in the world, you will never stand in your power. Without it, you will never fully own your “strong I”. Until you celebrate who you already are, you will always be hustling your way to worthiness, as notable researcher and storyteller Brene Brown would say. She defines hustling as the need to please, perfect, pretend, and to prove your worth. All this is an effort to show the world what you think it wants, not what’s really happening because you don’t believe that your experience, your reality is already good enough.

Professor Amy Cuddy of Harvard knew of research that powerful people have powerful body language—taking up more physical space–and thus appearing more confident to others. She proved that the reverse is also true: just doing powerful poses can actually create the feeling of power. Similarly, I’d argue that by doing the work you’re called to do and by owning your difference, you own your narrative power – and owning it is what lets you create the future.

You do not need to “be seen” before pursuing your ideas. Enjoy yourself. Work. Create. Add value. Do what you can, consider everything an experiment to be held lightly, and then see what it leads to. Trust that in the doing, you are learning and growing, and being powerful. While it is quite possible you will be left “unseen” by some of society, at least you’ll see yourself. In this way, power stretches to become dignity.

Own your story, and you own your life, Justine Musk recently wrote. Talk to yourself as a friend, not an enemy. And remember, you cannot change anything unless you first see your own self as powerful enough to act. The way we talk of ourselves and to ourselves grants power – narrative power — to what happens next.

At least I found this quite powerful:)

https://hbr.org/2013/11/the-first-step-to-being-powerful

 

 

Event Slush

Slush is the focal point for Eurasian startups and tech talent to meet with top-tier international investors, executives and media. In 2014, Slush brings together 10.000 attendees and more than 2500 companies for the two-day event, which takes place on November 18-19th in Helsinki. Slush is a non-profit event organized by a community of entrepreneurs, investors, students and music festival organizers. Although

Slush has grown from a 300-person event to become one of the leading events of its kind in the world, the philosophy behind it has remained the same: to help the next generation of great, world-conquering companies forward.

Check: http://www.slush.org

INNOVATION AND PERSPECTIVE

Innovation depends on having a perspective. Perspective comes often from experience and deeper maturity. You do not get maturity if you are been grown-up in a too ”easy” and polished environment.

Some countries deliver innovations more than the others. Regardless on how you measure it there is something special in the ecosystems of Israel.  In terms of the technology and innovation there is a continous flow of breath taking achievements. Experience in Israel starts to cumulate when you are relatively young. This is because the society jams so many transformative experiences when kids barely get out of high school. By the time they get to the college, their heads are in a different place than those of basic European or American counterparts. Maturity is a powerful fuel to generate innovations when it is mixed with childish impatience. Military training playes quite crucial role in this ”exercise”.

Innovations are not born in the class room workshops mentored by the consultants. This imaginary expert brings the people together and everybody has a pen and piece of paper. Fast, smooth and well educated consultant tries to facilitate,  ”Lets innovate today what our company could do better for the customers. Everybody has five minutes to write his best idea and then we vote, which is the best candidate”.  Maybe this is a joke, but believe me it does not work.

It is strange what things drive innovation in the real life. Relationships develop and maturity and experience grows in speedy forms through competive sports, military or some what similar multiyear barriers bothering us. It requires a new place and position from which to observe. Value adding innovations are done by elite. With elite I mean brave people who go through different type of tought selection processes in a form or the other. These are groups of people or even nations that have been pushed sometimes by the others. In the best case this unique mentality spreads like a virus in the whole nation.

Facilitating a national mentality and large scale creativity to burst economy requires of course many things. Despite of several attemps European political decision makers seem to lack experience that we need so much right now. They do not know how to support start-ups to boost growth and innovations, because they often do not want to be exposed to potential failure. Potilicans are aftraid more than ever and attributes for the growth do not exist. Being tidy is more important than aim for a true courage.

Next year we will have our election for the new parliament in Finland. Small country in the world, but still about the same size as Israel or Singapore. Key ingredients for entrepreneurship are produced when people can cross boundaries, turn social norms upside down, agitate openly new markets and catalyze radical ideas. I wish we will have brave enough leaders selected this time to drive us on the edge of chaos to wake us up from sleepy backwaters back to a leader in the innovation work. We need politicians who are builders them self, irrigators, impatient and effective.

Bone Index selected as a most promising Life Science company in Stockholm

Bone Index is one of those companies that one must be proud of. Novel technology and very ambitious team that can and will make a difference.

Company has been recently named the most promising Nordic Life Science company at the industry’s largest Nordic conference in Stockholm. Bone Index received a Nordic Stars Award at the Nordic Life Science Days, an event that attracted more than 570 companies from 26 countries.

Bone Index has developed the world’s first pocket-sized diagnostic device for osteoporosis. The company’s Bindex® device makes it easier to screen patients in need of medication. Osteoporosis causes bones to become fragile and susceptible to fractures. The social costs of osteoporotic fractures in the EU region are estimated at 40 billion euros per year.

“The unique Bindex® device developed by the company identifies patients with osteoporosis quickly and easily. Up to now, the biggest problem has been the low rate of diagnosis, because it has only been possible to examine bone density in hospitals by means of an expensive X-ray scan, which subjects patients to a radiation dose,” says the Chairman of the Board of Directors, Jussi Holopainen.

Have a look:

http://www.mynewsdesk.com/se/swedenbio/pressreleases/nordic-stars-awards-2014-winners-announced-1052020

BC Platforms delivers genetic data management solution to Vaasa Hospital District

November 5, 2014

Diabetes is the fastest growing disease in the world today so the research in prevention and care of the illness is vitally important. With the research, the intention in the future is to deliver customized treatment tailored to the individual patient and move towards a personalized medicine model.

BC Platforms will implement a comprehensive data management solution for the Direva study for the better use of genetic information in diabetes research. “The solution will greatly improve the overall data management and analysis capability and significantly enhance Direva’s data security, storage efficiency and sharing capability”, explains Annemari Käräjämäki, Chief Medical Officer.

http://bcplatforms.com/news-events/

Digital Health in Europe: Investment Insights from Across the Pond

November 5, 2014 – By Camille Danielich

Led by Health 2.0 Chairman Matthew Holt, the Nov 3 webinar, EU vs US, Investments in Digital Health; highlighted important differences between health care markets in Europe and the United States, and elements that attract international investors. Panelists Lisa Suennen (Venture Valkyrie), Rosemary Cunningham-Thomas (Artemis Healthcare Ventures), Charles Stacey (Inventages), and Klaus Stockemann (Peppermint Ventures), shared their insights on the current climate of European digital health investment.

The consensus was that health IT market investments are increasing, but difficult to quantify because of the blurring of subcategories, such as pharmaceuticals, wearables, and other devices. The panel agreed that a lack of widespread EU digital health adoption has provided somewhat of a barrier to significant European investment. While Klaus conveyed widespread German unenthusiasm, Rosemary noted that success in the UK was bolstered by company activity and innovation at “pressure points”- such as diabetes management and psychological and mental health services- where the need for digital health solutions is great.

Please check: http://www.health2con.com/news/2014/11/05/eu-vs-us-investments-in-digital-health-recap/?utm_content=buffer8d5ad&utm_medium=social&utm_source=linkedin.com&utm_campaign=buffer

Start-up nation Finland

According to the pioneering work of Nobel Prize winner Robert Solow, technolocial innovation is the ultimate source of productivity and growth. It is the only proven way for economies to consistently get ahead-especially innovation born by start-up companies.

Economist Carl Schramm, president of the Kauffmann Foundation, which analyzes entrepreneurial economics, told that ”for United States to survive and continue its economic leadership in the world, we must see entrepreneurship as our central comparative advantage. Nothing else can give the necessary leverage”.

Israel specializes in high-growth entrepreneurship, start-ups that wind up transforming entire global industries. High-growth entrepreneurship is district in that it uses specialized talent-from engineers and scientists to business managers and marketers-to commercialize a radically innovative idea.

The question BusinessWeek cover some time ago put it ”Can America invest Its Way Back?”, we should ask the same question now in Finland?  Future coming year of 2015 is the year of parliament elections. Focus within the public debate has been in government spending and public sector reforms mainly in the healthcare. There is a continuous risk that orientation to innovation and growth is forgotten, because it has not leveraged or delivered success as perhaps planned. I believe that it is not the target it self, but the mechanisms and tactics selected in Finland.

There are more Israli companies listed in NASDAQ than all companies from entire European continent. VC investments in Israel are about 30 times greater than in Europe. In terms of driving forces and heritage there are elements in Finland as well, which could bring us the same potential. Finland should be the natural place when world is seeking for innovation. We have done it earlier and we can do that again.

Inspired by Dan Senor & Saul Singer publication: Stat-up Nation. The story of Israel´s economic miracle. Book has stories that are really worth of reading.