Your team is seeking $1M to prove the viability of an innovative service. You can take as long as you like, but you have to pay your own salaries from the $1M as well as all the other costs. To get this money (from your company or investors) you first have to explain the value proposition. Since they trust your team, they are willing to consider multiple value propositions.
Present two or three value propositions in a 15-minute presentation and a (10-20 page) report.
Each value proposition consists of
Š A description of how the innovation works
Š A value diagram including your proposed service as one of the players.
Š A scope of the total market : an estimate the number of players of each type.
Š A scope of a sufficient test market: smaller numbers for each player type.
Š For each transaction (value exchange) in the diagram:
§ a dollar estimate of how much value it represents to the giver, and
§ an estimate of how many transactions per year will occur in the test market and the total market.
Most importantly, this diagram should predict the expected annual revenue for your service in the total and test markets. If your innovation has significant operating costs other than normal computing and marketing services, you should estimate those, too. Each estimate should be backed up by evidence that you have gathered from literature searches, surveys, or interviews. It is OK to label an estimate a guess if you think there is little doubt (i.e. I’ll believe it).
Evaluate the value proposition for an innovation and its prospects for succeeding using
Š Revenue Models
Š Google Research
Credibility of the value propositions: 80%
Maximum expected profit (= claimed profit for total market * credibility) of the best one: 15%
Style of presentation and report: 5%
Š Select a handful of promising projects. For each one
o Create a preliminary value proposition for each one, guessing at ranges for all the numbers.
o For the critical value flows, i.e. the ones that affect your profit, construct a spreadsheet that computes yearly profit based on the numbers in your model. It should also so the value added (i.e. profit improvement) for other players on whose participation you depend.
o You might split up to do these.
Š Choose the best two. “Best” is some combination of profitability, your ability to test market with $1M, interesting to your team, etc.
Š Reduce the uncertainty of the of the most important numbers in those models using
o Literature searches, i.e. the internet
o Ask representative players questions like
§ “Would you participate in this service?” [You’ll need a good, short description, like an ad.]
§ “What are your costs?”
§ “How much would you pay?”
o Use face-to-face interviews for important players and surveys (using Google Forms™, Survey Monkey™, or Mechanical Turk™) for large number of potential players.
Š If you are not satisfied with the outcomes of the two you chose and have more time, try a third.
Š You are not required to base your thoughts on the reading or lectures, but they should give you an idea of how I grade when it’s subjective.
Š Any number of you can make the presentation, but rehearse multiple times so that you are consistent and not redundant.
Place the items (presentation and report) in the team’s Dropbox™ folder by midnight, 3/7. Also fill out any surveys you receive by midnight, 3/7.