Nadia's picture
How to build a revenue stream to support your activities - part 1

As an incredibly diverse community, the range of experience and knowledge about building economically sustainability projects amongst members ranges from "where do I even begin" to "I just sold my 3rd company". Also, there are many different interpretations of "economic sustainability" and strategies for achieving it. Moneyless crowdfunding with Makerfox anyone?

A recurring topic is one David De Ugarte dove into in this Las Indias's piece on generating revenue through sales. Especially in purpose/value driven contexts, this topic is often controversial and deeply unsettling: [] our “conscience” and the “private logic” will join forces to tell us “we are not good at it”, and that this “it” – selling – is very close to deceiving. But this is false. 

Most initiatives fail to generate monetary resources not because they don’t manage to develop and deliver a product to the market; they fail because they develop and deliver an experience, service or product that no customers want or need enough to pay for. This is not magic though, it is something that you learn to do. 

Many of the projects we see popping up on Edgeryders, are collaborative and decentralised initiatives. Perhaps it makes sense to structure a process which everyone can participate in to build economic sustainability into projects in a decentralised way:

  1. Identify and document our assumptions

    1. What are our assumptions/hypotheses about how we gratify our clients and or sponsors, who they are, how we will acquire and monetize them?

    2. What are our assumptions/hypotheses about how we serve the needs of our constituency, who they are, as well as how we engage them into becoming more active participants in (and beneficiaries of) our initiatives?

  2. Talk to prospective customers to validate (or invalidate) our assumptions

    1. What problems do they face?  How do they solve them?  What matters to them?  What is a must-have for them?

  3. Identify the risk factors in the opportunity

    1. Are we facing significant technology risks?  Or more of market risk?  How can we test and validate these (starting with the most risky)?  What market testable milestones can we build that would result in sufficient evidence to induce us to pivot or move forward? A proof of concept? A letter of intent?  A prototype?

  4. Create and Test a Minimum Viable Offer

    1. landing page click-through that prove there’s some amount of interest in an experience, product or service;

    2. a time commitment for an in-person meeting to view a demo that shows the customer or funder's problem being resolved;

    3. a resource commitment for a pilot program to test how the experience, product or service or product fits into a particular environment.

  5. Once we have users using our MVO we listen for & tune into the Must-have signal

    1. We listen very carefully to find our must-have signal and articulate it.

    2. We Double-down and strip away the unnecessary> focus on building an experience, service or product that is cherished and supported by everyone who uses it.

 

Does this make sense to you? Do you want to learn the hands-on-skills involved?

I am just about to launch an initiative on behalf of the social enterprise supporting the community. For those who want to learn the skills, this offers an excellent opportunity to learn-by-doing with me.

Let me know you are interested by leaving a comment below or emailing me: nadia@edgeryders.eu

Comments

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Noemi's picture

What can I say, having learned quite a bit just by watching you work your magic :)

@Ruxandra wouldn't this be useful to your Babele team?

 

Ok so it seems there is an interest

Nadia's picture

I have resisted doing this for a while out of time constraints, but it kept popping up as a need. A few minutes after this post went live I started getting emails from people who want to sign up for the course. Perhaps I should have set this up earlier, but as always...time time time.

 

 

The lean startup methodology :-)

Ruxandra's picture

Hi Nadia,

yes, great post. What you are saying actually is indeed the fact that there needs to be value creation for social purpose driven initiatives.

For it to be value driven, there need to be people that are ready to pay for the service.

The whole concept of testing with a Minimum viable product (MVP) or Minimum viable Offer (MVO) it's the ideas behind the lean startup philosophy.

Test something from users, learn how to identify their needs (because they do not always express them directly) and how to create something that satisfies their needs creating enough value for them to really use your product/service. Etc.

I believe there is much to learn from the whole lean startup philosophy for people that want to change the way our world is driven. This is why we were organizing workshops on lean startup and collaborative business modeling (as the one organized in Stockholm). However, there are also limits of the lean startup principles. For example with Babele, we received the true validation of the concept only in October 2014, so 1 year and 2 months after having launched the platform. And we started selling services with the platform only in February 2015 (so 1 year and almost 6 months after). It takes a lot of patience in building professional products and services, and sometimes the lean startup philosophy invites people to give up too soon because they were not able to receive proper validation soon enough...

Yes I think we need to remix what is out there to work for us

Nadia's picture

I am looking at collaborative ways of generating revenue for people working on the kinds of projects that pop up in this community and others. They rarely fit comfortably in existing categories (various mixes of startup, social enterprise, art project, activism, research etc etc) and they often require engineering different kinds social contracts which the same people to move between multiple roles e.g. user, consumer, cobuilder etc. without fear of exploitation. It's tricky. But maybe you want to build this together Ruxandra, as a join Babele Edgeryders project? Here's where the course is being shaped, feel free to jump right in: https://edgeryders.eu/en/how-to-build-a-revenue-stream-to-support-your-activities-p2p-course

Would be thrilled to help out

Ruxandra's picture

Yes, I completely agree with the remix.

I looked at the way the course is going to be structured. This is indeed great, I like very much the idea of peer-to-peer feedback, and of weekly calls to state the advancements. We were doing this with the crowdmentoring programm that we organized with Babele in October, and it really works :-).

My remark regarding the course is that this is great for ideas that were not implemented yet, but it would be fantastic to adapt them to already existing ideas. For example if they already have an MVO, they would still need to figure out if they satisfy needs and if somebody is ready to pay for their service because it's creating value, but the focus, the questions, etc, would be different. What do you think? 

 

Sure

Nadia's picture

Let's build the tasks for people to complete together? When should we schedule the first group call for, next thursday morning work for you?

Collaborative ways of generating revenue

TiberiusB's picture

Hi all, 

I got captivated by this thread, because this is precisely what we are trying to do at SENSORICA. 

@Nadia "I am looking at collaborative ways of generating revenue for people working on the kinds of projects that pop up in this community and others. They rarely fit comfortably in existing categories (various mixes of startup, social enterprise, art project, activism, research etc etc) and they often require engineering different kinds social contracts which the same people to move between multiple roles e.g. user, consumer, cobuilder etc. without fear of exploitation. It's tricky. "

First, what is the value system? We need to map it first and that will determine how to set everything up for value to be created, distributed and for the benefits to be shared among participants. Second, there is a choice to be made about the type of environment we want to create. Is it about creating value in a corporate-type environment or in a peer production environment. Nadia's words above suggest that something like the second choice is preferred. People like us need to be free, want to contribute to different projects, want to be able to influence and take ownership of processes, want to share... So how do you set up an environment that allows value creation and its distribution but feels like a network and is build on openness, transparency, decentralized processes? This question is at the core of my activities since 2008 and my answer is the Open Value Network (OVN) model. There are a lot of hybrid models that try to go in that direction but preserve some of the old stuff, and I think that is because people are not ready or can't go all the way. Within SENSORICA  all projects are open, everyone can perform tasks, no barrier to value creation, and we use the value accounting system to redistribute the revenue. Networks that have projects formalized as a company, incubators and accelerators for example, don't have a lot of co-creation or exchanges between these entities. Within a value network projects are open and are only loosely formalized. If you have a system to track contributions you'll get a lot of value flows between projects, synergy increases, there is a lot of recycling and sharing of tangible and intangible resources.  

We are now prototyping services. A client makes a request, a group forms within the network and use the infrastructure to deliver. Here's one example 

http://www.sensorica.co/home/what-we-do/products/offered-services/barda-periscope-project

Hey :)

Nadia's picture

So I followed your link and couldn't really make sense of what the contents of that page want from me as a visitor. Are you trying to sell me something? Am I expected to post something somewhere?

We are looking at the same problem from different angles. I saw there was a need to put together an overview of how you actually generate revenue because for a lot of people it is kind of a black box. Then you can plug those skillsets into different contexts that operate under different rules. Your Open Value Networks Concept in my mind is one such context: I am looking at all the stuff that happens before a customer arrived at your door stating they want to contract you to do x thing for y amount of money.

The background story is that I had a meal with an Italian civil servant who has become friends with three homeless-ish guys in Milan. One of the guys is an Italian aristocrat who spent all his money. The second is a skilled Senegalese metal worker who lost his job as a factory worker. The third is a Maroccan guy who lives out of his car, and is not really specialised in any area.

Guess which of the three is doing best?

Interesting

Alberto's picture

That page seems to be a sort of fairly abstract description of what any project ought to look like. Its categories are very abstract: "Create spaces", "Map interests", "Create structure" etc. Each comes with deadline and deliverables. Each person running a project would fill in these fields as appropriate – in fact, quite similarly to what happens with European Commission-funded project (they have "Excellence", "Impact" etc.). Also the process people have used in the periscope case is similar: work on a GoogleDoc, then copy-paste into the Sensorica form. The point of copy-pasting seems to give people a way in to contribute (and be rewarded accordingly – kind of like Github + accounting). This is all reverse engineering, I am not actually seeing the accounting (no fields denominated in € or $ or whatever), but that might be due to my non-logged in status.

We have a similar system, except no forms. You have a project, you post it as a group on the platform and receive your basic tools for cooperation (wikis, tasks etc.), loosely coupled with what the whole community is doing. This is meant to maximize the chance that somebody you don't know will randomly walk in and turn out to be exactly the person needed for that project. People are encouraged to find their own ay to share, under Who Does The Work Calls The Shots – doers decide.

A problem in ER is turning out to be how to reward the quite difficult and not always fun activity of making the sales. Not rewarding encourages waiting around for someone to walk in with a contract; rewarding it seems quite awkward, at least before you have some hard data on what it costs to do that kind of work (accounting for all the failed pitches). How do you guys do it in Sensorica? Does your accounting award a commission to people making successful sales? How much, if I may ask?
 

Sales

WinniePoncelet's picture

@Alberto have you figured something out for the sales? I see a similar issue popping up for us and we haven't found an answer yet.

In our case, there will be some recurring and organic inflow of missions and we're counting on that to make it easier. Though we really do need long shots as well.

Maybe a little

Alberto's picture

The traditional solution is commission on sales. We found out quickly that it does not work for a company like Edgeryders, small and new and trying to make way. Reason: we agreed we would try to grow based on overdelivery. We would compensate the risk taken by clients in hiring us by being excellent value for money. This means we would be hurt by taking 10% of or budget out to pay for the commission: we need all the money to provide the service. Essentially, we are foregoing commission to invest in reputation. 

The problem is mitigated by none of us being only a salesperson. Each person in ER gets intrigued by a project, and tries to sell it because she means to then work on it. With us, the project's champion must lead it; almost always the champion is the one closing the deal, or having worked a lot on it. So we can compensate this person by paying her a little more generously once the sale has been made. It's like an informal commission. 

Encourage, support and train more people to do public talks

Nadia's picture

Also, build informal social events where people just meet. In what we do "sales" basically means really understanding what people you come across need and connect it with something you are doing. Then there's the research work to understand how they can put money into hiring you. Once you know this you can make an offer. So maybe it could work to split these tasks across the collective? We're getting there as we move into a space.

Helpful

WinniePoncelet's picture

Thanks, this is helpful. Sorry for the late reply, your posts went under my radar. Interestingly though, the outlines of a similar approach have been forming for us since my post.

Basic backstory: we are professionalising our services as a collective of freelancers. For recurring services we have simple formats (graphic design, workshops, ...) that are easily sold and applicable to many kinds of clients. Each team member has their own specific expertise, so the division there is easily made. Eg. the workshop guy would sell workshops, but meanwhile also be on the lookout for graphic design missions. One mission could involve both writing and graphics. Collaboration is easily coordinated there. The organisation stays agile, without dependencies, with a shared story. These are the easy advantages teaming up as freelancers offers.

Projects, paid or not, are to be initiated and implemented by the champion (team member or volunteer) that proposes it, much like what you describe. Some more coordination is required and this is usually done by the champion. I'm sure the overdeliver idea is applicable to us in this early stage. Not so sure about the extra payment for carrying a project, as it varies a lot from industry to industry how much money is available for covering these costs. The client could have low funds (underfunded education system), there's plenty of competition (projects involving more generic services eg. web and graphic design) etc.

Flagship projects do create openings for higher margin formats, if we can find a way to channel it there. A hard thing to quantify and it would increase dependencies again, projects being the indirect sales strategy for other formats. Many things to be aware of, curious to see what will work best.

Accounting

Rune's picture

 @TiberiusB how is this accounting system working?

interested and following

Hazem's picture

a comment to show interest and follow

been learning a lot since I joined this community :)

Time to dust this off again

Nadia's picture

Ping @Ruxandra do you have time for a chat about this in the next few days? I think it may be time to look into this in the context of care. @Susa and I are running Hacking Utopia, a studio course on product design for social and demographic change at UDK. (it's tied to the OpenCare project). They're currently coming out of the research phase in which they have been guided through a process of identifying and understanding where they could make meaningful design interventions (products and or services). Today they're going to summarise what they have learned and what they want to build (I'll post documentation online here later). Next they will be actually designing the products and I think the process above could be very helpful. Would you be up for joining a skype call where we help them to think through the business modelling/sustainability design for their products?

Yes, definitely

Ruxandra's picture

Hi Nadia,

yes definitely we can have a skype call late morning on Friday if that is ok with you. Just ping me on skype. 

Ruxandra

Hi! I'll be on a train then, but Monday?

Nadia's picture

Works for you?

Monday should be fine as well

Ruxandra's picture

Let's try on Monday then.

Ruxandra

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