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Rethink Afrika X Start X Ebook
Rethink Afrika X Start X Ebook
F O
WHAT IS AN ONLINE
1 BUSINESS?
E L B A T
WHY START AN ONLINE
3 BUSINESS?
TYPES OF ONLINE
6 BUSINESSES
PLANNING YOUR START UP
10 BUSINESS
DESIGN THINKING
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LEAN START UP METHODOLOGY
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LEAN START UP BUSINESS
20 MODEL
STARTING AN
ONLINE
BUSINESS
What is an online
business?
An online business or e-business (electronic business) is any form of commercial
or business transaction that involves sharing information across the global net. E-
commerce constitutes the exchange of products or services between individuals,
groups and businesses and can be seen as an important function in any business
operation. Electronic businesses or e-commerce functions focuses on the use of
ICT (Information and Communications Technology) to allow the external
activities and relationships of the business with individuals, groups and other
businesses, while e-business refers to business with the help of the internet.
In 1994, IBM, with its agency Ogilvy & Mather, began to use its foundation in IT
solutions and expertise to market itself as a leader of conducting business on the
internet through the term “e-business”. Then CEO, Louis V. Gerstner, Jr. Was prepared
to invest $1 billion to market this new brand.
Modern e-commerce typically uses the World Wide Web (WWW) for at least one
part of the transaction’s life cycle, although it may also use other technologies
such as e-mail.
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E-commerce draws on technologies such as mobile commerce, electronic funds
transfer, supply chain management, Internet marketing, online transaction
processing, electronic data interchange (EDI), inventory management systems,
and automated data collection.
The following below is a list of the top 20 online businesses in South Africa:
1. Action Gear
2. &Threads
3. Bidorbuy.co.za
4. Boost Gymwear
5. Cape Coffee Beans
6. Esque
7. Flook Sporting Deals
8. Futurama
9. Gemboree
10. Groupon South Africa
11. HomeChoice
12. It’s About Time
13. IToys
14. Juniva.com
15. Kapas Baby & Toddler
16. Kitchen Chef
17. League of Beers
18. Legwear Safari
19. LekkeSlaap
20. Loot.co.za
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Why start an online
business?
In the context of South Africa, now more than ever, the economy needs to
grow. Economic growth then allows for improved infrastructure, education,
service delivery and most importantly, employment opportunities.
Politicians, academics and economists alike disagree on which policies to
pursue to achieve economic development but they unanimously agree that
SMME’s (Small, Medium and Micro-sized Enterprise) will be the driver of
economic development. Simply put – entrepreneurship is the answer.
You might not explicitly call yourself an entrepreneur yet, but traditional
options are becoming increasingly limited. The 4th industrial revolution is on
our doorstep, which brings with job automation, 5g internet, augmented and
virtual reality, customer service automation, machine learning and artificial
intelligence. We need to make a decision now, adapt or die. Should you
choose do adapt, digital entrepreneurship is a great way to start.
Below are some of the reasons why starting an online business is the best
investment an entrepreneur can make:
Of course, not every online business will be an overnight success with rapid
exponential growth. Many digital entrepreneurs start online businesses
believing that customers are automatically going to find them. There are
millions of online businesses across the world, accessible to anyone with an
internet connection. Opportunity is there for everyone, but you need to play
your part too.
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Scaling a business is not an easy task, whether it’s a physical store or an
online business, but online businesses have advantages over brick-and-
mortar businesses. For instance, a brick-and-mortar retail store has a
specific and defined audience, typically within the radius of the business
location. An online business is not restricted and can market to anyone
across the World Wide Web (WWW).
Scaling a business means setting the stage and infrastructure to enable and support
growth in your business. It means having the ability to grow without being hampered. It
requuires rigorous planning, funding, staff, processess, technology and partners.
Not being tied to a particular location or desk from 9-5 can be seriously
empowering. Most young entrepreneurs do not know how to balance the
freedom and fail miserably, while others use the motivation to work even
harder. DO NOT mistake freedom for free time.
True digital entrepreneurs respect the freedom and understand that the hard
work is well worth the ability to spend more time with their families and
partake in activities that most miss out on because they are part of the 9-5
grind.
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3. Low overhead and high margin
An online business will often allow you to eliminate some of the huge costs
associated with a brick-and-mortar business. Not only can you eliminate
things such as expensive offices or retail space and long term lease
commitments, but you can also eliminate having to tie up your money in
stocking inventory. A drop shipping agreement (discussed later) with a
manufacturer or a manufacturer-to-order arrangement can greatly
reduce your financial risk and will also allow you to maintain more
consistent margins with less upfront costs.
In business or commerce generally, margin, refers to the difference between the seller’s
cost price for acquiring products and the selling price. Margins appear as percentages of net
sales revenues. The term “margin” has slightly different meanings in fincial accounting and
investing.
Overhead Expenses are l the costs on the income statement except for direct labour, direct
materials, and direct expenses.
With a well thought out integrated digital marketing plan, search engine
optimization and paid media, an online business can thrive. You have the
access to the entire world at your fingertips. The luxury of being able to
target specific provinces, regions and countries gives an upper hand to
online-based businesses.
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Types of online
businesses
We should begin with the products and services that are generally
bought online.
The buying process for services depends on the dealer. Some may allow
you to purchase their services directly from their website or platform. An
example of such a platform is Sweepsouth.co.za. People who want to buy
services from SweepSouth must place an order on the website before the
seller delivers their services.
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3. Digital products
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2. Business to Business (B2B)
As its name states, B2B e-commerce pertains to transactions conducted
between two businesses. Any company whose customers are other
businesses operate on a B2B model.
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5. Government to Business (G2B)
G2C transactions take place when a company pays for government
goods, services, or fees online. Examples could be a business paying for
taxes using the Internet (SARS eServices)
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Planning your online
business - Lean start-up
methodology
Before we get into the main business of the session, it is important to
understand your business. You may have an existing business or you may not.
The following section is for both instances. It is a way to take a re-look at
your business, or perhaps extend the opportunities of your business. Our aim
is to help facilitate the planning and implementation of a new idea as
quickly as possible. Learning and building along the way is the point of our
program and we hope you will spend some time on this section and
familiarize yourself with the links we provide.
Design Thinking
Design Thinking is a design methodology that provides a solution-based
approach to solving problems. It’s extremely useful in tackling complex
problems that are ill-defined or unknown, by understanding the human
needs involved, by re-framing the problem in human-centric ways, by
creating many ideas in brainstorming sessions, and by adopting a hands-on
approach in prototyping and testing. Understanding these five stages of
Design Thinking will empower anyone to apply the Design Thinking methods
in order to solve complex problems that occur around us — in our
companies, in our countries, and even on the scale of our planet.
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Design thinking utilizes elements from the designer's toolkit like empathy
and experimentation to arrive at innovative solutions. By using design
thinking, you make decisions based on what future customers really want
instead of relying only on historical data or making risky bets based on
instinct instead of evidence.
Although there are some variable aspects to both design thinking and
digital design thinking principles, we will focus on design thinking as it
provides a better rounded approach to solving human problems with
viable business ideas.
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Design Thinking Process
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The Define stage will help the designers in your team gather great ideas to
establish features, functions, and any other elements that will allow them to
solve the problems or, at the very least, allow users to resolve issues
themselves with minimum difficulty. In the Define stage you will start to
progress to the third stage, Ideate, by asking questions which can help you
look for ideas for solutions by asking: “How might we… encourage teenage
girls to perform an action that benefits them and also involves your company’s
product or service?
With this solid background, you and your team members can start to "think
outside the box" to identify new solutions to the problem statement you’ve
created, and you can start to look for alternative ways of viewing the
problem.
You should pick some other Ideation techniques by the end of the Ideation
phase to help you investigate and test your ideas so you can find the best way
to either solve a problem or provide the elements required to circumvent it.
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Prototype: The design team will now produce a
number of inexpensive, scaled down versions of the
product or specific features found within the
product, so they can investigate the problem
solutions generated in the previous stage.
Prototypes may be shared and tested within the team itself, in other
departments, or on a small group of people outside the design team. This is
an experimental phase, and the aim is to identify the best possible solution
for each of the problems identified during the first three stages.
The solutions are implemented within the prototypes, and, one by one, they
are investigated and either accepted, improved and re-examined, or
rejected on the basis of the users’ experiences. By the end of this stage, the
design team will have a better idea of the constraints inherent to the product
and the problems that are present, and have a clearer view of how real users
would behave, think, and feel when interacting with the end product.
Testing: Empathising:
Developing a Understanding the
prototype/solution human needs involved.
to the problem.
Defining: Re-framing
and defining the
problem in human-
Prototyping: centric ways.
Adopting a hands-
on approach in
prototyping. Ideating: Creating
many ideas in
ideation sessions.
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Lean Start-up Methodology
The "Lean start-up" is a development methodology coined by Eric Ries that is
focused on launching products/services much quicker and more in line with
customer needs. The lean start-up methodology can help your start-up business
shorten the development cycles and dramatically minimize the amount of
capital required to to build and launch a business.
Many start-ups spend a lot of years and large amounts of capital resources on
building businesses without ever questioning whether customers actually want
or need their offering. In other words, the greatest risk for many start-up
businesses is starting and investing in a product or service that no customer
actually needs. This is the main problem that the Lean start-up methodology
aims to solve.
Instead of following rigid set of start-up rules, the methodology introduces key
principles (explained later) that entrepreneurs may use as a guideline to
building products and services with a much broader and customer oriented
business.
Ideas
Pivot
Prototype
MVP
Measure
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Why start your business lean?
The lean start-up methodology can dramatically help your start-up business
mainly because it focuses on reducing the three major factors and risks that
most start-up businesses may face;
1. Product Risk
2. Customer Risk
3. Business Model Risk
By testing your Minimum Viable Product (MVP) to your early adopters, your
business will be able to collect feedback and data of what your customers
really need and want. By testing your MVP on early adopters, you can use the
feedback to decide whether to continue building your product/service, tweak
aspects of it or completely pivot your business.
Simply put, by prototyping for MVP, demo or early version of your business, you
will receive a chance to see and gauge how customers respond to your
product. You may implement the customer feedback in a new version of your
offering and you will then have an opportunity to gauge how customers
respond to your business offering.
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The general idea of the lean start-up method is that start-up businesses may
capitalize on the BUILD-MEASURE-LEARN model because they will have the
opportunity to turn their MVP into a sustainable business by using real and
relevant accountable metrics instead of assumptions and hypothetical.
Validated learning from customer feedback will help your start-up optimize its
business model and ensure that your start-up is headed in the right direction.
Additionally, for your start-up business to be measurable, validated learning
must be based on FACTS.
The lean start-up method will help push your business to build products and
services through validated learning, scientific experimentation and iterative
products launches.
Finally, the lean stat-up method will help you establish a strategy that will
increase the odds of building a successful business model.
Earlier in this section, we mentioned that the Lean start-up method is based on the
BUILD-MEASURE-LEARN model. Entrepreneurs who practice the lean start-up
method are encouraged to constantly question and investigate everything that
revolves around their product/service - from the relevance of their business idea,
design choices, and any additional features. In order to achieve this, entrepreneurs
may follow the BUILD-MEASURE-LEARN model by building a minimum viable
product (MVP).
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An MVP is a version of a product/service that has enough features to be
released, though it is not a fully completed project. Here at ReThink Afrika we
call it a prototype. This is very important because by building a
product/service that has only a minimum set of features, start-ups can put the
product/service in front of an audience and retrieve valuable feedback. By
doing this, you will avoid wasting time and money on building a
product/service that may turn out to be unwanted by customers.
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Start-ups can use the MVP to gain feedback and identify what customers really
want from your business. By doing this exercise, start-ups will have an
opportunity to implement customers' feedback in the development of their
business model. Additionally, releasing an MVP/Prototype may sometimes
indicate that the start-up should not release their product/service, or give
them direction on how they can improve it.
When customers do not react as desired, your start-up must quickly adjust to
limit its losses and return to developing products/services that customers want,
and not what you are forcing on them. Remember, failure is the rule, NOT the
exception.
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A Business Model Canvas is the strategic management and lean start-up
methodology template for developing a new or document existing business
models. It is a visual chart with elements describing a businesses
products/services, value proposition, infrastructure, customers and finances.
Start-ups can also use the Business Model Canvas to understand your own
business or that of a competitor!
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The Business Model Canvas is a shared language for describing, visualizing,
assessing and changing business models. It describes the rationale of how a
start-up creates, delivers and captures value.
There are nine building blocks in the business model canvas and they are
customer value proposition, customer segments, channels, customer
relationships, revenue streams, key resources, key partners, key activities, and
the cost structure.
When completing the Business Model Canvas, you will brainstorms and conduct
research on each of the elements. The data you will collect can be placed in
each relevant section of the canvas.
Let's look into what the 9 building blocks of the Business Model Canvas are
more in detail:
These key activities should solely focus on fulfilling its value proposition,
reaching customer segments and maintaining customer relationships, and
generating revenue. There are three categories of key activities which include
production, problem-solving and platforms.
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Key Resources is where you list down which key resources or the
main inputs you will need to carry out your key activities in order
to create your value proposition.
There are several types of key resources which include the human resources,
financial resources, intellectual resources and physical resources.
In the Cost Structure block, you will identify all the costs
associated with operating your business model. You will need to
focus on evaluating the cost of creating and delivering your
value propositions, creating revenue steams and maintaining
customer relationships.
Evaluating the cost structure will be easier to do once you have defined
your key resources, activities, and partners. Businesses can either be cost-
driven (focuses on minimizing costs) and value-driven (focuses on providing
maximum value to the customer).
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Customer Segments are the groups of people/companies that
you will be trying to target and sell your product/service to.
Segmenting your customers based on similarities such as
geography, gender, age, behaviors, interests, etc. gives your
start-up the opportunity to better serve their needs, specifically
by customising your solution that you are providing.
After a thorough analysis of your customer segments, you can determine who
should you serve and ignore. There are different customer segments a
business model can target and they include mass markets, niche markets,
segmented markets, diversified markets, and multi-sided markets.
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Revenue Streams are the sources from which a business
generates money by selling their product/service to the
customers. In this building block, you will describe how your start-
up will earn revenue from your value proposition.
Once you have completed your Business Model Canvas, you can share with
fellow entrepreneurs to compare notes or to an organisation to pursue. The
Business Model Canvas is a living document, therefore after completing it,
you will need to revisit and ensure that it is always relevant, updated and
accurate.
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