Planningness 2011

05.19.2011 HOW TO DESIGN A BUSINESS Colin Raney IDEO, Business Design colinraney.com @colincolin

My Goals05.19.2011 _ Explain Business Design. _ Illustrate it. _ Share a few helpful tools. _ Have you give it a try.

05.19.2011 BUSINESS DESIGN

Over the years, design05.19.2011 has expanded outward. Graphic Industrial Interaction System Buchanan’s Orders of Design

It began as a means to help05.19.2011 people communicate. Signs Symbols Graphic Print Buchanan’s Orders of Design

Then, it expanded to help us05.19.2011 improve physical things. Products Graphic Industrial Buchanan’s Orders of Design

Then,it expanded it’s scope to05.19.2011 tackle how we use less tangible things. Services Experiences Graphic Industrial Interaction Interfaces Information Buchanan’s Orders of Design

Lately, design has been used to tackle05.19.2011 more complex and interrelated problems. Businesses Organizations Graphic Industrial Interaction System Education Government Buchanan’s Orders of Design

Our goal today:05.19.2011 Begin to design a business.* Graphic Industrial Interaction System * This can take month - we have a little less than two hours. ** Here goes nothing...

05.19.2011 When you design the business around the experience, (instead of the experience around the business) you create a more powerful and relatable offer.

Today, the most compelling companies05.19.2011 have business models that that have been designed to amplify the offering.

05.19.2011 When we “design a business”, we create a platform for an experience. By putting the experience first, we’re creating a user-centered business, (because the business is the vehicle to deliver the experience).

05.19.2011 DESIGNING BUSINESSES

05.19.2011 Before we begin... It’s probably worth noting that there is no right way to design a business, (but there’s lots of wrong ways.)

05.19.2011 Our path today: 1. Understand the business 2. Understand the user needs 3. Design the experience 4. Design the business

05.11.2011 UNDERSTAND THE BUSINESS

Businesses are value creating05.19.2011 systems that serve their customers. Growth Strategy Partners Costs Channel Market Value Proposition Segments Distribution Promotion Capabilities Pricing Model Competitive Strategy *Model by Tom Hulme (@Thulme)

Start by understanding which users the05.19.2011 business serves, and how they serve them. Value Market Proposition Segments *Model by Tom Hulme (@Thulme)

Think about the ends and means05.19.2011 of serving users, (and how that effects the offering.) Channel Market Value Proposition Segments Distribution Promotion Pricing Model *Model by Tom Hulme (@Thulme)

Consider how the business05.19.2011 builds their offer. Partners Costs Channel Market Value Proposition Segments Distribution Promotion Capabilities Pricing Model *Model by Tom Hulme (@Thulme)

Finally, consider how the business05.19.2011 intends to grow and compete. Growth Strategy Partners Costs Channel Market Value Proposition Segments Distribution Promotion Capabilities Pricing Model Competitive Strategy *Model by Tom Hulme (@Thulme)

05.19.2011 Let’s try an example. How can we help Netflix grow?

Netflix is an entertainment05.19.2011 subscription service. Value Market Proposition Segments Streaming & Tech-enabled mail rental forward-thinking of movies consumers. and TV Shows

They use online channels to market and05.19.2011 deliver content for a monthly subscription. Channel Market Value Proposition Segments Distribution Mail & Streaming Promotion WOM, Internet, Streaming & Trial programs Tech-enabled mail rental forward-thinking of movies consumers. and TV Shows Pricing Model Tiered Monthly Fees

The source the content from publishers05.19.2011 and managed the logistics of delivery. Partners Costs Channel Market Value Proposition Segments Distribution Content Mail & Streaming Publishers Promotion WOM, Internet, Content, Streaming & Trial programs Tech-enabled Marketing, mail rental forward-thinking Bandwidth, Capabilities of movies consumers. Employees Pricing Model and TV Shows Logistics, Streaming, Tiered Recc. Monthly Engine Fees

They grow by adding subscriptions, and05.19.2011 competition is fierce. Growth Strategy Growth through new subscriptions Partners Costs Channel Market Value Proposition Segments Distribution Content Mail & Streaming Publishers Promotion WOM, Internet, Content, Streaming & Trial programs Tech-enabled Marketing, mail rental forward-thinking Bandwidth, Capabilities of movies consumers. Employees Pricing Model and TV Shows Logistics, Streaming, Tiered Recc. Monthly Engine Fees Competitive Strategy Extensive catalog Subscription lock-in

Now, identify tensions that create05.19.2011 opportunities for design?* Growth Strategy Growth through new subscriptions Partners Costs Channel Market Value Proposition Segments Distribution Mail & Streaming Content Publishers Promotion WOM, Internet, Content, Trial programs Streaming & Tech-enabled Marketing, mail rental forward-thinking Bandwidth, Capabilities of movies consumers. Employees Pricing Model and TV Shows Logistics, Streaming, Tiered Recc. Monthly Engine Fees Competitive Strategy Extensive catalog *Frameworks should catalyze design. Subscription lock-in (If it’s not sparking new ideas, it’s not the right framework.)

Look behind the tensions,05.19.2011 think about their causes. Growth Strategy Limited by one subscription Growth through per household. new subscriptions Trying to navigate simultaneous streaming & mail distribution. Partners Costs Channel Market Value Proposition Segments Distribution Streaming has created a Mail & Streaming contentious Content relationship Publishers Promotion WOM, Internet, with partners Content, Streaming & Trial programs Tech-enabled Marketing, mail rental forward-thinking Bandwidth, Capabilities of movies consumers. Recc engine Employees Pricing Model and TV Shows requires lots Logistics, of “training”. Streaming, Tiered Not all Recc. Monthly homes set up Engine Fees to stream. Limited to monthly Competitive Strategy rate. Multiple services No ability to meter attempting to occupy Extensive catalog for incremental use. the same space Subscription lock-in (Amazon, Apple, WalMart)

05.11.2011 DESIGN THE EXPERIENCE.

By understanding user needs and current05.19.2011 patterns, we can design new experiences.* *Massive oversimplification.

Meet Joe.05.19.2011 Joe’s a 39 year old male living in New York City. He loves watching movies in television shows; that’s usually how he passes his time on weekends and during his long train commutes. He had a teenage aspiration to be a director, so he’s always searching for new content and new points of view. He loves foreign films. Content platforms: iPad, iPhone, XBox 360, DVD player, laptop (streaming). How might Netflix find new ways to connect Joe with the content he wants?

Let’s generate concepts05.19.2011 that might work for Joe.

Look for concepts that push the05.19.2011 experience and the business.

Think about the benefits05.19.2011 behind the ideas. Benefits Benefits - Offline Content - Pay-per-view - Competitive w/iTunes - Exposes new users - More relevant - Platform for shorts out of the home

Consider smashing a few things together.05.19.2011 + = Mobile Benefits Benefits Benefits - Offline Content - Pay-per-view - Micro-payments for - Competitive w/iTunes - Exposes new users mobile content - More relevant - Platform for shorts - Good for short content out of the home - Broadens Netflix viewing occasions

05.11.2011 DESIGN THE BUSINESS.

So, how could we build a business that will05.19.2011 deliver Netflix Mobile? Ask: 1. Why should we do it? 2. What do we need to deliver? 3. How will this change our org? 4. What are the risks? 5. How can we prototype/pilot?

Where will Netflix need to invest?05.19.2011 Growth Strategy Growth through new subscriptions Partners Costs Channel Market Value Proposition Segments Distribution Content Mail & Streaming Publishers Promotion WOM, Internet, Content, Tech-enabled Streaming & Trial programs Marketing, forward-thinking mail rental Bandwidth, consumers. Capabilities of movies Employees Pricing Model and TV Shows Logistics, (Mobile & Streaming, Tiered Stationary) Recc. Monthly Engine Fees Competitive Strategy Extensive catalog Subscription lock-in

Define the big problems05.19.2011 to work through first. Leaps of Faith: 1. Do customers like the service? 2. Will customers pay (how much)? 3. Which content is best supported? 4. What is technically feasible? 5. How will we message?

Define the big problems05.19.2011 to work through first. Leaps of Faith: 1. Do customers like the service? 2. Will customers pay (how much)? 3. Which content is best supported? 4. What is technically feasible? 5. How will we message? Working through these problems helps you build evidence for the organization.

How could we measure success?05.19.2011 Measure: 1. Number of unique downloads 2. Avg repeat purchases 3. Avg time engaged 4. Price sensitivity (More evidence to build momentum.)

What’s the best way to prototype?05.19.2011

What’s the best way to prototype?05.19.2011 Maybe build an app loaded with content that simulates purchase and monitors user activity. Send the iPods to users and see what they think.

When you design the business,05.19.2011 you have to think about... 1. How you will deliver the offer. 2. How you will evolve the org. 3. How you can prototype and learn up to ( and beyond final launch).

05.11.2011 QUESTIONS?

05.11.2011 OK, YOUR TURN.

Wiley & Sons Publishing05.19.2011 200 years in the publishing industry $6.1B in revenue per year Specialization in education, health and travel

Publishing is changing.05.19.2011 Rapid advances in digital media have caused many competitors to collapse and consolidate. No one’s sure of the future, but Wiley understands they need options for new revenues.

Publishing is changing.05.19.2011 Wiley’s For Dummies franchise is a strong brand that could be positioned within new experiences. With over 150 million books in print covering 1,300 topics, Dummies drives 40% of revenue. The series delivers easily digestible content, and makes learning new topics easy and fun.

05.11.2011 WHAT SHOULD WILEY DO?

Growth isn’t easy.05.19.2011 Any new experience platforms will cannibalize Wiley’s current book sales. Wiley could grow revenue by launching more compelling lower-cost experiences. They could also offer additional products and services adjacent to the current subject.

05.11.2011 HOW ABOUT STARTING WITH PEOPLE?

SHARON05.19.2011 Sharon is a 45 year-old mother of two. Her kids keep her very busy, and she struggles to stay on top of all her responsibilities. It’s tax season and last year her family bought a new home. She’s trying to make sense of her tax options and her accountant isn’t that helpful. She’s looking for someone who can explain things in her terms on her time.

NICK05.19.2011 Nick is a hands-on type of guy - he loves to learn but he needs to experience it. He’s looking to understand the fundamentals, then he’s itching to try something. Six months ago, he tried rock climbing at his local REI and it helped him understand the sport better. Now, he climbs at least one a week at a rock climbing gym.

JANEY05.19.2011 Janey is a 28 year old self professed gadget girl from San Francisco, CA. She’s naturally curious and makes a point to know a little about everything. Because she’s comfortable finding information online, she’s also in the habit of just in time research. If she’s headed to a wine bar with the girls, she’ll brush up on her varietals just before heading out on the town.

05.11.2011 1. UNDERSTAND THE BUSINESS 2. UNDERSTAND THE NEEDS 3. DESIGN THE EXPERIENCE 4. DESIGN THE BUSINESS

05.19.2011 DISCUSS

Debrief05.19.2011 What was surprising about the exercise? How could you use these learnings? What was hard? Easy? What was missing?

05.11.2011 GO FORTH AND CREATE VALUE...

05.19.2011 Thank You. Colin Raney IDEO, Business Design colinraney.com @colincolin

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Planningness 2011

by Colin Raney

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