From a concept to viable business — How do we know if we are building the right thing?
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From a concept to viable business — How do we know if we are building the right thing?

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In this session Marko will explain the essential building blocks of any kind of business and how one should go about validating the business.

In this session Marko will explain the essential building blocks of any kind of business and how one should go about validating the business.

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From a concept to viable business — How do we know if we are building the right thing? Presentation Transcript

  • 1. Building the right thing Marko Taipale @ TGA2012
  • 2. Marko Taipale• Principal consultant with agile/lean mindset, CTO, Advisor• 15+ years of software development• Capabilities to deliver products from concept to cash• Tens of public speaking appearancesInternational online gaming company (TO 100+ Meur) improved time-to-market from 24months to 3 monthsFinnish energy company purchased process control system and got the delivery 4 times fasterthan expected.The system secured the business for next 2 years.Finnish software product company saved 1,3 Meur / year in management and administration.Software company validated new business model for new product in 2 months.
  • 3. ContextNew Product Development Project delivery
  • 4. the RIGHT thing?
  • 5. The right thing?• Concept (Problem / Solution fit) • a good one? It solves a problem• Business Model (Product / Market fit) • a good one? It scales ie. it is a business• Prototype (Hypothesis / Experiment fit) • a good one? It leads to learning• Service (User needs / Service fit) • a good one? You are not aware you are using it
  • 6. The right thing? Connected!• Concept (Problem / Solution fit) • a good one? It solves a problem• Business Model (Product / Market fit) • a good one? It scales ie. it is a business• Prototype (Hypothesis / Experiment fit) • a good one? It leads to learning• Service (User needs / Service fit) • a good one? You are not aware you are using it
  • 7. The right thing? Connected!• Concept (Problem / Solution fit) • a good one? It solves a problem• Business Model (Product / Market fit) • a good one? It scales ie. it is a business• Prototype (Hypothesis / Experiment fit) • a good one? It leads to learning• Service (User needs / Service fit) • a good one? You are not aware you are using it
  • 8. Product / Market fitProblem / Solution fit Balance
  • 9. How to ensure you are doing the right thing?
  • 10. <insert your agile“from idea to backlog” tool here>
  • 11. But that is just stupid! (why?)
  • 12. Cause it expects that you know the requirementsAnd that there is money to be made
  • 13. In new product development the requirements are unknown... and the business is unknown
  • 14. In order to do the right thing you need to...• Model your business• Understand your market• State your guesses, create tests, validate • by talking to your customer • by measuring (and build the measures in)
  • 15. Lean Startup Customer DevelopmentMultiple methods/tools emerge Business Model Generation Productization
  • 16. Business Model Generation
  • 17. “A business model describesthe rationale of how anorganization creates, delivers,and captures value”
  • 18. 9 blocks of business model
  • 19. Customer Segmentswhich customers and users you are serving?which jobs do they really want to get done?
  • 20. Value Propositionswhat are you offering to them? what is that getting done for them? do they care?
  • 21. Channelshow does each customer segment want to be reached? through which interaction points?
  • 22. Customer RelationshipsHow do you get customers, keep them and grow them?
  • 23. Revenue Streamswhat are customers really willing to pay for? how? are you creating transactional or recurring revenues?
  • 24. Key Resourceswhich resources underpin your BM? which assets are essential?
  • 25. Key Activitieswhich activities you need to perform well in your BM? what is crucial?
  • 26. Key Partnerswhich partners and suppliers leverage your model? who do you need to rely on?
  • 27. Cost Structurewhat is the resulting cost structure?which key elements drive your costs?
  • 28. the same technology,product, or service can have numerous business models
  • 29. alternatives: ask yourself..
  • 30. transactional vs. product vs. service scale vs. scope recurring revenues niche market vs. direct sales vs. blue ocean vs. mass market inderect sales red ocean capital expenditure vs. open vs. closed personal vs. automated partnership Difficult questionsone customer segment vs. tailor-made vs. physical vs. virtual another mass production paid vs. free copyright vs. copyleft fixed vs. variable cost distributed vs. advertising vs. in-sourcing vs. out-sourcing centralized sales
  • 31. Choose!
  • 32. Business Model canlook great on paper...
  • 33. but it is just series of guesses!
  • 34. get out of thebuilding and test each hypothesis with real, breathing customer!
  • 35. Three layers of BMCs Sell books online, no inventory,Model cheaper prices, great selection
  • 36. Three layers of BMCs Key partners: publishers are fine with small but frequent ordersHypotheses and there is a contracting model that supports this Sell books online, no inventory, Model cheaper prices, great selection
  • 37. Three layers of BMCs Meet publisher X and check that they are fine with small Tests frequent orders Key partners: publishers are fine with small but frequent ordersHypotheses and there is a contracting model that supports this Sell books online, no inventory, Model cheaper prices, great selection
  • 38. Customer Developmentcustomer customer customer companydiscovery validation creation building pivot
  • 39. This Business Model testing is called Customer Developmentcustomer customer customer companydiscovery validation creation building pivot
  • 40. 2 phases Search Executioncustomer customer customer companydiscovery validation creation building pivot
  • 41. 1st stepcustomer customer customer companydiscovery validation creation building pivot
  • 42. Customer Discovery: Problem / Solution fit1. Draw Business Model Canvas2. State hypotheses3. Test the problem (or need)4. Test the solution (verify that you have it)5. Verify or Pivot
  • 43. 2nd stepcustomer customer customer companydiscovery validation creation building pivot
  • 44. Customer validation: Product / Market fit1. Get ready to sell2. Get out of the building to test sell3. Develop positioning4. Verify or Repeat
  • 45. Market opportunity• Business model• Identify the customer and market need• Size the market• Identify and size competitors• Check growth potential/rate
  • 46. Total Available Market - How many would need this product? - How large is the market if they all bought? - Industry analysis in your domain.. to find out - is it growing how fast?Served Available Market - how big is our slice? - availability, pricing (how many I can serve) - how big the market would be if they all bought - talk to customers to find outTarget Market - Who I am going to sell 1st, 2nd and 3rd year - How many customers is that? - What if they all bought? - How to find out: talk to potential customers
  • 47. Early adopters are not your market
  • 48. Market analysis answers a simple question:Is this Business Model worth implementing?
  • 49. Test and adapt your model until it works!customer customer customer companydiscovery validation creation building pivot
  • 50. This adaptation is called a pivotcustomer customer customer companydiscovery validation creation building pivot (repeat * until proven)
  • 51. Don’t scale executionuntil you’ve verified the business model
  • 52. Execution is not search!
  • 53. Build the measures in (+ quality in)Techies: Continuous Delivery with ATDD is not enough!
  • 54. Hard part:from measures to learning
  • 55. There are no factsinside your building
  • 56. You still need a vision and a purpose
  • 57. Why big companies are in such a trouble?
  • 58. 2 phases Search Executioncustomer customer customer companydiscovery validation creation building pivot From execution to search
  • 59. So..We need to interface the business, designand engineering in order to create successfulbusinessesBusiness is the driver: if you cannot make abusiness case for it, it has no (business)value.
  • 60. What happens tomorrow?See where you are (discovery, validation,creation or building) and act accordingly
  • 61. All we do...is match the demand.. of understanding and solving a problem.. of a business.. of learning.. of users
  • 62. DisclaimerExercising this does not guarantee success... but it ensures you fail fast and often More chances to succeed!
  • 63. ResourcesSingle PO is missing the point: http://huitale.blogspot.fi/2010/12/single-product-owner-model-is-broken.html