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Building the right thing      Marko Taipale @ TGA2012
Marko Taipale•   Principal consultant with agile/lean mindset, CTO, Advisor•   15+ years of software development•   Capabi...
ContextNew Product Development               Project delivery
the RIGHT thing?
The right thing?•   Concept (Problem / Solution fit)    •   a good one? It solves a problem•   Business Model (Product / Ma...
The right thing?                                                     Connected!•   Concept (Problem / Solution fit)    •   ...
The right thing?                                                     Connected!•   Concept (Problem / Solution fit)    •   ...
Product / Market fitProblem / Solution fit              Balance
How to ensure you are doing the right thing?
<insert your agile“from idea to backlog”      tool here>
But that is just stupid!        (why?)
Cause it expects that you            know the requirementsAnd that there is money to be made
In new product development    the requirements are       unknown... and the business is unknown
In order to do the right thing        you need to...•   Model your business•   Understand your market•   State your guesse...
Lean Startup     Customer DevelopmentMultiple methods/tools emerge       Business Model Generation                    Prod...
Business Model Generation
“A business model describesthe rationale of how anorganization creates, delivers,and captures value”
9 blocks of business       model
Customer Segmentswhich customers and users you are serving?which jobs do they really want to get done?
Value Propositionswhat are you offering to them? what is that getting done                for them? do they care?
Channelshow does each customer segment want to be reached?         through which interaction points?
Customer             RelationshipsHow do you get customers, keep them and grow them?
Revenue Streamswhat are customers really willing to pay for? how? are you      creating transactional or recurring revenues?
Key Resourceswhich resources underpin your BM? which assets are                    essential?
Key Activitieswhich activities you need to perform well in your BM?                    what is crucial?
Key Partnerswhich partners and suppliers leverage your model?          who do you need to rely on?
Cost Structurewhat is the resulting cost structure?which key elements drive your costs?
the same technology,product, or service can   have numerous business models
alternatives: ask    yourself..
transactional vs.                              product vs. service           scale vs. scope    recurring revenues     nic...
Choose!
Business Model canlook great on paper...
but it is just series of        guesses!
get out of thebuilding and test  each hypothesis with real, breathing customer!
Three layers of BMCs              Sell books online, no inventory,Model         cheaper prices, great selection
Three layers of BMCs                Key partners: publishers are fine                with small but frequent ordersHypothes...
Three layers of BMCs                Meet publisher X and check                that they are fine with small  Tests         ...
Customer Developmentcustomer        customer     customer    companydiscovery       validation    creation    building    ...
This Business Model testing is called             Customer            Developmentcustomer        customer     customer    ...
2 phases        Search                      Executioncustomer        customer     customer      companydiscovery       val...
1st stepcustomer        customer     customer    companydiscovery       validation    creation    building        pivot
Customer Discovery: Problem / Solution fit1. Draw Business Model Canvas2. State hypotheses3. Test the problem (or need)4. T...
2nd stepcustomer        customer     customer    companydiscovery       validation    creation    building        pivot
Customer validation:  Product / Market fit1. Get ready to sell2. Get out of the building to test sell3. Develop positioning...
Market opportunity•   Business model•   Identify the customer and market need•   Size the market•   Identify and size comp...
Total Available Market   - How many would need this product?   - How large is the market if they all bought?   - Industry ...
Early adopters are not your market
Market analysis answers a simple question:Is this Business Model worth implementing?
Test and adapt your                  model until it                        works!customer        customer     customer    ...
This adaptation is called                      a pivotcustomer        customer     customer    companydiscovery       vali...
Don’t scale executionuntil you’ve verified the business model
Execution is not search!
Build the measures in          (+ quality in)Techies: Continuous Delivery with ATDD is not enough!
Hard part:from measures to learning
There are no factsinside your building
You still need a vision   and a purpose
Why big companies are in such a trouble?
2 phases        Search                      Executioncustomer        customer     customer      companydiscovery       val...
So..We need to interface the business, designand engineering in order to create successfulbusinessesBusiness is the driver...
What happens tomorrow?See where you are (discovery, validation,creation or building) and act accordingly
All we do...is match the demand.. of understanding and solving a problem.. of a business.. of learning.. of users
DisclaimerExercising this does not guarantee success... but it ensures you fail fast and often          More chances to su...
ResourcesSingle PO is missing the point: http://huitale.blogspot.fi/2010/12/single-product-owner-model-is-broken.html
From a concept to viable business — How do we know if we are building the right thing?
From a concept to viable business — How do we know if we are building the right thing?
From a concept to viable business — How do we know if we are building the right thing?
From a concept to viable business — How do we know if we are building the right thing?
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.

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

  1. 1. Building the right thing Marko Taipale @ TGA2012
  2. 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. 3. ContextNew Product Development Project delivery
  4. 4. the RIGHT thing?
  5. 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. 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. 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. 8. Product / Market fitProblem / Solution fit Balance
  9. 9. How to ensure you are doing the right thing?
  10. 10. <insert your agile“from idea to backlog” tool here>
  11. 11. But that is just stupid! (why?)
  12. 12. Cause it expects that you know the requirementsAnd that there is money to be made
  13. 13. In new product development the requirements are unknown... and the business is unknown
  14. 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. 15. Lean Startup Customer DevelopmentMultiple methods/tools emerge Business Model Generation Productization
  16. 16. Business Model Generation
  17. 17. “A business model describesthe rationale of how anorganization creates, delivers,and captures value”
  18. 18. 9 blocks of business model
  19. 19. Customer Segmentswhich customers and users you are serving?which jobs do they really want to get done?
  20. 20. Value Propositionswhat are you offering to them? what is that getting done for them? do they care?
  21. 21. Channelshow does each customer segment want to be reached? through which interaction points?
  22. 22. Customer RelationshipsHow do you get customers, keep them and grow them?
  23. 23. Revenue Streamswhat are customers really willing to pay for? how? are you creating transactional or recurring revenues?
  24. 24. Key Resourceswhich resources underpin your BM? which assets are essential?
  25. 25. Key Activitieswhich activities you need to perform well in your BM? what is crucial?
  26. 26. Key Partnerswhich partners and suppliers leverage your model? who do you need to rely on?
  27. 27. Cost Structurewhat is the resulting cost structure?which key elements drive your costs?
  28. 28. the same technology,product, or service can have numerous business models
  29. 29. alternatives: ask yourself..
  30. 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. 31. Choose!
  32. 32. Business Model canlook great on paper...
  33. 33. but it is just series of guesses!
  34. 34. get out of thebuilding and test each hypothesis with real, breathing customer!
  35. 35. Three layers of BMCs Sell books online, no inventory,Model cheaper prices, great selection
  36. 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. 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. 38. Customer Developmentcustomer customer customer companydiscovery validation creation building pivot
  39. 39. This Business Model testing is called Customer Developmentcustomer customer customer companydiscovery validation creation building pivot
  40. 40. 2 phases Search Executioncustomer customer customer companydiscovery validation creation building pivot
  41. 41. 1st stepcustomer customer customer companydiscovery validation creation building pivot
  42. 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. 43. 2nd stepcustomer customer customer companydiscovery validation creation building pivot
  44. 44. Customer validation: Product / Market fit1. Get ready to sell2. Get out of the building to test sell3. Develop positioning4. Verify or Repeat
  45. 45. Market opportunity• Business model• Identify the customer and market need• Size the market• Identify and size competitors• Check growth potential/rate
  46. 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. 47. Early adopters are not your market
  48. 48. Market analysis answers a simple question:Is this Business Model worth implementing?
  49. 49. Test and adapt your model until it works!customer customer customer companydiscovery validation creation building pivot
  50. 50. This adaptation is called a pivotcustomer customer customer companydiscovery validation creation building pivot (repeat * until proven)
  51. 51. Don’t scale executionuntil you’ve verified the business model
  52. 52. Execution is not search!
  53. 53. Build the measures in (+ quality in)Techies: Continuous Delivery with ATDD is not enough!
  54. 54. Hard part:from measures to learning
  55. 55. There are no factsinside your building
  56. 56. You still need a vision and a purpose
  57. 57. Why big companies are in such a trouble?
  58. 58. 2 phases Search Executioncustomer customer customer companydiscovery validation creation building pivot From execution to search
  59. 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. 60. What happens tomorrow?See where you are (discovery, validation,creation or building) and act accordingly
  61. 61. All we do...is match the demand.. of understanding and solving a problem.. of a business.. of learning.. of users
  62. 62. DisclaimerExercising this does not guarantee success... but it ensures you fail fast and often More chances to succeed!
  63. 63. ResourcesSingle PO is missing the point: http://huitale.blogspot.fi/2010/12/single-product-owner-model-is-broken.html
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