Bringing Agility to Business DevelopmentSomik Raha, AssociateSmartOrg, Incsmartorg.com© 2000-2012 SmartOrg. | Confidential...
Legal StuffThis deck is licensed under the Creative Commons – Attribution – NoDerivatives 3.0 License.Please feel free to ...
Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.3EvaluateoptionvalueIntroduction• Business Development• The Agi...
Definition of Business DevelopmentBusiness Development is the turning of an idea into amarketable business asset© 2000-201...
Agile Software Development greatly increasesquality and productivity© 2000-2012 SmartOrg. | Confidential and Proprietary.5...
Current Business Development vs. Agile BusinessDevelopment© 2000-2012 SmartOrg. | Confidential and Proprietary.6Processes ...
Poll: What role do you play in your organization?1. Business Development2. Marketing/Sales3. Product Management4. Product ...
© 2000-2012 SmartOrg. | Confidential and Proprietary.8Collaborative DevelopmentWorking business modelsCustomer collaborati...
© 2000-2012 SmartOrg. | Confidential and Proprietary.9Collaborative DevelopmentWorking business modelsCustomer collaborati...
Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.10EvaluateoptionvalueBusinessDevelopment:Turning idea intomarke...
Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.11EvaluateoptionvalueIntroduction
Business development is about managingincreasing amounts of investment© 2000-2012 SmartOrg. | Confidential and Proprietary...
Agile business development is aboutlearning/failing/succeeding quickly© 2000-2012 SmartOrg. | Confidential and Proprietary...
We will communicate Agile BusinessDevelopment with a catalog of patterns“Each pattern describes a problem which occurs ove...
Evidential Work© 2000-2012 SmartOrg. | Confidential and Proprietary.15
Pattern: Evidential WorkWhen investing serious money behind an idea, it is easy to bedistracted away from the evidence nee...
The Mortgage Question© 2000-2012 SmartOrg. | Confidential and Proprietary.17What do you need to see before mortgagingyour ...
Simulation: βCorpMakes statistical dataanalysis products© 2000-2012 SmartOrg. | Confidential and Proprietary.18NewProductA...
Simulation: Evidential Work© 2000-2012 SmartOrg. | Confidential and Proprietary.19Phase 1: DevelopValue Proposition,Get Ap...
Learning Plans© 2000-2012 SmartOrg. | Confidential and Proprietary.20
Pattern: Learning PlansWhen communicating development plans, it is easy to lose sight of thelearning needed to justify fur...
Simulation: βMark Learning Plan© 2000-2012 SmartOrg. | Confidential and Proprietary.22Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10βMarkP...
Evidence Assessment© 2000-2012 SmartOrg. | Confidential and Proprietary.23
Pattern: Evidence AssessmentDifferent people understand different things when talking aboutuncertainty in a qualitative fa...
Simulation: Comparing projects by their phaseallows us to calibrate© 2000-2012 SmartOrg. | Confidential and Proprietary.25...
Pattern: Reasons Behind NumbersPeople can get into a mindless number game and lose sight of thereal purpose of uncertainty...
Pattern: Blind PollsPeople can follow power and feel shy to share what they truly know.Therefore, disallow calling out num...
Simulation: Evidence Assessment of Phase 2:Prove Value Proposition with Customers© 2000-2012 SmartOrg. | Confidential and ...
Simulation: Evidence Assessment of Phase 2:Prove Value Proposition with Customers© 2000-2012 SmartOrg. | Confidential and ...
Simulation: Evidence Assessment of Phase 2:Prove Value Proposition with Customers• Technical Performance• Human Control Gr...
Simulation: Evidence Assessment SummaryHuman Control Group confirms that βMark picks 90% of allactual chatter© 2000-2012 S...
Simulation: Probability of Success of Phase 2© 2000-2012 SmartOrg. | Confidential and Proprietary.32βMark Evidence Assessm...
Simulation: Probability of Success of Phase 2© 2000-2012 SmartOrg. | Confidential and Proprietary.33βMark Evidence Assessm...
Debrief: Reflections/Questions?© 2000-2012 SmartOrg. | Confidential and Proprietary.34EvaluateoptionvalueIntroduction
Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.35EvaluateoptionvalueIntroduction
After development has succeeded, we areready to double-down© 2000-2012 SmartOrg. | Confidential and Proprietary.36TimeCash...
Agile business development incorporatesmultiple scenario-thinking before doubling down© 2000-2012 SmartOrg. | Confidential...
© 2000-2012 SmartOrg. | Confidential and Proprietary.38EvidentiallyAssessableFactors
Pattern: “Evidentially Assessable Factors”Economic factors that are hard to support with evidence can beeasily manipulated...
Simulation: Decompose economics to identifyassessments and calculations© 2000-2012 SmartOrg. | Confidential and Proprietar...
Pattern: “Extreme Credible Ranges”Groups have a tendency toward groupthink and compromise, whichprevents discovery of impo...
Simulation:Market Share for βMark© 2000-2012 SmartOrg. | Confidential and Proprietary.42HighLowReasons for High• Not much ...
Most Leveraged Uncertainties© 2000-2012 SmartOrg. | Confidential and Proprietary.43
Pattern: “Most Leveraged Uncertainties”© 2000-2012 SmartOrg. | Confidential and Proprietary.44It is easy for us to fixate ...
Simulation: The top bars in the Tornado identifythe uncertainties with the highest leverage© 2000-2012 SmartOrg. | Confide...
Debrief: Reflections/Questions?© 2000-2012 SmartOrg. | Confidential and Proprietary.46EvaluateoptionvalueIntroduction
Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.47EvaluateoptionvalueIntroduction
Pattern: “Simple Options Valuation”Placing dollar values on development opportunities is a task thatcan be obfuscated by c...
Simulation: Simple Option Valuation© 2000-2012 SmartOrg. | Confidential and Proprietary.49$0.75M$82MThe equivalentvalue ju...
Pattern: “10-50-90 Bars”Focusing on single number valuations of projects hides theunderlying uncertainty in the upside and...
Simulation: Compare Uncertainty for βCorp© 2000-2012 SmartOrg. | Confidential and Proprietary.51Zoom can losea lot of mone...
Simulation: There is a big gap in marketunderstanding for Zoom© 2000-2012 SmartOrg. | Confidential and Proprietary.52The t...
Pattern: “Uncertainty-Value Screen”People can get emotionally attached to pet projects and lose sightof the big picture.Th...
Simulation: Uncertainty–Value Screen for βCorp© 2000-2012 SmartOrg. | Confidential and Proprietary.54What can we doto move...
Pattern: “Evidence-Driven Funding”Investments in large opportunities with low chance of success arenecessary and yet, peri...
Pattern: “Productivity Ordering”Organizations use budgets as a given constraint when makingfunding decisions, without clea...
Simulation: CFO Chart© 2000-2012 SmartOrg. | Confidential and Proprietary.57OysterPearlOysterZoom got cut down tosize beca...
DebriefReflections? Questions?© 2000-2012 SmartOrg. | Confidential and Proprietary.58
Analytic Practices of Agile BusinessDevelopment are the platform for collaboration© 2000-2012 SmartOrg. | Confidential and...
© 2000-2012 SmartOrg. | Confidential and Proprietary.60Collaborative DevelopmentWorking business modelsCustomer collaborat...
Continuing the ConversationLearn More• Include Business Design in Innovation• Tornado Diagram: Resolving Conflict and Conf...
Appendix© 2000-2012 SmartOrg. | Confidential and Proprietary.62
Pattern: “Purpose Values”Dry intellectual logic does not motivate people to reach excellence.Therefore, find the values th...
Simulation: Show Purpose Values of βCorpAnswer “What transformation in the world do you wantto bring about through the wor...
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Agile business development

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Patterns that support agile business development. These patterns can also be called Evaluation Patterns, for they provide the building blocks to take an evaluation-driven approach to funding R&D.

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  • Instructions: Poll title “State of business development in your organization”We do not have a formal business development processThe term business development is often confused with salesWe have a formal process but are not agileWe have a formal process and are agile
  • Instructions: Please prepare this poll as follows with the title “What role do you play in your organization?”: Business Development Marketing/Sales Product Management Product Development Project Management EngineeringThis should be multiple-choice – more than one can be picked.
  • Instructions:Show chat window; title of chat window “What evidence do you need to see before mortgaging your house to fund BetaMark?”When we move to the next slide, the chat window should move on the side, visible only to speaker and moderators.
  • Instructions:I will refer to the chat window to make points connecting with this slide. After this slide, this chat window is no longer needed.
  • Nothing to be done here. I will just show this slide, and ask people for questions in Q&A
  • Instructions:When animation goes to “List reasons for success,” Chat Window opens up with the title “List reasons for success”. When animation goes to “List reasons for failure”, new Chat Window opens up with the title “List reasons for failure”. The earlier chat window remains open, both are side-by-side, and editable.When we move to the next slide, these chat windows move to the side so only moderators and speaker can see them.
  • Instructions:1. Somik will read out reasons for success that he likes and wants added underneath “Lab results promising”. The color should be green and font should be “Arial” and size 162. Somik will read out reasons for failure that he likes and wants added underneath “We’ve never done this before”. The color should be red and font should be “Arial” and size 163. When the animation moves to the green box “Given these reasons …,” Somik will cue and ask people to answer a poll. The following poll should open up:Poll:Given the reasons for success and failure, where does your probability of success fall?80-100%60-80%40-60%20-40%0-20%4. When Somik concludes the poll, two chat windows should open up, with the titles “80-100%” and “0-20%”. Somik will ask each camp to put their reasons in the respective windows and respond to each other’s points.5. Somik will make some final comments, “This is how we facilitate a discussion.” Chat windows will disappear after we move to the next slide.
  • Nothing to be done here.
  • Nothing to be done here.
  • Instructions: Chat window opens up with the title “Please enter reasons for the market share percentage being high”. I will start with that prompt.Enter reasons that I identify below “not much competition yet.” The color should be green and font should be “Arial” and size 16.I will then ask “How high is high?” The previous chat window closes, and a new one opens with the title “How high is high?”I will then ask “Now let’s look at reasons for low”. A new chat window opens with the title “Please enter reasons for the market share percentage being low.” Enter reasons that I identify below “A big competitor may get in before us.” The color should be red and font should be “Arial” and size 16.I will then ask “How low is low?” The previous chat window closes, and a new one opens with the title “How low is low?”I will then ask “What is your over-under number?” The previous chat window closes and a new one opens with the title, “What is your base number?”When I move to the next slide, the chat window closes.
  • Read More: http://smartorg.com/2011/10/tornado-diagram-resolving-conflict-and-confusion-with-objectivity-and-evidence/
  • Transcript of "Agile business development"

    1. 1. Bringing Agility to Business DevelopmentSomik Raha, AssociateSmartOrg, Incsmartorg.com© 2000-2012 SmartOrg. | Confidential and Proprietary.1
    2. 2. Legal StuffThis deck is licensed under the Creative Commons – Attribution – NoDerivatives 3.0 License.Please feel free to contact sraha@smartorg.com if you have anyquestions.© 2000-2013 SmartOrg. | For Classroom Use Only. Not for distribution.2
    3. 3. Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.3EvaluateoptionvalueIntroduction• Business Development• The Agile Manifesto• Current State• Values
    4. 4. Definition of Business DevelopmentBusiness Development is the turning of an idea into amarketable business asset© 2000-2012 SmartOrg. | Confidential and Proprietary.4
    5. 5. Agile Software Development greatly increasesquality and productivity© 2000-2012 SmartOrg. | Confidential and Proprietary.5Collaborative developmentWorking softwareCustomer collaborationResponding to changeProcesses and toolsComprehensive documentationContract negotiationFollowing a planOVERThe Agile ManifestoWe value…That is, while there is value in the items onthe right, we value the items on the left more.
    6. 6. Current Business Development vs. Agile BusinessDevelopment© 2000-2012 SmartOrg. | Confidential and Proprietary.6Processes and toolsComprehensive paperworkContract negotiationFollowing a planProcesses and toolsComprehensive documentationContract negotiationFollowing a planCollaborative DevelopmentWorking business modelsCustomer collaborationResponding to changeCURRENT BUSINESS DEVELOPMENT FOCUSAGILE BUSINESS DEVELOPMENT FOCUSNON-AGILE SOFTWARE DEVELOPMENT FOCUSCollaborative DevelopmentWorking softwareCustomer collaborationResponding to changeAGILE SOFTWARE DEVELOPMENT FOCUS
    7. 7. Poll: What role do you play in your organization?1. Business Development2. Marketing/Sales3. Product Management4. Product Development5. Project Management6. Engineering© 2000-2012 SmartOrg. | Confidential and Proprietary.7
    8. 8. © 2000-2012 SmartOrg. | Confidential and Proprietary.8Collaborative DevelopmentWorking business modelsCustomer collaborationResponding to changeAgile practices support the Agile manifesto
    9. 9. © 2000-2012 SmartOrg. | Confidential and Proprietary.9Collaborative DevelopmentWorking business modelsCustomer collaborationResponding to changeWhat practices get us to the goalpost??
    10. 10. Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.10EvaluateoptionvalueBusinessDevelopment:Turning idea intomarketablebusiness assetMarketPerformance:Given businessdevelopment hassucceeded, howwill this productfare in themarket?Combined Value:What dollaramount representsour option valueof developing thisidea as a businessgiven where weare right now?Introduction
    11. 11. Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.11EvaluateoptionvalueIntroduction
    12. 12. Business development is about managingincreasing amounts of investment© 2000-2012 SmartOrg. | Confidential and Proprietary.12TimeCashflow
    13. 13. Agile business development is aboutlearning/failing/succeeding quickly© 2000-2012 SmartOrg. | Confidential and Proprietary.13TimeCashflow
    14. 14. We will communicate Agile BusinessDevelopment with a catalog of patterns“Each pattern describes a problem which occurs overand over again in our environment, and then describesthe core of the solution to that problem, in such a waythat you can use this solution a million times over, withoutever doing it the same way twice.”“What is a design pattern?” from Design Patterns: Elements of Reusable Object-Oriented Software by Gamma et al., 1995Elements of a pattern: pattern name, problem, solution, image* andconsequences* optional© 2000-2012 SmartOrg. | Confidential and Proprietary.14
    15. 15. Evidential Work© 2000-2012 SmartOrg. | Confidential and Proprietary.15
    16. 16. Pattern: Evidential WorkWhen investing serious money behind an idea, it is easy to bedistracted away from the evidence needed to justify the investmentby the work that needs to be done.Therefore, design work to deliver evidence as quickly as possibleConsequencesA clear idea of the proof needed to justify investment, the workneeded to deliver that proof, the cost and the schedule of thatworkRelated Patterns: Communicate evidential work with “LearningPlans”© 2000-2012 SmartOrg. | Confidential and Proprietary.16
    17. 17. The Mortgage Question© 2000-2012 SmartOrg. | Confidential and Proprietary.17What do you need to see before mortgagingyour house to fund this project?
    18. 18. Simulation: βCorpMakes statistical dataanalysis products© 2000-2012 SmartOrg. | Confidential and Proprietary.18NewProductAllows analysis of the effectiveness of marketing campaignsby examining social media chatter for emotional contentaround the product.This product will help βCorp enter the social media space.What evidence do you need to see before mortgaging your house on this product?
    19. 19. Simulation: Evidential Work© 2000-2012 SmartOrg. | Confidential and Proprietary.19Phase 1: DevelopValue Proposition,Get Approval•Customer Enthusiasm•βCorp SponsorshipPhase 2: ProveValue Propositionwith Customers•Technical Performance•Customer CommitmentPhase 3: Prepare toScale•Robust Pipeline•Scalable Business Case• Solicit pilot customers• Business case analysis• Obtain right to pursue• Requirements / gap analysis =>technical roadmap• Preliminary offer• Pre-sales, talk to customers• Incubation structure definedInvestment: $0.5M4 FTE x 6 month x $200K = $400KExpenses = $100K• Conduct 2-4 customer pilots acrossareas - map processes, demonstratevalue• Fill gaps in platform and services• Capture learning• Build resources / PMO• Plan G2M / business• Extend / revise roadmap• Advance needed technology• Define full platformInvestment: $4M20 FTE x 1 year x $150K = $3MExpenses, capital = $1M• Complete, harden platform• Establish channel / G2M• Sales / BD• Marketing / communication• Set up P&L / organization• Deliver operationally to first pilots• Conduct additional pilots of new kinds• Support structureInvestment: $6MTeam, Expenses as in Phase II = $4MSales, Business Development = $1MSupport, infrastructure = $1M
    20. 20. Learning Plans© 2000-2012 SmartOrg. | Confidential and Proprietary.20
    21. 21. Pattern: Learning PlansWhen communicating development plans, it is easy to lose sight of thelearning needed to justify further investment.Therefore, depict key stages of evidence needed and the workneeded to deliver that evidence on a timescaleConsequencesA simple timeline that communicates key evidential stages, the workinvolved (details and investment) and the sequence.Related Patterns: Evidential Work and Evidence Assessment© 2000-2012 SmartOrg. | Confidential and Proprietary.21
    22. 22. Simulation: βMark Learning Plan© 2000-2012 SmartOrg. | Confidential and Proprietary.22Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10βMarkPhase I – DevelopValue Proposition,Get Approval• Solicit pilot customers• Business case analysis• Obtain right to pursue• Requirements / gapanalysis => technicalroadmap• Preliminary offer• Pre-sales, talk tocustomers• Incubation structuredefinedInvestment: $0.5M4 FTE x 6 month x$200K = $400KExpenses = $100KPhase II – Prove Value Proposition withCustomersCustomer enthusiasm,βCorp sponsorship• Conduct 2-4 customer pilots across areas - mapprocesses, demonstrate value• Fill gaps in platform and services• Capture learning• Build resources / PMO• Plan G2M / business• Extend / revise roadmap• Advance needed technology• Define full platformInvestment: $4M20 FTE x 1 year x $150K = $3MExpenses, capital = $1MTechnical performance,Customer commitmentKey: Major Phase• Work during phase• Phase Investment• Proof points at milestoneCumulative investmentthrough launchTotal: $10.5MP&L commit May 11Phase III – Prepare to Scale• Complete, harden platform• Establish channel / G2M• Sales / BD• Marketing / communication• Set up P&L / organization• Deliver operationally to first pilots• Conduct additional pilots of new kinds• Support structureInvestment: $6MTeam, Expenses as in Phase II = $4MSales, Business Development = $1MSupport, infrastructure = $1MRobust pipeline,Scalable business case
    23. 23. Evidence Assessment© 2000-2012 SmartOrg. | Confidential and Proprietary.23
    24. 24. Pattern: Evidence AssessmentDifferent people understand different things when talking aboutuncertainty in a qualitative fashion, which makes communicationdifficult.Therefore, assess calibrated probabilities for each point ofevidence, multiplying to get overall probability of successConsequencesA simple quantitative understanding of uncertainty that iscomparable across projects.Related Patterns: Evidential Work and Evidence Assessment© 2000-2012 SmartOrg. | Confidential and Proprietary.24
    25. 25. Simulation: Comparing projects by their phaseallows us to calibrate© 2000-2012 SmartOrg. | Confidential and Proprietary.25Why does a Phase 1project have such a highprobability?After recalibratingIdeaProveScaleIdeaProveScale
    26. 26. Pattern: Reasons Behind NumbersPeople can get into a mindless number game and lose sight of thereal purpose of uncertainty assessments – to discover learninggaps.Therefore, before accepting numbers, obtain reasons for them.ConsequencesThe logic behind the numbers is made transparent, facilitatingteam learning.Related Patterns: Evidential Work and Evidence Assessment© 2000-2012 SmartOrg. | Confidential and Proprietary.26
    27. 27. Pattern: Blind PollsPeople can follow power and feel shy to share what they truly know.Therefore, disallow calling out numbers in a group, forcing eachmember to write down their number and then collect it when all aredoneConsequencesDifferences in numbers become transparent and drive discussion inlearning gaps, leading to possible adjustment after the group hasnew knowledgeRelated Patterns: Evidential Work and Evidence Assessment© 2000-2012 SmartOrg. | Confidential and Proprietary.27
    28. 28. Simulation: Evidence Assessment of Phase 2:Prove Value Proposition with Customers© 2000-2012 SmartOrg. | Confidential and Proprietary.28Phase 1: DevelopValue Proposition,Get Approval•Customer Enthusiasm•βCorp SponsorshipPhase 2: ProveValue Propositionwith Customers•Technical Performance•Customer CommitmentPhase 3: Prepare toScale•Robust Pipeline•Scalable Business Case
    29. 29. Simulation: Evidence Assessment of Phase 2:Prove Value Proposition with Customers© 2000-2012 SmartOrg. | Confidential and Proprietary.29Phase 1: DevelopValue Proposition,Get Approval•Customer Enthusiasm•βCorp SponsorshipPhase 2: ProveValue Propositionwith Customers•Technical Performance•Customer CommitmentPhase 3: Prepare toScale•Robust Pipeline•Scalable Business CaseTechnical PerformanceRun Human Control Group,• βMark picks 90% of all actual chatter• βMark distinguishes correctly between +ve and –vefeelings at least 90% of the timeCustomer Commitment• At least one customer signs up for company-wideadoption
    30. 30. Simulation: Evidence Assessment of Phase 2:Prove Value Proposition with Customers• Technical Performance• Human Control Group confirms that βMark picks 90% of allactual chatterIn your chat:List reasons for successList reasons for failure© 2000-2012 SmartOrg. | Confidential and Proprietary.30
    31. 31. Simulation: Evidence Assessment SummaryHuman Control Group confirms that βMark picks 90% of allactual chatter© 2000-2012 SmartOrg. | Confidential and Proprietary.31SuccessFailureReasons for Success• Lab results promisingReasons for Failure:• We’ve never done thisbeforeGiven these reasons for successand failure, what is your probabilityof success?
    32. 32. Simulation: Probability of Success of Phase 2© 2000-2012 SmartOrg. | Confidential and Proprietary.32βMark Evidence AssessmentPhase I: Develop Value Proposition, Get Approval 37.5%Phase II: Prove Value Proposition with Customers 43.2%Overall Probability 3.88%Forwardchance ofsuccess3.88%10.4%Customer Enthusiasm – 50%βCorp Sponsorship – 75%Technical PerformanceCoverage Accuracy – 90%Emotional Accuracy – 80%Customer Commitment – 60%Phase III: Prepare to ScaleRobust Pipeline – 60%Scalable Business Case – 40%24%24%
    33. 33. Simulation: Probability of Success of Phase 2© 2000-2012 SmartOrg. | Confidential and Proprietary.33βMark Evidence AssessmentPhase I: Develop Value Proposition, Get Approval 100%Phase II: Prove Value Proposition with Customers 43.2%Overall Probability 10.4%Forwardchance ofsuccess10.4%Customer Enthusiasm – 100%βCorp Sponsorship – 100%Technical PerformanceCoverage Accuracy – 90%Emotional Accuracy – 80%Customer Commitment – 60%Phase III: Prepare to ScaleRobust Pipeline – 60%Scalable Business Case – 40%24%24%SUCCESS
    34. 34. Debrief: Reflections/Questions?© 2000-2012 SmartOrg. | Confidential and Proprietary.34EvaluateoptionvalueIntroduction
    35. 35. Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.35EvaluateoptionvalueIntroduction
    36. 36. After development has succeeded, we areready to double-down© 2000-2012 SmartOrg. | Confidential and Proprietary.36TimeCashflow
    37. 37. Agile business development incorporatesmultiple scenario-thinking before doubling down© 2000-2012 SmartOrg. | Confidential and Proprietary.37TimeCashflow
    38. 38. © 2000-2012 SmartOrg. | Confidential and Proprietary.38EvidentiallyAssessableFactors
    39. 39. Pattern: “Evidentially Assessable Factors”Economic factors that are hard to support with evidence can beeasily manipulated to distort our understanding about opportunitysize.Therefore, decompose economic models such that factors that arehard to support with evidence are derived from other factors thatare easy to assess on the basis of evidence.ConsequencesAssessment conversations remain rooted in real world knowledgeinstead of devolving into the abstract. Numbers produced are ofmuch higher quality.Related Patterns: “Extreme Credible Ranges” and “Most LeveragedUncertainties”© 2000-2012 SmartOrg. | Confidential and Proprietary.39
    40. 40. Simulation: Decompose economics to identifyassessments and calculations© 2000-2012 SmartOrg. | Confidential and Proprietary.40Total AddressableMarkete.g. 10K units inyear of launchPenetratione.g. 20%MarketSharee.g. 25%Units Sold/yre.g. 500Unit Pricee.g. $70KRevenuee.g. $35MUnit Coste.g. $2KFixed Coste.g. $5MVariable Coste.g. $1MAnnual Profite.g. 29M
    41. 41. Pattern: “Extreme Credible Ranges”Groups have a tendency toward groupthink and compromise, whichprevents discovery of important information gaps on factors that driveeconomics.Therefore, get groups to dwell on the credibly extreme ends of each factorand capture both ends of the assessment as a range, along with a realisticassessment.Consequences:Those who have a difference of opinion are no longer ignored, butfactored into the decision-making process. We are no longer anchored tothe optimistic or pessimistic, but have both along with a realistic scenario.Related Patterns: “Evidentially Assessable Factors” and “Most LeveragedUncertainties”© 2000-2012 SmartOrg. | Confidential and Proprietary.41
    42. 42. Simulation:Market Share for βMark© 2000-2012 SmartOrg. | Confidential and Proprietary.42HighLowReasons for High• Not much competitionyetReasons for Low:• A big competitor mayget in before usBase40%30%20%20%10%5%40%5%30%,20%,20% 25%Total Addressable Market (TAM): 5-10-20thousand unitsPenetration of similar technology: 10%-20%-30%
    43. 43. Most Leveraged Uncertainties© 2000-2012 SmartOrg. | Confidential and Proprietary.43
    44. 44. Pattern: “Most Leveraged Uncertainties”© 2000-2012 SmartOrg. | Confidential and Proprietary.44It is easy for us to fixate on uncertainty in economic factors that arein front of us, or the factors with the highest leverage, as opposed tolooking at both and finding the ones that really matter.Therefore, identify the most leveraged uncertaintiesConsequences:• Conversations can now focus on uncertainties that have themost leverage, instead of just focusing on swing in uncertainty orleverage by themselves.• Discussion focused on obtaining upside and containingdownsideRelated Patterns: “Extreme Credible Ranges” and “EvidentiallyAssessable Factors”
    45. 45. Simulation: The top bars in the Tornado identifythe uncertainties with the highest leverage© 2000-2012 SmartOrg. | Confidential and Proprietary.45The 10-50-90 bar summarizes overalluncertainty into a single range:Low: -18M Base: 44M High: 197MTop 4 factorscapture mostof the variancein NPV
    46. 46. Debrief: Reflections/Questions?© 2000-2012 SmartOrg. | Confidential and Proprietary.46EvaluateoptionvalueIntroduction
    47. 47. Agenda© 2000-2012 SmartOrg. | Confidential and Proprietary.47EvaluateoptionvalueIntroduction
    48. 48. Pattern: “Simple Options Valuation”Placing dollar values on development opportunities is a task thatcan be obfuscated by complex financial models, which shift thefocus away from collaborative learning discussions toward magicnumbers.Therefore, use simple options valuation to make clear the logicbehind development opportunity valuation.© 2000-2012 SmartOrg. | Confidential and Proprietary.48Consequences:The equivalent dollar amount in a simplevaluation incorporates the uncertainty in theopportunity and is directly traceable into itsconstituent components.Related Patterns: Uncertainty-Value Screen,Productivity Ordering
    49. 49. Simulation: Simple Option Valuation© 2000-2012 SmartOrg. | Confidential and Proprietary.49$0.75M$82MThe equivalentvalue just went upbecause ofdevelopmentsuccessThink of this as anequivalent valuerepresenting theuncertainty in thisdealThese numbers comefrom the 10-50-90 bar
    50. 50. Pattern: “10-50-90 Bars”Focusing on single number valuations of projects hides theunderlying uncertainty in the upside and downside of that project.Therefore, use 10-50-90 bars to characterize uncertainty in eachdevelopment project.© 2000-2012 SmartOrg. | Confidential and Proprietary.50Consequences:• Shows the biggest upsides and downsidesthat need to be managedRelated Patterns: “Productivity Ordering”,“Uncertainty-Value Screen”, “Most LeveragedUncertainties”Value 
    51. 51. Simulation: Compare Uncertainty for βCorp© 2000-2012 SmartOrg. | Confidential and Proprietary.51Zoom can losea lot of money,but it can alsomake the mostmoney
    52. 52. Simulation: There is a big gap in marketunderstanding for Zoom© 2000-2012 SmartOrg. | Confidential and Proprietary.52The top 4uncertainties have todo with marketunderstanding
    53. 53. Pattern: “Uncertainty-Value Screen”People can get emotionally attached to pet projects and lose sightof the big picture.Therefore, use uncertainty-value screens to understand wheredevelopment projects fall and how they need to be managed.© 2000-2012 SmartOrg. | Confidential and Proprietary.53Consequences:• Facilitates a rich conversation on how tofeasibly move projects to a better place• Great projects can be picked over goodones, with transparent logic as opposed topolitical posturing, making hard decisionsmore acceptable to people.Related Patterns: “Productivity Ordering”,“Learning Plans”, “Evidence-Driven Funding”Also known as: Innovation Screen
    54. 54. Simulation: Uncertainty–Value Screen for βCorp© 2000-2012 SmartOrg. | Confidential and Proprietary.54What can we doto move theseprojects out ofthis quadrant?Zoom seems fairlyspeculative –need to get somemarket thinkinggoing on itValue given development successProbabilityofDevelopmentSuccess
    55. 55. Pattern: “Evidence-Driven Funding”Investments in large opportunities with low chance of success arenecessary and yet, perilous.Therefore, invest by evidence delivered in preceding phase.Consequences:• Investments are not arbitrary but thoughtful• Investments are connected to delivery of evidence• Projects not tied to P&L statements, which would kill innovation,and instead managed through learning plan progress.Related Patterns: “Learning Plans,” “Evidential Work” and“Uncertainty-Value Screen”© 2000-2012 SmartOrg. | Confidential and Proprietary.55
    56. 56. Pattern: “Productivity Ordering”Organizations use budgets as a given constraint when makingfunding decisions, without clearly communicating the value ofsecuring more resources to fund development.Therefore, order development projects by their productivity on aplot of cumulative value versus cumulative investment.© 2000-2012 SmartOrg. | Confidential and Proprietary.56Consequences:• Provides feedback on the value-cut thatgoes together with a cost-cut• Emphasizes why the CFO was hired – toobtain funding for important opportunities!Related Patterns: “Uncertainty-Value Screen”Also Known As: CFO ChartCumulative CostCumulativeValueBudget LineExtra ValueExtra Cost
    57. 57. Simulation: CFO Chart© 2000-2012 SmartOrg. | Confidential and Proprietary.57OysterPearlOysterZoom got cut down tosize because of theinherent uncertaintyCumulative Cost ($ millions)CumulativeValue($millions)
    58. 58. DebriefReflections? Questions?© 2000-2012 SmartOrg. | Confidential and Proprietary.58
    59. 59. Analytic Practices of Agile BusinessDevelopment are the platform for collaboration© 2000-2012 SmartOrg. | Confidential and Proprietary.59ProofPointsLearningPlanDevelopmentUncertaintyExtremeCredibleRangesMostLeveragedUncertaintiesSimple Option Value,Value-Unc Screen,CFO ChartWatchdownside,swing forupsideWork to deliverproof points10-50-90Summary BarAssessableEconomicFactors
    60. 60. © 2000-2012 SmartOrg. | Confidential and Proprietary.60Collaborative DevelopmentWorking business modelsCustomer collaborationResponding to changeThe analytic practices propel us toward thegoalpost
    61. 61. Continuing the ConversationLearn More• Include Business Design in Innovation• Tornado Diagram: Resolving Conflict and Confusion withObjectivity and Evidence• Try SimpleTornado – open sourceLinkedIn Group• Invitations will be sent to attendees to join the “Agile BusinessDevelopment” groupConnect with me• Please feel free to reach out at sraha@smartorg.com© 2000-2012 SmartOrg. | Confidential and Proprietary.61
    62. 62. Appendix© 2000-2012 SmartOrg. | Confidential and Proprietary.62
    63. 63. Pattern: “Purpose Values”Dry intellectual logic does not motivate people to reach excellence.Therefore, find the values that define the purpose of theorganization and align business opportunities and strategy to deliveron these values.© 2000-2012 SmartOrg. | Confidential and Proprietary.63Consequences:People rally around the chosen opportunities and are excited tomake it happenRead More: http://smartorg.com/2012/06/valuepoint6/
    64. 64. Simulation: Show Purpose Values of βCorpAnswer “What transformation in the world do you wantto bring about through the work of this company?”Keep asking “Why?” When you can’t answer anymore,those are your purpose values.How well does the opportunity under developmentsupport the purpose values?© 2000-2012 SmartOrg. | Confidential and Proprietary.64

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