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Business-Engineering-Technology (BET)
BUSI / ENGR 3520
Integrating Business and Engineering Theories with Practice
Fall 2020 Course Summary & Final Review
Dan O’Leary // dan.oleary@auburn.edu
Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 1
INDUSTRIAL & SYSTEMS
ENGINEERING
Introduction
This deck summarizes the traditional lectures given in BUSI / ENGR 3520 during the
Fall 2020 semester as part of the Business-Engineering-Technology (BET) minor at
Auburn University. The course teaches concepts related to innovation,
entrepreneurship, product development, and leadership, including:
• Entrepreneurial Mindset
• Technology Trends and Opportunity Identification
• Creativity and Design Thinking
• Evidence-Based Entrepreneurship and the Lean Startup Method
• Business Model Generation and Customer Development
• Concept Generation, Specifications, and Benchmarking
Over 400 slides of material have been condensed into less than 80, summarizing
approximately 30% of the semester’s total course content.
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 2
Program Background
• BET is an undergraduate minor for qualifying Auburn students majoring in those
programs. All courses are offered as BUSI and ENGR, allowing students from each
major the opportunity to include courses in the other on their transcript.
• BET is a product of the Thomas Walter Center for Technology Management
(TWC), which is part of the Industrial & Systems Engineering department (ISE).
• TWC also offers ISE’s MS of Engineering Management & Study Abroad programs
• BET includes 6 courses (16cr) over 2 years. The first-year covers a range of topics
related to innovation, entrepreneurship, product development, and leadership.
Year two adds strategic management, hands-on design, and a capstone project.
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 3
Class Textbooks
Referenced in these slides as Neck and Ulrich
Entrepreneurship: The Practice and Mindset
Neck, Neck, and Murray
2nd Edition, SAGE Publications, 2020
Confusing array of digital / print options
Product Design and Development
Ulrich, Eppinger, and Yang
7th Edition, McGraw Hill, 2020
Good quality Kindle version for $12 / 33 (rent / buy)
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 4
TLDR: The Essence of BET 3520/60
Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20
Making Valuable Things Happen
5
Three Simultaneous Problems
• Business orientation – Viability
• Strategy, financial analysis, marketing
• Engineering orientation – Feasibility
• Technical and functional design
• Design orientation – Desirability
• Aesthetics and user experience
Customer orientation – address unmet needs
Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20
Design
“Desirable”
REAL?
Engineering
“Feasible”
WIN?
Business
“Viable”
WORTH IT?
6
The single necessary and sufficient condition for
a business is a paying customer.
Entrepreneurial Mindset
Neck Chapters 1,2
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 7
Traditional Management & Leadership Skills
• Management → “Doing Things Right”
• Relates to conditions of stability
• Well-informed decision-making processes
• Relies on data from past experience
• Leadership → “Doing the Right Things”
• Applies to times of change
• Establishing and executing on a vision
• Methods for creative problem solving and collaboration
21st Century Change – Management and Leadership are inseparable
Successful managers must be good leaders, and vice-versa
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 8
What is Entrepreneurship?
• “A way of thinking, acting, and being that combines the ability to find
or create new opportunities with the courage to act on them.”
• “…vital life skill that prepares individuals to deal with an ambiguous
and uncertain future.”
• “…vehicle for developing a set of skills – financial, social,
communication, marketing, problem solving, and creative thinking, to
name a few – that are applicable across many fields.”
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 9
Mindset
• Established set of attitudes held by someone
• Lens through which we view, interpret, and react to the world
• Subconsciously guides our reactions and decisions
• Two general orientations:
• Fixed – perceive their talents and abilities as set traits
• Growth – believe their abilities can be developed
• Change is possible, takes practice
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 10
The Entrepreneurial Mindset
• Characterized by
• Habitually searching for opportunities in their daily activities
• Tendency to be confident and take action in uncertain conditions
• Willingness to accept and learn from failure
• Concentration, adaptability, and self-regulation – self-leadership
• Interrelated with the Entrepreneurial Method
• Mindset ⇔ Method
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 11
Beware of Passion
• Passion = intense emotional output; symptom
• Valuable driver associated with courage, motivation, resilience, etc.
• Fickle – change more easily than underlying motivations
• Blinding – ignore warning signs, discount negative feedback
• “Find your passion” may not be the best advice
• Less likely to try new things
• Tend to give up more easily in the face of obstacles
• Go deeper – “develop your passion”
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 12
The Entrepreneurship Method
1. Define Impact
2. Identify Resources
3. Develop Idea
4. Control Risk
5. Start Small
6. Expand Resources
7. Learn and Improve
8. Assess Honestly
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 13
Practice Makes Perfect?
• Entrepreneurial Method requires practice to master
• How to maximize returns on practice?
• Rote practice (repetition) yields diminishing returns
• Performance does not improve with experience
• Example: driving a car every day does not make you Mario Andretti
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 14
Deliberate Practice
• “Perfect practice makes perfect”
• Rigorous, carefully focused efforts improve performance
• Focus, attention, and concentration
• Consistent over a long time period
• Goals and continuous feedback
• Cognitive benefits – performance, memory, intuition
• Learning how to learn
• Use frameworks not ad-hoc methods
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 15
Trends and Challenges
Not in Texts
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 16
2nd Machine Age
• Technology: “the application of scientific knowledge for practical
purposes, especially in industry” (Wikipedia)
• First Machine Age – muscle power to steam power
• Second Machine Age – mental → computer power
• Mental power at least as important to progress
• Huge, ongoing impact on humanity
• Digital technology still rapidly improving
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 17
Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. W. W. Norton & Company, 2014.
Rapid Change
• Many examples
• So common in your lifetime that it may seem “normal”
• Google Translate
• Forbes’ earnings previews all generated algorithmically
• Computers win at Jeopardy, Go, StarCraft
• 3D Printing – see Print the Legend assignment
• Pattern: Gradual then Sudden Change
• Exponential
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 18
Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. W. W. Norton & Company, 2014.
Moore’s Law
• Gordon Moore, founder of Intel
• “Complexity for minimum component costs has increased at a rate of
roughly a factor of two per year”, 1965
• Common interpretation: speed and capability of computers double
about every two years while the prices decrease
• Predicted it would hold for 10 years
• No end in sight – scientists and engineers keep innovating
• Remarkable – not seen in any other domain
• Sustained (long term) with high growth rate (low period)
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 19
Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. W. W. Norton & Company, 2014.
Ideas and Opportunities
Neck Chapter 3
Ulrich Chapter 3
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 20
What is an Opportunity?
• “A hypothesis about how value might be created.” - Ulrich
• “A way of generating value through unique, novel, or desirable
products, services, and even processes that have not been previously
exploited in a particular context.” – Neck
• Not the solution!
• Keep the “problem space” wide
• Don’t limit options by imagining solutions early on
Market with a need to be filled,
problem to be solved, job to be done.
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 21
Factors Driving Economic Value
• Idea – quality of the core idea itself
• “You can’t make a silk purse out of a sow’s ear.” – Jonathan Swift
• Team – the people and their development effort
• Midas hypothesis, the golden touch
• Market – your potential customers
• Scale of the gap that you’ve identified
• “Exogenous” (external) – everything else (other)
Ideas matter, but aren’t everything.
To find the best ones, start with many.
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 22
From Idea to Opportunity
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 23
Idea
Classification
Matrix
Utility & Novelty
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary
Value
Utility
24
Creativity & Design Thinking
Neck Chapter 4
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 25
Connecting Concepts
• Change creates new, unmet Needs
• Organizations seek Opportunities to meet Needs
• An Innovation is a novel and useful response to an Opportunity
• The market, recognizing the Value of an innovation, adopts it
Change → Needs → Opportunities → Innovation → Value
“Making Valuable Things Happen” = Innovation
Creates new value, builds competitive advantage
Inherently Creative Problem-Solving Process
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 26
Design Thinking
• Toolkit for an entrepreneur to solve complex problems for people
• A human-centered approach to innovation that brings together what
people need with what is technologically feasible and economically
viable.
• Identify new solutions that meet market needs
• Framework and strategy for innovation
• Pioneered, popularized by IDEO
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 27
Design Thinking Process
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 28
Design Thinking Process
• System of overlapping phases, not linear
• Divergent Thinking – imaginative, playful, relatively unconstrained
• Generate many ideas
• Develop broad understanding of problem
• Convergent Thinking – selective, thoughtful, abstract to concrete
• Narrow down ideas
• Identify those with the most potential
• Goal: Product-Market Fit
• Match user needs with solution delivered by the product (value)
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 29
Evidence-Based E-ship
Neck Chapter 5
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 30
Business Model
• How a new venture creates, delivers, and captures value, including
activities and resources that interact to deliver value to customers
• Defined by its strategy and four key components
• Business Model Strategies
• Innovation – create entirely new market, Facebook → Social Media
• Disruption – new way of doing things, MOOCs → Education
• Differentiation – stand out products, Yeti → Coolers
• Imitation – no advantages, seek differentiation!
• Correspond to the idea classification system, L4 N3
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 31
Four Parts of a Business Model
• Offering – what you are “selling,” the value generated for your
customers, and how you will reach and communicate with them
• Includes Customer Value Proposition (CVP)
• Customers – the people who populate the segments of the market
that your offering will serve and are willing to pay for your offering
• Must be selective – market segmentation
• Infrastructure – all the resources (people, technology, products,
suppliers, partners, facilities) required to deliver the value proposition
• Financials – the revenue and cost structures needed to cover
operating expenses and other financial obligations
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 32
Customer Value Proposition (CVP)
• Sum total of benefits which customer is paying for
• Part of the Offer, perhaps the most important part of your BizMod
• To be effective your CVP must:
• Offer better value than the competition
• Be measurable (to quantify competitive advantage)
• Be sustainable
• Design Thinking!
• Successful CVPs based on deep understanding of user and their needs
• Not about persuading customers to buy your solution
• Emphasizes how much they are willing to pay for the value
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 33
What is a Startup?
A temporary organization that is designed to search for a
repeatable and scalable business model
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 34
Evidence-Based Entrepreneurship (EBE)
• EBE is the practice of hypothesizing, testing, and validating
• Startups have “runways” – time until they run out of resources ($)
• Must validate assumptions quickly and efficiently, learn fast
• Corporate planning methods (5-year plans) not relevant
• EBE provides the right framework, favoring:
• Experimentation over elaborate planning
• Customer feedback over intuition
• Iterative design over traditional up-front development
• Starts with identifying the assumptions in hypothesized opportunity
• During the search both the problem and solution will change
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 35
Business Model Generation
Neck Chapter 5
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 36
Business Model Canvas
• Created 2008 by Swiss business theorist Alexander Osterwalder
• Very popular way to communicate, think through business models
• Launched his company Strategyzer, consulting, webinars, etc.
• Kicked off a series of books, lots of competitors
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 37
Osterwalder, Alexander, and Yves Pigneur. Business Model Generation: A Handbook
for Visionaries, Game Changers, and Challengers. John Wiley & Sons, 2013.
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 38
The Business Model Canvas
designed by: Strategyzer AG
The makers of Business Model Generation and Strategyzer
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
strategyzer.com
Revenue Streams
Customer SegmentsValue PropositionsKey ActivitiesKey Partners
Cost Structure
Customer Relationships
Designed by: Date: Version:Designed for:
ChannelsKey Resources
https://www.strategyzer.com/canvas/business-model-canvas
Offering
Customers
Financials
Infrastructure
Left – Delivering Value
Partners
Activities
Resources
Costs
Right – Creating Value
Customer Relationships
Customer Segments
Channels
Revenue Streams
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 39
Business Model = How to Deliver and Capture Value
Lean Startup Method
Neck Chapter 7
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 40
Experimentation
• Experiment = test designed to help you answer “big three” questions
• Primarily Feasibility and Viability
• Desirability is the focus of Design Thinking, some overlap
• Neck tries to distinguish experiments and prototypes, confusing
• Prototype = experimental model of your product
• Communicate look / feel / function for user feedback
• Range in “fidelity” from rapid, low-cost models to early releases
• Choose right method for stage of development, information needed
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 41
Scientific Method Applied
1. Ask lots of questions
2. Carry out background research
3. Develop a hypothesis
4. Test hypothesis by running experiments
5. Analyze the data
6. Assess the results
Think like scientist, don’t Act like one!
Goal: Use low-cost, quick methods to shape
ideas, improve them through rapid iteration.
Not to build the perfect experiment.
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 42
Experiment using Prototypes
Wireframe Button to Nowhere / Landing Page
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 43
Hand Drawn or Software Tools Email sign-up or Click capture
Experiment using Prototypes
Storyboard Role-Playing
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 44
Sketched Customer Journey Fireball, fireball! Lightning bolt!
Experiment using Prototypes
Preselling Concierge
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 45
Biggest Kickstarter Campaign Ever Manual Order Fulfillment
Lean Startup Method
• Most well-known flavor of EBE
• Three Step Loop – Build, Measure, Learn
• Heavy Emphasis on Measuring Results – organize, analyze, track
• Split tests, search engine marketing, funnel analysis
• High Cyclic Rate = key competitive advantage
• Pivot or Persevere – change need / solution to find product-market fit
• “Demo-Sell-Build” is a better approach than “Build-Demo-Sell”
• Borrows some elements from Lean Manufacturing
• EBE and LSM bring some “discipline” to Innovation
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 46
“Achieving Failure”
• Happens all. The. TIME.
• Businesses assume they…
• Know what customers want
• Know how much customers are willing to pay
• Can predict the future
• Will gain mainstream adoption immediately
• Etc.
• Successfully build a product that customers reject
• Personal experience: do not recommend.
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 47
Customer Development
Neck Chp 6 (4.6, 7.6)
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 48
What is Customer Development?
• WHAT: Identifying, learning from, and understanding your customers
• WHY: Validate assumptions about your imagined problem / solution
• HOW: Qualitative (aka market or ethnographic) research
• Some Key Questions:
• Who are your customers?
• How will you reach them?
• How can you learn best from them?
• How do you interpret the results?
• Design Thinking → empathy
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 49
What is a Market?
• Market:
• A set of actual or potential customers
• For a given set of products or services
• Who have a common set of needs and wants
• Who reference each other when making buying decisions
• A place where supply meets demand
• Physical / virtual location – farmer’s market or online retailer
• Grouping of customers – e.g. “the market for women’s jeans”
• Market Opportunity: degree of demand in a market for a product
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 50
Customer Segmentation
• Different groups / organizations an enterprise aims to reach and serve
• Grouped by common behaviors or attributes → tailor BMC
• Differing needs, channels, relationships, profitability
• Customer segments can be defined in four ways:
• Who are they? Demographics like age, gender, education, etc.
• Where? Where they live and hang out, interact (“watering holes”)
• How do they behave? Behavioral and lifestyle habits
• What are their needs? Fundamental to the offering
• Answers → develop end-user profile
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 51
Rogers’ Technology Adoption Life Cycle
• Innovators
• Enthusiastic, ok with risk
• Early Adopters
• Gov / Biz buyers
• Looking for competitive adv
• Early Majority
• Practical, risk averse
• Mass market opinions
• 34% - key to success
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 52
Rogers’ Technology Adoption Life Cycle
• Late Majority
• Skeptical, pessimistic
• Simple low-cost products
• Laggards
• Negative, dislike change
• Least likely adopters
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 53
Model can help understand
adoption and explain why some
products never take off.
“The Chasm”
Beachhead Market
• Concentration of Firepower
• Customers in a beachhead market…
• Buy similar products
• Have similar value expectations
• Use word of mouth to communicate with others in similar regions
or professional organizations
• Small, humble beginnings
• Generates sufficient cash flow to win over other markets
• Builds traction, reputation, track record
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 54
Qualitative Research
Tell me if you’ve experienced something like this before:
User: You installed my computer.
Why didn’t you install the network router, too?
Contractor: You said you wanted the computer installed.
User: But the computer won’t be of much use without a router.
Contractor: You said you wanted the computer installed.
I did just what you requested.
Getting the problem right is the most important part of the process.
Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary
Nicholas, J. M., & Steyn, H. (2017). Project Management for Engineering, Business and Technology. Routledge.
11/13/20 55
Interviews
• Key QR methods: Interviews, Observation
• From Neck sections 4.6 and 7.6
• Ch 4 – Design Thinking – Needs
• Ch 7 – Experimentation – Feedback
• Different context, focus, methods
• Both Primary Market Research
• “Success starts with understanding your customers.”
• Giff Constable, Talking To Humans
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 56
Constable, Giff, et al. Talking to Humans. 2014. Open WorldCat, https://s3.amazonaws.com/TalkingtoHumans/Talking+to+Humans.pdf.
TALKING
TO HUMANS
Success starts with understanding
your customers
GIFF CONSTABLE
with Frank Rimalovski
illustrations by Tom Fishburne
and foreword by Steve Blank
Interviewing “Do’s”
• Meet face-to-face, one-on-one
• Take notes, preferably done by an assistant
• Seek understanding, not answers
• Get stories, not speculation / prediction
• Use your questions as a guide, not a script – follow the clues!
• Be conversational and relaxed, but directed
• Actively listen and observe, “parrot”
• Record some basic, observable facts about your subject (don’t ask)
• Ask who else you should talk to
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 57
Interviewing “Don’ts”
• Record sessions
• Try to sell your idea
• Overstay your welcome
• Talk (interrupt, give answer / opinion, fill empty space) – Listen!
• Seek validation or get defensive / argumentative
• Miss / ignore important unexpected discoveries
• Talk about pricing
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 58
Empathy Map – Say, Do, Think, and Feel
Structured Interpretation of Interviews
• Collate / integrate data
• Uncover surprising insights
• Identify:
• Unmet needs
• Frustrations, pain points
• Areas for improvement
• Different perspectives
• Question assumptions
• Get into someone else’s head
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 59
Product Development Process
Ulrich Chapter 1, 2
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 60
What is Product Development (PD)?
• Economic success of most firms depends on their ability to:
• Identify customer needs
• Create products that meet those needs profitably
• 3520 focus has been on concept development – “front end” process
• Provide context and introduce topics that 3510 will focus on
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 61
The set of activities beginning with the perception of a
market opportunity and ending in the production, sale,
and delivery of a product.
Measures of Successful PD
• Product Quality
• Ultimately reflected in market share, price customers willing to pay
• Product Cost
• Determines profit for given volume and price
• Development Cost
• Significant part of the overall investment
• Development Time
• Determines firm’s “responsiveness,” and time to investment return
• Development Capability
• Institutional knowledge and capability are important assets
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 62
Stakeholder Interests
• Stakeholder = anyone with a vested interest in the product
• Development team wants to make an interesting product
• Manufacturing community interested in job creation
• Product users expect high safety standards
• Regulators require compliance with myriad regulations
• Executives insist the product is in line with company values / vision
• Public expects the firm to prioritize sustainability
Stakeholder Categorization & Prioritization critical
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 63
Product Development Team
Interdisciplinary effort with three primary team functions
• Marketing
• IDs customer needs and opportunities, defines market segments
• Customer communication, pricing, launch and promotion
• Design
• Engineering – mechanical, electrical, software, etc.
• Industrial – aesthetics, ergonomics, user interface, etc.
• Manufacturing
• Designing, operating / coordinating production
• Includes purchasing, distribution, and installation (supply chain)
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 64
Challenges of Product Development
• Few companies are successful more than half of the time
• Trade-offs – vehicle weight vs manufacturing and testing costs
• Dynamics – changing technology, customer preferences
• Details – which part to use x thousands of parts
• Time Pressure – quickly without complete information
• Economics – profit a function of costs, price, sales volume
• Further complicated by organizational realities – resources, agendas,
leadership, priorities, culture, etc.
• All relate to problem-solving, decision-making; analytical and creative
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 65
Product Development Process
• Steps employed to conceive, design, and commercialize a product
• Benefits of a well-defined process:
• Quality Assurance – checkpoints / gates build in oversight
• Coordination – clarifies roles and expectations
• Planning – includes scheduled milestones
• Management – provides benchmarks for assessing performance
• Improvement – via documentation and review
• Functions: information processing, risk management
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 66
Generic Product Development Process
1. Planning
• Strategy → Opportunity Identification → “Mission Statement”
• Target market, business goals, key assumptions, constraints
2. Concept Development
• Needs identification and concept generation, screening, selection
• Describe form, function with specs, benchmarks, and financials
3. System-Level Design – architecture, functional decomposition
4. Detailed Design
5. Testing and Refinement
6. Production Ramp-Up
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 67
Tailoring
• Particular processes will differ by unique context of firm and project
• “Tailoring” = adapting a generic method to specific circumstances
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 68
Trends in PD Processes
• Design Thinking – user-centered approach
• Development Speed – digital facilitation
• Platform Leverage – modular components
• Outsourcing / Offshoring – globalization
• Lean Principles – production, startup, agile
• Open Innovation – open source, etc.
• Sustainability – environmentally responsible design
• Business Model Innovation – whole product view
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 69
Specs & Benchmarking
Ulrich Chapter 6
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 70
What are Specifications?
• Customer needs expressed in their native language, subjective
• “the suspension is easy to install”
• “the suspension enables high-speed descents on bumpy trails”
• Product specifications are specific, measurable, objective
• Specification = Metric + Value(s) + Units
• Ex: “the average time to assemble is less than 75 seconds”
• Must translate customer needs into product specifications, evolve
• Target Specs – initial, aspirational, prior to constraints
• Final Specs – end result of refinement, trade-offs
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 71
Collect Benchmarking Data
• Target specs relate user needs to competitive product position
• Data on competing products used to support positioning decisions
• User needs → metrics → benchmarks → specifications → design
• Online research and catalogs not ideal
• Purchase, test, disassemble, analyze
• Two methods
• Benchmark against Customer Needs
• Benchmark against Metrics
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 72
Dynamics of Product Specifications
• Target specs change for many reasons
• Customers change
• Competitors respond
• Technical capabilities improve
• Designs evolve as details develop
• Tradeoffs and conflicts become apparent
• Start with marginal and ideal values (aspirational)
• Learn what it is feasible to deliver before setting final specs… When?
• EARLY if competing on cost, performance; LATE if on market match
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 73
Concept Generation
Ulrich Chapter 7
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 74
Concept Generation
• Concept = approximate description of the technology, working
principles, and form of the solution
• Concise description of how the product will satisfy customer needs
• Expressed as sketch / model accompanied by text description
• Product success depends largely on quality of underlying concept
• Relatively quick, inexpensive part of overall product development
• Typically less than 5% of budget and 15% of development time
• Customer needs and target specs → Concepts for final selection
• Hundreds of concepts → 5-10 worth serious consideration
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 75
Design Freedom & Cost of Changes
Cost of Change
Increases Rapidly
Number of Options
Decreases Rapidly
Explore Broadly Early!
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 76
Pitch Decks
Neck Supplement B
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 77
Presentations
• Components
• Content – the information you want to convey
• Script – spoken words that are the core of your presentation
• Slides (“Deck”) – the visual aide(s) that support your presentation
• Delivery – pace, dress, interaction, drama, style, etc.
• Content > Script > Slides
• Must be selective
• Script = content most important / relevant to audience
• Slides = highlights and visualizations of script
• Script ≠ Slides!
Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 78
Guidelines
• Slides
• Readable! 28pt minimum for standard fonts
• Be visual – good graphics that support the story
• The less words the better
• Also harder – memorization, time constraints, confidence
• Effective, attractive design
• Use of color, consistent formatting
• Choice and number of fonts
• Leverage available templates, avoid stock template
• Use animation sparingly (rarely)
Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 79
Pitch Deck Design
• From Entrepreneurship: The Practice and Mindset
• Sample pitch deck is not ideal – somewhat lacking in depth /
detail, ignores earlier advice (font size, etc.)
• Aim higher!
• Pitch – Very specific type of presentation
• Act of clearly presenting & describing a product or service
• Purpose is to stimulate interest, not to close a deal
Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 80
Our Project Template
1. Title Page including Company and Product Name, Logo
2. Impact and Charter Statements
3. Idea → Solution → Concept
4. Innovative elements / unique strengths of the Business Model
5. Key Assumptions related to Desirability, Feasibility, Viability
6. Why Now? – Timing, Trends, or Competitive Advantage
7. Customer Discovery – Beachhead, End User Profile
8. Benchmarks
9. Team – Names and Team Role (not major / college)
10. Summary with Call to Action
11. Closing followed by necessary supporting slides
11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 81

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BET 3520 Fall 2020 Course Summary

  • 1. Business-Engineering-Technology (BET) BUSI / ENGR 3520 Integrating Business and Engineering Theories with Practice Fall 2020 Course Summary & Final Review Dan O’Leary // dan.oleary@auburn.edu Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 1 INDUSTRIAL & SYSTEMS ENGINEERING
  • 2. Introduction This deck summarizes the traditional lectures given in BUSI / ENGR 3520 during the Fall 2020 semester as part of the Business-Engineering-Technology (BET) minor at Auburn University. The course teaches concepts related to innovation, entrepreneurship, product development, and leadership, including: • Entrepreneurial Mindset • Technology Trends and Opportunity Identification • Creativity and Design Thinking • Evidence-Based Entrepreneurship and the Lean Startup Method • Business Model Generation and Customer Development • Concept Generation, Specifications, and Benchmarking Over 400 slides of material have been condensed into less than 80, summarizing approximately 30% of the semester’s total course content. 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 2
  • 3. Program Background • BET is an undergraduate minor for qualifying Auburn students majoring in those programs. All courses are offered as BUSI and ENGR, allowing students from each major the opportunity to include courses in the other on their transcript. • BET is a product of the Thomas Walter Center for Technology Management (TWC), which is part of the Industrial & Systems Engineering department (ISE). • TWC also offers ISE’s MS of Engineering Management & Study Abroad programs • BET includes 6 courses (16cr) over 2 years. The first-year covers a range of topics related to innovation, entrepreneurship, product development, and leadership. Year two adds strategic management, hands-on design, and a capstone project. 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 3
  • 4. Class Textbooks Referenced in these slides as Neck and Ulrich Entrepreneurship: The Practice and Mindset Neck, Neck, and Murray 2nd Edition, SAGE Publications, 2020 Confusing array of digital / print options Product Design and Development Ulrich, Eppinger, and Yang 7th Edition, McGraw Hill, 2020 Good quality Kindle version for $12 / 33 (rent / buy) 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 4
  • 5. TLDR: The Essence of BET 3520/60 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 Making Valuable Things Happen 5
  • 6. Three Simultaneous Problems • Business orientation – Viability • Strategy, financial analysis, marketing • Engineering orientation – Feasibility • Technical and functional design • Design orientation – Desirability • Aesthetics and user experience Customer orientation – address unmet needs Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 Design “Desirable” REAL? Engineering “Feasible” WIN? Business “Viable” WORTH IT? 6 The single necessary and sufficient condition for a business is a paying customer.
  • 7. Entrepreneurial Mindset Neck Chapters 1,2 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 7
  • 8. Traditional Management & Leadership Skills • Management → “Doing Things Right” • Relates to conditions of stability • Well-informed decision-making processes • Relies on data from past experience • Leadership → “Doing the Right Things” • Applies to times of change • Establishing and executing on a vision • Methods for creative problem solving and collaboration 21st Century Change – Management and Leadership are inseparable Successful managers must be good leaders, and vice-versa 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 8
  • 9. What is Entrepreneurship? • “A way of thinking, acting, and being that combines the ability to find or create new opportunities with the courage to act on them.” • “…vital life skill that prepares individuals to deal with an ambiguous and uncertain future.” • “…vehicle for developing a set of skills – financial, social, communication, marketing, problem solving, and creative thinking, to name a few – that are applicable across many fields.” 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 9
  • 10. Mindset • Established set of attitudes held by someone • Lens through which we view, interpret, and react to the world • Subconsciously guides our reactions and decisions • Two general orientations: • Fixed – perceive their talents and abilities as set traits • Growth – believe their abilities can be developed • Change is possible, takes practice 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 10
  • 11. The Entrepreneurial Mindset • Characterized by • Habitually searching for opportunities in their daily activities • Tendency to be confident and take action in uncertain conditions • Willingness to accept and learn from failure • Concentration, adaptability, and self-regulation – self-leadership • Interrelated with the Entrepreneurial Method • Mindset ⇔ Method 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 11
  • 12. Beware of Passion • Passion = intense emotional output; symptom • Valuable driver associated with courage, motivation, resilience, etc. • Fickle – change more easily than underlying motivations • Blinding – ignore warning signs, discount negative feedback • “Find your passion” may not be the best advice • Less likely to try new things • Tend to give up more easily in the face of obstacles • Go deeper – “develop your passion” 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 12
  • 13. The Entrepreneurship Method 1. Define Impact 2. Identify Resources 3. Develop Idea 4. Control Risk 5. Start Small 6. Expand Resources 7. Learn and Improve 8. Assess Honestly 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 13
  • 14. Practice Makes Perfect? • Entrepreneurial Method requires practice to master • How to maximize returns on practice? • Rote practice (repetition) yields diminishing returns • Performance does not improve with experience • Example: driving a car every day does not make you Mario Andretti 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 14
  • 15. Deliberate Practice • “Perfect practice makes perfect” • Rigorous, carefully focused efforts improve performance • Focus, attention, and concentration • Consistent over a long time period • Goals and continuous feedback • Cognitive benefits – performance, memory, intuition • Learning how to learn • Use frameworks not ad-hoc methods 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 15
  • 16. Trends and Challenges Not in Texts 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 16
  • 17. 2nd Machine Age • Technology: “the application of scientific knowledge for practical purposes, especially in industry” (Wikipedia) • First Machine Age – muscle power to steam power • Second Machine Age – mental → computer power • Mental power at least as important to progress • Huge, ongoing impact on humanity • Digital technology still rapidly improving 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 17 Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. W. W. Norton & Company, 2014.
  • 18. Rapid Change • Many examples • So common in your lifetime that it may seem “normal” • Google Translate • Forbes’ earnings previews all generated algorithmically • Computers win at Jeopardy, Go, StarCraft • 3D Printing – see Print the Legend assignment • Pattern: Gradual then Sudden Change • Exponential 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 18 Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. W. W. Norton & Company, 2014.
  • 19. Moore’s Law • Gordon Moore, founder of Intel • “Complexity for minimum component costs has increased at a rate of roughly a factor of two per year”, 1965 • Common interpretation: speed and capability of computers double about every two years while the prices decrease • Predicted it would hold for 10 years • No end in sight – scientists and engineers keep innovating • Remarkable – not seen in any other domain • Sustained (long term) with high growth rate (low period) 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 19 Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. W. W. Norton & Company, 2014.
  • 20. Ideas and Opportunities Neck Chapter 3 Ulrich Chapter 3 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 20
  • 21. What is an Opportunity? • “A hypothesis about how value might be created.” - Ulrich • “A way of generating value through unique, novel, or desirable products, services, and even processes that have not been previously exploited in a particular context.” – Neck • Not the solution! • Keep the “problem space” wide • Don’t limit options by imagining solutions early on Market with a need to be filled, problem to be solved, job to be done. 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 21
  • 22. Factors Driving Economic Value • Idea – quality of the core idea itself • “You can’t make a silk purse out of a sow’s ear.” – Jonathan Swift • Team – the people and their development effort • Midas hypothesis, the golden touch • Market – your potential customers • Scale of the gap that you’ve identified • “Exogenous” (external) – everything else (other) Ideas matter, but aren’t everything. To find the best ones, start with many. 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 22
  • 23. From Idea to Opportunity 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 23
  • 24. Idea Classification Matrix Utility & Novelty 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary Value Utility 24
  • 25. Creativity & Design Thinking Neck Chapter 4 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 25
  • 26. Connecting Concepts • Change creates new, unmet Needs • Organizations seek Opportunities to meet Needs • An Innovation is a novel and useful response to an Opportunity • The market, recognizing the Value of an innovation, adopts it Change → Needs → Opportunities → Innovation → Value “Making Valuable Things Happen” = Innovation Creates new value, builds competitive advantage Inherently Creative Problem-Solving Process 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 26
  • 27. Design Thinking • Toolkit for an entrepreneur to solve complex problems for people • A human-centered approach to innovation that brings together what people need with what is technologically feasible and economically viable. • Identify new solutions that meet market needs • Framework and strategy for innovation • Pioneered, popularized by IDEO 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 27
  • 28. Design Thinking Process 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 28
  • 29. Design Thinking Process • System of overlapping phases, not linear • Divergent Thinking – imaginative, playful, relatively unconstrained • Generate many ideas • Develop broad understanding of problem • Convergent Thinking – selective, thoughtful, abstract to concrete • Narrow down ideas • Identify those with the most potential • Goal: Product-Market Fit • Match user needs with solution delivered by the product (value) 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 29
  • 30. Evidence-Based E-ship Neck Chapter 5 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 30
  • 31. Business Model • How a new venture creates, delivers, and captures value, including activities and resources that interact to deliver value to customers • Defined by its strategy and four key components • Business Model Strategies • Innovation – create entirely new market, Facebook → Social Media • Disruption – new way of doing things, MOOCs → Education • Differentiation – stand out products, Yeti → Coolers • Imitation – no advantages, seek differentiation! • Correspond to the idea classification system, L4 N3 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 31
  • 32. Four Parts of a Business Model • Offering – what you are “selling,” the value generated for your customers, and how you will reach and communicate with them • Includes Customer Value Proposition (CVP) • Customers – the people who populate the segments of the market that your offering will serve and are willing to pay for your offering • Must be selective – market segmentation • Infrastructure – all the resources (people, technology, products, suppliers, partners, facilities) required to deliver the value proposition • Financials – the revenue and cost structures needed to cover operating expenses and other financial obligations 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 32
  • 33. Customer Value Proposition (CVP) • Sum total of benefits which customer is paying for • Part of the Offer, perhaps the most important part of your BizMod • To be effective your CVP must: • Offer better value than the competition • Be measurable (to quantify competitive advantage) • Be sustainable • Design Thinking! • Successful CVPs based on deep understanding of user and their needs • Not about persuading customers to buy your solution • Emphasizes how much they are willing to pay for the value 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 33
  • 34. What is a Startup? A temporary organization that is designed to search for a repeatable and scalable business model 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 34
  • 35. Evidence-Based Entrepreneurship (EBE) • EBE is the practice of hypothesizing, testing, and validating • Startups have “runways” – time until they run out of resources ($) • Must validate assumptions quickly and efficiently, learn fast • Corporate planning methods (5-year plans) not relevant • EBE provides the right framework, favoring: • Experimentation over elaborate planning • Customer feedback over intuition • Iterative design over traditional up-front development • Starts with identifying the assumptions in hypothesized opportunity • During the search both the problem and solution will change 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 35
  • 36. Business Model Generation Neck Chapter 5 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 36
  • 37. Business Model Canvas • Created 2008 by Swiss business theorist Alexander Osterwalder • Very popular way to communicate, think through business models • Launched his company Strategyzer, consulting, webinars, etc. • Kicked off a series of books, lots of competitors 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 37 Osterwalder, Alexander, and Yves Pigneur. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons, 2013.
  • 38. 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 38 The Business Model Canvas designed by: Strategyzer AG The makers of Business Model Generation and Strategyzer This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit: http://creativecommons.org/licenses/by-sa/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. strategyzer.com Revenue Streams Customer SegmentsValue PropositionsKey ActivitiesKey Partners Cost Structure Customer Relationships Designed by: Date: Version:Designed for: ChannelsKey Resources https://www.strategyzer.com/canvas/business-model-canvas Offering Customers Financials Infrastructure
  • 39. Left – Delivering Value Partners Activities Resources Costs Right – Creating Value Customer Relationships Customer Segments Channels Revenue Streams 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 39 Business Model = How to Deliver and Capture Value
  • 40. Lean Startup Method Neck Chapter 7 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 40
  • 41. Experimentation • Experiment = test designed to help you answer “big three” questions • Primarily Feasibility and Viability • Desirability is the focus of Design Thinking, some overlap • Neck tries to distinguish experiments and prototypes, confusing • Prototype = experimental model of your product • Communicate look / feel / function for user feedback • Range in “fidelity” from rapid, low-cost models to early releases • Choose right method for stage of development, information needed 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 41
  • 42. Scientific Method Applied 1. Ask lots of questions 2. Carry out background research 3. Develop a hypothesis 4. Test hypothesis by running experiments 5. Analyze the data 6. Assess the results Think like scientist, don’t Act like one! Goal: Use low-cost, quick methods to shape ideas, improve them through rapid iteration. Not to build the perfect experiment. 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 42
  • 43. Experiment using Prototypes Wireframe Button to Nowhere / Landing Page 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 43 Hand Drawn or Software Tools Email sign-up or Click capture
  • 44. Experiment using Prototypes Storyboard Role-Playing 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 44 Sketched Customer Journey Fireball, fireball! Lightning bolt!
  • 45. Experiment using Prototypes Preselling Concierge 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 45 Biggest Kickstarter Campaign Ever Manual Order Fulfillment
  • 46. Lean Startup Method • Most well-known flavor of EBE • Three Step Loop – Build, Measure, Learn • Heavy Emphasis on Measuring Results – organize, analyze, track • Split tests, search engine marketing, funnel analysis • High Cyclic Rate = key competitive advantage • Pivot or Persevere – change need / solution to find product-market fit • “Demo-Sell-Build” is a better approach than “Build-Demo-Sell” • Borrows some elements from Lean Manufacturing • EBE and LSM bring some “discipline” to Innovation 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 46
  • 47. “Achieving Failure” • Happens all. The. TIME. • Businesses assume they… • Know what customers want • Know how much customers are willing to pay • Can predict the future • Will gain mainstream adoption immediately • Etc. • Successfully build a product that customers reject • Personal experience: do not recommend. 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 47
  • 48. Customer Development Neck Chp 6 (4.6, 7.6) 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 48
  • 49. What is Customer Development? • WHAT: Identifying, learning from, and understanding your customers • WHY: Validate assumptions about your imagined problem / solution • HOW: Qualitative (aka market or ethnographic) research • Some Key Questions: • Who are your customers? • How will you reach them? • How can you learn best from them? • How do you interpret the results? • Design Thinking → empathy 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 49
  • 50. What is a Market? • Market: • A set of actual or potential customers • For a given set of products or services • Who have a common set of needs and wants • Who reference each other when making buying decisions • A place where supply meets demand • Physical / virtual location – farmer’s market or online retailer • Grouping of customers – e.g. “the market for women’s jeans” • Market Opportunity: degree of demand in a market for a product 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 50
  • 51. Customer Segmentation • Different groups / organizations an enterprise aims to reach and serve • Grouped by common behaviors or attributes → tailor BMC • Differing needs, channels, relationships, profitability • Customer segments can be defined in four ways: • Who are they? Demographics like age, gender, education, etc. • Where? Where they live and hang out, interact (“watering holes”) • How do they behave? Behavioral and lifestyle habits • What are their needs? Fundamental to the offering • Answers → develop end-user profile 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 51
  • 52. Rogers’ Technology Adoption Life Cycle • Innovators • Enthusiastic, ok with risk • Early Adopters • Gov / Biz buyers • Looking for competitive adv • Early Majority • Practical, risk averse • Mass market opinions • 34% - key to success 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 52
  • 53. Rogers’ Technology Adoption Life Cycle • Late Majority • Skeptical, pessimistic • Simple low-cost products • Laggards • Negative, dislike change • Least likely adopters 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 53 Model can help understand adoption and explain why some products never take off. “The Chasm”
  • 54. Beachhead Market • Concentration of Firepower • Customers in a beachhead market… • Buy similar products • Have similar value expectations • Use word of mouth to communicate with others in similar regions or professional organizations • Small, humble beginnings • Generates sufficient cash flow to win over other markets • Builds traction, reputation, track record 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 54
  • 55. Qualitative Research Tell me if you’ve experienced something like this before: User: You installed my computer. Why didn’t you install the network router, too? Contractor: You said you wanted the computer installed. User: But the computer won’t be of much use without a router. Contractor: You said you wanted the computer installed. I did just what you requested. Getting the problem right is the most important part of the process. Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary Nicholas, J. M., & Steyn, H. (2017). Project Management for Engineering, Business and Technology. Routledge. 11/13/20 55
  • 56. Interviews • Key QR methods: Interviews, Observation • From Neck sections 4.6 and 7.6 • Ch 4 – Design Thinking – Needs • Ch 7 – Experimentation – Feedback • Different context, focus, methods • Both Primary Market Research • “Success starts with understanding your customers.” • Giff Constable, Talking To Humans 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 56 Constable, Giff, et al. Talking to Humans. 2014. Open WorldCat, https://s3.amazonaws.com/TalkingtoHumans/Talking+to+Humans.pdf. TALKING TO HUMANS Success starts with understanding your customers GIFF CONSTABLE with Frank Rimalovski illustrations by Tom Fishburne and foreword by Steve Blank
  • 57. Interviewing “Do’s” • Meet face-to-face, one-on-one • Take notes, preferably done by an assistant • Seek understanding, not answers • Get stories, not speculation / prediction • Use your questions as a guide, not a script – follow the clues! • Be conversational and relaxed, but directed • Actively listen and observe, “parrot” • Record some basic, observable facts about your subject (don’t ask) • Ask who else you should talk to 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 57
  • 58. Interviewing “Don’ts” • Record sessions • Try to sell your idea • Overstay your welcome • Talk (interrupt, give answer / opinion, fill empty space) – Listen! • Seek validation or get defensive / argumentative • Miss / ignore important unexpected discoveries • Talk about pricing 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 58
  • 59. Empathy Map – Say, Do, Think, and Feel Structured Interpretation of Interviews • Collate / integrate data • Uncover surprising insights • Identify: • Unmet needs • Frustrations, pain points • Areas for improvement • Different perspectives • Question assumptions • Get into someone else’s head 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 59
  • 60. Product Development Process Ulrich Chapter 1, 2 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 60
  • 61. What is Product Development (PD)? • Economic success of most firms depends on their ability to: • Identify customer needs • Create products that meet those needs profitably • 3520 focus has been on concept development – “front end” process • Provide context and introduce topics that 3510 will focus on 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 61 The set of activities beginning with the perception of a market opportunity and ending in the production, sale, and delivery of a product.
  • 62. Measures of Successful PD • Product Quality • Ultimately reflected in market share, price customers willing to pay • Product Cost • Determines profit for given volume and price • Development Cost • Significant part of the overall investment • Development Time • Determines firm’s “responsiveness,” and time to investment return • Development Capability • Institutional knowledge and capability are important assets 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 62
  • 63. Stakeholder Interests • Stakeholder = anyone with a vested interest in the product • Development team wants to make an interesting product • Manufacturing community interested in job creation • Product users expect high safety standards • Regulators require compliance with myriad regulations • Executives insist the product is in line with company values / vision • Public expects the firm to prioritize sustainability Stakeholder Categorization & Prioritization critical 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 63
  • 64. Product Development Team Interdisciplinary effort with three primary team functions • Marketing • IDs customer needs and opportunities, defines market segments • Customer communication, pricing, launch and promotion • Design • Engineering – mechanical, electrical, software, etc. • Industrial – aesthetics, ergonomics, user interface, etc. • Manufacturing • Designing, operating / coordinating production • Includes purchasing, distribution, and installation (supply chain) 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 64
  • 65. Challenges of Product Development • Few companies are successful more than half of the time • Trade-offs – vehicle weight vs manufacturing and testing costs • Dynamics – changing technology, customer preferences • Details – which part to use x thousands of parts • Time Pressure – quickly without complete information • Economics – profit a function of costs, price, sales volume • Further complicated by organizational realities – resources, agendas, leadership, priorities, culture, etc. • All relate to problem-solving, decision-making; analytical and creative 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 65
  • 66. Product Development Process • Steps employed to conceive, design, and commercialize a product • Benefits of a well-defined process: • Quality Assurance – checkpoints / gates build in oversight • Coordination – clarifies roles and expectations • Planning – includes scheduled milestones • Management – provides benchmarks for assessing performance • Improvement – via documentation and review • Functions: information processing, risk management 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 66
  • 67. Generic Product Development Process 1. Planning • Strategy → Opportunity Identification → “Mission Statement” • Target market, business goals, key assumptions, constraints 2. Concept Development • Needs identification and concept generation, screening, selection • Describe form, function with specs, benchmarks, and financials 3. System-Level Design – architecture, functional decomposition 4. Detailed Design 5. Testing and Refinement 6. Production Ramp-Up 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 67
  • 68. Tailoring • Particular processes will differ by unique context of firm and project • “Tailoring” = adapting a generic method to specific circumstances 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 68
  • 69. Trends in PD Processes • Design Thinking – user-centered approach • Development Speed – digital facilitation • Platform Leverage – modular components • Outsourcing / Offshoring – globalization • Lean Principles – production, startup, agile • Open Innovation – open source, etc. • Sustainability – environmentally responsible design • Business Model Innovation – whole product view 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 69
  • 70. Specs & Benchmarking Ulrich Chapter 6 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 70
  • 71. What are Specifications? • Customer needs expressed in their native language, subjective • “the suspension is easy to install” • “the suspension enables high-speed descents on bumpy trails” • Product specifications are specific, measurable, objective • Specification = Metric + Value(s) + Units • Ex: “the average time to assemble is less than 75 seconds” • Must translate customer needs into product specifications, evolve • Target Specs – initial, aspirational, prior to constraints • Final Specs – end result of refinement, trade-offs 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 71
  • 72. Collect Benchmarking Data • Target specs relate user needs to competitive product position • Data on competing products used to support positioning decisions • User needs → metrics → benchmarks → specifications → design • Online research and catalogs not ideal • Purchase, test, disassemble, analyze • Two methods • Benchmark against Customer Needs • Benchmark against Metrics 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 72
  • 73. Dynamics of Product Specifications • Target specs change for many reasons • Customers change • Competitors respond • Technical capabilities improve • Designs evolve as details develop • Tradeoffs and conflicts become apparent • Start with marginal and ideal values (aspirational) • Learn what it is feasible to deliver before setting final specs… When? • EARLY if competing on cost, performance; LATE if on market match 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 73
  • 74. Concept Generation Ulrich Chapter 7 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 74
  • 75. Concept Generation • Concept = approximate description of the technology, working principles, and form of the solution • Concise description of how the product will satisfy customer needs • Expressed as sketch / model accompanied by text description • Product success depends largely on quality of underlying concept • Relatively quick, inexpensive part of overall product development • Typically less than 5% of budget and 15% of development time • Customer needs and target specs → Concepts for final selection • Hundreds of concepts → 5-10 worth serious consideration 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 75
  • 76. Design Freedom & Cost of Changes Cost of Change Increases Rapidly Number of Options Decreases Rapidly Explore Broadly Early! 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 76
  • 77. Pitch Decks Neck Supplement B 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 77
  • 78. Presentations • Components • Content – the information you want to convey • Script – spoken words that are the core of your presentation • Slides (“Deck”) – the visual aide(s) that support your presentation • Delivery – pace, dress, interaction, drama, style, etc. • Content > Script > Slides • Must be selective • Script = content most important / relevant to audience • Slides = highlights and visualizations of script • Script ≠ Slides! Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 78
  • 79. Guidelines • Slides • Readable! 28pt minimum for standard fonts • Be visual – good graphics that support the story • The less words the better • Also harder – memorization, time constraints, confidence • Effective, attractive design • Use of color, consistent formatting • Choice and number of fonts • Leverage available templates, avoid stock template • Use animation sparingly (rarely) Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 79
  • 80. Pitch Deck Design • From Entrepreneurship: The Practice and Mindset • Sample pitch deck is not ideal – somewhat lacking in depth / detail, ignores earlier advice (font size, etc.) • Aim higher! • Pitch – Very specific type of presentation • Act of clearly presenting & describing a product or service • Purpose is to stimulate interest, not to close a deal Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary11/13/20 80
  • 81. Our Project Template 1. Title Page including Company and Product Name, Logo 2. Impact and Charter Statements 3. Idea → Solution → Concept 4. Innovative elements / unique strengths of the Business Model 5. Key Assumptions related to Desirability, Feasibility, Viability 6. Why Now? – Timing, Trends, or Competitive Advantage 7. Customer Discovery – Beachhead, End User Profile 8. Benchmarks 9. Team – Names and Team Role (not major / college) 10. Summary with Call to Action 11. Closing followed by necessary supporting slides 11/13/20 Thomas Walter Center, Industrial & Systems Engineering, Auburn University - BET 3520 Fall 2020 Summary 81