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Agile innovation and Thinking Like a Startup

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Many enterprises are struggling to innovate whilst smaller startups are disrupting the market. Existing organisational business models work well in a known and predictable environment. However, these approaches fail when applied to an uncertain and changing environment.

In this session I will discuss the different approaches and how an organisation can balance a portfolio that both can exploit existing opportunities while enable the exploration of new opportunities.

I will draw on my experience working with some innovation teams in an enterprise and how we are re-focusing agile back to its roots and thinking like a startup to evolve the way we work.

Participants will also gain an understanding how Design Thinking/Human Centred Design, Lean Startup, Agile and Business Model Innovation can blended together to transform the way you work to enable innovation within larger enterprises.

Published in: Business

Agile innovation and Thinking Like a Startup

  1. 1. 1 Chris Chan Agile Innovation Thinking Like A Startup
  2. 2. 2 I AM @c2reflexions c2reflexions.com Conference www.agilecoachcampaustralia.org Meetup User Groups Agile Coaching Circles: www.meetup.com/AgileCoach Lean Coffee: www.meetup.com/Melbourne-Lean-Coffee Large-Scale Scrum (LeSS): www.meetup.com/LargeScaleScrum
  3. 3. 3 What does innovation mean? Chris Chan | @c2reflexions
  4. 4. 4 “Coming up with something new and useful” Chris Chan | @c2reflexions (it’s profitable application of creativity)
  5. 5. 5 Why do new ideas fail?  “I know what the customer wants”  “Build and they will come”  Focus on execution instead of learning  Measures of false progress  Premature Scaling  Late feedback; Management by crisis Market Research Chris Chan | @c2reflexions
  6. 6. 6 2 questions that “real” innovation KILL “What’s the ROI?” and “When will I see it?” Chris Chan | @c2reflexions
  7. 7. 7 Chris Chan | @c2reflexions
  8. 8. 8 Pace of Change around us overtakes organisation’s rate of learning -- Eddie Obeng Chris Chan | @c2reflexions
  9. 9. 9 “We spend our time responding rationally to a world which we understand and recognize, but which no longer exists.” -- Eddie Obeng Chris Chan | @c2reflexions
  10. 10. 10 Are you’re a responsive organisation? Chris Chan | @c2reflexions
  11. 11. 11 Chris Chan | @c2reflexions Responsive Organizations are built to learn and respond rapidly through the open flow of information; encouraging experimentation and learning on rapid cycles; and organizing as a network of employees, customers, and partners motivated by shared purpose. www.responsive.org/manifesto
  12. 12. 12 How do you explore new opportunities in an existing enterprise business? Chris Chan | @c2reflexions
  13. 13. 13 Exploration - StartupExploitation - Existing Business A company is a permanent organisation designed to execute a repeatable and scalable business model. A startup is a temporary organisation designed to search for a repeatable and scalable business model. Chris Chan | @c2reflexions
  14. 14. 14 Business Model Innovation In Existing Companies EXPLOITATION EXPLORATION Known Predictable Unknown Organic Execution ROI Plan Forecasts Traditional business methods are suitable Search Experiment Build Measure Learn Traditional business methods fail Teams Chris Chan | @c2reflexions
  15. 15. 15 We can’t create a plan to predict the future. We need discovery driven learning, where you act as opposed to plan your way to the future.
  16. 16. 16 Develop a Pipeline of Business Models using Three Horizons HORIZON 1HORIZON 2HORIZON 3 Chris Chan | @c2reflexions IDEAS Moore, Geoffrey A. Escape Velocity: Free Your Company's Future from the Pull of the Past. Execute • Existing Business Model • Known • Today’s cash flow Execute/ Search • New opportunities via Business Model Innovation • Partially known • Test Business Model • Today’s revenue growth + tomorrow’s cash flow Search • New / Disruptive Business Model • Unknown • Seed future growth options
  17. 17. 17 Agile Manifesto: Culture of Learning, Not Just Delivery http://agilemanifesto.org
  18. 18. 18 Agile in the Age of Learning and Innovation Agile 2001* Agile Today Individuals & Interactions Safety is a must for high performance Customer Collaboration Make Customers Awesome Deliver Value, Respond to Change Experiment & Learn Rapidly * 2001 is the year the Agile Manifesto was created
  19. 19. 19 Through learning we re-create ourselves. Through learning we become able to do something we were never able to do. Peter Senge Author The Fifth Discipline, 1990 Chris Chan | @c2reflexions
  20. 20. 20 ExplorationExploitation
  21. 21. 21 The Team is a Mini-Startup The team is the foundation to a Culture of Innovation Chris Chan | @c2reflexions
  22. 22. Is your team really a team?
  23. 23. 23
  24. 24. Two prerequisites to becoming a team: 1. Team Purpose 2. Interdependence among members
  25. 25. 25 Performance / Impact Adapted from Katzenback & Smith, The Wisdom of Teams, 2003 Working Group Team Effectiveness Potential Team Pseudo Team Real Team Great Team / High Performing Team 5 Levels of teamwork Chris Chan | @c2reflexions
  26. 26. 26 Performance / Impact Working Group Team EffectivenessPseudo Team Great Team / High Performing Team 5 Levels of teamwork Working Group The members interact primarily to share information, best practices, or perspectives and to make decisions to help each individual perform within his or her area of responsibility. There are no common purpose or performance goals that require mutual accountability. Potential Team Real Team Adapted from Katzenback & Smith, The Wisdom of Teams, 2003 Chris Chan | @c2reflexions
  27. 27. 27 Performance / Impact Working Group Team EffectivenessPseudo Team Great Team / High Performing Team 5 Levels of teamwork Pseudo Team There’s a potential for significant, incremental gain. The team has not focused on collective performance and is not really trying to achieve it. The members don’t want to take the risks necessary to become a potential team. They have no interest in shaping a common purpose or set of performance goals. What is especially dangerous about the pseudo team is that the members believe that they are a real team, yet they produce inferior results. Potential Team Real Team Adapted from Katzenback & Smith, The Wisdom of Teams, 2003 Chris Chan | @c2reflexions
  28. 28. 28 Performance / Impact Working Group Team EffectivenessPseudo Team Great Team / High Performing Team 5 Levels of teamwork Potential Team This is a group for which there’s a significant, incremental performance need. The members are really trying to improve its performance impact. However, the members must work on developing a clear purpose, goals, and common approach. It has not yet established collective accountability. Potential Team Real Team Adapted from Katzenback & Smith, The Wisdom of Teams, 2003 Chris Chan | @c2reflexions
  29. 29. 29 Performance / Impact Working Group Team EffectivenessPseudo Team Great Team / High Performing Team 5 Levels of teamwork Real Team This is a small number of people with complementary skills who are equally committed to a common purpose, goals, and working approach for which they hold themselves mutually accountable. Potential Team Real Team Adapted from Katzenback & Smith, The Wisdom of Teams, 2003 Chris Chan | @c2reflexions
  30. 30. 30 Performance / Impact Working Group Team EffectivenessPseudo Team Great Team / High Performing Team 5 Levels of teamwork High Performing Team This has all the characteristics of a real team, but the members are deeply committed to one another’s personal growth and development. They far out- perform all other teams. The members form powerful relationships. Moving from a real team to a high performance team requires a very strong personal commitment. They outperform all reasonable expectations given its membership Potential Team Real Team Adapted from Katzenback & Smith, The Wisdom of Teams, 2003 Chris Chan | @c2reflexions
  31. 31. 31 What ingredients make up an innovative team?  Safety  Anatomy of the team  How do we task the team  Incentives  Decision Making  Learning  Funding the team  How should the team work Chris Chan | @c2reflexions
  32. 32. 32 Chris Chan | @c2reflexions
  33. 33. 33 People Operations (HR)  Dubbed ‘Project Aristotle’  2 year study  200+ interviews  250 attributes  180+ active Google teams https://rework.withgoogle.com/blog/five-keys-to-a-successful-google-team/ Chris Chan | @c2reflexions
  34. 34. 34 We were pretty confident that we'd find the perfect mix of individual traits and skills necessary for a stellar team. Who is on a team matters less than how the team members interact, structure their work, and view their contributions Julia Rozovsky, Google People Operations Analyst Chris Chan | @c2reflexions
  35. 35. 35 Chris Chan | @c2reflexions
  36. 36. 36 Psychological safety was far and away the most important of the five dynamics we found -- it’s the underpinning of the other four. Chris Chan | @c2reflexions
  37. 37. 37 Feeling safe in the workplace helps encourage the spirit of experimentation so critical for innovation. https://hbr.org/2015/12/proof-that-positive-work-cultures-are-more-productive Amy Edmondson, Harvard Chris Chan | @c2reflexions
  38. 38. 38 In a startup ‘fear of failure’ drives speed and urgency. In a large company ‘fear of failure’ inhibits speed and risk. Steve Blank
  39. 39. 39 Chris Chan | @c2reflexions
  40. 40. 40 IDEO Company Culture Chris Chan | @c2reflexions
  41. 41. 41 Blameless Retrospectives  Requires Psychological Safety  View mistakes, errors, slips, lapses, etc. with a perspective of learning  Learn the facts without fear of punishment or retribution  Critical for “real” continuous improvement and learning
  42. 42. 42 Retrospective Prime Directive Regardless of what we discover, we understand and truly believe that everyone did the best job he or she could, given what was known at the time, his or her skills and abilities, the resources available, and the situation at hand www.retrospectives.com/pages/retroPrimeDirective.html
  43. 43. 43 Anatomy of a Team  Small (Amazon two pizza team)  Co-located (reduce feedback loop & hand-offs)  Dedicated team members  Cross Functional (T-Shaped People) • Exploit specialisation where possible, break it when it becomes a bottleneck Chris Chan | @c2reflexions
  44. 44. 44 Task Teams to Achieve Business Outcomes  Business outcomes are measurable changes to customer behaviour. They are objective measures to success.  Give teams a problem to solve, not a solution to implement.  Specify “true north” and let teams figure out how to achieve the goals and move the needle.  Empower teams, not individuals. Chris Chan | @c2reflexions
  45. 45. 45 Re-defining “Done” Agile 2001 Style Chris Chan | @c2reflexions
  46. 46. 46 Success is a feature or shipping a product... …it’s how to a customer’s problem Chris Chan | @c2reflexions
  47. 47. 47 Re-defining “Done” Agile Today Style Chris Chan | @c2reflexions Make customers awesome!
  48. 48. 48 Photo: Andiyan Lutfi Majority of work is done in teams “Individual performance is not just overrated. In organisations, it simply doesn’t exist” - Niels Pflaeging, Organize for Complexity Chris Chan | @c2reflexions
  49. 49. 49 Team Based Incentives  Teams are accountable for the outcomes (not output)  Value arises from the interaction between various individuals, or within teams.  Collective applied competencies and abilities in the system that make a difference.
  50. 50. 50 IDEO Company Culture Chris Chan | @c2reflexions
  51. 51. 51 Decentralise decision making  Move decision making and authority to information  Time critical  Closest to the customer  Frequent  Autonomy  Psychological ownership Customer Information Authority Chris Chan | @c2reflexions
  52. 52. 52 Teams are Optimised for Learning  Learn first, then delivery  Organisations learn only through individuals who learn  Employees skilled at creating, acquiring and transferring knowledge  Learning organisations are able to adapt to the unpredictable more quickly than their competitors could  It’s SAFE to be wrong Growth Mindset When I fail, I learn Chris Chan | @c2reflexions “People are born fairly skillless. But we have an extraordinary meta-skill to acquire new skills” - Bas Vodde
  53. 53. 53 Change the Funding Model What we say is that we don’t exactly know what we’re going to do, but we know there is an opportunity to do something. We have tried to move away from highly defined business cases that state this is exactly what you’ll get, as teams feel very constricted by that. It’s a simple, high-level target that you then give to the team, along with funding, to get going. They then feel less constrained and feel more able to experiment and innovate. - Cameron Gogh, Australia Post GM, Digital Delivery Centre Capacity Funded Investment Chris Chan | @c2reflexions www.cmo.com.au/article/595460/making-digital-new-way-innovating-australia-post
  54. 54. 54 Incremental Learning = Incremental Funding  Information discovery has value  It is the price we would be willing to pay to know something that we don’t already know. • Whether something works or not. • Whether something has value or not. • It is the value of avoiding a potentially long trip down the wrong path. Chris Chan | @c2reflexions
  55. 55. 55Fund Teams to Achieve Business Outcomes, Not Pieces of Work Stakeholders & Investment Committee Small bite, continuous funding blocks Team What have we learned? What outcomes did we achieve? What other experiments do we need? What have we learned about benefits and costs? secure funding Chris Chan | @c2reflexions Decisions based on objective observations & evidence Change Customer Behaviour, Measure outcomes (move the needle) & Validate Business Model
  56. 56. 56 And finally….. …..how should the team work? Chris Chan | @c2reflexions
  57. 57. 57 ExplorationExploitation
  58. 58. DESIGN THINKING
  59. 59. What was the best gift you have received? Why? Chris Chan | @c2reflexions
  60. 60. Design thinking is about building a deep empathy with the people you are designing for. It starts with people – what we call human centered design – and applies the creative tools of design, like story-telling, prototyping and experimentation to deliver breakthrough new innovations. Tim Brown, IDEO Chris Chan | @c2reflexions
  61. 61. 62 Chris Chan | @c2reflexions
  62. 62. 63 Chris Chan | @c2reflexions
  63. 63. Desirability FeasibilityViability Human Do customers even want this? Do they really need it? Technology Can we afford it? Will it bring us long term benefits? Business Do we have the capability to pursue this? Does the technology exist today? Chris Chan | @c2reflexions
  64. 64. 65 Design Thinking Process Chris Chan | @c2reflexions Stanford d.school
  65. 65. 66 Chris Chan | @c2reflexions
  66. 66. 67 Chris Chan | @c2reflexions
  67. 67. LEAN STARTUP
  68. 68. 69 Published September 2011 BUILDLEARN MEASURE  Experiment and test relentlessly  Validate your riskiest assumptions  Fail fast to succeed sooner  Learn from customer feedback Chris Chan | @c2reflexions
  69. 69. 70 Experiments  Fast and cheap  Learn rapidly  Validate assumptions and hypothesis  Don't build a product unless you can validate it  Fail fast, to succeed sooner Chris Chan | @c2reflexions
  70. 70. 71 Failure is Success if we Learn from It Breakthrough insights are usually hidden within failed experiments. “There is no such thing as a failed experiment – only unexpected outcomes.” - Buckminster Fuller, Architect & Inventor Chris Chan | @c2reflexions
  71. 71. 72 Unexpected Outcomes need to be Declared Upfront “If you simply plan on seeing what happens, you will always succeed at seeing what happens.” - Eric Ries, The Lean Startup Chris Chan | @c2reflexions
  72. 72. 73 BUILDLEARN MEASURE Chris Chan | @c2reflexions Δ
  73. 73. 74 BUILDLEARN MEASURE Chris Chan | @c2reflexions HYPOTHESIS1 PREDICTION2 EXPERIMENT3 OBSERVATION4 Δ Learning
  74. 74. 75 Pirate Metrics Acquisition Activation Retention Revenue Referral User is interested User comes back and uses the product User converts to a paying customer User shares with others User signs up and completes key activity Dave McClure Chris Chan | @c2reflexions UnwareVisitor Passionate, Happy Customer
  75. 75. 76 Chris Chan | @c2reflexions Hopeful Activation Revenue Happy Customer Retention Passionate Referral Actually, in reality the funnel is non-linear Aware & interested Acquisition Customer Factory
  76. 76. 77 Chris Chan | @c2reflexions
  77. 77. 78 Minimal Viable Product (MVP)  A MVP is the version of a new product that generates the maximum amount of validated learning when experimenting with customers with the least effort  The goal is to test fundamental hypotheses (or leap of faith assumptions) and begin the learning process as fast of possible  Enables evidence based decision to persevere with existing business model, pivot or explore a new way to achieve the vision or stop Chris Chan | @c2reflexions
  78. 78. 79 How Not to Build a MVP Chris Chan | @c2reflexions
  79. 79. 80 Is this how to build an MVP? Chris Chan | @c2reflexions
  80. 80. 81 How about this? Chris Chan | @c2reflexions
  81. 81. 82 The MVP is much more minimum than you think! Minimal Viable Customer Experience Minimum Scalable Product Continually Optimised Product Chris Chan | @c2reflexions
  82. 82. 83 How To Build a MVP Chris Chan | @c2reflexions Minimal Viable Customer Experience Minimum Scalable Product Continually Optimised Product 1 2 3 4 5 6 7 Focus: Validated Learning Experiments: Pivots Focus: Growth Experiments: Optimisations
  83. 83. with real customers, partners and vendors Get out of the building and Test each hypothesis Chris Chan | @c2reflexions
  84. 84. 85 It’s all about the Evidence  Prove you have a consistent customer problem  Prove your solution will solve the customer problem  Prove that you can acquire customers  Prove that customers will pay  Prove that you can deliver the solution for less than what the customer will pay  Prove that you can scale (only after proving other points)
  85. 85. Don’t scale execution until you’ve VERIFIED the business model or changed customer behaviour Seeking benefits/profit too early is a pre-optimisation trap
  86. 86. BUSINESS MODEL INNOVATION
  87. 87. A business model describes how your company creates, delivers and captures value. - Alex Osterwalder Or in English: A business model describes how your company makes money.
  88. 88. Business Models used to be Static A business plan is an operating document and describes the execution strategy for addressing known customers, market and product features. When discovering or innovating, the objective is to validate the business model hypotheses.
  89. 89. 90 Chris Chan | @c2reflexions Lean Canvas  Adapted from the Business Model Canvas for Lean Startup  What’s different: • Focus on problem & solution • Added unfair advantage • Makes the assumption that product/market fit is the riskiest hypotheses that must be tested Problem Solution Key Metrics Unfair Advantage
  90. 90. Cost Structure Customer Acquisition costs Distribution costs Hosting People, etc. Revenue Streams Revenue Model Life Time Value Revenue Gross Margin Problem Top 3 problems Solution Top 3 features Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states why you are different and worth paying attention Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target customers PRODUCT MARKET
  91. 91. Cost Structure Customer Acquisition costs Distribution costs Hosting People, etc. Revenue Streams Revenue Model Life Time Value Revenue Gross Margin Problem Top 3 problems Solution Top 3 features Key Metrics Key activities you measure Unique Value Proposition Single, clear, compelling message that states why you are different and worth paying attention Unfair Advantage Can’t be easily copied or bought Channels Path to customers Customer Segments Target customers PRODUCT MARKET GUESS GUESS GUESS
  92. 92. Problem The top 3 problems the customer is facing today Could be jobs customers need done. Understand how customers address these problems today. Chris Chan | @c2reflexions
  93. 93. Customer Segments Narrow group of people that buy/use your product. Object is to define an early adopter, not a mainstream customer. Chris Chan | @c2reflexions
  94. 94. Unique Value Proposition Why are you different and worth getting attention? Single, clear compelling message that turns an unaware customer into an interested prospect. It’s not selling; it’s getting a prospect’s attention. Chris Chan | @c2reflexions
  95. 95. Solution Sketch out the simplest thing you could possibly build to address each problem of the customer. What is the minimum viable product (MVP)? Chris Chan | @c2reflexions
  96. 96. Channels How does the customer learn about the product? SEO, Direct Sales, Tradeshows/Events, Blog, Meetups Chris Chan | @c2reflexions
  97. 97. Revenue Streams How much is the problem worth to the customer? Not how much it costs you to implement the solution. Chris Chan | @c2reflexions
  98. 98. Cost Structure What are your people costs? Marketing channel costs? Infrastructure costs? Chris Chan | @c2reflexions
  99. 99. Key Metrics What are the one or two indicators that your product is successful (Pirate Metrics) Chris Chan | @c2reflexions
  100. 100. Unfair Advantage “A real unfair advantage us something that cannot be easily copied or bought” Hardest to fill out so left for last Its here to make you really think how you can/will make yourself different and make your difference matter Chris Chan | @c2reflexions
  101. 101. 10 2 Three Stages of a Innovation Stage 1 Stage 2 Stage 3 Chris Chan | @c2reflexions
  102. 102. Validate Problem/Solution Fit Do I have a problem worth solving?Chris Chan | @c2reflexions
  103. 103. Achieve Product/Market Fit I have built something people want? Chris Chan | @c2reflexions
  104. 104. Scale! How do I accelerate growth? Chris Chan | @c2reflexions
  105. 105. 10 6 Experiment Dashboard
  106. 106. 10 7 Systematically de-risk your vision
  107. 107. INTEGRATING IT ALL
  108. 108. 10 9 Experiments Lean StartupDesign Thinking Agile & Continuous Delivery Business Model Innovation Develop an actionable and entrepreneur-focused business plan Scale Optimise and grow the product Market Fit Business model validation (MVP) Solution Fit Solution fit for customer problem Problem Customer problem definition Discover Ideas & customer opportunity Chris Chan | @c2reflexions Learning Team
  109. 109. LEARNING has to be core in your corporate DNA. The only SUSTAINABLE competitive advantage is the ability to learn faster than our competitor. Its about building a learning mindset that enables your organisation to adapt continuously. Chris Chan | @c2reflexions
  110. 110. 11 1 FASTEST Chris Chan | @c2reflexions
  111. 111. Lessons Learned • Innovation is as odd to the execution machine inside of existing companies • Companies need different policies, procedures and incentives designed for innovation • Teams are foundation to innovation • 4 interrelated approaches for innovation – Design Thinking – Lean Startup – Agile – Lean Canvas • Create a culture of learning and experimentation Chris Chan | @c2reflexions
  112. 112. 11 3 @c2reflexions c2reflexions.comI hope to be a disruptive force to those who think the way we develop products and services is just fine

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