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Designing and Understanding Business

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How to understand how design and business fit together (and don't). Understanding how a market changes everything about how you design.

From my General Assembly User Experience Class Series

Published in: Design
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Designing and Understanding Business

  1. 1. Understanding and Designing Business with “requirements gathering”
  2. 2. Last week• Questions?
  3. 3. Tomorrow• Bring your all the post its with user needs and desires• Bring all the post its you’ll generate tonight of what the business currently has, and what it plans to build• Reading: Chapt 6 of Design is Job (preferably the whole thing– 9 bucks for the digital copy!)
  4. 4. Discuss• Questionaire
  5. 5. 10 Questions1. Exactly what problem will 6. Why now? (market window) this solve? (value 7. How will we get this product proposition) to market? (go-to-market2. For whom do we solve that strategy) problem? (target market) 8. How will we measure3. How big is the opportunity? success/make money from (market size) this product?4. What alternatives are out (metrics/revenue strategy) there? (competitive 9. What factors are critical to landscape) success? (solution5. Why are we best suited to requirements) pursue this? (our 10. Given the above, what’s the differentiator) recommendation? (go or no- go)Marty Cagen http://www.svpg.com/blog/files/assessing_product_opportunities.html
  6. 6. Business is from Mars, Design from Venus Deductive Reasoning Abductive Reasoning “Traditional firms utilize and “Designers value highly a reward the use of two kinds third type of logic: abductive of logic. The first, inductive, reasoning. Abductive entails proving through reasoning, as described by observation that something Darden professor Jeanne actually works. The second, Liedtka, embraces the logic deductive, involves proving -- of what might be. through reasoning from principles -- that something This style of thinking is must be.” critical to the creative process.”http://www.businessweek.com/innovate/content/aug2005/di20050803_823317.htm
  7. 7. Designers can make great leaps forward
  8. 8. But the business folks can be left behind
  9. 9. Critical thinking can also help you with their ideas How many have you thought about aclient or a boss “That’s a moronic idea” Can you build a bridge to their goal?
  10. 10. Yes, and AND7
  11. 11. Step Back Think Organize Proceed The Inner Game of Stress: Outsmart Lifes Challenges and Fulfill Your Potential by W. Timothy Gallwey8
  12. 12. Tools for Thinking• Clarification: Do I understand what you are saying?• Understanding: Do I understand your thinking• Context: Do I understand the world we are acting in?• Evidence: What tells me this is right?
  13. 13. For Clarification, try Active Listening • Repeat • Paraphrase • Extend
  14. 14. For Understanding, try Five WhysMy car will not start. (the problem) Why? - The battery is dead. (first why) Why? - The alternator is not functioning. (second why) Why? - The alternator belt has broken. (third why) Why? - The alternator belt was well beyond its useful service life and has never been replaced. (fourth why) Why? - I have not been maintaining my car according to the recommended service schedule. (fifth why, a root cause) Why? - Replacement parts are not available because of the extreme age of my vehicle. (sixth why, optional footnote)
  15. 15. A little about MarketsCONTEXT
  16. 16. One Word: Plastics
  17. 17. Why the one word?• Opportunity• Brand Completeness• Blocking competition• Raising money• Curiosity
  18. 18. Types of Opportunities/Ideas Better Cheaper Niche NewI can do it I can do it I can do it You neverbetter cheaper for you knew you needed it
  19. 19. How big is the opportunity? Total Available Market (TAM) • How many people would want/need the product?Total Available • How large is the marketMarket (TAM) be (in $’s) if they all bought? • How many units would that be? How Do I Find Out? • Industry Analysts – Gartner, Forrester • Wall Street Analysts – Goldman, Morgan
  20. 20. How big is my slice? Served Available Market (SAM) • How many people need or Served can use product?Total Available Available • How many people have MarketMarket (TAM) the money to (SAM) buy the product • How large would the market be (in $’s) if they all bought? • How many units would that be? How Do I Find Out? • Talk to potential customers
  21. 21. Your idea is worthless aloneIdea Execution Timing Dumb Luck
  22. 22. What business will you be in?MARKETS
  23. 23. Customer Development Customer DevelopmentCustomer Customer Customer CompanyDiscovery Validation Creation Building Steven Gary Blank, Four Steps to the Ephinany
  24. 24. Who are your customers? • How many of them are there? • Are they price sensitive? • How big is their problem? • How often do they have the problem? • How do they solve it today?
  25. 25. New Product Conundrum• New Product Introductions sometimes work, yet sometimes fail – Why? – Is it the people that are different? – Is it the product that are different?• Perhaps there are different “types” of ventures?
  26. 26. Three Types of Markets Existing Market Resegmented New Market Market• Who Cares?• Type of Market changes EVERYTHING• Sales, marketing and business development differ radically by market type
  27. 27. Existing: founded 1938
  28. 28. Competitor founded 1972
  29. 29. Competing in an Existing Market• Faster/Better• High end• Somewhere else
  30. 30. Resegmented
  31. 31. Gap’s new entry
  32. 32. Competing by resegmenting• Niche = marketing/branding driven• Cheaper = low end
  33. 33. New Market?
  34. 34. NewNew Existing Resegmented
  35. 35. New Market• Cheaper/good enough can create a new class of product/customer• Innovative/never existed before
  36. 36. John Gourville, Eager Sellers and Stony Buyers (2006)
  37. 37. Deadpool
  38. 38. Type of Market Changes Everything Existing Resegment New Market ed Market Market• Market • Sales • Customers – Market Size – Sales Model • Needs – Cost of Entry – Margins • Adoption – Sales Cycle – Launch Type – Chasm Width – Competitive • Finance Barriers • Ongoing Capital – Positioning • Time to Profitability
  39. 39. Choose your idea stupid The holy grail Ability to provide unique product bankrupt compete on price or service Value to customerFrom Guy Kawasaki, Art of the Start
  40. 40. Who are your customers? What is your market? How big is the opportunity?ExerciseWHAT IS YOUR IDEA?
  41. 41. How do we make money?BUSINESS MODELS
  42. 42. Business creates value for which they receive money Money allows them the resources to provide value
  43. 43. Who are you users?WHAT DO YOU USERS HAVE TO DO?
  44. 44. Marketplace Model Advertising Model Affiliate Model Community ModelSubscription Model
  45. 45. I have always been a woman who arrangesthings,for the pleasure–and the profit–it derives.I have always been a woman who arrangesthings,like furniture and daffodils and lives.Marketplaces bring buyers andsellers together and facilitatetransactions. They can play a role inbusiness-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually amarketplace charges a fee orcommission for each transaction itenables.
  46. 46. Can I trust I want the this seller? best price!I want to find things! I’ll go where the buyers are Users must find products, evaluate seller, and make a purchase
  47. 47. Advertising ModelThe web advertising model is anupdate of the one we’re familiarwith from broadcast TV. The web“broadcaster” provides contentand services (like email, IM,blogs) mixed with advertisingmessages. The advertisingmodel works best when thevolume of viewer traffic is largeor highly specialized.
  48. 48. Users must:• Notice advertising• Interact with adPreconditions: User must visit advertising locationShare their demographic informationTypes:CPMCPCCPA
  49. 49. Community ModelThe viability of the communitymodel is based on user loyalty.Revenue can be based on the saleof ancillary products and services orvoluntary contributions; or revenuemay be tied to contextualadvertising and subscriptions forpremium services. The Internet isinherently suited to communitybusiness models and today this isone of the more fertile areas ofdevelopment, as seen in rise ofsocial networking. Open Source Red Hat, OpenX Open Content Wikipedia, Freebase
  50. 50. Users need to • Create an identity • Connect with other users • Build a reputation • Create and share content/work/etcUsers must care
  51. 51. Subscription ModelUsers are charged a periodic—daily,monthly or annual—fee to subscribeto a service. It is not uncommon forsites to combine free content with“premium” (i.e., subscriber- ormember-only) content. Subscriptionfees are incurred irrespective ofactual usage rates. Subscription andadvertising models are frequentlycombined.Content ServicesSoftware as a ServiceInternet Services Providers
  52. 52. User must: • Able to evaluate the offering • Subscribe and unsubscribe to offering • Realize value offered
  53. 53. CombosAdvertising Community
  54. 54. CombosAdvertising Community Subscription
  55. 55. CombosMarketplace Community Affiliate
  56. 56. Prioritize and SequencePattern: Wikipedia:User gets value Looks up contentUser returns, gets more Keeps finding more value contentUser reciprocates Sees error, corrects User adds content User donates User contributes money
  57. 57. Marketplace Model Advertising Model Affiliate Model Community Model Subscription ModelExerciseHOW DO YOU MAKE MONEY?
  58. 58. 10 Questions1. Exactly what problem will 6. Why now? (market window) this solve? (value 7. How will we get this product proposition) to market? (go-to-market2. For whom do we solve that strategy) problem? (target market) 8. How will we measure3. How big is the opportunity? success/make money from (market size) this product?4. What alternatives are out (metrics/revenue strategy) there? (competitive 9. What factors are critical to landscape) success? (solution5. Why are we best suited to requirements) pursue this? (our 10. Given the above, what’s the differentiator) recommendation? (go or no- go)Marty Cagen http://www.svpg.com/blog/files/assessing_product_opportunities.html
  59. 59. Questions? @cwodtke cwodtke@eleganthack.com

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