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Discovery Driven Planning for new ventures, products and services

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New ventures are inherently uncertain—whether you're starting a new business, creating a new product or launching a new service. Reducing risk and trying to predict what is going to happen can be tricky. What if there was a different way?

Discovery Driven Planning allows you to explore the viability of a new venture by beginning with the end in mind—what will it really take for your venture to be a success? Originally developed by Rita Gunther McGrath and Ian MacMillan, the framework guides you through a process of identifying and discovering the information you need to make informed decisions. Without investing big, you will be able to quickly establish whether your idea is capable of delivering the return you desire and whether it is competitive.

With step-by-step examples, we present an easy to understand guide to Discovery Driven Planning; one of our go-to tools for anybody considering a new venture, whether you are a startup, corporate or somewhere in-between.

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Discovery Driven Planning for new ventures, products and services

  1. 1. Begin with the end in mind Exploring the viability of a new venture, product or service A guide to Discovery Driven Planning for startups, corporates and everything in-between
  2. 2. So you want to launch a new venture, product or service? Allow us to ask you a question or four... Do you know how viable your new venture is? Do you really know? Is this based on fact or fiction? Have you examined and tested your plans? What about before you’ve even started?
  3. 3. Somehow we need to move from... Things I don’t know Things I know (and have proven to be correct) Things I don’t know Things I know to
  4. 4. Somehow we need to move from... Things I don’t know Things I know (and have proven to be correct) Things I don’t know Things I know to ...without investing thousands, betting your house or risking failing big!
  5. 5. are easyIdeas ‣ The MBA and Executive Education students of Tim Kastelle, UQ Business School, have analysed the innovation capability of more than 300 organisations: less than 4% —only 10 or so firms—were idea poor. Sources: Kastelle, T. 2013. Why your innovation contest won’t work. Harvard Business Review [online] https://hbr.org/2013/11/why-your-innovation-contest- wont-work/ (accessed 10 April 2015); Startup Britain, 2015. New figures reveal record breaking year for startups [online] http://www.startupbritain.org/what-s- new/?option=com_sub&view=onenews&id=14 (accessed 10 April 2015); Startup Britain, 2017. Startup Tracker [online] http://startupbritain.org/startup-tracker/ (accessed 23 October 2017). In 2016, 657,790 businesses were registered with Companies House. i
  6. 6. Even in established businesses, research shows that between one third and half of all new product launches fail. Reality is tough100 50 0 Years Percentageofbusinessesstillalive 0 105 ‣ An analysis conducted by Scott Shane, a professor of entrepreneurship in the US, showed that only half of those businesses started between 1977 and 2000 were still alive after 5 years. ‣ Trends are similar in the UK: failure rates have dropped recently but it is estimated that in small and medium enterprises, only half survive more than 5 years and graduating between size bands is difficult. Sources: Shane, S.A. 2008. Startup failure rates - the real numbers. Small Business Trends [online] http://smallbiztrends.com/2008/04/startup-failure-rates.html (accessed 10 April 2015); Shane, S.A. 2009. Failure is a constant in entrepreneurship. The New York Times [online] http://boss.blogs.nytimes.com/2009/07/15/failure-is-a-constant-in-entrepreneurship/?_r=0 (accessed 10 April 2015); Whitelock, C. 2014. Growing pains: majority of SMEs don’t survive five years. RSA [online] https://news.rsagroup.com/pressrelease/view/1675 (accessed 10 April 2015); RSA, 2014. Growing pains: how the UK became a nation of ‘micropreneurs’ {PDF] http://www.rsabroker.com/sites/default/files/SME%20Growing%20Pains%20White%20paper.pdf (accessed 10 April 2015); Castellion, G. & Markham, S. 2013. Perspective: new product failure rates: influence of argumentum ad populum and self-interest. Journal of Product Innovation & Management 30:976-979. reality Reality is tough! ‣ Survival patterns of new businesses are remarkably consistent: typically, fewer than half of all startups are still ‘alive’ (in business and in existence) after 5 years.
  7. 7. ‘New’ is inherently uncertain ‣ When you’re creating a new product, service or venture, there is a lot you don’t yet know—and plenty of unknown unknowns! ‣ You perfect the idea, build it, launch it and then wait for the money to role in—but what if it doesn’t? ‣ Organisations invest huge quantities of time, effort and financial resource based upon unproven assumptions without stopping to check that their assumptions are correct. ‣ This results in only finding out those assumptions are wrong once it’s too late. ‣ So you end up having to go back to the drawing board to reassess all the assumptions you made in the first place, starting over with all the time and money this entails. Legal Notice: "The Simpsons" TM and © Fox and its related companies. All rights reserved. Any reproduction, duplication, or distribution in any form is expressly prohibited. Disclaimer: This web site, its operators, and any content contained on this site relating to "The Simpsons" are not authorized by Fox.
  8. 8. what if there was a different way ?
  9. 9. There are (at least) 2approaches to planning
  10. 10. As defined by Merriam-Webster Dictionary (2015) http://www.merriam-webster.com/dictionary/forecast Forecasting A prediction or estimate based upon the information that is available to say that something will happen in the future
  11. 11. As defined by Rita Gunther McGrath & Ian MacMillan (2009) Discovery-driven growth: a breakthrough process to reduce risk and seize opportunity. Boston: Harvard Business Press. Discovery driven planning A recognition that bold but uncertain outcomes are not readily predictable—the data you need to become more certain must first be discovered
  12. 12. Forecasting is very powerful when prior information is readily available “We’ve been doing this for years.” “We always aim for a 25% margin.” “We know exactly what our costs will be.” “We can estimate our future performance based on past performance.” “We know our marketing works if we spend £3,000.” “Our business model is tried and tested.”
  13. 13. New venture truth: Bold but uncertain outcomes are not readily predictable
  14. 14. Uncertainty introduces greater risk in forecasting ‣ When data is not available on past performance, forecasting can be difficult. ‣ New ventures are inherently risky. You don’t yet know who exactly your customer will be, what is valuable to them, how much demand there is, how much you will be able to charge, and so on. ‣ It is possible to assign educated values to these things but until they are tested in reality, it is difficult to predict the outcome with any certainty. ‣ Failing to evaluate the viability of a venture and test key assumptions before it’s too late can result in futile activity and investment, and may be disastrous. Sources: McGrath, R.G. & MacMillan, I.C. 1995. Discovery-Driven Planning. Harvard Business Review [online] https://hbr.org/1995/07/discovery-driven-planning (accessed 15 September 2017); McGrath, R.G. & MacMillan, I.C. 2009. Discovery-drive growth: a breakthrough process to reduce risk and seize opportunity. Boston: Harvard Business Press.
  15. 15. The most dangerous assumptions in a business plan are those that are tacit or unrecognized. As a result they go unchallenged or untested. For example, a corporate venture team designed an innovative new communications product and chose to use the existing company sales force to sell it.They assumed that because the existing channel was already selling other communications products, this route would be quickest to market. Disappointing sales followed. Hollister B. Sykes & David Dunham Sykes, H.B. & Dunham, D. 1995. Critical assumption planning: a practical tool for managing business development risk. Journal of Business Venturing 10:413-424.
  16. 16. Case study: Disneyland Paris Despite being Europe’s top tourist destination, Disneyland Paris has recorded losses in 18 of its 25 years and faced its first financial crisis just 2 years after opening in 1992. Initial projections were too optimistic and were based on experiences in other parks; (that is,Walt Disney World andTokyo Disney Resort). ‣ Assumed a high ticket price of more than $40 would be tolerated by market. Forced to make sharp price reduction to secure target visitor numbers, by which time lost benefits of early-stage word of mouth. ‣ Assumed people would stay an average of 4 days in the park’s five hotels. In 1993, average stay was just 2 days. ‣ Assumed park visitors would ‘graze’ all day on food. Long queues at restaurants have plagued the park throughout its lifetime as visitors adhere to mealtimes. ‣ Assumed visitors would buy a similar mix of high margin merchandise. Purchasing behaviour favours low-margin print items. Sources: McGrath, R.G. & MacMillan, I.C. 1995. Discovery-Driven Planning. Harvard Business Review [online] https://hbr.org/1995/07/discovery-driven-planning (accessed 15 September 2017); Vinocur, N. & Sage, A. 2015. Special report: For French investors, a Euro Disney nightmare. Reuters [online] http://uk.reuters.com/article/2015/02/02/us-eurodisney-shareholders-specialreport- idUSKBN0L60UU20150202 (accessed 2 July 2015); BBC News, 2017. Disney to buy most of Euro Disney [online] http://www.bbc.co.uk/news/business-38928629 (accessed 15 September 2017). Image: Blue & Pink by George Grinsted on Flickr https://flic.kr/p/a6HEVW
  17. 17. The problem with assumptions —or rather implicit assumptions ‣ When you can’t predict with certainty, you have to make assumptions—that’s ok. ‣ It’s not ok when implicit assumptions are embedded into projections from the start where they become invisible and go unchallenged. ‣ Failure to recognise assumptions can mean that implicit assumptions are compounded by further implicit assumptions to arrive at answers upon which you decide whether to invest millions or years of your life.
  18. 18. Dangerous implicit assumptions As suggested by Rita Gunther McGrath & Ian MacMillan ‣ Customers will buy our products because we think it is a good product. ‣ Customers will buy our product because it’s technically superior. ‣ Customers will agree with our perception that the product is “great.” ‣ Customers run no risk in buying from us instead of continuing to buy from their past suppliers. ‣ The product will sell itself. ‣ Distributors are desperate to stock and service the product. ‣ We can develop the product on time and on budget. ‣ We will have no trouble attracting the right staff. ‣ Competitors will respond rationally. ‣ We can insulate our product from competition. ‣ We will be able to hold down prices while gaining share rapidly. ‣ The rest of our company will gladly support our strategy and provide help as needed. Source: McGrath, R.G. & MacMillan, I.C. 1995. Discovery-Driven Planning. Harvard Business Review [online] https://hbr.org/1995/07/discovery-driven-planning (accessed 15 September 2017).
  19. 19. Tracing the source of assumptions ‣ Profit forecasts, revenue forecasts, cash flow forecasts and predicted return on investment are all derivative assumptions. ‣ Figures and calculations are all derived from other assumptions, such as who the customer really is, what they really want or need, what value they will place on your product or service, what margin can be achieved, percentage of customers who will buy, density of prospects in a given region, and so on. Source: Sykes, H.B. & Dunham, D. 1995. Critical assumption planning: a practical tool for managing business development risk. Journal of Business Venturing 10:413-424.
  20. 20. Discovery Driven Planning Begin with the end in mind £
  21. 21. A word on its creators ‣ Developed by Rita Gunther McGrath & Ian MacMillan. ‣ Rita Gunther McGrath is a Professor at Columbia Business School and is a globally recognised expert on strategy in uncertain and volatile environments. ‣ Ian MacMillan is the Dhirubhai Ambani Professor of Innovation and Entrepreneurship at Wharton; he has been a director of several companies and has extensive consulting experience.
  22. 22. 5 key steps in Discovery Driven Planning Bake profitability in from the start with a reverse income statement Benchmark competitive achievement and market reality Define operational requirements and allowable costs Document, test and revisit assumptions Plan to learn at key checkpoints 1 3 2 4 5 Sources: McGrath, R.G. & MacMillan, I.C. 1995. Discovery-Driven Planning. Harvard Business Review [online] https://hbr.org/1995/07/discovery-driven-planning (accessed 15 September 2017); McGrath, R.G. & MacMillan, I.C. 1999. Discovery driven planning: turning conventional planning on its head. DeepCanyon [PDF] http://www.fast-bridge.net/wp-content/uploads/resources/ Discovery_Driven_Planning.pdf (accessed 15 September 2017). Gallo, A. 2017. A refresher on discovery-driven planning. Harvard Business Review [online] https://hbr.org/2017/02/a-refresher- on-discovery-driven-planning (accessed 23 October 2017).
  23. 23. In other words... What return does this venture need to deliver and is it capable of doing so? What do we know about the market reality and is the venture actually competitive? What activities are involved in running this venture and how much will these cost? Do we have a buffer available in our allowable costs? What assumptions have we made in our plans? How can we test these assumptions to become more certain about the viability of our plans? 1 3 2 4 5
  24. 24. Discovery Driven Planning Bake profitability in from the start with a reverse income statement 1
  25. 25. Bake profitability in from the start ‣ Right at the outset you should be looking to ensure an attractive outcome when the business reaches maturity. ‣ If you’re going to put all of this effort and investment into a new venture, you need to ensure it’s going to be worthwhile. ‣ Instead of estimating revenue and assuming profit will follow, determine what level of profit is acceptable and required. ‣ There is an opportunity cost to starting a new venture (especially if it’s doomed)—if you’re not doing this, you could be doing something else. Sources: McGrath, R.G. & MacMillan, I.C. 1995. Discovery-Driven Planning. Harvard Business Review [online] https://hbr.org/1995/07/discovery-driven-planning (accessed 15 September 2017); McGrath, R.G. & MacMillan, I.C. 1999. Discovery driven planning: turning conventional planning on its head. DeepCanyon [PDF] http://www.fast-bridge.net/wp- content/uploads/resources/Discovery_Driven_Planning.pdf (accessed 15 September 2017).
  26. 26. Bake profitability in from the start Source: YouTube, 2015. Jerry Maguire Show Me The Money! [online] https://www.youtube.com/watch?v=1-mOKMq19zU (accessed 30 June 2015).
  27. 27. Understanding profit PROFIT = REVENUE - COST Volume x Price Fixed costs +Variable costs
  28. 28. Let’s look at an example ‣ I’m a freelance photographer. ‣ I want to make £15,000 per year in profit. ‣ I believe a profit margin of 30% is realistic. ‣ In line with market rates, I will be charging £675 per one-day photo shoot. ‣ Is this a viable venture? Image: Canon AE-1 by 55Laney69 on Flickr https://flic.kr/p/dgrdGg Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  29. 29. The reverse income statement Total figuresTotal figures Source of figures Profits required £15,000 Decision by photographer Desired profit margin 30% Guideline industry benchmark Revenues required £50,000 15,000/0.3=50,000 Allowable costs £35,000 50,000-15,000=35,000 Required revenue per year = £50,000 Allowable costs = £35,000Profit = £15,000 Per unit figuresPer unit figures Source of figures Price per photo shoot £675 Decision by photographer Number of shoots to be sold 74 50,000/675=74.07 Average number of shoots bought per client 1 Assumption Number of clients required 74 74/1=74 Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  30. 30. A more corporate example ‣ An engineering company with an existing product range are looking to launch an innovative new electric motor in a developing market. ‣ Historically, products in developed markets have each generated an average 10% net profit margin and contributed at least £500,000 in profit to the bottom line each year. ‣ The board are looking for the new motor to match or exceed this contribution. ‣ Target price for the motor is £500. Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  31. 31. The reverse income statement Total figuresTotal figures Source of figures Profits required £500,000 Decision by board Desired profit margin 10% Assumption Revenues required £5,000,000 500,000/0.1=5,000,000 Allowable costs £4,500,000 5,000,000-500,000=4,500,000 Required revenue per year = £5,000,000 Allowable costs = £4,500,000Profit = £500,000 Per unit figuresPer unit figures Source of figures Price of new product (per unit) £500 Internal decision Number of widgets required to be sold 10,000 5,000,000/500=10,000 Average number of products bought per customer 2 Historical benchmark Number of paying customers required 5,000 10,000/2=5,000 Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  32. 32. As a new venture, what if I don’t have a required profit figure in mind? ‣ Do you have a required turnover in mind? If so, you can start with that. ‣ Do you know what your cost base will be? If so, you can start with that. ‣ Do you know how much you would like to earn? If so, this forms part of either your costs or your profit. ‣ In addition to one of these figures, you also need to have a profit margin but it is usually possible to estimate this with a little market research on industry benchmarks.
  33. 33. With just a few figures... ‣ We now know approximately what the future business needs to look like to be a success. ‣ We know approximately how big the business will be and what sales volume will be required.We can also see how much can realistically be spent to achieve this outcome. ‣ For both the photographer and the engineering company, it seems as though their ventures might be viable (subject to further testing of assumptions). ‣ Other ventures will however fall at the first hurdle. For example, it may become immediately apparent that the number of customers required for success simply isn’t achievable (due to either market size or past performance). ‣ You’ll have a sense of whether your venture is realistic for you.
  34. 34. Discovery Driven Planning Benchmarking competitive achievement and market reality 2
  35. 35. The discipline of competitive achievement and market reality ‣ Realism is critical in planning for a new venture. ‣ As humans—and especially entrepreneurs!—we are prone to being overly optimistic. We overestimate market size and profitability. We don’t take account of the competition. We assume our technologies will perform better than they do in reality. We presume operations and sales will be easy. ‣ We need to challenge these tendencies and to build a realistic picture of what the business must look like for it to be competitive. Sources: McGrath, R.G. & MacMillan, I.C. 1995. Discovery-Driven Planning. Harvard Business Review [online] https://hbr.org/1995/07/discovery-driven-planning (accessed 15 September 2017); McGrath, R.G. & MacMillan, I.C. 1999. Discovery driven planning: turning conventional planning on its head. DeepCanyon [PDF] http://www.fast-bridge.net/wp- content/uploads/resources/Discovery_Driven_Planning.pdf (accessed 15 September 2017).
  36. 36. The point is not to demand the highest degree of accuracy but to build a reasonable model of the economics and logistics of the venture and to assess the order of magnitude of the challenges. Rita Gunther McGrath & Ian MacMillan McGrath, R.G. & MacMillan, I.C. 1995. Discovery-Driven Planning. Harvard Business Review [online] https://hbr.org/1995/07/discovery-driven-planning (accessed 15 September 2017)
  37. 37. Benchmarking against existing knowledge ‣ With a little market research, it is possible to benchmark against existing data and to make educated judgements about a market to determine whether a given venture is really competitive. ‣ Essentially, you are looking to establish what is already known about the market, your customers, your product/service/technology, and any existing competition (including substitutes). Upon this basis, you can then begin to evaluate your venture. ‣ Key tools include benchmarking against your nearest competitive offer, analysing your consumption chain (awareness; selection; purchase; usage; service; and disposal or discontinuation of relationship); and benchmarking against key metrics. Sources: McGrath, R.G. & MacMillan, I.C. 2009. Discovery-driven growth: a breakthrough process to reduce risk and seize opportunity. Boston: Harvard Business Review; Sykes, H.B. & Dunham, D. 1995. Critical assumption planning: a practical tool for managing business development risk. Journal of Business Venturing 10:413-424.
  38. 38. ‣ Nearest competitive offers include other freelance photographers, stock photography, and DIY. To be competitive, it will therefore be necessary to differentiate on quality, individuality of style, price or some other dimension. ‣ Is is possible for me to add value anywhere in the consumption chain (when people become aware of me; when customers select my service; when customers purchase my service; during delivery of the service itself; in aftercare)? Is there anything I need to be mindful of when people discontinue their relationship with me—can I make it more positive in any way? Let’s consider our photographer Image: Canon AE-1 by 55Laney69 on Flickr https://flic.kr/p/dgrdGg Qualitative benchmarking Why would a prospective customer choose me as a photographer? Am I competitive? Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  39. 39. ‣ Let’s assume that of the people who are aware of my service, 1 in 5 people ask for a quote. Of these quotes, 50% go on to purchase. ‣ For my venture to be viable, I need to sell 74 one-day shoots per year.Therefore, I need 740 people (that is, 74x5x2=740) to become aware of my service each year (although this doesn’t take account of repeat business). ‣ For each one-day shoot, I will also need to do approximately one day of editing. I will therefore be spending 148 days on client projects per year.This leaves me approximately 100 working days for other activities. Let’s consider our photographer Image: Canon AE-1 by 55Laney69 on Flickr https://flic.kr/p/dgrdGg Quantitative benchmarking Can I match or exceed the established practices and units of business within my industry? Is my venture realistic? Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  40. 40. TAM, SAM and Target Market Target Market Served Available Market Total Addressable Market TAM for makers of a new smartphone app might be the 1.9 billion smartphone users worldwide If your app only works on Android in English, the SAM will be much smaller. Of those, only a certain percentage of those users might consider buying your app— these are your target market
  41. 41. Discovery Driven Planning Specification of organisational deliverables and allowable costs 3
  42. 42. Specification of organisational deliverables and allowable costs ‣ By now you’ve calculated the revenue and sales that need to be achieved and benchmarked against your existing knowledge, but how are you actually going to run the venture and how much will this cost? ‣ Is there a buffer between your cost base and your allowable costs or are you already making a loss before you’ve even started? ‣ List in full everything that will be needed to run the business (what you will need to deliver in operational terms) and intelligently estimate the associated costs. Source: McGrath, R.G. & MacMillan, I.C. 2009. Discovery-driven growth: a breakthrough process to reduce risk and seize opportunity. Boston: Harvard Business Press; Gallo, A. 2017. A refresher on discovery-driven planning. Harvard Business Review [online] https://hbr.org/2017/02/a-refresher-on-discovery-driven-planning (accessed 23 October 2017). Allowable costs Actual costs
  43. 43. Discovering the costs of photography ‣ Equipment; as a guide allow a monthly amount which allows you to buy a new camera every three or four years, a new lens each year and an annual camera service ‣ Digital storage media (e.g. USB) ‣ Props and backdrops ‣ Lighting ‣ Studio rent and rates ‣ Insurance for buildings, contents and equipment ‣ Public liability insurance ‣ Photographic editing software ‣ Client gallery software ‣ Studio management software/customer database ‣ Memberships and certifications ‣ Continuing professional development ‣ Website hosting and maintenance ‣ Advertising and marketing ‣ Office stationery ‣ Telephone and broadband ‣ Other utilities ‣ Bookkeeping and accountancy ‣ Legal fees With a little market research, we find that the following costs can be associated with running a photographic venture: Sources: Heather, 2011. Do professional photographers really make money? Life as a Lilly blog [online] http://chrisheatherlilly.com/?p=5318 (accessed 3 July 2015); Baby & Newborn Photography Association, 2015. The true cost of running a newborn photography business. BANPAS [online] http://www.banpas.co.uk/costofrunninganewbornphotographybusiness (accessed 3 July 2015). | Example created by Stocker Partnership based upon the Discovery Driven Planning framework.
  44. 44. Outlining all expected costs ‣ By developing a spreadsheet of all the costs and details of where you found the data, you’ll have a fully transparent audit trail. ‣ If you are working across a team, adding a column that shows who has found and estimated each figure helps to maintain transparency and enable more effective testing of assumptions. ‣ It can be helpful to use Google Docs or Zoho Docs for real time collaboration so you all have access to the same data. Analysis of expected costsAnalysis of expected costs Source Team member Liability insurance £1,000 See quote from insurance brokers for £10m public liability insurance Jamie Annual accountant fees £450 Assumption Pete Etc...
  45. 45. No derivatives allowed! ‣ It’s important not to let derivative numbers creep into the calculations—otherwise you’ll lose the transparency of your assumptions. ‣ For example, rent of £23,000 p.a. is actually composed of... Description Source Square footage 1,000 See space requirement document SR023 Cost per square foot £20 Quote from real estate firm C001 Total cost for 1,000 square foot £20,000 Calculation Service charge £3,000 Assumption Time period 1 year Quote from real estate firm C001 Total annual office rent costs £23,000 Calculation
  46. 46. Discovery Driven Planning Document, test and revisit assumptions 4
  47. 47. Document, test and revisit assumptions ‣ Looking back over all the work you’ve done so far, now explicitly document all the assumptions you have made. ‣ If you’ve developed spreadsheets of calculations, you can include notes of these assumptions as you go along and assign them reference numbers so that you can keep track.Always record your sources: whether the data was a management decision, an assumption, a calculation or a benchmark. ‣ Begin by focusing on the critical assumptions, so that you don’t get bogged down in too much detail. Source: McGrath, R.G. & MacMillan, I.C. 2009. Discovery-driven growth: a breakthrough process to reduce risk and seize opportunity. Boston: Harvard Business Press.
  48. 48. The assumptions our photographer has made No Description Current best estimate Source Date last checked Responsible party Notes 1 Realistic profit margin 30% The British Photographic Council Industry Survey of Photographers 2010 July 2015 Photographer 2 Price per photo shoot £675 Decision by photographer July 2015 Photographer 3 Average number of shoots purchased per client 1 Assumption July 2015 Photographer 4 Of people aware of service, proportion who ask for a quote 1 in 5 Assumption July 2015 Photographer 5 Proportion of people who purchase following a quote 50% Assumption July 2015 Photographer 6 Unit of delivery that people will purchase 1 day photoshoot Assumption July 2015 Photographer If 0.5 day shoots are more popular, risk that double the number of clients will be needed Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  49. 49. Discovery Driven Planning Plan to learn at key checkpoints 5
  50. 50. Plan to learn at key checkpoints ‣ Checkpoint planning can be used to monitor the progress of new ventures by postponing major commitments of resources until the evidence from the previous checkpoint signals that the risk of taking the next step is justified. ‣ Outline the key checkpoints of your new venture. For each checkpoint, it is likely that several key assumptions are likely to be tested, revealing information that was not available before. ‣ In the early stages, 5 checkpoints should be ample. ‣ The aim is to design your project in a way that maximises the number of assumptions tested and minimises the amount of time and money invested. ‣ Some assumptions will be repeatedly tested. Sources: McGrath, R.G. & MacMillan, I.C. 2009. Discovery-driven growth: a breakthrough process to reduce risk and seize opportunity. Boston: Harvard Business Press; McGrath, R.G. & MacMillan, I.C. 1999. Discovery driven planning: turning conventional planning on its head. DeepCanyon; McGrath, R.G. & MacMillan, I.C. 1995. Discovery-driven planning. Harvard Business Review; Gallo, A. 2017. A refresher on discovery-driven planning. Harvard Business Review [online] https://hbr.org/2017/02/a-refresher-on-discovery-driven-planning (accessed 23 October 2017).
  51. 51. Testing our photographer’s assumptions Checkpoint Assumptions being tested Market research, including conversations with industry professionals Realistic profit margin; price per photo shoot; average number of shoots purchased per client; proportion of people who ask for a quote; proportion of people who purchase following a quote; unit of delivery that people will purchase Costs research, (e.g. studio rent and rates; cost of software; and so on) Realistic profit margin; cost figures Trial marketing campaign (prior to pilot pop-up studio) Proportion of people who ask for a quote; proportion of people who purchase following a quote; unit of delivery that people will purchase; average number of shoots purchased per client Pilot pop-up studio Price per photo shoot; average number of shoots purchased per client; proportion of people who ask for a quote; proportion of people who purchase following a quote; unit of delivery that people will purchase Example created by Stocker Partnership based upon the Discovery Driven Planning Framework.
  52. 52. Discovery Driven Planning Viable venture... or not?
  53. 53. Having identified what return this venture needs to deliver, you are confident that the venture is capable of delivering the required revenue and profit. Having researched the market reality, you have ascertained that your venture is competitive within this space. Having documented what activities are involved in running this venture and how much these will cost, you have a buffer available in your allowable costs. Having identified the assumptions you have made in your plans, you have a plan to test these assumptions to become more certain about the viability of your plans, starting with the most critical first. You may pass GO if...
  54. 54. Next steps: viability is a process ‣ Establishing viability is an iterative process, not a one time ‘go/no-go’ answer. ‣ Even if your new venture, product or service initially seems to be viable, you need to keep an open mind as you continue to validate assumptions. ‣ Start by testing the most critical assumptions first—those that are core to the viability of your venture and about which the least is known. Not all assumptions are created equal. ‣ Try to maximise your learning whilst minimising the amount of investment required in order to do so. ‣ You are looking to identify the key points of failure BEFORE you ‘go large’ on investment. ‣ Both the Lean Startup approach and Steve Blank’s Customer Development Process work really well with Discovery Driven Planning. ! £ ? ✚ ♥︎ ⟳
  55. 55. What does all this mean for your new venture?
  56. 56. STOCKER PARTNERSHIP The Stocker Partnership is a strategy and innovation consultancy We help organisations to create and exploit new opportunities 024 76 100 193 hello@stockerpartnership.com Matt Stocker Debbie Stocker www.stockerpartnership.com Follow us on LinkedIn Subscribe to our blog Sign up to our newsletter WE’RE NOT BUT WE ARE CLEVER BIG @mattstocker @debbiestocker Illustrations by Stina Jones (stinajones.co.uk), and Matt Stocker

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