Building the right thingMarko Taipale @ TGA2012

Marko Taipale• Principal consultant with agile/lean mindset, CTO, Advisor

• 15+ years of software development

• Capabilities to deliver products from concept to cash

• Tens of public speaking appearances

International online gaming company (TO 100+ Meur) improved time-to-market from 24 months to 3 months

Finnish energy company purchased process control system and got the delivery 4 times faster than expected. The system secured the business for next 2 years.

Finnish software product company saved 1,3 Meur / year in management and administration.

Software company validated new business model for new product in 2 months.

Context

New Product Development

Project delivery

the RIGHT thing?

The right thing?

• Concept (Problem / Solution fit)

• a good one? It solves a problem

• Business Model (Product / Market fit)

• a good one? It scales ie. it is a business

• Prototype (Hypothesis / Experiment fit)

• a good one? It leads to learning

• Service (User needs / Service fit)

• a good one? You are not aware you are using it

The right thing?

• Concept (Problem / Solution fit)

• a good one? It solves a problem

• Business Model (Product / Market fit)

• a good one? It scales ie. it is a business

• Prototype (Hypothesis / Experiment fit)

• a good one? It leads to learning

• Service (User needs / Service fit)

• a good one? You are not aware you are using it

Connected!

The right thing?

• Concept (Problem / Solution fit)

• a good one? It solves a problem

• Business Model (Product / Market fit)

• a good one? It scales ie. it is a business

• Prototype (Hypothesis / Experiment fit)

• a good one? It leads to learning

• Service (User needs / Service fit)

• a good one? You are not aware you are using it

Connected!

Balance

Product / Market fitProblem / Solution fit

How to ensure you are doing the right thing?

<insert your agile “from idea to backlog”

tool here>

But that is just stupid!(why?)

Cause it expects that you know the requirements

And that there is money to be made

In new product development the requirements are

unknown

... and the business is unknown

In order to do the right thing you need to...

• Model your business

• Understand your market

• State your guesses, create tests, validate

• by talking to your customer

• by measuring (and build the measures in)

Lean Startup

Customer Development

Business Model Generation

Productization

Multiple methods/tools emerge

Business Model Generation

“A business model describesthe rationale of how an organization creates, delivers, and captures value”

9 blocks of business model

Customer Segmentswhich customers and users you are serving?which jobs do they really want to get done?

Value Propositionswhat are you offering to them? what is that getting done

for them? do they care?

Channelshow does each customer segment want to be reached?

through which interaction points?

Customer Relationships

How do you get customers, keep them and grow them?

Revenue Streamswhat are customers really willing to pay for? how? are you

creating transactional or recurring revenues?

Key Resourceswhich resources underpin your BM? which assets are

essential?

Key Activitieswhich activities you need to perform well in your BM?

what is crucial?

Key Partnerswhich partners and suppliers leverage your model?

who do you need to rely on?

Cost Structurewhat is the resulting cost structure?

which key elements drive your costs?

the same technology, product, or service can

have numerous business models

alternatives: ask yourself..

Difficult questions

transactional vs. recurring revenues product vs. service scale vs. scope

niche market vs. mass market

direct sales vs. inderect sales

blue ocean vs. red ocean

capital expenditure vs. partnership open vs. closed personal vs. automated

one customer segment vs.another physical vs. virtual tailor-made vs.

mass production

paid vs. free copyright vs. copyleft fixed vs. variable cost

distributed vs. centralized in-sourcing vs. out-sourcing advertising vs.

sales

Choose!

Business Model can look great on paper...

but it is just series of guesses!

get out of the building and test

each hypothesis

with real, breathing customer!

Three layers of BMCs

Model Sell books online, no inventory, cheaper prices, great selection

Three layers of BMCs

Model

Hypotheses

Sell books online, no inventory, cheaper prices, great selection

Key partners: publishers are fine with small but frequent orders and there is a contracting model that supports this

Three layers of BMCs

Model

Hypotheses

Tests

Sell books online, no inventory, cheaper prices, great selection

Key partners: publishers are fine with small but frequent orders and there is a contracting model that supports this

Meet publisher X and check that they are fine with small frequent orders

Customer Development

customerdiscovery

customervalidation

customercreation

company building

pivot

This Business Model testing is called Customer

Development

customerdiscovery

customervalidation

customercreation

company building

pivot

2 phases

customerdiscovery

customervalidation

customercreation

company building

pivot

Search Execution

customerdiscovery

customervalidation

customercreation

company building

pivot

1st step

Customer Discovery:Problem / Solution fit

1. Draw Business Model Canvas

2. State hypotheses

3. Test the problem (or need)

4. Test the solution (verify that you have it)

5. Verify or Pivot

customerdiscovery

customervalidation

customercreation

company building

pivot

2nd step

Customer validation: Product / Market fit

1. Get ready to sell

2. Get out of the building to test sell

3. Develop positioning

4. Verify or Repeat

Market opportunity

• Business model

• Identify the customer and market need

• Size the market

• Identify and size competitors

• Check growth potential/rate

Total Available Market

Served Available Market

Target Market

- How many would need this product?- How large is the market if they all bought?- Industry analysis in your domain.. to find out- is it growing how fast?

- how big is our slice?- availability, pricing (how many I can serve)- how big the market would be if they all bought- talk to customers to find out

- Who I am going to sell 1st, 2nd and 3rd year- How many customers is that?- What if they all bought?- How to find out: talk to potential customers

Early adopters are not your market

Market analysis answers a simple question:

Is this Business Model worth implementing?

customerdiscovery

customervalidation

customercreation

company building

pivot

Test and adapt your model until it

works!

customerdiscovery

customervalidation

customercreation

company building

pivot

This adaptation is called a pivot

(repeat * until proven)

Don’t scale execution until you’ve verified the business model

Execution is not search!

Build the measures in(+ quality in)

Techies: Continuous Delivery with ATDD is not enough!

Hard part: from measures to learning

There are no facts inside your building

You still need a vision and a purpose

Why big companies are in such a trouble?

2 phases

customerdiscovery

customervalidation

customercreation

company building

pivot

Search Execution

From execution to search

So..

We need to interface the business, design and engineering in order to create successful businesses

Business is the driver: if you cannot make a business case for it, it has no (business) value.

What happens tomorrow?

See where you are (discovery, validation, creation or building) and act accordingly

All we do...is match the demand

.. of understanding and solving a problem

.. of a business

.. of learning

.. of users

Disclaimer

Exercising this does not guarantee success

... but it ensures you fail fast and often

More chances to succeed!

Resources

http://huitale.blogspot.fi/2010/12/single-product-owner-model-is-broken.htmlSingle PO is missing the point: