Business Design (Beta)

Business Design Executive MBA “Innovation & Business Creation” Technische Universität
München (TUM) & University of California, Berkeley | May 2013 Bernhard Doll | [email protected] Note: optimized for presentation with tablets

Intro Education +  Ph.D. (Dr. rer. pol.) in Management from
TU München +  M.Sc. (Univ.) in Psychology and Sociology +  Visiting Scholar at Hong Kong University of Science & Technology and Macquarie University Sydney +  Dipl.-Inf./B. Eng. (hons) in Software Engineering +  Research Fellow at Leipzig Graduate School of Management +  Research Fellow at Peter-Pribilla-Foundation Professional Experience +  Founder and Managing Director of Orange Hills GmbH +  Founder, CTO, member of supervisory board or catalyst of many start-ups (including Webmiles, Interhyp - IPO: 2005, SiteForce AG, Treems AG, mybestbrands, coma AG etc.) +  Director at Center for “Innovation & Business Creation” at TUM +  Head of Software Engineering at a.f.i.m. GmbH / TBWA +  Lecturer at TUM Business School, University of St. Gallen, Leipzig Graduate School of Management, University Erlangen- Nuremberg, FH Salzburg, FH München among others. About me 2

Intro Readings 3 Schrage, M. (1999): Serious Play – How
the world’s best companies simulate to innovate, Boston: Harvard Business School Press ISBN-13: 978-0875848143 Kawasaki, G. (2004): The art of the start – the time-tested, battle- hardened guide for anyone starting anything, London: Penguin Books ISBN-13: 978-1591840565 Ries, E. (2011): The Lean Startup, New York: Crown Business ISBN-13: 978-0307887894

Intro 4 Agenda 1 2 Intro 3 4 5 Ideas
Business Validation Realization Hands-on experience 6 Day 1-2 Day 3-4 Please note: In this slide deck, many examples are taken from the IT industry. However, the core concept of Business Design can be applied to many other industries.

Intro WHY ARE YOU HERE? 5

Intro Day 1 Day 2 6 EMOTIONAL FLOW UFF OHH
YEAH “…let’s rock the world – but how?“ “…way much more difficult than expected“ “…good to have clear guidance Day 3-4

Intro 7 What is design? “Design is the transformation of
existing conditions into preferred ones.“ Herbert Simon “Design thinking is a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity.” Tim Brown, IDEO ”Design is not just what it looks like and feels like. Design is how it works.“ Steve Jobs, Apple

Intro 8 How designers work

Intro 9 How designers work ”Business people don‘t just need
to understand designers better; they need to become designers.“ Roger Martin, Dean Rotman School

Intro 10 „Naked“ entrepreneur “I have a GREAT vision to
change the world!” +  Corporate innovator +  Business developer +  Marketing expert +  Designer +  Researcher

Intro 11 „Naked“ entrepreneur Seed / startup stage Early
stage Expansion stage Later stage “I have a GREAT vision to change the world!” +  Corporate innovator +  Business developer +  Marketing expert +  Designer +  Researcher

Intro 12 MOST OF THEM FAIL “I have a GREAT
vision to change the world!”

Intro 13 BIGGEST PROBLEM? People build something
nobody wants.

Intro 14 BIGGEST PROBLEM? People build something
nobody wants. Discover Scope Business Case Execute Test Launch Gate Gate Gate Gate Gate

Intro IDEA: GOOD OR BAD? Discover Scope Business Case Gate
Gate ? Strategy Market strategy Product position USP Market entry Market Market size Competitors Market share Revenue goals Finance Relevant revenue Break even time Max. neg. cashflow NPV for life cycle Not defined yet Not clear Me-too-product Market occupied < 25 Mio. € 1-2 players < 10% < 3 Mio. € < 5% of branch > 6 years > 10 Mio. € < 5 Mio. € In discussion In discussion Some USP’s Market follower 25-50 Mio. € 2-5 players 10-25% 3-12 Mio. € 5-25% of branch 4-6 years 5-10 Mio. € 5-10 Mio. € Clear and communicated Clear, coordinated with SMP* Clear advantage in competition Market leader > 50 Mio. € > 5 players > 25% > 12 Mio. € > 25% of branch < 4 years < 5 Mio. € > 10 Mio. € Technology Technology basis Products basis / platform Variants /options Patent situation Process-to-market SMP* R&D conditions Transition to series 3rd party dependency Risks Technical risks Time risks Cost risks Others * Sales, Marketing, Production 0 15

How do you evaluate ideas in your professional context? 2
min. Session 1

Intro Challenge #1 ...at the very beginning Innovation = hard
to imagine 17

Intro ULTIMATE CASH FORMULA 18 X

Intro VIENNA COFFEE HOTSPOT 19

Intro HOW TO DESIGN THE DIFFERENCE? 20 Hotel Sacher
Selling coﬀee, cakes and a tradi�onal Viennese coﬀee house atmosphere Starbucks Selling Frappuccino with caramel topping, cakes and a very special feeling

to predict 21

Intro Getting from plan A ...To something that really works
22 1 2 3 4

Intro Getting from plan A ...To something that really works
23 1 2 3 4 Pivot Pivot Pivot Additional reading: Mullins, J. & Komisar, M. (2011): Getting to plan B, Harvard Business Press. ISBN: 978-1422126691

Intro Knowledge landscape ”What we know is a drop, what
we don’t now is an ocean.” Isaac Newton 2 unknown known unknown known Accessibility Availability 1 3 4 explicit knowledge implicit knowledge ? 24

to Evaluate 25

Intro 26

Intro 27

Intro 28 1860 1900 1950 2000 2012 1 2 4
8 16 32 64 128 0 US$ per barrel Crude oil prices since 1861 Source: Wikipedia

Intro 29 DCF + NPV A B C
Companies should be making this comparison DCF and NPV methodologies implicitly make this comparison Assumed cash stream resulting from doing nothing ”Most executives compare the cash flows from innovation against the default scenario of doing nothing, assuming – incorrectly – that the present health of the company will persist indefinitely if the investment is not made. For a better assessment of the innovation‘s value, the comparison should be between its projected discounted cash flow and the more likely scenario of a decline in performance in the absence of innovation investment.“ Source: Christensen (2008) NPV = DCF – required investment PV = 1 1 + r1 x C1 DCF = Ct (1+rt )t

Intro 30 DCF + NPV A B C
Companies should be making this comparison DCF and NPV methodologies implicitly make this comparison Assumed cash stream resulting from doing nothing ”Most executives compare the cash flows from innovation against the default scenario of doing nothing, assuming – incorrectly – that the present health of the company will persist indefinitely if the investment is not made. For a better assessment of the innovation‘s value, the comparison should be between its projected discounted cash flow and the more likely scenario of a decline in performance in the absence of innovation investment.“ Source: Christensen (2008) NPV = DCF – required investment PV = 1 1 + r1 x C1 DCF = Ct (1+rt )t Source: Christensen (2008) Example of the US music industry New market entrants: Established industry:

Intro PSYCHOLOGY OF EVALUATING IDEAS 31 Estimated Output Perceived Input
Alternative A Alternative B Personal investment ratio Perceived Input Personal investment ratio Estimated Output What do These Guys have in COmMon? “…there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. The coolness arises partly from the fear of opponents, who have the laws on their side and partly from the incredulity of men, who do not readily believe in the new things until they have long experienced them.” Niccolo Machiavelli (1469-1527) 1 2 3 4

Intro DEALING WITH UNCERTAINTY 32

Intro 33 Human- centered Evolutionary Context- oriented Holistic Visual Team-oriented
Six principles of Business Design

Intro WRAP UP 34

Ideas Agenda 35 1 2 Intro 3 4 5 Ideas
Business Validation Realization Hands-on experience 6 Day 1-2 Day 3-4

Ideas 36 HOW TO START?

Ideas How to start 37 Markets & competitors What others
are doing You & context What you can achieve with your resources Users & customers What people need …or want to become 1 2 3

Ideas How to start: OPTION 1 38 Markets & competitors
What others are doing You & context What you can achieve with your resources Users & customers What people need …or want to become 1 2 3

Ideas The next big thing... 39 Trends & technology:
h�p://�ny.cc/18h15 Web Trend Map Ex�nc�on Timeline Trends and Technology Timeline Ex�nc�on: h�p://�ny.cc/uht29 Web Trends: h�p://�ny.cc/6ws7b “The future is already here — it's just not very evenly distributed.“ (William Gibson)

Ideas Business Ideas Design your business in your browser |
URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Download ^|PDF | URL: http://bit.ly/17crj1c Motivation Title Group Date Iteration 1 2 3 What job(s) are our customers and users trying to get done? E.g. - completing a task, - solving a problem, - satisfying a need or desire. Job(s) to get done Pains Gains Ideas Strategic Fit What are customers / users doing in each phase? Which aspects trigger negative emotions? Which aspects trigger (unexpected) positive emotions? Focus How can we help our target group(s) to better get the job(s) done by relieving pains or stimulating gains? mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high Business Model Trends What trends or environmental changes might fuel the success of the ideas above? E.g. - political - environmental - social - technologial 1 Have you spotted a trend? Describe the main elements and derive ideas out of them 2 Have you observed a customer problem or an unsatisfied need? Start sketching the “job” and come up with ideas that might alleviate the customer’s life. 3 Do you have already winning business ideas? Map your ideas onto the pains and gains of a customer’s “job” to find out, whether your idea is relevant. mid low high mid low high Business Design Process Step 1: Observe the world (trends, customers, yourself) to get a starting point Step 2: Collect business ideas and find your focus Download: http://bit.ly/10cz2TI http://bit.ly/13zc222 http://bit.ly/17PUx4h http://bit.ly/10FImm6 Next steps: Step 3: Turn your ideas into business models and define KPIs Step 4: Identify core hypotheses and efficient ways to test them Step 5: Design your initial (“lean”) market offerings and get rid of “waste” Step 6: Manage your team to execute on step 4 and 5 Step 7: Reflect your learnings and change your business models, if appropriate Continue with step 3 and iterate. Check out our template library to facilitate step 3 to 7: www.orangehills.de/en/ Process Use post-its in different colors to seperate observed from prospective pains and gains. TRENDS...AS A TOOL 40 Trends To push an innovative idea on the market, it is beneficial to ride on the wave of a political, environmental social or technological trend to fuel success. Think about these trends carefully and reflect the impact on your ideas. URL: bit.ly/1j56JUS The “Business Idea” is a simple tool to describe the “job(s)” your customers and users are trying to get done (= customer journey) with corresponding positive and negative emotions and to map business ideas that might help improve the customer or user experience along the process. The lower part is dedicated to collect trends that might fuel the success of the ideas. Ideas Collect ideas that can help our target group(s) to better get the job(s) done by relieving pains or stimulating gains. Place theses ideas at that stage of the process, where it really has an impact. Evaluate ideas based on how they fit to your business strategy.

Ideas COPY CAT 41

Ideas COPY CAT 42 Is Copy Cat a bad thing?
Paradigm Position Product Process Innovation Do better... Do different... Source: Bessant (2007)

Ideas “Innovation isn‘t about coming up with the next big
idea. It is about combining existing ideas and parts in a new way.“ Saul Kaplan, The Business Innovation Factory 43

Ideas Before you CAN pitch the “right” solution, you have
to understand the “right” customer problem 45

Ideas Story of A milkshake 46 What’s the job this
product helps you to get done? “With few exceptions, every job people need or want to do has a social, a functional, and an emotional dimension. If marketers understand each of these dimensions, then they can design a product that's precisely targeted to the job. In other words, the job, not the customer, is the fundamental unit of analysis for a marketer, who hopes to develop products that customers will buy.“ Clay Christensen, Harvard Business School (2006)

Ideas JOB(S) TO GET DONE 47 „When________, they want
to________, so they can________.“ Context Job(s) to get done: 1.  “When I am hungry....” 2.  “When I'm in a rush and hungry....” 3.  “When I'm in a rush, starving and 'on the go'....” 4.  “When I'm in a rush, starving, 'on the go' and need something I can eat with one hand, not sure when the next time I'll be able to eat,...” Source: Klement (2013) Motivation (not action) Outcome „When I am sitting in my car commuting to work, I want to fight boredom, so I can enjoy my trip and arrive at my workplace fresh and relaxed.“ Add as many details as possible to the context of your customers’ situation to design solutions that really help getting their job(s) done: Solution: Restaurant (with tasty food) Fast-food restaurant Fast-food restaurant with drive-through Fast-food restaurant with drive-through and food packaging that can be handled with one hand

Ideas #GOOT(F)B 48 = get out of the (fucking) building

Ideas “We don‘t know what we see, we see what
we know.“ Johann Wolfgang v. Goethe 49

Ideas Understanding Customers: PROCESS Cycle 2 1 + Scope field research
+ Narrow down your target group(s) + Select method and process + Schedule your activities + Prepare interview guidelines and tools (cameras, audio recorders, etc.) Tip: Browse magazines for people who are pretty similar to your target group to sharpen your senses for them. Preparation 2 Data gathering I 3 Customer matrix 4 Data gathering II 6 5 Filling up Matrix analysis + Select participants for cycle 1 + Identify behavioral dimensions to span the market + Design of customer journeys and personas to capture the data Observations Interviews Dimension A Dimension B Persona Persona Persona + Position personas on the matrix + Select participants to fill up the matrix + Design of personas to capture the data Dimension A Dimension B Persona Persona Persona Persona Persona Saturation Analyze customer matrix + to prioritize customer segments + to identify market niches or underserved markets + to unveil innovation potential + to understand competitive situation …and try to find answers you are looking for. Observations Interviews + Overlay offerings / competitors etc. Cycle 1 Persona Persona

Ideas Business Ideas Design your business in your browser |
URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Download ^|PDF | URL: http://bit.ly/17crj1c Motivation Title Group Date Iteration 1 2 3 What job(s) are our customers and users trying to get done? E.g. - completing a task, - solving a problem, - satisfying a need or desire. Job(s) to get done Pains Gains Ideas Strategic Fit What are customers / users doing in each phase? Which aspects trigger negative emotions? Which aspects trigger (unexpected) positive emotions? Focus How can we help our target group(s) to better get the job(s) done by relieving pains or stimulating gains? mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high mid low high Business Model Trends What trends or environmental changes might fuel the success of the ideas above? E.g. - political - environmental - social - technologial 1 Have you spotted a trend? Describe the main elements and derive ideas out of them 2 Have you observed a customer problem or an unsatisfied need? Start sketching the “job” and come up with ideas that might alleviate the customer’s life. 3 Do you have already winning business ideas? Map your ideas onto the pains and gains of a customer’s “job” to find out, whether your idea is relevant. mid low high mid low high Business Design Process Step 1: Observe the world (trends, customers, yourself) to get a starting point Step 2: Collect business ideas and find your focus Download: http://bit.ly/10cz2TI http://bit.ly/13zc222 http://bit.ly/17PUx4h http://bit.ly/10FImm6 Next steps: Step 3: Turn your ideas into business models and define KPIs Step 4: Identify core hypotheses and efficient ways to test them Step 5: Design your initial (“lean”) market offerings and get rid of “waste” Step 6: Manage your team to execute on step 4 and 5 Step 7: Reflect your learnings and change your business models, if appropriate Continue with step 3 and iterate. Check out our template library to facilitate step 3 to 7: www.orangehills.de/en/ Process Use post-its in different colors to seperate observed from prospective pains and gains. CUSTOMER JOURNEY...AS A TOOL 51 URL: bit.ly/1j56JUS The “Business Idea” is a simple tool to describe the “job(s)” your customers and users are trying to get done (= customer journey) with corresponding positive and negative emotions and to map business ideas that might help improve the customer or user experience along the process. The lower part is dedicated to collect trends that might fuel the success of the ideas. Pains Job(s) to get done Gains Gains are aspects in the process above, in which innovative ideas might deliver additional value, people don’t expect. They trigger positive emotions, which improve the overall experience. Rate the strength of these positive emotions by ticking the boxes provided. The first step is to capture every single step of a customer’s or user’s process to complete a task, to solve a problem or to satisfy a certain need or desire. Pains are aspects of the process above, in which people experience annoying situations and, thus, negative emotions are triggered. People feel the desire to alleviate these situations. Rate the strength of these negative emotions by ticking the boxes provided. Ideas Collect ideas that can help our target group(s) to better get the job(s) done by relieving pains or stimulating gains. Place theses ideas at that stage of the process, where it really has an impact. Evaluate ideas based on how they fit to your business strategy.

Ideas VISUALIZING „FAKE“ CUSTOMERS 52 This is a persona: A
persona is a archetypical description of customers / users . Personas are designed to capture and visualize qualitative field research about customers / users. They help you and your team to understand what makes them tick and what they potentially need to improve their lives. It’s about getting a “professional” gut feeling and not finding the ultimate truth. Consumer behavior Personal quotes Demographics Preferences Key statement Pain points

Ideas VISUALIZING MARKETS Dimension A Dimension B Products and services
you offer Are there more customers of this type? 53 Products and services of your competitors Is there are market? Stop your research when your learning curve starts to flatten out

Ideas WHO IS YOUR PRIMARY CUSTOMER? 54 Source: amazon.com Source:
marykay.com.au “The strategic choice of primary customer – with special emphasis on “primary” – defines the business. This is certainly true at Amazon. [...] The company‘s choice of primary customer is reflected clearly in its well-known mission “to be the world’s most consumer-centric company. This unwavering focus on consumers has created innovations such as prime free shipping, detailed product reviews (including negative ones), look- inside-this-book, and the listing of lower-priced products from off-site competitors.“ - Robert Simons (2014)

Ideas ANOTHER TWIST: How to improve ProDuCts 55 How can
we make better products for our target group?

Ideas WHY IMPROVE PRODUCTS? 56

Ideas Develop YOUR customers 57 Additional reading: Schrage, M. (2012):
Who do you want your customers to become? HBR Press. ISBN: 978-1-4221-8785-2 Who do you want your customer to become? How do you make your customer more valuable? What customer journey can help „create“ this kind of customer?

Ideas Causation VS. Effectuation 59 Causation Effectuation “...takes a particular
effect as given and focuses on selecting between different set of means to create that effect.“ ”...takes a set of means as given and focus on selecting between possible effects that can be created with that set of means.“ Additional reading: Sarasvathy, S. (2009): Effectuation, Edward Elgar. ISBN: 978-1848445727

Ideas How do we design a value proposition for markets
that do not exist yet? How do we make pricing decisions when the firm does not exist yet? How do we hire people for an organization that does not exist yet? How do we value firms in an industry that did not exist five years ago? 60 Effectuation approach helps you unveil your personal/organizational “unfair” advantage, which is something you do better than your competitors and hard to copy. Source: Egmont Ehapa Verlag

Ideas THE STORY OF „FREITAG“ BAGS 61

What “means“ can you offer to start a new business?
3 min. Session 2

How would you translate your reflections into a “joint“ business
idea? 10 min. Session 3

Ideas WRAP UP 64

Business Agenda 65 1 2 Intro 3 4 5 Ideas

Business BUSINESS Model innovation #bmi 66 Source: Osterwalder 2010 Additional
reading: Osterwalder, A. (2008): Business Model Generation, Self Published. ISBN: 978-2-8399-0580-0

Business Example: XEROX 67 Pay per copy

Business Example: GILETTE 68 18,85 € Amazon.com 21,97 € (8
pcs.) Amazon.com Average lifespan: 6 weeks

Business Example: Happy Meal 69 Who values what?

Business Example: LINKEDIN 70 Upgrade to premium services

Business Example: AIRBNB 71

Business Example: INTERHYP.DE 72 “Interhyp is Germany‘s largest distributor of
residential mortgages. As a broker, Interhyp does not act as a lender but instead selects the best mortgages for its customers among offers from over 250 commercial banks, saving banks and insurance companies. We focus on competent, personal and objective consulting by our approximately 316 mortgage consultants. Private customers receive advice from our homepage www.interhyp.de and through 23 regional offices in key German cities.” Source: Interhyp Annual Report 2011

Business Example: MYBESTBRANDS 73 ~ 0,30 € per click-out

Business Example: MYBESTBRANDS 74 ~ 0,30 € per click-out Business
model patterns Source: http://www.boardofinnovation.com/downloads/bmp.pdf

Business BUSINESS Model...AS A TOOL 75 The “Business Model Canvas”
has been designed to visualize the essential ingredients of a business model on one page. The left part is focused on external components that can be “seen” from customers and users, the right part on internal components within the company. URL: bit.ly/10cz2TI Business Model Format: DIN A0 Title Group Date Design your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users

Business Business Model Format: DIN A0 Title Group Date Design
your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users BUSINESS Model: EXTERNAL VIEW 76 Offerings Relationships Channels Customers & users Customers are people who are willing to pay for your offerings. Users eventually use it. It is crucial to know as much as possible about customers and users - who they are, what job(s) they are trying to get done, what they really need. Do you? Brand & messages It is not enough to develop a brilliant product. It has to be sold with a simple, clean and compelling message, wrapped in a brand that embodies your company’s values. One of the most valuable assets of any company are established channels to customers. To know which channel is effective and efficient to reach your customers (and partners) is one of the first things you need to discover. Every business model requires its own type of relationship to customers and users. It can be very personal or automated. No matter what you choose, make sure you meet the expectations of your customers. Your offerings are the central part of your business model. What do your customers pay for? What do they get in return? Think about products, but also services and a combination of both to best serve your customers. The “Business Model Canvas” has been designed to visualize the essential ingredients of a business model on one page. The left part is focused on external components that can be “seen” from customers and users, the right part on internal components within the company. URL: bit.ly/10cz2TI

your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users The “Business Model Canvas” has been designed to visualize the essential ingredients of a business model on one page. The left part is focused on external components that can be “seen” from customers and users, the right part on internal components within the company. BUSINESS Model: INTERNAL VIEW 77 Resources Partners Processes Profit formula The question seems to be simple, but the answer is very tough. You can‘t excel in every aspect of your business model. You have to decide, what is really core of your company - and what can be outsourced. Every successful business depends not only on the company‘s skills and resources but on reliable partners who do things, which are not core of the company. Managing these partners is key to your success. The profit formula gives answers to the questions, how much money can be made in terms of revenue, how costs are allocated and how much profit each transaction nets to achieve the desired profit level. Channels One of the most valuable assets of any company are established channels to customers. To know which channel is effective and efficient to reach your customers (and partners) is one of the first things you need to discover. To create and deliver your offering to customers and users, you need a certain set of resources. What are your key assets you need within your company for your business model – and what do you purchase from partners in the value chain. “Pattern” Pricing & revenue Investments Costs URL: bit.ly/10cz2TI

your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users EXAMPLE: ITUNES 78 The “Business Model Canvas” has been designed to visualize the essential ingredients of a business model on one page. The left part is focused on external components that can be “seen” from customers and users, the right part on internal components within the company. URL: bit.ly/10cz2TI Back in 2003: What was the business model of Apple iTunes when they started the iTunes music store? MP3 software player “1000 songs in a your pocket” Hardware player iTunes store We deliver seamless music experience Wherever you are, enjoy all your music Website Retail stores Mac hardware (Premium) mass market Apple enthusiasts Automated Apple brand Record companies OEMs Technology providers (MP3 codec) Content Patents Soft- and hardware Cloud storage Soft- and hardware design Marketing & sales Content management Brand & access to customer base Key account Cloud storage People Hard- and software design Marketing campaigns Manufac- turing Hardware revenues 99 cent per song Transaction based Royalties

Business VIRTUAL BUSINESS MODELING 79 “Rapid Modeler” is a real-time
collaboration software for teams. The software allows you to develop ideas, business models and services with people across dispersed locations and helps you save travel time and costs. For details visit: http://www.rapidmodeler.de URL: bit.ly/q7slqa View: Business Model

How would you extend your business idea to a business
model? 10 min. Session 4

your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users Business Model Format: DIN A0 Title Group Date Design your business in your browser | URL: http://www.rapidmodeler.de Customers Users Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and how many of them can we reach? What (internal) key resources do we need to create and deliver the offering? Who will be using our offering and in which situation? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer segment that unlocks the most value in our business? ...and user segment? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) BUSINESS DNA 81 The “Business DNA” is the very essence of your business model, which is the key to build your initial market offerings in later stages. If you only have 30 seconds to pitch your business, present the DNA. DNA URL: bit.ly/10cz2TI „When___, they want to___, so they can___.“ „We deliver___, so that___.“ „We excel in___, which is unfair because___.” Primary customer / user Source: “Primary customer” according to Simons (2014) What is the core of your business model?

Business Promotors & Stakeholders © 2014 Orange Hills GmbH. All
rights reserved. Power promotors / advisory board Who is member of the advisory board to advise the project team and to “protect” the output? Who else is involved in creating and delivering the offering to the target groups? Power VIP zone Special treatment needed? Stakeholders / VIPs Support Business Model Format: DIN A0 Title Group Date Design your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users FOR CORPORATE INNOVATORS 82 As a corporate innovator, you usually fight at two front lines to establish a new business model: At one hand, your challenge is to design a new business that is desired by your target groups, viable from an economic perspective and somehow feasible that you are technically able to create and deliver the offering. On the other hand, incorporating a new business model in an established organization used to execute business models (not to explore them) causes many organizational and political issues, personal irritations and conflicts of stakeholders involved. In order to succeed, you have to deal with both. Who do you need to make your business work?

your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users ”HOW“ AND “WHAT“ IS NOT ENOUGH 83 How? Why? 2 3 What? 1 Example: “Everything we do, we believe in challenging the status quo. We believe in thinking differently. The way we challenge the status quo is by making our products beautifully designed, simple and user-friendly. And we happen to make great computers. Wanna buy one?“ Apple’s mission statement Why? How? What? Additional reading: Sinek. S. (2009): Start with WHY, Portfolio / Penguin. ISBN: 978-1591846444 Differentiate here!

Business „WHY“ = SOURCE OF TRANSFORMATION 84 1997 2013

WHY does your business model really matter? 5 min. Session
5

Business “MARKETING IS ABOUT SELLING MORE STUFF TO MORE PEOPLE
MORE OFTEN FOR MORE MONEY MORE EFFICIENTLY.” Sergio Zyman, CMO Coca-Cola 86

Business HOW CAN WE MEASURE SUCCESS? 87 Relevant metrics Questions
Acquisition Acquisition costs for customers, users and partners, mentions, traffic, cost-per-click, open rate, etc. How do customers and users become aware of you? SEO, SEM, widgets, email, PR, campaigns, blogs, etc. Number of completed onboarding processes, enrollments, sign-ups, used the offering at least once, etc. Engagement, daily and monthly active uses, churn/attrition rate, etc. Daily/monthly revenue per segment, customer lifetime value, conversion rate, shopping cart size etc. Invites sent, number of referrals, mentions in the press / blogs, viral cycle time etc. Do drive-by visitors subscribe, buy, use, etc.? Features, design, tone, compensation, affirmation, etc. Does a one-time customer or user become engaged? Notifications, alerts, reminders, emails, updates, etc. Do you make money from customer activity? Transactions, volume, costs, resource velocity, subscriptions, etc. Do customers and users promote your offering? Email, widgets, conferences, campaigns, affiliates Activation Retention Revenue Referral Source: according to Croll / Yoskowitz (2013) Ask yourself: “Can I measure the metrics?” and “Does the metrics help me decide what to do differently?” If the answer to one of these questions is “No”, it is very likely not a good metrics you should care about. Focus on a small number of KPIs to increase your focus. Don’t get lost in too much data. KPIs have to lead to action and you can’t affect dozen of KPIs simultaneously. Daily Weekly Monthly Quarterly At the start, define reachable short- term targets: E.g. 10% more active users every week. Sounds boring? You will be surprised how quickly the numbers get large…

your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users BUSINESS KPIs 88 Again: “Can I measure the metrics?” and “Does the metrics help me decide what to do differently?” If the answer to one of these questions is “No”, it is very likely not a good metrics you should care about. The “Business Model Canvas” has been designed to visualize the essential ingredients of a business model on one page. The left part is focused on external components that can be “seen” from customers and users, the right part on internal components within the company. URL: bit.ly/10cz2TI KPI 1 threshold KPI 2 threshold KPI 3 threshold

Business Example: GOOGLE ANALYTICS / GECKOBOARD 89

Business WRAP UP 90

Validation Agenda 91 1 2 Intro 3 4 5 Ideas

Validation Business Model Format: DIN A0 Title Group Date Design
your business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users EVERY PLAN IS BASED ON UNKNOWNS 92 The “Business Model Canvas” has been designed to visualize the essential ingredients of a business model on one page. The left part is focused on external components that can be “seen” from customers and users, the right part on internal components within the company. URL: bit.ly/10cz2TI MP3 software player “1000 songs in a your pocket” Hardware player iTunes store Website Retail stores Mac hardware (Premium) mass market Apple enthusiasts Automated Apple brand Record companies OEMs Technology providers (MP3 codec) Content Patents Soft- and hardware Cloud storage Soft- and hardware design Marketing & sales Content management Brand & access to customer base Key account Cloud storage People Hard- and software design Marketing campaigns Manufac- turing Hardware revenues 99 cent per song Transaction based Royalties Back in 2003: What was the business model of Apple iTunes when they started the iTunes music store? ? ? ? We deliver seamless music experience Wherever you are, enjoy all your music ? ?

Validation LEARN TO PLAN PLAN TO LEARN 93

Validation Hypotheses & Experiments Format: DIN A0 Design your business
in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Analogs Antilogs Hypotheses Experiments What things are new to us but we can learn from others, because they have proven that it just works? How can we test the identified hypotheses with the least effort? What assumptions grow out of relevant antilogs that are critical for our business? What things are new to us and new to the entire market, which is why we can’t learn from anyone? Test focus A+ A- Joint activities? How to test hypotheses? 1. Try to break down a high-level hypothesis into a set of low-level hypotheses. 2. Run experiments, if it is sufficient to reflect the status quo or possible to simulate affected parts of the future in a realistic way. 3. In any other case, build a MVP first and test the hypotheses afterwards. Never let people predict the future – not even their own behavior. It‘s a waste of time! ...and keep in mind that most hypotheses can’t be proven “right”. It’s about getting a professional gut feeling. Download ^|PDF | URL: http://bit.ly/13zc222 + Customers + Users + Brand & messages + Channels + Relationships + Offerings + Resources + Processes + Partners + Profit formula + Business DNA Title Group Date Iteration 1 2 3 proceed with LO / MVP definition Experiment LO / MVP define experiments Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Importance Uncertainties Business Model Lean Offerings / MVP Look at every single element of your business model to find analogs and antilogs: desirable feasible viable Examples - Customer / partner interviews - Observation - Survey - A/B testing Examples - CAD / CAM - 3D printing / prototyping - Technical simulation - System dynamics simulation Examples - Expert interviews - Financial modeling - Business simulation - DCF / business case (Social) prototype required to simulate the future? Make sure your analogs are reliable sources to learn from others. In many cases, analogies eventually turn out to be somehow different to your business when you look under the hood. future today / 1 / 2 / 3 / 4 / 5 Hypotheses…AS A TOOL 94 URL: bit.ly/13zc222 The “Hypotheses Canvas” can help you reveal critical assumptions in your business model, which are both uncertain and important for the success of the innovation endeavor. Moreover, you have space to plan how to test the assumptions as efficient as possible. Don’t test ideas! Test the assumptions of your ideas, systematically!

in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Analogs Antilogs Hypotheses Experiments What things are new to us but we can learn from others, because they have proven that it just works? How can we test the identified hypotheses with the least effort? What assumptions grow out of relevant antilogs that are critical for our business? What things are new to us and new to the entire market, which is why we can’t learn from anyone? Test focus A+ A- Joint activities? How to test hypotheses? 1. Try to break down a high-level hypothesis into a set of low-level hypotheses. 2. Run experiments, if it is sufficient to reflect the status quo or possible to simulate affected parts of the future in a realistic way. 3. In any other case, build a MVP first and test the hypotheses afterwards. Never let people predict the future – not even their own behavior. It‘s a waste of time! ...and keep in mind that most hypotheses can’t be proven “right”. It’s about getting a professional gut feeling. Download ^|PDF | URL: http://bit.ly/13zc222 + Customers + Users + Brand & messages + Channels + Relationships + Offerings + Resources + Processes + Partners + Profit formula + Business DNA Title Group Date Iteration 1 2 3 proceed with LO / MVP definition Experiment LO / MVP define experiments Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Importance Uncertainties Business Model Lean Offerings / MVP Look at every single element of your business model to find analogs and antilogs: desirable feasible viable Examples - Customer / partner interviews - Observation - Survey - A/B testing Examples - CAD / CAM - 3D printing / prototyping - Technical simulation - System dynamics simulation Examples - Expert interviews - Financial modeling - Business simulation - DCF / business case (Social) prototype required to simulate the future? Make sure your analogs are reliable sources to learn from others. In many cases, analogies eventually turn out to be somehow different to your business when you look under the hood. future today / 1 / 2 / 3 / 4 / 5 Hypotheses…AS A TOOL 95 Analogs Antilogs Antilogs are aspects in your business model, which are new to you and new to the market, which is why you can’t learn from anyone. If some antilogs are very critical for your success and you know only little about it, put them into your test focus and learn. Analogs are aspects in your business model, which are new to you but you can learn from others, because they have proven that it works. Don‘t reinvent the wheel. If someone has already proven something you need, take it (if you are allowed to). URL: bit.ly/13zc222 The “Hypotheses Canvas” can help you reveal critical assumptions in your business model, which are both uncertain and important for the success of the innovation endeavor. Moreover, you have space to plan how to test the assumptions as efficient as possible. Don’t test ideas! Test the assumptions of your ideas, systematically! In some cases, the difference between analogs and antilogs is blurred. Hypotheses are assumptions that grow out of critical antilogs (both uncertain and important). Make sure your hypotheses are simple, focused and can be tested with simple means. Otherwise, you need to narrow them down. Hypotheses Show- stoppers

in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Analogs Antilogs Hypotheses Experiments What things are new to us but we can learn from others, because they have proven that it just works? How can we test the identified hypotheses with the least effort? What assumptions grow out of relevant antilogs that are critical for our business? What things are new to us and new to the entire market, which is why we can’t learn from anyone? Test focus A+ A- Joint activities? How to test hypotheses? 1. Try to break down a high-level hypothesis into a set of low-level hypotheses. 2. Run experiments, if it is sufficient to reflect the status quo or possible to simulate affected parts of the future in a realistic way. 3. In any other case, build a MVP first and test the hypotheses afterwards. Never let people predict the future – not even their own behavior. It‘s a waste of time! ...and keep in mind that most hypotheses can’t be proven “right”. It’s about getting a professional gut feeling. Download ^|PDF | URL: http://bit.ly/13zc222 + Customers + Users + Brand & messages + Channels + Relationships + Offerings + Resources + Processes + Partners + Profit formula + Business DNA Title Group Date Iteration 1 2 3 proceed with LO / MVP definition Experiment LO / MVP define experiments Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Importance Uncertainties Business Model Lean Offerings / MVP Look at every single element of your business model to find analogs and antilogs: desirable feasible viable Examples - Customer / partner interviews - Observation - Survey - A/B testing Examples - CAD / CAM - 3D printing / prototyping - Technical simulation - System dynamics simulation Examples - Expert interviews - Financial modeling - Business simulation - DCF / business case (Social) prototype required to simulate the future? Make sure your analogs are reliable sources to learn from others. In many cases, analogies eventually turn out to be somehow different to your business when you look under the hood. future today / 1 / 2 / 3 / 4 / 5 EXAMPLE: AIRBNB 96 Hypotheses are assumptions that grow out of critical antilogs (both uncertain and important). Make sure your hypotheses are simple, focused and can be tested with simple means. Otherwise, you need to narrow them down. Hypotheses H1 H2 H3 H4 H5 H6 H7 Level 1 Level2 Level 3 Hypotheses hierarchy Details Scope ”We will reach 5 million nights booked by 2012.“ ”Hosts with professional photography will get 2-3 times more bookings than the market average.“ ”Number of hosts signing up is 10x higher than the market average, because they are enthusiastic to receive professional photos.“ Analogs Antilogs Antilogs are aspects in your business model, which are new to you and new to the market, which is why you can’t learn from anyone. If some antilogs are very critical for your success and you know only little about it, put them into your test focus and learn. Analogs are aspects in your business model, which are new to you but you can learn from others, because they have proven that it works. Don‘t reinvent the wheel. If someone has already proven something you need, take it (if you are allowed to). In some cases, the difference between analogs and antilogs is blurred.

Validation 97 What is YOUR BET ON THE FUTURE? In
other words: “What are your five core hypotheses regarding your future business model? Yep, just 5…” The “killer question” to challenge every innovation team

What analogs and antilogs are inherent in your business model?
10 min. Session 6

Validation 99 ONE OF THE WORST PRODUCT FLOPS

Validation THEY TESTED A LOT: the right thing? 100 The
Pepsi Challenge back in the late 80’s W Wh hi ic ch h C Co ol la a d do o y yo ou u p pr re ef fe er r? ?

Validation 101 TESTING ≠ ≠REALITY

Validation Business experiments 102 Source: Thomke (1998), p. 745 (1)
Design (2) Build (3) Run (4) Analyze DESIGN REQUIREMENTS DONE Use learning from previous cycle(s) to conceive and design an improved solution. Develop models and / or build prototypes to be used in running experiments. Test model / prototype in real or simulated use environment. Analyze findings from previous step and learn. Changes in exogenous information DESIGN ACTIVITY Examples: +  Landing page (+ “notify me when you release”): Will anyone actually buy this? +  Crowd testing: How much will customers pay? +  Demo/video: Does this solution resonate with people? +  E-mail marketing: Do customers like your story (and do something to be part of it)? +  Sales prelaunch: Will customer buy (before you have even built it)? +  Lean version 1.0: Will customers use it and come back? (à MVP, see next chapter)

in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Analogs Antilogs Hypotheses Experiments What things are new to us but we can learn from others, because they have proven that it just works? How can we test the identified hypotheses with the least effort? What assumptions grow out of relevant antilogs that are critical for our business? What things are new to us and new to the entire market, which is why we can’t learn from anyone? Test focus A+ A- Joint activities? How to test hypotheses? 1. Try to break down a high-level hypothesis into a set of low-level hypotheses. 2. Run experiments, if it is sufficient to reflect the status quo or possible to simulate affected parts of the future in a realistic way. 3. In any other case, build a MVP first and test the hypotheses afterwards. Never let people predict the future – not even their own behavior. It‘s a waste of time! ...and keep in mind that most hypotheses can’t be proven “right”. It’s about getting a professional gut feeling. Download ^|PDF | URL: http://bit.ly/13zc222 + Customers + Users + Brand & messages + Channels + Relationships + Offerings + Resources + Processes + Partners + Profit formula + Business DNA Title Group Date Iteration 1 2 3 proceed with LO / MVP definition Experiment LO / MVP define experiments Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Importance Uncertainties Business Model Lean Offerings / MVP Look at every single element of your business model to find analogs and antilogs: desirable feasible viable Examples - Customer / partner interviews - Observation - Survey - A/B testing Examples - CAD / CAM - 3D printing / prototyping - Technical simulation - System dynamics simulation Examples - Expert interviews - Financial modeling - Business simulation - DCF / business case (Social) prototype required to simulate the future? Make sure your analogs are reliable sources to learn from others. In many cases, analogies eventually turn out to be somehow different to your business when you look under the hood. future today / 1 / 2 / 3 / 4 / 5 The “Hypotheses Canvas” can help you reveal critical assumptions in your business model, which are both uncertain and important for the success of the innovation endeavor. Moreover, you have space to plan how to test the assumptions as efficient as possible. EXPeRIMeNTS…AS A TOOL 103 Experiments Some hypotheses can be tested with simple means, such as interviews, prototyping or advanced experimental settings including A/B, multivariate testing and crowd sourcing. Plan your tests carefully to find the answers you are looking for. URL: bit.ly/13zc222

Validation PROTOTYPES AS Shared spaces 104 Source: According to Schrage
(1999), p. xv a) Transactional model of communication b) Collaborative model of communication Receiver / sender Sender / receiver Information source / destination Destination / information source audible Message Message Signal Received signal Noise source Source: According to Shannon (1948), p. 380 „shared space“ visual tactile Receiver / sender Sender / receiver Information source / destination Destination / information source Message Message Signal Received signal Noise source audible Additional reading: Schrage, M. (1999): Serious play, Harvard Business Press. ISBN: 978-0875848143

Validation PROTOTYPE = INTERACTION 105 ...to simulate, embrace and discuss
what the future reality might be

Validation SOCIAL PROTOTYPING 106 +  Do you remember? ...to simulate,
embrace and discuss what the future reality might be

Validation PROTOTYPE? YES 107 This is the traditional (engineering-driven) perspective
on prototypes, the first of its kind, the pre- version for mass production.

Validation PROTOTYPE? YES 108 Source: Calgraphix Many mechanical models and
prototypes can be easily manufactured with low-cost 3D printers.

Validation PROTOTYPE? YES 109 Source: UIStencils Storyboards can help visualize
customer encounters or entire customer experience at early stages.

Validation PROTOTYPE? YES 110 Role plays are a cheap and
easy way to prototype services. If played by yourself, you get a good understanding how a customer might feel like.

Validation PROTOTYPE? YES 111 Source: UIStencils Even rough sketches of
a new product, service or software UI is a prototype. With a different purpose, however.

Validation Prototype? YES 112 A B C
D E F G H I 1 2 3 4 5 6 7 8 9 10 1 2 Marke des Unternehmens mit hoher Strahlkra� in den Markt; verkörpert Innova�on („orange“) ... zeigt Kunden unseren USP Schnelligkeit, um Inves��ons-‐ entscheidungen für Innova�onen vorzubereiten Nutzer/Endkunde, für den wir innova�ve Geschä�smodelle entwickeln, eingebunden in den Innova�onsprozess Zentrale Steuerung von Innova�onsprojekten in Anlehnung an Kanban Mitarbeiter für Vorbereitung neuer Kundenprojekte: Bedarfsanalyse, Projekt-‐ und Zielplanung Key Account Management für die persönliche Betreuung von Kunden Endkunde Kunde Projek�eam PM K Zufriedener Kunde mit „grei�aren“ Ereignissen und fer�g entwickeltem MVP Projek�eam unserer Kunden bei der Arbeit, Prototypen zu entwickeln und systema�sch zu testen Methodische Toolbox zur Unterstützung von „lean“ Innova�onsprojekten Kid toys are powerful tools to make the intangible of innovation tangible. Use the power of metaphors to express aspects beyond words.

Intro Source: LEGO© Serious Play™ 3D modeling can help you
+  build your company’s vision +  model service encounters +  design business models +  support interdisciplinary teamwork and personal engagement What do you see in this model?

Validation EVOLUTION OF PrototypeS 114 Source: UnternehmerTUM (2006) Failed start-up
project, founded by three TUM engineering graduates Build your first prototypes by yourself. You will get a better feeling for your product, improve teamwork and customer interactions.

Validation PROTOTYPING TOOLS 115 +  Microsoft Powerpoint: Flexible tool to
create visuals of different kinds +  Storyboards 3D: Create stunning storyboards, even if you lack drawing skills +  eMachineShop.com: Order CNC machine custom parts online (waterjet, plasma, laser cutting, etc.) +  MakerBot Industries: Desktop 3D printing +  Fab@Home: Open source 3D printing +  Ponoko.com: Design, make and build your own custom products +  Phidgets.com: Plug & play building blocks for low cost USB sensing and control +  NI LabView: Visual development environment for electronic systems +  Protoshare.com: Website wireframing / prototyping +  Balsamiq.com: Rapid wireframing and mockups for websites & mobile apps +  Axure: Interactive HTML prototypes +  Microsoft Visio: Clickable web demos +  Prototypes: Create functional click- dummys for tablets and smartphones +  DjangoProject.com: Web framework to build functional web platforms +  Node.js: Event-driven I/O system to build scalable server software +  jQuery: UI library for web applications +  UserVoice.com: Online user feedback system Great inspiration: Make:magazine

Validation EXAMPLE: 3D PRINTING FOR EVERYONE 116

in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Analogs Antilogs Hypotheses Experiments What things are new to us but we can learn from others, because they have proven that it just works? How can we test the identified hypotheses with the least effort? What assumptions grow out of relevant antilogs that are critical for our business? What things are new to us and new to the entire market, which is why we can’t learn from anyone? Test focus A+ A- Joint activities? How to test hypotheses? 1. Try to break down a high-level hypothesis into a set of low-level hypotheses. 2. Run experiments, if it is sufficient to reflect the status quo or possible to simulate affected parts of the future in a realistic way. 3. In any other case, build a MVP first and test the hypotheses afterwards. Never let people predict the future – not even their own behavior. It‘s a waste of time! ...and keep in mind that most hypotheses can’t be proven “right”. It’s about getting a professional gut feeling. Download ^|PDF | URL: http://bit.ly/13zc222 + Customers + Users + Brand & messages + Channels + Relationships + Offerings + Resources + Processes + Partners + Profit formula + Business DNA Title Group Date Iteration 1 2 3 proceed with LO / MVP definition Experiment LO / MVP define experiments Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Experiment LO / MVP Importance Uncertainties Business Model Lean Offerings / MVP Look at every single element of your business model to find analogs and antilogs: desirable feasible viable Examples - Customer / partner interviews - Observation - Survey - A/B testing Examples - CAD / CAM - 3D printing / prototyping - Technical simulation - System dynamics simulation Examples - Expert interviews - Financial modeling - Business simulation - DCF / business case (Social) prototype required to simulate the future? Make sure your analogs are reliable sources to learn from others. In many cases, analogies eventually turn out to be somehow different to your business when you look under the hood. future today / 1 / 2 / 3 / 4 / 5 EXAMPLE: ITUNES 117 The “Hypotheses Canvas” can help you reveal critical assumptions in your business model, which are both uncertain and important for the success of the innovation endeavor. Moreover, you have space to plan how to test the assumptions as efficient as possible. URL: bit.ly/13zc222 Users love to listen to their favorite tunes on the way Users are used to load music online Users manage their music on their PCs How are the music rights (DRM) enforceable? How likely is the antitrust approval? How important is the look & feel of CD boxes? Is 128 Kbit/s 16 bit sufficient? How important is qrtwork and bonus material? Are customers ready to pay for music downloads? Do customers accept the limited usage rights? How big is negotiating power of record companies? 60% of our test customers pay 99 cent per song Two big music labels give access to > 5.000 songs… 75% of our test customers accept terms & conditions Test POS with download possibilities of TOP 40 songs Negotiations with record companies Test POS with iPod customers Back in 2003: Which hypotheses were Apple facing when they were about to launch iTunes?

Validation …AND ONLINE 118 “Rapid Modeler” is a real-time collaboration
software for teams. The software allows you to develop ideas, business models and services with people across dispersed locations and helps you save travel time and costs. For details visit: http://www.rapidmodeler.de URL: bit.ly/q7slqa View: Hypotheses & Experiments

Validation TRACK YOUR LEARNING PERFORMANCE 119 URL: bit.ly/q7slqa Home screen

What are your core hypotheses and how would you test
them? 5 min. Session 7

Validation WRAP UP 121

Realization Agenda 122 1 2 Intro 3 4 5 Ideas
Business Validation Realization Hands-on experience 6 Day 1-2 Day 3-4 Please note: In this slide deck, many examples are taken from the IT industry. However, the core concept of Business Design can be applied to many other industries.

Realization “IDEAS ARE WORTH NOTHING, UNLESS EXECUTED.“ Jason Fried, 37signals
123

Realization Process paradigms 124 Things you know Things you don‘t
know Personality More deterministic Less predictable Innovation Innovation Process Objective Paradigm Control Metaphor Prototype Patron Result Sequential Implements „knowns“ Seeks simplicity Top-down Clock-wise Is driven by process Newton Perfectionist Iterative Reduces „unknowns“ Embraces complexity Buttom-up Ecologies Drives the process Darwin Optimalist

Realization BIRTH OF “WATERFALL“ Model? 125 p. 2 p.
3 p. 4 p. 5 p. 9 Source: Royce, W. (1970): Managing the development of large software systems, IEEE WESCON, pp. 1-9.

Realization EVOLUTION OF IDeas 126 „shadow beliefs“ of entrepreneurs Business
strategy 1 Business strategy 2 Business strategy 3 „We know exactly what we are doing!“ „We know what our customers want!“ „We can accurately predict the future!“ „Advancing the plan is progress!“ Business potential Pivot Pivot Change strategic directions, but stay grounded in what you have learned. A pivot is not a mistake! Examples: +  Zoom-in pivot +  Zoom-out pivot +  Value capture pivot +  Engine of growth pivot Time Source: “shadow beliefs” according to Eric Ries (2009)

Realization 127 If you don‘t know what you are
doing, you be�er do it fast!

Realization EVOLUTION OF IDeas 128 „shadow beliefs“ of entrepreneurs Business
strategy 1 Business strategy 2 Business strategy 3 „We know exactly what we are doing!“ „We know what our customers want!“ „We can accurately predict the future!“ „Advancing the plan is progress!“ Business potential Pivot Pivot Change strategic directions, but stay grounded in what you have learned. A pivot is not a mistake! Examples: +  Zoom-in pivot +  Zoom-out pivot +  Value capture pivot +  Engine of growth pivot Time Source: “shadow beliefs” according to Eric Ries (2009) +  Customer discovery: Captures the founder’s vision and turns it into a series of business model hypotheses. Then it develops a plan to test customer reactions to those hypotheses and turn them into facts. +  Customer validation: Tests whether the resulting business model is repeatable and scalable. If not, return to customer discovery. +  Customer creation: Is the start of execution. It builds end-user demand and drives it into the sales channel to scale the business. +  Company building: Transitions the organization from a start-up to a company focused on executing a validated model. Customer development process by Steve Blank Pivot Search Customer discovery Customer validation Customer creation Company building Execute Source: Blank/Dorf (2012) „lean“ „fat“ Product / market fit

Realization EVOLUTION OF IDeas „shadow beliefs“ of entrepreneurs Business strategy
1 Business strategy 2 Business strategy 3 „We know exactly what we are doing!“ „We know what our customers want!“ „We can accurately predict the future!“ „Advancing the plan is progress!“ Business potential Pivot Pivot Change strategic directions, but stay grounded in what you have learned. A pivot is not a mistake! Examples: +  Zoom-in pivot +  Zoom-out pivot +  Value capture pivot +  Engine of growth pivot Source: “shadow beliefs” according to Eric Ries (2009) Pivot? Build-measure-learn cycle by Eric Ries Phase 1 “Customer discovery” Problem & solution fit Phase 2 “Customer validation” Product & Market fit Phase 3 “Customer creation” Growth Source: Ries (2012) The fundamental activity of a startup or corporate innovator is to turn ideas into products and services, to measure how customers respond and then to learn what works and what doesn‘t. This may eventually lead to a pivot of your strategy or to preserve elements of your future model that have been proven right. All successful innovation processes should be geared to accelerate that feedback loop. Idea Build Launch Measure Analyze Learn 129 Time

Realization “If you freeze an idea too quickly, you fall
in love with it. If you refine it too quickly, you become attached to it and it becomes very hard to keep exploring, to keep looking for better. The crudeness of the early models in particular is very deliberate.” Jim Glymph, Gehry Partners 130

Realization Lean Traditional traditional VS. LEAN 131 Strategy Business model
Hypotheses-driven Business plan Implementation-driven Customer development Get out of the office and test hypotheses Agile development Build the product iteratively and incrementally Customer and agile development teams Hire for learning, nimbleness and speed Metrics that matter Customer acquisition cost, lifetime customer value, churn, viralness Expected Fix by iterating on ideas and pivoting away from ones that don‘t work Rapid Operates on good-enough data Product Management; prepare offering for market following a linear, step-by-step plan Agile or waterfall development; build the product iteratively, or fully specify the product before building it Department by function Hire for experience and ability to execute Accounting Income statement, balance sheet, cash flow statement Exception Fix by firing executives Measured Operates on complete data New-Product Process Engineering Organization Financial Reporting Failure Speed Source: Blank (2013)

Realization ”An organization can never know what it thinks or
wants until it sees what it does.” Karl E. Weick, Sociologist 132 Additional reading: Ben-Sahar, T. (2009): The pursuit of perfect, McGraw Hill. ISBN: 978-0071629034 Additional reading: Beinhocker, E. (2004): The origin of wealth, Harvard Business Press. ISBN: 978-1422121030

Realization LEAN OFFERINGS / MVP 133 In other (my) words:
A new product or service with a minimum set of features that fulfills at least the following conditions: +  Are your hypotheses covered? +  Can you charge your cu$tomer? +  Is your DNA embedded? +  Does your mother like it? If yes, SHIP IT & LEARN! “The Minimum Viable Product (MVP) is that version of a new product, which allows a team to collect the maximum amount of validated learning about customers with the least effort.” - Eric Ries #hypo #bm #bm

Realization ”No matter how well you perform, there's always somebody
of intelligent opinion who thinks it's lousy.“ Sir Laurence Olivier 134

Realization MVP FOR… 135

How would your lean offerings look like? 10 min. Session
8

Realization Lean Offerings / MVP Design your business in your
browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Modifiability Reusability Visuality Must have What is the minimal set of user stories customers and users expect to be implemented in order to deliver the core value of the product and/or service? Should have What is the extended set of user stories that increases the value of the product and/or service to the next level? What is a lean offering / MVP (= Minimum Viable Product)? Minimal set of user stories that fulfills at least the following requirements: + Are your hypotheses covered? + Can you charge your customers? + Is your DNA embedded? + Does your mother like it? To define user stories, look through the lenses of customers and users. Could have What are optional user stories that can help us better serve our customers and users in the future? What non-functional requirements should be embedded in our product and/or service? Functional Non-functional DNA fit Ease of implementation Tools Which tool is most appropriate to build the MVP? F NF DNA Download ^|PDF | URL: http://bit.ly/17PUx4h Title Group Date Iteration 1 2 3 Low High Low High Hypotheses & Experiments Action Plan Hypotheses “As a___, I want to___.” (Role) (Action) Keep in mind that each user story should be independent of any other user story. What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Low High Durability Low High Competitive benchmark What user stories has our No. 1 competitor (”DNA fit”) considered in its offering to their customers and users? ...what non-functional requirements do they fulfill? Fc NFc LEAN OFFERINGS…AS A TOOL 137 URL: bit.ly/17PUx4h The “Lean Offerings / MVP Canvas” gives you guidance to decide, which features should be part of your first launch version of your product or service. Moreover, you can think about non-functional requirements and the development tool you need to translate the functional requirements into a visual model or prototype. Rule of thumb: Do you want users to switch from existing offerings to your products? +  Yes: Features are an important part of people’s decision to try it. +  No: Simplicity is usually much more important for greenfield users than being feature rich.

browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Modifiability Reusability Visuality Must have What is the minimal set of user stories customers and users expect to be implemented in order to deliver the core value of the product and/or service? Should have What is the extended set of user stories that increases the value of the product and/or service to the next level? What is a lean offering / MVP (= Minimum Viable Product)? Minimal set of user stories that fulfills at least the following requirements: + Are your hypotheses covered? + Can you charge your customers? + Is your DNA embedded? + Does your mother like it? To define user stories, look through the lenses of customers and users. Could have What are optional user stories that can help us better serve our customers and users in the future? What non-functional requirements should be embedded in our product and/or service? Functional Non-functional DNA fit Ease of implementation Tools Which tool is most appropriate to build the MVP? F NF DNA Download ^|PDF | URL: http://bit.ly/17PUx4h Title Group Date Iteration 1 2 3 Low High Low High Hypotheses & Experiments Action Plan Hypotheses “As a___, I want to___.” (Role) (Action) Keep in mind that each user story should be independent of any other user story. What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Low High Durability Low High Competitive benchmark What user stories has our No. 1 competitor (”DNA fit”) considered in its offering to their customers and users? ...what non-functional requirements do they fulfill? Fc NFc LEAN OFFERINGS…AS A TOOL 138 Hypotheses DNA Functional requirements Non-functional requirements Tools We define a MVP in terms of functional requirements as user stories, which will be categorized based on how easy they can be implemented and how well they fit to the DNA of the business model. Apart from the functional requirements, we translate the DNA of the business model into a bunch of non- functional factors to make sure the MVP looks the way it is supposed to and is built with the right tool. The DNA of the underlying business model is key to prioritize functional and non- functional requirements of your MVP. Define it first before you start thinking about your first product or service. It is important to pick the “right” tool to build the first version of your MVP. The following dimensions help you determine the characteristics of the MVP, which will eventually lead to the tool you need to build it. MVPs are designed not only to build your first product or service, but also to test hypotheses in reality, which can’t be tested in an experimental setting. Be aware of these hypotheses when you design your MVP. URL: bit.ly/17PUx4h Competitive benchmark What do other players in the market offer to their customers and users, which is similar to your offering? This analysis is especially important, when you want them switch from existing offerings to yours.

browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Modifiability Reusability Visuality Must have What is the minimal set of user stories customers and users expect to be implemented in order to deliver the core value of the product and/or service? Should have What is the extended set of user stories that increases the value of the product and/or service to the next level? What is a lean offering / MVP (= Minimum Viable Product)? Minimal set of user stories that fulfills at least the following requirements: + Are your hypotheses covered? + Can you charge your customers? + Is your DNA embedded? + Does your mother like it? To define user stories, look through the lenses of customers and users. Could have What are optional user stories that can help us better serve our customers and users in the future? What non-functional requirements should be embedded in our product and/or service? Functional Non-functional DNA fit Ease of implementation Tools Which tool is most appropriate to build the MVP? F NF DNA Download ^|PDF | URL: http://bit.ly/17PUx4h Title Group Date Iteration 1 2 3 Low High Low High Hypotheses & Experiments Action Plan Hypotheses “As a___, I want to___.” (Role) (Action) Keep in mind that each user story should be independent of any other user story. What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Low High Durability Low High Competitive benchmark What user stories have our biggest competitors considered in their offerings to their customers and users? ...what non-functional requirements do they fulfill? EXAMPLE: ITUNES 139 URL: bit.ly/17PUx4h The “Lean Offerings / MVP Canvas” gives you guidance to decide, which features should be part of your first launch version of your product or service. Moreover, you can think about non-functional requirements and the development tool you need to translate the functional requirements into a visual model or prototype. Seamless music experience Enjoy all my music, everywhere Brand & access to customer base Users want to play their entire music Users want to purchase music Users want to rate songs Users want to organize music with folders Users want to pay for purchases Users want to search for new music (free text + categories) Users want to copy songs on their iPod Users want to listen to music with high quality Users want to share their personal profile Users demand bonus material and artwork Users want to manage their personal profile Users want to connect with other users Users need music recommen- dations Users want to archive music Users want to recommend music to friends Users want to adjust the sound quality (equalizer) Back in 2003: Which user stories were able to represent best the DNA of the iTunes business model? Great design Easy to use Seamlessly integrated hard- and software Users want to play selected songs from their library Users want to organize music with folders Users want to listen to their favorite tunes on the go

Realization …AND ONLINE 140 “Rapid Modeler” is a real-time collaboration
software for teams. The software allows you to develop ideas, business models and services with people across dispersed locations and helps you save travel time and costs. For details visit: http://www.rapidmodeler.de URL: bit.ly/q7slqa View: MVP

Realization FROM MVP TO MVB (= Business) 141 Defining your
first product or service on the market is not enough. Consider with your team, which elements of your underlying business model are needed to create and deliver your offering to the market – your “Minimum Viable Business” (MVB). Which customer channels are the most effective ones for the start? Which partners do you need first and which of the core resources and processes are eventually needed to kick-off your business tomorrow? Your thinking at this stage should be very focused and more detailed than ever before, when you sketched out your business model with the “Business Model Canvas”. Point out everything needed to tap into your market and get rid of the “waste” that is not essential to get YOUR job done. External elements of your business model … and internal elements Lean Offerings / MVP Design your business in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Modifiability Reusability Visuality Must have What is the minimal set of user stories customers and users expect to be implemented in order to deliver the core value of the product and/or service? Should have What is the extended set of user stories that increases the value of the product and/or service to the next level? What is a lean offering / MVP (= Minimum Viable Product)? Minimal set of user stories that fulfills at least the following requirements: + Are your hypotheses covered? + Can you charge your customers? + Is your DNA embedded? + Does your mother like it? To define user stories, look through the lenses of customers and users. Could have What are optional user stories that can help us better serve our customers and users in the future? What non-functional requirements should be embedded in our product and/or service? Functional Non-functional DNA fit Ease of implementation Tools Which tool is most appropriate to build the MVP? F NF DNA Download ^|PDF | URL: http://bit.ly/17PUx4h Title Group Date Iteration 1 2 3 Low High Low High Hypotheses & Experiments Action Plan Hypotheses “As a___, I want to___.” (Role) (Action) Keep in mind that each user story should be independent of any other user story. What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Low High Durability Low High Competitive benchmark What user stories has our No. 1 competitor (”DNA fit”) considered in its offering to their customers and users? ...what non-functional requirements do they fulfill? Fc NFc

Realization LET‘S DO SOME “LEAN“ PROJECT MANAGEMENT 142

Realization 7W Action Plan Format: DIN A0 Design your business
in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Experiments Lean Offerings MVP / B Output Activities / Roles Team Reflection Each post-it represents one activity with an effort of 2-3 mandays Week 01 Week 02 Week 03 Week 04 Week 05 Week 06 Week 07 What activities need to be carried out to build the lean offerings / MVP / B? What activities need to be carried out to run the defined experiments? What tangible output do we want to achieve after 7 weeks? What have we learned and do we have to change our strategy? Download ^|PDF | URL: http://bit.ly/10FImm6 Good Weak Brilliant Title Group Date Iteration 1 2 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Halftime Lean Offerings / MVP / Hypotheses & Experiments Analogs Are there any activities needed to investigate around analogs? ACTION PLAN…AS A TOOL 143 URL: bit.ly/10FImm6 The “Action Plan” is a very simple but effective way to organize activities of a “lean” innovation project in your team. Adapt the number of weeks per cycle to what is adequate in your industry. It is important that you create something tangible after each cycle that fulfills the given purpose.

in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Experiments Lean Offerings MVP / B Output Activities / Roles Team Reflection Each post-it represents one activity with an effort of 2-3 mandays Week 01 Week 02 Week 03 Week 04 Week 05 Week 06 Week 07 What activities need to be carried out to build the lean offerings / MVP / B? What activities need to be carried out to run the defined experiments? What tangible output do we want to achieve after 7 weeks? What have we learned and do we have to change our strategy? Download ^|PDF | URL: http://bit.ly/10FImm6 Good Weak Brilliant Title Group Date Iteration 1 2 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Halftime Lean Offerings / MVP / Hypotheses & Experiments Analogs Are there any activities needed to investigate around analogs? ACTION PLAN…AS A TOOL 144 Activities “MVP / B” Activities “Experiments” Output At the beginning of each cycle, we plan activities to run the experiments for the identified hypotheses. Plan these activities for the entire cycle and adapt the plan week by week due to new requirements. All activities related to the design and creation of the MVP / B are planned in this area. Plan these kind of activities for the entire cycle and reflect every week, whether changes are required. The definition of a tangible output for each cycle is usually the first thing you do before you start working. In many cases, the development of your MVP will be your first goal. The “Action Plan” is a very simple but effective way to organize activities of a “lean” innovation project in your team. Adapt the number of weeks per cycle to what is adequate in your industry. It is important that you create something tangible after each cycle that fulfills the given purpose. Team performance The team and the quality of your teamwork is the most important ingredient in these kind of projects. Track your team performance week by week and plan team interventions if necessary. After each cycle, it is essential to sit down with your team and reflect what you have learned so far. It may happen that something need to be improved or a shift in long-term strategy is ahead. Reflection URL: bit.ly/10FImm6 Activities “Analogs” In some cases, investigations are required to collect additional information regarding the “analogs. Desk research and expert interviews are excellent tools to gather these information.

in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Experiments Lean Offerings MVP / B Output Activities / Roles Team Reflection Each post-it represents one activity with an effort of 2-3 mandays Week 01 Week 02 Week 03 Week 04 Week 05 Week 06 Week 07 What activities need to be carried out to build the lean offerings / MVP / B? What activities need to be carried out to run the defined experiments? What tangible output do we want to achieve after 7 weeks? What have we learned and do we have to change our strategy? Download ^|PDF | URL: http://bit.ly/10FImm6 Good Weak Brilliant Title Group Date Iteration 1 2 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Halftime Lean Offerings / MVP / Hypotheses & Experiments Analogs Are there any activities needed to investigate around analogs? REFLECT WHAT YOU HAVE LEARNED 145 Activities “MVP / B” Activities “Experiments” Output At the beginning of each cycle, we plan activities to run the experiments for the identified hypotheses. Plan these activities for the entire cycle and adapt the plan week by week due to new requirements. All activities related to the design and creation of the MVP / B are planned in this area. Plan these kind of activities for the entire cycle and reflect every week, whether changes are required. The definition of a tangible output for each cycle is usually the first thing you do before you start working. In many cases, the development of your MVP will be your first goal. The “Action Plan” is a very simple but effective way to organize activities of a “lean” innovation project in your team. Team performance The team and the quality of your teamwork is the most important ingredient in these kind of projects. Track your team performance week by week and plan team interventions if necessary. After each cycle, it is essential to sit down with your team and reflect what you have learned so far. It may happen that something need to be improved or a shift in long-term strategy is ahead. Reflection Activities “Analogs” In some cases, investigations are required to collect additional information regarding the “analogs. Desk research and expert interviews are excellent tools to gather these information. 1.  Kill project: We have learned that our new offering doesn’t help our customers and users to get a meaningful job done. 2.  Fix problem: We have learned that we did something wrong from a methodological perspective. 3.  Pivot MVP: We have learned that our initial offering needs urgent modifications. 4.  Pivot strategy: We have learned that our initial strategy doesn’t work. 5.  Carry on: We have learned that we can create value for customers and us, which is good enough to carry on. Reflection

in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Experiments Lean Offerings MVP / B Output Activities / Roles Team Reflection Each post-it represents one activity with an effort of 2-3 mandays Week 01 Week 02 Week 03 Week 04 Week 05 Week 06 Week 07 What activities need to be carried out to build the lean offerings / MVP / B? What activities need to be carried out to run the defined experiments? What tangible output do we want to achieve after 7 weeks? What have we learned and do we have to change our strategy? Download ^|PDF | URL: http://bit.ly/10FImm6 Good Weak Brilliant Title Group Date Iteration 1 2 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Halftime Lean Offerings / MVP / Hypotheses & Experiments Analogs Are there any activities needed to investigate around analogs? EXAMPLE: ITUNES 146 URL: bit.ly/10FImm6 The “Project Dashboard” is a very simple but effective way to organize activities of a “lean” innovation project in your team. Adapt the number of weeks per cycle to what is adequate in your industry. It is important that you create something tangible after each cycle that fulfills the given purpose. Prepare sales process UI concept design Design sales presentation Sketch mockups Develop DRM concept Setup initial music lib Discuss sales presentation with marketing Publish job profiles Setup workplaces for new staff Call president of DMV Arrange meetings with record companies Design landing page for test POS Develop landing page Prepare test POS in Munich retail store Reorganize production for test POS Inform store staff Start test POS Negotiate DRM concept with record companies Sales presentation Landing page for test POS Initial music lib Back in 2003: How could the first seven weeks of the implementation process look like?

Realization VIRTUAL TEAM MANAGEMENT 147 “Rapid Modeler” is a real-time
collaboration software for teams. The software allows you to develop ideas, business models and services with people across dispersed locations and helps you save travel time and costs. For details visit: http://www.rapidmodeler.de URL: bit.ly/q7slqa View: Action Plan

Realization MANAGING PROJECT PORTFOLIO 148 Strategic fit Distance to success
Long way to go, but promising market attractiveness and good strategic fit r = Market potential / growth A r G F C E B D Kill these projects - today These projects are everybody’s darling Potential candidates for spin-offs?

What would you do in your first 7 weeks? 10
min. Session 9

Realization WRAP UP 150

Business Model Format: DIN A0 Title Group Date Design your
business in your browser | URL: http://www.rapidmodeler.de Target groups Brand & messages Offerings Relationships Channels Profit formula Channels Resources Processes Partners Investments Costs Pricing & revenue Pattern How much money do we need to spend before we earn? How much do our customers pay (per unit)? How, when and how often do we charge our customers? What are the most important costs to create and deliver the offering? Delivery R&D Who is our sales target and who will be using our offering? What (internal) key resources do we need to create and deliver the offering? Who are our (external) key partners to create and deliver the offering? What bundle of products and services do we offer to our customers and users? How do we want our brand to be perceived and what is our story to sell the offering? Through which channels do our customers and users want to be reached? What kinds of relationships do our customers and users expect? Through which channels do our partners want to be reached? What (internal) key processes do we need to create and deliver the offering? Download ^|PDF | URL: http://bit.ly/10cz2TI © 2014 Orange Hills GmbH. All rights reserved. Inspired by www.businessmodelgeneration.com. Iteration 1 2 3 Business Ideas Hypotheses & Experiments What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) Primary What is our primary customer and user segment that unlocks the most value in our business? What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Customers Users Lean Offerings / MVP Design your business in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Modifiability Reusability Visuality Must have What is the minimal set of user stories customers and users expect to be implemented in order to deliver the core value of the product and/or service? Should have What is the extended set of user stories that increases the value of the product and/or service to the next level? What is a lean offering / MVP (= Minimum Viable Product)? Minimal set of user stories that fulfills at least the following requirements: + Are your hypotheses covered? + Can you charge your customers? + Is your DNA embedded? + Does your mother like it? To define user stories, look through the lenses of customers and users. Could have What are optional user stories that can help us better serve our customers and users in the future? What non-functional requirements should be embedded in our product and/or service? Functional Non-functional DNA fit Ease of implementation Tools Which tool is most appropriate to build the MVP? F NF DNA Download ^|PDF | URL: http://bit.ly/17PUx4h Title Group Date Iteration 1 2 3 Low High Low High Hypotheses & Experiments Action Plan Hypotheses “As a___, I want to___.” (Role) (Action) Keep in mind that each user story should be independent of any other user story. What job(s) are our customers and users trying to get done? Job(s) to get done “When___, they want to___, so they can___.” (Context) (Motivation) (Outcome) What kind of value do we create for customers and users with our offering? Core value “We deliver___, so that___.” (Value) (Outcome) What do we do better than our competitors, which is hard to copy? Unfair advantage “We excel in___, which is unfair because___.” (Advantage) (Reason) Low High Durability Low High Competitive benchmark What user stories have our biggest competitors considered in their offerings to their customers and users? ...what non-functional requirements do they fulfill? Hypotheses & Experiments Format: DIN A0 Design your business in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Analogs Antilogs Hypotheses Experiments What things are new to us but we can learn from others, because they have proven that it just works? How can we test the identified hypotheses with the least effort? What assumptions grow out of relevant antilogs that are critical for our business? What things are new to us and new to the entire market, which is why we can’t learn from anyone? Test focus A+ A- Joint activities? How to test hypotheses? 1. Try to break down a high-level hypothesis into a set of low-level hypotheses. 2. Run experiments, if it is sufficient to reflect the status quo or possible to simulate affected parts of the future in a realistic way. 3. In any other case, build a MVP first and test the hypotheses afterwards. Never let people predict the future – not even their own behavior. It‘s a waste of time! ...and keep in mind that most hypotheses can’t be proven “right”. It’s about getting a professional gut feeling. Download ^|PDF | URL: http://bit.ly/13zc222 + Customers + Users + Brand & messages + Channels + Relationships + Offerings + Resources + Processes + Partners + Profit formula + Business DNA Title Group Date Iteration 1 2 3 proceed with MVP definition Experiment MVP define experiments Experiment MVP Experiment MVP Experiment MVP Experiment MVP Importance Uncertainties Business Model Minimum Viable Product Look at every single element of your business model to find analogs and antilogs: desirable feasible viable Examples - Customer / partner interviews - Observation - Survey - Crowd sourcing Examples - CAD / CAM - 3D printing / prototyping - Technical simulation - System dynamics simulation Examples - Expert interviews - Financial modeling - Business simulation - DCF / business case (Social) prototype required to simulate the future? Make sure your analogs are reliable sources to learn from others. In many cases, analogies eventually turn out to be somehow different to your business when you look under the hood. 7W Action Plan Format: DIN A0 Design your business in your browser | URL: http://www.rapidmodeler.de © 2014 Orange Hills GmbH. All rights reserved. Experiments MVP / B Output Activities / Roles Team Reflection Each post-it represents one activity with an effort of 2-3 mandays Week 01 Week 02 Week 03 Week 04 Week 05 Week 06 Week 07 What activities need to be carried out to build the MVP / B? What activities need to be carried out to run the defined experiments? What tangible output do we want to achieve after 7 weeks? What have we learned and do we have to change our strategy? Download ^|PDF | URL: http://bit.ly/10FImm6 Good Weak Brilliant Title Group Date Iteration 1 2 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Threshold Iteration 1 Iteration 2 Iteration 3 Halftime Minimum Viable Product / Hypotheses & Experiments Analogs Are there any activities needed to investigate around analogs? BUSINESS DESIGN PROCESS 151 Pivots / improvements Extensions / improvements B. Business model C. Hypotheses & experiments E. Action plan D. Lean offerings 1 2 3 Market & trends Customers & users You & context A. Business idea Cycle 1-x +  Analogs +  Antilogs +  Hypotheses +  Experiments +  Functional requirements +  Non-functional requirements & tools +  Competitive benchmark +  Activities “MVP / B” +  Activities “Experiments” +  Output +  Team performance +  Reflection +  Customers & users +  Brand & messages +  Channels +  Relationships +  Offerings +  Resources +  Processes +  Partners +  Profit formula +  Business DNA Business DNA = +  Job(s) to get done +  Core value +  “Unfair” advantage KPIs KPIs r = Market potential / growth Distance to success Strategy fit r F. Portfolio Levers of growth Source: Orange Hills GmbH / Bernhard Doll (2013)

What is your story? 3 min. each The Battle Whose
story is most compelling? Make some noise for them...

Any questions 153 ? Aristotle: “What does it mean to
be a good person?” René Descartes: “What does it mean to be?” Friedrich Nietzsche: “What does it mean?” Bertrand Russell: “What does ‘it’ mean?” C.S. Lewis: “What does it?” Lil Jon: “What?”

NOT ENOUGH? 154 ISBN: 978-‐0262018494 Available at
ISBN: 978-‐3-‐8349-‐1943-‐4 ISBN: 978-‐0470510667 ISBN: 978-‐0470847428 ISBN: 978-‐0566092138

Bernhard Doll Orange Hills GmbH Sendlinger Str. 29 80331 München,
Germany E. [email protected] T. +49-89-4520545-0 F. +49-89-4520545-69 Follow us on Twitter: @orangehillsgmbh 155

Business Design (Beta)

Business Design (Beta)

Other Decks in Business

Featured

Transcript