New Business Modelling Framework (NBMF)

https://nbm4.com/#what

A method for becoming a digital enterprise, creating new digital business models & products, and commercializing them:

1. Solution Discovery
1.1. Idea
1.2. Customer
1.3. Value Suggestion

2. Solution Delivery
2.1. Value Test
2.2. Product
2.3. Go to Market

Transcript

1. New Business Modelling Framework (NBM4) New Products & Business Development Michael Kozloff www.nbm4.com linkedin.com/in/mkozloff/ A method for becoming a digital enterprise, creating new business models & products, and commercializing them. v0.064
2. Michael Kozloff 2 New digital products planning, development, and growth 25+ years of experience in leading technology and telecom companies in Central & Eastern Europe and CIS countries: general management, product management, and business development As a senior product management and business development consultant completed more than 30 projects for business modeling & new products development Launched a cloud IoT platform and commercial fleets marketplace in major telco Increased IBM's cloud services business in Central and Eastern Europe by 3.5 times Launched a cloud platform and of cloud partner ecosystem for major telco Launched IaaS cloud services provider and sold it to strategic investor Increased VMware business in CIS by 3 times Helped Microsoft Become a Leading Enterprise Solution Provider Co-founded AI/OCR software developer Michael Kozloff Strategy, new business models, product management and growth
3. 3 Featured Product & Business Development Experience PROJECT CUSTOMER Development of the concept for local municipal government digitization System integrator Development of the digital transformation strategy of internal financial and production IT systems and development of the product vision for the new external digital services Top media holding Development of the M2M/IoT strategy and product management of IoT products and platforms with 30+ products and 70+ FTEs Top telecom operator Development of the business case for b2b marketplace platform Top telecom operator Development and launch of the b2b marketplace for commercial fleets owners Top telecom operator Development of the long-term strategy for the leading provider of telematics solutions Auto telematics developer Telematics as a service business and financial model development Auto telematics developer RPA (robotic process automation) market research and vendors recommendation Resource company AI (artificial intelligence) and VDA (virtual digital assistants) market research and vendors recommendation Resource company PC as a Service business model (PCaaS) development Cloud provider Development of IBM cloud services in Central and Eastern Europe with an achieved x3.5 business growth IBM Partner cloud ecosystem launch Top telecom operator Development of the business model, architecture, and product requirements for public cloud platforms beСloud , Nitec Business model development and launch of the IaaS cloud services provider De Novo / Active Cloud Development of the financial model and architecture for a private cloud platform Financial organization Development of the Microsoft Cloud Distributor business plan Microsoft distributor Development of the Business model of the fiscal data operator (FDO) FDO Analysis of the data center market development of an investment model for Tier III data center acquisition Large investment fund Development of the СPaaS (Communication Platform as a Service ) business model and sales excellence framework Zingaya / VoxImplant Development of customer ROI models for Microsoft Windows Server, Microsoft Enterprise Agreement, Microsoft Enterprise Search Microsoft Development of the Business case for launching cloud value-added services (VAS) Investment fund and telecom operator Customer ROI models development for Autodesk, Digital Design, Microsoft, EMC/Documentum, VMware, Security Code products 20+ different Management of VMware business in CIS with achieved x3 annual revenue growth VMware
4. Main Sections 4 01 01 Definitions Definitions … 02 02 Digital Transformation Digital Enterprise Digital Transformation & Digital Enterprise … 03 03 … 04 04 New Business Models Framework (NBM4) New Business Models Framework (NBM4) … Product Model Product Model 05 05 … Exhibits 2.1. Value Test 2.2. Product 2.3. Go to Market 2. Solution Delivery 1.1. Idea 1.2. Customer 1.3. Value Suggestion 1. Solution Discovery Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Digital Transformation Digital Enterprise Product Model New Business Models Framework (NBM4) Exhibits Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4) Exhibits
5. Table of Contents 5
6. Change History 6 Date What’s New 12/29/2021 First release 02/07/2022 Business modeling toolkit by Peer Insight 02/15/2022 Expanded description of the Unit Economics 04/03/2022 Definitions and examples of successful digital transformation 06/01/2022 Description of the Stage-Gate(R) new product development (NPD) process. Differences between product models. Dedicated and overlapping roles in MSE product teams. Introduction to Agile and SCRUM. Prototyping and key methods. 6 thinking hats. 07/07/2022 Revised document structure
7. Definitions and Abbreviations 7 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
8. Product model An organizational function that guides the organization and management of the new product development (NPD) process, product teams, rapid planning, production, and launch to the market of new products Product Any item or service that you sell [on a recurring basis] to serve a customer's needs ** Product management An organizational function that guides every step of a product’s lifecycle — from development to positioning and pricing — by focusing on the product and its customers first and foremost* Definitions (1) Product team Autonomous team created for the long- term solution of customer problems with full responsibility for the creation, development and management of the product 8 *atlassian.com/agile/product-management ** aha.io/roadmapping/guide/product-management/what-is-a-product
9. Digital Enterprise An enterprise characterized by: 1. Creation of digitalized products or services that are either delivered fully digitally (e.g., digital media or online banking), or 2. Where physical products and services are obtained by the customer by digital means (e.g., online car-sharing services). Digital transformation Radical, fundamental changes towards becoming a digital enterprise. Includes the transformation of the new product development (NPD) process into digital: NPD >>> DNPD Definitions (2) 9 The Digital Practitioner Body of Knowledge Standard opengroup.org/dpbok
10. Digital Transformation Changes Core Business 10 Digital transformation transforms an organization's core business to better meet the needs of new customers through new business models, digital technologies, and data
11. Digital = Made With Digits, Computers and Software 11 A binary number system ("base two") is the internal language of computers: it has two possible digital values for each digit: 0 or 1.
12. Transformation 12 https://en.wiktionary.org/wiki/transformation From Ecclesiastical Latin: trānsfōrmātiō The act of transforming or the state of being transformed. Business transformation, a major change in the identity, structure, or purpose of an organization (from the field of strategic management)
13. Analogy in Nature 13 lovecraftianscience.wordpress.com/ The life cycle of a butterfly Caterpillar Chrysalis Butterfly Eggs
14. Digital Transformation as a Project Initiative 14 Source : Digital Practitioner Body of Knowledge Standard, 2019 Enterprise "as is" Digital Transformation Digital Enterprise “to be" Radical, fundamental changes to becoming a digital enterprise Creates digital products or services in digital form (software), or Offers physical products and customer service through digital means (car sharing, delivery orders…) Core business with an existing set of products and customers
15. Not All “Digital” Counts as a Digital Transformation 15 Digitization Digitalization Digital transformation The widespread use of information technologies to improve business processes Creation of a new business Taking analog data and converting it to digital
16. Platform A digital environment that facilitates interactions between two (two-sided platforms) or more (multisided platforms) distinct user groups, usually consumers and producers, by creating value for all participants. There are two main types of platforms: • Transaction platforms, which facilitate direct exchanges between users (e.g., e-commerce sites), and • Innovation platforms, which enable third-party developers to create complementary products or services (e.g., app stores).1 Platform Ecosystem A multisided platform that meets the following criteria:2 1. Availability of a unified information technology infrastructure 2. Openness 3. Win-win principles for all participants Many markets are structured as platform ecosystems, they can be open or closed platforms, where a stable core (such as a smartphone operating system or a music streaming service) mediates the relationship between a wide range of complements (like apps, games or songs) and prospective end-users. Definitions 16 [1] Hagiu, Andrei. "Strategic Decisions for Multisided Platforms." MIT Sloan Management Review, December 19, 2013, https://sloanreview.mit.edu/article/strategic-decisions-for-multisided-platforms/ . [2] Rietveld, Joost, Melissa A. Schilling, and Cristian Bellavitis. "Platform Strategy: Managing Ecosystem Value Through Selective Promotion of Complements." Organization Science, vol. 30, no. 6, 2019, pp. 1232-1251, https://pubsonline.informs.org/doi/10.1287/orsc.2019.1290.
17. The difference between a product and a project 17 Project definition >>> Product Any generic product or service that you sell on a recurring basis to serve a customer's needs > ERP System Project A temporary endeavor undertaken to create a unique project service or result (PMI, PMBOK®) > Release of the new version of ERP > ERP deployment for the customer Budget Time Scope Defined before the start Relatively constant over the project’s timeline. Change management is a separate and complex process Unknown before the start Constantly changing during the product’s lifecycle
18. The Difference Between a Product and a Project 18 Project definition >>> Product Any generic product or service that you sell on a recurring basis to serve a customer's needs > ERP System Project A temporary endeavor undertaken to create a unique project service or result (PMI, PMBOK®)1 > Release of the new version of ERP > ERP deployment for the customer Budget Time Scope Defined before the start Relatively constant over the project’s timeline. Change management is a separate and complex process Unknown before the start Constantly changing during the product’s lifecycle
19. Definitions 19 Steve Blank, Driving Corporate Innovation: Design Thinking vs. Customer Development [URL] * User-centric design is another word that is commonly used. Startup of the 20th century The founders came up with a product idea Version 1 development Finding Clients • Business plan launch • Hiring sellers The Lean Tech Startup of the 21st Century (Greenfield) The founders came up with a product idea CustDev >>> MVP Iterations and pivots • Little data • Run as hypotheses are confirmed • Hiring sellers Corporate startup/product Brownfield The founders came up with a product idea ABCDX > Design Thinking > MVP Iterations and pivots • Lots of data • Run as Ready • Hiring sellers Customer Development [CustDev, customer development ] is testing an idea or prototype of a future product on potential consumers. Design Thinking [ Design Thinking *]—an approach to solving customer problems, starting with the "search for the need" of the client (to reduce the risk of making a product that no one wants), rapid prototyping, and learning Similar methods, differences in motivation, data availability and tactics
20. NBM4 (New Business Modeling Framework) A method of creating new business models, as described in this document. PMF (Product Market Fit) The presence of a product that satisfies the needs of a particular market and has value for the consumer PCF (Product Channel Fit) Availability of a product that satisfies the needs of certain distribution channels. NPD / NDPD New [Digital] Products Development process Terms and Abbreviations 20
21. Digital Transformation and the Digital Enterprise 21 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
22. The term "Industry 4.0" means the fourth industrial revolution, defined by the following characteristics:1 › Digitization and integration of vertical and horizontal value chains › Digitalization of product and service offerings › Digital business models and customer access 22 Industry 4.0 Although the technological components of the concept are crucial, they do not answer many questions on their own: › How can these characteristics help in business development? › How to take them into account in the strategy of the organization? › What is the best path to the digital enterprise? [1] PwC, Industry 4.0 framework and contributing digital technologies >>>
23. Industry 4.0 Framework and Contributing Digital Technologies 23 [1] PwC, Industry 4.0 framework and contributing digital technologies >>> While Industry 3.0 focused on the automation of single machines and processes, Industry 4.0 focuses on the end-to-end digitization of all physical assets and integration into digital ecosystems with value chain partners. Generating, analyzing, and communicating data seamlessly underpins the gains promised by Industry 4.0, which networks a wide range of new technologies to create value.
24. Digital Enterprise 4.1—Industry 4.0 Plus e-Commercialization STAGES 1. Development of a digital transformation strategy 2. Development of new digital products 3. E-commercialization METHODOLOGY › Consensus of key stakeholders › New Business Models Framework ( NBM4 ) › Lean Startup › Design Thinking / Customer Development Development and implementation of a strategy for the transformation of a traditional business into a digital enterprise to grow shareholders’ value …through the digital transformation and the rapid creation, testing, and scaling of new digital business models and products … and e-Commercialization through the digital omnichannel promotion and sales excellence Digital transformation – radical, fundamental changes to become a digital enterprise. Digital Enterprise : › Creates digital products or services entirely in digital formats (software, online banking…) › Offers physical products and services to customers through digital means (subscription car, carsharing, marketplace…) 24
25. Extinction vs. Prosperity 25 valuer.ai/blog/50-examples-of-corporations-that-failed-to-innovate-and-missed-their-chance Images: CC Wiki Commons : Digital enterprises with the constantly emerging new products, platforms and ecosystems Were previously market leaders, but went out of the business
26. The Path to the Digital Enterprise 26 In constantly changing markets, businesses want to diversify their product portfolio and find a new more sustainable business model(s). Thrive, not become extinct! Bank >>> IT company Revolut, N26 Gasoline >>> Electricity Tesla Auto >>> Auto by subscription Volvo, Hyundai, Skoda… Car sales vs Market cap 2021 US vehicle sales figures by models **) Market capitalization as of 22.06.2022 >>> >>> #684 369 (Ford F)* $46B ** #223 887 (all models)* $736B **
27. 27 Transitioning to a Digital Enterprise Business strategy Digital transformation strategy Product model Digital Factory / Digital Platform The new digital product development process Digital Commercialization ? ? ? ? ? ? How do we develop new digital products? On what platform? On what infrastructure? Should we enter new markets? Whether to develop new business models and products? For which clients? What products? How to organize the process? What to change in existing ones? How do we sell new products? Through what channels? How do we build Sales Excellence practices?
28. 28 Digital Transformation Strategy (4P) Traditional Enterprise Digital Enterprise Legacy organization, processes, teams and technologies Principles • Product centricity • Customer focus • Product teams' autonomy • Accountability Plan and design • Transformation strategy • Portfolio strategy • Product strategy • New business models • e-Commercialization model Diagnostics of the current business state and the level of digital maturity Key stakeholders, business strategy, appetite for change and risks Diagnostics Implementation Digital business model(s) Digital processes, products, and commercialization model • Organizational and financial structure • Team • Processes • Digital platform • Development of digital products • e-Commercialization Position Perspective
29. Value > Who is our client and what value do we want to offer them? > Through what customer experience? Strategy > Digital transformation strategy (4P) > Product strategy > Technology strategy Data > KPIs & OKRs > P&L Plan/Fact > Operating and investment performance Technology > Selection and implementation of technologies for the digital platform, products and services, digitalization of business processes, ecosystem People and Processes > Corporate culture, organizational structure, team > Product model (from design to product thinking) > Functions & Processes: Lean Startup, Design Thinking, Agile, Marketing & Sales, Data & Reporting… Independent startups are created in the "greenfield”. Corporate startups are launched inside or outside the parent organization and usually inherit some of its processes and culture (“brownfield”), which has both a benefits and a disadvantages. Both approaches share these elements in their business models. New Business Model for Startups / New Products Operational management Continuous development 29
30. 30 Approaches to Creating New Value Our core competencies? Current business model? What else can we offer? Through what channels? To what clients? What products need to be developed? What business model will create sufficient profit? What can we offer them additionally? What ecosystem serves their needs? What types of clients are we looking for? What are their pains and needs? Internal capabilities External requirements From Competence to Customer Needs: Inside-Out From Customer Experience to Design: Outside-In Value: functional benefits minus acquisition cost Value: emotional benefits minus disadvantages Based on materials from PeerInsight.com
31. Types of Product Models & Methods for Starting New Businesses within Corporations 31 [1] How to launch a new business: Three approaches that work.McKinsey >>> [2] PeerInsight.com Methods to launch a new business1 Internal VC-like incubator Scale-up Factory Clean slate Approach to value creation2 Inside-Out Inside-Out / Outside-In Outside-In Strategic Maturity of ideas Proximity to core business Ecosystem role Source of capabilities Long-term target setup for new businesses Brownfield • Corporate startup Redfield • Internal products and digitalization Greenfield • Independent startup Types of Product Models [Details]
32. Three Methods for Starting New Businesses within Corporations 32 How to launch a new business: Three approaches that work.McKinsey >>> . Internal VC-like incubator Scale-up Factory Clean slate Description Internal employees develop ideas from the bottom up, pitch them to an internal venture-capital (VC) board, receive funding for initial-concept validation, and then build and scale the approved concepts Parent company sets up a fully owned but separate subsidiary exclusively dedicated to business building, This factory takes concepts from the parent and scales them as independent businesses Incumbents set up anew, fully independent start-up that leverages such advantages of the mother company as access to distribution channels, but is independent in its decision making Strategic posture Develop broad portfolio of businesses from well- developed pipeline of ideas; incubate multiple concepts Commit fully to building multiple businesses at scale. Typical focus is a portfolio of five to eight new businesses at any given time “Bet big” on a promising idea with significant investment and high speed to market Maturity of ideas Early stage: ideas validated and turned into minimum viable products (MVPs) prior to scaling Mature: typically strong, validated concepts or MVPs generated by parent’s R&D organization Medium: riskiest assumptions have been validated, but the business still needs to be built and scaled from scratch Proximity to core business Close: ideas are generated by internal employees in response to core-business needs, with the parent company remaining the new venture's key customer Arm’s length: factory ventures typically aim to support the core business as well as to acquire external customers Independent: separate legal entity, often as 100% daughter company with focus well beyond the incumbent organization's core focus Ecosystem role Business is buildable without strong collaboration with external partners, but partner solutions may be helpful to expand and scale the offering Parent/core business remains most important relationship, but external customers and partners are required to scale Attracting numerous external partners and customers often essential to building a viable business. Frequently important to be perceived as neutral in the market Source of capabilities Primarily internal, with external advisors included on the VC board Mix of internal and external, with the factory filling capability gaps (eg, digital skills) primarily through external hiring Primarily external for both leadership teams and broader staff Long-term target setup for new businesses Flexible: scaled business can be integrated back into the parent or spun out Independent, but closely aligned with the parent’s core activities Independent, standalone business collaborating with the parent. Exits to third parties also viable
33. 33 Creating the Customer Experience (CX) of the Future Analysis and correction of problems Improvements Optimization New quality of CX Today’s CJM Customer Journey Maps: What the customer is doing, thinking, feeling and saying today Future CJM 1 Maps of future client journeys: what we want the client to do, think, feel and say tomorrow Customer experience maturity level 1. Digital transformation starts with improving the customer experience 2. Future customer journeys determine the strategy for the development of new products 1. Idea for a new product or improvement of the old one • Market research • Preliminary business plan and case • What we want to do: preliminary hypotheses 1… N 2. Client (Customer Development) : • Person (buyer / user / agent of influence) • Main tasks to be solved (Jobs to be Done) • Empathy Map • Customer Journey Map ( CJM ) • Pain points 3. Product vision and strategy • What solution, a new value, a pain relief the product can offer? • Refinement of Hypotheses 1… N through HADI- cycles • Product vision and development plan • Refined business plan and case • PRD, User Stories & Epics, Architecture 4. Product development and commercialization • Prototype(s) > MVP / MLP > Version 2… N / Pivot 1…N • Product Market Fit: find customers for a product • Product Channel Fit: search for promotion channels • Scaling in the market and channels Product life cycle 1) Customer Journey Map - customer journey map: CJM is a directed graph on which the customer journey is mapped using touch points, including details about customer interaction with the product
34. 34 Challenges and Obstacles Transition to the continuous development and deployment of digital products for companies with no experience in developing, selling, and supporting software and services Legacy business processes and IT always create inertia that makes change difficult or impossible, even with a background in digital business
35. 1. Low digital maturity › Outdated inflexible business processes, lack of data, slow decision making, low adaptability to change, no experience in digital product development › Lack of consensus on digital transformation › Low trust in consultants due to low responsibility for the outcomes 2. Low level of product development maturity › Slow time to market (T2M), new products do not find the market fit, low ROI › Competitors offer the better customer experience › Long, bureaucratic processes are not suitable for new business models and products 3. Problems of commercialization › Stagnation of the current business model › Old marketing and sales channels do not work for new products › New digital products do not bring the expected results 1. Develop a strategy for transforming into a digital enterprise › Analysis of the level of digital and product development maturity › Market analysis to find promising directions for the new businesses › Development of the strategy and implementation plan for the Digital Transformation 2. Optimization of the product development › Get recommendations about the implementation of the modern product model and digital product development process › Implementation of design thinking and customer development methods › Design and implementation of a digital factory, platform, and digital ecosystem 3. Development and implementation of the E-commercialization strategy › Marketing and Sales strategy for new business models › New operating model for digital products (cloud, data, e-com, digital channels, unified CX) › Define and implement the Sales Excellence model Challenges and Obstacles Solutions Suggested Solutions 35
36. Innovation > Experiments to find new value > Hypothesis testing (HADI -cycles) and failure analysis > Speed (Time to Market) and feedback based on data Value > Customers’ understanding of value is constantly changing > New products should create new value > New technologies and digitalization make experimenting cheaper and faster Data > Decision-making based on data, not emotions and past experience > Collection, analysis, and use of data from max. number of sources at all levels of the organization > Data protection and security is a paramount Competitors > Competing with substitutes for value blurs industry boundaries > Competitors can be partners > Platforms and ecosystems as new types of intermediaries Customers > Know your customer (personas, pains, jobs to be done, paths to purchase) > Digitization helps improve customer experience and loyalty > Old processes and the channels usually don't work 36 Key changes Based on: David Rogers , Digital Transformation Playbook davidrogers.biz
37. 37 Radical Organizational and Technological Changes to Support Digital Transformation Physical Products and goods Digital Products and services (software) Projects / Waterfall Products, Design thinking, Agile Monolithic Applications Microservices and API Economics IT as a supporting function IT as foundation, digital factory and modular services Management by experience and intuition ML, data, tests support decision-making Sales channels are separated from the product Digital ecosystem and sales channels Multichannel Omnichannel Unified customer experience Digital Manufacturing, Platforms and Ecosystems Industrial manufacturing and platforms with limited IT presence
38. Nintendo Almost Went Bankrupt in the Mid-2010s 38 Nintendo’s Sad Struggle for Survival 2016-17 2006 2016 Consoles + Game Subscriptions Game consoles Mobile games With The Pokémon Company and Niantic >>>
39. However, Has Reborn After Transformation 39 statista.com/chart/11647/nintendo-operating-profit/ intelligentautomation.network/transformation/articles/the-legend-of-nintendos-business- transformation Operating income, $ billion per year From console release to online gaming platform and software release In 2014, Nintendo began to completely change its business model and, like Nike, Coca-Cola began working directly with the consumer (Direct to Consumer, DTC model). Handheld and home game consoles have been merged into a "hybrid console" with a Switch subscription, which gives members access to free games, additional features like team games, and the ability to save their data in the cloud. Nintendo has also pioneered the so-called "unfolding system" where players pay extra to gain access to new and enhanced features.
40. 40 An Illustration of a Successful Digital Transformation: Vizio 2021 2020 ∆ % Revenue Devices $502.5 $545.5 -8% Platform+ $85.9 $36.7 134% Net revenue $588.3 $582.2 one% Gross profit Devices $25.6 $58.2 -56% Platform+ $57.3 $30.6 88% Devices: TV, audio speakers, etc. Platform+: viewing data, advertising, AVOD streaming and other digital services Financial Results and Outlook Q3'21 Earnings Call investors.vizio.com/investor-relations/default.aspx Outcomes of the new digital products
41. 41 An Illustration of a Successful Digital Transformation: Hasbro New digital products: games and content, digital distribution Major Segments ($Millions) Net Revenues Operating Profit (Loss) Q3 2021 Q3 2020 %Change Q3 2021 Q3 2020 Consumer products $1,282.7 $1,317.8 -3% $210.4 $226.2 Wizards of the Coast and Digital Gaming $360.2 $273.4 + 32% $159.4 $141.6 Entertainment $327.1 $185.4 + 76% $22.4 $(28.3) Hasbro Reports Strong Revenue, Operating Profit and Earnings Growth in Third Quarter 2021 hasbro.gcs-web.com/news-releases/news-release-details/hasbro-reports-strong-revenue-operating- profit-and-earnings Outcomes of the new digital products
42. 42 An Illustration of a Successful Digital Transformation: Amazon 23%AWS, Subscriptions, and Physical Store Revenue in 2020 G. 77% 72% 67% 61% 53% 50% 51% 0% 0% 0% 3% 7% 6% 4% 13% 15% 17% 18% 18% 19% 21% 3% 4% 5% 5% 6% 7% 7% 5% 7% 9% 10% 11% 12% 12% 1% 2% 2% 3% 4% 5% 6% 2014 2015 2016 2017 2018 2019 2020 Online stores Physical stores Retail third-party seller services Subscription services AWS Other Total Net Revenue 2014 - 2020, by Product Group ($ billion ) Global net revenue of Amazon from 2014 to 2020, by product group(in billion US dollars) statista.com/statistics/672747/amazons-consolidated-net-revenue-by-segment/ Outcomes of the new digital products
43. 43 An Illustration of a Successful Digital Transformation: NIKE 2021 2020 ∆ % Total NIKE Brand Revenues , $ millions $42,293 $35,568 19% Nike Brand Revenues by: Sales to Wholesale Customers $25,898 $23,156 12% Sales through NIKE Direct 16.370 12.382 32% Incl: Digital commerce sales $9,100 $ 5.500 60% Global Brand Divisions 25 30 -17% Development of direct online sales in addition to distribution and stores Digital apps for fitness, workouts and shopping NIKE's annual report for the fiscal year ended May 31, 2021
44. Product Model Elements of the product model Product Team Operating model, digital platform & ecosystem 44 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
45. 45 Elements of the Product Model Product Team Operating Model, Digital Platform, Ecosystem Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
46. Product capabilities How will the customer experience product experience and capabilities? Linking new Products to the Business Strategy 46 Based on the materials from romanpichler.com Business strategy How does a business create value? Business model How will the product reach its business goal? How is it monetized? Portfolio strategy How does the product portfolio support the business strategy? Product metrics (KPIs & OKRs) How is the effectiveness of the product assessed? Product strategy How to create a successful product? Product roadmap How will the product strategy be implemented?
47. 47 Goals and Components of the Product Model Creating new value for shareholders, customers, and partners Improving the speed and quality of the product development and market introduction Commercialization of new products Increased transparency and efficiency: › Unified system of product portfolio goals and indicators › Optimal structure and role model › Budgets, P&L, unit economics, reporting › Synchronized strategy (vision) and tactics (roadmap, backlog) for all product teams › Standard architecture, platform, approaches, and methods › Regular operational rhythm and measurement of work in progress & user satisfaction Key components Organization Permanent (cross-functional) teams formed around products with the necessary competencies to develop, launch and find Product-Market Fit and Product-Channel Fit Processes, level of maturity Product development from customer needs basing on research, in-depth interviews (Customer Development), prototype testing The overall transparent operational rhythm of the organization (by year, quarter, month...) Deep involvement of marketing and sales from the MVP stage People and Culture Sufficient staffing of teams, min 1 person in each key competence Ongoing assessment of team maturity is conducted, and maturity development plans are formed and implemented Technologies Common architecture, stack, platform (dev, BSS, OSS, ops, SRE), digital factory infrastructure for independent development by different teams and possibly partners The production process to support rapid cyclical hypothesis testing, development, and releases (sprints, prototyping, A/B testing, DevOps CI/CD, SRE...) Goals
48. 48 Definition of Product A product is any item or service that you sell repeatedly to serve a customer's needs The properties of the product are: Product type Client Value Examples External External to the organization The product meets the needs for the target market audience Any commercial product or service Internal Users within the organization The product meets the needs of internal user groups Intranet portal for organization employees, any internal IT product Platform Internal or external developers of other products Based on reusable platform components, internal and external developers accelerate development and improve the quality of their products Cloud IaaS/PaaS platforms for commercial customers Application and data platform for internal software developers Value: solving tasks, removing pains, and/or creating other benefits for the customer/user Capabilities: Functionality to meet customer needs Technologies that support functionality Customer experience: the best possible customer and user experience (CX) Business model that includes monetization methods and channels for delivering value to the client
49. 49 Principles of the Product Model Focus on the product Product model and product team are built around the product Value for customers The product must create value for customers through creating benefits, improving outputs, solving problems, and/or eliminating pains Team autonomy The product team has the full authority, resources, and competencies to autonomously develop and deliver the product to customers Team’s accountability The team takes full responsibility for the product and its monetization results. CPO* acts as the CEO** and is fully accountable for results * Chief Product Owner ** Chief Executive Officer
50. Product idea & Vision Business model Market model (TAM>TOM>SOM) 5 Why and other cause-effect models Market Requirements Document Business case and business plan Customer Persona(s) Profile Empathy map(s) Customer Journey Map, CJM «as is» Persona's day/week in a life Jobs to be Done (JTBD), "as is" and prioritization Persona’s pains and prioritization Customer Journey Map, CJM «to be» Jobs to be Done (JTBD), "to be" and prioritization Product features and prioritization Value Map Service Blueprint Model Product Architecture Product Requirements Document / Epics / Stories Growth model and Sales Excellence Framework Customer support and customer experience development model Transformation (growth, pivot or exit) 50 Key Artifacts—Data and Knowledge Gained After Testing Hypothesis
51. Variations in Product Models 51 Redfield (internal corporate digitalization) Project approach The business customer turns to IT for the necessary functionality or acquires it from the 3rd party vendors (leads to the growth of shadow IT) Rudiments of product model Brownfield (corporate startup) Inherited internal processes, policies, and dependencies The product model depends on the product team, shareholders, management board, business process owners, policies, standards, systems Greenfield (independent startup) No inherited internal processes and dependencies The product model depends on the founders and the product team External Products (for commercial clients) Internal Products (for internal customers) Product Idea Researches / CustDev UI/UX Prototype(s ) Prototype Testing User / Job Stories MVP developmen t Pivot / Growth Product Idea Researches / CustDev UI/UX prototype(s) and tests User / Job Stories или ТЗ MVP development Integration into corp. landscape Launch into commerce Operation Pivot / Growth Product Idea Business & Functional Requirements Architecture Terms of Reference Development Front + Back Integration into corp. landscape Testing Operation Improvements
52. 52 Elements of the Product Model Product Team Operating Model, Digital Platform, Ecosystem Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
53. The core product development team typically includes representatives from six functions Who Makes Up a Product Development Team? 53 https://www.aha.io/roadmapping/guide/product-management/what-makes-up-the-product-team Product team Innovation Product management Project management Product marketing Engineering Operations
54. 54 Structure of the Product Team (1) Functions Responsibilities Roles Innovation › Build an idea management process to gather and evaluate feedback from customers, team members, and stakeholders › Lead innovation projects and run pilot programs › Secure funding to pursue new ideas for products and services › Identify and prioritize opportunities for business transformation › Establish and track innovation KPIs, such as new customers or ideas submitted › Chief innovation officer (CINO) › Chief digital officer (CDO) › Director of strategy › Director of innovation › Research and development (R&D) director › Director of digital transformation › Innovation manager Product management and user experience (UX) › Set the product vision and strategy › Understand customer needs › Conduct user testing › Vet ideas for new products and improvements › Create product roadmaps › Plan and deliver releases › Lead the cross-functional product team › Define new product features › Design product experiences › Chief product officer (CPO) › VP of product management › Director of product management › Group product manager › Product manager › Product owner › Director of product design › UX designer › UX researcher › Product designer Project management › Deliver projects on time and within budget › Provide visibility into progress against delivery › Coordinate cross-functional teams and dependencies › Manage project approvals and resources › Streamline processes across the organization to improve efficiency › Chief operating officer (COO) › Director of program management › Director of project management › Program manager › Project manager
55. 55 Structure of the Product Team (2) Functions Responsibilities Roles Product marketing › Research the competitive landscape › Define buyer personas › Create and coordinate launch plans › Craft positioning and messaging to highlight the benefits of using the product › Increase product awareness and usage › Director of product marketing › Senior product marketing manager › Solutions marketing manager › Portfolio marketing manager Engineering › Build applications and functionality › Deliver working code on time › Design robust architecture to support the product goals › Integrate product into CI/CD (continuous integration, continuous delivery) pipeline to iterate quickly › Chief technology officer (CTO) › Director of software development › Engineering manager › Software developer › User experience (UX) designer › User interface (UI) designer › Quality assurance (QA) tester Operations › Drive organizational success › Define business strategy and objectives › Establish ways to generate revenue and reduce costs › Build alignment across teams in the organization › Monitor and report on KPIs › Chief executive officer (CEO) › VP of business operations › Director of business operations › Business analyst › Business consultant
56. 56 Product Management Function In a Large Organization Product Product group Product unit Product team Product teams Team of product and other teams Product Manager Group leader Director of products Business leader Business unit Team of product and other teams Business strategy > Product development strategy Formation and management of product teams Product financing New Product Development (NPD) Commercialization and business development Key business processes
57. 57 Example of the Product Team Structure and Key Roles Chief Product Owner (CPO) Product Portfolio Manager 2 Product Manager 1 Product Manager Proxy Business Analysts Product Owner / Technical Product Manager (mini- CTO) Product Architect UX designers Technical writers (documentation) Developers Quality Assurance (testers) DevOps and Site Reliability Engineers Agile Coach Growth Product Manager Sales Marketing Product Manager 2 (mini-CEO) Product Manager 3 Product Portfolio Manager 1 Platform Product Manager Chief Technical Officer (CTO) Product Support Manager
58. MSE Product Team A MSE Product Team B MSE Product Team C MSE Product Team D  Product Manager  Product Owner  Business Doman Expert  Project Manager  SW Developer  Technology Domain Expert  Testing / Quality Assurance Product Management Team Composition in Midsize Enterprises 58 Gartner, 6/10/2021 [URL] The product manager is the most common role shared among teams. Only 38% of product teams surveyed had a dedicated product manager. In over 1/3 of all product teams, the product manager and product owner roles are played by the same person. The role of software developer is usually played by a dedicated team member. Set up software developers as dedicated team members to enable them to sustain their core activities.
59. Product Management Team Composition in Midsize Enterprises 59 Gartner, 6/10/2021 [URL] Ideally, 100% of roles would be dedicated, but in reality, most product team roles are played by members who work on more than one product team. Despite the greater sharing of resources, MSEs are able to perform as effectively as their larger counterparts. There are seven roles critical to ensuring product teams have adequate capabilities. They were found to be the most prevalent, being included in at least 85% of MSE product teams. All but one of these roles (the software developer) are usually shared across multiple teams. 76% 24% Midsize Enterprises (MSEs) Shared Roles Dedicated Roles 52% 48% Shared Roles Dedicated Roles Large Enterprises
60. The Rest of the Roles Vary in Prevalence and Likelihood of Dedication 60 Gartner, 6/10/2021 [URL] Product Manager High (present in >85% of teams) Testing / Quality Assurance Project Manager Product Owner Business Domain Expert Technology Domain Expert Software Developer Agile Coach Low (present in <70% of teams) API Specialist Microservice Specialist Release Train Engineer Scrum Master Business Analyst Medium (present in 70-85% of teams) System Analyst Quality Engineer Product Architect Solution Architect DevOps UI/UX Product Specialist Likelihood of Role Dedication Low Medium High
61. Product Team’s Role Combinations 61 Gartner, 6/10/2021 [URL] 20% of team members tend to play two or more of these technical roles simultaneously 10% of team members tend to play two or more of these three roles simultaneously Person UI/UX Designer Software Developer Technology Domain Expert Solution Architect System Analyst Testing / Quality Assurance Person Business Analyst Business Doman Expert Product Specialist
62. Cross-functional BizDevOps teams are built with all required skills, and team members report up to either a business lead or a tech lead BizDevOps Product Team Structure Based on The five core IT shifts of scaled agile organizations. McKinsey 62 Cross Functional BizDevOps teams (5-9 people.) Tribe = "team of teams" Team member area of expertise Business Development / Testing Site Reliability Engineering (SRE) Business leader (mini CEO) Tech leader (mini CTO/CIO) CPO >>>
63. 63 Responsibilities of a Product Manager Role / Job title Focus Stakeholders Product manager or chief product owner (CPO) Manages the entire product lifecycle and product roadmap or product portfolio Internal—development, sales, marketing, customer service, lawyers, management, and board members External—customers, end-users, and partners Product manager or product owner Supports the development team, manages the priorities of the backlog and the product feature set Internal—developers, designers and technical managers Business development manager (growth product manager) Delivers business results - growth, customer retention, revenue, etc. Internal—business leaders Technical product manager Works with a team of developers and engineers on basic product specifications and functionality Internal—developers, designers and technical managers Platform product manager Creates and optimizes technical components common to multiple products Internal—engineers
64. Product Manager vs. Product Owner (Agile Team) 64 Product Manager vs. Product Owner Product Manager Product owner Focus Market Development, engineering Creates Focus, direction, roadmap Story backlog Horizon Program Increments (PI) The Quarter Iterations Sprint = 1-5 weeks Controls Product Features Client stories >>>
65. Then: Waterfall Now: Agile Little Changes, Big Changes 65 You and Your Project Manager Requirements Design Implementation Verification Maintenance Personas Stories Develop- ment Discussion >>> Project Manager is Driving from A to B Product Manager Lives the Product’s Life
66. Product Managers vs Project Managers 66 Project Managers vs Product Managers: Difference, Roles & Challenges Product Manager Project Manager Creates Roadmap Planning of resources and budget Analyzing and Prioritizing Time management Determine and align features Keep project team in check Launch the product Monitor progress Manage documents and reports >>>
67. 67 Example of Key Performance Indicators for Managing Product Teams and Products (1) 10% 25 0 5 45% 25 50 15 700 Research and development (R&D) as a percentage of sales Total R&D/product headcount New patent generation New products released Average ROI per product Story points retired Team velocity points Sprint burndown Errors per 1,000 lines of code (KSLOC) Customer satisfaction (CSAT) How much of your income is spent in creating new products Over a period of time Progress in patenting Over a period of time How much ROI (Return on Investment) each new product generates The amount of work (not hours) completed by e.g., a SCRUM team How many story points can be retired in a sprint Task / Sprint Burndown Chart Measures product quality and can be benchmarked against the industry Overall quality of customer experience › %, R&D as a percentage of sales = (R&D expenditure x 100)/gross company sales › # of total R&D or product team members › # of patents filed; › # of patent applications pending approval; › # of patents secured; › # of rejected patent applications › # of new products in conceptualization and planning phases; › # of new products in development; › How many new products are released in a year? › Average product ROI = (the net profit earned by new products) x 100/the costs to produce new products › # of story points retired in a sprint, i.e., iteration; › # of story points retired per team member. › #, Team velocity points = the average number of story points retired by a team per sprint. › X axis = # days within a sprint › Y axis= the work remaining › Daily update. › The burndown line should track downwards by the middle of the sprint › # of errors / 1000 lines of source code › CSAT = (the number of positive responses from customers) x 100/the total number of survey responses Fact: Vs plan:
68. 68 Example of Key Performance Indicators for Managing Product Teams and Products (2) 32 85% 6% 15% 40 000 13 000 50 000 723 6% Net Promoter Score (NPS) Retention rate Customer churn rate Conversion rate Customer Lifetime Value (LTV) Customer acquisition cost (CAC) Active users Support tickets Stickiness Bounce rate Consumer loyalty index. Request your customers to rate your product from 1 to 10. Measure of customer loyalty How many customers you lose over a period E.g., for conversions from trial versions to paid Indicates the revenue expected from customers in the long term Costs to acquire new users or new customers The counts of daily active users (DAUs) and monthly active users (MAUs) Amount of support needed by clients How often users use the product How often users leave the site or app after visiting one page › E.g., customers rating your product 8 or above as promoters. The other are detractors. › Calculate the % of promoters and detractors. › NPS = (% of promoters – % of detractors). › %, The customer retention rate = {(the total # of customers at the end of a time period – # of new customers onboarded during this period) x 100}/the total # of customers at beginning of the period › %, The customer churn rate = (the number of customers lost during a specific time period) x 100 / the total number of customers at the beginning of the period › %, The conversion rate = (the number of users that become paying customers) x 100/the total number of users. › LTV = average revenue per customer in a period x average customer lifetime › Projected LTV = (ARPA x Gross margin) / Churn › See Unit Economics for more details › CAC = customer acquisition costs over time / # of new customers acquired over time › = the relevant costs for securing and onboarding customers for a time period / the number of new customers acquired during that period Account for the following parameters: › The interaction; › The time period of the interaction Metrics › # DAU › # MAU › # of support tickets created › Stickiness ratio = daily active users (DAU) / monthly active users (MAU) › Bounce rate = (# of single-page sessions) x 100 / total # of sessions Fact: Vs plan:
69. 69 Example of Key Performance Indicators for Managing Product Teams and Products (3) 12 million 2 million 450 Monthly recurring revenue (MRR) Monthly new revenue (MNR) Average revenue per user (ARPU) Roadmap scoring ... ... ... ... ... Monthly recurring revenue (MRR) for SaaS and subscriptions from old users Monthly new revenue (MRR) for SaaS and subscriptions from new users Average Revenue per User / Account (ARPU/ARPA) for the period Prioritisation of requests for improvements / new features › MRR = average monthly income per user x total # of users per month › MNR = average monthly revenue per new users x total # of new users per month › Average revenue per user = total revenue in a specific period / # of paying users in that period › Find out the reach of a feature request by analyzing # of users impacted. › Calculate the impact of the request. › Determine the confidence level in your impact assessment. › Calculate the total effort needed to complete the enhancement/feature request. › The product roadmap score is {(reach x impact x confidence)/effort}. Fact: Vs plan:
70. Number of product teams: how many teams are formed in the product group Headcount: planned and actual headcount in the teams Maturity: assessing the level of product management maturity and potential of the team, e.g., › Team building, entry-level › Incomplete headcount, fragmented use of the best product practices › Completed teams, ongoing use of best practices › Established Agile/SCRUM/… processes › Self-development is in place. The rhythm of Business: ongoing use of regular standups, sprints, and business reviews Team KPIs 70 KPIs for the Product Teams (Example) 65% Maturity Roadmap Product Features Headcount Training Workplace % on the maturity scale Established, agreed with the business stakeholders Backlog completed by X% Enough / not enough Completed at X% Conducted at X% All required tools, workspaces, access are provided Group KPIs (Team of Teams)
71. 71 Evaluating the Impact of Innovation on Organization’s Core Business Invincible companies kill a lot of their projects, all the time. Even good ones to keep the best. The opposite of the kill rate is the number of zombie projects a company keeps running. They are not really providing any value or evidence of progress but remain in the portfolio because they become someone’s pet project. 1. What is the Kill Rate? When properly organized, innovation can create meaningful value for a company in two ways: 1.Through revenue and profit growth 2.Through transforming and creating a culture in which innovation can be implemented on an ongoing basis. 2. What Contributions Are Your Innovation Projects Making to Company Growth? It doesn't matter, if the innovation structure is far away from the CEO and he/she spends less than 40% of his/her time on it, as it most likely will not be successful 3. Where Does Innovation Live in Your Organization Chart? How Invincible Is Your Company? Alexander Osterwalder & Tendayi Viki The Innovator's Handbook 2022. Innov8rs.co. innov8rs.co/ihb22/
72. 72 Elements of the Product Model Product Team Operating Model, Digital PlatForm, Ecosystem Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
73. Product Lifecycle Management 73 Product launch / transformation Product strategy and vision Product financing Testing the riskiest hypotheses on prototypes Product development Product growth / Commercialization Product support and feedback collection Governance and product performance evaluation Process of managing a product's lifecycle from inception, through design and development, to sales, service, and transformation or retirement
74. Product Development Management: From Project to Project 74 Continuous decision- making cycle for product development and transformation Product Development MVP Release 1 Release 2 Release N Project 1 Project 2 Project 3 Project N Product launch / transformation Product strategy and vision Product financing Testing the most risky hypotheses on prototypes Product development Product growth / Commercialization Product support and feedback collection Governance and product performance evaluation
75. Product Deployment Management for the Complex/Custom Products in B2B 75 Preparation Customer audit / assessment of requirements Development of the Terms of Reference and project planning System architecture, design and sizing System implementation, integration and deployment Configuration and testing Go live Deployment of an off-the- shelf product, custom development and/or integration for the customer = project Product Customer deployment 1 Customer deployment 2 Customer deployment 3 Customer deployment N Project 1 Project 2 Project 3 Project N V1 V N
76. Project Product Resources are allocated for the duration of the project Product lifetime is not known in advance Focus on cost reduction rather than value maximization Product costs do not matter—focus on revenue growth, margins and return on investment We want to know all customer requirements as precisely as possible in advance Customer needs are not known in advance and always changing. Create and test hypotheses quickly. Challenges of the Traditional Project Culture for the Product Model 76
77. Cloud, AI / ML, Big Data, IoT, eCommerce The digital ecosystem and eCommerce Digital Platform: Cloud, Low/No Code, Agile, DevOps, Big Data, AI / ML, APIs Infrastructure (Cloud), networks and devices (IoT), SREs Yesterday Market analysis Search and selection of ideas Plan / Business case Prototype Development Tests Deployment Integration Growth and support Product Management Objective: Shortening Time to Market (T2M) Today Market analysis, product idea Product vision and hypothesis Design > Creating MVPs > Tests Integration and Deployment Development Management and support Pivoting / Retirement G0 G1 G2 G3 G4 G5 G0 G1 G2 G0 G1 G2 G3 G4 G5 G6 G7 G8 Stage-Gate Process > journey through the Gates 2-3 years 0.5-1 year 0.5-2 months Tomorrow Idea, vision and hypothesis Riskiest hypothesis testing on a prototypes Most Lovable Product (MLP) Value orchestrating Changes in business model Time from idea to market (Time to Market) Agile DevOps 77 Agile Process > journey through the Hypothesis Testing
78. Stage Gate® New Product Development (NPD) Method and Process 78 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
79. Introduction Overview of the Stage-Gate® Innovation Performance Framework Stage-Gate® and the Innovation Performance Framework® are registered trademarks of Stage- Gate Inc. https://www.stage-gate.com/ 79 To keep pace with market needs, companies must implement new product development (NPD) processes. NPD processes can be time-consuming and costly with a high risk of failure. Although 100% development success cannot be guaranteed, the risk of producing 'bad' products can be significantly reduced by improving the efficiency of NPD processes. Stage-Gate® Innovation Performance Framework1 is a value-creating business process and risk model designed to quickly and profitably transform an organization's best new ideas into winning new products. Pioneered by Drs. Scott J. Edgett and Robert G. Cooper >>>
80. New products Products new to the entire industry Products new to the local market Products new to the individual developer Types of New Products 80
81. Organizations with Best NPD Methods Demonstrate Better Business Performance 81 BEST THE REST Profit from new products 49.1 % 21.2% Conversion of ideas into new products 4 9.2 First to market product launches Over a period of 10 years 44%-49.5% Over a period of 10 years 30%-25.3% PDMA Foundation Comparative Performance Assessment Study
82. Product modification Development of new products Sales A typical consumer product often has a limited lifespan and is usually replaced by better next- generation equivalents 1st generation of the product 2nd generation of the product Product updates and upgrades can expand its lifespan Product Lifecycle 82 Sales Time Time Extended lifecycle
83. Life Cycle of New Ideas/Technologies (Gartner) 83 Source: Gartner Hype Cycle for Emerging Technologies, 2021 (August 2021) >>>
84. Factors Influencing NPD and Product Design 84 Factors that influence product development Industry Requirements Competition Regulatory requirements Other factors Customer requirements Organization Strategy and Culture Resources and Capabilities Factors That Affect the Development of a Product 1 >>>
85. Regulatory restrictions create mandatory requirements for product capabilities • Personal and general data protection laws (GDPR, HIPAA, FCRA, FERPA, GLBA, ECPA, COPPA, VPPA, etc.) • Environmental standards and the trend towards ESG (environmental, social and governance) • Open standards requirements (PSD2, PEPPOL, GS1...) • Export restrictions • And others Influence of Regulation on NPD 85
86. Impact of the Organization Strategy on NPD Processes 86 Types of organizations Pioneers Innovators Copycats Definition • Inventing new needs • Inventing new products • Investing in research & development • Taking into account the experience of the pioneers • Making a better product • Investing in brand and marketing • Copying others' ideas • Focus on pricing Implementation • Market leadership • "Cream skimming" of the market • Setting new standards • Identify and remove entry barriers • Set customer preferences • Lower research and development costs • Fewer failed new products • It is easier to improve existing ideas • Monetization of the opinion about the high cost of innovative products • High volumes and small margins Requirements • Focus on customer needs and pains • Own research • High R&D and product launch costs • Analytics and foresight • Ability to improve • The need for low-cost equivalents • Cheap logistics Examples • 3M, Tesla • Microsoft, Apple • Many :-)
87. Lack of Transparency in NPD Leads to Lower Efficiency of Output Source: Wheelwright, S. / Clark, K. (1992): Revolutionizing Product Development. 87 Potential issues: Not systematic approach, luck of methodology Multiple stakeholders trying to influence the outcome without the essential coordination No process owner(s) Good ideas get lost along the way The results are not optimal Constant lack of time and resources
88. The Stage-Gate® Innovation Performance Framework® is a proprietary, science-based management model that provides visibility, oversight, and best practices that enable organizational new product, service & technology innovation capability and success. Its purpose-built design is proven to systematically surface the highest potential opportunities to accelerate from early Stage concept to launch using a flexible process- based playbook with a transparent, options- based decision structure, via Gates. The method was created by Drs. Robert Cooper and Scott Edgett in the late 1990s and is used in product portfolio management Stage-Gate® Innovation Performance Framework® 88 https://www.stage-gate.com/
89. Pre-commercialization assessment Post-development evaluation Secondary evaluation Business case Initial assessment Post release evaluation (ROI) • Transparent standard process • Clear decision-making points and allocation of responsibility Cooper & Edgett Stage-Gate® Process Cooper (2000): Product Leadership - Stage-Gate Stage-Gate® Idea-to-Launch Process (Scott J. Edgett and Robert G. Cooper) 89 >>> • Many barriers and artifacts slow down the process (long time to market) • The market is changing faster than the product is being developed Primary research Barrier 1 Barrier 2 Barrier 3 Barrier 4 Barrier 5 Stage 1 Detailed research (business case) Testing & debugging Product development Production and start of sales Idea Stage 2 Step 3 Step 4 Step 5 STOP STOP STOP STOP STOP
90. Idea Funnel in NPD 90 conversion of ideas into products: 1-3% Primary research Barrier 1 Barrier 2 Barrier 3 Barrier 4 Barrier 5 Stage 1 Detailed research (business case) Testing & debugging Product development Production and start of sales Idea Stage 2 Step 3 Step 4 Step 5 STOP STOP STOP STOP STOP
91. Development costs Costs of NPD 91 Major cost increase starts with the development phase Primary research Barrier 1 Barrier 2 Barrier 3 Barrier 4 Barrier 5 Stage 1 Detailed research (business case) Testing & debugging Product development Production and start of sales Idea Stage 2 Step 3 Step 4 Step 5 STOP STOP STOP STOP STOP
92. Stage gates can kill innovation, risk management can fuel it Productive mistakes should be encouraged, and risks should be managed Venture capital companies are focusing on: Flexibility Speed Control Risk Management vs. Stage-Gate® 92 Source: Accenture: Stage Gates Can Kill Innovation
93. Assessment of ideas Business case Search for ideas Product development and product release Analysis of the idea Development Testing on the market Sales and marketing Go to Market Evaluation of performance Change product Analysis of results Internal ideas External ideas Key Steps in the Stage-Gate® NPD Process 93
94. Idea Analysis Stage 94 100 100 10 3 100% 30% 10% 70% 2 2 2 100% 100 = number of ideas % of conversions to the next stage 1 100% 50% 100% Assessment of ideas Business case Search for ideas Product development and product release Analysis of the idea Development Testing on the market Sales and marketing Go to Market Evaluation achievements Change product Analysis of results Internal ideas External ideas Most ideas are screened out at the "idea analysis" stage
95. Organizational Functions Involved in the New Product Development 95 Products Manual IT Marketing Sales Other units Assessment of ideas Business case Search for ideas Product development and product release Analysis of the idea Development Testing on the market Sales and marketing Go to Market Evaluation achievements Change product Analysis of results Internal ideas External ideas
96. Tasks • Introducing a culture of "producing and sharing new product ideas" in the organization's supply chain (suppliers, partners, customers) • Setting up the process to monitor and gather new ideas from internal and external sources • Impact/threat factors assessment for the core business • Informal discussion and ideas evaluation in communities Result: • A long list of ideas for formal evaluation Success Factors: • Motivation to produce new ideas • Innovative corporate culture • Use of external ideas • Acceptance of the right to fail • Filtering of ideas for evaluation and selection of the best ones • Clear business strategy • Appetite to risk 1. Search for the New Product Ideas 96 Assessment of ideas Business case Search for ideas Product development Testing on the market Sales and marketing Evaluation achievements Change product Analysis of the idea Development Go to Market Analysis of results External ideas Internal ideas
97. 2. Evaluation of Ideas 97 Tasks • Formal evaluation of ideas with the participation of all stakeholders considering: • Strategic importance • Market potential and readiness • Feasibility • Cost, value, risk Result: • A short list of the best ideas • Product sponsor identified Success Factors: • A product sponsor has been found • Process owner: who is responsible for the optimal use of resources? • Organizational strategy as a filter Assessment of ideas Business case Search for ideas Product development Testing on the market Sales and marketing Evaluation achievements Change product Analysis of the idea Development Go to Market Analysis of results External ideas Internal ideas
98. 3. Developing a Business Case 98 Tasks • Development of a detailed business case taking into account: • Strategic importance of the new product(s) • Product idea evaluation results and stakeholders’ feedback • Market analysis • Key success factors • Estimation of costs, sales volumes, partner discounts, etc. • NPV/IRR/ ROI projections, financial model sensitivity, and risk analysis Result: • Business case • Proposal to the management on the project financing Success Factors: • Top management involvement and support • Clear accountability for the final product and business results • Quality of the project management • Taking into account the views of clients and partners at the early stage of the project Assessment of ideas Business case Search for ideas Product development Testing on the market Sales and marketing Evaluation achievements Change product Analysis of the idea Development Go to Market Analysis of results External ideas Internal ideas
99. 4. Product Development and Release 99 Tasks • Creating a "virtual team" (product management, business departments, sales, marketing, IT...) • Development of product features • Verification of regulatory, security and quality requirements • Development of communication strategy (internal, product value promotion, marketing materials etc.) • Development of enabling and training programs for partners and customers • Project and resource management • Preparing a marketing plan Result: • Product, finished business plan including marketing plan, P&L, documentation, etc. Success Factors: • Final management decision about product launch (yes/no) • Clear NPD processes, management involvement, and allocation of responsibilities within the product portfolio • Quality system Assessment of ideas Business case Search for ideas Product development Testing on the market Sales and marketing Evaluation achievements Change product Analysis of the idea Development Go to Market Analysis of results External ideas Internal ideas
100. Market tests: • Testing on a limited range of clients (e.g., on MVP and beta versions) Go to Market: • Development of the product logistics • Channel enablement and training • Setting up the communications (internal and external) Result: • Product launched on the market • Testing results obtained Success Factors: • Conformance with planned deadlines • Readiness to contingencies and rapid response to the unexpected 5-6. Testing on the Market / Promotion 100 Assessment of ideas Business case Search for ideas Product development Testing on the market Sales and marketing Evaluation achievements Change product Analysis of the idea Development Go to Market Analysis of results External ideas Internal ideas
101. 7-8. Achievement Assessment / Product Change 101 Achievement Assessment: • What went wrong and how to avoid it in the future? • What went according to plan and how to improve in the future? • What can be replicated as a best practice? Product change: • Plan / Fact analysis • Customer satisfaction survey • Market research: competitors' reactions? Result: • Assessment report / ROI analysis • Plan for next steps and further actions Success Factors: • Using best practices • Quality assessment of processes (not products) for future improvement • Product change is an ongoing process Assessment of ideas Business case Search for ideas Product development Testing on the market Sales and marketing Evaluation achievements Change product Analysis of the idea Development Go to Market Analysis of results External ideas Internal ideas
102. Related Processes and Best Practices 102 Agile Software Development Objective: fast development and delivery of incremental value Secure Development Lifecycle (SDL) Objective: Eliminate vulnerabilities in software at the early design stages Project and project portfolio management Objective: Effective management of time, cost and results while minimizing risks Quality management system (e.g. according to ISO 900x) Can include all product management processes including project management, NPD/SDL Agile ...
103. Product Lifecycle Management (PLM) Software Tools 103 1. Aha.io 2. Andromeda PLM 3. Aras PLM 4. Arena PLM 5. Autodesk Vault & Fusion Lifecycle PLM 6. Bamboo Rose 7. Centric Retail PLM 8. Click Up 9. CMPRO 10. Dassault Enovia 11. Fuse PLM 12. Infor Optiva 13. Jira Align… 14. Kalypso PLM 15. Monday.com 16. Omnify Empower PLM 17. Oracle Agile 18. ProductBoard 19. ProductCenter 20. Propel 21. PTC Windchill 22. SAP PLM 23. Sopheon Accolade 24. Siemens Teamcenter 25. Upchain 26. Yunique PLM 27. … and many others
104. Analysis of the current status CPO • Company strategy analysis • Understanding customer needs • Analysis of current NPD process and proposing required organizational changes • Analysis of existing products • Analysis of key influencing factors 3-5 people from interested units ~2-3 months Analysis, conclusions, action plan Results of the evaluation of the present NPD process • Benchmarking against best practices • Identify key target characteristics of the NPD and product model • Identify the key success factors • Development of implementation roadmap Implementation plan for the new NPD process • Presentation to sponsors • Feedback analysis • Refinement of the plan if necessary NPD implementation plan Development of an implementation plan Development of the NPD Implementation Plan 104 Product Model / NPD Process Resources The process Timeline Key tasks Results
105. Organization + external consultants Development of new products Organization 2-3 months ∞ • NPD method and process creation, deployment and tuning in the organization • Building a product team and establishing communications with key stakeholders NPD method & process have been implemented • Finding the most effective opportunities and focus areas for innovations • Trial of a new process and release of 1-2 new products using a new method New products have been created under the new NPD method • Implementation process analysis • Report to the Board of Directors and shareholders Implementation of the NPD method and process based on the best practises Analysis Final NPD version Project Team ~ 1-2 months NPD Implementation 105 NPD Deployment NPD in Action Resources The process Timeline Tasks Results
106. Implementation Team 106 Team Leader • Experience in participating in similar projects to develop new technological products, including ones for international markets • Excellent internal and external communication skills Experts and consultants • 1~2 product managers with product management, Agile, SDP, ISO 9000 experience … • 1 sales expert • 1 marketing expert • 1-2 IT experts (cloud, AI, IoT, DevOps) • 1 business development consultant with industry experience
107. Product development is a difficult process. In a brownfield environment it is necessary to build procedures that take into account the influencing factors of the organization's core business. There is an understandable proven approach that involves customization and decision- making to launch a project to build and implement the New Product Development methods in the organization. Conclusions 107
108. Cloud Operating Model for Digital Products and the Role of Enterprise IT 108 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
109. SRE ... Infrastructure as a code DevSecOps Product management 109 Cloud Operating Model for Digital Products Basic infrastructure Digital platform + OSS Applications / Digital products KPIs/OKRs Products • IRR, NPV, P&L, T2M DevOps • T2M, SLA, % manual operations Infrastructure • SLO, SLA, TCO, T2M Private cloud Virtual private cloud Public cloud IaaS / PaaS / IoT SECaaS OSS Automation Big Data, Analytics Business Platform (BSS) Orders Own products (SaaS) Partners Finance Product management Partner products (SaaS) Front office (CMS, fronts, user cabinets, self-service, eComm, Marketplace) Customers Analytics 1 2 2 4 3 1. Business platform Manages the business logic of the digital ecosystem 2. Products / DevOps / Site Reliability Engineering (SRE) Product development and maintenance teams, include product teams, developers, DevOps, SREs... 3. Digital platform Common infrastructure and platform services to support product teams 4. Results-based management For products, development processes, and operations based on Agile methods 5. Engineering competencies Best engineering competencies for infrastructure accessibility Agile development 5 1 2 3 4 5 Low / No Code Idea Plan Prototype / MVP Continuous Improvements Product Life: from Dawn till Sunset >>> Based on McKinsey, Building a cloud-ready operating model for agility and resiliency March 19, 2021
110. 110 Transition From a Project-based to a Product-based Corporate Business-Technology Operating Model From projects To the products Structure Hierarchies Waterfall Products Value Launching new directions requires a long and thorough elaboration and cascade planning at all levels of strategy, business units, initiatives and projects Working with uncertainty and rapid innovation require collaboration and experimentation Implementation: Timeline Timeboxes: from months to several years No beginning and no end, evolving during product life cycle Objectives Focus on schedule and resource planning Focus on performance and product value Plan The roadmap is limited by the scope A roadmap for the entire life cycle of the product Team Gathered for the duration of the project Stays for the life of the product Budget Finite, based on benefits projected in a business case Annual, sufficient to support the core team during product’s life span >>> How Johnson & Johnson transformed its corporate business-technology operating model July 19, 2021
111. 111 Digital Chaos: a Product Portfolio without a Unifyed Platform Application 1 Execution Environment / DevOps DBMS, Big Data, AI, BI Security OS / Containers Virtual Machines Data storage Servers Networks Data Center BSS (cabinet, tariffs, billing 1) Front-ends Marketing, sales, support Digital product 1 Application 2 Execution environment DBMS Security Data storage Servers Networks Data Center BSS (tariffs, billing 2) Front-end Digital product 2 Application 3 Execution environment DBMS, Big Data, AI, BI, IoT OS / Containers Virtual Machines Data storage Servers Networks Data Center Marketing, sales, support Digital product 3 Each product team develops the entire IT stack › Long Time to Market › Cost multiplier › Architectural silo › Technical debt › Not scalable › Not secure Many isolated components and products Poor ecosystem and customer experience
112. 112 Unified Digital Platform is the Foundation for Digital Products and Ecosystem Application 1 Run-time Environment / DevOps / SRE DBMS, Big Data, AI, BI, IoT Security OS / Containers Virtual machines Data storage Servers Networks Data Centers + Edge Business/Operation Support Systems (BSS/OSS: product & user management, orchestration, tariffs, billing, support...) Product Catalogue / eComm Marketing, sales Digital product 1 Application 2 Digital product 2 Application 3 Marketing, sales Digital product 3 Development teams are 100% product-focused › Shorter Time to Market › Reduced costs because of reusable components / services › Single scalable and secure architecture Improved customer experience Growing ecosystem and better unit economics › CAC reduction › ARPA and LTV growth API API API API API API API
113. Writing a business code Writing a business code Configuring a system software Dealing with security issues Configuring integrations, middleware, databases, messaging… Setting up monitoring tools Logs analysis Auditing application performance ... 85% 113 Application Developer’s Efficiency Without a platform With a digital platform (PaaS) 99.99% availability x5-7 Time to Market acceleration Many product teams use a unified DevOps experience 15% 100% "I don't want to waste time setting up the infrastructure for my applications." Developer
114. 114 Challenges of the Legacy Enterprise IT for Brownfield Digital Products The Goal: Rapid launch of new products • "Our goal is to bring new products to market faster than our competitors." Impact of legacy IT systems • "As our business has evolved over many years, we have accumulated a number of legacy systems... • This has significantly increased launch times for new products, especially when compared to recent competitors with fewer and more advanced IT systems." Excessive efforts • "If we wanted to create a new converged offering for several different communication services, our development team would have to repeat the functionality of catalog and order management systems every time... • We realized that standardizing our processes and systems across the business would significantly reduce our release cycles." Legacy IT issues in large organizations • Normally do CapEx • Unknown unit cost for IT resources • No service model with Chargeback • No documentation • Lack of performance = long update times • Monolithic architecture without APIs • Not all required components available in the stack • No SLA and L3 support • Security concerns • SW licenses for internal use only
115. 115 What Do Digital Products Need from IT Platforms? Flexibility Products prefer OpEx Transparency Products need to know the cost per unit of IT resources Speed / Scalability Products need IT resources now, not in a week or months Challenges of legacy IT • Do love CapEx • Unknown unit cost for IT resources • No IT as a Service model with Chargeback • Lack of performance = long update times • Corporate IT does not scale "down"
116. Stack completeness Application platform, data platform, APIs, security, VMs, containers, networks... Automation. Self-service DevOps, OSS/BSS, ITaaS, Infrastructure as Code Geography Compliance with regulatory requirements (personal data protection etc.) 116 What Do Digital Products Need from IT Platforms? (2) Challenges of legacy IT • No required components and services • No documentation • Monolithic architecture, no APIs • No automation • No self-service • No presence in the vital geo regions
117. 117 What Do Digital Products Need from IT Platforms? (3) Challenges of legacy IT • Corporate licenses available for internal use only • No SLA and L3 support • Security concerns Risk management Licensing compliance, fault tolerance, security... SLA, monitoring, alerts Availability, Application Performance Monitoring (APM), SLA for the whole IT stack Product and IT stack technical support L2-L3 support lines, response time
118. Opportunities to Increase Inhouse IT Maturity 118 Initial Managed Defined Quantitatively Managed Optimizing Culture + organization Architecture + technology Methodology Security + compliance Emerging innovation spaces Service mgt + Operations Data Science + Governance As Is To be As Is To be As Is To be As Is To be As Is To be As Is To be As Is To be IBM IT Maturity Model: ibm.com/garage/method/practices/think/it-maturity-model/
119. A Digital Platform for the Digital Product Development 119 New Digital Product Development (NDPD) Process = Software Development Digital Platform (PaaS) Digital products and solutions Basic digital infrastructure (IaaS) BSS, orchestration, SRE * Front office Agile, Low/No Code, DevOps, CI/CD Sandboxes Development and testing Business platform Design Thinking Customer Development New business models Cloud Native architecture, microservices, security A managed digital ecosystem Flexible processes and value orchestration Idea Solution Design Prototype / MVP Growth Product Lifecycle: from dawn to dusk New client experience SLO / SLA / NPS
120. Digital Ecosystem: Infrastructure and Platform 120 Data models, catalogs, data platform, APIs Development tools, integration, data platform, AI/ML (PaaS) 4 Management of partners, products, commerce, logistics and support Business platform (BSS and Marketplace) 2 Industry sections of the marketplace (categories) Product catalog, eCommerce storefront 1 2G 3G 4G BLE LPWAN 5G NFC CPU, RAM, HDD Infrastructure (IaaS) 5 Industry offering 1 Industry offering 2 Industry offering N Customers, suppliers and channels Devices, sensors, data transmission, security, IoT Sensors, devices Connectivity networks 6 3 Integration with backend Integration with the back office and partners
121. Business Platform Architecture (BSS and Marketplace) 121 Infrastructure IaaS / PaaS / Data Security APIs Operations & Maintenance Master data management Notifications Partners Revenue Product management Analytics ISV / Merchants Channels Billing / GL Payments Accounts Accounts receivables Onboarding Payments and settlements Consumption (Mediation / Chargeback) Policies Subscription lifecycle mng QoS/SLA Customers Products Partners Dashboards / Reporting Products Orders Clients Catalog PLM Marketplace Orders Ware- houses Logistics Campaigns CRM SFA Loyalty Front / Web APIs Customer Cabinets Self-service product catalog Cabinets for Merchants and Partners Categories and Products Search Own products (SaaS + products) Merchants (goods & services) Startup products (sandbox) ISV partners (SaaS)
122. 122 Business Model Options for the Digital Ecosystem Connectivity / Networks Cloud platform: Compute, Storage, IoT, DevOps, Big Data, ML, APIs, Serverless... Partner Products Own products Business platform: Product and partner management, Solution design and orchestration Sensors and equipment (Internet of Things) Growth hacking, marketing and sales Sales channels and Customers Suppliers, vendors, partners Processes (procurement, logistics, sales) End to end customer solutions Solution components development own & by partners Quick onboarding of the partners and ready-to-use solution building blocks Industry specific or horizontal ecosystem Digital Ecosystem Ecosystem as a service A platform that supports customers and partners Customers and Sales channels A product for developing your own ecosystem of end-to-end client solutions .. .
123. Customers/Partners Acquisition, Onboarding and Support 123 Digital acquisition Key business processes Performance Customers PR SEO SMM Direct sales Sales representatives Agents Distributors Referral program Vendors onboarding Products onboarding Document management, mutual settlements Billing Sales management (CRM) KYC Autofunnels End to end analytics Trigger mailings Promotional newsletter Data enrichment Predictive analytics Communications management Unified Customer Experience Presale (solution selling) (complex products) Call Center / Service Desk (1st line) Call Center / Service Desk - technical (2nd line) Distributor sales channels Self-service (simple products) Channels CX CRM Processes
124. Business platform (BSS) Value Orchestration* and Partner Ecosystem 124 Cloud infrastructure (IaaS) Partner Products (SaaS) Own Products (SaaS) API API Cloud platform (PaaS) (Databases, Big Data/AI, DevOps, IoT...) Solution Builder Basic Products Catalogue Participation in Value Partners The partner’s product journey into the digital ecosystem 1. Solution Builder allows self-service assemble of custom solutions from a catalog of the prebuilt own- and partner- made products / components / solution building blocks / microservices 2. The business platform acts as a value orchestrator by managing the products and solutions lifecycle within the service catalog 3. Customer experience within the ecosystem should include: single ID/sign-on, single unified billing, and self-service Access to Customer experience Self- service Single ID Unified billing Search Selection Automated onboarding Launch Marketplace, value orchestrator Objective: 1-2 weeks Value Self- service Single ID Unified billing (*) "Value orchestration" means using generic software and APIs (and platforms) to quickly build and customize client solutions. The cloud is the rocket fuel that fuels orchestration," Forrester
125. New Business Model Framework (NBM4) Methods and best practises for creating and developing new business models and products 125 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
126. 20 Reasons Why Startups Fail 126 CB Insights >>>
127. Lack of a shared vision, purpose and/or strategy Short-term thinking/focus Lack of time, resources or staff Lack of “spec time” to develop new ideas and opportunities Innovation not articulated as a company-wide commitment Lack of ownership by senior leaders Leadership expects payoff sooner than is realistic Lack of a systematic innovation process Management incentives are not structured to reward innovation No reward and recognition programs [small wins] Constantly shifting priorities Belief that innovation is inherently risky Internal process focus rather than external customer focus Inadequate understanding of customers Focus on successes of the past rather than the challenges of the future Unwillingness to change in the absence of a burning platform Unwillingness to acknowledge and learn from past “failures” Politics – efforts to sustain the status quo to support entrenched interests Rewarding crisis management rather than crisis prevention Hierarchy – over- management and review of new ideas Micromanagement Under-funding of new ideas in the name of sustaining current efforts Fear that criticizing current practices and commitments is a high-risk activity Risk aversion Addiction to left- brained, analytical thinking Absence of user- friendly idea management processes Innovation not part of the performance review process Lack of skillful brainstorm facilitation No creative thinking training Top Key Obstacles To Innovation Top 30+ Key Obstacles To Innovation 127 >>> >>>
128. Andy Rachleff 128 “First you need to define and test your value hypothesis. And then only once proven do you move on to your growth hypothesis. The value hypothesis defines the what, the who, and the how. What are you going to build, who is desperate for it, and what is the business model you are going to use to deliver it?” Andy Rachleff #1 Value, #2 Growth >>>
129. A combination of Design Thinking, Lean Startup and Agile How to Reduce the Risk of Failure? Gartner 129 >>> HADI cycles Hypotheses about the value of the solution Understanding the customers’ challenges and pains Solving customer problems Solution development Who is the customer? Map of empathy Prototypes and tests Understanding the customer
130. goodreads.com/work/quotes/24034629-think-like-a-freak 130 It has long been said that the three hardest words to say in the English language are I love you. We heartily disagree! For most people, it is much harder to say I don’t know. ― Steven D. Levitt, Think Like a Freak
131. The Main Challenge with the New Products: The Ability To Distinguish Facts From Hypotheses 131 1) Based on: Think Like A Freak: The Authors of Freakonomics Offer to Retrain Your Brain Steven Levitt, Stephen Dubner 2014 >>> People are constantly trying to pretend they know more than they really do. This refers to belief, a category of subjective, virtually unverifiable, born out of political, religious and other worldviews. And quite often it's about predictions. 1 Not only do we have scant knowledge about the world around us, we don't even know ourselves very well. It is even more impossible to be well versed in several areas at once. Therefore, in order to free your consciousness for informal approaches, you should not take both others and your own opinion as the final truth. Find the courage to say, 'I don't know,' and then when you say you do know something, your words will have more credibility. 1 Don't be afraid to admit that there's something you don't know Find the courage to say: "I don't know"
132. goodreads.com/work/quotes/24034629-think-like-a-freak 132 If the consequences of pretending to know can be so damaging, why do people keep doing it? That’s easy: in most cases, the cost of saying “I don’t know” is higher than the cost of being wrong—at least for the individual. ― Steven D. Levitt, Think Like a Freak
133. Facts And Hypotheses To Test 133 en.wikipedia.org/wiki/Red_Queen’s_race Startup Genome Shikhar Ghosh Shikhar Ghosh Bureau of Labor New product success is not guaranteed: 9 out of 10 startups fail (Startup Genome, in 2019 report 11 out of 12) 7.5 out of 10 venture-backed startups fail (source: Shikhar Ghosh) 2 out of 10 new businesses fail in the first year of operation (source: Bureau of Labor) "A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!" Red Queen* 1. Using Design Thinking / Customer Development methods to test hypothesis early in product development will increase the chances of success 2. Using Design Thinking / Customer Development techniques when working with clients shortens the deal cycle (reduces CAC), increases conversion rates, ARPU and LTV The Facts Hypotheses for Verifications
134. Hypothesis > Testing > Proof/Disproof > Repeat HADI Cycles: Knowledge Creation Through Hypothesis Testing HADI cycle with examples: how to generate a hypothesis and make your life easier 134 The HADI cycle is a cyclically repeated process of testing product-related hypotheses: • Hypothesis is a claim that must be proven. • Fact is a type of knowledge that does not necessitate proof (proven or disproven hypothesis). H A D I Hypothesis (Hypothesis) Action (Action) Analytics (Data) Insights (Insights) Confidence in the effect Difficulty of implementation "If ...", "then ...". What do I need to do to proof it? Data collection Which metrics are affected? Proof (+/-) Effect for metrics 0-100% 1-10 >>>
135. Goldratt's Theory of Constraints TOC (Theory of Constraints) en.wikipedia.org/wiki/Theory_of_constraints 135 Find the bottleneck - a limitation of the system where the production process (or some other) gets "stuck", i.e. accumulates tasks) Decide how to maximize the performance of this constraint Subject the system to this solution (=make sure that the performance of the constraint is not idle Expand the constrain If the constraints are removed, return to step 1. If more expansion is needed, go to step 4 The part of Goldratt's Theory of Constraints (TOC) related to identifying bottlenecks can be used to prioritize hypotheses in HADI cycles >>> 1 2 3 4 5
136. Customer’s Problem Finding and testing the idea how to solve Customer’s Problem Customer Solution Customer development is a four-step framework, originally identified by Steve Blank Customer Development Process, Steve Blank "The Four Steps to the Epiphany" by Steve Blank, pp. 17-28. 136 1. Customer discovery 2. Customer validation 3. Customer creation 4. Company building Pivot Pivot Idea PMF / PCF CMF & MMF PMF - Product Market Fit (the product has customers) PCF - Product Channel Fit (there are the right sales channels for the product) CMF - Channel Model Fit (channels are defined by the business model) MMF - Model Market Fit (market influences the business model) >>> >>> Validation
137. 137 Product Development Based On Design Thinking1 5. Test Determine what works and identify any issues 1. Empathize Understand the users and their needs2 2. Define Frame the problem in user and human- centered ways 3. Ideate Gather feedback and create ideas 4. Prototype / Develop Produce preliminary versions of a product or feature {1} Concept of Design Thinking first appeared in “The Sciences of the Artificial”. Herbert A. Simon. 1968 // Wikipedia [2] Design Thinking stages by Aha.io >>> >>> 4. Prototype >>> >>>
138. NBM4 vs Design Thinking (DT) 138 Solution Discovery Idea Customer • Empathize (DT) • Define (DT) Value Suggestion • Ideate (DT) Solution Delivery Value test • Prototype (DT) Product • Test (DT) Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market
139. NBM4 vs Customer Development (CD) 139 Solution Discovery Customer discovery (CD) Idea Customer Value Suggestion Solution Delivery Value test • Customer Validation (CD) Product • Customer Validation (CD) Go to Market • Customer Creation & Company Building (CD) Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market 1. Customer discovery 2. Customer validation 3. Customer creation 4. Company building
140. Six Stages of NBM4 Six stages of the New Business Models Framework method 140 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
141. 141 NBM4: From the Customer’s Problem To the New Solution (Product)* * New Business Model Framework – a method for creating new business models and products 1. Discover a Solution for the Customers’ Problem 2. Deliver the Solution they Would Love 3. Product Growth and Business Development Solution Discovery Solution Discovery Idea Idea Customer Customer Value Suggestion Value Suggestion Solution Delivery Solution Delivery Value Test Value Test Product Product Go to Market Go to Market
142. 142 1. From Product Idea to Value Hypothesis NBM4 1.1 Idea Product idea Market research and segmentation Business model (hypothesis) Business case (hypothesis) NBM4 1.2 Customer Person profile Goals / results, success metrics, motivation Empathy map Current client path (CJM) Jobs to be Done (JTBD) Pains: the main problems we want to eliminate NBM4 1.3 Value suggestion How we will solve the customer’s problems: product vision Key product features (hypothesis) User / Job stories (hypothesis) Value hypothesis (increased benefits, reduced pains): Value map Market research and customer development Refining of hypotheses Gathering the facts (proofed hypotheses) Product idea (hypotheses) HADI-cycle Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market
143. 143 From Value Testing to Product Development and Growth Market research and customer development Refining of hypotheses Gathering the facts (proofed hypotheses) Product idea (hypotheses) HADI-cycle NBM4 2.1 Value Test Testing hypotheses about product value Prototyping Testing riskiest product hypotheses on prototypes NBM4 2.2 Product Refinement of the initial idea and development of the MVP / Product Product requirements, User/Job Stories, Epics Backlog prioritization Product development NBM4 2.3 Go to Market Finding the Product Market fit Refined value proposition Finding the Product Channel Fit Growth and scaling Sales Excellence model to support business development Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market
144. Product idea Business model Market model (TAM>TOM>SOM) Model 5 Why Market Requirements Business case and business plan Persona Profile Empathy Map Customer Journey Map, CJM "as is" Day / week of a Person's life Jobs to be Done (JTBD), “ as is” Pains Customer Journey Map, CJM “to be" Jobs to be Done (JTBD), “to be” Product features backlog: User/Job Stories Value Map Service Blueprint Product Architecture Product Requirements Document (Epics / Stories) Sales Excellence Framework Customer support and customer experience development model Product Development & Growth 144 Key Product Artifacts: Data and Knowledge to Test Hypotheses
145. NBM4 1. Solution Discovery Product idea and concept Customer research Product value hypothesis 145 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
146. Causal Analysis Techniques Finding a long-term solution benefits from using root-cause analysis techniques 146 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
147. Popular Techniques for Solving Problems 147 7 Incredible Techniques to Easily Solve the Root of Any Problem Root McKinsey: 7 Steps to Solving a Problem / Issue 5 Whys Analysis Cause-and-Effect Diagram or “Fishbone” Diagram Pareto Analysis Failure Mode and Effects Analysis (FMEA) Fault Tree Analysis Current Reality Tree (CRT) RPR (Rapid Problem Resolution) Diagnosis Cause >>>
148. 148 McKinsey: 7 Steps to Solving a Problem / Issue Define the problem Articulate the problem What are we trying to solve? What are the constraints that exist? What are the dependencies? Disaggregate the problem Use logic trees to disaggregate the problem E.g., profit or return-on-assets tree Prioritize Select the most significant components of the problem (important and solvable vs unimportant and unsolvable vs certainty and uncertainty) How important is this lever or this branch of the tree in the overall outcome that we seek to achieve? How much can I move that lever? Work plan Develop a work plan (who, what, when?) Iterative problem solving is a critical part of this stage. Deal with biases Analysis Formulate and analyze different solution options (iteratively, A/B/C...) Synthesis Based on the results of the analysis, assemble the best solution options Tell the story Create a story that answers the question: "what should be done to solve the problem? >>> Even better, if the story explains why the problem must be solved. How to master the seven-step problem-solving process. McKinsey
149. Problem Why? Because of... Why? Because of... Why? Because of... Why? Because of... Why? Because of... Main reason / motivation 5 Whys › A simple search method for identifying deep cause and effect relationships › Developed in the 1940s by Toyota founder Sakichi Toyoda › Became popular in the 1970s due to the popularization of the Toyota Production System "5 Why?" 149
150. "Why?" is a vague question and in some situations a sequence of more precise questions is needed, for example: › What is the history of events leading up to this situation? › What conditions triggered those events? › What factors influenced the event and the development of the situation? › Can we identify the root cause of this problem? › How does the mechanism/process in which the problem occurred work? A Critique of the "5 Why?" Method 150 vervago.com/beyond-the-5-whys/ Problem Why? Because of... Why? Because of... Why? Because of... Why? Because of... Why? Because of... Main reason / motivation
151. Pain Category 1 Category 3 Category 5 Category 2 Category 4 Category 6 Reason 1 Reason 2 Reason 1 Reason 2 Reason 1 Reason 2 Reason 2 Reason 1 Reason 2 Reason 1 Reason 2 Reason 1 Tool for analyzing the relationship between effects and causes Ishikawa (fishbone) Diagram 151
152. Six Thinking Hats articulated by Edward de Bono is a simple, effective parallel thinking process that helps people be more productive, focused, and mindfully involved. By breaking thoughts down into six "parallel" or "side" areas, it allows the full range of ideas and thoughts, from intuitive to data-driven analysis, to be discussed separately. By using these six types of thinking in a structured way, groups can approach problem solving more effectively. Six Thinking Hats by Edward de Bono Six Thinking Hats 152 >>>
153. Six Thinking Hats 153 Six Thinking Hats Hat Definition Examples Blue Hat Manages the discussion process by timing, moderating, and enforcing Thinking Hat guidelines. "We will discuss this matter within one hour." "It's time Yellow Hat this idea. Everything else aside, what are the benefits of this plan?" "Let's put emotional reactions aside for the moment; we'll come to them when it's time to put on Red Hat." White Hat Calls for and provides facts and data that are known or needed for the discussion. "How much does it cost to produce one unit?" "Revenue was up 8.5% last quarter." "Last year, there were an estimated 75 million people aged 18-34 in the U.S." Green Hat Oriented towards alternatives, new insights or fresh ideas. "Instead of manufacturing in China, we could have overhauled the Detroit plant." "It's a difficult position to take. Let's think about some potential solutions to Black Hat's problems." "Are there other options?" Yellow Hat Finds the value and benefits of ideas and supporting concepts. "Can we reduce heating or air conditioning to save on energy costs?" "Our sales staff already has a lot of experience selling ABC." "Advancing into a new market segment will open up many opportunities for growth." Red Hat Recognizes feelings such as fear, frustration, enthusiasm, hunches and intuition. "That sentence makes me angry." "I really love this project! I'm really excited to work on it!" "White Hat has no data to back this up, but my gut feeling is that customers fear we will withdraw support in the future." Black Hat Identifies problems and tries to give the best argument against the idea. "We don't have the production capacity to expand that fast." "I'm pretty sure it would be illegal." "This idea has a lot of advantages for Yellow Hat, what problems can we solve with it?" >>> >>>
154. The group may use these hats in any order during the discussion, but the discussion usually progresses from blue to white, green, yellow, red, and finally black. This gives the following order of discussion: Blue: start with approach and process White: a review of the facts Green: creating new ideas without judgment Yellow: focus on the benefits Red: takes into account the emotional reaction to any ideas Black: applies critical thinking after examining the benefits to test the viability of new ideas Any hat can reappear in the discussion. For example, after the facts (white) are laid out, processes can be reassessed (blue), or after the pros (yellow) and cons (black) are discussed, new ideas can emerge (green). Using 6 Thinking Hats in a Teamwork and Conducting Meetings 154 Six Thinking Hats, The de Bono Group Six Thinking Hats - A Great Technique of Organizing Meetings >>> The blue hat manages the meeting The white hat puts all the information on the table The red hat puts all the feelings on the table The yellow hat finds solutions and brings optimism The green hat creates new ideas The black hat finds risks. >>>
155. Brainstorming as a Method for Generating Better Ideas 155 Seven steps to better brainstorming. McKinsey 1. Know your organization’s decision- making criteria • “Think outside the box!” is an unhelpful exhortation if external circumstances or company policies create boxes that the organization truly must live within. 2. Ask the right questions Prepare 15-20 “right questions” that your team will explore in small groups during a series of idea generation sessions They should force your participants to take a new and unfamiliar perspective They should limit the conceptual space your team will explore, without being so restrictive that it forces particular answers or outcomes 3. Choose the right people Pick people who can answer the questions you’re asking Choose participants with firsthand, “in the trenches” knowledge 4. Divide and conquer Don’t hold one continuous, rambling discussion among the entire group for several hours. Conduct multiple, discrete, highly focused idea generation sessions among subgroups of 3 to 5 people. Each subgroup should focus on a single question for 30 minutes. Take the 15 to 20 questions you prepared earlier and divide them among the subgroups— about 5 questions each 5. On your mark, get set, go! After your participants arrive, but before the division into subgroups, orient them so that your expectations about what they will—and won’t—accomplish are clear. Each subgroup will thoughtfully consider and discuss a single question for 30 min. No other idea from any source—no matter how good—should be mentioned during a subgroup’s individual session. 6. Wrap it up Each subgroup privately narrows its own list of ideas to a top few and then share all the leading ideas with the full group to motivate and inspire participants The full group shouldn’t pick a winner. Close the workshop on a high note and describe exactly what steps will be taken to choose the winning ideas and how they will learn about the final decisions. 7. Follow up quickly Decisions and other follow-up activities should be quick and thorough. Senior leaders sort ideas into four buckets: move immediately to implementation planning, decide today to implement soon, assign a group to research the idea further, or reject right away. Team should have done the work upfront to understand the criteria senior leaders would use to judge its work >>> Preparation Better ideas and outcomes Most attempts at brainstorming are doomed. To generate better ideas—and boost the odds that your organization will act on them—start by asking better questions. We call our approach “brainsteering,” and while it requires more preparation than traditional brainstorming, the results are worthwhile: better ideas in business situations as diverse as inventing new products and services, attracting new customers, improving business processes…
156. Fighting Bias: The Best Way to Brainstorm 156 Bias busters: A better way to brainstorm. McKinsey Problem: individuals are particularly vulnerable to motivations to conform Brainstormers do not want to express ideas that contradict their supervisors' thoughts Why undermine a supervisor's views or challenge their self-confidence if it means risking their own power, influence or authority? Solution: anonymous brainstorming and silent voting Anonymous brainstorming, along with silent voting, can serve as a counterweight to individuals’ motivations to conform and help contributors feel like their expertise and ideas are being fairly considered: 1. A final list of ideas is collected in advance without attribution. 2. The discussion takes place in random order. 3. Following the discussion, there is anonymous voting >>> Individuals’ motivations to conform created an environment in which mediocre ideas were allowed to flourish and true change was less likely to happen.
157. NBM4 1.1 Product Idea Product idea and concept Market and target audience analysis Initial hypotheses about business model, business case, and main product capabilities 157 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
158. The initial product hypotheses about: › Target market segment and customers › Product capabilities and value › Business model and business case In the Beginning was the Idea 158
159. 1.1.1. Product Idea 159 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
160. Product Team Exercise. List Ideas/Product Features that will Create a New Value for Customers 160 Objective › Suggest ways to better solve the customer's problems and/or eliminate pains Action › Team writes ideas on stickers and put them on the board Outcomes › List of key solutions for customer jobs, challenges, problems, and pains › Basis for the further assessment of the product’s value proposition and positioning › All participants understand the value of the solution to the client Hypotheses: how the product will help customers create new gains and eliminate pains
161. Product Team Exercise. Initial Prioritization of Product Ideas / Features 161 Objective › Evaluating team ideas by value for the customer and development feasibility Action › Write each idea on a sticker and put it on the Value—Feasibility map Outcomes › List of top (most valuable and feasible) product ideas › Basis for product positioning, value mapping, and further testing and development › All participants understand the product value for customers and start to build product vision Customer Value High Low Complex and expensive Simple and cheap. Feasibility High stakes Strategic advantages Infrastructure Good economics Obvious benefits Tactical advantage Unwise use of resources and time Obvious choice Hard choice Idea 1 Ignore Idea 2 Idea 3 Idea 4
162. 162 Product Team Exercise: Evaluation of Ideas Product idea / features Customer Value (1 - 5) Feasibility (1 - 5) 1 Idea 1 2 Idea 2 3 … N Idea N
163. 1 2 3 4 5 1 2 3 4 5 Value for the customer Feasibility >>> 163 Ideas Prioritization Matrix << Complexity / Cost of implementation Idea 1 Idea 5 Idea N
164. 1.1.2. Product Vision 164 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
165. 165 Product Vision Board Product Vision Board / crisp summary of the vision/idea What is your purpose for creating this product? Which positive change should it bring about? Target group Which market segment does the product address? Who are the target users and customers? Needs Which needs does the product fulfil? How does it create value for its users? Which emotions will it evoke? Product What product is it? What makes it stand out? Is it feasible to develop the product? 3-5 key features Architecture and technologies What is the wow effect for the target customers? Business goals How is the product going to benefit the company? What are the business goals? Sources of revenue Pricing Sales channels >>> Based on 8 Tips For Creating A Compelling Product Vision by Roman Pichler
166. Product Team Exercise: Create a Product Vision Statement 8 Tips For Creating A Compelling Product Vision 166 Objective • Initial product vision represents first set of product value hypothesis to be tested on the later stages • Refined product vision should be based on the best elements from the product story (storyboard), or product’s value map Action • The description should include who (persona), what (persona will be able to implement in the client story) and wow effect (measurable outcome for the persona) Outcome • Defining or refining a future product vision or important goal in product development based on customers' business goals. • Common understanding and agreement on long-term product objectives >>>
167. Another 8 Ways to Express a Product Vision 167 8 Ways to Express a Product Vision >>>
168. Vision Pivots vs. Discovery Pivots 168 Vision Pivots vs. Discovery Pivots A discovery pivot moves you closer to realizing your product vision Discovery pivot requires consistently trying new ideas and experimenting A vision pivot puts you on a path to a different business with a different vision Don't give up on your vision to soon. “Be stubborn on vision, but flexible on details.” @Jeff Bezos >>>
169. 1.1.3. Market Requirements Research 169 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
170. 170 Market Hypotheses for the Product (Product Market Fit) Market Product / Solution Category What category does the customer place your product in? Commercial cargo carrier (Example) Person(s) Who is the buyer? Fleet manager Jobs / Tasks What tasks are Jobs to be Done? Uses commercial vehicles to transport goods Pains What are the challenges for the target audience in this category? Few orders, expensive vehicle operation, cargo and fuel theft, low load/km efficiency Motivation to change Why is it important for the buyer of your product to eliminate these pains? Money: revenue and profit growth, loss and cost reduction Market Product Fit
171. 171 Market Hypotheses for the Product (Product Market Fit) ? What is the value of the product to the customer? How does it create additional benefits and/or eliminate pains? Unique Value Preposition (UVP) ? How the core value can be conveyed in simple words? Elevator speech ? How quickly can we give our target audience a sense of value? Time to Value ? How and why will customers continue to use our product? What are the mechanisms for retaining customers? Retention (product stickiness) Market Product / Solution Market Product Fit
172. 172 Market Model Hypotheses Global market • Product / Solution • Level of penetration of analogues? • PAM, TAM, SAM, SOM Segment > Territory Product / Solution Level of penetration of analogues? PAM, TAM, SAM, SOM 1. PAM (Potential Available Market) – ideal market’s size for the product without any restrictions (can be neglected) 2. TAM (Total Addressable Market) – the total size of the market for a similar category of products 3. SAM (Served/Serviceable Available Market) – is the segment of the TAM targeted by your product which is within your reach 4. SOM (Serviceable & Obtainable Market) – is the fraction of SAM that you can initially capture PAM TAM SAM SOM Target accounts list (TAL)
173. 173 Market Size Estimation (TAM-SAM-SOM) Industry Customers Geo / territory Product Market description TAM TAM SAM SAM SOM SOM How the segment size is calculated: TAM SAM SOM Calculation result: $$$ $$$ $$$ Market description Top-down and bottom-up estimates Estimated market size ТАМ SAM SOM
174. Market segmentation by Mark Sherrington's «5W» Customer Segmentation (5W) [1] D – Marketing. The antidote for wasteful marketing and marketing waste. Mark Sherrington February 2022 174 5W Definition Question Segment 1 Segment 2 Segment N Who? The socio-demographic and psychological profile of the buyer Who is the customer (persona)? What? The nature of the product category What does the customer buy from your range or a similar range of products? When? The occasion and context When does he need it? Where? The place and circumstances Where does he buy it? Why? The motivation (cognitive and underlying) Why would he want to do that? >>> “Journalists use the 5 W structure when writing up a story – who, what, when, where, why. The same perspective can be applied to marketing. Why people buy things, what explains brand adoption, will be influenced by [same 5Ws]” 1
175. Main competitors by market segments 1, 2… N Product Team Exercise: Main Competitors 175 40 thirty twenty ten 0 -ten -twenty 0 ten twenty thirty 40 fifty 60 Market share, % YoY growth , % ? ? ? ? Main competitor 40 thirty twenty ten 0 -ten -twenty 0 ten twenty thirty 40 fifty 60 Market share, % YoY growth , % ? ? Main competitor Market 1 Market N
176. 176 Customer Segmentation in b2b Market Segment 1 (industry, territory…) Segment N (industry, territory…) TAM > SAM > SOM TAL Client organization 5W Key Buyer / Sponsor (Person) Person Profile Empathy Map Jobs To Be Done Key pains Customer Journey Agent of Influence / Customer 1… N (Personas) Chain of pains (interconnected pains of key personas) Key Customer / User (Personas) 2. Solution Delivery Customer Development / Design Thinking 1. Market research 3. Account Planning Key Account Planning / Design Thinking / Solution Discovery
177. 1.1.4. Business Model Design 177 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
178. The Business Model Canvas (Strategyzer) 178 Business Model Generation (2010), Osterwalder and Pigneur >>> Customer Segments are the groups of people and/or organizations a company or organization aims to reach and create value for with a dedicated Value Proposition. Value Propositions are based on a bundle of products and services that create value for a Customer Segment. Channels - how a Value Proposition is communicated and delivered to a Customer Segment through communication, distribution, and sales Channels. Customer Relationships outline what type of relationship is established and maintained with each Customer Segment, and they explain how customers are acquired and retained. Revenue Streams result from a Value Proposition successfully offered to a Customer Segment. It is how an organization captures value with a price that customers are willing to pay. Key Resources are the most important assets required to offer and deliver the previously described elements. Key Activities are the most important activities an organization needs to perform well. Key Partnerships show the network of suppliers and partners that bring in external resources and activities. Cost Structure describes all costs incurred to operate a business model. Profit is calculated by subtracting the total of all costs in the Cost Structure from the total of all Revenue Streams.
179. The Lean Canvas (Ash Mauyra) 179 The Lean Canvas, Ash Maurya >>> Lean Canvas is a 1-page business plan template created by Ash Maurya that helps you deconstruct your idea into its key assumptions. It is adapted from Alex Osterwalder's Business Model Canvas and optimized for Lean Startups. It replaces elaborate business plans with a single page business model. Problem: A brief description of the top 3 problems you’re addressing Customer Segments: Who are the customers/users of this system? Can they be further segmented? Unique Value Proposition: What is the product’s tagline or primary reason you are different and worth buying? Solution: What is the minimum feature set (MVP) that demonstrates the UVP up above? Channels: List the FREE and PAID channels you can use to reach your customer. Cost Structure: List out all your fixed and variable costs. Revenue Streams: Identify your revenue model — subscription, ads, freemium, etc. and outline your back-of-the-envelope assumptions for lifetime value, gross margin, break-even point, etc. Unfair Advantage: Something that cannot be copied or bought. - Jason Cohen, A smart bear Lean Canvas is adapted from The Business Model Canvas (http://www.businessmodelgeneration.com) and is licensed under the Creative Commons Attribution-Share Alike 3.0 Un-ported License. >>>
180. Problem Existing alternatives Unique Value Preposition (UVP) Customer Segments Solution Key metrics Unfair Advantage Channels Cost Structure TBD Revenue Streams TBD 180 The Lean Canvas, Ash Maurya
181. Channels Cost Structure Revenue Streams 181 Initial hypotheses about solution capabilities, value preposition and customer segments Problem Existing alternatives Unique Value Preposition (UVP) Customer Segments Solution Key metrics Unfair Advantage
182. Problem Existing alternatives UVP Customer Segments Solution Key metrics Competitive advantages Channels Cost Structure Revenue Streams 182 Initial hypotheses about the business case
183. Product strategy should answer four main questions (Real pain point, Design, Capabilities, Logistics – RDCL Radical Product Strategy Radhika Dutt. Radical product strategy 183 >>> Real Pain Point Who will engage with your product? Who has this need? Describe your target customer persona(s) facing this need. For each persona, what is their job/task and what are they trying to achieve? What’s their real pain point? What will make them successful? Design How do people engage with your product? What’s the functionality that’s solving their Real pain point, and how does it make them feel, i.e. what’s the Design? Interface: how people use your product Identity: how people perceive your product Capabilities How do you deliver on the promise of your design? Capabilities [features] can be : Tangible such as data, patents, trade secrets, hard to build skills, and Intangible including relationships, partnerships, and processes. Logistics How does your product get into people’s hands? What are the Logistics of your product? Pricing, support, service, sales channels, and delivery mechanism are all factors that should be designed into your product.
184. Lean UX Canvas Template 184 Created by Jeff Gothelf, http://www.jeffgothelf.com/blog/leanuxcanvas/ https://miro.com/templates/lean-ux-canvas/ Business problem What business have you identified that needs help? Solution ideas List product / feature / enhancement ideas that help your target audience achieve the benefits they are seeking. Business outcomes What changes in customer behavior will indicate you have solved a real problem in a way that adds value to your customers? Users and customers What types of users and customers should you focus on first? User benefits What are the goals your users are trying to achieve? What is motivating them to seek out your solution? Hypotheses Combine the assumptions from 2, 3, 4 and 5 into the following template hypothesis statement: "We believe that [business outcome] will be achieved if [user] attains [benefit] with [feature]". Each hypothesis should focus on one feature. What's the most important thing we need to learn first? For each hypothesis, identify the riskiest assumption. This is the assumption that will cause the entire idea to fail if it's wrong. What's the least amount of work we need to do to learn the next most important thing? Brainstorm the types of experiments you can run to learn whether your riskiest assumption is true or false. 1 2 3 4 6 8 7 5
185. RISK INVESTMENT CURVE 185 Peer Insight, Business Model Design Toolkit Imagine you just used the best user-centered design methods to validate that customers love your killer, new idea. But now what? How do you make your idea a reality? Design thinking is a problem-solving toolkit optimized for the unknown. It’s commonly used to explore user needs, but how do we apply its core principles to the business model? Peer Insight uses the risk-investment curve (above) to visualize how you can de-risk opportunities quickly through in-market research. At each “lily pad,” you remove layers of uncertainty through in-market experimentation, and you confirm your “say-data” with “do-data”. This will help cross the bridge from a customer’s verbal confirmation of a concept, to money actually changing hands. >>>
186. Design Thinking / HCD* methods for business model testing 186 Peer Insight, Business Model Design Toolkit Design your business model using templates to explore options Using 4 templates, you ask yourself what your starting position is on some of the big business model questions Make a list of assumptions The templates you just made are your early guess. What questions are still outstanding? Ask yourself, “What don’t I know for certain?” Create the Test Plan & prototypes Pick your top 2-3 make-or-break assumptions and create a test plan to answer those outstanding questions Run the test Create the prototypes necessary for your test and run it! >>> *) Human Centered Design (HCD)
187. This is the first step in scaling an idea, it essentially helps you understand who is the person you are wanting to serve (think target user) and what unmet need are you fulfilling of theirs (think offering)? Additionally, this template highlights the benefits that’ll resonate with your target user and how you will stand out among your competitors. It’s important to note that you may have more than one target user and you’ll have to think through the differences in what each may want and need. (e.g., buyer vs beneficiary.) This template isn’t set in stone; as you learn more in your research you can continually refine your value proposition. Step 1: Value Proposition 187 Peer Insight, Business Model Design Toolkit User 1 User 2 User 3 FOR Target Who Want Unmet Needs We Will Offer Offering That Provides Benefits Uniquely Differentiation >>>
188. Revenue Model Mad Lib 188 Peer Insight, Business Model Design Toolkit You’ll want to use the revenue model mad lib (after the value proposition) to understand who will actually be buying this service, not just benefiting from it. How frequently will customers pay for this? Is it a subscription model or onetime fee? These are all questions you can test in the market with your users. It’s great to go into testing with an opinion, or a hypothesis, and either confirm or disconfirm it through your research. Who is your target user [persona]? Are they paying for it? Do they get value from your service/ product (the beneficiary)? What are their pain points that your offering seeks to address? ________lifestyle is _____________. When person USER’s ADJECTIVE ___________________________ , she is always having COMMON ACTIVITY THAT YOUR OFFERING ADDRESSES to _______________________________ TARGET USER PAIN POINTS WORD BANK & DEFINITIONS: USER Consumer An individual consumer is buying or benefiting from the offering Business A private or public organization is buying or benefiting from the offering Third-Party A third-party is buying or benefiting from the offering Shared/Co-Pay A group of buyers or beneficiaries share costs CHANNELS Online Search/Paid Ads User searches for a keyword and comes across your offering’s web page Social Media User comes across your offering organically or from a post you sponsor Word-of-mouth User hears about offering from an interaction with trusted contacts Direct salesforce User interacts with someone who represents your brand Retail/E-commerce User comes across your offering while shopping online or in-store Franchisee/Re-seller User comes across your offering while shopping online or in-store from a third-party vendor You define core features of your offering, key user benefits (use value prop on previous page) ON-RAMP Free Consultation User connects with a product representative to learn about the product’s value to them Product Preview User receives a virtual walk-through of the product, it’s features and how to maximize value Money-Back Guarantee User buys the offering and has the option to return it for a full refund Free Trial User tries the offering at no expense to them for a limited amount of time Referral Bonus User receives discount for referring/ being referred VALUE EXCHANGE Pay-Per-Use User pays every time they use the offering Subscription User pays a rate for offering on a fixed cadence One-Time User pays for the offering 1 time and gets unlimited access Free: Ads/Data User doesn’t pay for offering, but they create revenue through engagement Gain-Sharing User receives additional value as the business grows Freemium User accesses a basic version of the offering for free and can pay for add-on services/tools >>>
189. Revenue Model Mad Lib 189 How will potential users learn about the offering? One day, when she’s trying to [COMMON ACTIVITY YOUR OFFERING ADDRESSES], she learns about [YOUR OFFERING] from [CHANNELS]. She’s attracted to [YOUR OFFERING] because it [CORE FEATURES] , which will improve her life by [KEY CUSTOMER BENEFITS]. To see if [YOUR OFFERING] is right for her, she explores it more deeply by [ON-RAMP]. How will your user acquire your offering? She finds value in [YOUR OFFERING] and decides to acquire it by going to [CHANNEL] and choosing... Choose a model for how your user exchanges value for your offering: SUBSCRIPTION User pays a rate for offering on a fixed cadence e.g. Netflix, Stitch Fix ...to subscribe and pay [PRICE] on a [FREQUENCY] basis, but also has the option to [OTHER SUBSCRIPTION PLANS/OTHER VALUE-EXCHANGE MODELS] PAY-PER-USE User pays everytime they use the offering e.g. Parking Meter ...to pay RATE every time she uses it, but also has the option to [OTHER VALUE-EXCHANGE MODELS] ONE-TIME User pays for the offering 1 time and gets unlimited access Financing: user pays a rate on a fixed cadence, with interest e.g. Buying a car ...to buy it for [PRICE], but she also has the option to [FINANCING OPTIONS/OTHER VALUE-EXCHANGE MODELS] FREE-ACCESS User doesn’t pay for offering, but they create revenue through engagement e.g. Social media, Google Search Freemium: User accesses a basic version of the offering for free and can pay for add-on services/tools e.g. Spotify, Zoom… ...to use it for free and creates value by [AD/OTHER REVENUE FROM USER DATA/ENGAGEMENT] ...to use it for free, with the option to pay for [ADDITIONAL FEATURES/FUNCTIONALITY] How will you keep users coming back for more? She continues to engage with [YOUR OFFERING] by [CHANNELS/VALUE EXCHANGE] Peer Insight, Business Model Design Toolkit >>>
190. Often when people are doing business model research, they think they need to build their idea out of the gate – even before you know if customers will pay for it. The Supply Chain template helps you think through what you will buy, bring, build, borrow and block to make your business model test come to life. Instead of assuming you must build everything, this template helps you think about what you could borrow or buy to stand up the test. This template touches on the supply side of the equation; meaning how will you, as the idea creator and test maker, make your idea tangible? Supply Chain 190 Peer Insight, Business Model Design Toolkit >>>
191. Supply Chain 191 Блокируем ПРОДУКТ Покупаем Привлекаем Занимаем Создаем Покупаем Создаем Покупаем Создаем Peer Insight, Business Model Design Toolkit >>>
192. Control Points 192 Peer Insight, Business Model Design Toolkit The control points grid helps you understand how defendable your idea is against competitors. The further your idea sits to the right of the grid (toward the “constrained” side) the more defensible your idea. The goal is to have some parts of your solution hidden. Meaning, there is a special sauce component that no one could really copy. Your idea is constrained by the data you collect, or the algorithms you use. When you’re first testing your business model, this is important to think about even if it’s not something you’ll activate until you’re scaling your idea. >>>
193. Step 2: Make A List of Assumptions 193 Peer Insight, Business Model Design Toolkit Outlining your make-or-break assumptions should happen way before any business model test is launched To refresh: an assumption is a thing that is accepted as true without any proof. Therefore, we test our assumptions, and usually the most critical or make-or-break to our idea first. Once we have confidence that we can confirm or disconfirm the assumption we can move on. These assumptions typically fall into three categories: value, scale and execution. >>>
194. Step 3: Create the Test Plan & Prototypes 194 Peer Insight, Business Model Design Toolkit Using the template, map each of the most critical (riskiest) assumptions to a prototype and test plan, or how you’ll be able to confirm or disconfirm that assumption with the data you get from the prototype and test What are you listening for? What data do you need? Warning: you might try and create one “super test” to test all of your assumptions. The efficiency is tempting but try and isolate the test variables so you can be sure of what the data is signaling. >>>
195. Why Create A Prototype? 195 Peer Insight, Business Model Design Toolkit Do-data is behavioral data and a more reliable predictor of future behavior than say data. So, we put a prototype in our user’s hands, and observe and measure their behavior. The best thing is, you don’t need to run a large pilot and spend tons of money to get do data. Letting the user interact with something tangible like a storyboard or webpage, provides invaluable dialogue into a deeper understanding of what they want, how much they’ll pay for it. You’ll pick the prototype type that: A. fits any constraints you have – time, budget, etc. B. that can answer the question in your assumption or the least amount of money to develop. Low-fidelity prototypes Paper prototypes 2D visuals of how a user experiences different types of value with the offering Pitch Deck A simulation of sales collateral that pitch the value proposition of the offering Pitch video A simulation of sales collateral that pitch the value proposition of the offering Medium-fidelity prototypes Digital mockup A digital prototype of the experience that allows user to interact with elements of the offering Physical Mockup A live simulation of how the user will experience different types of value with the offering Adwords & Landing page A paid campaign on Google that takes people to a landing page with a brief description of the service (and a way to signup for an alpha/beta test) High-fidelity prototypes Functional prototype: A version of the experience that feels real to the user Pilot: front end only An in-market experience with a small number of users (20-100), for a limited amount of time (3-9 months), where they pay for/access the offering, and your team works on the backend to deliver the experience in a scrappy >>>
196. Step 4: Run the Test 196 Peer Insight, Business Model Design Toolkit Execute the test plan! Touch base with the data as you go and pivot, as necessary. Here’s some tips and tricks to keep in mind as you’re testing your business model. Focus on your make-or-break assumptions. You don’t need to deliver the full experience, but rather those pieces are critical to testing your most important assumptions. Move from “Say data” to “Do data.” Connecting to customers in higher-fidelity conditions allow you to measure their behavior instead of what they say they would do. Do data always beats say data. Bypass systems and processes where you can. Ask yourself what is the scrappiest way you could stand up this experience? Then make it even scrappier (without compromising your learnings). Be nimble. Did you learn enough to make an adjustment? Do it! Just be sure to document the evolutions along the way. Keeping these experiments small allows you to adjust in real time and maximize your learnings (instead of running a huge pilot and realizing you asked the wrong question in the first place). It’s just the first dollar. Getting that first dollar is exciting. However, still ahead of us is: What’s the adoption rate? The customer acquisition cost? The churn rate? But at least you’ve validated the revenue model before you need to make those investments. >>>
197. 1.1.5. Business Case, OKRs and KPIs 197 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
198. Initial hypotheses about product financial metrics with required resources and investments estimation Refined as the product evolves based on the market, operational and other data Business case 198 Focus on Unite Economics Revenue Cost of goods sold (COGS) Fixed cost EBITDA
199. The right objective should describe what you are going to achieve and how you are going to measure its achievement Objective: Create an Awesome Customer Experience John Doerr’s Goal Formula): I will (Objective) as measured by (this set of Key Results) Key Results: › Improve Net Promoter Score from X to Y › Increase Repurchase Rate from X to Y › Maintain Customer Acquisition cost under Y OKR (Objectives and Key Results) is a goal system used by Google and others. It is a simple tool to create alignment and engagement around measurable goals. OKR (Objectives and Key Results) 199 What is OKR? The Beginner’s Guide to OKR >>> >>>
200. Key Metrics 200 Customer acquisition Retention and growth Business management Lead Generation Sales Strategy Income model Variable costs Cost of marketing Cost of sales Revenue Cost of Goods Sold and total Customer Acquisition cost Costs (G&A, R&D, S&M) Budget Cost per lead (CPL) Conversion Marketing Customer Acquisition Cost (CAC) Sales Team # Customers Sales Customer Acquisition Cost (CAC) Monthly new / recurring (MNR / MRR) Churn / Expansion Lifetime Value (LTV) COGS Gross Margin (GM) Full Customer Acquisition Cost (CAC) Team
201. Pick 1 top-line metric > Set goals > Define the strategy how to achieve it Defining the Right Top Line Metric Defining Product Success: Metrics and Goals 201 Avoid vanity and non-actionable metrics When choosing between multiple metrics, pick the simplest measurable metric you can move Pick the metric that most closely represents the usage of your product Do not be afraid to change the metric if you need to Choose a simple metric that connects to your drivers. Avoid ratios Consider counter-metrics if needed Change the metric as your business evolves Setting Goals: “grow MAU to 10M by Q4 2018.” You can choose goals based on: Product or business aspirations Product metrics New products Some general guidance on choosing goals: Pick goals that are time- bound Set different goals for different time frames Set two goals: an 80-20 and a 50-50 Set specific goals (SMART) When writing your goals, don’t include the “how” Setting a goal is as much science as it is art >>> Do not pick more than one metric
202. 202 Profit & Loss Forecast by Month / Quarter / Year M/Q/Y 1 M/Q/Y 2 ... M/Q/Y N # customers # sellers Revenue from sales COGS Gross profit Cost of sales and marketing (CAC) Profit from sales OpEx (G&A and others) EBITDA Depreciation EBIT Forecast Cash Flow The business achieves profitability in M/Q/Y__ with a gross margin of __% and EBIT margin > __%
203. Customers › # New customers added per period › # New customers, total to date › Monthly new revenue (MNR) › Monthly recurring revenue (MRR) Marketing and sales team › Total initial investment in customer acquisition ___ $$$ › Each seller creates an average of ___ $$$ MRR › Break even after ___ months 203 Customers, Marketing and Sales
204. 204 Costs › # Full-time equivalent (FTE) employees in Year 1 › # FTEs in Year 3 › FTE budget $$$ › Wage % from sales › Labor budget / FTE › Sales / Income per 1 FTE › G&A in Year 1 - Year 3 › G&A % of sales › G&A expenses examples: › Rent › Utilities › Insurance › Executives' wages and benefits. › The depreciation on office fixtures and equipment › Legal counsel and accounting staff salaries › Office supplies Core Team Cost G&A (General and Administrative) Costs
205. 1.1.6. Unit Economics 205 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
206. Unit Economics 206 Unit economics is a part of break-even analysis that considers variable costs Would a company with variable expenses make enough money to pay its fixed costs: Contribution Margin = (Net sales – Variable expenses) > Fixed expenses Customer Lifetime Revenue / Value (LTV) > Customer Acquisition Costs (CAC) by x3+ (rule of thumb) Unit economics analysis helps to better understand operational profitability in combination with P&L metrics. What is a Unit? Unit = Product Unit = Customer Calculation through: CM (Contribution Margin) Calculation through: CAC (Customer Acquisition Cost) and LTV (Lifetime Value) over the entire customer lifecycle C = unit margin P = unit revenue V = unit variable cost
207. Calculation of unit economy through contribution margin 207 If the sale of each unit (unit of product) creates a profit, then it creates a Contribution Margin to cover the fixed costs. After a certain number of profitable units are sold, the breakeven point is reached. If selling a unit does not generate profits to cover fixed costs, they cannot be covered by operating activities. Then it is worth considering whether it makes sense to scale an unprofitable product. Unit = Product Breakeven Point Revenue from Sales Units, # Money Contribution Margin Variable Costs Fixed Costs Units, # Money Contribution Margin Losses Profit Contribution Margin
208. In the Long Term All Costs are Variable 208 They just grow at different rates. For example, the size of the development team (fixed costs) slowly grows (quasi-variables costs) Fixed costs Units, Sales Money Increase in fixed costs when renting a larger office, warehouse, data centre... A jump in fixed costs when renting a larger office, warehouse, data center... Gradual increase due to the quasi-variable nature of some fixed costs
209. 209 Unit Economy and Customer Acquisition Metrics Metric Value How to measure? CPL Cost per lead resulting from a customer acquisition campaign $$$ Cost of customer acquisition campaign / number of acquired leads Conversion Rate Leads to Customers: The ratio of leads to those who complete a desired action and ultimately become buyers % As a result of the campaign or for the period: number of acquired leads / number of acquired customers CAC Customer Acquisition Cost: The total cost of acquiring a customer $$$ Acquisition costs / number of new customers for the period ARPA Average Revenue per Account: The average revenue per customer in a period $$$ Revenue / number of new customers for the period Churn Rate Churn, Churn Rate: The proportion of revenue lost from existing customers who stop paying after a period % For the period LTV Customer Lifetime Value $$$ Revenue from the customer over the lifetime of the product: Forecast or fact LTV / CAC CAC Coverage Period >3 = ok Calculation based on forecast and/or actual numbers CAC / ARPA Customer Payback Period Months Calculation based on forecast or actual indicators MNR Monthly New Revenue: The monthly revenue from newly acquired customers $$$/month Monthly MRR Monthly Recurring Revenue: Monthly revenue from existing customers. $$$/month ARPA x number of paying customers
210. 210 How to calculate CAC? Marketing and Sales Salary Budget • Salaries and wages of all marketing and sales employees, including both full- time equivalents (FTEs) and contract staff. Marketing and Sales Overhead • Costs for office space, equipment, and utilities. Paid Promotion • All expenses related to paid advertising and promotional activities. Tools • Software, analytics, and other tools that support marketing and sales efforts. CAC = Number of New Customers within a specific period (month, quarter, year)
211. Traditional approach How to calculate LTV? 211 Pros Cons A simple formula Does not work if you have very long customer lifetimes and negative churn due to customer expansion (adding more users) and/or ARPA growth Easy to use in the business model at early stage Does not consider the time value of money LTV = Average Customer Lifetime × Average Gross Profit per Account Average Customer Lifetime ACL = 1 Churn (%) Average Gross Profit per Account = ARPU × Gross Profit Margin (%) LTV = ARPU × Gross Profit Margin % Churn (%)
212. Customer Churn 212 Groups of paying customers registered over a period (usually a month) are called cohorts. The January 2022 cohort consists of all customers who registered in January 2022. Business needs to track how many customers will continue to use the product and how revenue for each cohort will change over time. 100% 90% 81% 73% 66% 59% 53% 48% 43% 39% 35% 31% 28% 25% 23% 21% 19% 17% 15% 14% 12% 11% 10% 9% 8% 100% 88% 77% 68% 60% 53% 46% 41% 36% 32% 28% 25% 22% 19% 17% 15% 13% 11% 10% 9% 8% 7% 6% 5% 5% 100% 80% 64% 51% 41% 33% 26% 21% 17% 13% 11% 9% 7% 5% 4% 4% 3% 2% 2% 1% 1% 1% 1% 1% 0% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 10% 12% 20% Percentage of customers in a particular cohort over several years with three different monthly Customer Churn Rates Customer churn is measured by the rate of churned customers for the period in %. The example on the right shows the percentage of paying customers remaining in the cohort from the original 100% by a period with monthly customer churn rates (10%, 12%, 20%). Multiplying ARPA by the initial number of customers in the cohort gets the cohort revenue forecast by a period without bearing in mind the time value of money. Churn = Lost Customers Total Customers at the Start ×100%
213. Churn and Discounting Cash Flow (DCF) 213 100% 90% 81% 73% 66% 59% 53% 48% 43% 39% 35% 31% 28% 25% 23% 21% 19% 17% 15% 14% 12% 11% 10% 9% 8% 100% 81% 66% 53% 43% 35% 28% 23% 19% 15% 12% 10% 8% 6% 5% 4% 3% 3% 2% 2% 1% 1% 1% 1% 1% 100% 77% 59% 45% 34% 26% 20% 15% 12% 9% 7% 5% 4% 3% 2% 2% 1% 1% 1% 1% 0% 0% 0% 0% 0% Without discounting 10% discount rate 15% discount rate In forecasting future revenues, it is appropriate to discount the cash flow to account for risks and time value of money Accordingly, cohort revenues will decrease because of: The customer churn, and If the discount rate increases Cohort Payment Effect of Applying DCF in the Cohort with 10% Customer Churn Rate
214. Customer Churn Is Not Equal Cash Churn 214 A negative cash churn or expansion occurs when the increase in the average check of the remaining customers is higher than the level of customer churn Retention rates help to estimate churn in customers and money... • Customers: CRR (Customer Retention Rate) = 1 - Customer Churn Rate • Cash: FRR (Financial Retention Rate) = 1 – Financial/Cash Churn Rate Losing a customer who pays less than the ARPA and a customer who pays more than the ARPA will result in the same churn in customers, but different in cash Client 2 ARPA = $4000 Client 1 ARPA = $1000 Period 1 Client 2 ARPA = $4000 Period 2 Client 1 churned Customer churn = 50% Cash churn = 20% Client 2 ARPA = $6000 Client 1 churned Client 2 increased ARPA Customer churn = 50% Cash churn = -20% Period 2' or Based on What’s your TRUE customer lifetime value (LTV)? – DCF provides the answer by David Skok >>>
215. Retention Rates (Customers and Money) 215 Customer and financial retention rates can also be used to estimate churn in customers and money: A business with a negative churn (expansion) will have a financial retention rate greater than 100%. FRR (or DRR, Dollar Retention Rate) is one of the key metrics for evaluating the performance of cloud (XaaS) businesses when using a subscription business model and is usually present in the reporting of public companies. CRR (Customer Retention Rate) FRR (Financial Retention Rate) CRR = 1 - Customer Churn Rate FRR = 1 - Cash Churn Rate
216. Effect of Discounting Future Cash Flow for the Cohort with the Negative Cash Churn (Expansion) 216 100% 106% 108% 107% 104% 100% 94% 88% 82% 75% 69% 63% 57% 51% 46% 41% 37% 33% 30% 26% 23% 21% 18% 16% 14% 100% 96% 88% 78% 68% 59% 50% 42% 35% 29% 24% 20% 16% 13% 11% 9% 7% 6% 4% 4% 3% 2% 2% 1% 1% 100% 90% 78% 66% 54% 44% 36% 28% 22% 17% 14% 11% 8% 6% 5% 4% 3% 2% 2% 1% 1% 1% 1% 0% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 % of revenue % of revenue (10% discount rate) % of revenue (15% discount rate) Cohort payment (% of revenue in the first period) with the following parameters: Annual customer churn rate = 15% Annual growth rate (expansion) for remaining customer = 25% Financial Retention Rate = 106.25% Cohort Payment
217. LTV Calculation with DCF Applied to a Negative Churn Scenario1 217 16,11 7,72 5,95 4,79 3,97 0,85 0,77 0,72 0,68 0,64 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 $- $2 $4 $6 $8 $10 $12 $14 $16 $18 0 10% 15% 20% 25% LTV K With the following parameters: ARPA x Gross Margin % = $1,000 Customer Churn Rate = 15% G (growth rate for remaining customers) = 25.00% FRR (or DRR) = 106.25% ... we get the following LTV values Discount rate* [1] What’s your TRUE customer lifetime value (LTV)? – DCF provides the answer by David Skok >>> How LTV is affected by various Discount Rates K = 1 − Churn% × 1 − Discount Rate LTV = ARPA × Gross Margin × 1 1 − K + G×K 1 − K 2
218. LTV to CAC Ratio 218 *) General recommendations. You need to look more precisely in the context of the specific business model, considering variable costs, ARPU, cost of capital, etc. Best practices:* LTV should be at least three times higher than CAC LTV > 3 x CAC Revenue must exceed CAC in 12 months or sooner CAC < 12 x MRR
219. NBM4 1.2 Customer Know your customer 219 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
220. Goals, objectives, jobs, problems, motivation, and emotions of users and customers are paramount to product success Why Do the Customer Research? 220 Jobs and pains come first, then the need for a solution There is a chance to sell the product if there is a need for the solution Sales growth = product success Understanding your audience is essential to the product's success
221. Customer Personas 221 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
222. 222 What is a Customer Persona? № Role Name 1 Front-end Developer Jhon 2 Technical Support Manager Mary A customer/user/buyer persona is the profile of your ideal target customer, who is involved in buying/using your product or service. A product team should first agree on the target persona list, e.g.:
223. Product Team Exercise. Define Customer / User Personas for your Product 223 Objective › Agree on who is the customer, key personas, and where is the business opportunity for the product. Action › The business or product owner describes the opportunity space for the product team. Outcomes › The team understands the overall product development strategy. › Identified different Personas as potential customers/users of the future product. ?
224. Personas are fictional representations of the very real people who interact with your products. Well-defined personas allow your entire team to empathize with your audience's pain points and better understand their needs1 Product Team Exercise. Personas Profiling 224 Demographics Personal goals, needs Communication channels, social networks, and hobbies Role in the organization (B2B) Business goals, jobs/tasks to be done, needs, and success criteria (KPIs) Pains, challenges, suggestions, objections Influence map How they solve problems now The customer journey to solutions now (as is) Competitors, substitutes for our product Persona’s profile characteristics example: [1] Aha! Roadmaps | Personas >>>
225. Demographics Gender, age, education, marital status, income level Personal goals, needs Personal goals and values, needs, consumption styles, brands, hobbies and interests Communication channels, social networks, and hobbies Social media and other digital and non-digital sources of information that influence behavior and decision- making Role in the organization (b2b) Professional experience, employer, position, professional groups, and associations, key knowledge and skills Job duties, reporting structure, and communications Business goals, jobs/tasks to be done, needs, and success criteria (KPIs) Why do they do this job, what do they want to achieve, and what motivates and demotivates them. Business goals, key tasks, KPIs (motivators), OKRs (work metrics), main time eaters at work Pains, challenges, suggestions, objections Perceived and latent pains and challenges in getting the jobs done and achieving their goals: what prevents the achievement of business goals and job success What they want to change (suggestions) and what they do not want to change (objections to proposed changes) Influence map Other persons who may influence the Persona’s decisions: relatives, friends, public influencers, business decision- makers, advisors to decision-makers, gatekeepers (hold access to decision-makers), mediators (provide access to decision-makers) How do they solve problems now How are pains and problems being addressed now or how they want them to be addressed, what solutions they are considering, buying, using and why The customer journey to solutions now (as is) Key marketing funnel steps: awareness, consideration, purchase, ownership, and promotion. Who are competitors and/or substitutes for our product now? 225
226. goodreads.com/work/quotes/24034629-think-like-a-freak 226 “If it takes a lot of courage to admit you don’t know all the answers, just imagine how hard it is to admit you don’t even know the right question.” ― Steven D. Levitt, Think Like a Freak
227. 1. What do you do [at work, in life]? 2. What is [professional] success for you? 3. What are the barriers to success? 4. Tell me a story about the last time you [solved this problem, have this job done] … 5. What was the most difficult thing? 6. Why was it so difficult? 7. How do you solve this problem now? 8. Why do you not like this solution? Generic customer development interview script Data Source: a Customer Development Interviews 227 >>> Based on Customer Interview Script Generator
228. 228 Some people say give the customers what they want, but that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, 'If I'd ask customers what they wanted, they would've told me a faster horse.' People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page. Steve Jobs People Don't Know What They Want Until You Show it to Them Quote by GoodReads >>>
229. 229 I think really great products come from melding two points of view-;the technology point of view and the customer point of view. You need both. You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new. It took us three years to build the NeXT computer. If we'd given customers what they said they wanted, we'd have built a computer they'd have been happy with a year after we spoke to them; not something they'd want now. Steve Jobs You can't just ask customers what they want and then try to give that to them An interview with Steven Jobs, Inc.'s Entrepreneur of the Decade >>>
230. Quote by GoodReads 230 Figure out what people really care about, not what they say they care about. ― Steven D. Levitt, Think Like a Freak >>>
231. 231 Principles of Conducting Problem Interviews with Customers Do not talk about the product idea/solution during the interview › It can alter the other person's perception of a potential solution in alignment with your (biased) viewpoint (bias) Do not ask questions about the future › Do not let them talk about hypothetical circumstances (fantasies do not reflect the essence of the problem at hand) >>>
232. Impacts the reliability of the interpretation. A few examples 232 [1] Confirmation Bias: A Ubiquitous Phenomenon in Many Guises. Raymond S. Nickerson First Published June 1, 1998 Research Article. https://doi.org/10.1037/1089-2680.2.2.175 [2] https://en.wikipedia.org/wiki/Hawthorne_effect Cognitive Biases in Conducting and Analyzing CustDev Interview Outcomes Confirmation Bias, in the psychological literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs, expectations, or a hypothesis in hand1. E.g.: › Biased search › Biased interpretation › Memory bias Hawthorne effect, research participants know they are being observed and deviate from usual behavioral patterns: correction of responses2 Status quo bias stems from our tendencies to avoid losses and regret at all costs3: hiding problems/pains Hindsight Bias, the tendency, upon learning an outcome of an event—such as an experiment, a sporting event, a military decision, or a political election—to overestimate one’s ability to have foreseen the outcome. It is colloquially known as the “I knew it all along phenomenon4: biased conclusions and predictions Examples of Confirmation Bias when conducting CustDev interviews: › Communicating with people who basically share your opinion › Ignoring people with a different point of view › Using questions that support the initial hypothesis › Focus on responses that support the hypothesis › Errors in transcribing results (did not remember, did not write down > changed the answer) › Errors with interpretations of answers to closed questions (yes/no) › The responses received seem not corresponding to reality › Biased conclusions and projections [3] https://thedecisionlab.com/biases/ [4] https://www.britannica.com/topic/hindsight-bias
233. Why do we prefer doing something to doing nothing? Action Bias Why do we rely on our current emotions when making quick decisions? Affect Heuristic Why we prefer options that are known to us Ambiguity Effect Why we tend to rely heavily upon the first piece of information we receive Anchoring Bias Why do we focus more on some things than others? Attentional Bias Why do we tend to think that things that happened recently are more likely to happen again? Availability Heuristic Why do we support opinions as they become more popular? Bandwagon Effect Other Examples of Cognitive Biases (1 of 5) https://thedecisionlab.com/biases/ 233 Why do we believe our horoscopes? Barnum Effect Why do we rely on specific information over statistics? Base Rate Fallacy Why do we focus on trivial things? Bikeshedding Why do we transfer negative emotions about being broke on items that we purchase? Bottom-Dollar Effect Why are we satisfied by "good enough"? Bounded Rationality Why do we value items purchased in a bundle less than those purchased individually? Bundling Bias Why are we likely to spend more after reading the word “bye”? Bye-Now Effect Why does paying without physical cash increase the likelihood that we purchase something? Cashless Effect Why do we think we’re more likely to win at the big casino versus the small one? Category Size Bias Why do we have a harder time choosing when we have more options? Choice Overload Why is it so hard to change someone's beliefs? Cognitive Dissonance Why do people support their past ideas, even when presented with evidence that they're wrong? Commitment Bias Why do we favor our existing beliefs? Confirmation Bias Why do we make worse decisions at the end of the day? Decision Fatigue
234. Why we feel the past is better compared to what the future holds Declinism Why do we feel more strongly about one option after a third one is added? Decoy Effect Why do we tend to hold on to losing investments? Disposition Effect Why we tend to view two options as more distinctive when evaluating them simultaneously than separately. Distinction Bias Why can we not perceive our own abilities? Dunning–Kruger Effect Why do we mispredict how much our emotions influence our behavior? Empathy Gap Why do we value items more if they belong to us? Endowment Effect Other Examples of Cognitive Biases (2 of 5) https://thedecisionlab.com/biases/ 234 Why do we think others are in it for the money, but we’re in it for the experience? Extrinsic Incentive Bias Why do our decisions depend on how options are presented to us? Framing Effect Why do we have trouble thinking outside the box? Functional Fixedness Why do we underestimate the influence of the situation on people’s behavior? Fundamental Attribution Error Why do we think a random event is more or less likely to occur if it happened several times in the past? Gambler's Fallacy Why do we forget information that we just looked up? Google Effect Why do positive impressions produced in one area positively influence our opinions in another area? Halo Effect Why is our confidence disproportionate to the difficulty of a task? Hard-easy effect Why do we take mental shortcuts? Heuristics Why do we see unpredictable events as predictable after they occur? Hindsight Bias Why do we expect previous successful performance to lead to future successful performance? Hot-hand Fallacy Why do we value immediate rewards more than long- term rewards? Hyperbolic Discounting Why do we place disproportionately high value on things we helped to create? IKEA Effect Why are we more likely to offer help to a specific individual than a vague group? Identifiable Victim Effect
235. Why we believe we have more control over the world than we actually do Illusion of Control Why are we overconfident in our predictions? Illusion of Validity Why do we think some things are related when they aren’t? Illusory Correlation Why do we believe misinformation more easily when it’s repeated many times? Illusory Truth Effect Why do we treat our in-group better than we do our out- group? In-group Bias Why do we work harder when we are promised a reward? Incentivization Why do we believe that we get what we deserve? Just-World Hypothesis Other Examples of Cognitive Biases (3 of 5) https://thedecisionlab.com/biases/ 235 Why does spacing out the repetition of information make one more likely to remember it? Lag Effect Why do we use the same skills everywhere? Law of the Instrument Why do our preferences change depending on whether we judge our options together or separately? Less-is-Better Effect Why do we exaggerate some details of a story, but minimize others? Leveling and Sharpening Why do we remember information that we attach significance to better than information we repeat? Levels of Processing Why do scientists keep looking for a statistically significant result after failing to find one initially? Look-elsewhere Effect Why do we buy insurance? Loss Aversion Why do we think less about some purchases than others? Mental Accounting Why do we prefer things that we are familiar with? Mere Exposure Effect Why rewards of unknown sizes tend to motivate us more than known rewards Motivating Uncertainty Effect Why we tend to prefer spreading limited resources evenly across options. Naive Allocation Why do we believe we have an objective understanding of the world? Naive Realism Why is the news always so depressing? Negativity Bias Why do we tend to favor brands that show care for societal issues? Noble Edge Effect
236. How do our sentimental feelings for the past influence our actions in the present? Nostalgia Effect Why do we change our behavior when we’re being watched? Observer Expectancy Effect Why don’t we pull the trolley lever? Omission Bias Why do we overestimate the probability of success? Optimism Bias Why do we prefer to ignore negative information? Ostrich Effect Why do we lose interest in an activity after we are rewarded for it? Overjustification Effect How do our memories differ from our experiences? Peak-end Rule Other Examples of Cognitive Biases (4 of 5) https://thedecisionlab.com/biases/ 236 Why do we think we’re destined to fail? Pessimism bias Why do we underestimate how long it will take to complete a task? Planning Fallacy Why do we only remember the first things on our grocery list? Primacy Effect Why do some ideas prompt other ideas later on without our conscious awareness? Priming Why do we think our current preferences will remain the same in the future? Projection Bias Why is negotiation so difficult? Reactive devaluation Why do we anticipate regret before we make a decision? Regret Aversion Why do we use similarity to gauge statistical probability? Representativeness Heuristic Why responses to a survey or experiment can be inaccurate due to the nature of the survey or experiment Response Bias Why do we overestimate our self- control? Restraint Bias Why do we think the good old days were so good? Rosy Retrospection Why do we focus on items or information that are more prominent and ignore those that are not? Salience Bias Why do we blame external factors for our own mistakes? Self-serving Bias Why do we better remember items at the beginning or end of a list? Serial Position Effect
237. Why do men think that women are always flirting with them? Sexual Overperception Bias Why do we follow the behavior of others? Social Norms Why we forget where our memories come from, and thereby lose our ability to distinguish the reality or likelihood of each memory. Source Confusion Why do we retain information better when we learn it over a long time period? Spacing Effect Why do we feel like we stand out more than we really do? Spotlight Effect Why do we tend to leave things as they are? Status Quo Bias Why is yawning contagious? Suggestibility Other Examples of Cognitive Biases (5 of 5) https://thedecisionlab.com/biases/ 237 Why do we misjudge groups by only looking at specific group members? Survivorship Bias Why do we focus on one characteristic to compare when choosing between alternatives? Take-the-best Heuristic Why do some things “seem like they just happened yesterday?” Telescoping Effect Why do we think we understand the world more than we actually do? The Illusion of Explanatory Depth Why do we perform better when someone has high expectations of us? The Pygmalion effect Why are we likely to continue with an investment even if it would be rational to give it up? The Sunk Cost Fallacy Why do we seek certainty in risky situations? Zero Risk Bias
238. In organizations, multiple decision-makers make and influence decisions Influence Map for B2B 238 Target Persona They: › Advise › Help/obstruct › Discuss › Check › Sources of information › Recommend or discourage › Open or close access to the target persona They can make a recommendation / introduction Direct influencers Indirect influencers › Makes decisions › Gives objections › Agrees on solutions › Agrees on budgets › Confirms purchases
239. Product Team Exercise: Empathy Mapping. Experience Yourself as a Customer 239 The goal is to understand that Persona: › speaks, does, thinks, feels, hears, and sees; › what kind of pain experiences; › what he/she wants to achieve ...in life and at work. Action › Each participant writes their choices on post- its and glues them to the appropriate sections of the map. Outcome › Finding a common vision of the situation, benefits and problems, as seen through the eyes of the customers What bothers What s pleases Pains (fears, frustrations, barriers, challenges, suggestions, ob ections) Gains (what they want to achieve, desires or needs, key success factors) Hears and Sees Do s and Say s Thinks and Feels Do s and Say s Thinks and Feels Hears and Sees Think – what do they think about the current situation and the future? Feel – what emotions do they experience? Hear – what do they hear from colleagues, friends, family, press, and authorities...? See – what do they see around? Do – what do they do, spend time on, and what jobs/tasks do they need to accomplish? Say – what do they say in public?
240. 240 Empathy Map for Personas (Template) What bothers? What’s pleases Pains (fears, frustrations, barriers, challenges, suggestions, objections) Gains (what they want to achieve, desires or needs, key success factors) Hears and Sees Do's and Say's Thinks and Feels Persona Do's and Say's Thinks and Feels Hears and Sees
241. 241 Empathy Map for Personas (Template) Pains (fears, frustrations, barriers, challenges, suggestions, objections) Gains (what they want to achieve, desires or needs, key success factors) Hears Do's and Say's Thinks and Feels Sees Persona
242. Empathy Map for Personas (Simplified Template) ? ? ? ? Hears Sees Thinks and Feels Says and Does 242
243. ? ? ? ? Empathy Map for Personas (Template) Does / Says Thinks / Feels Hears Sees 243
244. ? ? ? ? 244 Empathy Map for Personas (Template) Does / Says Thinks / Feels Hears Sees ? ? Pains Gains
245. Customer Journey Map (CJM) 245 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
246. What is a Customer Journey Map? 246 Customer Journey Map: What is Customer Journey Mapping & Why is it Important? https://www.salesforce.com/uk/blog/2016/03/customer-journey-mapping-explained.html A customer journey map is a visual representation of the customer journey (also called the buyer journey or user journey). It helps you tell the story of your customers’ experiences with your brand across all touchpoints. Whether your customers interact with you via social media, email, livechat or other channels, mapping the customer journey out visually helps ensure no customer slips through cracks. Customer journey mapping (also called user journey mapping) is the process of creating a customer journey map, a visual story of your customers’ interactions with your brand.
247. An example of CJM template in Miro: miro.com/atlassian-team-plays/customer-journey-map/ Creating the Customer Journey and Experience of the Future 247 Analysis and correction of problems Improvements Optimization New quality CJ/CX today. Customer journey maps: what the customer is doing, thinking, feeling and saying today Future CJ/CX Future customer journey/experience : what we want the customer to do, think, feel and say tomorrow Level of customer experience maturity 1. Start with enhancing the present customer experience for already existing products (understand existing CJs/CX) 2. The approach for developing new products and new product capabilities is driven by the future customer journey (future CJs/CX)
248. Customer Journey Mapping (“as is”) 248 Objective › Understand what actions the person is taking right now to achieve their goals and get jobs done; what he feels, thinks, and feels; and what problems (pains) they are experiencing with the job, outcomes, and results. Action › Each participant describes their vision on post- its and glues them to the board › Grouping by similarity Outcome › Understand what the person does and what problems they face as an outcome of their actions 1 2 N Stages of CJM Does Thinks Feels What can be improved? Jobs to be Done / Processes Steps Tasks
249. Team Exercise: Customer Journey Mapping “As Is" Description Description Description Description Description Description Persona ... Objective: ... Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Actions • What does he do, with whom, what he have to contact? • • • • • Thoughts • What does he think? Feelings • What does he feel? Improvement opportunities • How can we improve the situation / solve or eliminate the problem? 249 Jobs to be Done / Processes Steps Tasks
250. CUSTOMER JOURNEY MAP THOUGHTS, EMOTIONS, POSSIBILITIES STEPS TOUCH POINTS AWARENESS ACQUISITION ACTIVATION RETENTION LOYALTY Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point Touch point ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... -20 0 20 250
251. CUSTOMER JOURNEY MAP EMOTIONAL LEVEL AWARENESS ACQUISITION ACTIVATION RETENTION LOYALTY METRICS ... OPPORTUNITIES TO IMPROVE ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ACTION ACTION ACTION ACTION ACTION ACTION ACTION ... ... ... ... ... ... ... JOB/TASK TASK TASK TASK TASK TASK TASK STEPS 251
252. CUSTOMER JOURNEY MAP Premium customer service baseline GOOD EXPERIENCE BAD EXPERIENCE TOUCH POINTS Invitation Office involvement Completion Reflection Appoint ment Arrival Entry Queue Order Waiting Chairs Drinks Service Packaging Exit After-service Worry Good beverage Farewell Closing Atmosphere Scent Loudly Cold Fake greeting Reception Convenience Courtesy Crowd Comfort temperature Delicious drink Free Wi-Fi Noise 252 NPS
253. CUSTOMER JOURNEY MAP STEPS NEEDS & ACTIONS EXPECTATIONS OPPORTUNITIES FOR IMPROVEMENT ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... Positive (+) Negative (-) STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 253 EMOTIONAL LEVEL
254. STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 STEP 7 CUSTOMER JOURNEY MAP FEELS THINKS DO Touch points ... ... ... ... ... ... ... ... ... ... ... ... ... ... + Positive - Negative 254
255. CUSTOMER JOURNEY MAP DEFINITION COMPARISON NEGOTIATIONS PURCHASE 1. Reviews the current cell phone plan 2. Defines the required parameters of the new plan 3. Watches commercials on TV Conducts research on operators 4. Uses a website of operators to compare plans and options 6. Calls her operator to tell them she's looking for a new plan 7. Calling competitors to see their offers 8. Decides on a new plan and calls customer service to switch OPPORTUNITIES TO IMPROVE ... OWNER + METRICS ... PERSONA Scenario: ... PERSONA Scenario: ... 255
256. 256 День из жизни careerkarma.com/careers/software-engineer/
257. Jobs, tasks, and emotions experienced during the day A Day in the Life of a Persona 257 Checks business information: mail, bank, reports, social networks, messengers Traveling to the office, to custpmers, or work from home Calls Planning of the order fulfilment and/or problem solving Working with clients Problems Going to the store/sports... Going home Morning Evening
258. CJM vs Business Process Mapping (BPM) 258 Sheila Shaffie – ProcessArc. Do I Need Both Process and Customer Journey Maps? CJM BPM Goals Build Empathy Track emotions Unbiased view of value creation Identification of constraint points Similarities Provide visual representation of workflow / jobs to be done Identify improvement opportunities Differences Front Stage: Customer journey What the customer sees & feels Back Stage: Business processes & technologies How they work together Business processes & technologies support customer journey and enable customer experience Why we need both Shows the touch points and customer emotions with systems and processes Shows constrains and opportunities to improve customer experience >>>
259. CJM vs Business Process Mapping (BPM) 259 Sheila Shaffie – ProcessArc. Do I Need Both Process and Customer Journey Maps? >>> Front Stage: Customer Journey What the customer sees & feels (CX) Back Stage: Business processes & technologies What supports the customer journey & experience
260. Current business processes diagnostic Description of processes / CJMs "as is" 01 Analysis of the current state Determine the outcomes and impact of “as is” procees on enterprise KPIs Describe the key problems, issues and pains 02 Future processes design Design and description of "to be" business processes / CJMs 03 Solutions development Finding solutions to close the “as is”/”to be” gap Development of business/functional requirements for the future processes and IT systems 04 Decision prioritization Choosing a solution based on a trade-off between cost / outcomes / implementation complexity 05 Traditional Process of Analyzing and Optimizing Enterprise Business Processes (B2B) 260
261. A business process is a set of interrelated activities or jobs aimed at creating a specific product or service for customers Two Main Types of Process-based KPI's – Work and Cycle Time 261 1. Describe key processes and their steps, cycles and durations Process-based KPI's: › Work time = actual work hours required to complete the process step’s task › Cycle time = the total time that elapses in a process from Finish-to-Finish 2. Describe relevant KPIs of the process, for example: › # of units (documents, records, products) processed daily / monthly / annually › # units processed by employee › Cost to process unit › Customer satisfaction with the process (NPS)…
262. View from the stratosphere › Very high-level process map. Description of the process at the level of major departments or higher. Includes only the main steps of the process. A bird's eye view › Medium level of details. Breaks down a high-level process into a more detailed process. › Level of the departments/key teams Ground view › Detailed process map. Details of the process at the sub-process or individual’s level › Applicable only to business-critical sub-processes Levels of Details in the Business Processes Map 262 3 km 30 km 1 2 3 4 2.2 2.3 2.4 2.5 2.6 0.1 km 2.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.1 2.1.8 2.1.7
263. Business Process Analysis › Executed via a “top-down" approach for different organization’s levels › Requires deep dive to get to Persona (user) level › Emerged for B2B complex product deployments e.g., ERP, CRM, BI IT systems CJM › Products are made for users, not organizations › CJM describes the user's path to complete his job to be done › Emerged in B2C product development and customer experience analysis Complement each other for B2B product development Business Process Analysis and CJM 263
264. Jobs to be Done (JTBD) in the Context of Persona Objectives and Desired Output Jobs to be Done (JTBD) Job Stories User Stories 264 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
265. John B. Palmer, Rick Pedi, Bob Moesta and the JTBD community Definition WHEN COFFEE & KALE COMPETE, Alan Klement whencoffeeandkalecompete.com/ 265 Customers want to make a progress in a particular circumstance Customers don't need a product; they want help to make their lives better Customers have "jobs" and they want them to be "done". 'Customers don't have needs, they just want to make progress within the system they belong.' Eye-opening statement from Alan Klement's book. - Jérémie Pottier @dzey
266. • A method for focusing on: • ...in customer behavior. Jobs to be Done (JTBD) 266 intercom.com/blog/using-job-stories-design-features-ui-ux/ jtbd.info/2-what-is-jobs-to-be-done-jtbd-796b82081cca Term: Paul Adams. Причинно-следственных связях (causality) Тревогах (anxieties) Мотивов (motivations) Source: Alan Klement, Intercom Causal relationships (causality) Anxieties (anxieties) Motives (motivations)
267. Job Story 267 Designing features using Job Stories by Alan Klement After the end of the quarter, I want to get a P&L report so that I can manage the business promptly After the end of the quarter, I want to get P&L at most at the end of the first week of the next month so that I can promptly manage the business When ___________________, I want to ___________________ So I can ___________________ SITUATION MOTIVATION EXPECTED OUTCOME As is Vs. To be Now it takes 50 days. = PAIN! It should take less than 10 days >>>
268. What are the key jobs/tasks to be done for customers to achieve their goals? Job Stories – Data about the Jobs/Tasks to be Done Job Stories guide 268 Elements of the Job Story Example JS1 JS2 JS...N Event / situation / need When _______________ [situation] When I can't go to the store. Motivation I want to _______________ [action] I want to order delivery from an online store Expected outcome So I can _______________ [get expected outcomes] So I can cook a dinner and make a week's supply of groceries >>>
269. 269 How to create Job Stories 1. Start with the high-level job. 2. Identify a smaller job or jobs which help resolve the higher-level job. 3. Observe how people solve the problem now (i.e., which job do they currently use). 4. Come up with a Job Story, or Job Stories, that investigate the causality, anxieties, and motivations of what they do now. 5. Create a solution (usually in the form of a feature or UI change) which resolves that Job Story. When ______________, I want to ______________ So I Can ______________ Designing features using Job Stories by Alan Klement >>>
270. 270 User Story >>> As a "manager", I want to “get a report" so "I can find out which departments need additional resources" As a role, I want to action (so that benefit) WHO WHAT WHY What is User Story?
271. User Story Criticism (in Favor of Job Stories) 271 As a _______________, I want ________, So that benefit ___________________ Persona Action Expected Result What changes if you remove the persona? How do you know it's the best action? Motivation to get results Too many hypotheses! If the product doesn't work, what is the reason: the wrong hypothesis about the motivation or bad implementation of the product? Job Stories Offer A Viable Alternative To User Stories >>>
272. User Story vs Job Story 272 User Story Job Story Users vary significantly and deeply understanding those users is important + - Few roles, many jobs/tasks, it's important to consider “When” - + Example As a user, I want to be required to enter a valid postal code, so I don’t waste time searching for a clearly invalid postal code When searching by postal code, I want to be required to enter a valid code, so I don’t waste time searching for a clearly invalid postal code. Combination 1. Job User Story 2. User Job Story 1. When searching by postal code, a buyer wants to be required to enter a valid code, so the buyer doesn’t waste time searching for a clearly invalid postal code. 2. As a user who is searching by postal code, I want to be required to enter a valid postal code, so I don’t waste time searching for a clearly invalid postal code Job Stories Offer A Viable Alternative To User Stories >>>
273. Combination of User Story & Job Story 273 Role (Persona) When situation Wants to do what action To get the expected outcome As a [role] When [situation] I want to [what action] So I can [get expected outcome]
274. User activity 1 User activity User jobs/tasks User / Job Stories User activity 2 User activity 3 Task 1 Task 2 Task 3 Task 4 Task 5 User activity User activity User activity User activity User activity User activity User activity User/Job Story Map “As Is" 274 User Activity = Future Product Feature Aha. Feature prioritization templates Release 1 Release 2 Release 3 >>>
275. Prioritization of User/Jobs Stories 275 User / Job Stories Importance for the customers (1-5) Feasibility of feature development: (1-5) 1 2 3 2 3 3 3 4 2 4 5 2 5 4 2 6 3 4 7 1 5 8 2 4 9 4 5 10 2 1 11 3 2 12 5 5 5 = essential task 5 = feasible; 1 = not feasable
276. Lifecycle of a User Story 276 What is User Story? Pending • User stories are found. • Short description of user’s jobs. • Just for reminding all parties for a future discussion of user’s request. To-do To be addressed in the next few weeks > time-boxed in a sprint. Discussing • End user confirming the requirements and define the acceptance criteria. • Development team writes down the requirements or any decisions as conversation notes. • UX may create wireframes or storyboards (UX design). Developing After the requirements are clarified, the development team will design and implement the features to fulfill user's requests. Confirming • End user will be given access to the testing environment or a semi-complete software product (sometimes known as an alpha version) for confirming the feature. • Confirmation will be performed based on the confirmation criteria when detailing the user story. Finished Finally, the feature is confirmed to be done, the user story is considered in the Finished state >>>
277. Pains 277 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
278. Andy Rachleff 278 If you look at the most successful startups, they actually didn’t have “the world’s best management teams“ in the very early days. They happened to have conceived, or more likely pivoted into, an idea that addresses an amazing point of pain around which consumers where desperate for a solution” Andy Rachleff No Pain – no Gain >>>
279. Product Team Exercise. Understanding the Customer Pains 279 Objective › Highlight key pains “as is” (from CJM and/or User/Job Stories) Action › Find associated and similar pains (grouping) and give them a general description Outcomes › Consistent list of customer pains › Ability to understand the interrelationships and cause of each pain in the context of the client's objectives and expectations 1 2 N Stages of CJM Does Thinks Feels
280. 280 Pains Example (Commercial Fleet Owner) Stages of CJM "as is" Collects and analyzes data Sells Distributes and executes orders Pains Buys... Where’s my vehicle? Where is the driver? Where from and where to do they need to go? How to see it in real-time with my phone? How to max. order fulfillment with the min. mileage Constant need in optimization: Vehicles, drivers, orders, routes… A small number of orders Frequent order cancellations Late deliveries Spoilage of goods (fragility, timing) Frequent breakdowns of old vehicles, technical maintenance, fines High fuel and maintenance costs and fraud Traffic fines Growing opex and capex. Cash gaps It's a lot of hard work every day... Customers are interested in low prices: high competition They screwed up again...
281. 281 Pain Analysis № Pain / problem Who is affected? Where does it happen? When does it happen? What impact does it have on business outcomes and KPIs 1 Description of pain What other people besides the main persona are affected by this pain? Chain of pains In what process, job/task, activity? At what moment in time? At what event? Why is it important for the customer? What are the implications? 2 X
282. 282 Pain Map Persona 1 Persona 2 Persona 3 Process / Jobs to be Done Tasks Activities Pains 1…N Impact on outcome and KPIs Reduced productivity Increased cost Increased cost Decreased profit Decreased revenue Decreased profit How is it solved today Manual operations No solution Responsibility on the supplier Opportunities for the Product
283. Product Team Exercise. Pain Prioritization 283 Objective › Prioritize Persona’s key pains Action › Determine the importance of each pain to the client (1-5) › The influence on the outcomes the customer needs determines how important is the pain (e.g., effect on business goals and KPIs for b2b) › Evaluate possibility to eliminate pain with the product feature(s) (1-5) Outcome › List of key pains and their priorities › Team focused on eliminating key pains Pain Implication for the Customer (1-5) Can we eliminate it? (1-5) 1. Pain description 2 3 4 5 Х
284. 284 A Pain Matrix The importance of the pain to the customer Low High High Low 5 5 1 Feasibility (product can eliminate the pain) 1
285. NBM4 1.3 Value Suggestion Product value hypothesis: how will we solve customer problems? Value map 285 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
286. 286 Summary: What do We Know so Far? Customer Persona(s) profile Their goals, needed outcomes, success factors (KPIs, OKRs...) Jobs to be Done “as is” Today’s Customer Journey, CJM “as is” Key pains and their priorities for the Persona Refined product vision and story: what should product do to provide new value to the Persona? Future Customer Journey, CJM “to be” Description of the product features that will remove customer pains and provide new benefits: › Business and functional requirements, user/job stories, use cases › Product architecture and service blueprint › Product requirements document or Terms of References (ToR) document for complex b2b products Value Map Known facts (As-Is) Hypotheses about future product’s value yet to be tested (To-Be)
287. Product Story 287 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
288. goodreads.com/work/quotes/24034629-think-like-a-freak 288 “If you really want to persuade someone who doesn’t wish to be persuaded, you should tell him a story.” ― Steven D. Levitt, Think Like a Freak
289. For Sale, Baby Shoes, Never Worn1 The shortest story in history [1] Legend attributes Ernest Hemingway as the author of the shortest 6-word story in history But Quote Investigator has found no substantive evidence that Ernest Hemingway composed this six word story. 289 >>>
290. Storyboarding: a Product Story for the Customer canva.com/learn/how-to-build-a-storyboard/ Storyboarding in UX Design 290 Objective › Tell the Top 3 product positioning ideas as a "story" for the client Action › Explain how the solution addresses the customer's pains and exceeds their expectations with a 3-step story including need, actions, and outcome. Each sticker is a stage in the future Customer Journey Map Outcome › Visualize a clear vision of the product and its value proposition for the user/customer › Basis for product positioning and promotion: messages, landing pages, and content › All participants understand the value of the solution/product to the customer >>>
291. 291 Story Template Example Scene No. Frame No. Scene No. Frame No. Scene No. Frame No. Scene No. Frame No. Scene No. Frame No. Scene No. Frame No. Title: Page: boords.com
292. Boords Explainer 292 boords.com
293. 293 Structure of the Story How to Write a Better Novel: The 4 Most Common Story Structures. MasterClass Story structure (narrative structure, storyline, or plotline)—is the organizational framework of a story. The first act. Set the stakes, bring out the main characters, an initial inciting incident brings the story’s first climax The second act is a series of events meant to challenge: obstacles and reactions to those struggles. The third act is where all that resulting build-up of pressure leads to the big final climax, and the eventual fall-out and resolution (wrap-up of any loose ends). The three-act structure Exposition Inciting incident Rising action Climax Falling action Resolution, and Denouement Freytag’s pyramid Part 1. Call to adventure •After initial resistance, and meeting of a guide or mentor figure, the hero arrives at a turning point, or a point of no return: they must make a choice to plunge into the unknown Part 2. Reflects a three- act structure Tests •the search for truth •a great ordeal Part 3. Hero returns •By the end of the story, the main character returns to the world they began in as a person changed by what they just experienced. The hero’s journey 1. Choose a premise and write it up in a one- sentence summary. 2. Expand that one- sentence summary into a full paragraph 3. Create character summaries. 4. Build your character summaries into full profiles. 5. Expand to a multi-page synopsis. The snowflake method by Randy Ingermanson >>>
294. Your story should convey the why, not the what The Power of Storytelling The Power of Storytelling 294 “People don’t buy what you do; they buy why you do it.” Simon Sinek How to craft your story and brand strategy “Why” not “What” Empathy Mapping The Five Whys Differentiation Matrix Brainstorm with a Content Strategist or Copywriter >>> What makes a good story? Communicates what makes you unique, not a “me too” message Resonates with the needs and wants of your audience, not your business Be about one big idea, not multiple points Conveys the why, not the what Reveals your authentic brand, not put on a pretty façade
295. 295 Airbnb Brand & Identity History The Evolution of Airbnb’s Brand & Identity >>> Forget Hotels 2007 Travel like a human 2008- 2009 Belong anywhere 2013- 2014 Don’t Go There, Live There 2016 All the comforts of home, plus more 2018
296. Value Map and Product Positioning Hypothesis 296 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
297. UVP: Unique Value Proposition for Product Positioning 297 #1 Pains, problems, challenges of the target customer group #1 Customer motivation to find solution UVP of the solution (product) Why to change? #2 Pains, problems, challenges of the target customer group Why now? Why us? #2 Customer motivation to find solution Why to change? Why now? Why us?
298. 298 The Value Proposition Canvas by Strategyzer >>> = Value map Customer Profile Meets or exceeds customer expectations Tasks / jobs Pains Gains Pain relievers The creators of gains Product / Features The Value Proposition Canvas by Strategyzer
299. 299 Product Team Exercise: The Value Proposition Canvas = Product Value Map Customer Profile Value meets or exceeds customer’s expectations Main product features How product features solve customer problems How product features create gains for the customer Benefits/gains derived from the execution of the job with the product Pains, problems, risks in carrying out the job Jobs: what customers do to achieve their goals The Value Proposition Canvas by Strategyzer >>>
300. 300 Customer Profile Example: Tesla Customer segment Gains Pain Jobs / Tasks >>> The Value Proposition Canvas
301. 301 Product Team Exercise: Product Value Proposition (Peer Insight) Person 1 Persona 2 Persona 3 For target (customer, persona, ...) Product 1 Product 2 Product 3 Who wants (unmet needs) We will offer (product, feature) That provides (gains, benefits, removed pains) Uniquely (our differences) >>> Business Model Design Toolkit
302. Ad-libs are a great way to quickly shape alternative directions for your value proposition. They force you to pinpoint how exactly you are going to creating value. Prototype three to five different directions by filling out the blanks in the ad-lib at right. Strategyzer’s Ad-Lib Value Proposition Template 302 Ad-Lib Value Proposition Template >>> Our ____________Products and Services____________ help(s)____________ Customer Segment____________ who want to __________________ jobs to be done_______________ by _________verb (e.g., reducing, avoiding)_________ __________________ and a customer pain___________ and________verb (e.g., increasing, enabling)________ _________________and a customer pain____________. (Unlike _________ competing value proposition_______)
303. Product Risks 303 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
304. Product Team Exercise. Define the Main Assumptions and Risks 304 Objective › Describe key assumptions and risks that threaten the success of the product to understand the weak elements of the product strategy Action › Describe the risks related to customers/users, their pains and the product/solution use cases Outcomes › List of risks and weaknesses of the product strategy › Understanding weaknesses will help bring in the right expertise to address them
305. Product Team Exercise. Product Risks Assessment and Prioritization 305 Objective › Identify assumptions and risks that are least known and appear to be the most risky Action › Discuss and prioritize product risks according to the severity and your understanding of their probability of occurrence Outcome › Shared understanding of future product risks › Opportunity to share knowledge with risk mitigation experts Risk 4 Risk 7 Risk 8 Risk 1 Risk 2 Risk 5 Risk 3 Risk 6 1 2 3 4 5 1 2 3 4 5 Probability Severity
306. 306 Risk Matrix Risk 4 Risk 7 Risk 8 Risk 1 Risk 2 Risk 5 Risk 3 Risk 6 1 2 3 4 5 1 2 3 4 5 Probability Severity
307. Hypotheses About the Product Features Detail future product features as hypothesis for further verification and testing 307 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
308. Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Actions • What does he do, with whom, what he have to contact? • • • • • Thoughts • What does he think? Feelings • What does he feel? Improvement opportunities • How can we improve the situation / solve or eliminate the problem? Jobs to be Done / Processes Steps Tasks 308 Exercise: Customer Journey Mapping “To Be" (with your product) Persona ... Objective: ...
309. 309 The Job Canvas “To Be” (Carlos Oliveira) Job to be Done: When [situation] I want to [motivation] So I can [expected outcomes] Insights Hypotheses Success What we know What we believe How we’ll know it’s true User experience (UX/CX) Experiments How it will work How we’ll learn The Job Canvas — Rallying around the Job To Be Done >>>
310. User activity 1 User activity User jobs/tasks User / Job Stories User activity 2 User activity 3 Task 1 Task 2 Task 3 Task 4 Task 5 User activity User activity User activity User activity User activity User activity User activity User/Job Story Map “To Be" 310 User Activity = Future Product Feature Aha. Feature prioritization templates Release 1 Release 2 Release 3 >>>
311. From User Stories to Product Requirements 311 User Stories vs. Requirements by Ron Yang. Aha.io User/Job Stories Product Requirements The Objective Focus on the experience — what the person using the product wants to be able to do. Focus on functionality — what the product should do Syntax As a ____, I want to achieve ____ so that I realize the following benefit of ____ Should go into specific details on how the product must work to guide the development team on how to build a new feature or functionality Example As a user, I want to be able to reset my password so I can get back into the system if I forget it. The user is allowed to reset their password once they have received a password reset email. The email should contain a unique link for resetting the password and that link should expire after two hours. Who writes it? Can be written by about anyone close to the product. But it is the product manager or owner who maintains the backlog of user stories. Requirements are written by the product manager, product owner, or business analyst. Technical leads are often involved as well as the engineers. When are they written? Throughout the building of a product. The product backlog serves as a prioritized list of the functionality that needs to be developed. Also, can be crafted at any time. However, it is best to define what is desired from the user standpoint first. >>>
312. Product Team Exercise. Define Product Features for Prototype / MVP / New Version of the Product 312 Objective › Develop a description of the minimum possible product (MVP) you want to develop to test the main product hypotheses Action › Describe what features should be included in the prototype / MVP / new version to build a product backlog Outcomes › General understanding of MVP capabilities › Which features are the riskiest in terms of customer demand › Which product hypotheses need further to be tested prior start of the product development
313. If the product gives Persona X a possibility to solve a problem / eliminate a pain / create a new benefit, Then he/she can get a [measurable] outcome 1, 2…N Hypotheses about product features 313 Objective › Create a list of hypotheses about product features that need to be developed first for inclusion in the MVP Action › Describe the hypotheses to be tested by the product team, considering the riskiest assumptions. › Include measurable metrics so that the expected results for the Person can be estimated Outcomes › A common understanding of what risks need to be checked prior to development › Product success metrics to align with business objectives
314. 314 Hypotheses for MVP minimum viable Describe the characteristics of unsuccessful products that no one wants to use Describe the characteristics of the most viable product on the market MVP MVP capabilities/features: 1. 2. 3. ... N
315. Product Team Exercise. “Themes” and “Non-Themes” for MVP 315 Objective › Avoid the proliferation of MVP features: define what should be included in the MVP (topics) and what should not (non-topics) Action › Describe what will become "themes" for the MVP and what can be set aside for the future ("non- themes") Outcomes › A common understanding of what the team is focused on when creating an MVP › A clear vision of the components to be set aside for future releases › A way to save design and development time by focusing on what is really important and needed now Themes Non-Themes
316. The Art of Managing Stakeholders Through Product Discovery 316 The Art of Managing Stakeholders Through Product Discovery *) the Highest Paid Person’s Opinion >>> Don’t engage in opinion battles when managing stakeholders Don’t overwhelm your stakeholders with everything all at once Favor short, frequent updates over long, infrequent updates Be visual Integrate the feedback you get Get feedback one on one Do share your work (and get buy-in) every step of the way The HiPPO* always wins. Everyone has an opinion about what we should build and it’s hard to win opinion battles with people higher in the corporate hierarchy than us.
317. NBM4 2. Solution Delivery Testing the product value hypotheses Development of the product Go to Market: Product Market and Product Channel Fit 317 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
318. NBM 2.1. Value Test The product vision and value suggestion are completed Let’s test the product value hypotheses 318 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
319. RAT (Riskiest Assumption Test) – testing the riskiest assumptions prior to MVP development (*) perfomatix.com/minimum-viable-product-mvp-startup/ ** ) What Is the Riskiest Assumption Test and Why Are Startups Embracing It? clutch.co/app- developers/resources/what-is-riskiest-assumption-test 319 Unlike MVP, the riskiest assumption test can determine whether consumers have interest in a product before developing anything ** Focus is on Learning, Measurement, and then Development: 1. Description of a business model, e.g., Business Model Canvas 2. Hypothesis formulation, e.g.: [this feature] is necessary for [product] success. 3. Conducting experiments and evaluating Outcomes, e.g.: • Depth Customer Development interviews • Simple Landing Pages • Wireframes, mock-ups, low and high-fidelity prototypes Idea Development Product Measurement Data Analysis / learning MVP concept* Focus is on Development, Measurement, Learning
320. Prioritization of Product Features 320 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
321. Themes are large strategic focus areas across the organization. Initiatives are collections of epics that drive toward a common goal. Epics are large sections that can be broken down into a series of smaller tasks (called stories). Stories, also called “user stories” [or job stories], are short requirements or requests written from the perspective of an end-user. Product Features: Stories, Epics, Initiatives and Themes 321 Stories, epics, and initiatives >>>
322. 322 20 Product Prioritization Techniques 20 Product Prioritization Techniques: A Map and Guided Tour >>>
323. Feature 2 Feature 3 Feature 1 Feature 2 Feature 1 Feature 1 Feature 2 Feature 1 Must have Should have Could have Won't have 323 MoSCoW Prioritization Technique MoSCoW Prioritization >>>
324. 324 Kano Framework 1. Attractive (A) + (delighted) / - (not dissatisfied) 2. Performance (P) + (satisfied) / - (dissatisfied) 3. Must-be (M) + (neutral) / - (very dissatisfied) 4. Indifferent (I) + (neutral) / - (neutral) 5. Reverse (R) + (dissatisfied) / - (satisfied) 1. Delighted. 2. Satisfied 3. Still (Neutral) 4. Dissatisfied 5. Frustrated. Categories of Features Level of Customer Satisfaction Positive question: how customers feel if they have the feature Negative question: how they feel if they did not have the feature. The Complete Guide to the Kano Model >>> 1. None 2. Some 3. Basic 4. Good 5. Best Level of Functionality
325. Based on user surveys with positive and negative questions about feature availability in the product Function Prioritization Chart (Kano Framework) 325 Customer satisfaction Availability of function A P I M R Not available Best in class Not satisfied. Satisfied Neutral
326. Two Questions for Each Feature Possible Answers The Question Pair that Uncovers Customer Perceptions 326 foldingburritos.com/kano-model/ Positive question: how customers feel if they have the feature Dysfunctional or negative question: how they feel if they did not have the feature I like it I expect it I am neutral (don’t care) I can tolerate it (live with) I dislike it A, P, M, I + Reverse + Questionable A, P, M, I + Reverse
327. Prototyping 327 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
328. The process of developing a working small-scale reproduction of the final product. Used for obtaining customer feedback. The Prototyping Model is one of the most popularly used Software Development Life Cycle Models (SDLC models) Prototyping 328 Software Engineering Prototyping Model // Geeks for Geeks [URL] Customer feedback Develop / Refine Prototype Testing of prototype by customers Is used to Is used to Results into
329. Early interactive prototyping Integral prototyping Prototyping as a communication tool Iterative prototyping Prototyping for testing with clients Prototyping and user research Prototyping for brainstorming Prototyping for making the best decisions Prototyping as central to Design Thinking Prototyping for better specification for developers How Prototyping Boosts Product Design & Development The ultimate guide to prototyping 329 >>>
330. Why Create A Prototype? 330 Peer Insight, Business Model Design Toolkit Do-data is behavioral data and a more reliable predictor of future behavior than say data. So, we put a prototype in our user’s hands, and observe and measure their behavior. The best thing is, you don’t need to run a large pilot and spend tons of money to get do data. Letting the user interact with something tangible like a storyboard or webpage, provides invaluable dialogue into a deeper understanding of what they want, how much they’ll pay for it. You’ll pick the prototype type that: A. fits any constraints you have – time, budget, etc. B. that can answer the question in your assumption or the least amount of money to develop. Low-fidelity prototypes Paper prototypes 2D visuals of how a user experiences different types of value with the offering Pitch Deck A simulation of sales collateral that pitch the value proposition of the offering Pitch video A simulation of sales collateral that pitch the value proposition of the offering Medium-fidelity prototypes Digital mockup A digital prototype of the experience that allows user to interact with elements of the offering Physical Mockup A live simulation of how the user will experience different types of value with the offering Adwords & Landing page A paid campaign on Google that takes people to a landing page with a brief description of the service (and a way to signup for an alpha/beta test) High-fidelity prototypes Functional prototype: A version of the experience that feels real to the user Pilot: front end only An in-market experience with a small number of users (20-100), for a limited amount of time (3-9 months), where they pay for/access the offering, and your team works on the backend to deliver the experience in a scrappy >>>
331. Relative Cost of Eliminating Bugs in the Software Product 331 Requirements Architecture Prototyping Programming Integration / Component Testing Final testing After release Product release Eliminating errors after release costs orders of magnitude more than at the design and prototyping stage Costs
332. Prototyping Personas: Roles, Organizations, Needs (Examples) 332 Product / Project Manager Founder / CEO / Director Visual UI/UX Designer Analyst Frontend Engineer Backend Engineer Digital Marketing Agency IT Company (System Integration) Startup Freelancer Design Firm Web Agency Directly Export to Gutenberg/Elementor on WordPress Get the code and integrate into WordPress, WebFlow… Directly publish website in the tool Get the HTML/CSS Code Get the React Code Get the Vue Code Needs Organization Role
333. A) Rapid Throwaway Prototyping A developed prototype needs not necessarily be a part of the ultimately accepted prototype. Customer feedback helps in preventing unnecessary design faults and hence, the final prototype developed is of better quality. B) Evolutionary Prototyping The initial prototype is incrementally refined based on the customer feedback till it finally gets accepted. In comparison to Rapid Throwaway Prototyping, it offers a better approach which saves time as well as effort. This is because developing a prototype from scratch for every iteration of the process can sometimes be very frustrating for the developers. C) Incremental Prototyping The final expected product is broken into different small pieces of prototypes and being developed individually. In the end, when all individual pieces are properly developed, then the different prototypes are collectively merged into a single final product in their predefined order. It’s a very efficient approach that reduces the complexity of the development process, where the goal is divided into sub-parts and each sub-part is developed individually. D) Extreme Prototyping Is mainly used for web development. It is consisting of three sequential independent phases: D.1) A basic prototype with all the existing static pages are presented in the HTML format. D.2) Functional screens are made with a simulated data process using a prototype services layer. D.3) All the services are implemented and associated with the final prototype. Four Types of Prototyping Software Engineering Prototyping Model // Geeks for Geeks [URL] 333
334. The Prototyping Model should be used when the requirements of the product are not clearly understood or are unstable. It can also be used if requirements are changing quickly. This model can be successfully used for developing user interfaces, high technology software-intensive systems, and systems with complex algorithms and interfaces. It is also a very good choice to demonstrate the technical feasibility of the product. When to Use Prototyping? 334 Software Engineering Prototyping Model // Geeks for Geeks [URL]
335. Overlap of MVP and UX. You should implement lean UX design when you find yourself struggling to achieve your objectives. What is Lean UX? What is Lean UX? A Beginner’s Guide with Principles, Methods & Tips to Start 335 lean UX buyer persona template lean UX buyer persona template Miro lean UX web testing methods lean UX web testing methods lean UX web testing methods instant visual feedback instant visual feedback What is Lean UX? • Lean UX involves bringing all associated departments together in an effort to minimize waste and increase production and profit. • The process completely does away with deliverables and instead relies on immediate feedback to produce small and continuous changes over time. • Persona > problems > solution hypothesis > validation > testing > prototypes > MVP > repeat 5 Lean UX Methods • Devise & Validate Your User Hypothesis • Develop Your Lean UX Wireframe • Seek Out Early Validation • Test, Analyze & Tweak • Iteration, Rinse & Repeat Lean UX Examples • Apple • Skype • Crazy Egg • Dropbox Lean UX Tools • IdeaTheorem offers a free lean UX buyer persona template • Miro solves that problem by providing you with a lean UX canvas • Crazy Egg was one of the early innovators of lean UX web testing methods • Hotjar allows for instant visual feedback for your website or app • Optimizely >>>
336. What is UI and UX testing? Who, What, and Why – A Guide to User Testing Methods 336 Who, What, and Why – A Guide to User Testing Methods UI testing focuses on testing the user interface of a website or other product to make sure everything functions as it should and that users understand how to use the UI. UX testing, though, focuses on the overall experience of the user and how the product or website makes the user feel. >>>
337. What is UX research methods? Who, What, and Why – A Guide to User Testing Methods 337 Who, What, and Why – A Guide to User Testing Methods Common UX research methods include user observation, surveys, interviews, card sorting, usability tests, and other similar methodology. These testing methods should be implemented throughout the design process. According to the book, A Mathematical Model of the Finding of Usability Problems five usability testing participants will uncover 85% of the issues within the tested UI. For best results, this should be performed with three design iterations for a total of 15 participants. >>>
338. Everyone wants to prototype – to create a fast and just-real-enough version of their new product – to ensure they're building the right thing, but no one has the time. Building an MVP that hasn't been preceded by a prototype is the slowest and most expensive way to test your hypothesis – because if you've gotten the premise sufficiently wrong in MVP, rework will be expensive! Attitudinal prototypes are things like paper prototypes or clickable prototypes. A behavioral prototype is a functional – a simple physical or digital experience with which people can accomplish something. Another name – works-like, unscalable product, or WUP. Works-like, Unscalable Product (WUP) Stop Obsessing Over Your Prototype and Just Let Customers See It 338 >>>
339. Works-like, Unscalable Product (WUP) 339 Stop Obsessing Over Your Prototype and Just Let Customers See It >>> DoorDash delivery startup (raised $1 billion, valued at $4 billion) WUP Simple landing page PaloAltoDelivery.com Co-founders had linked PDFs of a few local restaurant menus and listed their personal phone number Each day they got new food orders, which they delivered personally Until they were confident they had hit upon an unmet need. Typical WUPs: They were fast They were scrappy and required almost no build Each WUP helped the founders not only gain confidence, but assurance people will love it Each WUP avoided elbow grease bias
340. UX Research Methods 340 UX Research Cheat Sheet >>> Top UX Research Methods Discover Field study Diary study User interview Stakeholder interview Requirements & constraints gathering Explore Competitive analysis Design review Persona building Task analysis Journey mapping Prototype feedback & testing (clickable or paper prototypes) Write user stories Card sorting Test Qualitative usability testing (in-person or remote) Benchmark testing Accessibility evaluation Listen Survey Analytics review Search-log analysis Usability-bug review Frequently-asked-questions (FAQ) review
341. UX Research Methods Usage 341 UX Research Cheat Sheet >>> The most-frequent methods used by UX professionals, from UX Careers survey report. Percentages refer to the proportion of respondents who said they use each method at least every year or two.
342. VOC (voice of the customer) User Onboarding Design Thinking Wireframes > Mockup > Prototype UI vs UX Moderated User Test & Unmoderated User Test Responsive Web Design (RWD) Information Architecture (IA), Card sorting Gestalt Principles (Law of Simplicity) HEART framework Hick’s Law UXD (UEX or XD) – User eXperience Design 342 UXD (UEX or XD) – User eXperience Design Wireframe-mockup-prototype >>>
343. When to Test User testing is most effective when utilized before any effort goes into development. The moment you have anything tangible, you begin testing with a user: sketch, wireframe, prototype… How to Test The 5 second test Show your design to your team members, friends or spouses for 5 seconds and ask: • What do you think this design is about? • What is the primary action you could take? • What did you like about it? • What did you dislike about it? Guerilla testing Showing up at a coffee shop and randomly selecting people and asking them (politely) for feedback on designs in exchange for coffee Longitudinal Study Goal: Gather feedback from the same person repeatedly, over a period of time Journaling a customer’s lifetime within the application Gather feedback on feature changes System usability scale (SUS) Goal: A standard metric/scale to gather and measure feedback SUS Example: User Testing The Absolute Beginner’s Guide to User Testing 343 >>>
344. Test users on tasks that are core to the app’s functionality Search for a jacket in your favorite color and purchase it Find trousers from your favorite brand Complete a checkout for 3 items you find interesting How do you qualitatively measure the feedback on these items? Some of the standard metrics used are: Time on task – How long did it take the user to complete the task? Success on task – How often were users able to successfully complete the tasks? Failure rate – How often did they fail? User Testing The Absolute Beginner’s Guide to User Testing 344 >>> What to Test
345. Paper Prototyping is a technique that consists of creating hand drawings of user interfaces in order to enable them to be rapidly designed, simulated and tested. To communicate ideas: between designers, developers, users and other stakeholders in the first stages of the user- centered design process. As a usability testing technique: to observe the human interaction with user interfaces even before these interfaces are designed and developed. Paper Prototyping As A Usability Testing Technique Paper Prototyping As A Usability Testing Technique 345 Testing Roles Description Real Users As stated by Jakob Nielsen, 5 users should be able to identify about 85% of all usability problems. These users will interact with a paper version of the user interface that is being tested. A Facilitator Usability professional to record the issues raised during the meeting A Human Computer The lead developer or someone who knows how the system is supposed to work manipulates the paper prototype so that it can provide the feedback based on the user’s interaction. Will not explain or give hints to the users about how the interface is supposed to behave Observers Members of the development team to observe and interpret the users’ interactions with the paper prototype >>>
346. Figma Helps Create, Test and Ship Better Designs From Start to Finish 346 Figma >>>
347. Google Venture Sprints Model (Video) 347 Google Venture Sprints Model >>>
348. Lengthy, 50-page requirements are not reliable ways of conveying all the subtleties of a digital product. Readers quickly get bored and even worse, misinterpret what is written. 1. Priorities your user stories for prototyping 2. Start prototyping the user stories 3. Annotate prototypes to get the right feedback Hands-on prototyping: a walk-through guide Hands-on prototyping: a walk-through guide 348 >>> Prototypes expand each user story into a tangible part of a system. If user stories express task-level goals, then prototypes can help us see the horizontal feature set (breadth) and vertical feature set (depth) required to fulfil each story.
349. List all your user stories Priorities user stories by risk Prototype the riskiest user stories Add comments and questions to your prototype Share the prototype for consolidated feedback Analyze feedback, update prototypes and user stories Hands-on prototyping: a walk-through guide 349 Hands-on prototyping: a walk-through guide >>> User Story Comments Risk Level 1. As a user I can create a new account Accounts are necessary to keep each user’s data separate and private High 2. As a user I can select pictures from my phone gallery Since this is a mobile app, it’s essential that users can connect to and access the phone’s image gallery High 3. As a user I can select my photo book size The book size selected on this screen should be the same book size used at the printer. There’s a chance that book size codes could get mixed up, resulting in the customer receiving the wrong size Medium • As part of an agile process, prototyping helps everyone unpack and priorities requirements before each sprint. • A prototype opens everyone’s eyes. The laundry list dissolves, and the product comes into focus. • The consequences of additional features become immediately real for everyone from a junior designer to a product VP.
350. In this video, we’re going to show you how to conduct great customer interviews. You get to watch product owner as he interviews a customer and tests a prototype with her. Customer Interview and Prototype Testing The Five-Act Interview 350 The Five-Act Interview: 1. Friendly welcome 2. Context questions 3. Introduce the prototype 4. Tasks 5. Quick debrief >>>
351. Prototyping Tools 351 Prototyping Tools Invision studio Invision studio Sketch Zeplin Figma Adobe XD Mockflow Balsamiq Justinmind Marvel App Webflow Flinto Framer Rapid UI Hype 3 Hype professional Hype professional Principal Adobe XD Origami Axure RP Proto.io Atomic UXPin Protopie Designing • Invision studio • Sketch • Zeplin • Figma • Adobe XD Wireframing • Mockflow • Balsamiq • Justinmind Designing and Developing • Marvel App • Webflow • Flinto • Framer • Rapid UI • Hype 3 • Hype professional • Principal • Adobe XD • Origami • Axure RP • Proto.io • Atomic • UXPin • Protopie >>>
352. UI/UX Prototyping Flow 352 ProtoPie - Crunchbase Company Profile Funding Hi-fidelity, dynamic prototypes Figma — Википедия Clickable design prototypes No/Low Code Application Platforms Design to Code HTML/CSS React Vue WordPress Axure RP Framer InVision JustInMind Marvel Moqups ProtoPie UXPin Application Lifecycle Management & DevOps Web
353. Free Wireframing Tool for Web and Mobile (Example) 353 Free wireframing tool for web and mobile >>>
354. NBM 2.2. Product development The riskiest product value hypotheses have been tested Let’s develop MVP or, better, MLP (Minimal Lovable Product) A Minimum Lovable Product (MLP) is an initial offering that customers love from the start 354 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
355. Customer Pains Solution (Product) Value Refined Product Vision and UVP 355 The hypothesis Facts (tested and verified hypotheses) Based on the Outcomes of Prototype Testing
356. 356 Suggested List of Product Features Product feature Who will be affected if implemented (Personas / Roles) Where? When? How? 1 2 3 ...
357. 357 Product Requirements Document (Example of the Structure) Product Feature Description 1 Feature 1, 2, 3... N Functional requirements for product features e.g., User Job Stories 2 Purpose What goals (business requirements, key success factors) of the customer/user will be supported by the implementation of this feature 3 User problem Pain point or challenge 4 Value for the customer How the proposed solution helps the customer (b2b) 5 Value for the user How the proposed solution helps the user (b2b client employee or b2c client) 6 Feasibility factors and risks Risk analysis 7 Complexity Score (1-5) 8 Priority Score (1-5)
358. 358 Product Requirements Document (Aha.io Example) Vision Where you want your product to be in the future Goals List product goals including their timeframe, and success metric Initiatives List high-level product initiatives Persona(s) Who the product is for 1. Objective Release Release name Date Release date Initiative Initiative that the release relates to Milestones Release milestones Features Features included in the release Dependencies Release dependencies 2. Release Feature Feature or user story name Description Description of what the new feature will do Purpose Task or action the user wants to accomplish User problem Pain point or challenge User value How the proposed solution helps the user Assumptions Business, user, or technical assumptions Not doing Anything that is out of scope for this feature Acceptance criteria Conditions of acceptance 3. Features 4. User flow and design Insert wireframes and mockups. Key performance indicator Baseline Target Timeframe Future features Purpose Priority Timeframe 6. Future work 5. Analytics Hypothesis: We believe <this feature> will achieve <this outcome>. Product requirements document (PRD) template. Aha.io >>>
359. Business Functional Requirements / User Job Stories and Product Requirements 359 Job Stories “to be" (business functional requirements for future product features) Product requirements Goals / outcomes to be achieved Job’s importance Factors affecting the job The Person’s jobs/tasks with regard to her/his role, the situation, the desired action(s) and the outcomes The Person > in the situation > wants action(s) > to get the outcome Product feature that does Persona’s job / solves problem Benefits created Pains removed Emotions created (wow effect) 3 - strategic 2 - tactic 1 - basic Analysis of factors that have a positive and negative impact on the possibility of implementing the product’s feature 1 2 3 4 5 6 7 8 9 10 11 12
360. Is the Product Requirements Document (PRD) Dead? Team NO: Trash Your PRD 1. PRDs were made for waterfall, not agile 2. PRDs are bloated 3. PRDs encourage “rear-view mirror” thinking 4. PRDs are rarely read Alternatives to the PRD 1. Prototypes 2. User Stories 3. Hybrid Spec Tickets 4. Wireframes and Storyboards Team Yes: The PRD Is Still Useful…Sometimes Do you use waterfall? Are you building for external clients? Are you building for enterprise? Does your support team need it? The Minimum Viable PRD 1. “User Stories. What is the exhaustive list of features we need to build for this project? What are the user stories that the development team should execute on?” 2. “Wireframes & Mocks. What does this thing look like?” 3. “Success metrics. How do we measure success? What metrics do we need to instrument and track?” 360 Is the Product Requirements Document Dead? A Debate. >>>
361. Agile development is a set of methods and practices where solutions evolve through collaboration between self-organizing, cross- functional teams. Agile software development is an umbrella term for a set of frameworks and practices based on the values and principles expressed in the Manifesto for Agile Software Development and the 12 Principles behind it. It includes a series of software development approaches focused on the use of iterative development and dynamic requirements generation and enforcement. Agile software development methodology 361 Source: Agile Alliance, Wikipedia Source: city innovations
362. Key Agile Concepts 362 Source: Agile Alliance User Stories •functional product increments called “user stories.” Daily Meeting •Each day at the same time, the team meets so as to bring everyone up to date. Personas •detailed, synthetic biographies of fictitious users of the future product Team •a small group of people, assigned to the same project or effort, nearly all of them on a full-time basis. Incremental Development •each successive version of the product is usable, and each builds upon the previous version by adding user-visible functionality. Iterative Development •intentionally “repeating” software development activities. Milestone Retrospective •underway, or at the end of the project, all of the team’s permanent members (not just the developers) invests from one to three days in a detailed analysis of the project’s significant events.
363. Agile 363 https://www.atlassian.com/agile Agile Frameworks Agile is an iterative approach to project management and software development that helps teams deliver value to their customers faster and with fewer headaches. Instead of betting everything on a "big bang" launch, an agile team delivers work in small, but consumable, increments. • Kanban • SCRUM • eXtreme Programming (XP) • Crystal Methodologies • Dynamic Software Development Method (DSDM) • Feature Driven Development (FDD) • Lean Software Development • ... • SAFe - Scaled Agile Framework • Large-Scale Scrum (LeSS) • Disciplined Agile (DA) • Spotify • Scrum@Scale (S@S) Small teams Big teams
364. Responding to change over following a plan Customer collaboration over contract negotiation Working software over comprehensive documentation Individuals and interactions over processes and tools Manifesto for Agile Software Development 364 https://agilemanifesto.org/ We are uncovering better ways of developing software by doing it and helping others do it. Through this work we have come to value:
365. Our highest priority is to satisfy the customer through early and continuous delivery of valuable software. Welcome changing requirements, even late in development. Agile processes harness change for the customer's competitive advantage. Deliver working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale. Business people and developers must work together daily throughout the project. Build projects around motivated individuals. Give them the environment and support they need and trust them to get the job done. The most efficient and effective method of conveying information to and within a development team is face-to-face conversation. Working software is the primary measure of progress. Agile processes promote sustainable development. The sponsors, developers, and users should be able to maintain a constant pace indefinitely. Continuous attention to technical excellence and good design enhances agility. Simplicity--the art of maximizing the amount of work not done--is essential. The best architectures, requirements, and designs emerge from self- organizing teams. At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly. 12 Principles Behind the Agile Manifesto 365 https://agilemanifesto.org/principles.html
366. 24 HOURS Goals and tasks are fixed for the duration of the sprint POTENTIALLY FINISHED PRODUCT / RELEASE SPRINT 1 – 4 WEEKs SCRUM MASTER DAILY MEETING ANALYSIS/ DEMO TASKS SPRINT PLANNING BACKLOG PRODUCT OWNER Prioritizing tasks FEATURES PRODUCT HYPOTHESES (MARKET / CLIENTS) SCRUM 366 PRODUCT TEAM PRODUCT MANAGER https://scrumguides.org/
367. Manages the product lifecycle and product development roadmap PRODUCT OWNER Responsible for the implementation of the backlog and the release of new versions PRODUCT TEAM Maintains the SCRUM culture in the team and ensures compliance with its principles SCRUM MASTER SCRUM Roles https://scrumguides.org/
368. NBM 2.3. Go to Market You’ve made it. Congratulations! Now let’s find the Product Market and Product Channel Fit 368 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
369. How, and through what channels, do we deliver the product to customers? Sales Model XaaS – Everything as a Service, cloud and subscription-based business model 369 Services (Principal services such as product subscriptions for XaaS*) Product(s) Related services (Channel enablement, user training, complex products deployment, technical support, etc.) Suppliers Suppliers Channels (Hypotheses to test) Customers (Hypotheses to test) Channels (Hypotheses to test) Customers (Hypotheses to test) Suppliers 1) Product Market Fit 2) Product Channel Fit
370. 370 Product Market Fit Hypotheses Market Product / Solution Category What category does the customer place your product in? ? Person(s) Who is the buyer? ? Tasks What tasks are Jobs to be Done? ? Pain What are the challenges for the target audience in this category? ? Motivation to purchase Why is it important for the buyer of your product to eliminate these pains? ? Market Product Fit
371. 371 Product Market Fit Hypotheses ? What is the value of the product to the customer? How does it create additional benefits and/or eliminate pain? Value offer ? How can the core value be conveyed in simple words? Elevator speech ? How quickly can we give our target audience a sense of value? Time to Value ? How and why will customers continue to use the product? What are the mechanisms for retaining customers with the product? Retention (product stickiness) Market Product / Solution Market Product Fit
372. Channel Matrix Targeting Costs (cost of engagement: CPL, CAC) Conversion Control Preparation time Time to data Scale Search engine marketing (SEM) Search engine optimization (SEO) Social Media Marketing (SMM) Newsletters Promo Codes and Links Virality Events Telesales / Digital Sales Sales to large customers Distributors and dealers Targeting—the ability to target different audiences Costs—forecasted and current of customer acquisition cost (CAC) in this channel Conversion—converting the channel’s audience into buyers Control—whether you can switch channels on/off at will Preparation time—the time needed to start experimenting with this channel Time to data collection—the time it takes to start collecting data about your experiments Scale—size/coverage of the channel. 372
373. Channel Matrix Product Channel Fit 373 Attribute 1 Attribute 2 ... ... ... ... Channel 1 Channel 2 ... ... Channels Product / Solution Product Channel Fit What channels we should use to promote the product? IMPORTANT: Channels do not bend to the product The product must bend to channels ?
374. Channels to Customers 374 Product Customer Sale Installation Service and Support Payment Product components suppliers Strengths Weaknesses Hypotheses to test Hypotheses to test Channels Value
375. Visualize Your Sales Weak Points with a Pirate Funnel THE PIRATE FUNNEL The Pirate Funnel is a customer-lifecycle framework by Dave McClure that shows what you need to focus on to optimize your marketing funnel. It is called a Pirate Funnel because the first letters spell out AAARRR for Awareness, Acquisition, Activation, Retention, Referral, and Revenue. 375 The Pirate Funnel by Dave McClure: AAARRR for Awareness, Acquisition, Activation, Retention, Referral, and Revenue >>>
376. How will you introduce your product to your potential customers? Examples: impressions, click-through rate, visits, and social media metrics. Where are your potential customers coming from? What channel is driving the most valuable traffic for your company? Examples: new leads, email subscribers, resource downloads, support and sales chats. How will your potential customers try your product or service for the first time? How will you make them realize the true value of your product or service? Examples: new trial signups, product sales, activation after app download. How many of your customers are you retaining? Why are you losing others? Examples: customer acquisition rate and customer churn rate. How can you increase revenue? What’s your monetization plan? Examples: customer acquisition cost and customer lifetime value. How can you turn your customers into advocates? What’s your systematic process to generate referrals consistently? Examples: Net Promoter Score, referrals, and social shares. Awareness Acquisition Activation Retention Revenue Referral The Pirate Funnel by Dave McClure: AAARRR for Awareness, Acquisition, Activation, Retention, Referral, and Revenue 376
377. Customer Relations Management Through the Marketing Funnel MARKETING FUNNEL The sales funnel, also known as the marketing funnel, shows marketing initiatives at each stage of the customer service process. It begins with educating clients about your product or solution, then moves on to generating leads and converting them into customers. The goal of the funnel is to provide a mechanism that allows marketers and salespeople to evaluate their progress at each stage. 377
378. Activities that facilitate awareness. Make your target audience aware of the problem you’re addressing and how you’re solving it TOFU (Top of the Funnel) Social media post and ads Email marketing Promotional video Press Release • Activities that facilitate conversion. Guide the leads in making an informed purchase decision BOFU (Bottom of the Funnel) Demo Feedback Success stories Comparison sheets Activities that facilitate evaluation. Convert those who are aware into leads MOFU (Middle of the Funnel) Discounts Exclusive offers Free trial Event 378 ToFu, MoFu and BoFu >>> >>>
379. 379 Direct to Customers (DTC) Sales Performance Measurement Example Year / Week # • 1 • 2 • … ADVERTISING • Total advertising costs • CPC • Agency Commission • Advertising budget • Channel 1… N SITE VISITORS • # Visits • # Visitors • # Average visits per visitor a finite timeframe • # Visits per business day • Session duration • Bounce rate LEADS • # Total leads • # Leads per business day • B2C leads • B2B leads • CR1 (leads / visitors) • CPL (cost per lead ) NEW CUSTOMERS • CR2 ( leads /new customers) • # New customers • # Users per 1 customer (b2b) • CAC (Customer Acquisition Cost) • UAC (user acquisition cost) • Tariff 1… N • Share 1… N ALL CUSTOMERS (+new) • # of customers • # of users • Average # of users per client • Region 1 • Region 2 • Country 1 • Country 2 REVENUES LEADS BY CHANNELS • Calls from the website • Orders on the site • Calls from advertisements • Leads from the bot • Email responses • Recommendations • Telesales / Face to face sellers LEAD REJECTIONS • Expensive • They don't see the value • Does not meet expectations • Competitors are better • ... CUSTOMER CHURN • Number of clients left during last month • Number of users left • Share of clients left, % • Share of users left, %
380. The value of the product to the customer Customer value for the product A SEGMENT The product need is very high, they buy a lot, quickly and often, with short sales cycle C SEGMENT There is a need for the product, but the value is low, many objections, buys small B SEGMENT Product is needed, but there are objections, buys a lot, average sales cycle D SEGMENT Low value, prospects ask a lot of questions and don't buy 380 ABCDX Segmentation for Existing Customers X SEGMENT The ideal customer for whom there is no product yet ABCDX segmentation works if there are paying customers: 10,000+ for b2c products and 100+ for b2b products
381. INTERACTION WITH CHANNELS AND BUSINESS FUNCTIONS IN THE BUYING AND SERVICING PROCESS AWARENESS CONSIDERATION PURCHASE USAGE LOYALTY STAGES ... ... ... ... ... ... ... ... ... ... STEPS TOUCH POINTS (EXAMPLE) FUNCTIONS Marketing Sales Product development UX Customer service 2 3 4 2 2 5 4 5 3 2 381 Customer Journey and Key Touch Points
382. Product Management vs Product Marketing Distinguishing Product Management from Product Marketing Based on: 280group.com/what-is-product-management/definition/ 382 Product management • Identify customer objectives, pains and needs Product marketing • Communicating the value of the product to the customer Product idea and vision Value testing MVP > MLP Growth (PMF, PCF, PMoF) Transformation Enables the creation of a better product Maximizes sales Area of intersection for discussion
383. Product refers to the good or service you are offering to customers. What needs does this product fulfil? What frustrations does it address? What makes it compelling to customers such that they will believe they need to have it? Product • BRAND • FEATURES • PACKAGING Price is what customers pay for a product or service and it considers the cost of production. What is the value of the product or service to customers? Are there established price points for this product or service in the market? How will this price compare with competitors? Price • PRICE • DISCOUNTS • BUNDLING DEALS • CREDIT TERMS Promotion is how you will get the word out about your product or service to your target customers. It includes advertising, public relations, and promotional strategies. Promotion • ADS • PR • SOCIAL MEDIA • EMAIL • SEARCH ENGINE • VIDEO Place refers to how and where your customers will look to see your product or service. It also considers how you will deliver the product or service to them. Will it be in a physical store or online? What will be the distribution channels? Place • STORES • WEBSITE • ONLINE • MARKETPLACE Classic Marketing Mix (4P) 383 Marketing Mix – 4P, Edmund Jerome McCarthy >>> >>>
384. After the Product Channel Fit stage, there will be a need to systematize and optimize the sales model and possibly change the initial business model Sales excellence is defined as the consistent outperformance of key growth objectives, achieved by strategic, cross-functional initiatives. These initiatives are key inputs of your revenue engine: your training, tools, enablement, and culture. Together, these factors create an environment that builds and supports high-performing sellers, thus delivering sales excellence. Sales Excellence Framework 384 Four Steps to Sales Excellence: How to Define, Measure, and Sustain Sales Growth Sales enablement Sales technology Sales training Sales culture Ongoing Outperformance of Sales Goals Programs, investments and initiatives are validated tested and optimized by sales analytics SALES EXCELLENCE INPUTS SALES OUTCOMES >>> >>>
385. 385 Sales Excellence Framework Customers: jobs and pains Sales methodology Personas KPIs Sales targets Sales Process New customers acquisition Seller's training Content portal Buying process (CJM) Cross-functional interactions Sales structure Funnel management Customer retention Coaching Internal communications Purchase criteria Budget CRM Forecasting and budgeting Plans for working with clients IT systems to support sales Customer satisfaction CUSTOMERS BUSINESS FUNCTIONS PROCESSES PROGRAMS READINESS COMMUNICATIONS Ecosystem Partner strategy Partner platform Customers and channels mapping Campaigns Guides and documents Partner reviews Wins/Losses analysis Segmentation: customers and channels Motivation and compensation Tenders Partner campaigns Partner training Transaction Management Events Performance assessment Sales reporting Evangelism Manuals / content Strategy Tactics Implementation Planning Based on hsm-framework.com
386. 386 Sales Excellence Framework: Customers Customers: jobs and pains Sales methodology Personas KPIs Sales targets Sales Process New customers acquisition Seller's training Content portal Buying process (CJM) Cross-functional interactions Sales structure Funnel management Customer retention Coaching Internal communications Purchase criteria Budget CRM Forecasting and budgeting Plans for working with clients IT systems to support sales Customer satisfaction CUSTOMERS BUSINESS FUNCTIONS PROCESSES PROGRAMS READINESS COMMUNICATIONS Ecosystem Partner strategy Partner platform Customers and channels mapping Campaigns Guides and documents Partner reviews Wins/Losses analysis Segmentation: customers and channels Motivation and compensation Tenders Partner campaigns Partner training Transaction Management Events Performance assessment Sales reporting Evangelism Manuals / content Customer Development Content for vendors, customers and partners Measuring NPS, CSAT... Quality surveys Mystery shopping
387. 387 Sales Excellence Framework: Partners Customers: jobs and pains Sales methodology Personas KPIs Sales targets Sales Process New customers acquisition Seller's training Content portal Buying process (CJM) Cross-functional interactions Sales structure Funnel management Customer retention Coaching Internal communications Purchase criteria Budget CRM Forecasting and budgeting Plans for working with clients IT systems to support sales Customer satisfaction CUSTOMERS BUSINESS FUNCTIONS PROCESSES PROGRAMS READINESS COMMUNICATIONS Ecosystem Partner strategy Partner platform Customers and channels mapping Campaigns Guides and documents Partner reviews Wins/Losses analysis Segmentation: customers and channels Motivation and compensation Tenders Partner campaigns Partner training Transaction Management Events Performance assessment Sales reporting Evangelism Manuals / content Partners team
388. 388 Sales Excellence Framework: Sales Strategy Customers: jobs and pains Sales methodology Personas KPIs Sales targets Sales Process New customers acquisition Seller's training Content portal Buying process (CJM) Cross-functional interactions Sales structure Funnel management Customer retention Coaching Internal communications Purchase criteria Budget CRM Forecasting and budgeting Plans for working with clients IT systems to support sales Customer satisfaction CUSTOMERS BUSINESS FUNCTIONS PROCESSES PROGRAMS READINESS COMMUNICATIONS Ecosystem Partner strategy Partner platform Customers and channels mapping Campaigns Guides and documents Partner reviews Wins/Losses analysis Segmentation: customers and channels Motivation and compensation Tenders Partner campaigns Partner training Transaction Management Events Performance assessment Sales reporting Evangelism Manuals / content Sales model and strategy
389. 389 Sales Excellence Framework: Sales Processes Customers: jobs and pains Sales methodology Personas KPIs Sales targets Sales Process New customers acquisition Seller's training Content portal Buying process (CJM) Cross-functional interactions Sales structure Funnel management Customer retention Coaching Internal communications Purchase criteria Budget CRM Forecasting and budgeting Plans for working with clients IT systems to support sales Customer satisfaction CUSTOMERS BUSINESS FUNCTIONS PROCESSES PROGRAMS READINESS COMMUNICATIONS Ecosystem Partner strategy Partner platform Customers and channels mapping Campaigns Guides and documents Partner reviews Wins/Losses analysis Segmentation: customers and channels Motivation and compensation Tenders Partner campaigns Partner training Transaction Management Events Performance assessment Sales reporting Evangelism Manuals / content Sales operations and support
390. 390 Sales Excellence Framework: Accelerating Sales Customers: jobs and pains Sales methodology Personas KPIs Sales targets Sales Process New customers acquisition Seller's training Content portal Buying process (CJM) Cross-functional interactions Sales structure Funnel management Customer retention Coaching Internal communications Purchase criteria Budget CRM Forecasting and budgeting Plans for working with clients IT systems to support sales Customer satisfaction CUSTOMERS BUSINESS FUNCTIONS PROCESSES PROGRAMS READINESS COMMUNICATIONS Ecosystem Partner strategy Partner platform Customers and channels mapping Campaigns Guides and documents Partner reviews Wins/Losses analysis Segmentation: customers and channels Motivation and compensation Tenders Partner campaigns Partner training Transaction Management Events Performance assessment Sales reporting Evangelism Manuals / content Managing customer acquisition & retention, and sales force readiness
391. Company’s Revenue Cycle 391
392. Definitions 392 Transaction Cycle: • A group of interrelated business operations (transactions). Company's Revenue Cycle: • Scope: Covers all activities involved in generating revenue, including sales, marketing, customer relationship management, and collecting payments from customers. • Main Purpose: To manage the recurring process of exchanging goods or services for monetary assets between the company and its clients. Process Flow • Begins with customer demand. • Proceeds through order fulfillment and invoicing. • Ends with the collection of monetary assets (cash and equivalents, like Accounts Receivable). Objectives • Efficiently convert goods/service s into monetary assets. • Ensure accuracy, proper recording, and minimal risk. Coordination • Involves sales, operations, logistics, accounting, and finance. • Central focus on Revenue Operations (RevOps) to align functions for efficiency and seamless cash flow.
393. Revenue Cycle: Problem and Solution 393 Problem • Lack of transparency in the revenue cycle results in financial losses, potential embezzlement, inaccurate financial reporting, and inefficiencies that hinder cash flow management. • This obstructs effective sales management decisions and prevents the organization from identifying bottlenecks or areas of improvement in the revenue process. Objectives • Enhance the productivity of the revenue cycle. • Improve data accuracy and transparency. • Reduce the risk of financial discrepancies and embezzlement. • Streamline workflows to accelerate cash flow and improve overall financial health. Solution • Clear Responsibilities: Clearly define roles and responsibilities for all participants involved in the revenue cycle. • Formalized Processes: Establish detailed guidelines and structured workflows to ensure consistency in operations. • Information Technologies: Facilitate cross-functional collaboration using role-based access controls and personalized information management systems.
394. Concept of Collaboration within Business Processes 394 Goal: Provide employees with the ability to quickly create an information environment for group and departmental work, allowing them to: • Collaborate in the execution of business processes. • Effectively exchange information and knowledge. • Exercise control over decisions made. Main Objective: Boost productivity and minimize costs related to addressing jobs to be done and business tasks.
395. Transaction Cycles of a Manufacturing Company 395
396. Transaction Cycles of a Manufacturing Company 396 Labor Raw Materials Fixed Assets Customers FG CF Finished Goods (FG) Cash Flow (CF)
397. Relationships Between Business Cycles 397 Labor Allocation Finished Goods Monetary Assets Materials Flow Funding Funding Allocation of funds to cover production costs, wages, and procurement of raw materials.
398. Allocation of Responsibilities 398 Functions Cycles Processes
399. Transaction Cycles of a Commercial Company 399
400. Transaction Flow 400 Revenue Cycle Sales of Goods ⟶ Shipment and Delivery ⟶ Cash Receipt ⟶ General Ledger and Reporting Expense Cycle Procurement / Wages ⟶ Receiving Goods / Services / Labor ⟶ General Ledger and Reporting Financial Cycle Investments ⟶ Cash Distribution ⟶ General Ledger and Reporting
401. Revenue Cycle Revenue Cycle Transactions from sale to receipt of cash. Key transactions: • Sales • Receipt of cash
402. Expense Cycle Expense Cycle
403. Financial cycle Financial Cycle
404. General Ledger and Reporting General Ledger and Reporting
405. Key Transactions in the Revenue Cycle
406. “All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes.” ― Taiichi Ohno, Toyota Production System: Beyond large-scale production [GoodReads] The Most Important of the Cycles
407. Revenue Cycle Objectives 407 Objective Description Record Sales Orders Accurately document all customer sales orders. Customer Credit Checks Perform thorough credit assessments for customers. Deliver Products Ensure timely delivery of products and services to customers. Invoice & Collect Generate invoices and collect payments within the specified timeframe. Record Cash Receipts Properly log cash receipts from customers. Maintain Records Keep detailed records of sales and cash transactions for customer accounts. Secure Products Ensure products are safe and ready for shipment or delivery. Safeguard Cash Protect cash until it is deposited in the bank.
408. Revenue Cycle: Data Sources Source Description Clients Includes customer data such as credit histories for end consumers and channel partners. Vendors Suppliers who provide goods or services needed for sales. Logistics Department Manages finished goods inventory and shipping status. Suppliers Entities providing raw materials or products to the company.
409. Steps in the Revenue Cycle 1. Receive Order 1. Credit Check 1. Enter Order 2. Ship Finished Goods 2. Deliver Finished Goods 3. Invoice Customer 4. Receive Payment 5. Document Handling 5. Accounting & Control 0. Sale / Contract / Public Offers 2. Customer Services
410. 1.0. Sales Order Key Information Required for Decision- Making: • Price/Tariff Plan • Sales Conditions: Discounts, standard payment terms, delivery timelines, quantity, packaging, etc. • Stock Availability • Customer Credit Status Key Steps: 1. Order Receipt 2. Clarify Sales Terms 3. Credit Approval 4. Verify Stock Availability 5. Order Confirmation: Notify the customer of the confirmed sales terms
411. 2–3. Shipping and Invoicing 2.0: Shipping • Order Picking and Packing • Shipment to Customer or Carrier • Service Provision 3.0: Invoicing (Billing) • Invoice Issuance • Accounts Receivable Management
412. 4.0. Receive Payment Collection of payments Debtor segmentation • ABC or other methods • Identification of events triggering calls to debtors in the debt aging process: • Focus on segments A and B • If resources and information system allow, including segment C Debtor communications • Letters • Calls • Vendor and security visits Bad Debts Management • Formation and refinement of bad debt provision parameters
413. 5. Document Handling, Accounting, and Control Primary Documentation Handling: • Conveying rules to participants involved in the cycle • Monitoring execution Recording Facts for: • Accounting • Control • Analysis • Supporting managerial decision-making
414. Sales Process Documents Key Documents in the Revenue Cycle Document Type Description Customer Order Records the customer's request for products or services. Sales Order Formally records the customer's request and aligns internal processes. Order Acknowledgment Confirms the receipt and acceptance of the customer's order. Picking List Specifies items to be picked for an order. Packing Slip Details the items packed for shipment. Bill of Lading (Shipping Receipt) Acknowledges receipt of goods for shipment. Shipping Notice Notifies that goods are on their way to the customer.
415. Payment Documents Key Documents in the Revenue Cycle (2) Document Type Description Tax Invoice (Factura-Invoice) An official request for payment that includes tax details, issued after goods are sold and delivered. Sales Invoice Generates a request for payment after goods have been delivered. Remittance Advice Confirms a payment has been made by the customer. Deposit Slip Acknowledges deposit of funds into a bank account. Credit Memo Used to correct errors or process refunds, ensuring customer satisfaction and accurate financial records. Credit Application Documents the customer's request for credit terms. Cash Receipt Records cash received from the customer for payment.
416. Internal Control Documents Key Documents in the Revenue Cycle (3) Document Type Description Back Order (Internal Production Order) Used internally to manage inventory when demand exceeds current stock. Payment Records (Bank Statements) Tracks all payment transactions for accuracy and compliance.
417. Key GL Accounts in the Revenue Cycle Sales (Advances & Shipments) • Recognizes sales revenue when goods are shipped or services are performed. Discounts: • Records any discounts offered to customers. Bad Debts Expense: • Costs incurred due to non-payment by customers. Inventory: • Represents the value of products available for sale. Returns and Losses (Sales Returns and Allowances): • Accounts for product returns or sales-related losses. Accounts Receivable (A/R): • Represents money owed by customers for goods or services provided. Allowance for Doubtful Accounts: • Estimates future uncollectible accounts. Cash: • Cash on hand or in the bank, including collections from customers.
418. Segregation of Duties and Control over the Revenue Cycle
419. Control Methods Control Method Description Segregation of Duties Authorization for executing an operation must be distinct from executing the operation itself (i.e., transaction processing). • Ensures a division between key activities. Control Activities Control operations must be separate from activities related to accounting. • Adds an extra layer of accountability to reduce risks. Organizational Structure The structure must ensure that any attempt at theft would require collusion between at least two or more employees. • Mitigates risks through a layered approach to authority and execution.
420. Segregation of Duties 420 Control Area Description Initiating Controls that initiate transactions within the revenue cycle. • These are the starting points of any operation that set the revenue cycle in motion. Authorizing Controls that approve transactions. • Ensure only authorized operations proceed, safeguarding the integrity of financial processes. Executing Controls responsible for carrying out transactions. • Execution of authorized and approved transactions such as delivery or payment. Accounting Controls responsible for recording transactions. • Ensures accurate recording and reporting of completed actions for transparency and traceability.
421. Accounts Receivable Control Control Area Description Authorization Approval for executing transactions, ensuring all activities are verified before being initiated. Recording Proper documentation of all transactions to maintain accuracy and traceability within the accounts. Execution Carrying out transactions as authorized, ensuring timely and correct actions are taken.
422. Functional Role Allocation in the Revenue Cycle Role Responsibilities Stage CEO Marketing & Sales - Promotion - Receiving Orders - Customer Service 1. Initiation Production & Logistics - Procurement - Delivery - Receiving - Storage - Manufacturing - Finished Goods 3. Execution Treasury - Credit Management - Cash Flow (Liquidity) - Insurance - Investments 2. Approval Controlling - Budgeting - Customer Accounts Management • Billing • Accounts Receivable • General Ledger 4. Accounting
423. Key Control Parameters Parameter Description Authorization Necessary authorizations are obtained for all transactions. Transaction Validity All recorded transactions are verified as actual and valid. Transaction Completeness All completed transactions are accurately recorded. Accurate Record-Keeping All accounting records are maintained accurately. Asset Security Assets (cash, inventory, data) are secured from loss or theft. Legality and Efficiency Business operations are conducted legally and efficiently.
424. Key Controlled Processes in the Revenue Cycle
425. 1. Order Processing: Potential Issues 425 Issue Description Incomplete Data Incomplete or inaccurate information about customer orders. Credit Sales Risk Selling on credit to customers with poor credit history. Order Legitimacy Ensuring that orders are legitimate and verified. Unexpected Costs • Out of Stock • Excessive Shipping • Incorrect Discounts Costs arising unexpectedly, such as: • Items not available in inventory. • Excess costs related to unnecessary shipping. • Applying incorrect discounts leading to losses.
426. 2. Delivery: Potential Issues Issue Description Delivery Errors • Wrong Item • Wrong Quantity • Wrong Address Mistakes during delivery including: • Incorrect product delivered to the customer. • Incorrect quantity of items delivered. • Incorrect delivery address used. Inventory Loss • In Warehouse • During Transit • Quality Issues Losses or theft of inventory, including: • Items lost or stolen from storage. • Items lost or damaged during transportation. • Breakage, substandard quality, incorrect sorting, expired items.
427. 3. Invoicing: Potential Issues Issue Description Missed Invoices Forgetting to issue invoices for delivered products/services. Duplicate Invoices Issuing the same invoice multiple times, causing confusion. Invoice Errors Mistakes in the invoice amount, details, or tax. Update Errors Errors during updates to accounts receivable data.
428. 4. Collection of Payments: Potential Issues Issue Description Cash Embezzlement Risk of theft or embezzlement of collected cash during payment collection processes.
429. Other Issues Problem Description Loss of Information Information is misplaced or lost during operations. Slow Process Execution Processes take too long to complete, affecting efficiency. Low Labor Productivity • Manual/Non-Optimized Operations • Repeated Data Entry • Lack of Knowledge & Skills Inefficient use of workforce time and skills. • Tasks that are not automated or streamlined. • Data is re-entered into multiple systems, increasing errors. • Employees lack understanding of systems and processes.
430. Exhibits 430 Hamburger Menu Icon with solid fill Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Definitions Product Model Definitions Digital Transformation & Digital Enterprise Product Model New Business Models Framework (NBM4)
431. NBM4 Templates to Develop and Position Products 431 1. Business model The Lean Canvas 2. Market Model (TAM>TOM>SOM) 2a. Questions 5 Why? 2b. Competitors 3. Person Profile 4. Empathy Map 5. Customer Journey Map, CJM 6. A Day in the Life of a Persona 7. A week in the life of a Persona 8. Jobs to be Done, JTBD), "as is" 9. Priorities of Jobs 10. Pains 10a. Priorities of Pains 11. Job Stories, “to be" and product features 11a. Product features and priorities 12. Value Map 13. Value Proposition Canvas (Thomson) 13a. Template Value Proposition Canvas (Thomson) 14. Channel Implementation Canvas (Neos Chronos) Available in Excel format by request or as part of an advisory assignment
432. 432 NBM4: From the Customer’s Problem To the New Solution (Product)* 1. Discover a Solution for the Customers’ Problem 2. Deliver the Solution they Would Love 3. Product Growth and Business Development * New Business Model Framework – a method for creating new business models and products Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market
433. 433 1. From Product Idea to Value Hypothesis NBM4 1.1 Idea Product idea Market research and segmentation Business model (hypothesis) Business case (hypothesis) NBM4 1.2 Customer Person profile Goals / results, success metrics, motivation Empathy map Current client path (CJM) Jobs to be Done (JTBD) Pains: the main problems we want to eliminate NBM4 1.3 Value suggestion How we will solve the customer’s problems: product vision Key product features (hypothesis) User / Job stories (hypothesis) Value hypothesis (increased benefits, reduced pains): Value map Market research and customer development Refining of hypotheses Gathering the facts (proofed hypotheses) Product idea (hypotheses) HADI-cycle Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market
434. 434 From Value Testing to Product Development and Growth Market research and customer development Refining of hypotheses Gathering the facts (proofed hypotheses) Product idea (hypotheses) HADI-cycle NBM4 2.1 Value Test Testing hypotheses about product value Prototyping Testing riskiest product hypotheses on prototypes NBM4 2.2 Product Refinement of the initial idea and development of the MVP / Product Product requirements, User/Job Stories, Epics Backlog prioritization Product development NBM4 2.3 Go to Market Finding the Product Market fit Refined value proposition Finding the Product Channel Fit Growth and scaling Sales Excellence model to support business development Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market Solution Discovery Idea Customer Value Suggestion Solution Delivery Value test Product Go to Market
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