BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
BETTER BY MEASURE
TWO TALES OF DISRUPTION
Class 3 | September 18, 2014
BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
OUTLINE
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SCIENCE LAB: TWO TALES OF DISRUPTION
BUSINESS SCHOOL: LEAN CUSTOMER DISCOVERY PART ONE
CONCEPT REVIEW
BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
TWO TALES OF DISRUPTION
SCIENCE LAB
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TWO TALES OF DISRUPTION
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V.
WHAT FEELINGS DOES THE TERM “DISRUPTION”
CONNOTE FOR YOU?
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TWO TALES OF DISRUPTION
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DISRUPTIVE… ANYTHING ELSE“Finance. Food. Fuel. Water shortage. Resource scarcity. Climate chaos. Mass poverty. Mass migration. Fundamentalism. Terrorism. Financial oligarchies. We have entered an Age of Disruption.”
– Otto Scharmer. “Leading from the Emerging Future.”
V.
DISRUPTIVE INNOVATION“True disruption means threatening your existing product line and your past investments. Breakthrough products disrupt current lines of businesses.”
– Peter Diamandis. X-Prize Foundation, Singularity
DEFINITION (NOUN): Disturbance or problems that interrupt an event, activity, or process.
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FIRST WE’LL FOCUS ON THE LATTER TYPE OF DISRUPTION. THE EARTH ON FIRE KIND.
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WHAT DISRUPTIVE IMPACTS DO WE HOPE TO SOLVE FOR?
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Clim
ate
Ch
ang
e
ENVIRONMENTAL IMPACTS
SOCIAL IMPACTS
HEALTHIMPACTS
Ch
ild S
lave
ry
Infe
ctio
ns
Dis
ease
These negative impacts are the results of interconnected systems –
economic, social, ecological.
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HOW DO WE SOLVE FOR THESE PROBLEMS?
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“WE CAN’T SOLVE PROBLEMS WITH THE SAME KIND OF THINKING THAT
CREATED THEM.” – Albert Einstein
In order to solve for these challenges we need to start by understanding the
systems and dynamics that created them so we can begin to imagine ways
to intervene and create positive change while avoiding unintended
consequences.
Let’s start by mapping systems.
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SYSTEMS THINKING IS A VERSITILE AND USEFUL FRAMEWORK WHICH WE ACTUALLY USE ALL THE TIME
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REBECCA’S SYSTEMS WORK• Mapping Walmart’s supply chain, water and energy use• Using LCA to understand the impacts of apparel for NRDC and the CFDA
JEN’S SYSTEMS WORK• Unraveling healthcare networks• Understanding the behaviors of hard to reach patients
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GETTING TO THE CORE OF A SYSTEM
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What is the purpose of the system?
What is your goal for understanding the system?
What are the boundaries, scale and context for the system?
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CHALLENGE: New York City Mayor’s office is working to rebuild Rockaway
Beach after super storm Sandy wreaked havoc on the area in 2012. They’ve
hired you to help them understand the system dynamics for the coastal region.
THINKING IN SYSTEMS: ROCKAWAY BEACH
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What’s the purpose of the system?
What’s your goal for understanding the system?
What are the boundaries, scale and context for the system?
THINKING IN SYSTEMS: ROCKAWAY BEACH
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A SYSTEMS IS MORE THAN THE SUM OF ITS PARTS, BUT LET’S START WITH
THE PARTS
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What are the variables in the system?
STOCKS: Material or information that has built up in a system over time. These
are the things that accumulate – the stuff you can count or measure.
What are the connections between variables in the system?
FLOWS: Stocks change over a period of time as a result of material or
information flows that enters or leaves the stocks.
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UNDERSTANDING SYSTEM DYNAMICS
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BALANCING FEEDBACK LOOPSA stabilizing, goal-seeking, regulating feedback
loop that keeps stocks at a specific level.
FEEDBACK LOOPS: Material or information that has built up in a system over
time. These are the things that accumulate – the stuff you can count or measure.
REINFORCING FEEDBACK LOOPSAn amplifying or enhancing feedback loop, which
trends toward instability (entropy). These are
“vicious cycles” and “virtuous cycles.”
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WHAT HAPPENS WHEN THERE’S A DELAY IN THE SYSTEM?
DELAYS: A delay in a balancing feedback loop
makes a system likely to oscillate. Changing the
length of a delay may make a large change in the
behavior of a system.
Stocking the right number of Apple Watches
Balancing of predator & prey numbers in ecosystems
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HOW ARE UNINTENDED CONSEQUENCES CREATED?
FIXES THAT FAIL (UNINTENDED CONSEQUENCES): A solution is rapidly
implemented to address the symptoms of an urgent problem. This quick fix sets
into motion unintended consequences that are not evident at first but end-up
adding to the symptoms.
Pest control > Invasive species introduction
Bank bailouts > Golden parachutes
New drug release > unplanned side effects
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What are the stocks? What are the flows?
What patterns or “archetypes” emerge over time (feedback loops)?
THINKING IN SYSTEMS: ROCKAWAY BEACH
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SYSTEMPublic
Education System
Unequal Quality & Access
Open Internet
Tech. Divide
The US Economy
2008 Financial
Crisis
ContinuousConsumption
Exhaustion of Resources
Private Healthcare
Obesity
SYSTEM DYNAMICS: The behavior over time of a system or any of its components.
SYSTEM DYNAMICS RESULT IN NEGATIVE IMPACTS
RESULTINGBEHAVIOR
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IMPACTS ARE INHERENTLY INTERCONNECTED BECAUSE SYSTEMS ARE INTERCONNECTED
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HEALTHIMPACT
SOCIALIMPACT
ENVIRONMENTALIMPACT
WHO KNEW?
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HOW IS IMPACT CONNECTED TO BUSINESS MODELS?
Impacts occurs as a result of the operations required to create value for
customers and shareholders. In business lingo we call these externalities.
EXTERNALITY: “A side effect or consequence of industrial or commercial activity
that affects other parties without this being reflected in the cost of the goods or
services involved, such as the pollination of surrounding crops kept for honey.”
- SOURCE: Google
• Externalities are embedded in both what you do and how you do it
• Externalities can be created as the direct result of a company’s actions or
indirectly, as a result of a series of causal actions
• Externalities occur both inside a company and outside a company’s walls
• External impact can be singular events or repeated patterns and both types
of impacts can be the result of systemic risk and error
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EXTERNALITIES CAN BE POSITIVE AND NEGATIVE
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NEGATIVE EXTERNALITY
Cost to Society > Private Cost
The cost to a third party (the
environment, society or private
individuals) is greater than the cost the
consumer, or company producing a
good or service is paying for it.
POSITIVE EXTERNALITY
Benefit to Society + Private Benefit
Occurs when third parties (the
environment, society, or private
individuals) receive benefits as a result
of the consumption or production of a
good or service.
“Positive externalities flow to the top, negative externalities to the poor.” - Otto scharmer, Leading from the emerging future
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WHAT PARTS OF A BUSINESSS DO EXTERNALITES STEM FROM? ANYWHERE
As function of product or service delivered to customers Positive impact: Renewable energy providers
Negative impact: Weapons manufacturing
As (un)intended behavior change resulting from customer use/consumption of servicePositive impact: Weight loss from joining online calorie counting service
Negative impact: Online dating platforms spurring STD outbreaks
Embedded in operations (supply chain & facilities)Positive impact: Generous maternity and paternity time benefits
Negative impact: Hazardous chemical emissions from production facility
Investment (via direct investment or purchase of goods/services)Positive impact: Investing in renewable energy credits
Negative impact: Purchase of conflict minerals for electronics equipment manufacturing
Corporate giving & policyPositive impact: Donations to local community organizations benefitting disadvantaged youth
Negative impact: Funding of lobbying against environmental regulation
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SOURCE: On left, icons from Business Model Canvas by Alex Osterwalder and XPlane
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IMPACTS ARE INHERENTLY INTER-CONNECTED, AS ARE THE ELEMENTS OF A BUSINESS
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HEALTHIMPACT
SOCIALIMPACT
ENVIRONMENTALIMPACT
Investment
Supply Chain/
FacilitiesCorporate
Giving
Product/Service
Function
Customer Behavior
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LEAN STARTUP
BUSINESS SCHOOL
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THE FOUNDERS DEFINE THE PRODUCT VISION AND
THEN USE CUSTOMER DISCOVERY TO FIND
CUSTOMERS AND A MARKET FOR THAT VISION.
-Steve Blank, The Startup Owner’s Manual
STARTUPS AS THE ORGANISM OF CHANGE
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LEAN LAUNCHPAD SIMULATES ENTREPRENEURSHIP
BY REQUIRING FOUNDERS TO GET OUT OF THE
BUILDING…AND INTO THEIR CUSTOMER’S WORLD.
Customer Discovery
Customer Creation
Customer Validation
CompanyBuilding
Pivot
LEAN LAUNCHPAD:
FLIPPED CLASSROOM
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KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONSHIPS
KEY RESOURCES
COST STRUCTURE REVENUE STREAMS
CHANNELS
CUSTOMER SEGMENTS
Who are our key partners?
Who are our key suppliers?
Which key resources are we acquiring from our partners?
Which key activities do our partners perform?
What value do we deliver to the customer?
Which one of our customers’ problems are we helping to solve?
What bundles of products and services are we offering to each segment?
Which customer needs are we satisfying?
What is the minimum viable product?
For whom are we creating value?
Who are our most important customers?
What are the customer archetypes?
What key activities do our value propositions require?
Our distribution channels?
Customer relationships?
Revenue Streams?
What key resources do our value propositions require?
Our distribution channels?
Customer relationships?
Revenue Streams?
How do we get, keep, and grow customers?
Which customer relationships have we established?
How are they integrated with the rest of our business model?
How costly are they?
Through which channels do our customer segments want to be reached?
How do other companies reach them now?
Which ones work best?
Which ones are most cost-effective
How are we integrating them with customer routines?
What are the most important costs inherent to our business model?
Which key resources are most expensive?
Which key activities are most expensive?
For what value are our customers really willing to pay?
For what do they currently play?
What is the revenue model?
What are the pricing tactics?
SOURCE: www.businessmodelgeneration.com//canvas | Canvas concepts developed by Alexander Osterwalder and Yves Pigneur.
LEAN LAUNCHPAD: BUSINESS MODEL CANVAS
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THE SHIFT: FROM PUSH AND MARKET TO CUSTOMER DEVELOPMENT
- The Four Steps to the Customer Epiphany by Steve Blank
Customer Discovery
Customer Creation
Customer Validation
CompanyBuilding
Pivot
THE CUSTOMER DEVELOPMENT MODEL
STOP STOP STOP
Concept/SeedProduct
DevelopmentAlpha/Beta
TestLaunch/ 1st
Ship
• Create marcom materials
• Create positioning
• Hire PR agency• Early buzz
• Create demand• Launch event• “Branding”
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THE PUSH AND MARKET MODEL
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The Customer Development
process changes the way startups
are built
Startups are not smaller versions of
large companies
A startup as a “temporary
organization designed to search for
a repeatable and scalable business
model”Co-founded 8 startups.
1996: E.piphany | 1998: $3.4 MM sales |
1999: IPO raised $72 MM
Author of Four Steps to the Epiphany, Startup Owner’s Manual
FIRST CAME STEVE
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CONTINUOUS CUSTOMER
INTERACTION
A STARTUP IS AN
EXPERIMENT
A HYPOTHESIS TO BE
TESTED
ASSUME CUSTOMER AND
FEATURES ARE
UNKNOWNS
LOW BURN BY DESIGN
ARE WE ON THE PATH TO A
SUSTAINABLE BUSINESS
Founded IMVU
Parallels between Lean and Agile, caught fire in the
startup community for software businesses, particularly
mobile and SaaS models.
THEN CAME ERIC
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LEAN
MANUFACTURING
TOTAL QUALITY
MANAGEMENT
KANBAN
CONTINUOUS
IMPROVEMENT
AGILE
WHAT CAME BEFORE STEVE AND ERIC
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DESIGN RESEARCH(Ethnography)
DESIGN THINKING(IDEO, Dschool)
AGILE AND LEAN INFLUENCES
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The Kanban Method respects the human condition. People resist change for emotional
reasons. When change affects their self-image, self-esteem, or position with a social
group, people will resist and the resistance will be emotional.
The Kanban Method adopts the Zen Buddhism concept that "water goes around the rock."
Hence, it focuses on changes that can be made without invoking emotional
resistance, while visualization and limiting work-in-progress raise awareness of deeper
issues allowing for an emotional engagement that helps to overcome resistance.
KANBAN
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BETTER BY MEASURE BUILDS OFF OF LEAN
LAUNCHPAD BY CONNECTING THE CUSTOMER’S WORLD
TO HEALTH, CIVIC SOCIETY AND THE ENVIRONMENT.
LEAN LAUNCHPAD GETS BETTER BY MEASURE
+
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THE SHIFT: BETTER BY MEASURE’S CUSTOMER DEVELOPMENT APPROACH
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FO
CU
SB
ET
TE
R B
Y
ME
AS
UR
E
Eco/Social Hypothesis Testing:By delivering your value proposition, what ecological/social values are created/eroded and how does this effect the customer?
Designing for Sustainable Growth:How might different growth scenarios affect ecological/social value creation/erosion?
Measuring Eco/Social Outcomes:How can we measure and sustain or improve environmental/social outcomes of corporate activities?
Co-Creating Eco/Social Solutions:Can you co-create value which addresses both customer needs and ecological/social values?
- The Four Steps to the Customer Epiphany by Steve Blank
Customer Discovery
Customer Creation
Customer Validation
CompanyBuilding
Pivot
BETTER BY MEASURE CUSTOMER DEVELOPMENT MODEL
STOP STOP STOP
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KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONSHIPS
KEY RESOURCES
COST STRUCTURE REVENUE STREAMS
CHANNELS
CUSTOMER SEGMENTS
• Who are our key partners?• Who are our key suppliers?• Which key resources are we
acquiring from our partners?• Which key activities do our
partners perform?• What key environmental and and
societal stakeholders might our activities effect?
• What value do we deliver to the customer?
• Which one of our customers’ problems are we helping to solve?
• What bundles of products and services are we offering to each segment?
• Which customer needs are we satisfying?
• What is the minimum viable product?
• What ecological and social value could be embedded in the core value proposition to customers?
• For whom are we creating value?• Who are our most important
customers?• What are the customer
archetypes?• What are the ecological/social
values and behaviors of our customers?
• What key activities do our value propositions require?
• Our distribution channels?• Customer relationships?• Revenue Streams?• What environmental and social
externalities might the key activities drive?
• What key resources do our value propositions require?
• Our distribution channels?• Customer relationships?• Revenue Streams?• What environmental and social
externalities might resource use create?
• How do we get, keep, and grow customers?
• Which customer relationships have we established?
• How are they integrated with the rest of our business model?
• How costly are they?• Will customer
acquisition/retention drive ecological and social impact?
• Can positive ecological and social value be used to acquire customers?
• Through which channels do our customer segments want to be reached?
• How do other companies reach them now?
• Which ones work best?• Which ones are most cost-effective• How are we integrating them with
customer routines?• What environmental and social
externalities might these channels require?
• What are the most important costs inherent to our business model?
• Which key resources are most expensive?• Which key activities are most expensive?• What key costs to the environment and civic
society are driven by our business model?
• Which of these externalities is likely to become future economic costs to our business, and by what mechanism (policy, public demand etc.)?
• For what value are our customers really willing to pay?
• For what do they currently pay?• What is the revenue model?• What are the pricing tactics?
• What customer behaviors will revenue generation drive which may affect the environment and civic society, and how?
SOURCE: www.businessmodelgeneration.com//canvas | Canvas concepts developed by Alexander Osterwalder and Yves Pigneur.
LEAN LAUNCHPAD: BETTER BY MEASURE’S ADAPTED BUSINESS MODEL CANVAS
BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
Customer discovery translates a founding team’s vision for the company into a hypothesis about each component of the business model and creates a set of experiments to test each hypothesis.
Customer discovery is not about collecting features lists from prospective customers or running lots of focus groups.
STEP 1: CUSTOMER DISCOVERY
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• Total addressable: how big is the universe?• Served available market: how many can I reach with my sales channel? • Target market: who will be the most likely buyers?
Total addressable market
Served available market
Target market
ESTIMATE YOUR TOTAL ADDRESSABLE MARKET
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ESTIMATE THE SIZE OF YOUR TOTAL ADDRESSABLE MARKET, SERVED
ADDRESSABLE MARKET, AND TARGET MARKET.
1. Build a systems map for the company you’re focusing on.
2. How does your concept fit into the system?
3. From your concept/systems map identify 2 critical business hypotheses to test, and 2
associated environmental/social hypotheses to test.
4. What do you expect to be true? How do you validate what you think is true?
5. Talk to at minimum 10 humans in person that fit your market to do this (Photograph
every human you meet, we want to see them!)
6. Go to the climate march to find a captive audience.
READ: Steve Easterbrook, The Power to Change Systems: http://planet3.org/2011/10/18/the-power-to-change-systems
OPTIONAL: Steve Blank, How to Build a Startup - https://www.udacity.com/course/ep245
HOMEWORK
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BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
THE PEOPLE’S CLIMATE MARCH
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REGISTER: http://peoplesclimate.org/march/