identifying and addressing risks in business nbi 2013

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Identifying & Addressing Risks in a Business NBI 2013, IIM B http://linkedin.com/in/thiyagarajan

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Talk at Next Big Idea 2013 (IIM B)

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Page 1: Identifying and addressing risks in business nbi 2013

Identifying & Addressing Risks in a Business

NBI 2013, IIM B

http://linkedin.com/in/thiyagarajan

Page 2: Identifying and addressing risks in business nbi 2013

Thing about Startup is

Page 3: Identifying and addressing risks in business nbi 2013

Problem Uncertain

Page 4: Identifying and addressing risks in business nbi 2013

Solution Uncertain

Page 5: Identifying and addressing risks in business nbi 2013

Is this the right team to build this ?

Page 6: Identifying and addressing risks in business nbi 2013

Will the Impact happen ?

Customers

Stakeholder

s

Society at Large

Page 7: Identifying and addressing risks in business nbi 2013

"A startup is a human institution designed to discover & create a business under conditions of

extreme uncertainty"

- Steve Blank

Page 8: Identifying and addressing risks in business nbi 2013

Also known as Risk

Page 9: Identifying and addressing risks in business nbi 2013

Uncertainity != RiskBut

Page 10: Identifying and addressing risks in business nbi 2013

Risk – a distant cousin of uncertainty

Page 11: Identifying and addressing risks in business nbi 2013

Risk vs Uncertainity

Page 12: Identifying and addressing risks in business nbi 2013

Risk - Known Unknown

Outcomes unknown but modeled through a probability distribution

Page 13: Identifying and addressing risks in business nbi 2013

Risk

A treacherous expedition through a previously travelled

path

Page 14: Identifying and addressing risks in business nbi 2013

Uncertainty - Unknown Unknown

To boldly go where no man

has gone before

Discovering Unchartered Territories

Page 15: Identifying and addressing risks in business nbi 2013

Startup Big Business

IdeaProblem/Solution Fit

User/Experience Fit

Product/Market Fit

Business Model/Growth Fit

Seed/Angel Series C/DSeries A Series B

Uncertainty Decreases

Risk Decreases

Stages

Page 16: Identifying and addressing risks in business nbi 2013

Humans terrible at handling both

Page 17: Identifying and addressing risks in business nbi 2013

Great Entrepreneurs stand out because of their

Decision Making in opaque conditions

Page 18: Identifying and addressing risks in business nbi 2013

Mitigate Risk

*Mitigation – Reduce Impact

Page 19: Identifying and addressing risks in business nbi 2013

Assess Potential Impact

Rank based on Negative Impact

Page 20: Identifying and addressing risks in business nbi 2013

Managing Uncertainty

Page 21: Identifying and addressing risks in business nbi 2013

Learning Trial & Error(small) Experiments

Change goals & course as you go

Page 22: Identifying and addressing risks in business nbi 2013

Selectionism Experiments

Pursuing several approaches in parallel to see what works

best.

Page 23: Identifying and addressing risks in business nbi 2013

Broad Types of Risks/Uncertainity

Page 24: Identifying and addressing risks in business nbi 2013

Technology Uncertainty/Risk

– Can it be built ?

Page 25: Identifying and addressing risks in business nbi 2013

Product Uncertainty/Risk

What use case is most important ?

Page 26: Identifying and addressing risks in business nbi 2013

Execution Uncertainty/Risk

– Can you get it done ?

Page 27: Identifying and addressing risks in business nbi 2013

Customer Uncertainty/Risk

– Will customers pay for it and recommend ?

Page 28: Identifying and addressing risks in business nbi 2013

Market Uncertainty/Risk

Aggregated Customer Uncertainty/Risk

Page 29: Identifying and addressing risks in business nbi 2013

Regulation Uncertainty/Risk

Page 30: Identifying and addressing risks in business nbi 2013

Since Resources are Limited

Time MoneyEnergy

Supporters Patience

Page 31: Identifying and addressing risks in business nbi 2013

Order Matters

Page 32: Identifying and addressing risks in business nbi 2013

Market Risk

99 % of the case

Limited Resources

Removing Tech Uncertainty/Risk

Removing Customer Uncertainty/Risk

Removing Product Uncertainty/RiskRemoving Execution Uncertainty/Risk

You Run out

Page 33: Identifying and addressing risks in business nbi 2013

Rank based on negative impact of these Uncertainty/Risks

Page 34: Identifying and addressing risks in business nbi 2013

Address Customer Uncertainty/Risk

First

Page 35: Identifying and addressing risks in business nbi 2013

Beware of Bias

Page 36: Identifying and addressing risks in business nbi 2013

HindSight Bias

Knew it all along effect

Page 37: Identifying and addressing risks in business nbi 2013

Overconfidence Bias

Not knowing limits of one's knowledge

Page 38: Identifying and addressing risks in business nbi 2013

Sampling Bias

Intuitive judgments are dominated by sample

proportion, and not by sample size.

Page 39: Identifying and addressing risks in business nbi 2013

Many more human bias ?

Page 40: Identifying and addressing risks in business nbi 2013

Don’t trust yourself ?

Very Demotivating

Page 41: Identifying and addressing risks in business nbi 2013

Intellectual UncertaintyPsychologically Certainty

Page 42: Identifying and addressing risks in business nbi 2013

“A true scientist believes in a model/theory enough to continue to be motivated to work on it but questions

it when the observations shows differently”

- Richard D Hamming

Page 43: Identifying and addressing risks in business nbi 2013

A STRUCTURED APPROACH

Page 44: Identifying and addressing risks in business nbi 2013

ZOOMING ON CUSTOMER RISK

Page 45: Identifying and addressing risks in business nbi 2013

Business Model Canvas

Page 46: Identifying and addressing risks in business nbi 2013

BMC is the Balance Sheet of an Idea

Page 47: Identifying and addressing risks in business nbi 2013

Business Model Canvas (BMC)

• A snapshot of your business model• Covers all aspects of your business• All of the stated are opinion, guess,

assumption• Need a way to reduce unknown in

each block

Page 48: Identifying and addressing risks in business nbi 2013

Startup Big Business

Uncertainty Decreases

Risk Decreases

Stages

Page 49: Identifying and addressing risks in business nbi 2013

At a given point in time

Only One Risk/Uncertainty that Matters

Page 50: Identifying and addressing risks in business nbi 2013

Startup Big Business

Uncertainty Decreases

Risk Decreases

Stages

experiment to learn

experiment to validate

Page 51: Identifying and addressing risks in business nbi 2013

Go over other sections in BMC

Page 52: Identifying and addressing risks in business nbi 2013

BMC zooms customer risk

Page 53: Identifying and addressing risks in business nbi 2013

Similarly Other risks

– Technology, Product & Regulation

Page 54: Identifying and addressing risks in business nbi 2013

Finally Next Big Idea

Page 55: Identifying and addressing risks in business nbi 2013

Cross Chasm of Unknown & Unprovable

Page 56: Identifying and addressing risks in business nbi 2013

Embrace Uncertainity

Wade through skillfully

Page 57: Identifying and addressing risks in business nbi 2013

Thanks