identifying and addressing risks in business nbi 2013
DESCRIPTION
Talk at Next Big Idea 2013 (IIM B)TRANSCRIPT
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Identifying & Addressing Risks in a Business
NBI 2013, IIM B
http://linkedin.com/in/thiyagarajan
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Thing about Startup is
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Problem Uncertain
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Solution Uncertain
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Is this the right team to build this ?
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Will the Impact happen ?
Customers
Stakeholder
s
Society at Large
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"A startup is a human institution designed to discover & create a business under conditions of
extreme uncertainty"
- Steve Blank
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Also known as Risk
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Uncertainity != RiskBut
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Risk – a distant cousin of uncertainty
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Risk vs Uncertainity
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Risk - Known Unknown
Outcomes unknown but modeled through a probability distribution
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Risk
A treacherous expedition through a previously travelled
path
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Uncertainty - Unknown Unknown
To boldly go where no man
has gone before
Discovering Unchartered Territories
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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
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Humans terrible at handling both
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Great Entrepreneurs stand out because of their
Decision Making in opaque conditions
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Mitigate Risk
*Mitigation – Reduce Impact
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Assess Potential Impact
Rank based on Negative Impact
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Managing Uncertainty
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Learning Trial & Error(small) Experiments
Change goals & course as you go
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Selectionism Experiments
Pursuing several approaches in parallel to see what works
best.
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Broad Types of Risks/Uncertainity
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Technology Uncertainty/Risk
– Can it be built ?
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Product Uncertainty/Risk
What use case is most important ?
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Execution Uncertainty/Risk
– Can you get it done ?
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Customer Uncertainty/Risk
– Will customers pay for it and recommend ?
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Market Uncertainty/Risk
Aggregated Customer Uncertainty/Risk
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Regulation Uncertainty/Risk
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Since Resources are Limited
Time MoneyEnergy
Supporters Patience
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Order Matters
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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
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Rank based on negative impact of these Uncertainty/Risks
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Address Customer Uncertainty/Risk
First
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Beware of Bias
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HindSight Bias
Knew it all along effect
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Overconfidence Bias
Not knowing limits of one's knowledge
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Sampling Bias
Intuitive judgments are dominated by sample
proportion, and not by sample size.
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Many more human bias ?
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Don’t trust yourself ?
Very Demotivating
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Intellectual UncertaintyPsychologically Certainty
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“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
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A STRUCTURED APPROACH
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ZOOMING ON CUSTOMER RISK
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Business Model Canvas
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BMC is the Balance Sheet of an Idea
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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
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Startup Big Business
Uncertainty Decreases
Risk Decreases
Stages
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At a given point in time
Only One Risk/Uncertainty that Matters
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Startup Big Business
Uncertainty Decreases
Risk Decreases
Stages
experiment to learn
experiment to validate
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Go over other sections in BMC
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BMC zooms customer risk
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Similarly Other risks
– Technology, Product & Regulation
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Finally Next Big Idea
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Cross Chasm of Unknown & Unprovable
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Embrace Uncertainity
Wade through skillfully
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Thanks