The document discusses how design thinking can help build the business case for new ventures. It outlines a 5-step process for developing the business case that incorporates design thinking principles. The steps include formulating the value proposition and assumptions, defining future success with an income statement, spelling out key assumptions, testing assumptions through thought experiments and in-market experiments, and refining based on the test results. It provides examples of how companies like Brivo have used this approach to test assumptions and either validate or pivot their ideas.
2. Meeting logistics
> 45 minute presentation
> 15 minutes for Q&A
> Submit questions through QA widget at anytime–
some answered during webinar and some post-webinar
Slides and replay of event available after webinar
About today’s webinar
3. 1
Today’s Presenter
Tim Ogilvie is co-founder of Peer Insight. He is
keen on helping large organizations create new
experiences, services, and business models.
Tim is co-author of Designing for Growth but
spends most of his time practicing in the field,
not writing or teaching. Tim is passionate about
entrepreneurship and placing small bets fast.
About today’s webinar
4. 2
Place small bets fast
The meaning of ‘free’
Please share your feedback: togilvie@peerinsight.com
8. 6
Design thinking is often treated
as a mystery
Image: Designing For Growth: a design thinking tool kit for managers
Asked to describe design, Tim Brennan
of Apple’s Creative Services drew the
following picture:
9. 7
What is? What if? What wows? What works?? $
our process: four questions
framing
interviewing
observing
analyzing
exploring
brainstorming
creating
building
refining
evaluating
experimenting
testing
implementing
We see design thinking as
a problem-solving process
10. 8
Design thinking is obsessed with users
Customer
desirability
Do users want it?
11. 9
… But it solves for users along
three dimensions
Customer
desirability
Do users want it?
economic
viability
Does it scale
profitably?
technical
feasibility
Can we deliver it
reliably?
16. 14
Q: When do we iterate?
The entrepreneurship process
is a series of learning loops
A: At each new milestone of learning
Empathize visualize co–creATE ITERATE
17. 15
1. Formulate a novel value proposition
2. Define future success as an income statement*
3. Spell out the assumptions
What would have to be true?
4. Test the make-or-break assumptions
Thought experiments
In-market experiments
5. Based on test results, refine the model, refine the
value proposition, or re-assess the investment
potential of this opportunity
Our business case method follows
5 steps:
* Adapted from Rita McGrath, “Discovery-driven Planning”
18. 16
EMPATHIZE
+ VISUALIZE
VISUALIZE
VISUALIZE
VISUALIZE
+ CO–CREATE
ITERATE
1. Formulate a novel value proposition
2. Define future success as an income statement*
3. Spell out the assumptions
What would have to be true?
4. Test the make-or-break assumptions
Thought experiments
In-market experiments
5. Based on test results, refine the model, refine the
value proposition, or re-assess the investment
potential of this opportunity
design thinking is embedded in the steps
* Adapted from Rita McGrath, “Discovery-driven Planning”
19. 17
step 1 2 provide the framing questions
value proposition assumptions
What would have to be true?
Revenues......
Costs..............
Profits............
For
Who want
We will
That provides
Uniquely
year X income
statement*
* Adapted from Rita McGrath, “Discovery-driven Planning”
minus
equals
20. 18
here’s how brivo answered these q’S
Revenues...250M
Costs..........200M
Profits..........50M
minus
equals
value proposition assumptions
year 4 income
statement*
What would have to be true?
21. 19
“I think you should be more explicit here in step two.”
Value
proposition
Year x
Income
Statement
22. 20
OUR BOOK, D4G, PROVIDES FOUR GENERIC
ASSUMPTIONS ANY CONCEPT MUST ADDRESS
value proposition
For
Who want
We will
That provides
Uniquely
assumptions
year X income
statement*
Revenues......
Costs..............
Profits............
minus
equals
Value assumption:
Customers will buy it–at
a price that works
Execution assumption:
Your firm can create and
deliver it–at a cost that
works
Scalability assumption:
You can build a volume
that makes it worthwhile
Defensibility assumption:
Competitors can’t easily
copy it
23. 21
value proposition assumptions
year X income
statement*
E. Cost model and unit
cost assumptions
Business Case Template/ Reverse Income Statement*
A. Value network and
go–to–market strategy
B. Addressable market
assumptions
C. Adoption rate
assumptions
D. Revenue model
and unit revenue
assumptions
For
Who want
We will
That provides
Uniquely
Revenues......
Costs..............
Profits............
minus
equals
* Adapted from Rita McGrath, “Discovery-driven Planning”
24. 22
These questions will help identify
the assumptions
A. Value network and go-to-market assumptions
Is our firm capable of executing the value proposition?
Do we need strategic partners?
What control points will we use to protect our role?
B. Addressable market assumptions
How large is the addressable market?
Do the network partners above maximize the opportunity?
C. Adoption rate assumptions
Is our solution superior to existing offerings?
How will we provide an on-ramp for customers to try it out?
How many potential customers will adopt our solution?
D. Revenue model and unit revenue assumptions
Who will pay for the solution? How much?
How will they justify paying that price?
E. Cost model and unit cost assumptions
What will it cost to acquire customers?
What will it cost to deliver the offering?
Will revenues exceed costs at scale?
25. 23
brivo set out to test 5
make–or–break assumptions
Brivo make-or-break assumptions
1. Branded 3rd party will manufacture SmartBox
2. All carriers will deliver to SmartBox from Day 1
3. Consumers w/ 6+ transactions/month will adopt it
4. Subscription price $15/month
5. Unit cost at scale will be $400
E. Cost model and unit
cost assumptions
A. Value network and
go–to–market strategy
B. Addressable market
assumptions
C. Adoption rate
assumptions
D. Revenue model
and unit revenue
assumptions
26. 24
there are Two ways to test assumptions
Thought Experiments
Hypothetical experiments that use
logic and existing data.
Envisioned experiences, require
imagination
Set in the future
2D and 3D
In–Market Experiments
Experiments conducted in the
marketplace with actual partners
and customers.
Live experiences, meant to feel real
(even if some elements are faked)
Set in the present
4D; persist over time (even if brief)
27. 25
confirming
E-commerce is expected to grow 10X
in next 5 years (1999 to 2004)
Carriers make 2.2 attempts
per every successful residential
delivery
disconfirming
Carriers have not been supportive in
the past of non-proprietary solutions
HERE’S WHY BRIVO EXPECTED
CARRIER ENTHUSIASM
Assumptions being tested
2. All carriers will deliver to SmartBox from Day 1
thought experiment
28. 26
Will it conform to their policies?
Will they use it versus other work-arounds?
Will they require any training to use it?
Will they require integration with their tablet?
Do they LIKE using it?
confirming
Any “yes” answers below
disconfirming
Any “no” answers below
2. All carriers will deliver to SmartBox from Day 1
Assumptions being tested
Brivo tested its carrier assumption
with a single smartbox
in–market experiment
29. 27
Maytag
Whirlpool
Brivo
Assumptions being tested
1. Branded 3rd party will manufacture SmartBox
5. Unit cost at scale $400
ConfiRming
A deal with Maytag or Whirlpool
disConfiRming
No deal
finding a manufacturer was key
thought experiment
31. 29
Brivo took a hard look at step 5
1. Formulate a novel value proposition
2. Define future success as an income statement
3. Spell out the assumptions
What would have to be true?
4. Test the make-or-break assumptions
Thought experiments
In-market experiments
5. Based on test results, refine the model, refine the
value proposition, or re-assess the investment
potential of this opportunity
* “The Lean Startup,” by Eric Ries
Persevere?
– or –
Pivot?*
32. 30
From B2C... to B2B in 30 days
Brivo’s search for a new value proposition
access control
multi-unit lockers
critical parts logistics
33. 31
The surprise winner? access control!
access control
multi-unit lockers
critical parts logistics
From B2C... to B2B in 30 days
35. 33
Case: healthcare service platform
Partners can help co–create
the revenue model
Assumptions being tested
1. Customers will be acquired through third parties
Visualize the solution in 2D, including
the revenue model alternatives
Meet with a candidate partner to
co–create customer aquisition and
revenue sharing
Revise solution based on feedback
Repeat with a second candidate
partner
36. 34
Business model co-creation panel
What are your current costs?
Which are you most certain can
be reduced?
Which ones do you already have
third party services to reduce?
Assumptions being tested
1. Customers will pay us to change driver behavior and reduce costs
2. There are multiple cost categories we can affect
case: Fleet telematics
b2b customers can help co–create
your pricing
37. 35
Assumptions being tested
1. We can acquire customers affordably
employer–sponsored retail pharmacies direct online
case: smoking cessation
It pays to experiment with multiple
options (simultaneously)
38. 36
Common errors
Instead of perfection... make progress
Trying to define every assumption
High-precision thought experiments
(complex models)
Making prototypes perfect
Seeking “validation”
Testing only the alternative we prefer
Focus only on metrics that look positive
Success of concept also serves as an
evaluation of the team’s competence
Only a few matter
Simple math only (no spreadsheets)
Speed is more important
“Exploring,” not “proving”
Test multiple alternatives
Focus instead on make–or–break
assumptions, provide 100%
transparency
Focus instead on team learning
39. 37
Our next webinar
This web seminar is a follow-on to “Design Thinking for the Business Case.” During this
50-minute interactive session we will share the principles and methods for conducting
affordable in-market experiments—in days or weeks, not months. Using simple templates and
real-world case examples, you will be able to:
Understand the role of an Alpha test
Understand the Affordable Loss Principle
Design split-tests
Understand entrepreneurial methods
applied in a large organization
Establish control points and IP protection
Identify and test different revenue models
Register early! http://ow.ly/fZaSb
IN-MARKET EXPERIMENTS:
THE SCIENCE OF PLACING
SMALL BETS FAST
January 29, 2013, 2:00PM – 3:00PM EST
41. 39
value proposition
thought experiments
in–market experiments
assumptions
year X income
statement
E. Cost model and unit
cost assumptions
A. Value network and
go–to–market strategy
B. Addressable market
assumptions
C. Adoption rate
assumptions
D. Revenue model
and unit revenue
assumptions
For
Who want
We will
That provides
Uniquely
Revenues......
Costs..............
Profits............
minus
equals
Empathize visualize co–creATE ITERATE
Here’S a better way to look at it