Agile business development

Bringing Agility to Business Development
Somik Raha, Associate
SmartOrg, Inc
smartorg.com

1

© 2000-2012 SmartOrg. | Confidential and Proprietary.

Legal Stuff
This deck is licensed under the Creative Commons – Attribution – No
Derivatives 3.0 License.
Please feel free to contact sraha@smartorg.com if you have any
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2

© 2000-2013 SmartOrg. | For Classroom Use Only. Not for distribution.

Agenda

Introduction

Business Development
The Agile Manifesto
Current State
Values

•
•
•
•

Evaluate
option
value

3


Definition of Business Development
Business Development is the turning of an idea into a
marketable business asset

4


Agile Software Development greatly increases
quality and productivity
The Agile Manifesto
We value…

Collaborative development
Working software
Customer collaboration
Responding to change

OVER

Processes and tools
Comprehensive documentation
Contract negotiation
Following a plan

That is, while there is value in the items on
the right, we value the items on the left more.

5


Current Business Development vs. Agile Business
Development
CURRENT BUSINESS DEVELOPMENT FOCUS
Processes and tools
Comprehensive paperwork
Following a plan

AGILE BUSINESS DEVELOPMENT FOCUS
Collaborative Development
Working business models

6


NON-AGILE SOFTWARE DEVELOPMENT FOCUS
Processes and tools
Comprehensive documentation
Following a plan

AGILE SOFTWARE DEVELOPMENT FOCUS
Working software

Poll: What role do you play in your organization?
1.
2.
3.
4.
5.
6.

7

Business Development
Marketing/Sales
Product Management
Product Development
Project Management
Engineering


Agile practices support the Agile manifesto


8


What practices get us to the goalpost?


?

9


Agenda
Business
Development:
Turning idea into
marketable
business asset

Introduction

Market
Performance:
Given business
development has
succeeded, how
will this product
fare in the
market?

10


Evaluate
option
value

Combined Value:
What dollar
amount represents
our option value
of developing this
idea as a business
given where we
are right now?

Agenda

Introduction

Evaluate
option
value

11


Cashflow

Business development is about managing
increasing amounts of investment

Time
12


Cashflow

Agile business development is about
learning/failing/succeeding quickly

Time
13


We will communicate Agile Business
Development with a catalog of patterns
“Each pattern describes a problem which occurs over
and over again in our environment, and then describes
the core of the solution to that problem, in such a way
that you can use this solution a million times over, without
ever doing it the same way twice.”
“What is a design pattern?” from Design Patterns: Elements of Reusable ObjectOriented Software by Gamma et al., 1995

Elements of a pattern: pattern name, problem, solution, image* and
consequences
* optional

14


Evidential Work
15


Pattern: Evidential Work
When investing serious money behind an idea, it is easy to be
distracted away from the evidence needed to justify the investment
by the work that needs to be done.
Therefore, design work to deliver evidence as quickly as possible
Consequences
A clear idea of the proof needed to justify investment, the work
needed to deliver that proof, the cost and the schedule of that
work
Related Patterns: Communicate evidential work with “Learning
Plans”

16


The Mortgage Question

What do you need to see before mortgaging
your house to fund this project?
17


Simulation: βCorp
Makes statistical data
analysis products

What evidence do you need to see before mortgaging your house on this product?

New
Product

Allows analysis of the effectiveness of marketing campaigns
by examining social media chatter for emotional content
around the product.
This product will help βCorp enter the social media space.

18


Simulation: Evidential Work

Phase 1: Develop
Value Proposition,
Get Approval

Phase 2: Prove Value
Proposition with
Customers

• Customer Enthusiasm
• βCorp Sponsorship

• Technical Performance
• Customer Commitment

•
•
•
•

• Conduct 2-4 customer pilots across
areas - map processes, demonstrate
value
• Fill gaps in platform and services
• Capture learning
• Build resources / PMO
• Plan G2M / business
• Extend / revise roadmap
• Advance needed technology
• Define full platform
Investment: $4M
20 FTE x 1 year x $150K = $3M
Expenses, capital = $1M

Solicit pilot customers
Business case analysis
Obtain right to pursue
Requirements / gap analysis =>
technical roadmap
• Preliminary offer
• Pre-sales, talk to customers
• Incubation structure defined
Investment: $0.5M
4 FTE x 6 month x $200K = $400K
Expenses = $100K

19


Phase 3: Prepare to
Scale
• Robust Pipeline
• Scalable Business Case

•
•
•
•
•
•
•
•

Complete, harden platform
Establish channel / G2M
Sales / BD
Marketing / communication
Set up P&L / organization
Deliver operationally to first pilots
Conduct additional pilots of new kinds
Support structure

Investment: $6M
Team, Expenses as in Phase II = $4M
Sales, Business Development = $1M
Support, infrastructure = $1M

Learning Plans

20


Pattern: Learning Plans
When communicating development plans, it is easy to lose sight of the
learning needed to justify further investment.
Therefore, depict key stages of evidence needed and the work
needed to deliver that evidence on a timescale
Consequences
A simple timeline that communicates key evidential stages, the work
involved (details and investment) and the sequence.
Related Patterns: Evidential Work and Evidence Assessment

21


Simulation: βMark Learning Plan
Q1

Q2

Q3

Q4

Q5

βMark

•
•
•
•

Solicit pilot customers
Business case analysis
Obtain right to pursue
Requirements / gap
analysis => technical
roadmap
• Preliminary offer
• Pre-sales, talk to
customers
• Incubation structure
defined
Investment: $0.5M
4 FTE x 6 month x
$200K = $400K
Expenses = $100K

Q7

Q8

Technical performance,
Customer commitment

Customer
enthusiasm, βCorp
sponsorship

Phase I – Develop
Value Proposition,
Get Approval

Q6

Phase II – Prove Value Proposition with
Customers
• Conduct 2-4 customer pilots across areas - map
processes, demonstrate value
• Fill gaps in platform and services
• Capture learning
• Build resources / PMO
• Plan G2M / business
• Extend / revise roadmap
• Advance needed technology
• Define full platform
Investment: $4M
20 FTE x 1 year x $150K = $3M
Expenses, capital = $1M

Major Phase
• Work during phase
• Phase Investment

22

• Proof points at milestone

Cumulative investment
through launch


Q10

Robust pipeline,
Scalable business case

Phase III – Prepare to Scale
•
•
•
•
•
•
•
•

Complete, harden platform
P&L commit May 11
Establish channel / G2M
Sales / BD
Marketing / communication
Set up P&L / organization
Deliver operationally to first pilots
Conduct additional pilots of new kinds
Support structure
Investment: $6M
Team, Expenses as in Phase II = $4M
Sales, Business Development = $1M
Support, infrastructure = $1M

Total: $10.5M
Key:

Q9

Evidence Assessment

23


Pattern: Evidence Assessment
Different people understand different things when talking about
uncertainty in a qualitative fashion, which makes communication
difficult.
Therefore, assess calibrated probabilities for each point of
evidence, multiplying to get overall probability of success
Consequences
A simple quantitative understanding of uncertainty that is
comparable across projects.

24


Simulation: Comparing projects by their phase
allows us to calibrate
Why does a Phase 1
project have such a high
probability?

Idea
Prove
Scale

After recalibrating

25


Idea
Prove
Scale

Pattern: Reasons Behind Numbers
People can get into a mindless number game and lose sight of the
real purpose of uncertainty assessments – to discover learning
gaps.
Therefore, before accepting numbers, obtain reasons for them.
Consequences
The logic behind the numbers is made transparent, facilitating
team learning.

26


Pattern: Blind Polls
People can follow power and feel shy to share what they truly know.
Therefore, disallow calling out numbers in a group, forcing each
member to write down their number and then collect it when all are
done
Consequences
Differences in numbers become transparent and drive discussion in
learning gaps, leading to possible adjustment after the group has
new knowledge

27


Simulation: Evidence Assessment of Phase 2:
Prove Value Proposition with Customers

Phase 1: Develop
Value Proposition,
Get Approval

28

Proposition with
Customers


Phase 3: Prepare to
Scale
• Robust Pipeline


Phase 1: Develop
Value Proposition, Get
Approval

Proposition with
Customers



Phase 3: Prepare to
Scale
• Robust Pipeline

Technical Performance
Run Human Control Group,
• βMark picks 90% of all actual chatter
• βMark distinguishes correctly between +ve and –ve
feelings at least 90% of the time

Customer Commitment
•

29

At least one customer signs up for company-wide
adoption


• Human Control Group confirms that βMark picks 90% of all
actual chatter

In your chat:
List reasons for success
List reasons for failure

30


Simulation: Evidence Assessment Summary
Human Control Group confirms that βMark picks 90% of all
actual chatter
Reasons for Success
• Lab results promising
Success
Given these reasons for success
and failure, what is your probability
of success?

Failure

31

Reasons for Failure:
• We’ve never done this
before


Simulation: Probability of Success of Phase 2
βMark Evidence Assessment

Forward
chance of
success

Phase I: Develop Value Proposition, Get Approval
Customer Enthusiasm – 50%
βCorp Sponsorship – 75%

37.5% 3.88%

Phase II: Prove Value Proposition with Customers
Coverage Accuracy – 90%
Emotional Accuracy – 80%
Customer Commitment – 60%

43.2% 10.4%

Phase III: Prepare to Scale

24%

Robust Pipeline – 60%
Scalable Business Case – 40%
Overall Probability

32


3.88%

24%

Simulation: Probability of Success of Phase 2
βMark Evidence Assessment

Forward
chance of
success

Phase I: Develop Value Proposition, Get Approval
Customer Enthusiasm – 100%
βCorp Sponsorship – 100%

100% SUCCESS

Phase II: Prove Value Proposition with Customers
Coverage Accuracy – 90%
Emotional Accuracy – 80%
Customer Commitment – 60%

43.2% 10.4%

Phase III: Prepare to Scale

24%

Robust Pipeline – 60%
Scalable Business Case – 40%
Overall Probability

33


10.4%

24%

Debrief: Reflections/Questions?

Introduction

Evaluate
option
value

34


Agenda

Introduction

Evaluate
option
value

35


Cashflow

After development has succeeded, we are
ready to double-down

Time
36


Cashflow

Agile business development incorporates
multiple scenario-thinking before doubling down

Time
37


Evidentially
Assessable
Factors

38


Pattern: “Evidentially Assessable Factors”
Economic factors that are hard to support with evidence can be
easily manipulated to distort our understanding about opportunity
size.
Therefore, decompose economic models such that factors that are
hard to support with evidence are derived from other factors that
are easy to assess on the basis of evidence.
Consequences
Assessment conversations remain rooted in real world knowledge
instead of devolving into the abstract. Numbers produced are of
much higher quality.
Related Patterns: “Extreme Credible Ranges” and “Most Leveraged
Uncertainties”
39


Simulation: Decompose economics to identify
assessments and calculations
Total Addressable
Market
e.g. 10K units in
year of launch

Penetration
e.g. 20%

Market
Share
e.g. 25%

Unit Cost
e.g. $2K

Units Sold/yr
e.g. 500

Unit Price
e.g. $70K

Revenue
e.g. $35M

Annual Profit
e.g. 29M
40


Variable Cost
e.g. $1M

Fixed Cost
e.g. $5M

Pattern: “Extreme Credible Ranges”
Groups have a tendency toward groupthink and compromise, which
prevents discovery of important information gaps on factors that drive
economics.
Therefore, get groups to dwell on the credibly extreme ends of each factor
and capture both ends of the assessment as a range, along with a realistic
assessment.
Consequences:
Those who have a difference of opinion are no longer ignored, but
factored into the decision-making process. We are no longer anchored to
the optimistic or pessimistic, but have both along with a realistic scenario.
Related Patterns: “Evidentially Assessable Factors” and “Most Leveraged
Uncertainties”

41


Simulation:
Market Share for βMark
40%
High
40%
30%
20%

30%, 2
0%, 20
%

20%
10%
5%

Reasons for High
• Not much competition
yet

Base

25%

Low

Reasons for Low:
• A big competitor may
get in before us

5%
42

Total Addressable Market (TAM): 5-10-20
thousand units
Penetration of similar technology: 10%20%-30%


Most Leveraged Uncertainties

43


Pattern: “Most Leveraged Uncertainties”
It is easy for us to fixate on uncertainty in economic factors that are
in front of us, or the factors with the highest leverage, as opposed to
looking at both and finding the ones that really matter.
Therefore, identify the most leveraged uncertainties
Consequences:
• Conversations can now focus on uncertainties that have the
most leverage, instead of just focusing on swing in uncertainty or
leverage by themselves.
• Discussion focused on obtaining upside and containing
downside
Related Patterns: “Extreme Credible Ranges” and “Evidentially
Assessable Factors”
44


Simulation: The top bars in the Tornado identify
the uncertainties with the highest leverage

Top 4 factors
capture most
of the variance
in NPV

45

The 10-50-90 bar summarizes overall
uncertainty into a single range:
Low: -18M Base: 44M High: 197M


Debrief: Reflections/Questions?

Introduction

Evaluate
option
value

46


Agenda

Introduction

Evaluate
option
value

47


Pattern: “Simple Options Valuation”
Placing dollar values on development opportunities is a task that
can be obfuscated by complex financial models, which shift the
focus away from collaborative learning discussions toward magic
numbers.
Therefore, use simple options valuation to make clear the logic
behind development opportunity valuation.
Consequences:
The equivalent dollar amount in a simple
valuation incorporates the uncertainty in the
opportunity and is directly traceable into its
constituent components.
Related Patterns: Uncertainty-Value
Screen, Productivity Ordering

48


Simulation: Simple Option Valuation
Think of this as an
equivalent value
representing the
uncertainty in this
deal

The equivalent
value just went up
because of
development
success
These numbers come
from the 10-50-90 bar

$0.75M

49

$82M


Pattern: “10-50-90 Bars”
Focusing on single number valuations of projects hides the
underlying uncertainty in the upside and downside of that project.
Therefore, use 10-50-90 bars to characterize uncertainty in each
development project.
Consequences:
• Shows the biggest upsides and downsides
that need to be managed
Related Patterns: “Productivity Ordering”,
“Uncertainty-Value Screen”, “Most Leveraged
Uncertainties”

Value 
50


Simulation: Compare Uncertainty for βCorp

Zoom can lose
a lot of
money, but it
can also make
the most money

51


Simulation: There is a big gap in market
understanding for Zoom

The top 4
uncertainties have to
do with market
understanding

52


Pattern: “Uncertainty-Value Screen”
People can get emotionally attached to pet projects and lose sight
of the big picture.
Therefore, use uncertainty-value screens to understand where
development projects fall and how they need to be managed.
Consequences:
• Facilitates a rich conversation on how to
feasibly move projects to a better place
• Great projects can be picked over good
ones, with transparent logic as opposed to
political posturing, making hard decisions
more acceptable to people.
Related Patterns: “Productivity Ordering”,
“Learning Plans”, “Evidence-Driven Funding”
Also known as: Innovation Screen
53


Probability of Development Success

Simulation: Uncertainty–Value Screen for βCorp

What can we do
to move these
projects out of
this quadrant?

Zoom seems fairly
speculative –
need to get some
market thinking
going on it

Value given development success

54


Pattern: “Evidence-Driven Funding”
Investments in large opportunities with low chance of success are
necessary and yet, perilous.
Therefore, invest by evidence delivered in preceding phase.
Consequences:
• Investments are not arbitrary but thoughtful
• Investments are connected to delivery of evidence
• Projects not tied to P&L statements, which would kill innovation,
and instead managed through learning plan progress.
Related Patterns: “Learning Plans,” “Evidential Work” and
“Uncertainty-Value Screen”

55


Pattern: “Productivity Ordering”
Organizations use budgets as a given constraint when making
funding decisions, without clearly communicating the value of
securing more resources to fund development.

Consequences:
• Provides feedback on the value-cut that
goes together with a cost-cut
• Emphasizes why the CFO was hired – to
obtain funding for important opportunities!
Related Patterns: “Uncertainty-Value Screen”
Also Known As: CFO Chart

Cumulative Value

Therefore, order development projects by their productivity on a
plot of cumulative value versus cumulative investment.

Extra Value
Extra Cost

Budget Line
Cumulative Cost

56


Simulation: CFO Chart

Cumulative Value ($ millions)

Oyster
Pearl

Zoom got cut down to
size because of the
inherent uncertainty

Oyster

Cumulative Cost ($ millions)
57


Debrief
Reflections? Questions?

58


Analytic Practices of Agile Business
Development are the platform for collaboration
Proof
Points

Work to deliver
proof points

Learning
Plan

Development
Uncertainty
Assessable
Economic
Factors

Extreme
Credible
Ranges

Most
Leveraged
Uncertainties

10-50-90
Summary Bar
Watch
downside, swi
ng for upside
59


Simple Option
Value, Value-Unc
Screen, CFO Chart

The analytic practices propel us toward the
goalpost


60


Continuing the Conversation
Learn More
• Include Business Design in Innovation
• Tornado Diagram: Resolving Conflict and Confusion with
Objectivity and Evidence
• Try SimpleTornado – open source
LinkedIn Group
• Invitations will be sent to attendees to join the “Agile Business
Development” group
Connect with me
• Please feel free to reach out at sraha@smartorg.com

61


Appendix

62


Pattern: “Purpose Values”
Dry intellectual logic does not motivate people to reach excellence.
Therefore, find the values that define the purpose of the
organization and align business opportunities and strategy to deliver
on these values.

Consequences:
People rally around the chosen opportunities and are excited to
make it happen
Read More: http://smartorg.com/2012/06/valuepoint6/

63


Simulation: Show Purpose Values of βCorp
Answer “What transformation in the world do you want
to bring about through the work of this company?”
Keep asking “Why?” When you can’t answer anymore,
those are your purpose values.
How well does the opportunity under development
support the purpose values?

64


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