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Agile business development

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The document provides an overview of bringing agile principles and practices to business development. It begins with defining business development and describing the agile manifesto values of collaborative development, working models/software, customer collaboration, and responding to change. It then contrasts traditional versus agile approaches to business development. The remainder of the document discusses evaluating options using techniques like option value analysis and outlines an agenda to apply agile practices like collaborative development and learning from failures to business development.

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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 questions. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Definition of Business Development Business Development is the turning of an idea into a marketable business asset 4 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Current Business Development vs. Agile Business Development CURRENT BUSINESS DEVELOPMENT FOCUS Processes and tools Comprehensive paperwork Contract negotiation Following a plan AGILE BUSINESS DEVELOPMENT FOCUS Collaborative Development Working business models Customer collaboration Responding to change 6 © 2000-2012 SmartOrg. | Confidential and Proprietary. NON-AGILE SOFTWARE DEVELOPMENT FOCUS Processes and tools Comprehensive documentation Contract negotiation Following a plan AGILE SOFTWARE DEVELOPMENT FOCUS Collaborative Development Working software Customer collaboration Responding to change
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Agile practices support the Agile manifesto Collaborative Development Working business models Customer collaboration Responding to change 8 © 2000-2012 SmartOrg. | Confidential and Proprietary.
What practices get us to the goalpost? Collaborative Development Working business models Customer collaboration Responding to change ? 9 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Cashflow Business development is about managing increasing amounts of investment Time 12 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Cashflow Agile business development is about learning/failing/succeeding quickly Time 13 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Evidential Work 15 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
The Mortgage Question What do you need to see before mortgaging your house to fund this project? 17 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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. Related Patterns: Evidential Work and Evidence Assessment 24 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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. Related Patterns: Evidential Work and Evidence Assessment 26 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 Related Patterns: Evidential Work and Evidence Assessment 27 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Simulation: Evidence Assessment of Phase 2: Prove Value Proposition with Customers Phase 1: Develop Value Proposition, Get Approval • Customer Enthusiasm • βCorp Sponsorship 28 Phase 2: Prove Value Proposition with Customers • Technical Performance • Customer Commitment © 2000-2012 SmartOrg. | Confidential and Proprietary. Phase 3: Prepare to Scale • Robust Pipeline • Scalable Business Case
Simulation: Evidence Assessment of Phase 2: Prove Value Proposition with Customers Phase 1: Develop Value Proposition, Get Approval Phase 2: Prove Value Proposition with Customers • Customer Enthusiasm • βCorp Sponsorship • Technical Performance • Customer Commitment Phase 3: Prepare to Scale • Robust Pipeline • Scalable Business Case 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Simulation: Evidence Assessment of Phase 2: Prove Value Proposition with Customers • Technical Performance • Human Control Group confirms that βMark picks 90% of all actual chatter In your chat: List reasons for success List reasons for failure 30 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 Technical Performance 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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 Technical Performance 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 10.4% 24%
Debrief: Reflections/Questions? Introduction Evaluate option value 34 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Agenda Introduction Evaluate option value 35 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Cashflow After development has succeeded, we are ready to double-down Time 36 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Cashflow Agile business development incorporates multiple scenario-thinking before doubling down Time 37 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Evidentially Assessable Factors 38 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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% © 2000-2012 SmartOrg. | Confidential and Proprietary.
Most Leveraged Uncertainties 43 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Debrief: Reflections/Questions? Introduction Evaluate option value 46 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Agenda Introduction Evaluate option value 47 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Simulation: Compare Uncertainty for βCorp Zoom can lose a lot of money, but it can also make the most money 51 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Simulation: There is a big gap in market understanding for Zoom The top 4 uncertainties have to do with market understanding 52 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Simulation: CFO Chart Cumulative Value ($ millions) Oyster Pearl Zoom got cut down to size because of the inherent uncertainty Oyster Cumulative Cost ($ millions) 57 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Debrief Reflections? Questions? 58 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary. Simple Option Value, Value-Unc Screen, CFO Chart
The analytic practices propel us toward the goalpost Collaborative Development Working business models Customer collaboration Responding to change 60 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
Appendix 62 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
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 © 2000-2012 SmartOrg. | Confidential and Proprietary.

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Agile business development

  • 1. Bringing Agility to Business Development Somik Raha, Associate SmartOrg, Inc smartorg.com 1 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 2. 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 questions. 2 © 2000-2013 SmartOrg. | For Classroom Use Only. Not for distribution.
  • 3. Agenda Introduction Business Development The Agile Manifesto Current State Values • • • • Evaluate option value 3 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 4. Definition of Business Development Business Development is the turning of an idea into a marketable business asset 4 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 5. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 6. Current Business Development vs. Agile Business Development CURRENT BUSINESS DEVELOPMENT FOCUS Processes and tools Comprehensive paperwork Contract negotiation Following a plan AGILE BUSINESS DEVELOPMENT FOCUS Collaborative Development Working business models Customer collaboration Responding to change 6 © 2000-2012 SmartOrg. | Confidential and Proprietary. NON-AGILE SOFTWARE DEVELOPMENT FOCUS Processes and tools Comprehensive documentation Contract negotiation Following a plan AGILE SOFTWARE DEVELOPMENT FOCUS Collaborative Development Working software Customer collaboration Responding to change
  • 7. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 8. Agile practices support the Agile manifesto Collaborative Development Working business models Customer collaboration Responding to change 8 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 9. What practices get us to the goalpost? Collaborative Development Working business models Customer collaboration Responding to change ? 9 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 10. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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?
  • 12. Cashflow Business development is about managing increasing amounts of investment Time 12 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 13. Cashflow Agile business development is about learning/failing/succeeding quickly Time 13 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 14. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 15. Evidential Work 15 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 16. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 17. The Mortgage Question What do you need to see before mortgaging your house to fund this project? 17 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 18. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 19. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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
  • 20. Learning Plans 20 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 21. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 22. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 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
  • 23. Evidence Assessment 23 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 24. 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. Related Patterns: Evidential Work and Evidence Assessment 24 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 25. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. Idea Prove Scale
  • 26. 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. Related Patterns: Evidential Work and Evidence Assessment 26 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 27. 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 Related Patterns: Evidential Work and Evidence Assessment 27 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 28. Simulation: Evidence Assessment of Phase 2: Prove Value Proposition with Customers Phase 1: Develop Value Proposition, Get Approval • Customer Enthusiasm • βCorp Sponsorship 28 Phase 2: Prove Value Proposition with Customers • Technical Performance • Customer Commitment © 2000-2012 SmartOrg. | Confidential and Proprietary. Phase 3: Prepare to Scale • Robust Pipeline • Scalable Business Case
  • 29. Simulation: Evidence Assessment of Phase 2: Prove Value Proposition with Customers Phase 1: Develop Value Proposition, Get Approval Phase 2: Prove Value Proposition with Customers • Customer Enthusiasm • βCorp Sponsorship • Technical Performance • Customer Commitment Phase 3: Prepare to Scale • Robust Pipeline • Scalable Business Case 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 30. Simulation: Evidence Assessment of Phase 2: Prove Value Proposition with Customers • Technical Performance • Human Control Group confirms that βMark picks 90% of all actual chatter In your chat: List reasons for success List reasons for failure 30 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 31. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 32. 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 Technical Performance 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 3.88% 24%
  • 33. 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 Technical Performance 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. 10.4% 24%
  • 36. Cashflow After development has succeeded, we are ready to double-down Time 36 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 37. Cashflow Agile business development incorporates multiple scenario-thinking before doubling down Time 37 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 39. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 40. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. Variable Cost e.g. $1M Fixed Cost e.g. $5M
  • 41. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 42. 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% © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 43. Most Leveraged Uncertainties 43 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 44. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 45. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 48. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 49. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 50. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 51. Simulation: Compare Uncertainty for βCorp Zoom can lose a lot of money, but it can also make the most money 51 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 52. Simulation: There is a big gap in market understanding for Zoom The top 4 uncertainties have to do with market understanding 52 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 53. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 54. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 55. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 56. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 57. Simulation: CFO Chart Cumulative Value ($ millions) Oyster Pearl Zoom got cut down to size because of the inherent uncertainty Oyster Cumulative Cost ($ millions) 57 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 58. Debrief Reflections? Questions? 58 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 59. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary. Simple Option Value, Value-Unc Screen, CFO Chart
  • 60. The analytic practices propel us toward the goalpost Collaborative Development Working business models Customer collaboration Responding to change 60 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 61. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 62. Appendix 62 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 63. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.
  • 64. 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 © 2000-2012 SmartOrg. | Confidential and Proprietary.

Editor's Notes

  • #7: Instructions: Poll title “State of business development in your organization”We do not have a formal business development processThe term business development is often confused with salesWe have a formal process but are not agileWe have a formal process and are agile
  • #8: Instructions: Please prepare this poll as follows with the title “What role do you play in your organization?”: Business Development Marketing/Sales Product Management Product Development Project Management EngineeringThis should be multiple-choice – more than one can be picked.
  • #19: Instructions:Show chat window; title of chat window “What evidence do you need to see before mortgaging your house to fund BetaMark?”When we move to the next slide, the chat window should move on the side, visible only to speaker and moderators.
  • #20: Instructions:I will refer to the chat window to make points connecting with this slide. After this slide, this chat window is no longer needed.
  • #23: Nothing to be done here. I will just show this slide, and ask people for questions in Q&A
  • #31: Instructions:When animation goes to “List reasons for success,” Chat Window opens up with the title “List reasons for success”. When animation goes to “List reasons for failure”, new Chat Window opens up with the title “List reasons for failure”. The earlier chat window remains open, both are side-by-side, and editable.When we move to the next slide, these chat windows move to the side so only moderators and speaker can see them.
  • #32: Instructions:1. Somik will read out reasons for success that he likes and wants added underneath “Lab results promising”. The color should be green and font should be “Arial” and size 162. Somik will read out reasons for failure that he likes and wants added underneath “We’ve never done this before”. The color should be red and font should be “Arial” and size 163. When the animation moves to the green box “Given these reasons …,” Somik will cue and ask people to answer a poll. The following poll should open up:Poll:Given the reasons for success and failure, where does your probability of success fall?80-100%60-80%40-60%20-40%0-20%4. When Somik concludes the poll, two chat windows should open up, with the titles “80-100%” and “0-20%”. Somik will ask each camp to put their reasons in the respective windows and respond to each other’s points.5. Somik will make some final comments, “This is how we facilitate a discussion.” Chat windows will disappear after we move to the next slide.
  • #33: Nothing to be done here.
  • #34: Nothing to be done here.
  • #43: Instructions: Chat window opens up with the title “Please enter reasons for the market share percentage being high”. I will start with that prompt.Enter reasons that I identify below “not much competition yet.” The color should be green and font should be “Arial” and size 16.I will then ask “How high is high?” The previous chat window closes, and a new one opens with the title “How high is high?”I will then ask “Now let’s look at reasons for low”. A new chat window opens with the title “Please enter reasons for the market share percentage being low.” Enter reasons that I identify below “A big competitor may get in before us.” The color should be red and font should be “Arial” and size 16.I will then ask “How low is low?” The previous chat window closes, and a new one opens with the title “How low is low?”I will then ask “What is your over-under number?” The previous chat window closes and a new one opens with the title, “What is your base number?”When I move to the next slide, the chat window closes.
  • #45: Read More: http://smartorg.com/2011/10/tornado-diagram-resolving-conflict-and-confusion-with-objectivity-and-evidence/