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Better by Measure: Two Tales of Disruption (Class 3, SVA Products of Design 2014)

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Rebecca Gard Silver

The document discusses the concept of disruption in business and its implications, focusing on environmental and social challenges as interconnected systems. It emphasizes using systems thinking to address issues like climate change, health impacts, and social inequality, while proposing a customer development model for startups that prioritizes sustainability. The text illustrates methods for identifying and addressing externalities in business practices, encouraging a shift towards creating positive ecological and social values.

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BETTER BY MEASURE TWO TALES OF DISRUPTION Class 3 | September 18, 2014 BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
OUTLINE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 2 SCIENCE LAB: TWO TALES OF DISRUPTION BUSINESS SCHOOL: LEAN CUSTOMER DISCOVERY PART ONE CONCEPT REVIEW
TWO TALES OF DISRUPTION SCIENCE LAB BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
TWO TALES OF DISRUPTION BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 4 V. WHAT FEELINGS DOES THE TERM “DISRUPTION” CONNOTE FOR YOU?
TWO TALES OF DISRUPTION DEFINITION (NOUN): Disturbance or problems that interrupt an event, activity, or process. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 DISRUPTIVE… ANYTHING ELSE “Finance. Food. Fuel. Water shortage. Resource scarcity. Climate chaos. Mass poverty. Mass migration. Fundamentalism. Terrorism. Financial oligarchies. We have entered an Age of Disruption.” – Otto Scharmer. “Leading from the Emerging Future.” 5 V. DISRUPTIVE INNOVATION “True disruption means threatening your existing product line and your past investments. Breakthrough products disrupt current lines of businesses.” – Peter Diamandis. X-Prize Foundation, Singularity
FIRST WE’LL FOCUS ON THE LATTER TYPE OF DISRUPTION. THE EARTH ON FIRE KIND. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 6
WHAT DISRUPTIVE IMPACTS DO WE HOPE TO SOLVE FOR? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 7 Climate Change ENVIRONMENTAL IMPACTS SOCIAL IMPACTS HEALTH IMPACTS Child Slavery Infections Disease These negative impacts are the results of interconnected systems – economic, social, ecological.
HOW DO WE SOLVE FOR THESE PROBLEMS? “WE CAN’T SOLVE PROBLEMS WITH THE SAME KIND OF THINKING THAT CREATED THEM.” – Albert Einstein In order to solve for these challenges we need to start by understanding the systems and dynamics that created them so we can begin to imagine ways to intervene and create positive change while avoiding unintended consequences. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 8 Let’s start by mapping systems.
SYSTEMS THINKING IS A VERSITILE AND USEFUL FRAMEWORK WHICH WE ACTUALLY USE ALL THE TIME REBECCA’S SYSTEMS WORK • Mapping Walmart’s supply chain, water and energy use • Using LCA to understand the impacts of apparel for NRDC and the CFDA BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 9 JEN’S SYSTEMS WORK • Unraveling healthcare networks • Understanding the behaviors of hard to reach patients
GETTING TO THE CORE OF A SYSTEM BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 10 What is the purpose of the system? What is your goal for understanding the system? What are the boundaries, scale and context for the system?
THINKING IN SYSTEMS: ROCKAWAY BEACH CHALLENGE: New York City Mayor’s office is working to rebuild Rockaway Beach after super storm Sandy wreaked havoc on the area in 2012. They’ve hired you to help them understand the system dynamics for the coastal region. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 11 CLASS 2 | PARSONS | SUSTAINABLE SYSTEMS | REBECCA SILVER
THINKING IN SYSTEMS: ROCKAWAY BEACH What’s the purpose of the system? What’s your goal for understanding the system? What are the boundaries, scale and context for the system? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 12 CLASS 2 | PARSONS | SUSTAINABLE SYSTEMS | REBECCA SILVER
A SYSTEMS IS MORE THAN THE SUM OF ITS PARTS, BUT LET’S START WITH THE PARTS BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 13 What are the variables in the system? STOCKS: Material or information that has built up in a system over time. These are the things that accumulate – the stuff you can count or measure. What are the connections between variables in the system? FLOWS: Stocks change over a period of time as a result of material or information flows that enters or leaves the stocks.
UNDERSTANDING SYSTEM DYNAMICS FEEDBACK LOOPS: Material or information that has built up in a system over time. These are the things that accumulate – the stuff you can count or measure. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 BALANCING FEEDBACK LOOPS A stabilizing, goal-seeking, regulating feedback loop that keeps stocks at a specific level. 14 REINFORCING FEEDBACK LOOPS An amplifying or enhancing feedback loop, which trends toward instability (entropy). These are “vicious cycles” and “virtuous cycles.”
WHAT HAPPENS WHEN THERE’S A DELAY IN THE SYSTEM? DELAYS: A delay in a balancing feedback loop makes a system likely to oscillate. Changing the length of a delay may make a large change in the behavior of a system. Stocking the right number of Apple Watches Balancing of predator & prey numbers in ecosystems BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
HOW ARE UNINTENDED CONSEQUENCES CREATED? FIXES THAT FAIL (UNINTENDED CONSEQUENCES): A solution is rapidly implemented to address the symptoms of an urgent problem. This quick fix sets into motion unintended consequences that are not evident at first but end-up adding to the symptoms. Pest control > Invasive species introduction Bank bailouts > Golden parachutes New drug release > unplanned side effects BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
THINKING IN SYSTEMS: ROCKAWAY BEACH What are the stocks? What are the flows? What patterns or “archetypes” emerge over time (feedback loops)? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 17 CLASS 2 | PARSONS | SUSTAINABLE SYSTEMS | REBECCA SILVER
SYSTEM DYNAMICS RESULT IN NEGATIVE IMPACTS SYSTEM DYNAMICS: The behavior over time of a system or any of its components. SYSTEM Public Education System Unequal Quality & Access Open Internet Tech. Divide The US Economy 2008 Financial Crisis Continuous Consumption Exhaustion of Resources Private Healthcare Obesity RESULTING BEHAVIOR BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 18
IMPACTS ARE INHERENTLY INTERCONNECTED BECAUSE SYSTEMS ARE INTERCONNECTED BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 19 HEALTH IMPACT SOCIAL IMPACT ENVIRONMENTAL IMPACT WHO KNEW?
HOW IS IMPACT CONNECTED TO BUSINESS MODELS? Impacts occurs as a result of the operations required to create value for customers and shareholders. In business lingo we call these externalities. EXTERNALITY: “A side effect or consequence of industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops kept for honey.” - SOURCE: Google • Externalities are embedded in both what you do and how you do it • Externalities can be created as the direct result of a company’s actions or indirectly, as a result of a series of causal actions • Externalities occur both inside a company and outside a company’s walls • External impact can be singular events or repeated patterns and both types of impacts can be the result of systemic risk and error BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 20
EXTERNALITIES CAN BE POSITIVE AND NEGATIVE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 21 NEGATIVE EXTERNALITY Cost to Society > Private Cost The cost to a third party (the environment, society or private individuals) is greater than the cost the consumer, or company producing a good or service is paying for it. POSITIVE EXTERNALITY Benefit to Society + Private Benefit Occurs when third parties (the environment, society, or private individuals) receive benefits as a result of the consumption or production of a good or service. “Positive externalities flow to the top, negative externalities to the poor.” - Otto scharmer, Leading from the emerging future
OUR ECONOMY THRIVES OFF OF EXTERNALITIES BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 22
WHAT PARTS OF A BUSINESSS DO EXTERNALITES STEM FROM? ANYWHERE As function of product or service delivered to customers Positive impact: Renewable energy providers Negative impact: Weapons manufacturing As (un)intended behavior change resulting from customer use/consumption of service Positive impact: Weight loss from joining online calorie counting service Negative impact: Online dating platforms spurring STD outbreaks Embedded in operations (supply chain & facilities) Positive impact: Generous maternity and paternity time benefits Negative impact: Hazardous chemical emissions from production facility Investment (via direct investment or purchase of goods/services) Positive impact: Investing in renewable energy credits Negative impact: Purchase of conflict minerals for electronics equipment manufacturing Corporate giving & policy Positive impact: Donations to local community organizations benefitting disadvantaged youth Negative impact: Funding of lobbying against environmental regulation SOURCE: On left, icons from Business Model Canvas by Alex Osterwalder and XPlane BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 23
IMPACTS ARE INHERENTLY INTER-CONNECTED, AS ARE THE ELEMENTS OF A BUSINESS BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 Product/Ser vice Function 24 HEALTH IMPACT SOCIAL IMPACT ENVIRONMENTAL IMPACT Investment Supply Chain/ Facilities Corporate Giving Customer Behavior
LEAN STARTUP BUSINESS SCHOOL BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
NOW BACK TO THE GOOD KIND OF DISRUPTION BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 26
STARTUPS AS THE ORGANISM OF CHANGE THE FOUNDERS DEFINE THE PRODUCT VISION AND THEN USE CUSTOMER DISCOVERY TO FIND CUSTOMERS AND A MARKET FOR THAT VISION. -Steve Blank, The Startup Owner’s Manual BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
LEAN LAUNCHPAD: LEAN LAUNCHPAD SIMULATES ENTREPRENEURSHIP BY REQUIRING FOUNDERS TO GET OUT OF THE BUILDING…AND INTO THEIR CUSTOMER’S WORLD. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 28 Customer Discovery Customer Creation Customer Validation Company Building Pivot FLIPPED CLASSROOM
BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 29 LEAN LAUNCHPAD: BUSINESS MODEL CANVAS
LEAN LAUNCHPAD: BUSINESS MODEL CANVAS KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONSHIPS What key activities do our value propositions require? Our distribution channels? Customer relationships? Revenue Streams? KEY RESOURCES How do we get, keep, and grow customers? Which customer relationships have we established? How are they integrated with the rest of our business model? How costly are they? CHANNELS Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from our partners? Which key activities do our partners perform? What value do we deliver to the customer? Which one of our customers’ problems are we helping to solve? What bundles of products and services are we offering to each segment? Which customer needs are we satisfying? What is the minimum viable product? What key resources do our value propositions require? Our distribution channels? Customer relationships? Revenue Streams? Through which channels do our customer segments want to be reached? How do other companies reach them now? Which ones work best? Which ones are most cost-effective How are we integrating them with customer routines? COST STRUCTURE REVENUE STREAMS CUSTOMER SEGMENTS For whom are we creating value? Who are our most important customers? What are the customer archetypes? What are the most important costs inherent to our business model? Which key resources are most expensive? Which key activities are most expensive? For what value are our customers really willing to pay? For what do they currently play? What is the revenue model? What are the pricing tactics? SOURCE: www.businessmodelgeneration.com//canvas | Canvas concepts developed by Alexander Osterwalder and Yves Pigneur. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 30
THE SHIFT: FROM PUSH AND MARKET TO CUSTOMER DEVELOPMENT THE CUSTOMER DEVELOPMENT MODEL STOP STOP STOP - The Four Steps to the Customer Epiphany by Steve Blank Customer Discovery BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 Customer Creation Customer Validation Company Building Pivot Concept/Seed Product Development Alpha/Beta Test Launch/ 1st Ship • Create marcom materials • Create positioning • Hire PR agency • Early buzz • Create demand • Launch event • “Branding” 31 THE PUSH AND MARKET MODEL
FIRST CAME STEVE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 The Customer Development process changes the way startups are built Startups are not smaller versions of large companies A startup as a “temporary organization designed to search for a repeatable and scalable business model” Co-founded 8 startups. 1996: E.piphany | 1998: $3.4 MM sales | 1999: IPO raised $72 MM Author of Four Steps to the Epiphany, Startup Owner’s Manual 32
THEN CAME ERIC BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 CONTINUOUS CUSTOMER INTERACTION A STARTUP IS AN EXPERIMENT A HYPOTHESIS TO BE TESTED ASSUME CUSTOMER AND FEATURES ARE UNKNOWNS LOW BURN BY DESIGN ARE WE ON THE PATH TO A SUSTAINABLE BUSINESS Founded IMVU Parallels between Lean and Agile, caught fire in the startup community for software businesses, particularly mobile and SaaS models. 33
WHAT CAME BEFORE STEVE AND ERIC LEAN MANUFACTURING TOTAL QUALITY MANAGEMENT KANBAN CONTINUOUS IMPROVEMENT AGILE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 34
BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 35
BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 DESIGN RESEARCH (Ethnography) DESIGN THINKING (IDEO, Dschool) AGILE AND LEAN INFLUENCES 36
KANBAN The Kanban Method respects the human condition. People resist change for emotional reasons. When change affects their self-image, self-esteem, or position with a social group, people will resist and the resistance will be emotional. The Kanban Method adopts the Zen Buddhism concept that "water goes around the rock." Hence, it focuses on changes that can be made without invoking emotional resistance, while visualization and limiting work-in-progress raise awareness of deeper issues allowing for an emotional engagement that helps to overcome resistance. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 37
BETTER BY MEASURE BUILDS OFF OF LEAN LAUNCHPAD BY CONNECTING THE CUSTOMER’S WORLD TO HEALTH, CIVIC SOCIETY AND THE ENVIRONMENT. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 38 LEAN LAUNCHPAD GETS BETTER BY MEASURE +
THE SHIFT: BETTER BY MEASURE’S CUSTOMER DEVELOPMENT APPROACH BETTER BY MEASURE CUSTOMER DEVELOPMENT MODEL STOP STOP STOP BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 39 BETTER BY FOCUS MEASURE Eco/Social Hypothesis Testing: By delivering your value proposition, what ecological/social values are created/eroded and how does this effect the customer? Designing for Sustainable Growth: How might different growth scenarios affect ecological/social value creation/erosion? Measuring Eco/Social Outcomes: How can we measure and sustain or improve environmental/soci al outcomes of corporate activities? Co-Creating Eco/Social Solutions: Can you co-create value which addresses both customer needs and ecological/social values? - The Four Steps to the Customer Epiphany by Steve Blank Customer Discovery Customer Creation Customer Validation Company Building Pivot
LEAN LAUNCHPAD: BETTER BY MEASURE’S ADAPTED BUSINESS MODEL CANVAS KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONSHIPS • What key activities do our value propositions require? • Our distribution channels? • Customer relationships? • Revenue Streams? • What environmental and social externalities might the key activities drive? KEY RESOURCES • How do we get, keep, and grow customers? • Which customer relationships have we established? • How are they integrated with the rest of our business model? • How costly are they? • Will customer acquisition/retention drive ecological and social impact? • Can positive ecological and social value be used to acquire customers? CHANNELS • Who are our key partners? • Who are our key suppliers? • Which key resources are we acquiring from our partners? • Which key activities do our partners perform? • What key environmental and and societal stakeholders might our activities effect? • What value do we deliver to the customer? • Which one of our customers’ problems are we helping to solve? • What bundles of products and services are we offering to each segment? • Which customer needs are we satisfying? • What is the minimum viable product? • What ecological and social value could be embedded in the core value proposition to customers? • What key resources do our value propositions require? • Our distribution channels? • Customer relationships? • Revenue Streams? • What environmental and social externalities might resource use create? • Through which channels do our customer segments want to be reached? • How do other companies reach them now? • Which ones work best? • Which ones are most cost-effective • How are we integrating them with customer routines? • What environmental and social externalities might these channels require? COST STRUCTURE REVENUE STREAMS CUSTOMER SEGMENTS • For whom are we creating value? • Who are our most important customers? • What are the customer archetypes? • What are the ecological/social values and behaviors of our customers? • What are the most important costs inherent to our business model? • Which key resources are most expensive? • Which key activities are most expensive? • What key costs to the environment and civic society are driven by our business model? • Which of these externalities is likely to become future economic costs to our business, and by what mechanism (policy, public demand etc.)? • For what value are our customers really willing to pay? • For what do they currently pay? • What is the revenue model? • What are the pricing tactics? • What customer behaviors will revenue generation drive which may affect the environment and civic society, and how? SOURCE: www.businessmodelgeneration.com//canvas | Canvas concepts developed by Alexander Osterwalder and Yves Pigneur. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 40
STEP 1: CUSTOMER DISCOVERY Customer discovery translates a founding team’s vision for the company into a hypothesis about each component of the business model and creates a set of experiments to test each hypothesis. Customer discovery is not about collecting features lists from prospective customers or running lots of focus groups. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 41
ESTIMATE YOUR TOTAL ADDRESSABLE MARKET Total addressable market Served available market • Total addressable: how big is the universe? • Served available market: how many can I reach with my sales channel? • Target market: who will be the most likely buyers? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 Target market 42
HOMEWORK ESTIMATE THE SIZE OF YOUR TOTAL ADDRESSABLE MARKET, SERVED ADDRESSABLE MARKET, AND TARGET MARKET. 1. Build a systems map for the company you’re focusing on. 2. How does your concept fit into the system? 3. From your concept/systems map identify 2 critical business hypotheses to test, and 2 associated environmental/social hypotheses to test. 4. What do you expect to be true? How do you validate what you think is true? 5. Talk to at minimum 10 humans in person that fit your market to do this (Photograph every human you meet, we want to see them!) 6. Go to the climate march to find a captive audience. READ: Steve Easterbrook, The Power to Change Systems: http://planet3.org/2011/10/18/the-power-to-change-systems OPTIONAL: Steve Blank, How to Build a Startup - https://www.udacity.com/course/ep245 BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 43
THE PEOPLE’S CLIMATE MARCH BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 REGISTER: http://peoplesclimate.org/march/ 44
CONCEPT CRITIQUE TO THE BOARD WE GO BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014

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Better by Measure: Two Tales of Disruption (Class 3, SVA Products of Design 2014)

  • 1. BETTER BY MEASURE TWO TALES OF DISRUPTION Class 3 | September 18, 2014 BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
  • 2. OUTLINE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 2 SCIENCE LAB: TWO TALES OF DISRUPTION BUSINESS SCHOOL: LEAN CUSTOMER DISCOVERY PART ONE CONCEPT REVIEW
  • 3. TWO TALES OF DISRUPTION SCIENCE LAB BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
  • 4. TWO TALES OF DISRUPTION BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 4 V. WHAT FEELINGS DOES THE TERM “DISRUPTION” CONNOTE FOR YOU?
  • 5. TWO TALES OF DISRUPTION DEFINITION (NOUN): Disturbance or problems that interrupt an event, activity, or process. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 DISRUPTIVE… ANYTHING ELSE “Finance. Food. Fuel. Water shortage. Resource scarcity. Climate chaos. Mass poverty. Mass migration. Fundamentalism. Terrorism. Financial oligarchies. We have entered an Age of Disruption.” – Otto Scharmer. “Leading from the Emerging Future.” 5 V. DISRUPTIVE INNOVATION “True disruption means threatening your existing product line and your past investments. Breakthrough products disrupt current lines of businesses.” – Peter Diamandis. X-Prize Foundation, Singularity
  • 6. FIRST WE’LL FOCUS ON THE LATTER TYPE OF DISRUPTION. THE EARTH ON FIRE KIND. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 6
  • 7. WHAT DISRUPTIVE IMPACTS DO WE HOPE TO SOLVE FOR? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 7 Climate Change ENVIRONMENTAL IMPACTS SOCIAL IMPACTS HEALTH IMPACTS Child Slavery Infections Disease These negative impacts are the results of interconnected systems – economic, social, ecological.
  • 8. HOW DO WE SOLVE FOR THESE PROBLEMS? “WE CAN’T SOLVE PROBLEMS WITH THE SAME KIND OF THINKING THAT CREATED THEM.” – Albert Einstein In order to solve for these challenges we need to start by understanding the systems and dynamics that created them so we can begin to imagine ways to intervene and create positive change while avoiding unintended consequences. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 8 Let’s start by mapping systems.
  • 9. SYSTEMS THINKING IS A VERSITILE AND USEFUL FRAMEWORK WHICH WE ACTUALLY USE ALL THE TIME REBECCA’S SYSTEMS WORK • Mapping Walmart’s supply chain, water and energy use • Using LCA to understand the impacts of apparel for NRDC and the CFDA BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 9 JEN’S SYSTEMS WORK • Unraveling healthcare networks • Understanding the behaviors of hard to reach patients
  • 10. GETTING TO THE CORE OF A SYSTEM BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 10 What is the purpose of the system? What is your goal for understanding the system? What are the boundaries, scale and context for the system?
  • 11. THINKING IN SYSTEMS: ROCKAWAY BEACH CHALLENGE: New York City Mayor’s office is working to rebuild Rockaway Beach after super storm Sandy wreaked havoc on the area in 2012. They’ve hired you to help them understand the system dynamics for the coastal region. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 11 CLASS 2 | PARSONS | SUSTAINABLE SYSTEMS | REBECCA SILVER
  • 12. THINKING IN SYSTEMS: ROCKAWAY BEACH What’s the purpose of the system? What’s your goal for understanding the system? What are the boundaries, scale and context for the system? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 12 CLASS 2 | PARSONS | SUSTAINABLE SYSTEMS | REBECCA SILVER
  • 13. A SYSTEMS IS MORE THAN THE SUM OF ITS PARTS, BUT LET’S START WITH THE PARTS BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 13 What are the variables in the system? STOCKS: Material or information that has built up in a system over time. These are the things that accumulate – the stuff you can count or measure. What are the connections between variables in the system? FLOWS: Stocks change over a period of time as a result of material or information flows that enters or leaves the stocks.
  • 14. UNDERSTANDING SYSTEM DYNAMICS FEEDBACK LOOPS: Material or information that has built up in a system over time. These are the things that accumulate – the stuff you can count or measure. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 BALANCING FEEDBACK LOOPS A stabilizing, goal-seeking, regulating feedback loop that keeps stocks at a specific level. 14 REINFORCING FEEDBACK LOOPS An amplifying or enhancing feedback loop, which trends toward instability (entropy). These are “vicious cycles” and “virtuous cycles.”
  • 15. WHAT HAPPENS WHEN THERE’S A DELAY IN THE SYSTEM? DELAYS: A delay in a balancing feedback loop makes a system likely to oscillate. Changing the length of a delay may make a large change in the behavior of a system. Stocking the right number of Apple Watches Balancing of predator & prey numbers in ecosystems BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
  • 16. HOW ARE UNINTENDED CONSEQUENCES CREATED? FIXES THAT FAIL (UNINTENDED CONSEQUENCES): A solution is rapidly implemented to address the symptoms of an urgent problem. This quick fix sets into motion unintended consequences that are not evident at first but end-up adding to the symptoms. Pest control > Invasive species introduction Bank bailouts > Golden parachutes New drug release > unplanned side effects BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
  • 17. THINKING IN SYSTEMS: ROCKAWAY BEACH What are the stocks? What are the flows? What patterns or “archetypes” emerge over time (feedback loops)? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 17 CLASS 2 | PARSONS | SUSTAINABLE SYSTEMS | REBECCA SILVER
  • 18. SYSTEM DYNAMICS RESULT IN NEGATIVE IMPACTS SYSTEM DYNAMICS: The behavior over time of a system or any of its components. SYSTEM Public Education System Unequal Quality & Access Open Internet Tech. Divide The US Economy 2008 Financial Crisis Continuous Consumption Exhaustion of Resources Private Healthcare Obesity RESULTING BEHAVIOR BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 18
  • 19. IMPACTS ARE INHERENTLY INTERCONNECTED BECAUSE SYSTEMS ARE INTERCONNECTED BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 19 HEALTH IMPACT SOCIAL IMPACT ENVIRONMENTAL IMPACT WHO KNEW?
  • 20. HOW IS IMPACT CONNECTED TO BUSINESS MODELS? Impacts occurs as a result of the operations required to create value for customers and shareholders. In business lingo we call these externalities. EXTERNALITY: “A side effect or consequence of industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops kept for honey.” - SOURCE: Google • Externalities are embedded in both what you do and how you do it • Externalities can be created as the direct result of a company’s actions or indirectly, as a result of a series of causal actions • Externalities occur both inside a company and outside a company’s walls • External impact can be singular events or repeated patterns and both types of impacts can be the result of systemic risk and error BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 20
  • 21. EXTERNALITIES CAN BE POSITIVE AND NEGATIVE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 21 NEGATIVE EXTERNALITY Cost to Society > Private Cost The cost to a third party (the environment, society or private individuals) is greater than the cost the consumer, or company producing a good or service is paying for it. POSITIVE EXTERNALITY Benefit to Society + Private Benefit Occurs when third parties (the environment, society, or private individuals) receive benefits as a result of the consumption or production of a good or service. “Positive externalities flow to the top, negative externalities to the poor.” - Otto scharmer, Leading from the emerging future
  • 22. OUR ECONOMY THRIVES OFF OF EXTERNALITIES BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 22
  • 23. WHAT PARTS OF A BUSINESSS DO EXTERNALITES STEM FROM? ANYWHERE As function of product or service delivered to customers Positive impact: Renewable energy providers Negative impact: Weapons manufacturing As (un)intended behavior change resulting from customer use/consumption of service Positive impact: Weight loss from joining online calorie counting service Negative impact: Online dating platforms spurring STD outbreaks Embedded in operations (supply chain & facilities) Positive impact: Generous maternity and paternity time benefits Negative impact: Hazardous chemical emissions from production facility Investment (via direct investment or purchase of goods/services) Positive impact: Investing in renewable energy credits Negative impact: Purchase of conflict minerals for electronics equipment manufacturing Corporate giving & policy Positive impact: Donations to local community organizations benefitting disadvantaged youth Negative impact: Funding of lobbying against environmental regulation SOURCE: On left, icons from Business Model Canvas by Alex Osterwalder and XPlane BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 23
  • 24. IMPACTS ARE INHERENTLY INTER-CONNECTED, AS ARE THE ELEMENTS OF A BUSINESS BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 Product/Ser vice Function 24 HEALTH IMPACT SOCIAL IMPACT ENVIRONMENTAL IMPACT Investment Supply Chain/ Facilities Corporate Giving Customer Behavior
  • 25. LEAN STARTUP BUSINESS SCHOOL BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
  • 26. NOW BACK TO THE GOOD KIND OF DISRUPTION BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 26
  • 27. STARTUPS AS THE ORGANISM OF CHANGE THE FOUNDERS DEFINE THE PRODUCT VISION AND THEN USE CUSTOMER DISCOVERY TO FIND CUSTOMERS AND A MARKET FOR THAT VISION. -Steve Blank, The Startup Owner’s Manual BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014
  • 28. LEAN LAUNCHPAD: LEAN LAUNCHPAD SIMULATES ENTREPRENEURSHIP BY REQUIRING FOUNDERS TO GET OUT OF THE BUILDING…AND INTO THEIR CUSTOMER’S WORLD. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 28 Customer Discovery Customer Creation Customer Validation Company Building Pivot FLIPPED CLASSROOM
  • 29. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 29 LEAN LAUNCHPAD: BUSINESS MODEL CANVAS
  • 30. LEAN LAUNCHPAD: BUSINESS MODEL CANVAS KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONSHIPS What key activities do our value propositions require? Our distribution channels? Customer relationships? Revenue Streams? KEY RESOURCES How do we get, keep, and grow customers? Which customer relationships have we established? How are they integrated with the rest of our business model? How costly are they? CHANNELS Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from our partners? Which key activities do our partners perform? What value do we deliver to the customer? Which one of our customers’ problems are we helping to solve? What bundles of products and services are we offering to each segment? Which customer needs are we satisfying? What is the minimum viable product? What key resources do our value propositions require? Our distribution channels? Customer relationships? Revenue Streams? Through which channels do our customer segments want to be reached? How do other companies reach them now? Which ones work best? Which ones are most cost-effective How are we integrating them with customer routines? COST STRUCTURE REVENUE STREAMS CUSTOMER SEGMENTS For whom are we creating value? Who are our most important customers? What are the customer archetypes? What are the most important costs inherent to our business model? Which key resources are most expensive? Which key activities are most expensive? For what value are our customers really willing to pay? For what do they currently play? What is the revenue model? What are the pricing tactics? SOURCE: www.businessmodelgeneration.com//canvas | Canvas concepts developed by Alexander Osterwalder and Yves Pigneur. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 30
  • 31. THE SHIFT: FROM PUSH AND MARKET TO CUSTOMER DEVELOPMENT THE CUSTOMER DEVELOPMENT MODEL STOP STOP STOP - The Four Steps to the Customer Epiphany by Steve Blank Customer Discovery BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 Customer Creation Customer Validation Company Building Pivot Concept/Seed Product Development Alpha/Beta Test Launch/ 1st Ship • Create marcom materials • Create positioning • Hire PR agency • Early buzz • Create demand • Launch event • “Branding” 31 THE PUSH AND MARKET MODEL
  • 32. FIRST CAME STEVE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 The Customer Development process changes the way startups are built Startups are not smaller versions of large companies A startup as a “temporary organization designed to search for a repeatable and scalable business model” Co-founded 8 startups. 1996: E.piphany | 1998: $3.4 MM sales | 1999: IPO raised $72 MM Author of Four Steps to the Epiphany, Startup Owner’s Manual 32
  • 33. THEN CAME ERIC BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 CONTINUOUS CUSTOMER INTERACTION A STARTUP IS AN EXPERIMENT A HYPOTHESIS TO BE TESTED ASSUME CUSTOMER AND FEATURES ARE UNKNOWNS LOW BURN BY DESIGN ARE WE ON THE PATH TO A SUSTAINABLE BUSINESS Founded IMVU Parallels between Lean and Agile, caught fire in the startup community for software businesses, particularly mobile and SaaS models. 33
  • 34. WHAT CAME BEFORE STEVE AND ERIC LEAN MANUFACTURING TOTAL QUALITY MANAGEMENT KANBAN CONTINUOUS IMPROVEMENT AGILE BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 34
  • 35. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 35
  • 36. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 DESIGN RESEARCH (Ethnography) DESIGN THINKING (IDEO, Dschool) AGILE AND LEAN INFLUENCES 36
  • 37. KANBAN The Kanban Method respects the human condition. People resist change for emotional reasons. When change affects their self-image, self-esteem, or position with a social group, people will resist and the resistance will be emotional. The Kanban Method adopts the Zen Buddhism concept that "water goes around the rock." Hence, it focuses on changes that can be made without invoking emotional resistance, while visualization and limiting work-in-progress raise awareness of deeper issues allowing for an emotional engagement that helps to overcome resistance. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 37
  • 38. BETTER BY MEASURE BUILDS OFF OF LEAN LAUNCHPAD BY CONNECTING THE CUSTOMER’S WORLD TO HEALTH, CIVIC SOCIETY AND THE ENVIRONMENT. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 38 LEAN LAUNCHPAD GETS BETTER BY MEASURE +
  • 39. THE SHIFT: BETTER BY MEASURE’S CUSTOMER DEVELOPMENT APPROACH BETTER BY MEASURE CUSTOMER DEVELOPMENT MODEL STOP STOP STOP BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 39 BETTER BY FOCUS MEASURE Eco/Social Hypothesis Testing: By delivering your value proposition, what ecological/social values are created/eroded and how does this effect the customer? Designing for Sustainable Growth: How might different growth scenarios affect ecological/social value creation/erosion? Measuring Eco/Social Outcomes: How can we measure and sustain or improve environmental/soci al outcomes of corporate activities? Co-Creating Eco/Social Solutions: Can you co-create value which addresses both customer needs and ecological/social values? - The Four Steps to the Customer Epiphany by Steve Blank Customer Discovery Customer Creation Customer Validation Company Building Pivot
  • 40. LEAN LAUNCHPAD: BETTER BY MEASURE’S ADAPTED BUSINESS MODEL CANVAS KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS CUSTOMER RELATIONSHIPS • What key activities do our value propositions require? • Our distribution channels? • Customer relationships? • Revenue Streams? • What environmental and social externalities might the key activities drive? KEY RESOURCES • How do we get, keep, and grow customers? • Which customer relationships have we established? • How are they integrated with the rest of our business model? • How costly are they? • Will customer acquisition/retention drive ecological and social impact? • Can positive ecological and social value be used to acquire customers? CHANNELS • Who are our key partners? • Who are our key suppliers? • Which key resources are we acquiring from our partners? • Which key activities do our partners perform? • What key environmental and and societal stakeholders might our activities effect? • What value do we deliver to the customer? • Which one of our customers’ problems are we helping to solve? • What bundles of products and services are we offering to each segment? • Which customer needs are we satisfying? • What is the minimum viable product? • What ecological and social value could be embedded in the core value proposition to customers? • What key resources do our value propositions require? • Our distribution channels? • Customer relationships? • Revenue Streams? • What environmental and social externalities might resource use create? • Through which channels do our customer segments want to be reached? • How do other companies reach them now? • Which ones work best? • Which ones are most cost-effective • How are we integrating them with customer routines? • What environmental and social externalities might these channels require? COST STRUCTURE REVENUE STREAMS CUSTOMER SEGMENTS • For whom are we creating value? • Who are our most important customers? • What are the customer archetypes? • What are the ecological/social values and behaviors of our customers? • What are the most important costs inherent to our business model? • Which key resources are most expensive? • Which key activities are most expensive? • What key costs to the environment and civic society are driven by our business model? • Which of these externalities is likely to become future economic costs to our business, and by what mechanism (policy, public demand etc.)? • For what value are our customers really willing to pay? • For what do they currently pay? • What is the revenue model? • What are the pricing tactics? • What customer behaviors will revenue generation drive which may affect the environment and civic society, and how? SOURCE: www.businessmodelgeneration.com//canvas | Canvas concepts developed by Alexander Osterwalder and Yves Pigneur. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 40
  • 41. STEP 1: CUSTOMER DISCOVERY Customer discovery translates a founding team’s vision for the company into a hypothesis about each component of the business model and creates a set of experiments to test each hypothesis. Customer discovery is not about collecting features lists from prospective customers or running lots of focus groups. BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 41
  • 42. ESTIMATE YOUR TOTAL ADDRESSABLE MARKET Total addressable market Served available market • Total addressable: how big is the universe? • Served available market: how many can I reach with my sales channel? • Target market: who will be the most likely buyers? BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 Target market 42
  • 43. HOMEWORK ESTIMATE THE SIZE OF YOUR TOTAL ADDRESSABLE MARKET, SERVED ADDRESSABLE MARKET, AND TARGET MARKET. 1. Build a systems map for the company you’re focusing on. 2. How does your concept fit into the system? 3. From your concept/systems map identify 2 critical business hypotheses to test, and 2 associated environmental/social hypotheses to test. 4. What do you expect to be true? How do you validate what you think is true? 5. Talk to at minimum 10 humans in person that fit your market to do this (Photograph every human you meet, we want to see them!) 6. Go to the climate march to find a captive audience. READ: Steve Easterbrook, The Power to Change Systems: http://planet3.org/2011/10/18/the-power-to-change-systems OPTIONAL: Steve Blank, How to Build a Startup - https://www.udacity.com/course/ep245 BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 43
  • 44. THE PEOPLE’S CLIMATE MARCH BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014 REGISTER: http://peoplesclimate.org/march/ 44
  • 45. CONCEPT CRITIQUE TO THE BOARD WE GO BETTER BY MEASURE | WEEK 3: SEPTEMBER 18, 2014

Editor's Notes

  • #9: Examples of where I’ve used Systems thinking – Walmart supply chain mapping project, NRDC work using LCA (a systems modeling framework), in masters program to evaluate system dynamics of natural systems
  • #10: We use it to test our theories of how the world works.
  • #15: REINFORCING FEEDBACK LOOPS: A forest which is clear cut, and not allowed to recover. A sea where fish are overfished. BALANCING FEEDBACK LOOP: A managed forest where lumber is harvested at a rate where the trees can grow back so lumber can be harvested in perpetuity. A sea where fish are caught at a rate which allows the population to regenerate itself so the stock of fish doesn’t diminish.
  • #24: Icons from Alex Osterwalder http://businessmodelhub.com/photo/business-model-canvas-icons?context=popular
  • #30: How to define, think, and draw a business model. Us e this as a tool to sketch out your business model. Take time to think about the alternate possibilities. Ask yourself difficult questions.
  • #31: Rules – you’re assigned a product but you can trade; by end of class you must commit to your product
  • #33: Mainstream management principles are not suited for the chaos and uncertainty that startups must face. Prior to lean manufacturing – managers would focus on the utilization rate of a machine. If a startup builds something that no one wants, it doesn’t matter if it’s on time and on budget.
  • #34: Revenue goals from the first day. No scaling until revenue. Are we on the path to a sustainable business. Speed wins. Get to each pivot sooner.
  • #36: http://lifeasahuman.com/files/2011/01/4183278431_9e130bcda5_b.jpg Water goes around a rock
  • #37: http://agilelion.com/agile-kanban-cafe/agile-and-lean-influences-where-did-kanban-scrum-scrumban-come-from
  • #38: http://lifeasahuman.com/files/2011/01/4183278431_9e130bcda5_b.jpg
  • #41: Rules – you’re assigned a product but you can trade; by end of class you must commit to your product
  • #43: Estimating TAM and SAM and target market is a good starting point for the market size hypothesis. Customers will help turn these hypotheses into facts. http://ultralightstartups.com/wp-content/uploads/2012/04/Steve-Blank-Market-Sizing.pdf