Designing and Understanding Business

Understanding and Designing Business

with “requirements gathering”

Last week

• Questions?

Tomorrow

• Bring your all the post its with user needs and desires

• Bring all the post its you’ll generate tonight of what the business currently has, and what it plans to build

• Reading: Chapt 6 of Design is Job (preferably the whole thing– 9 bucks for the digital copy!)

Discuss

• Questionaire

10 Questions1. Exactly what problem will this

solve? (value proposition)2. For whom do we solve that

problem? (target market)3. How big is the opportunity?

(market size)4. What alternatives are out

there? (competitive landscape)

5. Why are we best suited to pursue this? (our differentiator)

6. Why now? (market window)7. How will we get this product to

market? (go-to-market strategy)8. How will we measure

success/make money from this product? (metrics/revenue strategy)

9. What factors are critical to success? (solution requirements)

10. Given the above, what’s the recommendation? (go or no-go)

Marty Cagen http://www.svpg.com/blog/files/assessing_product_opportunities.html

Deductive Reasoning

“Traditional firms utilize and reward the use of two kinds of logic. The first, inductive, entails proving through observation that something actually works. The second, deductive, involves proving -- through reasoning from principles -- that something must be.”

Abductive Reasoning

“Designers value highly a third type of logic: abductive reasoning. Abductive reasoning, as described by Darden professor Jeanne Liedtka, embraces the logic of what might be.

This style of thinking is critical to the creative process.”

http://www.businessweek.com/innovate/content/aug2005/di20050803_823317.htm

Business is from Mars, Design from Venus

Designers can make great leaps forward

But the business folks can be left behind

Critical thinking can also help you with their ideas

How many have you thought about a client or a boss “That’s a moronic idea”

Can you build a bridge to their goal?

Yes, and

7

AND

8

Step Back

Think

Organize

ProceedThe Inner Game of Stress: Outsmart Life's Challenges and Fulfill Your Potential by W. Timothy Gallwey

Tools for Thinking

• Clarification: Do I understand what you are saying?

• Understanding: Do I understand your thinking

• Context: Do I understand the world we are acting in?

• Evidence: What tells me this is right?

For Clarification, try Active Listening

• Repeat• Paraphrase• Extend

For Understanding, try Five WhysMy car will not start. (the problem)

Why? - The battery is dead. (first why)Why? - The alternator is not functioning. (second why)Why? - The alternator belt has broken. (third why)Why? - The alternator belt was well beyond its useful service life and has never been replaced. (fourth why)Why? - I have not been maintaining my car according to the recommended service schedule. (fifth why, a root cause)Why? - Replacement parts are not available because of the extreme age of my vehicle. (sixth why, optional footnote)

CONTEXTA little about Markets

One Word: Plastics

Why the one word?

• Opportunity• Brand Completeness• Blocking competition• Raising money• Curiosity

Types of Opportunities/Ideas

Better Cheaper Niche New

I can do itbetter

I can do itcheaper

I can do itfor you

You neverknewyou needed it

How big is the opportunity?

Total Available Market (TAM)

Total Available Market (TAM)• How many people would want/needthe product?• How large is the market be(in $’s) if they all bought?• How many units would that be?

How Do I Find Out?• Industry Analysts – Gartner, Forrester• Wall Street Analysts – Goldman, Morgan

How big is my slice?

Total Available Market (TAM)

Served Available Market (SAM)

• How many people need or can use product?• How many people have the money tobuy the product• How large would the market be(in $’s) if they all bought?• How many units would that be?

How Do I Find Out?• Talk to potential customers

Served Available Market (SAM)

Your idea is worthless alone

Idea Execution Timing Dumb Luck

MARKETSWhat business will you be in?

Customer Development

Customer Development

CompanyBuilding

CustomerDiscovery

CustomerValidation

Customer Creation

Steven Gary Blank, Four Steps to the Ephinany

• How many of them are there?

• Are they price sensitive?• How big is their problem?• How often do they have

the problem?• How do they solve it

today?

Who are your customers?

New Product Conundrum

• New Product Introductions sometimes work, yet sometimes fail– Why?– Is it the people that are different?– Is it the product that are different?

• Perhaps there are different “types” of ventures?

Three Types of Markets

• Who Cares?• Type of Market changes EVERYTHING• Sales, marketing and business development

differ radically by market type

Existing Market Resegmented Market

New Market

Existing: founded 1938

Competitor founded 1972

Competing in an Existing Market

• Faster/Better • High end• Somewhere else

Resegmented

Gap’s new entry

Competing by resegmenting

• Niche = marketing/branding driven

• Cheaper = low end

New Market?

New

New Existing Resegmented

New Market

• Cheaper/good enough can create a new class of product/customer

• Innovative/never existed before

John Gourville, Eager Sellers and Stony Buyers (2006)

Deadpool

Type of Market Changes Everything

• Market– Market Size– Cost of Entry– Launch Type– Competitive

Barriers– Positioning

• Sales– Sales Model– Margins– Sales Cycle– Chasm Width

Existing Market

Resegmented Market

New Market

• Finance• Ongoing Capital• Time to Profitability

• Customers• Needs• Adoption

Choose your idea

From Guy Kawasaki, Art of the Start

Ability to provide unique product or service

Value to customer

compete on price

stupid

bankrupt

The holy grail

WHAT IS YOUR IDEA?Exercise

Who are your customers?What is your market?

How big is the opportunity?

BUSINESS MODELSHow do we make money?

Business creates value for which they receive money

Money allows them the resources to provide value

WHAT DO YOU USERS HAVE TO DO?Who are you users?

Marketplace ModelAdvertising Model

Affiliate ModelCommunity Model

Subscription Model

I have always been a woman who arranges things,for the pleasure–and the profit–it derives.I have always been a woman who arranges things, like furniture and daffodils and lives.

Marketplaces bring buyers and sellers together and facilitate transactions. They can play a role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a marketplace charges a fee or commission for each transaction it enables.

I’ll go where the buyers are

I want to find things!

I want the best price!

Can I trust this seller?

Users must find products, evaluate seller, and make a purchase

Advertising ModelThe web advertising model is an update of the one we’re familiar with from broadcast TV. The web “broadcaster” provides content and services (like email, IM, blogs) mixed with advertising messages. The advertising model works best when the volume of viewer traffic is large or highly specialized.

Users must:• Notice advertising• Interact with ad

Preconditions: User must visit advertising location

Share their demographic information

Types:CPMCPCCPA

Community ModelThe viability of the community model is based on user loyalty. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.

Open Source Red Hat, OpenXOpen Content Wikipedia, Freebase

Users need to • Create an identity • Connect with other users • Build a reputation• Create and share

content/work/etc

Users must care

Subscription ModelUsers are charged a periodic—daily, monthly or annual—fee to subscribe to a service. It is not uncommon for sites to combine free content with “premium” (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined. Content ServicesSoftware as a ServiceInternet Services Providers

User must:•Able to evaluate the

offering• Subscribe and

unsubscribe to offering•Realize value offered

Combos

Advertising Community

Combos

Advertising Community

Subscription

Combos

Marketplace Community

Affiliate

1, 2, 3Prioritize and Sequence

Pattern:User gets valueUser returns, gets more

valueUser reciprocates

User adds contentUser contributes money

Wikipedia:Looks up contentKeeps finding more

contentSees error, correctsUser donates

HOW DO YOU MAKE MONEY?Exercise

Marketplace ModelAdvertising Model

Affiliate ModelCommunity Model

Subscription Model

10 Questions1. Exactly what problem will this

solve? (value proposition)2. For whom do we solve that

problem? (target market)3. How big is the opportunity?

(market size)4. What alternatives are out

there? (competitive landscape)

5. Why are we best suited to pursue this? (our differentiator)

6. Why now? (market window)7. How will we get this product to

market? (go-to-market strategy)8. How will we measure

success/make money from this product? (metrics/revenue strategy)

9. What factors are critical to success? (solution requirements)

10. Given the above, what’s the recommendation? (go or no-go)

Marty Cagen http://www.svpg.com/blog/files/assessing_product_opportunities.html

Questions?

@cwodtkecwodtke@eleganthack.com