innovation at 50x 031616

Innovation at 50x

Steve Blank@sgblank

www.steveblank.com

03/16/16

What is Innovation?

Innovation ≠ Incubator

Innovation ≠ Accelerator

Innovation ≠ Startup

Innovation ≠ Lean Anything

Innovation ≠ Open

Innovation ≠ Reorganization




Innovation ≠ Café’s

These are all physical places to do innovation




Innovation ≠ Café’s

These are all physical places to do innovation

Having them does not guarantee any innovation

will happen

Innovation Development• Places:

– R&D, Engineering, Incubators, Accelerators, Hackathons, Open Innovation, etc.

• Methodology:– Waterfall, Agile, Lean

• Pedagogy:– Lean LaunchPad/I-Corps, Case-studies, Mentors

• Metrics:– KPI’s, StateGate®, ECV, Pivots, IRL, TRL, …

• Funding– VC, Corporate VC, M&A, etc.

Innovation Development• Places:

– R&D, Engineering, Incubators, Accelerators, Hackathons, Open Innovation, etc.

• Methodology:– Waterfall, Agile, Lean

• Pedagogy:– Lean LaunchPad/I-Corps, Case-studies, Mentors

• Metrics:– KPI’s, StateGate®, ECV, Pivots, IRL, TRL,…

• Funding– VC, Corporate VC, M&A, Incremental, etc.

Innovation Is?

Satisfying users current or future wants/needs by turning an idea into a product or service

Innovation Is?

Satisfying users current or future wants/needs by turning an idea into a product or service with speed and urgency, using minimal resources and costs

Innovation Succeeds

• Where there is a path to adoption• When it fits into the overall mission and strategy• Because it performs, has metrics, …• It is managed as an innovation portfolio• And has management support (the spirit of “yes”)

Continuous disruption requires Continuous Innovation

Steve Blank


Steve Blank

what’s this mean?∧

20th Century Corporate Lifecycle

21st Century Corporate Lifecycle


Steve Blank

Continuous Innovation requires new management tools

Steve Blank

Continuous Innovation requires new management tools

Lean Innovation Management

Steve Blank

Why Lean Innovation Management?

10x the number of initiatives in 1/5 the amount of time

50x

Can You Create an Organization that Executes and Innovates?

Can You Create an Organization that Executes and Innovates?

It’s Called an Ambidextrous Organization

Source: James March, Charles O’Reilly, Michael Tushman

An Ambidextrous organization achieves breakthrough innovations


An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way

they execute current business model


An Ambidextrous organization achieves breakthrough innovations while relentlessly improving the way they execute

current business model and serve existing customers


Here’s How

Types of Company Innovation

Steve Blank

Three Horizons of Innovation

Source: Baghai, Coley, White

Mature Businessour established capabilities

Rapidly Growing Business Emerging Business


Source: modified Baghai, Coley, White

our established capabilities

New Three Horizons of Innovation

Known

Unknown

Partially Known

Level of innovation is defined by whether the business model is being executed, extended or explored!

Execute

Explore

Extend


Existing Business Model:Process Innovation

Execute Core Mission

Known



Execute

Known

Partially Known

New Opportunities viaBusiness Model Innovation

Extends Core Business



Execute


Execute/Search

Known

Unknown

Partially known

New/Disruptive Business Model

Explores

Capabilities/Risk Assessment

Existing CapabilitiesLow Risk

Need New CapabilitiesHigh Risk

Some CapabilitiesModerate Risk

Known

UnknownPartially known

Innovation Allocation Across the Horizons

Known


60-70%

20-30%5-10%

Return on Investment by Horizon

Known


ROI 1-3 years

• Improve• Partner• Acquire

ROI 4-6 years

• Extend• Invest• Partner• Acquire

ROI 4-10 years

• Incubate• Invent• Invest• Acquire

Evangelos Simoudis/Steve Blank

Process Innovation

Product Mgmt Is the Current Process for Horizon 1

Horizon 1Extend the core

Product Management

Known Stakeholders

Use traditional methodologies for Horizon 1 projects

Steve Blank

Horizon 1: Roadmap Driven R&D

• Use product roadmap• Success: use in next gen product

– With “better” performance than last gen• Corporate competence: Predictable product improvement• Assets: IP, Advanced design

Source: Ikhlaq Sidhu, UC Berkeley

Horizon 1: Market/Customer Driven

• R&D decide their own projects with signals from: – Pilot studies – Business Unit or CTO priorities – External: start-ups and academic – Demo days or open interfaces to suppliers, customers,

universities • Projects must be relevant to core competencies • Success: is awareness, market perception, $’s+ profit• Assets: IP, Advanced design, External Industry Leadership

Source: Ikhlaq Sidhu, UC Berkeley

Process Innovation

Disruptive Innovation

Continuous Innovation

Lean Is the Process for Horizon 2 & 3 Innovation

Horizon 1Extend the core

Horizon 2

Horizon 3

Speed & Urgency

Lean

Use Lean Methodologies for Horizon 2 and 3 projects

Steve Blank

Lean Innovation Delivers Products and Services

that users want and need in a fraction of the time

The Lean Methodology

Lean = 3 parts

Business Model Canvas

Part 1

Customers

Channels

Customer Relationships

Revenue Model

Value Proposition

Activities

Resources

Partners

Costs

Source: Alexander Osterwalder- Business Model Generation

Business Model Canvas = hypotheses of how you create and deliver value for the company and its

customers

Part 1

Customers

Channels


Revenue Model

Value Proposition

Activities

Resources

Partners

Costs


1. Frame Hypotheses

• Frame Hypotheses

1. Frame Hypotheses

• Frame Hypotheses Business Model Canvas

Business Model Canvas


2. Test Hypotheses

• Frame Hypotheses• Test Hypotheses

Business Model Customer Development

Customer Development is how you search for the model

Customer Development

Turning the Business Model Canvas Into Facts

9 Guesses

Guess Guess

GuessGuess

GuessGuess

Guess

GuessGuess

Customers

Channel


Revenue Model


Customer Development is Hypothesis Testing

3. Build Incrementally & Iteratively

• Frame Hypotheses• Test Hypotheses• Build the product

incrementally & Iteratively

Business Model Customer DevelopmentAgile Engineering

The Minimum Viable Product (MVP)

• Smallest feature set that gets you the most … - learning, feedback, failure, orders, … - incremental and iterative

• It is not a prototype • It is not a deployable version with the fewest features• It is what enables a test of a hypothesis • It may be a drawing, a slide, a wireframe, clickable

workflow, etc…

The Pivot

• Definition: A substantive change to one or more of the business model canvas components

• Iteration without crisis

• Fast, agile and opportunistic

• Weeks and $100K

Pivot Cycle Time Matters

• Speed of cycle minimizes cash needs• Minimum feature set speeds up cycle time• Near instantaneous customer feedback drives feature set

CustomerDiscovery

CustomerValidation

CompanyBuilding

CustomerCreation

ExecutionSearch

Pivot

Part 1

Agile Engineering

+Part 2

Part 3

Elements of Lean Startup

Lean Gets Theory

Customer Development2003Blank

Agile Engineering2011Ries

Business Model Canvas2010

Osterwalder

HBR Cover2013

Lean Gets Practice

Lean LaunchPadFor Students

2011

1250+ teams Taught in 75 Universities

760+ teams Taught by 50 Universities

I-CorpsFor SBIR/STTR

2012

I-Corps For Life Sciences

2014

I-Corps For NSA

2015

~250,000 on-line students

Udacity.com

How Does This Really Work?

Example 1:Stanford Team

Lessons learned after 130 interviews

Yegor Tkachenko, MS

Marketing AnalyticsMachine Learning

Eric Peter, CS & MBAConsumer Insight ExpertManagement Consulting

Scott Steinberg, MBA

Marketing Growth StrategyManagement Consulting

Karan Singhal, Undergrad CS

Web DevelopmentUser Interface Design

Share&Tell

Share&Tell

Yegor Tkachenko, MS

Marketing AnalyticsMachine Learning

Eric Peter, CS & MBA

Consumer Insight ExpertManagement Consulting

Scott Steinberg, MBA

Marketing Growth StrategyManagement Consulting

Karan Singhal, Undergrad CS

Web DevelopmentUser Interface Design

Day 1 (Clarified)

We create a way for consumers to make money

by actively sharing their behavioral data and

opinions.

Through this data, we help companies unlock

previously unattainable insights.

Now

We help retailers and CPG companies understand

online shopping behavior.

We do this by creating a platform for people to donate

their Amazon shopping history

to raise money for charity.

130 Interview

s

3,500+ Survey responses

Cost StructureFixed - Infrastructure, servers, team of data scientists, corporate sales force, project managers & analysts, product & user experience development team

Variable - Payment to consumers for use of their data, profit-sharing model (dividends) with consumers, consumer service reps

Revenue Streams1. Custom research studies2. Per-feedback fees (surveys, video interviews, focus groups)3. Sales of raw data / data with automated analytics on top4. Subscriptions to the platform

Pricing based on sample size/type, data type/amount, number of questions, feedback time

Key Resources

Key ActivitiesKey Partners Value Proposition Customer Relationships

Channels

Business Canvas - Week 1Customer Segments

Consumers• Millennials/students• Lower income consumers with smartphones• Existing research participants

Enterprises• Marketing agencies, consulting• Marketing departments at large companies• Marketing departments at non-large CPG companies

• Panel acquisition, retention, incentivization, quality control• Automated seamless insights extraction • Data security• Empowered customer service (for consumer)• Sales force, customer service knowledgable about market research design & execution

• Historical granular data

• Automated platform for seamless insights extraction

• Expertise in market research methodology, execution, statistics

Consumers• Profit sharing• Targeted ads in line with customer’s tastes• Sense of empowermentEnterprises• Unique data,analysis• Easy and fast way to do it

Consumer• Website• Mobile app

Enterprise• Direct web portal• Resold through market research agencies• Custom consulting & research design services

Consumers• Getting paid for data that has already been shared, but from which individuals are not profiting• Provide sense of empowerment and control over data• Offers a natural, effortless way to share opinions• Feel heard and that opinion matters

Enterprises• Linking real-behavior with opinions (vs. stated behavior)• Ability to follow up with consumer• Faster turnaround

• Data API providers• Data aggregators• Marketing agencies• Panel participants

blue = consumerblack = enterprise

What we thought: Enterprise VP blue = consumerblack = enterprise

Enterprise Value Proposition:

Replace traditional survey providers by:● Linking real behavior with opinions (vs.

stated behavior)● Ability to follow up with consumer● Faster turnaround

Key Resources



Demographics● Age?● Gender?● ...

Behavior● Where did you buy?● What? How much?● ...

Emotions / Feelings● Why did you buy?● What matters to you?● ...

Survey

Surveys are based on SELF REPORTED data

Replace with real data

What we did: Talk to companies who use surveys for market

researchHypothesis: We can replace existing panel vendors if we have real behavioral data (as opposed to self-reported data)

What we did: 12 Customer Discovery interviews with companies that conduct market research using surveys

Enterprise

Week 1-3

What we found: Not that muchpain with self-reported data...

“Self-reported data isn’t great, but it’s directionally good

enough.”

“With real data, we’d get the same insight as we do now, but perhaps we’d be slightly more confident.”

“In order to switch vendors, you need to be able to answer a question we can’t

answer today”

“We have to use [vendor] - we have a long term contract through our HQ."

Enterprise

Week 1-3

What we found: Not that muchpain with self-reported data...

“Self-reported data isn’t great,

but it’s directionally

good enough.”

“With real data, we’d get the same insight as we do now, but perhaps we’d be slightly more confident.”

“In order to switch vendors, you need to be

able to answer a question we can’t answer

today”

“We have to use [vendor] - we

have a long term contract through

our HQ."

EnterpriseWeek 1-3

Adding behavioral data alone does not make us 10x better.

We need to be able to answer a specific question that marketers can’t answer today

So, we focused on changing the value prop to answer new questions

for marketers

How should I identify my

consumer target(SMB Businesses)

How do I better understand my

consumer target?

What is the path to purchase for online

and omnichannel shopping?

What are current online shopping trends?

Customer Needs Identified through Customer Discovery:

EnterpriseWeek 1-3

So, we focused on changing the value prop to answer new questions for marketers

How should I identify my

consumer target(SMB Businesses)


consumer target?

What is the path to purchase for online

and omnichannel shopping?


Customer Needs Identified through Customer Discovery:

EnterpriseWeek 1-3

Value Proposition

Enterprises• Linking real-behavior with opinions (vs. stated behavior)• Ability to follow up with consumer• Faster turnaround

Value PropositionEnterprises• Identify target consumers to increase marketing ROI

• Deeper and more accurate behavioral understanding of consumer segments

• Understand online/omnichannel path to purchase

• Understand online market trends at consumer level

Week 1 Week 3

✘

What about the consumer?


Variable - Payment to consumers for use of their data, profit-sharing model (dividends) with consumers, consumer service reps

Revenue Streams1. Custom research studies2. Per-feedback fees (surveys, video interviews, focus groups)3. Sales of raw data / data with automated analytics on top4. Subscriptions to the platformPricing based on sample size/type, data type/amount, number of questions, feedback time

Key Resources

Key ActivitiesKey Partners

Value Proposition


Channels

What we thought: Consumer VPCustomer Segments

Consumers• Millennials/students• Lower income consumers with smartphones• Existing research participants

Enterprises• Marketing agencies, consulting• Marketing departments at large companies• Marketing departments at non-large CPG companies





Consumers• Profit sharing• Targeted ads in line with customer’s tastes• Sense of empowermentEnterprises• Unique data,analysis• Easy and fast way to do it

Consumer• Website• Mobile app

Enterprise• Direct web portal• Resold through market research agencies• Custom consulting & research design services

Consumers• Getting paid for data that has already been shared, but from which individuals are not profiting• Provide sense of empowerment and control over data• Offers a natural, effortless way to share opinions• Feel heard and that opinion matters

Enterprises• Linking real-behavior with opinions• Ability to follow up with consumer- Faster turnaround• Give additional context in traditional surveys

• Data API providers• Data aggregators• Marketing agencies• Panel participants

blue = consumerblack = enterprise

Consumer Value Proposition Hypothesis:

Get paid for your dataFeel in control of your data

Feel heard and that opinions matter...and, that consumers are willing to provide all these data types:• Social media likes & posts• Email purchase receipts• Credit card purchase

history• Amazon.com purchase

history• GPS location history• Web and search history

First consumer testHypothesis: People will provide their data and opinions for money

Tested through: ~25 Customer Discovery focused consumer interviews

ConsumerWeek 1-3

Experiment: Take an MVP on an iPad to the mall

ConsumerWeek 1-3

What we learnedHypothesis: People will provide their data and opinions for money

ConsumerWeek 1-3

Findings:

People will provide data and opinions for money, BUT

Only younger and poorer consumers were interested

Cash-based model had other problems too:● Doesn’t support retention and engagement● Misaligned incentives● Not scalable to get to large # of consumers

Tested through: ~25 Customer Discovery focused consumer interviews

As a result: What if we offered equity instead of cash?

Solves all business needs! ● panel retention and engagement● identity verification● quality of data

ConsumerWeek 4

Google Consumer Survey: n = 500

Oh Wait… Need to Isolate VariablesAlways be skeptical of your data!

Consumers aren’t interested in concept of being a partial owner - they cared about the

extra cash!

Designing a good experiment just saved us 49% of our equity...phew!

ConsumerWeek 4

Value Proposition

Consumer:• Getting paid for data that has already been shared, but from which individuals are not profiting• Provide sense of empowerment and control over data• Offers a natural, effortless way to share opinions• Feel heard and that opinion matters

By Week 4, We Had No Idea What Consumer Value Prop Should Be

Value Proposition

Consumer:• Getting compensated for data that has already been shared• Provide sense of empowerment, control over data• Partial ownership of company

Week 1-4ConsumerWeek 1-4

Consumer:• Control over data• ???

Value Proposition

Week 1 Week 3 Week 4

Let’s first focus on narrowing down enterprise value prop to see

what data we need.

What we did: Customer Validation!

How should I identify my consumer target

(SMB Businesses)


consumer target?

What is the path to purchase for online and omnichannel shopping?


✘ ✘

EnterpriseWeek 4

14 more enterprise interviews to (in)validate our hypothesized value props and identify the most acute needs

“Great value prop guys, but I challenge you - if you had to do something tomorrow as an MVP,

what would it be? This is a LOT to do!”

Note: Quote paraphrased, concept of “Big Idea” was likely referenced

Key learning: A startup can’t do everything. It needs to do one thing well!

EnterpriseWeek 4

Well, why not focus on data that’s easiest to get?

Most Sensitive

Least Sensitive

Google Survey

ConsumerWeek 5

And heard from companies that Amazon data is big pain

point

EnterpriseWeek 5

As a result: An aha moment...

Share & Tell…...helps better understand your target's online & omnichannel shopping & purchasing behavior

• What is purchased on Amazon.com?• What is my online/omni market share?

Why?• Where else does my target shop? Why?• What does my target do before they buy?

What is their shopping path? Why?• What products does my customer buy /

not buy? What do they buy with my product? Why?

...helps better understand your target's persona / where to reach them

• What online behaviors (sites, apps, etc…)?• What media consumption habits?• What do they search for online?• What activities, interests, hobbies?• What demographics?

...provides ability to more directly and narrowly communicate with your target

• Direct messaging / promos on S&T platform

• Better targeting on existing ad networks

Focused value prop and segments:

Help CPG and retailers understand consumer trends

on Amazon

EnterpriseWeek 5-6


Variable - Payment/donations for use of their data, consumer service reps

Revenue Streams1. Subscriptions to insights / platform2. Per-survey fees3. Custom research studies4. Linking data to client databasesPricing based on sample size/type, data type/amount, number of questions, feedback time

Key Resources


Value Proposition

Customer Segments


Channels

Resulting Business Canvas

Consumers

• Smartphone using consumers who shop online• Millennials• Existing research participants• People who currently give to charity

Enterprises

• Retail (traditional)• Retail (e-commerce)• CPG with online sales





Consumer• Website• Mobile appEnterprise• Direct web portal supported by research-experience B2B sales force• Projects sold through market research & strategy firms

Consumers• Get: Charities send invitations• Get/Keep: Shopping discovery + targeted discounts app• Keep: Reports / comparisons of your data

Enterprises• Get:partnership,telesales,PR • Keep: Unique data, analysis• Easy and fast way to do it

Consumers• Feel good by donating data to charity• (potentially) Service to discover, get discounts on, and buy stuff online

Enterprises• Understand purchasing trends on Amazon by demographic group

• Data API providers• Data aggregators• Marketing agencies• Panel participants• Charities/non-profits

EnterpriseWeek 5-6blue = consumer

black = enterprise

• Understand purchasing trends on Amazon by demographic group

• Retail (traditional)• Retail (e-commerce)• CPG with online sales

As a result: Develop low-fi MVPEnterpriseWeek 5-6

Now, how do we incentivize consumers to provide Amazon

data?

ConsumerWeek 5

We identified a few possiblealternatives to cash...

Pay cash

Provide a valuable service

$5 / $10 cash

Donate your data

(to benefit a charity)

Receive targeted

promotions

Personalized product recommen

dations

✘Had learned previously consumers more

willing to share data if they get some intrinsic value

ConsumerWeek 5

What we did: 10+ Customer Discovery interviews...and 2,000+ survey

responses

ConsumerWeek 5

What we found: “Donate your data”best meets the business’s needs

Gets Amazon data?

Retention /

engagement? Quality? Large #? Outcome

$5 / $10 cash

✔ Cash is king! ✘ May be transactional / one-shot deal

✘ Limits to low income

✔ ~>50% interested

Kill for now or use in combo w/ donations

Donate your data

✔ Interest in ‘doing good’

✔ Donation implies opp to ask for future donation

✔ Consumer leads verified through charities

✔ ~27% interested

Focus for class; need to understand impact of bias

Targeted promos

✘ Does not solve major pain, already available

✔ Creates clear gain w. reason to come back

✔ Can verify respondent behavior

✘ Quant test running, qualitatively poor reaction

Test for “keep / grow” insteadProduct

recs✘ Limited interest - does not solve pain, not 10X better than others

✔ Creates clear gain w. reason to come back

-- Unclear if able to verify respondent

• Need 0.75% of TAM to register (1M / 150M)• Of those interested, ~3% will register• Implies >25% interested

ConsumerWeek 5

What we found: Consumers skeptical of donation scams

“I’d donate my Amazon data to raise money for charity X,

but only if that charity asked me too”

“I probably would not donate to a random

startup unless I knew for sure that they

were legit”

Nonprofits should send out communication asking people to donate their data

Nonprofits are a customer acquisition channel and a new customer segment

ConsumerWeek 5

As a result: 3-sided marketConsumer

Week 6

Value Proposition

Consumer:• Control over data• ???

Consumer:• Feel good by donating data to charity• Doesn’t cost money to donate

Value Proposition

Week 3 Week 5

Resulting BMC changes (I)

Consumer:• Millennials & students• Lower income consumers with smartphones• Existing research participants

SegmentConsumer:• Millennials• People who donate to charity

Segment

ConsumerWeek 6

✘✘

Value Proposition

Non-Profit:• A new revenue stream• A new way to engage with donor base• A way to get donations without pushback

Value Proposition

Week 3 Week 5

Resulting BMC changes (II)

Segment

Non-Profit:• All non-profits

Segment

ConsumerWeek 6

Resulting BMC changes (III)Consumer

Week 6

Consumer:• Targeted ads in line with customer’s tastes• Sense of empowerment

Cust. Relationship

Consumer:• Get: Charities send invitations

Cust. Relationship

Need to test this

✘

eCommerce Data & Insight Companies

Data aggregators

Online Donation Tools and Platforms

Slice, Clavis, Profiteero, One Click Retail, Profiteero, Return Path, Paribus?

Data Wallet, Datacoup, Infoscout, Axciom, Experian, LiveRamp, SuperFly

Razoo, CrowdRise, Causes, Survey Monkey, One Big Tweet, GoodSearch, AmazonSmile

Share&Tell

Marketing research agencies

TNS Qualitative, ,Conifer Research,Horowitz Research,Nielsen, Kantar, IPsos,dunnhumby

Our Competitive Set Has Evolved too

Removed through pivotsOnline Survey ToolsTraditional survey panelsOnline qualitative research

Behavioral Consumer Panels

(w/ or w/o surveys)

Nielsen, NPD, IRI, LuthResearch,VertoAnalytics, RealityMine, comScore

SHARE & TELL

ConsumerWeek 6

Nonprofits might not be the right route

What we did:

Interviewed 10+ nonprofits

Tested email campaign to 60

nonprofits to gauge interest

What we learned:

● Only nonprofits who value smaller donations (<$100) from larger base of people were interested in the model

● Nonprofits are slow to make decisions and risk-averse

So what?

Focus more efforts on testing viability of direct to consumer route.

Key hypothesis to test: Can we build enough trust through social media and website?

NonprofitsWeek 7-9

Non-profits may not be

most efficient consumer acquisition

path.

What we did: Tested ‘direct to consumer’ using a high fidelity MVP...

https://www.datadoesgood.com

ConsumerWeek 7-9

https://www.datadoesgood.com/

What we learned: ‘Direct to consumer’ might be a viable route

Arrived to the landing page

Clicked ‘donate now’

Logged in with Facebook

Shared Amazon data

Filled out demographics

100%

~18%

~6%

~6%

~5%

~80%

~95%

~55%

Choose a charity ~11%

~60%

25%

ConsumerWeek 9


Variable - Payment/donations for use of their data, consumer service reps

Revenue Streams1. Subscriptions to insights / platform2. Per-survey fees3. Custom research studies4. Linking data to client databasesPricing based on sample size/type, data type/amount, number of questions, feedback time

Key Resources


Value Proposition

Customer Segments


Channels

Consumers• Online shoppers• Current charity givers• Millennials• Existing research participants

Enterprises• Buyers at e-commerce retailers • Marketers at CPG with online sales

Nonprofits??• Hungry for donations and values small donations from large # of donors• Private donations are main revenue stream

• Donor acquisition??• Donor retention and engagement??• Data quality control• Data security and storage• Automated analytics• Custom analytics• Sales force• Legal

• Physical - workspace, servers• Additional human (short-term) - Full-stack software engineer, Database architect, Security consultant, Legal Consultant, Advisors/Industry Movers(long-term) - Sales team, Analytics team, Security team, Engineering team, Advisors• Intellectual - Trademarks, Contracts with clients, Proprietary analytic tools, Software copyright• Financial - angel/venture funding

Consumers• Website• Mobile app

Enterprises• Web portal supported by B2B sales force• Projects through market research & strategy firms

Nonprofits??• Web portal

Consumers• Get: Social media campaigns & charities send invitations• Keep: Reports / comparisons of your data Enterprises• Get:partnership,telesales,PR • Keep: Unique data, analysis• Easy and fast way to do itNonprofits??• Get: telesales, PR

Consumers• Feel good by donating data to charity• Donating is free & easy

Enterprises• Understand purchasing trends on Amazon by demographic group.brand preference

Nonprofits??• A new revenue stream• A new way to engage with donor base• A way to get donations without pushback

Short Term:• Charities/non-profits• Nonprofit hubs/associations• Legal• Other collectors of online purchase history

Long Term• Data API providers• Data aggregators• E-commerce retailers• Ad networks and programmatic ad buyers?

Final Business Model Canvas Week 10

So...what’s next...

We are going to continue working on this after the class.

Can we gain traction with consumers?

Several additional experiments we want to run incorporating feedback from our MVP.

● Facebook “nominations”● Linking more directly to causes● Many improvements to the MVP

Can we get a letter of intent from any businesses?

We continue to hear companies say they are interested and that this data is valuable. Is one willing to sign a non-binding letter of intent

First Priority Second Priority

Appendix

What we learned: Refined value proposition for enterprise...

Share & Tell…...helps better understand your target's online & omnichannel shopping & purchasing behavior

• What is purchased on Amazon.com?• What is my online/omni market share?

Why?• Where else does my target shop? Why?• What does my target do before they buy?

What is their shopping path? Why?• What products does my customer buy /

not buy? What do they buy with my product? Why?

...helps better understand your target's persona / where to reach them

• What online behaviors (sites, apps, etc…)?• What media consumption habits?• What do they search for online?• What activities, interests, hobbies?• What demographics?

...provides ability to more directly and narrowly communicate with your target

• Direct messaging / promos on S&T platform

• Better targeting on existing ad networks

EnterpriseWeek 4

...for 3 generic enterprise segmentsEnterprise

Week 4

Retailers

Traditional

E-Commerce

1

2

CPG

With online sales

Without online sales

3

What is market research?

Comes in many forms...

1. Surveys to understand consumer opinions / emotions

2. Data to understand market trends

Initial hypothesis:“disrupt” survey-based market research

A quick primer:How do surveys work?

What features do my

customers care about?

1 Business asks a question about their customer

What does my most valuable customer look

like?

What drives customer loyalty?


2 Market research team writes a survey that will inform the answer



Emotions / Feelings● Why did you buy?● What matters to

you?● ...

Survey

5 - 10 minutes of questions

10 - 15 minutes of questions


3 Survey sent to consumers through a ‘panel provider’




you?● ...

Survey

$ / person

Panel ProviderMarket Research team




you?● ...

Survey


4 Consumers answer survey based on their memory


Self reported data


5 Market research team analyzes data to develop an answer

Market Research team

Insight & recommended business action




you?● ...

Survey

...Where we thought we fit in




Why can’t this be based on actual (vs. self reported) data?




you?● ...

Survey





...let’s be a “next gen” panel provider that merges real data

with opinions


What data?• Social media likes &

posts• Email purchase receipts• Credit card purchase

history• Amazon.com purchase

history• GPS location history• Web and search history

Opinions how?• Record short video /

audio clips• Take <5 min surveys• Write reviews• 1-1 text chats

Other learnings

Presenting

Share the key insights that led to a decision or answer.

Don’t just share the answer

Example: Equity IdeaWe learned a, b, & c...therefore we want to do “x”

VS.

We want to do “x”. Here is some rationale for why.

Preempt question the audience might ask and prepare

responses.

Don’t bullshit if you don’t know the answer. It’s okay to say need

time investigate it.

1 2

Group work1. Set up regular recurring meetings at least twice a week

2. Carefully consider if the task is best performed by a group or by an individuala. Everyone wants to participate in decision making, but it is often more efficient

if a single person completes 80% of the task and the group then finishes the rest

3. If there is any tension, discuss it explicitly

4. Don’t take criticism of your ideas personally

5. Humor helps

Launchpad Methodology/Process1. Applying the scientific method to business model is extremely

usefula. treating all ideas as hypotheses prevents attachment to bad

ideasi. also encourages rapid iteration to get to better ideas faster

b. using MVPs as tests of ideas rather than finished products avoids wasting tons of development time

2. Interviewsa. what people initially say is not what they would actually do

i. need to push commitment to see what they actually dob. interviews with experts are a quick way to get a lay of an

industryc. it’s surprisingly easy to get interviews with experts with a warm

intro, student status, and the purpose of learning as much as we can

d. need to clarify customer segment as early as possible to interview the right peoplei. early interviews should focus on figuring out who they are

Example 2:National Science Foundation Team



Lean Means Getting Out of Your Office

Horizon 2

Horizon 3

Speed & Urgency

Lean

Steve Blank

• If you’re not talking to 100’s of customers, it’s not lean• If you’re not building iterative and incremental minimum

viable products, it’s not lean

Managing Three Horizons of Innovation - Current


Execute


Search


Execute/Search

Known


Lean Innovation MgmtProcess Mgmt

Managing Three Horizons of Innovation - Goal

Existing Business Model:Continuous Innovation

Execute


Search


Execute/Search

Known


Lean Innovation Mgmt

Innovation Metrics

NASA/DOD Technology Readiness Level (TRL)

• Formal Way to assess project maturity• Quantify Relative Risks• Data Driven• Adopted by NASA, DOD, FAA, ESA…

NASA/DOD Technology Readiness: Levels 1 & 2

Basic Technology Research• Basic principles observed• Technology concept formulated

Concept

NASA/DOD Technology Readiness Levels 3 & 4

Research to prove Feasibility • Experimental proof of concept• Breadboard validation in lab

Research

Concept

NASA/DOD Technology Readiness Levels 5 & 6

Demo Prototype • Breadboard validation outside the building• System demo in real-world

Research

Concept

Demo

NASA/DOD Technology Readiness Levels 7, 8, 9

Deployment• System Development• System deployed in real-world

Research

Concept

Demo

What Can We Do With Customer Discovery Data?

The Investment Readiness Level

Investment Readiness Level

We can do the same for new ventures


We can do the same for new ventures

Emphasis is on data


• A Formal Way to Quantify Relative Risks• Data Driven• Analog to NASA/DOD

Technology Readiness Level (TRL)• Use IRL as a way to establish immediate

funding increments

Investment Readiness: Levels 1 & 2

Hypotheses• Value Proposition summarized• Canvas hypotheses articulated

Hypotheses


Problem / Solution Fit• Problem Solution fit• Low fidelity MVP

Hypotheses

Problem/Solution


Validate• Product/Market fit• Right side of canvas

Hypotheses

Problem/Solution

Product/Market fit


Validate• Left side of canvas

Hypotheses

Problem/Solution

Product/Market fit

Investment Readiness: Levels 9

Metrics That Matter

Hypotheses

Problem/Solution

Product/Market fit

Left side of the canvas

Technology Readiness Level

Problem/Solution

Hypotheses

Product/Market Fit

Validate Right side of Canvas

Validate Left side of Canvas

Metrics that Matter

InvestmentReadiness Level

Horizon 1 ProceduresMeets a Horizon 3 Project

Steve Blank

Horizon 3 Project

Horizon 1 Management

The Problem

Startups/New Corporate Initiatives Start as Innovation Engines

New/Disruptive Innovation

• Disruptive• Business Model Innovation

• Better/faster/cheaper

• Innovation requires no restrictions by plans, procedures or processes

• Success = finding a repeatable and scalable business model

• Grows and scales

Steve Blank

Horizon 3

Horizon 3 Needs To Leave Home

Process Innovation



• Physically separate from operating divisions

• Company Incubator, etc• Their own plans, procedures, policies,

incentives and KPI’s• They operate with speed and urgency• Goal is to find a repeatable and

scalable mission model

Steve Blank

Success Creates “Debt”

Success creates• Technical debt• Organizational debt

• Refactoring “cleans up” debt by restructuring it Refactoring

Steve Blank

New/Disruptive Innovation

Type of Innovation

Innovation Becomes Execution

Process Execution


• Success means scale

• Scale requires plans, procedures, processes, incentives, KPI’s

• Innovation becomes execution

Refactoring Group

Steve Blank


Horizon 3

Refactoring is an Integral Part of Innovation

Process Innovation


• Horizon 3 takes shortcuts • Technical shortcuts add up and

become what is called Technical debt

• People/process shortcuts are Organizational debt

• Refactoring “cleans up” debt by restructuring it

• You need a process organization dedicated to refactoring Horizon 3 projects

Refactoring Group

Steve Blank

Horizon 1

Type of Innovation

Innovators Leave or Start New Initiatives

Process Execution


• Founders/early employees don’t fit in execution organizations

• Short-sighted companies: innovators leave

• Far-sighted companies: they start the next cycle of innovation

Refactoring Group

Steve Blank



“Get to Yes” Corporate support of Innovation in

All 3 Horizons

Process Innovation

Refactoring Group

Company support orgs

Steve Blank

• Task Support Organizations to work inside Horizon 2/3• Assign Finance, Legal, HR, etc.• Job is helping all Horizon projects “get to yes”• leverage existing assets and capabilities is critical


Company Incentives & GoalsIn support of Innovation in All 3 Horizons


Steve Blank

• Companies operate on goals and incentives• Incent mavericks, incent support, incent adoption

Process Innovation

Refactoring Group




Steve Blank

• Company operates on goals and incentives• Incent mavericks, incent support, incent adoptionIf there are no Horizon 2/3 incentives in the company then there is no real commitment to innovation

Process Innovation

Refactoring Group




Steve Blank

• Company operates on goals and incentives• Incent mavericks, incent support, incent adoptionIf supporting Horizon 2/3 is not part of Company goals & incentives then there is no real commitment to innovation

Process Innovation

Refactoring Group


Positive – Financial Awards, Performance Bonuses, & Honorary Awards

Negative – You can lose product funding

Type of Innovation

Innovation Becomes ExecutionHorizon 1 Adopts Horizon 2 & 3

Process Execution

Steve Blank

Horizon 3 support orgs

Refactoring Group


• Success means scale

• Scale requires plans, KPI’s procedures, processes, incentives

• Innovation becomes execution


Horizon 2

Horizon 3

Horizon 1

Intrapreneurs are (Good) RebelsBad Rebels

AngerPessimist

Energy-sappingAlienate

ProblemsVocalize Problems

Worry ThatPoint Fingers

DoubtSocial Loner

AssertionsMe-focused

Break RulesComplain

Good Rebels

PassionOptimistEnergy-generatingAttractPossibilitiesSocialize OpportunitiesWonder ifPinpoint CausesBelieveSocial

QuestionsMission-focused

Change RulesCreate

Source: Carmen Medina www.rebelsatwork.com

Horizon 3 Protects MavericksHorizon 1 Fires Mavericks

• In Horizon 1– Pains in the butt– Always looking at something different– Doesn’t get with the program

• In Horizon 3– The head of your innovation project– Invents your next capability

Why Innovation Fails

Shiny Objects• Tech founder becomes enamored with new tech (shiny object)• Company still dependent on Horizon 1 until new tech is adopted

Solution:• Make sure that $’s, people, and infrastructure are in place to

cross the Tech Transfer “Valley of Death”

Leadership is Focused on Now• Leadership managing for current business & quarterly earnings• CEO and/or mgmt incentives all on current mission and goals

Solution:• Align incentives• Appoint a Corporate Chief Innovation Officer

Innovation Is a Buzzword• Stop using it to describe everything

Solution:• Use the Horizon 1, 2 & 3 metaphor

Failure is Career Retarding• In a company a failed project is to be avoided at all costs• In a Lean organization failure is part of the process• Pivoting from a failure gets us learning

Bottleneck: The Intransigent MiddleTurning Go into No

• Top of the organization says, “Do it”• Bottom of the organization

(innovators) ready to go• Middle management kills it

– Actively– Sabotage– Benign Neglect

• Innovation programs die

Steve Blank

Innovation Groups Ready

Middle Mgmt Barrier

Executive Buy-In

GO

NO

Why the Bottleneck?

• Threat– Power, ownership, turf, prestige, pay

• Confused– Job spec’s are still the same– No training on how to support, participate

• No incentives to change behavior• No penalty for ignoring it

Steve Blank

Sales Freezes Talking to Customers

• Sales says “no one can talk to our customers”

Solution:• Customer Discovery is not pitching new products

Steve Blank

Engineering Is Not Talking to Customers

• Engineering believes innovation is about technology

Solution:• Focus the organization on understanding customer problems• Focus on solving current or future problems

Steve Blank

Towards New HorizonsRethinking the Enterprise

Towards New HorizonsRethinking the Enterprise

take best practices from startups and apply it to the corporation

Hor

Known Business Model

The Limits of Current Horizons


Horizon 1


189

Develop-ment

Research


Horizon 1

Develop-ment

Research

Business Units

Horizon 1The Limits of Current Horizons



Extend the Business Model



Horizon 2


Develop-ment

Research

Business Units

CustomersCustomers

Customers


Horizon 2


Develop-ment

Research

Business Units

CustomersCustomers

Customers


• 90% of R&D dollars support existing products• Research = adv development to support existing products

Horizon 1 & 2


Unknown Business Model

Extend the Business Model



Horizon 3


Develop-ment

Research

Business Units

CustomersCustomers

Customers


Horizon 3

Copyright 2016 Evangelos Simoudis

Research

DevelopmentBusiness

Units

In most companies, Horizon 3 research $’s are eliminated or outsourced

e.g., university funding, government labs consortia

Today R&D’s mission Has ChangedHorizon 3

Develop-ment

Research

Business Units

CustomersCustomers

Customers

Innovation Outpost(s)

and Inpost(s)

Solution = Innovation Outposts/Inposts


Innovation Outposts

Bus DevStrategy & Corp

Dev

Corp VC

Ecosystem Specific

R&D

Corp Incubators

Steve Blank/Evangelous Simoudis

Innovation Outpost• Standalone unit for Horizon 2 and 3 innovation • May contain as needed:

• Corp VC• Incubator• Specific R&D• Bus Development

Innovation Outposts


Dev

Corp VC

Ecosystem Specific

R&D

Corp Incubators

Business UnitsBusiness UnitsBusiness Units

Technology innovations

Business problems & context


Innovation Outpost

Business model & Technology Innovations

Spin ins

New Business Unit

StartupsStartups

Startups

Innovation Outposts


Dev

Corp VC

Ecosystem Specific

R&D

Corp Incubators





Innovation Outpost

Spin ins

New Business Unit

• Outposts operate under many degrees of freedom• e.g., investments, incubation

• Launches many experiments (investments, incubated teams) inexpensively to test out innovation-related hypotheses

Innovation Outposts – Moonshot Support


Dev

Corp VC

Ecosystem Specific

R&D

Corp Incubators





Innovation Outpost

Business model & Technology Innovations

Spin ins

New Business Unit

• Moonshot = large commitment of resources for a Horizon 3 goal • Requires H1 & H3 collaboration

NewUnit

NewUnit

As new business units created by the Innovation Outpost grow, they hire employees with different culture than that of the H1 corporate parent

H1 Corporation

ExistingBU

ExistingBU

Outposts Change the Culture

New Employees


NewUnit

NewUnit

NewUnit

New

Unit

ExistingBU

H1 Corporation

ExistingBU

2) augmenting the H1 corporation through their presence.

Outposts Change the Culture

Startups


Summary

• Lean Innovation Management is not about efficiency and innovation

• It’s about developing the capabilities necessary to offset competitors who may have equal or better technologies

• It’s how to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments

• It’s about survival in the 21st Century

Thanks!

[email protected]

mailto:[email protected]

Removing the Bottlenecks

• Prove that this can work• Then: Communicate, communicate, communicate

– Big idea – shared goal/mission– Strategy – big picture of how the pieces work together– Tactical implementation

• Update job specs to include innovation support• Change incentives to include innovation support• Shower those who came before with appreciation• Support those who try and fail and try again

Steve Blank

How to Start an Innovation Engine- 0

• Reorganize around Mission + Innovation• Each Horizon 1 division needs a Chief Innovation Officer

• Drives Continuous Innovation • Finds Horizon 2 opportunities• Starts and Funds 10x the new initiatives for MVP’s

• Company needs a COO of Innovation• Runs/funds Horizon 3 incubators with I-Corps methodology• Runs open innovation incubators• Provides staff and infrastructure support for Divisional Innovation

Steve Blank

How to Start an Innovation Engine- 1

• Adopt Common Language: Horizons, Lean, Pivots, MVPs, etc. • Identify Lean Innovation Vehicles

• R&D, Engineering, Incubators, Accelerators, etc.• Adopt Lean Product Development: Digital Services Playbook..• Adopt Lean Metrics: Hypotheses tested, Pivots, IRL, TRL, …

• Adopt Lean Funding: TRLs & IRL

• Adopt Lean Pedagogy: Lean LaunchPad/I-Corps

• Use Lean Mgmt processes– Agree how to “Hand-off” and “scale” small efforts (hard)– Develop organizational processes/procedures/incentives that support

innovation (hard)

Steve Blank

Start an Innovation Engine - 2

• Educate the company on Innovation – Communicate goals– Communicate process (hard)

• Everyone expects detailed specs like Horizon 1 - bad– Consolidate innovation efforts (hard)– Recruit teams (3-4 people)– Recruit mentors - one per team (hard)– Get divisional cooperation (hard)– Train the Trainers

Steve Blank

Start an Innovation Engine- 3

• Design Programs– Emphasis on speed, urgency, evidence, pivots– 1½ day “Train-the-Trainers”– 6/8-week “I-Corps” programs– Investments and adoption of H1 and H2 by divisions

• Run Programs

Steve Blank

Start an Innovation Engine - 4

• Rally around a mission not theory• Pick something everyone agrees is a good goal

and congruent with the company’s mission• Legitimatize the need for exploration and

exploitation

Steve Blank

Start an Innovation Engine -5

• Leadership that is capable of managing the issues associated with multiple simultaneous Horizons– Resource allocation– Incentives– Etc.

• Needs to balance a culture of risk taking, speed = mitigation, quick to opportunities, receptive to innovation

Steve Blank

Thanks!

[email protected]

mailto:[email protected]

Innovation at 50x

Steve Blank@sgblank

www.steveblank.com

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