Agile business development

PowerPoint Presentation

Bringing Agility to Business Development

Somik Raha, AssociateSmartOrg, Incsmartorg.com

2000-2012 SmartOrg. | Confidential and Proprietary.

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Legal Stuff

This deck is licensed under the Creative Commons Attribution No Derivatives 3.0 License.

Please feel free to contact [email protected] if you have any questions.

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

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Agenda


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Business DevelopmentThe Agile ManifestoCurrent StateValues

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Definition of Business Development

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


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Agile Software Development greatly increases quality and productivity


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Collaborative developmentWorking softwareCustomer collaborationResponding to change

Processes and toolsComprehensive documentationContract negotiationFollowing a plan

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The Agile Manifesto

We value

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

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Current Business Development vs. Agile Business Development


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Processes and toolsComprehensive paperworkContract negotiationFollowing a plan

Processes and toolsComprehensive documentationContract negotiationFollowing a plan

Collaborative DevelopmentWorking business modelsCustomer collaborationResponding to change

CURRENT BUSINESS DEVELOPMENT FOCUS

AGILE BUSINESS DEVELOPMENT FOCUS

NON-AGILE SOFTWARE DEVELOPMENT FOCUS

Collaborative DevelopmentWorking softwareCustomer collaborationResponding to change

AGILE SOFTWARE DEVELOPMENT FOCUS

Instructions: Poll title State of business development in your organizationWe do not have a formal business development processThe term business development is often confused with salesWe have a formal process but are not agileWe have a formal process and are agile

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Poll: What role do you play in your organization?

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


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Instructions: Please prepare this poll as follows with the title What role do you play in your organization?: Business Development Marketing/Sales Product Management Product Development Project Management Engineering

This should be multiple-choice more than one can be picked.

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Communication,Simplicity, Feedback

Courage, Respect

Agile practices support the Agile manifesto

PRACTICES

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Courage, Respect

What practices get us to the goalpost?

?

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Agenda


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Business Development: Turning idea into marketable business asset

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

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

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Agenda


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Business development is about managing increasing amounts of investment


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Time

Cashflow

Double-down

Take-off

Die

Develop

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Agile business development is about learning/failing/succeeding quickly


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Time

Develop

Double-down

Take-off

Die

Learn

Try other projects

Cashflow

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We will communicate Agile Business Development with a catalog of patterns

Each pattern describes a problem which occurs over and over again in our environment, and then describes the core of the solution to that problem, in such a way that you can use this solution a million times over, without ever doing it the same way twice.

What is a design pattern? from Design Patterns: Elements of Reusable Object-Oriented Software by Gamma et al., 1995

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

* optional


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Evidential Work


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Pattern: Evidential Work

When investing serious money behind an idea, it is easy to be distracted away from the evidence needed to justify the investment by the work that needs to be done.

Therefore, design work to deliver evidence as quickly as possible

ConsequencesA clear idea of the proof needed to justify investment, the work needed to deliver that proof, the cost and the schedule of that work

Related Patterns: Communicate evidential work with Learning Plans


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The Mortgage Question


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

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Simulation: Corp

Makes statistical data analysis products


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Life

Flow

AB

Fly

Zoom

Mark

New Product

Allows analysis of the effectiveness of marketing campaigns by examining social media chatter for emotional content around the product.

This product will help Corp enter the social media space.

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

Instructions:Show chat window; title of chat window What evidence do you need to see before mortgaging your house to fund BetaMark?When we move to the next slide, the chat window should move on the side, visible only to speaker and moderators.

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Simulation: Evidential Work


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Solicit pilot customersBusiness case analysisObtain right to pursueRequirements / gap analysis => technical roadmapPreliminary offerPre-sales, talk to customersIncubation structure definedInvestment: $0.5M4 FTE x 6 month x $200K = $400KExpenses = $100K

Conduct 2-4 customer pilots across areas - map processes, demonstrate valueFill gaps in platform and servicesCapture learningBuild resources / PMOPlan G2M / businessExtend / revise roadmapAdvance needed technologyDefine full platformInvestment: $4M20 FTE x 1 year x $150K = $3MExpenses, capital = $1M

Complete, harden platformEstablish channel / G2MSales / BDMarketing / communicationSet up P&L / organizationDeliver operationally to first pilotsConduct additional pilots of new kindsSupport structure

Investment: $6MTeam, Expenses as in Phase II = $4MSales, Business Development = $1MSupport, infrastructure = $1M

Instructions:I will refer to the chat window to make points connecting with this slide. After this slide, this chat window is no longer needed.

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Learning Plans


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Pattern: Learning Plans

When communicating development plans, it is easy to lose sight of the learning needed to justify further investment.

Therefore, depict key stages of evidence needed and the work needed to deliver that evidence on a timescale

ConsequencesA simple timeline that communicates key evidential stages, the work involved (details and investment) and the sequence.

Related Patterns: Evidential Work and Evidence Assessment


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Simulation: Mark Learning Plan


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Q1

Q2

Q3

Q4

Q5

Q6

Q7

Q8

Q9

Q10

Mark

Phase I Develop Value Proposition, Get Approval

Solicit pilot customersBusiness case analysisObtain right to pursueRequirements / gap analysis => technical roadmapPreliminary offerPre-sales, talk to customersIncubation structure definedInvestment: $0.5M4 FTE x 6 month x $200K = $400KExpenses = $100K

Phase II Prove Value Proposition with Customers

Customer enthusiasm, Corp sponsorship

Conduct 2-4 customer pilots across areas - map processes, demonstrate valueFill gaps in platform and servicesCapture learningBuild resources / PMOPlan G2M / businessExtend / revise roadmapAdvance needed technologyDefine full platformInvestment: $4M20 FTE x 1 year x $150K = $3MExpenses, capital = $1M

Technical performance, Customer commitment

Key:

Major Phase

Work during phasePhase Investment

Proof points at milestone

Cumulative investment through launch

Total: $10.5M

P&L commit May 11

Phase III Prepare to Scale

Complete, harden platformEstablish channel / G2MSales / BDMarketing / communicationSet up P&L / organizationDeliver operationally to first pilotsConduct additional pilots of new kindsSupport structure

Investment: $6MTeam, Expenses as in Phase II = $4MSales, Business Development = $1MSupport, infrastructure = $1M

Robust pipeline, Scalable business case

Nothing to be done here. I will just show this slide, and ask people for questions in Q&A

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Evidence Assessment


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Pattern: Evidence Assessment

Different people understand different things when talking about uncertainty in a qualitative fashion, which makes communication difficult.

Therefore, assess calibrated probabilities for each point of evidence, multiplying to get overall probability of success

ConsequencesA simple quantitative understanding of uncertainty that is comparable across projects.



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Simulation: Comparing projects by their phase allows us to calibrate


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Why does a Phase 1 project have such a high probability?

After recalibrating

IdeaProveScale

IdeaProveScale

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Pattern: Reasons Behind Numbers

People can get into a mindless number game and lose sight of the real purpose of uncertainty assessments to discover learning gaps.

Therefore, before accepting numbers, obtain reasons for them.

ConsequencesThe logic behind the numbers is made transparent, facilitating team learning.



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Pattern: Blind Polls

People can follow power and feel shy to share what they truly know.

Therefore, disallow calling out numbers in a group, forcing each member to write down their number and then collect it when all are done

ConsequencesDifferences in numbers become transparent and drive discussion in learning gaps, leading to possible adjustment after the group has new knowledge



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


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Technical PerformanceRun Human Control Group,Mark picks 90% of all actual chatterMark distinguishes correctly between +ve and ve feelings at least 90% of the timeCustomer CommitmentAt least one customer signs up for company-wide adoption

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Technical PerformanceHuman Control Group confirms that Mark picks 90% of all actual chatter

In your chat:List reasons for successList reasons for failure


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Instructions:When animation goes to List reasons for success, Chat Window opens up with the title List reasons for success. When animation goes to List reasons for failure, new Chat Window opens up with the title List reasons for failure. The earlier chat window remains open, both are side-by-side, and editable.

When we move to the next slide, these chat windows move to the side so only moderators and speaker can see them.

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Simulation: Evidence Assessment Summary

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


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Success

Failure

Reasons for SuccessLab results promising

Reasons for Failure:Weve never done this before

Given these reasons for success and failure, what is your probability of success?

Instructions:1. Somik will read out reasons for success that he likes and wants added underneath Lab results promising. The color should be green and font should be Arial and size 162. Somik will read out reasons for failure that he likes and wants added underneath Weve never done this before. The color should be red and font should be Arial and size 163. When the animation moves to the green box Given these reasons , Somik will cue and ask people to answer a poll. The following poll should open up:

Poll:Given the reasons for success and failure, where does your probability of success fall?80-100%60-80%40-60%20-40%0-20%

4. When Somik concludes the poll, two chat windows should open up, with the titles 80-100% and 0-20%. Somik will ask each camp to put their reasons in the respective windows and respond to each others points.

5. Somik will make some final comments, This is how we facilitate a discussion. Chat windows will disappear after we move to the next slide.

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Simulation: Probability of Success of Phase 2


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Mark Evidence Assessment

Phase I: Develop Value Proposition, Get Approval

37.5%

Phase II: Prove Value Proposition with Customers

43.2%

Overall Probability

3.88%

Forward chance of success

3.88%

10.4%

Customer Enthusiasm 50%Corp Sponsorship 75%

Technical Performance Coverage Accuracy 90%Emotional Accuracy 80%Customer Commitment 60%

Phase III: Prepare to Scale

Robust Pipeline 60%Scalable Business Case 40%

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24%

Nothing to be done here.

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Simulation: Probability of Success of Phase 2


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Mark Evidence Assessment

Phase I: Develop Value Proposition, Get Approval

100%

Phase II: Prove Value Proposition with Customers

43.2%

Overall Probability

10.4%

Forward chance of success

10.4%

Customer Enthusiasm 100%Corp Sponsorship 100%

Technical Performance Coverage Accuracy 90%Emotional Accuracy 80%Customer Commitment 60%

Phase III: Prepare to Scale

Robust Pipeline 60%Scalable Business Case 40%

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24%

SUCCESS

Nothing to be done here.

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Debrief: Reflections/Questions?


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Agenda


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


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Time

Cashflow

Double-down

Take-off

Die

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Agile business development incorporates multiple scenario-thinking before doubling down


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Time

Double-down

Take-off

Die

Take-off

Take-off

Cashflow

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Evidentially Assessable Factors

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Pattern: Evidentially Assessable Factors

Economic factors that are hard to support with evidence can be easily manipulated to distort our understanding about opportunity size.

Therefore, decompose economic models such that factors that are hard to support with evidence are derived from other factors that are easy to assess on the basis of evidence.

ConsequencesAssessment conversations remain rooted in real world knowledge instead of devolving into the abstract. Numbers produced are of much higher quality.

Related Patterns: Extreme Credible Ranges and Most Leveraged Uncertainties


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Simulation: Decompose economics to identify assessments and calculations


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Total Addressable Markete.g. 10K units in year of launch

Penetratione.g. 20%

Market Sharee.g. 25%

Units Sold/yre.g. 500

Unit Pricee.g. $70K

Revenuee.g. $35M

Unit Coste.g. $2K

Fixed Cost e.g. $5M

Variable Coste.g. $1M

Annual Profite.g. 29M

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Pattern: Extreme Credible Ranges

Groups have a tendency toward groupthink and compromise, which prevents discovery of important information gaps on factors that drive economics.

Therefore, get groups to dwell on the credibly extreme ends of each factor and capture both ends of the assessment as a range, along with a realistic assessment.

Consequences:Those who have a difference of opinion are no longer ignored, but factored into the decision-making process. We are no longer anchored to the optimistic or pessimistic, but have both along with a realistic scenario.

Related Patterns: Evidentially Assessable Factors and Most Leveraged Uncertainties


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Simulation:Market Share for Mark


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High

Low

Reasons for HighNot much competition yet

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

Base

40%30%20%

20%10%5%

40%

5%

30%, 20%, 20%

25%

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

Instructions: Chat window opens up with the title Please enter reasons for the market share percentage being high. I will start with that prompt.Enter reasons that I identify below not much competition yet. The color should be green and font should be Arial and size 16.I will then ask How high is high? The previous chat window closes, and a new one opens with the title How high is high?I will then ask Now lets look at reasons for low. A new chat window opens with the title Please enter reasons for the market share percentage being low. Enter reasons that I identify below A big competitor may get in before us. The color should be red and font should be Arial and size 16.I will then ask How low is low? The previous chat window closes, and a new one opens with the title How low is low?I will then ask What is your over-under number? The previous chat window closes and a new one opens with the title, What is your base number?When I move to the next slide, the chat window closes.

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Most Leveraged Uncertainties


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Pattern: Most Leveraged Uncertainties


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It is easy for us to fixate on uncertainty in economic factors that are in front of us, or the factors with the highest leverage, as opposed to looking at both and finding the ones that really matter.

Therefore, identify the most leveraged uncertainties

Consequences:Conversations can now focus on uncertainties that have the most leverage, instead of just focusing on swing in uncertainty or leverage by themselves.Discussion focused on obtaining upside and containing downside

Related Patterns: Extreme Credible Ranges and Evidentially Assessable Factors

Read More: http://smartorg.com/2011/10/tornado-diagram-resolving-conflict-and-confusion-with-objectivity-and-evidence/

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


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

Top 4 factors capture most of the variance in NPV

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Debrief: Reflections/Questions?


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Agenda


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Pattern: Simple Options Valuation

Placing dollar values on development opportunities is a task that can be obfuscated by complex financial models, which shift the focus away from collaborative learning discussions toward magic numbers.

Therefore, use simple options valuation to make clear the logic behind development opportunity valuation.


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Consequences: The equivalent dollar amount in a simple valuation incorporates the uncertainty in the opportunity and is directly traceable into its constituent components.

Related Patterns: Uncertainty-Value Screen, Productivity Ordering

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Simulation: Simple Option Valuation


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$0.75M

$82M

The equivalent value just went up because of development success

Think of this as an equivalent value representing the uncertainty in this deal

These numbers come from the 10-50-90 bar

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Pattern: 10-50-90 Bars

Focusing on single number valuations of projects hides the underlying uncertainty in the upside and downside of that project.

Therefore, use 10-50-90 bars to characterize uncertainty in each development project.


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Consequences:Shows the biggest upsides and downsides that need to be managed

Related Patterns: Productivity Ordering, Uncertainty-Value Screen, Most Leveraged Uncertainties

Value

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Simulation: Compare Uncertainty for Corp


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

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


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The top 4 uncertainties have to do with market understanding

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Pattern: Uncertainty-Value Screen

People can get emotionally attached to pet projects and lose sight of the big picture.

Therefore, use uncertainty-value screens to understand where development projects fall and how they need to be managed.


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Consequences:Facilitates a rich conversation on how to feasibly move projects to a better placeGreat projects can be picked over good ones, with transparent logic as opposed to political posturing, making hard decisions more acceptable to people.

Related Patterns: Productivity Ordering, Learning Plans, Evidence-Driven Funding

Also known as: Innovation Screen

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Simulation: UncertaintyValue Screen for Corp


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

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

Value given development success

Probability of Development Success

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Pattern: Evidence-Driven Funding

Investments in large opportunities with low chance of success are necessary and yet, perilous.

Therefore, invest by evidence delivered in preceding phase.

Consequences:Investments are not arbitrary but thoughtfulInvestments are connected to delivery of evidenceProjects not tied to P&L statements, which would kill innovation, and instead managed through learning plan progress.

Related Patterns: Learning Plans, Evidential Work and Uncertainty-Value Screen


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Pattern: Productivity Ordering

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

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


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Consequences:Provides feedback on the value-cut that goes together with a cost-cutEmphasizes why the CFO was hired to obtain funding for important opportunities!

Related Patterns: Uncertainty-Value Screen

Also Known As: CFO Chart

Cumulative Cost

Cumulative Value

Budget Line

Extra Value

Extra Cost

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Simulation: CFO Chart


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Oyster

Pearl

Oyster

Zoom got cut down to size because of the inherent uncertainty

Cumulative Cost ($ millions)

Cumulative Value ($ millions)

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Debrief

Reflections? Questions?


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Analytic Practices of Agile Business Development are the platform for collaboration


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Proof Points

Learning Plan

Development Uncertainty

Extreme Credible Ranges

Most Leveraged Uncertainties

Simple Option Value, Value-Unc Screen, CFO Chart

Watch downside, swing for upside

Work to deliver proof points

10-50-90 Summary Bar

Assessable Economic Factors

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Courage, Respect

The analytic practices propel us toward the goalpost

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Continuing the Conversation

Learn MoreInclude Business Design in InnovationTornado Diagram: Resolving Conflict and Confusion with Objectivity and EvidenceTry SimpleTornado open source

LinkedIn GroupInvitations will be sent to attendees to join the Agile Business Development group

Connect with mePlease feel free to reach out at [email protected]


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Appendix


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Pattern: Purpose Values

Dry intellectual logic does not motivate people to reach excellence.

Therefore, find the values that define the purpose of the organization and align business opportunities and strategy to deliver on these values.


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Consequences:People rally around the chosen opportunities and are excited to make it happen

Read More: http://smartorg.com/2012/06/valuepoint6/

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Simulation: Show Purpose Values of Corp

Answer What transformation in the world do you want to bring about through the work of this company?

Keep asking Why? When you cant answer anymore, those are your purpose values.

How well does the opportunity under development support the purpose values?


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Agile business development

Education

Transcript of Agile business development