Category: Advice for boards

Key take-aways from AICD Director Download: Lean/Design Thinking Part 3

Lead Change from the Top – Part 3 Wrap-Up

In this 3-part series reflecting on my work across universities and organisations, I have discussed the application of Lean / Design thinking, Value Proposition Design and Business Model Design to businesses so that they can stop making the #1 mistake: creating products people don’t want. I’ve also detailed some important research and experimentation tools necessary to inform design.

Read Part 1 and Part 2

 

I have personally facilitated workshops for more than 50 teams, from research institutes and from companies, and I have never seen a team that has not invalidated an assumption and I have never seen a team that has not discovered new information that has formed a new validated assumption. In short, I have never seen a project that has not been de-risked and potential impact enhanced by this process.

 

Therefore, important questions directors should ask include: Do we use design thinking in our commercialisation process? Is there a value proposition canvas for each project? Have we conducted interviews, or experiments, or both, for our value proposition canvases? Then ask the team to tell you about those stories.

 

Directors should encourage teams to use design thinking in their commercialisation process. They should encourage teams to use value proposition canvases and business model canvases, and they should encourage teams to conduct interviews and experiments, to understand their target customer more deeply. They should expect that there will be some assumptions validated. There’ll be some assumptions invalidated. However, there will also be new information coming from the interviews and experiments. Expect and be flexible enough for projects to pivot, and expect projects to be killed off. Expect things not to survive the process. The important aspect there is that the learnings are done at a very cheap point in time, where ultimately it’s not going to cost a lot for a project to be killed.

 

Questions Directors should ask

1.     Do we use Lean / Design Thinking in our commercialisation process?

2.     Is there a Value Proposition Canvas (VPC) for each project?

–   Have we conducted Customer Discovery Interviews for each VPC?

–   Have we conducted Customer Discovery Experiments for each VPC?

3.     Is there a Business Model Canvas (BMC) for each project?

–   Have we conducted Customer Discovery Interviews for each BMC?

–   Have we conducted Customer Discovery Experiments for each BMC?

4.     What have we validated, invalidated or discovered through our VPC & BMC?

5.     Has any project pivoted, or has any project been killed off, tell us about that journey?

Directors should encourage teams to

–   Buy a book or two

–   Invest in Lean / Design Thinking

–   Engage a facilitator to run a series workshops

–   Build skills and knowledge

Key take-aways from AICD Director Download: Lean / Design Thinking Part 2

Lead Change from the Top – Part 2

In my previous article I discussed the application of Lean / Design thinking, in Value Proposition Design and Business Model Design to businesses so that they can stop making the #1 mistake: creating products people don’t want.

 

Using these frameworks is a necessary first step, however at this stage the assumptions are usually all guesses. As part of the program, the development team is required to go out and test their assumptions and talk to customers to discover if they are on the right track. As well-informed as the team may be, there can be a lot of very important nuances in the answers customers give, which are absolutely necessary to this process. This information is often not captured or obvious in market research studies. Testing the market by interviewing prospective customers with your assumptions is important.

 

Once assumptions have been tested in this way the team is able to start filling out the business model canvas, putting down assumptions about how the business model will work. But again, they are all guesses until they are tested for how that’s actually going to work in practice. Again, all the details and nuances in the responses from customers as to whether and how they like to buy through a particular channel or whether there’s a better fit for them in another channel comes to light. These are all important pieces of information that are necessary to gather from customers interviews.

 

Here, the objective is to try to optimise the value proposition fit. We’re trying to observe the customer. Using our original assumptions we observe and verify the things that we felt we understood about the customer. Or if we were wrong, then we learn from the information provided by the customer interviews, changing our value proposition canvas or our business model canvas.

 

All this work on understanding the customer and observing the customer before we start to design and create the value in the product or service forms the basis of what and how we plan to offer. That’s how we achieve value proposition fit, and it’s really important to do this with a customer focus.

 

The definition of ‘customer’ = all stakeholders: customers, regulators, insurers, all of the players out there that make up the ecosystem which is going to be buying or supporting the purchase of the product. It is important to gather as much information from all of these participants in the market as possible. That way, a new product or service when launched into the market can be de-risked and optimised for the greatest impact. 

 

So we’re not talking about market research, where we are trying to observe a few things about many people. We’re talking about insight research where we’re trying to observe everything about a smaller number of people. In this process we’re studying the desirability of a new product or service. We’re not focused on Can we do this?’ We are focused on Do they want this?’

 

We’re not focused on ‘Can we do this?’ … We are focused on ‘Do they want this?’

We do this by spending time running customer interviews; getting out of the building. As Steve Blank said in his book The Startup Owners Manual: ‘Getting out of the building’ and interviewing customers, observing them, understanding what they do, understanding what choices they make, why they make those choices, what are the key attributes they’re looking for.

 

Again in this process we’re also trying to understand and identify what we might call early adopters or innovators in the market. These will be the first customers to take up your product. They’re the ones that are going to be propagating the information to other customers, acting as your reference source for the next tier of customer that comes on board.

 

Beyond the interviewing, we go the next step, which is really around experimenting. A team can experiment by offering a seminar to customers, which is a sure way to find out if they’re interested enough in the product. Would they actually come along to a seminar? Or offering them some more information about the proposed solution on a website and if they give their name and address they can have a PDF white-paper. These are some ways of experimenting with customers that require the customer to commit some time and effort, while also giving you an indication if they are interested beyond just being interviewed. If they’re happy to actually give up some of their time, jump in the car, drive down the road, and sit in a seminar for a couple of hours, to listen to what’s happening with this type of product, and to understand what your plans are! Interviews and experiments are both important mechanisms.

 

With experimentation, one of the things we’re looking for is a deeper understanding of stakeholders and potential customers, a deeper understanding of:

·       who feels the pain more acutely

·       who is trying to solve the problem

·       who will be more interested in the product

·       who might be the early adopter or innovators in the space, willing to take up the product early

 

It’s important to get customers’ support and endorsement. If you can get their support and endorsement, then you’ll get the early revenues but you’ll also get recommendations to the early majority to take up the product. And these are all important stepping-stones in de-risking the launch of a new product or service, and maximising the impact that that product or service can have.

 

When looking for early adopters, it’s important to understand their hierarchy of needs. Early adopters have a problem, are aware of having a problem, are actively seeking a solution, have put a solution together or hacked a solution together, in order to get something done. And they either have a budget, or they’re willing to get a budget, because they feel the problem acutely. So it’s important to identify those early adopters. They will help to create the right language around your product or service, to articulate the kinds of messages that these early adopters would respond to. And a lot of this information comes out of the interviews that you conduct during design thinking.

 

This is what people / groups are doing to try and de-risk new product development, new product R&D, inform the design of projects, and to de-risk the launch and increase the impact of new products on the market.

 

In the final article of this series I will zero in on the role of boards and how directors should approach design thinking for their organisation.

Key take-aways from AICD Director Download: Lean / Design Thinking Part 1

Lead Change from the Top – PART 1

In this 3-Part series I’ll share key take-aways from a recent keynote address at the Australian Institute of Company Directors, covering much of my work with universities and organisations.

 

There was some important research published by Simon – Kucher and Partners in 2014 (and Strategyzer and 100firsthits.com) where they looked at the top 10 business mistakes, with #1 being actually building the wrong thing, building something no one wants. It’s not hiring the wrong people, or lack of focus, or failing to execute sales and marketing. All of those things are key, however the number one mistake is building something no-one wants.

 

The number one business mistake = building something no-one wants.

 

Companies are constantly developing products and services to launch into the market. However, around 72% of new product and service innovations fail to deliver on customer expectations (Simon – Kucher and Partners 2014). Or you can say that customers don’t care about 7 out of 10 new products or new services introduced to the market.

 

Lean thinking, in Value Proposition Design and Business Model Design, is a customer-centric method for the design of new products and new services. Design Thinking is a method for practical, creative resolution of problems incorporating the strategies designers use during the process of designing (Wikipedia definition). The key feature with Lean / Design Thinking from a business perspective is that it is now used very effectively in the design and validation of problem solution fit, product market fit, value proposition design and business model design.

 

Leading the work in this field are Alexander Osterwalder and Yves Pigneur authors of “Business Model Generation” and “Value Proposition Design” (with co-authors Greg Bernarda and Alan Smith). Other important references are Eric Ries with his book “The Lean Startup” and Steve Blank with his book “The Startup Owner’s Manual”. These books are all great references for looking at how you can validate problem solution fit, validate product market fit, design new business models and validate those business models and value propositions before embarking on taking products or services out into the market.

 

Using this method and the frameworks, and doing the work, allows you to understand the customer deeply, as well as identifying the early adopters and innovators in your market. You can greatly enhance the launch of a new product or new service in this way. It can also, and usually does, significantly reduce risk to your organisation or company.

 

Alexander Osterwalder and Yves Pigneur with their book “Business Model Generation” have described a visual design tool to design and test business models in a ‘business model canvas’, and with “Value Proposition Design” have described a visual design tool to design and test value propositions in a ‘value proposition canvas’.

 

Through the work that I do with CSIRO, universities, organisations and companies across the country, I translate and witness this methodology in action. These workshops are designed to focus on team work, understanding the customer, problem discovery, value proposition design, validating and de-risking, taking new products and new services out into the market, and maximising the impact of publicly funded research.

 

In these workshops, we use the above-mentioned frameworks for visualising and testing the assumptions that we have about the customer. These frameworks are central to the teaching and learning. A development team can use the value proposition canvas to articulate all the information they have on the customer; what they believe is the job the customer is trying to get done; the pains and gains that the customer has. This allows the development team to design a product or service that truly serves the customer.