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As we all know, there are more confounding alarm clocks than elegant iPods in the world. Despite our knowledge of design, companies continue to churn out bad products. How can we improve our chances of creating great products? I think it requires designers to understand a little about finance and strategy, and managers to know a little about design. It requires using design skills to communicate, selling your ideas, and patience. During this event I'll introduce a few specific techniques for thinking about the business situation. Then when you're tired of listening to me we can do an exercise to create a product that fits a particular strategy, then talk about how this approach applies to your everyday work. Hopefully it'll be both useful and fun.
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Getting Good Designs BuiltVictor LombardiJune 26, 2007
Sponsored by
http://www.ixda.org/
http://smartexperience.org/
“The Promising Syllabus”
I promise to help you do something you probably couldn’tdo before, but…
We all need to take responsibility for our own learning
1. Explain what you want to know2. Ask clarifying questions3. Tell us about your experience
Agreed?
Great, let’s get started…
When design is the strategy
"[the iPhone is pushing operators] to meet its designvision rather than the other way around and refuses to betied to requirements that befuddle the UI and lead to anincoherent user experience. Stan Sigman (CEO ofCingular) revealed that Cingular had entered into acontractual agreement with Apple two years ago withoutever seeing the product, based purely on the strength ofthe design vision.”http://visionmobile.com/blog/2007/01/iphone-delivers-a-genuinely-disruptive-ui/
For the rest of us…
"I understand that we must compromise with the largerforces of business that buffet us, but that doesn't meanwe have to become quislings. Just because they force ill-chosen compromises upon us does not mean that we arerequired to justify them as being necessary or evenadequate."– Alan Cooper, IxDA email discussion, not too long ago
Know business fundamentals
Understand your context
Discover the company’scompetitive advantage
Align your customer need with company priorities
My framework…
Know business fundamentals
Understand your context
Discover the company’scompetitive advantage
Concepts and vocabulary
Financial basics
Scenarios
Align your customer need with company priorities
Meet Them More Than Halfway
“The better strategy fordesigners would be to regardthe current effort to educatethe CEO about how designerssee the world as a lost cause,and instead try to educatethemselves on how the CEOsees the world.”- Richard Farson, “Designersas Leaders”
http://www.wbsi.org/farson/com_design_leaders.htm
Financials + Scenarios
Expected ReturnIgnoring fees to calculate the expected return of loan interest and equity
Fail after 3 years Fail after 4 years
Replay loan, no
equity
Replay loan, 50%
of equity
Replay loan, 100% of
equity
Replay loan,
150% of equity
Percentage of loan repayment 60% 80% 100% 100% 100% 100%
Average Investment 8,333,333$ 8,333,333$ 8,333,333$ 8,333,333$ 8,333,333$ 8,333,333$
Loan repaid 5,000,000$ 6,666,667$ 8,333,333$ 8,333,333$ 8,333,333$ 8,333,333$
Interest gained 990,000$ 1,320,000$ 1,650,000$ 1,650,000$ 1,650,000$ 1,650,000$
Probability of outcome 2% 3% 5% 15% 65% 10%
Expected value of loan repayment 119,800$ 239,600$ 499,167$ 1,497,500$ 6,489,167$ 998,333$
Equity multiple 0 0 0 2 4 6
Potential equity -$ -$ -$ 16,666,667$ 33,333,333$ 50,000,000$
Probability of outcome 2% 3% 5% 15% 65% 10%
Expected value of equity -$ -$ -$ 2,500,000$ 21,666,667$ 5,000,000$
Expected value of loan and equity 119,800$ 239,600$ 499,167$ 3,997,500$ 28,155,833$ 5,998,333$
Expected return 39,010,233$
Outcomes
• Numbers can be sketches and prototypes• Financial models are based on assumptions about the
future of the product• Scenarios can be written in Excel
Case Study of Corporate Strategy: Microsoft
In 2005 an internal memo by Ray Ozzie, Microsoft CTO,was published publicly…
Summary of Ozzie’s Recommendation: Scenarios
1. Work with division presidents to assign “scenarioowners”
2. Work with these individuals “to concretely map outscenarios and pragmatically assess changes needed inproduct and go-to-market plans related to services andservice-based scenarios” both short- and long-term
3. “All Business Groups …develop their plans to embracethis mission and create new service offerings that delivervalue …and… utilize the platform capabilities…”
4. A blog
Know business fundamentals
Understand your context
Discover the company’scompetitive advantage
Align your customer need with company priorities
Interpersonal relationships
Dialog style
Concepts and vocabulary
Financial basics
Scenarios
Abductive Reasoning
"We can't afford the new widget. Do you want to use existing widget Aor B?"“What else do we have? How else can we use it? How else can weget the money for the new widget? Can the new widget do somethingadditional to help the people making the financial decision? Let’sbrainstorm more options…”
For more on abductive thinking see Liedtke, http://www.rotman.utoronto.ca/pdf/rotman_mgmt_winter03.pdf
Question the constraints, andgenerate options within theconstraints
Constraints
Generate new options, use aprocess to narrow them down, thendecide
Jump to obvious options
CollaborationNegotiation
Try:When faced with:
The Neuroscience of Leadership
David Rock and Jeffrey Schwartz
• Change is pain Organizational change is unexpectedly difficultbecause it provokes sensations of physiological discomfort.
• Focus is power The act of paying attention creates chemical andphysical changes in the brain.
• Expectation shapes reality People’s preconceptions have asignificant impact on what they perceive.
So…• Focus people on solutions instead of problems• Let them generate their own insights• Keep them focused on their insights
http://www.strategy-business.com/press/article/06207?pg=all
Know business fundamentals
Understand your context
Discover the company’scompetitive advantage
Align your customer need with company priorities
Interpersonal relationships
Dialog style
At each level:
Corporate
Business unit
Business model
Product Line
Product
Operations
Concepts and vocabulary
Financial basics
Scenarios
Example: Acme Publishing Company
Strategy:“Change mix of business to keep up with evolvingconsumers and advertisers; become more brand-centricand expand market-leading brands; innovatively attract newcustomers; and explore new revenue opportunities throughcross-selling and multi-platform sales.”
Implications for the designer:Talk about new design team hires in terms of how it willbenefit marketingTry to introduce features that also become ‘marketingfeatures’, e.g. Wow/viral features
Role that design plays in offering
Cus
tom
er F
ocus
•AIG
•Coke
•Time Inc.
•Apple
•Alessi
•General Motors
Many paths to success…
Role that design plays in offering
Cus
tom
er F
ocus
•Aveo
•Kodiac
•Corvette
•Silverado
Product Level Focus
The Leverage School of Strategy…
+ =
Evolving Strategy
GoogleGoogle 1.0 search engineGoogle 2.0 sold its search capacity to AOL/Netscape,Yahoo…Google 3.0 sold simple text ads linked to search resultsGoogle 4.0 inserted relevant ads into any and all WebcontentGoogle 5.0 is an innovation factory that produces atorrent of new Web-based services, including Gmail,Google Desktop, and Google Base
Gary Hamel, “Management à la Google”http://tinyurl.com/o4w7f
Buying strategic options…
Know business fundamentals
Understand your context
Discover the company’scompetitive advantage
Align your customer need with company priorities
Align with short-term priorities
Align with strategy
Develop an approach for building your capabilities(e.g. bootstrapping)
Interpersonal relationships
Dialog style
At each level:
Corporate
Business unit
Business model
Operations
Concepts and vocabulary
Financial basics
Scenarios
A little about business strategy, and an exercise…
Business Strategy in One Slide: Porter’s Generic Strategies
“Strategic management is the process of specifying an organization's objectives,developing policies and plans to achieve these objectives, and allocating resources soas to implement the plans. It is the highest level of managerial activity, usuallyperformed by the company's Chief Executive Officer (CEO) and executive team. Itprovides overall direction to the whole enterprise. An organization’s strategy must beappropriate for its resources, circumstances, and objectives. ”
Porter’s Generic Strategies:• Cost Leadership: sell at lower prices, usually by lower
costs or by selling in volume
• Niche: focus on one audience type and satisfy theirparticular wants or needs
• Differentiation: offer a perceivably different brand,product, or service
http://www.quickmba.com/strategy/generic.shtml
Cost Leadership
Niche
Differentiation
Which is the Internet Best For?
Price/Cost Niche Differentiation
Generic Strategies on the Internet
Cost Leadership Niche Differentiation
Cost Leadership + Differentiation: Blue Oceans
• "Blue oceans" are untapped and uncontested markets.Blue ocean offerings cross conventional marketsegmentation while simultaneously achieving lowercosts/price.
http://business-model-design.blogspot.com/2007/01/nintendos-blue-ocean-strategy-wii.html
Strategy Canvas: Wines
http://tinyurl.com/yp2fzd
Blue Ocean Exercise: Online Diet & Fitness Programs
High
Low
Offering
MealPlan
FitnessPlan
Tracking/Reporting Style Price Community Offline
WeightWatchers
FitDay
RealAge
Daily Plate
Invent a blue ocean business concept that will offer something radically different and cost less thancompetitors. Add additional criteria to this graph if you like.What is the name of the product or service?How is it better for customers?How does that way of serving customers also help save money?
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