Agile innovation and Thinking Like a Startup

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Chris Chan

Agile Innovation

Thinking Like A Startup

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I AM

@c2reflexions

c2reflexions.com Conference

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What does innovation mean?

Chris Chan | @c2reflexions

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“Coming up with something

new and useful”


(it’s profitable application of creativity)

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Why do new ideas fail?

“I know what the customer

wants”

“Build and they will come”

Focus on execution instead

of learning

Measures of false progress

Premature Scaling

Late feedback; Management

by crisis

Market

Research


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2 questions that

“real” innovationKILL

“What’s the ROI?”

and

“When will I see it?”


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Pace of Change around us overtakes organisation’s rate of learning

-- Eddie Obeng


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“We spend our time responding rationally to

a world which we understand and recognize,

but which no longer exists.”

-- Eddie Obeng


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Are you’re a responsive organisation?


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Responsive Organizations are built to learn

and respond rapidly through the open flow

of information;

encouraging experimentation and learning

on rapid cycles;

and organizing as a network of employees,

customers, and partners motivated by

shared purpose.

www.responsive.org/manifesto

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How do you explore new opportunities in an

existing enterprise business?


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Exploration - StartupExploitation - Existing Business

A company is a permanent

organisation designed

to execute a repeatable and

scalable business model.

A startup is a temporary

organisation designed

to search for a repeatable

and scalable business model.


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Business Model Innovation

In Existing Companies

EXPLOITATION EXPLORATIONKnown

Predictable

Unknown

Organic

Execution

ROI

PlanForecasts

Traditional business methods are suitable

Search

Experiment

BuildMeasure

Learn

Traditional business methods fail

Teams


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We can’t create a plan to predict the

future.

We need discovery driven learning,

where you act as opposed to plan

your way to the future.

16Develop a Pipeline of Business Models using Three Horizons

HORIZON 1HORIZON 2HORIZON 3


IDE

AS

Moore, Geoffrey A. Escape Velocity: Free Your Company's Future from the Pull of the Past.

Execute

• Existing Business Model

• Known

• Today’s cash flow

Execute/

Search

• New opportunities via

Business Model Innovation

• Partially known

• Test Business Model

• Today’s revenue growth +

tomorrow’s cash flow

Search

• New / Disruptive Business Model

• Unknown

• Seed future growth options

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Agile Manifesto: Culture of Learning, Not

Just Delivery

http://agilemanifesto.org

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Agile in the Age of Learning and Innovation

Agile 2001* Agile Today

Individuals & Interactions Safety is a must for high

performance

Customer Collaboration Make Customers Awesome

Deliver Value,

Respond to Change

Experiment & Learn Rapidly

* 2001 is the year the Agile Manifesto was created

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Through learning we re-create

ourselves. Through learning we

become able to do something we

were never able to do.Peter Senge

Author The Fifth Discipline, 1990


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Ex

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The Team is a Mini-Startup

The team is the foundation

to a Culture of Innovation


Is your team really a team?

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Two prerequisites to becoming a team:

1. Team Purpose

2. Interdependence among members

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Performance / Impact

Adapted from Katzenback & Smith, The Wisdom of Teams, 2003

Working Group

Team Effectiveness

Potential Team

Pseudo Team

Real Team

Great Team / High Performing Team

5 Levels of teamwork


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Working Group

Team EffectivenessPseudo Team



Working Group

The members interact primarily to

share information, best practices, or

perspectives and to make decisions

to help each individual perform within

his or her area of responsibility.

There are no common purpose or

performance goals that require

mutual accountability.

Potential Team

Real Team



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Working Group



5 Levels of teamwork Pseudo Team

There’s a potential for significant,

incremental gain. The team has not

focused on collective performance and

is not really trying to achieve it. The

members don’t want to take the risks

necessary to become a potential team.

They have no interest in shaping a

common purpose or set of performance

goals.

What is especially dangerous about the

pseudo team is that the members

believe that they are a real team, yet

they produce inferior results.

Potential Team

Real Team



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Working Group




Potential Team

This is a group for which

there’s a significant,

incremental performance

need. The members are really

trying to improve its

performance impact.

However, the members must

work on developing a clear

purpose, goals, and common

approach. It has not yet

established collective

accountability.

Potential Team

Real Team



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Working Group




Real Team

This is a small number of

people with complementary

skills who are equally

committed to a common

purpose, goals, and working

approach for which they hold

themselves mutually

accountable.

Potential Team

Real Team



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Working Group



5 Levels of teamwork High Performing Team

This has all the characteristics of

a real team, but the members are

deeply committed to one

another’s personal growth and

development. They far out-

perform all other teams. The

members form powerful

relationships. Moving from a real

team to a high performance team

requires a very strong personal

commitment.

They outperform all reasonable

expectations given its

membership

Potential Team

Real Team



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What ingredients make up

an innovative team?

Safety

Anatomy of the team

How do we task the team

Incentives

Decision Making

Learning

Funding the team

How should the team work


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People Operations (HR)

Dubbed ‘Project Aristotle’

2 year study

200+ interviews

250 attributes

180+ active Google teams

https://rework.withgoogle.com/blog/five-keys-to-a-successful-google-team/


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We were pretty confident that we'd find the

perfect mix of individual traits and skills

necessary for a stellar team.

Who is on a team matters less than how

the team members interact, structure their

work, and view their contributions

Julia Rozovsky, Google People Operations Analyst


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Psychological safety was far and

away the most important of the five

dynamics we found -- it’s the

underpinning of the other four.


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Feeling safe in the workplace

helps encourage the spirit of

experimentation so critical for

innovation.

https://hbr.org/2015/12/proof-that-positive-work-cultures-are-more-productive

Amy Edmondson, Harvard


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In a startup ‘fear of failure’ drives

speed and urgency.

In a large company ‘fear of failure’

inhibits speed and risk.

Steve Blank

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IDEO Company Culture


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Blameless Retrospectives

Requires Psychological Safety

View mistakes, errors, slips,

lapses, etc. with a perspective of

learning

Learn the facts without fear of

punishment or retribution

Critical for “real” continuous

improvement and learning

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Retrospective Prime Directive

Regardless of what we discover, we

understand and truly believe that everyone

did the best job he or she could, given what

was known at the time, his or her skills and

abilities, the resources available, and the

situation at hand

www.retrospectives.com/pages/retroPrimeDirective.html

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Anatomy of a Team

Small (Amazon two pizza team)

Co-located (reduce feedback loop &

hand-offs)

Dedicated team members

Cross Functional (T-Shaped People)

• Exploit specialisation where possible,

break it when it becomes a bottleneck


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Task Teams to Achieve Business Outcomes

Business outcomes are measurable changes to

customer behaviour. They are objective measures to

success.

Give teams a problem to solve, not a solution to

implement.

Specify “true north” and let teams figure out how to

achieve the goals and move the needle.

Empower teams, not individuals.


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Re-defining “Done”

Agile 2001 Style


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Success is

a feature or shipping a product...

…it’s how to

a customer’s problem


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Re-defining “Done”

Agile Today Style


Make customers

awesome!

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Photo: Andiyan Lutfi

Majority of work is done

in teams

“Individual performance is not just

overrated. In organisations, it simply

doesn’t exist”

- Niels Pflaeging, Organize for Complexity


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Team Based Incentives

Teams are accountable for the

outcomes (not output)

Value arises from the interaction

between various individuals, or

within teams.

Collective applied competencies

and abilities in the system that

make a difference.

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IDEO Company Culture


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Decentralise decision making

Move decision making and

authority to information

Time critical

Closest to the customer

Frequent

Autonomy

Psychological ownership Customer

Information

Auth

ority


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Teams are Optimised for Learning

Learn first, then delivery

Organisations learn only through

individuals who learn

Employees skilled at creating,

acquiring and transferring knowledge

Learning organisations are able to

adapt to the unpredictable more

quickly than their competitors could

It’s SAFE to be wrong

Growth

Mindset

When I fail, I learn


“People are born fairly skillless. But

we have an extraordinary meta-skill

to acquire new skills”- Bas Vodde

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Change the Funding Model

What we say is that we don’t exactly know what we’re going to

do, but we know there is an opportunity to do something.

We have tried to move away from highly defined business cases

that state this is exactly what you’ll get, as teams feel very

constricted by that.

It’s a simple, high-level target that you then give to the team,

along with funding, to get going. They then feel less constrained

and feel more able to experiment and innovate.

- Cameron Gogh, Australia Post GM, Digital Delivery Centre

Capacity Funded Investment


www.cmo.com.au/article/595460/making-digital-new-way-innovating-australia-post

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Incremental Learning = Incremental Funding

Information discovery has value

It is the price we would be willing to pay to know

something that we don’t already know.

• Whether something works or not.

• Whether something has value or not.

• It is the value of avoiding a potentially long trip

down the wrong path.


55Fund Teams to Achieve Business Outcomes,

Not Pieces of Work

Stakeholders &

Investment Committee

Small bite, continuous funding blocks

Team

What have we learned?

What outcomes did we achieve?

What other experiments do we need?

What have we learned about benefits and

costs?

secure funding


Decisions based on objective observations & evidence

Change Customer Behaviour,

Measure outcomes (move the needle)

& Validate Business Model

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And finally…..

…..how should the team work?


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DESIGN THINKING

What was the best gift you have received?

Why?


Design thinking is about

building a deep empathy with

the people you are designing

for.

It starts with people – what we

call human centered design –

and applies the creative tools of

design, like story-telling,

prototyping and

experimentation to deliver

breakthrough new innovations.

Tim Brown, IDEO


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63Chris Chan | @c2reflexions

Desirability

FeasibilityViability

HumanDo customers even want this?Do they really need it?

TechnologyCan we afford it?Will it bring us long term benefits?

BusinessDo we have the capability to pursue this?Does the technology exist today?


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Design Thinking Process


Stanford d.school

66Chris Chan | @c2reflexions

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LEAN STARTUP

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Published September 2011

BUILDLEARN

MEASURE

Experiment and test

relentlessly

Validate your riskiest

assumptions

Fail fast to succeed sooner

Learn from customer feedback


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Experiments

Fast and cheap

Learn rapidly

Validate assumptions and hypothesis

Don't build a product unless you can

validate it

Fail fast, to succeed sooner


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Failure is Success if we Learn from It

Breakthrough insights are usually

hidden within failed experiments.

“There is no such thing as a failed

experiment – only unexpected outcomes.”

- Buckminster Fuller, Architect & Inventor


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Unexpected Outcomes need to be Declared Upfront

“If you simply plan on seeing what happens,

you will always succeed at seeing what

happens.”

- Eric Ries, The Lean Startup


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BUILDLEARN

MEASURE


Δ

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BUILDLEARN

MEASURE


HYPOTHESIS1

PREDICTION2

EXPERIMENT3

OBSERVATION4

Δ

Learning

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Pirate Metrics

Acquisition

Activation

Retention

Revenue

Referral

User is interested

User comes back and uses the product

User converts to a paying customer

User shares with others

User signs up and

completes key activity

Dave McClure


Unware Visitor

Passionate, Happy Customer

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Hopeful

Activation Revenue

Happy Customer

Retention

Passionate

Referral

Actually, in reality the funnel is non-linear

Aware & interested

Acquisition Customer Factory

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Minimal Viable Product (MVP)

A MVP is the version of a new product that generates the maximum

amount of validated learning when experimenting with customers

with the least effort

The goal is to test fundamental hypotheses (or leap of faith

assumptions) and begin the learning process as fast of possible

Enables evidence based decision to persevere with existing

business model, pivot or explore a new way to achieve the vision or

stop


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How Not to Build a MVP


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Is this how to build an MVP?


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How about this?


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The MVP is much more minimum than you

think!

Minimal Viable Customer

Experience

Minimum Scalable Product

Continually Optimised Product


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How To Build a MVP


Minimal Viable Customer Experience

Minimum Scalable Product

Continually Optimised

Product

1 2 3 4 5 6 7

Focus: Validated Learning

Experiments: PivotsFocus: Growth

Experiments: Optimisations

with real customers, partners and vendors

Get out of the building and

Testeach hypothesis


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It’s all about the Evidence

Prove you have a consistent customer

problem

Prove your solution will solve the

customer problem

Prove that you can acquire customers

Prove that customers will pay

Prove that you can deliver the solution for

less than what the customer will pay

Prove that you can scale (only after

proving other points)

Don’t scale execution until

you’ve

VERIFIED

the business model or

changed customer

behaviour

Seeking benefits/profit too early is a pre-optimisation trap

BUSINESS MODEL

INNOVATION

A business model describes how your company creates,delivers and captures value.

- Alex Osterwalder

Or in English: A business model describes how your company makes money.

Business Models used to be StaticA business plan is an operating

document and describes the

execution strategy for

addressing known customers,

market and product features.

When discovering or innovating,

the objective is to validate the

business model hypotheses.

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Lean Canvas Adapted from the

Business Model Canvas

for Lean Startup

What’s different:

• Focus on problem &

solution

• Added unfair

advantage

• Makes the assumption

that product/market fit

is the riskiest

hypotheses that must

be tested

ProblemSolution

Key Metrics

Unfair

Advantage

Cost Structure

Customer Acquisition costs

Distribution costs

Hosting

People, etc.

Revenue Streams

Revenue Model

Life Time Value

Revenue

Gross Margin

Problem

Top 3 problems

Solution

Top 3 features

Key MetricsKey activities you

measure

Unique Value

PropositionSingle, clear,

compelling message

that states why you are

different and worth

paying attention

Unfair AdvantageCan’t be easily copied

or bought

ChannelsPath to customers

Customer

SegmentsTarget customers

PRODUCT MARKET

Cost Structure

Customer Acquisition costs

Distribution costs

Hosting

People, etc.

Revenue Streams

Revenue Model

Life Time Value

Revenue

Gross Margin

Problem

Top 3 problems

Solution

Top 3 features

Key MetricsKey activities you

measure

Unique Value

PropositionSingle, clear,

compelling message

that states why you are

different and worth

paying attention

Unfair AdvantageCan’t be easily copied

or bought

ChannelsPath to customers

Customer

SegmentsTarget customers

PRODUCT MARKET

GUESS

GUESS

GUESS

Problem

The top 3 problems the customer is facing today

Could be jobs customers need done.

Understand how customers address these problems today.


Customer Segments

Narrow group of people that buy/use your product.

Object is to define an early adopter, not a mainstream customer.


Unique Value Proposition

Why are you different and worth getting attention?

Single, clear compelling message that turns an unaware customer

into an interested prospect.

It’s not selling; it’s getting a prospect’s attention.


Solution

Sketch out the simplest thing you could possibly build to address

each problem of the customer.

What is the minimum viable product (MVP)?


Channels

How does the customer learn about the product?

SEO, Direct Sales, Tradeshows/Events, Blog, Meetups


Revenue Streams

How much is the problem worth to the customer?

Not how much it costs you to implement the solution.


Cost Structure

What are your people costs?

Marketing channel costs?

Infrastructure costs?


Key Metrics

What are the one or two indicators that your product is successful

(Pirate Metrics)


Unfair Advantage

“A real unfair advantage us something that cannot be easily copied

or bought”

Hardest to fill out so left for last

Its here to make you really think how you can/will make yourself

different and make your difference matterChris Chan | @c2reflexions

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Three Stages of a Innovation

Stage 1 Stage 2 Stage 3


Validate Problem/Solution Fit

Do I have a problem worth solving?Chris Chan | @c2reflexions

Achieve Product/Market Fit

I have built something people want?Chris Chan | @c2reflexions

Scale!

How do I accelerate growth?Chris Chan | @c2reflexions

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Experiment Dashboard

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Systematically de-risk your vision

INTEGRATING IT ALL

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Experiments

Lean StartupDesign Thinking Agile & Continuous Delivery

Business Model InnovationDevelop an actionable and

entrepreneur-focused business plan

ScaleOptimise and grow

the product

Market FitBusiness model

validation (MVP)

Solution FitSolution fit for

customer problem

ProblemCustomer problem

definition

DiscoverIdeas &

customer

opportunity


Learning

Team

LEARNING has to be core in your corporate DNA.

The only SUSTAINABLE competitive advantage is

the ability to learn faster than our competitor.

Its about building a learning mindset that enables

your organisation to adapt continuously.


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1

FASTEST


Lessons Learned

• Innovation is as odd to the execution machine inside of existing companies

• Companies need different policies, procedures and incentives designed for innovation

• Teams are foundation to innovation

• 4 interrelated approaches for innovation

– Design Thinking

– Lean Startup

– Agile

– Lean Canvas

• Create a culture of learning and experimentation


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@c2reflexions

c2reflexions.comI hope to be a disruptive force

to those who think the way

we develop products and

services is just fine