Startup Series: Lean Analytics, Innovation, and Tilting at Windmills

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Fifty years ago, a typical company on the S&P 500 stayed there for three-quarters of a century. Today, they last only fifteen years. Technological disruption has run roughshod through the boardrooms of the world. At the same time, small startups with nothing to lose have become more methodical about iteration, experimentation, and innovation. Fueled by deep investment backing and unfettered by legacy distractions like regulation, customers, and infrastructure, they're turning into Billion-dollar ventures. From lackluster jobs growth to tech speculation to the disruption of nearly every industry, the death of big companies is the elephant in the room. But can we teach the elephant to dance? Join author, entrepreneur, and Strata conference chair Alistair Croll for a look at how some large organizations are applying data-driven methods, a deliberate portfolio of innovation, and Lean approaches that help them surviveand even thrivein a changing competitive landscape.


Lean Analytics, Innovation, and

Tilting at WindmillsHive data meetup

August, 2014


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F500 Life Expectancy

Growth by entering a new business 95

% failCorporate

Strategy Board

99% failClay


75 years

15 years

1950 2010...

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This isnt about a lack of resources.

Thursday, August 14, 14 Thursday, August 14, 14

Blockbuster had a lot going for it.

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Plenty of inventory, of course. But that matters less than...

Thursday, August 14, 14 intelligence, customers, existing payment approval, and customer history.

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The problem was framing:

Blockbuster thought it was in the video store management business. Netflix realized it was in the entertainment delivery business.

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Organizations die because they fail to move to new business models.

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Clay Christensen, The Innovators Dilemma






















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Technologies outstrip what the market needs, driven by feedback from the best current customer.

Clay Christensen, The Innovators Dilemma






8 5.25

High end

customer Low end


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The new market has different criteria for success, which are uninteresting to incumbents.

Clay Christensen, The Innovators Dilemma








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Sometimes this has unintended consequences

Clay Christensen, The Innovators Dilemma






Smaller disc size means less vibration impact, leading to greater density, increasing storage capacity

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Amazon Web Services and the server value network, August 14, 14

Amazon Web Services and the server value network

Bare metal equipment Density Heat


Cloud computing Instances Objects

Spinup time Scaleout

Capex, financing, TCO, ROI

Opex, demand, time to result

CIO, enterprise IT CTO, coder, app owner, line of business, startup




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Server vendors missed the disruption and the change in the value network.

Clay Christensen, The Innovators Dilemma






Elastic resources mean we can scale up to huge, and shrink costs when not in use.

Physical servers:MIPS, heat, density, cost per cycle.

Sold to CIOs Cloud computing:Opex cost, time to spin up, scaleout, objects stored

Sold to developers & marketers

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Why now?

First: High rate of change of digital technologies & channels.

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Software is eating the world.

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Arbitron and radio data

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Times a song in heavy rotation is played daily




2007 2012Thursday, August 14, 14

Why now?

Second: Its no longer about whether you can build itits about whether

anyone will care.

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The Attention EconomyWhat information consumes is rather obvious: it consumes the attention of its recipients.

Hence a wealth of information creates a poverty of attention, and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.

(Computers, Communications and the Public Interest, pages 40-41, Martin Greenberger, ed., The Johns Hopkins Press, 1971.)Herbert Simon

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Lit motors tests the risky partThursday, August 14, 14

Everything to lose:Why big companies need innovation.

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Business optimization (five mores)



Business model


You can convince executives of this

because some of it is familiar.

This terrifies them because it eats the current business.

A three-maxima model of enterprise innovation

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Three kinds of innovation

Sustain/core(optimizing for more of the same)

Innovate/adjacent(introduce nearby product,

market, or method)

Disrupt/transformative(Fundamentally changing

the business model)

Improve alongcurrent metrics...

...or alterthe rate of improvement

Switch to a newvalue model

Change the businessmodel entirely

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Improvement Adjacency RemodelingDo the same,only better.

Explore whatsnearby quickly

Try out newbusiness models

Lean approaches apply, but the metrics vary widely.




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Sustaining Adjacent DisruptiveNext years car Electric car,

same dealerOn-demand, app-based

car service

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Sustaining innovation is about more of the same.(says Sergio Zyman)

More things

To more people

For more money

More often

More eciently Supply chain optimizationPer-transaction cost reduction

Loyal customer base that returnsDemand prediction, notification

Maximum shopping cartPrice skimming/tiering

Highly viral offeringLow incremental order costs

Inventory increaseGifting, wish lists

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Adjacent innovation is about changing one part of the model in a way that

alters the value network.

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Experiment with product, market, and method.

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Product(new what)

Market(new who)

Method(new how)3 kinds of


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Adjacent productto the same market in the same way

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Selling the same product to an adjacent market in the same way.

Of P&Gs 38 brands, only 19 were sold in Asia as of 2011Market expansion is seldom selling the same thing to new people. In Asia, P&G needed to

Align pricing with novelty (prestige, mass-tige, over-the-counter)Change consumer expectations (moving from dilutes to concentrates)Adjust positioning and ingredients such as white fungus, ginseng, and the parasitic cordyceps

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Selling the same product to the same market in a new way.

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(At this point, observant Intrapreneurs should be asking, should P&G be in

the house cleaning business?

And that would be transformative.)

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Transformative innovation is about taking a leap, changing more than one dimension simultaneously in search of

a new business model.

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Transformative isolation:Skunkworks

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If sustaining, incremental innovation produces linear growth, then

disruptive, transformative innovation produces exponential growth.

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Transformative incubation: Metlife Infinity

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Significant market850K full-time law enforcement officers in the US; 700K state/local; 525K patrol officers130M incident reports/y. 70M new incidents; 200K involve use of forceOnly 31% of local police agencies keep computer files on use-of-force incidents

Strong product benefitsExonerates the officer 96% of the time.47% percent increase in charges and summons (2007)

Patrol officers spend 15-25% of their time writing incident reports, recorded evidence reduces this by 22%, meaning 50m more on patrol

ChallengesNew business model

Pricing unclearSaaS offering

Compliance and governanceUnions, regulation, chain of evidence

Changing the current model (radio is everything)

Transformative incubation: Taser

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Engine as a serviceThursday, August 14, 14 as a service

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Efficiency is tied to analytics. Well still look

for new materials, or for the physics of devices, but the

analytics ... is whats really untapped.

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Intrapreneurs drive innovation in organizations that have already

found product-market fit.

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Intrapreneur:Someone working to produce

disruptive change in an organization that has already found a sustainable,

repeatable business model.

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Also: a pariah.Successful innovators share certain attributes.

Bad listener: Wilfully ignore feedback from your best customers.Cannibal: If successful, destroying existing revenue streams.Job killer: Automation & lower margins are your favorite tools.

Security risk: Advocate of transparency, open data, communities.Narcissist: Worry constantly about how youll get attention.Slum lord: Sell to those with less money, deviants, and weirdos.

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Some things smart Intrapreneurs do dierently

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Think Lean, and analytically.

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The plural of anecdote is not data.(Roger Brinner)

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Dont sell what you can make. Make what you can sell.

Kevin Costner is a lousy entrepreneur.

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The core of Lean is iteration.

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Everyones idea is the best right?

People love this part!

(but thats not always a good thing)

This is where things fall apart.

No data, no learning.

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Companies that use data-driven analytics instead of intuition have 5%-6% higher productivity and profits than competitors.

Brynjolfsson, Erik, Lorin Hitt, and Heekyung Kim. "Strength in Numbers: How Does Data-Driven Decisionmaking Affect Firm Performance?." Available at SSRN 1819486 (2011).

2011 MIT study of 179 large publicly traded firms

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E-commerce SaaS Media




Interviews; qualitative results; quantitative scoring; surveys

Loyalty, conversion

CAC, shares, reactivation

Transaction, CLV

Affiliates, white-label

Engagement, churn

Inherent virality, CAC

Upselling, CAC, CLV

API, magic #, mktplace

Content, spam

Invites, sharing

Ads, donations

Analytics, user data

Inventory, listings

SEM, sharing

Transactions, commission

Other verticals

(Money from transactions)

Downloads, churn, virality

WoM, app ratings, CAC


Spinoffs, publishers

(Money from active users)

Traffic, visits, returns

Content virality, SEM

CPE, affiliate %, eyeballs

Syndication, licenses

(Money from ad clicks)

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Frame it like a studyProduct creation is almost accidental.Unlike a VC or startup, when the initiative fails the organization still learns.

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When in doubt, collect dataFrom tackling the FTA rate to visualizing the criminal justice supply chain.

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Use data to create a taste for data

Sitting on Billions of rows of transactional dataDavid Boyle ran 1M online surveysOnce the value was obvious to management, got license to dig.

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Dont just collect data, chase it.

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Know what has tobe built in-house

SAP integrationEmployment law

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Think subversively.

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Focus on the desired behavior, not just the information.

26% increase in towel re-use with an appeal to social norms; 33% increase when tied to

the specific room.

Energy Conservation Nudges and Environmentalist Ideology: Evidence from a Randomized Residential Electricity

Field Experiment - Costa & Kahn 2011

The effectiveness of energy conservation nudges depends on an individuals political ideology ... Conservatives who learn that their

consumption is less than their neighbors boomerang whereas liberals reduce their consumption.

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Take baby steps.

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Tesla, August 14, 14

Twitters 140-character limit isnt arbitrary. Its

constrained by the size

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Innovation portfolios at big companiesCore Adjacent Transformative

70% 20% 10%






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The most important figures that one needs for management are unknown or unknowable, but successful management must nevertheless take account of them.

Lloyd S. NelsonThursday, August 14, 14

Pic by Twodolla on Flickr., August 14, 14



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Once, a leader convinced othersin the absence of data.

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Now, a leader knowswhat questions to ask.

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