What is Means to be Strategic and Create Value (UX Strat Summit, SF 2014)

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Designers are already inherently connected to strategy. They just need to know how to get into the room. Note: the talking points in the notes field isn't a full transcript. They're mostly just notes for myself while presenting.

Text of What is Means to be Strategic and Create Value (UX Strat Summit, SF 2014)

  • WHAT IT MEANS TO BE STRATEGIC (AND CREATE VALUE) Nathan Shedro California College of the Arts designmba.org nathan.com Saturday, June 14, 14
  • Saturday, June 14, 14 I come from a design background. In my case, Im trained as an automobile designer, though I didnt go into the industry.
  • Saturday, June 14, 14 Instead, I went directly into Information Design (which, at the time, was mostly in print).
  • Saturday, June 14, 14 Professionally, I grew-up in Interaction Design, working on presentations and kiosks in the late 80s, CD-ROMs and application interfaces throughout the 90s, and LOTS of websites starting in 1994. These are merely a fraction.
  • MAKE IT SO Interaction Design Lessons from Science Fiction by NATHAN SHEDROFF & CHRISTOPHER NOESSEL foreword by Bruce Sterling Many designers enjoy the interfaces seen in science fiction films and television shows. Freed from the rigorous constraints of designing for real users, sci-fi production designers develop blue-sky interfaces that are inspiring, humorous, and even instructive. By carefully studying these outsider user interfaces, designers can derive lessons that make their real-world designs more cutting edge and successful. Designers who love science ction will go bananas over Shedroff and Noessels delightful and informative book on how interaction design in sci- movies informs interaction design in the real world.... You will nd it as useful as any design textbook, but a whole lot more fun. ALAN COOPER Father of Visual Basic and author of The Inmates Are Running the Asylum Part futurist treatise, part design manual, and part cultural analysis, Make It So is a fascinating investigation of an often-overlooked topic: how sci- inuences the development of tomorrows machine interfaces. ANNALEE NEWITZ Editor, io9 blog Shedroff and Noessel have created one of the most thorough and insightful studies ever made of this domain. MARK COLERAN Visual designer of interfaces for movies (credits include The Bourne Identity, The Island, and Lara Croft: Tomb Raider) Every geeks wet dream: a science ction and interface design book rolled into one. MARIA GIUDICE CEO and Founder, Hot Studio www.rosenfeldmedia.com MORE ON MAKE IT SO www.rosenfeldmedia.com/books/science-fiction-interface/ MAKEITSObyNATHANSHEDROFF&CHRISTOPHERNOESSEL Experience Design 1.1 a manifesto for the design of experiences by Nathan Shedroff product taxonomies 16 user behavior 116 100 years 22 information 42 takeaways 28 data 36 knowledge 48 subjectivity 78 consistency 96 navigation 84 product taxonomies 16 user behavior 116 experiences 4 experience taxonomies 10 100 years 22 wisdom 54 information 42 takeaways 28 data 36 knowledge 48 subjectivity 78 consistency 96 navigation 84 Design Strategy in Action Edited by Nathan Shedroff A publication from the MBA in Design Strategy program California College of the Arts 2011 2008 Edition Dictionary of Sustainable Management Saturday, June 14, 14 Ive written, designed, and contributed to a lot of books (mostly on some aspect of design). These are the most important, though not all.
  • Saturday, June 14, 14 In 1996, I started working on experience, brand, online, and corporate strategy for a variety of companies, mostly in online ventures. This opened-up a new set of understandings for me about the product/service work I didso much so that in 2006 earned an MBA.
  • MBA IN DESIGN STRATEGY MBA IN STRATEGIC FORESIGHT MBA IN PUBLIC POLICY DESIGN Saturday, June 14, 14 Designer (industrial, information, interaction, experience) turned business consultant and strategist, now, an educator. Im here to share how we teach experience, value, design, and business today to our degree and executive students.
  • VALUE Saturday, June 14, 14 You cant talk about strategy without talking about value and I dont believe we dont talk about value in the right ways in business, and as people from the more design- oriented side of business, it frustrates us, trying to get our points across. We are constantly struggling with the idea of value and how its measured.
  • CLV = GC - M i = 0 n (1 + d) i r i i = 1 n (1 + d) i - 0.5 r i - 1 Lifetime Customer Value GC = gross contribution per customer M = (relevant) retention costs per customer per year n = horizon (in years) r = yearly retention rate d = yearly discount rate. EXPERIENCE CREATES VALUE Saturday, June 14, 14 Economists resort to attempts like these to prove that relationships are important to business (how did we get to the point where this is a revelation?). create real value: Companies have been trying to assess this value for a long time.
  • Brand Value = { (V/S)b - (V/S)g } * Sales (V/S)b = Enterprise Value / Sales ratio of the rm with the benet of the brand name (V/S)g = Enterprise Value / Sales ratio of the rm with the generic product Let's use as an example branded cereals maker like Kellogg (K) against a generic provider like Ralcorp (RAH). Value of Kellogg brand name = (1.78 - 1.32)(13846) = $6,369 Million Thus, (6369/24200) or 26% of the value of the company is derived from brand equity. EXPERIENCE CREATES VALUE Saturday, June 14, 14 But none of these methods get at the total value, partly because theyre all focused on the quantitativeonly the things that can be measured.
  • Other Metrics: Booz & Co Global Innovation Study (2012) Forresters Customer Experience Index UK Design Council BusinessWeek Index etc. DESIGN CREATES VALUE dmi: futurED company 2011 $bb rank % of sales 1 Apple $2.4 53 2.2% 2 Google $5.2 26 13.6% 3 3M $1.6 86 5.3% 4 Samsung $9.0 6 6.0% 5 GE $4.6 30 3.2% 6 Microsoft $9.0 5 12.9% 7 Toyota $9.9 1 4.2% 8 P&G $2.0 72 2.4% 9 IBM $6.3 17 5.9% 10 Amazon $2.9 48 6.1% The ten most innovative companies outperformed the top ten R&D spenders on all financial metrics. Booz&Co Global Innovation Study 2012 And 9 out of 10 are DMI members Saturday, June 14, 14 But none of these methods get at total value, partly because theyre all focused on the quantitative.
  • Instagram Saturday, June 14, 14 Let me use an example. Last year, in 2012, Facebook bought Instagram for how much money?
  • Instagram $1.1B Saturday, June 14, 14 $1.1B. Now you might argue that Facebook overpaid and thats their business but they still did so because it was valuable to them. But, how did they calculate that value? How would you? For example, what was their book value?
  • Instagram ~$50M Saturday, June 14, 14 No one who wasnt part of the deal knows for sure but Im betting it was around $100K. Even if you count the money investors put into the company, it was only a few million.
  • Instagram $1.05B ~$50M Saturday, June 14, 14 So, what accounted for the other $1.05B in value? It was the relationships they had created with customers.
  • Pixar $2.27B $1.97B Saturday, June 14, 14 (Disney) Theyre not the only ones. This is a regular phenomenon with companiesespecially creative ones (but not only).
  • Nextel $29.7B $5.3B Saturday, June 14, 14 (Sprint) This is clearest when companies are bought but its true of companies at any point in their lives.
  • GOODWILL BOOK VALUE Saturday, June 14, 14 Book value or fair value In the business world, we dont so dont know how to measure this, nor account for it, so we call it goodwill. In accounting,
  • BRAND VALUE BOOK VALUE Saturday, June 14, 14 In the brand world, we call Brand Value but that doesnt account for everything tahts happening either, its just a convenient placeholder for whats going on.
  • Instagram $1.05B ~$50M Saturday, June 14, 14 But, look again at the numbers. Which is the number worth focusing on? ALL the best value is off the books. This is true of many, many companiesany with a strong brand, any with strong relationships, any that deliver value that is off the books. And, this isnt just a phenomenon of B2C rms. So, our denition of value (not to mention our curation of it) is
  • TOTAL VALUE Saturday, June 14, 14 If we add these values together we get the actual total value of a companyone that better reects the relationships with customers (and shareholders). Businesses know that this value exists but because they cant measure it easily (and theyve been told to only look at the numbers for
  • FUNCTIONAL VALUE + FINANCIAL VALUE + EMOTIONAL VALUE + IDENTITY VALUE + MEANINGFUL VALUE = TOTAL VALUE Saturday, June 14, 14 So, here is what Ive learned about Total Value. There are at least 5 types of signicant value that contribute to Total Value.
  • TOTAL VALUE QUANTITATIVE FUNCTIONAL VALUE + FINANCIAL VALUE + EMOTIONAL VALUE + I