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
www.agilecoachcampaustralia.org
Meetup User Groups
Agile Coaching Circles: www.meetup.com/AgileCoach
Lean Coffee: www.meetup.com/Melbourne-Lean-Coffee
Large-Scale Scrum (LeSS): www.meetup.com/LargeScaleScrum

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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” innovation
KILL “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 EXPLORATION
Known
Predictable
Unknown
Organic
Execution
ROI
Plan
Forecasts
Traditional business methods are suitable
Search
Experiment
Build
Measure
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.

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Develop a Pipeline of Business Models using Three Horizons
HORIZON 1HORIZON 2HORIZON 3
IDEAS
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
• 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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The Team is a Mini-Startup
The team is the foundation
to a Culture of Innovation

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
Authority

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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?

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

Desirability
FeasibilityViability
Human
Do customers even want this?
Do they really need it?
Technology
Can we afford it?
Will it bring us long term benefits?
Business
Do we have the capability to pursue this?
Does the technology exist today?

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Design Thinking Process
Stanford d.school

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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
UnwareVisitor
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: Pivots
Focus: Growth
Experiments: Optimisations

with real customers, partners and vendors
Get out of the building and
Test
each 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

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 Static
A 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
Problem
Solution
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 Metrics
Key activities you
measure
Unique Value
Proposition
Single, clear,
compelling message
that states why you are
different and worth
paying attention
Unfair Advantage
Can’t be easily copied
or bought
Channels
Path to customers
Customer
Segments
Target 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 Metrics
Key activities you
measure
Unique Value
Proposition
Single, clear,
compelling message
that states why you are
different and worth
paying attention
Unfair Advantage
Can’t be easily copied
or bought
Channels
Path to customers
Customer
Segments
Target 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 matter

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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?

Scale!
How do I accelerate growth?

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Systematically de-risk your vision

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Experiments
Lean StartupDesign Thinking Agile & Continuous Delivery
Develop an actionable and
entrepreneur-focused business plan
Scale
Optimise and grow
the product
Market Fit
Business model
validation (MVP)
Solution Fit
Solution fit for
customer problem
Problem
Customer problem
definition
Discover
Ideas &
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

Agile innovation and Thinking Like a Startup

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