In this session Marko will explain the essential building blocks of any kind of business and how one should go about validating the business.

1. Building the right thing
Marko Taipale @ TGA2012

2. Marko Taipale
• Principal consultant with agile/lean mindset, CTO, Advisor
• 15+ years of software development
• Capabilities to deliver products from concept to cash
• Tens of public speaking appearances
International online gaming company (TO 100+ Meur) improved time-to-market from 24
months to 3 months
Finnish energy company purchased process control system and got the delivery 4 times faster
than expected.The system secured the business for next 2 years.
Finnish software product company saved 1,3 Meur / year in management and administration.
Software company validated new business model for new product in 2 months.

3. Context
New Product Development
Project delivery

4. the RIGHT thing?

5. The right thing?
• Concept (Problem / Solution fit)
• a good one? It solves a problem
• Business Model (Product / Market fit)
• a good one? It scales ie. it is a business
• Prototype (Hypothesis / Experiment fit)
• a good one? It leads to learning
• Service (User needs / Service fit)
• a good one? You are not aware you are using it

6. The right thing?
Connected!
• Concept (Problem / Solution fit)
• a good one? It solves a problem
• Business Model (Product / Market fit)
• a good one? It scales ie. it is a business
• Prototype (Hypothesis / Experiment fit)
• a good one? It leads to learning
• Service (User needs / Service fit)
• a good one? You are not aware you are using it

7. The right thing?
Connected!
• Concept (Problem / Solution fit)
• a good one? It solves a problem
• Business Model (Product / Market fit)
• a good one? It scales ie. it is a business
• Prototype (Hypothesis / Experiment fit)
• a good one? It leads to learning
• Service (User needs / Service fit)
• a good one? You are not aware you are using it

8. Product / Market fit
Problem / Solution fit
Balance

9. How to ensure you are
doing the right thing?

10. <insert your agile
“from idea to backlog”
tool here>

11. But that is just stupid!
(why?)

12. Cause it expects that you
know the requirements
And that there is money to be made

13. In new product development
the requirements are
unknown
... and the business is unknown

14. In order to do the right thing
you need to...
• Model your business
• Understand your market
• State your guesses, create tests, validate
• by talking to your customer
• by measuring (and build the measures in)

15. Lean Startup
Customer Development
Multiple methods/tools emerge
Business Model Generation
Productization

16. Business Model Generation

17. “A business model describes
the rationale of how an
organization creates, delivers,
and captures value”

18. 9 blocks of business
model

20. Customer Segments
which customers and users you are serving?
which jobs do they really want to get done?

21. Value Propositions
what are you offering to them? what is that getting done
for them? do they care?

22. Channels
how does each customer segment want to be reached?
through which interaction points?

23. Customer
Relationships
How do you get customers, keep them and grow them?

24. Revenue Streams
what are customers really willing to pay for? how? are you
creating transactional or recurring revenues?

25. Key Resources
which resources underpin your BM? which assets are
essential?

26. Key Activities
which activities you need to perform well in your BM?
what is crucial?

27. Key Partners
which partners and suppliers leverage your model?
who do you need to rely on?

28. Cost Structure
what is the resulting cost structure?
which key elements drive your costs?

30. the same technology,
product, or service can
have numerous
business models

33. alternatives: ask
yourself..

34. transactional vs.
product vs. service scale vs. scope
recurring revenues
niche market vs. direct sales vs. blue ocean vs.
mass market inderect sales red ocean
capital expenditure vs.
open vs. closed personal vs. automated
partnership
Difficult questions
one customer segment vs. tailor-made vs.
physical vs. virtual
another mass production
paid vs. free copyright vs. copyleft fixed vs. variable cost
distributed vs. advertising vs.
in-sourcing vs. out-sourcing
centralized sales

35. Choose!

36. Business Model can
look great on paper...

37. but it is just series of
guesses!

38. get out of the
building and test
each hypothesis
with real, breathing customer!

39. Three layers of BMCs
Sell books online, no inventory,
Model cheaper prices, great selection

40. Three layers of BMCs
Key partners: publishers are fine
with small but frequent orders
Hypotheses and there is a contracting model
that supports this
Sell books online, no inventory,
Model cheaper prices, great selection

41. Three layers of BMCs
Meet publisher X and check
that they are fine with small
Tests frequent orders
Key partners: publishers are fine
with small but frequent orders
Hypotheses and there is a contracting model
that supports this
Sell books online, no inventory,
Model cheaper prices, great selection

42. Customer Development
customer customer customer company
discovery validation creation building
pivot

43. This Business Model testing is called
Customer
Development
customer customer customer company
discovery validation creation building
pivot

44. 2 phases
Search Execution
customer customer customer company
discovery validation creation building
pivot

45. 1st step
customer customer customer company
discovery validation creation building
pivot

46. Customer Discovery:
Problem / Solution fit
1. Draw Business Model Canvas
2. State hypotheses
3. Test the problem (or need)
4. Test the solution (verify that you have it)
5. Verify or Pivot

47. 2nd step
customer customer customer company
discovery validation creation building
pivot

48. Customer validation:
Product / Market fit
1. Get ready to sell
2. Get out of the building to test sell
3. Develop positioning
4. Verify or Repeat

49. Market opportunity
• Business model
• Identify the customer and market need
• Size the market
• Identify and size competitors
• Check growth potential/rate

50. Total Available Market
- How many would need this product?
- How large is the market if they all bought?
- Industry analysis in your domain.. to find out
- is it growing how fast?
Served Available Market
- how big is our slice?
- availability, pricing (how many I can serve)
- how big the market would be if they all bought
- talk to customers to find out
Target Market
- Who I am going to sell 1st, 2nd and 3rd year
- How many customers is that?
- What if they all bought?
- How to find out: talk to potential customers

51. Early adopters are not your market

52. Market analysis answers a simple question:
Is this Business Model worth implementing?

53. Test and adapt your
model until it
works!
customer customer customer company
discovery validation creation building
pivot

54. This adaptation is called
a pivot
customer customer customer company
discovery validation creation building
pivot
(repeat * until proven)

55. Don’t scale execution
until you’ve verified
the business model

56. Execution is not search!

57. Build the measures in
(+ quality in)
Techies: Continuous Delivery with ATDD is not enough!

58. Hard part:
from measures to learning

59. There are no facts
inside your building

60. You still need a vision
and a purpose

61. Why big companies are
in such a trouble?

62. 2 phases
Search Execution
customer customer customer company
discovery validation creation building
pivot
From execution to search

63. So..
We need to interface the business, design
and engineering in order to create successful
businesses
Business is the driver: if you cannot make a
business case for it, it has no (business)
value.

64. What happens tomorrow?
See where you are (discovery, validation,
creation or building) and act accordingly

65. All we do...
is match the demand
.. of understanding and solving a problem
.. of a business
.. of learning
.. of users

66. Disclaimer
Exercising this does not guarantee success
... but it ensures you fail fast and often
More chances to succeed!

68. Resources
Single PO is missing the point: http://huitale.blogspot.fi/2010/12/single-product-owner-model-is-broken.html