Software Product Definition Fall, 2015 Week 3 Prof. Sheryl Root Prof. Tony Wasserman 1

Agenda Feedback on problem statements – Task 1 More on disruptive innovation Pivoting Organizational Readiness Teams 2

Task 1 Feedback General feedback Suggestions 3

Great Companies Fail “… most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.” Seriously? from “The Innovator’s Dilemma” 4

Review: What type of Innovation are you bringing to market? Continuous “Better mousetrap” Established problem Lots of competition Incremental improvement Discontinuous Radically new Selling uphill First-mover advantage Game changers Different types of risk Different types of market inquiry High tech is often Discontinuous 5

What type of Innovation are you bringing to market? (Part II) Sustaining Improve product performance Associated with historical values Incremental or discontinuous Don’t cause companies to fail Disruptive Worse performance ! Benefits in new market Valued by fringe Cheaper, simpler, smaller… Eventually eats into existing market from “The Innovator’s Dilemma” 6

Disruptive Technologies Examples: Transistors vs. vacuum tubes Pocket calculators vs. desktop calculators MP3 players vs. Walkman/Discman Mini-mills vs. traditional steel mills Cell phones vs. traditional wired phones Others? 7

The Disruption Dynamic Performance demanded at the high end of the market Performance demanded at the low end of the market Progress due to sustaining technologies Disruptive technological innovation Progress due to sustaining technologies Time Product Performance from “The Innovator’s Dilemma” 8

9 How to Build A Startup Idea Size of the Opportunity Business Model (s) Customer Discovery Customer Validation TheoryPractice What is the problem to be solved? Target market? Customer potential? Value of Solution? Reality Check? What is strategy to reach customer ? Approach to overcome issues in solving problem? Coherent roadmap of actions?

10 The Basics for Getting Started Identify your target market. Develop a prospect list. Determine an outreach strategy. Assess your ability to carry out your strategy. Start telling and selling.

11 Business Model Cost-SideValue-Side Value Proposition Key Activities Key Resources Key Partners Customer Relationships Channels Customer Segments What to eliminate/reduce Cost Implications What to raise/create Value Creation Social CostsSocial Benefits

12 Test hypotheses: -Problem -Target Market - Product/solution - Value of Solution - Competition Business Model Validation

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Customer Development & Pivot 15 Customer Discovery Customer Validation Customer Creation Company Building Search Execute Pivot

Listening to Customers Can Lead to Failure Companies depend on customers and investors for resources They, not managers, dictate how money is spent! Small markets don’t solve the growth needs of large companies 20% growth for a $40M company: $8M 20% growth for a $1B company: $200M Markets that don’t exist can’t be analyzed Disruptive technologies don’t apply to the existing market Technology supply may not equal market demand Overshoot and catch-up 16

Check Your Understanding What did we observe with disk drives? Straightforward innovations packaged differently… … enabling wholly new markets While the sustaining innovations were hard ones! 17

Value Network Circumscribes the Question of “What’s Valuable” ! Architecture of Disk Architecture of Disk Drive Architecture of Computer System Architecture of Environment Market-imposed constraints Power, Capacity, Ruggedness, Speed… 18

Fit in? Or Disrupt? Discuss your product/solution concept Sustaining or disruptive? Are you interviewing to understand an existing value network? Or a new one?? Can customers locked in one value network give insight about new markets? 19

Pursuing Self-Disruption A cultural near-impossibility 20

Elevator Door Opens… You step into the elevator with the VP who asks you for an update on-the-spot. Summarize your team’s status in two minutes What was the last thing you said you would do? What did you do? What are you planning to do next? Most important issue or concern or barrier And how YOU will handle it 21

Teams You have identified problems to be solved You have named your team Have you formed your ground rules and agreed on team processes? Roles? Scheduled weekly meetings? Made assignments for tasks to be done? If you want to meet with me, schedule a time, prepare agenda and provide it to me 24 hours prior Topics could include: Task work and issues Readings discussions or questions Team effectiveness issues 22

Questions? Do we need to conduct interviewing information affinity exercise? How are you doing on interviews? How are you sharing information gathered? How are you storing and tracking information? How will you integrate your findings? 23