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 survive—and even thrive—in a changing competitive landscape.

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

Lean Analytics, Innovation, and

Tilting at WindmillsHive data meetup

August, 2014

@acroll

Thursday, August 14, 14

Thursday, August 14, 14

(http://csinvesting.org/2012/01/06/fortune-500-extinction/)

F500 Life Expectancy

Growth by entering a new business 95

% failCorporate

Strategy Board

99% failClay

Christensen

75 years

15 years

1950 2010...

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This isnt about a lack of resources.

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http://www.flickr.com/photos/maladjusted/5207565912 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...

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...market 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

Cost

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

Clay Christensen, The Innovators Dilemma

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High 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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Storagecapacity

Portability

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Sometimes this has unintended consequences

Clay Christensen, The Innovators Dilemma

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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

http://www.theregister.co.uk/2013/04/18/amazon_2_trillion_s3/http://www.saphana.com/community/blogs/blog/2013/04/18/hanalgorithmics--efficiency-by-design-with-sap-hana--part-1Thursday, August 14, 14

Amazon Web Services and the server value network

Bare metal equipment Density Heat

GHz MIPS

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

Valuecriteria

Money

Buyer

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

Clay Christensen, The Innovators Dilemma

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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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YOU ARE HERE

Thursday, August 14, 14

YOU ARE HERE

LOCALMAXIMUMOPTIMIZATION

OF CURRENT METRICS

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YOU ARE HERE

GLOBALMAXIMUMINNOVATION

WITH NEWRULES

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YOU ARE HERE

SHORT-TERM INVESTORSHATE GOING DOWNHILL

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Why now?

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

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http://www.flickr.com/photos/ebolasmallpox/3733059220/

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

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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)

Product,market,method

innovation

Business model

innovation

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.

Sustain/core

Innovate/adjacent

Disrupt/transformative

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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

innovation

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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 evidence.com

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Engine as a serviceThursday, August 14, 14

http://www.nasa.gov/images/content/365835main_airplane_noise_qtd2_3024x2016.jpgEngine as a service

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Efficiency is tied to analytics. Well still look

for new materials, or