Enterprise Lean Startup Workshop
Discover Your Future
Are you ready to “Discover Your Future”? Sign up here for more information on our “Enterprise Lean Startup” workshop. In this 2-day hands-on workshop, we guide you through the fundamentals that direct you to your future. Experience the work of “Form, Discover, Validate, Transition, and Operate” for Disciplined Exploration and Operation. Learn guidance for creating your investment context in a 3-horizon Portfolio. Practice the disciplines of “Frame, Build, Measure, and Learn” for Empirical Learning.
You make Horizon 3 investments in future offers that will pay off years beyond the current operating horizon. These initiatives are somewhat fuzzy. They are hunches or guesses about innovation that target a time horizon of 36 - 72 months. And they are brazen. Your Horizon 3 investments come from the idea that this work will actually create a category not just gain category power. In so doing, you intend to take the market as you are creating your category. But this is just an idea. There is a great deal discovery and validation to help such ideas move into Horizon 2 plausibility for growth and materiality. Like Horizon 2 initiatives, Horizon 3 investments are not expected to appear in the market during the current planning year. But here is where they differ: Horizon 3 initiatives do not put a strain on resources that affect the current year. They are for the distant future and so are kept completely separate for investment purposes. Be sure this is clearly defined as you set your portfolio investment strategy. You should not be tracking operating expense here; rather, track your capital expense, the monies you have set aside for this work.
Because Horizon 3 investments really are your investment in the future of your company. They are the core to your escape velocity. They are evidence of your readiness and willingness to pull away from your successes of the past. In Horizon 3, you are letting go of metrics of growth and materiality. You are not tracking market share or wallet share. Rather, you are taking an idea and preparing to invest in it as a disciplined explorer. You invest in gathering empirical evidence that you have true innovation at your doorstep. In Horizon 3, you are seeking to create PR buzz and to investigate name-brand customers as well as name-brand partners. You are making your first steps to discover your future.
Your Horizon 2 investments are expected to pay back significantly, but not in the same fiscal year as you make the investment. Here, you are investing in the future, 12- 36 months out. Your work as a Disciplined Explorer is really called forth to support these investments. Yes, Horizon 2 offers target high-growth areas. However, you are not fully assured of that growth. For this reason, these offers need your discipline in discovery, validation, and transition work before they are truly material to current financials. Initial pay back in these investments in your portfolio comes from a small base of customers. More expansive growth into your overall potential customer base will take time. Build this expanded window into your go-to-market strategies as well as your portfolio investment strategy. Track your validation strategy very carefully in order to manage pressures from the business as well as any discouragement about the time it is taking to transition to operational cash flow.
Horizon 2 investments may look quirky and unstable; their adoption patterns can be quite sporadic and you may lose faith in your investment. Be patient. Apply your disciplines as an explorer to help you weather these waves of confidence. Gather empirical evidence that says, “We’re going to be material to the business.” Expect that, while these investments create material demands on your overall resources in the current year, you are validating their ability to provide significant material returns, upwards of 10%, in the future.
Ultimately, protecting and having patience in your Horizon 2 investments is key.
Your Horizon 1 investments support your current business offerings. Through a well-defined operating expense, they generate today’s cash flow. Here is where you are feeding the execution engine of your organization. Immediate results are expected. In your overall portfolio strategy, Horizon 1 investments are meant to carry the load of bringing in cash to support your other investments. Because of their vitalness to your overall strategy, these offers must lend themselves to reliable forecasting measurements in how they contribute to the fiscal year’s cash flow.
Unlike Horizon 2 or Horizon 3 investments, consider your Horizon 1 investments as those for offers that have established operating histories. They have high materiality in that they are expected to generate 5 -10%o of your total revenue or total profit. For this reason, despite potential low growth expectations, protect your allocation of investments here in your portfolio strategy. Too much distraction from these offers or investing overly aggressively in potential new offers, and you’ll lose the engine that feeds the rest of your portfolio investments.
In Disciplined Exploration, you must first follow steps that set you up successfully to Discover, Validate, Transition and Operate with and ability to make pivot/persevere decisions throughout. For that reason, start your exploration with the discipline of Form: 1) define your team; 2) create your vision; and 3) develop an innovation sandbox.
Define Your Team
To be truly effective in your exploration, form a cross-discipline, multifunctional team. Be very intentional in how you bring together members from many departments across your organization to help you with your exploratory work. Seek team members from engineering, sales, marketing, R&D, and even legal. Find people who have an enthusiasm to explore. Ensure they also understand and are prepared to abide by the necessary discipline associated with this exploration. You’ll know that you have the right people if they are prepared to identify potential pitfalls and as well as opportunities as you proceed through your exploration. As the team forms, encourage members to create a team name based on the vision.
Create Your Vision
Your team as a collective must now work with you to agree upon the vision. Simon Sinek’s TED Talk describes a good method for this. You can think of a team being guided by a Why/How/What sense of it vision and work. The team’s “Why” should tightly align with the company’s “Why”. In the language of Sinek’s model, the team’s “How” and “What” are up to you and should align with your purpose behind creating the team. Your “How” and “What” express the boundaries of your exploration as well as the discipline you bring.
Develop an Innovation Sandbox
Finally, you need to create an innovation sandbox to protect your rapid iterations and experiments from any blocks that may naturally occur in your company at large. In your discipline, you do not want your exploration to have unintended negative consequences for your organization. Limit all of your work to your innovation sandbox. This may be hard to do. But this discipline is critical. It protects your company, brand, and customers from your work. As you define the innovation sandbox, be sure to document policies around operating practices, boundaries, and rules. These policies are essential to the effectiveness of your sandbox.
In Disciplined Exploration, the Discover step has three sub-steps that guide you through your exploration. To be disciplined in how you Discover, you must 1) validate the potential problem; 2) validate potential solutions; and 3) validate your viable business model.
Validate the potential problem
In this step of Discover, look at your potential customer segments. Do you really understand your potential customer segments’ problem and what they want solved? To validate the potential problem you need to 1) determine their significant pain; 2) uncover the circumstances surrounding that pain; and 3) learn how these potential customers are handling the pain today. (Notice how these activities differ from conventional research of the attributes of potential customers.) Your primary tools in this step of Discover are empathy interviews and invalidation interviews. Technique: Empathy and Invalidation Interviews
Understanding pain starts with empathy interviews. These are in-person interviews designed for you to learn what your potential customers are thinking, saying, feeling, and doing. Through your careful listening and documentation, use your emergent empathy to articulate their problems as best you can. Use your data to inform an overall Empathy map. This guides your understanding of possible points of view to what the real problem is. But you are not done; you must now validate your understanding. To do this, conduct problem invalidation interviews. Because you are attempting to invalidate your observations without bias, these interviews demand more structure than your empathy interviews.
Validate Potential Solutions
The next aspect of the Discover step is to validate a potential solution of the customer’s problems. Do this by testing several prototype solutions. You want to figure out if any solution that you have proposed actually solves the customer’s problem.
Technique: Prototype Testing
As a Disciplined Explorer, prototype testing looks a little different than what you may be used to. It directly complements the work you have done in validating your customer problem. That is, you once again connect directly with your potential customer for validation. You could create an overall pitch to your potential customer. But this doesn’t pull forth that visceral reaction you seek in true discovery, Rather, you need to create something tangible through which you can any real-world feedback. At the heart of your experiment is an MVP, or Minimum Viable Product. The MVP isn’t just a smaller version of your final product; it represents the minimum amount of building required to get the most insight into how your solution may make your potential customer’s pain go away. You have a variety of ways to bring an MVP as a prototype -- a Video Demo, a Concierge experience, a Wizard of Oz product, and Crowd Funding.
Validate Your Viable Business Model
The final aspect of Discover is to determine if you can create a viable business based on your problem work and your solution work. Can your business model be profitable? Your viable business model must balance value and cost. In the first two sections of Discover, you’ve honed in on the value of making your potential customers’ pain go away. Now you delve into your costs both building the possible solutions and of reaching those customers.
Technique: Lifetime Value and Customer Acquisition Cost
To validate your viable business model, assemble your value articulation with cost information. This involves the discipline of determining a sense of the lifetime value (LTV) of your solution side-by-side with best hunch of your customer acquisition cost (CAC). These two fundamental metrics guide the creation of your business model. That is, you are weighing your value hypothesis against your growth and cost hypotheses in order to determine if your model is truly viable.
In Disciplined Exploration, you move to Validate once you make a “Persevere” decision from your Discover step. You are now poised to bring your offer to your company. Can you justify your offer’s ability to generate sales and cash flow? Can you remove the barriers between your company’s offer and your customer’s wallet? To Validate, you must 1) ensure founders can sell; 2) create a Sales Playbook; and, 3) prepare to go to market.
Founders Can Sell
Although you have made a “persevere” decision about your offer, you haven’t yet transitioned the offer for large scale availability and selling. This step of Validate addresses that potentially delicate stage between “not ready” and “ready”. As founders, you are validating your understanding of the flow of money and your ability to sell. Bring your in-depth knowledge of the offer into a subset of the market. Specifically, seek out “earlyvangelists” as your target market. These are the people who have been acutely feeling the pain of the lack of solution. They are in such dire need of a way out of their pain, they have very often pulled together their own solution. This is your prime audience. Recall your empathy work. Listen versus defend. And be prepared to have some of your earlyvangelists want to draw out more of the solution with you; they are so eager for your successful offer, they may even work with you to create your sales playbook.
Create Your Sales Playbook
Now it’s time to execute your draft sales plan to test that it works: that people beyond the founders can sell your offer to customers. Create an initial sales playbook. Define how you intend to reach your customers. Position your offer in a way that’s appealing to your defined users and buyers beyond the earlyvangelists. Determine your intended sales/activation funnel. And maintain a roadmap that can be easily articulated to your target customers and buyers. Your sales playbook is intended to carry the selling torch from the founders to your non-founding sales organization. Go out and sell, or generate sales through a web channel. Pay attention to where issues in your sales and activation funnel. Be prepared to continuously update your playbook based on a cadence of reflection on experiences and results.
Prepare to Go to Market
Finally, it’s time to verify your go-to-market strategy. Consider using Geoffrey Moore’s Nine Point Market Development Strategy. This structure guides: your understanding of the target customer, the compelling reason to buy, components of the whole product, partners and allies, channels, pricing, competition, positioning, and your next target. You should have already initially addressed some of these components through evolutions on your Business Model Canvas or Lean Canvas. For you to enable business operations and execution of the new offer, however, you need this level of detail. This go-to-market strategy positions you well for the next discipline in your exploration: Transition.
Pivot or Persevere
As a Disciplined Explorer, you’ll find times where, between steps in the flow, you’ll need to make decisions about the path of your offers. This is referred to as a “Pivot or Persevere” juncture. That is, judging from the work in the previous step and the resulting outcomes, you create decisions about the state of your offers. Pivot/Persevere occurs as you move from the Discover step to the Validate step. You also make a Pivot/Persevere decision between the Validate step and the Transition step.
Your ability and willingness to Pivot may be the “make it” or “break it” in you path as a Disciplined Explorer. Too often, as we create offers, our default behavior is to Persevere. We work hard to prove that our plausible offers are absolutely the right ones. To Pivot suggests that you may have it wrong. Your idea may not have the legs to move beyond the work of an effective Business Model. Or, you really can’t formulate an effective sales model, either through the founders or through the sales playbook. Acknowledging these realities is not a weakness; it is your strength as an
Just as you strive to Persevere to the next step, you must apply the discipline to invite a useful Pivot.
Some of the pivots described in Eric Ries’ book The Lean Startup are: zoom-in pivot, zoom-out pivot, customer segment pivot, customer need pivot, and value capture pivot. There are more pivots at your disposal. Each of them guides you in altering your offers in such a way that you can gain more plausibility or more probability.
You’ve been disciplined in how you have discovered and validated your offer. Now it’s time to apply discipline in how you bring that new offer into current operations, to join the rest of the proven offers. This is the last step of Disciplined Exploration: Transition. In this step, you are bridging exploration with operational execution. Ensuring an effective transition requires you to 1) create a transition team; 2) transition knowledge into departments; and 3) roll off the discovery team.
Form a Transition Team
Transition requires budget and authority to form a cross-departmental transition team. Create a team contains the following members:
- Innovators from the discovery team who continue to be funded from the initial Horizon 3 (H3) budget.
- Deployers expert in detail at various departmental processes
- Optimizers adept at rearchitecting across processes to fully take advantage of execution for the new offer
- Orchestrator, the most important role, expert in coordinating the entire process from the innovators, through the deployers to the departments with an ability to relate to the many people and parts of the organization.
The deployers, optimizers, and orchestrator are all currently in the operational part of your company. Transition requires you to pull them from their existing responsibilities. You need their in-depth departmental knowledge to create the broad knowledge base quintessential to an effective Transition team. Dedicate funding to support this team together. Specific funding protects the team and alleviates the pain of pulling them from their departments.
Integrate the New Offer into Departments
The transition team absorbs the knowledge and execution history of the new offer from the discovery team. You support this team in how they gather information. Innovators and deployers create a plan collaboratively for deploying that operating knowledge into their departments as part of the Horizon 1 (H1) execution part of your business. The orchestrator ensures the flow of knowledge across all affected departments as well as the effectiveness of the transition process. Additionally, the orchestrator ensures that the sales playbook and the go-to-market strategy from the Validate step are optimally operationalized. Once departments deploy and fully integrate the new offer, support team members in rejoining their departments.
Roll off Discovery Team
Once departments have taken over operations, help the discovery team members determine their next work. They may choose to follow the offer into the departments as it becomes operational. Or they may take their expertise in Disciplined Exploration to other Horizon 3 (H3) discovery efforts. Protect these valuable people. Specifically, do not lay off the members of the original discovery team simply because that work is done. These innovators and disciplined explorers have much to offer the organization. Losing them sets a bad precedent for future discovery teams. This may seriously hurt or ultimately destroy your overall H3 program. Hold onto this valuable talent pool as you define how to roll them off their discovery work.
The steps in Disciplined Exploration that have led you from Horizon 3 through Horizon 2 prepare you to move your offers into Horizon 1. You’ve guided your plausible offers through the discipline of Form, Discover, Validate and Transition. And you have applied Pivot/Persevere events along the way. Through this discipline, you have set yourself to move your probable offers to to proven offers. Operate. You are ready to Operate.
In this Horizon 1 domain, your proven offers move into a sort of algorithm of flow in your organization. They are fully absorbed into the execution engine of your organization. You continue to support their market development. And now you also focus your energy on maximizing the predictable value of your offers for the company. That means you pay attention to the fit of your offers in the overall portfolio strategy of your company.
How will you protect the viability of your offers with other portfolio offerings? Continue to refer to your company’s high-level strategy. Through this guidance, evaluate each offer’s ability to advance that high-level strategy. Then allocate operating energy accordingly. Engage in the cadence of steering business epics and architectural epics that can impact your offers’ viability. Represent your offers in the overall product roadmap through your involvement in both product management and release management. This involvement is critical. Demand to absorb new offers may outstrip your company’s ability to deliver effectively. Limited resources may threaten the success of your offers. The more Agile your operating execution process, the easier it will be to transition your new offers into this operational environment.
After formation, your team first fills out your canvas. Depending on your purpose, you’ll choose either the Lean Canvas or the Feature Canvas. Team members collaborate to fill in the boxes in the order listed, then post the canvas in a communal location (online if team members are distributed).
Next, your team needs to enumerate the assumptions on the canvas. Sometimes these assumptions, especially ingrained ones, are hard to identify. Having a multi-disciplinary team can help bring new perspectives.
Identify Key Assumptions
After your team has identified assumptions, you must organize and prioritize by importance. For example, which assumptions, if proven untrue, will cause your business or feature model to crumble? Teams must determine if any assumptions are nested; if so, you can remove that assumption if the parent is proven false. We encourage you to add more assumptions if necessary. Your key assumptions should rise to the top.
Next, your team develops sets of experiments to support or invalidate each assumption. Then, teams rank the sets of experiments in a backlog.
Each experiment teaches you something important. Now, it’s time to share that knowledge and use it to steer your exploration more effectively. This is the time to revisit your canvas, and update boxes based the new information.
Framing the Experiment
Before you start building and running an experiment, you first need to frame it. Start by building empathy for your users and customers. The better your intuition about your customers, the better you will construct experiments to test your understanding.
One of many techniques is Journey Mapping from Design Thinking. This is a great way to holistically see your users’ experience. If this process is too laborious, even simple empathy maps can be very helpful. Your organization may have guidelines to explore for reaching out to customers. You also might need to get and set up permissions to do this work.
Capturing the Details of Your Experiment
Now, it’s time to capture the details.
- Background. What do you want to learn and why? Writing this down forces you to articulate what you hope to learn.
- Hypothesis. Simply express your expectations from the experiment. If we do this, we repeatedly expect this result.
- Variables. Consider the variables in your environment. Remember your science fairs as a kid. You identified dependent, independent, and control variables. Make sure there is a clear correlation between the dependent and independent variables.
- Details. Document the details of your experiment. This is important! Use the structure in the experiment sheet to make sure you’re running an experiment designed for learning.
Our brains can play tricks on us. One particular trick, retrospective coherence, makes us believe the results we experience were what we expected all along even if the results differ greatly from what we originally expected. This makes it especially important to write down your expectations before running the experiment. At the end of the experiment you want to be able to go back and review it. You want to put yourself in a position to see the unexpected, because that is the moment when learning happens.
Framing works best by applying empathy for your user. This is a good template with which to start. Empathy Map
Designing the Experiment
Now that you’ve framed your experiment, you can design, build, and run it. Use an Agile development methodology to build out the details of your experiment. It’s important to consider how everything will fit together. Pay special attention to designing and building the right data collection methods. When the experiment is complete, your data must be robust enough to provide results and actionable information.
Building the Experiment
When time to build, this doesn’t necessarily mean creating something big and complicated. Remember, you want to build the smallest increment necessary to invalidate your hypothesis with data. Perhaps all you need is a paper prototype or a landing page to collect the data you need.
Running the Experiment
Once designed and built, it’s time to run your experiment and collect your data. This could be as simple as conducting an invalidation interview with your potential customers or as elaborate as shipping software. The key is to work in increments that maximize the number of learning cycles you can run.
Measuring and Sharing Your Results
You ran your experiment; now it’s time to measure the results. When you designed and built your experiment, you included dependent, independent, and control variables that were important to evaluating your hypothesis. Start by collecting and analyzing the data that the experiment provided.
What actually happened during the experiment? How does the data relate to your hypothesis? Does it support or invalidate it? Consider what you expected to happen, as documented, with what actually happened in the experiment.
Finally, organize your data and present it as a compelling story. You want to teach and enable your team from the results of your experiment. Does it prove or disprove your hypothesis? Simple, engaging stories are most effective, so distill your data into a narrative with just the parts that matter.
Document and Share Your Findings
The final step is to document and share what you learned. Compare your hypothesis and expected results with actual results. What happened? You invested time and money to buy knowledge, and you derive value by sharing what you learned with the broader team.
By completing the Experiment Sheet and sharing it, you will tell a structured story about what you learned. Fill it out, including next steps, the cost of obtaining results, and ancillary insights. Sometimes ancillary knowledge or insights turn out to be the most valuable result of running your experiment.
Share your findings. If you are part of a co-located team, post materials on a wall in your workspace. Otherwise, put your materials online in a shared space where others can see them. This way, your team can easily access the current business model, assumptions, and experiments.