Show Me the Money! Defining Enterprise Value at Scale

Defining business value for product innovation is an essential and critical task used to obtain funding in enterprise environments. When Elon Musk obtained VC funding for Tesla, he used innovative business value modeling to make ruthless choices in his product offerings.

Leading innovation companies such as Facebook, Salesforce, Tesla were not the first companies to create their primary product, but they had a special “secret sauce” that was devised by their executive team and Head of Product, combining a special recipe of strategy, processes, pricing, product features and other intrinsic items that differentiate a product line.

The Head of Product role has become elevated to the same level of importance as the CEO for many innovation companies as the ability to become a market leader requires specialized leadership for large enterprise organizations. For example, Chris Cox was recently appointed at Facebook as the head of product where he serves as chief of staff to Facebook CEO Mark Zuckerberg on product development, leading the companies’ worldwide product development, design and marketing functions. He acts as the lynchpin to guide development and design of products, keeping Facebook at the forefront of product innovation.

So, the question remains – what differentiates a “great” product from a “good” product? In order to assess and define areas of value for innovative products, the following steps need to be followed in various executive meetings and requirement gathering sessions:

1.     Identify your company’s values.

It’s mind-mapping and word-cloud time. Conduct sessions with executives, board members, customer representatives and the Head of Product to brainstorm the value principles that matter the most. These are guiding principles that describe your philosophy, product goals, and work ethic. 

2.     Create a strategy

Using tools such as the BCG Matrix, Porter’s Five Forces, Porter’s Value Chain, Hoshin-X, Pareto analysis, create a strategy that sets the tone and pace for the organization based on the values. Conduct collaborative executive leadership sessions where all voices are heard, and agree on a 1-year strategy, 3-5 year strategy, deliverables and metrics. Aim to reach at least 3-5 customers with several questions that will clarify their objectives and your needs. Create a dashboard designed to display your metrics clearly and simply. Review and iterate, creating areas for improvement based on key learnings based on feedback from the customers and key executive players.

 3.     Use innovation accounting to drive metrics

Innovation accounting is a way of evaluating progress when all the metrics (revenue, customers, ROI) are effectively zero. Innovation accounting provides a framework of chained leading indicators, each of which predicts success. Each link in the cain is essential and when broken, demands immediate attention. IA has three different levels, each of which corresponds to an organizational dashboard that includes three levels that include 1) a simple dashboard of metrics, 2) a well thought out strategy and business plan, and 3) learnings gained from the first two levels. All of these elements can be discussed in your initial executive sessions which include the CEO, CIO, CTO, Head of Product and other executives who act as the lynchpin to set the tone and pace for the organization.

 4.     Place items in a backlog

Create a backlog of product lines, products, and processes, stack ranking them in order of importance. Before your team decides on a final set of items and ranking, the right questions need to be asked to create a strategy. Some questions can include the following:

·      Who else is playing the game?

·      What are the changes surrounding the holistic environment for the product or process you are offering?

·      What does the future look like?  

5.     Uncover MVP

Based on the output of your sessions, find an MVP that includes your top priority items and begin to iterate. Create a prototype of the product and begin to iterate on an initial prototype or design. Pivot and correct to create your next iteration. Rinse and repeat. If you are using agile methodologies, these activities can go into Sprint 0. Create a backlog of product features using the same stack ranking technique, sorting out the most valuable items and eliminating the waste.

6.     Multiply, divide and conquer.

Once you create an initial product, now iterate using lean-agile methodologies, along with scrum. Iterate, rinse and repeat, finding nuggets of value, good patterns using scrum practices including sprint planning, daily standup, sprint review and sprint retrospective. Scale up products and product lines based on your findings and learnings.

7.     Conduct feedback sessions

Continue to get feedback from your executive team, board members and customers, and incorporate the findings into future product iterations. Continually groom all product line, product and feature backlogs to realize success.

Unfortunately, there is no magic recipe or silver bullet for success, however, following these tips can act as a starting guide to help organizations create products that dazzle and delight customers. Additionally, organizational culture can be created that fosters innovation, creating an environment of culture, collaboration and sharing.

References

Blue Ocean Shift – W. Chan Kim & Renee Mauborgne

Blue Ocean Strategy – Michael Porter

Business Model Generation – Alexander Osterwalder

Competitive Strategy: Techniques for Analyzing Industries – Michael E. Porter

Crossing the Chasm – Geoffrey A. Moore

Good to Great – Jim Collins

Lean Startup – Eric Ries

The Boston Consulting Group On Strategy: Classic Concepts and New Perspectives – Carl W. Stern & Michael S. Deimler

The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail – Clayton Christensen

The Innovator’s Solution: Creating and Sustaining Successful Growth – Clayton Christenson and Michael E. Raynor

The Innovators: How a Group of Hackers, Geniuses and Geeks Created the Digital Revolution – Walter Isaacson

The Value Equation: Align your Core Values, Transform Your Business and Create Sustainable Success – Garry Krum & Steven Smith