 Hi everybody, thank you for joining in the session like the agile community. I'm really happy to be here Really like hanging out with agile people not a scrum master not scaled agile or anything I Guess we draw a lot. I draw a lot on many things but my core competency is Like a lot of uncertainty So transformation innovation and We just have a tremendous overlap, but I think I'm drawn to the whole community always because this that's just nice people focus And I just feel they're comfortable. So I'm really glad Coming back here again being able to present again And I would love you To engage a little bit. I know it's hard but I've done this presentation not this one another one last year and that was a bit It's psychologically a bit hard because like you have no You don't see anybody you don't know what the other people are thinking and so on so at some point it might get to you They got to me last time So a bit of engagement is great, right? So it's saying I understand it like anything critical Any question a thumbs up was really much appreciated more can start right now so I Also before before we go into it and you see chromatics logo down there That is my that's a partner organization based in the US and much much of what is in this presentation comes from them and Yeah, can't credit them enough So just to keep that in mind. Thank you cool So we will start with the problem space today Just talk a little bit about the issues like why do we need innovation like why do we talk even about innovation accounting? Why why do we need something different? It's kind of that's kind of the question. I guess that we want to quickly explore and so One of the main issues we're trying to solve what to make better is the business case and And Trying to engage a little bit right now. So maybe one or two if you want to punch something in here in the in the chat So who's who thinks? What are the problems with the business case in an innovation context? Like if one of you can if one of you can type something in here while I speak that will be fantastic and Well, basically, how do projects get chosen? How do potentially our way great to heart all right Thank you very much engaging your champions tangible outcome. Fantastic. So our right timeline fantastic. Can we Ask the man estimating the value is super super difficult fantastic and why is it so difficult Kind of cannot object to speed valued risk. Oh, man. The engagement is it's fantastic You might be very happy right now risk great Okay, so we see there is risk and reward goes together So there's a lot of risk and we have a lot of risk like we there's a lot of uncertainty simply and the business case pretends often to have Certainty what tries to find ways to create that make it look like it's certainly Great and we don't even know what customers want yet and do we meet their demands and To what price fantastic downside risk Fantastic, so So It specifically innovation context we have Very minimal data Right, we have mostly qualitative data They might come in this kind of form we collecting them value proposition canvas business model canvases we have Personals we use we work with So we have a lot of qualitative data and we and we're very good at we're very good at like we we're getting better and better Actually understanding customer needs forming better questionnaires Having little experiments in the beginning empathizing all these sort of things But at the end of the day all of that stuff has to be translated into something it looks like this and That's just no good because we know It doesn't really work and for once it creates a massive disconnect Between those who come up with these ideas Who create backlogs who see a chance to see a glimmer like a glimmer of hope so to say like here We have something we have a few ideas And those who have to them like the business sponsor the finance department and so on like how can they possibly really understand each other and The systems within companies as we know at the end of the day you have to calculate the number And so that's something we're the space where we thrive the space that we love the space where we try to solve more problems Really for both parties really, right? We talk a lot about empathy with our customers, but I think we should also have empathy with like the CFO and See how we can tackle the problem for me from that angle I wrote an article I've shared a link with you together with Tristan and We identified actually three distinct issues with the business case As you said they're not accurate Right and that present value like one number. We try we asked me folks like for one number five years down the track and like We don't know we don't know the tech we're using. We don't know our customer position cost We really don't know but we have to do this and so We basically forced to make things up in the sense that there's no other way to get it over the line like we have We have certain expectations We know these expectations and innovation in an uncertain context even higher because we know we get discounted right, so we get this heavily discounted because and Any business bought any any CFO knows that that's risky and that's the tool how they do it So what do we have to do in return? We have to like make up a higher Tem we have to pretend the market is larger or whatever it is to make this to get this over the line It's like the system forces us to make up to make it all look a little bit better than it really is and Lastly, it's just not testable It is testable like our eye is testable in Four or five years. We know whether or not the our eye happened, right? So that's really the problem like we want to know much earlier We want to have better predictability and we want to know much earlier whether or not something has any hope of survival or not Right does that make sense is that summed up a little bit or there any questions at this point? No How many people dropped out already not too many people are still coming in great Thank you testing hypothesis. Yeah in a sense. That is if you want It's not really phrased as a hypothesis, but right. Yeah, like the our eye is at least it sounds great So we're assuming acts whatever our eye and yes It's test it will be tested the market will test it Yeah, and we know it's anything Early validation. So what we're looking for exactly it's early validation ideally In a quantifiable like what we're trying to bridge that what we're doing quantifiably with a with a color And all the qualitative knowledge we have with it with a quantifiable model And we're looking for something that they were looking for something that is testable a lot earlier, right? and so The solution to the state for that or we believe the solution is is actually it's innovation accounting So how many how many people are vaguely familiar with like with innovation accounting? Like have used anything that they would call how many people used Can anybody just say a thumbs up or so if they have used something that would call innovation accounting? sweet one person Hands up fantastic Yeah, we're not together otherwise I would ask what it means for you and so on but maybe we skip that might be a bit the challenging but great fantastic, so to introduce the concept it was it was coined by our grease and Ever since he coined that the term gets broader and broader and broader but to bring it home It's good to look at it from this perspective of levels of innovation metrics so When we measure innovation We usually break it up into individuals like skills how teams are performing that is often very different from how projects perform Like a team can do exactly the right thing at the right time But the project doesn't necessarily need to succeed for the team to do really good work So those are different we need different ways of measuring And we're looking at the project and that's really what we're talking about today And that's traditionally what innovation accounting meant. So how can we make that a? Comparability predictability, how can we have lead indicators and all these other things? We can look at the portfolio at the funnel and we can also look at the ecosystem and look at broader broader components broader limiting factors to build the to building up the system so We are looking at the project today. So how do we get? From something it looks like this or like this or anything else like any like any tool in there To this In a sensible way and not really to this. This is not really what we want like But we want to spreadsheet. We want to talk the language of numbers ideally so this thing is way too specific like we're asking entrepreneurs or Innovators to come up with a number. We know they will never hit most likely It's underneath that Yes, just statistically like that's just most likely the case But can they be single numbers? Yeah, so basically what we do, right? Tell me the ROI Yeah, we get to that perfect. Yeah, perfect Even best case worst case scenarios we can talk about that. They're pretty they're not very good So this thing is probably like it's not very true. It's not very accurate and most of all it's not testable So what we want is actually something it's a bit like When you go to an innovator and you ask them like give me the ROI, it's a bit like going into a meteorology say hey Can you can you tell me where the where the Where the storm that is just forming And where the hurricane that is just forming it's about to hit in five days What will the meteorologist say like get out of here. I can't do that I can't tell you where exactly and in what state and at what time and with what force this thing will hit the coast They can't do that But it doesn't mean that they can't provide valuable information to make good decisions real-world decisions like most likely we should have accurate now and and that is really the best thing that we can do and We can't do that. It is basically a range It is a range of possible outcomes and the further you go into the future the further the range obviously is because You know less and less and less it becomes less predictable right But the earlier we can quantify the earlier we can make good decisions The earlier we can make good decisions the earlier we can pull the plug and the earlier we can pull the plug the more ideas You can basically test and that's how we increase the the likelihood of success Was that too much? Could I have a bit too enthusiastic or something any questions? So we're looking for something that is true like we want to tell the truth like to our best ability As accurate as possible and Ideally tested. How does that look in in our context? It looks something like that ranges We're looking for ranges. We're looking left for the most likely outcome. That's what we're trying to get to today. Yeah The thumbs up or something I'm just giving it a moment Any questions I drink something people dropping out 44 how do you get to this wonderful fantastic? Thank you Yeah, exactly by what's likely and If it's not and if there is that enough possibility That it if it's at least possible then what we can do is we can that's the basis of a meter funding approach We can put some money in to some experimentation Get some information back and narrow down this chart basically. Yeah So how much does the range help? Let's pause that question and Maybe ask that again later if that's okay. I have a feeling it might be clear So the way we we we designed this process or To to bridge to bridge the gap there between qualitative staff early research and a hurricane chart The range helps to narrow down and identify possibilities Great Sure we get to this. I will think really good on time. Hope we have some good time later on as well fantastic so Really quickly an overview and then we go into the specific into the specifics of this So we want to organize our qualitative data. We're using storyboarding journey mapping storyboarding We use that to to take out the metrics we need the lead indicators funnel metrics Then we get folks to draw this up the visual financial model So really just a tiny step further Understanding the loops of the business model kind of the things we're looking for like specifically virality Then we put that take those numbers put that into a spreadsheet for the first time and Then we define ranges for those numbers basically So it's a little bit much for now, but we just move on so storyboarding and metrics What we want to achieve is we want to have of this idea. We want to look at this business model That's really what we're trying to do. We're trying to establish a new business model and we're looking at the inputs and outputs So what are they and this is really really helpful like this is probably the most helpful to you can really use out there you say all Sorry, thank you perfect. So we're usually working like you will see two examples today one is Like an Instagram kind of app idea and the other one is usually we're using a restaurant like we're keeping a very very simple And that's kind of the ideas do the examples we go with right Okay, so in this case it doesn't really matter too much, but somebody is somewhere taking pictures The pictures are really nice, right? And you know, you see this with smiley faces and then The assumption here is that they go to an editor and they get a wonderful photo back right And then they're happy and then they share it with people and then they get more social engagement and credibility and everyone's happy, right? so This is this is fantastic because it tells us exactly the customer journey like what is our assumption here that people are actually doing They come they see an ad they download the app They pay acts for it They pay after three months. They pay for whatever it is right at a certain time They perform a certain actions exactly what we're assuming and so when we narrow down the main variables of the story then we can look at what we call the happenings metrics So How many trips do they take how many how many pictures? Whoa? That's just out of life of its own. It's a lot of numbers up there and words, but If we assume they take poor shots, then how what's the how many poor shots do they take? Do they apply filters and so on? This is in a sense what we still call vanity metrics. They don't really tell us Really tell us what are we doing? But what we can do from there and you see every step should be simple even though I'm rushing through it I'm pretty sure most of you Familiar with that and you do actually could you could you verify that for me for a second? Some of you like that that makes that makes total sense. I think right Or not like does it not make sense is my question to anybody here so far Like I do you do journey journey mapping anyway, right and so The question here. This is what we're looking for This is really the base of everything. We're looking for actionable metrics It's what we say. We need actual metrics to build a hypothesis driven financial model. So That's how you can get them. You're actually looking at rates or ratios. That's what we need to Perfect. Thank you. Yeah, if you can identify mistakes, that would be great You know always have to improve obviously just as happy Then I still assumptions. Thank you for pointing out absolute assumptions 100% I have to say that when you get entrepreneurs and teams to do this and to do this well They're thinking very hard about their assumptions It's a lot harder to to argue for absolute craziness, right? So 100% still I Usually see improvements what I would I would say Okay So how many Pictures do actually need to be improved and then in this case Yeah, at what point in our journey do they create an account at what point journey do they pay, right? This is just this is just a highlight for example So we basically made it from here to here. So we organize all this qualitative stuff And we've got our metrics out already The next part is we're not even touching a spreadsheet now Let's just go to the whiteboard. Let's go to mural or what have you and Draw this up at a high level. So from here to you The pirate metric framework We're just going through it without really mentioning it too much like it's gonna be in it's gonna be a That's basically the fundamental metric system here we're using This it's great because it's because we always look at it as a funnel, right? So we look at customer behavior in the summer. So how many of this visitors come now We went from the app forgive me for that. I should change that in the future really I have the same example in the same slide We're looking at a at a restaurant now correct Correct. They can be 100% 100% we can we can make we can actually stop there Not do this not do anything else and already Try to kill our assumptions right there And we can already look like have have a feeling have a voting have a two by two Like impact over over uncertainty business impact of one certainly two by two Just from that storyboard and prioritize risk and uncertainty 100% 100% I'm just Responding to the chat, right and In a qualitative way go out gather more information against that 100% and that's what we do and it's beautiful and I recommend everybody to just do it But we're looking for a model, right? We're looking for something where we've got 10 ideas and we need to choose and we want to go further with it and We're looking for a quantifiable so we would translate this into Visitors customers money as an output it could might as well be impact Also, yeah, the challenge is often I find like a little bit like when you have internal projects Like my examples don't necessarily translate too well So if anybody wants to jump in and see how they can translate it into like internal Organizational like in large organizations internal projects that you might be very busy with and see how we can like Rich what we're talking about here Just to turn to internal stuff Very cool, but really it's about understanding the loops and it's it's not a minor thing We will see later the loops are really what makes or break a really good business model Retention obviously right if we have folks using our product like I don't know a fidgy spinner and then they throw it away and That's it right or they can't they take one picture they go away. That's it like Sure might be okay. Might be okay in certain circumstances Specifically if you want to have yeah Retention is usually it's one of the big Leaves of growth so without retention you usually have a big problem growing anything in any sustainable way and so Then then we look at referral Insanely incredibly important that specifically when we want to have Any any hockey stick curve in our business model if you want to argue for anything remotely like that we see later It's very very important And they might refer different points, right? They might be paying money first and then refer or they might come in and then they refer to three people and then refer to one later and so on so on but these are very essential assumptions we need to talk about and This really helps to align the team to align stakeholders to to talk to each other Right and that's sitting in front of some spreadsheet and putting some numbers in here and there right? It's fantastic just for You know team cohesions, I suppose or whatever the right word is Yeah returning visitors this there's so many possibilities for loops we can subdivide the funnel a little bit different and Really understand our business model better and from there we can take what we had earlier and Put those numbers in as you said They're all assumptions for 100% But what we should have at this point at least this we thought about it really hard There needs to be there needs to be a logic. Otherwise this thing breaks. There's this right this There's a certain sanity check And we have all these actual metrics in there. I think I forgot something else Right, let's let's pause for a second Does that make sense of far did we take did we go from like a business model canvas with sticky notes and research and everything That we managed to get here in a concise way does that make sense so far as what does not make sense rather Hopefully anybody dropping off that can't be that Great, correct. They have different and that's a great point, right? Because like if we knew the business model already Then we don't need to do a sense of stuff If you know your business model you can benchmark every metric, you know the industry standard You know the costing, you know your conversion rates, you know Like how much you're gonna deviate like if it's not innovative You know the business model That's the problem. You don't know your business model and if you have to write something up for it that takes you five days Or whatever and make these huge cases and make up all the stuff and then you can't even test it at the end Then you have a very bad tool for making decisions So the question is how long will this take you if you have a trained team and You get to understanding your business model. You're not a standard Right Great Well, people do it and people are incredibly good at it But it's usually the people who are really good at telling some sort of financial story, right? You make like you don't really have much so You win in this environment if you can you know do like I call it a number novel You're writing a story there with your spreadsheet and then if you're really good writer And you can write a great text around it and make this business case and then you have really good political alliances within the company and That's that's how it works so we're looking for other ways we're looking for systems and repeatable processes that can that are better and understandable and and Can be scaled and you're right business cases Every business model is different do I forget something cannot retain Our user base. What do we do with the idea? Okay, let me try to understand this after after doing all these processes model to purchase steps If it cannot retain our user base I don't know if you if you chandize if you could clarify that might just be me I don't fully follow. I might just move on Let's just set this over your stage anyway, so we're so we came from here to here to here, right and the idea is here that Of the promises that from there to the spreadsheet. It's not so far anymore They were coming very close to the spreadsheet now and Hopefully we took everybody on the jerk Everybody who does research everybody's excited about the new idea about hey, we can deliver value here. I know people want this at least right But the financial acumen is maybe not so You know Not so high or the scared of spreadsheets like how many people scared of spreadsheets because like some folks in the organization are tremendously good and You know, you know how do you know how to navigate it? It's intimidating. So how do we how do we bridge this gap? How do we bring people together and how to make a process that works? And I and that's the idea here like now we come from this visual model that everybody understands Now we touch a spreadsheet for the first time quantified model So it's quite beautiful because all levers of growth Which is basically you can Oh, silly me. I have to jump into the actual spreadsheet. All right. That's six this me folks So I didn't give away the growth for a fiber either. Great. Good job, Elia. Cool. So Come this looks like guys Okay, cool, we have the there we go all right, so In here we can now even with this basic assumptions all blade assumptions We can start playing around we can start making some predictions and sanity checks again And in a little bit more sophisticated way, right? We can say, okay This project needs to return Needs to return a lot. We say like if what about or like we can already model each type of growth We have available we can say We can what happens if we have more customers What if they stick around for longer and what if they refer a lot folks and just checking it for my notes Are we good with time? Yeah So we can see down here We can play a bit with the numbers. So I'm just asking you one thing How do we achieve exponential growth? Like what variable here? Do I need to modify like visitors come into my store? 50% of them become currently customers eating eating lasagna I make 20 bucks out of them 50% of them come back every month in this current assumption here and 50% refer and These are the cost but let's leave out the cost in Referrals and retention what do you want me to do with either of this? What number should I put in in referral or retention? Don't say hundred ten for retention for referrals Yeah, what number should we punch in there? Nice exactly. No idea 75. Let's just have a play Fantastic and what happens? Not yet imagine the business model that great 75% refer 70 70 so next guess what do we need to achieve exponential growth? When we have a hockey stick down here, sorry for those Haven't made that clear Let's try 80 what happens when we do 80 not even linear 200 200% referral well, let's do it. Let's see. Let's go up a little bit 90 95 100 and that's linear growth. So in order to reach exponential growth, what do we need to fix here? Nothing. Oh people are dropping out Customer attention, all right, I better move on. Okay, so Look fantastic. So I guess I like your position. So okay great increase referrals Further we can have like we can have a new idea. What if we Have a different referral model and so on so we can refine the business model further We can see is there any hope and you know to be fair not everybody needs exponential growth That's not the point of the exercise yet, right? There is no like there's no need very often You know, you reach a certain point and that's fine. That's absolutely happy times But if somebody comes in and says we have this exponential great story All right, show me some basic numbers and let's send it to check this in a very quick way, right? And we can also say we can go back to our Customer journey and we can look what's wrong. What do we need to do? It's all really nicely connects And what we can do now is already We can run an experiment and we can feel it back in here. So Since it's a funnel We have early indicators for success, right? If we say we have to run Facebook ads and they're gonna bring in a thousand visitors per month and 50 of those become customers Well, try to get a thousand people for the money that you assume Onto your onto your landing page If that doesn't remotely work, there's no need to play with the rest There's no need to build anything and so on right? So this is the stuff we're talking about every day this is how we bring it from You know for what we do into numbers into a way that into a way that an into a financial model Like that's a hypothesis to a financial model But we haven't really solved the other big issue like Coming back to the beginning like it's there's still all assumptions the rest still all assumptions and If you know, it's still something we need to test and test and test and it's not it's still one number and So I'm just wondering if we should go back to the presentation here So but what we wanted to get to What's the hurricane shot wasn't it like we wanted to we wanted to do that and Whoa Always nice sailing in front of techies Doesn't make it any better. Let's just bring up the spreadsheet. So what we really want ranges Who has heard of a Monte Carlo analysis? Has anybody heard of a Monte Carlo analysis before? Cool, I expected that that's fantastic Somebody else a few more everybody has heard of it. Please say yes Great. Oh, this is fun Fantastic fantastic so great Lots of folks brilliant. I'll share I'll share an article with you later like We what we can do There's a big problem with usually with best case worst case scenarios It's usually very very bad math So we could say like hey give us the best in the worst case And we just average it out and then we know the most like like, you know We're gonna hit somewhere in the middle It's not very good math and So I just want to just want to put that out there When we continue when we talk about this now. So the beauty now is We can basically take all the stress out of predicting the future For entrepreneurs and we can take all the stress out also for business sponsors now by demanding fake accuracy I think I think we can create a lot like a lot better relationships by using ranges So you see here, it's a 95% confidence interval like that's going a little bit far for today But it's not actually saying the best case scenario It's really like I am I'm 90% confident We will be an X percent confident We will never be better than this and it will never be worse than that And we do that for each variable and then we have ranges so what we spoke about earlier and That is true That's as much as we know today right and We can talk about we have a pep and have an honest conversation about it in the team with everybody and That shows the true uncertainty So just for those who are not familiar But what you do then What you basically do is you brute force a calculation onto your business model once you've defined those ranges And you make like 30,000 calculations or something and then you pretend this business model has run at 30,000 times It looks a bit fancy back here, but just to get a quick impression So here you have the range and then you have In this case, I think we have 300 calculations or so and If the variables normal distributed it takes a bit more From the middle and a few less from the outliers and so on and that's the beauty of how making it more accurate by Not pretending that everything is linear you can Model how these variables behave variables behave together certain interdependencies and so on and what you come up with at the end is Is the hurricane check and there we are they're the meteorologists of business modeling, right? And What did we have really we often really have an idea we have a few assumptions But this is really the best thing we can do in terms of predicting the future This is the most likely outcome You know still possible pretty unlikely, but as we see this calculation here is far below the What we usually take as the basic business case So I think the one the one point I really wanted to make is that You have a lot of uncertainty and the innovation team's job It's not necessarily to come like identified a winner in the beginning, right? none of you guys should be expected to To to have good ideas like every single time, right? but Progress should look like you actually learning and Now you have the ability to run an experiment to do qualitative to get some qualitative data to do research And to come back and then narrow down the ranges and they should narrow down your hurricane chart And you should be able to each week every second week show progress and Communicate with everybody else your progress in the company That gets me really excited, right? So That's how we bridge to get There's some lessons learned and Some shameless Self-promotion We do have a course on that Yep So I will stop the presentation here. I think Maybe give me the chance to share this one link before we drop off here in case somebody wants to Do that Yep Cool. Yeah, so I hope that provided no review of our technical innovation accounting is how we bring pirate metrics together With with ranges with better math and how we you know treat UX teams well and the finance department well equally Thank you