Measuring Innovation

Ash Maurya - Founder of LEANSTACK, Author of “Scaling Lean”

IET11T

CA ACCELERATOR ZONE

Solution

Awesome

The Innovator’s Bias

`

?

Anyone up for some excel magic?

Traditional metrics like revenue and ROI all track zero or negative at the earliest stages.

Build velocity, validated

learning, etc.

Build velocity, validated

learning, etc.

Execution of an untested plan isn’t any better.

Things get even murkier after launch

In God we trust, all others bring data. -W. Edwards Deming

Drowning in a sea of data

WTF?

Build velocity, validated

learning, etc.

The Dichotomy of the Progress Story

Whatever demonstrates growth

We need a different measure of progress.

01 Defining Progress

OU

TLIN

E02 Prioritizing Waste

03 Achieving Breakthrough

What do both stakeholders and innovators want?

The hockey-stick curve

TRACTION matters above everything else

Yay!

Same data plotted differently

What is TRACTION exactly?

Traction is the output of your business model.

A business model describes how you create, deliver, and capture value.

-Saul Kaplan

The hockey-stick curve

Track Customer behavior

Create Value Capture Value Cost (Deliver Value)

Create Value Capture Value Cost (Deliver Value)>1

VALUE EQUATION

Create Value Capture Value Cost (Deliver Value)>1

VALUE EQUATION

>=2

MONETIZATION EQUATION

Create Value Capture Value Cost (Deliver Value)> >=

TRACTION

The rate at which a business model captures monetizable value from its customers.

Monetizable value is NOT current revenue but a leading indicator of future revenue.

Saas

Freemium

Trial

E-commerce

Ad-based

Marketplace

Big Data

User Generated Content

Retail

Media

Community

Membership site

Platform

Open Source

Enterprise

Non-profit

Social

Saas

Freemium

Trial

E-commerce

Ad-based

Marketplace

Big Data

User Generated Content

Retail

Media

Community

Membership site

Platform

Open Source

Enterprise

Non-profit

Social

3 business model archetypes

DIRECT MULTI-SIDED MARKETPLACE

$

DIRECT

Unaware visitors Happy customers

Direct models

Unaware visitors Happy customers

Direct models

TRACTION IN A DIRECT MODEL:

The rate at which you create customers.

What customer behaviors lead to traction?

Unaware visitors Happy customers

Direct models

Unaware visitors Happy customers

Direct models

Time spent in store correlated with money spent

MULTI-SIDED

Unaware visitors Happy users

Multi-sided models

Unaware visitors Happy users

Multi-sided models

Derivative asset

Unaware visitors Happy users

Multi-sided models

Happy customers

Derivative asset

Unaware visitors Happy users

Multi-sided models

Happy customers

Derivative asset

Advertisers

TRACTION IN A MULTISIDED MODEL:

Derivative asset to revenue exchange rate

MARKETPLACE

$

Marketplaces

Happy buyer

Happy seller

Marketplaces

Happy buyer

Happy seller

$

Marketplaces

Transaction

Unaware buyers Happy buyer

Unaware sellers Happy seller

$Transaction

Marketplaces

TRACTION IN A MARKETPLACE MODEL:

The rate of transactions.

01 Defining Progress

OU

TLIN

E02 Prioritizing Waste

03 Achieving Breakthrough

Before you can prioritize waste, you have to be able to see the factory floor.

Unaware visitors Happy customers

Goal Observe &Orient

Leverage

ExperimentAnalyze

Next ActionLeverage

ExperimentAnalyze

Next Action

Observe &OrientGoal

G O L E A N

30-90 day iterations

1-4 week iterations

ASH MAURYA @ashmaurya

ash@leanstack.com

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