DESIGN-TO-COST: WIE INNOVATION-

SPINNER MIT CONTROLLING-FREAKS

FRIEDEN SCHLIESSEN.FRIEDEN SCHLIESSEN.“THINK BIG, START SMALL, MODIFY FAST”

DTAG, Robert Schwegler

Bonn, Darmstadt, 07.07.2015

THE 4Q MODEL: WHAT IS IT? WHERE FROM?

?

1. Optimization initiative Express48 EOY2013, 48 interviews working & mgmt level

2. 4Q Pilot: 4 projects, one cancelled

3. 4Q Steering: promoted within CFO’s Design2Cost initiative as Process Innovation

2

THE 4Q MODEL: DESIGNING AND DEVELOPING CUSTOMER’S MOST

DESIRED PRODUCTS AT OPTIMIZED COSTS.

BENEFITS

1. Guide for the product development process,

well fitting to our existing Agile approach

2. Focus: efficient and rapid development, acceleration of Time-2-Market, Feature-

management and fast customer feedback

3

3. Incorporate: Target Costing/ Design to Value principles

4. Criteria to right size investments along all phases of the product lifecycle

5. The Minimal viable product (MVP) is the starting point of the 4Q model.

DESPITE FREQUENT USE OF SYNONYMS,

THERE ARE DEMARCATIONS TO D2C AND D2V

Target Costing (TC) Design to Cost (D2C) Design to Value (D2V)

� „Design and construct products following „Design and construct products following „Design and construct products following „Design and construct products following

cost point aspects“ cost point aspects“ cost point aspects“ cost point aspects“

� „What is a product allowed to cost?“„What is a product allowed to cost?“„What is a product allowed to cost?“„What is a product allowed to cost?“ � „Design and construct products following „Design and construct products following „Design and construct products following „Design and construct products following

customer needs“customer needs“customer needs“customer needs“

4

Guiding approach: Minimal viable product (MVP)

minimal viableMVPLow-quality products, that

either don‘t work or

nobody needs

Products that well-funded

companies can afford to

create by doing a lot of

market research and R&D

A quick, but usefull product you can create,

before exhausting ressources and confidence

HIG

H

CustomerValue

NO VALUE

(BELOW THE MINIMUM VIABLE

PRODUCT

THE 4Q MODEL FOCUSES ON DESIGNING THE MVP

USING D2V / D2C PRINCIPLES FOR FURTHER INVESTMENTS

BAD VALUE/COST RATIO AREA

Details on MVP

DESIGN TO VALUE (D2V)AREA

4Q Model

� Idea: Categorizing of development and operations Categorizing of development and operations Categorizing of development and operations Categorizing of development and operations

to speed-up time-2-market

�The MVP is the starting point MVP is the starting point MVP is the starting point MVP is the starting point of the 4Q model

�All additional investments are tightly bound to

D2C/D2V following the MVP approach.

�The minimum viable product is that version of a

new product which allows a team to collect the collect the collect the collect the

maximum amount of validated learning maximum amount of validated learning maximum amount of validated learning maximum amount of validated learning about

customers with the least effortwith the least effortwith the least effortwith the least effort

�An MVP is notis notis notis not a minimal product - it is a strategy

and process directed toward making and selling a

product to customers

� It is an iterative process iterative process iterative process iterative process of idea generation,

prototyping, presentation, data collection, analysis

and learning.

LOW

PRODUCT FEATURE SET)

5

# Features

Quelle: hillerassociates.com, wikipedia

THE TELEKOM 4Q MODEL

Details on MVP

4Q MODEL: CATEGORIZING DEVELOPMENT AND OPERATIONS

TO SPEED-UP TIME-2-MARKET

Details

Q1: Q1: Q1: Q1: Teams have the option to develop agile new offers and pre-test them in small test market

Q2: Q2: Q2: Q2: Mass marketable implementation on pilot experience in Q1

Q3:Q3:Q3:Q3: Risk minimized changes on platform components

Q4: Q4: Q4: Q4: Small adjustments to customer feedback will be quickly implemented automated provided.

4Q Model

PROJECTMAINTENANCE

FR

ON

TE

ND

Low

imp

ac

t PrototypingAdaptions/

Configuration/

Customizing

6

� Efficient and rapid development

� Support of the "fail fast, fail cheap“ principle

� Acceleration of Time2Market by categorizing work

� Fast customer feedback

� Simple integration of partners (e.g. best shoring in Q2)

� Incentives for lean development (avoiding overhead, agile approach)

Targets / AdvantagesQ1Q1Q1Q1

Q2Q2Q2Q2Q3Q3Q3Q3

Q4Q4Q4Q4

FR

ON

TE

ND

B

AC

KE

ND

(Pla

tfo

rm)

Hig

h im

pa

ct Adjustments

of platformProject work

Opex Capex

4Q MODEL: CATEGORIZING DEVELOPMENT AND OPERATIONS

TO SPEED-UP TIME-2-MARKET : TRANSITIONS WITHIN 4Q

Details on transitions4Q Model

PROJECTMAINTENANCE

FR

ON

TE

ND

Low

imp

ac

t PrototypingAdaptions/

Configuration/

Customizing

1

Fail fast,

fail cheap

3

2

4 � Drop product idea� Learn about product potential with minimal investment3

� New product� Complex new function/feature

2

� Small Changes on existing products � Bug fixing1

7

Q1Q1Q1Q1

Q2Q2Q2Q2Q3Q3Q3Q3

Q4Q4Q4Q4

FR

ON

TE

ND

B

AC

KE

ND

(Pla

tfo

rm)

Hig

h im

pa

ct Adjustments

of platformProject work

Opex Capex

fail cheap

5

6

7

� Customization leads to core adjustments� Typical implementation duration per feature: days7

� Ensure high quality and implement further user requests� Typical implementation duration per feature: weeks6

� Plan further investment steps based on successful prototype� Typical implementation duration per feature: Months5

� Initial take over of parts of innovation into existing product(s)� Typical implementation duration per feature: days4

4Q MODEL: CATEGORIZING OF DEVELOPMENT AND OPERATIONS

TO SPEED-UP TIME-2-MARKET4Q Model

PROJECTMAINTENANCE

FR

ON

TE

ND

Low

imp

ac

t

� Fail cheap, fail fast!

� Fast development teams, low SLA, low

volume traffic, throw-away prototypes

� UI-driven innovation on available APIs

� Extension of server-side functionality

� Runs in agile scrum contracting mode

� Gathers requirements for heavier backend implementations

� Restricted resources (no sustained eng.)

� Pilots/prototypes need to be handed over to Q2 or be killed

� Fast customer feedback loops

� Small changes with local impact only (no cross dependencies on sub-

systems) with local & risk based testing

� High deploy frequency

� Fast & automated release cycles

� Typical changes:

� Mainly FrontEnd (UI) changes for market adaptations

� Sustained Engineering (minor changes)

� Market local extensions with configuration

8

Q1Q1Q1Q1

Q2Q2Q2Q2Q3Q3Q3Q3

Q4Q4Q4Q4

BA

CK

EN

D(P

latf

orm

)H

igh

imp

ac

t

� Pilots/prototypes need to be handed over to Q2 or be killed

� High quality implementations with input from requirements

gathered in Q1

� Some key project people will move to guide product stream

development (Q3)

� Clear contracting to multiple API users/providers and quality

pre-announced changes to them (capacity management)

� Model seamless migrations on incompatible changes between

sub-systems

� Ability to steer off-shore with running fully functional prototype

� Market local extensions with configuration

� Market local customization implemented at predefined customization

hooks resulting in direct feedback for Q3

� Sustained Engineering

� Mainly Resource Facing Systems

� Fast cycles for bug-fixes and minor adaptations avoiding

system inconsistencies

� No dependencies

� Supports enhancements

and maintenance

CONTEXT OF LIFE CYCLE, 4Q-MODEL AND DESIGN TO …

Sa

les

Time

Introduction Growth Maturity DeclineLife Cycle

Product/

Feature

4Q Focus

9

Development of a Minimal

Viable Product (MVP) with

focus on time-to-market.

Maximize variabilization of

costs along customer line.

Introduction of new features

along D2V criteria and

optimization of product

development costs.

(Profitably) Maximize Revenue.

Product lifecycle management.

Customer experience

benchmarking and continuous

monitoring of cycle.

maximize EBITDA/EBIT

… Value … Cost + Value … Cost + Value

Liquidate product

Beware of expensive ‘turn

around plans’. Deliver cash,

otherwise liquidate.

… Cost

Product

Financial

Design to …

Target Price n/a Extractable/Available Available Available

THANK YOU!