Tuesday, May 3, 2011

Agile Business Discovery

One of the most important advantages of Agile methodologies is the rapid feedback loop. This feedback loop is intended for refining and optimizing the development process. It also helps to ensure that final product matches customer’s expectations and solves the actual business problem.

In all this, it is assumed that the business problem is known. But what if it’s not? What if the business model itself is being discovered? Shouldn’t we apply the same Agile principles in discovering the business model?

You might ask: “What kind of business is that, if it does not understand its own business model?” Many examples come to mind: start-ups, big organizations trying to expand, etc. In all such cases, the business model or at least the required feature-set needs to be discovered through a rapid feedback loop with potential customers.

Describing Innovation At Google, Patrick Copeland put it extremely concise: “Before building it right, build the right IT”. He recommends what he calls prEtotyping (as opposed to prOtotyping) to get a real-life customer feedback about a potentially great business idea. Whereas prototyping focuses on proving that the product can be build and refining its technical structure, prEtotyping is aimed at proving the business model itself, and helps screening ideas before any real investments are made into the development.

Many people believe that their ideas or business models worth millions. However, from the experience we know that not every company becomes the next Google, Facebook, Tweeter, etc. The only way to get any confidence in a product is to elicit early feedback from potential customers. Essentially, it means applying empirical, scientific technique to discovery of viable business ideas. As with any empirical studies, the method requires actual data, preferably in a numeric form. This data can include page hits, returning customers, etc. Often, even the most primitive pseudo-implementation (CRUD?) is enough to gather such data. Sometimes, just a study of customer preferences and simulated sessions allow vetting of ideas without any implementation or prototypes.

In conclusion, if you’re trying to implement a new business idea or to augment an existing one, use the same Agile feedback methods to validate or screen out the idea before investing in it.

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