9/7/23

Session 8
Digital Product Management

What is a prototype?

For users to effectively evaluate the • a series of screen sketches

design of a product, designers must • a PowerPoint slide show
produce an interactive version of
their ideas, this activity is called • a video simulating the use of
prototyping. a system
• A prototype can be a small-scale • a lump of wood/clay/Lego
model: blocks
• a miniature car • a cardboard mock-up
• a model of a building • a piece of software with
• A clay model limited functionality
• A computer aided visualisation
• A 3 D printed model

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Why prototype?

allows stakeholders to interact with an envisioned

Evaluation and feedback: product, to gain some experience of using it in realistic
settings and to explore imagined uses

Communication clarifies vague requirement

Validation of design ideas: test out the technical feasibility of an idea

Choosing between alternatives: provides multiple designs for the application

Low-fidelity Prototyping

Does not look very much like the final product

Uses materials that are very different from the intended final version, such as paper
and cardboard
Used during early stages of development

Cheap and easy to modify so they support the exploration of alternative designs
and ideas
It is never intended to be integrated into the final system. They are for exploration
only.

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Examples of Low-fidelity prototyping

Storyboards

Sketching

Index cards

‘Wizard of Oz’

Storyboard
§ Initially from the film industry, used to get the idea of a scene
§ Snapshots at particular points in the interaction
§ Series of sketches
§ shows how a user can perform a task using the device
§ Often used with scenarios
§ brings more detail to the written scenario
§ offers stakeholders a chance to role-play with the prototype, by stepping
through the scenario

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Sketching
• Drawing skills are not critical
• symbols to indicate tasks, activities, objects
• flowcharts for time-related issues
• block diagrams for functional components

Index cards
• Small cards (3 X 5 inches)
• Each card represents one screen
• multiple screens can be shown easily on a table or the wall
• Thread or lines can indicate relationships between screens like
• sequence
• hyperlinks
• Often used in website development

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‘Wizard-of-Oz’ prototyping
• Simulated interaction
The user thinks they are interacting with a computer, but a developer is
providing output rather than the system.

User

>Blurb blurb
>Do this
>Why?

High-fidelity prototyping
• Choice of materials and methods
• similar or identical to the ones in the final product
• Looks more like the final system
• appearance, not functionality
• Misled user expectations
• users may think they have a full system

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Compromises in prototyping
• All prototypes involve compromises
• Compromises in low-fidelity prototypes:
• device doesn't actually work
• Compromises in high-fidelity prototypes:
• limited functionality available
• Two common types of compromise
• ‘horizontal’: provide a wide range of functions, but with little detail
• ‘vertical’: provide a lot of detail for only a few functions

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Why Use Low-fi Prototypes?

• Traditional methods take too long
• sketches -> prototype -> evaluate -> iterate
• Can simulate the prototype
• sketches -> evaluate -> iterate
• sketches act as prototypes
• Kindergarten implementation skills
• allows non-programmers to participate in the design process

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The Basic Materials

• Large, heavy, white paper (11 x 17)
• 5x8 in. index cards
• Post It Notes
• Tape, stick glue, correction tape
• Pens & markers (many colors & sizes)
• Overhead transparencies
• Scissors, knives, etc.
• Whiteboards
• Prototyping software (Marvel app)

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Constructing the Model

• Set a deadline
• don’t think too long - build it!
• Draw a window frame on large paper
• Put different screen regions on cards
• anything that moves, changes, appears/disappears
• Ready response for any user action
• e.g., have those pull-down menus already made
• Use photocopier to make many versions

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Preparing for a Test

• Select your users
• understand background of intended users
• use a questionnaire to get the people you need
• don’t use friends or family

• Prepare scenarios that are

• typical of the product during actual use
• make prototype support these (small, yet broad)

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Preparing for a Test

• Create “informed consent” forms:
• Explain who you are, and what the goal of your
experiment is.
• Include phrases like:
• This is not part of your (class or job) evaluation
• You can quit at any time
• Your name will not be included in any reports
• Identifying data will be anonymized
• Participation is voluntary…

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Conducting a Test
• Four testers (minimum)
• greeter - puts users at ease & gets data
• facilitator - only team member who speaks
• gives instructions & encourages thoughts, opinions
• computer - knows application logic & controls it
• always simulates the response, w/o explanation
• observers - take notes & recommendations
• Typical session is 1 hour
• preparation, the test, debriefing

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Conducting a Test (cont.)

• Greet
• get forms filled, assure confidentiality, etc.
• Test
• facilitator hands written tasks to the user
• must be clear & detailed
• facilitator keeps getting “output” from participant
• “What are you thinking right now?”, “Think aloud”
• observe -> avoid strong reactions: laugh, gape, etc.

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Conducting a Test (cont.)

• Debrief
• fill out post-evaluation questionnaire
• ask questions about parts you saw problems on
• gather impressions
• give thanks

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Evaluating Results
• Sort & prioritize observations
• what was important?
• lots of problems in the same area?
• Create a written report on findings
• gives agenda for meeting on design changes
• Make changes & iterate

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Advantages of Low-fi Prototyping

• Takes only a few hours
• no expensive equipment needed
• Can test multiple alternatives
• fast iterations
• number of iterations is tied to final quality
• Almost all interaction can be faked

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Business Model

• Describes the rationale of how an organization creates, delivers, and

captures value

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Business Model Canvas

Alexander Osterwalder
www.strategizer.com

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9 Building Blocks

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9 Building Blocks

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Customer Segmentation Building Block

Defines a group of people, or organizations, an enterprise
aims to reach and serve

• Customers are heart of Plan Separate segments if:

• Group Customers into distinct •Need a distinct product
segments with common needs •Utilize different Channels
& behaviors
•Require special Relationships
•Have different profitabilities
•Pay for unique aspects

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Value Proposition Building Block

Describes the bundle of products and services that create value

for a specific Customer Segment

• Reason why Customers buy

from one company over
another

• Solves a Customer Problem,

or satisfies a set of Needs

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Value Proposition Elements

Design
Difficult to measure,
Performance
but important in
Fashion & Consumer Common way to Customization
Electronics create value
Tailoring products &
services to specific
PC sector relied on Customers
powerful machines,
but has limits Enables customized
products & economy
of scale

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More Value Proposition Elements

Risk Reduction
“Getting the Job
Done” Price Customers value risk
reduction
Create value by Low-price has
helping Customer get implications for rest
jobs done of Business Model

Cost Reduction Accessibility

Brand / Status
Important way to Provide offering to
Customers value use create value
Customers who lack
and display of a brand
access

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EffectiveValue Proposition Characteristics

• Is the Value Proposition . . .

•
Simple - Easily understood and communicated
• Customer Specific - focused and consistent with their beliefs,
knowledge, behavior and/or experiences
• Credible Promise - Customers believe you can deliver better
than competition
• Relevant & Motivating - Addresses Needs, concerns, and
outcomes of significant importance
• Ownable - Unique relative to competitor’s position

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Channels Building Block

Describes how a company communicates with & reaches its
Customers to deliver a Value Proposition

• Customer Interface: Communication, Distribution, & Sales

• Customer touch points, & important in their experience

Channels provide:
• Product awareness
• Allow Customers to purchase
• Provide post-purchase support

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Channel Types and Phases

Channels have 5 distinct phases. Each Channel can

cover some or all of these phases

Awareness Evaluation Purchase Delivery After Sales

Raise Assist Allow Deliver

Customers Provide
awareness Customers Value
to purchase post-
about evaluate Proposition
products & purchase
company & Value to
services support
offerings Proposition Customers

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Customer Relationship Building Block

Describes the types of relationship a company establishes

with specific Customer Segments

Must clarify desired relationship

with each Customer Segment

Relationship Motivations:
•Acquisition
•Retention
•Boost Sales (upselling)

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Customer Relationship Categories

Self-Service Automated Services

Personal Assistance
•Direct access for •No direct Customer •Sophisticated form
relationship of self-service
help
•Provides self-help
Dedicated Personal
Co-Creation
Assistance Communities
•Customer specific •Beyond traditional
•User community relationship to co-
Representative aides connections create value.
•Intimate relationship between members

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Revenue Streams Building Block

Represents cash a company generates from each Customer Segment
(Revenue - Cost = Earnings)

• “Arteries” of the Business

• Must ask....”What is each Customer
Segment willing to pay?”
• Each Stream has different pricing:
List, bargaining, market dependent,
volume dependent, etc
• Types of Revenue Streams:
Transaction & Recurring

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Ways to Generate Revenue Streams

Licensing
Asset Sale
Subscription Fee
•Physical product sale •Grant to use IP
•Sell continuous •Common in media
access to service industry

Usage Fee Brokerage Fees

Lending / Renting /
•Service use fee Leasing •Intermediation
services performed on
•Temporary grant of
behalf of two or more
right to use asset for
parties
fixed time

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Pricing Mechanisms
Fixed “Menu” Pricing Dynamic Pricing
Price negotiated between
Fixed prices for products, Negotiation
List Price parties & is dependent on
& services (Bargaining)
negotiation skill

Price depends on
Product Feature Price depends on number
Yield Management inventory and time frame
Dependent or quality
of purchase

Customer
Price depends on type & Price established based on
Segment Real-time Markets
characteristic of Segment supply and demand
Dependent

Volume Price as a function of Price determined by

Auctions
Dependent quantity competitive bidding

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Key Resources Building Block

Describes most important assets required to make
business model work
• Enables production reach markets,
& earn revenue

• Required resources are dependent

on selected Business Model

• Resources may be physical,

financial, intellectual, or human

• Resources may be owned, leased

or acquired
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Key Resources Catalog

Physical
•Buildings, cars, machinery,
Intellectual
systems, point-of-sales
systems, and distribution •Brands, proprietary
knowledge, patents
Human copyrights, partnerships, and
•Critical in knowledge Customer data bases
intensive & creative businesses •IP difficult to develop, but
powerful
Financial
•Cash, credit, stock

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Key Activities Building Block

Describes most important things a company must do to make its
Business Model work

Required to create and offer a

Value Proposition, reach
markets, maintain Customer
Relationships, and earn
Revenue

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Key Activities Catalog

Production
•Design, mfg., & deliver
product in quantity or superior
quality
Platform / Network
•Dominates mfg. Business
Models •Networks, matchmaking,
software and brands can
serve as platforms
Problem Solving
•Develop new solutions
•Dominates knowledge
management Business Models

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Key Partnerships Building Block

Describes network of suppliers and partners that make the
Business Model work

Types of partnerships:
1.Strategic alliances between non-
competitors
2.Strategic alliance between
competitors
3.Joint Ventures to develop new
business
4.Buyer-Supplier to assure reliable
supply
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Partnership Motivations

Optimization & Economy of

Scale
•Most basic form of
partnership Acquisition of Particular
•Often results in outsourcing Resources & Activities

Reduction of Risk & •Extend capabilities by

Uncertainty relying on others to furnish
• Competitors form strategic part of the required resources /
alliance in one area while activities
competing in another

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Cost Structure Building Block

Describes all costs incurred to operate a Business Model

• Create & deliver value,

maintain Customer
relationships, & generate
revenue all incur cost

• Easily calculated after

defining: Key Resources,
Key Activities, & Key
Partnerships

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Cost vs. Value Driven Models

Cost Driven:
Low Cost Value Proposition, automation, & outsourcing

Fixed Cost Variable Cost Scope

Scale Economy
Same cost Cost vary in Economy
Cost / unit drops
regardless of proportion with Same mktg &
as volume
volume volume dist. support
increases
many products

Value Driven:
Focused on value creation, not cost. Premium Value Propositions
and personalized service

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Reasons for a Business Model

• Prove you are serious
• Establish Milestones
• Understand Competition
• Know Customers
• State Assumptions
• Document Revenue Model
• Attract Investors
• Reduce Risk
• Attract Employees

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Lean startup

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Lean Start Up Methodology

• Start Up
• “A human institution designed to create a new product or service under
conditions of extreme uncertainty. “
• Lean Start Up
• A method to systematically address uncertainty through rapid iteration and
market learning
• A method for developing businesses and products first proposed in 2008 by
Eric Ries that can shorten the product development cycle by adopting a
combination of business-hypothesis-driven experimentation, iterative product
releases, and validated learning in order to meet early needs of customers
and reduce market risk by avoiding spending money where the outcome is
uncertain.

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3 Myths people have

• Lean means cheap. Lean Startup try to spend as little money as
possible.
• It won’t work for my business. It’s only for tech / web companies.
• It only works for small, bootstrapped companies.

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5 Principles of The Lean Startup

• Entrepreneurs are everywhere
• Entrepreneurship is management
• Validated Learning
• Build – Measure – Learn
• Innovation Accounting

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Questions we seek answers?

• Should we build this new product or service?
• How can we increase our odds of success?

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History
Robert Deming
Toyota Lean Manufacturing
Agile Software Development
Lean Startup
Steve Blank
Eric Ries
Alexander Osterwalder
Lean Startup Community

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Uncertainty?
Technical / product risk
Can we build this?

Customer / market risk

If we build this, will people use/buy it?

Business model risk

Once we build this, can we find a way to make money from it?

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Assumption?
Starts with “I believe that” statements
Clarifies your current understanding of what
you don’t know with certainty
Some are more important than others
Identify and isolate critical assumptions

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Assumptions Example
Early Assumption

“In a city where space

is extremely limited,
people will pay a
small amount of
money, for a small
amount of space...
they don’t need a
hotel.”

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Exercise
• Write a list of assumptions for your product / business innovation?

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How to prioritize assumptions

Once you list assumptions, prioritize
them using a grid like this:

Impact
Will kill
OR

Time horizon Won’t kill

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Exercise
• Identify your most important assumptions using the
simple prioritization from the previous page?

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What is a hypothesis?
• “If then” statement that helps design tests for an assumption

• Clarifies your current understanding of what uncertainty you seek to resolve

• Is specific in the action, timing and value / amount of impact

• Helps to design and build an MVP

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Exercise
• For your most important assumption, write some hypotheses you
might want to test?

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Critical Hypothesis Example

Critical Hypothesis

“Professional
photographed listings
get 2-3 times more
business (and host
don’t turn down free
professional
photography.”

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What is an Experiment?
• A scientific procedure undertaken to make a discovery, test a hypothesis, or demonstrate
a known fact

• Or

• A scientific test in which you perform a series of actions and carefully observe their
effects in order to learn about something

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Minimum Viable Product (MVP)

• Experiment that helps you validate (or invalidate) hypotheses about the value or
growth potential for a new product

• An MVP helps you answer a specific question about one of your assumptions

• Building an MVP is not a 1-time event

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Exercise
• For the key assumption / hypothesis, design the most simple MVP you can think.

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Validated Learning
• Translate your critical assumptions into an experiment:

• Isolate critical assumptions for testing

• Draft your hypothesis to be tested
• Build an experiment
• Measure the results
• Collect the data and learning in a systematic

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Customer Development
• Talking to people
• “Get out of the building”
• Qualitative interviews to learn more about customer needs and
behaviors
• May start with the first test you run after you build an MVP

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Pivot
• Change in direction without a change in vision

• OR

• Persevere: A team’s decision to test the next most important

hypothesis

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Experimentation

• Process of rapidly learning what customers want and will pay for

• Test assumptions so that you don’t waste time and money building
the wrong thing

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B. Testing process

• Build-Measure-Learn loop
• Identify your assumptions
• Prioritize assumptions
• Focus on assumption with biggest risk
• Figure out how to test assumption quickly
• Figure out your hypothesis about that test
• Run experiment
• Review results
• Iterate

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Build,
Measure,
Learn Loop

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Culture of Testing
• Experiment design is important
• But, recording and evaluating the learning is more important
• Establish an organization that learns together
• Step up the sophistication of the experiment when you are ready to do so as a team
• Team learning is the most important outcome

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C. Measure Results
• What knowledge are you looking to gain?
• “The What”

• What you are going to do with the knowledge when you get it?
• “The So What”

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What if every hypothesis is invalidated?

• Pivot.

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