Lean Innovation Flashcards
Describe Value, what does Aristotle say about it?
All value is instrumental, a thing is only of value for the contribution it makes to some other goal or objective
- Value is subjective to the eye of the beholder
Economics relies on 2 assumptions, what are these assumptions and are they wrong?
- Markets are efficient, whereby the laws of supply and demand act quickly to regulate the price
- People are rational, making decisions to optimise their long term well being
- These assumptions do not hold
Give 4 examples of irrational behaviour regarding money:
1) Endowment effect and loss aversion: People value things they already have more than things they don’t
2) Narrow framing and short-termism: People don’t consider the wider context or the long term consequences in their decisions
3) Mental accounting: People are reluctant to write off sun costs or trade-offs between separate issues
4) Acquisition and Transactional Utility: Apart from the value people experience from a thing, they also perceive value from the transaction
Give an example of Narrow framing and short termism:
Not considering the wider context: Buying a car that emits a lot of gasses, not thinking about the long term repercussions like climate change, or going for a phone contract over buying now
Give an example of mental accounting:
Being reluctant to write off loses, eg not wanting to throw out a pair of trainers that wont be worn because they were expensive
Give an example of acquisition and transactional utility:
Buying something you don’t need because it was a bargain, and you feel like you got good value for it
What theory did Bernoulli come up with?
Diminishing marginal utility of wealth
Explain the diminishing marginal utility of wealth graph
- financial gains/losses (x-axis)
- Perceived value/utility (y-axis)
- s-shape but longer in the bottom left quadrant
Why is the value function curve shaped like an S
- Because as people get more money the perceived value of it becomes exponentially smaller, for example $10 to a homeless man has huge value, but to Steve jobs the perceived value is much less significant
Why is the value function curve much steeper/longer in the negative quadrant
Because we are much more afraid of losing something we already have than gaining something new
What are moments of truth? with examples
- Things that consumers want and must be right for the customer to buy the product
- eg, its the right price, its the right type of product, its easy to use, its reusable
What can be achieved by raising the level of abstraction?
by asking why the customer wants this product and then why again, we can begin to innovate new products that go straight to the core of the problem
eg, why do you want a pen, to write something, why do you want to write something, so i can make notes for an exam… Boom new note writing product
What is an exnovation
When there is more value in not innovating, eg, not upgrading adapter socket shapes
What is discovery driven growth
This is a way to test your assumptions that a product will work
-It allows you to grow and innovate while managing the level of risk.
We assume something and then measure the risk of that assumption
how can we manage risk using discovery driven growth methods
- Devise low cost/low risk experiements to test the assumptions being made, like the customer will love the smell of this candle
- modify ideas in response to experimental results
- and this all reduces risk of bringing a product to market and failing
