Lesson 8 - Value Stream Economics Flashcards
Which Profit Engine?
TurboTax
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
TurboTax
Product Pyramid
Internal or External Products?
Profit = Revenue - Cost
External
Profit = Revenue - Cost
When is a good time to review out-license models?
- Every Program Increment boundry.
- On major releases or architectural changes.
- When a system demo is fully integrated.
- Twice a year with dynamic budgeting of the LPM.
When is a good time to review out-license models?
On major releases or architectural changes.
When selecting a value exchange model what is the most important thing to think about?
- Overall Profit
- Customer
- Technology
- Revenue
When selecting a value exchange model what is the most important thing to think about?
Customer
Perception is just as important as reality.
Which Profit Engine?
Amazon Web Services
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Amazon Web Services
Platform Ecosystem
Which Value Exchange?
Something that is counted
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Something that is counted
Meter
Which Profit Engine?
Prepare to defend your niche in court
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Prepare to defend your niche in court
First, fast
Which Value Exchange?
Annual
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Annual
Time-based access
Which Value Exchange?
Concurrent
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Concurrent
Meter
Which Value Exchange?
Company B helps Company A get renewals from Companies C-Z and takes a cut.
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Company B helps Company A get renewals from Companies C-Z and takes a cut.
% of revenue/cost saved
Which Value Exchange?
Digital goods in a game
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Digital goods in a game
Data/Digital Goods
Which Profit Engine?
Add modules
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Add modules
Leverage the installed base
This governs the use of intellectual and other property.
- License model
- Profit engine
- Value stream economics
- Value exchange
This governs the use of intellectual and other property.
License model
Yes this is part of value stream economics so this is a tricky card. -Look for the “more right” answer.
Which Value Exchange?
Credit score
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Credit score
Data/Digital Goods
Which Value Exchange?
Google’s user clicks
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Google’s user clicks
Transaction
Pick two statements that indicate your Solution is reducing the cost for your Customer:
- Streamlines workflows
- Creates access to new markets
- Accelerates their time-to-market
- Less expensive to purchase
Pick two statements that indicate your Solution is reducing the cost for your Customer:
- Streamlines workflows
- Less expensive to purchase
True or False
Soft value is subjective.
True
Which Profit Engine?
# of a company’s products in use is much larger than its annual unit sales volume.
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
# of a company’s products in use is much larger than its annual unit sales volume.
Leverage the installed base
Which Value Exchange?
Absolute value
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Absolute value
Meter
Which Value Exchange?
Count the items in the DB
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Count the items in the DB
Meter
Which Value Exchange?
Replenishment of the resources
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Replenishment of the resources
Meter
Which Profit Engine?
GM’s OnStar
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
GM’s OnStar
Leverage the installed base
Enforcement: Real-time or Post-facto
Creating invoices from product telemetry
Post-facto
Which Value Exchange?
Paypal
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Paypal
Transaction
Which Value Exchange?
Attributes determine value of the metadata.
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Attributes determine value of the metadata.
Data/Digital Goods
Pricing research techniques:
Gabor-Granger
- Combination of attributes most influential.
- Perceived value.
- Willingness to purchase.
Gabor-Granger
Willingness to purchase.
DEFINITION: The sustainable profit you generate for a business.
- Accounting model
- Fidicuary responsibility
- Pecuniary renewal
- Economic impact
DEFINITION: The sustainable profit you generate for a business.
Economic impact
Enforcement: Real-time or Post-facto
Disabling some or all of the application use when a term is violated.
Real-Time
Hard or Soft Value?
I can determine value based on:
- Testing that validates.
- Surveys that assess
- Direct observation.
Hard Value
Which Value Exchange?
Jira Server Licensing
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Jira Server Licensing
Time-based access
of
Meter
Which Value Exchange?
Content or workflow sharing between humans and software
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Content or workflow sharing between humans and software
Service
In-License or Out-License?
Negotiated or accepted with a supplier.
In-License
Influences on Price: Pick One
Substitutes
- Market Aspects
- Pricing strategy
- Product Life Cycle
Substitutes
Market Aspects
Which Value Exchange?
A software the helps optimize pricing for products and takes a share of the sales.
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
A software the helps optimize pricing for products and takes a share of the sales.
% of revenue/cost saved
Which Profit Engine?
Allstate Your Choice Auto Policies
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Allstate Your Choice Auto Policies
Product Pyramid
Influences on Price: Pick One
Intellectual Property Niche
- Market Aspects
- Pricing strategy
- Product Life Cycle
Intellectual Property Niche
Market Aspects
Which Value Exchange?
Perpetual
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Perpetual
Time-based access
Pricing research techniques:
Van Westendorp price sensitivity meter
- Do this yourself.
- You might need some help doing this.
- Hire some folks to help you.
Van Westendorp price sensitivity meter
Do this yourself.
Which Profit Engine?
Add product lines
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Add product lines
Leverage the installed base
Hard or Soft Value?
Values
Soft Value
Hard or Soft Value?
Convenience
Soft Value
Pick two statements that indicate your Solution is increasing revenue for your Customer:
- Streamlines workflows
- Creates access to new markets
- Accelerates their time-to-market
- Less expensive to purchase
Pick two statements that indicate your Solution is increasing revenue for your Customer:
- Creates access to new markets
- Accelerates their time-to-market
Which Value Exchange?
Remote updates
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Remote updates
Hardware
Which Profit Engine?
Buying gas for your car.
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Buying gas for your car.
Product Pyramid
Influences on Price: Pick One
Brand
- Market Aspects
- Pricing strategy
- Product Life Cycle
Brand
Market Aspects
Pricing research techniques:
Van Westendorp price sensitivity meter
- Combination of attributes most influential.
- Perceived value.
- Willingness to purchase.
Van Westendorp price sensitivity meter
Perceived value.
Which Value Exchange?
Anti-Virus updates
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Anti-Virus updates
Service
In-License or Out-License?
Negotiated or accepted with a Customer.
Out-License
Which Value Exchange?
Indentifiable resources
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Indentifiable resources
Meter
This model captures how you trade products and Solutions for money.
- Business Model
- Value Exchange Model
- Whole-Product Model
- Market Segmentation Model
This model captures how you trade products and Solutions for money.
Value Exchange Model
When it comes to value exchanges, internal products are typically determined by:
- Usage
- Charge Backs
- Cost Centers
- Licensing
When it comes to value exchanges, internal products are typically determined by:
Licensing
Which Profit Engine?
Ford using black paint because it dries the fastest
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Ford using black paint because it dries the fastest
Experience Curve
Which Value Exchange?
Software inside of it is perceived as free
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Software inside of it is perceived as free
Hardware
Influences on Price: Pick One
Premium vs. low-end
- Market Aspects
- Pricing strategy
- Product Life Cycle
Premium vs. low-end
Pricing strategy
Which Value Exchange?
VPN Router
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
VPN Router
Hardware
Which Value Exchange?
Can the digitial item be transferred to another entity?
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Can the digitial item be transferred to another entity?
Data/Digital Goods
Enforcement rights is about:
- Identify : Respond
- Contract : Audit
- Agree : Violation
- Relative peace : Having toddlers
Enforcement rights is about:
Identify : Respond
Internal or External Products?
Spend Justification = Value - Cost
Internal
Spend Justification = Value - Cost
Hard or Soft Value?
Branding
Soft Value
Which Profit Engine?
IBM selling architecture to Lenovo
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
IBM selling architecture to Lenovo
Platform Ecosystem
Which Value Exchange?
Generate unique data that is perishable.
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Generate unique data that is perishable.
Data/Digital Goods
Which Value Exchange?
Licensing IP for time, not actually buying the property.
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Licensing IP for time, not actually buying the property.
Time-based access
From a hard value point of view, if I know how much I can extract in terms of pricing, I then need to answer what:
- What factors could change to increase the extraction?
- When can I spike the price up?
- How much of that value can I get?
- Which customers have that budgeted?
From a hard value point of view, if I know how much I can extract in terms of pricing, I then need to answer what:
How much of that value can I get?
Pricing research techniques:
Conjoint Analysis
- Do this yourself.
- You might need some help doing this.
- Hire some folks to help you.
Conjoint Analysis
Hire some folks to help you.
Pricing research techniques:
Conjoint Analysis
- Combination of attributes most influential.
- Perceived value.
- Willingness to purchase.
Conjoint Analysis
Combination of attributes most influential.
Which Profit Engine?
Blending SW and services into a single Value Stream
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Blending SW and services into a single Value Stream
Think offering
ROI % = ( (________ - Costs) / Costs) x 100
- Profit
- Benefit/Gain
- Revenue
- Price
ROI % = ( (Benefit/Gain - Costs) / Costs) x 100
Which Profit Engine?
Good, Better, Best
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Good, Better, Best
Product Pyramid
We should plot elasticity to identify ‘dead zones’ with:
- Customer growth over a timeline.
- Adoption metrics using product telemetry.
- Demand curves to identify optimal revenue.
- Marketing event/rhythms overlayed with product usage.
We should plot elasticity to identify ‘dead zones’ with:
Demand curves to identify optimal revenue.
Which Value Exchange?
Named users or names terminals/sessions
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Named users or names terminals/sessions
Meter
Which Profit Engine?
Your entire enterprise is aligned towards releases
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Your entire enterprise is aligned towards releases
First, fast
Value stream economics are used to ensure Value Streams are creating…
- marketable Solutions for long term lifecycles.
- viable and sustainable products and Solutions.
- low cost Solutions that are able to be extended as business needs present themselves.
Value stream economics are used to ensure Value Streams are creating…
viable and sustainable products and Solutions.
Which Value Exchange?
audit, invoice, remittance
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
audit, invoice, remittance
Transaction
True or False
Hard value is subjective.
False
Hard value can be objectively measured.
Pricing research techniques:
Gabor-Granger
- Do this yourself.
- You might need some help doing this.
- Hire some folks to help you.
Gabor-Granger
You might need some help doing this.
Which Value Exchange?
Competing based on timeliness and accuracy.
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Competing based on timeliness and accuracy.
Data/Digital Goods
Hard or Soft Value?
Empirical process control theory.
Hard Value
Objectively measured sometimes by observation (Empirical).
Which Profit Engine?
ARM’s chip triple benefit cost model
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
ARM’s chip triple benefit cost model
Platform Ecosystem
Which Value Exchange?
Automation and distribution
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Automation and distribution
Data/Digital Goods
Which Profit Engine?
Built-in quality, TDD, BDD
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Built-in quality, TDD, BDD
Experience Curve
A profit engine’s goal is to be:
- Incremental
- Iterative
A profit engine’s goal is to be:
Iterative
Over and over and over again.
“Show me the money!!!!!” - Tom Cruise

This will impact your economic value to establish premium pricing.
Example: Daytime running lights.
- Hard Value
- Controlling Value
- Soft Value
- Hidden value
This will impact your economic value to establish premium pricing.
Example: Daytime running lights.
Hidden value
Which Value Exchange?
Consider roles and access rights.
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Consider roles and access rights.
Service
Which Value Exchange?
Rental
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Rental
Time-based access
Which Profit Engine?
70%-90% Drop from 1,000th unit to 2,000th unit
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
70%-90% Drop from 1,000th unit to 2,000th unit
Experience Curve
Which Value Exchange?
Prevent improper sharing
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Prevent improper sharing
Meter
Value Exchange Models each have different technical needs for:
- Product Delivery
- Solution Context
- Architecture
- Agile Release Trains
Value Exchange Models each have different technical needs for:
Architecture
Influences on Price: Pick One
Channels and Distribution
- Market Aspects
- Pricing strategy
- Product Life Cycle
Channels and Distribution
Market Aspects
A profit engine includes which of the following:
- Creating new value exchanges.
- Repeating value exchanges.
- Increasing profit of an existing value exchange.
A profit engine includes ALL of these:
- Creating new value exchanges.
- Repeating value exchanges.
- Increasing profit of an existing value exchange.
Which Profit Engine?
“Price Ladder”
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Add product lines
Product Pyramid
Definition: Refers to how much consumers expect to pay for a good in relation to other competitors and the previously advertised price.
- Reference Price
- Bottom Price
- Market Price
- Comparative Price
Definition: Refers to how much consumers expect to pay for a good in relation to other competitors and the previously advertised price.
Reference Price
Value stream economics models the flow of value and _____________
- the financial model of the Value Streams.
- the Market Segmentaion impact of the Solutions.
- the overall market need and Business Model being served.
Value stream economics models the flow of value and the financial model of the Value Streams.
Which Value Exchange?
Derives value from embedded software
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Derives value from embedded software
Hardware
Influences on Price: Pick One
Flexibility early on
- Market Aspects
- Pricing strategy
- Product Life Cycle
Flexibility early on
Product Life Cycle
Which Value Exchange?
Need to delete data when license expires
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Need to delete data when license expires
Time-based access
Which Value Exchange?
Defined and measurable unit of work
- Data/Digital Goods
- Hardware
- Meter
- % of revenue/cost saved
- Service
- Time-based access
- Transaction
Defined and measurable unit of work
Transaction
Comparing list price or asking price to its actual sale.
- Discount Analysis
- Gap Trending
- Dead Zone Identification
- Customer Demand Elasticity
Comparing list price or asking price to its actual sale.
Discount Analysis
Influences on Price: Pick One
Penetration Goals
- Market Aspects
- Pricing strategy
- Product Life Cycle
Penetration Goals
Pricing Strategy
Which Profit Engine?
Promote Scale Through Interactions Not Volume
- Leverage the installed base
- Product Pyramid
- Platform ecosystem
- Experience curve
- First, fast
- Think offering
Which Profit Engine?
Promote Scale Through Interactions Not Volume
Platform Ecosystem
Price elasticity of demand means…
- The ability of a company to have multiple price levels.
- The responsiveness of demand after a change in price.
- The band between dead zones and maximum revenue.
- The difference of the current price and the last reference price.
Price elasticity of demand (PED) means…
The responsiveness of demand after a change in price.