lean startup for finance: using innovation accounting for valuation and risk management

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Measuring Learning in Dollars David Binetti @dbinetti

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Page 1: Lean Startup for Finance: Using Innovation Accounting for Valuation and Risk Management

Measuring Learning in DollarsDavid Binetti

@dbinetti

Page 2: Lean Startup for Finance: Using Innovation Accounting for Valuation and Risk Management
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... But Consider Finance's Perspective

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The Accounting is the Problem

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We Need Options

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Financial Options→ Right, but not obligation

→ Delay decisions until we know more

Where there is uncertainty, you'll find options.

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We Need Innovation

Options

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Value = Sum of the Possibilities

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$3.3M - $1.0M = $2.3M

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Lean Startup, Positive ROI

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Now, Let's Learn

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Given what you've learned,are you better, worse,

or about the same?

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Invest

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Pass

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Pivot

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Measures Learning in

Dollars

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Measures Risk

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Risk Sigma 1.6

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Risk Sigma 1.1

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Risk Sigma 0.8

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Risk Sigma 0.4

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Risk Sigma→ Normalized metric

→ Comparable between projects→ Enables corporate governance

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KPIs(We want the Truth, Fast)

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Accurate bad news is superior to inaccurate

good news

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KPIs→ Sensitivity and Specificity (Accuracy)

→ Fall out, miss rate, PPV, FOR→ Clinical trials for your business model

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WarningValuation is NOT a KPI

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Innovation Options are Profit Insurance

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Value, Risk, KPIs?That's (Innovation) Accounting!

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Product Happy→ No traps

→ Focuses on learning→ Rewards speed and truth

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Finance Happy→ Reports in dollars/sigma→ Allocates resources→ Meaningful KPIs

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Deliver FabricationsDetermine Reality

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@dbinettihttp://innovation-options.com