Más contenido relacionado

Similar a Market Volatility Considerations for Scale-up Stage Tech Companies in 2023 - March 2023 - Dave Litwiller(20)

Más de Dave Litwiller(20)


Market Volatility Considerations for Scale-up Stage Tech Companies in 2023 - March 2023 - Dave Litwiller

  2. BACKGROUND • It looks like increased economic and business volatility will be with us for a while • Partial causes: • Inflation which is more than transient • Higher interest rates • Tightening credit • Quantitative tightening • Military conflict • There is continuing potential for further shocks: • Financial system, macroeconomic, geopolitical and supply chain
  3. BACKGROUND • The outlook for the second half of 2023 and potentially into 2024 is a growing likelihood of a recession, or at least a significant slowing of growth • As a slowdown takes hold, expect further disruptions from the cascading reckoning in both the private and public sectors from the excesses of the prior decade+ of historically low interest rates combined with extraordinary fiscal stimulus
  4. OVERVIEW • Today’s discussion: The leading tools to help prepare for and to navigate increasingly turbulent times for scale-up stage tech firms: • Scenario planning • Productivity enhancement drivers, particularly for knowledge- based work • Instrumenting and monitoring revenue generation dynamics for signs of significant market and customer changes • Individual, group, and institutional methods to increase the velocity of learning and adaptation, as well as distributed action • Increasing awareness and sensitivity to changes in customer value proposition and adoption decision mechanics
  5. SCENARIO PLANNING • What it is? A strategic planning method pioneered in the 1970’s to help prepare for future uncertainties and disruptions • Scenario planning is based on developing a range of plausible, internally consistent narratives for the company and its industry • Each scenario is not designed to be a prediction or forecast • Instead, the scenarios collectively are tools to help leaders explore a range of potential outcomes and prepare for different contingencies
  6. SCENARIO PLANNING • Suggested approaches for scenario planning: • Consider a quantitatively wider range of qualitatively different scenarios as catalysts to strategic thinking vs. what would have been used in recent years
  7. SCENARIO PLANNING • Typically heading into a likely downturn, look at financial ranges 2* or even 2.5* of what would be considered during more benign business conditions • Scenarios should be different enough to create mutually exclusive choices in prospective strategy and execution to create meaningful contrast, choice, and discussion about frames of reference and risk • Spend time talking about the conditions which would constitute sufficient signal strength for the governance and leadership to switch from one scenario to another among a range of plausible possibilities as time and circumstances advance • Beyond financial dimensions of each scenario, be specific about ramifications at a minimum for technology, product, target markets, customer development and enabling operating capabilities
  8. PRODUCTIVITY GROWTH • One thing which may be different with this economic slowdown and future recovery, given the pandemic-era changes in the labour force and continuing low unemployment: A stronger divergence between firms which can generate higher, sustainable productivity vs. those which cannot • Predominantly body shop methods for growing and expanding businesses are likely to be difficult to sustain • The leverage of productivity growth will potentially raise the stakes in at least two areas with widespread applications and implications: 1. The use of generative AI in knowledge-based work 2. Robotic process automation (RPA)
  9. GENERATIVE AI • A few things which are becoming clear already from the rapid uptake of tools like ChatGPT, Dall-E, Copilot and their peers: • Used well, they really can enhance productivity for many kinds of knowledge workers • Using them to advantage depends on users having • A lot of context for the problem domain and solution space users are working in • Ability to abstract their needs/problems correctly to get the best out of the AI, • Sufficient dexterity to quickly probe multiple possibilities, usually through what is increasingly known as prompt engineering, and, • Enough domain knowledge to keep the AI tools on track (sidestepping hallucination and nonsense answers)
  10. GENERATIVE AI • Generative AI is already showing strong impact in a wide range of knowledge work, including • Generating ideas, arguments and counterarguments • Writing prose and generating images • Conducting background research • Coding and debugging • Performing data analysis • And, further domain-specific abilities
  11. GENERATIVE AI • Enhancing capabilities in these realms has profound implications for boosting productivity in many scale-up stage tech businesses • The impacts are likely to be strong enough that this won’t be a neutral event • Firms which adopt these technologies and practices better than their competitors will get ahead; those which do not will fall behind
  12. GENERATIVE AI • Two main acceleration forms in creative knowledge work: • Divergent phase, through suitable seeding, increasing the range of plausible options in set-based design or multiple avenue exploration for subsequent consideration, to help avoid premature lock-in on a single or preferred solution, as well as improve the odds of finding recombinant insights • Convergent phase, to help with error identification, correction and other forms of debugging, tuning and optimization, as well as documentation
  13. ROBOTIC PROCESS AUTOMATION • It is increasingly possible to handle the ~80% of routine business processes mainly through automation, limiting ongoing human involvement to supervision, quality control, exception handling, and guiding ongoing improvements • The remaining ~20% of less common cases is often more trouble than its worth to try to automate • In total, there are significant efficiency gains to be had from RPA in many businesses, especially those that were born digital as is the case for many scale-up stage tech businesses today • The usual starting place is the processes which have the highest volumes of relatively routine transactions
  14. CHANGES IN REVENUE GENERATION DYNAMICS • At times of significant change in economic and business conditions, the generative mechanisms for the sales pipeline can undergo significant change • Blunt aggregate monitoring and reporting of the sales pipeline can conceal difficulties, and precious response time can be irretrievably lost
  15. CHANGES IN REVENUE GENERATION DYNAMICS • Things to do in times of growing economic strains: • Revisit which sales pipeline analytics are most meaningful and predictive in light of current circumstances • Watch for stage-to-stage velocity changes in the sales funnel, especially at MOFU and later • Cohort analysis is powerful to show high frequency changes over time • Pipeline coverage ratios typically have to go up a lot during more difficult times, often as high as 2.5* to 3* LTM incremental sales
  16. RAPID ENTERPRISE ADAPTATION PROCESS • The faster the rate of internal and external change, the more important it is to build and enhance an enterprise- wide learning and adaptation system • Continuous Improvement, Root Cause Analysis, Corrective and Preventative Action and Correction of Error methodologies applied business-wide are among the leading tried and tested methods most scale-up stage companies employ to systematize enterprise adaptation
  17. RAPID ENTERPRISE ADAPTATION PROCESS • The added benefit of these systems for leadership and management: • They create a driver for communicating, evaluating, updating, teaching and distributing learning about the appropriate frame of reference to use when solving problems and making decisions • The further dividend of these system in trying times: • When there is a good real-time mechanism for keeping more people on a similar wavelength about how to solve problems and make decisions, it helps keep up the ability to delegate and distribute problem resolution in larger enterprises, countering the natural tendency for recentralization of authority in more turbulent business conditions
  18. CHANGES IN CUSTOMER PURCHASE BEHAVIOUR • In B2B in more challenging times: • Customers tend to favour smaller, less risky deals • Required payback times come way down, often to as short as three to six months • Expect greater use of zero-based budgeting among buyers, and less entitlement spending from year to year • Generally as a response to more challenging business conditions, the way to go is to be ready to parse product and service delivery into smaller increments, with rapid deployment, and short time to realized value for customers • Measure these parameters, monitor performance, and apply corrective actions as needed
  19. CHANGES IN CUSTOMER PURCHASE BEHAVIOUR • In B2C: • There can be significant changes in the value prop that customers want in more challenging, stressful financial times • The foundations of previously established product-market fit can even come into question • The best course of action is often to start by being very humble about assuming how peoples’ wants and needs may have changed as economic conditions downshift • Then, do a wholesale reevaluation of whether the product delivers the same utility and peace of mind it used to, as evidenced by rate of real-time uptake to strong recurring usage, referrals and virality • After that, do a gap analysis of current state vs. target, survey users about the root causes of divergences, and move to close the gaps
  20. TAKEAWAYS • Competitive forces may accelerate in many ways during the coming economic slowdown for scale-up stage tech firms • The time may well be at hand for transformative mainstream impact across much knowledge work for generative AI and RPA, and their ability to provide a lasting and significant productivity lift • This is very different from the productivity impact of ICT overall for the past twenty years, which has been tepid • We may be in the midst of a very big moment • In the recent past, frothy markets and abundant capital gave hope to a lot of different business approaches that won’t be sustainable now • Looking ahead, more prudent spending and investment will magnify the differences between firms which get stronger through their adaptability, methods, workflows and technologies, relative to those which do not
  21. SUGGESTIONS • If you haven’t done so already, consider having a company wide hackathon and demo event capstone about how to improve methods and workflows using generative AI and/or RPA • Be mindful of confidentiality and data privacy obligations, which may require preparation of sufficiently anonymized data for development, test and demonstration
  22. INDICATIVE REFERENCES • Impact of ChatGPT on a range of knowledge work: • Experimental Evidence on the Productivity Effects of Generative Artificial Intelligence, Shakked Noy and Whitney Zhang, March 2, 2023 Working Paper • files/Noy_Zhang_1.pdf • Impact of Copilot on entry level programming: • The Impact of AI on Developer Productivity: Evidence from GitHub Copilot, Sida Peng et al, Feb. 13, 2023 •
  23. FURTHER DISCUSSION For additional dialog about adapting to the slowing macroeconomic picture and response options in start-ups and scale-ups: