Lessons: Customer Development / Lean Startup

Lessons:

Mostly around the concept of a Lean Startup

http://www.startuplessonslearned.com/2008/09/lean-startup.html

the key idea is to have a customer focused process which guides the rest of your strategic planning, funding and other types of progress. This is generally meant for technology startups, but some of the customer validation processes look very good for all other types of startups.

1) Focus on the customer

"startup is an organization built to search for a repeatable and scalable business mode" - Steve Blank

Customers care about their problems NOT your solution. - ash maurya paraphrasing Dave McClure

These blog posts reflect Steve Blank's line of thinking:

http://steveblank.com/2009/08/27/the-leading-cause-of-startup-death-the-product-development-diagram/

http://steveblank.com/2009/08/31/the-customer-development-manifesto-reasons-for-the-revolution-part-1/

http://steveblank.com/2009/09/03/the-customer-development-manifesto-reasons-for-the-revolution-part-2/

http://steveblank.com/2009/09/07/the-customer-development-manifesto-the-death-spiral-part-3/

http://steveblank.com/2009/09/10/customer-development-manifesto-part-4/

http://steveblank.com/2009/09/17/the-path-of-warriors-and-winners/

(continues below... the blog posts are quite disjointed though)

Customer Development for Web Startups:

Steve Blank realizes the missing pieces in his advice:

http://steveblank.com/2009/11/16/times-square-strategy-session-web-startups-and-customer-development/

Focusing on the MVP: minimum viable product

http://www.ashmaurya.com/2010/02/customer-development-checklist-for-my-web-startup-part-1/

http://www.ashmaurya.com/2010/02/customer-development-checklist-for-my-web-startup-part-2/

and how to run it

http://www.ashmaurya.com/2009/12/achieving-flow-in-a-lean-startup/

http://www.paulgraham.com/makersschedule.html

talk to people!

http://steveblank.com/2009/12/17/building-a-company-with-customer-data-metrics-are-not-enough/

Ash Maurya's disclaimer: I feel the fundamentals outlined here apply to any type of web startup, with the exception of startups that *primarily* rely on high network effects, like Twitter and Facebook, where initial success metrics are user acquisition versus revenue based.

2) Tempo

Not about perfect information, about speed of decision. I think i have to make faster 'reversible' decisions. Thus far i've spent my time building up resources to make quick decision when it comes to it, but i can't choose if i haven't built up the picture yet.

http://steveblank.com/2009/04/10/good-enough-decision-making/

There's a link to an excellent book-chapter on tempo from the Marine corps, familiar to me from my army days, but i've never thought about it applied like this. It also uncovered the OODA loop, familiar from business theory, but i didn't know it came from an analysis of why US F83s beat N Korean Mig13s in the Korean War.

Observe, Orient, Decide, Act.

however, how do i conduct OODA?

3) Marketing

- screencasting software (ash maurya) use it to practice a concise and sharp pitch and still have a video to show of at the end of it all.

- reaching customers

http://venturehacks.com/articles/sean-ellis-interview

http://steveblank.com/2009/12/17/building-a-company-with-customer-data-metrics-are-not-enough/

Competition and positioning: (bird's eye view by Steve blunt)

My test for how well you understand this “order of battle” is to hand the founder a marker, have them go up to the whiteboard and diagram the players in the market and where they fit. (Try it.)

Product-Market Fit by Marc Andreeson :

Marc Andreeson looks at this problem as a product/market fit, and says market is more important than team or product, its the first and most fundamental thing. I quote from him below:

Let's introduce Rachleff's Corollary of Startup Success:

The only thing that matters is getting to product/market fit.

Product/market fit means being in a good market with a product that can satisfy that market.

You can always feel when product/market fit isn't happening. The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of "blah", the sales cycle takes too long, and lots of deals never close.

And you can always feel product/market fit when it's happening. The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can. Reporters are calling because they've heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck's.

Lots of startups fail before product/market fit ever happens.

My contention, in fact, is that they fail because they never get to product/market fit.

Carried a step further, I believe that the life of any startup can be divided into two parts: before product/market fit (call this "BPMF") and after product/market fit("APMF").

When you are BPMF, focus obsessively on getting to product/market fit.

Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don't want to, telling customers yes when you don't want to, raising that fourth round of highly dilutive venture capital -- whatever is required.

When you get right down to it, you can ignore almost everything else.

I'm not suggesting that you do ignore everything else -- just that judging from what I've seen in successful startups, you can.

Whenever you see a successful startup, you see one that has reached product/market fit -- and usually along the way screwed up all kinds of other things, from channel model to pipeline development strategy to marketing plan to press relations to compensation policies to the CEO sleeping with the venture capitalist. And the startup is still successful.

Conversely, you see a surprising number of really well-run startups that have all aspects of operations completely buttoned down, HR policies in place, great sales model, thoroughly thought-through marketing plan, great interview processes, outstanding catered food, 30" monitors for all the programmers, top tier VCs on the board -- heading straight off a cliff due to not ever finding product/market fit.

Ironically, once a startup is successful, and you ask the founders what made it successful, they will usually cite all kinds of things that had nothing to do with it. People are terrible at understanding causation. But in almost every case, the cause was actually product/market fit.

Because, really, what else could it possibly be?

4) Personal disciplines:

write down your hypotheses:

http://www.ashmaurya.com/2010/08/businessmodelcanvas/

(idea: write hypotheses so that you can test them later, if you don't write them down, you'll keep changing them to make excuses for yourself. )

5) Mistakes not to make:

http://blog.asmartbear.com/startup-lesson.html

5 lessons from 150 startup pitches

1) http://blog.asmartbear.com/not-competitive-advantage.html

2) http://blog.asmartbear.com/unfair-advantages.html

3) http://blog.asmartbear.com/customer-validation.html

4) http://blog.asmartbear.com/competitive-positioning.html

5) http://blog.asmartbear.com/startup-marketing-ideas.html

======================

Lessons Learnt:

1) Focus on customers is a key for a business

2) This takes alot of attention and 'getting out there'

3) This requires 'pace', but the idea of 'lean startups' is to match the tempo to the customer development process

Bubbles

- a very reflective post-

There are bubbles and there are bubbles.

I'm not going to talk about financial bubbles here. I'm going to talk of bubbles of the mind. We live in a society which is highly fragmented by points of view, and small, emergent and ever-evolving subcultures. The street and skate culture has declined a little, and the cos-play and anime culture have risen abit more in Singapore. People are in circles of income and class, where who they meet is determined by where they, stay, the schools we go to. Thankfully in Singapore, schooling is determined by educational ablity, so the poor can go to top schools, but the rich who spend time reading books, attending piano classes and have parents who taught them to read and write end up in the top schools. There are great levelers, like the national library, the internet and funds to subsidize computers, but nothing beats parents who can guide their kids (for better or worse) to a good education.

There are bubbles, and there is the capacity of the mind. As a child, many many things escape you. Developmental psychologist tell us that children begin to see opposing points of view at about the age of ten, but only begin to see the world in shades of grey from 12-13 onwards. It is at that stage when the world becomes shades of grey, that they are bombarded with learning as their brains become capable of taking in more knowledge (thus the workload of the current secondary schools), and they are given youth and sub-cultures to choose from, in order to escape the orthodoxy of whatever their parents defined as their childhood and home environment.

There is a bubble of school, most in Singapore a privileged enough not to work through secondary school, to focus on learning and the trials of friends, educational, sporting and artistic challenges. That is a time of learning and experimentation. Yet that is also a bubble, but a bubble that the mind can bear. A happier time where things are simpler, mainly because folks in that stage can only see things more simply, and the betrayals and disappointments which we think characterize adulthood are just beginning. That is also a most painful time, as the human has not grown its emotional skin to ward off pains and unhappiness which the teenager sees (hopefully) for the first time. I think that the experiences in this bubble are fundamental, formative and potentially traumatizing, many experiences before the age of sixteen essentially define who we are, our tastes, confidence and preferences.

Let me talk about these bubbles in different terms. Re-defining what i have just covered.

There are bubbles of perception.

There are bubbles of institutions (e.g school) and the communities surrounding the institution.

Simply put we can only perceive that which our senses can take in and of that, notice what our minds are capable of noticing and think thoughts which our brains are capable of handling. Many psychological effects happen here, priming and trained pattern recognition is an important one. We understand patterns and concepts which we have learnt, and can see them when they next appear. (Life cycle of a frog, life cycle of a human, life cycle of a product, life cycle of a relationship) we apply using metaphors.

There are bubbles of institutions. I talk about institutions in the sense of the architecture (building), the policies (rules) and the people (community, and circles of friends).

A school has its own building. If a school is built on a hill, the students will understand and see the lay of the land around the school. If a school is built in the middle of apartment blocks, a student may only know the landmarks he or she walks to. If a school has no central meeting place, but only classrooms and corridors, students who attend the same school may never meet each other, only walking to and from class each day.

The policies shape the school. I attended a hokkien clan association primary school, we bowed low when we greeted a teacher, even along the corridor, till today, i bow somewhat when greeting authority, even if it just manifests as a slumping of shoulders and head. How long the recess break is shapes how friendships form.

The people who make the community, key people like principals, teachers, stand-out students, and quiet wall-flowers make a community. The group of friends one gravitates to the cliques formed in each class make what an individual knows.

The fact of the matter is, we can only know the institutions we are in intimately. The boys' school down the valley will never understand what it is like to be in the girls' school at the top of the hill. Even learning vicariously through stories, gives insight into that institution, but not deep insight.

Thus, i would say that the institutions which we are part of form part of the bubbles we are in.

So:

bubbles = sum of: ( perception + institutions) over time

Our perceptions, our institutions (or lack therof) will change over time.

Why did i start writing this post?

I have two more thoughts.

1) The act of starting and running a company requires one to leave all the bubbles behind.

http://onstartups.com/tabid/3339/bid/17741/The-11-Harsh-Realities-Of-Being-An-Entrepreneur.aspx

http://paulgraham.com/die.html

The point of new business entities is to re-make the way institutions currently operate. they are change makers. Change has a starting point, but no end point of reference. By definition, it alters the perception and institutions (companies, schools, governments) which it works with. And over time, enough change constitutes radical alteration of institutions.

(perception is far harder to change as that is biological change, that depends on biological evolution, which moves in generations, while social evolution moves far faster, in decades or less on the internet)

2) Another bubble exists.

This is a far more abstract point.

We have a line between the real and not real.

If one looks at the idea of 'ghosts' and 'demons' and their portrayal in art as a reflection of the dreams and subconcious of the human being, there is a strong inclination to pervert that which we see in our everyday life. 'disappearances', 'the grotesque'.

A western, judeo-christian view of the world splits quite neatly between the 'real' and the 'sublime'. All nice views of conventionality or beauty. But does not take into consideration the space where nothing really exists except for fragments, and the entities which arise in that space, like the space between dreaming and waking we cannot describe in words.

Japanese art and anime have space for that world between dreaming and waking, and live in a far more complex space.

I'd like to point out, that it is probably possible to completely exclude a particular view of the world. To remove it from perceptions and institutions and in so doing, form a bubble in and of itself, excluding everything else. The lack of mention of the grotesque within judeo-christian culture, except as the taboo of hell, is a bubble in and of itself. Singaporean culture, with its pragmatic ways, seem to have a dollar sign over everything, and leave out intrinsic value, like the worth of the human, the worth of art.

I don't understand how these bubbles of collective reality form yet.

I think business can break bubbles of collective reality which form profitable opportunities, however there are many, deeper bubbles of collective reality which have formed in our modern, daily life which we are not aware of.

- dirtiness v.s sanitation

- ugliness v.s consumer and popular culture

There may be bubbles of collective reality which have characterized humans, like we expect objects to fall when dropped (gravity), cups to hold water (mass and density) and for sound to carry through air.

Bubbles characterize our growth as human beings, from childhood to adulthood, they characterize modern society and its institutions and business led change. I propose that bubbles under-gird all cultures and civilizations and the human race itself.

Reality divided: Atoms, Bits and the rest of us

The world as we know it is having its foundations split.

We call it the internet of things [McKinsey Quarterly Article or according to IBM, a Smarter Planet ], but rather its about the creation of a virtual image of the planet as we know it. This isn't virtual worlds, or mirror worlds, but rather its Simulation and Simulacra, Baudrillard style.

In the beginning, there was Atoms, and then humans invented bits. These was only one basic thing which everything was made from, the Atom. But humans invented the mathematical notation of the bit, which we found a brilliant new way to store information. Humans always relied on some abstract symbols to communicate. Like language and the meaning that comes from strange squiggly strokes like the ones you're reading now. We realized we could digitize that, and soon enough, the internet appeared.

Today we have digitized 2 main things: (1) almost everything that can be represented symbolically, that's all the 'media' that we know today. Media in the traditional sense, symbollic languge, 2D images and video, 3D objects. (2) our relationships. we try to store information about customer relationships, and in real life digitize our communication through mobile phones and email.

we are trying to apply that approach to the real world, putting sensors in rivers...etc.

The real world of atoms now has a mirror in digital data. This mirror doesn't reflect everything, it simply reflects what humans and their organizations feel is useful.

A bottom line: There is a world of atoms, and a world of bits, they mirror each other, but through the lens of utility value.

More and more of what we base our world and our time on is the world of bits. I know i live in a world surrounded by virtual worlds and augmented reality technologies, and i shouldn't watch so much ghost in the shell and other Japanese animae that dwell on the line between real and unreal and the ambiguity in between.

I'm not losing my sense of reality (yet) but i have a strong sense that the idea of reality in the next 30 years is going to be vastly different from the past.

Imagine what a statement this is: "Our Idea of Reality is Changing"

Its actually a testable hypothesis.

(a) The objects that make our day to day existence more real

(b) The people that make our day to day existence more real

(c) The events that make our day to day existence more real

Track the changes over time and through age groups.

The question is of course: What is reality?

That which i can see and touch? Or that which reacts back to my presence and assures me that I exist. Or that which i can remember and know who i am and how i have existed.

We have always had the physical and the metaphysical. Now we add the digital.

I am a networked child

Image from: http://www.visualcomplexity.com/vc/project_details.cfm?id=489&index=59&domain=Social%20Networks

http://www.auscillate.com/itp/listview/

Last night when i dreamt, the faces of two friends who I knew in secondary school came before my minds eye. In the intervening years they had met and through Facebook i realized that they were happily dating and looked on their way to marriage. I seldom meet them, just bumped into them both on a date months ago How did they sweep into my mind? My wall feed from Facebook brings fragments and faces up to my subconscious mind which leaks into my dreams. The equations behind it reads people whose profiles i frequently look at or interact with, even in my private messages on facebook (i sometimes use facebook as a social email) and let me know when they change things in their life.

I live on multiple networks. Sociologists describe the friends we have in terms of a network. They've been doing this for decades. Social networks like facebook and friendster encouraged us to pull our our friend on to their sites. Before that, instant messaging programs like ICQ, MSN gave us contact lists and a means to contact our friends. How many people today still use paper phone directories, I stopped using mine when i was 14, the fact i had one would probably make me sound old to my nieces and nephews. I have a "network" of friends. People who i have made a social connection with, acquaintances, friends, close friends, family. I have a digital representation of these networks on MSN, (probably my old ICQ profile if i ever revive it), Skype, Facebook. Not to mention the 'dinosaurs' of email and phone contacts.

My dream came to be (if one thinks dreams are reflections of the fragments that go through our minds in the day) because Facebook brought parts of my "network" of friends to my view. The best bit, is that i'm geographically distant from most of my friends working here in Melbourne (for a few months). i don't actually meet most my friends physically right now. I skype/ phone/ facebook/ email them. This sort of physical distance is perfectly acceptable now-a-days it seems.

More important theoretically is what it means to be "a networked child", having grown up in the age of ICQ. To be grandiose let me state 2 things.

Firstly: Social networks take 2 forms, the social and the digital, these networks resonate and pass information and connections between each other. This will change human interaction quite radically.

Secondly: The most important metaphor for today is the "network". Networks have always been fundamental to industrial and economic development and will even be more obvious in the future.

Allow me to discuss this in a few spheres.

The Social

(1) The great unknown mass of people

Whenever i'm on facebook and i click on a profile where i have NO mutual friends or just a few, i'm reminded that I am only one little kid in a small town. There are tons of people with other friendships and relationships which are just as real to them. Everybody has boys and girls and men and women and older friends whom they know... its always been that way, just right now, i can see it on their friend-list on facebook. Its more real because i can see the faces of these friends... (like.. that girl's profile picture reminds me of my crazy friend... Ishallnotmentionnames)

Most of us have had one or two friends online who we actually don't know in person, particularly from the MIRC days. Or, less frequently real world acquaintances who we have gotten to know better through common online interests.

I'd point out 2 types of social spaces on the web. One space is for strangers to meet, this is almost always around a common interest. [There's a great theory that almost explains this in the paper <<>> ]

The other space is for people who know each other to have recurring connections/conversations/interactions.

Some spaces, like the now defunct online game Metaplace had both of these (a social networking site and a virtual world for people to meet) or people pull friends between these spaces. (like the people on Tirnua.com -a virtual world- who asked me to add them on facebook)

(2) 'Real' and digital networks of people reinforce each other

The people that I know in real life, are also often part of my digital social network. They move in between these networks and friendships gain additional momentum from this movement. Let me illustrate. I used to always see this girl on the bus/train. Do note that in most urban societies, there are also physical transport networks, that determine our social interaction, for example, shopping malls are usually at bus interchanges and shops at traffic junctions, because more people meet there. (the person who knows the most people in an office is the guy who sits next to the toilet according to some research) So.. i see this girl on the same bus/train every 6 months or so, turns out we live on the same street. (Same node on the network, which increases the probability of meeting over time) We meet at an event, because we have mutual friends. This is all part of 'real' networks. We add each other on facebook and i move house to another area, we're part of each other's digital networks now. We stay in touch on facebook and meet and help each other out from time to time on different things when our interests converge. Eventually we become close friends through constant exchanges of private messages.

(3) People have multiple networks.

"On the internet, nobody knows you're a dog" is the old saying, on digital spaces, we can reconstruct our own identity. Actually, we do this in real life too. A friend once told me about his confusion between the spheres of his life, he has his Clubbing Friends, School Friends, Church Friends, Hobby Friends. and 'its so weird' when people from different spheres meet. Some of our friends know us only in that particular context, e.g work. and its simply that sort of friendship.

Ethnographer Sherry Turkle quotes a psychologist's theory on identity at the end of her book 'Life In The Screen', that each of us have different identities all in the same person. We live out each of these different identities in different contexts. If these contacts are described by our friends, than maybe we do have multiple different social networks. (using different terms, we are members of different communities)

The Economic

Networks have been critical in economic development. The rail network in the 1800s was critical to the take-off of the industrial revolution in France and Germany. Simply because they facilitated the exchange of goods, networks and information.

The internet has done something similar, and i'd propose the idea that because it was so efficient, we found ways to digitize as many goods and services as possible.

Social networks are critical in doing business. Francis Fukuyama theorizes that trust is critical to do business, in countries with low levels of general trust between strangers, and low confidence in the legal system, social ties between powerful families and their companies become the critical way of doing business. Essentially, there's a social circle of powerful people at the top of a society who run everything.

How does this work on the internet and in the future? Well, no different in the way it works. We need a way to exchange things (web or rail or road...) and we need to know that business agreements can be honoured. The question is: How can we make new forms of social connections that support business? Company-led marketplaces like Apple's Appstore helps combine the 2 principles above, and helps strangers to sell things to each other.

The Emotional

Humans need company to feel loved and appreciated. And our social connections make us happy. These 'real' social ties and strong relationships have been supported by things like Facebook and Skype.

However there are real questions that remain. Urban alienation is everywhere in our cities. Lots of people are metaphorically standing at the store window and looking in on relationships on the internet. If friends bring happiness, how do digital relationships change that?

I only have questions here:

a) What kind of interaction do we need to have to make us happy. To listen, to look at each other in the eye, to hug? How do we express affection, as well as share in each others' lives? I can see my friends' emotions on Facebook sometimes, i can feel for them, but this is a private feeling, is this a relationship?

b) How much 'disclosure' is good. (how many people am i telling things to? what am i saying? how much am I saying?) There are people who live their lives 'online' telling people how they feel from their status updates, and others who don't. Who's happier?

Obviously emotions, and happiness depend so much on the individual and their life story and their point in their lives.

The future: I'm going to try to read more about this and understand it, I won't have the time to make this into a full academic study, and there's tons of great papers written on social networks and even a book based on some of these great papers. (One of Malcolm Gladwell's popular books draws on work by Mark Grannovetter's research on social networks)

The real points of interest are based on my 2 'grandiose statements'

Firstly Social networks now bounce between the digital and the "real" world, and i've seen on my online wanderings much evidence for multiple social networks on the web interacting, migrating and doing all sorts of interesting things. I'm curious about how the digital and real social networks interact and will change our society.

Secondly In economic history, there's never been a serious consideration of how networks in all their different permutations have shaped our world today. There's room for a great book on that (not written by me of course lol...), and how the first trend of 'real' and digital networks will impact the economic history of the future.

Right now, my working idea is this:

The world of the future will look like China's internet today. Full of bored, underemployed people (who were once young internet denziens), some will make money in a vast online cottage industry, a la Ebay, others will just spend their free time on the web.

There isn't enough 'real' work to go around because of hyper efficient large enterprises who over-work a few highly paid people, so most people will be bored, underemployed and online, spending their time with friends and activities on the web. The economic reality of low employment, may co-incide with a society that is networked on multiple levels, and very new forms of play, social life, and work can emerge.