the software entrepreneurship process
TRANSCRIPT
2 — Process
From Code to Product gidgreen.com/course
From Code to Product Lecture 2 — Process — Slide 2 gidgreen.com/course
Lecture 2
Product development for startups
Or… Customer development
Or… How to avoid making an ice cream glove
Or… How to discover the ice cream glove is actually a great idea
From Code to Product Lecture 2 — Process — Slide 3 gidgreen.com/course
Lecture 2
• Companies vs startups • Product—Market fit • The idea • The first version • Collecting data • Iteration and pivots • Are we there yet?
From Code to Product Lecture 2 — Process — Slide 4 gidgreen.com/course
“Normal” companies
• Existing product • Known market • Established path to market • Brand recognition • Paying customers • Revenue > Costs (usually) • Incremental development
From Code to Product Lecture 2 — Process — Slide 5 gidgreen.com/course
Startup companies
• Existing product No product • Known market Uncertain market • Established path to market • Brand recognition Totally unknown • Paying customers No customers • Revenue > Costs Zero revenue • Incremental development Clean slate
From Code to Product Lecture 2 — Process — Slide 6 gidgreen.com/course
A company’s priorities
• Increase profit • More customers • More $ per customer • Improve product • New products • New business area • Acquire others
From Code to Product Lecture 2 — Process — Slide 7 gidgreen.com/course
A startup’s priorities
• Increase profit Don’t die • More customers Find some users • More $ per customer Get $ from users • Improve product Create a product • New products • New business area Find business area • Acquire others Get acquired
From Code to Product Lecture 2 — Process — Slide 8 gidgreen.com/course
Development by Waterfall
From Code to Product Lecture 2 — Process — Slide 9 gidgreen.com/course
Requirements
Design
Implementation
Verification
Maintenance
Development for startups
From Code to Product Lecture 2 — Process — Slide 10 gidgreen.com/course
Requirements
Design
Implementation
Maintenance
Ideas
Verification Collect Data
1 month or less…
Why do companies fail?
From Code to Product Lecture 2 — Process — Slide 11 gidgreen.com/course
Superceded
Undercut Surpassed
Attrition
Why do startups fail?
• Running out of… – Money – Ideas – Energy – Faith
• Before reaching… – Break even – A (lucky) exit
From Code to Product Lecture 2 — Process — Slide 12 gidgreen.com/course
A startup is…
“…a human institution designed to deliver a
new product or service under conditions of
extreme uncertainty.” — Eric Ries
“…an organization formed to search for a
repeatable and scalable business model”
— Steve Blank
From Code to Product Lecture 2 — Process — Slide 13 gidgreen.com/course
Lecture 2
• Companies vs startups • Product—Market fit • The idea • The first version • Collecting data • Iteration and pivots • Are we there yet?
From Code to Product Lecture 2 — Process — Slide 14 gidgreen.com/course
Product—Market Fit
From Code to Product Lecture 2 — Process — Slide 15 gidgreen.com/course
Time
That incredible moment when you realize that
many people truly need (or want) your product and you can make real
money from
it
Ideas
Implementation
Collect Data
Startup stages
From Code to Product Lecture 2 — Process — Slide 16 gidgreen.com/course
Time
Idea Version 1 Product Efficiency
Product Market
Fit
Lecture 2
• Companies vs startups • Product—Market fit • The idea • The first version • Collecting data • Iteration and pivots • Are we there yet?
From Code to Product Lecture 2 — Process — Slide 17 gidgreen.com/course
Sources of inspiration
From Code to Product Lecture 2 — Process — Slide 18 gidgreen.com/course
Own needs Business experience
Current events Others’ success
Wouldn’t it be cool? Everyone’s doing it!
Immediate questions
• Is it feasible? • Why now? • Why you? • Who would want it? • How will it grow? • Could it make money? • Is it defensible? • Define success or failure
From Code to Product Lecture 2 — Process — Slide 19 gidgreen.com/course
Why now?
From Code to Product Lecture 2 — Process — Slide 20 gidgreen.com/course
Critical mass New platform
Troubled incumbent
Bandwidth No one thought of it!
Macro shifts
Some trends
• Cloud computing • Big data • Smartphones • HTML5 • QR codes • 3D printing
From Code to Product Lecture 2 — Process — Slide 21 gidgreen.com/course
• Ageing in West • Consultants • Financial crisis • BRIC countries • Mobiles in Africa • Outsourcing
Technology Society
Be a trend spotter, not a trend setter
Can it be done?
• Break into layers • Find the hardest part – Algorithm – Performance – Compatibility – Scaling
• Find equivalents • Do you know how?
From Code to Product Lecture 2 — Process — Slide 22 gidgreen.com/course
Who would want it?
• Talk to your ideal customer – Use connections – Cold calls / emails – (Surveys)
• Search for competition • Check search volumes • Vaporware/prototypes • Ask friends and family
From Code to Product Lecture 2 — Process — Slide 23 gidgreen.com/course
How will it grow?
From Code to Product Lecture 2 — Process — Slide 24 gidgreen.com/course
Pure virality Self promoting
Word of mouth Search engines
Paid advertising Direct sales
Could it make money?
• What’s the model? – Is there enough pain?
• Is the market… – Large enough? – Long term? – Growing?
• Is there competition? • Are there per-customer costs?
From Code to Product Lecture 2 — Process — Slide 25 gidgreen.com/course
Is it defensible?
From Code to Product Lecture 2 — Process — Slide 26 gidgreen.com/course
Economy of scale Technology
Accumulation Lock-in
Is it defensible?
From Code to Product Lecture 2 — Process — Slide 27 gidgreen.com/course
Network effects Brand awareness
First mover advantage
Outspending on advertising
Lecture 2
• Companies vs startups • Product—Market fit • The idea • The first version • Collecting data • Iteration and pivots • Are we there yet?
From Code to Product Lecture 2 — Process — Slide 28 gidgreen.com/course
The first version
• “Minimum viable product”
• Identify early adopters
• Build quickly
• Design for learning
• No barriers to use
• Aim to fail fast
From Code to Product Lecture 2 — Process — Slide 29 gidgreen.com/course
What’s in?
• Simple interface
• Some explanation
• Metrics
• Feedback form
• Final product name
• Rapid deployment
From Code to Product Lecture 2 — Process — Slide 30 gidgreen.com/course
What’s out?
• Beautiful interface
• Peripheral features
• Lots of options
• Scalable infrastructure
• Business model
• Bugs and glitches
From Code to Product Lecture 2 — Process — Slide 31 gidgreen.com/course
Early Google
From Code to Product Lecture 2 — Process — Slide 32 gidgreen.com/course
Early Amazon
From Code to Product Lecture 2 — Process — Slide 33 gidgreen.com/course
Early Facebook
From Code to Product Lecture 2 — Process — Slide 34 gidgreen.com/course
Version 1.0
“If you’re not embarrassed when you ship your first version you waited too long… You can never fully anticipate how an audience is going to react to something you’ve created until it’s out there.”
— Matt Mullenweg, WordPress
From Code to Product Lecture 2 — Process — Slide 35 gidgreen.com/course
Lecture 2
• Companies vs startups • Product—Market fit • The idea • The first version • Collecting data • Iteration and pivots • Are we there yet?
From Code to Product Lecture 2 — Process — Slide 36 gidgreen.com/course
Collecting data
• Change hats
• Observation – Direct
– Remote
• Feedback emails
• Metrics
• Brand monitoring
From Code to Product Lecture 2 — Process — Slide 37 gidgreen.com/course
Direct observation
• Find subjects – Advertise – Public places – Acquaintances
• Start from blank • Don’t interfere – Questions allowed
• Discuss at end
From Code to Product Lecture 2 — Process — Slide 38 gidgreen.com/course
Power of the few
From Code to Product Lecture 2 — Process — Slide 39 gidgreen.com/course
0
5
10
15
20
25
!"# $!"# %!"# &!"# '!"# (!!"#
Obse
rvati
ons
Requir
ed
!"#$%&'()*+&%*,##-(
90% certainty
Remote observation
From Code to Product Lecture 2 — Process — Slide 40 gidgreen.com/course
Feedback emails
• Read by product team
• Answer them
• Feedback = pre-sales
• Keep a tally
• Metadata
• Watch for jewels
From Code to Product Lecture 2 — Process — Slide 41 gidgreen.com/course
Feedback tools
From Code to Product Lecture 2 — Process — Slide 42 gidgreen.com/course
Real metrics
• Unique visits per … • Registrations per … • Downloads per … • Searches for product name per … • Engagement per user • Retention per user • Revenue per …
From Code to Product Lecture 2 — Process — Slide 43 gidgreen.com/course
Vanity metrics
• Total … • “Hits” • Traffic from: – Bots – Script kiddies
• Publicity • Purchased users • One-time revenue
From Code to Product Lecture 2 — Process — Slide 44 gidgreen.com/course
Brand monitoring
From Code to Product Lecture 2 — Process — Slide 45 gidgreen.com/course
The building
“In a startup no facts exist inside the building, only opinions… Get the hell outside the building.”
— Steve Blank
From Code to Product Lecture 2 — Process — Slide 46 gidgreen.com/course
Lecture 2
• Companies vs startups • Product—Market fit • The idea • The first version • Collecting data • Iteration and pivots • Are we there yet?
From Code to Product Lecture 2 — Process — Slide 47 gidgreen.com/course
Iterate to increase…
• For customer – Features – Usability – Marketing
• For you – Engagement – Growth rate – Revenue
From Code to Product Lecture 2 — Process — Slide 48 gidgreen.com/course
Iteration priorities
• Bugs first! • Show stoppers • Popular requests – But maintain your vision
• Easy improvements • Jewels = market openers • Avoid specials
From Code to Product Lecture 2 — Process — Slide 49 gidgreen.com/course
Serve, don’t obey
“If I had asked people what they wanted, they would have said faster horses.”
— attributed to Henry Ford “A lot of times people don't know what they want until you show it to them.”
— Steve Jobs
From Code to Product Lecture 2 — Process — Slide 50 gidgreen.com/course
Don’t be scared!
From Code to Product Lecture 2 — Process — Slide 51 gidgreen.com/course
0
200000
400000
600000
800000
1000000
0 2 4 6 8 10
Users
Years
From 1,000 to 1,000,000 users at
10% per month
Persevere or Pivot?
• Metrics improving?
• Still learning?
• Stuck serving the few?
• Frustrated?
• Is failure defined?
• Be brave, be swift
From Code to Product Lecture 2 — Process — Slide 52 gidgreen.com/course
Product Pivots
• Zoom in
• Zoom out
• Platform ↔ Application
• Technology
• Application of technology
• Reuse accumulated data
From Code to Product Lecture 2 — Process — Slide 53 gidgreen.com/course
Other Pivots
• Business model
• Target customers
• High margin ↔ High volume
• Sales channel
• Clean slate
From Code to Product Lecture 2 — Process — Slide 54 gidgreen.com/course
Famous Pivots
From Code to Product Lecture 2 — Process — Slide 55 gidgreen.com/course
Lecture 2
• Companies vs startups • Product—Market fit • The idea • The first version • Collecting data • Iteration and pivots • Are we there yet?
From Code to Product Lecture 2 — Process — Slide 56 gidgreen.com/course
Are we there yet?
“Startups occasionally ask me… whether they have achieved product/market fit… if you are asking, you’re not there yet.”
— Eric Ries
“In a great market — a market with lots of real potential customers — the market pulls product out of the startup.”
— Marc Andreesen From Code to Product Lecture 2 — Process — Slide 57 gidgreen.com/course
Painting a picture “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... 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…”
— Marc Andreesen
From Code to Product Lecture 2 — Process — Slide 58 gidgreen.com/course
A rule of thumb
“In my experience, achieving product/market fit requires at least 40% of users saying they would be ‘very disappointed’ without your product.”
— Sean Ellis
From Code to Product Lecture 2 — Process — Slide 59 gidgreen.com/course
Sustainable growth
• Old business → New business • User driven – Virality – Self promotion – Word of mouth
• Sales driven – Lifetime value > Acquisition cost – (beware competition)
From Code to Product Lecture 2 — Process — Slide 60 gidgreen.com/course
Books
From Code to Product Lecture 2 — Process — Slide 61 gidgreen.com/course
gettingreal.37signals.com
A story…
From Code to Product Lecture 2 — Process — Slide 62 gidgreen.com/course