For the past few months at Fabric, we've seen several entrepreneurs pitching Internet/Software concepts in the idea stage. They have brought investment decks, paper drawings, wire frames, and product descriptions. (Thankfully no business plans). They are all pre-Seed and they are all meeting with investors. Some of them have started building their product, but 50% have not.
The few that have not started building their product give different reasons for this. Common excuses are:
While these reasons seem to make sense, they raise a few flags with our team. Here's what we worry about:
You don't need to raise money to start to build your product
If you are committed, then you should put all your cash into product development now. That includes your credit cards and whatever you can borrow from anyone. We've seen Wordpress “products” built for $2k to test a hypothesis. The first version of Groupon was a Wordpress site. Why? Many investors won't even see you unless you have something live. That's a fact. (More reasons below).
Product development is different - and much harder - than sketching
We've had many people come to us with hand drawn wire-frames with very little detail. We're happy to see these things - it's better then nothing - but it's not enough. When you work on the details of your product through flows and mock-ups, you are forced to make decisions that you don't have to make when you are in sketch mode. For instance, you have to settle on database structure and priorities. You have to make left or right decisions in areas of your product that will impact other decisions down the road. You have to be super clear on your product description and you have to communicate the nuance of your thinking. You can avoid all that when you are in sketch mode. It's different. Very different. Who's telling you this? Dennis the Foursquare founder.
Learning fast is important
Many of your assumptions are wrong. (Einstein was wrong most of the time!) The trouble is, you won't find out until you put some part of your product in front of users and test. The longer you wait, the longer you stay in never land. It's nice in never land, but you'll have to get testing sooner or later. It should always be sooner because when you learn which of your assumptions are wrong you can correct - which of course is critical to progress. This is basic science and it's shocking to see so many people get this wrong.
Strong social products RULE the world and social products are different
To win today, you need to learn how to build social products. Building social products - or community products - is really different than building, for instance, a direct marketing product. You'll need to think about how to build context into your interface and, in many cases, where your growth model is dependent on viral coefficient you have to build loops - essentially social loops - into the core fabric of your product. The challenge? It takes time to learn how to build a solid product - a social product - for your users. You'll need to start as early as possible on this journey since there are many lessons to learn.
But what if my product requires infrastructure and complex architecture to work? What if it's a transaction product with a deep back-end?
It doesn't matter. Some of the coolest products was started without a backend. You don't need any of that stuff to prove some level of product/customer fit. Besides, never put a large part of your budget into tech until you are certain that you NEED that tech. You should test, test, test, before you invest in tech. If you worry about scale, just limit growth by capping your Alpha to x users. Also, you don't need real transactions to show investors that users would likely go through with a transaction. Be creative.
Most of the entrepreneurs we work with go after consumer Internet. They all need to raise more money to get past their next milestones and most investors care about traction. It's simply impossible to show traction without a product. To get traction, real traction, you have to figure out what makes your early adopters tick. You have to understand your different user segments and you have to identify your key users - the ones that drive viral growth. To do this, you have to build, test, learn, and iterate. You have to build a culture for rapid development and you have to train your product, design, marketing, and development team members to work on the most important aspects of your product. This all takes time.
So, get started on your product now. You'll need all the time you have.
It was my turn to read Eric Ries' (Ries's?) The Lean Start-Up. The very first thing that wrapped me in was his definition of a start-up. I think we all know what a start-up is, or at least have a vague idea, but there is a lot of gray area. It reminded me of an argument I would get into with an old roommate: he would always say that his company is a start-up, but I never thought that it was. I could never place my finger on exactly why. My arguments were weak: your company has many employees. Your company has been in business for six years. Your company makes a profit. MY company at the time, see, WAS a start-up; we had few employees, just started business that year, and were operating on rounds of investments much less making any profit. Needless to say, my angry blubbering hardly made for a convincing argument.
Mr. Ries describes a start-up in this way:
“A startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.”
This old friend's company was not delivering a new service as it had been in business for six years (when something stops being “new” I guess is subjective, but six years doing the same thing isn't even in question), nor were they operating under conditions of extreme uncertainty: they knew exactly who their customers were and how to communicate with them. So pfft. Four years later, and I'm still right. (Or should I say, four years later, and I finally figured out why I'm still right?)
Two of my biggest takeaways from this book:
Here's to a new strategy and growth. Cheers!
Working with entrepreneurs before they launch their first product is often exciting and challenging. For many, the most difficult part of building the first product is launching. Pushing the button. Saying “OK, this is it, now we'll put this in front of people today.” It's hard because your vision of what the product should be and what you've built in that first version will be far far apart.
You fear that the product won't work. That no one will use it. You fear that people will talk about you and your product in some negative way. You believe you won't get a second chance. That no one will care.
Of course, on some of these points, you are right. Few people will care. Most of those who see your product will maybe use it once and never again. Some people might even tell other people that your product suck (although few will remember to do so since they are too busy to be going around complaining to friends about this Alpha product they tried once.)
The fear of launching to “the market” seems reasonable enough. However, we've seen this fear of launching even with closed Alphas. For instance, we've seen weeks of tinkering with the first version of a product before pushing it in front of just 30 users. Yes, even at that stage, people are afraid of what users will think. They choose to hold off on user testing until the product is “in better shape.” We've seen products be in 100% stealth for six months. Most of the product works fine and we have 3 tests we could run with users right now, but because the design or experience is not “good enough” the product/user testing never begins.
This is human nature. Many entrepreneurs, especially successful ones, are perfectionists. They want the product to be really strong before they show it. They want to be proud of it. They want the design to be smooth, the experience to flow seamlessly, and they want optimized technical performance.
Lean Is Better But Not Everyone Gets It
The Lean Methodology was partly designed to tackle such issues, but it has been met with some resistance. For instance, in the past few months, we heard from one seasoned Internet/Mobile entrepreneur that this lean methodology is just hype. They don't buy it. They think “it works with some products, but not with ours.” Some believe that you have to build most of the product before you put users in. Some have even mentioned Steve Jobs as proof that the way to go is to have a vision and then build exactly what you want - not what users say they want.
This is bullshit. First of, Steve Jobs was entirely in tune with the customer. He listened to users all the time. He was the user. He was also more in tune with design, product, and marketing then anyone else alive. He knew exactly what was needed to bring about success, but remember the first version of many of “his” products? Even he had to go through a lot of trial and error. It won't be any different for you.
So if you build 80% of your product before you bring users in, you are in deep deep trouble. The point of lean is not to build a poor product fast and launch it. The point is to figure out which of your core assumptions are right and wrong. The point is to learn - fast and early - what to build and how to build it, where to focus your resources, and what not to build.
To minimize waste and get answers from users - you must launch early. You have to get one version of your product in front of one group of users so that you can get to testing. Something magical happens when you talk to people who are using your product for the first time. You'll discover that they won't behave the way you intended. You'll find that people will do things that you didn't even think of. They will ask for features that you don't have on your product roadmap.
The fear of launching is irrational. Once you launch, you'll realize that most people won't care. They won't care because you didn't get the product right. There is only one way to get the product right: Launch early, test, measure, and iterate. Repeat. It takes time, but it's the only way.
When we wake up every morning, we drink coffee… and then we get on with it. We develop products - web products mostly. We love this! In fact, we've found this type of work so challenging and rewarding that we created a Product Development Group within Fabric Interactive. Next to our Social Media Marketing Group, it is our main focus area at Fabric.
For the past two years, entrepreneurs, media, agencies, and brands have come to us with napkin ideas, business plans, or complete Product Development Plans for various consumer products or applications. In some cases, we've found that the expectations for what is possible and realistic outpace the budget and experience of the team we're working with. This means that our first job is to close this gap, provide leadership, and to focus the product development process.
I know many of you are thinking about developing your own web product or already have plans for launching a new business or product line based off an application or website. To help you, I want share our experiences with you. From our experience shelf, here are some of the challenges you're likely to encounter as you blaze down the path of product development:
Initial Product (Version 1.0) does not meet audience needs
Relax. It is highly unlikely that your product will connect with your audience right out of the gate. In fact, it may take 12-months to get the traction needed to meet user acquisition requirements needed for your next investor round. The cost of Product Development over 12 months may be significant and most certainly will match your initial investment.
Product does not deliver clear differential value for core audience
Right. Most web products – advertising or subscriber supported – are unable to fix this problem. In our experience, this comes down to a lack of focus. To win today, you need to focus on one specific audience and one particular unmet need. If you try to do too much for too many audiences, you will likely fail. This is universally true for ventures with limited funding. Again and again, we see small fish trying to compete with big well-funded players without laser focus on brand or audience. You must narrow focus. Then, you can execute brilliantly.
Attracting users to a new brand/product
Starting from zero can be very hard and quite costly. For instance, organic growth (from Google natural search index) will be very slow for 12 months for a new domain in a competitive area. Many co-marketing or traffic partners won’t partner until you have traffic and a tested product – so it can be a chicken and egg problem. For many, the only way to gain traction is to buy traffic in the beginning.
For some new ventures, it may be worth acquiring a blog or two (many are for sale) and grow your product from the established acquired audience. Part of your traffic – and product strategy – may be to build a network of sites all with a slightly different value proposition for your audience(s).
Getting people to use your product
Beyond getting users to your site, the main challenge is to get them to use it. For example, acquiring your first 5,000 users can be a major challenge. For instance, gaining momentum is a major issue for most social networking sites and absolutely critical to all reputation based products. There are no short-cuts really. It’s just hard work.
Unknown Brand and User Generated Content model
It can be difficult and costly to build a new brand where User Generated Content (UGC) is part of the model. Beyond the importance of appearance (design) the main challenge is in the actual UGC itself. It is hard to get people to do stuff. Also, from a management standpoint, even with the best of systems, there is cost in maintaining UGC quality and relevancy. The cost of scaling is – naturally – variable in that you’ll need additional human resources in managing increasing user numbers.
Underestimating Competitors Strengths
Competition is usually much stronger than it may seem. The attention of your audience (what did you say?) is limited and you will have to fight hard to win their trust. For instance, there are many well funded competitors targeting the “new parent” market and acquiring new users from this audience may be difficult for a start-up.
Underestimating the in-house resources required to build and grow a web product
Building and growing a web product is a 120% full-time job. We have seen many start-ups trying to do this on 50% of the founder’s time and they have all failed. The truth is that if you launch a venture part-time, you will likely lack the pace and commitment needed to win. “Oh, once I get this going, I will quit my day job.” To which we say, no you won't, because if you were committed you wouldn't be in your day job. To succeed, it is likely that you’ll need several people full-time for 12+ months. Anything less than that makes for a half-effort and will likely lead to frustration and failure. (Most start-ups take 3 years to build and does not make much money for founders until year 2+. Can you handle that?)
Those are some big challenges, right? Well, it doesn't matter to you, because you're going to do it anyway are you not? You are going all the way. You'll make it happen. Yes, you will. If you just focus and put your mind to it. Let's go!
Lean start-ups are like playing a special type of Plinko.
For those of you who aren't familiar with Plinko - see Plinko
In Lean Start-up, the process of building a sustainable business involves two primary types of movement, the test - involving a hypothesis and a testable, actionable metric (Really, the test isn't movement. Instead the action taken as a result of the test is the actual movement. See my post The Anorexic Start-up), and the pivot - a change to a core philosophy about how the product works, who it serves, etc.
Generally, a start-up takes an informed idea - something pre-validated with some level of interest by potential customers and builds an MVP (minimum viable product) to prove that product will build a sustainable business.
The business proves, validates, by testing their MVP against a set of base hypotheses with a set of desired actionable metrics. These base hypotheses are called the leap of faith hypotheses, the ones without which, the product as it is envisioned is doomed to failure.
Should some of those hypotheses prove false, it may be time for an immediate pivot, but that's not the subject of this post.
Once the initial concept is proved viable and their is evidence of some traction, the team begins iterating. During this phase, the team works to improve the product by bringing it more in line with the desired metrics. This is accomplished by creating experiments consisting of a central hypothesis against a set of actionable metrics. E.g. Changing the messaging on page x will result in higher percentage of behavior y. These tests are carefully constructed to ensure the results are verifiable and repeatable - generally by a/b testing.
Eventually these tests start producing diminishing returns. When it becomes clear the ultimate business goal will not be reachable with the given product, it is time for a pivot.
The price is right.
Instead of a ball or round disc, your product is a slinky. It's sitting at the very top of a special Plinko board. That board is design so that instead of pegs, their are platforms just big enough for your slinky to rest on that each pivot around the peg as an axis. When you start iterating, you drop your slinky onto the top platform. It draws out quickly from the start, generating big results. But, as the rear of the slinky starts to compress, so too does your progress towards your goal - a particular metric set at some stage down the Plinko board. Now, for most businesses, you're still not where you want to be and you make the decision to pivot. At this point, the platform rotates, launching your product or decision process in a new direction, allowing you to add value in different ways.
The crux is that YOU are in control of when your platform rotates. If you rotate too soon, you risk losing potential gains, throwing your slinky into a wild swing (banging into other platforms, etc) with no clear path. If you rotate too late, you've let your product stagnate and lose momentum. Just right, and your product moves like, well, a slinky down stairs.
Eventually, you reach your goal.
Or do you?
Most businesses don't end up quite where they imagined they would. On the great Plinko board, there are a lot of different platforms to land on, each a different business model with a different level of success. Remember, your goal is a sustainable business - it just might not be the one you thought.
For the past year, we've spent most of our time focusing on a new path - a new strategy - for Fabric.
Today, we announce (officially!) that we are 100% committed to helping entrepreneurs, brands, and media build new digital products and drive key usage metrics for those products.
So why would a Startup or brand work with Fabric and not just hire it's own team?
It's fairly simple. Most startups or brands that come to have two key challenges:
What we offer is a faster and less costly route to market for those who do not have their full teams in place. We are focused on the first 6 months of the product cycle - taking a product from zero to 100,000 users. Fabric's teams and process is focused on driving key usage metrics from fast learning and rapid product iteration.
At the product development level, we bring:
We know that the most challenging aspect of bringing a new product to market is to get initial traction and drive usage. Therefore, in addition to our Rapid Iterative Product Development Process we also offer go-to-market services for new products and Startups:
If you have a new Internet/mobile consumer or SaaS product, we want to talk to you. Right now, the product we build sits within social, mobile, geo-location, and SaaS, but we're open to any project that is utility based and/or is attempting to solve a real problem. Call us!
For the past few years, we've worked with several startups. Most of our work has been from idea/concept stage. Our team is passionate about this work. We love working with entrepreneurs. We love the energy of it.
So, what kind of startups are we looking for?
Our expertise area is consumer web and mobile. We've built social networking sites, transaction/commerce applications, and self-help products.
Today, we're looking for big ideas from passionate entrepreneurs. For instance, we're frustrated by the inefficiencies in every day life. We look at food, waste, energy, transportation, and the endless data silos - left over by legacy systems - just making our daily life a pain. We focus on startups that go after problems we understand.
For instance, right now, we are working on a smart dating product (sort of the anti-eHarmony), a useful recommendation site for parents with young kids, and a crowd-sourced fashion site. All cool stuff!
We also like simple B2B stuff, like what Basecamp did for project management and collaboration. Game changer. Simple. Solved a lot of problems for millions of people. Complex? Not really. Hard to execute? Yes, but mostly because it required dedication and focus on user problems.
We like simple ideas. Solve one problem. Keep it focused.
In short, we want to build kickass products that solve real problems we understand and care about.
Feel as if you should call us? Do it. Ask for Erlend.
We spend a lot of time working with web/mobile entrepreneurs and we're super lucky to be working with amazing people with cool ideas, tons of energy, and a lot of passion. For the past six months, we've tried to pull our clients, both startups and brands, into following our methodology: Lean Product Development. The benefits with Lean are clear: better products from a science/testing approach, less time to market (or less time to get in front of users), and less waste.
For our clients, the “trouble” with Lean is that you never really know “what you will get.” You don't know what you will eventually build even when you've spent 25% of your budget. You cannot, and you should not, estimate the “entire” project up front and you should not spend time on specs and documentation of “features” that you may or may not build.
This can be unsettling to clients. We understand why. The traditional model, most often used by agencies is very clear and straight forward. It goes like this:
In the traditional model, because you “know what you are building” up front - you can tell how much it will cost and “what you will get.” This is a great feeling. It seems less risky. I can touch it. It's a “deliverable.”
The problem is that this “method” does not work at all for consumer web/mobile product development of any kind today. The reasons are many, but the main one is: You will most certainly be wrong about “what you need to build” and you can be sure that what you build - the whole thing - won't really work or connect with users until you are well into future releases.
Despite this, this “waterfall” model, is the standard among most agencies and many development shops. Most of our clients who have interactive or agency experience are familiar with this model. We understand why it seems to “work.” The problem is: We cannot build products that way, because it is wrong. We know that it doesn't work.
The truth is that you never know what you will build
You don't know what you need to build in the beginning of the project and you don't know what you have “left” to build when you are 50% “there.” It is wasteful to do big estimates and loads of documentation up front - before you get users engaged. It is wasteful to spend time on spec writing and requirements that does not center on specific assumptions, test cases, data from learning, and/or user feedback.
It is true, neither you nor we know “what it will cost” and exactly “how long it will take.” You don't know when you will be “done.” In fact, being “done” is not a possibility. You will never be done. (Unless you sell your product or exit in some way.) You have to get used to it. There are no “complete estimates” and no “complete specs.” You don't need it.
You should focus on what matters. That is not documentation. That is not estimates. Those are wrong always. What you need is what every scientist spends her time doing every day: EXPERIMENTS. Well structured experiments.
This is what we try to do with every client. We do it because we have tested the traditional model vs the Lean model and Lean wins hands down every time. We hope you do it too. Do you?
Recently, entrepreneurial consultant Eric Reis published his book, The Lean Start-up as the culmination of his lean start-up experiences and a summary of the tenets of the lean start-up movement.
Here at Fabric, we've been following our own lean philosophy for years. We advocate Minimum Viable Products (MVP) - I'm still baffled that this is now a “buzz word.” We encourage iterative testable development in small batches. We encourage our clients to change direction when they or their product have hit a wall; in lean, this is called a “pivot.” I like to call repeated pivots “walking”
We're big believers in lean thinking and the lean development framework. Each of its central tenets are both common sense business practices and productive guidelines for building a successful business.
There are dangers lurking in lean.
There is a certain evangelical thread that permeates Eric's book and the Lean community. When I'm faced with evangelism for any system, I immediately grow skeptical. Generally this behavior tends to blind one to the faults in a given system or behavior. This danger lurks in lean development.
Learning for Learning's Sake.
Central to the Lean Start-up belief is that learning is, in and of itself, the goal of building your product. “Our goal in building products is to be able to run experiments that will help us learn how to build a sustainable business” (p201, Reis, The Lean Startup).
Is it really our goal in business to simply learn how to build a business? This message pervades the book; that learning is the ultimate goal. While I appreciate this high minded approach, it is a fundamentally flawed message. Learning is an integral and inseparable component, but a step on the path nonetheless. The goal of your product is to build a sustainable business, not simply to learn how to do so.
I'll venture to guess Reis wants you to build a sustainable business, and that learning is what gets you there. However, that's not how the message is framed. Instead, it seems he's battling bad start-up behavior so strongly, that his message is a little right (or left) of center in an attempt to bring people back to the fold of good business practice. Ironically, this behavior is something he addresses specifically in his book in regards to individual developers and teams.
The book contains one other example of a mis-framed idea - that the experiment is 'movement.' In this context, movement is defined as progress towards your goal. If you assume learning is your goal, then indeed, any experiment that results in learning is progress and hence movement. But, since learning by itself isn't our goal, that it is movement doesn't necessarily follow. Remember, our goal is to build a sustainable business, not to learn. Instead, think of your informed, validated decisions that result from the experiment as movement.
Perhaps I'm splitting hairs. This is, after all, potentially just an issue of semantics. But, there is a simple way to validate: test it. Go up to your potential clients - in our case start-ups and businesses with new products - and ask them if they are in business to learn or to build a successful business. I've done this. Unless your respondent is already a lean evangelist, their answer is universally to build a successful business. Now, follow up by telling that same client they're wrong, that they are in the business of learning. When the client gives you that look - you know, the “you're crazy, did I really hire you” look, you'll have your answer. Of course, don't do this with clients you want to keep… mis-framing scares your clients for no reason.
While it's true that every decision made about a product should be a validated one, the central goal of our business is not to learn. That goal is reserved for academia. Instead, our goal is to build a sustainable business. What we learn along the way is crucial to informing our path to that goal. But we must be careful not to frame learning as the goal itself. Else you risk alienating potential clients who aren't initiated, or falling into the trap of learning for learning's sake.
Remember, we want a lean business, not an anorexic one.
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