The Software Entrepreneurship Process

2 — ProcessFrom Code to Productgidgreen.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 ideaFrom 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 developmentFrom 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 slateFrom 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 othersFrom 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 acquiredFrom Code to Product Lecture 2 — Process — Slide 8 gidgreen.com/course

Development by Waterfall Requirements Design Implementation Verification MaintenanceFrom Code to Product Lecture 2 — Process — Slide 9 gidgreen.com/course

Development for startups Requirements Ideas Design Implementation Collect Data Verification 1 month or less… MaintenanceFrom Code to Product Lecture 2 — Process — Slide 10 gidgreen.com/course

Why do companies fail? Surpassed Undercut Superceded AttritionFrom Code to Product Lecture 2 — Process — Slide 11 gidgreen.com/course

Why do startups fail?•  Running out of… –  Money –  Ideas –  Energy –  Faith•  Before reaching… –  Break even –  A (lucky) exitFrom Code to Product Lecture 2 — Process — Slide 12 gidgreen.com/course

A startup is…“…a human institution designed to deliver anew product or service under conditions ofextreme uncertainty.” — Eric Ries“…an organization formed to search for arepeatable and scalable business model” — Steve BlankFrom Code to Product Lecture 2 — Process — Slide 13 gidgreen.com/course

Product—Market Fit That incredible moment when you realize that many people truly need (or want) your product Ideas and you can make real money Implementation from Collect Data it TimeFrom Code to Product Lecture 2 — Process — Slide 15 gidgreen.com/course

Startup stages Product Market Fit Idea Version 1 Product Efficiency TimeFrom Code to Product Lecture 2 — Process — Slide 16 gidgreen.com/course

Sources of inspiration Own needs Business experience Current events Others’ success Wouldn’t it be cool? Everyone’s doing it!From Code to Product Lecture 2 — Process — Slide 18 gidgreen.com/course

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 failureFrom Code to Product Lecture 2 — Process — Slide 19 gidgreen.com/course

Why now? Critical mass New platform Macro shifts Troubled incumbent Bandwidth No one thought of it!From Code to Product Lecture 2 — Process — Slide 20 gidgreen.com/course

Some trends Technology Society•  Cloud computing •  Ageing in West•  Big data •  Consultants•  Smartphones •  Financial crisis•  HTML5 •  BRIC countries•  QR codes •  Mobiles in Africa•  3D printing •  Outsourcing Be a trend spotter, not a trend setterFrom Code to Product Lecture 2 — Process — Slide 21 gidgreen.com/course

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 familyFrom Code to Product Lecture 2 — Process — Slide 23 gidgreen.com/course

How will it grow? Pure virality Self promoting Word of mouth Search engines Paid advertising Direct salesFrom Code to Product Lecture 2 — Process — Slide 24 gidgreen.com/course

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? Economy of scale Technology Accumulation Lock-inFrom Code to Product Lecture 2 — Process — Slide 26 gidgreen.com/course

Is it defensible? Network effects Brand awareness First mover Outspending on advantage advertisingFrom Code to Product Lecture 2 — Process — Slide 27 gidgreen.com/course

The first version•  “Minimum viable product”•  Identify early adopters•  Build quickly•  Design for learning•  No barriers to use•  Aim to fail fastFrom 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 deploymentFrom 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 glitchesFrom Code to Product Lecture 2 — Process — Slide 31 gidgreen.com/course

Early GoogleFrom Code to Product Lecture 2 — Process — Slide 32 gidgreen.com/course

Early AmazonFrom Code to Product Lecture 2 — Process — Slide 33 gidgreen.com/course

Early FacebookFrom Code to Product Lecture 2 — Process — Slide 34 gidgreen.com/course

Version 1.0“If you’re not embarrassed when youship your first version you waited toolong… You can never fully anticipatehow an audience is going to react tosomething you’ve created until it’s outthere.” — Matt Mullenweg, WordPressFrom Code to Product Lecture 2 — Process — Slide 35 gidgreen.com/course

Collecting data•  Change hats•  Observation –  Direct –  Remote•  Feedback emails•  Metrics•  Brand monitoringFrom 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 endFrom Code to Product Lecture 2 — Process — Slide 38 gidgreen.com/course

Power of the few 25 90% certainty 20Observations Required 15 10 5 0 !"# $!"# %!"# &!"# !"# (!!"# !"#$%&()*+&%*,##-( From Code to Product Lecture 2 — Process — Slide 39 gidgreen.com/course

Remote observationFrom 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 jewelsFrom Code to Product Lecture 2 — Process — Slide 41 gidgreen.com/course

Feedback toolsFrom 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 revenueFrom Code to Product Lecture 2 — Process — Slide 44 gidgreen.com/course

Brand monitoringFrom Code to Product Lecture 2 — Process — Slide 45 gidgreen.com/course

The building“In a startup no facts exist inside thebuilding, only opinions… Get the helloutside the building.” — Steve BlankFrom Code to Product Lecture 2 — Process — Slide 46 gidgreen.com/course

Iterate to increase…•  For customer –  Features –  Usability –  Marketing•  For you –  Engagement –  Growth rate –  RevenueFrom 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 specialsFrom 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 dont know whatthey want until you show it to them.” — Steve JobsFrom Code to Product Lecture 2 — Process — Slide 50 gidgreen.com/course

Don’t be scared! 1000000 800000 From 1,000 to 1,000,000 users at 600000 10% per monthUsers 400000 200000 0 0 2 4 6 8 10 YearsFrom Code to Product Lecture 2 — Process — Slide 51 gidgreen.com/course

Persevere or Pivot?•  Metrics improving?•  Still learning?•  Stuck serving the few?•  Frustrated?•  Is failure defined?•  Be brave, be swiftFrom 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 dataFrom Code to Product Lecture 2 — Process — Slide 53 gidgreen.com/course

Other Pivots•  Business model•  Target customers•  High margin ↔ High volume•  Sales channel•  Clean slateFrom Code to Product Lecture 2 — Process — Slide 54 gidgreen.com/course

Famous PivotsFrom Code to Product Lecture 2 — Process — Slide 55 gidgreen.com/course

Are we there yet?“Startups occasionally ask me… whetherthey have achieved product/market fit… ifyou are asking, you’re not there yet.” — Eric Ries“In a great market — a market with lots ofreal potential customers — the market pullsproduct out of the startup.” — Marc AndreesenFrom Code to Product Lecture 2 — Process — Slide 57 gidgreen.com/course

Painting a picture“You can always feel when product/market fit isnthappening. The customers arent quite getting value outof the product, word of mouth isnt spreading, usage isntgrowing that fast, press reviews are kind of "blah", thesales cycle takes too long, and lots of deals never close.And you can always feel product/market fit when itshappening. The customers are buying the product just asfast as you can make it... Money from customers is pilingup in your company checking account. Youre hiring salesand customer support staff as fast as you can. Reportersare calling because theyve heard about your hot new…” — Marc AndreesenFrom 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% ofusers saying they would be ‘verydisappointed’ without your product.” — Sean EllisFrom 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 gettingreal.37signals.comFrom Code to Product Lecture 2 — Process — Slide 61 gidgreen.com/course

A story…From Code to Product Lecture 2 — Process — Slide 62 gidgreen.com/course

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The Software Entrepreneurship Process

by gidgreen on Jun 18, 2012

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