Asia Invented Growth Hacking and Lean Startups


Published on

Guess what? Growth hacking, Lean Startup, and other 21st Silicon Valley innovation buzz trends were invented in Asia

Published in: Technology

Asia Invented Growth Hacking and Lean Startups

  1. 1. Guess what? Growth hacking, Lean Startup, and other 21st Silicon Valley innovation buzz y trends were invented in AsiaDr. Virginia Cha Chief of Research, Institute of Systems Science, NUSMar 23 2013 23, Executive Advisor, NUS Entrepreneurship Centre AdvisorMatch’n’Hack Entrepreneur-in-Residence, SMUSingapore Adjunct Professor, Science Entrepreneurship, INSEAD
  2. 2. What’s the l t t t tWh t’ th latest startup buzz iin Silicon V ll ? b Sili Valley? 2
  3. 3. 3
  4. 4. GrowthG h 4
  5. 5. How did these trends emerge? g
  6. 6. Technology Creates New Forms of Consumption 500 million users in < 6 years 6
  7. 7. Bessemer s Bessemer’s Law of Internet Efficiency Web Application Development pp p Cost “The time and money required to NetScape Apache A h p produce (design, develop, test, launch, ( g , p, , ,$20,000 Java scale) a basic e-commerce application ActiveX drops in half every two years.” Flash Shockwave PHP XML Ruby R b on R il Rails service APIs Amazon S3 AJAX $300 1995 1999 2003 2007 Source: David Cowan, Bessemer Venture Partners 7
  8. 8. Startup Economics Have Changed $5K $25K $50K“Ramen profitability is an unfamiliar idea to most peoplebecause it only recently became feasible.” Paul Graham 8
  9. 9. Great Startups 1980 1996 1980-1996 FORE SYSTEMS 1980 1982 1984 1986 1988 1990 1992 1994 1996Source: David Cowan, Bessemer Venture Partners 9
  10. 10. Great Startups 1996 2007 1996-2007 2001 2002 2003 2004 2005 2006 2007Source: David Cowan, Bessemer Venture Partners 10
  11. 11. What is the trend? 11
  12. 12. Even in how you start a company! 12
  13. 13. Traditional Models of New Venture Creation 13
  14. 14. Traditional business planning method Waterfall Strategy Design Launch Development• Smart strategy• Great design• Great development team• Big launch that generates salesAssumes the problem and the solution are kA h bl d h l i known 14
  15. 15. Traditional business planning method Waterfall Strategy Design Launch Development• Major US Airline commissioned study• Opportunity gap in last minute travel• The airline was unable to capitalize on new entrepreneurial opportunity• Th consulting team spun off idea The lti t ff id• Launched product from outsourced team 15 Source: David Yong and
  16. 16. The venture was designed, planned, and launched purposefully…Source: David Yong and
  17. 17. Dominant View ofNew Venture Creation ProcessN V t C ti P Execution: Team Formation Deciding to be a entrepreneur Prototype/Product Business Model /Service Development Development Sales Innovative I ti Competitive Partnership Idea/Opportunity Strategy Operations Recognition Business Plan Marketing Fund Raising Financial Management Organizational Management 17
  18. 18. Why do new venture ideasalways involve innovation? 18
  19. 19. Innovation leads to growth 19 19
  20. 20. Popular innovation pframeworks embedded inthe business plans… p Design Thinking Prototyping Blue Ocean Business Model Canvas …and many more d 20
  21. 21. Common CharacteristicsStart with Design/StrategyNew Markets/ApplicationsEmphasis is on original and novel worksPurposeful go-to-market model 21
  22. 22. Start-up failure rates 1000 business plans 6 get funded 40% survive (=2.4) ( 2.4) <1% get big (<0.06) 0.1% 0 1% are big hitsIn a million projects projects,less than 10 become big hitsSource: 22
  23. 23. Traditional business planning method Waterfall Strategy Design Launch Development• Smart strategy• Great design• Great development team• Big launch that generates sales 23
  24. 24. Dotcom failures from a lunar cycleago taught us… 24
  25. 25. getting to a business idea/plan and b sinessraising money does not = success… 25
  26. 26. Customer Discovery is hard 26
  27. 27. Agile / XP programming Product OwnerSource: 27
  28. 28. Customer discovery and agileProblem and solution supposed to be unknown.Closer to reality and more flexible flexible.Source: Eric Ries and Steve Blank 28
  29. 29. FAILFAST 29
  30. 30. orGrowFAST
  31. 31. GrowthG h
  32. 32. What is Growth Hacking? gGrowth hacking is a set oftactics and best practicesfor achieving user growthThe hilTh philosophy of hacking h f h kimeans all methods can beused to achieve growth.“Growth hacking is actuallymore of a philosophy ofhowho marketing should be sho lddone at a startup.” – Mark Ellis 32
  33. 33. Growth Companies from Growth HackingGrowth h kiG th hacking helped to drive growth at these companies in h l dt di th t th i itheir beginning (start-up) stages: 33
  34. 34. source: Dropbox 34
  35. 35. DropBox and Growth Hacking Then:1. Signup D i Si Driven Homepage H Common now, pioneered here2. Easy Signup Process Name, Email, Password3. Refer a Friend Now: With incentives. Also works as a way to track and analyze users activitiessource: Dropbox 35
  36. 36. Dropbox continues its growth hacking techniques Space Race Campaign 2012 Details: Students who sign up get 3GB of space free Students signing up contribute to their universities ranking The universities ranking can earn students up to 25GB of free space for two years Students used Facebook, email, and other mediums to help there schools and th d themselves gain space l i Dropbox out/crowd sourced its opbo ou /c o d sou ced s marketing to users with this campaignsource: Dropbox 36
  37. 37. Dropbox Space Race World Rankings at the beginning of the space race…. Singaporesource: Dropbox 37
  38. 38. Dropbox Space RaceWhy is Singapore so successful? y g p National University of Singapore 2nd Nanyang Technological University 4th Singapore Managament U i Si M t Universty 21st t tNUS Hackers newsfeed, Facebook, email blasts newsfeed Facebookto entire student population (SMU), high socialmedia engagement. g g 38
  39. 39. Dropbox Space RaceLarger schools, like NUS pushed MIT fromtop position immediatelyMIT students did their own growth hacking!Students automatically created 1000 s of 1000’ adresses.They created 1000 of these email addresses,signed them up f d i d th for dropbox, d l t d th b deleted theemails, then reworked them into new emails.They repeated this p y p process multiple times. pGrowth hacking within growth hacking –even the growth hacking was outsourced(unintended) 39
  40. 40. Dropbox Space Race 40
  41. 41. Spin the Globe to Asia A i 41
  42. 42. Meanwhile, in Asia, entrepreneurs live on thepprinciple of ramen economics pHeck, ramen was invented here! 42
  43. 43. Shanzhai in ChinaSource: and Google Images 43
  44. 44. What is Shanzhai? Copied, Pirated or Imitation Goods• Electronics• Clothing• Food• Drink• Ads• Mobile PhonesSource: 44
  45. 45. Products of Shanzhai 1.0 (2006) ( )Photos taken by author/research assistants on trips to Huaqiangbei, Shenzhen, 2010-2011 45
  46. 46. Products of Shanzhai 1.0Photos taken by author at Huaqiangbei, Shenzhen, 2012 46
  47. 47. Components of Shanzhai 1.0Photos taken by author/research assistants on trips to Huaqiangbei, Shenzhen, 2010-2011 47
  48. 48. Shanzhai 2.0 Apple Peel (2010) Released July 2010 as a ‘ ki ’ R l dJ l ‘skin’ iPod Touch Apple Peel for the iPod Touch It acts like a phone without a screen. Inside contains • GSM module • Antenna • SIM card slot • Extra battery ½ price iPhonePhoto source: Virginia Cha 48
  49. 49. The Brothers Behind the Apple PeelSource: TVB Pearl Special Broadcast on Shanzhai and the Apple Peel 49
  50. 50. 50 50Photo source: Virginia Cha
  51. 51. Shanzhai 2.0 No longer just copying hardware (fake iPhones ) Building on existing electronics and through incremental innovation creating products around th ti d t d them (A l peel) (Apple l)Source:, Photo source: Mili, apple, dx-power company websites. 51
  52. 52. Photo source: 52
  53. 53. Apple Pan (Apple Peel 2.0) Thumb drive for iPhone, Th b d i f iPh iPod, and iPad No iTune needed Costs 288 RMBPhoto source: 53
  54. 54. Shanzhai 2.0 Peel Concept for SoftwarePhoto source: Xiaomi 54
  55. 55. Shanzhai 3.0 Innovation Platform (2012) Local smart mobile phone developer with own R&D development, such as K-Touch, Meizu and Xiaomi All grew first then developed innovations Platform approach: S ft Pl tf h Software + H d Hardware + Service S iImage sources: 55
  56. 56. Xiaomi M1 Xiaomi M1 Launched Aug 2011Photo source: Xiaomi 56
  57. 57. 57
  58. 58. Image source: China Daily 58
  59. 59. Question:Without design or plan, how dothe Shanzhai players develop p y p their Go-to-market (GTM) capabilities? 59
  60. 60. Shanzhai Mobile Phones – How did it start? Release of MTK Turnkey chipset (2005) created a platform for bazaar High R&D Cost Short Long R&D R&D Cycle Cycle The Advantage of Turn-Key The Turnkey platform shortened the R&D cycle from 9-12 months to < 3 months and lowered the technology costs for middle and small mobile Low R&D Cost phone manufacturers. MTK mobile phone manufacturers Vertically integrated mobile phone manufacturers 60
  61. 61. Shanzhai and the Bazaar – The EcosystemProvides the fuel to a faster churning supply chain ecosystem Shanzhai Industry in Shenzhen Phone Manufacturers 3000+ Component Manufacturers 3000 Phone Mold Manufacturers 200 Industrial Design 100 Logistics, Trade and Tertiary Businesses 2000+ 61
  62. 62. Shanzhai and the Bazaar – The EcosystemQuick R&D, Quick Design, Quick Manufacturing, Quick Shipment• A typical large-scale, vertically integrated, international phone manufacturer (e.g. Apple) takes up to a year from idea to product launch• In Shenzhen, the main “Bandit city” of Shanzhai, manufacturers just need 20 days.• Shanzhai manufacturers share ideas• Like Linux: Release Early and Often 62
  63. 63. Product Releases Through Feedback Supply Chain Custo Trade Manuf mer r acturer Speed of feedback collection in Shenzhen? 7 Days 1 Day < 3 Day Customer Trader ManufacturerSynthesized based on interviews conducted from multiple trips to Shenzhen (2010-2011) 63
  64. 64. Fast Iterations from Feedback Shanzhai iPhone 4 2 months • Traditional back cover • Irremovable back cover • internal SIM Card slot • External SIM Card slotSource: 64
  65. 65. 4F’s of Shanzhai InnovationRapid Product Iterations Low costExperimentation Modular componentsQuick Response Affordable Fast Frugal Fit FadLocalizationL li i Trend setting d iTargeted features Early adoptorCustomized Status seeking 65
  66. 66. Velocity of Implementation -- FAST iPhone and Ciphone Can you tell the difference? ySource: 66
  67. 67. Relentless Cost Reduction -- FRUGAL SamsungiPhone Galaxy 2 小米4s S3 S =RMB RMB RMB5,880 4,999 1,999 1 999 Image source: Google Images 67
  68. 68. Localization -- FIT • Online Dating Platform Pl f • 5.5 million monthly active users • Sell “Stamps” for 2 RMB (0.40 SGD)Source: 68
  69. 69. Fashion Oriented -- FADCollectibles to let fans (mifan) buy into the xiaomi lifestyle and culture 69
  70. 70. Shanzhai Progression1.0 is about copy + grafted on improvements2.0 is about a fusion of genuine products + g paccessories to stretch utility3.0 is about creating own innovation platformThe methodology is about releasing improvementsto test the market reaction – then create the actualscalable product product. 70
  71. 71. Sounds likeLean Startup + Growth Hacking ? g 71
  72. 72. The rules f 21st century for tInnovation have changed 72
  74. 74. he path to innovation is not straight
  75. 75. Asian Model –Not about first to market with innovation Be one of the firsts to solve a unique customer problem Asia has many people. A unique problem = big enough market = growth = h k t th profits Growth invites - swarms of lowcost competitors - new needs and new profits p To maintain growth – Innovation is necessary to maintain and maximize monopolistic profits 75
  76. 76. Disruption to the Model of Innovation Traditional Innovation models focused on strategy & frameworks and purposeful Go-to-market (GTM) plan Rate of technological changes and mass market adoption made lean startup and growth hacking the new dominant model for how innovations GTM 76
  77. 77. Convergence Asia has used the growth approach to determine how new products GTM h d t due to lack of innovation capital & ramen economics The Lean Startup/ Growth Hacking g Silicon Valley buzz trends share many of the same characteristics as the Shanzhai model
  78. 78. Innovation Approach vs Growth Approach• Start with design/strategy • Start with growth as objective• New markets/applications • New customers• Novel/original works • Not important to be original• Market • Experimentation/release early, p / y research/prototyping as release frequently. Continuous test vehicle before beta instead of official releases product launch• Purposeful to-to-market • Launch first, then iterate the product• Cathedral and Structured • Bazaar and Lean 78
  79. 79. SummaryInnovate for Growth • Traditional Model - Hedgehog • Focus on strategy and planning • Requires capital and investmentGrow first, then Innovate • Shanzhai model • Growth hacking • Test experiment, hack on ramen economics Test, experiment • Be the Fox 79
  80. 80. What doesthe future hold? Photo source:
  81. 81. “Hardware is the New Software.Apply Lean/Shanzhai approach to unleash anew wave of innovation opportunities” opportunities Dr. Virginia Cha, 2013 81
  82. 82. ThankTh k you! ! 82
  83. 83. Photo Credits W. Sieber Attribution-NoDerivs License flickr com/photos/aqaba/304927371/John Parkinson Attribution-NoDerivs License Weslie Leung Attribution-NonCommercial License Attribution-NoDerivs LicenseLorelei Attribution-NonCommercial-NoDerivs License Jimmy Smith attribution li tt ib ti license S tt R bi Scott Robinson Attribution-NonCommercial-NoDerivs License Andreas Reinhold Attribution License marya 83
  84. 84. Photo Credits sandia gov/news/resources/releases/2007/images/arlowames jpg // s c h /photo/914288 h d bl l d f 84