Crisis vs Innovation: How to harness product & strategy in times of change
Before launching into an analysis and toolkit for startups in times of change, I’d just like to express my sincere sympathy for all those who read this article whose friends and family have suffered personally from the effects of Covid-19. It is truly a difficult time and the economic effects are overshadowed by any personal loss.
A few months ago, my friend Nathan asked if I knew of a “killer roadmap article that I’d recommend”. Nothing out there captured our learnings from building Universe, so I thought I’d craft an artifact that could help others.
And now, in this time of change, below I reflect on how this could be used to help startups reassess and calibrate their strategies, enabling them to emerge even stronger on the other side.
What should you expect to take away by reading to the end of this article? 💡
I’m hopeful this article will help you better answer the following questions:
- with fewer resources, how do you decide where to invest?
- how will you measure your velocity though this change?
- how can you identify silver linings, and build a case to act on them?
Prioritization, in times of change
What kind of changes are you currently facing?
Even in normal times, startups embrace and even effect (“disrupt”) change in their industries. So this framework is valid even in a time of stability.
But we are now in a time of more macro-change. Nearly every business needs to reassess its direction and efforts. The practice of prioritization and efficiently building product has become mission-critical to all.
Due to the current crisis, nearly every startup I advise is stepping back and reprioritizing their direction and efforts given:
- (a) changes to their customer base
- (b) changes to their supplier base
- (c) changes in their resources (capital, runway, team)
- (d) a mix or all of the above.
However, despite the multiple vectors of change articulated above, prioritization in a startup is decidedly not a “multiple choice” effort.
Being a startup necessitates focus. In fact and fortunately, a lack of capital, and the presence of constraints can increase creativity: “necessity is the mother of invention.” Good startups harness this dynamic into “strategy,” to win.
What is “Strategy”? 🐬
One way I like to define the term “Strategy,” which is often a misused, misunderstood and a somewhat nebulous-seeming word, is as follows:
Strategy is prioritization based on a combination of two types of lenses…
- porpoising “up” to look into the distance and assess a lay of the land
- porpoising “down” to see the details using nitty gritty analysis
These two types of lenses are used to gather data on…
- opportunities: what value can be created for clients, customers, suppliers, partners, internal stakeholders, and the industry overall*
- resources: what investment capital, human capital, partnerships, clients, customers, suppliers* can be leveraged to unlock opportunities
* Note: the overlap in these lists is deliberate!
Combining these two types of inputs, and synthesizing them into an informed decision and plan results in a “strategy”, against which one can execute.
(Shoutout to my good friend Janet Bannister who happens also to be our Managing Partner of Real Ventures, for sharing with me the “porpoise” metaphor for this duality that we happen to mutually appreciate.)
The Grid
The following is a template for optimizing your strategy such that your startup’s limited resources are applied to its best opportunities. I’ve made this free to you via this Google Spreadsheet. (Attribution appreciated 😇)
🚧 🚧 ✅ ✅ ✅
Some notes in reading this spreadsheet:
- You’ll see three persona types — in this case, segmented by customer size — large widget factories, medium widget factories, and small widget factories (the example startup’s customers)— your segmentation doesn’t have to be by size, but this is one such example.
- the notion of T-Shirt size is a convenient way of estimating the size of a feature. Is it a small, medium or large? 👕 In this example, for simplicity’s sake, a Large T-Shirt is deemed to take 3 months, a Medium = 2 months, and a Small = 1 month. My co-founder Adam, deserves attributions all over this article — but I’ll reference his involvement here since in particular he was instrumental in this key aspect of estimating ROI, the length of time something takes to complete, in essence: its cost.
- A key input here is “Number of Developers”. In this example, we are using a system where Developers are pairing on software — that is to say, two developers are working using “Pair Programming” methods on the same project (perhaps the subject of a future blog post!) Projecting how we’d hire and ramp-up developers enabled us to determine how many concurrent projects we could process. This also could be used as an investment case in VC pitches, to justify investment based on when and how many developers should be hired, to maximize opportunity unlock.
- All this yields a grid of construction 🚧 and completion ✅, enabling the entrepreneur to estimate sales upon completion, and sequence the order of feature projects based on the balance of $ unlocked vs length of development (cost). This $/cost yields in a sense an ROI prioritization metric across features.
- A keen reader of The Grid spreadsheet will note there are no XL T-Shirt sizes (let alone XXL!). This is intentional, but requires discipline. We would sometimes brainstorm features that were XL in size 👔— we used L as a threshold. Any XL feature we would “tailor” ✂️ into two or more pieces, yielding separate MVP projects that were each L or less in size. We would also endeavour to split any L projects into M or S, and ideally any M into S projects. The key was to find the most efficient (smallest) atomically scoped projects that yielded output viable of shipping on their own.
- You’ll note “Feature G” has 0 customers — this is an example of an internal reporting feature, not quantified by $, but with a temporal deadline (in this example “must complete before Q4”). Knowing the effort and completion timeline of other features in the roadmap can help estimate when you should slot in something like “Feature G” which is a “must do” and doesn’t have a direct $ outcome, but has a time deadline.
Should the squeaky wheel get the oil? 🎡
- Fast forward 5 months. Suddenly!… a client asks you for a new feature. Do you react to this, or do you build what you originally had planned? Should the squeaky wheel get the oil? The beauty of this framework is how it provides a method to measure the impact and opportunity cost (both positively and negatively) of injecting things into the roadmap mid-year. If you inject a M-sized feature that adds $100,000 value driven by a customer request, does it meaningfully shift out $100,000 of other features’ value? If so, and more valuable requests are bumped, then it’s net negative despite the acute client pressure.
- Porpoise up: can you brainstorm new features or initiatives that would address your current crisis at hand (at the time of writing this, Covid-19)? — what is the impact of those projects, and what are their “T-Shirt Sizes.” Perhaps these will be more valuable than features envisioned pre-crisis, and accordingly should rise to the top of “The Grid?”
Caveats:
- Intentionally (socratically), you’ll notice that these features are sorted by “$ Annualized GM from Feature X” (with the exception of the required reporting feature being slotted in with a buffer time for Q4). It may be more impactful to sequence the build rollout by the other column “$ GM per month of development” — this accounts for the fact that some projects which are quicker to build may actually yield proportionately more impact. As an exercise, how would you re-sort these features in the template?
- The devil is in the details. It is essential to “porpoise up” and “porpoise down” on each feature to correctly estimate its estimated number of customers generated (and furthermore, to estimate and define the personas). At Universe, we used a “Product Brief” document to enable a product owner to define in more detail what estimated value would come from a given product build, as well as its complexity in being built.
“Entrepreneurship is the pursuit of opportunity without regard to resources currently under control”
HBS professor Howard Stevenson defines Entrepreneurship as “the pursuit of opportunity without regard to resources currently controlled.”
How can an entrepreneur magically pursue opportunity without resources currently controlled, you ask?
As my professor of software engineering, Luiz Capretz often said to us, “it’s not magic!” The adept manager will identify which opportunities are highest impact, and execute on these most valuable opportunities with their current (and future) resources.
But here’s where some magic DOES come in: the entrepreneur will also be aware of the broader opportunity, story, and vision–and be capable of unlocking new resources (including those not yet controlled) by working with and inspiring others: investors, partners, customers, and team.
For instance, to elevate from Manager 💼 to Entrepreneur 🦄, by using “The Grid” as a tool to unlock your magic:
- ⚖️ Can you use the tool to define what is the optimal amount of investment which would provide new resources, and how this local-optima would unlock a disproportionate level of opportunity?
- 🤝 By answering the above, does communicating to investors what the use of proceeds will be, and what opportunity they will unlock make them more confident in investing?
- 🐳 Can the value of an opportunity be amplified working more closely with a customer or partner? Are your opportunities thinking big enough?
- 👩🌾 Is an opportunity so valuable to a customer, that they might be willing to help fund the resources needed to prioritize it? (Note: we were careful to not build a “Special,” which is a feature beneficial only to one customer)
- 🐝 Can your suppliers unlock new resources? How can you “grow the pie”?
- 🍯 ️Does the presence of having the subsequent phase of work slated to begin at [Week X] communicate to Developers more clearly why the current thing needs to be finished in a timely fashion, in a way that’s more powerful and inspiring than an arbitrary deadline?
- 🔎 Does the transparency of this “menu” of roadmap items inspire and engage team members to be able to say “I think I can build that faster,” or “I’d really like to be the one to have the opportunity to build [X]” — these insights and this passion is powerful. Your resources may be more resourceful than you think (especially if you recruit effectively 😉)!
Spoiler alert, our answer to the above questions we found to be… “yes!”
Silver linings 😷
As I write this, we are in a time of substantial crisis as the world reacts to the Covid-19 pandemic. In the future, there will (inevitably) be new times of macro crisis. And certainly, in the future, a startup may be facing a crisis that affects seemingly only their own startup.
In these times of crisis, using a framework to recalibrate can be essential when there is a shift in customers or suppliers. And thinking truly “strategically” can help provide reason versus operating based on emotionally driven decision making, especially if resources are extra thin.
May one silver lining in these times of crises be that we emerge with a heightened level of innovation. The world will be better for it. Society, the economy and health (both physical & mental), need your innovation now more than ever.
Stay tuned, “squad” 🦑
The above was a methodology that we used for years ~1.5-6 of the Universe journey. After this, we switched to a “Squad” structure, which I will describe in a subsequent sequel post at a future date! 🚀
Craig was the founding CEO of universe.com — Universe was acquired by Live Nation Entertainment NYSE:LYV (Ticketmaster). The views expressed here are his own.
At Universe, Craig raised capital from angel and VC investors, led the company’s strategy, successfully executed a successful pivot (from sharing economy marketplace → event marketplace), oversaw the company’s acquisition of its universe.com domain name, led product development resulting in (among other innovations) the launch of its iOS & Android apps and the company’s embeddable widget, and defined and grew the marketplace’s LTV:CAC ratio and other metrics, bringing Universe from concept → launch → growth ➝ acquisition.
Craig is a classically trained software engineer and business analyst, with hands on experience at BCG, Credit Suisse and in software engineering roles. While at Credit Suisse’s technology investment banking division based out of San Francisco, Craig advised tech companies on their M&A and corporate finance needs. At BCG, Craig advised tech companies on strategy & operations, in Canada, US, Italy and Austria.
He studied software engineering at Western University, and business at Ivey where he earned his HBA. He is an avid rock climber.
- Instagram: instagram.com/craigfollett
- Twitter: twitter.com/craigfollett
