Almost everyone who runs a SaaS business applies (a form of) Agile, often with the addition of principles from the immensely popular Lean Startup- and Lean Software Development-movement. And if you keep up to date with the latest trends, you’ll add some stuff from Design Thinking.
These methods have different goals, and require different mindsets, but they can absolutely be combined and complement each other:
Agile is all about capturing software development complexity in a model that ensures efficient, predictable cadence. It’s not so much about what you’re building, except that it implies using personas and user stories from those personas, in order to stay connected to the real world.
The Lean core premise is just one thing: reduce risk. The entire Lean concept focuses around validating that you’re still on track, and pivot when you see you’re not.
Last but not least, Design Thinking is about creating and keeping a better connection with the end-user of the product, by really empathizing with him/her and taking it from there.
As a Startup CTO, I advise founders about best practices within these principles and methodologies, and how to combine them.
Based on my experience with many startups and scaleups over the last couple of years, I can safely say that it turns out not to be easy to map good intentions into consistent policy fueled by the principles of Agile, Lean and Design Thinking.
Agile alone is the subject of many urban legends, and you could spend your entire work week just following the religious discussions around its ‘correct’ implementation.
I don’t want to make it sound easier than it is, but I do want to add one crucial concept that will help every startup in getting to grips with its growth path
Every choice a startup makes should be tested against its intrinsic value-add.
Whatever plans you might have with your startup, the value (intellectual property — IP) your company represents, takes a central role. This is true when you’re looking for an investor, and forms the basis of what we call an exit strategy.
But the question is: how do you do that, build up value? And how does that relate to Agile, Lean and Design Thinking?
I can be short about Agile. As I have said, it has its role in reducing the perceived complexity of software development, but it doesn’t add value on its own, although you could say that running an Agile practice well, reduces costs, so in that sense it contributes indirectly.
Knowledge of Lean and Design Thinking is a lot less wide spread, so let’s explore what they might have to do with value add.
Essentially, it’s quite easy to, at every decision, ask yourself the question what that decision brings you in terms of the value that sits in your startup. Is what we do, how we do it, contributing to the fact that our startup needs to grow in value? Or not?
Practice shows that few people actually fully understand this. As a CTO, I see stuff every day that makes me wonder: how could they have made this choice?
- How could they have decided to have a developer work on a feature that has nothing to do with the core proposition for six months?
- How could they transfer so much influence to a development partner, give away control over stuff they should have governed themselves?
- How could they have added a dependency on a third party commercial product in their USP space?
- How come they never spent time and effort on knowledge buildup and transfer within their growing organization?
Thinking in terms of growing value, or IP-thinking, clearly isn’t obvious enough.
Time for some more exploration.
Lean & IP
As I mentioned above, Lean is about de-risking.
Lean Software Development is based on 7 principles:
A lot has already been said about each of these aspects, and I have written another blog that discussed some of them.
In the end, every startup wants to conquer the world in its own niche, by doing stuff better, more efficiently, or by disrupting existing processes altogether.
But you want to rapidly go-to-market, with a proposition that immediately has something unique (and hopefully shows even more potential).
The issue is that everything you need to do to get there, costs money, but unfortunately, that is exactly what is the most scarce within startups.
That is why it’s so important to spend your money wisely.
With the first Lean Principle, Eliminate Waste, it’s easy to link IP-thinking. Just look at stuff that doesn’t add value to your product:
- Stuff that doesn’t differentiate (that is inherently part of any SaaS product). Think commodities like Subscription Management, Payment handling, authentication, Support Desk integration, Analytics tooling, etc.
- Stuff that is necessary for the app to run (but nothing more). Think generation of PDFs to download or email, importing Excel data, but also more complex stuff like image recognition or text analysis, for which API services exist, sometimes even offered as regular SaaS services at your Cloud Provider.
You typically are better off not developing this kind of stuff. Instead, integrate, via APIs or modules.
In the light of building up IP, it is crucial to spend as little time as possible on stuff that doesn’t add IP, and by now, we’ve seen that what doesn’t differentiate us from the competition is likely not adding value.
Of course, there are various other sides to Eliminate Waste, but they have less to do with IP.
The second Lean principle is crystal clear, but nevertheless seems to be easily forgotten!
Much of what makes your SaaS-startup unique is obviously in the core components, the algorithms and the unique way you build and use data. These are knowledge-intensive elements that have cost you blood, sweat and tears.
From the standpoint of investors or acquiring parties, Cost-to-Duplicate plays an important role in valuing startups. From your own perspective as a startup, losing precious knowledge about your own system is a major risk. As a startup, you have to ensure knowledge buildup and -sharing in your organization and prevent accidentally taking decisions that block or prevent that, especially during the enthusiastic and opportunistic starting phase.
That hopefully sounds plausible, but I meet startups every month that have run into all kinds of trouble when it comes to knowledge buildup and policies.
What about this client that literally handed over the product development to a technology partner? How does this startup guarantee any kind of control over IP? This is something a startup needs to initiate and govern, because a tech partner will not have much priority on documentation and knowledge transfer without being incentivized by the Startup.
Or this: a startup has initially worked with a top freelancer for the creation of an MVP. This freelancer has now moved on and the startup has a big problem with transferring the software to a new tech lead, because documentation is lacking altogether.
My many encounters with startups paint a consistent picture of continuous and serious lack of governance on knowledge management.
Knowledge Management in organizations is crucial for buildup of IP.
Design Thinking & IP
Another, but equally important way to save on unnecessary stuff, is using Design Thinking.
Design Thinking is a method of meeting human needs and desires in a technologically feasible and strategically viable way. — Tim Brown, UBQT Design School
By rigorously starting with your audience/customers (Empathize), you avoid building stuff that no one is waiting for.
Basically, Design Thinking is a mindset: keep close to your end users; divide them into personas and look at building software that optimally addresses their needs.
Design Think is not a linear process. Instead, it’s a continuous loop, in which everything that is delivered is continuously evaluated and can lead to product refinement and improvement.
Then what does Design Thinking have to do with IP? Everything!
Everything you build in a way that the target audience feels ‘understood’, will lead to a bigger chance they will choose your product (competitive advantage), a smaller chance of losing customers (Churn) and to more loyalty (customer loyalty). A growing, satisfied customer base will in turn be the most important basis for valuation, later on in the process.
Invest in your USPs
When we talk about doing the right things for your money, in terms of IP and value add, it’s obviously crucial to find out exactly what it is that makes your startup, your SaaS product unique in its kind. This may sound easy but it’s not. Every startup founder is convinced of the uniqueness of his/her Big Idea.
Really looking at what it takes to do stuff differently than your competition, in software terms, is a lot more complex.
It’s only when you, at every choice during development of your product, really make an effort to ask yourself what value is being added to your product (and company), that you avoid unconsciously making a wrong decision.
It’s important to not just do this when deciding about actual software features. Instead, it applies to the whole spectrum of software development, including technical cooperation models, team buildup, in- and outsourcing, development process and governance.
As always, being conscious of an issue is the start of finding a solution. From the moment you realize that your startup is all about IP buildup, you will automatically act accordingly, and your chances of making it will grow.
- IP-Driven M&A
- Valuing Startup Ventures
- 5 Things Every Developer Must Know about Intellectual Property Rights
- When Should You Sell Your Company? | SaaStr
- If You’re Selling SaaS, Then You’re Selling a Commodity | Groove Blog
- 18 Lessons Learned Interviewing The World’s Top SaaS Entrepreneurs
- Lean Practices In Software Development Process
- Combining Design Thinking, Lean Startup, and Agile…
- Understanding how Design Thinking, Lean and Agile Work…
This blog was previously published in Dutch on Sprout.nl.