Startups and Innovative Digital Products
Part 2: On Startups
You can read the first part here.
Software is eating the world and, by far, the most recognisable innovators are the tech startups. Amazon, Uber and AirBnB excel at most of the innovation types, not just product. Actually, their product represents only a tiny fraction of what it took to build their business. Take a look at how much it costs to build those products.
In case you are wondering about what’s their secret sauce, let’s backtrack a little, in order to see what is a startup. Steve Blank tells us is that a startup is a temporary organisation used to search for a repeatable and scalable business model. Also, we can refer to Eric Reis’s definition: a startup is a human institution designed to deliver a new product or service under conditions of extreme uncertainty.
The most important part of this definition is what you can read between the lines. It has nothing to do with:
> the size of the company
> the sector of the economy
> the industry in which one operates
The goal of a startup is to figure out the right thing to build (as quickly as possible) that customers want and are willing to pay for.
People often tend to lose sight of the fact that a startup is not just about a product, a technological breakthrough, or even a brilliant idea. A startup is greater than the sum of its parts with learning being the essential unit of innovation.
What does it take to build the right thing?
There is an essential difference between a startup and a company, no matter the size or age. A company is built to execute a business plan, a startup is built to search for a business plan (repeatable and scalable). This is important for a team or a tech company that wants to build its own products.
Using startup methodologies is the most efficient way to prevent building the wrong things.
Do you need a brilliant idea? You can find some spoilers here. Truth is nobody cares about anybody’s ideas. They’re a dime a dozen. And all good and simple ideas are already taken. Inexperienced entrepreneurs ask for NDAs to be signed before disclosing their idea. A rookie mistake that gets you banned from the business and investment world. If you need to protect your idea, what are you going to do once you launch? There are entire corporations that have as a business model copying successful startups.
Successful products and startups solve problems; look for inconvenience, inefficiency, inevitability; find gaps and fill them; make things 10x better. And the only way you know you’re on the right track is when somebody pays for your product no matter how crappy it is. Therefore, it is important to solve real pains. Build painkillers not vitamins.
So how do you get on the right track?
The search model is the essential startup mindset. This is very hard for companies (and for their employees), which are used to execute. Searching means there’s a big chance you’ll find out you are on the wrong track and this is a hard pill to swallow. Nobody likes to find out their baby (idea) is ugly. Startups do this anyway, because success is more important than ego. A startup’s default state is failure. As a founder, to have to work to un-fail it.
But there are some tried-and-true tools to help make this effort easier. Let’s have a look:
> Forget about volumes of business plans. A startup documents the idea with a business model canvas (even better a lean business canvas) and post-its.
> What matters the most for a startup is execution, therefore you need to understand how to use the Lean Startup Methodology to validate your hypothesis (Running Lean is probably more actionable). Customer development is the tactic you use to make sure you are building the right thing.
As a startup you need to focus on a couple of aspects:
> Creating value is not enough — you also need to capture some of the value you create.
> You have to know that growth is what you’re after. If you get growth, everything else tends to fall into place.
And here’s the kicker: growth means understanding the problem, understanding the solution, and understanding your customers’ behaviours. Because at the end of the day a startup’s competition is not other startups (Google and Facebook were not the first of their kind), but the customer existing behaviours and needs. Get this right, be passionate about the problem and the search for a solution, and you won’t have to worry about anything else.
Entrepreneurship is all about exploration — knowing the right answer is good, but what is great is knowing how to find the right answers!
A big “thank you” goes to Cristina, Roxana, and the Glu Labs team for their input!
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