Coding is Not Everything to Success
A Systems View of Start-up Development
Recently I saw a post in a “Hackers” Facebook group where a person posted an idea to find collaborators. Instead they were berated because they could not code. This post’s response, pictured above, highlights two problems in the current startup ecosystem:
- Developers often believe their skills are the most important aspect of a startup’s success.
- Non-technical people do not have a good way to show the work they contribute to the creation of a successful start-up.
This article is a call to shift the current startup ecosystem from a tech-oriented mindset to a System mindset in which product development is seen as a part of a larger cycle of company development. Within a System mindset companies take in energy in the form of customers, convert this energy through a business model into revenue, and generate cycles of customers to create recurring profits. No one piece is more important than the whole.
The Systems mindset forms the basis of the Startup Experiment Index, a chart that can help technical and non-technical people better communicate with each other how much work each has done and how this work contributes to the success of the larger company.
The combination of a Systems mindset and use of the Startup Experiment Index can create more proactive relationships between technical and non-technical founders.
Startups as Systems
If technical skills were truly the most important aspect of company creation, it is odd that while apps in the Apple and Google Play stores have increased 15% every year for the past decade, the rate of profit-generating companies in the U.S. has declined at the same time. Yet, the creation of an app remains one of the first things accelerators and investors ask for to assess company ability. These demands engrain in founders the belief that a technology product should be the cornerstone of their companies.
The rush to build an app or website generates a high work-to-validation ratio. This means founders do a lot of work without knowing whether this effort will lead to a profitable business model.
To better understand this concept, lets look at two different companies.
Company A: TalkBlock is a start-up where people can send messages on the blockchain. This app comes with a Messaging feature, Facebook Login, a blockchain, and a chatbot to get new users signed up. This start-up has raised $200,000, is founded by two technical founders, and is in a highly rated accelerator. However, they do not have a clear revenue model and show a low number of repeat customers.
Company B: BlockTalk offers a weekly email on topics in the blockchain arena. All they have is an email list, they have not raised any money, and have not gotten into an accelerator. However, their email list is growing every month, and now 10% of their subscribers are paying for “Premium” insights.
If you were to go to a pitch competition, Company A seems most impressive with a fancy app and admission to a highly ranked accelerator program. But from a Systems perspective, Company A has a lot of energy expenditure for little evidence of a successful business model.
The work-to-validation ratio can be calculated by taking the number of “open”, or unvalidated experiments, to the number of “closed,” or validated experiments a company runs. Start-ups should strive to have a lower ratio of unvalidated work to validated work.
Company A is all risk, with a ratio of 6 increments of work to zero increments of validation that this work contributes to a successful model.
Meanwhile, Company B has a much more modest work-to-validation ratio. It is “carrying” less risk.
The more time founders build products that do not return energy in the form of profit, the more they risk running out of money. However, the more time people spend building products, the more attached they get to their ideas. Even though developers might say they love iteration, in actuality they do not like when their code is scrapped. This unease only increases as a feature built in a weekend becomes a full app built over several months. This is termed trajectory lock, or the inability to pivot to new models even in the face of information that the company is going in an unprofitable direction. The more one builds, the more one is convinced of building greatness.
The work-to-validation ratio can help investors and accelerators better gauge potential successes. It can also help save entrepreneurs from the subtlest foe; themselves.
A Shared Language
In the conversation above, the hacker assumes that the person who asks for help has done no work to validate their idea and just wants someone to do work for them. If true, the developer’s outrage would be valid; there would be an uneven balance of energy input into the company. The problem is, there has been no good way for non-technical people to showcase their contributions in a way that is directly parallel to their technical peers.
A method to help technical and non-technical founders better communicate starts with structuring each increment of work as an experiment, and each experiment set within the larger Startup Experiment Index, created by the virtual accelerator Adjacent. Each experiment has two measures of success:
- was it successful in increasing the metric that was measured?
- was it successful in creating a profitable, repeatable business model?
The Startup Experiment Index can create more productive conversations between technical and non-technical founders because the most important thing is not a product, it is energy efficient experimentation across the individual components of marketing, product, and business models.
A Shift in Mindset
If you are a person with technical skills when you next hear a start-up team that has built an app for months in “stealth” mode, instead of thinking “wow that must be a pretty cool idea since they’re hiding it” you would be better off to think “wow those people are going to run out of money.” If they want to recruit you, explain how they can use the Startup Experiment Index to convince you. You will save everyone a lot of time, money, and heartache.
If you are a non-technical founder, use the Startup Experiment Index to advocate for your worth to technical founders, investors, and accelerators. Your idea might not initially win the most acclaim, but slowly, ideas when combined with rigorous experimentation and a Systems Thinking mindset, can move the world.
