What’s in a Startup Methodology?

Back when I did the transition from studying software engineering to entrepreneurship, one question kept coming to me - while methodologies are inevitable for successfully building software products, why isn’t there an integrated methodology for launching and taking that product to market?

Take for an example the Perpetual Beta and Spotify, a successful online peer-to-peer music streaming service. Spotify did not only use beta versions to test engineering requirements with early users – using beta-invites enabled Spotify to create demand for their service at the same time.

Software developers have been embracing agile practices such as Continuous Deployment for years, but merely from a technical viewpoint. I believe that the Perpetual Beta represents a new line of ambidextrous practices that not only enables a startup to plan, test and build – but also serve, distribute and market their product at a lower cost.

Astonishingly, methodologies that help entrepreneurs facilitate software product development alongside commercialization are still scarce. At the one hand there exist a variety of methodologies to manage risk in agile software product development, including Scrum, Extreme Programming and Adaptive Software Development.

However, none or few of these methods, to my best knowledge, encapsulate risk in commercialization. To simplify, think of it as Scrum + marketing (Scrumm). At the other hand traditional management practices have been argued not to fit the extreme uncertainty in startups, and often comes too short in terms of aligning with disruption driven by Internet technologies.

At the time I was also more than inspired by Crossing the Chasm that addresses the specifics of marketing disruptive high-tech products. But I still find the Pre-chasm phase left unintended. In my last post I wrote about diagramming the product-market fit, which I here have aligned with the Technology Adoption Life Cycle.

Pre-Chasm Startup Methodology

In many ways I think that new-product introduction is about ramping the Pre-chasm, where building and taking new products to market are not two separate activities.

Obviously a startup needs ambidextrous qualities. Working engineering and marketing in parallel will enable a startup to discover the holy grail of product-market fit – a key tenet with Customer Development and Lean Startup thinking. Together with elaboration on 37signals' Getting Real and Rework, I look forward to seeing what this emerging school of startup methodologies brings.

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Diagramming Product-Market Fit at Lean Startup

Continual iteration is a fundamental principle in agile thinking as well as in startup methodologies such as Customer Development and Lean Startup. Basically, its premise is that a startup will mitigate risk and uncertainty by shortening product and customer learning loops, and adjust its product-market fit accordingly.

A startup achieves product-market fit when it masters the balance of building a solution, or product that acts on a customer’s problem, or vice versa. Both product development and customer development each has its own iterative loop structure. I believe that the two should be reciprocally acting and proceed in parallel towards the goal of product-market fit and that this makes a multiple-loop system. This invokes an ambidextrous challenge to early-stage ventures.

Building on my former post on Disciplined Creativity with Mihály Csíkszentmihályi’s Flow diagram, I would add to the Lean Startup model.

The diagram above shows product-market flow as a result of efforts in parallel iteration between agile product development (at the y-axis) and customer development (at the x-axis). In order to achieve a product-market flow state, that is product-market fit, a balance must be struck between customer development and product development. If a startup is drifting too far along one of the axis without iterating, flow cannot occur.

I believe that iteration beyond the product-market flow zone could be considered pivoting - that is when you change a fundamental part of your business model in regards to products and customers. To successfully iterate between product and customers and achieve product-market fit, you would develop a minimum viable product offering that enables you to learn about your customers needs and wants.

At startup you must pay close attention not only to the iterative tasks within customer development and agile product development separately, but also to the feedback loops in between the two. However, time is limited, and you should be aware of trade-offs in achieving flow in a Lean Startup. This is where continual iteration and validated learning allows for greater risk reduction under extreme uncertainty.

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9 Minimum Viable Product WordPress Themes

Minimum Viable Product is an essential part of of the Lean Startup and Customer Development methodologies. According to Eric Ries "the Minimum Viable Product is that product which has just those features (and no more) that allows you to ship a product that resonates with early adopters; some of whom will pay you money or give you feedback."

With the raise of cloud computing and SaaS, the website often makes the product itself. Nevertheless, commoditization of Amazon-ish hosing services, search marketing, free and open source software such as the LAMP stack and publishing systems like WordPress - allows startups to build and market their products at a lower cost. This is a simple overview of - cut to the chase - minimum viable WordPress themes.

1. Optimize by WooThemes is a product and feature-centric theme that emphasizes a clear value statement and sense of call to action.

2.iPhone App theme by Templatic. The name speaks for itself. The theme is designed for, but not limited to marketing of iPhone apps. The call to action button is nicely positioned in the mid of the screen. Although the blue area/the header is static, I'm sure that this can be changed with ease.

iPhoneapp WordPress theme

3. Feature Pitch by WooThemes is an out of the box theme suitable for marketing that one compelling product of yours. Also take a notice of that lighting orange tab at the upper right. Good thinking.

Feature Pitch Minimum Viable Product wordpress theme

4. eBook theme by Templatic. Although the name implies a focus on eBooks, its message can easily be changed to work for any product.  It comes with widgets for testimonials and newsletter sign-up right out of the box.

ebook WordPress theme

5. Coffee Break by WooThemes has unlike the others put the call to action buttons at the leftmost side. It is clean and clearly built with usability in mind. The slider can easily be disabled.

Coffeebreak Minimum Viable Product WordPress theme

6. iProduct Theme by Templatic. Yes it is a product-centric theme. Its layout differs from the others as its download buttons are centered underneath the product image. iProduct comes with a pricing plan module, as well as a testimonials and customer service widget by default.

iProduct Minimum Viable Product wordpress theme

7. Eminent is a simple company-product hybrid. It provides call to action along with Twitter aggregation and client list features.

Eminent minimum viable product wordpress theme

8. Ignite is one dead simple theme. It is primarily a landing page, but it might make a good basis for starting the design of a minimum viable product site.

ignite minimum viable product wordpress theme

9. GetBusiness is a Web2.0-style theme more focused on company profiling. However, with slight modifications it would work as well as a minimum viable product theme. The call to action button and value proposition is at the heart of the front page.

GetBusiness minimum viable product wordpress theme

The themes have in common the emphasis on minimum viable product techniques. Their design is built around the product rather than the other way around. There is a clear slogan and value proposition, as well as product feature listings. Call to action buttons, along with testimonials and customer service widgets are at the center of the templates. Perhaps the most important, the minimum viable theme should organize for customer feedback and simple testing of ideas.

You may have noticed that WooThemes and Templatic themes dominate the list. I believe that this is not by accident. If you have a look at their respective sites, you'll see that they make good examples of how to design a compelling reason to buy.

If you like this post you may also enjoy Business Model Press, a WordPress Plugin for Lean Startups.

Business Model Canvas Tool for WordPress

What is Open Source Entrepreneurship?

Recently, I commented to Dogpatch's blog which coined the idea of Open Source Entrepreneurship for their philosophy; "the community benefits from a very high level of interactivity and sharing between the members". With the growing role of open source as an enabler of entrepreneurship, I believe that coining the idea carries responsibility and deserves further elaboration.

With EasyPeasy, a community providing an open source operating system for netbooks, I observe that some competitors makes use of open source software alike. They don't, however, share their source code or new builds back with the community  - which in the first place provided them with the opportunity. Open source software may be an impetus to entrepreneurship, but is it mutual? Should open source enabled entrepreneurs contribute back, or does the argument “we give back when we grow big” holds?

With the dissemination of open source software, technology becomes commodity and allows entrepreneurs to shorten development and time-to-market cycles. Since open source software is available to almost anybody, it's not the technology itself, but the application and capacity to meet with customers’ needs that makes it a competitive edge. Consequently, the basis of value creation migrates from "back-end" product development towards "front-end" customer development. For an example, the threshold for putting up a LAMP architecture and yet another Digg-clone script is minimal.

I believe that entrepreneurs that are using open source should share their modifications and extensions from the start. Even in spite of competitive risk. And it is more to it than ethics. The nature of open source methods allows startups to leverage the true value of building user and customer relationships, learn from and test their hypothesis with early adopters. This is essential to user-lead product development which turns out to be a promise of value creation. As with social media, community management becomes a necessity and startups will be able to get a head start when it comes to tapping into their users' needs. When done right the startup will be able to recruit from the open source community, and create market evangelists as they get increased ownership to the product.

There is probably more to it, but I hope that open source entrepreneurship adapts open source software thinking but exploiting it. See also Matt Mullenweg, WordPress founder: Why it pays to stay faithful to open source. In the long run "giving back" will help the open source paradigm to evolve, and in turn spur entrepreneurship.

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The network economy calls for new models – entrepreneurship or management?

Technology changes, yet methodology remain. When managers develop strategies for their companies many still use the tools of the traditional organization. As mentioned in the previous post on the Lean Startup Business Model Pattern, there's a growing toolbox of methodologies. However, the traditional business strategy formulation frameworks still fail to adapt technology change and the network economy, as well as the understanding of entrepreneurship as a process but a whim. I reckon that there are some trajectories especially fruitful for adaption.

  • Take Michal Porter's frameworks for an example. How do you apply the value chain framework to networked businesses, two-sided markets (e.g. social networks, online dating, auction sites, search marketing, credit cards, banks, etc.) where manufacturing is not the locus of value creation [1]. Management and consultants of all colors tend to stand by the former, but are the models still valid?
  • Also consider whether entrepreneurs have the time and resources to sit down and carefully lay out their long-time strategy. Or whether strategy formulation should come as consequence of processes where resources are scarce and uncertainty is extreme. This calls for new frameworks that embrace entrepreneurial learning and change methodologies. To cite Steven Blank, A Startup is Not a Smaller Version of a Large Company. Instead early stage ventures require their own tools and techniques.
  • Commodification of web services, API's and social media allows unstructured strategic models to become structured. That is, conceptual models would integrate data about your customers, such as user behavior and demographics to aid in decision support and increased responsiveness. Similarly, how does rapid collaboration and the free flow of information that are made possible with the social web affect the technology adoption life cycle?

The management challenges presented by entrepreneurship are different [2]. Nevertheless, the management challenges presented by the networked economy (read cloud computing, social web, you get it) are different. Network companies create value by facilitating connections between two or more customers. Not by efficiency in A-to-B manufacturing. Too often  managers try to use traditional strategy methodologies when dealing with new technology paradigms. Similar to what Clayton Christensen & co may think of as cramming. When dealing with the introduction of disruptive technologies of any kind, managers still have to align with entrepreneurial approaches. Indeed, there is a need for change methodologies.

[1] There are some excellent work on value networks and multi-sided markets by among others Ø. Fjeldstad and E. Andersen's Casting of the Chains , Tom Eisenmann, and the contributors at the Catalyst Code blog.

[2] This post was also inspired by Is Entrepreneurship a Management Science? by Eric Ries for Harvard Business Review

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What Do You Want To Read About Startup Methodologies?

While talking about user generated content and customer development in general, and in order to learn about my readers, I figured that I would walk the talk. Having some new ideas on the subject of startup methodologies, I would ask of your opinion on what should be my next post. For those of you who would consider the case studies, EasyPeasy is an open source operating system for netbooks. It has 1M downloads with users in over 142 countries, and currently attempts to pivot into the Social OS space.

How to Design Your Business Model as a Lean Startup

If you spend time exploring innovation frameworks you know that their configuration to a large extent apply, assembly or build upon previous work (hat off to science). Here, I explore the conformity of two emerging frameworks: the Business Model Ontology by Alex Osterwalder and the Lean Startup methodology by Eric Ries. The result, the Lean Startup and Business Model Canvas pattern.

Osterwalder's Business Model Ontology proposes a single reference model based on the similarities of a wide range of business model configurations. The business model canvas (used as basis for the illustration above) describes nine building blocks that form a high-concept business model.

Eric Ries coins the Lean Startup, a methodological approach for creating and managing startups using principles of Steven Blank's customer development  methodology alongside agile development methodologies.

The Lean Startup Business Model adopts key principles from the Lean Startup (i.e. agile development and customer development) with the building blocks of the business model canvas. In his recent book, Business Model Generation, Osterwalder uses the notion of Design Patterns alongside the ideas of Christopher Alexander and Tim O'Reilly among others to describe common configurations of business model components. Hence, the Lean Startup Business Model Pattern.

The Lean Startup Business Model Pattern aligns the pillars that constitutes the Lean Startup methodology; customer development and agile software development as well as technology commoditization.

As illustrated in the business model canvas above, one key tenet with the Lean Startup methodology is the Product-Market fit, which optimally results from agile product development, the solution offered, to match with customer development, the problem that is solved for a customer.

The Customer Offering or Value Proposition component of the template can be understood with the Minimum Viable Product concept used with Lean Startup method (see also whole product or doughnut diagram in Crossing the Chasm). The Customer Segments in which the Minimum Viable Product is offered, typically is characterized by early adopters or lead users in the social system.

Eric Ries also speaks of how free and open source software (FOSS) availability and user generated content reduce startup costs. This is typically allocated the Key Resources component. That is, technology leadership is a key resource to a Lean Startup. Similarly, open web hosting services are recognized with the Partner Network component. As is convenient search engine marketing with the Distributions Channels component. Social media supports the Customer Relationship component, enabling user-generated content, viral loops, and interaction with customers.

Data-driven approaches based on customer-centric metrics applies to Distribution Channels, but can be considered a key activity as well. Among the Key Activities are agile software development methods and techniques, and use of metrics (e.g. Dave McClure's AARRR, Startup Metrics) to help a startup measure performance and adjust its direction accordingly.

Although “listening to customers” is considered a technique within the agile development methodologies, this is central not only to customer development, agile development and the Lean Startup – it is also central to Business Model Generation (Emphatic Design), disruptive innovation (Jobs-to-be-done), lead user innovation, and voice of the customer among other customer-centric innovation frameworks.

The conformity of the frameworks is not straightforward though. One challenge is that the level of abstraction differs - think numerator and denominator. How to distinguish between tactics, process, strategy and concepts herein? According to Steven Blank’s customer development methodology (slide #29 in this presentation), product development and customer development can be viewed through the tactical lens, while the business model view could be viewed through the strategic lens. Osterwalder understands business models as a facilitator between business processes and strategy. Myself, I would start from the premise that strategy or goals often come as consequence of continuous learning in early stage ventures where resources are scarce and uncertainty is extreme.

Another challenge is how to make the pattern illustrate iterative development and internal feedback loops that are fundamental to the Lean Startup methodology. When working with models and methodologies there is a general challenge in uniting behavior (process) and structure; to what extent the two frameworks are integratable in terms of methodologies and notations.

Borrowing from areas such as software engineering and system dynamics, future work would envision a tool that aid in rapid entrepreneurial learning and aggregates key metrics in order mitigate risk in new-product introductions.

Further discussion should consider which principles from the Lean Startup methodology that should be included in the Business Model Pattern and where they belong. Coming up, I will address how a startup could use this pattern to validate their business model as a part of their lean methodology. Stay tuned.

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Social Media Strategy Frameworks: what about the metrics?

The social web has created an ecosystem where off- and on-line businesses are rushing into blogs, social network pages, communities and other social media. When will organizations start taking a structured, holistic approach, rather than just pouring budgets into all cool ideas? While I have been on the outlook for such supportive frameworks during the previous weeks, the following three seems to be the most referred.

  • The POST MethodPerhaps the most popularized framework as of today, the POST method by Groundswell describes a systematic approach to social strategy. POST is a acronym for People, Objectives, Strategy and Technology.
  • The Three SpheresAlthough Jeremiah Owyang applies the Three Spheres to web strategy in general, social media strategy could be considered a sub-set herein. The three spheres are the Community Sphere, the Business Sphere and the Technology Sphere.
  • The Five S's. Windmill Networking suggests five basic “S” concepts of social media marketing: Share, Support, Social, Strategy, and Sales.

The figure's colors show correlations among the components in the frameworks. Conceptually there is a technology component at the bottom, and a business/strategy one at the top. In the "middle", there is a social-community component (often user-generated media) - the business logic that technology and strategy align with. Yet, there is room for more descriptive frameworks for managing social media strategy.

With this middle layer I believe that time has come to revisit the true meaning of bubble-ish network effects and the "openness" as a part of every business model. This is the gist of  user-generated content. Also, I'd prefer to add an additional layer, it be "M" for Metrics into "POSTM". In the months and years to come, measurement will become a key activity and impetus to competitive advantage . While control migrates back to the demand-side (i.e. buyers of social media strategy), knowledge of metrics will become invaluable. As Thomas Davenports title suggests, is Competing on Analytics: The New Science of Winning?

Disciplined Creativity: how to balance between creativity and focus?

Innovation and entrepreneurship is subject to a fundamental paradox - the trade-off between creativity and focus. Many entrepreneurs are by nature creative individuals that must balance between glazing new ideas, products or features at the one hand, and execution and determinism at the other.

DisciplinedCreativity-methodologist

The Disciplined Creativity idea is derived from the Flow concept by Mihály Csíkszentmihályi to help innovators reconcile creativity and discipline in parallel.

Update: In light of Lean Startup and Customer development methods this brings about a discussion on how entrepreneurs can stay true to their vision while still maintaining the flexibility to pivot.