Rigorous experiments & hard work is a hidden truth behind tech star stories.

When I started college, the whole web was about 360 servers in September 1994. By December, it was in the tens of thousands. I can say this with a straight face, only because I was lucky enough to have good timing to get a front row seat to this explosion of the web. Hint: it’s called the Internet nowadays.

In the early days of the web, the first real-world newspaper which made it online was the San Jose Mercury News. By reading news via email, I was able to get an Associated Press feed on world news. A San Francisco take on everything going on in the world was mind blowing to my still-teenage mind.

As the dotcom era heated up, there were more and more fantastic stories which the media caught onto, usually along the same lines:

2-3 young guys
a garage
an idea

A few months later they were millionaires. A few years later they were billionaires. Unfortunately, as a student, I didn’t have a garage.

While the fantastic stories kept ringing in my head for years after the dotcom crash, I later realized the stories glossed over a few critical elements:

First of all, most of these early stage tech ventures fail. The ones who hit the news were not representative of the typical tech founder experience. That’s a bit more mundane. It’s much more likely for a tech venture where you’re creating something completely new with a new business model to fail, than setting up a restaurant on a busy corner. Certainly back when it cost millions to get good enough servers to scale the business.

Second of all, the press coverage doesn’t include what founders actually do, on a day to day basis. There’s just this predictable narrative leap from a garage to billions. For some reason, I eventually learned to question what was missing from that picture.

Third of all, it’s perfectly understandable that this story has become a stereotype based on media incentives. The media want to sell advertising. People love to read these kinds of romantic stories about changing the world and making billions in the process. Even people who have no interest in trying it themselves.

I’m sure that most of these stories were well researched and accurate. It’s just human nature filling in the gaps and distorting the overall picture (well at least that was true in my own case).

After reading the Lean Startup, I’d figured out what was missing. Experiments.

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That’s what founders actually do, on a day-to- day basis. Printing up a stack of business cards and going networking to impress people you’re a founder? That makes you indistinguishable from everyone else with the same strategy.

If you want to refine an idea and turn it into a business, experiments will get you there. Real tech founders use the scientific method, meticulously testing their assumptions. It’s no coincidence that many of the first round of founders were computer scientists. They were trained to think like scientists, in addition to feeling comfortable with their word processor. Rigorous experiments were the hidden truth behind these tech star stories.

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First impressions matter, except when you’re looking for a problem worth solving. In that case, split testing your landing pages is a complete waste of money.

Traditionally, you’d use split testing to optimize your landing page. Help it turn traffic into conversions. Your user gets your message. The user experience communicates your message in the stickiest way possible. This tool assumes, though, that you know who you’re selling to, what they need, and roughly what you’re offering.

Why does this matter?

Well, if you don’t know what you’re selling yet, you’re losing money by split testing–when you need it the most. You’re lighting dollar bills on fire and throwing them off your pretty balcony.

Before you optimize your message, you’re better off proving that you have audience-problem-solution fit…first. That’s the whole point of Landing Pages as an experiment or a landing page MVP ( minimum viable product).

Let’s say you have a budget of $200. You still haven’t proven specific people will pay money for your product idea. In that case, you’re better off testing two completely different ideas. That way, the higher conversion rate helps you identify which one is better “raw material”.

“Go” or “no-go”. Not A vs B. And only “Go” on the best one.

Instead of split testing two variants of one idea (comparing A to B), figure out which of 4 different “As” makes your target audience drool the most.

Here’s the deal:

If start with a high conversion rate out of the gate, optimizing it will give you even more bang for your buck later. It’s better to start with a handful of ideas and figure out which one has the best conversion rate right from the beginning.

Better yet, focus on one audience, and pitch them a variety of ideas to see what makes them click.

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If you want to find out more about how to construct proper Landing Page MVP experiments, then my book Launch Tomorrow aims to please.

It’s available over here.

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Failures should not stop you from trying, keep on truckin

A friend of mine from when I was growing up is a true blue professional hacker for the US military. He gets paid to hack security software. Specifically, he writes software which figures out how other security software works. He figures out what the requirements are.

He prods the software, notes down its behaviors, and then uses that feedback to construct more ideas for tests. Based on the requirements he gleans, his team can build exactly the same thing from scratch, if they decide that’s what they want to. Geeks call this technique reverse engineering.

You can take the same approach when trying to sell a new product. While it might not always feel pleasant, the market tells you what it thinks by giving you feedback. (No feedback is feedback too.) I’ve put up offers which seemed like they’d be interesting for my target audience, but they didn’t sell.

Certainly made me feel like a doofus, although it clearly wasn’t fatal, since I’m writing to you about it! They attracted attention and freebie downloads successfully, but for some reason, people didn’t feel motivated to buy.

Keep on truckin’. If you don’t have a selling offer yet, keep prototyping new products and putting them up for sale where you think your market hangs out. Keep talking to them.

You can do this systematically by planning to launch a new offer every week. It doesn’t need to be perfect with a massive campaign and a perfect website. It just needs to attractive to a niche and buyable.

Once you are at the stage that people are buying, then go ahead and work outwards from there. Your first few sales, while they might seem insignificant, are a crucial step forwards. They give you the basis for reverse engineering who buys in your market and why they buy. You can feed this information back into your product and your marketing.

You’ve identified who buys. Find out about them. What makes them tick. Why they bought. What they liked or didn’t like about the product.
Once you know that, adjust your positioning. Test a change in the language used. Once you know exactly what people want to buy, make it easy for them to find it. Test the packaging, cover, or images. At this stage you can try to improve conversion rates with the usual suspects.
At the same time, figure out where your buyers hang out. Use this medium to reach them. Instead of overwhelming yourself with 94 ways to generate traffic, or basing your whole business off Google traffic, start with a few sources of traffic. Master them. The best traffic sources to choose are the ones which your first buyers already use.

If you don’t have buyers yet, that is your first bottleneck. Figure out how to solve that problem first. Once you have customers, then you have your work laid out for you.

You’ll probably find my book on experiments valuable, to help you get your head around it.

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none of these will work: you need a “thinking” tool

There’s a specific agile tool which I think every early-stage product team should use, regardless of whether they’re following the Lean Startup methodology. Lean Startup drew its roots from agile software development. Eric Reis added Steve Blank’s idea of customer development to agile. Assuming we aren’t talking about re-reading Eric Reis’ book for the 17th time, the best Lean Startup tool is the dogeared post-it.

That’s it.

What? Why not some kind of fancy-shmancy online tool that defines, builds, and releases your product? In your sleep. There’s lots of those around. < grin >

Post-Its are placeholders for team discussions. Invented by accident at 3M, having slips of paper with adhesive turned out to be a fantastic tool for organizing ideas.

This harks back to the old Class-Responsibility-Collaboration (CRC) approach introduced in the early days of object oriented software design. Post-its and index cards helped create the internal design of a larger software program. If you don’t understand the problem domain well enough, then it’s hard to design good, clean software. Post-its allowed developers to note that they need to discuss something in detail at a later date. Once developers were ready, they huddled around a problem. They dissected the problem into sub-components. They formulated a solid hypothesis about the best way to solve a technical problem.

Over the years, software teams have attempted to create software versions of the same experience. There are lots of tools which approximate this effect. Of the ones which I think are probably as close as you can get with software: Jira and PivotalTracker.

Unfortunately, as soon as you get a team in front of computer screens you lose a lot of information. This holds true regardless of whether they are in the same room or in different time zones.

Here’s a handful of ways you can use Post-Its for your product development:

General Brainstorming: A great way to pull out the gems from introverts in a group setting, you can write up Post Its individually, vote on them, and discuss them. In fact, this is a format we use at the Lean Startup Circle London #LeanCoffee sessions I help run.
Marketing Copy: When speaking to customers, you hear the words which customers use to describe their problem. By tapping into the conversation already going on in their heads, you increase your own ability to convince them. Just because you know your solution will address their problem, doesn’t mean they do. Since you describe the problem exactly how they see it, you draw in their attention and fascinate them. When you have prospect language on postits, it’s easy to group post-its into similar themes. You can reorganize them based on whatever criteria you want.
Developing An Unfair Advantage: Getting a team to think about their strengths is hard to do. But when you talk about your team’s strength, document them on post its. Have your discovered strengths hanging on a wall. Help everyone with day-to-day decision-making criteria, by focusing everyone on adding to those strengths. By building on your strengths, you are much more likely to succeed. You rapidly develop an unfair advantage, by reinvesting into your strengths.
Verbalizing Your Unique Selling Proposition: Why should a prospect buy from you specifically? Immediately after they decide to buy your type of solution, this is the next question you must answer. It’s simple. It’s critical for your business. It’s also easy to forget about. Post-Its are a good way to organize your thoughts. You can add information about your competitors and alternatives. This will distill the one sound bite which will convince you and your prospects that your offering the best one possible.
Identify Unmet Market Needs: Sometimes you may be struggling with identifying a problem worth solving. To build a successful product, you need to be addressing a difficult problem for your prospects. A good example of using post-its for this process is in the book Blue Ocean Strategy. You can map out the offerings of an entire industry against how customers “scratch their itch”. This identifies unmet needs in the customer’s process of solving their problem.
Feature requests or bug reports: Post-Its are already the bread and butter tool of any decent development team. What about yours? Working from Post-Its, it’s much easier to deliver prototypes or new features faster. Post-Its capture nuggets of wisdom gleaned from direct access to customers or the product owner can be. Post-Its help gather together the relevant considerations for a new product. If everyone is looking at the same wall of post-its, it’s much easier to deliver.
Long Term Planning and Vision: While there is often a strong focus on increasing certainty and clarity with tools like product roadmaps, you risk destroying value by pre-committing to things which don’t need to be committed to. A good example is the default setting of task dependencies within Microsoft Project. In contrast, if you continuously articulate your vision with post-its, you can adapt your vision as you learn. Even though Agile tends to be tactical and focussed on the short term, you can also track long term visions with post-its.
Hypothesis Test Backlog: Post-Its help keep track of assumptions and hypotheses you still haven’t proven. This is the valuable “grunt work” which Lean Startup prescribes. A great way to keep track of what you still need to learn about your market, your product, or your business model, Post-Its allow you to adapt Lean Startup to your situation. Launch that product successfully!
Map Features To Business Goals: Quite often product teams get lost in tons of feature ideas and “things to do”. It’s easy to feel overwhelmed. The most creative way I’ve applied post-its? Gojko Adzic’ Impact Mapping tool. Impact mapping helps you identify high level business goals. Then you organize your development around reaching those goals. It’s a powerful and subtle process.

More Visibility + Less Structure = More Learning

If your goal with Lean Startup is to de-risk a product idea as soon as possible, you need to identify where you are going. To do that quickly, you need “signal”. Signal will help you achieve that faster.

A smattering of post-its on a physical wall are a true “information radiator”. Anyone and everyone can jump in, comment, or move the post-its around. This means you engage everyone’s head.

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Post-Its are a thinking tool. They help your team think clearly about

your problem
your product
your role in delivering a solution to that problem.

With Post-Its, it’s not really about using post-its themselves. Using PostIts means that you interact more effectively: in-person, on-location, face-to-face.

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Unsurprising confession: when I was a scrappy young bachelor, I’d hit the clubs with friends. In a nightclub, anything can happen. I’ve started relationships, albeit not very healthy ones. Lots of Schwarzenegger bodies without Schwarzenegger minds emit intimidating body language. Even the roof can collapse (even though it’s unlikely).

By combining vodka and Red Bull, these muscleheads got the best of both worlds. Lots of energy, complete loss of inhibition, and a sense of being invincible came with this highly exotic cocktail. That combination, while it might have been great in a night club, in reality was a pretty dreadful combination elsewhere.

See, just because it may have been a good idea at the time, it doesn’t mean that the next day would have been so pleasant. The hangovers were terrible the following day.

They craved the loss of inhibition. I suspect some of these guys regretted doing things the next day. Saying things. Because they had alcohol, they had an excuse, in case somebody would hold them accountable, including themselves.

I like being in tune with my id as much as the next guy. I just don’t want to feel the need to explain myself to my conscience. The next day. Vodka and Red Bull was the easy way out. No need to think.

Effective planning requires that same level of conscientiousness. Time is precious. If you haven’t thought through what you’re trying to achieve, you are almost guaranteed to be wasting time. At least some.

Making sure that you’re moving towards your objectives, particularly in an uncertain environment, gives you much greater certainty.

Let’s say you want to make a decision among a couple of strategic alternatives. Each one has certain pros and cons. Each has consequences. Each constrains what you can do later. You’re also not sure how your competitors will react to each alternative. As a result, it’s not immediately clear which one would actually be the best choice. Each one has risk. Not choosing an option is also a risky option.
Enter real options analysis.

Real options help analyze the “big issues” for a company and its existence. They have to do with big milestones. In a corporate setting, having strategic clarity means that the whole company will find it much easier to execute. Everyone is “on the same page”. A strategic decision touches everyone. All stakeholders are affected.

This is analogous to the big milestones in a person’s life: birth, coming of age, marriage, death. All major religions and primitive cultures celebrate these milestones for people. They are important to everyone who knows that person. The community acts together.

Given that a corporation is a legal person created to maximize wealth and profits, real options help decide whether to take a specific path and when to do it.

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According to Sick and Gamba:

Properly managed options create value and reduce risk for the organizations that own them. They arise because of the interplay of 4 things:
1. Real assets: ﬁnancial options are generally redundant and hence do not create of destroy shareholder value. Real options cannot be replicated by stakeholders and generally create
value.
2. Risk: volatility and risk-return relationships.
3. Leverage: variable costs and beneﬁts work against either ﬁxed costs and beneﬁts or imperfectly correlated costs and beneﬁts.
4. Flexibility: to manage the risk and leverage by accepting upside risk potential and reducing downside risk.

As a decision-making tool, real options help you “cut to the chase” at any given moment. They estimate a financial value on each strategic choice, without forcing you to spend anything. Based on a few things you know or you can estimate, you can easily calculate an implied financial value for each choice. As a result, if you have a limited amount of resources, you create a metric that makes the choices comparable. You can compare $ to $.

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