- Entrepreneurs are everywhere – Ries defined the startup and highlighted key elements of his definition: “a human institution, delivering a new product or service under conditions of extreme uncertainty.”
- Validated learning – The quintessence of Eric Ries’ approach to product development in startups is to create learning experiments, where teams follow a continuous cycle of ‘build-measure-learn’.
- Innovation accounting – If such experiments ‘fail’ it isn’ the end of the world (Ries’ world that is) since entrepreneurs will at least have discovered early on that their strategy doesn’t work. Ries’ spiel is all about creating meaningful, achievable milestones to which entrepreneurs can be held accountable.
- Real metrics – Rather than learning for the sake of it, Ries makes a strong case for building experiments around ‘real’ metrics. We often get blinded by ‘vanity’ metrics such as customer growth or the number of features added, but such numbers tend to be fairly meaningless and lack context. In contrast, a metric like the increase in customer revenue as a result of a new feature can provide a young startup with valuable customer insight.
- Pivot or persevere? Ries has introduced the “pivot” into strategy speak. When a business decides to ‘pivot’ it means that it changes directions without totally abandoning previous learning or its product vision. In an ideal world a company becomes very good at reducing time between pivots, which means that it decides early in a product lifecycle to continue, iterate or drop the product or feature altogether.
- Continuous testing and iterating – In the session, Ries explained about the value of techniques such as A/B testing, continuous deployment and real-time monitoring. It’s not so much about the specific techniques one uses, the key is about doing real-time user testing, finding out what the customer really wants and making business decisions following user feedback. It reminded me of the book by “Undercover UX” by Cennydd Bowles and James Box.
- Growth engines – This was the bit in Ries’ presentation that resonated the least with me. Terms such as ‘paid engine of growth’ (reinvesting revenue into acquiring new customers) or ‘sticky engine of growth’ (customer retention) seem to be part and parcel of most marketing strategies of established companies and startups alike. I do agree, however, with Ries’ point about concentrating on a single growth engine instead of a scattergun approach.
Monthly Archives: February 2012
Over the past few months I’ve been learning more about streaming, trying to understand beter how it works and who operates in this market (think Spotify, Rdio and LoveFilm). A logical next step was trying to get a better grasp on the business side of things; what makes streaming so interesting from a business revenue point of view?
- Increase in number of streaming subscribers – In a recent webcast with TechCrunch Netflix’ CEO Reed Hastings made it clear where he sees the future of his business by stating that “We expect DVD Subscribers to decline every quarter … forever.” He illustrated this by stating that Netflix had lost 2.76m DVD rental subscribers in Q4 of 2011 whilst its streaming service gained 220k users.
- Low cost model – In the same webcast, Hastings explained that even though the margins on DVD rental are much higher compared to streaming (since prices of DVD rental are higher), the variable cost attributed to streaming are much lower.
This made me think about the following:
- Will streaming cost really be that low? – I can understand that the variable cost involved in streaming are likely to be significantly lower than DVD rental. The fixed cost of streaming are, however, much higher compared to other (subscription) models. I’m thinking of the fixed costs to set up a streaming infrastructure (e.g. enabling users to stream both in an online and offline mode) but particularly the cost of securing streaming content. With Netflix and LoveFilm battling it out to bolster their catalogues of streaming content in the UK I can imagine the big film studios and TV production companies rubbing their hands with glee and driving up the price of their content.
- Will streaming really take off? I guess this will very much depend on factors such as cost, consumers choosing between downloading and streaming (between access and ownership) etc. Streaming is a relatively new model, so it will be interesting to see what its consumer adoption will be like.
Related links for further learning:
IBM’s recent acquisition of DemandTec sits within IBM’s “Smarter Commerce” initiative. This strategy is all about enabling businesses to quickly adjust prices, promotions and other marketing efforts by analysing online and in-store buying trends. One could argue that this deal is just a takeover like many others. However, these are some of the things about this deal that sparked my interest:
- Big software companies are all at it – Recent weeks have seen similar deals by SAP and Oracle respectively. Like the takeover of DemandTec, the purchases of SuccessFactors (by SAP) and RightNow (by Oracle) are aimed at becoming a ‘software-as-a-service’ (SaaS) company.
- Software as a service (SaaS) – It sounds sexy but what does SaaS actually mean? Whereas many traditional software companies like IBM and SAP used to be about client-side servers and databases, today’s focus is shifting much more towards providing clients with web-based solutions, with users only needing an Internet browser to access the service. I started writing about this trend a while ago just because it seems quite a big strategic shift for most traditional software vendors.
- ‘Smarter Commerce’ sounds great but what does it mean? – I learned that Smarter Commerce is another way to phrase IBM’s intention to generate revenue out of providing businesses with cloud-based analytics products that enable them to make well-informed business decisions and to respond to customer trends in a timely and appropriate fashion. This is exactly the kind of business in which DemandTec operates.
- At the end of the day, it’s all about the cloud – The aforementioned shift towards SaaS is seen as part of cloud computing which for instance means that to use the software provided by the likes of DemandTec or Salesforce.com a user typically only needs an Internet browser and, equally significantly, the software is designed in such a way that multiple clients and users can use it for their own unique purposes.
Related links for further learning: