Saturday, July 5, 2014

For digital startups, dealing with extreme uncertainty

Versión en español.

When you are starting out with a digital product, it makes sense to get advice from experts. But experts can't help you learn as much as you can on your own.

In fact, most of the successful digital entrepreneurs I know give the same advice: develop a prototype as quickly as possible. A business plan or a powerpoint is fine, but you need to put your actual product into the hands of the public and test your theories. See if they work.
Video with subtitles in English of six digital journalism entrepreneurs.

See also the comments of Gonzalo Costa.
The thinking of these entrepreneurs has gotten its most eloquent expression in Eric Ries's book The Lean Startup. The idea is to save time and money on product development by introducing a  minimum viable product to the target customer, measuring response, making adjustments, and trying again. (Some examples for journalists are below.)

No business plan for uncertainty

Developing a minimum viable product makes sense for a startup, Ries says, where the entrepreneur is working in an environment of extreme uncertainty and there is no proven business model. A business plan is so theoretical that it doesn't make sense.

Big media businesses don't like to use the lean startup process because they are worried that a poor product will damage their reputation with consumers. So they test products and names and packaging on focus groups, do extensive research, spend heavily to market the new product, and then hold their breath. Remember those words: extreme uncertainty. Despite everything, many product launches fail.

Ries and the practitioners of the lean startup strategy do their testing in the marketplace itself, online, where they get the most honest market research possible -- actual customer behavior. Each failure is a learning experience, which the entrepreneur uses to adjust the product's pricing, positioning, delivery (that is, they pivot), and test the response again. Ries calls this validated learning.

Google’s original product was a simple search box, and the developers apologized, Ries tells in a video presentation. Google promised it would develop an entire portal later. But the minimum viable product -- embodied in a simple page with a search box -- turned out to be Google's best product, and they haven't changed it much.

The worst that could happen

For would-be news entrepreneurs the message is to test your concept online. Your problem will not be that any flaws in your product will be ridiculed and will damage your reputation. Your problem will be getting anyone to look at it in the first place.

Let's say your theory is that people want more news about the independent music scene in your town. The only way to find out is to start publishing about it on a blog or web page (a minimum viable product), tell your friends and acquaintances and the community at large about it (social media), and make sure people can find it (search engine optimization).

The worst that could happen? Nobody cares. Then you can modify the product and keep trying until you prove that there is (or isn't) enough of a market to make your work worthwhile.

On the other hand, you may have a post that goes viral and crashes your server because you weren't prepared. In either case, you have gained some validated learning you can use to make adjustments to your product or service.

For journalists, a minimum viable product can be as simple as the headline on a story. If the best investigative story on your website is not getting any traffic, try another headline, try adding a graphic, try adding photos, change the display, change the position on the page. Try something, and measure what happens.

Metrics aren't tool of the dumb

Many journalists reject the value of metrics. They hate to see editors judge their work merely by page views. They see metrics as a vehicle for dumbing down the product or pandering to the audience. But look at metrics another way. Look at them as a way to find out what is capturing the attention of your target market. Use metrics to make sure your best work is finding an audience.

Ries tells in his video how he failed to use a simple metric with his startup and learned a hard lesson.

He and his team of programmers had poured all their energy into developing a product that would integrate all of a person's instant-messaging services in one place. And after six months of intensive coding and whiteboarding of strategy using all the best practices of agile development, they launched the product. Nobody would download it, even though it was free. They had to throw out all six months of work and start over.

What we could have done, Ries said, is simply set up a page with a button inviting people to download the described product and gauge the response. They would not have had to develop a product. The second page could have been a simple thank you for responding and a promise to deliver the product as soon as it was ready.

I recently saw a good example of this form of response testing with an application I use. It announced a new expense report format and new pricing, and I signed up. Here was the response:

From: David Barrett <>To: jgerardbreiner@yahoo.comSent: Wednesday, June 4, 2014 8:58 PMSubject: [Expensify] Realtime expense reports phase one: Major price simplification, reduction
Wow, there has been an incredible response to my last newsletter announcing the realtime expense report beta.  So many thousands of responses that I wasn't able to reply to them all.  I really appreciate your patience as I gradually work through the backlog of responses, and as we roll out realtime expense reports in pieces.  I think you'll find it worth the wait.

He puts a positive spin -- what an overwhelming response! -- on the fact that he can't deliver because of a backlog. He has tested a theory. He has a database of people who say they want the product. Now he knows that he should invest some time in developing it.

Many would-be digital entrepreneurs ask me for advice on a variety of issues, from which content management system is best to which social networks they should be using. If I know what the experts are saying, I will share that.

But ultimately, I tell people, you need to find out for yourself. The road ahead is not clearly marked. Remember, establishing a startup means dealing with extreme uncertainty about which direction to go. You will need to plant your own milestones. You will have to find your own way. Therein lies the pleasure and the pain.

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