Dave Concannon

This article on “The little-known secret to choosing a web designer” inspired me enough to blow the cobwebs off this site and write something. A quote:

Designers who don’t understand that websites are business assets which must achieve specific business objectives, which in turn are tied to revenue goals…are not actually designers at all. They are artists. Giving them your money is not an investment in creating a business asset

Read it. Love it. Slap anyone who drones platitudes in fuzzy saccharine tones about unmeasurable qualities that are likely to be completely coincidental to your businesses success.

That sort of touchy-feely ‘GO TEAM!’ nonsense is total cargo cult. Let’s take a ridiculous example: A hypothetical business owner, Bob, goes out on his morning walk to buy a coffee. When he gets back to the office, he checks his online sales report and sees that he’s sold three units. The next day, he comes back with his regular cup o’ joe and finds that he’s sold 5 units. He puzzles his good fortune, wondering what caused this jump in sales… and realizes – he’s wearing red socks! Awesome. He sends an office-wide memo to make sure everyone in the company wears red socks at all times, and begins browsing the website of the local Porsche dealership.

Bullshit? Maybe… except back in the time of chimpanzees I worked for a ‘Bob’. All the positive-trending metrics and analytics in the world didn’t matter, because to Bob the site ‘just looked wrong’. It didn’t matter that the people we were selling to weren’t Bob, didn’t think like Bob, and didn’t like the same sorts of things Bob liked. It didn’t matter that under empirical measurement more people visited the site. It didn’t matter that the changes we made ensured more of these visiting people told us they were interested in our products and wanted to write us cheques. It just mattered that it ‘didn’t feel right’.

That right there my friends is a fantastic barometer for incompetence. If you work somewhere that can deny people trying to give them money because they’re more interested in the branding/passion/making-a-difference than rock-solid metrics, you’re better off leaving them to it.

Two more very simple questions one can ask to see if you’re screwed. The absolute basics:

1. How much does it cost to attract and sign a new customer?
2. How much will we make from a customer over their lifetime of using our products?

The answer to these should be a ballpark range, or a solid number, or at least an indication that they know what they hell you’re talking about even if they tell you to mind your own damn business. If you ask and there’s an uncomfortable silence, they get a confused look in their eye like their breakfast burrito is going to repeat on them, or they start off into a long nebulous rant about ‘potential’ / ‘building a presence’ / ‘pushing the envelope’… well, at least you have time to start working on a side project before they run out of cash.

If you’re smart, know your way around technology, and care about what you do – everyone everywhere is looking to hire you right about now.

We do not purchase an automobile, for example, merely to own some machinery. Indeed, it is not machinery we are buying at all, but what we can have by way of it: a means of rapidly carrying us from one location to another, an object of envy for others, protection from the weather. Similarly, a radio must cease to exist as equipment and become sound. A perfect radio will draw no attention to itself, will make it seem we are in the very presence of the source of its sound. Neither do we watch a movie screen, nor look at television. We look at is what on television, or in the movie, and become annoyed when the equipment intrudes – when the film is unfocused or the picture tube malfunctions.

When machinery functions perfectly it ceases to be there – but so do we.

From ‘Finite and Infinite Games‘ by James P. Carse.

From an interesting question on Quora -

“Why is Vodka so expensive?”

Because it is sold in expensive bottles.  The “juice” in a bottle typically costs less than $.10 to make.  The vast majority of vodkas in the US get their liquid from a few contract producers like ADM

Interpolate this into your average tech startup – The ‘value add’ for the majority of startups isn’t in using Ruby on Rails, or Cloud Storage, or a no-SQL database. It’s not in using the latest Agile techniques, or the best continuous deployment system (though all of these things help).  It’s how you make your users feel – Design, User Experience, and that disgusting practice that techies love to hate -  Marketing. Technology is a commodity*.

* There is still room for the disruptive technology innovations of your Google, but how many of those come along?

Paul Graham’s recent article on generating startup ideas got me thinking.  He splits startup ideas into two categories:

Those that grow organically out of your own life

Those that you decide, from afar, are going to be necessary to some class of users other than you.

His article mainly focuses on the organic idea-generation process; finding something that bothers you and fixing it minimally before offering it to other people and incrementally improving upon it. A tried and trusted way to create something of value, and at worst you fix your own problem.

A Different Source of Inspiration

The other class of ideas is something I thought I’d focus on – Where building something for yourself and then offering it to others seems to be Problem Focused, the second approach would be more Market Focused. What I mean by ‘Market Focused’ is that you are hypothesizing that there are a group of people out there who are not you that:

1. Have a problem
2. Would pay money for a product or service that can fix it
3. Are sufficient in number to make it worth the effort

While Paul Graham warns:

The worst ideas we see at Y Combinator are from young founders making things they think other people will want.

It’s an idea I’d like to explore a little more.

Market-Focused Ideas

Where the first type of idea generation is more introspective, the second may involve more exploration.  Instead of starting with a problem in need of a solution, you’re looking for the problem. There’s plenty of opportunity to find a sufficiently large niche market that has a problem that has either not been solved, has been solved inefficiently, or has been solved a by a dominant market force (a ‘Gorilla’ in Geoffrey Moore’s lingo) that has grown lazy.  The first two cases case may be a problems that were not economically viable to solve, resulting in no solution or a solution that creates a weak business. Applying a customer development process to customers in these areas will help determine whether it’s worth spending more time on. I think the ‘Gorilla’ situation is the most interesting.

Kicking Gorillas

In this third case, a market where the dominant player is sitting back to milk the customers, you can find outdated technology, poor customer service, and/or exorbitant pricing structures. Any of these are possible chinks in the Gorilla’s armor for an agile startup to position against. If you can bring updated concepts (and associated value addition) to the customer at a lower price,  a lesser implementation and training cost, or bundled with better service you can create a very interesting business. Just because the problem has been “solved” doesn’t mean there isn’t a great opportunity – Google launched well after the search problem had been ’solved’ by it’s now practically redundant competitors.

Caveats

There are obvious caveats that will fall out during analysis of the opportunity, here are a few:

1. You may need very specific domain knowledge and credibility to access some markets e.g. Medicine or Law.
2. Double sided markets may require time and capitalization to gain mass (e.g. An advertising network needs both publishers and advertisers in volume before anything interesting happens).
3. Despite the gorilla sitting on it’s laurels, it may have a certain amount of lock-in by creating a high switching cost for it’s customers.

Update: Jason Calacanis’ latest email has a great section on capitalizing on ideas, see the section marked “How to be an Angel Investor and Business Creator“.

An interesting quote from “Tribal Leadership” on how industrialization changed the school system:

The solution was to train a new generation of workers by teaching them inside a system that looked a lot like a factory. In school, bell rings, go to class; bell rings, recess; bell rings, go back to class; bell rings, eat lunch; bell rings, go home. At school, children with the “right” answer get a gold star, then an A. A star pupil is one who does the homework and has the right answers. This new system undid the classic liberal education which said that value was in the well-designed question.

As data becomes more and more accessible and available, how valuable are these sorts of skills? Ubiquitous access to information means memorization of things like specific dates or formulae is an over-rated skill. The real skill is in understanding the underlying series of systems and actions that formed that memorable date. It is in knowing that a formula exists in the abstract, and can be applied specifically in different and possibly unrelated areas.

Creativity

Sir Ken Robinson had a fantastic talk at TED on why applying a system across the board marginalizes certain creative personality types, and why he believes that nurturing creativity should be held in equal regard to skills like writing and numerical literacy. Paul Graham briefly mentions why apprenticeships make sense for some people. How will technology advances influence teaching?

Finally, here’s a great video on the importance of a good teacher from one of Seth Godin’s recent posts.

Write a description of your current job including all the tasks and requirements of what you do every day. Then in a different column, list all the skills you use on a daily basis. Finally, compare the two columns – Is there anything missing from your job description that doesn’t have a corresponding skill? Is there anything in your skill set that doesn’t find a home somewhere in your job description?

• If there are a lot of things in your job description that don’t have a matching skill then you probably need to get learning.
• If there are more skills than responsibilities, maybe you need a new challenge?

Following up on my previous post on game mechanics, I’ve seen some interesting commentary and implementations.

Dave McClure thinks “checkins” (The main ‘game’ component of foursquare and gowalla) will become a commodity within a year. It would seem to make sense – It’s an original idea, but in terms of defensibility there’s no real barrier to prevent people adding this sort of function to any software.  How useful are ‘checkins’ to more serious software? It remains to be seen.  Steve Blank’s latest post on this sort of competitive analysis driving feature sprawl has an interesting summary of why this may not be such a great strategy. It’s not just the nuts and bolts of what you do, it’s the ecosystem you build around it.

Gaming Unit Testing

Where game mechanics can be really interesting is in turning dull tasks into something more interesting. Here’s an example of using “achievements” in a unit testing framework - rewarding the user for getting their tests to pass (or fail in particularly frustrating ways).

Game Dynamics Presentation at DICE 2010

Finally, here’s a very interesting presentation on Game Dynamics from DICE 2010 (via marketing.fm).

The astute reader will notice an extra widget on the right hand side of the blog here. It’s in support of the Startup Visa idea which will grant visas to entrepreneurs with existing funding looking to start their companies in the states.

This initiative will create new jobs and significantly increase the talent pool of highly-skilled entrepreneurs in the states.

The Startup Visa Act proposes legislation to modify the existing EB-5 Visa drive job creation in the US and increase American global competiveness by helping immigrant entrepreneurs secure visas to the United States and create new companies, where there is investment capital available from a sponsoring US venture capital or angel investor of at least $100,000 in an equity financing of not less than $250,000.

More information on the startup visa here: http://startupvisa.com/2010/02/24/kerry-lugar-startup-visa-act/

How can you help?  Add the widget to your blog from this link: http://startupvisa.2gov.org/widget/.

I’ve tried linking my Posterous account with this blog, but there are a few things which need to be upgraded on the hosting account here before that can happen. In the meantime, if you’re interested I’m providing much shorter and more regular updates at my posterous account. The general theme is based around lean startups, customer development, and various entrepreneurial topics.

http://daveconcannon.posterous.com/

There was in the sixties a man named Fritz Perls who was a gestalt therapist. Gestalt therapy derives from art history, it proposes you must understand the ‘whole’ before you can understand the details. What you have to look at is the entire culture, the entire family and community and so on. Perls proposed that in all relationships people could be either toxic or nourishing towards one another. It is not necessarily true that the same person will be toxic or nourishing in every relationship, but the combination of any two people in a relationship produces toxic or nourishing consequences. And the important thing that I can tell you is that there is a test to determine whether someone is toxic or nourishing in your relationship with them. Here is the test: You have spent some time with this person, either you have a drink or go for dinner or you go to a ball game. It doesn’t matter very much but at the end of that time you observe whether you are more energised or less energised. Whether you are tired or whether you are exhilarated. If you are more tired then you have been poisoned. If you have more energy you have been nourished. The test is almost infallible and I suggest that you use it for the rest of your life.

(From http://miltonglaser.com/pages/milton/essays/es3.html)