Dave Concannon

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In this third case, a market where the dominant player is sitting back to milk the customers, you can find outdated technology, poor customer service, and/or exorbitant pricing structures.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)

It’s been about twenty years since I first met Eoin Ryan, the artist behind Space Avalanche. While spreading the news of his latest Batman-themed comic everywhere and anywhere I can think of, an odd thought struck me – The reason we first met and eventually became friends was Batman.

Twenty years ago I was five feet tall and had an outrageous twang to my voice as a result of six years of American schooling in Jeddah, Saudi Arabia. Apart from the desert heat, great sports fields, and pools, Jeddah was fantastic for it’s imported technology at bargain prices, and access to freely pirated music and movies from Asian countries. This meant that I found myself in a small Irish town with access to the summer’s biggest blockbuster several months before it would appear in Irish cinemas – Tim Burton’s original Batman. Not a bad bargaining chip for a fish-out-of-water twelve year old in a new school in a country he didn’t really remember very well.

Long story short, Eoin hatched a totally transparent plot to make friends based entirely on the fact that he’d be able to watch Batman before everyone else in the country. Minor disagreements aside, we’ve been good friends ever since.

Twenty years down the line, we’ve been working on this web comic nonsense as a bit of a labor of love in our spare time. Eoin does the creative bit, and I play the part of the town crier who moonlights fixing webservers. In the meantime we’ve been nominated for the Irish Web Awards, made the front pages of Digg and Reddit, and become rich and famous. What have we learned in the process?

Well, mainly that it’s bloody hard work. In a later post I’ll go into the various ways we’ve tried to spread the word and how it’s affected our traffic.

I’ve been living in Berkeley for about a month now, and have passed by one particular pizza restaurant a few dozen times but never gone in. Why? Every Thursday, Friday, and Saturday nights there are lines from the door of this restaurant back to the start of the block. Eventually we decided that the food must be good enough to hang around in a queue for a while and after hearing a few recommendations from friends we decided to check it out.

This particular restaurant puts on a jazz band, so the wait wasn’t going to be too terrible. There must have been 25 people in the queue when we joined. How long did it take to get our pizza?

About 4 minutes.

A restaurant this popular has to have dozens pizza toppings, right? How many different types of pizza were there on the menu?

One.

By focusing on creating one style of pizza a day, this restaurant succeeds in being able to rapidly produce delicious food that people will queue around the block for. People sometimes come as much for the jazz band as they do for the pizza – after collecting their box they’ll sit on the street median eating pizza and listening to jazz. It’s not uncommon on a Saturday evening to see dozens of people sitting out.   That they can focus on creating this one type of pizza means the queue moves rapidly. Also, they only accept cash, and the pizza is priced to be easy to manage – 10 dollars for half a pizza, 20 dollars for a full one. Perhaps slightly more expensive than your standard pizza, but how did it taste?

Amazing

If you care about the software you write, then you’ve read “Getting Real” by 37signals. Think of this pizza restaurant the next time you’re creating software - Build less, but make the “less” amazing. Your customers will love you, and if you get it right they might just queue around the block.

Image via bpdragon@flickr

At the moment I’m going through the process of trying to get a business idea up and running with a friend.  After doing some cost analysis on our prototype, getting some initial research and determining costs on the (many) IP issues, and some excellent advice and mentoring from a very smart guy,  I managed to just about cram a few words in edgeways to a rather unimpressed business advisor from Enterprise Ireland.  While we didn’t walk away with an enormous sack of Nazi gold, he did give us the benefit of the doubt and recommended us for the Enterprise Start 2 program run at the Guinness Enterprise Center by the Dublin Business Innovation Centre.

Enterprise Start 2 Program

I can wholeheartedly recommend the program as a very practical, well-grounded course. Not only is the content and presentation excellent, but the program puts you in touch with people trying to launch their own ideas. The feedback and advice from other people in a similar situation is invaluable.

The program is broken into five modules which bring you through the process of identifying and addressing the unknown quantities in your business concept. The primary aim is to determine what value you will bring to a specific customer,  how many customers are in the market, and what sort of marketing and sales channels to use to target them. We started off with a prototype product (non-software), which wowed everyone we showed it to. The vast majority of people who see it, love it.

Therein lies part of the problem. While people love the concept, those same people are unlikely to fork out some of their hard-earned cash for it. Trying to drill down into a market which would consider the product a “must have” item didn’t yield a lot of success – any markets the process discovered are areas which we have little or no experience in.  So, after re-jigging the concept somewhat we’ve found a market segment that we understand, and who will happily give us money for the idea.

Finding a product / market fit

It’s just as well we hadn’t spent a year of product development before this revelation – which leads me to Eric Ries‘ fantastic presentation on how to build a “Lean Startup”.  The basic concept that he espouses is that while Waterfall development makes the assumption that both the problem and the solution are known entities, and Agile concedes that the solution is unknown and needs to adapt – neither is actually correct for a lot of startups. It is possible to build a working, bug-free product, and fail spectacularly as a business.  Without verifying your design ideas continually against the people who are actually going to use your product, you’re setting the scene for a party that nobody’s going to come to.