Showing posts from February, 2011

Reality Distortion Fields and Naive Entrepreneurs

by Lucas Vargas

First coined to describe Steve Jobs’ charisma and its effects on employees, the reality distortion field (RDF) term has been generalized to refer to the effect on an audience’s sense of level of difficulty. It makes the audience believe that accomplishing a mission, no matter how complicated it could be, is possible.

But then a question comes to my mind. Is it possible for an entrepreneur to apply a lean startup methodology if he creates an RDF? To answer this question, we must distinguish two types of entrepreneurs.

The first group consists of people who create the RDF but not necessarily believe that the mission can be fulfilled. They use the rhetoric and charisma to convince their interlocutors, motivate them to accept an idea, regardless of whether they believe it or not. I would classify them as smart. I believe that Steve Jobs is part of this group of people. He doesn’t really believe that all the products he develops are going to be a success. He takes advantage of…

The Arranged Marriage Mindset

by Mohammed Aaser

After studying entrepreneurship for two years at Harvard Business School (HBS), I’ve been trying to understand what makes some startups more successful than others.   Moreover, I’ve been especially interested in this since I launched a startup a few years back which I eventually had to shut down (
I believe that there are two factors that significantly increase the likelihood of success for startups.  These two factors are adopting an “Arranged Marriage” mindset, and the second is having an “Unfair Advantage”. This first post covers the Arranged Marriage mindset, and my next post will be about the Unfair Advantage.
The arranged marriage mindset assumes you don’t know much
Take a few seconds and think about what life would be like if you had to have an arranged marriage.  An arranged marriage would likely involve getting to know someone for a short period of time, and making a permanent marriage decision based on that.  You would not be able to live…

Fred Wilson Comes to Harvard Business School

by Jeff Bussgang, Flybridge Capital partner and HBS Rock Entrepreneur-in-Residence. Republished with permission from Jeff's blog.
It was a treat to host Fred Wilson of Union Square Ventures at Harvard Business School today - his first time attending a class at the school.  Fred, as most readers of this blog know, is a venture capital legend in the making and the investor in some of today's leading consumer Web properties, including Twitter, Zynga and Four Square.
Fred and I had a discussion in about lean start-ups and pattern recognition with the HBS students in Professor Tom Eisenmann's class "Launching Technology Ventures".  If you want to see some of the Tweets that came out of the class (imagine a professor encouraging students to grab their smart phones and live Tweet in class!) you can check them out here (#HBSLTV was the hashtag). A few takeaways from our session that I thought were particularly insightful:
Early on in a start-up, entrepreneurs should be hunch…

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Reality Check: How to Know When To Pull the Plug

by Private

What is the difference between persistence and denial? How many unsuccessful pivots do you need to go through before you should realise it’s time to call it quits?
This topic of knowing when to pull the plug is potentially one of the most difficult questions I’ve faced to date. Although our LTV classes have sparked multiple discussions on this topic, I unfortunately admit that we’ve yet to uncover the ideal answer to this question. In typical HBS fashion, the answer seems to be... “It depends...”
So what does it all depend on? Here’s my attempt categorize what I believe to be the critical consideration factors into three buckets; internal, external and personal factors
Internal How much cash (and thus time) is left in the bank? How does this relate to the type of business you’re in and its associated development costs and cycles?Are there still new untested ideas that could potentially be the light at the end of the tunnel? Would these ideas be merely be band-aids or do they ha…

The Cognitive Startup

by Sarah Dillard

“Listen to your customers, but don’t do what they say.” Eric Ries
I’ve been on Quora fewer than ten times.  My impressions of it are thus snapshots, and I have not grown gradually with it.  Each time I’ve visited Quora, I’ve been impressed by the quality of answers to questions about the Silicon Valley ecosystem.
But on the non-Silicon-Valley topics I care about, the questions still aren’t good, let alone the answers.  One only needs to browse through “microfinance” or “emerging markets” for ample evidence.  Meanwhile, each time I go back, the feature set is larger and more confusing—I have followers?  An inbox?  Notifications?  I thought I was just looking for an answer to a question, maybe one I didn’t even know I had.    
I’m not privy to Quora’s iterative process, but it feels like a company that is listening to its current user base rather than thinking about what it will feel like to join as a new user.  For Quora to “cross the chasm,” it will have to be intuitivel…

Business Development at Startups: Why Is It So Tough?

by Sreejita Deb

Partnerships with a large organization can offer a start-up access to a large base of users, validate the business model in the eyes of an investor and unlock revenue potential- the real question is how do you make it work? Deal making is much like recruiting the right team for your start-up. Most of all you want to make sure you’re watching for “fit”- right attitude, right skills and at the right time.
Let's start with attitude. Chances are limited that you'll find a large organization where processes are lean. In the absence of that, look for an organization where the culture is similar to a startup- organizations that are more entrepreneurial and most importantly that have a real sense of urgency about getting things done and not one which is slow and lets hierarchy overwhelm critical decisions.
“ Critical decisions” is a good segue to the next point-  the organization you want to partner with has to have a natural sense of urgency and you need to heighten it …

Infiltrating the Enterprise

by Katharine Nevins

Using customer development methods for enterprise products seems hard, but Dropbox is making it work

Lean startup wisdom says that a startup should get product in front of customers early and often in the process of customer development.  Feedback from real customers voting with their clicks and their dollars is the cheapest and most reliable user data you can get to improve the product, marketing, etc.  Customer development as we’ve been learning it, however, seems like it would be challenging to do when creating an enterprise product.

Unlike consumers, who are can be found cheaply through Twitter, Facebook, and Google Adwords, enterprise software buyers are relatively few and tough to access as cheaply.  Assuming that the startups can find enterprise decision-makers through their personal networks, LinkedIn, etc, getting real feedback from them might still be difficult.  My understanding (based on having worked on small business accounting package Quickbooks) is th…

When To Turn On The Sleaze

by Albert Chung

One of the most important issues facing an early stage startup is how to attract a user base. Thus far we’ve seen companies that have been reluctant to employ “sleazy” marketing tactics, presumably to not compromise the overall user experience. Below is a list of some sleazy marketing tactics that a startup could employ to drive early growth in both its user base and initial revenues. Some obviously register higher in sleaze factor* than others: Scam lead gen (i.e. Online quizzes turning into $9.99 monthly subscriptions without any notification). Sleaze factor: 10Shill posting (a la Whole Foods). Sleaze factor: 9.5Spamming people off purchased email lists. Sleaze factor: 8Selling email addresses to third parties. Sleaze factor: 8Installing difficult to remove adware. Sleaze factor: 7Crippling functionality unless users invite X numbers of friends. Sleaze factor: 6Legit lead gen (i.e. Netflix subscriptions). Sleaze factor: 5Incentivizing users with extra stuff (badges, st…

A Lean Approach to Career Planning

by Seth Moulton

Minimum Viable Product is the new fad of the start-up world: don’t design and build everything to a T—get something out to market as quickly, and as cheaply, as possible; use it to test hypotheses and learn from customers; and be able to iterate and pivot quickly on your way to the final product. Even in heavy investment world of clean-tech this idea is getting some traction; we heard from the co-founders of Aquion Energy that companies often risk spending way too much time and energy over-designing a product. 

In a way I think this theory can be applied to young people seeking careers of impact in the world; many of the MVP concept’s virtues for products might be applicable for “producing” a successful career in an individual. Some of the best advice I ever received was “whatever you do, do it well.” Success breeds success and opens doors, even if don’t yet find yourself in your ideal job. But the name of the game in career paths these days is also maximizing “pivots”—r…

A Sprinkling of Unvalidated Vision May Pay Long Term Dividends

by Charlotte Jepps

Conventional wisdom in ‘lean startup’ theory appears to prescribe the following formula:

1.      Sketch out an initial vision

2.      Test these ideas and the resulting products rigorously, engaging users to play with a ‘minimal viable’ version early on as a tool for learning

3.      Use these test results to pivot the product systematically to nestle it snugly into the chosen market niche, ensuring maximum engagement

4.      … and then scale scale scale!!

5.      Follow up with ongoing A/B tests and refinements

“Product-market fit” is the pivotal moment, at the end of step 3, that serves as the trigger for transition from research and development phases to customer acquisition and eventual monetisation.

While convincing as an approach to attain maximum user engagement at launch, I think it is important to remember that “fit” is less of a static formula, but a state of alignment that requires continuous maintenance over the lifetime of a user’s engagement. Whilst the “f…

Virtual Virality

by Natasha Prasad

In the summer of 2009, Zynga launched Farmville, an unglamorous, copycat game that no one could have predicted would one day become the most popular application on Facebook.  Today, Farmville has 80 million monthly users and yet, for all its successes, Zynga games continue to be called everything from “ludicrous” and “mind-numbing” to “spammy” and “exploitative”.  Love them or hate them, Zynga has exploded and the lean startup philosophy, it seems, is plastered all over it: customer-centric design, split-testing, rapid iteration, data driven decision-making and, perhaps most impressively, viral engineering.
As startups grapple with that fundamental challenge of generating long term value in excess of customer acquisition costs, Zynga, it appears, has found the Holy Grail.  Campaigns, SEO, partnerships, Facebook ads, CRM – none of these buzzwords come cheap and, with a non-zero churn rate, it is tough to extract sufficient value from a user before he/she jumps ship.  V…

The Early Show vs. The Late Show: Designing for Early Adopters vs. Mainstream Consumers

by Ernesto Humpierres

The first person that ever told me about BitTorrent was my father; he is a good example of how a previous generation is more tech savvy than the younger one. If you had been there when he first mentioned BitTorrent you would have thought not only did he like the technology, but also that he was selling it. He mentioned all the awesome things you could do with it and how many hours he was spending every night playing with it. But then came the demonstration, he opened something called Azureus (now Vuze) and started talking about seeding, tracking, leeching, share ratio, and other terms. By the end of his presentation I was lost, I had no idea how to use torrents and I really didn’t feel like understanding it anyways (to this day I’ve never used any BitTorrent client). All I really wanted was an uncomplicated Google style search bar.

My behavior in this situation is typical of a mainstream consumer, we really like what technology does, but we want it simple and pol…

Big PR Splashes: When Do They Make Sense?

by Charle Alfy

A big PR splash never hurts, right? It serves as good advertising, strong brand reinforcement, a good way to attract new customers and a strong enticement for good employees to join the company. It’s even better when there’s no hefty price tag attached if it is done through competitions like TechCrunch or prestigious press coverage. Plus, let’s face it; it’s a good feeling to see your own baby celebrated publicly!

Well, that’s not always true. The joys of an early celebration could lead to a long-term misery in two cases; if it was used at the time of the product launch instead of the marketing launch, or if the company is better off using a Judo Strategy in the face of strong incumbent competition.

Eric Ries draws that distinction between product launch and marketing launch in his interview with in May 2009. An early product launch is important to get the feedback of an early group of customers to inform the entrepreneur about how the product is perceived. Th…

Technical Skill: How Much Do You Need?

by Colt Stander
While I am in the works of creating my own accessories company, I have been questioned countless times, why aren’t you doing the designs if you were once a designer?  Similarly, often, entrepreneurs launching a website believe it best to learn how to code and then develop their own site rather than outsourcing this need.  In response, I question the focus of the entrepreneur and her evaluation of what she brings to the table in a founding team and promote her to do what she does best.
Similar to the comparative advantage of one country over another in worldwide economics, founding teams need to consider what skills and assets they have and the most efficient way of fulfilling their startup needs.  If I am able to make $50/hr doing strategic work, it is incredibly inefficient for me learn a new technical skill so I can complete a project which may have cost me $45/hr.  Even in the situation where the founder doesn’t have the funds to hire work to be done, other sources of…

Value Myths of Platform Businesses

by Rick Hansen
The Chicken-Egg Problem
The current obsession among tech start-ups is driving user adoption.  The emergence of social networks and platform-based businesses has pushed it to a fever pitch.  But which is more important: growth or profitability?  How do you value services that presumably become more valuable with network effects? The first lesson in investing is that if a value proposition appears to be too good to be true or really hard to understand, then it’s probably not true.  Recently John Pestana came to speak at HBS in an informal setting.  He’s semi-famous in tech circles as a co-founder of Omniture, which was acquired about a year and a half ago by Adobe for nearly $2B.  He mentioned that if ten years ago he had to list companies who might potentially buy Omniture, Adobe wouldn’t have cracked the top 50.  But John built a business which made money.  He didn’t want to worry about strategic buyers or synergies.  The point he focused most on was this: if you build a b…