Seeds, Pods and Big Bets

Indeed is investing more and more in discovering and building new products.  As the product team discussed and evaluated our successes and failures – I found it difficult to communicate without some common terminology around the different types of innovation projects underway.

So here are a couple of terms I proposed that were intended to help the discussion.  In all cases I’m talking about trying to find new successful products – new sources of revenue that are pre product-market fit.  Initiatives to grow core business are outside of this discussion.

Seeds: Small projects; less than one quarter long; pursuing a solution to an opportunity; developing and piloting an MVP solution; gather some initial benchmark performance data.

Pods: Medium size projects; 3-4 quarters long; pursuing solutions to an opportunity; enough time to gather benchmark KPIs, to run some tests to see how the KPIs improve, and to try a few different approaches to the product.

Big Bets: Large projects; 6+ quarters long; strong commitment to a new business opportunity; try to launch and scale it quickly.

Projects of any size that have found product-market fit are no longer seeds, pods or big bets.  They’re new products and they need to be scaled as large and as efficiently as possible.  Also, these are not strictly stages.  These are different approaches to product discovery and development.

 

Seeds Pods Big Bets
Timeline 1 quarter 3-4 quarters 6-8 quarters
# of Engineers 1 engineer 2-3 engineers 3-5 engineers
Marketing Budget ~$15k $50k – $500k / qtr $250k – $2M / qtr
Purpose Pilot a specific solution to a specific problem.  Clarify an opportunity. Pursue a solution to a specific problem.  Some flexibility to pivot as the project proceeds. You believe you know the solution to a problem.  Go big and launch it.
Goals Go from zero to one. Quarterly goals.  A modest level of initial performance constrained by cost.  e.g. 10 hires at <$500/hire.  Improving significantly each quarter. Quarterly goals.  Showing growth, and performance improvement, constrained by cost.
Approvals Required None Senior Leadership approval Senior Leadership sponsor
Business Model Not established Establishing Should be clear

 

What are they good for?

Seeds

Seeds are useful because they bring an idea to life.  It’s fine to research an idea – like creating a site dedicated to jobseeker events – but the requirement to actually pilot something adds a level of fidelity to it.  It’s way easier to engage with something tangible – to both poke holes in the idea, and to see the full potential.  Show, don’t tell.  The nice thing about seeds is that they don’t need Senior Leadership support.  You can – and should – support seed projects that few people would bet on.

Seeds also support the creation of pods and/or big bets.  Both pods and big bets are a substantial investment of limited resources (product, engineering, sales).  Starting with a seed is a way to get some clarity and hopefully some real data before committing to a pod or big bet.

You should expect to stop after the seed phase and then make a decision about what the next step is.  That might mean putting the seed idea on the shelf.  It might mean gathering the resources to create a pod.  But it’s a mistake to continue at the seed level too long.  They need more resources (engineering, marketing) to have much of a chance of real success.

Pods

Pods are like a small funded startup with a year of runway.  They have a problem identified, they are building and launching a product.  Their goal is to find product-market fit, or to show a clear trajectory on the KPIs towards product market fit – before the $ runs out.  Lean startup approaches to product discovery and validation apply here.

For pods to be successful they require a certain amount of investment.  They require 2-3 engineers.  They require product marketing support – with a budget.  They might require some integration with other products.  And they require some Senior Leadership support to help secure resources.

Big Bets

If you think you’re onto something, if you’re committed to it – then go big.  Pros: bigger product faster.  Cons: what if you don’t have product-market fit?  Then you’re burning lots of resources as you try to find it.

Big bets require an engaged executive sponsor because of the significant investment involved.

Ok, I understand the proposed terminology, so what?

Companies should be pursuing a mix of these concurrently.  They all have a role to play.   You should make it easy for entrepreneurs in the org to pursue a seed project they’re excited about.  This could be an innovation rotation, a labs/skunkworks project, or the permission to launch a nights-and-weekends project.

I would propose that pods are one of the most efficient ways to find product-market fit; enough resources to actually try something out and learn, but with limited cost to the company.

Finally – You shouldn’t be afraid to place a limited number big bets on the most promising opportunities in your space.  Bigger risks but bigger rewards.

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Technical Risk vs Market Risk, Part II

Haters gonna hate.  Engineers gonna build.  Unsurprisingly, engineers are drawn to the challenges that interest them: reliability, scalability, and reduced technical risk.  In a product space where Market Risk dominates (see Part I), these are the wrong priorities.

A lot of startup advice makes sense when you realize it’s designed to address market risk not technical risk.  YCombinator basically exists to beat entrepreneurs over the head with this lesson – same thing with the Lean Startup methodology.

Even if you have a large amount of technical risk that needs to be addressed, don’t forget the market risk.

Consider the agile software development movement.  It began more than 20 years ago in the contract software development community, and was designed to address the high percentage of failed projects.  Since a lot of contract software development is for internal systems, there was an assumption of product-market fit embodied in the requirements.  However, all too often the resulting product failed to properly address the needs of the contracting organization.  It wasn’t that there was some technical invention missing – but rather that existing technology was shaped into a solution that failed to solve the problem.  The first principle behind the Agile Manifesto is:

Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.

This addresses technical risk – ensuring subsystems work together as early as possible.  It also addresses market risk by providing regular checkpoints to validate product-market fit (even when there is someone writing a check who says they know what their organization needs).

But be careful!  Agile approaches don’t necessarily address product-market fit.  In a product company, building something in sprints doesn’t protect you from building the wrong thing in the right way.  If you aren’t validating the market as you go along (or better yet before), you’re just addressing technical risk (which is good, but not sufficient).

I was delighted the other day by an engineering manager who really demonstrated an understanding of technical risk vs market risk.  When discussing whether to put together an engineering team to start building a product – or use a more lightweight rapid-prototyping and piloting approach (that may need to be replaced if the product succeeds), the engineer manager said:

“I know we can build something that scales, what I don’t know is if the product will succeed”

That pretty much sums up most startups these days.  So spend more time finding out if the product will succeed and trust in your ability to scale.

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Technical Risk vs Market Risk, Part I

If someone could build a teleportation device that worked, and that cost less than $2,000 to transport a person across the planet, they would be rich.

If someone were to build a bluetooth-controlled LED display that could be affixed to the back of a car and allow the driver to display messages from their phone, they might be rich.

What’s the difference between these two ideas?  In the first case, we know there’s a market for rapid transportation of people.  There’s evidence all around (cars, trains, airplanes).  What’s lacking is the technology – it’s not clear if the technology can be made to work.  In the second case we don’t know if there’s a market for communicating with the people behind you using your phone.  The gap is the market (or as some say, product-market fit) – it’s not clear if customers will adopt the product.

If you were thinking of investing in companies pursuing these two ideas, and you were talking about the risks, you would say the first has technical risk, and the second has market risk.

To figure out which kind of risk your product is facing, ask yourself: If the technology was available to buy off-the-shelf, cheap, and any startup could build it, would it be obviously successful?

  • High resolution mobile screen, with full web browsing capability (aka iPhone)?  Yes: tech risk.
  • Social network to share filtered photos (aka Instagram)?  No: market risk
  • Container that keeps vegetables fresh without losing any nutrients for a month? Yes: tech risk.
  • Macaroni & Cheese Flavored Ice Cream?  No: market risk

Interestingly, the rapid pace of technology has meant that more technology is available off-the-shelf (hardware and software), cheap and any startup can build it.  A lot of the lower hanging fruit of products with technical risk have been created; and new opportunities are now in reach. These new opportunities are for things that aren’t just better, faster, cheaper.  These are new opportunities to address unrealized needs; things you didn’t realize you would want or love.  I would put things like Twitter, Instagram, AirBnB, Pinterest and Snapchat in this category.  It wasn’t obvious that there was a market for these products.  And while they definitely had technical risk too, the bigger risk was market risk.

In the real world new products face a combination of technical risk and market risk.  But usually one dominates.  And I believe that we have moved into a world with more market risk than technical risk.  Take a look at the Unicorn List and ask yourself how many of these represent new technology that was risky, vs the application of technology into a new area with an uncertain market.

In part II I will show how this shift from technical risk to market risk explains the rise of Agile development and the Lean Startup movement.

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Inside Amazon.com, what’s the culture really like these days?

I’m inclined to agree that the recent New York Times article on Amazon “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace” appears pretty slanted and seems written to match a pre-conceived narrative.

I’ve never worked at Amazon, but I have former colleagues that I respect who work there.  A lot of the practices described in the article are much more benign in practice (e.g. systems for peer-feedback, meetings to calibrate the evaluation of employees, etc) and are pretty common among tech companies.

For those interested in these types of things, there’s a good counterpoint to the article written by Nick Ciubotariu, a current engineering manager at Amazon, here: An Amazonian’s response to “Inside Amazon: Wrestling Big Ideas in a Bruising Workplace”

However, Nick is writing from the perspective of a recent (18 mo tenure) engineering manager who is presumably very good at his job and well-suited to thrive.  Average performers, or folks in other departments such as warehousing, sales, marketing might have a very different experience.  Also, on occasion Nick has chosen his words very carefully, for example:

During my 18 months at Amazon, I’ve never worked a single weekend when I didn’t want to. No one tells me to work nights. No one makes me answer emails at night. No one texts me to ask me why emails aren’t answered. I don’t have these expectations of the managers that work for me, and if they were to do this to their Engineers, I would rectify that myself, immediately.

Notice that he doesn’t address whether he actually works weekends and nights.  Maybe he’s just a happy Amabot.  :-)

My final thought it that even if Amazon were as the NYTimes article described, it would be a legit approach to business:

“Amazon is O.K. with moving through a lot of people to identify and retain superstars,” said Vijay Ravindran, who worked at the retailer for seven years, the last two as the manager overseeing the checkout technology. “They keep the stars by offering a combination of incredible opportunities and incredible compensation. It’s like panning for gold.”

For more perspective, read the comments (on LinkedIn) on Nick’s rebuttal, or the NYTimes Article comments.

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First 24 hours with the Apple Watch

It’s a pain in the ass to pull a phone out of your pocket when you’re sitting down -especially in jeans.

I pull my phone out of my pocket 30 times/day just to interact with it for 5 seconds: when I get into my car and the kids want to listen to the Disney Pandora station; when I get a phone call to see who it’s from; when I need to see where my next meeting is; when I need to perform two-factor authentication to login; etc.

This is the first world problem that I was hoping the Apple Watch would solve.  My Apple Watch arrived last night and I’ve now had it for 24 hrs, and so far I’m happy.

Pros:

  • IMG_5558The Modular watch face comes configured to show the current or next item from your calendar.  It displays the meeting title, time and location.  My work week is 80% scheduled these days – so I’m frequently trying to figure out where I should be going next.  Having this available as a flick of the wrist is super handy.
  • Two factor auth works!  Duo Mobile works flawlessly.  I can login to my work VPN by providing my password and asking it to push the request to my watch.  The authentication notification comes to my watch and I can just press approve.  I don’t have to take my hands away from the keyboard.  For services that don’t support push – like IMG_5561GMail – the Duo Mobile watch app can generate passcodes with a few presses (open app, select the account).  This takes away some of the friction from two-factor auth.
  • Starting up a Pandora radio station works.  After buckling up, while my phone (in my pocket) is establishing the bluetooth connection to the car radio, I can open the Pandora app and click the “Do You Want to Build a Snowman” station, so my daughters and I can play name-that-tune and sing along on the ride to school.

Cons:

  • There’s a whole bunch of apps installed on the watch that I’ll never use and I cannot delete – e.g. stocks, weather.  They’re just taking up space and making it harder to find the few apps I want to use.
  • By default the Activity app is everywhere: in the glances, sending you updates every couple of hours, sending reminders to stand up, etc.  I had to go into the settings and turn off 6 different notifications to get it to shut up.  And I still can’t remove the app from my watch app screen.
  • By default all app notifications start out enabled on the Apple Watch.  And to make it even worse, audible notification is turned on.  So there I am in my first meeting of the day and Ping Ping goes my watch.  I suppose that if they defaulted these to off few people would enable them.  So instead this forces everyone who gets an Apple Watch to go through the full list of apps on their phone and disable notification mirroring on most of them.
  • I can’t help but wonder if this will open up a whole new channel for distracted driving.  Incoming texts, Tweets, Facebook notifications – all distractingly in your field of vision.  I wonder if they could add a driving mode that suppresses notifications while in-motion?

I bought the lower-priced Apple Watch Sport, which – at $400 – still makes it by far the most expensive watch I’ve ever purchased (also: the 3rd watch I’ve ever purchased).  Fortunately I can afford a $400 experiment with new technology.  For many this is still an unaffordable luxury.

What will be extremely interesting to see is what the replacement cycle looks like.  People hold onto their luxury watches for many years.  Will the Apple Watch be like an iPhone (replaced every year or two) or more like the iPad (replaced every 4 or 5 years)?

Only time will tell.

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Hey Geek, Attracted to Buddhism? You should check out Stoicism.

I have always been attracted to the Buddhism.  Although I don’t necessarily believe that we are part of a cycle of rebirth, I do believe that attachment leads to suffering, and I believe that the Noble Eightfold Path (chose carefully your words, your actions, your livelihood, etc) is a pretty good and worthwhile approach to living.

But I have never been comfortable with the Buddhist ideal that involves detachment from the world; that the most dedicated adherent (the monastic) doesn’t marry, raise children, or participate in civic or commercial life; that what we seek is liberation or nirvana – literally “blown out”, as in a candle – from our attachments.

I have also long been attracted to Stoicism, after reading The Art of Living by Sharon Lebell in college.  I think Stoicism gets a bad rap.  Probably because the word stoic – enduring pain and hardship without showing one’s feelings or complaining – looks at a Stoicism from the outside and assumes that people who practice it are long-suffering.  This couldn’t be further from the truth.  Lebell’s small book taught me that there are things under my control (my thoughts and actions), and things not under my control (the thoughts and actions of others, my health, my reputation), and that I have the power to alter my perspective on things not under my control.  If I practise this, I will experience less pain and hardship – not supress them.

I never realize what a significant impact that book had on my life until I recently picked up A Guide to the Good Life, by William B. Irvine.  Dr Irvine presents a brief history of Stoicism and explains the various Stoic psychological practices – and I identified with almost all of them.

For example, Negative Visualization is the practice of regularly stopping and reflecting upon the potential loss of things you value; imagining that you have lost your job, or your health, or your child.  Not worrying about these things, but imagining that these could happen in ways beyond your control, and that ultimately you would be okay.

I do this regularly.  Not usually about large things like the loss of a child – but about many things in small ways.  I regularly imagine not being able to afford a car, and having to bike or take public transit.  It would be a hinderance – I’d have less time with my kids before they have to go to bed, for instance – but we’d survive.  Or I imagine losing my ability to type – I wouldn’t be able to program, but I’d probably still find some way to be of value to my employer (maybe as a full-time tech interviewer, or a technology trainer).  This practise helped me recently when I  broke my middle finger quite badly by jamming it.  I looked at my crooked finger and imagined the worst – amputation – and realized I could be ok with it.  Lots of people used to lose fingers in accidents.  I’d be ok with 90% of my fingers, and this is not under my control.  This allowed me to view any outcome as ok, and approach the whole thing lightly.  It turned out I needed surgery, two pins, months of unpleasant therapy to get my working finger back.  But it didn’t take an ounce of joy away from my life.

The other practices he mentions are:

  • Don’t concern yourself with things that are out of your control.
  • Don’t reflect on the past and ask ‘what if’.
  • Practise self-denial.  (I’m not particularly experienced with this one)
  • Reflect upon the way you are living and behaving.

Dr Irvine also covers Stoic advice on how to handle various life situations such as social relations, insults, grief, fame, luxury, illness and death.  I particularly liked that he attempted to bring Stoicism into a modern context and how he shared examples from his own life and practice.

I was particularly delighted that Dr Irvine connected stoicism with Buddhism.  I have always thought there were important parallels.   Buddhism and Stoicism both focus on the impermanence of everything, and the reality of the present moment.  They both draw attention to the internal causes of our discomfort (our attachments) and both work to insert a gap between a stimulus (such as an illness or insult) and our response.  Both are extremely empowering and should lead to more tranquility.

At various points in my life I have thought that I am a failing, inadequate Buddhist.  Now I realize I am probably more of a failing, inadequate Stoic.

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Do More Faster, Part 1 – Idea and Vision

How can you accelerate your startup or new product?  Ship it, share it and get feedback.  “Many entrepreneurs are hesitant to share too much about what they’re doing and, even when they do, they hold back some of their thoughts even when talking to people who could be incredibly helpful to them.”  So say Nate Abbott and Natty Zola, co-founders of Everlater (acquired by MapQuest in 2012) in a great book Do More Faster: TechStars Lessons to Accelerate Your Startup by Brad Feld and David Cohen.

do-more-faster

The book, published in 2010, is a series of short essays for entrepreneurs on vision, managing people, building products, fundraising and staying sane.  Its a great startup resource, and a good introduction to TechStars.  The book is organized into themes, and today I’ll share a little about the first section of the book “Idea and Vision”.

Idea and Vision

“Most people think that the core of a startup is a singular amazing world-changing and earth-shattering idea. It turns out that this idea is almost always completely wrong. … Startups are about testing theories and quickly pivoting based on feedback and data.  Only through hundreds of small – and sometimes large – adjustments does the seemingly overnight success emerge.”  So begins the series of essays on Idea and Vision.

  • Trust Me, Your Idea Is Worthless (Tim Ferriss)

“Almost anyone can (and has!) come up with a great idea, but only a skilled entrepreneur can execute it. Skilled in this case doesn’t mean experienced; it means flexible and action-oriented.”

  • Start With Your Passion (Kevin Mann, founder Graphic.ly)

“Every single day I am excited to go to work. I get to create and innovate in a sector I love. … If you’re not passionate about what you’re doing, it won’t mean enough to you to succeed. Startup founders choose an insanely difficult path, so passion is a prerequisite.” 

  • Look for the Pain (Isaac Saldana, founder SendGrid)

“When you’re selling a solution to a problem and you find that nobody is saying no to your prices, you’ve found some serious pain. We’re building SendGrid to solve a very specific problem that I discovered just by paying attention.”

  • Get Feedback Early (Nate Abbott & Natty Zola, co-founders of Everlater)

“Entrepreneurs overvalue their ideas. They should be doing the opposite and shout about what they are working on from any rooftop they can find.  Getting feedback and new ideas is the lifeblood of any startup. There is no point in living in fear of someone stealing your idea.”

  • Usage Is Like Oxygen for Ideas (Matt Mullenweg, founder of WordPress)

“You can never fully anticipate how an audience is going to react to something you’ve created until it’s out there. That means every moment you’re working on something without it being in the public arena, it’s actually dying, deprived of the oxygen of the real world. By shipping early and often you have the unique competitive advantage of getting useful feedback on your product.”

“You think your busines is different, you’re going to have only one shot at press, and everything needs to be perfect for when TechCruch brings the world to your door. But if you have only one shot at getting an audience, you are doing it wrong.”

“In a rapid iteration environment, the most important thing isn’t necessarily how perfect code is when you send it out, but how quickly you can revert.”

  • Forget the Kitchen Sink (David Cohen, co-founder of TechStars)

“Most people use a particular service because it does one thing really, really well.”

“Small things, like a microscopic world, almost always turn out to be bigger than you think when you zoom in” (quoting Ev Williams)

  • Find That One Thing They Love (Darren Crystal, co-founder Photobucket)

“We noticed that people were doing something that we didn’t want them to do. …  At first, our natural instinct was to shut this behavior down because it’s not what we wanted our users to do. Luckily, we didn’t act on that instinct quickly. Instead, we started watching what our users were doing, and we discovered that most of them didn’t even care about the photo sharing site. Instead our services turned out to be a way for our users to show their photos on sites like eBay, LiveJournal, Craigslist, and social networking sites like MySpace.”

  • You Never Need Another Original Idea (Niel Robertson, founder of Trada)

“As long as I listen to my customers, I never need to have another original idea. It’s a simple concept. Go get customers, then listen. It really can be that simple. The agbility to listen is an important skill for any startup founder. We’re all accustomed to trying to persuade people to try our products, invest in our companies, or to listen to what we have to say. If you’re doing that with customers, you’re doing it backward. Too many startups build things that they think their customers will want. If you’re looking for creative ideas that can make your company better, simply spend time with your customers. It’s not rocket science, but I’m always surprised by how few companies are really good at doing this”

[I would note that you’re not listen to customers for solutions, you’re listening for their unsolved and important problems. They don’t define the solution, they identify the problem for you to solve.]

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