Date post: | 21-Apr-2017 |
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Percent of businesses that fail
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
71%69%66%63%60%55%50%44%36%25%
http://www.statisticbrain.com/startup-failure-by-industry/
Still operating after 4 yearsFinance Insurance and Real Estate
Education and HealthAgriculture
ServicesWholesale
MiningManufacturing
ConstructionRetail
Transportation Communication and UtilitiesInformation 37%
45%
47%
47%
49%
51%
54%
55%
56%
56%
58%
http://www.statisticbrain.com/startup-failure-by-industry/
Why firms die
http://www.statisticbrain.com/startup-failure-by-industry/
Neglect,fraud,
disaster1%
Lack of industryexperience
13%Lack of managerialexperience
34%
Incompetence52%
Emotional Pricing Living too high for the business Nonpayment of taxes No knowledge of pricing Lack of planning No knowledge of financing No experience in record-keeping
Poor credit granting practices
Expansion too rapid Inadequate borrowing
practices
Carry inadequate inventory No knowledge of suppliers Wasted advertising budget
Known set of requirements
Unclear how to satisfy them
Build Test LaunchViable?Problemstatement
Adjust
Sprints
Unknown set of requirements
Possible problem space
Product/market
hypothesisTrial startup
Product/market
hypothesisTrial startup
Product/market hypothesis
Trial startup
Product/market hypothesis
Trial startup
You are herePIV
OT
Everyone’s idea is the best right?
People love this part!
(but that’s not always a good thing)
This is where things fall apart.
No data, no learning.
Most startups don’t know what they’ll be when they grow up.
Hotmailwas a database company
Flickrwas going to be an MMO
Twitter was a podcasting company
Autodesk made desktop automation
Paypalfirst built for Palmpilots
Freshbookswas invoicing for a web design firm
Wikipedia was to be written by experts only
Mitelwas a lawnmower company
First calculator(stepped reckoner)
One of the first to recognize the importance of
binary.
“I thought again about my early plan
of a new language or writing-system of
reason, which could serve as a
communication tool for all different
nations..”
The best of all possible worlds is the one in which the fewest
starting conditions produce the greatest variety of outcomes.
In a startup, the purpose of analytics is to iterate to product/market fit
before the money runs out.
A good metric is:
Understandable
If you’re busy explaining the data, you won’t be busy acting on it.
Comparative
Comparison is context.
A ratio or rate
The only way to measure change and roll up the tension between two metrics (MPH)
Behaviorchanging
What will you do differently based on the results you collect?
The simplest rule
badmetric.
If a metric won’t change how you behave, it’s a
h"p://www.flickr.com/photos/circasassy/7858155676/
Metrics help you know yourself.
Acquisition
Hybrid
Loyalty
70%of retailers
20%of retailers
10%of retailers
You are just like
Customers that buy >1x in 90d
Once
2-2.5per year
>2.5per year
Your customers will buy from you
Then you are in this mode
1-15%
15-30%
>30%
Low acquisition cost, high checkout
Increasing return rates, market share
Loyalty, selection, inventory size
Focus on
(Thanks to Kevin Hillstrom for this.)
Qualitative
Unstructured, anecdotal, revealing, hard to aggregate, often too positive & reassuring.
Warm and fuzzy.
Quantitative
Numbers and stats. Hard facts, less insight, easier to analyze; often sour and disappointing.
Cold and hard.
Exploratory
Speculative. Tries to find unexpected or interesting insights. Source of unfair advantages.
Cool.
Reporting
Predictable. Keeps you abreast of the normal, day-to-day operations. Can be managed by exception.
Necessary.
Rumsfeld on Analytics
(Or rather, Avinash Kaushik channeling Rumsfeld)
Things we
know
don’tknow
we know Are facts which may be wrong and should be checked against data.
we don’tknow
Are questions we can answer by reporting, which we should baseline & automate.
we knowAre intuition which we should quantify and teach to improve effectiveness, efficiency.
we don’tknow
Are exploration which is where unfair advantage and interesting epiphanies live.
MayAprMarFeb
Slicing and dicing data
Jan
0
5,000
Activ
e use
rs
Cohort: Comparison of similar groups along a timeline. (this is the April cohort)
A/B test: Changing one thing (i.e. color) and measuring the result (i.e. revenue.)
Multivariateanalysis Changing several things at once to see which correlates with a result.
☀☁☀☁
Segment: Cross-sectional
comparison of all people divided by
some attribute (age, gender, etc.)
☀
☁
January February March April May
Rev/customer $5.00 $4.50 $4.33 $4.25 $4.50Is this company growing or stagnating?
Cohort 1 2 3 4 5
January $5 $3 $2 $1 $0.5
February $6 $4 $2 $1
March $7 $6 $5
April $8 $7
May $9
How about this one?
Cohort 1 2 3 4 5
January $5 $3 $2 $1 $0.5
February $6 $4 $2 $1
March $7 $6 $5
April $8 $7
May $9
Averages $7 $5 $3 $1 $0.5
Look at the same data in cohorts
Lagging
Historical. Shows you how you’re doing; reports the news. Example: sales.
Explaining the past.
Leading
Forward-looking. Number today that predicts tomorrow; reports the news. Example: pipeline.
Predicting the future.
Correlated
Two variables that are related (but may be dependent on something else.)
Ice cream & drowning.
Causal
An independent variable that directly impacts a dependent one.
Summertime & drowning.
A leading, causal metric is a superpower.
h"p://www.flickr.com/photos/bloke_with_camera/401812833/sizes/o/in/photostream/
Is social action a leading indicator of donation?
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A Facebook user reaching 7 friends within 10 days of signing up (Chamath Palihapitiya)
If someone comes back to Zynga a day after signing up for a game, they’ll probably become an engaged, paying user (Nabeel Hyatt)
A Dropbox user who puts at least one file in one folder on one device (ChenLi Wang)
Twitter user following a certain number of people, and a certain percentage of those people following the user back (Josh Elman)
A LinkedIn user getting to X connections in Y days (Elliot Schmukler)
Some examples
(From the 2012 Growth Hacking conference. http://growthhackersconference.com/)
http://www.flickr.com/photos/bootbearwdc/1243690099/
Think subversively.
Aunshul Rege of Rutgers University, USA in 2009
Experienced scammers expect a “strike rate” of 1 or 2 replies per 1,000 messages emailed; they expect to land 2 or 3 “Mugu” (fools) each week. One scammer boasted “When you get a reply it’s 70% sure you’ll get the money” “By sending an email that repels all but the most gullible,” says [Microsoft Researcher Corman] Herley, “the scammer gets the most promising marks to self-select, and tilts the true to false positive ratio in his favor.”
1000 emails
1-2 responses
1 fool and their money, parted.
Bad language (0.1% conversion)
Gullible (70% conversion)
1000 emails
100 responses
1 fool and their money, parted.
Good language (10% conversion)
Not-gullible (.07% conversion)
This would be horribly inefficient since
humans are involved.
“It can scarcely be denied that the supreme goal of all theory is
to make the irreducible basic elements as simple and as few as possible without
having to surrender the adequate representation of a single datum of
experience.”
http://media.photobucket.com/image/einstein/derekabril/einstein_010.png
Eric’s three engines of growth
Virality
Make people invite friends.
How many they tell, how fast they
tell them.
Price
Spend money to get customers.
Customers are worth more than
they cost.
Stickiness
Keep people coming back.
Approach
Get customers faster than you
lose them.
Math that matters
Dave’s Pirate MetricsAARRR
AcquisitionHow do your users become aware of you?
SEO, SEM, widgets, email, PR, campaigns, blogs ...
ActivationDo drive-by visitors subscribe, use, etc?
Features, design, tone, compensation, affirmation ...
RetentionDoes a one-time user become engaged?
Notifications, alerts, reminders, emails, updates...
RevenueDo you make money from user activity?
Transactions, clicks, subscriptions, DLC, analytics...
ReferralDo users promote your product?
Email, widgets, campaigns, likes, RTs, affiliates...
Stage
EMPATHY I’ve found a real, poorly-met need that a reachable market faces.
STICKINESS I’ve figured out how to solve the problem in a way they will keep using and pay for.
VIRALITY I’ve found ways to get them to tell their friends, either intrinsically or through incentives.
REVENUE The users and features fuel growth organically and artificially.
SCALE I’ve found a sustainable, scalable business with the right margins in a healthy ecosystem.
GateTh
e fiv
e st
ages
http://ww
w.flickr.com/photos/tinfoilraccoon/197640807/
A lemonade stand’s business model is simple. Yours should be too.
Put this all togetherMetric/Assumption Value
Population of Canada 34.88M
Mobile phone percentage 80%
Mobile phones in Canada 27,904M
IOS percentage 15.5%
IOS phones in Canada 4.32M
IOS devices per account 3.1*
IOS accounts we can sell to in Canada (this is our Total Addressable Market) 1.39M
* I made this up. Don’t believe everything you read.
How much is the TAM worth?Metric/Assumption Value
TAM 1.39M
Percent we will claim 5%
Number of users 69,500
User lifetime 40 months
Revenue per month $5 per month
CLV $200
Expected total revenues $13.9M
* I made this up. Don’t believe everything you read.
Bottoms-upMetric/Assumption Value
Impressions (acquisition) 9,266,667Percent that install 10%Installs (activation) 926,667
Percent still using after 30 days 25%Become regular users (retention) 231,667
Percent that buy 30%Buy premium version (revenue) 69,500Percent that churn each month 2.5%
Customer lifespan 40Revenue per month 5
Customer lifetime value 200TAM value $13,900,000
Reality check
Bottoms-up (TAM) Value
Impressions (acquisition) 9.3 M impressions
Top-down (TAM) Value
IOS accounts we can sell to in Canada (this is our Total Addressable Market) 1.39 M users in Canada
You Shall Not Pass.
Six business model archetypes.
E-commerce SaaS MediaMobileapp
User-gencontent
2-sidedmarket
The business you’re in
Can you move enough customers through this cycle to make more money than you spend?
Make them refer others
Retain them
Get revenue from them
Acquire customers
Activate them
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version
(Which means eye charts like these.)
Customer Acquisition Cost
paid direct search wom inherent virality
VISITOR
Freemium/trial offer
Enrollment
User
Disengaged User
Cancel
Freemium churn
Engaged User
Free user disengagement
Reactivate
Cancel
Trial abandonment rate
Invite Others
Paying Customer
Reactivationrate
Paid conversion
FORMER USERS
User Lifetime Value
Reactivate
FORMER CUSTOMERS
Customer Lifetime Value
Viral coefficientViral rate
Resolution
Support data
Account Cancelled Billing Info Exp.
Paid Churn Rate
Tiering
Capacity Limit
Upselling rate Upselling
Disengaged DissatisfiedTrial Over
Model + Stage = One Metric That Matters.
One Metric That Matters.
The business you’re in
E-Com SaaS Mobile 2-Sided Media UCG
Empathy
Stickiness
Virality
Revenue
ScaleThe
stag
e yo
u’re
at
Moz cuts down on metricsSaaS-based SEO toolkit in the scale stage. Focused on net adds.
Was a marketing campaign successful? Were customer complaints lowered? Was a product upgrade valuable?
Net adds up:
Can we acquire more valuable customers? What product features can increase engagement? Can we improve customer support?
Net adds flat:
Are the new customers not the right segment? Did a marketing campaign fail? Did a product upgrade fail somehow? Is customer support falling apart?
Net adds down:
Metrics are like squeeze toys.
http://www.flickr.com/photos/connortarter/4791605202/
Empathy
Stickiness
Virality
Revenue
Scale
E-commerce SaaS MediaMobile
appUser-gencontent
2-sidedmarket
Interviews; qualitative results; quantitative scoring; surveys
Loyalty, conversion
CAC, shares, reactivation
Transaction, CLV
Affiliates, white-label
Engagement, churn
Inherent virality, CAC
Upselling, CAC, CLV
API, magic #, mktplace
Content, spam
Invites, sharing
Ads, donations
Analytics, user data
Inventory, listings
SEM, sharing
Transactions, commission
Other verticals
(Money from transactions)
Downloads, churn, virality
WoM, app ratings, CAC
CLV, ARPDAU
Spinoffs, publishers
(Money from active users)
Traffic, visits, returns
Content virality, SEM
CPE, affiliate %, eyeballs
Syndication, licenses
(Money from ad clicks)
Baseline: 5-7% growth a week
“A good growth rate during YC is 5-7% a week,” he says. “If you can hit 10% a week you're doing exceptionally well. If you can only manage 1%, it's a sign you haven't yet figured out what you're doing.” At revenue stage, measure growth in revenue. Before that, measure growth in active users.
Paul Graham, Y Combinator
• Are there enough people who really care enough to sustain a 5% growth rate?
• Don’t strive for a 5% growth at the expense of really understanding your customers and building a meaningful solution
• Once you’re a pre-revenue startup at or near product/market fit, you should have 5% growth of active users each week
• Once you’re generating revenues, they should grow at 5% a week
It’s oxygenYou need customers to keep learning It’s a substitute for solvency
Photo by Paul Miller on Flickr. https://w
ww
.flickr.com/photos/94674772@
N03/8788576498
Baseline: 10% visitor engagement/day
Fred Wilson’s social ratios
30% of users/month use web or mobile app
10% of users/day use web or mobile app
1% of users/day use it concurrently
Baseline: 2-5% monthly churn• The best SaaS get 1.5% - 3% a month. They have multiple Ph.D’s
on the job.• Get below a 5% monthly churn rate before you know you’ve got a
business that’s ready to grow (Mark MacLeod) and around 2% before you really step on the gas (David Skok)
• Last-ditch appeals and reactivation can have a big impact. Facebook’s “don’t leave” reduces attrition by 7%.
Baseline: Calculating customer lifetime
25%monthly churn
100/25=4The average
customer lasts 4 months
5%monthly churn
100/5=20The average
customer lasts 20 months
2%monthly churn
100/2=50The average
customer lasts 50 months
Baseline: CAC under 1/3 of CLV• CLV is wrong. CAC Is probably wrong, too.• Time kills all plans: It’ll take a long time to find
out whether your churn and revenue projections are right
• Cashflow: You’re basically “loaning” the customer money between acquisition and CLV.
• It keeps you honest: Limiting yourself to a CAC of only a third of your CLV will forces you to verify costs sooner.
Lifetime of 20 mo.$30/mo. per
customer$600 CLV
$200 CACNow segment those users!
1/3 spend
Draw a new linePivot orgive up
Try again
Success!
Did we move the needle?
Measure the results
Make changes in production
Design a test
Hypothesis
With data:find a
commonality
Without data: make a good
guess
Find a potential improvement
Draw a linePick a KPI
The minimum needed to test the core idea
Survey owner adds recipient to groupSurvey owner asks question
Recipient reads survey questionRecipient responds to questionRecipient sees survey results
(Later, if needed…)Recipient visits site; no password!Recipient does password recovery
One-time link sent to emailRecipient creates password
Recipient can edit profile, etc.
Survey owner adds recipient to group
Survey owner asks question
Recipient gets invite
Recipient reads survey question
Recipient responds to question
Recipient installs mobile app
Recipient creates account, profile
Recipient sees survey results
Recipient can edit profile, etc.
10-2
5% R
ESPO
NSE R
ATE
70-9
0% R
ESPO
NSE R
ATE
Gut instinct (hypothesis)Professional photography helps AirBnB’s business
Candidate solution (MVP)20 field photographers posing as employees
Measure the resultsCompare photographed listings to a control group
Make a decision Launch photography as a new feature for all hosts
Draw a new linePivot orgive up
Try again
Success!
Did we move the needle?
Measure the results
Make changes in production
Design a test
Hypothesis
With data:find a
commonality
Without data: make a good
guess
Find a potential improvement
Draw a linePick a KPI
“Gee, those houses that do well look really
nice.”
Maybe it’s the camera.
“Computer: What do all the
highly rented houses have in
common?”
Camera model.
With data:find a commonality
Without data: make a good guess
Circle of Moms: Not enough engagement• Too few people were
actually using the product
• Less than 20% of any circles had any activity after their initial creation
• A few million monthly uniques from 10M registered users, but no sustained traction
• They found moms were far more engaged • Their messages to one another were on average 50% longer • They were 115% more likely to attach a picture to a post they wrote • They were 110% more likely to engage in a threaded (i.e. deep)
conversation • Circle owners’ friends were 50% more likely to engage with the circle • They were 75% more likely to click on Facebook notifications • They were 180% more likely to click on Facebook news feed items • They were 60% more likely to accept invitations to the app
• Pivoted to the new market, including a name change • By late 2009, 4.5M users and strong engagement • Sold to Sugar, inc. in early 2012
Landing page design A/B testing
Cohort analysis General analytics
URL shortening
Funnel analytics
Influencer Marketing
Publisher analytics
SaaS analytics
Gaming analytics
User interaction Customer satisfaction KPI dashboardsUser segmentation
User analytics Spying on users
(http://csinvesting.org/2012/01/06/fortune-500-extinction/)
F500 Life Expectancy
Growth by entering a new business 95
% failCorporate
Strategy Board
99% failClay
Christensen
75 years
15 years
1950 2010...
mikemace.com
The slow death of a market leader.
Revenue over timeThis is what most managers track. Note that sales keep rising (making you feel safe) until you run off the edge of the cliff.
“Let’s cut prices to accelerate our growth.”
“Time to enter the mainstream. Cut prices.”
“We may miss the quarter. Let’s do a price promotion.”
“That wasn’t supposed to happen. We’ll have to lay some people off.
Gross margin percentDeclining profit per unit (gross margin) is actually your best signal of trouble.
The adoption curve Here’s where you actually are, but you don’t know it because you can’t draw the curve until after the market saturates.
Early adopters
Late adopters
Clay Christensen, The Innovator’s Dilemma
Cost
per
MB
$1000
$100
$10
$1
Time
14”
Mainfra
me
8”
Minicom
puter
5.25”
Deskto
p
3.5”
Noteboo
k
Technologies outstrip what the market needs, driven by feedback from the “best” current customer.
Clay Christensen, The Innovator’s Dilemma
$1000
$100
$10
$1
Time
8” 5.25”
High end
customerLow end
customer
The new market has different criteria for success, which are uninteresting to incumbents.
Clay Christensen, The Innovator’s Dilemma
$1000
$100
$10
$1
Time
Storagecapacity
Portability
Sometimes this has unintended consequences
Clay Christensen, The Innovator’s Dilemma
$1000
$100
$10
$1
Time
Smaller disc size means less vibration impact, leading to greater density, increasing storage capacity
This alone explains the collapse of modern print media.
Circulation, annually Clicks, instantaneously
Letters to the editor, weekly Hashtags, always
The Attention Economy“What information consumes is rather obvious: it consumes the attention of its recipients.
Hence a wealth of information creates a poverty of attention, and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.”
(Computers, Communications and the Public Interest, pages 40-41, Martin Greenberger, ed., The Johns Hopkins Press, 1971.)Herbert Simon
http://www.flickr.com/photos/ebolasmallpox/3733059220/
Software is eating the world.
An economic order quantity of one.
Crafted Mass-produced Automated Digital
Quantity Few Many Some One
Cost High Low Medium Free
Lead time Small Large Medium None
Self-service Medium None Some Lots
Customization High None Some Lots
• Cloud computing • Social media • 3D printing • Per-customer
analysis • Mobile tracking • Etc...
This is why software is eating the
world.
Sustainable competitive advantage allows for inertia and power to build up along the lines of
an existing business model, which will soon die.
Instead, seek transient competitive advantage.
Rita Gunther McGrath, The End of Competitive Advantage
http://www.flickr.com/photos/art_es_anna/288880795/
The problem was framing:
Blockbuster thought it was in the video store management business. Netflix realized it was in the entertainment delivery business.
• $1B invested in Nook • $475M operating loss
in April 2013 • CEO gone
First mover advantage happens long before the market emerges.
Capital cycles don’t fit the short, iterative nature of startup uncertainty
12 month budgeting cycle; annual plan. Future based on past.
Agile, scrum, lean iterations. Today’s model. No evidence about the future.
Project
Project
Project
ProjectProject
Project
Project
Project
Project
Project
Project
Project
(Requires budget insulation)
“Using Cue, you can tell if someone has the ‘flu in 10 minutes.”
http://tiltthewindmill.com/when-can-becomes-must/
“Using Cue, you must tell if someone has the ‘flu in 10 minutes…
…or Johnny can’t come on the school trip.”
When you’re a startup your goal is to find a sustainable,
repeatable business model.
When you’re a big company your goal is to perpetuate one.
Intrapreneur: Someone working to produce
disruptive change in an organization that has already found a sustainable,
repeatable business model.
Business model vs. company stage
Company size/ageEarly stage Big/incumbent
B2B
Targ
et
mar
ket
B2C
Less
WoM
M
ore
form
al d
ecis
ions
Slower cycle timeMore legacy constraints
It is way too easy to mix these up.
Intrap
reneu
rs
In a startup, the purpose of analytics is to iterate to product/market fit
before the money runs out.
Companies that use data-driven analytics instead of intuition have 5%-6% higher productivity and profits than competitors.
Brynjolfsson, Erik, Lorin Hitt, and Heekyung Kim. "Strength in Numbers: How Does Data-Driven Decisionmaking Affect Firm Performance?." Available at SSRN 1819486 (2011).
2011 MIT study of 179 large publicly traded firms
The fundamental shift from Big Data
Ask question
Defineschema
Collectdata
Answerquestion
Refine problem
Collect data
Ask question
Emergent schema
Explore data
Answerquestion
“Collect first; ask questions later.”
Three kinds of innovation
Sustain/core(optimizing for more of the same)
Innovate/adjacent(introduce nearby product,
market, or method)
Disrupt/transformative(Fundamentally changing
the business model)
Improve along current metrics...
...or alterthe rate of improvement
Switch to a new value model
Change the businessmodel entirely
Many models for enterprise innovation
Core Adjacent TransformativeDo the same thing better.
Nearby product, market, or method.
Start something entirely new.
Regionaloptimizations.
Innovation, go-to-market strategies.
Reinvent the business model.
• Get there faster • Smaller batches • Solution, then testing • Increased accountability
• Customer development • Test similar cases • Parallel deployment • Analytics & cycle time
• Fail fast • Skunkworks/R&D • Focus on the search • Ignore the current
model & margins
Another way to look at it
Core Adjacent TransformativeKnow the problem
(customers tell you it) Know the solution
(customers/regulations/norms dictate it.)
Know the problem (market analysis)
Don’t know the solution (non-obvious innovation
confers competitive advantage.)
Don’t know the problem (just an emerging need/
change) Don’t know the solution.
Waterfall:Execution matters
Agile/scrum:Iteration matters
Lean Startup: Discovery matters
http://www.nasa.gov/images/content/365835main_airplane_noise_qtd2_3024x2016.jpgEngine as a service
“Efficiency is tied to analytics. We’ll still look for new materials, or for the physics of devices, but the analytics ... is
what’s really untapped.”
Currentstate
Business optimization (five mores)
Product,market,method
innovation
Business model
innovation
You can convince executives of this
because some of it is familiar.
This terrifies them because it eats the current business.
A three-maxima model of enterprise innovation
Improvement Adjacency RemodelingDo the same,only better.
Explore what’snearby quickly
Try out newbusiness models
Lean approaches apply, but the metrics vary widely.
Sustain/core
Innovate/adjacent
Disrupt/transformative
Sustaining Adjacent DisruptiveNext year’s car Electric car,
same dealerOn-demand, app-based
car service
Sustaining innovation is about more of the same. (says Sergio Zyman)
More things
To more people
For more money
More often
More efficiently Supply chain optimization Per-transaction cost reduction
Loyal customer base that returns Demand prediction, notification
Maximum shopping cart Price skimming/tiering
Highly viral offering Low incremental order costs
Inventory increase Gifting, wish lists
Blizzard extends the lifespan of WOW
Earlyadopters
Rapid
growth
Marketsaturation
The infamous S-curve
(Product lifecycle, Bass diffusion curve, etc.)
Blizzard extends the lifespan of WOW
Fixing this: sustaining growth with novelty
Product & market innovation (“New & improved!”)
Blizzard extends the lifespan of WOW
WOW
BurningCrusade
Wrath ofthe Lich King
Mists ofPandariaCataclysm
Warlords of Draenor
Most of your innovation will be adjacent or sustaining.
Question marks!(low market share, high growth rate)
May be the next big thing. Consumes investment, but
will require money to increase market share.
Stars!(high growth rate, high market share)
What everyone wants. As market invariably stops
growing, should become cash cows.
Dogs!(low market share, low growth rate)
Barely breaks even, may be a distraction from better
opportunities. Sell off or shut down.
Cash cows!(high market share,
low growth rate) Boring sources of cash, to be milked but not worth additional investment.
G
row
th ra
te
Market share
Pivot to increasemarketshare
throughvirality,
attention
Pivot toincrease growth
rate throughdisruption
Pivot toredefine problem/solution through
empathy
Milk withrevenue
optimization asgrowth slows
If you don’t like this, go launch a startup.
Software, experimentation, and iterative cycles of learning help you
get to the local maximum better and faster. That’s a good thing.
But it’s not the only thing.
Amazon Web Services and the server value network
Server computing
• Density • Heat
• GHz • MIPS
Cloud computing
• Instances • Objects
• Spinup time • Scaleout
Capex, financing, TCO, ROI
Opex, demand, time to result
CIO, enterprise IT CTO, coder, app owner, line of business, startup
Valuecriteria
Money
Buyer
Selling the same product to an adjacent market in the same way.
Of P&G’s 38 brands, only 19 were sold in Asia as of 2011 Market expansion is seldom selling the same thing to new people. In Asia, P&G needed to
Align pricing with novelty (prestige, mass-tige, over-the-counter) Change consumer expectations (moving from dilutes to concentrates) Adjust positioning and ingredients such as white fungus, ginseng, and the parasitic cordyceps
Selling the same product to the same market in a new way.
The biggest innovation in logistics of the 20th century.
http://www.flickr.com/photos/photohome_uk/1494590209
Changing the method of C2C classifieds
A blend of who, what, how Classified C2C sales (same “what”) Strictly for Japanese women (targeted “how”) New how (phone is capture, display, payment, transaction)
Did 100 interviews w/target users before launch
Key insight: Japanese women sell their entire wardrobe twice in their lives
5,000 and 10,000 sales in first month
10% commission fee Average price of items is pretty low, at around 2,000 to 3,000 yen (or $22 to $34)
Not an auction: seller decides price
Mobile-only model Phone is payment, storefront, and even a way for sellers to build their catalog
http://www.sffashtech.com/2012/10/10/a-free-market-fashion-app-exclusively-for-women-japan/
(At this point, observant Intrapreneurs should be asking, should P&G be in
the house cleaning business?
And that would be transformative.)
Transformative innovation is about taking a leap, changing more than one dimension simultaneously in search of
a new business model.
If sustaining, incremental innovation produces linear growth, then
disruptive, transformative innovation produces exponential growth.
Significant market 850K full-time law enforcement officers in the US; 700K state/local; 525K patrol officers 130M incident reports/y. 70M new incidents; 200K involve use of force Only 31% of local police agencies keep computer files on use-of-force incidents
Strong product benefits Exonerates the officer 96% of the time. 47% percent increase in charges and summons (2007)
Patrol officers spend 15-25% of their time writing incident reports, recorded evidence reduces this by 22%, meaning 50m more on patrol
Challenges New business model
Pricing unclear SaaS offering
Compliance and governance Unions, regulation, chain of evidence
Changing the current model (radio is everything)
Transformative incubation: Taser evidence.com
Part four: What works for large companies
(A bagful of tricks from agitators in companies of all sizes.)
The job of an intrapreneur is to identify an adjacent market, product,
or method that conforms to organizational filters.
It is not to improve the current product, market, or method.
Also: a pariah. Successful innovators share certain attributes.
Bad listener: Wilfully ignore feedback from your best customers.
Cannibal: If successful, destroying existing revenue streams.
Job killer: Automation & lower margins are your favorite tools.
Security risk: Advocate of transparency, open data, communities.
Narcissist: Worry constantly about how you’ll get attention.
Slum lord: Sell to those with less money, deviants, and weirdos.
Know what kind of innovation you’re after.
New
CurrentCurrent New
Market
Product
Penetrate:Increase revenues,
market share, product quality, brand differentiation.
Marketing.
Market development: Sell existing products
to new markets, segments, uses. Export & license.
Product development:
Invent new products for your market. R&D,
enhancements. Acquisition.
Startup:New products for new markets. New rules,
business units, organizational
structure. Innovation.
Based on H. Igor Ansoff’s matrix
Increase
d risk o
f politic
al fallo
ut (and grea
t succe
ss!)
Innovation portfolios at big companiesCore Adjacent Transformative
70% 20% 10%
Inve
stm
ent
70%20%10%Retu
rn
Use outliers and missed searches to hunt for good ideas & adjacencies
(Multi-billion-dollar hygiene product company)
1/8 men have an incontinence issue. 1/3 women do. When search results show a significant number of men searching, this suggests the adjacent (male) market is underserved.
Frame it like a studyProduct creation is almost accidental. Unlike a VC or startup, when the initiative fails the organization still learns.
http://www.flickr.com/photos/creative_tools/8544475139
When in doubt, collect dataFrom tackling the FTA rate to visualizing the criminal justice supply chain.
Use data to create a taste for data
Sitting on Billions of rows of transactional data David Boyle ran 1M online surveys Once the value was obvious to management, got license to dig.
4” e-ink display with name and specialty. Badge scans barcode and gets specs; checks inventory; enters data on a touch screen.
Smart Badge
Today: Workers see their own productivity.Coming soon: comparing yourself to 400,000 other employees.Ultimately: Learning what (and who) works well.
Data Exhaust
Tesco connects its workforce
Understand hidden constraints
That pencil story is a myth. Graphite is conductive and explosive. The Minimum Viable Product is Viable for a reason.
http://www.flickr.com/photos/bootbearwdc/1243690099/
Think subversively.
Run it as a consulting business first.
(Just don’t get addicted to it. Your goal is to learn and overcome integration challenges and find the 20% of features that 80% of the market
will pay for.)
Convince your boss she asked for this
Draw a new linePivot orgive up
Try again
Success!
Did we move the needle?
Measure the results
Make changes in production
Design a test
Hypothesis
With data:find a
commonality
Without data: make a good guess
Find a potential
improvement
Draw a linein the sand
Pick a KPI
Focus on the desired behavior, not just the information.
http://www.psychologytoday.com/blog/yes/200808/changing-minds-and-changing-towels
26% increase in towel re-use with an appeal to social norms; 33% increase when tied to
the specific room.
Energy Conservation “Nudges” and Environmentalist Ideology: Evidence from a Randomized Residential Electricity
Field Experiment - Costa & Kahn 2011
The effectiveness of energy conservation “nudges” depends on an individual’s political ideology ... Conservatives who learn that their
consumption is less than their neighbors’ “boomerang” whereas liberals reduce their consumption.
Tesla
http://www.hdwallpapersinn.com/wp-content/uploads/2012/12/600-tesla.jpg
Twitter’s 140-character limit isn’t arbitrary. It’s
constrained by the size of SMS (160
characters) and username (20 characters.)http://i.i.cbsi.com/cnwk.1d/i/tim/2011/11/18/
sms_screen_twitter_activity_stream_270x405.png
Figure out how to translate it back to a simple model that fits the company’s
existing value model.
If your company dies, this is why.
Software Platform Merchandising User-generated content Marketplace Media/content Service
Oracle’s accounting suite Amazon’s EC2 cloud Thinkgeek’s retail store Facebook’s status update AirBnB’s list of house rentals CNN’s news page A hairstylist
Prod
uct
type
What the startup does in return. May be a product or service; may be hardware or software; may be a mixture.
One-time transaction Recurring subscription Consumption charges Advertising clicks Re-sale of user data Donation
Single purchase from Fab Monthly charge from Freshbooks Compute cycles from Rackspace PPC revenue on CNET.com Twitter’s firehose license Wikipedia’s annual campaign
Reve
nue
mod
el How the startup extracts money from its visitors, users, or customers.
Paid advertising Search Engine Mgmt. Social media outreach Inherent virality Artificial virality Affiliate marketing Public relations App/ecosystem mkt.
Banner on Informationweek.com High pagerank for ELC in kid’s toys Active on Twitter i.e. Kissmetrics Inviting team member to Asana Rewarding Dropbox user for others’ signups Sharing a % of sales with a referring blogger Speaker submission to SXSW Placement in the Android market
Acqu
isitio
nch
anne
l
How the visitor, customer, or user finds out about the startup.
Hosted service Digital delivery Physical delivery
Salesforce.com’s CRM Valve purchase of desktop game Knife shipped from Sur La TableDe
liver
ym
odel
How the product gets to the customer.
Simple purchase Discounts & incentives Free trial Freemium Pay for privacy Free-to-play
Buying a PC on Dell.com Black Friday discount, loss leader, free ship Time-limited trial such as fitbit Premium Free tier, relying on upgrades, like EvernoteFree account content is public, like Slideshare Monetize in-app purchases, like Airmech
Sellin
gta
ctic What the startup does to
convince the visitor or user to become a paying customer.
Acquisitionchannel
Sellingtactic
Revenuemodel
Producttype
Deliverymodel
Business aspect
Flipbookpage(s)
Inherent virality. Artificial virality.
Sharing files with others. Free storage when others sign up.
Freemium. Limited-capacity accounts are free; subscribe when you need more.
Recurring subscription. $99/year, monthly fees, enterprise tiers.
Platform. Storage-as-a-service with APIs, collaboration, synchronization tools.
Hosted service. Digital delivery.
Cloud storage, web interface. Desktop client software.
Dropbox example
Use the right proxies for B2B productsStage Startup metrics Intrapreneur metrics
EmpathyCustomers interviewed (needs &
solutions), assumptions quantified, TAM, monetization possibility
Non-customers interviewed; assumptions quantified, constraints identified, TAM,
disruption potential
Stickiness Churn, engagement Support tickets, integration time, call center data, delays
Virality Viral coefficient, viral cycle time Net Promoter Score, referrals, case study willingness
Revenue Attention, engagement Billable activity; signed LOIs; pilot programs; after-development profitability
Scale Automation Contribution, training costs, licensing
Tomorrow’s company: Running parallel businesses
Innovation Sustaining/core Adjacent Transformative/disruptive
Core action Optimizing/improving Experimenting Searching/
inventing
Focus on Known metrics Risk removal Assumption validation
Which will live Within current business unit
Incubated, then integrated
As new/separate entities
Problem is Known Known Unknown
Solution is Known Unknown Unknown
I need a carA.
I should buya carB.
It should bea hybridC.
I should buya Honda CivicD.
Everyone in the world
People who want to drive
Prospective car buyers
People looking for a hybrid
Honda Civic Hybrid owners
I need a carA.
I should buya carB.
It should bea hybridC.
I should buya Honda CivicD.
Everyone in the world
“Isn’t it time you got out of the city?” campaign showing how cars make nature accessible & ridiculing
urban hipsters.
Ads showing how cars are needed any time (pregnancy, errands, urgent
business) and how a car is a “personal assistant.”
Urgency (“every time you drive a non-hybrid car you kill the planet a little”) and testimonials from buyers
who’ve saved money.
Honda branding ads and model-specific promotions.
Follow-up satisfaction campaign to encourage buyers to tell their friends
People who want to drive “I need a vehicle to get around, be productive, and enjoy my life.”
Prospective car buyers “I want to own a car because it’s convenient; it’s a personal relationship; I don’t trust others.”
People looking for a hybrid “I want to save money and fuel. I also care about the environment and want to be seen as ‘green’.”
Honda Civic Hybrid owners
I need a carA.
I should buya carB.
It should bea hybridC.
I should buya Honda CivicD.
Everyone in the world
People who want to drive “I need a vehicle to get around, be productive, and enjoy my life.”
Prospective car buyers “I want to own a car because it’s convenient; it’s a personal relationship; I don’t trust others.”
People looking for a hybrid “I want to save money and fuel. I also care about the environment and want to be seen as ‘green’.”
Honda Civic Hybrid owners
Those who don’t need cars • I’m too young to drive • I’m too old to drive • I can walk or take public
transit
Car users who won’t buy • It’s too expensive for me • I will use a shared car service • It’ll get stolen
Those who won’t buy hybrids • Hybrids are gutless • Batteries are toxic & explosive • In the end it costs more than
it saves
I will buy another brand • I buy domestic • I’ve always driven a VW • Toyotas are reliable • I want something prestigious
I need a carA.
I should buya carB.
It should bea hybridC.
I should buya Honda CivicD.
Everyone in the world
People who want to drive “I need a vehicle to get around, be productive, and enjoy my life.”
Prospective car buyers “I want to own a car because it’s convenient; it’s a personal relationship; I don’t trust others.”
People looking for a hybrid “I want to save money and fuel. I also care about the environment and want to be seen as ‘green’.”
Honda Civic Hybrid owners
Those who don’t need cars • I’m too young to drive • I’m too old to drive • I can walk or take public
transit
Car users who won’t buy • It’s too expensive for me • I will use a shared car service • It’ll get stolen
Those who won’t buy hybrids • Hybrids are gutless • Batteries are toxic & explosive • In the end it costs more than
it saves
I will buy another brand • I buy domestic • I’ve always driven a VW • Toyotas are reliable • I want something prestigious
Sponsor a driving school
“Give the gift of driving” campaign for grandparents.
Financing, cashback
Sell to carshares; underscore their limitations
PR on dangers of commuting, pedestrian deaths
Theft warranty, tracking services, high-end locks
Independent tests, standard metrics (0-60 in X)
Lab research, studies
ROI calculator; replacement programs
Prove Honda hires US workers
“Time to leave Germany” ads
Spontaneous accel. stories
Premium brand (Acura)
I need a carA.
I should buya carB.
It should bea hybridC.
I should buya Honda CivicD.
Everyone in the world
“Isn’t it time you got out of the city?” campaign showing how cars make nature accessible & ridiculing
urban hipsters.
Ads showing how cars are needed any time (pregnancy, errands, urgent
business) and how a car is a “personal assistant.”
Urgency (“every time you drive a non-hybrid car you kill the planet a little”) and testimonials from buyers
who’ve saved money.
Honda branding ads and model-specific promotions.
Follow-up satisfaction campaign to encourage buyers to tell their friends
People who want to drive “I need a vehicle to get around, be productive, and enjoy my life.”
Prospective car buyers “I want to own a car because it’s convenient; it’s a personal relationship; I don’t trust others.”
People looking for a hybrid “I want to save money and fuel. I also care about the environment and want to be seen as ‘green’.”
Honda Civic Hybrid owners
Those who don’t need cars • I’m too young to drive • I’m too old to drive • I can walk or take public
transit
Car users who won’t buy • It’s too expensive for me • I will use a shared car service • It’ll get stolen
Those who won’t buy hybrids • Hybrids are gutless • Batteries are toxic & explosive • In the end it costs more than
it saves
I will buy another brand • I buy domestic • I’ve always driven a VW • Toyotas are reliable • I want something prestigious
Sponsor a driving school
“Give the gift of driving” campaign for grandparents.
Financing, cashback
Sell to carshares; underscore their limitations
PR on dangers of commuting, pedestrian deaths
Theft warranty, tracking services, high-end locks
Independent tests, standard metrics (0-60 in X)
Lab research, studies
ROI calculator; replacement programs
Prove Honda hires US workers
“Time to leave Germany” ads
Spontaneous accel. stories
Premium brand (Acura)
I need a carA.
I should buya carB.
It should bea hybridC.
I should buya Honda CivicD.
Everyone in the world
Hits A metric from the early, foolish days of the Web. Count people instead.
Page views Marginally better than hits. Unless you’re displaying ad inventory, count people.
Visits Is this one person visiting a hundred times, or are a hundred people visiting once? Fail.
Unique visitors This tells you nothing about what they did, why they stuck around, or if they left.
Followers/friends/likes
Count actions instead. Find out how many followers will do your bidding.
Time on site, or pages/visit
Poor version of engagement. Lots of time spent on support pages is actually a bad sign.
Emails collected How many recipients will act on what’s in them?
Number of downloads
Outside app stores, downloads alone don’t lead to lifetime value. Measure activations/active accounts.
Example: a restaurant
• Empathy: Before opening, the owner first learns about the diners in its area, their desires, what foods aren’t available, and trends in eating.
• Stickiness: Then he develops a menu and tests it out with consumers, making frequent adjustments until tables are full and patrons return regularly. He’s giving things away, testing things, asking diners what they think. Costs are high because of variance and uncertain inventory.
• Virality: He starts loyalty programs to bring frequent diners back, or to encourage people to share with their friends. He engages on Yelp and Foursquare.
• Revenue: With virality kicked off, he works on margins—fewer free meals, tighter controls on costs, more standardization.
• Scale: Finally, knowing he can run a profitable business, he pours some of the revenues into marketing and promotion. He reaches out to food reviewers, travel magazines, and radio stations. He launches a second restaurant, or a franchise based on the initial one.
Example: a software company
• Empathy: The founder finds an unmet need, often because she has a background in a particular industry or has worked with existing solutions that are being disrupted.
• Stickiness: She meets with an initial group of prospects, and signs contracts that look more like consulting agreements, which she uses to build an initial product. She’s careful not to commit to exclusivity, and tries to steer customers towards standardized solutions, charging heavily for custom features. She supports the customers directly from the engineering team until the product is stable and usable.
• Virality: Product in hand, she asks for references from satisfied customers, and uses them as testimonials. She starts direct sales, and grows the customer base. She launches a user group, and starts to automate support. She releases an API, encouraging third-party development and scaling potential market size without direct development.
• Revenue: She focuses on growing the pipeline, sales margins, and revenues while controlling costs. Tasks are automated, outsourced, or offshored. Feature enhancements are scored based on anticipated payoff and development cost. Recurring license and support revenue becomes an increasingly large component of overall revenues.
• Scale: She signs deals with large distributors, and works with global consulting firms to have them deploy and integrate her tool. She attends trade shows to collect leads, carefully measuring cost of acquisition against close rate and lead value.
How to avoid leading the witness
Don’t tip your handAvoid biased wording, preconceptions, or a giveaway appearance. Word your surveys carefully to be neutral.
Make the question realGet them to purchase. Ask them to pay. Demand real introductions. Or ask them “how many of your friends would say X” to avoid self-effacement
Keep diggingAsk “why” several times. Leave lingering, uncomfortable pauses in the conversation and let them fill them.
Look for other cluesHave a colleague make notes of when they react, or of their body language.
Mobile app model: Localmind hacks Twitter
• Stage: Empathy • Model: UGC/mobile
• Real-time question and answer platform tied to locations. • Needed to find out if a core behavior—answering questions about a place—
happened enough to make the business real
Localmind hacks Twitter
• Before writing a line of code, Localmind was concerned that people would never answer questions.
• This was their biggest risk: if questions went unanswered users would have a terrible experience and stop using Localmind.
• Ran an experiment on Twitter • Tracked geolocated tweets in Times Square • Sent @ messages to people who had just tweeted, asking questions about the
area: how busy is it; is the subway running on time; is something open; etc. • The response rate to their tweeted questions was very high.
• Good enough proxy to de-risk the solution, and convince the team and investors that it was worth building Localmind.
Creating an answers-at-scale campaign
• Know why you’re doing a survey in the first place
Ask what existing brands come to
mind in an industry
Market alongside them? Address competitors?
Choose partners?
Ask how customers try to find a product
or service
Help you plan marketing
campaigns and choice of media
Ask what kind of money people
spend on a problem
Shape your pricing strategy
Test which tagline or unique value proposition
resonates best with customers
Choose the winning one, or just take that as advice
Creating an answers-at-scale campaign
• Know why you’re doing a survey in the first place
• Design the survey Demographic segmentation
questions
Quantifiable answers to your
research problem
Qualitative, open-ended feedback
Creating an answers-at-scale campaign
• Know why you’re doing a survey in the first place
• Design the survey
• Test it (you’ll always have mistakes)
• Know why you’re doing a survey in the first place
• Design the survey
• Test it (you’ll always have mistakes)
• Send it out
Audience plea
Creating an answers-at-scale campaign
Via your NW To a paid list As an ad campaign
Beware of respondent bias,
misrepresentation of the larger market
Beware of spamminess, low
open rates
Name the problem Give the solution or unique value
“Are you a single mom? Take this brief survey and help us
address a big challenge.”
“Can’t sleep? We’re trying to fix that, and
want your input.”)
“Our accounting software automatically finds tax breaks. Help us plan the product
roadmap.”
Creating an answers-at-scale campaign
• Know why you’re doing a survey in the first place
• Design the survey
• Test it (you’ll always have mistakes)
• Send it out
• Collect the results
• Analyze the data
Were you able to capture the attention of the market? Did they click on your ads and links? Which ones worked best? Are you on the right track? What decisions can you now make with the data you’ve collected? Will people try out your solution/product? How many of your respondents were willing to be contacted? How many agreed to join a forum or a beta? How many asked for access in their open-ended responses?
Bysegment!
When it’s time to move on
• Have you conducted enough quality customer interviews to feel confident that I’ve found a problem worth solving?
• Do you understand your customer well enough? • Do you believe your solution will meet the needs of customers?
Hits1995Visits1997Visitors1999Conversions2002Engagement2010
Who did you add? Where from? Why?
What did they do? How did it benefit?
Who did you lose? Why did they leave?
Days since last visit
1200
1000
800
600
400
200
01 2 3 4 5 6 7 8 9
Days since last engagement
January February
Disengaged
(>10 days)
25000
20000
15000
10000
5000
0
Num
ber o
f use
rs
When it’s time to move on
• Are people using the product as expected? • Define an active user. What percentage of your users/customers is active? Write this down. Could this be higher? What can you do to improve engagement? • Evaluate your feature roadmap against the 7 questions to ask before building more features. Does this change the priorities of feature development? • Evaluate the complaints you’re getting from users. How does this impact feature development going forward?
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Viral coefficient
v ≠ 1, pt = δp0 (1 – vt+1) / (1 – v) + p0
http://robert.zubek.net/blog/2008/01/30/viral-coefficient-calculation/
Viral coefficient
How to calculate it
• First calculate the invitation rate, which is the number of invites sent divided by the number of users you have.
• Then calculate the acceptance rate, which is the number of signups or enrollments divided by the number of invites.
• Then multiply the two together. • Consider, for example
• Your 2,000 customers have sent out 5,000 invitations during their lifetime on your site.
• Your invitation rate is 2.5. • For every ten invitations received, one gets clicked.
• Your acceptance rate is 0.1. • Multiply the two, and you have your viral coefficient: 0.25. Every customer you
add will add an addition 25% of a customer.
Virality stage:Timehop’s content sharing
• Stage: Virality • Model: Mobile app
• Social network around the past • Focused on virality (but not necessarily the coefficient!)
The one metric that matters: content sharing
• Focused on percent of daily active users that share their content
• Aiming for 20-30% of DAU sharing
“All that matters now is virality. Everything else—be it press, publicity stunts or something else—is like pushing a rock up a mountain: it will never scale. But being viral will.”
- Jonathan Wegener, co-founder
3 kinds of virality
• Inherent virality is built into the product, and happens as a function of use. • Artificial virality is forced, and often built into a reward system. • Word of mouth virality is simply conversations generated by satisfied users.
Laid, paid, made, afraid
Who is your audience?
Drive-by visitors vs. serious evaluators; loyal users vs. one-time buyers; lurkers vs. contributors. Have one audience.
What do you want them to do?
Tell five friends; sign up for a year’s subscription; write a blog post on your behalf; invest some money. Just be clear.
Why should they do it?
Drive-by visitors versus serious evaluators; loyal returning users versus one-time buyers; lurkers versus contributors
Power or respect among their peers; appeal to reputation.
Money, or alternate currency rewards; an appeal to greed or compensation.
Sex, attractiveness; an appeal to desire.
Fear of missing out, risk, loss, etc.; an appeal to safety.
Made Paid Laid Afraid
Humans have four big motivators:
When it’s time to move on
• Are you using one of the three types of virality (inherent, artificial, word of mouth) for your startup? Describe how. If virality is a weak aspect of your startup, write down 3-5 ideas for how you could build more virality into your product.
• What’s your viral coefficient? Even if it’s below 1 (which it likely is), do you feel like the virality that exists is good enough to help sustain growth and lower customer acquisition costs?
• What’s your viral cycle time? How could you speed it up?
What’s a fitbit customer worth?
• The user can record their steps with a device in their pocket • They can use it and sync data to the hosted application • They can visit the portal to see their statistics • They can manually enter sleep and food data • They can buy the premium Fitbit offering
• Each of these is a different tier of engagement, and Fitbit could segment users across these five segments when analyzing the effectiveness of a marketing campaign or the volume of support e-mails.
Revenue stage:Backupify’s customer lifecycle
• Stage: Revenue • Model: SaaS
• Leading backup provider for cloud based data. • The company was founded in 2008 by Robert May and Vik Chadha • Has gone on to raise $19.5M in several rounds of financing.
What job are you doing?
Personal dimension
Social dimension
Functional aspects
Emotional aspects
Related jobs to be done
Functional aspects
Emotional aspects
Personal dimension
Social dimension
Main job to be done
http://innovatorstoolkit.com/content/technique-1-jobs-be-done
Changes create new JTBD answers
Photo by Andrew Dyer on Flickr - https://www.flickr.com/photos/andrewdyer/350938953
+ = ?
Some stats
• 215M digital signatures
• 18 minutes to start a company, entirely online
• 1/3 of voting happens via the Internet
“The most important figures that one needs for management are unknown or unknowable, but successful management must nevertheless take account of them.”
Lloyd S. Nelson
Pic by Twodolla on Flickr. http://www.flickr.com/photos/twodolla/3168857844
Alistair Croll [email protected] @acroll
Ben Yoskovitz [email protected] @byosko
Maybe they don’t love you like they said they do.
N
Your offering doesn’t make them want tobrag or their contact isn’t really a friend
N
Advocates can’t learn & conveyyour message easily
N
They don’t trust you entirelyN
Woohoo! Scalable, viral, explainable product!
YGet a meeting
Y
Grab the phoneY
They pitch itY
Call them now?Y
Intro to a friend?
Interview
Target customer Reachable, referenceable.
Find 10 prospects*
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
Target customer Reachable, referenceable.
* 10 is an aribtrary number. Just be sure there are enough out there to grow sustainably from their actions.
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Standardize 80% of the offering
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Your margins, differentiation, and scalable
growth come from this.
Without it, you’re either a consultant; or the market isn’t ready; or the tech isn’t possible yet.
And that’s OK because you know.
The whole point of digital is personal
Segment 1
User segment(who)
Segment 2
Segment 3
Goal(what)
Goal 1
Goal 2
Goal 3
Motivation(why)
Goal 1
Goal 2
Goal 3
http://www.thirdwunder.com/funnels-are-a-horrible-metaphor/Photo Credit: Patrick McGarvey
More like this.
The leaky bucket of subscriptions.
Photo by Jeffrey on Flickr - https://www.flickr.com/photos/jb912/7479464134
Bounces Non-creators
Non-payers
Churn
Signuprate
Engagementlevel
Conversionrate
Visitors
Subscribers
Engaged users
Payingcustomers
Leaky buckets are a bad metaphor
Bounces Non-creators
Non-payers
Churn
Improve stickiness; call-to-action optimization;A/B page testing; picking better traffic sources
Notifications; updates; reactivating users;segmenting those who are engaged.
Usage caps, natural upselling;premium features
Better support; credit card renewal; naturally sustained features
The tradeoff
Charge a monthly fee Charge annual fee up front
Find out if they hate it sooner, when they cancel on first billing cycle.
No need to pay back CAC; cash you can use right away.
Takes months to recoup the money you spent acquiring them.
May be a zombie user who vanishes when the year is up.
They’re happy, you keep your money, goodwill for offering.
They’re unsatisfied, you made it right, they tell you why, you learn.
The solution—because the goal is to learn, not to trap customers.
Annual fee, with an out
1. Offer an annual, discounted fee.
2. After a couple of weeks, ask if they’d like a refund.
The mobile app !customer lifecycle!
Ratings Reviews
Search
Leaderboards
Purchases
Downloads
Installs
Play
Disengagement
Reactivation
Uninstallation
Disengagement
Account"creation
Virality
Downloads,"Gross revenue
ARPU
App sales
Activation
Churn, CLV
In-app"purchases
App
stor
e!
Incentivized
Legitimate
Fraudulent
Ratings!
What job are you doing?
Personal dimension
Social dimension
Functional aspects
Emotional aspects
Related jobs to be done
Functional aspects
Emotional aspects
Personal dimension
Social dimension
Main job to be done
http://innovatorstoolkit.com/content/technique-1-jobs-be-done
Changes create new JTBD answers
Photo by Andrew Dyer on Flickr - https://www.flickr.com/photos/andrewdyer/350938953
+ = ?
http://www.flickr.com/photos/puuikibeach/4789015423 http://www.flickr.com/photos/elcapitanbsc/3936927326
Cost of experiments: down. Cost of attention: way up.
A leading indicator
http://www.flickr.com/photos/avlxyz/4889656453http://www.flickr.com/photos/mysticcountry/3567440970
50 reservationsat 5PM
250 coversthat night
(Varies by restaurant. McDonalds ≠ Fat Duck.)
http://www.flickr.com/photos/southbeachcars/6892880699
Restaurant MVP
Is purple ink better?http://tippingresearch.com/uploads/managing_tips.pdf