Eric Ries and learning how to pivot (or persevere)

About a month ago I wrote a blog post about Niall Murphy, successful founder of The Cloud, and his experiences and learnings from creating (and selling) a successful startup. I then attended the UK launch of “The Lean Startup” by Eric Ries. Eric Ries is a young American developer who has founded and been involved in a number of startups.
In a jam packed London auditorium, Ries explained the key principles that underpin his book:
  1. Entrepreneurs are everywhere – Ries defined the startup and highlighted key elements of his definition: “a human institution, delivering a new product or service under conditions of extreme uncertainty.”
  2. Validated learning – The quintessence of Eric Ries’ approach to product development in startups is to create learning experiments, where teams follow a continuous cycle of ‘build-measure-learn’.
  3. Innovation accounting – If such experiments ‘fail’ it isn’ the end of the world (Ries’ world that is) since entrepreneurs will at least have discovered early on that their strategy doesn’t work. Ries’ spiel is all about creating meaningful, achievable milestones to which entrepreneurs can be held accountable.
  4. Real metrics – Rather than learning for the sake of it, Ries makes a strong case for building experiments around ‘real’ metrics. We often get blinded by ‘vanity’ metrics such as customer growth  or the number of features added, but such numbers tend to be fairly meaningless and lack context. In contrast, a metric like the increase in customer revenue as a result of a new feature can provide a young startup with valuable customer insight.
  5. Pivot or persevere? Ries has introduced the “pivot” into strategy speak. When a business decides to ‘pivot’ it means that it changes directions without totally abandoning previous learning or its product vision. In an ideal world a company becomes very good at reducing time between pivots, which means that it decides early in a product lifecycle to continue, iterate or drop the product or feature altogether.
  6. Continuous testing and iterating – In the session, Ries explained about the value of techniques such as A/B testing, continuous deployment and real-time monitoring. It’s not so much about the specific techniques one uses, the key is about doing real-time user testing, finding out what the customer really wants and making business decisions following user feedback. It reminded me of the book by “Undercover UX” by Cennydd Bowles and James Box.
  7. Growth engines – This was the bit in Ries’ presentation that resonated the least with me. Terms such as ‘paid engine of growth’ (reinvesting revenue into acquiring new customers) or ‘sticky engine of growth’ (customer retention) seem to be part and parcel of most marketing strategies of established companies and startups alike. I do agree, however, with Ries’ point about concentrating on a single growth engine instead of a scattergun approach.
Main learning point: I guess it’s not fair to compare Niall Murphy’s presentation with the talk by Eric Ries. One is a successful entrepreneur who sold his business and now invests in new ventures. The other is a young ex-developer who has been involved with a number of startups and now spends his time spreading his lessons learnt. I liked Murphy’s story for all the things he has achieved, whereas Ries’ presentation got me thinking about how I could best apply a ‘lean’ mindset to my day job. What I liked most about both their stories is that were based on continuous learning and improving.

Fanhattan: cool name, but how does it work?

Intrigued by its cool sounding name, I wanted to find out more about Fanhattan. I then came across this demo by one of the founders of the service, which has been going for about a year now. In this demo, Gilles BianRosa (CEO) made it clear that Fanhattan is all about content and not about the individual apps that host films or TV shows.

As BianRosa explained, for the Fanhattan user it’s most and foremost about “what do I want to watch?” This means that as a user I will look for the content first and Fanhattan will subsequently present me with a range of services where I can access this content (think Netflix, iTunes and Amazon).

These are the main things that I learned about Fanhattan:

  1. It acts as a ‘content gateway’ – Rather than having to go into a specific app or service, Fanhattan enables you to look for the content you want to watch, after which it will let you know through which services you can access this content. The app is built in HTML5 which means it will fully support rich media like audio and video.
  2. It offers content in the broadest sense of the word – It’s a shame Fanhattan isn’t available in the UK yet, because I would love to have a closer look at all the features Fanhattan displays around a specific piece of content. Call me a geek but I would be very interested in seeing up close how Fanhattan display products or data related to “The Godfather” such as merchandising, the movie soundtrack, PG ratings, similar films recommendations and film info.
  3. It has a clear social element – As we know, digital content lends itself incredibly well to sharing with your friends and to friend recommendations. Fanhattan taps into this social discovery element by enabling its users to build a Taste Profile with the content they have watched, which they can easily share with friends. Similarly, if you like a film or TV show on Fanhattan this will automatically appear on your Facebook wall.
  4. It’s cross-platform – Being available on a number of platforms sounds like a no-brainer but Fanhattan has been following a (in my mind sensible) phased approach to rolling out on different platforms, with the iPhone being the latest addition. I understand that TV and game consoles are next on Fanhattan’s product roadmap.
  5. It’s cloud based – Because the content discovery element of Fanhattan is happening in the cloud, it should increase Fanhattan’s flexibility in displaying and storing (discovery) data and content.
  6. It has a flexible model – Users can either subscribe to Fanhattan (like you do for services like Spotify or Rdio) or pay Fanhattan for each transaction separately. It’s a shame no figures are publicly available on the uptake of Fanhattan as a subscription service vs. users paying for content on an ad-hoc basis.
Main learning point: I do see apps like Fanhattan playing an important role in the discovery of new content, acting as a user-friendly portal to a wide range of content-oriented services. At present, Fanhattan isn’t available in the UK; I’ll be keeping an eye out for Fanhattan or similar services rolling out on these shores. Will users warm up to the idea that you can use a single service to access the content? Will they move away from the likes of Lovefilm, Netflix or Amazon in favour of Fanhattan or a Spotify-like service focused on films/TV shows?

Related links for further learning: 

http://blog.fanhattan.com/2011/09/13/social-discovery-and-the-power-of-vudu/

http://techcrunch.com/2011/11/16/fanhattan-tv-discovery-app-migrates-to-the-iphone/

http://gigaom.com/video/fanhattan-takes-content-discovery-to-the-cloud/

http://news.cnet.com/8301-17938_105-20025825-1.html

Learning more about streaming, this time it’s about Netflix (again)

Over the past few months I’ve been learning more about streaming, trying to understand beter how it works and who operates in this market (think Spotify, Rdio and LoveFilm). A logical next step was trying to get a better grasp on the business side of things; what makes streaming so interesting from a business revenue point of view?

  1. Increase in number of streaming subscribers – In a recent webcast with TechCrunch Netflix’ CEO Reed Hastings made it clear where he sees the future of his business by stating that “We expect DVD Subscribers to decline every quarter … forever.” He illustrated this by stating that Netflix had lost 2.76m DVD rental subscribers in Q4 of 2011 whilst its streaming service gained 220k users.
  2. Low cost model – In the same webcast, Hastings explained that even though the margins on DVD rental are much higher compared to streaming (since prices of DVD rental are higher), the variable cost attributed to streaming are much lower.

This made me think about the following:

  1. Will streaming cost really be that low? – I can understand that the variable cost involved in streaming are likely to be significantly lower than DVD rental. The fixed cost of streaming are, however, much higher compared to other (subscription) models. I’m thinking of the fixed costs to set up a streaming infrastructure (e.g. enabling users to stream both in an online and offline mode) but particularly the cost of securing streaming content. With Netflix and LoveFilm battling it out to bolster their catalogues of streaming content in the UK I can imagine the big film studios and TV production companies rubbing their hands with glee and driving up the price of their content.
  2. Will streaming really take off? I guess this will very much depend on factors such as cost, consumers choosing between downloading and streaming (between access and ownership) etcStreaming is a relatively new model, so it will be interesting to see what its consumer adoption will be like.

Related links for further learning:

http://techcrunch.com/2012/01/25/reed-hastings-we-expect-dvd-subscribers-to-decline-every-quarter-forever/

http://news.cnet.com/8301-17938_105-20093587-1/netflix-vs-blockbuster-whats-the-best-service-for-streaming-and-dvds/

http://mashable.com/2011/12/06/verizon-netflix/

http://paidcontent.co.uk/article/419-interview-netflixs-hastings-aims-to-challenge-bskyb

http://paidcontent.co.uk/article/419-netflix-sees-overseas-losses-doubling-to-118-million-this-quarter/

http://paidcontent.co.uk/article/419-lovefilm-adding-abc-tv-show-archive-in-uk-netflix-fight/

IBM buys DemandTec – What does this deal tell us?

IBM’s recent acquisition of DemandTec sits within IBM’s “Smarter Commerce” initiative. This strategy is all about enabling businesses to quickly adjust prices, promotions and other marketing efforts by analysing online and in-store buying trends. One could argue that this deal is just a takeover like many others. However, these are some of the things about this deal that sparked my interest:

  1. Big software companies are all at it – Recent weeks have seen similar deals by SAP and Oracle respectively. Like the takeover of DemandTec, the purchases of SuccessFactors (by SAP) and RightNow (by Oracle) are aimed at becoming a ‘software-as-a-service’ (SaaS) company.
  2. Software as a service (SaaS) – It sounds sexy but what does SaaS actually mean? Whereas many traditional software companies like IBM and SAP used to be about client-side servers and databases, today’s focus is shifting much more towards providing clients with web-based solutions, with users only needing an Internet browser to access the service. I started writing about this trend a while ago just because it seems quite a big strategic shift for most traditional software vendors.
  3. ‘Smarter Commerce’ sounds great but what does it mean? – I learned that Smarter Commerce is another way to phrase IBM’s intention to generate revenue out of providing businesses with cloud-based analytics products that enable them to make well-informed business decisions and to respond to customer trends in a timely and appropriate fashion. This is exactly the kind of business in which DemandTec operates.
  4. At the end of the day, it’s all about the cloud –  The aforementioned shift towards SaaS is seen as part of cloud computing which for instance means that to use the software provided by the likes of DemandTec or Salesforce.com a user typically only needs an Internet browser and, equally significantly, the software is designed in such a way that multiple clients and users can use it for their own unique purposes.
Main learning point: the recent acquisition of DemandTec by IBM signifies an interesting strategic shift towards cloud-based ‘software as a service’ products. The kind of data analytics products which DemandTec provide are all web based, accessible through an Internet browser, and which are geared towards being applied in a wide range of user scenarios, applicable to the greatest number of customers. For software stalwarts like SAP and IBM who have a made a lot of money providing large business with customised software solutions, this seems quite a drastic change of interests. To be continued.

Related links for further learning:

http://www-03.ibm.com/press/uk/en/pressrelease/36370.wss

http://www.zdnet.com/blog/btl/ibm-buys-demandtec-for-440-million-adds-to-analytics-commerce-line-up/64984

http://www.bloomberg.com/news/2011-12-08/ibm-buys-demandtec-for-440-million-to-add-consumer-buying-trend-tools.html

http://en.wikipedia.org/wiki/Software_as_a_service