Let me go out on a limb and assume if the title of this post got you here you know what Customer Development is. So, I’m proposing that with your Customer Development you also do an Anti-Customer Development. My definition of Anti-Customer Development is to interview people that would *not* buy your product, but they might look like they would. Continue reading it.
If you are doing a startup, just starting as a side-project or profitable and on its way to unicorndom, as a founder you are bound to encounter many advisors on your journey. These interactions come in unstructured and structured ways: the coffee with a friend of a friend who’s an exec at a Fortune 500 to an entrepreneur who is a formal advisor on your board. They come with different names as advisors, partners, mentors or just friend. Continue reading.
The amazing rise and prominence of Y Combinator, TechStars and 500 Startups has bestowed upon us the idea that startups have a very specific timeframe to figure out their product, raise money, launch, build a brand, etc. You combine that with many entrepreneurs talking about having an MVP in a couple of weeks, and abandoning their idea after four weeks and you start to believe that if you can’t prove something in a couple of months it’s not a good path to continue. Continue reading.
Four years ago Gamification was all the rage. Books were being published, conferences were being held, VCs and angels would ask you if you shouldn’t add badges, leaderboard and points to your product. It was like the tech world (excluding games) had discovered the holy grail of how to engage and retain users. And then, the fad died. Continue reading it.
We live in a very peculiar time in history in which the demand for tech skills are so high that companies are going above and beyond to convince talent to join their mission. These are primarily software engineers, but also designers, product managers, managers, etc. As a tech person, I can tell you that without metaphors and analogies we wouldn’t be able to communicate. So I’m borrowing a well-known software paradigm to explain another, the project management triangle of scope, cost & schedule to explain how tech companies can excel recruiting talent. Continue reading it on Medium.
I’m not the kind of person that buys technology to see if it works and fits their lifestyle. I have to picture how I’ll use that tech and do an ROI in my mind if it’s worth it or not. Even though I consider myself an earlier adopter, I’m also one who doesn’t like to waste money. The Apple Watch was a big gamble for me. I wanted partially for the tech, partially for the fashion statement. I bent my rules of having clear tech-ROI and I don’t regret, it was worth it.
A watch I can wear
It has been a while since I wore a real watch. I used the Basis B1 for a while when it came out. The Basis wasn’t a good watch. The Apple Watch is an excellent watch. It fits well in your arm; it’s easy to see the time, etc. It’s also very beautifully built, with rounded corners and the right balance of glass, metal and rubber (I have the black sports edition).
I was worried the bloggers and reporters were whining about how distracting the notifications were, and they had to customize the crap out of it. Bullshit. These reporters/bloggers are absolutely outside of the norm and probably get notifications every minute from the many apps they use. The default notifications are enough. Not only that, but since I get my phone’s notification on my watch (for all apps on my phone), I don’t have to reach to my phone as often. This has increased my productivity since the notification is not actionable on the watch, but at least I see it, and that satisfy my dopamine needs.
Who would have thought that this is the killer feature for me? Well, it is. Although the Timer app is not very sophisticated, I use it a lot. Primarily when I’m cooking, but also when I give N-minute warnings to my kids to stop playing video games or to get ready to leave. If the Timer app supported multiple timers, it would be even better.
The “experts” were so paranoid about Battery life saying it would be a weak point, and you’d have to charge it during the day. Another piece of expert BS. I use it a lot throughout the day. I go running for an hour or more with it, I check my heart rate several times during the day and at the end of the day (after 12-16 hours of usage) the battery is never below 50%. More often than not, at the end of the day the battery is in the 60-65% range.
I would not buy the watch just because of these features, but they add up to the value prop:
- Remote control for the iPhone camera.
- Weather app & current temperature on the watch face.
- Heart Rate: I had very low expectations of this since I wore the Basis for so long, and the HR of the Basis wasn’t very accurate, particularly during physical activity. The Apple Watch HR is much, much better. I still haven’t abandoned my Wahoo HR strap, though.• Steps.
- Apple Pay. It’s neat. Neater than using Apple Pay on the phone. Plus people’s reaction is also priceless.
- Water resistant.
Fitness App & functionality
What a piece of crap. Both, what happens in the watch and the companion mobile app. I probably have a higher bar for this since I’ve been in this industry for 4+ years, but the built-in fitness functionality is nearly useless (except for counting steps). I could give a two-page long list of problems with this. The bottom line is that it doesn’t compute even close your level of physical activity, and that’s a deal breaker.
Here are a few fun things: Even though I work at a standing desk the watch is constantly notifying me to stand. Any activity but running is not properly accounted in calories or the “minutes of activities” – I did paddle board for one hour, and the watch didn’t register at all. The way it measures calories is very wonky (that’s the technical term) – instead of going for all day calories burn they went to calories burn during exercise only, but since it doesn’t detect exercise well it also gets this wrong. The visualization of the data (in the watch, in the Activities app or in the Health app) is barely usable. On, and on, and on.
Please, someone, tell me an amazing and useful app that I can install, and it will make the watch experience better. I can’t find one! The apps are mostly useless. Twitter – useless. RunKeeper – useless. American Airlines – useless. Apple should have done what it did with the iPhone. Launch with only the built-in apps and that’s it. It takes time for app developers to understand fully the value of a new form factor and how to best build native experiences.
Wi-fi / LTE / 3G
The lack of any connection to the real-world without the phone is a problem. It would be the first problem I would fix if I were Apple. I have my phone with me nearly all the time, except when I’m at home and my phone is charging on my kitchen counter. If I’m more than 15 feet or so away from my phone, the watch loses connectivity. I also would like to be able to – once in a while – leave the home without the phone, using just the watch (and clothes, optionally), and be able to make calls, text and have GPS. These are particularly appealing scenarios if I’m going to the beach, running, biking, paddle-boarding, etc.
- Another power adapter. Another thing for me to forget when I travel.
- It will be stolen, broken, lost or become obsolete in the next 18 months. It means I’m paying $1 per day to use this thing. I’ve made peace with that feeling.
- Lack of GPS.
- The speaker is bad. Calls over the watch are of very low quality.
For me, the Apple Watch was worth the price and knowing what I know now I’d buy it again. That said, I’m having a hard time recommending it to people. Unless you are an early-adopter and you have $400 to dispose of, just skip it and wait for V2 or V3.
I’m excited about the Apple Watch. I’m a lot more excited what the wearable tech will be like in 5 to 10 years, but now let’s focus on the first month of Apple Watch.
Today, hundreds of thousands of people will receive their newly minted Apple Watch, and they will play with it to their hearts content, and then they will install some apps. But for the vast majority of app developers this first month will be a disappointment.
Let’s put aside the fact the watch is a new form factor. It requires new types of interactions. We’ll learn what’s interesting, what’s annoying and what’s critical to have on your wrist — Yes, there are plenty of other smart watches out there, but nothing has caught up yet.
Like most apps in any store, user adoption follows a power law curve. A few apps are in the “head” of the curve and get wide adoption while the rest have fewer and fewer users, also known as the long-tail.
Let’s assume the average user will install ten apps on the watch in the first month of usage. There are currently 2,300 approved apps. I’m guessing half of users will get their watch in April (based on the 1,000,000 sales estimate and rumors of a backlog extending to June) there will be 5,000,000 app installs during that period. Let’s also assume that out of that number, half will be flagship apps: Facebook, Instagram, Twitter, etc.
That leaves 2,500,000 million installs to be battled by 2,300 apps. If this were a perfect distribution, the average app would get just about 1,000 installs in month 1. But that’s not how it works, a few of the 2,300 apps will get most of the share. If we look at a simple power-law distribution, 1% of the apps will get 99% of the installs. That means 23 out of the 2,300 apps will have 100K installs or more while the remaining 2,270 will get about 11 installs.
Here is the equations for the app installs for the first month (assuming 500K activated units):
- 0.2-Percenters Flagship apps (5): 90-99% adoption = 450K-500K installs
- 1-Percenters: 500K Watches x ((10 – 5) x 99%) Installs / (2,300 Apps x 1%) = 108K installs / app
- 99-Percenters: 500K Watches x ((10 -5) x 1%) Installs / (2,300 Apps x 99%) = 11 installs / app (eleven!)
11 installs per app in the first month
Yeah, that’s crazy isn’t it. Well, what if we turn the expectation knob full on “optimistic”? Let’s say Apple will ship 1M watches in the first month and the average user will install 25 apps in the watch, not 10. That means most of the apps will get about a mindblowing 50 installs in the first month.
It will get worse before it gets better
Apple won’t sell as many watches in Q2/Q3 as they did with the pre-order. Most people were obsessed with the idea of having an Apple Watch already pre-ordered one. The next boost in Apple Watch adoption will be in the holiday season. If Apple can break 5M sold units in 2015, it’s 5X what this app installs looks like in this first month. The number of Apps available by the end of the year, it’s likely to be in the tens of thousands. That changes the equation to something still unpalatable for the average app developer:
Here is what 2015 will look like, being optimistic about average number of installs (25 per Watch*), and 10K apps available in the App Store and 5M units activated:
- 0.2-Percenters (20) Flagship Apps: 90-99% adoption = 4-5M installs
- 1-Percenters: 5M Watches x ((25 – 20) x 99%) Installs / (10K Apps X 1%) = 250K installs / app
- 99-Percenters: 5M Watches x ((25 – 20) x 1%) Installs / (10K Apps X 99%) = 25 installs / app (Twenty five!)
Maybe I’m a couple of orders of magnitude off on my math. Maybe the power-law is not as steep as I describe it here. Instead of top 1% of the apps getting 99% of the installs, maybe they get 80% of the installs, in which cases your average app would get 500 installs in 2015. Did you read that? Five-hundred installs for the whole year.
The Silver Lining
There are two big winners by my calculations. The first is that we’ll see about 20 apps that are not the flagship ones take off. It will be very interesting to see the categories they belong to (Payment? News? Messaging? Fitness? Game?) and the type of value they are adding. And, from a product perspective, the type of interaction and UI they implemented.
The second winner will be Facebook. No, I’m not talking about their Watch App, those won’t make a dent in their service usage or revenue. I’m talking about the 9,900 apps that cost tens of thousands to millions of dollars to implement, and they will spend enormous amounts of money to acquire users. Some of these apps will invest tens of thousands of dollars or more in customer acquisition. That could account for an extra $50-100M in ad revenue in 2015 alone.
There was a pattern in the early days of Mobile Apps: Spend above and beyond to acquire users to get the top ranking in your category. It was easier to maintain that position while the user base of the platform grew exponentially. Many Apps will take a similar approach expecting the watch to have hundreds of millions of users in the next five years. Spending $25-100K in the first few months to guarantee your future position is a “cheap” price to pay. This strategy will work for a handful of apps, it will fail for most.
* This Nielsen report indicate the average iPhone user has 27 apps installed so that number is not far off.
Bill Gates letter to Microsoft employees in commemoration of Microsoft’s 40th anniversary is brief, but it hints at what’s to come. If you look at the progression of technology in ten year blocks (2015, 2005, 1995, 1985, 1975) you get amazed by the decade-wide leaps we’ve made. Even the visionaries had a hard time describing what ten years in the future will look like, so 2025 is anyone’s guess.
That said, we are entering a new era in which technology is reaching a couple of extra billion people in the planet and it will make their lives significantly better. As we, technologists and entrepreneurs, build this future, we have to keep in mind a few things to make sure we are creating the “right” kind of future.
Here is a list of seven principles that we should live by as we build this future:
One – Comfort
We take it for granted the form-factors we have today without thinking how we got here. A keyboard and a mouse were clearly designed to help the office worker, not the field worker, the farmer, the factory worker or even doctors and nurses at a hospital. Laptops and tablets came to broaden the spectrum of the computing form-factor some people can use to do their job, but what’s next? We still have long ways to go in terms of voice-recognition, wrist-based computing (watches or something else), gesture recognition, and things that are just embedded in our clothes, walls, glasses, floors, etc. Physical burden should be a consideration in everything we build. We are not talking about early adopters anymore.
Two – Ability
We all faced a piece of technology that had a terrible UI or required us to acquire knowledge that wasn’t worth for the value it delivered, thus never crossing the chasm into the hands of most people. Delivering products that doesn’t create a cognitive burden for the user and works as seamlessly as turning a light switch is critical for its success. Doing less at the cost of functionality is probably a good place to start, but doing the right thing and deliver on the expectation is what we should be aiming for.
Three – Access
If people can’t acquire a product it will impossible for them to adopt it and benefit from it. If the tool is available, but the energy to power it doesn’t exist, it’s the same thing as not having this tool. If we build something that requires Internet connectivity all the time, we limit where this can be used.
Four – Price
No matter how great the technology is if the people that would benefit from it can’t afford, it’s of no use. The good thing is that in technology prices always goes down. Part is the advancement of manufacturing process, part is the commoditization of shared components, and part is higher demand that improves production effectiveness.
Five – Privacy
We came long ways in improving our understanding of technology privacy and human beings’ desire. Certainly some companies pushed the boundaries and felt pushed back. Privacy is not a one size fits all. The same way in a pre-technology era some people might feel comfortable talking about a rash in their legs or a fight they had with a spouse, others don’t. We must create technology that can be widely adopted. Unfortunately that means more work for us, the builders, to make sure we provide the right privacy controls and knobs so that all can feel unthreatened and welcomed as they are.
Six – Security
We are definitely entering a dark moment for security – and consequently privacy. This goes well beyond someone stealing a social security number. It goes into threats that people receive in social media and force them to abandon (or not even getting started with) a piece of technology that could be beneficial for them, professionally and personally. This is about basic safety and eliminating the fear of physical, emotional or reputation threats.
Seven – Motivation
Finally, people need to want to have the technology because they see a clear value personally or professionally by adopting it. It’s going to help than have more fun, reduce pain, make more money or save more money, achieve personal goals, etc. It boils down to helping people live longer and better lives.
2025 here we come.
This comes from the corners of airline’s absurdities. A friend of mine going on vacation to Europe tried to change his flight back to do a two-day stop in another city for a couple of businesses meetings. He went to Delta’s website and when he punched in the change, this is what Delta wanted to charge him:
Yes, you read that right. The change of flight would cost $509,692.62 (USD)! Forget the typical $75 some airlines charge.
I believe that any startup idea, even if it’s an obviously bad one, can be pivoted into a bigger and better idea, so getting started is probably the most important step in making an idea into a successful execution. Sometimes entrepreneurs spend way too much time dwelling on the idea – on a piece of paper, or in the name of the company.
While mentoring TechStars companies over the last five years, I’ve seen what I would consider bad starting points – small markets, bad value prop, high operational cost for low LTV – become billion dollar ideas. Executing them is the hard part, for big or small ideas, for good or bad ideas and that’s where you should focus. To help you find a better idea so you can spend your energy on execution, I’m listing three very unusual sources of idea generation:
The Built-In Apps
Big companies in charge of big platforms have a slower shipping cycle compared with startups. As much as Facebook, Google, Microsoft, Apple or Twitter claim to be entrepreneurial and fast moving, they are not (they were at some point). Steering a very large boat takes time. Here lies the opportunity for entrepreneurs. Anything that’s built into that platform that could be replaced is a great candidate for you to attack. It took Gmail 10 years to update their Contacts experience. iPhone’s calendar app is a joke. Amazon’s AWS cloud resources management took many years to get to an OK point. That gave the opportunity to many entrepreneurs to identify those opportunities and launch alternatives.
But there are more to be done. Each new iOS, Android, Windows, MacOS, AWS, Twitter or Facebook release that exposes new functionality and it has some “built-in” app/service/component, it won’t be updated for a year or two, maybe more. As a startup, you can learn what it does, understand pain points & feedback, and create features that address those problems. Of course you’ll be competing against the “default” app, so many people will tell you to go home. But if you truly create a much better product, people will notice, start using and telling their friends.
Recently Acquired Startups
There are many reasons startups get acquired. Some get acquired for their talent, some for the customer base, some for the underlying technology and some for their revenue. It turns out that revenue is usually the least likely reason a startup is acquired. This presents an interesting dynamic. If a company bought a startup, not because of the prospective value of its business, what’s the buyer incentive to keep the direction of the product as is? Answer: very low.
Most of the acquisitions (guesswork here since I have no real data) lead to the acquired product being shut down in the first two years. Sometimes, pieces of the technology make their way through the main acquirer’s product. But rarely existing users are happy or satisfied with the results, and frequently previous users/customers are upset, angry and venting on social media. You probably had that feeling as well when a product you use often got acquired by a big company, and you just know that you’ll get screwed at some point.
Well, here is the opportunity for you, the entrepreneur. You can’t time the market, but odds are you can be close to timing when a product will decay in value or be shut down after their acquisition. So, the business idea is to start a competitor to product X as soon as X is bought by a big company. By the time your product is hitting the market, your previous bigger competitor will be slowly dying and once their customer revolt you come in as the savior.
Recently Shutdown Startups
Startups fail for reasons far and wide. From poor management to ops cost, from high burning rate to dead ends. Of course, sometimes they die for not finding product-market fit in time and investors or founders decide not to continue the chase. It doesn’t necessarily mean it was a bad idea. It doesn’t even mean there wasn’t a market for it. How many brilliant products go the way of the dodo because the execs didn’t understand a distribution strategy, marketing or customer acquisition?
If I were you, I’d pay special attention to startups that get some traction (press, users, partnerships, etc.) and failed. Or startups that shut down and caused lots of users on Twitter or social media to complain, bitch or whine about it. You are looking for passionate customers left in the rain. This means there is demand, but the supply failed to deliver.