Saturday, January 8, 2011

Launching Tech Ventures: Part IV, Readings


This is the fourth of four posts about Launching Technology Ventures (LTV), a new MBA elective course I'm developing at Harvard Business School to explore lean startup management practices. Part I provides an overview of concepts covered in the course. Part II describes LTV's class sessions. Part III lists a set of tools and techniques that I think any MBA working in a tech venture should master.

[Addendum, Apr. 10, 2011: if you are interested in lean startup concepts, you should also check out the LTV course blog. Students write blog posts instead of taking an exam. They've done terrific work.]

Below, I've compiled a list of readings — mostly blog posts, but also some books — that cover topics relevant to my course, i.e., lean startup management practices, product marketing/management, and business development. I don't list readings on funding a startup, motivations for founding, or co-founder relationships. For readings on those topics, see my earlier compilation for web entrepreneurs.

Of course, learning-by-reading is no substitute for learning-by-doing — but almost everything on the list was written by people who work or invest in new ventures, so there's a lot of wisdom here. If I've missed valuable readings, please let me know in your comments below.

Lean Startup Concepts
Business Model Analysis
Product Management
Customer Conversion Funnel Analysis/Optimization
B2B Selling
Public Relations
Business Development
Recruiting/Organizational Issues
More Books and Tools
  • Do More Faster, edited by Brad Feld and David Cohen, compiles advice across a range of topics from TechStars entrepreneurs and mentors.
  • Founders at Work, by Y Combinator's Jessica Livingston, collects her interviews with two dozen founders relating their lessons learned.
  • Tom Hulme at IDEO has compiled and crowd-sourced a list of tools for tech startups, organized by function and company life cycle stage; a similar list compiled by Shyam Subramanyam; another list from Jaret Manuel; and my own list of free software tools for lean startups.
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Friday, January 7, 2011

Launching Tech Ventures: Part III, Tools & Techniques


This is the third of four posts about Launching Technology Ventures (LTV), a new MBA elective course I'm developing at Harvard Business School to explore lean startup management practices. Part I provides an overview of concepts covered in the course. Part II describes LTV's class sessions. Part IV lists recommended readings for the course.

[Addendum, Apr. 10, 2011: if you are interested in lean startup concepts, you should also check out the LTV course blog. Students write blog posts instead of taking an exam. They've done terrific work.]

Here’s a preliminary list of tools and techniques that I think MBAs should master if they are working in product management, marketing, or business development functions in tech startups or in new ventures in established tech companies. In LTV, students will work on a team-based field project that applies one of these tools/techniques in a new venture.


  1. IDEO-style Idea Generation. IDEO has a structured approach for  applying ‘design thinking’ to new product development.
  2. Business Model Generation. Ash Maurya has adapted Osterwalder’s business model generation framework for use in info tech startups.
  3. Customer Discovery Interviews. In Four Steps to the Epiphany, Steve Blank describes interview processes for assessing demand for a product idea.
  4. Focus Group Research.
  5. Survey Research.
  6. Persona Development. A persona is a fictional character with demographic, psychographic, and behavior attributes of a representative product user. Many tech companies assess new features in terms of their fit with personas’ needs.
  7. Competitor Site Benchmarking.
  8. Wireframing. A wireframe is a skeletal depiction of a website showing key navigational concepts and page content. Many wireframing software tools are available, e.g., Balsamiq.
  9. Prototype Development.
  10. Usability Tests. For $39, UserTesting.com will videotape a representative consumer trying a product or feature.
  11. A/B Test of New Feature.
  12. Conversion Funnel Analysis/Optimization.
  13. Landing Page Optimization. Performable specializes in landing page optimization.
  14. Search Engine Marketing Campaign Design/Optimization.
  15. Inbound Marketing Campaign Design/Delivery/Analysis. This book by Hubspot’s founders explains the logic for relying on blogs, Facebook, Twitter, etc. to drive traffic to a site.
  16. Public Relations Strategy. Startup CEOs disagree on whether a DIY approach to PR makes sense, and how long startups should wait before they invest money/time in PR.
  17. Site Redesign Based on User Experience Analysis.
  18. Analysis of User Requests for Product Support.
  19. Analysis of User Suggestions for New Features. Dropbox has implemented a site feature for soliciting feature suggestions, called “Votebox."
  20. Product Roadmap/Feature Prioritization Process Design. Startups who rely on agile development methods use project management tools such as Pivotal Tracker.
  21. Design/Delivery of Sales Pitch for Early Adopters.
  22. Sales Lead Prioritization Process.
  23. Design/Delivery of Charter User Program. Silicon Valley Product Group, a consulting firm that helps tech companies improve their product management capabilities, makes the case for a structured approach to working with beta customers.
  24. Net Promoter Score Analysis. NPS, a measure of product loyalty used by many tech companies,  is obtained by asking customers: "How likely is it on a 0-10 scale that you’d recommend our product to a friend/colleague?" Respondents are categorized as Promoters (9-10 rating), Passives (7-8), or Detractors (0-6). NPS = Promoter % - Detractor %.  
  25. Lifetime Value of a Customer Analysis.
The links in the list above are added to help with definitions rather than to serve as a comprehensive guide for someone who wants to learn about these techniques. See Part IV of this series for more books and blog posts that discuss the techniques and their application.

Over time, I’d like to build a knowledge base — perhaps through a wiki — that captures what MBAs and others working in tech ventures need to know about these tools and techniques. In particular, when/where/how/why is the technique best used? Are there conditions where the technique is not appropriate? What mistakes do people make with the technique? How can MBAs acquire the skills needed to apply the technique?

I'd value your feedback. What tools/techniques are missing from list? Do you have thoughts about the questions I pose above?
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Launching Tech Ventures: Part II, Class Sessions


This is the second of four posts about Launching Technology Ventures (LTV), a new MBA elective course I'm developing at Harvard Business School to explore lean startup management practices. Part I provides an overview of concepts covered in the course. Part III lists a set of tools and techniques that I think any MBA working in a tech venture should master. Part IV lists recommended readings for the course.

[Addendum, Apr. 10, 2011: if you are interested in lean startup concepts, you should also check out the LTV course blog. Students write blog posts instead of taking an exam. They've done terrific work.]


Here’s a preliminary syllabus for the 15 class sessions of LTV, which will start in late January and run through early March.

  1. Dropbox. Accel/Sequoia-backed Dropbox offers a cloud-based service that allows users to synchronize and share files across PCs and smart phones. We’ll use this case to introduce several course concepts, including product-market fit, user-centered product development, customer conversion funnel optimization in a ‘freemium’ SaaS context, and business development challenges for early-stage ventures negotiating with large corporations.
  2. IMVU. Guest: Eric Ries, IMVU co-founder & former CTO and HBS Entrepreneur-in-Residence. We’ll discuss how he and his colleagues pioneered lean startup principles at Menlo Ventures-backed IMVU, which offers an instant messaging service built around 3-D avatars. Eric will also discuss how lean startup concepts have evolved and whether the concepts are applicable beyond info tech startups.
  3. Triangulate. Trinity Ventures/angel-backed Triangulate offers a Facebook-based dating service. We’ll explore how this startup has used lean startup principles to guide product development through several pivots.
  4. Cake Financial. Cake was a website for consumers seeking to improve their investment portfolio performance. Although this TechCrunch40 finalist raised $9 million in venture capital and got press accolades, it never achieved strong product-market fit, and Cake’s assets were sold to E*Trade last year. The case explores whether this outcome was inevitable given market conditions, and what, if anything, the team might have been done differently.
  5. David Skok, General Partner, Matrix Partners. David will share insights on SaaS economics, customer conversion funnel optimization, and how to build a sales and marketing ‘machine’ in an early-stage venture.
  6. Rentjuice. Angel-backed Rentjuice provides web-based tools for rental real estate agents. Building on Skok’s ideas, we’ll explore issues in building direct sales capabilities in a SaaS-based early-stage venure.
  7. Aardvark. Aardvark, backed by August Capital and subsequently acquired by Google, is a social search service. We’ll focus on Aardvark’s use of ‘mechanical Turk’ product development processes. To learn about customers’ needs, the company substituted human operators for algorithms in routing beta users’ search queries to parties in a social network.
  8. Mochi Media. Mochi, backed by Accel and subsequently acquired by Shanda, developed a three-sided platform, connecting Flash game developers, sites that aggregate these games, and advertisers. We’ll use this case to explore the applicability of lean startup principles to platform-based businesses that harness strong network effects, along with the challenges of a ‘middleware’ business model that shares a large fraction of value with platform partners.
  9. Fred Wilson, Managing Partner, Union Square Ventures. Fred will discuss the new investor ecosystem that is evolving to serve capital-efficient startups (e.g., “super angels,” seed-funds, etc.), along with his perspectives on the tradeoffs between lean and “fat” strategies for building startups. He will be interviewed by Jeff Bussgang, Flybridge Capital General Partner & HBS Entrepreneur-in-Residence.
  10. Predictive Biosciences. Flybridge/Highland/NEA-backed Predictive has developed accurate and non-intrusive (‘pee-in-a-cup’) cancer diagnostic tests. We’ll explore the interplay between customer requirements and product development priorities in a life sciences context, and ask whether lean startup principles are applicable .
  11. Aquion Energy. Aquion is developing a low-cost, long-lasting, sodium ion battery suited for grid-scale energy storage. We’ll discuss product and customer development priorities for an early-stage venture confronting the clean tech ‘valley of death,’ i.e., the challenge of raising more equity capital than VCs are typically willing to provide under conditions deemed too risky for debt financing.
  12. Chegg. Kleiner-backed Chegg dominates the emerging textbook rental business. We’ll examine pressures that the company encountered as it grew explosively, and how management is responding to scaling challenges.
  13. foursquare. Union Square/Andreessen Horowitz-backed foursquare offers location-based services. We’ll use this session to explore the applicability of lean startup principles to platform-based businesses that harness strong network effects. In particular, in such businesses, is it possible/advisable to achieve product-market fit before you identify a monetization strategy?
  14. OPOWER. Accel/Kleiner-backed OPOWER helps electric utilities improve efficiency by delivering reports to consumers about their energy use. We’ll focus on how the company introduced formal product management processes.
  15. Course Wrap.
LTV has four modules. The first six company cases (Dropbox through Aardvark) examine challenges confronting early-stage ventures as they search for product-market fit. The last three company cases (Chegg, Foursquare, OPOWER) plus Mochi Media explore issues that tech ventures encounter when scaling, after achieving product-market fit. A third module consists of sessions on Predictive Biosciences and Aquion Energy, in which we’ll test the applicability of lean startup principles beyond info tech in capital-intensive, science-based ventures. The fourth module consists of  sessions with two venture capital partners who will address topics of general relevance to early-stage ventures.

The cases won't be available through Havard Business Publishing until the spring. If you are an academic and you want access to a case sooner for use in your course, contact me and I'll try to expedite availability.

In the meantime, I'd be grateful for feedback. Next year, I'd like to add a case about a big tech company (e.g., Google, Amazon) launching a new product. What else is missing? Can you suggest other case studies that would complement these?
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Launching Tech Ventures: Part I, Course Overview

This is the first of four posts about Launching Technology Ventures (LTV), a new MBA elective course I'm developing at Harvard Business School to explore lean startup management practices. Part II will describe LTV's class sessions. Part III will list a set of tools and techniques that I think any MBA working in a tech venture should master. Part IV lists recommended readings for the course.

[Addendum, Apr. 10, 2011: if you are interested in lean startup concepts, you should also check out the LTV course blog. Students write blog posts instead of taking an exam. They've done terrific work.]

Most startups fail — usually due to lack of customer demand, not product development problems. These new ventures burn through their capital, wasting money on engineering and marketing before discovering they have built a product no one wants. Startups are more likely to succeed when they rapidly and iteratively test assumptions about a new venture’s business model based on customer feedback, then quickly refine promising concepts and ruthlessly cull the flops. New ventures that follow this approach are lean startups. “Lean” invokes the image of bootstrapping entrepreneurs, sustained by ramen noodles and a dream. Some lean startups fit that image. However, the term “lean” is derived from Toyota’s management philosophy. Toyota uses short production cycles to reduce inventory and eliminate waste. Lean startups similarly rely on short product development cycles to eliminate waste and gain rapid market feedback.

Lean startup practices are being pursued by firms in Silicon Valley and beyond. These practices have gained special traction in the information technology sector, where rapid “build/measure/learn” cycles are facilitated by the availability of open source engineering tools and Internet marketing channels. However, lean practices can also be applied by startups in other sectors and by large corporations launching new products.       

Launching Technology Ventures uses case studies to examine lean startup practices. LTV focuses on the integration of marketing and engineering functions and emphasizes implementation rather than strategy formulation issues. The course does not examine financing options or the composition of founding teams. LTV draws heavily on the ideas of Eric Ries, Steve Blank, Marty Cagan and other practitioners. Ries coined the term “lean startup” when he connected ideas from lean manufacturing and agile software development to Blank’s customer development process.  

Course Structure and Key Concepts

LTV is organized into two modules that explore execution challenges before and after a startup achieves product-market fit,  i.e., a match between its product solution and market needs.

The first module about challenges prior to achieving product-market fit covers the following core concepts:
  • The importance of well-structured experiments to confirm or disprove hypotheses about uncertain business model elements, thereby securing what Ries calls validated learning.
  • The benefits of what Ries calls a minimum viable product (MVP), i.e., the smallest set of product features and business initiatives needed to secure the next round of validated learning. MVPs can be counter-intuitive for managers and entrepreneurs, who often see fully-featured products as being better. However, building more features than necessary risks wasting time on functionality no one wants. It also compromises experimental designs, because it can be difficult to determine why a customer rejected a new version that incorporates many simultaneous changes.
  • The value of rapidly iterating the MVP based on customer feedback obtained through interviews, focus groups, usability tests, customer support interactions, etc.
  • Pivoting, i.e., changing a startup’s business model based on validated learning. When they pivot, startups retain some elements of their prior model to avoid waste. Lean startups may make many small pivots or a few big ones.
  • The need for metrics to gauge whether business model hypotheses have been validated, e.g., viral coefficients, customer retention rates.
  • The benefits of bootstrapping and avoiding big investments in marketing and infrastructure until business model hypotheses are validated.
In the first module, in addition to covering these core concepts, we’ll consider several issues of practical concern to marketing and product managers in early stage companies, for example:

  • When should a startup outsource engineering work?
  • How do firms design products for virality?
  • In a B2B context, how can an unknown startup with an unproven product identify potential early adopters and craft an effective sales pitch for them?
  • When does a “do-it-yourself” approach to public relations make sense, and how long should startups wait before they aggressively invest in PR?

The second module addresses challenges when scaling a business after achieving product-market fit. Topics include:
  • Approaches to customer conversion funnel analysis and optimization, e.g., usability labs, A/B testing.
  • Metrics for scaling startups, e.g., Net Promoter Score, Lifetime Value of a Customer.
  • Challenges in scaling a direct sales force; processes for prioritizing sales leads.
  • Tradeoffs for startups relying on business development partnerships with large companies.
  • Why, when and how startups should introduce formal product management processes, e.g., project prioritization and tracking systems, product roadmaps.


Boundaries

In addition to the issues described above, LTV will consider whether lean startup principles apply in three special contexts:
  • Platform-Based Businesses. "Do not scale until you validate your business model" is a core principle for lean startups. But does this make sense for platform-based businesses that harness strong network effects, such as Facebook, YouTube, and Twitter? All these firms scaled aggressively before they had proven business models; they subsequently relied on ecosystem partners to experiment with ways to monetize their big platforms.
  • Science-Based Businesses. For a class of capital- and/or science-intensive ventures—e.g., biotech, clean tech—the rapid iteration that is central for lean startups may not be a practical option. For such products, development and/or deployment inherently takes a long time due to fundamental uncertainty about engineering approaches or delays in deploying production capacity.
  • Large Corporations. Big companies have deep pockets and ample resources; that is their principal advantage over nimble startups. So, why should big companies constrain themselves unnaturally by running lean?
I'm eager to get feedback on the concepts covered in my course. What seems off target or missing?

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