Dot-com tech bubble chart 1994-2002

I lived through the infamous Dot-com Bubble. I was at a startup in 1998, that went through the usual ups and downs and up again. Then I founded a design consultancy (for some stability, believe it or not) and advised a number of small and medium-sized startups in Silicon Valley for several years (before eventually joining eBay). Some had solid products with real business models and went on to IPOs or acquisitions (e.g., Uppercase was acquired by Microsoft in 2000). But, a few were remarkably resistant to my efforts to help them think through their business model (I won’t name names). They didn’t seem very concerned about revenue at all, which I found quite surprising (almost as surprised as they felt when their design consultant was pushing them to discuss a revenue model). Lo and behold, those startups did not survive and some collapsed so quickly that I sometimes was left standing in front of their empty building with an unpaid invoice in hand. I certainly learned a number of valuable lessons during those bubble years. I would hope that everyone in the Tech industry these days has learned from the sins of their tech startup fathers, but apparently that isn’t always the case (as evidenced at this year’s LAUNCH Festival).

The majority of serious investors who experienced the first bubble also learned their lesson. The advice they now provide to founders does include detailed discussions around sustainable revenue models, such as subscriptions and transactions instead of traditional advertising revenue. I do think that a lot of entrepreneurs have learned from the mistakes of their predecessors. Over the past few years, I have talked with many founders and witnessed smart thinking around product strategy, business strategy, and exploring early revenue models beyond that old model of “We’ll have a lot of users and sell ads.” But, I have also witnessed a unfortunate number of startups with a fun or “clever” concept that apparently haven’t spent any time thinking through their business model. A perfect example was highlighted today in an article on Business Insider that described the failed pitch by Zabbi. As bad as the pitch sounded, the website is even worse. There is nothing on that landing page that would compel me to try that app. In a world of app overload, you had better be crystal clear on your differentiation and value proposition.

Dave McClure of 500 Startups cut to the chase with his usual acerbic insight:

“I’m not convinced you have a real product. I didn’t get what the fuck you are doing at all. How many people in the room believe this shit? Playing ‘Don’t Worry Be Happy’ isn’t going to show me your business model.”

Source: Business Insider

So, startup founders, I hope you’re paying attention and taking notes. I know that many of you weren’t around for the first bubble, but that doesn’t mean that you can’t learn from it. You can certainly learn from the cornucopia of advice that so many angel investors, tech analysts, and other startup founders are sharing so freely these days. Hiten Shah, co-founder of KISSmetrics, has many useful posts on conversion and revenue on their blog, for example. Read, ask, discuss, learn. I am also more than happy to talk with you about your product strategy, your business model, and how surprisingly subtle design changes can make all the difference in your conversion flows and revenue. Just reach out to me.

Don’t ever walk onto a stage or into a pitch meeting without a clear and concise explanation of how your wonderful startup is going to wow and acquire new customers AND make money from them.

Time spent on various sites (excluding Facebook), worldwide, January 2011-2012. Source: ComScore

This VentureBeat article provided a compelling infographic, including Facebook, that captures the essence of what is happening in this Social Media space (Original source: Statista). While Twitter, Linkedin, and Google+ may have more unique users per month, the real story is in engagement (i.e., time spent on the sites). It’s great to have more eyeballs, but only if they are actually coming back to your site frequently and using it a lot. And that is why you should be keeping a close eye on Tumblr and Pinterest.

Social Network Use in the U.S. Source: Statista

But, is Pinterest the right place to speak to your potential customers? Are they even using Pinterest? For example, the users on Pinterest are mostly female (87%) and ages 25-54 (80%). So, if you’re trying to reach a teen male audience with your product message, for example, it may not be the best place for you to invest your time. Pinterest is also an inherently visual experience. When you “pin” things to your “boards” (i.e., to share them), you are pinning an image. The image can be selected from all of the images that Pinterest finds at a specified URL address or you can upload images from your computer. That pin then links back to the site it came from. So, this is different than other social media sites that allow you to just share text, or a link, or a snippet of an article. If that is what you want to share, then you might be better off doing that on Twitter, Tumblr, or your Facebook page.

Of course, your own social media strategy probably includes sharing content and updates across most or all of the typical social channels. But, some businesses seem to lend themselves very well to the Pinterest experience vs. others. They have a strong visual component to their products and services, like Etsy. Or, they have great charts and meaningful infographics that convey their business messages, like the Wall Street Journal. Other organizations seem to be stretching to play the “visual game” and it feels forced. Yale University’s board is just sad.

Yes, it is hard to ignore the big sites that have a lot of users and, by all means, you should be using Facebook, Twitter, and Linkedin for your business. But, ignore Pinterest and Tumblr at your own peril. Many sites are already finding that Pinterest is driving more referral traffic than Google+, Linkedin, and MySpace combined. Also, the engagement is remarkably different. In my own experiments, I’m discovering that users on Pinterest and Tumblr are repinning and reblogging (i.e., resharing) my posts at a much higher level than I’ve ever experienced on Facebook and Twitter, even though I have many more followers on those sites. Plus, they are actively commenting and asking follow-up questions too. Isn’t that what you’ve always wanted from your audience?

I leave you with this useful infographic from MDG Advertising, as a quick guide to Pinterest and how you should use it.

Infographicby MDG Advertising

Presentation Transcript

• The User Experience IS the Product Experience, Product Management Conference, Larry Cornett, Ph.D.
• Overview
• The Power of Product Experience
• User-Centered Product Design (UCD)
• The Role of Product Management
• Product Success at eBay
• Q&A
• The Power of Product Experience
• Focus on UX matters
• It wasn’t always the case
• But, customers now have choices
• Competition emerges faster
• A great user experience differentiates
• A great user experience builds loyalty
• My Background
• What the user experience with your product really is about
• Competitive landscape
• Technologies are becoming commoditized
• Platforms enable fast development & distribution
• Rapid iteration and testing cycles
• Intense focus on users, data, and metrics
• Innovative experiences built on top of data & tech
• Race to launch minimum viable product (MVP)
• Extreme MVP
• Who will win?
• Companies that “get it”
• Companies who listen, observe, & use data
• Companies that solve “pain”
• Companies that obsess over the details
• Companies that deliver great experiences
• User-Centered Product Design
• What is UCD?
• The UCD approach
• Integrating UCD & Agile
• Global innovation average success rate is 4% across all geographies and industries
• How to succeed
• UCD Success: Apple Computer, Netflix.com, Mint.com
• UCD Failures: Google Nexus, Sansa e200 Series MP3 Player, Google Wave
• Typical UCD barriers
• Who is accountable?
• The Role of Product Management
• What Product Management is not
• Being the champion
• Creating a vision
• Defining the strategy
• Specifying the right product
• Executing the plan
• Validating performance
• Defending the product
• Being accountable
• User-centered philosophy
• Your allies
• Product success at eBay
• Defining success
• Aligning goals
• Redesigning selling
• Selling form before
• Unique challenges
• The process
• UCD practices
• The result
• Success
• Improved ease of use
• Efficiency
• Scalability
• Profitability
• 25% to 50% reduction in the listing time
• Continued success
• Lessons learned

The Role of Product Management

According to a recent OfficeTeam Survey, almost 1/2 of the employees surveyed said that they have worked for unreasonable managers and 1 in 4 just decided to suffer through it.

A more recent and diverse survey conducted by Fierce, Inc. was a bit more positive.

Contrary to much of the recent hype around bad bosses, over 70 percent of respondents claimed to have a good working relationship with their supervisor. Even more encouraging is that 62 percent of those surveyed report that their job satisfaction is “high” or “extremely high,” and 53 percent report that their boss’s management style has a direct and positive impact on their relationships with coworkers, fostering collaboration and encouraging candid communication.

While these results are good news for businesses looking to retain and engage their workforce, the survey also revealed the central characteristics of good bosses, which include:

- Eighty percent of respondents who reported a good employee-supervisor relationship claim that the most important thing a boss can do to create a positive working relationship is to both solicit and value their input.
- Among respondents who claimed to have a poor relationship with their boss, 42 percent stated that one of the top reasons the relationship was strained was due to their boss’ failure to listen or take their input into account.
- Of the managers surveyed, less than 25 percent identified soliciting input as an area in which they wanted to improve.
- Thirty-seven percent of those who reported a good relationship felt that it was also important for a manager to offer constructive feedback.
- Over 40 percent of those who felt they had a bad supervisor identified a lack of candor on the part of their boss as critical to the downfall of the relationship.

Whether you have a good boss or a bad boss, there is something uniquely valuable about a personal career and leadership coach. Even with a good boss, there will always be issues that you won’t feel comfortable discussing with your direct manager. A good coach has your best interest and goals in mind and they maintain the confidentiality of your discussions. If this sounds a little similar to a therapist, it’s not surprising. A great session with a great coach can indeed feel a little like a career therapy session. I always learned a lot during my sessions and I’m glad that I was lucky enough to experience this type of personal coaching. I highly recommend that you explore it for yourself and your own team.

Some of the key benefits:

• Great leaders help create a great corporate culture. The influence of this creates a positive ripple effect that will improve employee satisfaction, effectiveness, and retention.
• Leaders learn how to identify and leverage their strengths and manage their weaknesses, thus improving their performance.
• More effective leadership contributes directly to more effective organizational performance (e.g., leaders facilitate and accelerate success vs. hindering progress).
• Great leaders attract other great leaders (e.g., people often decide whether or not to join a leadership team based on who is on the exec staff).
• Great leaders attract great talent (e.g., talent follows great leadership even across companies).
• Corporate reputation is directly related to the perceived talent and effectiveness of the leadership team.
• Finally, whether you like it or not, the Market also reacts to the perceived talent and effectiveness of the leadership team (see below).

HP stock pops 7% on rumor that the CEO, Leo Apotheker, is getting fired

Then HP stock promptly plunges once it is clear that Meg Whitman is taking over as CEO

* Chart source Yahoo! Finance

Here are two excellent organizations that I worked with while I was at Yahoo. They provided group workshops and 1-on-1 leadership coaching for me, my peers, and several members of my own management team. Well worth the investment!

Axialent

Axialent offers a number of services for business leaders, including 1-on-1 coaching. I participated in this while I was at Yahoo and my coach, Sharon Ting, was fantastic.

Mariposa Leadership

Mariposa Leadership also offers 1-on-1 leadership coaching. I was lucky enough to have the CEO, Sue Bethanis, as my coach and learned a lot during my meetings with her. They also offer group workshops.

Some of the topics we discussed:

• What differentiates successful innovation from the more typical product evolution?
• How do you best measure true innovation success vs. failure?
• How can you best optimize your organization and processes to foster successful innovation?
• After experiencing many different innovation programs and processes, what actually works?
• What are the myths of innovation that continue to be pitfalls?

Here is the MP3 audio recording of the panel discussion:
Focus Panel on Sustainable Innovation 9-28-11

Speakers

	Luke Wroblewski Founder LukeW Ideation & Design
	Adam Nash Greylock Partners
	Kate Aronowitz Director of Design Facebook
	Larry Cornett  Founder & CEO, Innovation Speaker & Consultant Brilliant Forge

Some of the factors affecting the pace of business change:

• Volatile economic environment
• Increased competition
• Fast-changing regulatory environment
• Rapid changes in customer preferences
• Changing technologies

Barriers slowing business response to change:

• Lack of resources to implement change
• Lack of coordination across different functions
• Inaccurate or incomplete data
• Bureaucratic decision-making process
• Reluctance among senior executives to change strategy
• Lack of leadership
• Lack of autonomy for managers/executives
• Reluctance to admit that previous strategic decisions were wrong
• Lack of innovation capability

There are certainly things that can be done by larger corporations to address these issues, but they require strong leadership, real vision, and bold execution.

First, it requires significant changes in how organizations hire, organize teams, encourage exploration, and reward success.

Second, it requires significant changes in business processes and product development processes to foster goal-directed innovation, weave it appropriately into the product process, and streamline decision-making so that products can be delivered more quickly to market.

Finally, it requires a clarity of vision and a focused strategy to engender passion, not only in your customers, but also in your employees. Without their passion and belief in your mission and what you are delivering to your customers, nothing of significance will ever be created.

Credit: Progress Software’s infographic based on research from the Economist Intelligence Unit.

Summary

We are all witnessing an increasing velocity of product and service innovation within the competitive landscape. Creating a sustainable process for successful innovation is now even more critical for corporate survival. Yet, it seems that only nimble startups and a select few larger companies are able to accomplish this. Why is that? Our panelists have experienced innovation success and failure at some of the largest Fortune 500 companies and some of the smallest tech startups. Join our roundtable to find out more about their lessons learned.

We’ll cover such topics as:

• What differentiates successful innovation from the more typical product evolution?
• How do you best measure true innovation success vs. failure?
• How can you best optimize your organization and processes to foster successful innovation?
• After experiencing many different innovation programs and processes, what actually works?
• What are the myths of innovation that continue to be pitfalls?

How to Attend

Experience this event live online by visiting the event page up to 15 minutes before the start.
Not going to be online? Call-in:

US Toll-free:  (866) 951-1151
International: (201) 590-2255
Passcode: 4999006

Save to Calendar

Speakers

	Luke Wroblewski Founder LukeW Ideation & Design
	Adam Nash Greylock Partners
	Kate Aronowitz Director of Design Facebook
	Larry Cornett  Founder & CEO, Innovation Speaker & Consultant Brilliant Forge

From a recent post by Salim Ismail on GigaOM about Yahoo’s matrix:

But it is terrible for accountability or speed. Whenever you launch or change a product, you have to get clearance from legal, PR, branding, privacy etc, which inevitably takes time. The matrix structure also prevents any real risk taking. The legal department, for example, wants the same ToS across all the products. Brickhouse was created to circumvent this issue. Set up outside and away from the mother ship, we hoped to be the tugboat that pulled the big tanker around. It worked for a while, but the Microsoft bid pretty much derailed that effort. The company had to focus all its energies to fend off the bid, which was necessary but incredibly disruptive to morale and productivity.  In addition, the Matrix had woken up and was attacking our unit (the best analogy I’ve found for this is that whenever you do corporate incubation, the immune system of the company will come and attack you — but that’s a whole other post).

The matrix structure works great in older, slower industries, but on the Internet, the two attributes you must have are speed and risk. Very simply, Yahoo’s organizational structure is antithetical to the industry they’re in. Over time, that structure has calcified and today, Yahoo is a 14 year old dinosaur in the industry it helped form.

I agree that the matrix only makes sense for certain support functions that you really should centralize, usually due to policy and oversight (e.g., HR, Legal). But, pushing other functions like Design and Research into a matrix role tends to slow down execution and hinders innovation. Decision-making becomes fuzzy when different team members actually report into different organizations. Accountability and “loyalty” are also unclear when someone works day-to-day within one organization, but has a manager outside of that organization who may have goals that are not fully aligned with the goals of that product team. I know, because I have experienced this personally as organizations decentralized into a matrix role and then re-centralized again, several times over the period of just a few years in a number of corporations where I was employed. The cycles of reorganizations and changes in ownership, decision-making, and accountability all contributed to execution issues.

However, I’m not sure that I would characterize the Brickhouse team at Yahoo as executing successfully until the Matrix “attacked it”. Everyone within Product and Engineering organizations should be responsible and accountable for the innovation and evolution of their respective products. Creating a separate “innovation group” that exists somewhere else in an ivory tower only makes sense if that group is chartered with the creation of an entirely new product. There are historical examples of that having some mixed success. For example, Apple’s original Macintosh team delivered, but the rest of the company felt alienated. If the innovation is supposedly being applied to an existing product line, you can be certain that the core team will feel alienated and exhibit “organ rejection” when you try to inject that innovation back into the core product. Also, this separate innovation group typically does not have the deep knowledge and experience with a product that the dedicated team does, after years and years of design and development. Yes, yes. I know that a team can stagnate and fail to innovate their own product because they are too close to it. But, that can be fixed. There are many ways to remedy this through intelligent hiring, better organizational models, and sustainable changes to product process that help drive repeatable innovation. Thinking that you can create product innovation in a vacuum, without collaboration with the existing team, and have it succeed in the market is a myth.

It simply does not work.

More to come…

Over the years, I have experimented with dozens of platforms for blogging, microblogging, and social networks. I have long been a WordPress user for my own blogs. I have also used Facebook, Twitter, Google+, YouTube, Delicious, Stumbleupon, and Digg as distribution channels and connecting with followers. But, I had not used Tumblr until a few months ago. The experience has been enlightening and helps me understand the site’s popularity and growth. The engagement with my followers on Tumblr has been very different than Facebook and Twitter. The frequency of likes and comments is much greater on Tumblr. Posts are reblogged more often than the same content is retweeted on Twitter or shared on Facebook.

The ease of reblogging content on Tumblr has certainly been a huge part of its popularity and growth, but this is also creating one of Tumblr’s biggest issues: Copyright infringement. As I scroll through my Tumblr stream, it is clear that a large majority of the content is “borrowed” and modified. I can’t imagine that Tumblr won’t need to crack down on this at some point, just as YouTube did (which helps protect them from lawsuits). Some believe that Tumblr will only have serious success with large brands and advertisers once it deals with this issue plus its “porn issue“. Regardless, the increases in time spent and users that Tumblr has been enjoying makes it a player that everyone needs to keep an eye on.

Highlights of Nielsen’s “State of the Media: The Social Media Report”

• Social networks and blogs continue to dominate Americans’ time online, now accounting for nearly a quarter of total time spent on the Internet
• At over 53 billion total minutes during May 2011, Americans spend more time on Facebook than they do on any other website
• Tumblr is an emerging player in social media, nearly tripling its audience from a year ago
• Nearly 40 percent of social media users access social media content from their mobile phone
• Internet users over the age of 55 are driving the growth of social networking through the Mobile Internet
• 70 percent of active online adult social networkers shop online, 12 percent more likely than the average adult Internet user
• Across a sample of 10 global markets, social networks and blogs are the top online destination in each country, accounting for the majority of time spent online and reaching at least 60 percent of active Internet users
• From the Nielsen Social Media Report: Q3 2011

My biggest takeaway from all of this? Startups absolutely need great mentors. Surprisingly, hands-on help from their investors did not have a significantly positive effect on their performance. I believe that most startup founders assume that they are going to get the guidance they need to be successful once they have secured the backing of a solid VC firm. This certainly does not appear to be the case. As I look through the key findings from the report, these points of failure seem to quite avoidable if a startup had a strong, smart team of mentors that they could turn to for advice on these issues. In particular, the most common reason for startup failure was “premature scaling” along one or more key dimensions (i.e., Customer, Product, Team, Financials, and Business model). Knowing how and when to scale a startup appropriately along these dimensions is something that an experienced mentor understands (e.g., someone who has learned from his or her own scaling successes and failures).

Key findings from their report

1. Founders that learn are more successful. Startups that have helpful mentors, track performance metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.
2. Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all. A pivot is when a startup decides to change a major part of its business.
3. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves. Startups can prematurely scale their team, their customer acquisition strategies or over build the product.
4. Many investors invest 2-3x more capital than necessary in startups in the discovery phase. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.
5. Hands-on help from investors have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. However, this does not mean that investors don’t have a significant effect on valuations and M&A.
6. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.
7. Business-heavy founding teams are 6.2x more likely to successfully scale with sales-driven startups than with product-centric startups.
8. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups without network effects than with product-centric startups with network effects.
9. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.
10. Founders that don’t work full-time have 4x less user growth and end up raising 24x less money from investors.
11. Most successful founders are driven by impact rather than experience or money.
12. 72% of founders find out that their initial intellectual property is not a competitive advantage.
13. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.
14. Startups that haven’t raised money overestimate their market size by 100x and often misinterpret their market as new.
15. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the dynamics of customer interaction. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time requirements, market risk and team composition.

Startup Genome Report: premature scaling v 1.1 . Copyright 2011, contents under creative commons license

The team at Visual.ly created this infographic to illustrate the highlights of the report.

by visually via