Pay It Forward

Hello Friends,

el RED has been inspired by many great books. I use a kindle to highlight the parts I would love to reread . Sharing those here, hoping it would come of use to someone. Pay it forward.

Regards

Saurabh

Hooked

How to keep users Hooked ?

Feel a tad bored and instantly open Twitter

Pang of loneliness scrolling through their Facebook feeds

A question comes. They query Google.

The first-to-mind solution wins.

A trigger is the actuator of behavior—the spark plug in the engine. Triggers come in two types: external and internal.

Habit-forming products start by alerting users with external triggers like an e-mail, a website link, or the app icon on a phone.

Following the trigger comes the action: the behavior done in anticipation of a reward

Companies leverage two basic pulleys of human behavior to increase the likelihood of an action occurring: the ease of performing an action and the psychological motivation to do it.

Variable Reward. ability to create a craving.intrigue is created.

What distinguishes the Hooked Model from a plain vanilla feedback loop is the Hook’s ability to create a craving.

Variable rewards are one of the most powerful tools companies implement to hook users;

Investment. The last phase of the Hooked Model is where the user does a bit of work. The investment phase isn’t about users opening up their wallets and moving on with their day. Rather, the investment implies an action that improves the service for the next go-around. Inviting friends, stating preferences, building virtual assets, and learning to use new features are all investments users make to improve their experience.

These commitments can be leveraged to make the trigger more engaging, the action easier, and the reward more exciting with every pass through the Hooked Model.

Choice architecture, a concept described by famed scholars Thaler, Sunstein, and Balz in their same-titled scholarly paper, offers techniques to influence people’s decisions and affect behavioral outcomes.

The Hooked Model has four phases: trigger, action, variable reward, and investment.

Like nail biting, many of our daily decisions are made simply because that was the way we have found resolution in the past. The brain automatically deduces that if the decision was a good one yesterday, then it is a safe bet again today and the action becomes a routine.

If our programmed behaviors are so influential in guiding our everyday actions, surely harnessing the same power of habits can be a boon for industry. Indeed, for those able to shape them in an effective way, habits can be very good for the bottom line.

While the viability of some products depends on habit-formation to thrive, that is not always the case. For example, companies selling infrequently bought or used products or services do not require habitual users—at least, not in the sense of everyday engagement.

Life insurance companies, for instance, leverage salespeople, advertising, and word-of-mouth referrals and recommendations to prompt consumers to buy policies. Once the policy is bought, there is nothing more the customer.

Some products have a very high CLTV. For example, credit card customers tend to stay loyal for a very long time and are worth a bundle. Hence, credit card companies are willing to spend a considerable amount of money acquiring new customers.

Buffett and his partner, Charlie Munger, realized that as customers form routines around a product, they come to depend upon it and become less sensitive to price.

In the free-to-play video game business, it is standard practice for game developers to delay asking users to pay money until they have played consistently and habitually. Once the compulsion to play is in place and the desire to progress in the game increases, converting users into paying customers is much easier

Viral Cycle Time is the amount of time it takes a user to invite another user, and it can have a massive impact. “For example, after 20 days with a cycle time of two days, you will have 20,470 users,” Skok writes. “But if you halved that cycle time to one day, you would have over 20 million users! It is logical that it would be better to have more cycles occur, but it is less obvious just how much better.”

Many entrepreneurs fall into the trap of building products that are only marginally better than existing solutions, hoping their innovation will be good enough to woo customers away from existing products.

Old habits die hard and new products or services need to offer dramatic improvements to shake users out of old routines.

Products that require a high degree of behavior change are doomed to fail even if the benefits of using the new product are clear and substantial.

Users also increase their dependency on habit-forming products by storing value in them—further reducing the likelihood of switching to an alternative. For example, every e-mail sent and received using Google’s Gmail is stored indefinitely, providing users with a lasting repository of past conversations.

Memories and experiences captured on Instagram are added to one’s digital scrapbook. Switching to a new e- mail service, social network, or photo-sharing app becomes more difficult the more people use them. The nontransferable value created and stored inside these services discourages users from leaving.

The nontransferable value created and stored inside these services discourages users from leaving. To borrow a term from accounting, behaviors are LIFO—“last in, first out.” In other words, the habits you’ve most recently acquired are also the ones most likely to go soonest.

Altering behavior requires not only an understanding of how to persuade people to act—for example, the first time they land on a web page—but also necessitates getting them to repeat behaviors for long periods, ideally for the rest of their lives

The enemy of forming new habits is past behaviors, and research suggests that old habits die hard. Even when we change our routines, neural pathways remain etched in our brains, ready to be reactivated when we lose focus. For new behaviors to really take hold, they must occur often.

Habits keep users loyal. If a user is familiar with the Google interface, switching to Bing requires cognitive effort.

Although many aspects of Bing are similar to Google, even a slight change in pixel placement forces the would- be user to learn a new way of interacting with the site.

For an infrequent action to become a habit, the user must perceive a high degree of utility, either from gaining pleasure or avoiding pain.

Amazon is so confident in its ability to form user habits that it sells and runs ads for directly competitive products on its site.Customers often see the item they are about to buy listed at a cheaper price and can click away to transact elsewhere. Not only does Amazon make money from the ads it runs from competing businesses, it also utilizes other companies’ marketing dollars to form a habit in the shopper’s mind. Amazon seeks to become the solution to a frequently occurring pain point—the customer’s desire to find the items they want. By allowing users to comparison shop from within the site, Amazon provides tremendous perceived utility to its customers.

A company can begin to determine its product’s habit-forming potential by plotting two factors: frequency (how often the behavior occurs) and perceived utility (how useful and rewarding the behavior is in the user’s mind over alternative solutions).

Some behaviors never become habits because they do not occur frequently enough. No matter how much utility is involved, infrequent behaviors remain conscious actions and never create the automatic response that is characteristic of habits.

Remember, the Hooked Model does not get people to do things they don’t want to do. Your product must ultimately be useful.

Facebook, Twitter, Instagram, and Pinterest. What are they selling—vitamins or painkillers? Most people would guess vitamins, thinking users aren’t doing much of anything important other than perhaps seeking a quick boost of social validation.

Before making up your mind on the vitamin versus painkiller debate for some of the world’s most successful tech companies, consider this idea: A habit is when not doing an action causes a bit of discomfort. The sensation is similar to an itch, a feeling that manifests within the mind until it is satisfied. The habit-forming products we use are simply there to provide some sort of relief.

My answer to the vitamin versus painkiller question: Habit-forming technologies are both. These services seem at first to be offering nice-to-have vitamins, but once the habit is established, they provide an ongoing pain remedy.

It is worth noting that although some people use the terms interchangeably, habits are not the same things as addictions. The latter describes persistent, compulsive dependencies on a behavior or substance that harms the user. Addictions, by definition, are self-destructive.

When successful, forming strong user habits can have several business benefits including: higher customer lifetime value (CLTV), greater pricing flexibility, supercharged growth, and a sharper competitive edge.

Habit-forming products often start as nice-to-haves (vitamins) but once the habit is formed, they become musthaves (painkillers). Habit-forming products alleviate users’ discomfort by relieving a pronounced itch.

If you are building a habit-forming product, write down the answers to these questions: What habits does your business model require? What problem are users turning to your product to solve? How do users currently solve that problem and why does it need a solution? How frequently do you expect users to engage with your product once they are habituated? What user behavior do you want to make into a habit?

The chain reaction that forms a habit always starts with a trigger. Habits are not created, they are built upon.

New habits need a foundation upon which to build. Triggers provide the basis for sustained behavior change.

Triggers take the form of obvious cues like the morning alarm clock but also come as more subtle, sometimes subconscious signals that just as effectively influence our daily behavior

Triggers come in two types: external and internal

External Triggers Habit-forming technologies start changing behavior by first cueing users with a call to action.

External triggers are embedded with information, which tells the user what to do next. Online, an external trigger may take the form of a prominent button, such as the large “Log in to Mint” prompt in the email from Mint.com

More choices require the user to evaluate multiple options. Too many choices or irrelevant options can cause hesitation, confusion, or worse—abandonment.Reducing the thinking required to take the next action increases the likelihood of the desired behavior occurring with little thought.

Types of External Triggers. Companies can utilize four types of external triggers to move users to complete desired actions.

Paid Triggers. Advertising, search engine marketing, and other paid channels are commonly used to get users’ attention.Habit-forming companies tend not to rely on paid triggers

Companies generally use paid triggers to acquire new users and then leverage other triggers to bring them back.

Earned Triggers. Earned triggers are free in that they cannot be bought directly, but they often require investment in the form of time spent on public and media relations. For earned triggers to drive ongoing user acquisition, companies must keep their products in the limelight—a difficult and unpredictable task.

Relationship Triggers. One person telling others about a product or service can be a highly effective external trigger for action. Whether through an electronic invitation, a Facebook “like,” or old fashioned word of mouth, product referrals from friends and family are often a key component of technology diffusion.

Sometimes relationship triggers drive growth because people love to tell one another about a wonderful offer.

When designers intentionally trick users into inviting friends or blasting a message to their social networks, they may see some initial growth, but it comes at the expense of users’ goodwill and trust.

Proper use of relationship triggers requires building an engaged user base that is enthusiastic about sharing the benefits of the product with others.

Owned Triggers. Owned triggers consume a piece of real estate in the user’s environment. They consistently show up in daily life and it is ultimately up to the user to opt in to allowing these triggers to appear.

Owned triggers are only set after users sign up for an account, submit their email address, install an app, opt in to newsletters, or otherwise indicate they want to continue receiving communications. While paid, earned, and relationship triggers drive new user acquisition, owned triggers prompt repeat engagement until a habit is formed.

When users form habits, they are cued by a different kind of trigger: internal ones.Internal triggers manifest automatically in your mind. Connecting internal triggers with a product is the brass ring of habit-forming technology.

Emotions, particularly negative ones, are powerful internal triggers and greatly influence our daily routines. Feelings of boredom, loneliness, frustration, confusion, and indecisiveness often instigate a slight pain or irritation and prompt an almost instantaneous and often mindless action to quell the negative sensation. For instance, Yin often uses Instagram when she fears a special moment will be lost forever. The severity of the Emotions, particularly negative ones, are powerful internal triggers and greatly influence our daily routines.The severity of the discomfort may be relatively minor—perhaps her fear is below the perceptibility of consciousness—but that’s exactly the point.

The desire to be entertained can be thought of as the need to satiate boredom. A need to share good news can also be thought of as an attempt to find and maintain social connections.

Users who find a product that alleviates their pain will form strong, positive associations with the product over time.

Gradually, these bonds cement into a habit as users turn to your product when experiencing certain internal triggers.The study demonstrated that people suffering from symptoms of depression used the Internet more.

The mother of all habit-forming technology, is a go-to solution for many of our daily agitations, from validating our importance (or even our existence) by checking to see if someone needs us

Building for Triggers Products that successfully create habits soothe the user’s pain by laying claim to a particular feeling. To do so, product designers must know their user’s internal triggers—that is, the pain they seek to solve. Finding customers’ internal triggers requires learning more about people than what they can tell you in a survey, though.

The ultimate goal of a habit-forming product is to solve the user’s pain by creating an association so that the user identifies the company’s product or service as the source of relief.

How do you, as a designer, go about uncovering the source of a user’s pain? The best place to start is to learn the drivers behind successful habit-forming products—not to copy them, but to understand how they solve users’ problems. Doing so will give you practice in diving deeper into the mind of the consumer and alert you to common human needs and desires. As We often think the Internet enables you to do new things … But people just want to do the same things they’ve always done.”

We often think the Internet enables you to do new things … But people just want to do the same things they’ve always done.”

Ask yourself what pain these habits solve and what the user might be feeling right before one of these actions.

Spend a lot of time writing what’s called user narratives. “He is in the middle of Chicago and they go to a coffee store … This is the experience they’re going to have. It reads like a play. It’s really, really beautiful. If you do that story well, then all of the prioritization, all of the product, all of the design and all the coordination that you need to do with these products just falls out naturally because you can edit the story and everyone can relate to the story from all levels of the organization, engineers to operations to support to designers to the business side of the house.”

Dorsey believes a clear description of users—their desires, emotions, the context with which they use the product —is paramount to building the right solution. In addition to Dorsey’s user narratives, tools like customer development,11 usability studies, and empathy maps12 are examples of methods for learning about potential users.

One method is to try asking the question “Why?” as many times as it takes to get to an emotion. Usually, this will happen by the fifth why. This is a technique adapted from the Toyota Production System, described by Taiichi Ohno as the “5 Whys Method.”

Why #1: Why would Julie want to use e-mail? Answer: So she can send and receive messages.

Why #2: Why would she want to do that? Answer: Because she wants to share and receive information quickly.

Why #3: Why does she want to do that? Answer: To know what’s going on in the lives of her coworkers, friends, and family.

Why #4: Why does she need to know that? Answer: To know if someone needs her.

Why #5: Why would she care about that? Answer: She fears being out of the loop. Now we’ve got something! Fear is a powerful internal trigger and we can design our solution to help calm Julie’s fear. It is the fear of losing a special moment that instigates a pang of stress. This negative emotion is the internal trigger that brings Instagram users back to the app to alleviate this pain by capturing a photo.

Instagram also alleviates the increasingly recognizable pain point known as fear of missing out, or FOMO. For Instagram, associations with internal triggers provide a foundation to form new habits.

Refer to the answers you came up with in the last “Do This Now” section to complete the following exercises: Who is your product’s user? What is the user doing right before your intended habit? Come up with three internal triggers that could cue your user to action. Refer to the 5 Whys Method described in this chapter. Which internal trigger does your user experience most frequently? Finish this brief narrative using the most frequent internal trigger and the habit you are designing: “Every time the user (internal trigger), he/she (first action of intended habit).”

Refer back to the question about what the user is doing right before the first action of the habit. What might be places and times to send an external trigger? How can you couple an external trigger as closely as possible to when the user’s internal trigger fires? Think of at least three conventional ways to trigger your user with current technology (e-mails, notifications, text messages, etc.). Then stretch yourself to come up with at least three crazy or currently impossible ideas for ways to trigger your user (wearable computers, biometric sensors, carrier pigeons, etc.). You could find that your crazy ideas spur some new approaches that may not be so nutty after all. In a few years new technologies will create all sorts of currently unimaginable triggering opportunities.

To initiate action, doing must be easier than thinking. Remember, a habit is a behavior done with little or no conscious thought. The more effort—either physical or mental—required to perform the desired action, the less likely it is to occur.

Fogg posits that there are three ingredients required to initiate any and all behaviors: (1) the user must have sufficient motivation; (2) the user must have the ability to complete the desired action; and (3) a trigger must be present to activate the behavior.

While a trigger cues an action, motivation defines the level of desire to take that action.

All humans are motivated to seek pleasure and avoid pain; to seek hope and avoid fear; and finally, to seek social acceptance and avoid rejection.

What motivates some people will not motivate others, a fact that provides all the more reason to understand the needs of your particular target audience.

However, even with the right trigger enabled and motivation running high, product designers often find users still don’t behave the way they want them to. What’s missing in this equation? Usability—or rather, the ability of the user to take action easily.

First, Hauptly states, understand the reason people use a product or service. Next, lay out the steps the customer must take to get the job done. Finally, once the series of tasks from intention to outcome is understood, simply start removing steps until you reach the simplest possible process. “Take a human desire, preferably one that has been around for a really long time … Identify that desire and use modern technology to take out steps.”

Posting content online is dramatically easier. The result? The percentage of users creating content online, as opposed to simply consuming it, increased.A few keyboard taps and users were sharing.

Six “elements of simplicity”—the factors that influence a task’s difficulty.These are:

Time—how long it takes to complete an action.

Money—the fiscal cost of taking an action.

Physical effort—the amount of labor involved in taking the action.

Brain cycles—the level of mental effort and focus required to take an action.

Social deviance—how accepted the behavior is by others.

Non-routine—according to Fogg, “How much the action matches or disrupts existing routines.”

Twitter helps people share articles, videos, photos, or any other content they find on the web. The company noticed that 25 percent of tweets contained a link.

To ease the way for link sharing, Twitter created an embeddable Tweet button for third-party sites, allowing them to offer visitors a one-click way to tweet directly from their pages

Google’s PageRank algorithm proved to be a much more effective way to index the web. By ranking pages based on how frequently other sites linked to them, Google improved search relevance.

Infinite scroll. whenever the user nears the bottom of a page, more results automatically load. Users never have to pause as they continue scrolling through pins or posts without end

Even though users are often unaware of these influences on their behavior, heuristics can predict their actions.

The Scarcity Effect. The appearance of scarcity affected their perception of value.

The Framing Effect. Context also shapes perception. The mind takes shortcuts informed by our surroundings to make quick and sometimes erroneous judgments. perception can form a personal reality based on how a product is framed, even when there is little relationship with objAbility is influenced by the six factors of time, money, physical effort, brain cycles, social deviance, and nonroutineness. Ability is dependent on users and their context at that moment.ective quality.

The Anchoring Effect. After doing some quick math I discovered that the undershirts not on sale were actually cheaper per shirt than the discounted brand’s package. People often anchor to one piece of information when making a decision.

The Endowed Progress Effect. The study demonstrates the endowed progress effect, a phenomenon that increases motivation as people believe they are nearing a goal. On LinkedIn every user starts with some semblance of progress . The next step is to “Improve Your Profile Strength” by supplying additional information.

Ability is influenced by the six factors of time, money, physical effort, brain cycles, social deviance, and nonroutineness. Ability is dependent on users and their context at that moment.

Walk through the path your users would take to use your product or service, beginning from the time they feel their internal trigger to the point where they receive their expected outcome. How many steps does it take before users obtain the reward they came for? How does this process compare with the simplicity of some of the examples described in this chapter? How does it compare with competing products and services?

Ability is influenced by the six factors of time, money, physical effort, brain cycles, social deviance, and nonroutineness. Ability is dependent on users and their context at that moment.

Users must come to depend on the product as a reliable solution to their problem—the salve for the itch they came to scratch.

Variable reward phase, in which you reward your users by solving a problem, reinforcing their motivation for the action taken in the previous phase

Nucleus accumbens was not activating when the reward (in this case a monetary payout) was received, but rather in anticipation of it.The study revealed that what draws us to act is not the sensation we receive from the reward itself, but the need to alleviate the craving for that reward.

Without variability we are like children in that once we figure out what will happen next, we become less excited by the experience.To hold our attention, products must have an ongoing degree of novelty.

Habits help us conserve our attention for other things while we go about the tasks we perform with little or no conscious thought. However, when something breaks the cause-and-effect pattern we’ve come to expect—when we encounter something outside the norm—we suddenly become aware of it again.4 Novelty sparks our interest, makes us pay attention, and—like a baby encountering a friendly dog for the first time—we seem to love it. Rewards.

Recent experiments reveal that variability increases activity in the nucleus accumbens and spikes levels of the neurotransmitter dopamine, driving our hungry search for rewards.

Variable rewards come in three types: the tribe, the hunt, and the self.

Rewards of the Tribe We are a species that depends on one another. Rewards of the tribe, or social rewards, are driven by our connectedness with other people. Our brains are adapted to seek rewards that make us feel accepted, attractive, important, and included. Facebook, Twitter, Pinterest, and several other sites collectively provide over a billion people with powerful social rewards on a variable schedule. With every post, tweet, or pin, users anticipate social validation. People who observe someone being rewarded for a particular behavior are more likely to alter their own beliefs and subsequent actions. This technique works particularly well when people observe the behavior of people most like themselves or who are slightly more experienced (and therefore, role models).

The uncertainty of what users will find each time they visit the site creates the intrigue needed to pull them back again. “Likes” and comments offer tribal validation for those who shared the content, and provide variable rewards that motivate them to continue posting.

Stack Overflow is the world’s largest question-and-answer site for software developers.

Stack Overflow devotees write responses in anticipation of rewards of the tribe. Each time a user submits an answer, other members have the opportunity to vote the response up or down. The best responses percolate upward, accumulating points for their authors . When they reach certain point levels, members earn badges, which confer special status and privileges. On Stack Overflow, points are not just an empty game mechanic; they confer special value by representing how much someone has contributed to his or her tribe. Users enjoy the feeling of helping their fellow programmers and earning the respect of people whose opinions they value.

The online video game was filled with “trolls”—people who enjoyed bullying other players while being protected by the anonymity the game provides. League of Legends soon earned a nasty reputation for having an “unforgiving—even abusive—community.”To combat the trolls, the game creators designed a reward system leveraging Bandura’s social learning theory, which they called Honor Points (figure 20). The system gave players the ability to award points for particularly sportsmanlike conduct worthy of recognition. These virtual kudos encouraged positive behavior and helped the best and most cooperative players to stand out in the community. The number of points earned was highly variable and could only be conferred by other players. Honor Points soon became a coveted marker of tribe- conferred status and helped weed out trolls by signaling to others which players should be avoided.

Rewards of the Hunt. Early humans killed animals using a technique known as “persistence hunting,” During the chase, the runner is driven by the pursuit itself; this same mental hardwiring also provides clues into the source of our insatiable desires today. The search for resources defines the next type of variable reward—the rewards of the hunt. Slot machines provide a classic example of variable rewards of the hunt.By awarding money in random intervals, games of chance entice players with the prospect of a jackpot.

Twitter. The “feed” has become a social staple of many online products. The stream of limitless information displayed in a scrolling interface makes for a compelling reward of the hunt. The Twitter timeline, for example, is filled with a mix of both mundane and relevant content. This variety creates an enticingly unpredictable user experience.

Pinterest, a company that has grown to reach over 250 million monthly users worldwide, also employs a feed, but with a visual twist.The online pinboarding site is a virtual smorgasbord of objects of desire. The site is curated by its community of users who ensure that a high degree of intriguing content appears on each page. As the user scrolls to the bottom of the page, some images appear to be cut off. Images often appear out of view below the browser fold. However, these images offer a glimpse of what’s ahead, even if just barely visible. To relieve their curiosity, all users have to do is scroll to reveal the full picture

Rewards of the Self Finally, there are the variable rewards we seek for a more personal form of gratification. We are driven to conquer obstacles, even if just for the satisfaction of doing so. The rewards of the self are fueled by “intrinsic motivation” as highlighted by the work of Edward Deci and Richard Ryan. Their self-determination theory espouses that people desire, among other things, to gain.

Video games. Rewards of the self are a defining component in video games, as players seek to master the skills needed to pursue their quest.

The humble e-mail system provides an example of how the search for mastery, completion, and competence moves users to habitual and sometimes mindless actions. Have you ever caught yourself checking your email for no particular reason? Perhaps you unconsciously decided to open it to see what messages might be waiting for you. For many, the number of unread messages represents a sort of goal to be completed. Yet to feel rewarded, the user must have a sense of accomplishment. What happens when in-boxes become flooded with too many messages? Users can give up when they sense the struggle to get their in-boxes under control is hopeless. To combat the problem and give users a sense of progress, Google created “Priority Inbox.”20 Using this feature, Gmail cleverly segments emails into sorted folders to increase the frequency of users achieving “in-box zero”—a near-mystical state of having no unread emails.

Codecademy seeks to make learning to write code more fun and rewarding. The site offers step-by-step instructions for building a web app, animation, and even a browser-based game. The interactive lessons deliver immediate feedback, At Codecademy users can enter a single correct function and the code works or doesn’t, providing instant feedback.

Important Considerations for Designing Reward Systems Variable Rewards Are Not a Free Pass. Why, then, have users remained highly engaged with Quora but not with Mahalo, despite its variable monetary rewards?

Quora demonstrated that social rewards and the variable reinforcement of recognition from peers proved to be much more frequent and salient motivators.Quora instituted an upvoting system that reports user satisfaction with answers and provides a steady stream of social feedback.

Only by understanding what truly matters to users can a company correctly match the right variable reward to their intended behavior. When there is a mismatch between the customer’s problem and the company’s assumed solution, no amount of gamification will help spur engagement. if the user has no ongoing itch at all—say, no need to return repeatedly to a site that lacks any value beyond the initial visit—gamification will fail because of a lack of inherent interest in the product or service offered. Rewards must fit into the narrative of why the product is used and align with the user’s internal triggers and motivations.

Maintain a Sense of Autonomy. the company committed a very public blunder—one that illustrates another important consideration. “Views,” which revealed the real identity of people visiting a particular question or answer. For users, the idea of knowing who was seeing content they added to the site proved very intriguing. Users could now know, for example, when a celebrity or prominent venture capital investor viewed something they created. However, the feature backfired.. In an instant, users lost their treasured anonymity when asking, answering, or simply viewing Quora questions that were personal, awkward, or intimate. For users, the idea of knowing who was seeing content they added to the site proved very intriguing. Users could now know, for example, when a celebrity or prominent venture capital investor viewed something they created. However, the feature backfired. In an instant, users lost their treasured anonymity when asking, answering, or simply viewing

Few words, placed at the end of a request, are a highly effective way to gain compliance, doubling the likelihood. “But you are free to accept or refuse.”The “but you are free” technique demonstrates how we are more likely to be persuaded to give when our ability to choose is reaffirmed.reactance, the hair-trigger response to threats to your autonomy. However, when a request is coupled with an affirmation of the right to choose, reactance is kept at bay. Yet

Keeping a food diary was not part of my daily routine and was not something I came to the app wanting to do.I soon began to feel obligated to confess my mealtime transgressions to my phone. MyFitnessPal became MyFitnessPain.I soon began to feel obligated to confess my mealtime transgressions to my phone.it leverages familiar behaviors users want to do, instead of have to do.

Before my reactance alarm went off, I started receiving kudos from other members of the site after entering my very first run. Curious to know who was sending the virtual encouragement, I logged in, whereupon I immediately saw a question from “mrosplock5,” a woman looking for advice

Fitocracy is first and foremost an online community. The app roped me in by closely mimicking real-world gym jabber among friends. The ritual of connecting with like-minded people existed long before Fitocracy, and the company leverages this behavior by making it easier and more rewarding to share encouragement, exchange advice, and receive praise.

The ritual of connecting with like-minded people existed long before Fitocracy, and the company leverages this behavior by making it easier and more rewarding to share encouragement, exchange advice, and receive praise.

Social acceptance is something we all crave,

To be fair, MyFitnessPal also has social features intended to keep members engaged. However, as opposed to Fitocracy, the benefits of interacting with the community come much later in the user experience, if ever.

The fact remains that the most successful consumer technologies are the ones that nobody makes us use.

Unfortunately, too many companies build their products betting users will do what they make them do instead of letting them do what they want to do

Companies fail to change user behaviors because they do not make their services enjoyable for its own sake, often asking users to learn new, unfamiliar actions instead of making old routines easier.

Companies that successfully change behaviors present users with an implicit choice between their old way of doing things and a new, more convenient way to fulfill existing needs.

Beware of Finite Variability. Companies that successfully change behaviors present users with an implicit choice between their old way of doing things and a new, more convenient way to fulfill existing needs. Experiences with finite variability become less engaging because they eventually become predictable.

Businesses with finite variability are not inferior per se; they just operate under different constraints. They must constantly churn out new content and experiences to cater to their consumers’ insatiable desire for novelty.

Zero to One

The next Larry Page or Sergey Brin won’t make a search engine. And the next Mark Zuckerberg won’t create a social network. If you are copying these guys, you aren’t learning from them.

every time we create something new, we go from 0 to 1. The act of creation is singular, as is the moment of creation, and the result is something fresh and strange.

humans are distinguished from other species by our ability to work miracles. We call these miracles technology.

Humans don’t decide what to build by making choices from some cosmic catalog of options given in advance; instead, by creating new technologies, we rewrite the plan of the world.

the single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.

I like to ask this question: “What important truth do very few people agree with you on?”

This question sounds easy because it’s straightforward. Actually, it’s very hard to answer. It’s intellectually difficult because the knowledge that everyone is taught in school is by definition agreed upon.

it’s psychologically difficult because anyone trying to answer must say something she knows to be unpopular. Brilliant thinking is rare, but courage is in even shorter supply than genius.

the future is simply the set of all moments yet to come. But what makes the future distinctive and important isn’t that it hasn’t happened yet, but rather that it will be a time when the world looks different from today. In this sense, if nothing about our society changes for the next 100 years, then the future is over 100 years away. If things change radically in the next decade, then the future is nearly at hand. No one can predict the future exactly, but we know two things: it’s going to be different, and it must be rooted in today’s world. Most answers to the contrarian question are different ways of seeing the present; good answers are as close as we can come to looking into the future.

there is no reason why technology should be limited to computers. Properly understood, any new and better way of doing things is technology.

most people think the future of the world will be defined by globalization, but the truth is that technology matters more. Without technological change, if China doubles its energy production over the next two decades, it will also double its air pollution. If every one of India’s hundreds of millions of households were to live the way Americans already do—using only today’s tools—the result would be environmentally catastrophic. Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce resources, globalization without new technology is unsustainable.

“Madness is rare in individuals—but in groups, parties, nations, and ages it is the rule,” Nietzsche wrote

Consider an elementary proposition: companies exist to make money, not to lose it. This should be obvious to any thinking person. But it wasn’t so obvious to many in the late 1990s, when no loss was too big to be described as an investment in an even bigger, brighter future. The conventional wisdom of the “New Economy” accepted page views as a more authoritative, forward-looking financial metric than something as pedestrian as profit.

The first step to thinking clearly is to question what we think we know about the past.

four big lessons from the dot-com crash

1. Make incremental advances

Small, incremental steps are the only safe path forward.

2. Stay lean and flexible

try things out, “iterate,” and treat entrepreneurship as agnostic experimentation.

3. Improve on the competition

The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors.

4. Focus on product, not sales

If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution.

yet the opposite principles are probably more correct:

1. It is better to risk boldness than triviality. 2. A bad plan is better than no plan. 3. Competitive markets destroy profits. 4. Sales matters just as much as product.

To build the next generation of companies, we must abandon the dogmas created

ask yourself: how much of what you know about business is shaped by mistaken reactions to past mistakes?

The most contrarian thing of all is not to oppose the crowd but to think for yourself.

your company could create a lot of value without becoming very valuable itself. Creating value is not enough—you also need to capture some of the value you create.

For example, U.S. airline companies serve millions of passengers and create hundreds of billions of dollars of value each year. But in 2012, when the average airfare each way was $178, the airlines made only 37 cents per passenger trip.

Compare them to Google, which creates less value but captures far more. Google brought in $50 billion in 2012 (versus $160 billion for the airlines), but it kept 21% of those revenues as profits—more than 100 times the airline industry’s profit margin that year.

Economists use two simplified models to explain the difference: perfect competition and monopoly.

Every firm in a competitive market is undifferentiated and sells the same homogeneous products. Since no firm has any market power, they must all sell at whatever price the market determines.

Under perfect competition, in the long run no company makes an economic profit.

In this book, we’re not interested in illegal bullies or government favorites: by “monopoly,” we mean the kind of company that’s so good at what it does that no other firm can offer a close substitute.

Americans mythologize competition and credit it with saving us from socialist bread lines. Actually, capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away. The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

both monopolists and competitors are incentivized to bend the truth.

Monopoly Lies Monopolists lie to protect themselves.

they tend to do whatever they can to conceal their monopoly—usually by exaggerating the power of their (nonexistent) competition.

Competitive Lies Non-monopolists tell the opposite lie: “we’re in a league of our own.”

The fatal temptation is to describe your market extremely narrowly so that you dominate it by definition.

Non-monopolists exaggerate their distinction by defining their market as the intersection of various smaller markets:

Monopolists, by contrast, disguise their monopoly by framing their market as the union of several large markets:

The problem with a competitive business goes beyond lack of profits.

The competitive ecosystem pushes people toward ruthlessness or death.

A monopoly like Google is different.

Google’s motto—“Don’t be evil”—is in part a branding ploy, but it’s also characteristic of a kind of business that’s successful enough to take ethics seriously without jeopardizing its own existence. In business, money is either an important thing or it is everything.

monopolies deserve their bad reputation—but only in a world where nothing changes.

In a static world, a monopolist is just a rent collector. If you corner the market for something, you can jack up the price; others will have no choice but to buy from you.

But the world we live in is dynamic: it’s possible to invent new and better things. Creative monopolists give customers more choices by adding entirely new categories of abundance to the world. Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making it better.

Even the government knows this: that’s why one of its departments works hard to create monopolies (by granting patents to new inventions) even though another part hunts them down (by prosecuting antitrust cases).

The dynamism of new monopolies itself explains why old monopolies don’t strangle innovation. With Apple’s iOS at the forefront, the rise of mobile computing has dramatically reduced Microsoft’s decades-long operating system dominance. Before that, IBM’s hardware monopoly of the ’60s and ’70s was overtaken by Microsoft’s software monopoly. AT&T had a monopoly on telephone service for most of the 20th century, but now anyone can get a cheap cell phone plan from any number of providers. If the tendency of monopoly businesses were to hold back progress, they would be dangerous and we’d be right to oppose them. But the history of progress is a history of better monopoly businesses replacing incumbents.

why are economists obsessed with competition as an ideal state? It’s a relic of history. Economists copied their mathematics from the work of 19th-century physicists: they see individuals and businesses as interchangeable atoms, not as unique creators.

in business, equilibrium means stasis, and stasis means death. If your industry is in a competitive equilibrium, the death of your business won’t matter to the world; some other undifferentiated competitor will always be ready to take your place.

every new creation takes place far from equilibrium. In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.

Tolstoy opens Anna Karenina by observing: “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

More than anything else, competition is an ideology—the ideology—that pervades our society and distorts our thinking. We preach competition, internalize its necessity, and enact its commandments; and as a result, we trap ourselves within it—even though the more we compete, the less we gain.

ignore it. Our educational system both drives and reflects our obsession with competition. Grades themselves allow precise measurement of each student’s competitiveness; pupils with the highest marks receive status and credentials. We teach every young person the same subjects in mostly the same ways, irrespective of individual talents and preferences. Students who don’t learn best by sitting still at a desk are made to feel somehow inferior, while children who excel on conventional measures like tests and assignments end up defining their identities in terms of this weirdly contrived academic parallel reality. And it gets worse as students ascend to higher levels of the tournament. Elite students climb confidently until they reach a level of competition sufficiently intense to beat their dreams out of them. Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking. For the privilege of being turned into conformists, students (or their families) pay hundreds of thousands of dollars in skyrocketing tuition that continues to outpace inflation. Why are we doing this to ourselves?

All Rhodes Scholars had a great future in their past.

WAR AND PEACE Professors downplay the cutthroat culture of academia, but managers never tire of comparing business to war. MBA students carry around copies of Clausewitz and Sun Tzu. War metaphors invade our everyday business language: we use headhunters to build up a sales force that will enable us to take a captive market and make a killing. But really it’s competition, not business, that is like war: allegedly necessary, supposedly valiant, but ultimately destructive.

According to Marx, people fight because they are different. The proletariat fights the bourgeoisie because they have completely different ideas and goals (generated, for Marx, by their very different material circumstances). The greater the differences, the greater the conflict.

To Shakespeare, by contrast, all combatants look more or less alike. It’s not at all clear why they should be fighting, since they have nothing to fight about.

In the world of business, at least, Shakespeare proves the superior guide. Inside a firm, people become obsessed with their competitors for career advancement. Then the firms themselves become obsessed with their competitors in the marketplace. Amid all the human drama, people lose sight of what matters and focus on their rivals instead.

Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past.

Competition can make people hallucinate opportunities where none exist. The crazy ’90s version of this was the fierce battle for the online pet store market. It was Pets.com vs. PetStore.com vs. Petopia.com vs. what seemed like dozens of others.

Winning is better than losing, but everybody loses when the war isn’t one worth fighting.

Other times, rivalry is just weird and distracting.

For Hamlet, greatness means willingness to fight for reasons as thin as an eggshell: anyone would fight for things that matter; true heroes take their personal honor so seriously they will fight for things that don’t matter. This twisted logic is part of human nature, but it’s disastrous in business. If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most.

a great business is defined by its ability to generate cash flows in the future.

the value of a business today is the sum of all the money it will make in the future. (To properly value a business, you also have to discount those future cash flows to their present worth, since a given amount of money today is worth more than the same amount in the future.)

Comparing discounted cash flows shows the difference between low-growth businesses and high-growth startups at its starkest. Most of the value of low-growth businesses is in the near term.

An Old Economy business (like a newspaper) might hold its value if it can maintain its current cash flows for five or six years. However, any firm with close substitutes will see its profits competed away. Nightclubs or restaurants are extreme examples: successful ones might collect healthy amounts today, but their cash flows will probably dwindle over the next few years when customers move on to newer and trendier alternatives. Technology companies follow the opposite trajectory. They often lose money for the first few years: it takes time to build valuable things, and that means delayed revenue. Most of a tech company’s value will come at least 10 to 15 years in the future.

The overwhelming importance of future profits is counterintuitive even in Silicon Valley. For a company to be valuable it must grow and endure, but many entrepreneurs focus only on short-term growth. They have an excuse: growth is easy to measure, but durability isn’t. Those who succumb to measurement mania obsess about weekly active user statistics, monthly revenue targets, and quarterly earnings reports. However, you can hit those numbers and still overlook deeper, harder-to-measure problems that threaten the durability of your business.

For example, rapid short-term growth at both Zynga and Groupon distracted managers and investors from long-term challenges. Zynga scored early wins with games like Farmville and claimed to have a “psychometric engine” to rigorously gauge the appeal of new releases. But they ended up with the same problem as every Hollywood studio: how can you reliably produce a constant stream of popular entertainment for a fickle audience? (Nobody knows.) Groupon posted fast growth as hundreds of thousands of local businesses tried their product. But persuading those businesses to become repeat customers was harder than they thought.

What does a company with large cash flows far into the future look like? Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.

Start Small and Monopolize Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market. Always err on the side of starting too small.

Small doesn’t mean nonexistent. We made this mistake early on at PayPal. Our first product let people beam money to each other via PalmPilots.

The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.

Any big market is a bad choice, and a big market already served by competing companies is even worse. This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $100 billion market. In practice, a large market will either lack a good starting point or it will be open to competition, so it’s hard to ever reach that 1%. And even if you do succeed in gaining a small foothold, you’ll have to be satisfied with keeping the lights on: cutthroat competition means your profits will be zero.

Don’t Disrupt

Originally, “disruption” was a term of art to describe how a firm can use new technology to introduce a low-end product at low prices, improve the product over time, and eventually overtake even the premium products offered by incumbent companies using older technology.

However, disruption has recently transmogrified into a self-congratulatory buzzword for anything posing as trendy and new. This seemingly trivial fad matters because it distorts an entrepreneur’s self-understanding in an inherently competitive way. The concept was coined to describe threats to incumbent companies, so startups’ obsession with disruption means they see themselves through older firms’ eyes.

if you truly want to make something new, the act of creation is far more important than the old industries that might not like what you create.

Disruption also attracts attention: disruptors are people who look for trouble and find it. Disruptive kids get sent to the principal’s office. Disruptive companies often pick fights they can’t win.

As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.

moving first is a tactic, not a goal. What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you.

It’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits.

The way to do that is to dominate a small niche and scale up from there, toward your ambitious long-term vision.

Malcolm Gladwell,

declares in Outliers that success results from a “patchwork of lucky breaks and arbitrary advantages.”

Ralph Waldo Emerson captured this ethos when he wrote: “Shallow men believe in luck, believe in circumstances…. Strong men believe in cause and effect.”

Instead of pursuing many-sided mediocrity and calling it “well-roundedness,” a definite person determines the one best thing to do and then does it. Instead of working tirelessly to make herself indistinguishable, she strives to be great at something substantive—to be a monopoly of one.

Malcolm Gladwell says you can’t understand Bill Gates’s success without understanding his fortunate personal context: he grew up in a good family, went to a private school equipped with a computer lab, and counted Paul Allen as a childhood friend. But perhaps you can’t understand Malcolm Gladwell without understanding his historical context as a Boomer (born in 1963). When Baby Boomers grow up and write books to explain why one or another individual is successful, they point to the power of a particular individual’s context as determined by chance. But they miss the even bigger social context for their own preferred explanations: a whole generation learned from childhood to overrate the power of chance and underrate the importance of planning.

progress without planning is what we call “evolution.”

Darwin himself wrote that life tends to “progress” without anybody intending it. Every living thing is just a random iteration on some other organism, and the best iterations win.

it’s not clear that Darwinian biology should explain how to build a better society or how to create a new business out of nothing.

Would-be entrepreneurs are told that nothing can be known in advance: we’re supposed to listen to what customers say they want, make nothing more than a “minimum viable product,” and iterate our way to success. But leanness is a methodology, not a goal. Making small changes to things that already exist might lead you to a local maximum, but it won’t help you find the global maximum.

iteration without a bold plan won’t take you from 0 to 1. A company is the strangest place of all for an indefinite optimist: why should you expect your own business to succeed without a plan to make it happen?

Darwinism may be a fine theory in other contexts, but in startups, intelligent design works best.

THE RETURN OF DESIGN

It’s true that every great entrepreneur is first and foremost a designer.

the most important lesson to learn from Jobs has nothing to do with aesthetics. The greatest thing Jobs designed was his business. Apple imagined and executed definite multi-year plans to create new products and distribute them effectively. Forget “minimum viable products”—ever since he started Apple in 1976, Jobs saw that you can change the world through careful planning,

Long-term planning is often undervalued by our indefinite short-term world.

YOU ARE NOT A LOTTERY TICKET

Malcolm Gladwell must be persuaded to change his theories.

A startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world. It begins by rejecting the unjust tyranny of Chance. You are not a lottery ticket.

MONEY MAKES MONEY. “For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them” (Matthew 25:29).

monopoly businesses capture more value than millions of undifferentiated competitors. Whatever Einstein did or didn’t say, the power law—so named because exponential equations describe severely unequal distributions—is the law of the universe.

the power law becomes visible when you follow the money: in venture capital, where investors try to profit from exponential growth in early-stage companies, a few companies attain exponentially greater value than all others.

will be normally distributed: that is, bad companies will fail, mediocre ones will stay flat, and good ones will return 2x or even 4x. Assuming this bland pattern, investors assemble a diversified portfolio and hope that winners counterbalance losers. But this “spray and pray” approach usually produces an entire portfolio of flops, with no hits at all. This is because venture returns don’t follow a normal distribution overall. Rather, they follow a power law: a small handful of companies radically outperform all others.

The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.

This implies two very strange rules for VCs. First, only invest in companies that have the potential to return the value of the entire fund. This is a scary rule, because it eliminates the vast majority of possible investments. (Even quite successful companies usually succeed on a more humble scale.) This leads to rule number two: because rule number one is so restrictive, there can’t be any other rules.

Consider what happens when you break the first rule. Andreessen Horowitz invested $250,000 in Instagram in 2010. When Facebook bought Instagram just two years later for $1 billion, Andreessen netted $78 million—a 312x return in less than two years. That’s a phenomenal return, befitting the firm’s reputation as one of the Valley’s best. But in a weird way it’s not nearly enough, because Andreessen Horowitz has a $1.5 billion fund: if they only wrote $250,000 checks, they would need to find 19 Instagrams just to break even.

even the best VC firms have a “portfolio.” However, every single company in a good venture portfolio must have the potential to succeed at vast scale.

Whenever you shift from the substance of a business to the financial question of whether or not it fits into a diversified hedging strategy, venture investing starts to look a lot like buying lottery tickets. And once you think that you’re playing the lottery, you’ve already psychologically prepared yourself to lose.

The most common answer to the question of future value is a diversified portfolio: “Don’t put all your eggs in one basket,” everyone has been told. As we said, even the best venture investors have a portfolio, but investors who understand the power law make as few investments as possible. The kind of portfolio thinking embraced by both folk wisdom and financial convention, by contrast, regards diversified betting as a source of strength. The more you dabble, the more you are supposed to have hedged against the uncertainty of the future.

an individual cannot diversify his own life by keeping dozens of equally possible careers in ready reserve. Our schools teach the opposite: institutionalized education traffics in a kind of homogenized, generic knowledge. Everybody who passes through the American school system learns not to think in power law terms. Every high school course period lasts 45 minutes whatever the subject. Every student proceeds at a similar pace. At college, model students obsessively hedge their futures by assembling a suite of exotic and minor skills. Every university believes in “excellence,” and hundred-page course catalogs arranged alphabetically according to arbitrary departments of knowledge seem designed to reassure you that “it doesn’t matter what you do, as long as you do it well.” That is completely false. It does matter what you do. You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future.

For the startup world, this means you should not necessarily start your own company, even if you are extraordinarily talented. If anything, too many people are starting their own companies today. People who understand the power law will hesitate more than others when it comes to founding a new venture: they know how tremendously successful they could become by joining the very best company while it’s growing fast. The power law means that differences between companies will dwarf the differences in roles inside companies. You could have 100% of the equity if you fully fund your own venture, but if it fails you’ll have 100% of nothing. Owning just 0.01% of Google, by contrast, is incredibly valuable (more than $35 million as of this writing).

Remember our contrarian question: what important truth do very few people agree with you on? If we already understand as much of the natural world as we ever will—if all of today’s conventional ideas are already enlightened, and if everything has already been done—then there are no good answers. Contrarian thinking doesn’t make any sense unless the world still has secrets left to give up.

Recall the business version of our contrarian question: what valuable company is nobody building? Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable. If there are many secrets left in the world, there are probably many world-changing companies yet to be started.

WHY AREN’T PEOPLE LOOKING FOR SECRETS? Most people act as if there were no secrets left to find.

there are easy truths that children are expected to rattle off, and then there are the mysteries of God, which can’t be explained. In between—the zone of hard truths—lies heresy.

Why has so much of our society come to believe that there are no hard secrets left?

Along with the natural fact that physical frontiers have receded, four social trends have conspired to root out belief in secrets. First is incrementalism. From an early age, we are taught that the right way to do things is to proceed one very small step at a time, day by day, grade by grade. If you overachieve and end up learning something that’s not on the test, you won’t receive credit for it. But in exchange for doing exactly what’s asked of you (and for doing it just a bit better than your peers), you’ll get an A. This process extends all the way up through the tenure track, which is why academics usually chase large numbers of trivial publications instead of new frontiers. Second is risk aversion. People are scared of secrets because they are scared of being wrong. By definition, a secret hasn’t been vetted by the mainstream. If your goal is to never make a mistake in your life, you shouldn’t look for secrets. The prospect of being lonely but right—dedicating your life to something that no one else believes in—is already hard. The prospect of being lonely and wrong can be unbearable. Third is complacency. Social elites have the most freedom and ability to explore new thinking, but they seem to believe in secrets the least. Why search for a new secret if you can comfortably collect rents on everything that has already been done? Every fall, the deans at top law schools and business schools welcome the incoming class with the same implicit message: “You got into this elite institution. Your worries are over. You’re set for life.” But that’s probably the kind of thing that’s true only if you don’t believe it. Fourth is “flatness.” As globalization advances, people perceive the world as one homogeneous, highly competitive marketplace: the world is “flat.” Given that assumption, anyone who might have had the ambition to look for a secret will first ask himself: if it were possible to discover something new, wouldn’t someone from the faceless global talent pool of smarter and more creative people have found it already? This voice of doubt can dissuade people from even starting to look for secrets in a world that seems too big a place for any individual to contribute something unique.

The actual truth is that there are many more secrets left to find, but they will yield only to relentless searchers. There is more to do in science, medicine, engineering, and in technology of all kinds. We are within reach not just of marginal goals set at the competitive edge of today’s conventional disciplines, but of ambitions so great that even the boldest minds of the Scientific Revolution hesitated to announce them directly.

Blue Ocean Strategy

The surge in social network sites, blogs, micro-blogs, video-sharing services, user-driven content, and internet ratings that have become close to ubiquitous around the globe have shifted the power and credibility of voice from organizations to individuals.

Cirque du Soleil’s

It appealed to a whole new group of customers: adults and corporate clients prepared to pay a price several times as great as traditional circuses for an unprecedented entertainment experience.

Look back 120 years and ask yourself, How many of today’s industries were then unknown? The answer: many industries as basic as automobiles, music recording, aviation, petrochemicals, health care, and management consulting were unheard of or had just begun to emerge at that time. Now turn the clock back only forty years. Again, a plethora of multi billion- and trillion-dollar industries jumps out—e-commerce; cell phones; laptops, routers, switches, and networking devices; gas-fired electricity plants; biotechnology; discount bars to name a few. Just four decades ago, none of these industries existed in a meaningful way.

Now put the clock forward twenty years —or perhaps fifty years—and ask yourself how many now unknown industries will likely exist then.

The overriding focus of strategic thinking has been on competition based red ocean strategies. Part of the explanation for this is that corporate strategy is heavily influenced by its roots in military strategy. The very language of strategy is deeply imbued with military references – chief executive “officers” in “headquarters”, “troops” on the “front lines”. Described this way, strategy is about confronting an opponent and fighting over a given piece of land that is both limited and constant.

To focus on the red ocean is therefore to accept the key constraining factors of war—limited terrain and the need to beat an enemy to succeed—and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested.

Our study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering.

What consistently separated winners from losers in creating blue oceans was their approach to strategy.

The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

Value innovation places equal emphasis on value and innovation. Value without innovation tends to focus on value creation on an incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace. Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for.

Value innovation occurs only when companies align innovation with utility, price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that companies hatch.

Value innovation is a new way of thinking about and executing strategy that results in the creation of a blue ocean and a break from the competition. Importantly, value innovation defies one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off. It is conventionally believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. Here strategy is seen as making a choice between differentiation and low cost.In contrast, those that seek to create blue oceans pursue differentiation and low cost simultaneously.

Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves.

Value innovation is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players. We call this the reconstructionist view.

Effective blue ocean strategy should be about risk minimization and not risk taking.

Our research found that customers can scarcely imagine how to create uncontested market space. Their insight also tends toward the familiar “offer me more for less.” And what customers typically want “more” of are those product and service features that the industry currently offers.

To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry. To pursue both value and low cost, you should resist the old logic of benchmarking competitors in the existing field and choosing between differentiation and cost leadership.

Sometimes there is a fundamental change in what buyers’ value, but companies that are focused on benchmarking one another do not act on, or even perceive, the change.

The Eliminate-Reduce-Raise-Create Grid

Three complementary qualities: focus, divergence, and a compelling tagline.

Focus

Every great strategy has focus, and a company’s strategic profile, or value curve, should clearly show it.

Divergence

When a company’s strategy is formed reactively as it tries to keep up with the competition, it loses its uniqueness.

Compelling Tagline

A good strategy has a clear-cut and compelling tagline.

Reading the Value Curves

The strategy canvas enables companies to see the future in the present. To achieve this, companies must understand how to read value curves.

A Blue Ocean Strategy

The first question the value curves answer is whether a business deserves to be a winner. When a company’s value curve, or its competitors’, meets the three criteria that define a good blue ocean strategy—focus, divergence, and a compelling tagline that speaks to the market—the company is on the right track. These three criteria serve as an initial litmus test of the commercial viability of blue ocean ideas.

On the other hand, when a company’s value curve lacks focus, its cost structure will tend to be high and its business model complex in implementation and execution. When it lacks divergence, a company’s strategy is a me-too, with no reason to stand apart in the marketplace. When it lacks an internally driven or a classic example of innovation for innovation’s sake with no great commercial potential and no natural take-off capability.

A Company Caught in the Red Ocean

When a company’s value curve converges with its competitors, it signals that a company is likely caught within the red ocean of bloody competition. A company’s explicit or implicit strategy tends to be trying to outdo its competition on the basis of cost or quality. This signals slow growth unless,

Overdelivery without Payback

When a company’s value curve on the strategy canvas is shown to deliver high levels across all factors, the question is, does the company’s market share and profitability reflect these investments? If not, the strategy canvas signals that the company may be oversupplying its customers, offering too much of those elements that add incremental value to buyers.

Strategic Contradictions

Are there strategic contradictions? These are areas where a company is offering a high level on one competing factor while ignoring others that support that factor. An example is investing heavily in making a company’s website easy to use but failing to correct the site’s slow speed of operations.

An Internally Driven Company

In drawing the strategy canvas, how does a company label the industry’s competing factors? For example, does it use the word megahertz instead of speed, or thermal water temperature instead of hot water? Are the competing factors stated in terms buyers can understand and value, or are they in operational jargon?

Reconstruct Market Boundaries

This principle addresses the search risk many companies struggle with. The challenge is to successfully identify, out of the haystack of possibilities that exist, commercially compelling blue ocean opportunities. These patterns applied across all types of industry sectors—from consumer goods, to industrial products, to finance and services, to telecoms and IT, to pharmaceuticals and B2B

Looking at familiar data from a new perspective. These paths challenge the six fundamental assumptions underlying many companies’ strategies.

Specifically, companies tend to do the following: Define their industry similarly and focus on being the best within it

Look at their industries through the lens of generally accepted strategic groups (such as luxury automobiles, economy care, and family vehicles), and strive to stand out in the strategic group they play in

Focus on the same buyer group, be it the purchaser (as in the office equipment industry), the user (as in the clothing industry), or the influencer (as in the pharmaceutical industry)

Define the scope of the products and services offered by their industry similarly

Accept their industry’s functional or emotional orientation

Focus on the same point in time —and often on current competitive threats—in formulating strategy

The more that companies share this conventional wisdom about how they compete, the greater the competitive convergence among them.

Instead of looking within these boundaries, managers need to look systematically across them to create blue oceans. They need to look across alternative industries, across strategic groups, across buyers groups, across complementary product and service offering, across the functional-emotional orientation of an industry, and even across time.

Path 1: Look Across Alternative Industries

Products or services that have different forms but offer the same functionality or core utility are often substitutes for each other. On the other hand, alternatives include products or services that have different functions and forms but the same purpose.

For example, to sort out their personal finance, people can buy and install a finance software package, hire a CPA, or simply use pencil and paper. And nowadays there are also apps that help with this. The software, the CPA, the pencil and financial apps are largely substitutes for each other.

Despite the differences in form and function, however, people go to a restaurant for the same objective that they go to the movies: to enjoy a night out. These are not substitutes, but alternatives to choose from.

In making every purchase decision, buyers implicitly weigh alternatives, often unconsciously.

The thought process is intuitive for individual consumers and industrial buyers alike. For some reason, we often abandon this intuitive thinking when we become sellers. A shift in price, a change in model, even a new ad campaign can elicit a tremendous response from rivals within an industry, but the same actions in an alternative industry are usually so unnoticed.

Path 2: Look Across Strategic Groups Within Industries

Strategic groups can generally be ranked in a rough hierarchical order built on two dimensions: price and performance. Each jump in price tends to bring a corresponding jump in some dimensions of performance.

The key to creating a blue ocean across existing strategic groups is to break out of this narrow tunnel vision by understanding which factors determine customers’ decisions to trade up or down from one group to another.

In the luxury car market, Toyota’s Lexus carved out a new blue ocean by offering the quality of the high-end Mercedes, BMW, and Jaguar at a price closer to the lower-end Cadillac and Lincoln.

What are the strategic groups in your industry? Why do customers trade up for the higher group, and why do they trade down for the lower one?

Path 3: Look Across the chain of buyers

There is a chain of “buyers” who are directly or indirectly involved in the buying decision. The purchasers who pay for the product or service may differ from the actual users, and in some cases there are important influencers as well. Although these three groups may overlap, they often differ. When they do, they frequently hold different definitions of value. A corporate purchasing agent, for example, may be more concerned with cost than the corporate user, who is likely to be far more concerned with ease of use. Similarly, a retailer may value a manufacturer’s just-in-time stock replenishment and innovative financing. But consumer purchasers, although strongly influenced by the channel, do not value these things. The pharmaceutical industry, for example, focuses overridingly on influencers: doctors. The office equipment industry focuses heavily on purchasers: corporate purchasing departments. And the clothing industry sells predominantly to users. Sometimes there is a strong economic rationale for this focus. But often it is the result of industry practices that have never been questioned.

What is the chain of buyers in your industry? Which buyer group does your industry typically focus on? If you shifted the buyer group of your industry, how could you unlock new value?

Path 4: Look across Complementary Product and Service Offerings

Path 5 Looks Across Functional or Emotional Appeal to Buyers

When companies are willing to challenge the functional emotional orientation of their industry, they often find new market space. We have observed two common patterns. Emotionally oriented industries offer many extras that add price without enhancing functionality. Stripping away those extras may create a fundamentally simpler, lower-priced, lower-cost business model that customers would welcome. Conversely, functionally oriented industries can often infuse commodity products with new life by adding a dose of emotion and, in so doing, can stimulate new demand.

Swatch, which transformed the functionally driven budget watch industry into an emotionally driven fashion statement, or The Body Shop, which did the reverse, transforming the emotionally driven industry of cosmetics into a functional, no-nonsense cosmetic house.

Patrimonio Hoy program.

At the foundation of patrimonio Hoy was the traditional Mexican system of tandas, a traditional community savings scheme. In a tanda, ten individuals (for example) contribute 100 pesos per week for ten weeks. In the first week, lots are drawn to see who “wins” the 1,000 pesos ($93) in each of the ten weeks. All participants win the 1,000 pesos one time only,

Patrimonio Hoy building materials club.

Whereas Cemex’s competitors sold bags of cement, Cemex was selling a dream, with a business model involving innovative financing and construction know-how. Cemex went a step further, throwing small festivities for the town when a room was finished and thereby reinforcing the happiness it brought to people and the tanda tradition

A burst of blue ocean creation has been under way in a number of service industries but in the opposite direction—moving from an emotional to a functional orientation, Relationship businesses, such as insurance, banking, and investing, have relied heavily on the emotional bond between broker and client. They are ripe for change.

Does your industry compete on functionality or emotional appeal? If you compete on emotional appeal, what elements can you strip out to make it functional? If you compete on functionality what elements can be added to make it emotional?

Path 6: Look Across Time

Whether it’s the emergence of new technologies or major regulatory changes, managers tend to focus on projecting the trend itself. That is, they ask in which direction a technology will evolve, how it will be adopted, whether it will become scalable. They pace their own actions to keep up with the development of the trends they’re tracking.

But key insights into blue ocean strategy rarely come from projecting the trend itself. Instead they arise from business insights into how the trend will change value to customers and impact the company’s business model. By looking across time—from the value a market delivers today to the value it might deliver tomorrow.

Three principles are critical to assessing trends across time. These trends must be decisive to your business, they must be irreversible, and they must have a clear trajectory.

Many trends can be observed at any one time—for example, a discontinuity in technology, the rise of a new lifestyle, or a change in regulatory or social environments. But usually only one or two will have a decisive impact on any particular business. Having identified a trend of this nature, you can then look across time and ask yourself what the market would look like if the trend were taken to its logical conclusion. Working back from that vision of a blue ocean strategy, you can identify what must be changed today to unlock a new blue ocean.

Today iTunes offers more than 37 million songs as well as movies, TV shows, books, and podcasts.

Cisco Systems created a new market space by thinking across time trends. It started with a decisive and irreversible trend that had a clear trajectory: the growing demand for high-speed data exchange.

CNN created the first real-time twenty-four-hour global news network based on the rising tide of globalization.

Focus on the big picture, not the numbers. This approach consistently produces strategies that unlock the creativity of a wide range of people within an organization, open companies’ eyes to blue oceans, and are easy to understand and communicate for effective execution.

Drawing a strategy canvas does three things.

First, it shows the strategic profile of an industry by depicting very clearly the factors (and the possible future factors) that affect competition among industry players.

Second, it shows the strategic profile of current and potential competitors, identifying which factors they invest in strategically.

Finally, it shows the company’s strategic profile—or value curve—depicting how it invests in the factors of competition and how it might invest in them in the future.

The strategic profile with high blue ocean potential has three complementary qualities: focus, divergence, and a compelling tagline. If a company’s strategic profile does not clearly reveal those qualities, its strategy will likely be muddled, undifferentiated, and hard to communicate. It is also likely to be costly to execute.

Drawing Your Strategy Canvas

Most managers have a strong impression of how they and their competitors fare along one or two dimensions within their own scope of responsibility, but very few can see the overall dynamics of their industry. The catering manager of an airline, for example, will be highly sensitive to how the airline compares in terms of refreshments. But that focus makes consistent measurement difficult; what seems to be a very big difference to the catering manager may not be important to customers, who look at the complete offering.

Step 1: Visual Awakening

Many people had pet ideas of which they were the sole champions.

Step 2: Visual Exploration

The next step is to send a team into the field, putting managers face-to-face with what they must make sense of: how people use or don’t use their products or services. This step may seem obvious, but we have found that managers often outsource this part of the strategy-making process. They rely on reports that other people (often at one or two removes form the world they report on) have put together. A company should never outsource its eyes.

For example, account relationship managers, whom nearly everyone had agreed were a key to success and on whom EFS prided itself, turned out to be the company’s Achilles’ heel. Customers hated wasting time dealing with relationship managers. To buyers, relationship managers were seen as relationship savers because EFS failed to deliver on its promises.

Each team had to draw six new value curves using the six path framework explained in chapter 3. Each new value curve had to depict a strategy that would make the company stand out in its market. By demanding six pictures from each team, we hoped to push managers to create innovative proposals and break the boundaries of their conventional thinking.

For each visual strategy, the teams also had to write a compelling tagline that captured the essence of the strategy and spoke directly to buyers. Suggestions included “Leave It to Us,” “Make ME Smarter,” and “Transactions in Trust.” A strong sense of competition developed between the two teams, making the process fun, imbuing it with energy, and driving the teams to develop blue ocean strategies.

Step 3: Visual Strategy Fair

After the twelve strategies were presented, each judge—an invited attendee—was given five sticky notes and told to put them next to his or her favorites. The judges could put all five on a single strategy if they found it that compelling. The transparency and immediacy of this approach freed it from the politics that sometimes seem endemic to the strategic planning process.

Step 4: Visual Communication

After the future strategy is set, the last step is to communicate it in a way that can be easily understood by any employee.

Employees were so motivated by the clear game plan that many pinned up a version of the strategy canvas in their cubicles as a reminder of EFS’s new priorities and the gaps that needed to be closed.

Using the pioneer-Migrator-Settler (PMS) Map

All the companies that created blue oceans in our study have been pioneers in their industries, not necessarily in developing new technologies but in pushing the value they offer customers to new frontiers.

A company’s pioneers are the businesses that offer unprecedented value. These are your blue ocean offerings, and they are the most powerful sources of profitable growth. At the other extreme are settlers—businesses whose value curves conform to the basic shape of the industry’s. These are me-too businesses.

The potential of migrators lies somewhere in between. Such businesses extend the industry’s curve by giving customers more for less, but they don’t alter its basic shape. These businesses offer improved value, but not innovative value. These are businesses whose strategies fall on the margin between red oceans and blue oceans.

The more an industry is populated by settlers, the greater is the opportunity to value-innovate and create a blue ocean of new market space. Chief executives should instead use value and innovation as the important parameters for managing their portfolio of businesses. They should use innovation because, without it, companies are stuck in the trap of competitive improvements. They should use value because innovative ideas will be profitable only if they are linked to what buyers are willing to pay for.

Aristotle pointed out, “The soul never thinks without an image.”

Reach Beyond Existing Demand

Companies should challenge two conventional strategy practices. One is the focus on existing customers. The other is the drive for finer segmentation to accommodate buyer differences.

Typically, to grow their share of a market, companies strive to retain and expand existing customers. This often leads to finer segmentation and greater tailoring of offerings to better meet customer preferences. The more intense the competition is, the greater, on average, is the resulting customization of offerings. As companies compete to embrace customer preferences through finer segmentation, they often risk creating too-small target markets. To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. That allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before.

To reach beyond existing demand, think noncustomers before customers; commonalities before differences; and desegmentation before pursuing finer segmentation.

The Three Tiers of Noncustomers

The first tier of noncustomers is closest to your market. They sit on the edge of the market. They are buyers who minimally purchase an industry’s offering out of necessity but are mentally noncustomers of the industry.

The second tier of noncustomers is people who refuse to use your industry’s offerings.

The third tier of noncustomers is farthest from your market. They are noncustomers who have never thought of your market’s offerings as an option.

Lesson: noncustomers tend to offer far more insight into how to unlock and grow a blue ocean than do relatively content existing customers. What are the key reasons first –tier noncustomers want to jump ship and leave your industry? Look for the commonalities across their responses. Focus on these, and not on the differences between them. You will glean insight into how to desegment buyers and unleash an ocean of latent untapped demand.

Go for the Biggest Catchment

Because the scale of blue ocean opportunities that a specific tier of noncustomers can unlock varies across time and industries, you should focus on the tier that represents the biggest catchment that your organization has the capability to act on. But you should also explore whether there are overlapping commonalities across all three tiers of noncustomers. In that way, you can expand the scope of latent demand you can unleash

The point here is not to argue that it’s wrong to focus on existing customers or segmentation but rather to challenge these existing, taken-for-granted strategic orientations.

The Right Strategic Sequence

As shown in figure 6-1, companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.

Unless the technology makes buyers’ lives dramatically simpler, more convenient, more productive, less risky, or more fun and fashionable, it will not attract the masses no matter how many awards it wins. Value innovation is not the same as technology innovation.

Many companies take a reverse course, first testing the waters of a new product or service by targeting novelty seeking, price-insensitive customers at the launch of a new business idea; only over time do they drop prices to attract mainstream buyers. It is increasingly important, however, to know from the start what price will quickly capture the mass of target buyers.

Like the creative concepts of Pret A Manger or JCDecaux, many of the most powerful blue ocean ideas have tremendous value but in themselves consist of no new technological discoveries. As a result they are neither patentable nor excludable and hence are vulnerable to imitation.

All this means that the strategic price you set for your offering must not only attract buyers in large numbers but also help you to retain them. Given the high potential for free riding, an offering’s reputation must be earned on day one, because brand building increasingly relies heavily on word-of-mouth recommendations spreading rapidly through our networked society. Companies must therefore start with an offer that buyers can’t refuse and must keep it that way to discourage any free-riding imitations. This is what makes strategic pricing key.

Step 1: Identify the Price Corridor of the Target Mass

The main challenge in determining a strategic price is to understand the price sensitivities of those people who will be comparing the new product or service with a host of very different-looking products and services offered outside the group of traditional competitors.

A good way to look outside industry boundaries is to list products and services that fall into two categories: those that take different forms but perform the same function, and those that take different forms and functions but share the same overarching objective.

Different form, same function.

Many companies that create blue oceans attract customers from other industries who use a product or service that performs the same function or bears the same core utility as the new one but takes a very different physical form. In the case of Ford’s Model T, Ford looked to the horse-drawn carriage. The horse-drawn carriage had the same core utility as the car:

Different form and function, same objective.

Some companies lure customers from even further away. Cirque du Soleil, for example, has diverted customers from a wide range of evening activities. To enjoy a night out

The key here is not to pursue pricing against competition within an industry but rather to pursue pricing against substitutes and alternatives across industries and non-industries.

Step 2: Specify a Level within the Price Corridor

Companies with uncertain patent and asset protection should consider pricing somewhere in the middle of the corridor. As for companies that have no such protection, lower-boundary strategic pricing is advised. Companies would be wise to pursue mid- to lower-boundary strategic pricing from the start if any of the following apply:

Their blue ocean offering has high fixed costs and marginal variable costs.

The attractiveness of the blue ocean offering depends heavily on network externalities.

The cost structure behind the blue ocean offering benefits from steep economies of scale and scope. In these cases, volume brings with it significant cost advantages, something that makes pricing for volume even more key.

From Strategic Pricing to Target Costing

Price-minus costing, and not cost plus pricing, is essential if you are to arrive at a cost structure that is both profitable and hard for potential followers to match.

Before plowing forward and investing in the new idea, the company must first overcome such fears by educating the fearful.

Employees

Business Partners

The General Public

The Blue Ocean Idea Index

Overcome Key Organizational Hurdles

They face four hurdles. One is cognitive: waking employees up to the need for a strategic shift. The second hurdle is limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. But resources were being cut, and not raised, in many of the organizations we studied.

Third is motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo? That will take years, and managers don’t have that kind of time. The final hurdle is politics. As one manager put it, “In our organization you get shot down before you stand up.”

Four hurdles that managers consistently claim limit their ability to execute blue ocean strategy: the cognitive hurdle that blinds employees from seeing that radical change is necessary; the resource hurdle that is endemic in firms; the motivational hurdle that discourages and demoralizes staff; and the political hurdle of internal and external resistance to change.

Break through the Cognitive Hurdle

Tipping point leadership does not rely on numbers to break through the organization’s cognitive hurdle. To tip the cognitive hurdle fast, tipping point leaders such as Bratton zoom in on the act of disproportionate influence: making people see and experience harsh reality firsthand. “Seeing is believing.” After a child puts a finger on a burning stove, he or she will never do it again. After a negative experience, children will change their behavior of their own accord; again, no parental pestering is required.

Tipping point leadership builds on this insight to inspire a fast change in mind-set that is internally driven of people’s own accord. Instead of relying on numbers to tip the cognitive hurdle, they make people experience the need for change in two ways.

Ride the “Electric Sewer”

To break the status quo, employees must come face-to-face with the worst operational problems. Numbers are disputable and uninspiring, but coming face-to-face with poor performance is shocking and inescapable, but actionable.

Making top brass and middle brass—starting with himself—ride the electric sewer day and night

Meet with Disgruntled Customers

To tip the cognitive hurdle, not only must you get your managers out of the office to see operational horror, but you also must get them to listen to their most disgruntled customers firsthand.

What they felt victimized by and harassed by were the constant minor irritants:

Jump the Resource Hurdle

Do they have the money to spend on the necessary changes? At this point, most reformist CEOs do one of two things. Either they trim their ambitions and demoralize their workforce all over again, or they fight for more resources from their bankers and shareholders, a process that can take time and divert attention from the underlying problems.

Hot spots, cold spots, and horse trading. Hot spots are activities that have low resource input but high potential performance gains. In contrast, cold spots are activities that have high resource input but low performance impact. In every organization, hot spots and cold spots typically abound. Horse trading involves trading your unit’s excess resources in one area for another unit’s excess resources to fill remaining resource gaps.

Redistribute Resources to Your Hot Spots

Logic was that increments in performance could be achieved only with proportional increment in resource.

Are you allocating resources based on old assumptions, or do you seek out and concentrate resources on hot spots? Where are your hot spots? What activities have the greatest performance impact but are resource starved? Where are your cold spots? What activities are resource oversupplied but have scant performance impact? Do you have a horse trader, and what can you trade ?

Jump the Motivational Hurdle

How can you motivate the mass of employees fast and at low cost? When most business leaders want to break from the status quo and transform their organization, they issue grand strategic visions and turn to massive top-down mobilization initiatives. They act on the assumption that to create massive reactions, proportionately massive action is required. But this is often a cumbersome, expensive, and time-consuming process, given the wide variety of motivational needs in most large companies. Kingpins, fishbowl management, and atomization.

Zoom In on Kingpins

To trigger an epidemic movement of positive energy, however, you should not spread your efforts thin. Rather, you should concentrate your efforts on kingpins, the key influencers in the organization. These are people inside the organization who are natural leaders, who are well respected and persuasive, or who have an ability to unlock or block access to key resources.

Place Kingpins in a Fishbowl

Fishbowl management, where kingpins’ actions and inaction are made as transparent to others as are fish in a bowl of water. By placing kingpins in a fishbowl in this way, you greatly raise the stakes of inaction. Light is shined on who is lagging behind, and a fair stage is set for rapid change agents to shine. For fishbowl management to work, it must be based on transparency, inclusion, and fair process. Biweekly crime strategy review meeting, top brass to review the performance of all. Attendance was mandatory.

As a result, an intense performance culture was created in weeks—forget about months. For this work, however, organizations must simultaneously make fair process the modus operandi. By fair process we mean engaging all the affected people in the process, explaining to them the basis of decisions and the reasons people will be promoted or sidestepped in the future, and setting clear expectations of what that means to employees’ performance.

Atomize to Get the Organization to Change Itself

The last disproportionate influence factor is atomization. To make the challenge attainable, Bratton broke it into bite-size atoms that officers at different levels could relate to. “block by block, precinct by precinct, and borough by borough.”

Knock Over the Political Hurdle

Organizational politics is an inescapable reality of corporate and public life. The more likely change becomes, the more fiercely and vocally these negative influencers—both internal and external—will fight to protect their positions, and their resistance can seriously damage and even derail the strategy execution process.

Focus on three disproportionate influence factors: leveraging angels, silencing devils, and getting a consigliere on their top management team. Angels are those who have the most to gain from the strategy. Devils are those who have the most to lose from it. And a consigliere is a politically adept but highly respected insider who knows in advance all the land mines, including who will fight you and who will support you.

Don’t fight alone. Get a higher and wider voice to fight with you. Identify your detractors and supporters—forget the middle—and strive to create a win-win outcome for both. But move quickly. Isolate your detractors by building a broader coalition with your angels before a battle begins. In this way, you will discourage the war before it has a chance to start or gain steam. Key to winning over your detractors or devils is knowing all their likely angels of attack and building up counterarguments backed by irrefutable facts and reason.

Challenging Conventional Wisdom

Don’t follow conventional wisdom. Not every challenge requires a proportionate action. Focus on acts of disproportionate influence. This is a critical leadership component for making blue ocean strategy happen.

Build Execution into Strategy

People’s minds and hearts must align with the new strategy so that at the level of the individual, people embrace it of their own accord and willingly go beyond compulsory execution to voluntary cooperation in carrying it out. Where blue ocean strategy is concerned, this challenge is heightened. Trepidation builds as people are required to step out of their comfort zones and change how they have worked in the past. They wonder, what are the real reasons for this change? Is management honest when it speaks of building future growth through a change in strategic course? Or are they trying to make us redundant and work us out of our jobs?

Management risk is relevant to strategy execution in both red and blue oceans, but it is greater for blue ocean strategy because its execution often requires significant change. Companies must reach beyond the usual suspects of carrots and sticks. They must reach a fair process in the making and executing of strategy. Our research shows that fair process is a key variable that distinguishes successful blue ocean strategic moves from those that failed. The presence or absence of fair process can make or break a company’s best execution efforts.

The Three E Principles of Fair Process

There are three mutually reinforcing elements that define fair process: engagement, explanation, and clarity of expectation.

Expectation clarity requires that after a strategy is set, managers state clearly the new rules of the game. Although the expectations may be demanding, employees should know up front what standards they will be judged by and the penalties for failure. When people understand what is expected of them, political jockeying and favoritism are minimized, and people can force on executing the strategy rapidly.

No one explained why the strategic shift was needed, how the company needed to break away from the competition to stimulate new demand, and why the shift in the manufacturing process was a key element of that strategy. Employees sat in stunned silence, with no understanding of the rationale behind the change. The managers mistook this for acceptance.

Why Does Fair Process Matter?

Emotionally, individuals seek recognition of their value, not as “labor,” “personnel,” or “human resources” but as human beings who are treated with full respect and dignity and appreciated for their individual worth regardless of hierarchical level. Intellectually, individuals seek recognition that their ideas are sought after and given thoughtful reflection, and that others think enough of their intelligence to explain their thinking to them.

When individuals feel recognized for their intellectual worth, they are willing to share their knowledge; in fact, they feel inspired to impress and confirm the expectations of their intellectual value, suggesting active ideas and knowledge sharing.Similarly, when individuals are treated with emotional recognition, they feel emotionally tied to the strategy and inspired to give their all. Lacking trust is the strategy-making process, people lack trust in the resulting strategies. Such is the emotional power that a fair process can provoke.

Fair Process and External Stakeholders

Align Value, Profit, and People Propositions

Define what blue ocean strategy is, how to reconstruct market boundaries and offer a leap in value to buyers. Unlocking business model innovation through strategic pricing, target costing, and the like so a company can seize new customers profitably. Releasing the creativity, knowledge sharing, and voluntary cooperation of people through the proper approach to employees and partners. While all three are correct, they are also only partial answers.

At the highest level, there are three propositions essential to the success of strategy: the value proposition, the profit proposition, and the people proposition. While good strategy content is based on a compelling value proposition for buyers with a robust profit proposition for the organization, sustainable strategy execution is based largely on a motivating people proposition. Lacking a holistic understanding of strategy, it is easy for an organization to focus overridingly on one or two strategy propositions to the exclusion of the other(s).

Strategic alignment is the responsibility of an organization’s top executives versus those in charge of marketing, manufacturing, human resource, or other functions. Executives with a strong functional bias typically cannot successfully fulfill this important role because they tend to focus on a part, not the whole, of the three strategy propositions, hence missing the alignment.

Putting It All Together

When the record labels approached Napster to work out a revenue-sharing model for the digital download of music that would create a win-win for both sides, Napster balked. The excitement over Napster’s spectacular growth prevented it from appreciating that it needed an external people proposition that offered differentiation and low cost for its key partners,

Renew Blue Oceans

Understanding the process of renewal is key to ensure that the creation of blue oceans is not a one-off occurrence but is institutionalized as a repeatable process in an organization.

Barriers to Imitation

The alignment barrier. The alignment of the three strategy propositions—value, profit, and people.

The cognitive and organizational barrier. CNN was referred to as Chicken Noodle News by the industry. Ridicule does not inspire rapid imitation as it creates a cognitive barrier. Imitation often requires companies to make substantial changes to their existing business practices, organizational politics often kick in, delaying for years a company’s commitment to imitate a blue ocean strategy.

The brand barrier.

The economic and legal barrier.

Renewal at the Individual Business level

Monitoring value curves signals when to value-innovate and when not to. When a company’s value curve still has focus, divergence, and a compelling tagline, it should resist the temptation to value innovate the business again and instead should focus on lengthening, widening, and deepening its rent stream through operational improvements of scale and market coverage. It should swim as far as possible in the blue ocean, making itself a moving target, distancing itself from early imitators, and discouraging them in the process. The aim here is to dominate the blue ocean over imitators for as long as possible.

Renewal at the Corporate Level for a Multibusiness Firm

A dynamic extension of the pioneer-migrator-settler (PMS) map introduced in chapter 4 serves this purpose well. It can be used to visually depict the movement of a corporate portfolio in one picture by capturing a corporation’s portfolio of business offerings over time. By plotting the corporate portfolio as pioneers, migrators, and settlers on the dynamic PMS map, executives can see at a glance where the gravity of its current portfolio of businesses is, how this has shifted over time, and when there is a need to create a new blue ocean to renew the portfolio. As explained in chapter 4, settlers are me-too businesses, migrators represent value improvements, and pioneers are a company’s value innovations. While settlers are today’s cash generators that typically have marginal growth potential, pioneers have high growth potential but often consume cash at the outset as they expand; migrators’ profitable growth potential lies somewhere in between. To maximize growth prospects then, a company’s portfolio should have a healthy balance between pioneers for future growth and migrators and settlers for cash flow at a given point in time.

Once Apple’s iPod began to be imitated, for example, to counter competition it rapidly launched a range of iPod variants at various price points with the iPod mini, shuffle, nano, touch, and so on. This not only served to keep encroaching competitors at arm’s length, but also expanded the size of the ocean it created, allowing Apple, not imitators, to capture the lion’s share of the profit and growth of this new market space.

Avoid Red Ocean Traps

You have to get your framing right to create blue oceans. Perspective is critical to success. Your mind-set is more ingrained than you realize.

Red Ocean Trap One: The belief that blue ocean strategy is a customer-oriented strategy that’s about being customer led.

A blue ocean strategist gains insights about reconstructing market boundaries not by looking at existing customers, but by exploring noncustomers.

Red Ocean Trap Two: The belief that to create blue oceans, you must venture beyond your core business,

Think of Casella Wines with [yellow tail] in the wine industry, Nintendo with the Wii, Chrysler with the minivan, Apple with its iMac,

Red Ocean Trap Three: The misconception that blue ocean strategy is about new technologies.

The reason buyers love these blue ocean offerings isn’t because they involve bleeding-edge technology per se, but because these offerings make the technology essentially disappear from buyer’s minds. Ask: How does your product or service offer a leap in productivity, simplicity, ease of use, convenience, fun and/or environmental friendliness? Value innovation, not technology innovation, is what opens up commercially compelling new markets.

Red Ocean Trap Four: The belief that to create a blue ocean, you must be first to market.

Blue ocean strategy is not about being first to market. Rather it’s about being first to get it right by linking innovation to value.

Red Ocean Trap Five: misconception that blue ocean strategy and differentiation strategy are synonymous.

Under traditional competitive strategy, differentiation is achieved by providing premium value at a higher cost to the company and at a higher price for customers.

Blue ocean strategy is an “and-and,” not an either-or, strategy.

Red Ocean Trap Six: The misconception that blue ocean strategy is a low-cost strategy that focuses on low pricing.

A blue ocean strategic move captures the mass of target buyers not through low-cost pricing, but through strategic pricing. The key here is not to pursue pricing against the competition within an industry but to pursue pricing against substitutes and alternatives that are currently capturing the noncustomers of your industry.

Red Ocean Trap Seven: The belief that blue ocean strategy is the same as innovation.

Many technology innovators fail to create and capture blue oceans by confusing innovation with value innovation.

Red Ocean Trap Eight: The belief that blue ocean strategy is a theory of marketing and a niche strategy.

Blue ocean strategy should also not be confused with a niche strategy. It is more about de-segmenting the market by focusing on key commonalities across the buyer group to open up and capture the largest catchment of demand. When practitioners confuse the two, they all too often are driven to look for customer differences for niche markets in the existing industry space rather than the commonalities that cut across buyer groups in search of blue oceans or new demand.

Red Ocean Trap Nine: The belief that blue ocean strategy sees competition as bad when in fact it can be good for companies.

Red Ocean Trap Ten: The belief that blue ocean strategy is synonymous with creative destruction or disruption.

By reconstructing existing market boundaries, blue ocean strategy creates new market space and is created beyond existing industries. When new market space is created beyond existing industry boundaries, as with Viagra, reconstruction tends to bring about non destructive creation. In many cases, even when the reconstruction occurs within industries, blue ocean strategy also produces nondestructive creation. Nintendo’s Wii, for example, created a blue ocean in the video game industry. It had an element of creative destruction.

Blue ocean strategy is about redefining the problem itself, which tends to create new demand or an offering that often complements rather than displaces existing products and services.

The focus of the blue ocean strategy is not on restricting output at a high price but rather on creating new aggregate demand through a leap in buyer value at an accessible price. This creates a strong incentive not only to keep it that way over time to discourage potential free-riding imitators. In this way, buyers win and the society benefits from improved efficiency. This creates a win-win scenario. A breakthrough in value is achieved for buyers, for the company, and for society at large.

Billion Dollar App

The potential upside of asking the question you’re afraid to ask always outweighs the chance that you’ll hear the word ‘no’ in response.

We wanted to create a service that drivers would love.

The core of my role was to understand what drivers really wanted – and how to design that into an app they’d love using every day.

Smartphone users were asked, ‘How do social and communications activities on smartphones make you feel?’ The two strongest sentiments they reported were ‘connected’ and ‘excited’.

Leading apps capitalise on this by focusing exceptional effort on design, usability, performance and things like the tone of voice used in their copy.

People want to be ‘excited’ and ‘connected’, it makes sense that anything that is done to maximise those sentiments is only going to make an app more popular.

Start with Big Problems

One approach to coming up with a big idea is to understand what people love to do, and what people need to do.

There are 67 universals in the list that are unique to humans: age grading, athletic sports, bodily adornment, calendar, cleanliness training, community organisation, cooking, cooperative labour, cosmology (study of the universe), courtship, dancing, decorative art, divination (predicting the future), division of labour, dream interpretation, education, eschatology (what happens at the end of the world), ethics, ethno-botany (the relationship between humans and plants), etiquette, faith healing, family feasting, fire making, folklore, food taboos, funeral rites, games, gestures, gift giving, government, greetings, hailing taxis,* hairstyles, hospitality, housing, hygiene, incest taboos, inheritance rules, joking, kin groups, kinship nomenclature (the system of categorising relatives), language, law, luck superstitions, magic, marriage, mealtimes, medicine, obstetrics, pregnancy usages (childbirth rituals), penal sanctions (punishment of crimes), personal names, population policy, postnatal care, property rights, propitiation of supernatural beings, puberty customs, religious ritual, residence rules, sexual restrictions, soul concepts, status differentiation, surgery, tool making, trade, visiting, weather control, weaving.

If your idea resonates with a human universal, you will maximise the universal appeal of your app.

Tomi Ahonen for what he’s done. He publishes an annual Mobile Almanac,

If the app offers an experience that hits a nerve – a latent psychological or behavioural need (I want to be anonymous with my messages) – then it explodes.

As humans, we love to share.

Sharing also just feels good because of the way our brains are wired. According to Harvard University professors Diana Tamir and Jason Mitchell, sharing information about ourselves is intrinsically rewarding and gives us a few squirts of dopamine every time we do it.

When coming up with your big idea or big problem to solve, think about whether it is inherently social, or whether it could be made social,

Instagram. One of the main ways it drove growth from the very first day was by allowing users to simultaneously share their photos on Facebook and Twitter from the moment the photo was taken using the Instagram app.

What is disruptive, however, is taking something that was not social and shareable – and reinventing it completely.

Groupon. When it launched, its premise was simple: if you want to buy a great product at this 50–75 percent discounted price, you need to get 100 other people to buy it too within a certain timeframe. Suddenly, Groupon created a very selfish – and social – incentive for people to tell others about their sales.

Focused more on talking about optimising server code to ensure messages are being moved more quickly, more efficiently and more reliably than other hot topics (such as valuations and buyouts). That is how Snapchat disrupted communications. It has made an entire generation – a much younger one – feel liberated again.They wanted to seduce users with interaction and animation – not with words or text. They wanted to create a game that would resonate with basic human psychology.

Square tackled a big problem, enabling anyone to simply, easily and cost-effectively, become a credit-card- accepting merchant.

Founders of groundbreaking apps don’t just stumble into something great: they have fantastically ambitious visions from Day One. It is a combination of this vision to solve existing problems in novel ways, the refusal to take no for an answer and persevering in the face of scepticism that has launched apps that have changed our lives.

It takes seven years. It’s not easy to build a billion-dollar company and it doesn’t happen overnight. On average it takes seven years to reach a billion-dollar valuation (and either an IPO, or merger, or acquisition), so you had better be in for the long haul.

Five business models that work.

The first is gaming, where users pay for a virtual service or goods.

The second is e-commerce / marketplace, where users pay for a real world good or service.

The third is advertising (or consumer audience building in the case where the company has not yet switched on the advertising).

The fourth is Software as a Service (SaaS), whereby users pay for cloud-based software (typically via a subscription model).

And the last is enterprise, whereby companies pay for larger-scale software (again, via a subscription-type model).

You can now get an MIT, Stanford or Harvard education essentially for free via great online course programmes such as OpenCourseWare (from MIT), edX (from MIT, Harvard and Stanford, among others) and from iTunes U.

Pivoting your business is admitting the failure of your current (and currently funded) idea, clinging on to whatever remaining investor money you have, and trying your next new idea.

‘Instead of doing a check-in that had an optional photo, we thought, Why don’t we do a photo that has an optional check-in?’

It was a bit of a Eureka moment as it dawned on him that filters could make a huge difference.

That night Systrom went back to their hotel room and began searching the Internet to find out how to build a photo filter.

They were laser-focused on a single platform, the iPhone, and doing a single thing, sharing photos – really well. This tunnel vision translated into very impressive ‘stickiness’ for the app. Not only were they able to attract new downloads and new users at a phenomenal rate, but those people were sticking around.

Figure out how your idea – your solution – translates into an app. Sketch on napkins, sketch ideas in Photoshop, do whatever you need to do to make your idea real and communicable to others.

Three key roles need owners: someone must lead the product vision; someone needs to build the technology; and someone needs to be focused on getting users and generating money.

Your mum promised to use your app – so make sure she does. Persuade every friend and family member to download it, use it – and give brutal, honest feedback.

Figure out your target user group early, and find out how to target them and get the app in their hands. • Aim to get feedback from hundreds of real users, if not a thousand (if you’re a marketplace model a couple of hundred will be good going).

Think about analytics and how you’re going to measure the performance of your app, and therefore the performance of your business.

Not everyone, however, is willing to work 80-hour weeks, or be told by everyone they meet that their idea won’t work and still persevere every day, or constantly sell their idea to every person they meet to build up their team, or work through mountains of legal documents late into the night, or spend months chasing investment to keep their idea alive. Understand from the onset that it’s a hard – and long – fight.

– the companies that generated revenues from Day One are the ones who wield the real power, create the most value and, most importantly, control their own destinies.

Out of the billion-dollar success stories between 2004 and 2014, 90 percent of the co founders had at least a few years working together, or knew each other from school.

If you’re great on the business side, you’ll need to stretch yourself to develop a product that users really want to use, and then seduce a great software developer to work alongside you.

The very title ‘cofounder’ is a powerful asset – and can help you negotiate with potential candidates.

Jay Bregman.

Wherefore Art Thou, Cofounder?

The good news, however, is that today there are many more events, meetups and even websites that help facilitate this process.

Here are some great events that will get you talking to the right people.

Developer Meetups.

Technology Conferences.

From TechCrunch Disrupt in New York, San Francisco and Berlin, to

LeWeb in Paris, to DLD in Berlin and Web Summit in Dublin,

And make sure that you have ‘Founder’ in big letters on your name badge (people are more likely to talk to you if they think you’re important or have your own company).

Startup Weekend.

This is a great event, and is designed for those of us who are time-poor. Think of it as an end-to-end business plan and software prototyping competition, crammed into a weekend. It is now operating internationally, with thousands of successful weekends completed. The concept is simple: turn up on Friday night with or without a great startup idea; people who have ideas pitch them; everyone else listens. By the end of the night everyone assembles into more or less evenly sized teams, with more or less balanced skills (the organisers do a great job of making sure the right composition of people is selected for each weekend). Over the course of the weekend, the teams refine their ideas and pitches, put together a presentation and then hack together a basic Test proof-of-concept piece of software by Sunday afternoon. The final team presentations happen on Sunday evening – and a winner is crowned. It’s a great way to spend a weekend and meet some amazing people.

Techcrunch disrupt hackathon.

A hackathon is where developers (and designers and people with ideas) all get together and build something functional – a website, an app – in a fixed period of time. In this case it starts on Friday night and culminates with public demos on Sunday afternoon. With more than 800 people taking part – twice a year – in both New York City and San Francisco, this is also a great event.

ANGELLIST.

One of the most promising places to find cofounders – as well as anything startup-related – is AngelList.

If you’d like even more suggestions about great cofounder events, meetups and websites – just visit the Billion- Dollar App website at mybilliondollarapp.com

Unless you already have an existing relationship with your cofounder, I strongly suggest that you both work on an extended project together to ensure that this person is someone you should be committing to for the lifespan of your app.

Create a proof of concept together.

Start flushing out all the features of your app: the business model, the target users, how you will home in your first thousand. Work

Red flags It’s also worth mentioning a few cofounder red flags.

One of the most amusing types is the ‘expert who wants to charge you fees upfront’.

The real movers and shakers in the Internet world are more than happy to help you for free. People in the know will always help you – but typically they will do that only if they think you’re a person with the skill and motivation to make your company work, or if they genuinely think that you have a solid, unique idea that is worthy of further development.

Don’t settle for an OK name. A great name is 10 times better than a good name. So invest the time now, because down the line there will be a million reasons why it’s close to impossible to change it.

Can your name become a verb? Hailo me a taxi, Google that word. This is one of the most powerful characteristics – and one you can’t force. But you can ensure that your name is conducive to this usage.

namestation.com.

sedo.com.

domainnamesoup.com.

instantdomainsearch.com.

Once you’ve settled on a name, it’s time to start thinking about details such as your strapline, logo, colour scheme, tone of voice and style, which, when wrapped together, deliver what is called your brand.

The website 99designs.com

Launchrock.com offers a very handy service here: it hosts a basic website for you; you can customise it with your logo and colour scheme with zero coding skills; you can add details about what your app does, when it’s launching and how to get in touch with you.

Most importantly, and its main feature, it prompts everyone who visits your site to register their email address and get early access to your app. It then encourages those visitors to share the site with friends. Why is this great? Well, over the course of the next few weeks and months as you build your app – reaching out to designers, contractors, developers and investors – people will invariably visit your website. With

launchrock.com in place you’re now capturing hundreds of the email addresses of people interested in your app. That means you’re building a list of potential users. For a small amount of effort you’ve started to build your user base.

It’s also a good idea to register all of your social-media accounts – claim your Twitter and Instagram handle, your Facebook page (along with a custom URL), your Google+ and Pinterest pages. Start building a consistent online identity.

When you launch your app, you need to test it out on the smartphones that will run it.

You focus on Android first, you’ll need to support a lot more than two screen sizes from the start. It also means that everyone needs to think about screen size all the time – from your product managers, to your designers, to your engineers.

It also means you need to have at least 10 of the top Android handsets in your office so that you can test that your app works on them as expected. And, yes, there are big differences between how your app can or might behave on

an HTC smartphone versus a Samsung one. If you don’t test thoroughly, you risk annoying

iOS and Android – it’s worth noting that they both have a substantial update about once a year.

Everything starts with Version 0.1 – it’s the very first iteration, the prototype, of your app

For Hailo it was focusing on how a user could see nearby taxis on a map, then hit the ‘Pick Me Up Here’ button and have a driver accept the hail. We also added in the ability to see the driver come towards you. That was enough to make people feel a wow moment.

If we couldn’t generate enough interest from drivers to use the app, there wouldn’t be a large enough supply of taxis, which would mean no passengers using the service, which would then mean we didn’t have a business.

Every week I hosted a group of about 15 taxi drivers for breakfast at a café and

You need to get to wow as quickly, cheaply and efficiently as possible.

The point of doing it this way – using paper designs, testing the bare minimum – is to get real data, to get real validation. Imagine the opposite: spending three months designing something in detail and another couple of months developing the software without any feedback from users. Unless you’re testing absolutely everything with your target users, you have no idea whether it will work.

Hailo required a rather involved prototype because we required two apps, and they needed to talk to each other.

To visualise the prototype you want to build, you actually need to start to put together an increasingly detailed blueprint of your app. This blueprint has two goals: (i) to illustrate what each screen of your app looks like; and (ii) to explain how your app behaves.

Other people involved in the app-development process, such as testers, will also need to understand these documents. Their job will be to compare and test what the app is supposed (designed) to do compared with what your developers have actually implemented.

Moqups.com

one called Balsamiq.com, and then a more advanced one called OmniGraffle.

Dieter Rams is one of the great pioneers of industrial design.

According to Rams good design: • Is innovative • Makes a product useful • Is aesthetic • Makes a product understandable • Is unobtrusive • Is honest • Is long-lasting • Is thorough down to the last detail • Is environmentally friendly • Has as little design as possible.

download all the current billion-dollar apps – Snapchat, Flipboard, Angry Birds, Puzzle and Dragons, Uber, Candy Crush Saga, Instagram, Square, Waze, WhatsApp, Viber, Tango, Pandora and, of course, Hailo. Make sure you’re an expert with other leading apps such as Facebook, Dropbox, Evernote, Amazon, eBay.

It’s helpful to build a collection of screenshots of your favourite apps and favourite features.

A great source of inspiration is www.pttrns.com – it’s home to thousands of screenshots.

But be careful with what you use as a benchmark: just because they appear on this or that site, it doesn’t mean they’re effective.

Functional Versus Beautiful. There is a fine line between beautiful and functional

functionality should be your number-one priority.

Hunting Designers

A great approach is to trawl two websites in particular – dribbble.com and behance.net. I’ve experienced great success with Dribbble (yes, three

I would also suggest checking out AngelList: it attracts the most entrepreneurial cross-section of people, across all areas, whether in design or engineering.

Tools have come onto the market that allow you to make visual designs more interactive than ever before. A great example is proto.io. Hailo’s designers used it quite a bit.

There’s one more thing you need to think about before you start coding: making it super-easy for users to send you feedback.

In these early stages, don’t make a user dig around your app to find a feedback form: make sure it’s front and centre and makes it easy to get in touch with you with feedback. Reactions to the early versions of your app are key to success, and you want to use real user feedback to tune the direction in which you’re heading.

To make your app a success, you need a systematic way to understand the experiences of all your users, what they are actually doing on your app, and what they like and dislike

Analytics is the answer. You can include snippets of analytics software in your app so that you can automatically track what every single user is doing on your app – what they are looking at, what they are clicking, how long they spend performing an action and at what point they open and close the app.

Leaders, is mixpanel.com. This tool gives you a powerful way to view your users on an individual and group level, allowing you to see precisely what they are doing every time they fire up your app. There are

Starting off, I would recommend putting in two solutions: a robust free solution such as Google Analytics (which has been improving in leaps and bounds on the mobile side) and something like Mixpanel, because of its powerful communication capabilities and its very powerful ability to segment and analyse your users.

are Flurry

Localytics

Kontagent (we found it to be quite a bit behind the

Successful Internet and app entrepreneurs are obsessed with metrics. If you can’t measure something, you can’t improve it. From the start, you need to both focus on the correct metrics and make sure that you have the analytics in place to measure them reliably.

There are five types of metrics to remember

(they are quite pirate-like – AARRR): • Acquisition: users downloading your app from a variety of channels; • Activation: users enjoying their first ‘happy’ experience on your app; • Retention: users coming back and using your app multiple times; • Referral: users loving your app so much they refer others to download it; • Revenue: users completing actions on your app that you’re able to monetise.

From Day One we built in the ability to input into the passenger app on Hailo ‘promotion codes’ that would give passengers £5, £10 or more off their next taxi ride.

Stage Conversion Goal Notes Acquisition User downloads app Measured, but not used as a measure of success Acquisition User launches app, either taps any button or session time greater than 10 seconds This was Hailo’s ‘higher bar’ version of acquisition Activation User creates an account A user who has shown interest in becoming a passenger Activation User adds credit-card details (required for fare payment) A user who has shown real interest in becoming a passenger Activation User requests a taxi Hailo still has to provide user with a driver Activation User receives confirmed driver Hailo’s job is done – now it’s up to the driver Activation User gets into a taxi As good as revenue (but not just yet) Revenue User completes ride and pays The Holy Grail moment

How to be Found in the App Store

‘app-store optimisation’ (ASO for short).

You want to include both what your app does (as well as keywords) and branding, i.e. your name.

Examples are ‘WhatsApp Messenger’, ‘Square Register’, ‘Square Wallet’.

Description.

Keywords. This field appears only in Apple’s App Store (it is the equivalent of the ‘description’ field in Google Play).

Don’t repeat words already in your title;

separate keywords with commas; don’t use spaces

ICON.

Be mindful that you have space for only about eleven characters within the icon (I say about because it varies, i.e. the letter ‘m’ is a lot wider than ‘i’ for example) for your app name, otherwise it will appear truncated on a user’s phone, so check it first!

Ideally, you want your site to focus on helping people download your app – i.e. a crisp, snappy description – and then a clear download button that links directly to the app stores you’re on.

If a user browses your website from an iPhone, then instead of showing two links – one for Google Play and one for the Apple App Store – you should drop the Google Play one.

All these little things make a difference

If you’re looking for something that will expedite building your website, you should try Bootstrap.

Domain Names. Protect your domain name by buying it as soon as possible along with any obvious misspellings

Also, if your app is clearly going to have international appeal – which I hope it does – grab the country-specific suffixes such as .co.uk, .fr and all the countries you think are pertinent. Don’t forget .cn (China) – these guys are pretty fast at picking up what will be a very useful domain for you

ALEXA. Check your alexa.com traffic rank. This free tool tracks the popularity of sites on the Internet

The most important places to put the keywords are probably the ‘title tag’ part of the HTML in your web pages (i.e. the words between ‘<title>’ and ‘</title>’) and the page header (another part in the HTML of your pages – i.e.

Backlinking To Yourself.

Creating A Sitemap. This is something you do to help out the ‘crawlers’

The better your navigation – i.e. the simpler and fewer clicks it takes to get to any page – the better.

Image Descriptions.

Fresh Content.

Making It Social. Once you have this content, you want to get it out into the world. Distributing it via your social media – Twitter, Facebook, Pinterest and Google+ accounts – is key, especially if it prompts people to link back to your website.

Link, Link, Link. SEO is all about linkages – so feel free to reach out to other businesses (via their webmasters or connections you know) and ask them to include a link to your website on their blog or list of partners, or any other way from their website. It all helps.

But definitely don’t use link farms,5 or anything that sounds too good to be true. Keep it clean and build it up over time.

Great Press Kit. Make sure you have at least a mini section on your website for press – and a press kit. Include all the info about your app

CAC, or the Customer Acquisition Cost,

CPA, the Cost Per Acquisition, or the CPD, the Cost Per Download.

One of the biggest and easiest-to-use platforms is Google’s AdMob.

Google’s AdSense

There are ten top mobile-advertising platforms that you’ll want to pay attention to – Google’s AdMob, Millennial Media, iAd (from Apple), Flurry (in addition to a free analytics solution, it also has a big ad network), inMobi, Chartboost, MoPub, Amobee, HasOffers and Euclid Analytics.

Press Releases.

PRWeb,

Targeted wire services such as Business Wire.

Do The Legwork. Reach out to journalists yourself.

Pull together a list of blogs in your relevant sector (technology and app news) as well as popular blogs that love reviewing apps (there’s a myriad of those), and then spend a few days writing a lot of emails – and be prepared to reply to a

Social media

With the aid of a tool such as HootSuite you can also manage – and publish to – all those accounts from the one place

The best thing about tools such as HootSuite is that you can compose the content in advance – e.g. five posts over the weekend – and then schedule them to be published ‘automagically’ during the week. One good piece of advice about social media: you want to get into the habit of paying attention regularly and often in the early days. Pick a day of the week, and then systematically follow 100 people that are pertinent to your business.

With Facebook, follow all your real friends and invite everyone to follow your page.

Social media isn’t for the shy! If you make this systematic you’ll get into the thousands of followers in no time.

Their user-acquisition metric was self-sustaining (because of the inherent network effect of users inviting their friends).

Their user activation (effectively creating an account) converted at close to 100 per cent because it was a super- simple registration (just a username and password).

Referral metric was off the charts because it was baked into the app (the app works better when you invite more

(In the very early days of Hailo this was around 25 per cent until we introduced a first-time-user ‘tour’ that explained how the app worked. The tour shot our activation rate above 50 per cent.)

The aptly named AngelList is

If, say, your app is a game, a VC who has previously invested in a gaming company will know the ins and outs of the sector.

You need to ensure that you clearly own all your intellectual property, in other words, you need to make it clear that all the work you contract other parties to do belongs to your company.

If people are developing an app, website or other piece of software, then you need to make sure the source code belongs to you.

Founder Vesting

A founder-vesting schedule is basically a timeline of your earning full ownership of your shares in the company.

• Series Seed Documents. You can find them at seriesseed.com

The Founder Institute.

It has a version called the New Plain Preferred Term Sheet.

As part of the actual agreement, you’ll have four main things to agree: •

incorporation, which are typically needed to properly document the existence and treatment surrounding the new class of preferred stock that investors insist on; • Preferred stock investment agreement, which documents the actual details of the investment; • Bylaws that describe in detail how the company will be governed – read this very carefully; and • The board-member election consent, which elects the board member representing the investors.

Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson.

I ask existing users of a product how they would feel if they could no longer use the product. In my experience, achieving product–market fit requires at least 40 percent of users saying they would be ‘very disappointed’ without your product.

When we took Hailo to market at the end of 2011, I spent an inordinate amount of time surveying users (and giving out lots of in-app promo codes for £5 off your first ride to friends, family, random people on the street and anyone who would listen).

‘Don’t build something clever, build what people want.’

The person behind the ‘what’ is the head of product. The person behind the ‘how’ is the CTO, or chief technology officer – the person in charge of building the actual software.

Over time, as the CEO role becomes broader and more demanding, a dedicated head-of-product role needs to be created and filled with someone entirely focused on that mission. It’s tough to lead product development.

One of the key qualities of this person (besides being laser-focused on testing new product improvements and measuring their effectiveness) is the ability to say no. ‘No’ is a critical word to the success of any startup because it enables focus. Given limited time, money and resources, maintaining focus is the only way to get to product–market fit. Chamath Palihapitiya

The role of the product team very simply: testing, measuring and trying.

• What is the product you’re building? • Is that product solving the right problem? • Who are we solving the problem for (target users)?

The bottleneck is not usually having enough ideas about what product features to build, but rather how quickly you can deliver all the product features to your users.

• What is the app going to look like? • What is the app going to behave like? The responsibility for answering these questions lies with the design team (which is usually part of the product team). At

The question: does the app work as designed? Quality assurance (QA) – also called quality engineering (QE) – is tasked with making sure that the app your engineers are building is working as designed and specified.

I was brought in to head up the product development, the cofounders were taking little or no salary, we had a full-time designer (who was stretched to the limit working on the website, the passenger app and the driver app), we had a couple of iOS engineers and a couple of back-end engineers, and a couple of contractors supporting the developers, and we ended up bringing in a quality-assurance engineer because the platform was complex – and we had a lot of product development

Becoming a ten-million-dollar app and cementing your product–market fit is about developing product features quickly, testing them, measuring them, adopting the best ones and then repeating the process.

Agile is not about writing exhaustive outlines of what you would like your developers to build. It is not about planning every detail of your software development to death, trying to nail down what will be worked on weeks and months into the future. It is not about giving your development team an inflexible shopping list of features to develop and then leaving them alone to code it up. Being agile is about delivering valuable features or improvements within a short, regular period. This period is called a ‘development sprint’, and it typically lasts one or two weeks. The goal of a sprint is to deliver something of value – a specific feature

Why is this pretty cool? Well, it ends up delivering usable features or improvement to your users every two weeks.

These usable features or improvements are actually called ‘user stories’ – essentially a piece of functionality outlined in a very user-centric way (as

When you start approaching the hundred-million-dollar-app stage – when you start to grow at a crazy rate – communication remains absolutely critical. So the culture of communication you build now will reap even more powerful rewards in the future.

Full Service Agencies.If you use these guys to develop your app you will have no control over your app architecture, the quality of code and much else.

You should be actively talking with your users on at least a weekly – if not more frequent – basis to figure out what features you absolutely must add.

To try to figure out what users really love, try killing features. Take out a feature. If users scream about it, they find it useful, so bring it back.

TEST YOUR IDEAS. You should already have anywhere up to a thousand people with your app in their hands. You need to figure out an effective way of communicating with them frequently – at least once a week – and getting their qualitative feedback. Try also to form a group of 20 to 30 power users whom you can email or call 24/7.

whenever you want high fidelity feedback on a big new feature – is usertesting.com.

You can set up user tests with any kind of demographic of people (you list your criteria and usertesting.com finds the corresponding profiles in its database of users).

We dedicated a member of the product team to do UX work every other Friday on a select set of new features by using usertesting.com, and then to compile all the results, synthesise, and call a meeting with the product team to action the results.

Apple Enterprise Distribution. Apple has a special version of its distribution platform

HockeyApp is one great option.

One of the clever things that we did at Hailo was to very carefully select and communicate with our beta-testing community in London. Picking your target users is critical: you wouldn’t test a Square register solution with a gamer, and you wouldn’t test the Uber private-limousine app with someone on a low salary who doesn’t frequent the city much.

Make sure you monitor your ratings on a daily basis.

Make sure that you create a DNA of customer support from the very first day in your company. The cofounders should be checking the reviews daily and personally responding to customers.

First, prompt users to rate your app after they have had a great experience (e.g.

You can track how many times you prompt people via your analytics solution – and you can also track how many ratings you’re getting on a daily basis with app-store analytics tools such as AppAnnie or Distimo.

make sure that you prompt them to update their rating of your app every six months or so. Again, this should be an automatic prompt that is built into your app.

Further down the line, we started using the Net Promoter Score (NPS).

We invested in a SaaS solution from desk.com early

We built a nice system of Hailo credits to reimburse users for any issues they had, and also as a thank-you to our best users. Don’t forget about your best users – no one likes to be taken for granted!

Let’s use the example of an e-commerce app. Stage Conversion goal Conversion rate* Acquisition User downloads app 100% Acquisition User launches app – either taps any button – or session time > 10s 90% Activation User creates an account 70% Activation User adds credit-card details (required for fare payment) 50% Activation User adds item to shopping basket 40% Retention Opens app from email/push notification alert 50% Retention Opens app 2+ times in the first week 10% Retention Opens app 5+ times in the first month 10% Referral Refer 1+ users who download app 3% Referral Refer 1+ users who activate 2% Referral Refer 1+ users who generate revenue 1% Revenue User makes purchase < $5 3% Revenue User makes purchase >$5 and <$25 2% Revenue User

The typical conversion for users who make a purchase on any given day on an e-commerce app is around 4 or 5 percent

Everyone in the team should know which metrics their work can affect – and should feel empowered to improve those metrics.

Sharing metrics is critical to building visibility – and trust – within an organisation.

If people don’t fully understand the source of their metrics, they can lose faith in the accuracy of the metric itself. This is a bad situation.

Rookie Mistakes

Putting In Analytics Too Late.

Relying On A Single Analytics Solution.

Not Attributing Marketing Or Referral Source.

Not Plugging In Revenue Metrics.

Google Analytics.

Flurry.

Mixpanel.

all kinds of behavioural data (how many times someone has done or failed to do something on your app), to any other piece of data

Localytics.

QlikView

Your user-acquisition strategy is going to be focused on experimentation and validation. You need to go out there and find the most efficient channels to get users downloading your app, and at the same time you need to test what campaigns – messaging, wording, imagery, propositions – are going to get those channels to perform the actions you want.

For each channel you should test a variety of campaigns (which I will go through below) and then start putting together a picture of which channel–campaign combination yields the most users who deliver on your desired conversion goals for the lowest price. At that point you keep iterating – fast – focusing about 80 per cent of your time testing product improvements and features to improve the conversion rates on your main metrics. The remaining 20 per cent of your time should be spent thinking about brand-new, unique features that make users love your app even more. This process is one that you’ll be repeating throughout the life of your app.

Your goal is to get users to love – or even hate – your app. Death is when they don’t feel anything strong about you and you become someone stuck in the zone of indifference.

You need to discover the triggers that drive people to want to download, use and talk about your app. Start by finding the keywords, themes, phrases and images that excite people about your app.

• The top five emotions you want your app to elicit •

The top fifty words that describe your app •

The top fifty words that describe your brand •

The top customer needs your app satisfies and benefits it delivers •

The top problems your app solves •

The top fifty words that describe your competitors’ apps • The top fifty words that describe your competitors’ brands.

We distilled a lexicon, and then used it across our website, app, PR and marketing material.

‘Step 1: The Million-Dollar App’:

ensure you have a responsive website with a clear call to download your app; core SEO (search-engine optimisation) elements in place on your website; ASO (app-store optimisation) in place; and then a basic understanding of PPD (pay-per-download) advertising. We also talked about leveraging social features in your app, empowering people to more easily share your app and broadcast it to social-media channels.

Attribution. This is something you need to be able to track from the very beginning.

Generate simple, short and unique codes that users can send to other users.

If you design your campaign carefully, and ensure there is sufficient motivation for both the ‘inviter’ to send the codes (e.g. they earn credits or money for each one redeemed and not just shared – remember that!)

It’s worth investing the time in tracking all your advertising and referral in this way

If you’re an e-commerce (or gaming) site or app you should be generating $50,000 per month • If you’re a marketplace you should also be generating $50,000 per month • If you’re building a consumer audience app

You should have at least 100,000 downloads • $10 per user per month.

Average transaction value (ATV),

Your annual revenue per user (ARPU)

Customer lifetime value

Customer Acquisition Cost (CAC).

A typical cohort analysis compares the behaviour of all the users who registered in a given month (let’s say that all the users who downloaded your app in January use it on average five minutes per day) with all the users who downloaded it in another month (let’s say that customers who downloaded it in February use it on average six minutes per day). By comparing the January cohort with the February cohort, investors can see that users are using the app more – a great sign. Cohort analysis allows you to present a trend – typically from month to month – showing clear improvements across any metric: from session length, to customer acquisition cost, to lifetime value.

Check out CrunchBase. It’s one of the best (free) collections of information about startups around the world. Find companies that are similar to what you’re doing, or ones that you would consider comparable in terms of sector, product, team or traction.

One of the first things you should do at this point is figure out which VCs do invest early in Series A funding rounds.

But be careful, and identify investors with a strong history of investing early so that you don’t spend too much time pitching to investors who won’t actually be useful at this point.

Make sure that you get a good introduction from a friend, or, if that is not an option, visit the Billion-Dollar App website, where I’ve put together a list of some of the top firms in a number of capital cities.

The major term-sheet elements are the following: •

PRO-RATA RIGHTS. This allows an investor to continue to invest money to maintain their percentage ownership. •

LIQUIDATION PREFERENCE. This allows an investor to get their money out first in the case of an exit or other scenario. •

PREFERENTIAL RETURN. Investors will try to negotiate at least a 1x, if not a 2x, return on their original investment before other classes of shares are paid out. Be careful about this provision: 1x is normal; 2x is bad. •

BOARD SEATS. Your lead investor will insist on a board seat, especially if they are investing a considerable amount of money. Remember to select your board members very carefully, and make sure that you can maintain majority control of your board. Investors often want observer rights either alongside a board seat (or in lieu of) as well as asking for information rights (guaranteed updates about the company’s performance on an agreed frequency).

PREFERRED SHARES. Investors will require that you create a new class of share that has voting (and other) rights above and beyond that of common stock.

EMPLOYEE OPTION POOL. You will need to formalise an employee option pool (typically 10–20 per cent of the company) to ensure that you have a mechanism by which to attract and retain top talent.

EMPLOYEE AGREEMENTS. If you’ve set things up properly these will be in place. Investors will want to see that there are adequate intellectual property assignment provisions confidentiality provisions and non-competition/non-solicitation provisions in place.

FOUNDER VESTING. Most investors will try to add a guarantee to ensure the founders stay around for at least four years by making their founder shares vest over a fixed schedule. Most investors are adamant about this; some are more flexible. Recall the benefits that I outlined about adding this in yourself, especially if your company has several cofounders, when we discussed the million-dollar app.

The Clauses that Can Screw You

Liquidation Preference.

Anti Dilution Rights.

Non-Participating Liquidation Preference.

Drag Along Rights.

Warranties.

it’s standard to include non-compete clauses (so that employees can’t create a new company that directly competes with the business, or go and work with a direct competitor), anti-poaching clauses (so that, if you leave, you are forbidden from trying to take other members of the company with you)

Scales. Are you going to be profitable with a few thousand users? Or do you need to attract (and retain) millions of users?

Will your same business model appeal to people all over the world? Will everyone pay $0.99 to download it? Or will everyone be equally willing to make in-app purchases? Will some users be a lot more valuable than others? If so, should you spend a lot more acquiring more valuable users?

Innovative investors such as USV bring together the product, engineering and marketing teams from their portfolio companies a few times a year. This allows a free exchange of information, challenges and, most importantly, solutions.

If you want to be successful, you must demand that your VP of marketing be also a big-time data geek.

How to hire a VP of marketing

What you need first and foremost is someone who gets data, who gets analytics and who gets conversion.

That means presenting a single consistent and powerful profile of your app to everyone in the world.

In terms of remuneration,

where the VP of marketing comes in a bit later, and is getting paid £150,000, they would typically have a multiplier of 0.53 – or £75,000 of options at the time they join. So, if the company increases in value 5x, then they will have £375,000 worth of shares, or,

One of the most frequent mistakes I have heard about is using too few traffic sources to acquire new app users.

A mistake many app businesses make is to rely on traditional marketing channels.

Often the channels are helpful in bumping up your download numbers, but they don’t typically translate into valuable users.

The better the product, the longer the customer lifetime.

The time it takes to earn back that acquisition cost is important: the longer it takes to earn back, the more money you’re going to need to raise.

COMMUNICATION VIRALITY. ‘P.S.

‘Sent from my iPhone’ auto-signature.

SOCIAL-NETWORK VIRALITY. This is all about making it easier for your users to share content – or other relevant information – with their social networks, such as Facebook, Twitter, Pinterest and Google+. There are plenty of ways to do this automatically.

How do I measure my virality?

Business intelligence tools such as QlikView

it is critical that data should have a key owner in your team – and I would suggest in most cases that falls under the VP of marketing,

Mixpanel.

KISSmetrics

Uber messages me once or twice per month with interesting and relevant PR stories.

It recently improved its referral programme, now offering $20 every time I get a friend to sign up. That got my attention!

Email me every week with a bespoke round-up of what my friends are reading or recommending on the service.

Tip: make it super-easy for a user either to unsubscribe from your emails or to change the frequency or type of email alerts they receive. If users are unsubscribing, then listen to their actions.

People get excited – when you alert them to something relevant and interesting. Snapchat alerts me when a friend joins the app;

People love alerts about a new message, or new friend requests, but a weekly update about new social news content is something you need to be a bit more careful with.We found that if a user saw this message during their first attempt to book a taxi, they never opened the app again. Bummer.

We created a rule in our CRM system that would fire an email to a first-time user seeing the ‘No taxis available’ message. In the email we included a thoughtful message appealing to the user’s reasonableness – and, most importantly, offered them $10 off their next ride as an apology.

Finding Fanatics

make sure the words in your app – is actually contained in a ‘strings file’.

LANGUAGE TOOLS.

WebTranslateIt (WTI)

Smartling

TRANSLATIONS.

Beluga Linguistics and Lingo24.

They turned to cunning, rather than persevering with a full-frontal assault.

For example, just a few hundred purchases took the game to number one in the Finnish App Store. Rovio duplicated that strategy in other

Some apps were designed from the ground up to be easy to adopt, use and enjoy – and be language- and culture- neutral (there are massive benefits to this,

Uber targets the cities it wants to launch in and then goes about finding GMs

In recruiting these GMs, Uber tends to target ex-investment-banker-with-an-MBA types (I have met a number of them) who characterise the company’s personality. They are essentially entrepreneurs – with or without local market expertise – who go in there and make things happen. The goal is to get the service up and running with as few as 25 drivers.

The GMs receive all the collective experience and wisdom of the rapidly expanding company through their ‘Playbook’. The Playbook comes directly from the CEO and executive team and presents an extensive collection of strategies for overcoming obstacles on a local level, and includes everything from how to launch and operate social-media channels, to how to throw a launch party, to how to recruit key employees (such as D-Ops, or driver operations staff, and CMs, community managers) and deal with regulators. This last point is particularlyimportant.

Hailo recruited brilliant local GMs. However, its focus was not on building a network of ex investment bankers and B-schoolers to grow the business, but rather seasoned operators with talent for people management and operations.

The whole company and every team has one objective and three measurable key results every quarter, and, if you achieve two of the three, you achieve your overall objective; if you achieve all three, you’ve killed it. It is a good, simple organising principle that keeps people focused on the three things that matter – not the ten.

Friday Updates When Hailo started holding a Friday afternoon ‘all-hands meeting’, it elevated the company to a new level of openness and efficiency.

Conferences : Some members of the team will afford them opportunities to talk on behalf of the company – thus raising everyone’s profile in the tech community.

We send our iOS engineers to the WWDC (Worldwide Developers Conference) every year to see the latest and greatest from Apple, and, similarly, our Android team to the Google I/O conference.

Team responsible for building your app: product managers, designers, developers and QA (quality assurance – or testers).

The vast majority of your team should be focused on product and development.

A good rule of thumb is one product manager for eight to ten engineers, one designer for every two product managers, and one tester for every product manager.

Make sure that you hire product managers before you hire engineers. This ensures that you have a backlog of features for engineers to work on – and there’s someone there to guide the engineers well as they work.

Scrum Masters

The scrum master is the person in charge of helping the developers focus on building software, by removing all distractions and dependencies.

Running Lean

A complete list of meetups and links to other resources can be found at the official Lean Startup homepage: http://theleanstartup.com.

People confuse bootstrapping with self-funding. A stricter definition is funding with customer revenues.

DECK network (primarily targeted at designers and developers).

We started listening to the most popular (vocal) requests and ended up with a bloated application and lots of one- time-use features.

Principles guide what you do. Tactics show you how.

Document your Plan A. Identify the riskiest parts of your plan. Systematically test your plan.

Customers don’t care about your solution. They care about their problems.

Your job isn’t just building the best solution, but owning the entire business model and making all the pieces fit.

“tackling the riskiest parts first.” Not coincidentally, for most products, the solution isn’t what’s riskiest. The bigger risk for most startups is building something nobody wants.

A problem worth solving boils down to three questions: Is it something customers want? (must-have) Will they pay for it? If not, who will? (viable) Can it be solved? (feasible)

Pivot is a term used by Eric Ries to describe a change in direction of a startup while staying grounded in learning.

In order to maximize learning, you have to pick bold outcomes instead of chasing incremental improvements. So, rather than changing the color of your call-to-action button, change your entire landing page. Rather than tweaking your unique value proposition (UVP) for a single customer segment, experiment with different UVPs for different customer segments.

Instead, your first goal should be to establish just enough of a runway to allow you to start testing and validating your business model with customers.

Define the Solution. With that knowledge, I spent a day building a demo. It was a teaser landing page with a table of contents, a title, and a stock book-cover image

About half of the people agreed to this arrangement. The others chose to wait for the “finished product,” citing print, iPad, and/or Kindle as their preferred reading format. This further helped me distinguish early adopters from latter-stage customers. These early adopters were driven by the content alone and didn’t care how it was packaged.

Distinguish between customers and users.

If you have multiple user roles in your product, identify your customers. A customer is someone who pays for your product. A user does not. Split broad customer segments into smaller ones.

Put everyone on the same canvas at first. If you are building a multi sided business, you might find it necessary to outline different problems, channels, and value propositions for each side of the market. I recommend starting with a single canvas first and using a different color or tag to identify each customer segment. This helps you visualize everything on a single page.

Sketch a Lean Canvas for each customer segment. As you’ll find shortly, the elements of your business model can and will vary greatly by customer segment. I recommend starting with the top two or three customer segments you feel you understand the best or find most promising.

Think in the present.

When people need to get a job done, they hire a product or service to do it for them. The marketer’s task is to understand what jobs periodically arise in customers’ lives for which they might hire products the company could make. —

Many times these solutions may not be from an obvious competitor. As an example, the biggest alternative to most online collaboration tools is not another collaboration tool, but email. Doing nothing could also be a viable alternative for a customer if the pain is not acute enough.

Identify other user roles. Identify any other user roles that will interact with this customer.

The first battle isn’t even selling; it’s getting a prospect’s attention.

First-time visitors spend eight seconds on average on a landing page. Your UVP is their first interaction with your product. Craft a good UVP and they might stay and view the rest of your site. Otherwise, they’ll simply leave.

Be different, but make sure your difference matters.

Target early adopters.

Your sole job should be to find and target early adopters, which requires bold, clear, and specific messaging.

Focus on finished story benefits. You’ve probably heard about the importance of highlighting benefits over features. But benefits still require your customers to translate them to their worldview. A good UVP gets inside the head of your customers and focuses on the benefits your customers derive after using your product.

So, for instance, if you are creating a résumé-building service:

the finished story benefit would be “landing your dream job.”

Instant Clarity Headline = End Result Customer Wants + Specific Period of Time + Address the Objections

A classic example that fits this formula is Domino’s slogan: Hot fresh pizza delivered to your door in 30 minutes or it’s free. Pick your words carefully and own them.

Picking a few “key” words that you consistently use also drives your search engine optimization (SEO) ranking.

Answer: what, who, and why.

A good UVP needs to clearly answer the first two questions — what is your product and who is your customer. The “why” is sometimes hard to fit in the same statement,

Because all you have are untested problems, it is fairly common for them to get reprioritized or completely replaced with new ones after just a few customer interviews. For this reason, I recommend not getting carried away with fully defining your solution just yet. Rather, simply sketch out the simplest thing you could possibly build to address each problem. Bind a solution to your problem as late as possible.

Failing to build a significant path to customers is among the top reasons why startups fail. The initial goal of a startup is to learn, not to scale. So, at first it’s OK to rely on any channels that get you in front of potential customers.

If your business model relies on acquiring large numbers of customers to work with, that path may not scale beyond the initial stages, and it’s quite possible you’ll get stuck later. For this reason, it’s equally important to think about your scalable channels from day one so that you may start building and testing them early.

A commonly cited paid channel is search engine marketing (SEM). Eric Ries has written about how he tested his early product on $5 a day using Google AdWords, driving 100 clicks at a cost-per-click of 5 cents. If you can pull this off today, by all means use it,

Examples of inbound channels:

Blogs

SEO

Ebooks

White papers

Webinars

Examples of outbound channels:

SEM

Print/TV ads

Trade shows

Cold calling

Something I hear a lot is that an MVP is, by definition, embarrassingly minimal. How can you possibly charge for it?

First, an MVP is not synonymous with a half-baked or buggy product. Your MVP should address not only the top problems customers have identified as being important to them, but also the problems that are worth solving. By that definition, you should plan to deliver enough value to justify charging.

The mindset most of us have when we’re launching a new product is one of lowering signup friction. We want to make it as easy as possible for the customer to say yes and agree to take a chance on our product, hoping the value we deliver over time will earn us the privilege of his business. Not only does this approach delay validation of one of the riskier parts of the model (because it’s too easy for a user to say yes), but a lack of strong customer “commitment” can also be detrimental to optimal learning.

Here’s why:

Price is part of the product.

Price defines your customers.

Getting paid is the first form of validation.

One technique for setting initial pricing is pricing against the list of existing alternatives from the Problem box. These alternatives provide reference price anchors against which your offering will be measured.

What will it cost you to interview 30 to 50 customers?

What will it cost you to build and launch your MVP? What will your ongoing burn rate look like in terms of both fixed and variable costs?

specifically measure successful acquisition as getting my visitors to view my signup page.

Retention measures “repeated use” and/or engagement with your product.

A real unfair advantage is something that cannot be easily copied or bought.

some examples of real unfair advantages that fit this definition: Insider information The right “expert” endorsements A dream team Personal authority Large network effects Community Existing customers SEO ranking

Visit http://LeanCanvas.com and create your online canvas there.

Incorrect prioritization of risk is one of the top contributors of waste.

We know that startups are highly uncertain, but uncertainty and risk aren’t the same thing. We can be uncertain about a lot of things that aren’t risky.

Uncertainty: The lack of complete certainty, that is, the existence of more than one possibility.

Risk: A state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome.

Customer pain level (Problem) Prioritize customer segments that you believe will need your product the most. The goal is to have one or more of your top three problems as must-haves for them. Ease of reach (Channels)

Building a path to customers is one of the harder aspects of building a successful product. If you have an easier path to one segment of customers over others, take that into consideration. It doesn’t guarantee you’ll find a problem worth solving or a viable business model, but it will get you out of the building faster and speed up your learning.

Price/gross margin (Revenue Streams/Cost Structure) What you can charge for your product is largely driven by the customer segment. Pick a customer segment that allows you to maximize your margins. The more money you get to keep, the fewer customers you need to reach to break even.

Market size (Customer Segments) Pick a customer segment that represents a big enough market given the goals for your business.

Technical feasibility (Solution) Visit your Solution box to ensure that your planned solution not only is feasible, but also represents the minimum feature set to put in front of customers.

Start with a blank canvas and incrementally reveal parts of the business model

Devote 20% of your time to set up, 80% to conversation.

Leaving the complete canvas open in front of people always evokes a reaction because people can visualize the entire model and they

Ask specific questions. I specifically want to know: What do they consider to be the riskiest aspect of this plan? Have they overcome similar risks? How? How would they go about testing these risks? Are there other people I should speak with?

The key is not to take this feedback as either “judgment” or “validation,” but rather as a means of identifying and prioritizing risk.

Interacting with customers is everyone’s responsibility.

The three must-haves: development, design, and marketing

Development If you are building a product, you need strong product development skills on your team. Having prior experience building stuff is key, along with expertise in the specific technology you are using.

Design By “design” I mean both aesthetics and usability. In newer markets, function can take precedence over form, but we live in an increasingly “design-aware” world where form cannot be ignored. Also, a product is not just a collection of features but rather a collection of user flows. You need people on your team that can deliver on the right experience that matches your customers’ worldview. Marketing Everything else is marketing. Marketing drives the external perception of your product, and you need people that can put themselves in the shoes of your customer. Good copywriting and communication skills are key here, along with an understanding of metrics, pricing, and positioning.

You need all three — speed, learning, and focus — to run an optimal experiment.

Speed and focus When you are going fast and are focused but not learning, the image of a dog chasing its tail comes to mind. You are expending a lot of energy but simply going around in circles.

Learning and focus When you are focused on the right thing and learning but you are not moving quickly enough, you stand the danger of running out of resources or getting outpaced by a competitor.

Speed and learning Finally, when you are going fast and learning but you are not focused, you can fall into the premature optimization trap. Some examples of premature optimization are scaling servers when you have no customers, and optimizing landing pages when you don’t yet have a product that works.

Identify a Single Key Metric or Goal A startup can focus on only one metric. So you have to decide what that is and ignore everything else.

Challenge yourself to find the simplest thing you can do to test a hypothesis. This is an underappreciated skill. Once you truly understand what’s riskiest about your product, it’s often possible to build something other than the product to test it.

You don’t need automation to validate a marketplace.

started with a single customer and manually built these weekly plans to validate their riskiest assumptions first. Their objective was learning over efficiency. Over time, they signed up more customers and incrementally replaced the most inefficient portions of their solution with “just enough” automation to move them closer to their original big vision.

Formulate a Falsifiable Hypothesis

A falsifiable hypothesis is a statement that can be clearly proven wrong.

This is best illustrated with an example.

Too vague Being known as an “expert” will drive early adopters. Specific and testable A blog post will drive 100 signups.

Falsifiable Hypothesis = [Specific Repeatable Action] will [Expected Measurable Outcome]

Validate Qualitatively, Verify Quantitatively

Make Sure You Can Correlate Results Back to Specific Actions

When running qualitative experiments (like interviews), it’s important to run them the same way until certain repeatable patterns emerge.

Risks are tackled through experiments.

There are two common fallouts of this. One is that startups get discouraged from their initial lukewarm or negative learning and either pivot prematurely or abandon further experiments. The other is the complete opposite.

You can’t afford to blindly follow a process (even this one) or aimlessly run experiments just for the sake of learning. Instead, you need to start with the end in mind and carefully align your experiments into “staged iterations” so that your learning is additive.

The starting point is a completed Lean Canvas that lays out a plan that you believe should work. You then methodically run staged experiments that visit every box on the canvas.

Your business model is not a dartboard.

top three starting risks on the Lean Canvas as Problem, Channels, and Revenue streams.

Stage 1: Understand the problem

Stage 2: Define the solution

Will the solution work? Who is the early adopter? Does the pricing model work?

Stage 3: Validate qualitatively

Build your MVP and then soft-launch it to your early adopters. Do they realize the unique value proposition (UVP)? How will you find enough early adopters to support learning? Are you getting paid?

Stage 4: Verify quantitatively

Launch your refined product to a larger audience. Have you built something people want? How will you reach customers at scale? Do you have a viable business?

Product risk:

Getting the product right First make sure you have a problem worth solving.

Then define the smallest possible solution (MVP). Build and validate your MVP at a small scale (demonstrate UVP).

Then verify it at a large scale.

Customer risk: Building a path to customers

First identify who has the pain. Then narrow this down to early adopters who really want your product now. It’s OK to start with outbound channels. But gradually build/develop scalable inbound channels — the earlier the better.

Market risk: Building a viable business Identify competition through existing alternatives and pick a price for your solution. Test pricing first by measuring what customers say (verbal commitments). Then test pricing by what customers do. Optimize your cost structure to make the business model work.

Are Surveys Good for Anything? While surveys are bad at supporting initial learning, they can be quite effective at verifying what you learn from customer interviews.

The customer interview is a form of qualitative validation that is quite effective in uncovering strong signals

Once you have preliminary validation on your hypotheses, you can then use what you have learned to craft a survey and verify your findings quantitatively.

Build a frame around learning, not pitching.

The problem with starting with a pitch is that it is predicated on having knowledge about the “right” product for the customer (Problem/Solution Fit). Before you can pitch the “right” solution, you have to understand the “right” customer problem.

In a learning frame, the roles are reversed: you set the context, but then you let the customer do most of the talking.

People are generally willing to help if you set the right expectation of seeking their advice over trying to pitch to them.

Don’t ask customers what they want. Measure what they do.

It’s fairly common to find customers lying in interviews — sometimes out of politeness and sometimes because they really don’t know or don’t care enough.Your job shouldn’t be to call out their lies, but rather to find ways to validate what they say with what they do, preferably during the interview. For example, if a customer declares a problem as a must-have, probe deeper. Ask him how he solves the problem today. If he is doing nothing and still getting by, the problem may not be as acute. If, however, he is using a homegrown or competitor’s solution and he is not happy, that may be a problem worth solving.

Stick to a script.

While exploration is a critical aspect of talking to customers, you need to bind the conversation around specific learning goals.

Cast a wider net initially. Even though your first objective will be to home in on the defining attributes of early adopters, not all of your prospects will (or should) be early adopters.

Prefer face-to-face interviews.

Start with people you know.

Then use them to get two or three degrees out to find other people to interview. Not only does this help you practice and get comfortable with your script, but it’s an effective way to get warm introductions to other prospects.

Take someone along with you.

Ask for sufficient time. My interviews typically run between 20 and 30 minutes, without feeling rushed.

Avoid recording the interviewees. I tried recording interviewees early on (with their permission), but found that it made some people self-aware

Document results immediately after the interview.

Finding Prospects Whenever possible, you want to prioritize finding prospects through a channel you will actually use to acquire future customers.

Start with your first-degree contacts. The first place to start is with your immediate contacts that meet your target customer demographic.

Ask for introductions. The next step is to ask your first-degree contacts for introductions to people who meet your customer demographic.

Hey [friend], Hope all is well… I have a quick favor to ask. I’ve got a product idea that I’m trying to validate with wedding photographers. My goal is to chat with local photographers to better understand their world and evaluate whether it’s worthwhile pursuing this product. I’d really appreciate it if you could send this message along to people you know who fit this target.

Give something back. Turn the interview into a “real interview” and offer a write-up, blog post, or video in exchange.

You might be building a product that you think isn’t designed to solve a problem — for example, a video game, a short film, or a fiction novel. I argue that even in these cases there are underlying problems, albeit more desire- than pain-driven.

first spend time understanding your audience (early adopter) and then look for smaller, faster ways to test your solution — for example, build a teaser trailer for your video game, short film, or book.

It’s equally important to remember that your sustainable advantage will come from your ability to outlearn your current (and future) competition.

The Problem Interview

What You Need to Learn

Product risk: What are you solving? (Problem) How do customers rank the top three problems? Market risk: Who is the competition? (Existing Alternatives) How do customers solve these problems today? Customer risk: Who has the pain? (Customer Segments) Is this a viable customer segment?

Testing the Problem

Your first objective is measuring how customers react to your top problems.

engage customers more actively to truly understand the problems they face — specifically if/how they solve them today.

The interview will work like this. I’ll start by describing the main problems we are tackling, and then I’ll ask if any of those resonate with you. I’d like to stress that we don’t have a finished product yet, and our objective is to learn from you, not to sell or pitch anything to you. Does that sound good?

State the top one to three problems and ask your prospects to rank them:

Note So that you don’t bias the ranking, frequently reorder the Problem list.

Go through each problem in turn. Ask the interviewees how they address the problem today. Then sit back and listen. Let them go into as much detail as they wish. Ask follow-up questions, but don’t lead them or try to convince them of the merits of a problem (or solution).

Sometimes people unknowingly lie to you during the problem rankings, either because they are being polite or they simply don’t know. Check for that here. If they claim a problem is a “must-have,” but they aren’t actively doing anything to solve it, there’s a disconnect.

Even though you aren’t ready to talk about your solution in detail, you need to provide a hook to maintain interest. The high-concept pitch is perfect for this. It not only helps explain your solution at a high level, but also leaves a memorable sound bite that helps the interviewees spread your message.

Then you need to ask for permission to follow up. Your goal is to establish a continuous feedback loop with prospects. And finally, you need to ask the interviewees for referrals to other potential prospects:

Document Results

Do You Understand the Problem?

Review your results weekly.

debrief at the end of each week to review that week’s batch of interviews, summarize your learning, and make any adjustments to your script.

The goal is to adjust the script and customer demographic along the way so that you can incrementally get stronger and more consistent positive signals with each subsequent batch.

Start to home in on early adopters.

Refine the problems. If you get a strong “don’t need” signal across the board, drop that problem from the script.

Similarly, if you discover a new “must-have” problem, add it to the script. Your eventual goal is to distill your product down to one “must-have” problem — one Unique Value Proposition (UVP).

Really understand their existing alternatives. Understanding your early adopters’ existing alternatives is key to formulating the right product. Early adopters will use their existing alternatives as anchors against which they will judge your solution, pricing, and positioning.

You are done when you have interviewed

Can identify the demographics of an early adopter Have a must-have problem Can describe how customers solve this problem today

The Solution Interview Test the solution with a “demo” before building the actual product.

You will start by double-checking your learning from the Problem interview, then look to test the following additional risks: Customer risk: Who has the pain? (Early Adopters) How do you identify early adopters? Product risk: How will you solve these problems? (Solution) What is the minimum feature set needed to launch? Market risk: What is the pricing model? (Revenue Streams) Will customers pay for a solution? What price will they bear?

For software products, mock-ups and videos are a great way to “demo” your intended solution.

The demo needs to be realizable. I have friends at design studios that have special teams in place just to build early user demos. These demos are very much a part of the sales process and a lot of emphasis is placed on them, but they often rely on technologies (like Flash) that aren’t what the final product is built in. While they are quite effective at making the sale, they make the implementation team’s job quite difficult — with many of the more “flashy” elements sometimes being impossible to recreate. This leads to a disconnect in what is promised (and sold) to the client and what is eventually delivered.

The more real your demo looks, the more accurately you’ll be able to test your solution.

Content precedes design. Design in the absence of content is not design, it’s decoration.

Testing Your Pricing I find that people often misunderstand the “learning versus pitching” metaphor for customer interviews. Yes, your objective in customer interviews is to learn, not to sell, but you can’t learn effectively when you’re too vague or open-ended. You have to go into interviews with clear falsifiable hypotheses that may very well be shattered. That’s

Don’t Ask Customers What They’ll Pay, Tell Them

The mindset most of us have during Solution interviews is one of “lowering signup friction.” We want to make it as easy as possible for customers to say yes and agree to take a chance on our product, hoping the value we deliver over time will earn us the privilege of their business. Not only does this approach delay validation because it’s too easy to say yes, but a lack of strong customer “commitment” can also be detrimental to optimal learning.

Don’t Lower Signup Friction, Raise It

In most pitches, the presenter plays the role of a jester entertaining in a royal courtyard (of customers). Rather than trying to impress, position yourself to be the prize.

The first objective with your MVP is to learn. I’d much rather have 10 “all-in” early adopters I can give my full attention to than 100 “on-the-fence” users any day.

Most people are reluctant to charge for their MVP because they feel it’s too “minimal,” and they might even be embarrassed by it. I don’t subscribe to this way of thinking. The

The Solution Interview as AIDA. AIDA is a marketing acronym for Attention, Interest, Desire, and Action,

Attention

The most effective way to get noticed is to nail a customer problem.

Interest

Use the demo to show how you will deliver your UVP and generate interest.

Desire

Then take it up a notch. When you lower signup friction, you make it too easy for the customer to say yes, but you are not necessarily setting yourself up to learn effectively. You need to instead secure strong customer commitments by triggering on desire. The earlier pricing conversation generated desire through scarcity and prizing.

How Is This Different from a Pitch?

A pitch tends to be an all-or-nothing proposition. Here,

If you fail to elicit the expected behavior at each stage, it’s your cue to stop and probe deeper for reasons. For instance, you might have your positioning wrong or be talking to the wrong customer segment.

It’s a good idea to mix in new prospects with every batch of interviews so that you test all the hypotheses with a “beginner’s mind.”

The interview will work like this. I’ll start by describing the main problems we are tackling and then I’ll ask whether any of those resonate with you. I also would like to show you an early demo of the application. I’d like to stress that we don’t have a finished product yet, and our objective is to learn from you, not to sell or pitch anything to you.

Go through each problem in turn and illustrate how you solve it using the supporting demo. <For each problem> Illustrate how you solve the problem using the supporting demo. Pause after each one and ask if they have any questions. <Repeat for other problems> So, that’s what the application looks like right now. We are trying to prioritize what to finish and release first and would like to ask you a few more questions: What part of the demo resonated with you the most? Which could you live without? Are there any additional features you think are missing?

Usually the right price is one the customer accepts, but with a little resistance.

Don’t ask the customer for ballpark pricing. Instead, tell him your pricing model

If he accepts the pricing, make a note of whether he hesitated or readily accepted.

Wrapping Up (the Ask)

The first is permission to follow up with them to test the service when it’s ready.

The second is to ask for referrals to other people you could potentially interview.

Refine pricing. If you have no resistance to your pricing, consider testing a higher price.

Get to Release 1.0

The first step is to reduce the scope of your minimum viable product (MVP) to its essence so that you build the smallest thing possible.

Reduce your MVP A danger with iterating through mock-ups during the Solution interview is that it is quite easy to get carried away and end up with more than you need for your MVP.

Your MVP should be like a great reduction sauce — concentrated, intense, and flavorful.

Start with your number-one problem. The job of your unique value proposition (UVP) is to make a compelling promise. The job of the MVP is to deliver on that promise.

Eliminate nice-to-haves and don’t-needs. From your Solution interviews, you should be able to label every element on your mock-up as “must-have,” “nice-to-have,” or “don’t need.”

Repeat Step

for your number-two and number-three problem mock-ups.

Charge from day one, but collect on day 30.

It is also generally a good practice to defer up-front collection of credit card information to reduce signup friction and avoid negative option billing.

Focus on learning, not optimization.

Get Started Deploying Continuously

technique for shortening the cycle time from requirements to release is implementing a Continuous Deployment process

Continuous Deployment is a practice of releasing software continuously throughout the day — in minutes versus days, weeks, or months.

The biggest waste in software is created from waiting for software as it moves from one state to another: waiting to code, waiting to test, waiting to deploy. Reducing or eliminating these wait times leads to faster iterations, which is the key to success.

Right now is the perfect time to lay the groundwork and practice with Continuous Deployment — while you don’t have customers, lots of code, or servers to worry about. While Continuous Deployment won’t help you launch your MVP faster, starting with a basic system won’t slow you down and will help lay the foundation for speeding up future iterations after you launch.

Define your activation Flow

Your activation flow describes the path customers take from signing up for your service to having a gratifying first experience.

While the ultimate objective of your activation flow is to get your customers to experience your UVP as quickly as possible, most of what goes wrong right after you launch happens here. For this reason, it is far more critical to architect your activation flow for learning over optimization.

Reduce signup friction, but not at the expense of learning.

Reduce the number of steps, but not at the expense of learning.

Deliver on your UVP.

Be prepared for when things go wrong.

Build a Marketing Website

Your marketing website is critical in driving the acquisition trigger in your customer lifecycle.

Acquisition describes the path a customer takes from first landing on your website as an unaware visitor to becoming an interested prospect.

Each page should have a primary call to action and a secondary call to action. My primary call to action directs visitors to my pricing page (acquisition subgoal), while my secondary call to action offers a link to more information (e.g., product tour).

The landing page is by far the hardest of the three. Its job is to make a case for your product to an unaware visitor in fewer than eight seconds.

While the job of your landing page is to provide a compelling reason to buy your product, the job of your About page is to provide a compelling reason to buy from your company.

Tour page (video/screenshots)

there are several basic elements that make up a successful landing page,

Unique value proposition

Supporting visual

A clear call to action

Invitation to learn more

Get Ready to Measure

An actionable metric is one that ties specific and repeatable actions to observed results.

It’s not what you measure, but how.

Understanding the difference between a vanity metric and a macro metric is the first step. In order to make your metrics actionable, you have to additionally make them accessible (through simple reports) and auditable (by being able to go behind the numbers). The three A’s of metrics are: Actionable, Accessible, and Auditable.

Metrics Are People First

The ideal conversion dashboard is part analytics and part customer relationship management.

Metrics can’t explain themselves.

Don’t expect your users to come to you.

Not all metrics are equal.

When you just look at numbers, you get an averaging effect that can be greatly skewed if you don’t yet have a lot of traffic (or the right traffic). You need a way to segment your metrics into different buckets.

Micro-level funnels are characterized by short lifecycle events typically measured in minutes, while macro-level funnels are characterized by long lifecycle events typically measured in days or months.

This poses the following issues: Inaccurate conversion rates The numbers reported for the revenue event most likely include purchases made in May and exclude purchases made in July, which skews the overall conversion rates. Dealing with traffic fluctuations This skewing of numbers is further exacerbated by any fluctuations in traffic. If signups go down in July, your conversion rates will appear to be better when they may not be. Measuring progress (or not) Another problem with this sort of reporting is that your product is also constantly changing. It is hard, if not outright impossible, to tie back observed results (good or bad) to actions you took in the past, such as launching a new feature. Segmenting funnels Over time, you will probably run a split test or need to segment your funnel to isolate one group of customers from another. You can’t do this with a simple funnel report.

So, while funnels are a great visualization tool, funnels alone are not enough. The answer is to couple funnels with cohorts. Cohort analysis is very popular in medicine, where it is used to study the long-term effects of drugs and vaccines: A cohort is a group of people who share a common characteristic or experience within a defined period (e.g., are born, are exposed to a drug or a vaccine).

The MVP Interview

If you can’t convert a warm prospect in a 20-minute face-to-face interview, it will be much harder to convert a visitor in less than eight seconds on your landing page.

During the MVP interview, you are specifically looking to answer the following questions: Product risk: What is compelling about the product? (Unique Value Proposition or UVP) Does your landing page get noticed? Do customers make it all the way through your activation flow? What are the usability hot spots? Does your MVP demonstrate and deliver on your UVP? Customer risk: Do you have enough customers? (Channels) Can you bring on more customers using your existing channels? Market risk: Is the price right? (Revenue Streams) Do customers pay for your solution?

The MVP interview, like the Problem and Solution interviews, is less about pitching and more about learning.

record the testing session for others to watch later.

Signup and Activation (Test Solution) (15 minutes) This is the heart of the interview. Ask the interviewee to sign up and watch how he navigates your activation flow. Are you still interested in trying out this service? You can do so by clicking the “Sign up” link. It would be immensely valuable to us if we could watch you go through the signup process. Would that be OK?

Document Results

write down the top three problems you observed.

Make Feedback Easy

The fastest way to learn from customers is to talk to them.

A toll-free number sends a signal to your customers that you care and that you went the extra mile to make it easy for them to call you.

You don’t have a scaling problem yet.

Tech support is a continual learning feedback loop.

Tech support is customer development.

Tech support is marketing.

Your first objective during trials is to reduce user abandonment on your acquisition and activation paths. Your next objective is to increase retention and engagement, get paid (if that applies), and collect favorable customer testimonials. Your goal should be to get 80% of your early adopters through the complete cycle.

Acquisition and Activation

Drill into your sub funnels. Explore your acquisition and activation sub funnels to see where users are dropping off. Start with the leakiest bucket first. Are you losing them on a particular page, such as the landing page or pricing page? Look for patterns. Do certain types of users (e.g., Mac versus Windows users) experience higher failure rates than others?

Reach out to your users. You should be able to extract the list of users that failed at a particular step in your funnel. If you know what went wrong, correct it, and ask those users to come back.

Catch and report unexpected errors. When early users run into problems, they don’t turn into testers. They leave.

Retention Priority: Get users to come back and use your product during the trial. Send gentle email reminders.

Email can be automated, tracked, and measured. A common technique used by email marketers is drip marketing,

Even better than drip marketing is lifecycle marketing. Lifecycle marketing additionally considers the user’s stage in the customer lifecycle. So, for instance, if a user gets stuck during activation, instead of educating him about your advanced features, you would know to send him timely and appropriate troubleshooting help.

Follow up with your interviewees.

Get paying customers to talk to you.

Get “lost sales” prospects to talk to you.

Don’t spend a lot of effort acquiring customers and then just let them walk away.

Ask for customer testimonials. Get happy customers to write a short paragraph on your product’s value proposition.

Are You Ready to Launch?

Review your results frequently. Usability testing research shows that you can uncover 85% of your product’s problems with as few as five testers. Start with the most critical problems. Review everyone’s top three problems and rank them by severity. Do the smallest thing possible. Resist the temptation to completely redesign a new landing page or signup flow at this stage. Your objective is to first establish a baseline that works, and you can get there by making smaller tweaks. You’ll have lots of opportunities to test alternate hypotheses in Part IV of this book. Make sure things improve. Validate that your fixes actually improve things in subsequent interviews. Repeat Steps 1–3. Audit your conversion dashboard. This is the perfect opportunity to audit your conversion dashboard and make sure everything works as expected.

What Are the Launch Criteria? You are ready when at least 80% of your early adopters consistently make it through your conversion funnel. Specifically, they should: Be able to clearly articulate your unique value proposition (UVP) Be primed to sign up for your service Accept your pricing model Make it through your activation flow Provide positive testimonials

Your goal is to establish “just enough” traffic to support learning.

The reason both reactions were bad is that you don’t have five minutes on a landing page.

When people don’t trust you, they leave.

So, even though we could have added a “how it works” page or graphic on the landing page, chances are people wouldn’t stick around long enough to notice it.

Iteration 3: Emotional hook Rather than trying to present a particular benefit or explain how the product works, we took a more aspirational tack; one that used an image to connect with the target customer and communicated a finished story benefit

CloudFire landing page, iteration 3 This version worked. The first reaction we got from moms was: “That’s my life.” That connection made them more open to reading the left hand side of the page, which further connected with them by making the promise: “Get back to the more important things in your life. Faster.” That piqued their interest enough to want to learn more, which is exactly what you want out of your UVP headline. UVP: Why you are different and worth paying attention to. Qualitative versus quantitative learning Interestingly, this experiment in landing pages also serves as a great example of showing how qualitative learning can trump quantitative learning in the early stages of a product.

started an A/B split-test using Google Website Optimizer, driving traffic using Facebook ads, Google AdWords, and StumbleUpon.

Features Must Be Pulled, Not Pushed

While Continuous Deployment helps you streamline your product development process for speed, you have to be wary of simply cranking out more features faster.

Give your MVP a chance. First troubleshoot and resolve issues with existing features before chasing new features.

Implement an 80/20 Rule

Most of your time immediately after launch should be spent measuring and improving existing features versus chasing after shiny new features.

A good practice for keeping your features pipeline in check is to limit the number of features that can be concurrently worked on and only work on new features after you’ve validated that the features you just deployed had a positive or negative impact (i.e., yielded learning).

It is important to distinguish between minimal marketable features (MMFs) and smaller features/bug fixes.

A good test for an MMF is to ask yourself if you’d announce it to your customers in a blog post or newsletter. If it’s too tiny to mention, it’s not an MMF.

A key principle of Kanban that works to constrain the work queue involves setting limits on the number of features that can be in progress at any given time.

In a Lean Startup, however, a feature is only “Done” when it provides validated learning from customers

Defining “Done” this way further constraints your feature pipeline and prevents you from working on any new features unless you can prove that the current features just deployed provided validated learning.

The first determination involves checking the request against your product’s immediate needs and priorities: is it “Right action, right time?” So, for instance, if you have serious problems with your signup flow, all other downstream requests should take a backseat to that.

Customer-pulled requests If the feature is a customer-pulled request, arrange a call or meeting with the customer. Even though the customer might be asking for a specific solution, get to the root of the problem. Try to talk the customer out of wanting the feature. Have the customer sell you on why you should add the feature.

Validate qualitatively: Partial rollout Once the feature is coded and ready for use, partially deploy it to just a few customers first.

Validate qualitatively Conduct usability interviews similar to the MVP interview. Iterate as needed to correct issues.

Verify quantitatively: Full rollout You are ready to do a full rollout. Once your feature is rolled out, it is marked “Done,” and the lock of the work-in-progress limit is released. This allows you to start working on the next feature in the backlog queue.

Verify quantitatively With the feature fully live, you should now be able to compare your conversion cohorts for the week the feature went live against the previous week to verify the expected macro impact.

Depending on the type of feature, you might additionally need to set up a split-test.

The more concurrent split-tests you have going, the longer the verification time window. Long-running experiments can also start interfering with other experiments and complicate your cohorts. For these reasons, it is best to use your judgment to decide when to split-test and when not to.

Here are some guidelines: I generally don’t split-test a brand-new feature because you can compare against older cohorts that didn’t have this feature. I don’t split-test experiments that get very strong signals during qualitative testing. I do recommend split-testing experiments that get a medium to strong signal during qualitative testing and those that test improvements or alternate flows.

How would you feel if you could no longer use [product]? Very disappointed Somewhat disappointed Not disappointed (it isn’t really that useful) N/A – I no longer use [product]

If you find that over 40% of your users are saying that they would be “very disappointed” without your product, there is a great chance you can build sustainable, scalable customer acquisition growth on this “must have” product.

Surveys are more effective at verification than learning.

How do you steer your product toward product/market fit? The answer lies within your conversion dashboard.

measuring your product’s early resonance with users using two key metrics from your customer lifecycle — activation and retention, which together make up your value metrics.

revenue is only the first form of validation and, when used just by itself, could be a false positive as a product/ market fit test.

I’ve experienced numerous cases with my products where customers kept paying for a product they did not use (not even sporadically). Sometimes this was because someone else was paying (their company, for instance) or they simply forgot to cancel the product.

Have You Built Something People Want?

Review your conversion dashboard results weekly. Set a time every Monday to review your weekly conversion dashboard with the entire team.

Identify the leakiest buckets you need to fix first.

Prioritize your goals and features backlog.

Review your features backlog to prioritize new and existing feature improvements.

Formulate bold hypotheses. At this stage, avoid micro-optimization experiments. Instead, come up with bold hypotheses, but build the smallest thing possible to test them.

Add/kill features.

Review features throughout the feature lifecycle to ensure that they have a positive impact. Otherwise, rework or kill them.

Monitor your value metrics.

Review your retention cohorts.

Your goal is to see steady upward movement in these numbers. Otherwise, you’re simply spinning your wheels.

Run the Sean Ellis Test. Once your retention numbers approach 40%, consider running the Sean Ellis Test.

Growth here is driven by keeping the Viral Coefficient > 1 (i.e., each user brings in at least one other user).

While I had great passion for the technology behind the solution, I found myself with little passion for the customers or their problems. Only having passion for the solution is a problem.

Being different is good only if that difference matters.

While I succeeded in discovering viable “customer problems” to solve and even got pretty far in terms of validating the business model (with positive cash flow), something was grossly missing: passion for customers and their problems.

I had unknowingly tweaked my founding vision along the way from being problem-based — “connecting everyone on this planet” — to being solution-based — “a peer-to-web framework that blurs the boundaries between the desktop and the Web.” I had become a company with a “solution looking for a problem”

Create canvases for both sides. In a way, you are building two business models in one. You have to understand who the sellers are, how you’ll reach them, and what unique value you’ll provide them. Then do the same for the buyers.

Rather than creating a new or large marketplace, identify a prototypical preexisting “early adopter” marketplace where both the motivation and the friction for transacting business is currently high.

Run separate Problem and Solution interviews to validate your assumptions around pain level and motivations of both buyers and sellers. Get commitments, build an MVP, and start connecting buyers with sellers. For

Don’t automate match making. Matching buyers and sellers is a hard problem. Consider using a “Concierge MVP” model (like the Food on the Table case study from Chapter 5) to keep the quality level high while you learn what to automate.

The key is to build a continuous learning culture of experimenters versus specialists, where it’s everyone’s job to be accountable toward creating and capturing customer value.

more money might tempt you to hire more people and build more features — both of which may lead you off course and slow you down.

Constraints drive innovation, but more important, they force action.

Don’t hire until it hurts.

Charge from day one. Make a goal of first covering your hardware/hosting costs, and then your people costs.

build up your online reputation and brand, which pays off over time and could even lead to an unfair advantage.

In a Lean Startup, eliminating waste is a fundamental principle. Waste is any human activity which absorbs resources but creates no value.

What about work that needs to get done inside the building? Who is going to implement the solutions to problems uncovered outside the building?

create two teams that feed into each other: a problem team and a solution team. The problem team focuses on customer development, while the solution team focuses on product development. However, if you are a founder, you need to be on both teams, and this is where the fundamental scheduling tug-of-war problem lies.

Start with a single pricing plan. Starting with multiple plans that cover everyone under the sun is a form of waste.

One rule of thumb for building a successful business (by way of David Skok, Matrix Partners) is to ensure that the lifetime value of your customers exceeds the cost of customer acquisition by at least a factor of three.

do a back-of-the-envelope calculation based on your people/hardware costs and subscription revenue to find your break-even point.

Unless you are deriving monetary value from free users, the freemium model is less of a business model and more of a marketing tactic to fill your pipeline with potential prospects.

pricing is one of the riskiest (and most critical) parts of the business model and should be tested early. Freemium delays this learning.

Pricing should be set with the buyer in mind, not the seller.

Jason Cohen, who writes the popular A Smart Bear blog, even advocates accounting for free users as a “marketing expense” on your balance sheet, much like you would an ad buy or trade show expense.

Since your eventual goal is to charge for your product anyway, why not start there? Pick features and a plan based on what customers will pay for today and sign them on as your first customers. Not only is this simpler to build, but it’s also simpler to measure. Then, once you have learned how your customers are using your product, you can always offer a free plan if you want to. You would have collected valuable usage data along the way, which puts you in the best position to design multiple upstream and downstream plans.

A good free plan should ideally behave similarly to a free trial. The difference is that while a free trial is time- based, freemium is usage-based. If you understand the usage pattern of your product, you should be able to design the free plan so that a user naturally outgrows it at some point in the future that you can reasonably predict.

The number-one way to get a prospect (cold or warm) to agree to an interview is to “nail his problem.” One of the best exercises for crafting such a message involves spending an afternoon writing a shorter version of a long- form sales letter — no matter what type of business you’re building. You will not be sending this letter to any prospects. The point of the exercise is to get you to explain your product in narrative form, which will be helpful when requesting interviews, when conducting interviews, and while building a marketing landing page.

Establishing a website early with the right keywords from your UVP will also give you a head start in building your search engine optimization (SEO) ranking. Don’t worry about giving away too much about your product. We’re only going to mention the “Problem,” not the “Solution.”

Follow basic SEO practices. Make sure you also use your UVP in your title tag and place your keywords (not your product name) early. For example, use this: Customer Lifecycle Management Software – USERcycle not this: USERcycle – Customer Lifecycle Management Software

Collect email addresses. Pick your favorite tool, like Campaign Monitor or MailChimp, to collect email addresses using a “Notify Me” call-to-action button.

Measure your website. Start with a free analytics tool like Google Analytics to track visitors on your landing page.

How to Get Started with Continuous Deployment Figure A-1 shows an overview of the continuous deployment cycle. You probably already have (or should have) the pieces needed to put together a basic continuous deployment system. I’ll cover each stage of the continuous deployment cycle next. Commit One of the ways continuous deployment strives to reduce waste is by reducing work-in-progress inventory (i.e., undeployed code). Having lots of undeployed code increases inertia and reduces your ability to react quickly (more integration, more coordination, more planning). Here are two techniques that help you reduce your work-in-progress inventory: Code in smaller batches.

The basic idea here is to deploy less code but more frequently. The definition of a small batch is relative, but strive to make it as small as possible. I used to deploy code on a biweekly schedule with my last product and eventually got my batch size down to the output of a two-hour coding session. Sure, you won’t usually finish a full feature in two hours, but you’ll get pretty good at building and deploying features incrementally.

The number of lines of code in my average batch went from several hundred to about 25. A direct side effect of deploying fewer than 25 lines of code versus hundreds is that troubleshooting unexpected production issues immediately after a deployment becomes a whole lot easier, as does fixing and releasing them. Always be trunk-stable.

Another practice for reducing work-in-progress inventory is to not use any branching in your source control tree. I know this sounds a little extreme because branching and merging are among the most touted features in a source control management system — they allow you to isolate big, risky changes off the “stable” mainline trunk. But the longer you stay off the trunk, the more integration debt you collect, which again inevitably leads to more integration risk, coordination, and planning headaches. It’s more efficient to train yourself to always be trunk-stable and build and deploy your features incrementally. It’s important to point out that deploying features incrementally doesn’t necessarily mean

they are made live to all users immediately. This allows you to incrementally roll out big features and make them available to select users like your internal team until you are ready to go live. I’ll cover how you do this using a feature flipping system in the Deploy section.

Test Taking the continuous deployment plunge is particularly scary because it eliminates manual testing (QA), which typically has served as a safety net for catching defects after development and before deployment.

Here are some guidelines for overcoming this fear: Testing is everyone’s responsibility. First, I don’t know of any two- or three-person startup that has a QA department, which makes testing everyone’s responsibility. Second, having long test cycles creates the same work-in-progress inventory problems we discussed earlier. The solution is not creating a separate QA function, but rolling it into the development process and investing more heavily in automated testing.

Use a continuous integration server. Set up a continuous integration server, like Hudson, to automatically trigger a build (if you have compiled code) and run your application against your test suite after every commit.

Do not tolerate any failing tests. I’ve worked at places where developers train themselves to ignore failing tests because they know they are outdated. In a continuous deployment system, these tests serve as your last line of defense before pushing code into production, and you cannot tolerate a single failing test, especially since your ultimate goal is to automate deployment.

Prefer functional tests over unit tests. I don’t advocate achieving “full test coverage.” On the contrary, I believe writing unit tests for obscure edge cases is a form of waste and is not the most optimal use of time when the focus is speed and learning. I instead prefer creating functional tests over unit tests whenever possible. There are several great options, like Selenium and Sauce Labs, for writing and automating functional tests for web applications. Start with your activation flow. Building tests for features that your customers never get to is also a form of waste. When building tests, use your customer lifecycle to prioritize your tests. Start with the activation flow and then incrementally add other functional tests over time.

Deploy The deployment step pushes your tested code into your production environment. As this can get quite sophisticated when you have a cluster of machines, it is best to start early when you have just a few servers: Outsource as much of your server infrastructure as possible.

Spending effort setting up and configuring your own servers at this stage is a form of waste. You should instead pick a cloud or platform provider (like Amazon or Heroku) and focus all your efforts on building your application, not your infrastructure. Many cloud providers offer free tiers to get you started.

Create a separate staging area if you are so inclined. A separate staging area serves as an additional safety net before pushing code to production and can be a good idea for building up confidence in your deployment system. However, I’ve found staging areas to be of limited use beyond basic spot checking, and at some point your continuous integration server should be able to serve this function in a more repeatable and automated fashion.

Build one-click push and rollback scripts. The next step is to write a set of deploy scripts that can push your code to your production server and roll back your code to the last release. The rollback is used in the event you push a bad change. If you are deploying small enough batches, you should never need to roll back beyond the last release. If you are on Heroku, one-click push and rollback is offered out of the box. Deploy manually first, then automate. It is usually a good idea to run the push script manually at first and audit every deployment while you build up your confidence. If you are using Hudson as your continuous integration tool, it is fairly easy to add a task to automatically trigger your push script when you are ready for that.

Implement a simple feature flipper system. You will inevitably be faced with having to deploy a new “big” feature while maintaining the old ones, and you’ll need a mechanism in place to isolate your users from these changes. A feature flipper system fits that bill. A feature flipper system uses flags in your code that allow you to enable/disable features on a per-user basis.

Monitor The job of your monitoring system is to enable you to automatically detect, alert, and eventually even automatically recover from unexpected errors. An example of recovering from an error might be automatically triggering your rollback script in the event of a bad release. To be able to do this, your monitoring system would have to get pretty sophisticated and not just monitor your server health but also your application health (i.e., business metrics). The good news is that you don’t need to start there. It is actually a form of waste to try to overbuild your monitoring system, because the Pareto Principle rules here. The Pareto Principle: Roughly 80% of the effects come from 20% of the causes. The continuous deployment cycle has a built-in feedback loop that helps you build this monitoring incrementally. Here’s how to get started: Start with off-the-shelf monitoring. There are numerous off-the-shelf monitoring and alerting applications, including Ganglia, Nagios, and New Relic, that you can use to start monitoring basic server health metrics. Tolerate unexpected problems only once. You build up your monitoring system by implementing a Five Whys root cause analysis to every unexpected problem you encounter.

The Five Whys is a questions-asking method used to explore the cause/effect relationships underlying a particular problem. Ultimately, the goal of applying the Five Whys method is to determine a root cause of a defect or problem. The following example demonstrates the basic process: My car will not start. (the problem) Why? – The battery is dead. (first why) Why? – The alternator is not functioning. (second why) Why? – The alternator belt has broken. (third why) Why? – The alternator belt was well beyond its useful service life and has never been replaced. (fourth why) Why? – I have not been maintaining my car according to the recommended service schedule. (fifth why, a root cause) Why? – Replacement parts are not available because of the extreme age of my vehicle. (sixth why, optional footnote) I will start maintaining my car according to the recommended service schedule. (solution) — http://en.wikipedia.org/wiki/5_Whys Applied to unexpected problems in your production environment, the outcome of each Five Whys analysis should provide a slew of tests, monitoring, and alerts that you then add to your existing suite.

How to Build a Conversion Dashboard A key design principle is to decouple data collection from data visualization. This lets you minimize waste by allowing you to build your conversion dashboard incrementally.

How to Collect Data Here’s how to get started with data collection: Map metrics to events. The first step is to identify all the key events (user actions) that map back to your metrics. You should already have all your steps for your acquisition and activation funnels clearly defined. Mapping metrics to events It is helpful to also identify any key events for the other macro metrics

Figure A-3. Other macro metrics Track raw events. I recommend tracking your raw events in a separate events table/database or using a third-party system like Google Analytics, KISSmetrics, or Mixpanel. While logging data in your production tables might seem easy and harmless enough, your production tables are probably not designed for the kinds of queries you’ll need to run over time. You’ll end up either spending a lot of time dumping tables and massaging the data, or taxing your production system heavily for reports. Log everything. A good practice to complement tracking raw events is to log every “potentially interesting” property along with each event.

An example of a property could be your user’s browser, operating system, or referrer. While you may not use a particular property today (or think you’ll ever use it in the future), it’s fairly inexpensive to log a few extra bytes of information that could end up saving you time later, and more importantly, could provide a treasure trove of historical data.

How to Visualize Your Conversion Dashboard Now you’re ready to start visualizing your data: Build a weekly cohort report. The first report I use on my conversion dashboard is the weekly cohort report by join date I showed earlier. Weekly cohort report You’ll notice that I base my activation conversion rate off the number of “acquired” users versus total visitors. This is because I like to measure my activation rate (signup flow efficiency) independently from my acquisition rate (marketing efficiency). This way, if you get a surge of unanticipated PR traffic (like getting Digg’d or TechCrunch’d), unless these visitors truly intend to use your service (i.e., click your signup link), they will not affect your overall activation numbers. The weekly cohort report serves like a canary in a coal mine. If you find none of your numbers changing from week to week, you are simply spinning your wheels and not really making progress. A change in the numbers in a particular week lets you tie back those results to actions taken in that week. Be able to drill into your sub funnels. You should be able to drill into your detailed sub funnels and visualize all the steps, which is valuable for troubleshooting problems. Activation funnel Be able to go behind the numbers. At any given sub funnel event, you should be able to go behind the numbers and get to the list of people

How to Track Retention Retention measures repeated activity over a period of time. So the first step is to define what constitutes activity. Define an active user. There are many ways to define an active user. The most basic definition measures activity simply in terms of logins (i.e., does the user come back?). A more representative definition for tracking activity for product/market fit should measure not just usage but also “representative usage.” Every product has a core set of user actions that track ongoing representative usage. For example, writing blog posts is a key activity for a blogging platform. Also note that your key activity for activation may not be the same as your key activity for retention. A more advanced approach to measuring representative engagement comes from Dharmesh Shah, who coined the term “Customer Happiness Index,” or CHI. The idea is to use a formula to grade activity on a scale of 1 to 100 that is calculated using frequency, breadth, and depth of feature usage. At this stage, I recommend starting with the simplest formula. This formula should measure representative engagement that centers around your key activity. You can tweak the formula for your product over time to get a more graded CHI score that helps you segment your users into different buckets and focus your marketing, troubleshooting, and customer development activities.

Case Study: CloudFire The key activity in CloudFire that tracks ongoing usage is the sharing of content. I would start by simply defining an active user as someone who shares at least one photo album or movie during the trial period (30 days). A more advanced approach might be to calculate a Customer Happiness Index using a weighted formula similar to the following: CHI = [(Number of days logged in)/(Desired number of logins)*0.2 +

(At least one key activity) *0.8)] * 100 Then define an active user as someone with a CHI > 80. While this yields the same number of active users as before, it gives me a graded scale for segmenting my users by activity. Figure A-7 shows what four users with varying levels of activity over the trial period would look like.

Active users Visualize retention in your conversion dashboard. Now that you have a definition of an active user, you can visualize your conversion dashboard to show what percentage of users were active during your trial period (see Figure A-8). Figure A-8. Visualizing retention The retention rate is based on the number of “activated” users. Provide a detailed view. As with your other macro metrics, drilling into the retention macro should provide a detailed view. However, in this case, instead of showing a sub funnel, you would show the trending of your retention numbers over time (see Figure A-9). Figure A-9. Retention table Note You should ideally be able to change the time periods on both axes in Figure A-9, allowing you to visualize this report by day, week, or month.

Lean Start Up

How will early adopters spread this product ?

1. Do consumers recognize that they have the problem you are trying to solve?

2. If there was a solution, would they buy it?

3. Would they buy it from us?

4. Can we build a solution for that problem?

· Online surveying tool KISSinsights

Start with the creation of a simple hotline number using one of the new breed of low-cost and fast setup platforms such as Twilio. With a few hours’ work, they could add simple voice prompts, offering callers a menu of financial problems to choose from.

Instead of paying for expensive television or radio advertising to let people know about the service, use highly targeted advertising. Flyers on billboards, newspaper advertisements to those blocks, or specially targeted online ads would be a good start. Since the target area is so small, they could afford to pay a premium to create a high level of awareness in the target zone. The total cost would remain quite small.

The minimum viable product lacks many features that may prove essential later on.

A critical question to consider is whether customers will in fact sign up for the free trial given a certain number of promised features (the value hypothesis).

· Did something unexpectedly easy: he made a video

· “It drove hundreds of thousands of people to the website.

· In this case, the video was the minimum viable product.

· “We self-funded the company and released very cheap prototypes to test. What became Aardvark was the sixth prototype. Each prototype was a two to four week effort.

· : We invited one hundred to two hundred friends to try the prototypes and measured how many of them came back. The results were unambiguously negative until Aardvark.”

· “As we refined the product, we would bring in six to twelve people weekly to react to mockups, prototypes, or simulations that we were working on. It was a mix of existing users and people who never saw the product before. We had our engineers join for many of these sessions, both so that they could make modifications in real time, but also so we could all experience the pain of a user not knowing what to do.”

· As you consider building your own minimum viable product, let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek.

· Sooner or later, a successful startup will face competition from fast followers. A head start is rarely large enough to matter, and time spent in stealth mode – away from customers – is unlikely to provide a head start. The only way to win is to learn faster than anyone else.

· make a habit of asking startups whenever we meet: are you making your product better? They always say yes. Then I ask: how do you know?

a startup might prefer to build separate MVPs that are aimed at getting feedback on whether a company might perform a smoke test with its marketing materials. This is an old direct marketing technique in which customers are given the opportunity to preorder a product that has not yet been built. A smoke test measures only one thing: whether insufficient to validate an entire growth model. Nonetheless, it can be very useful to get feedback on this assumption before committing more money and other resources to the product.

To demonstrate validated learning, the design changes must improve the activation rate of new customers. If they do not, the new design should be judged a failure. This is an important rule: a good design is one that changes customer behavior for the better.

We tracked the “Funnel Metrics” behaviors that were critical to our engine of growth: customer registration, the download of our application, trial, repeat usage, and purchase.

Five dollars bought us a hundred clicks-every day. From a marketing point of view this was not very significant, but for learning it was priceless. Every single day we were able to measure our product’s performance with a brand new set of customers. Also, each time we revised the product, we got a brand new report card on how we were doing the very next day.

For example, one day we would debut a new marketing message aimed at first-time customers. The next day we might change the way new customers were initiated into the product. Other days, we would add new features, fix bugs, roll out a new visual design, or try a new layout for our website. Every time, we told ourselves we were making the product better, but that subjective confidence was put to the acid test of real numbers.

Day in and day out we were performing random trials. Each day was a new experiment. Each day’s customers were independent of those of the day before. Most important, even though our gross numbers were growing, it became clear that our funnel metrics were not changing. Is there a crowd trial site ?

The graph shows the conversion rates to IMVU of new customers who joined in each indicated month. Each conversion rate shows the percentage of customers who registered in that month who subsequently went on to take the indicated action.

This is the pattern: poor quantitative results force us to declare failure and create the motivation, context, and space for more qualitative research. These investigations produce new ideas – new hypotheses – to be tested, leading to a possible pivot. Each pivot unlocks new opportunities for further experimentation, and the cycle repeats. Each time we repeat this simple rhythm: establish the baseline, tune the engine, and make a decision to pivot or persevere.

· A split-test experiment is one in which different versions of a product are offered to customers at the same time. By observing the changes in behavior between the two groups, one can make inferences about the impact of the different variations.

BACKLOG

IN PROGRESS

BUILT

VALIDATED

Work on A begins. D and E are in development. F awaits validations.

BACKLOG

IN PROGRESS

BUILT

VALIDATED

F is validated. D and E await validation. G, H, I are new tasks to be undertaken. B and C are being built. A completes development.

BACKLOG

IN PROGRESS

BUILT

VALIDATED

H à

I à

G à

B à

C à

B and C have been built, but under Kanban, cannot be moved to the next bucket for validation until A, D, E have been validated. Work cannot begin on H and I until space opens up in the buckets ahead.

· Pretty soon everyone gets the hang of it. This progress occurs in fits and starts at first. Engineering may finish a big batch of work, followed by extensive testing and validation. As engineers look for ways to increase their productivity, they start to realize that if they include the validation exercise from the beginning, the whole team can be more productive.

For example, why build a new feature that is not part of the split-test experiment? It may save your time in the short turn, but it will take more time later to test, during the validation phase. The same logic applies to a story that an engineer doesn’t understand.

Under the old system, he or she would just build it and find out later what it was for. In the new system, that behavior is clearly counterproductive: without a clear hypothesis, how can a story ever be validated

Most important, teams working in this system begin to measure their productivity according to validated learning, not in terms of the production of new features

· Three A’s of metrics: Actionable, Accessible, and Auditable

Departments too often spend their energy learning how to use data to get what they want rather than as genuine feedback to guide their future actions.

There is an antidote to this misuse of data. First, make the reports as simple as possible so that everyone understands them. Remember the saying “Metrics are people, too.” The easiest way to make reports comprehensible is to use tangible, concrete units. What is a website hit? Nobody is really sure, but everyone knows what a person visiting the website is: one can practically picture those people sitting at their computers.

This is why cohort-based reports are the gold standard of learning metrics: they turn complex actions into people-based reports. Each cohort analysis says: among the people who used our product in this period, here’s how many of them exhibited each of the behaviors we care about. In the IMVU example, we saw four behaviors: downloading the product, logging into the product from one’s computer, engaging in a chat with other customers, and upgrading to the paid version of the product. In other words, the report deals with people and their actions, which are far more useful than piles of data points

It is only because David focused on actionable metrics for each of his leap-of-faith questions that he was able to accept that his company was failing.

· a startup’s runway is the number of pivots it can still make

· Measuring the runway through the lens of pivots rather than that of time suggests another way to extend that runway: get to each pivot faster. In other words, the startup has to find ways to achieve the same amount of validated learning at lower cost or in a shorter time.

· a virtual trading account and build a portfolio that was based on real market data without having to invest real money. The idea was to identify diamonds in the rough: amateur traders who lacked the resources to become fund managers but who possessed market insight. Amateur entrepreneurs ? stock traders ?

· This is also common with pivots; it is not necessary to throw out everything that came before and start over. Instead, it’s about repurposing what has been built and what has been learned to find a more positive direction.

The kind of pivot we needed is called a customer segment pivot. In this pivot, the company realizes that the product it’s building solves a real problem for real customers but that they are not the customers it originally planned to serve. In other words, the product hypothesis is confirmed only partially.

· : Just as lean manufacturing has pursued a just-in-just approach to building products, reducing the need for in-process inventory, Lean Startups practice just-in-time scalability, conducting product experiments without making massive up-front investments in planning and design.

· The biggest advantage of working in small batches is that quality problems can be identified much sooner. This is the origin of Toyota’s famous andon cord, which allows any worker to ask for help as soon as they notice any problem, such as a defect in a physical part, stopping the entire production line if it cannot be corrected immediately. This is another very counterintuitive practice. An assembly line works best when it is functioning smoothly, rolling car after car off the end of the line. The andon cord can interrupt this careful flow as the line is halted repeatedly. However, the benefits of finding and fixing problems faster outweigh this cost. This process of continuously driving out defects has been a win-win for Toyota and its customers. It is the root cause of Toyota’s historic high quality ratings and low costs.

· Instead of working in separate departments, engineers and designers would work together side by side on one feature at a time. Whenever that feature was ready to be tested with customers, they immediately would release a new version of the product, which would go live on our website for a relatively small number of people. The team would be able immediately to assess the impact of their work, evaluate its effect on customers, and decide what to do next. For tiny changes, the whole process might be repeated several times per day.

· This is not the way the Lean Startup model works, because customers often don’t know what they want. Our goal in building products is to be able to run experiments that will help us learn how to build a sustainable business. Thus, the right way to think about the product development process in a Lean Startup is that it is responding to pull requests in the form of experiments that need to be run.

· Remember that although we write the feedback loop as Build-Measure-Learn because the activities happen in that order, our planning really works in the reverse order: we figure out what we need to learn and then work backwards to see what product will work as an experiment to get that learning. Thus, it is not the customer, but rather our hypothesis about the customer, that pulls work from product development and other functions. Any other work is waste.

· : Sustainable growth is characterized by one simple rule: New customers come from the actions of past customers

1. As a side effect of product usage: Fashion or status, such as luxury goods products, drive awareness of themselves whenever they are used. “Startups don’t starve; they drown.” There are always a zillion new ideas about how to make the product better floating around, but the hard truth is that most of those ideas make a difference only at the margins. They are mere optimisations

· The Hotmail team. Everything changed when they made one small tweak to the product. They added to the bottom of every single email the message “P.S. Get your free email at Hotmail” along with a clickable link.

· The viral engine is powered by a feedback loop that can be quantified. It is called the viral loop, and its speed is determined by a single mathematical term called the viral coefficient, the higher this coefficient is, the faster the product will spread.

· For a product with a viral coefficient of 0.1, one in every ten customers will recruit one of his or her friends. This is not a sustainable loop. Imagine that one hundred customers sign up. They will cause ten friends to sign up. Those ten friends will cause one additional person to sign up, but there the loop will fizzle out.

By contrast, a viral loop with a coefficient that is greater than 1.0 will grow exponentially, because each person who signs up will bring, on average, more than one other person with him or her.

· Companies that rely on the viral engine of growth must focus on increasing the viral coefficient more than anything else, because even tiny changes in this number will cause dramatic change in their future prospects.

· Lifetime value (LTV)

· Suppose an advertisement costs $100 and causes fifty new customers to sign up for the service. This ad has a cost per acquisition (CPA) of $2.00. In this example, if the product has an LTV that is greater than $2, the product will grow. The margin between the LTV and the CPA determines how fast the paid engine of growth will turn (this is called the marginal profit).

· This is one of the most important discoveries of the lean manufacturing movement: you cannot trade quality for time. If you are causing (or missing) quality problems now, the resulting defects will slow you down later. Defects cause a lot of rework, low morale, and customer complaints, all of which slow progress and eat away at valuable resources.

· THE WISDOM OF THE FIVE WHYS

· At the root of every seemingly technical problem is a human problem. Five Whys provides an opportunity to discover what that human problem might be. Taiichi Ohno gives the following example:

When confronted with a problem, have you ever stopped and asked why five times? It is difficult to do even though it sounds easy. For example, suppose a machine stopped functioning:

1. Why did the machine stop? (There was an overload and the fuse blew)

2. Why was there an overload? (The bearing was not sufficient lubricated)

3. Why was it not lubricated sufficiently? (The lubrication pump was not pumping sufficiently)

4. Why was it not pumping sufficiently? (The shaft of the pump was worn and rattling.)

5. Why was the shaft worn out? (There was no strainer attached and metal scrap got in.)

Repeating “why” five times, like this, can help uncover the root problem and correct it. If this procedure were not carried through, one might simply replace the fuse or the pump shaft. In that case, the problem would recur within a few months.

Exponential Organizations

https://www.amazon.in/Exponential-Organizations-Better-Faster-Cheaper/dp/1626814236/ref=sr_1_1?crid=2TIJOMOLCATFO&keywords=exponential+organisations&qid=1701539042&s=books&sprefix=exponential+%2Cstripbooks%2C171&sr=1-1

· Abundance: The future is better than you Think (co-authored with Steven Kotler)

· The Virtual Corporation (with Bill Davidow) and the Protean Organization.

· 6D’s: Digitized, Deceptive, Disruptive, Dematerialize, Demonetize and Democratize.

Any Technology that becomes Digitized (our first “D”) enters a period of Deceptive growth. During the early period of exponentials, the doubling of small numbers(0.01, 0.02, 0.04, 0.08) all basically looks like zero. But once it hits the knee of the curve, you are only ten doublings away from 1000x, twenty doublings get you to 1,000,000x, and thirty doublings get you a 1,000,000,000x increase.

Such a rapid rise describes the third D, Disruptive. And, as you shall see in the pages of this book, once a technology becomes disruptive it dematerializes,which means that you no longer physically carry around a GPS , video camera or flashlight. All of them have dematerialized as apps onto your smartphone. And once that happens, the product or service Demonetize. This, Uber is demonetizing taxi fleets and Craigslist demonetized the classified ads (taking down a flock of newspapers in the process.)

The final step to all this is Democratization. Thirty years ago if you wanted to reach a billion people, you needed to be Coca-Cola or GE, with employees in one hundred countries. Today you can be a kid in a garage who uploads an app onto a few key platforms. Your ability to touch humanity has been democratized.

· The driver fuelling this phenomenon is information. Once any domain, discipline, technology or industry becomes information-enabled and powered by information flows, its price/performance begins doubling approximately annually.

· Futurist Paul Saffo

· Because mobile phones in the early 80s were bulky and expensive to use, renowned consulting firm McKinsey & Company advised AT&T not to enter the mobile telephone business, predicting there would be fewer than one million cellular phones in use by 2000. In fact, by 2000, there were one hundred million mobile phones.

· 1 percent doubling seven times is 100 percent.

· The marginal cost of taking an extra photograph didn’t just diminish, as it would with a linear improvement in the technology; instead, it essentially sank to zero. It didn’t matter if you took five pictures or five hundred. The cost was the same.

· Once you had them in the form of image recognition, artificial intelligence, social technologies, filtering, editing, and machine learning. Now anyone with minimal training could become a “darkroom wizard”

· Multiple directions: cameras, film, processing, distribution, retailing, marketing, packaging, storage and, ultimately and most decisively, a radical change in the perceptions of the marketplace.

That is the very definition of a paradigm shift.

A fundamental change in the role of information: semiconductor chips assuming the role of image capture , display, storage and controller; the Internet transforming supply, distribution and retail channels; and social network and groupware reorganizing institutions. Together, all indications are that we are shifting to an information-based paradigm.

The Singularity is Near : When Humans Transcend Biology.

Will be able to afford 3D printers to fabricate toys, cutlery, tools and fittings

Doblin Group, a noted innovation strategy consulting firm

· Skybox, Planet Labs, Nanosatisfi and Satellogic- are all launching nanosatellites

· Rather than owning assets or workforces and incrementally seeing a return on those assets, ExOs leverage external resources to achieve their objectives.

· Two key factors enabled Waze to succeed

· Access resources you don’t own

· Information is your greatest asset. More reliably than any other asset, information has the potential to double regularly. Rather than simply assembling assets, the key to success is accessing valuable caches of existing information.

· Quirky : “Make invention accessible”

· The most important outcome of a proper MTP is that it generates a cultural movement-what John Hagel and John Seely Brown call the “Power of Pull”. That is, the MTP is so inspirational that a community forms around the ExO and spontaneously begins operating on its own, ultimately creating its own community, tribe and culture.

· The biggest imperative of a worthy MTP is its Purpose.

· SCALE:

o Staff on Demand

o Community & Crowd

o Algorithms

o Leveraged Assets

o Engagement

· Staff On Demand

· Book, The Startup of You, LinkedIn Founder Reid Hoffman

· Staff-on-demand initiatives similar to Gigwalk are springing up everywhere: oDesk, Roamler, Elance, TaskRabbit and Amazon’s venerable Mechanical Turk are platforms where all levels of work, including highly skilled labor, can be outsourced.

· Data science company Kaggle.

· Community & Crowd

· “If you build communities and you do things in public,” he says, “you don’t have to find the right people, they find you.”

· Throughout human history, communities started off as geographically based (tribes), became ideological (e.g. religions) and then transitioned into civic administrations (monarchies and nation-states). Today, however, the Internet is producing trait-based communities that share intent, belief, resources, preferences, needs, risks and other characteristics, none of which depend on physical proximity.

· For an organization or enterprise, its “community” is made up of core team members, alumni(former team members), partners, vendors, customers, users and fans.

· Typically, there are three steps to building a community around an ExO:

o Use the MTP to attract and engage early members.

o Pg.# 65: Nurture the community. Anderson spends three hours every morning attending the DIY Drones Community.

o Create a platform to automate peer to peer engagement.

· Crowd

· Staff on Demand is hired for a particular task and usually via a platform like Elance.

· Creativity, innovation and the overall process of generating, developing, and communicating new ideas can be accomplished through the use of tools and platforms. Some platforms that aid this process include IdeaScale, eYeka, Spigit, InnoCentive, SolutionXchange, Crowdtap and Brightidea.

· Validation is achieved by obtaining measurable evidence that an experiment, product or service succeeds in meeting predetermined specifications. Tools such as UserVoice, Unbounce and Google AdWords can accomplish this.

· Gustin, a premium designer jeans company, uses crowdfunding for all of its designs. Customers back specific designs, and when a predetermined monetary goal has been reached, the products are created and shipped to all backers. Gustin thus has no product risk or inventory costs.

· ExOs are leveraging community and crowd for many functions traditionally handled inside the enterprise, including idea generation, funding, design, distribution, marketing and sales. This shift is powerful and taps into what university professor and social media guru Clay Shirky calls cognitive surplus.

· Algorithms

· There is even a marketplace called Algorithmia, where companies are matched with algorithms that can potentially make sense of their data.

· Machine Learning.

· Key open source examples include Hadoop and Cloudera.

· Deep Learning

· Leading startups in this space are DeepMind, bought by google in early 2014 for $500 million, back when Deep Mind had just thirteen employees, and Vicarious.

· Founded in 2004, Palantir builds government, commercial and health software solutions that empower organizations to make sense of disparate data.

· Leveraged Assets

· The ability to lease on-demand computing that would scale on a variable cost basis utterly changed the IT industry.

· In the same way that gyms use a membership model to aggregate expensive exercise machinery that few could afford to have at home, TechShop collects expensive manufacturing machinery

· If you own a car, it sits empty about 93 percent of the time

· Rachel Botsman and Roo Rogers in their book, What’s Mine is Yours: The Rise of Collaborative Consumption

· Engagement

· Engagement consists of digital reputation systems, games and incentive prizes, and provides the opportunity for faster growth due to more innovative ideas and customer and community loyalty.

· 11 Rules for Creating Value in the Social Era: Nilofer Merchant

· Eye Wire illustrates how an ExO can apply game elements and mechanics in non-game products and services to create a fun and engaging experience, converting users into loyal players- and in the process accomplish extraordinary things.

· To be successful, every Gamification initiative should leverage the following game techniques:

1. Dynamics: motivate behavior through scenarios, rule and progression

2. Mechanics: help achieve goals through teams, competitions, rewards and feedback

3. Components: track progress through quests , points levels badges and collections

· To increase awareness of the issues , Pep Boys implemented a platform called Axonify, which used a quiz to educate employees about specific incidents .

· The Gamification company provides a list with more than ninety examples including Badgeville, Bunchball, Dopamine and Comarch. Organizations can also use work.com(a Salesforce company)in which gamification is fully integrated, or Keas, which was specially created to improve employee wellness.

· INTERFACES : Interfaces are filtering and matching processes by which ExOs bridge from SCALE externalities to internal IDEAS control frameworks .

· Quirky has had to develop special processes and mechanisms to manage , rank, filter and engage .

· In response , Many ExOs are adopting the Objectives and key Result ( OKR), OKRs as the answer to two simple question

1. Where do I want to go? (Objectives)

2. How will I know I’m getting there?(Key Result to ensure progress is made)

· An Objective, for example, might be to “Increase sales by 25 percent, “along with “Form two Strategic partnership “ and “ Run Adwords campaign” as the desired key result. OKRs are about focus, simplicity, short(er) feedback cycle, and openness. As a result, insight and improvements are easier to see .

· Some Characteristics of OKRs:

1. KPI’s are determined top-down, while OKRs are determined bottom-up.

2. Objectives are the dream; Key results are the success criteria (i. e a way to measure incremental progress toward the objective.)

3. Objectives are qualitative and Key results are quantitative .OKRs are not the same as employee evaluation . OKrs are about the company’s goal Performance evaluations – which are entirely about evaluating how an employee performed in a given period are independent of OKRs.

4. Objectives are ambitious and should feel uncomfortable .

[ In general, upto five objectives and four key result per initiative are optimal, and key result should see and achievement rate of 60 to 70 percent ; if they don’t the base has been set too low.]

· Scientific results in neuroscience, gamification and behavioral economics have shown the importance of both specificity and frequent feedback in driving behavioral change and ultimately , having an impact . Specificity and rapid feedback cycle energize, motivate and drive company morale and culture. As a result , a number of services, including OKR Hub, Cascade, Teamly and 7 Geese, have been formed to help businesses track these measures .

· At Google, for example , all OKRs are completely transparent and public within the company.

· Large numbers of bottom-up ideas ,properly filtered , always trump top-down thinking , no matter the industry or organization.

· The Lean startup philosophy (also known as the Lean Launchpad) is in turn based upon Toyota’s “ Lean Manufacturing “Principle, first established a half – century ago ,in which the elimination of wasteful processes is paramount .(Sample Principle: “Eliminate all expenses with any goal other than the creation of value for the end customer.”

· Steve Blank’s Book, The Four Steps to the Epiphany,

· The most important message of the Lean Startup movement is to “ Fail fast and fail often, while eliminating waste .” Its approach can be summarized as a new , scientific, data-driven, interactive , and highly customer-driven approach to practical innovation .

· The traditional waterfall approach to product development is a linear process ( Most often referred to as NDP , for New Product Development is a linear process (most often referred to as NDP, for new product development )that uses sequential steps such as idea generation ,screening ,product design , development and commercialization. This process not only burns up a great deal of precious time but more importantly increasingly results in new products that don’t fit—Or , because the market is changing so quickly , no longer fit —the needs of the customer , culminating in a product no one wants.

· “Knowledge gives you a little bit of an edge, but tinkering ( trial and error) is the equivalent of 1000, IQ points. It is tinkering that allowed the Industrial Revolution. “

· The Modern rule of competition is whoever learns fastest, wins.”

· Procter & Gamble Heroic Failure award honors the employee or team with the biggest failure that delivered the greatest insight. Similarly , Tata offers an annual Dare To Try award, which recognizes the manager who took the biggest risk.

· There are some limitations to the Lean Startup approach, including lack of competitor analysis or consideration in design thinking ,Also it is important to note that the ability to fails is much easier in software and information based environments because iteration is so much easier, for a hardware company, it’s much harder to iterate. Apple launches hardware only when it’s perfect. You wouldn’t want to iterate and fail fast when building a nuclear reactor.

· AUTONOMY

· Holacracy (a concept as well as the company’s name )is defined as a social technology and or system of organizational governance , in which authority and decision making are distributed via fractal , self organizing terms rather than being vested at the top of a hierarchy. The system combines Experimentation , OKRs Openness, transparency and Autonomy.

· “ There are still hierarchies in a network, but the hierarchies tend to be competence-based hierarchies, relying more on peer accountability than on authority-based accountability — that is , accountability to someone who knows something , rather than to someone simply because they occupy a position, regardless of competence. It is a change in the role of the manager, not an abolition of the function.”

· SOCIAL TECHNOLOGIES “ Transparency is the new currency. Trust is the bill we’ll just be paying for.” Priestley’s equation for social business is : Connections + Engagement + Trust+Transparency.”

· Asana, a software company founded by Dustin Moskovitz (a co-founder of Facebook) and Justin Rosenstein. Improve work productivity .

· Linear Attributes:

Linear Organization characteristics	Exo characteristics
Top-down and hierarchical in its organization	Autonomy, Social Technologies
Driven by Financial outcomes	MTP dashboard
Linear, Sequential thinking	Experimentation, autonomy
Innovation primarily from within	Community & Crowd , Staff on demand , Leveraged Assets, Interfaces (innovation at the edges )
Strategic planning largely an extrapolation from the past	MTP, Experimentation
Risk intolerance	Experimentation
Process inflexibility	Autonomy Experimentation
Large numbers of FTE’s	Algorithms , Community & Crowd , staff on demand
Controls/Owns its own assets	Leveraged Assets
Strongly invested is status quo	MTP Dashboard, Experimentation

· The key question for any organization is not whether you “look” like an Exponential Organization, But ”How Exponential are you?

· Today, Hollywood operates in exactly the same loosely coupled , networked environment of an ExO ecosystem. Each participant, From the writer and actor , to the director and camera grip, manages his or her own career. Meanwhile , agents at every level help find and connect script with talent , Production companies and equipment. These days when a film is created, a team of independent entities come together for the duration of the production , operating on 24/7 schedules and in close collaboration. Once the film is finished, sets are broken down for reuse , equipment is reassigned and all the actors, grip and production assistants disband and scatter to pursue their next project, which often starts the very next day.

· Information Accelerates Everything

· Mobile networks (5G)sporting speeds of five gigabits per second .

· Many products are now launched early—unfinished and in perpetual beta—for the sole purpose of gathering data from users as early as possible to determine how to “finish’ the Product .

· As LinkedIn founder Reid Hoffman has said “If you’re not embarrassed by the product when you launch , you’ve launched too late.”

· Notes that whenever he gets stuck on a robot configuration or sensor problem, he posts a question online before he goes to bed, waking the next morning to find answers from tens of thousands of robot enthusiasts.

· Every industry is becoming information based either by being digitized or by using information to identify under – utilized assets (e.g, Collaborative consumptions).

· As technology brings us a world of abundance, access will triumph over ownership. By comparison, scarcity of supply or resources tends to keep cost high and stimulates ownership over access.

Many established companies still consider transparency to be the height of progressive business thinking. But the truth is that the five-year strategic plan is itself an obsolete instrument .In fact, rather than offering a competitive advantage, it is often a drag on operations, as has been well documented in the seminal book by Henry Mintzberg, Rise and Fall of Strategic Planning .

A five-year plan is a suicidal practice for an ExO. If it doesn’t send the company racing off in the wrong direction, it can present an inaccurate picture of what lies ahead., even in the right direction, The only solution is to establish a big vision (i.e., an MTP), set an ExO structure into place, implement a one year plan (at most) and watch it all scale while course –correcting in real time .

The answer to the question of how big an Exponential Organization can get yields yet another, more precise, question: How quickly can you convert exponential growth into the critical mass needed to become a platform? Once that happens there is no practical limit. It’s one big coral reef.

Importantly, the platform must be symbiotic to serve the feeders as well.

Organization can rent staff on demand from Gigwalk .

Much of this movement has grown out of the realization that the ownership of assets, even if mission-critical, is better handled by experts .

Focus on those areas in which you are really outperforming. This not only maximizes profit, but in a world with pervasive digital reputational systems , also set your image at the highest possible level .

There are five key precepts to Zappos that drive culture across the organization:

1. Vision: What you’re doing

2. Purpose : why you do it

3. Business model:What will fuel you as you’re doing it

4. Wow and uniqueness factors: what sets you apart from others .

5. Values : What matters to you

Teamly, which combines project management, OKRs and performance reviews with the power of an internal social network .

At Facebook, however, development teams enjoy the full trust of management. Any team can release new code onto the live site without oversight .As a management style, it seems counterintuitive, but with individual reputation at stake-and no one else to catch shoddy coding –Facebook teams end up working that much harder to ensure there are no errors. The result is that Facebook has been able to release code of unimaginable complexity faster than any other company in Silicon Valley history. In the process, it has seriously raised the bar.

everything is measurable and anything is knowable

Welcome to the sensor revolution.

Starting An Exo

Local Motors is a good example of an ExO startup.

Open sources with a Creative Commons license .

Technology Risk

PCH has aggressively turned his company into a platform on which anyone can launch hardware start-ups. To the extent that an individual wants to create the equivalent of an APP store for hardware startups, to the extent that an individual wants to create the equivalent of an App Store for Hardware startup. Brady Forrest, head of Highway1, a PCH incubator puts it simply: “We want hardware to be as easy as software.”

Startups could test the market like never before by leveraging A/B testing, Google AdWords campaigns, Social media and landing pages. Now an idea could be partially validated before product engineering even began

Select An Mtp (Massive Transformative Purpose)

Don’t just ask what the world needs. Ask what makes you come alive and go do it . what the world needs is people who have come alive.”

Step 2: Joint Or Create Relevant Mtp Communities

If you think your problem space doesn’t have community support , take a look at www.meetup.com. Meetup’s mission is both to revitalize local communities and to help people around the world organize.

The Innovator’s DNA : Mastering the five Skills of Disruptive Innovators. Co-author Clayton Christensen

Remember, the three key success factors for an ExO, idea are

1. First, a minimum 10x improvement over the status quo.

2. Second, leveraging information to radically cut the cost of marginal supply (i.e., the cost to expand the supply side of the business should be minimal).

3. Third, the idea should pass the “toothbrush test” originated by Larry Page: Does the idea solve a real customer problem or use case on a Frequent basis? It is something so useful that a user would go back to it several times a day?

“The day before a major breakthrough, it is just a crazy idea.”

The following eight ways to build a business model when the underlying information is free:

1. Immediacy : Immediacy is the reason people order In advance on Amazon or attend the theater on opening night. Being the first to know about or experience something has intrinsic cultural, social and even commercial value. In short: time confers privilege

2. Personalization: Having a product or service customized just for you not only gives added value in terms of quality or experience and ease-of-use or functionality, it also creates “ stickiness.” As both parties are invested in the process .

3. Interpretation : Even if the product or service is free there is still considerable added value to any service that can help shorten the learning curve to using it- or using it better . Kelly often jokes: “Software: free; the manual :$10,000.”

4. Authenticity : Added value comes from guarantee that the product or service is real and safe that it is , in Kelly’s words” bug free, reliable and warranted .”

5. Accessibility : Ownership requires management and maintenance. In an era where we own hundreds of apps on several platforms, any service that helps us organize everything and improve our ability to find what we need quickly is of particular value .

6. Embodiment : Digital information has no “ body” , no physical form, until we give it one—-high definition, 3D, a movie screen, a smartphone. We willingly pay more to have free software delivered to us in the physical format we prefer.

7. Patronage: “It is my belief that audiences want to pay creators.” Kelly wrote. “Fans like to reward artists, musicians, authors and the like with tokens of their appreciation, because it allows them to connect. But they will only pay if it is very easy to do , the amount is reasonable, and they feel certain the money will directly benefit the creators.” He adds that another benefit of a simple payment process is that it capitalizes on users’ impulsiveness. Examples include iTunes songs and Spotify, as well as Netflix subscription. Customers choose to pay for each of these services even though the same content can be acquired through piracy.

8. Findability : A creative work has no value unless its potential audience can find it. Such “findability” only exists at the aggregator level, as individual creators typically get lost in the noise. Thus, attaching yourself to effective channels and digital platforms like a app stores, social media sites or online marketplace where potential users can find you has considerable value to creators (and, Ultimately, to users)

Major disruption in business models as either unbundling or rebounding For example, let’s look at the financial services industry, A classic bank offers many services such as payment infrastructure ,trust, mobile and social wallets, e-commerce and m-commerce solution , lending ,investment, stocks etc. it’s a consolidated or aggregated offering of different individual financial services . Those banks are now being disrupted by a variety of financial startups, including square, clinkle, stripe, Lending Club, Kickstarter, e Toro and Estimize. We consider this fragmentation of individual financial services a form of unbundling .

Now, what if all these startups decided to cooperate or merge within the next five years? What if they agreed to create alliances via open APIs? What if they partnered and rebundled? You’d end up with a completely new bank with at least 10x less overhead than that of its predecessors, as the new entity would require less real estate and fewer employees.

Acquisition : How do users locate you? (Growth metric)

· Activation : Do users have a great first experience? (value Metric)

· Retention : Do users come back? (Value metric)

· Revenue : How do you make money ? (value metric)

· Referral : do users tell others ? (Growth metric)

The following is a guide to implementing ExO attributes into a startup

1. MTP: formulate an MTP in a particular problem space, one that all founders feel passionate about .

2. Staff on Demand : Use contractors, SoD Platforms wherever possible; keep FTEs to a minimum.

3. Community & Crowd : Validated idea in MTP communities.

Get product feedback.

Find co-founders, contractors and experts .

Use crowdfunding and crowdsourcing to validate market demand and as a marketing technique .

4. Algorithms : Identify data streams that can be automated and help with product development, implement cloud-based and open source machines and deep learning to increase insights.

5. Leveraged Assets: Do Not acquire assets.

Use cloud computing, Techshop for product development. Use incubators like Y combinator and Techstars for office, funding, mentoring and peer input. Starbucks as an office .

6. Engagement : Design product with engagement in mind and gather all user interaction. Gamify where possible .

Create a digital reputational system of users and suppliers to build trust and community . Use incentive prizes to engage crowds and create buzz.

7. Interfaces: Design custom processes for managing SCALE; do not automate until you’re ready to scale.

8. Dashboards: Set up OKR and value, serendipity, and growth matric dashboard; do not implement value metric until product finalized (see Step 10)

9. Experimentation : Established culture of Experimentation and constant iteration. Be willing to fail and pivot as needed .

10. Autonomy: Implement lite version of Holacracy. Start with the General company Circle as a first step; then move onto governance meetings. implement the GitHub technical and organizational model with radical openness, transparency and permission.

11. Social Technologies : Implement file sharing, Cloud based document management. Collaboration and activity streams both internally and within your community.

Make a plan to test and implement telepresence, virtual worlds and emotional sensing .

· Establishing a corporate culture starts with learning how to effectively track, manage and reward performance. And that begins with designing the OKR system we outlined in chapter Four, and then continuing through the process of getting the team habituated to transparency, accountability, execution and high performance.

· Ask key questions Periodically

1. Who is your customer?

2. Which customer problem are you solving?

3. What is your solution and does it improve the status quo by at least 10x?

4. How will you market the product or services ?

5. How are you selling the product and service ?

6. How do you turn customers in to advocate using viral effect and net promoter Scores to drive down the marginal cost of demand ?

7. How will you scale your customer segment ?

8. How will you drive the marginal cost of supply towards zero?

“ An invention needs to make sense in the world in which it is finished, not the world in which it is Started.”

It is about understanding the evolutionary trajectory of technology. That is, which functionalities and capacities will become feasible in two or three years given the pace of Moore’s Law? When you develop a product with the near future in mind instead of the present, it greatly increases your chances of success.

· Building and maintaining a Platform

1. Identify a pain point or use case for a consumer.

2. Identify a core value unit or social object in any interaction between a producer and consumer. This could be anything. Pictures, jokes, advice. Reviewing information about sharing rooms, tools and car-rides are examples of things that have led to a successful platform . Remember that many people will be both producers and consumers, and use this to your advantage.

3. Design a way to facilitate that interaction. Then see if you can build it as a small prototype that you can curate yourself. If it works at that level, it will be worth taking to the next level and scaling .

4. Determine how to build a network around your interaction. Find a way to turn your platform user into an ambassador. Before you know it, you’ll be on a roll.

· To implement platforms, ExOs follow four steps in terms of data and APIs:

1. Gather : The algorithmic process starts with harnessing data, which is gathered via sensors, people, or imported from public datasets.

2. Organize : Once the data is accessible. Algorithms such as machine or deep learning extract insights, identify trends and tune new algorithms. These are realized via tools such as Hadoop and Pivotal, Or even (open source)deep learning algorithms like Deep Mind or Skymind.

3. Expose: The final step is exposing the data in the form of an open platform . open data and APIs can be used such that an Exos community develops valuable services, new functionalities and innovation layered on top of the platform by remixing published data with their own. Examples of companies that have successfully exposed their data this way are the Ford company , Uber, IBM Watson, Twitter and facebook .

C2C

To engaged the community, Bla bla Car relies on its own digital reputation system , a framework it refers to as D.R.E.A.M.S (Declared Rated, Engaged, Activity Based, Moderated and Social) [Engagement], which is outlined below

1. Declared : Trusted Online profile, providing more information about users.

2. Ratings: Collaborative service asks users to rate one another after having met ‘ In real life,” enabling people to build good online reputation .

3. Engagement : If members are to feel completely comfortable transaction with one another they must believe other parties will honor financial commitments.

4. Activity-Based: Offer contextually relevant and real-time information to both buyer and supplier ensuring that the transaction progresses smoothly,from initial interest through to payment .

5. Moderation: All payment information transferred by users of a sharing service must be third party verified.

6. Social: Allow users to connect their online identity with their real world identity, be it socially, via Facebook, or professionally via LinkedIn .

When a Developer submits code to a GitHub project , that code is reviewed and commented upon by other developers, who also rate that developer. Github’s coding environment has instant messaging embedded within it, along with a distributed version control system ( instead of a central code repository). In practice, what that means is you don’t need a server; you have everything you need locally, and can start coding without first needing to get permission, And you can do so anywhere, even offline.

Coyote Logistics

For recruiting, the company prefers to hire young college graduates who show passion, attitude and personality, and who are completely new to the logistics industry .

A data –driven selection management solution created by Hireology and in 2012 hired 400 of 10,000 candidates using hireology’s platform. New employees receive extensive training and are informed of apprenticeship possibilities.

The primary mechanism used by Zynga to manage growth without diluting its culture was the formal application of objectives and Key Result (OKRs) to track terms and keep everyone synchronized.

Most acquisition fail because the mother company intentionally slow the newly acquired operation in order to better understand it, adapt its internal operation to the new order,

Achieve integration synergies and inculcate new employees into the company culture.

It is an understandable impulse, but one that almost always confuses and frustrates the new team. resulting in what Goldberg calls “ impedance mismatch.” That is, the newly arrived team has a sense of being stuck at the starting gate—feeling forgotten, ignored or punished-a situation that often leads key people to depart the company.

If you are relying on innovation solely from within your company, you’re dead”

Partner With, Invest In Or Acquire Exos

Recommendation; implement a program to identify, partner with, invest in or acquire the ExO in your industry. Give it teeth.

Inspire Exos At The Edge

John Hagel, Co-chairman of the aptly named Center for the Edge.

Move three proven Changemakers in your enterprise to the edges of the organization and unleash them as ExOs to disrupt other markets. Learn how they interact with the mother ship, and then add more .

Mach49

Are implementing several ExO principles to help global companies create new, “adjacent” businesses generated from within their organization. They intend to offer facilities, Valley networks and a seasoned team of executives familiar with both the corporate and startup worlds to jumpstart new corporate businesses – and to do so by leveraging resources that the corporation itself does not (and perhaps cannot) own.

H-Farm (Treviso, Italy)

ExO-oriented incubators are springing up in countries all over the world: Communitech and OneEleven in Ontario; SocialLab, with several offices throughout South America; Start-up Chile, in Santiago; and Thinkubator , which is headquartered in Copenhagen. Google has been especially busy, partnering with Startup Weekend and women 2.0 in the U.S, iHub in Kenya and Le Camping in France.

Our belief that large organizations can create successful partnerships with local, grassroots business accelerators. Business integration partners (BIP), a global consulting firm based in Italy, even has a “Corporate Accelerator in a Box” service. BIP has helped several blue-chip clients set up their own operation with recruiting, VC connection and university partnership. This service comes complete with process management and software to help run incentive competition and manage open source projects.

Algorithms

Smart companies are already using services such as Kaggle, Cloudera, Data Torrent, Splunk and Platfora for data insight; they’re also using an open source machine learning variation of Apache Hadoop.

Zara bucked the trend of trying to achieve success via economies of scale and instead focused on small, unique batches and nearly real-time production processes. For example, almost half of Zara’s garments are manufactured centrally, a decision that allows it to move from new design to distribution in less than two weeks.

80 percent of Fortune 500 companies have deployed social software such as Yammer.

The company also Opened a makerspace in Chicago called GE Garages, which is powered by TechShop and works in partnership with Skillshare, Quirky, Make and Inventables.

Amazon. If you’re a manager at Amazon and a subordinate comes to you with a great idea, your default answer must be YES. If you want to say no, you are required to write a two-page thesis explaining why it’s a bad idea. In other words, Amazon has increased the friction entailed in saying no, resulting in more ideas being tested (and hence implemented) throughout the company.

GVs Startup Lab, a private program that is part incubator, part hackathon and part co-working space.

AngelList , a Craigslist-like marketplace that matches entrepreneurs and angel investors.

Book age of Context: Mobile sensor Data and the Future of Privacy.

Automate and measure different processes in all departments

Using free code/algorithms optimized within the GitHub or Gitlab social platforms and the vast data available, classic throughput or process-based models will be substituted by performance-based models (e.g, cost per sale)

Vendor Relationship management

Extension of intention economy- the age of CRM is over, replaced by vendor Relationship management (VRM), a term coined by Doc Searls from Harvard University. VRM is an extension of the intention economy, and VRMs offer the ultimate in customer-driven. marketplace (e.g., Uber, BlaBla car).consumer own their own personal data and expose demand and purchasing intention with different vendors in the cloud, mostly in real time. CRM is initiated by companies, VRM by customers.

www.exponentialorgs.com

Pg.# 9: Abundance: The future is better than you Think (co-authored with Steven Kotler)
Pg.# 9: The Virtual Corporation (with Bill Davidow) and the Protean Organization.
Pg.# 10: 6D’s: Digitized, Deceptive, Disruptive, Dematerialize, Demonetize and Democratize.

Pg.# 19: The driver fuelling this phenomenon is information. Once any domain, discipline, technology or industry becomes information-enabled and powered by information flows, its price/performance begins doubling approximately annually.
Pg.# 21: Futurist Paul Saffo
Pg.# 25: Because mobile phones in the early 80s were bulky and expensive to use, renowned consulting firm McKinsey & Company advised AT&T not to enter the mobile telephone business, predicting there would be fewer than one million cellular phones in use by 2000. In fact, by 2000, there were one hundred million mobile phones.
Pg.# 27: 1 percent doubling seven times is 100 percent.
Pg.# 28: The marginal cost of taking an extra photograph didn’t just diminish, as it would with a linear improvement in the technology; instead, it essentially sank to zero. It didn’t matter if you took five pictures or five hundred. The cost was the same.
Pg.# 28: Once you had them in the form of image recognition, artificial intelligence, social technologies, filtering, editing, and machine learning. Now anyone with minimal training could become a “darkroom wizard”
Pg.# 29: Multiple directions: cameras, film, processing, distribution, retailing, marketing, packaging, storage and, ultimately and most decisively, a radical change in the perceptions of the marketplace.

That is the very definition of a paradigm shift.

The Singularity is Near : When Humans Transcend Biology.

Will be able to afford 3D printers to fabricate toys, cutlery, tools and fittings

Doblin Group, a noted innovation strategy consulting firm

Pg.# 34: Skybox, Planet Labs, Nanosatisfi and Satellogic- are all launching nanosatellites
Pg.# 45: Rather than owning assets or workforces and incrementally seeing a return on those assets, ExOs leverage external resources to achieve their objectives.
Pg.# 47: Two key factors enabled Waze to succeed
Pg.# 47: Access resources you don’t own
Pg.# 47: Information is your greatest asset. More reliably than any other asset, information has the potential to double regularly. Rather than simply assembling assets, the key to success is accessing valuable caches of existing information.
Pg.# 54: Quirky : “Make invention accessible”
Pg.# 55: The most important outcome of a proper MTP is that it generates a cultural movement-what John Hagel and John Seely Brown call the “Power of Pull”. That is, the MTP is so inspirational that a community forms around the ExO and spontaneously begins operating on its own, ultimately creating its own community, tribe and culture.
Pg.# 55: The biggest imperative of a worthy MTP is its Purpose.
Pg.# 58: SCALE:

o Staff on Demand

o Community & Crowd

o Algorithms

o Leveraged Assets

o Engagement

Pg.# 58: Staff On Demand
Pg.# 59: Book, The Startup of You, LinkedIn Founder Reid Hoffman
Pg.# 60: Staff-on-demand initiatives similar to Gigwalk are springing up everywhere: oDesk, Roamler, Elance, TaskRabbit and Amazon’s venerable Mechanical Turk are platforms where all levels of work, including highly skilled labor, can be outsourced.
Pg.# 61: Data science company Kaggle.
Pg.# 63: Community & Crowd
Pg.# 63: “If you build communities and you do things in public,” he says, “you don’t have to find the right people, they find you.”
Pg.# 63: Throughout human history, communities started off as geographically based (tribes), became ideological (e.g. religions) and then transitioned into civic administrations (monarchies and nation-states). Today, however, the Internet is producing trait-based communities that share intent, belief, resources, preferences, needs, risks and other characteristics, none of which depend on physical proximity.
Pg.# 63: For an organization or enterprise, its “community” is made up of core team members, alumni(former team members), partners, vendors, customers, users and fans.
Pg.# 64: Typically, there are three steps to building a community around an ExO:

o Use the MTP to attract and engage early members.

o Pg.# 65: Nurture the community. Anderson spends three hours every morning attending the DIY Drones Community.

o Create a platform to automate peer to peer engagement.

Pg.# 66: Crowd
Pg.# 66: Staff on Demand is hired for a particular task and usually via a platform like Elance.
Pg.# 66: Creativity, innovation and the overall process of generating, developing, and communicating new ideas can be accomplished through the use of tools and platforms. Some platforms that aid this process include IdeaScale, eYeka, Spigit, InnoCentive, SolutionXchange, Crowdtap and Brightidea.
Pg.# 67: Validation is achieved by obtaining measurable evidence that an experiment, product or service succeeds in meeting predetermined specifications. Tools such as UserVoice, Unbounce and Google AdWords can accomplish this.
Pg.# 67: Gustin, a premium designer jeans company, uses crowdfunding for all of its designs. Customers back specific designs, and when a predetermined monetary goal has been reached, the products are created and shipped to all backers. Gustin thus has no product risk or inventory costs.
Pg.# 67: ExOs are leveraging community and crowd for many functions traditionally handled inside the enterprise, including idea generation, funding, design, distribution, marketing and sales. This shift is powerful and taps into what university professor and social media guru Clay Shirky calls cognitive surplus.
Pg.# 68: Algorithms
Pg.# 69: There is even a marketplace called Algorithmia, where companies are matched with algorithms that can potentially make sense of their data.
Pg.# 69: Machine Learning.
Pg.# 69: Key open source examples include Hadoop and Cloudera.
Pg.# 69: Deep Learning
Pg.# 69: Leading startups in this space are DeepMind, bought by google in early 2014 for $500 million, back when Deep Mind had just thirteen employees, and Vicarious.
Pg.# 72: Founded in 2004, Palantir builds government, commercial and health software solutions that empower organizations to make sense of disparate data.
Pg.# 74: Leveraged Assets
Pg.# 75: The ability to lease on-demand computing that would scale on a variable cost basis utterly changed the IT industry.
Pg.# 75: In the same way that gyms use a membership model to aggregate expensive exercise machinery that few could afford to have at home, TechShop collects expensive manufacturing machinery
Pg.# 75: If you own a car, it sits empty about 93 percent of the time
Pg.# 75: Rachel Botsman and Roo Rogers in their book, What’s Mine is Yours: The Rise of Collaborative Consumption
Pg.# 77: Engagement
Pg.# 77: Engagement consists of digital reputation systems, games and incentive prizes, and provides the opportunity for faster growth due to more innovative ideas and customer and community loyalty.
Pg.# 77: Nilofer Merchant
Pg.# 77: 11 Rules for Creating Value in the Social Era:
Pg.# 79: Eye Wire illustrates how an ExO can apply game elements and mechanics in non-game products and services to create a fun and engaging experience, converting users into loyal players- and in the process accomplish extraordinary things.
Pg.# 79: To be successful, every Gamification initiative should leverage the following game techniques:

Dynamics: motivate behavior through scenarios, rule and progression
Mechanics: help achieve goals through teams, competitions, rewards and feedback
Components: track progress through quests , points levels badges and collections

Pg.# 80: To increase awareness of the issues , Pep Boys implemented a platform called Axonify, which used a quiz to educate employees about specific incidents .
Pg.# 80: The Gamification company provides a list with more than ninety examples including Badgeville, Bunchball, Dopamine and Comarch. Organizations can also use work.com(a Salesforce company)in which gamification is fully integrated, or Keas, which was specially created to improve employee wellness.
Pg.# 86: INTERFACES : Interfaces are filtering and matching processes by which ExOs bridge from SCALE externalities to internal IDEAS control frameworks .
Pg.# 86: Quirky has had to develop special processes and mechanisms to manage , rank, filter and engage .
Pg.# 92: In response , Many ExOs are adopting the Objectives and key Result ( OKR), OKRs as the answer to two simple question

Where do I want to go? (Objectives)
How will I know I’m getting there?(Key Result to ensure progress is made)

Pg.# 92: An Objective, for example, might be to “Increase sales by 25 percent, “along with “Form two Strategic partnership “ and “ Run Adwords campaign” as the desired key result. OKRs are about focus, simplicity, short(er) feedback cycle, and openness. As a result, insight and improvements are easier to see .
Pg.# 93: Some Characteristics of OKRs:

KPI’s are determined top-down, while OKRs are determined bottom-up.
Objectives are the dream; Key results are the success criteria (i. e a way to measure incremental progress toward the objective.)
Objectives are qualitative and Key results are quantitative .OKRs are not the same as employee evaluation . OKrs are about the company’s goal Performance evaluations – which are entirely about evaluating how an employee performed in a given period are independent of OKRs.
Objectives are ambitious and should feel uncomfortable .

[ In general, upto five objectives and four key result per initiative are optimal, and key result should see and achievement rate of 60 to 70 percent ; if they don’t the base has been set too low.]

Pg.# 94: Scientific results in neuroscience, gamification and behavioral economics have shown the importance of both specificity and frequent feedback in driving behavioral change and ultimately , having an impact . Specificity and rapid feedback cycle energize, motivate and drive company morale and culture. As a result , a number of services, including OKR Hub, Cascade, Teamly and 7 Geese, have been formed to help businesses track these measures .
Pg.# 94: At Google, for example , all OKRs are completely transparent and public within the company.
Pg.# 96: Large numbers of bottom-up ideas ,properly filtered , always trump top-down thinking , no matter the industry or organization.
Pg.# 97: The Lean startup philosophy (also known as the Lean Launchpad) is in turn based upon Toyota’s “ Lean Manufacturing “Principle, first established a half – century ago ,in which the elimination of wasteful processes is paramount .(Sample Principle: “Eliminate all expenses with any goal other than the creation of value for the end customer.”
Pg.# 97: Steve Blank’s Book, The Four Steps to the Epiphany,
Pg.# 97: The most important message of the Lean Startup movement is to “ Fail fast and fail often, while eliminating waste .” Its approach can be summarized as a new , scientific, data-driven, interactive , and highly customer-driven approach to practical innovation .
Pg.# 98: The traditional waterfall approach to product development is a linear process ( Most often referred to as NDP , for New Product Development is a linear process (most often referred to as NDP, for new product development )that uses sequential steps such as idea generation ,screening ,product design , development and commercialization. This process not only burns up a great deal of precious time but more importantly increasingly results in new products that don’t fit—Or , because the market is changing so quickly , no longer fit —the needs of the customer , culminating in a product no one wants.
Pg.# 98: “Knowledge gives you a little bit of an edge, but tinkering ( trial and error) is the equivalent of 1000, IQ points. It is tinkering that allowed the Industrial Revolution. “
Pg.# 99: The Modern rule of competition is whoever learns fastest, wins.”
Pg.# 101: Procter & Gamble Heroic Failure award honors the employee or team with the biggest failure that delivered the greatest insight. Similarly , Tata offers an annual Dare To Try award, which recognizes the manager who took the biggest risk.
Pg.# 102: There are some limitations to the Lean Startup approach, including lack of competitor analysis or consideration in design thinking ,Also it is important to note that the ability to fails is much easier in software and information based environments because iteration is so much easier, for a hardware company, it’s much harder to iterate. Apple launches hardware only when it’s perfect. You wouldn’t want to iterate and fail fast when building a nuclear reactor.
Pg.# 102: AUTONOMY
Pg.# 104: Holacracy (a concept as well as the company’s name )is defined as a social technology and or system of organizational governance , in which authority and decision making are distributed via fractal , self organizing terms rather than being vested at the top of a hierarchy. The system combines Experimentation , OKRs Openness, transparency and Autonomy.
Pg.# 105: “ There are still hierarchies in a network, but the hierarchies tend to be competence-based hierarchies, relying more on peer accountability than on authority-based accountability — that is , accountability to someone who knows something , rather than to someone simply because they occupy a position, regardless of competence. It is a change in the role of the manager, not an abolition of the function.”
Pg.# 109: SOCIAL TECHNOLOGIES “ Transparency is the new currency. Trust is the bill we’ll just be paying for.” Priestley’s equation for social business is : Connections + Engagement + Trust+Transparency.”
Pg.# 111: Asana, a software company founded by Dustin Moskovitz (a co-founder of Facebook) and Justin Rosenstein. Improve work productivity .
Pg.# 113: Linear Attributes:

Linear Organization characteristics	Exo characteristics
Top-down and hierarchical in its organization	Autonomy, Social Technologies
Driven by Financial outcomes	MTP dashboard
Linear, Sequential thinking	Experimentation, autonomy
Innovation primarily from within	Community & Crowd , Staff on demand , Leveraged Assets, Interfaces (innovation at the edges )
Strategic planning largely an extrapolation from the past	MTP, Experimentation
Risk intolerance	Experimentation
Process inflexibility	Autonomy Experimentation
Large numbers of FTE’s	Algorithms , Community & Crowd , staff on demand
Controls/Owns its own assets	Leveraged Assets
Strongly invested is status quo	MTP Dashboard, Experimentation

Pg.# 115: The key question for any organization is not whether you “look” like an Exponential Organization, But ”How Exponential are you?
Pg.# 116: Today, Hollywood operates in exactly the same loosely coupled , networked environment of an ExO ecosystem. Each participant, From the writer and actor , to the director and camera grip, manages his or her own career. Meanwhile , agents at every level help find and connect script with talent , Production companies and equipment. These days when a film is created, a team of independent entities come together for the duration of the production , operating on 24/7 schedules and in close collaboration. Once the film is finished, sets are broken down for reuse , equipment is reassigned and all the actors, grip and production assistants disband and scatter to pursue their next project, which often starts the very next day.
Pg.# 118: Information Accelerates Everything
Pg.# 118: Mobile networks (5G)sporting speeds of five gigabits per second .
Pg.# 119: Many products are now launched early—unfinished and in perpetual beta—for the sole purpose of gathering data from users as early as possible to determine how to “finish’ the Product .
Pg.# 119: As LinkedIn founder Reid Hoffman has said “If you’re not embarrassed by the product when you launch , you’ve launched too late.”
Pg.# 121: Notes that whenever he gets stuck on a robot configuration or sensor problem, he posts a question online before he goes to bed, waking the next morning to find answers from tens of thousands of robot enthusiasts.
Every industry is becoming information based either by being digitized or by using information to identify under – utilized assets (e.g, Collaborative consumptions).
As technology brings us a world of abundance, access will triumph over ownership. By comparison, scarcity of supply or resources tends to keep cost high and stimulates ownership over access.

Importantly, the platform must be symbiotic to serve the feeders as well.

Organization can rent staff on demand from Gigwalk .

Much of this movement has grown out of the realization that the ownership of assets, even if mission-critical, is better handled by experts .

There are five key precepts to Zappos that drive culture across the organization:

Vision: What you’re doing
Purpose : why you do it
Business model:What will fuel you as you’re doing it
Wow and uniqueness factors: what sets you apart from others .
Values : What matters to you

Teamly, which combines project management, OKRs and performance reviews with the power of an internal social network .

everything is measurable and anything is knowable

Welcome to the sensor revolution.

Starting An Exo

Local Motors is a good example of an ExO startup.

Open sources with a Creative Commons license .

Technology Risk

Select An Mtp (Massive Transformative Purpose)

Don’t just ask what the world needs. Ask what makes you come alive and go do it . what the world needs is people who have come alive.”

Step 2: Joint Or Create Relevant Mtp Communities

The Innovator’s DNA : Mastering the five Skills of Disruptive Innovators. Co-author Clayton Christensen

Remember, the three key success factors for an ExO, idea are

First, a minimum 10x improvement over the status quo.
Second, leveraging information to radically cut the cost of marginal supply (i.e., the cost to expand the supply side of the business should be minimal).
Third, the idea should pass the “toothbrush test” originated by Larry Page: Does the idea solve a real customer problem or use case on a Frequent basis? It is something so useful that a user would go back to it several times a day?

“The day before a major breakthrough, it is just a crazy idea.”

The following eight ways to build a business model when the underlying information is free:

Immediacy : Immediacy is the reason people order In advance on Amazon or attend the theater on opening night. Being the first to know about or experience something has intrinsic cultural, social and even commercial value. In short: time confers privilege
Personalization: Having a product or service customized just for you not only gives added value in terms of quality or experience and ease-of-use or functionality, it also creates “ stickiness.” As both parties are invested in the process .
Interpretation : Even if the product or service is free there is still considerable added value to any service that can help shorten the learning curve to using it- or using it better . Kelly often jokes: “Software: free; the manual :$10,000.”
Authenticity : Added value comes from guarantee that the product or service is real and safe that it is , in Kelly’s words” bug free, reliable and warranted .”
Accessibility : Ownership requires management and maintenance. In an era where we own hundreds of apps on several platforms, any service that helps us organize everything and improve our ability to find what we need quickly is of particular value .
Embodiment : Digital information has no “ body” , no physical form, until we give it one—-high definition, 3D, a movie screen, a smartphone. We willingly pay more to have free software delivered to us in the physical format we prefer.
Patronage: “It is my belief that audiences want to pay creators.” Kelly wrote. “Fans like to reward artists, musicians, authors and the like with tokens of their appreciation, because it allows them to connect. But they will only pay if it is very easy to do , the amount is reasonable, and they feel certain the money will directly benefit the creators.” He adds that another benefit of a simple payment process is that it capitalizes on users’ impulsiveness. Examples include iTunes songs and Spotify, as well as Netflix subscription. Customers choose to pay for each of these services even though the same content can be acquired through piracy.
Findability : A creative work has no value unless its potential audience can find it. Such “findability” only exists at the aggregator level, as individual creators typically get lost in the noise. Thus, attaching yourself to effective channels and digital platforms like a app stores, social media sites or online marketplace where potential users can find you has considerable value to creators (and, Ultimately, to users)

Acquisition : How do users locate you? (Growth metric)

Activation : Do users have a great first experience? (value Metric)
Retention : Do users come back? (Value metric)
Revenue : How do you make money ? (value metric)
Referral : do users tell others ? (Growth metric)

The following is a guide to implementing ExO attributes into a startup

MTP: formulate an MTP in a particular problem space, one that all founders feel passionate about .
Staff on Demand : Use contractors, SoD Platforms wherever possible; keep FTEs to a minimum.
Community & Crowd : Validated idea in MTP communities.

Get product feedback.

Find co-founders, contractors and experts .

Use crowdfunding and crowdsourcing to validate market demand and as a marketing technique .

Algorithms : Identify data streams that can be automated and help with product development, implement cloud-based and open source machines and deep learning to increase insights.
Leveraged Assets: Do Not acquire assets.

Use cloud computing, Techshop for product development. Use incubators like Y combinator and Techstars for office, funding, mentoring and peer input. Starbucks as an office .

Engagement : Design product with engagement in mind and gather all user interaction. Gamify where possible .

Create a digital reputational system of users and suppliers to build trust and community . Use incentive prizes to engage crowds and create buzz.

Interfaces: Design custom processes for managing SCALE; do not automate until you’re ready to scale.
Dashboards: Set up OKR and value, serendipity, and growth matric dashboard; do not implement value metric until product finalized (see Step 10)
Experimentation : Established culture of Experimentation and constant iteration. Be willing to fail and pivot as needed .
Autonomy: Implement lite version of Holacracy. Start with the General company Circle as a first step; then move onto governance meetings. implement the GitHub technical and organizational model with radical openness, transparency and permission.
Social Technologies : Implement file sharing, Cloud based document management. Collaboration and activity streams both internally and within your community.

Make a plan to test and implement telepresence, virtual worlds and emotional sensing .

Establishing a corporate culture starts with learning how to effectively track, manage and reward performance. And that begins with designing the OKR system we outlined in chapter Four, and then continuing through the process of getting the team habituated to transparency, accountability, execution and high performance.
Ask key questions Periodically

Who is your customer?
Which customer problem are you solving?
What is your solution and does it improve the status quo by at least 10x?
How will you market the product or services ?
How are you selling the product and service ?
How do you turn customers in to advocate using viral effect and net promoter Scores to drive down the marginal cost of demand ?
How will you scale your customer segment ?
How will you drive the marginal cost of supply towards zero?

“ An invention needs to make sense in the world in which it is finished, not the world in which it is Started.”

Building and maintaining a Platform

Identify a pain point or use case for a consumer.
Identify a core value unit or social object in any interaction between a producer and consumer. This could be anything. Pictures, jokes, advice. Reviewing information about sharing rooms, tools and car-rides are examples of things that have led to a successful platform . Remember that many people will be both producers and consumers, and use this to your advantage.
Design a way to facilitate that interaction. Then see if you can build it as a small prototype that you can curate yourself. If it works at that level, it will be worth taking to the next level and scaling .
Determine how to build a network around your interaction. Find a way to turn your platform user into an ambassador. Before you know it, you’ll be on a roll.

To implement platforms, ExOs follow four steps in terms of data and APIs:

Gather : The algorithmic process starts with harnessing data, which is gathered via sensors, people, or imported from public datasets.
Organize : Once the data is accessible. Algorithms such as machine or deep learning extract insights, identify trends and tune new algorithms. These are realized via tools such as Hadoop and Pivotal, Or even (open source)deep learning algorithms like Deep Mind or Skymind.
Expose: The final step is exposing the data in the form of an open platform . open data and APIs can be used such that an Exos community develops valuable services, new functionalities and innovation layered on top of the platform by remixing published data with their own. Examples of companies that have successfully exposed their data this way are the Ford company , Uber, IBM Watson, Twitter and facebook .

C2C

Declared : Trusted Online profile, providing more information about users.
Ratings: Collaborative service asks users to rate one another after having met ‘ In real life,” enabling people to build good online reputation .
Engagement : If members are to feel completely comfortable transaction with one another they must believe other parties will honor financial commitments.
Activity-Based: Offer contextually relevant and real-time information to both buyer and supplier ensuring that the transaction progresses smoothly,from initial interest through to payment .
Moderation: All payment information transferred by users of a sharing service must be third party verified.
Social: Allow users to connect their online identity with their real world identity, be it socially, via Facebook, or professionally via LinkedIn .

Coyote Logistics

For recruiting, the company prefers to hire young college graduates who show passion, attitude and personality, and who are completely new to the logistics industry .

The primary mechanism used by Zynga to manage growth without diluting its culture was the formal application of objectives and Key Result (OKRs) to track terms and keep everyone synchronized.

Most acquisition fail because the mother company intentionally slow the newly acquired operation in order to better understand it, adapt its internal operation to the new order,

Achieve integration synergies and inculcate new employees into the company culture.

If you are relying on innovation solely from within your company, you’re dead”

Partner With, Invest In Or Acquire Exos

Recommendation; implement a program to identify, partner with, invest in or acquire the ExO in your industry. Give it teeth.

Inspire Exos At The Edge

John Hagel, Co-chairman of the aptly named Center for the Edge.

Move three proven Changemakers in your enterprise to the edges of the organization and unleash them as ExOs to disrupt other markets. Learn how they interact with the mother ship, and then add more .

Mach49

H-Farm (Treviso, Italy)

Algorithms

80 percent of Fortune 500 companies have deployed social software such as Yammer.

The company also Opened a makerspace in Chicago called GE Garages, which is powered by TechShop and works in partnership with Skillshare, Quirky, Make and Inventables.

GVs Startup Lab, a private program that is part incubator, part hackathon and part co-working space.

AngelList , a Craigslist-like marketplace that matches entrepreneurs and angel investors.

Book age of Context: Mobile sensor Data and the Future of Privacy.

Automate and measure different processes in all departments

Vendor Relationship management

www.exponentialorgs.com

The Inevitable

Products will become services

Cars as example will become mode of transportation as a service

Becoming

Everything in tech will be about upgrades, all the time.the old will get pushed for new

We are neither in utopia or dystopia, we are in protein…a state of becoming, a state of constant process change. Incremental

progress…not sudden, easy to miss

Embrace the future, its becoming, a product of the process

We tend to look at old to define future, first movies were like theater plays, first video recordings were like movie making

Most software cos software questions are answered by other users thru the net

Users are not just customers are not just users…they could be ur vendors, programmers, developers, labs and marketers

In 2050 it will not be a better web or internet just like the internet did not turn out to be a better TV

Cognifying …..AI

Google is but AI . Using search to make AI better, not the other way round

Big Data

Every intelligence, needs to be taught

Engine is learning algorithm but fuel is the data that needs to be fed

Artificial smartness instead of conscious intelligence ….develop AI without conscious…concious would be the human element

We are a society of intelligence….as web shows ….we all are connected together..bits of smartness

All cognition is Specialized ….to perform specialized tasks

Machines have to think what we can’t think

We are not defining Artificial intelligence we are redefining humans

To demand AI be human-like is a flawed logic of asking if artificial flying should be like flapping wings !!

As robots make manufacturing cheap (dip) transport becomes the main cost and thus smart manufacturing maybe closer

We are not giving good jobs to robots we giving jobs they can do better

Jobs we didn’t know we wanted to get done. This is the most genius of the robot

Jobs only humans can do

Humans decide what they want to do …our desires are results based on our previous invention and this makes it circular question….map what next when AI takes over a task…thINC university

Anything repetitive will move to robot, automation

Race not against but with machines

FLOWING

Internet is worlds biggest copying machine

Wishlists are the result of JIT (just in time) reading , watching etc

Information age is exact and free…from exact and cheap of the industrial age

Trust cannot be copied….brand is trust

Quality other than trust that cannot be copied : why would anyone pay for something that they could get for free…and yet still if they are paying , then its a generative value . Generative value is created at the time of the transaction And cannot be copied , stored or warehoused …it is generated at that time

8 generative better then free are-

Immediacy…available immediately . Beta version is also immediately

Personalisation….requires ongoing conversation between producer and user

Interpretation…software free, manual high price. DNA mapping will become free but what u can do about it will become expensive

Authenticity ….free sw but authentic version with upgrade and bug free

Accessibility….ownership sucks …others tend to our possessions ..free material is available but with a paid service I can get free material anywhere

Embodiment ….luxurious to have physical possession. Gamers wld love to play face to face…so they need to book a theater , stadium, concert. Book is free, talk is expensive

Patronage….fans love artists….must be easy to pay, not expensive, give them value, their money has to be directly benefiting the creator

Discoverability ….being found is valuable. Fans pay for Amazon to get them what they want to read even though they can read the same.book for free

We accept the reality of what we are presented

Flowing stages

Fixed

Ubiquitous…copying

Sharing..unbundling and shares in bits

Opening, becoming. Audience becomes artist

SCREENING

Would everything be linked to a screen? Irrespective of the size ?

Screens elicit response..unlike books (page)…reading is almost athletic

Screens create reflexes , create patterns, are instruments of now…

ACCESSING

Possession is no more important, accessing is

5 deep tech trends accelerate accessing

Dematerialisation …make better stuff using fewer stuff. Lesser use but greater value

Subscription versus owning

Access can’t modify…some open platforms allow

Firechat…HK…direct to direct without using cell towers….via wifi radio….keep adding enough and cell tower data is gone.called mesh network

If your data goes through the cloud, who owns it then ? Do you own your own thoughts or are merely accessing it ?

Facebook most powerful asset, is the persistent online identity they need to create for us in order for constant sharing to work

Hot wired …users submit…editorial oversight helps..editors assign…user generated, editors enhance..hybrid model ….Wikipedia is also hybrid.. check…chapter 6, sharing..37 mins into. 1500 editors work behind

Deliver more of what I like…recommendation engine

Perhaps offer a stream i don’t like but may like

(People who disliked those, like this now)….age and other factor based likes and changes. Liking

2nd life

Sensors…review nest….every dumb product can be.made smart by adding sensors

Wearables

FB key success is true identity of a billion people.user i.d maybe fake but AI tracks friends and connects

Become a wired india partner ?

Quantified self meeting….hundreds across world

Society of questions and answers. Questioning is more powerful than answering

Innovator's DNA

Always question everything . Right questions are key . Challenge the status quo….provocative

What caused you to develop this ….? Who, what, when where questions to emerge

Ask why and why not questions…

What if questions to impose constraints …creativity triumphs constraints

Not just provocative questions but better ones

– Engage in question storming …. Identify a problem then write 50 questions about it.

– Cultivate question thinking…..

– Track your q to a ratio…..q have to outnumber answers , good questions are better than good answers

– keep a question centric notebook

Observing

Networking

Network for ideas…..not resource networker….or career progression….innovators seek ability to launch ideas.

Attend idea networking events…ted, davos, aspen idea festival

When people reject to engage with u, tell them u want to engage for ideas , perspective not resources ..they will feel like an expert

For someone to stay engaged with you..

Be interesting….breadth of experience…travel widely , Broadway, scuba, read widely, novel..history, networked widely…make sure your elevator pitch on the issue is prepared well

Sg …be authentic

Experimenting

Ask, what if ? Why ?

Philosophies

innovation is everyone’s job

Disruptive innovation is part of our innovation portfolio

Deploy lots of small innovation project teams

Take smart risks in pursuit of innovation

Lots of team are great to deliver / execute and most mix success between deliver and innovation

How to find an innovative team ?

Hire

Strong discovery skills.those showing any inventive record.

Deep expertise in one area and breadth in other areas

Passion to change the world and make a difference

Cheeky, restless

What if is as important as asking why

Anything u want

Everyone is selling ideas, sell execution. Ur business should say why and then only execution

Mail went from “cababy loves ….”

Where did you hear this musician..we will pass on the message to him , her

Delegate but don’t abdicate…trust but verify

Lessons from Private Equity Any Company Can Use

rigorous application of six main lessons:

Define the full potential: To improve profits and stock price, you need to make strategic choices with a clear picture of the full potential of your company in mind.

defining the full potential of your business is rigorously asking and factually answering the question “How high is up?” The target is increased equity value—how do you turn $1 of equity value today into $3, $4, or $5 tomorrow?

“Strategic due diligence” is the way to set the number, and growing your cash flow by pursuing a few core initiatives derived from this due diligence is the way to get there. Here is the key concept: no company can be successful when it divides its resources among too many initiatives. Focusing on the right critical issues—no more than three to five, in most cases—is crucial to achieving success.

Develop the blueprint: The blueprint is the road map for getting to that full-potential destination—the who, what, when, where, and how. In most cases, the blueprint zeroes in on the few initiatives you identified in the full potential thesis: the ones that will create the most value for the company in the medium term.

The emphasis is on measurable actions.

Accelerate performance:

This means molding the organization to the blueprint and matching talent to key initiatives.

It also means getting people to own the key initiatives, and setting up appropriate program management tools to support the initiatives and their “owners.”

Finally, accelerating performance means monitoring a few key metrics.

When you track the most critical data, you are in a position to determine whether the business is moving in the right direction or not. Your blueprint determines the key measures that are required to track the success of the chosen initiatives; the company then drives the entire corporate language and rewards system around those metrics.

Harness the talent:

Value-added boards help coach CEOs, provide real business input and make quick decisions on corporate requests. This first requires just the right composition: board members who really understand the industry and the company they represent, as well as the strengths and weaknesses of the management team. Of course, board members should also be well steeped in the key initiatives and the blueprint, and use its language with management. Indeed,

Make equity sweat: You have to embrace LBO economics, which in part means getting comfortable with leverage

This is a critical distinction as portfolio companies of PE firms can always ask the parent to write a check for needed investment.

Fostering a results-oriented mind-set, it also rests on developing a repeatable formula: repeatable within one activity and also across multiple activities. This repeatability is the key to sustaining results in company after company for smart PE investors.

It is a mind-set that rewards an attitude that seeks solutions proactively rather than reacting to events (we call this being at cause). It is the opposite of a passive, take no risk, “it happened to us” culture (or being at effect).

Creating operating value. Increasing the cash flow (and hence the value) of acquired companies is the process that the best PE firms are vigorously pursuing to keep generating attractive returns Shifting gears as soon as a deal is completed, they use a systematic approach to collaborate with management and spot, stage, lead, measure, and profit from strategic and operational improvements

The first thing that the best PE firms do is to develop a clear understanding of where and how a business makes money and why they’d want to own it.

they focus on at least five things:

Derived demand analysis (What are the true underlying drivers, how are they changing, and how will they affect demand?) india, world opening up, platform trade between partners ..not just discovery which amazon, alibaba do…but ease of transaction on a regular basis…analyze what benefits do amazon, alibaba, indiamart, flipkart give to its vendors

Customer analysis (What are this business’s customers going to do?)

Competitive analysis (What are this business’s competitors doing, and how does it stack up against this business?)

Environmental analysis (Are there technological, regulatory, or other issues or trends that may affect future performance positively or negatively?)

Microeconomic analysis (How does this business really make money and where?)

The only compelling reason to pay more than the next bidder is the discovery that the microeconomics of the business can be better than conventional wisdom would imply.

They live by the motto “In God we trust. All others bring data.”

KKR willingly paid this price because of the strength of the full-potential plan and clear momentum in results already banked.

You must collect facts on the key drivers of demand and how they are likely to behave in the future. You must interview customers to understand how they make purchase decisions and how your key products or services stack up against those of the competition. Are there gaps in performance that need to be addressed? Where and how? What are the customers’ future purchase intentions if we do nothing? How will that affect our market share? If we change things, what is the upside? What are the risks? How has pricing changed over time for key products and services? What are customers demanding and competitors doing that will affect the future pricing environment? Are my costs truly competitive? How can we conduct an apples-to-apples cost comparison versus key competition to understand how much and where we are advantaged or disadvantaged? What can we do to close any gaps? What can we do to leapfrog competitors? Will regulations or technology change in some fashion that will impact the business? How and how much? Do we understand where and how we really make money? Do we have unprofitable products? Do we make money on all of our customers? All

In the blueprint phase, PE buyers start with two key sets of data points: The three- to five-year full-potential equity value. The few big initiatives (again, usually somewhere between three and five, rarely more than a half dozen) that the management team and PE firm have decided to embrace aggressively in their full-potential analysis.

key point: the PE’s blueprint is very different from the traditional company’s strategic planning binders, which often tend to focus on “what we want to be” at the expense of “how we are going to deliver.”

The PE’s blueprint is only about action. It is about executing on the initiatives and how one dollar becomes several dollars within a specific time period.

The best PE firms foster senior management accountability. They do so in a number of ways, including insisting on executive sponsorship of individual initiatives. Each initiative gets an “owner”—someone who has a direct personal stake in its success. They also make the blueprint the centerpiece of their senior management dialogue. This means, among other things, monthly in-depth reviews of progress and results. In addition, they tie their executives’ compensation (including the equity portion) to the results of the executives’ own units and initiatives, effectively making them owners. Often, management teams own 10 to 30 percent of the total equity in their businesses, through grants, direct investment (if necessary, borrowings from the PE firm) and rewards for hitting blueprint targets. Not only do they “think like owners,” they are owners.

At the risk of stating the obvious: PE firms obsessively watch key metrics, including market data and performance data.

What may not be so obvious, however, is that not all PE firms track the same things. Some stop with the fundamentals of markets and financial results. Others—the more activist buyers—dig deeper. They track metrics that help them monitor progress toward operational goals before it shows up in the financial results

PE firms watch cash more closely than earnings, knowing that cash remains a true barometer of financial performance, as earnings are subject to distortion. As a rule, they prefer to calculate return on invested capital, which indicates the actual return on the money put into a business rather than fuzzier measures like return on accounting capital employed.

We often help companies think through what we call a “RAPID” scenario for decision making: in other words, just who is responsible for recommending an action (the R), agreeing (A), providing input (I), deciding (D), and ultimately performing (P), or executing against the decision.Think of it as decision making software, shared across the organisation.If you can effectively rewrite the software of decision making, you can effect significant change while still steering clear of the grand reorganization. Reorganizations are toxic, by and large because they tend to be time-consuming and intensely political. And, too often, the new structure is divorced from the very initiatives that lead to full potential.

look for data that will help you understand whether a specific initiative is succeeding according to the most relevant metrics. Is that data cash based, market based, competition based, or operationally based? If you can’t get it with your current resources, what do you have to add?

you’re the head of a publicly traded company, there are limits on the ways that you can use equity as an incentive. Even the time-honored tool of the stock option has its limits—and may be subjected to additional limits in the near future. There’s nothing to prevent you, however, from using bonuses—substantial bonuses—to reward outstanding performance within a key initiative. The simple screen to put all such bonuses through is whether the additional compensation is directly linked to an outcome that was within the individual’s control. Too many corporations tie incentives to the bottom line, which isn’t easily moved by an individual or working group within the organization. As a result they waste money intended to focus motivation.

(The members of merger integration teams, for example, often receive bonuses equal to 100 percent of their salaries—in part because if they do their jobs well, they may work themselves out of a job.)

Harnessing Talent in the Corporation.

you can ensure that your financial offer to talent is at least in line with the risks you are asking them to take. What does this mean? It means you have to pay close to market value for the skills you require. Don’t be handcuffed by tradition-bound notions of pay grades and antiquated hierarchical systems. Get market data on the alternatives talented people have and make sure your compensation package is competitive.

play up the non-financial elements of the rewards

Does your location appeal to him or her? Does the prospect of extensive travel—or the complete absence of travel—hold strong appeal for this individual?

you will need to find ways to include contingent compensation in your packages. But if the contingent piece of the compensation is large enough—and if the targets are ambitious but realistic—you have nothing to apologize for.

you need to find people who are more interested in opportunities than guarantees. To do so, you will have to scramble, invent, and push against the tide.

Explore “phantom equity” and other mechanisms that have been introduced in recent years by companies who are trying to solve exactly these kinds of problems. Phantom equity refers to plans (such as phantom stock or stock appreciation rights) that provide employees with a cash or stock payout based on the increase in the company’s stock value, but without granting them an actual ownership stake in the company. Look for people who aren’t yet infected with the “lifer” mentality.

Look for people in lower-paying sectors who don’t yet know what they’re worth and would welcome the chance to sign on with a company

PE Firms Love Cash

in a private equity environment, managing down working capital can be an indispensable part of the larger value creation formula

Let’s say in our fictional example that the annual debt service is $50. Let’s further say that the working capital as a percent of sales is 30 percent, and that next year’s growth in sales is budgeted at $100. That means that $30 (30 percent of $100) of cash will be required to fund budgeted growth. Finally, let’s assume that capital expenditures are $10 (maintenance expenditures plus required expenditures to fund sales growth). Adding those three deductions ($50 + $30 + $10) means that this business has $90 of cash requirements, and prior-year EBITDA of $125 to fund them. In this example, therefore, the real cash creation is $35. Bear in mind that no picture of cash flow is static, but depends on changes in market forces, competitors and customers. Thus, smart PE investors and CEOs measure the cash-generation potential of their businesses on a regular basis.

get an accurate handle on exactly where and when in the process you begin to make cash.

Say you buy a billion-dollar business, putting in $300 million in equity. You do so on the basis of a certain full potential thesis (as described in our earlier sections). Over the subsequent five years, you double the size of that business to $2 billion. But how much additional equity have you invested? Let’s say it’s another $300 million. You have to hold that second $300 million to the same return standards that you held the first $300 million to— otherwise, you are diluting your overall return

Senior managers have to push accountability down to its most effective level,

The general managers of your business units have to feel that they are on the hook to deliver the results. The people who own the initiatives and whose names are on the actions in the blueprint have to feel that they are equally on the hook.

“I tell my people, ‘Here is the framework. I want you to spend 50 percent of your time doing what you are supposed to do, but spend 50 percent on telling me how you can create more value,

Platform Scale

How an emerging business model helps startups build large empires with minimum investment

On platforms, the business does not create the end value; rather, the business only enables value creation.

the shift in media distribution power from journalists to

Unlike hotels, which invest in resource creation, platforms like Airbnb invest in creating better trust mechanisms that identify and differentiate good behavior from poor behavior and minimize interaction risks.

Threadless and 99Designs.

At their core, platforms enable a plug-and-play business model. Other businesses can easily connect their business with the platform, build products and services on top of it, and co-create value.

This ability to drive interactions through a “plug-and-play” infrastructure is a defining characteristic of platform scale.

In the quest to transform into platforms, organizations must shift from a culture of dollar absorption to a culture of data absorption. Business units should be measured not just in terms of dollars absorbed but also in terms of monetizable data absorbed.

Managing community incentives and governance is as important as managing internal employee conduct and compliance.

The Instagram founders understood the importance of managing ecosystems and communities. Employee #1, Josh Riedel, was a community manager, tasked solely with managing the growing community of content creators on Instagram.

Liquidity Management Is The New Inventory Control

Platforms do not hold inventory, but they must work similarly toward avoiding idle supply and unfulfilled demand. Producers will abandon the platform in the absence of relevant demand. Consumers searching for items become discouraged unless they are matched with relevant supply. Matching supply and demand isn’t merely an exercise in efficiency; it is the only way that a platform can hold the two sides together.

Platforms must focus on liquidity management to ensure that both producers and consumers find value in using the platform. High liquidity ensures that the demand on the platform is reliably served with supply and that the supply created on the platform is liquidated with demand efficiently.

Curation And Reputation Are The New Quality Control. Platforms cannot control quality as pipes did.

The importance of quality control on an open-access system cannot be overstated. Open systems encourage unrestricted production, leading to abundance, which can lead to a dip in quality and higher search efforts for consumers.

Many platforms determine producers’ (or consumers’) reputation and quality by aggregating social signals from the community.

When hosts and guests rate each other on Airbnb, both sides create signals of quality.

user journeys are the new sales funnels

AARRR (acquisition-activation-retention-revenue-referral) framework that tracks usage metrics – are often designed as funnels.

distribution is the new destination

Consumers had to visit a retail outlet to purchase a product or sit in front of a television to consume an advertising message. However, in an age of always-on connectivity, users are always connected to businesses, sometimes on multiple channels simultaneously.

The business should no longer focus simply on drawing users to a destination. Instead, a business should work on identifying new ways to distribute its experience into the context of the user.

BEHAVIOR DESIGN IS THE NEW LOYALTY PROGRAM

To ensure that producers and consumers participate regularly and often, platforms must invest in behavior design. By creating a new habit, Facebook, Instagram, and Pinterest ensure that users stick around of their own accord.

data science is the new business process optimisation

social feedback is the new sales commission

In addition to traditional inorganic incentives, social feedback is a key source of user incentivization on platforms. Producers on a platform may participate more often when explicit social feedback from consumers is communicated back to them. Readers share Buzzfeed and Upworthy articles because of the social feedback that results from such an action. Instagram users share their creations for social feedback.

algorithms are the new decision-makers

On platforms, algorithms are the arbiters of both resource allocation and reputation assignment

Self-policing communities and the algorithms that nudge them along are the new decision-makers.

real-time customization is the new market research

The Facebook newsfeed is a highly customized gossip column that rearranges itself in real time based on user preferences and actions.

excessive customization may also pose a challenge by constantly showing more of what a user has enjoyed in the past to the detriment of the overall experience. Platforms must ensure that they balance relevance with serendipity.

plug-and-play is the new business development

In the world of platforms, APIs, and self-serve interfaces, the very nature of business development has fundamentally changed. Increasingly, APIs are enabling a new form of business development. Prospective partners can plug and play, obviating the need for complex integration and, in some cases, complex contractual agreements. The API is the contract and the integration interface.

THE INVISIBLE HAND IS THE NEW IRON FIST.

The invisible hand – typically taking the form of algorithmic decisions – nudges producers to continue creating value on the platform. In a networked age, we are moving from a world of command and control to a self-serve world where user participation is encouraged through an invisible hand powered by data, APIs, and algorithms.

Platforms compete with each other on the basis of their ability to enable interactions sustainably. Platforms do not compete merely on the strength of better features or larger user base.

The importance of understanding the platform business, as an enabler of interactions, cannot be overstated.

Producers and Consumers Every interaction involves two participating roles. The producer creates supply or responds to demand on the platform.

The concepts of value and currency apply to all social and economic interactions. Producers create value in the form of goods or services. The exchange of value may involve the exchange of physical goods (e.g., eBay and Etsy), virtual goods (e.g., Medium, YouTube, and Facebook), standardized services (e.g., Uber and Airbnb), non- standardized services (e.g., TaskRabbit and Upwork), or data (e.g., Waze and Nest).

seven specific principles that guide the design of interaction-first businesses.

Plug-and-play business design Platforms must create a plug-and-play infrastructure to encourage interactions. Producers and consumers should be able to plug in to the infrastructure and interact with each other

Platforms must create a plug-and-play infrastructure to encourage interactions. Producers and consumers should be able to plug in to the infrastructure and interact with each other

Incentives must be architected into the platform to attract producers and consumers repeatedly.

However, open participation leads to the creation of noise. This makes the platform ineffective at enabling interactions.First, open participation may encourage undesirable behaviors by allowing access to all kinds of users.

Hence, platforms must architect some form of access control, especially for producers who create value on the platform. Second, open participation leads to an abundance of content, which could increase the efforts required by consumers to find the most relevant items. Hence, platforms need to implement and strengthen consumption filters that determine which items should be served to which consumers. The design of access control and consumption filters helps with the governance of interactions.

Balancing value creation for both producers and consumers

Optimizing the experience for a producer may lead to a poor experience for a consumer

For instance, removing barriers to production may help producers but lead to the creation of noise for consumers. In the same way, optimizing the experience of consumers may discourage producers. Consumers in a marketplace may benefit from competitive bidding among producers, but producers may not find it beneficial.

Strategic choice of “free”

“Free” is not a strategy by itself; it can only be part of a larger strategy that involves some form of monetization made possible by offering some value for free.

On platforms, “free” is strategic only if it follows at least one of the following two principles:

a.It increases the repeatability of interactions. If the provision of free services to consumers, producers, or both increases the repeatability of interactions, the choice of “free” is strategic.

b.It involves the capture of monetizable data. Facebook and Google offer free services but capture monetizable data: user interests and search keywords, respectively. Advertisements are served in real-time based on this captured data.

On most platforms, at least one role is subsidized to participate on the platform. Producer participation may be subsidized, and producers may get free access to the production tools to encourage value creation on the platform. Likewise, consumers may be allowed free access to the platform.

Pull, facilitate, and match

Platforms focus on enabling repeatable interactions

With the goal of enabling interactions, platform businesses have three rather different priorities: a.Pull. The platform must pull producers and consumers to participate on the platform. b.Facilitate. It must facilitate interactions between them. c.Match. It must match demand with supply to ensure that the right producers and consumers interact with each other. The platform achieves this by: 1.Architecting incentives that repeatedly pull these participants to the platform. 2.Providing a central infrastructure that facilitates the creation and exchange of value. 3.Matching participants with each other and with content/goods/services created on the platform.

Layering on new interactions

LinkedIn, for example, has multiple interactions, such as recruiters serving jobs to candidates and thought leaders publishing posts for readers. However, the central purpose of LinkedIn continues to be centered on enabling professionals to connect with each other. LinkedIn’s failure to power this core interaction would lead to the failure of all edge interactions that the platform enables.

Enabling end-to-end interactions

Increasingly, platforms are expanding beyond the matching function to enable end-to-end interaction. Uber doesn’t merely match the driver to the passenger. It also tracks the duration of the ride and uses that information to charge the passenger accurately and transfer the money back to the driver. Finally, it allows the two sides to rate each other – the exchange of social currencies – to determine signals of quality that it can leverage in subsequent interactions.

Creation of persistent value beyond the interaction

Airbnb hosts and guests rate and review each other during every interaction, creating a reputation that enables future transactions. Twitter followers may choose a new account to follow based on a tweet they read, thereby building that particular account’s influence. Reddit enables the development of crowd opinion on news articles by aggregating reader inputs and creating authority and visibility for articles.

PLATFORM SCALE IMPERATIVE

Platforms require completely different mental models to succeed. They need interaction-first thinking. Pipes rely on user-first thinking, not interaction-first thinking. In user-first thinking, the single user’s perspective rules all business decisions.

In interaction-first thinking, the focus on users does not cease but becomes subservient to the focus on interactions. Single user benefits may be overruled if the interaction between users suffers.

We are not in the business of selling products and services. We are in the business of mediating and enabling interactions!

Across all platforms, the following three distinct layers emerge repeatedly.

Network-Marketplace-Community layer

The first layer of a platform is the network or community layer, comprised of the participants on the platform and their relationships.

Marketplaces may not require users to form explicit connections but may regularly match buyers and sellers, allowing them to interact. Some platforms may have an implicit community layer. For example, users of Mint.com are not connected to each other, but every user’s financial analytics is benchmarked against that of similar users. Every user benefits implicitly from the community without the requirement to connect with others explicitly.

Infrastructure layer The infrastructure layer encapsulates the tools, services, and rules that enable the plug-andplay nature of a platform business. In itself, this layer has little value unless users and partners create value on the platform. External producers build on top of this infrastructure. On Android, developers build apps. On YouTube, video creators host videos. On eBay, sellers host product availability.

The infrastructure layer provides the infrastructure on top of which value can be created. Large-scale value creation leads to the problem of abundance. With an abundance of production, search costs increase for consumers. Too many videos on YouTube may make it harder for consumers to find the best ones. To solve for this, platforms need a third layer: data

Data layer The final platform layer is the data layer. Every platform uses data in some way.

The data layer powers relevance, matching the most relevant content/goods/services with the right users.. In some cases, the data layer may play an even more dominant role. The Nest thermostat is a data-intensive platform, where the value is created entirely through the data aggregated across thermostats.

Basic configuration 1: The marketplace/community platform

Airbnb, Uber, and most marketplace platforms have a thick marketplace/community layer. The network is the key source of value. Online communities like Reddit, social networks like Twitter, and content platforms like YouTube benefit from thick community layers.

Basic configuration 2: The infrastructure platform

Development platforms like Android provide the infrastructure on top of which apps may be created. In tandem with the Play marketplace, Android’s development infrastructure is the key source of value for developers.

Basic configuration 3: The data platform

Facebook uses data to fashion newsfeeds, and Airbnb uses data to match hosts to travelers. But on certain platforms, the data layer itself constitutes the key value created on the platform. Some of them may not even seem like platforms,

Wearables. Nike’s shoes and FuelBand constantly stream data to an underlying platform that integrates the user experience across the shoe, the wearable, and the mobile apps.

Nest Thermostat And The Internet Of Things. The

Industrial Internet. GE’s focus on the industrial Internet is another example of a data platform.

Enterprise 2.0. Andrew McAfee highlights the rise of social software in the enterprise and how it’s replacing traditional enterprise systems. Enterprise-wide social software needs an underlying data platform to aggregate the many workflows and knowledge exchanges within an organization. The streaming and aggregation of data from multiple input points and the subsequent provision of services to multiple stakeholders is an outcome of a central data platform.

Omnichannel Customer Journeys. Retailers like Burberry and Target use an underlying data platform to unify customer journeys across the store and other remote touchpoints.

Airbnb started out with poor network effects but with better use of data and a more robust infrastructure to enable interactions between hosts and guests.

It enabled end-to-end transactions and invested in the creation of trust mechanisms.

As YouTube gained traction, the focus of the platform moved from improving video hosting (infrastructure layer) to improving the matching of videos with consumers (data layer) and increasing viewer engagement (network layer).

Facebook’s largest draw, arguably, is the newsfeed. By focusing on the use of data to drive higher community engagement, Facebook built an entirely different business.

Quicken provides a tool to manage finances. In its initial days, Mint did the same but provided it for free. This allowed Mint to gain traction through a superior tool.

Mint enables an implicit network of consumers, who benefit from social analytics that benchmark their spending habits vis-a-vis that of their peers. It also powers a marketplace that allows financial institutions to sell their offerings to these consumers.

Instagram vs. Hipstamatic

Hipstamatic provided the technology to take beautiful photos using filters. As a software creator, not a platform business, it based its revenue model on charging for the app and for premium filters

The core value provided by Instagram – and the reason it succeeded despite a late start – was the network and community for sharing pictures.

Flickr still attracts a large base of users with its storage infrastructure. But a larger base of users uses Facebook to generate conversations around photos.

FIVE DRIVERS OF PLATFORM SCALE

Minimal marginal costs of production and distribution

Airbnb doesn’t incur additional costs associated with servicing new rooms. Airbnb does invest in community management to ensure that hosts follow best practices. It also offers insurance cover to hosts to encourage them to participate on the platform. However, compared to a hotel, the marginal costs of value creation are drastically lower for Airbnb

Network effects powered by positive feedback
Behavior design and community culture

Behavior design involves the creation of subtle cues that nudge the user toward the desired behavior. Through subtle cues, notifications, and feedback, users are encouraged to take small steps toward desired actions.

as platforms scale activity and achieve scale, they often suffer from the problem of abundance. As the number of videos on YouTube increases, its ability to serve the most relevant videos to users must also improve. This leads us to a fourth driver of platform scale: learning filters.

Learning filters

Facebook’s most important feature may well be the newsfeed. The news feed filters and serves content based on its judgment of what is most relevant to a particular user. Its ability to filter relevant content improves with greater usage. The news feed is a filter that learns.As a user uses the feed more often, it captures signals on what the user finds desirable (or undesirable) and leverages the data to strengthen the filter further

The news feed filters and serves content based on its judgment of what is most relevant to a particular user. Its ability to filter relevant content improves with greater usage. The news feed is a filter that learns. As a user uses the feed more often, it captures signals on what the user finds desirable (or undesirable) and leverages the data to strengthen the filter further.

Weak filters can weaken network effects, while strong filters constantly strengthen it.

Platforms that fail to scale relevance often fail despite achieving scale. Scale, ironically, is their undoing.

Virality

Instagram serves as a great example of viral growth, as explained in further detail in Section. Every time a user clicks a picture on Instagram and shares it with friends on Facebook, the platform is exposed to new users. This is a unique driver of growth that is very different from traditional word of mouth, where users would recommend an offering.

Virality doesn’t require a user’s recommendation.

Scaling is not a marketing or user acquisition or retention problem. This isn’t merely an issue of scaling the ability to generate and fulfill demand. Achieving platform scale requires the ability to scale value creation to scale value exchange – the ability to scale production and consumption simultaneously – and to repeat the two so that each reinforces the other.

Multiple user roles: A platform must cater to multiple user bases, each of which may perform one or more roles in the system. It needs to balance value, costs, and incentives across all these user bases and roles
Open architecture: Platforms are open systems that allow users to contribute and add value

It is important to ensure that a platform offers quality and relevance to ensure that the abundance does not overwhelm consumers. This priority is in conflict with being open and participative and needs to be carefully architected.

User-generated value: Since users create all the value, a platform often starts with no value. Design decisions, again, are critical to ensure that platforms attract usage, even at a low value.

The value of a platform is created by the interactions on top of the platform. The value is in neither the technology nor the rate of user adoption. Value lies solely in the activity of an ecosystem of connected users powers on the platform.

The one metric that platforms should really be judged on is the rate at which value is created on the platform.

SOCCER: THINKING SOCIAL AND INTERACTIONS

fixated on three things: • The ball or the puck • Who has control over it now • Who is likely to receive/intercept it nexT

Much like the rules of play in a game and the role of the referee, the platform’s purpose is to provide the conditions that are necessary for such interactions to occur efficiently

To design a building, one shouldn’t start with thinking about the building. When architects get down to thinking on paper, they start with a center and build things around and in relation to that center.

The notion of thinking in terms of centers instead of wholes is an important one.

When we look at a website or an app, we see it as a whole. We don’t see a center.

Thinking in whole leads us to start thinking about features. When building a platform, it is important that features are not the starting point. Features should instead be built around a center. The center determines how platform users will interact and guides the choice of features on the platform.

The true value of platforms lies in the value created by external producers and exchanged with consumers on the platform, not in technology, nor in user adoption.

The core value unit is the minimum standalone unit of value that is created on top of the platform. It represents supply or inventory created on top of the platform. Without this supply, the platform has very little value in and of itself.

the core value unit in light of these different configurations.

PATTERN 1: NETWORK/MARKETPLACE/COMMUNITY-DOMINATED

1.Goods. If the platform powers a marketplace for the exchange of goods,

eBay and Etsy are examples of such platforms

2.Standardized Services. If the platform powers a marketplace for the exchange of standardized services

A ride on Uber is a standardized service. The availability of accommodations on Airbnb is standardized

Non-Standardized Services. In contrast to the above, the service offered by a plumber on TaskRabbit cannot be standardized.

PATTERN 2: INFRASTRUCTURE-DOMINATED

Articles on Medium, videos on YouTube, and the ephemeral messages on Snapchat, all denote the core value units for the respective platforms.

While a single selfie on Instagram – the core value unit – is created by a single producer, a single article on Wikipedia may be created by multiple producers. When multiple producers collaborate to create value, as on platforms like Wikipedia or Quirky, the actions of all producers need to be designed for.

PATTERN 3: DATA DOMINATED

What is the equivalent of an app or a video for the Nest thermostat? The Nest thermostat is like every other thermostat except that it also streams data on its usage.

How does one think of a core value unit in a scenario where there is no infrastructure and no explicit community or marketplace? On data-dominated platforms, the data itself is the source of value.

Retail loyalty platforms capture a consumer’s interests based on past consumption to offer him/her more shopping deals in the future.

When information businesses behave like pipes, they transfer value units from the point of production to the point of consumption. The difference, though, is that these units are not produced by external producers. For example,Google’s crawlers crawl the Web to create the Web page indices (value units) that make Google valuable as a search engine. even though the indexed pages are being created by Google’s crawlers, not by external users.

Platforms are information factories without control over inventory. They can create the factory floor, i.e., provide the infrastructure. They can create a culture of quality control, but they do not employ an iron fist in controlling the amount and quality of what is produced and consumed.

Google’s ability to serve results and solve the world’s problems collapses if its crawlers don’t work well and its algorithms (filters) fail to serve the most relevant results.

platform design should follow the following principles. 1. Start With The Core Value Unit The design of all platforms should start with the core value unit. (see Figure 8a) Start with the unit. When designing Twitter for X, look at what the tweet for X looks like. When building Uber for Y, focus on the equivalent of the ride. What is the unit of supply on the new platform? What will it take for the platform to encourage its repeated and regular production? Start with the core value unit – and build out from there.

Build The Core Interaction Around The Core Value Unit

platforms are built around a set of actions that enable the creation, curation, and consumption of value.

In all interactions, the producer creates value for the consumer and the consumer “pays” for it using some form of currency. Currencies may range from actual money to attention, reputation, influence, and even data.

One important difference between pipes and platforms is worth noting. Consumers don’t add value in real time to the product in the case of a pipe. Value creation is the sole prerogative of the producer. On platforms, consumers may add value as well.

A producer may take a picture on Flickr, but consumers may tag it and help it get discovered. A producer may upload a video on YouTube, but consumer votes determine how often it is consumed.

Design The Platform Around The Core Interaction

Once we identify the core value unit and design the core interaction as a set of actions, platform design follows.

A common fallacy in a lot of software management is the temptation to start with the interface rather than the heart of the system. YouTube, for instance, is a complex system but has many different interfaces/functionalities for creators, viewers, brands, advertisers, media houses and other stakeholders on different channels.

When designing a platform, one must distinguish between the system and the interfaces. The design of the interfaces should be consistent with the design of the system.

All platform businesses require the exchange of information, goods/services, or currency

The platform’s monetization options are dictated by which transfers can be captured and/or tracked by the platform.

Clarity is a platform that connects experts with advice seekers through a consulting call.

Communities like CouchSurfing work similarly to Airbnb but without the exchange of actual money. In such cases, goodwill and reputation are generated and transferred within the community.

Google’s crawlers index the Web and create billions of units of value. When users type in a search query, they create a filter. Value units are passed through this filter, and the ones that are most relevant are served to the user.

HOW FILTERS DRIVE CONSUMPTION Successful platforms must ensure that the most relevant value units pass through filters.

1.Overlap. Ensuring that there is significant overlap between what producers produce and what consumers need.

2.Data. Ensuring that the platform captures rich data about core value units as well as

Consider how a YouTube video is served to a consumer. The video (core value unit) has various forms of data associated with it. These include information on What it is (title, description), How Good it is (indicated by votes), and Who it can be served to. The video is served in various ways: 1.It may show up on a user’s newsfeed. The news feed uses a filter that takes into account data on WHAT the user has consumed in the past. 2.It may show up in response to a search query. The search query acts as the filter. A user may slice and dice the search results further by adding parameters to the filter (video length). 3.It may be shown as a related video alongside a video that the user consumes. In this case, the similarity to the current video and to past consumption behavior work together to create the filter.

BRIEF TAXONOMY OF FILTERS

For a location-based application, the location may serve as a filter. For search engines, search queries act as filters. A newsfeed creates a filter based on a user’s past actions and social signals. A Twitter feed’s filter relies almost exclusively on recency.

Filters may pull units to themselves. That’s what search queries do. Units may also be pushed through filters. That’s how a news feed works.

Filters may be point-in-time or cumulative. If a search engine serves results to queries based only on search terms, it is employing a point-in-time filter.

If, however, it also factors in the user’s past search behavior, it is incorporating a cumulative filter as well.

A search query is an active intent filter. A news feed works on a passive context filter.

Context may be static or dynamic. Many Web 1.0 era filters were created based on long sign-up forms that the user filled out. Today, filters are created based on data captured on an ongoing basis through a user’s actions.

Facebook’s social graph. Through the social graph, third-party platforms like TripAdvisor serve reviews based on a collaborative filter of people who are close to you on the graph

the network itself is a filter. Who you follow determines what you consume. On Twitter, who you follow is the critical filter. Relevance is almost entirely dictated by it. On Facebook, who you are connected to and how often you interact with them strengthen the news feed filter. On Quora, users may follow other users, topics, and even questions. All of these, in turn, act as filters. The new economy runs on data. Platforms use data to match value units with filters.

brilliance of game design. A large goal can be broken down into a set of simple actions for users to perform repeatedly. These simple actions enable users to obtain value from the game and progress towards a larger goal.All actions in the core interaction fall into one of the following buckets:

Creation. In every interaction, there is at least one producer role that creates value.

2.Curation. Curation is a necessary component of every interaction.

Curation scales the quality of the supply on the platform. It encourages desirable behaviors and discourages undesirable behaviors. Rating and reviews help with curation. Upvoting and downvoting of content enable curation. Curation also has a more persistent impact throughout the system.

New users signing up on Twitter or Facebook are encouraged to connect and follow certain recommended users, as this creates a filter for them to start receiving content.

If a platform fails at encouraging creation, it breaks down.

If a platform fails at encouraging consumption, there’s a different problem.

A platform that fails to encourage curation becomes loaded with poor-quality content and fails to stay useful and engaging.

Finally, a platform that fails to encourage customization will increase search costs for the consumer. Consumers will find the experience irrelevant.

To design the core interaction, ask the following questions:

1.For a particular platform, what is the core value unit? What is the unit of supply on the platform that defines value for its users?

2.Who is the producer?

3.How does the producer create the core value unit?

4.Who is the consumer?

5.How does the consumer consume the unit?

6.How is the quality of the unit determined?

7.What is the filter used to serve the unit to the consumer?

8.What consumer actions help to create the filter?

9.How does the consumer consume relevant units?

The core interaction is the repeatable formula for value creation and exchange on the platform.

ORGANIZING FOR PLATFORM SCALE

The design of the organization that runs a platform business should also stem from the platform stack.

A platform that creates value sustainably and repeatedly must ensure that it has a healthy network layer, a functioning infrastructure layer, and a data layer that ensures a relevant and compelling experience at all times.

Platform strategy involves three primary priorities,

Pull. The platform must pull the producers and consumers to itself on an ongoing basis.

2.Facilitate. The platform must ensure that the tools and services it provides to its users enable them to interact with each other. It also needs to set the rules of access and usage to ensure that desirable interactions are encouraged and undesirable ones are discouraged.

Match. The platform uses data to serve relevant items to consumers.

The failure to create ongoing pull leads to the failure to create network effects and virality.

Platforms that create unnecessary friction in access and usage may hinder user participation, leading to a loss of network effects and failure of the platform to enable interactions. However, platforms that make it too easy for users to participate may invite a rapid deterioration in quality. Users rapidly abandon such platforms.

In its initial days, a platform may have no pull. In fact, platforms often suffer from a chicken-and-egg problem. Producers won’t participate without consumers and vice versa. Many platforms exhaust their resources through a traditional marketing approach, lacking a clear strategy for creating pull. The initial pull may need some form of inorganic effort.

Platforms also need to ensure that they create some form of long-term investment for producers and consumers that keeps them loyal to the platform. Our traditional view of loyalty has often involved lock-in and other forms of schemes that are not in a consumer’s best interest. On platforms, loyalty is created through designing new behaviors for users and by providing greater reputation and influence to producers over time.

Creating pull also requires reactivating deactivated users. It involves creating off-platform notifications that drive users back to the platform

New users who start participating on Quora see their Quora Credits – virtual currency on Quora – grow as their participation is appreciated by other users.

The blogging platform Medium keeps providing feedback to bloggers who write articles on it. Every time readers recommend these articles, the platform provides feedback to encourage producers to produce more.

An escrow payment service encourages buyers and sellers to participate without fear of losing money in a fraudulent transaction. Central insurance coverage encourages travelers and hosts to interact on Airbnb.

A platform’s ability to scale matchmaking helps it to achieve platform scale (see Figure 16). Matchmaking is accomplished through data. As a result, data acquisition becomes an important priority for platforms. Designing the data model – specifications for what data are required for the value unit and the filter – is a critical step in platform design. This informs a platform’s data acquisition strategy. Data acquisition is subtle but critical. LinkedIn’s progress bar encourages users to provide more data to the platform by showing them the completeness of their profiles and suggesting simple actions to enrich them further.

Data may also be acquired from third-party data providers, e.g., Facebook Connect. Platforms need to capture implicit forms of data based on usage patterns. These data points strengthen the filters for serving value to consumers.

The platform business model is structured around the core interaction that it enables. If a platform enables multiple interactions, the business model and architecture must be planned out one interaction at a time, starting with the core interaction. The focus on the interaction is very important.In a traditional, linear, pipe business, analysis is focused on the customer or the user. In the case of a platform, focusing analysis on the user isn’t useful enough. It is possible to engage and serve users without enabling the core interaction of the platform. When different types of users use the platform simultaneously, optimizing the experience for one user group may discourage the other user group from participating. The design of platforms needs to move away from user- centricity to interaction-centricity.

Producer, Consumer, And Platform. The platform acts as the infrastructure on which value is created and exchanged. The producer and consumer plug in to the platform to create and exchange value. As mentioned earlier, the terms “producer” and “consumer” refer to specific roles rather than specific user bases. The same person may act as a producer and consumer but will perform only one role in a particular interaction.

Value. The concept of value created on the platform is one of the most important concepts.

On a platform like Facebook, the status updates and other content create value. On Etsy, the goods listings act as inventory. The supply of value on TaskRabbit refers to the availability of service providers. On a data platform like Nest, the data captured by the thermostat creates the supply of value. The platform must balance the creation of an open, participative system with the need for quality control and relevance.

To enable open participation, the platform must create channels by which producers and consumers can plug in to the platform. Channels may involve websites and apps, but they may also involve distributed access mechanisms like widgets, browser plug-ins, and share buttons or the provisioning of APIs and SDKs. More importantly, channels may even refer to other forms of access, including channel partners who help certain kinds of producers and consumers participate. The sales force is a channel that helps merchants plug in to Groupon.

Access Control For Producers. The platform must create checks and balances that determine what kinds of producers are allowed and which types of production actions can be encouraged. It is important to note that access control may be designed to apply to both platform access and post-access rights. Wikipedia allows platform access but controls access at the level of post-access rights. Access control mechanisms may be editorial, algorithmic, or even social.

Filter Creation For Consumers. The platform must invest in the creation of consumption filters that ensure that content served to the consumers is highly relevant to them. To create filters, the platform must acquire data on an ongoing basis.

Across the interaction, the platform should provide the following:

Tools And Services Of Creation. This may constitute explicit specialized creation tools for producers, such as SDKs and content creation interfaces. Not all platforms require specialized creation tools. Platforms that enable the exchange of virtual goods (content) and remote services typically have the most sophisticated tools of creation.

Tools And Services Of Curation And Customization. This details the features, functionalities, and services that enable curation and customization on the platform. These may constitute in-house or partner-driven services as well as internal or external algorithms and social feedback mechanisms.

Tools and services of consumption.This may involve the set-up of consumption interfaces, newsfeeds, external widgets, and other such consumption tools, that serve value to consumers. It may even involve static interfaces. For example, an answer from Quora published in the Forbes magazine is an additional consumption outlet for value created on the platform.

The last step of building out the platform canvas focuses on value capture by the platform. This involves two factors

Currency. First, in every interaction, the consumer pays the producer using some form of currency. This currency may be money, but it may also be attention, reputation, influence, or some other form of non-monetary currency.

Capture. Finally, the platform must ensure that it captures value in some fashion.When actual money is exchanged through the platform, the platform may capture a cut of the transaction. If not, the following are five other ways in which the platform may capture value:

1.Charging one side to access the other

2.Charging a third party for advertising

3.Charging producers and consumers for premium tools and services

4.Charging consumers for access to high-quality, curated producers

5.Charging producers for an ability to signal high quality

MULTI-SIDED PLATFORMS WITH MULTIPLE INTERACTIONS Some platforms focus almost entirely on enabling one core interaction, but many platforms have more than one interaction. These platforms enable edge interactions around the central core interaction. The architecture of these platforms must evolve one interaction at a time. Starting with the core interaction, the platform canvas may be used to lay out the architecture of the platform. Once the platform is architected to enable the core interaction, the canvas may now be leveraged to lay out an edge interaction. In all likelihood, the edge interaction leverages some part of the core interaction and thus benefits from platform elements that have already been laid out. In addition, the value captured in the core interaction may be leveraged in the edge interaction and vice versa.

LinkedIn’s core interaction involves the connection and interaction of professionals with each other. An edge interaction allows recruiters to target professionals with jobs.

In general, designing the platform around the core interaction fleshes out most elements that the platform business must have. Additional elements may be designed on top of this by visiting each interaction in turn and building out the incremental components required to enable the same.

The business architecture of the platform (see Figure 17a) starts with the following questions:

1.What is the core interaction that the platform enables?

2.What is the unit of value created on the platform such that, without it, the platform has little or no value? What is the supply or inventory created on the platform?

3.Who are the producers of value? What motivates them to produce?

4.Who are the consumers of value? What motivates them to consume?Once the core interaction is laid out in relation to the platform, the plug-and-play nature of the platform needs to be designed (see Figure 17c):

5.What channels are used by producers to create value on the platform?

6.How does the platform manage access control for producers on these channels? What are the rules of access?

7.What channels are used by consumers to consume value from the platform?

8.What filters does the platform need to serve relevant content to consumers and to connect them with relevant producers?The third phase involves the definition of platform tools and services (see Figure 17e):

9.What tools and services should the platform provide to enable the interaction?

What creation tools and services should the platform provide?
What curation and customization tools and services should the platform provide?
What consumption tools and services should the platform provide?
How do these tools and services help the platform to 1) pull, 2) facilitate, and 3) match? The final phase of platform architecture involves value capture (see Figure 17f):
What currency does the consumer provide to the producer in exchange for value?
How does the platform capture some portion of this currency for itself? The canvas should first be laid out for the core interaction and subsequently for all edge interactions. Leveraging the 15 questions above, platform builders can design and architect a platform business centered around an interaction. For a platform with multiple interactions, the same process is repeated for the edge interactions after the core interaction has been designed.

emergence. A small set of micro-level rules gives rise to macro-level movements on emergent systems. Larger outcomes emerge as a consequence of these seemingly insignificant actions.they must allow for emergent behavior, some of which may redefine the architecture and lead the platform in an entirely new direction.

Tools and Rules The tools (and services) that a platform provides involve the infrastructure of the platform. The video uploading and hosting capabilities on YouTube are examples of tools. The rules are baked into the platform and lay out the boundaries of user behavior. The 140-character limit on Twitter is an explicit rule. A more implicit rule is the search algorithm on Airbnb that determines which listings show up on the first results page for a query. These are the boundaries of platform control. A platform may build out the technology (tools) and structure the constraints and algorithms that facilitate behavior (rules), but none of this guarantees success with the platform. Success can be planned for but not guaranteed.

The Interaction Unless users come on board and interact with each other, the platform will remain a ghost town.

The Experience Producers and consumers participate on a platform repeatedly if they get value out of using it.

While the interaction lays out the structure of value creation, there are various reasons that different users may use the same platform. The same interaction structure may yield different experiences. This is usually determined by the nature of the core value unit on the platform. Some users use YouTube for education, while others use it for entertainment. Different use cases may be powered by the same interaction structure

The inside-out perspective must be complemented with the outside-in perspective. The structure of tools and rules should be balanced with an understanding of producer and consumer motivations and the job to be done for both roles.

To understand, identify, and plan for emergence, the platform manager should lay out the job to be done for both the producer and the consumer, and should constantly monitor the platform for new behaviors and use cases emerging on it.

In hindsight, Twitter’s 140-character limit is a brilliant rule, as it enables more people to participate because of the much lower investment required to create content.

You know you have a platform when the users can shape their own experience – not just accept the maker’s ideas” — Jeff Jarvis

Experiences that prove rewarding are repeated more often in the interaction layer.

CASE STUDY: TWITTER

Hashtags are clickable and reorganize the feed.

What you get is determined by who you follow.

The stream is reverse-chronological (though it now allows for threading). 6.Favorites, retweets, and mentions will drive notifications.

The TRIE framework also demonstrates that the problem of feature creep has much larger implications in the case of platforms.

Repeatable and efficient interactions hold the key to platform scale. Repeatability involves ensuring that: 1.All actions in the interaction are executed smoothly. 2.The feedback loop in an interaction is executed so that it kickstarts the next interaction organically.

Six Elements Of Execution : To execute toward platform scale, the following elements must be in place:

1.Choice of the overall interaction space. The organization of producers and consumers around an interaction determines their motivation to participate in these interactions.

2.Production incentives. Producers must be appropriately incentivized to participate repeatedly.

3.Building long-term cumulative value. Platforms must ensure that participants – particularly producers – find long-term value in participation, value that scales as producers participate repeatedly on the platform. A platform that becomes more valuable with usage will attract greater usage.

4.Strong curation mechanisms and trust. All participants must be encouraged to repeatedly participate by ensuring that the platform rewards quality and mitigates risk.

5.Strong filters and relevance. Consumers should be able to find items of relevance with minimal effort and risk.

6.Ownable interactions. The platform should be able to own interactions sustainably and create enough value to prevent off-platform collusion among producers and consumers.

Understanding how users interact in physical space helps in building out the physical space that helps such users interact most efficiently. Platforms must build virtual interaction spaces

The creation of virtual interaction spaces follows the same set of principles that guides the creation of physical interaction spaces.

Six different forms of interaction drivers are commonly observed in physical and virtual interaction spaces: •

Connection. Participants in an interaction must have a pre-existing relationship before they can interact. Families are organized around this principle. Social networks like Facebook and LinkedIn are organized in this manner.

Content. Participants in an interaction interact through the creation and consumption of content, without any prior relationship requirements. Shared interests rather than participant relationships drive interactions. Special-interest clubs and city walking tours work on this principle. Platforms like Medium and YouTube as well as marketplaces like eBay and Etsy are structured around content.

Clout. The interaction space is structured such that certain participants – typically producers – drive interactions across multiple other participants because of their greater influence. Conferences are structured around this organizing principle. Twitter works on a clout-based model, but so do producer-driven marketplaces like Udemy.

Coordination. Interactions arise from a set of instructed actions that coordinate participants toward an outcome rather than deriving from existing relationships, influence, or shared interests. Open workshops, especially those targeted at a mixed audience, work along these lines. Wikipedia, Viki, and Quirky are examples

Competition. Interactions may be dominated by competitive moves among participants. Racing events may seem like an obvious example, but long-term urges to keep up with one’s neighbors are also governed by these principles. 99Designs is a platform that allows designers to bid competitively on design projects. Many crowdfunding platforms are organized under this model.

Culture and code. Certain interaction spaces may be structured entirely around a shared culture and code. The exchange of content, development of influence, coordination of work, and the creation of relationships are all subservient to the shared culture and code. Cults and movements organize themselves along these lines.

CONNECTION

Social networks like Facebook and LinkedIn are organized in this manner.

Unlike eBay or Airbnb, where the listing to be transacted takes precedence, a connection-based marketplace is organized around user relationships.

Users transact with people they already know.

CONTENT

Platforms like Medium and YouTube as well as marketplaces like eBay and Etsy are structured around content

CLOUT

Twitter works on a clout-based model, but so do producer-driven marketplaces like Udemy.

Clout may be explicit, as in the form of a Twitter following or a StackOverflow badge. Clout may also be implicit, where highly reputed users may receive greater exposure on the platform algorithmically.

COORDINATION

Wikipedia, Viki, and Quirky are examples of platforms that are structured around the coordination of different types of producers toward a common goal. B2B supply networks are also structured around coordination mechanisms and will increasingly benefit from platforms with interaction spaces designed around coordination mechanisms.

coordination mechanisms invariably rely on a reputation management system to ensure that users are accorded rights and access on the basis of their reputation, derived from past activity on the platform.

COMPETITION

99Designs is a platform that allows designers to bid competitively on design projects. Many crowdfunding platforms are organized under this model.

competitive mechanisms work best in scenarios where participants can compete with minimal investment to cap the losses incurred by those who do not win. If participation costs are high, participants who lose often may gradually become discouraged from participation, reducing the efficacy of such an interaction space.

CULTURE AND CODE

Very few interaction spaces start centered on culture alone

Reddit and HackerNews are functionally organized around content and clout but are well known for their strong, insular culture.

Less than 1% of users on Twitter have more than 10,000 followers. These interaction spaces scale by bringing high-quality producers on board and constantly nurturing and incentivizing them to increase their participation on the platform.

Quora is another example of a platform based on a combination of interaction drivers. While the core interaction is centered on content (questions and answers), the mechanism of answers being upvoted and gaining greater exposure is based on competition. Its virtual currency (credits), combined with the ability to develop a user following, enables the development of clout on the platform. Users can collaboratively suggest edits to improve answers. Finally, it also allows some level of connection, allowing users to connect directly and exchange messages with each other.

Understanding producer and consumer roles and catering to them individually is important for driving interactions on the platform. To execute toward platform scale, every platform needs to: 1.Understand the motivations of the producers. 2.Create enabling technology that caters to those motivations.

3.Have a clear strategy to maximize the number of producers on the platform and the frequency of their participation

Platforms that provide producers with both tools and access often beat platforms that provide only one of the two.Instagram created a thriving community around such photos, thereby providing tools as well as access. WordPress provides superior tools to producers, but Medium provides tools as well as access

Facebook provided access to an audience while Flickr provided only hosting tools. WordPress provides superior tools to producers, but Medium provides tools as well as access. In a networked age, access constitutes much of the value proposition. Platforms that offer producers only tools may be disrupted by those that provide access as well

Platforms that make creation easy and allow users with lower skills to create high-quality creations may achieve higher traction. The number of people who tweet is much higher than the number of people who blog.

Similarly, Instagram lowers the level of skills required to create beautiful pictures, a factor that led to its widespread adoption.

The platform should have a robust model to separate the bathroom singers from the award winners.

Algorithmic curation. The key ingredient of a scalable model of curation is the algorithmic detection of good versus bad, based on certain rules. While algorithmic curation is highly scalable, it may also lead to false positives and reject good creations, similar to a spam filter erroneously capturing legitimate email and classifying it as spam. Hence, it should be scaled carefully and constantly “teach” and optimize itself with social and editorial inputs.

Social curation. Social curation leverages the networked and distributed nature of platforms. The community of consumers is provided with tools (such as voting, rating, and flagging tools)

Editorial curation helps in understanding patterns that can then be automated and scaled. In some cases, editorial curation can even be used to kick-start the platform when there aren’t enough producers on the platform. Quora, the popular community-driven Q&A platform, has employed editorial resources in both forms. In the early days of the platform, editors would ask and answer questions to generate activity.

If the mechanism of ranking high and gaining visibility is unclear, producers may not be motivated to participate on the platform. Platforms often struggle to ensure democratic exposure for all producers. Those who join early get to the top faster. Early Twitter and Pinterest users succeeded in building massive followings. Producers who come in later have a greater problem being discovered. The platform must ensure that all users, regardless of when they join, find equal opportunity.

While marketplace platforms allow producers to earn money and run businesses, most other platforms do not provide content creators with monetary benefits.

In its initial days, a platform must focus on attracting producers. But once a minimum number of producers are on board, a second cycle must be started: the platform needs to convert consumers into producers.

Producers coming on board attract consumers, and consumers, in turn, are converted to producers. This ensures that the platform constantly scales the number of producers on board.

How Does The Platform Communicate Feedback From Consumers Back To Producers?

Feedback may take various forms. Producers on Twitter get explicit feedback in the form of retweets and favorites. Sellers on marketplaces may receive ratings and reviews that help them stand out for future transactions. Communicating feedback from consumers to producers is the single most important driver of sustainable and repeatable interactions on the platform.

Production interfaces and technologies should be built not with a feature-centric approach but with the intent to lower the barriers to participation in the core interaction. To ensure repeatability of the core interaction, producers should be able to participate in it with minimum effort.

The Skill Barrier

Instagram lowers the skill barrier required to create beautiful photographs that once required Photoshop prowess.

The Time/Effort Barrier

Twitter lowers that barrier and enables publishing with a very low investment of time and effort. Medium helps more serious writers build an audience while simplifying the writing interface and the act of finding an audience.Platforms that abstract all non-core activities for producers and act as true plug-and-play infrastructures succeed in attracting more production activity.

The Investment Barrier

platforms allow producers to obtain market access without commensurate investment.

Dribble, Behance, and other designer-focused platforms gained traction with the democratization of design software and the associated rise in freelancing among designers.

Uber offers benefits and vehicle purchase schemes to drivers who want to buy a new car and start participating on Uber.

The Resource Barrier

It is much easier to start a business in 2015 than it was in 1995. One of the most important reasons is the significant reduction in the amount of resources required to get a business up and running.

Today, the power of the network effect is fading. The network effect isn’t the one-stop solution for repeatable interactions that it once was.

Platforms with network effects often benefit from a winner-takes-all dynamic. The winner usually aggregates all producers and consumers onto one platform because of ever-strengthening network effects.

There is, however, a small caveat: the consideration of multihoming costs

In the world of platforms, this notion is an important one. If producers and/or consumers can co-exist on multiple platforms, the platform faces a constant competitive threat.

Users stick to Facebook or LinkedIn because they’ve invested in creating their personal network of connections.

Two shifts have brought about a rapid decline in multihoming costs. First, the rise of the social graph allows users to port their personal networks between different platforms.

The network effect isn’t quite as effective at retaining producers and consumers as it once was. Today, platforms need additional mechanisms to ensure that their best producers and consumers stick with them and continue to participate.

Platforms achieve this today by creating “cumulative value”: value that scales as the producer/consumer uses the platform more often.

Cumulative value doesn’t merely encourage repeatable interactions; it increases the repeatability of desirable interactions. By design, it scales the participation of the best producers and consumers on the platform.Cumulative value takes four forms.

Reputation

Reputation may take the form of explicit reputation, based on ratings and reviews, or implicit reputation, which does not have an explicit manifestation but is leveraged by a platform’s algorithms to promote or demote a producer based on past actions

Some platforms may even create a reputation based on editorial curation and vetting at the time of sign-up.

Reputation increases multihoming costs because it’s difficult for producers to build reputation on multiple platforms.

First, platforms that utilize a one-sided follow model enable producers to gain influence by building a loyal and engaged following of consumers

Influence may also be created through a second mechanism. Platforms like Wikipedia and StackOverflow give producers access to new rights on the platform as they participate more. The best producers acquire higher creation and moderation rights on these platforms.

Collections A third source of cumulative value comes through allowing producers to create a collection. Photographers and designers use platforms like 500px and Dribbble to showcase their portfolios. Writers may use Medium to showcase theirs someday. A larger collection creates increasingly higher feedback for a producer.

Learning filters

The Facebook newsfeed understands a consumer better over time and becomes more relevant. These feeds are based on learning filters that constantly seek input from the user’s explicit and implicit actions and refine themselves

Friction is often considered undesirable.

friction can also serve as a source of value by discouraging the repeatability of undesirable interactions.

Getting friction right is critical to the success of any plug-and-play architecture.

Friction is a good thing only if it increases the repeatability of desirable interactions and decreases the repeatability of undesirable ones.

A platform may constantly need to juggle the quality of interactions with the number of interactions.

Some platforms may avoid friction entirely. This is especially true for platforms with low interaction risks. For instance, Instagram’s adoption was driven by low friction in usage.

Craigslist enjoys strong network effects because it extends across categories with low as well as high interaction risks. The platform allows anyone to post a listing, without appropriate checks and balances. While the lack of friction may work very well for low-risk categories and encourage interactions there, it may lead to undesirable and dangerous interactions in high-risk categories.

Embracing friction with scale Quora has been increasing participation friction as it scales in a way that encourages quality on the platform. Anyone could ask a question in its early days, but asking a question on the platform now requires the user to pay in Quora credits. Promoting a question or answer on Quora may also be accomplished using Quora credits. As the platform has gained further traction, it has gradually embraced a higher level of friction. Content promotion increasingly requires more credits than it once did.

Friction as a source of superior signaling Friction may also lead to better signaling.

The following is a non-exhaustive list of design questions to consider while introducing friction onto a platform.

Does the friction affect one side or both? Does friction on either side add value to the other side? Does friction on either side deplete value for the other side?
What are the sources of friction? Do they improve quality and help with signaling?
Does friction increase the repeatability of desirable interactions?
Is the interaction high- value or high-risk?

SAMPLING COSTS The Failure Of Social Curation System

YouTube and Quora enable the community to curate content through upvotes/downvotes and the ability to report abuse. Airbnb and Uber leverage social curation to determine the quality of participants on the platform.

For all its benefits, social curation has its limitations. Social curation requires effort on the part of users. Platforms may fail when users either refuse to curate or are unable to judge quality well. Both these scenarios arise as a result of high sampling costs

Unlike retail sampling, social curation goes a step further and aggregates these inputs to create: 1. Social proof for new consumers to base their decisions on : The number of upvotes may help a user decide which answer to read first for a question on Quora. Higher ratings invite more business on TripAdvisor

Quality scores for ranking algorithms :Votes on an article determine where it shows up on the Reddit home page; 3. Feedback loop for the producer :Social curation allows producers to gather feedback. Photographers use 500px and designers use Dribbble to gather peer feedback.

Finding new artists to listen to by sampling a random assortment of artists is time-consuming. Rummaging through YouTube is equally time-consuming.

Instead, choosing whom to follow on Instagram by sampling twenty photos in the feed is much more efficient.

The cost of sampling an online course is much higher than the cost of sampling photos.

As interaction risks increase, editorial control becomes increasingly important. When hosting content and services with high sampling costs, platforms often introduce additional friction to ensure quality through editorial checks

Healthcare and banking/lending have very high sampling costs and rely on editorial control to a greater degree. A default on a loan is much more damaging than an irrelevant search result on a content platform

social curation tends to be more inefficient on platforms with higher sampling costs.

Not all user feedback is useful. A platform may often benefit more from the opinions of a few users than from that of the entire user base. Agoda allows only users who have already booked and stayed at hotels through them to rate those particular hotels. This prevents users from entering false reviews, a problem that is often associated with TripAdvisor. Agoda’s social curation system is designed to manage curation rights.

Kick-Starting Social Curation Systems Social curation doesn’t kick-start on its own

Platforms like Quora and Medium have succeeded in building highly effective social curation systems by starting editorially and building a culture of quality on the platform. The creation of culture is especially important when sampling judgment is subjective. Decisions to downvote answers on Quora can be subjective.

To avoid rampant downvoting or the lack of it when needed, users need to be made aware of the do’s and don’ts of down-voting. They need to be invited into a culture that encourages or discourages certain types of downvoting. In its early days, Quora editors and administrators handled a lot of curation. As the community grew and took over the curation, the editors scaled down. In all such transitions, building reputation systems to differentiate good curators from bad ones helps to scale curation. Wikipedia built out a virtual hierarchy of editors in a similar fashion. Medium started as an editorially managed platform and today has a large distributed editorial workforce built across its user base. These user-editors own and manage collections of articles across the platform and manage the writers’ access to readers.

Trust Drives Interactions

Trust is a critical factor in enabling interactions on platforms.

To understand trust, it is helpful to understand the evolution of trust as a driver of market interactions

The 7c’s of trust – Confirmed Identity, Centralized Moderation, Community Feedback, Codified Behavior, Culture, Completeness, Cover

Confirmed Identity

Lyft riders link their accounts to their Facebook profiles. Tinder and a whole range of other social platforms require users to sign up through Facebook Connect. Airbnb confirms a listing by sending out photographers to a specific apartment.

Centralized moderation is the first line of defense for building trust. In its early days, every platform uses centralized moderation in some form

Moderators also reach out to guests who are flagged as posing the greatest property-damage risk. The platform looks for signals for guests that potentially pose a risk, such as first-time renters booking high-end listings

Instagram, Twitter, and other social content platforms have community managers to help moderate the content. Centralized moderation is the simplest method to implement trust in the early days of the platform, but it is also the least scalable source of trust creation.

Community Feedback Community feedback is by far the most scalable mechanism for creating trust.

On Fiverr, where all prices are standardized to $5, community feedback is the single most important decision making factor for a buyer.

Codified Behavior Codified behavior involves the implementation of implicit rules in the workings of the platform.

These rules may be baked into the platform in the form of algorithms that implement checks and balances on user actions. They may also manifest themselves as small cues on the user interface that encourage a user to take certain kinds of actions.

Centralized Moderation, Instagram, Twitter, and other social content platforms have community managers to help moderate the content. Centralized moderation is the simplest method to implement trust in the early days of the platform, but it is also the least scalable source of trust creation.

Codified Behavior, Airbnb algorithmically blocks messages between hosts and guests that include the words “Western Union.” If a certain host and guest repeatedly book rooms with one another, they may be identified as a scam to build a reputation based on fake reviews.

Culture, often overlooked by developers, can have a significant impact in building trust

Lyft’s motto – “Your friend with a car” – encourages riders to converse with drivers and sit in the front seat as a friend would. Airbnb hosts do not simply provide accommodations; they also create a local experience when hosting the guests in person

Completeness,LinkedIn builds trust by encouraging professionals to complete and frequently update their resumes and the world’s largest professional database.

Airbnb hosts do not simply provide accommodations; they also create a local experience when hosting the guests in person

Cover,or insurance, is the final contributor to trust on the platform.

Cover works similar to a product guarantee: if the interaction does not work as expected, the platform covers the loss. Uber and Airbnb encourage producers to participate by offering them cover against undesirable situations.

Platforms must define interaction failure scenarios and track metrics that help to determine the degree of interaction failure on a platform. Freelancers who don’t get business within X days, requests that don’t get satisfied within Y minutes, and products that aren’t liquidated within a certain period may all be indicative of interaction failure.

When The Ecosystem Avoids The Platform

Most such platforms cannot facilitate a transaction before the buyer and seller meet and discuss the scope and terms of service. However, connecting the buyer and seller often encourages off-platform collusion, in which the buyer and seller take the transaction off-platform to avoid the transaction cut that the platform charges.

Encouraging repeatable interactions isn’t useful unless the platform can own the interaction and prevent off platform collusion.

Platforms that enable the sale of products (such as eBay and Etsy) or standardized services (such as Uber and Airbnb) do not require the buyers and sellers to discuss before transacting. These products and services are highly standardized, and the buyer can make a purchase decision based on the information available in the listing.

When hiring a freelancer on a freelancer platform, the client must define requirements and potentially interview freelancers. Once the end users know each other, they can potentially connect directly on LinkedIn or other networks, thus avoiding the platform cut. Connecting buyers and sellers directly before charging the transaction cut weakens the platform’s ability to capture value. The party that is charged the transaction cut is motivated to abandon the platform and conduct the transaction off-platform

on platforms like TaskRabbit, a client may want to continue using the same plumber for subsequent interactions once he finds a good one. Every time the platform enables a successful interaction, it is reducing its repeatability, as the client and the service provider can connect off-platform for subsequent interactions. This is a challenge that is not necessarily faced by Airbnb or as most travelers are unlikely to travel to the same city every time and will need to discover new accommodations. This is not a problem for a platform like Uber, either, as travelers care more about waiting time than about riding with a specific driver

forms that fail to extract the transaction cut often resort to a lead-generation, paid placement, or subscription based revenue model.

Dating websites and B2B platforms work on a subscription-based model while several financial comparison engines work on a lead-generation model. However,lead-generation models are attractive only at very high levels of activity, and subscription-based revenue models make the chicken-and-egg problem worse than it already is. A monetization model that involves extracting a cut from the buyer–seller transaction requires a mechanism for owning the end-to-end interaction. To own the interaction, platforms must create more value than they capture.

Exchange tracking tools

Clarity connects advice seekers with experts

Clarity provides additional call management and invoicing capabilities that help to capture the transaction on the platform. Since the call management software manages per-minute billing, advice seekers have the option to opt out of a call that isn’t proving useful. For the experts, the integrated payments and invoicing provide additional value.

Perhaps we don’t give them news but snippets of news and articles which allows us more control on what we show

Workflow management tools Upwork allows clients to manage the work being done by freelancers.Since most freelancers charge by the hour, Upwork provides time-tracking software and constantly monitors freelancers’ work by taking regular screenshots of their screen to ensure that they are working as required.

Reputation as a source of value Some platforms may not allow service providers to gather a rating unless the transaction is executed on the platform.

Design Principles

The workflow tools should create additional value for both sides, not just for one. This prevents either side from abandoning the platform for the transaction. 2.The tools should reduce friction in the interaction. 3.The interaction management tools should feed back into some form of on-platform reputation. Reputation is an added source of value that ensures stickiness on the platform. Clarity calls are followed by a request to rate the other side. Over time, the rating increases the discoverability of an expert on the platform

Chicken versus egg

The solution to the chicken and egg problem requires a bait that can break the vicious cycle of no activity.

The first and most important step in the creation of network effects is crafting a sustainable solution to the chicken-and-egg problem.

The problem can be reduced to the following pattern: Problem. How do I get producers and consumers, given that Condition 1. I need producers to get consumers, and Condition 2. I need consumers to get producers? If the two roles are not too distinct (e.g. Skype), the pattern may simply be stated as: Problem: How do I get users, given that: Condition 1: Users will not come unless there is value in the platform, and Condition 2: There is no value in the platform without having users on it?

Positive Feedback. Once a starting point to the loop is created, it is set in motion through a positive feedback loop.

the longer a network takes to reach critical mass, the longer it has to grapple with this problem

Getting The Harder Side In First.

Content platforms find it harder to attract content creators, compared to consumers. Hence, the platform needs to figure out a model that incentivizes the harder side to join in.

On-Boarding Of Two Distinct Markets

Uber : Serving two-sided markets requires reaching minimum traction on both sides. Hence, two-sided markets require building two companies, often with completely different challenges, not just building two forms of behaviors among users.

Five Design Principles For Solving Chicken-And-Egg Problems

Finding A Compelling Bait To Start The Loop.The first step in breaking a vicious cycle is to find an inorganic bait that attracts and hooks one of the two roles without the need for the other role being present.

Ensuring There Is No Friction In The Feedback Loop.

If producers come in first, the platform should make it easier for the consumers to follow suit, and vice versa. This works best when the first role is organically incentivized to bring the second role on board.

As an example, project creators host their projects on Kickstarter and subsequently spread the word about their project among their followers and friends. A virtuous cycle of producers bringing in consumers – some of whom then become producers – is set into motion.

Minimizing The Time It Takes For The Startup To Reach Critical Mass.

Facebook’s launch at Harvard University, and subsequently in similar closed markets, ensured that critical mass was reached a lot faster than the many Myspace copycats that were launching globally around that time.

Incentivizing The Role That Is More Difficult To Attract.Some user types may require more incentive to be pulled in.

Staging The Creation Of Two-Sided Markets.In

OpenTable used this strategy to get restaurants on board by providing restaurant management software (the bait) before any consumers signed up. Conversely, Megaupload seeded content (the bait) on its site to attract consumers on board, and subsequently, converted some consumers to producers of content.

How do I get initial users to start using my platform when there is no activity on it? One of the ways of solving this problem is to ensure that the first launch of the platform has a ‘standalone mode’. Essentially, a user should be able to derive value out of it even when other users are not on it.

OpenTable (and subsequently, other service booking systems) was one of the first platforms to execute this successfully. Entering a highly fragmented market (restaurant), the company distributed booking management systems, which the restaurant could use as standalone software for managing table reservations. This enabled OpenTable to aggregate table inventory, and real-time data on table availability, across restaurants. Once it had enough restaurants on board – and, hence, access to their seating inventory, as well – it opened out the network to allow consumers to start booking tables at participating restaurants.

In OpenTable’s case, the standalone model also provides additional revenue streams for the business, in addition to the lead generation fee that it charges for customer reservations.

RedBus, an Indian bus-booking platform, and one of the biggest success stories from South Asia, used a similar approach to create a comprehensive database of real-time seating inventory across buses. Bus operators would use the standalone reservation management systems to manage their business. With enough operators on board, redBus opened its ticketing solution to consumers and created a thriving platform to aggregate a highly fragmented and inefficient industry.

Delicious Approach To Curation

Tools like ScoopIt and PaperLi allow users to reorganize existing content into new consumption formats, like magazines, newspapers, and boards. The subsequent goal for many such ‘tools’ is to enable a thriving community on top of the content that is created and develop competitive advantage through network effects

Flipboard provided a compelling consumption interface for consuming content on the iPad. It delivered this through a unique magazine format for the tablet interface. Once it gained enough traction, it allowed users to start creating their own ‘magazines’ on Flipboard, simply by flipping’ content from another magazine. Unlike the other curation-as-creation platforms above, Flipboard’s content universe is closed within the Flipboard platform, and users cannot (yet) flip content in from outside Flipboard, but the principle of launching a network on top of a standalone tool remains the same

Mint.com is a platform that enables users to gain insights into their finances, helps them benchmark themselves against peers and connects them with relevant financial products, based on their individual financial profiles.

The platform approach allows Mint to offer its standalone value for free, thereby disrupting earlier competitors that required users to pay for the standalone value of personal finance management.

From Social Graphs To Commercial Graphs – Powered By The Standalone Mode

Software as a service (SAAS) providers like Tradeshift, SPS Commerce, and Procurify are powering the first few instances of the commercial graph today.

1.Provision Of Tools. At the outset, they provide invoicing and procurement software to enable companies to manage their network interactions better. As the companies interact through the software, interaction data is captured. This may include explicit data about interaction between companies, but it is more likely that this will include implicit indicators like the turnaround time on a request.

2.Provision Of The Standalone Mode. Data is aggregated and packaged as analytics for every individual company. Every business can track suppliers that regularly default or buyers who fail to meet contractual requirements

3.Provision Of Implicit Network Benefits. Commercial graphs use interaction data between companies to create a reputation score for every company.

4.Creation Of A Platform With Explicit Network Effects. Finally, the reputation layer provides visibility into the reputation of suppliers and customers outside one’s network. This enables companies to find new partners and suppliers that outperform their existing partners and suppliers on certain parameters

A general rule of thumb while creating a standalone mode is the following: The standalone mode, for producers, should encourage the creation of value units on the platform, which can then be used to pull in the consumption side.

How Paypal And Reddit Faked Their Way To Traction Case Studies In ‘Growth Faking’

Initial adoption was significantly driven by the fact that the platform allowed pirated content to be hosted. If you wanted to watch the latest episode of a sitcom for free, YouTube was your best bet. This strategy worked for a while, but being involved with pirated content was always likely to result in problems. Megaupload went under when it was alleged that the provisioning and hosting of pirated content was a deliberate part of the platform’s strategy. Faking initial supply may often serve as the bait needed to kick-start network effects.

The in-house team acts as a substitute for the producer side of the platform. First-time consumers get the impression that the platform is already in business, and continue participating. Over time, the user base grows, users start contributing themselves, and the platform sustains activity without having to fake it. There are three broad approaches to faking traction:

Seeding And Weeding Dating platforms often simulate initial traction by creating fake profiles and conversations.

Marketplaces may also showcase fake activity, initially, to attract buyers or sellers. Early on, a common tactic is to show top transactions of the day or most recent transactions – to signal high activity – even when very few transactions are taking place on the platform.

Faking usually works only for the first player in a new category. As a late entrant to a category that already boasts players with strong network effects, faking may hurt the platform, instead of helping

Seeding Demand The book, PayPal Wars, talks about how PayPal converted a base of eBay sellers, into PayPal users, by faking buyer-side demand for the service.

The company created a bot that would buy goods on eBay, and insist, as a prospective buyer, on paying for those goods using PayPal. Not only did sellers come to know about the service, they rushed onto it, as multiple bots, masquerading as buyers, insisted on using the same service, thereby creating an illusion of ubiquity. The fact that it reduced friction compared to every other existing payment mechanism

Seeding Supply

Lending marketplaces like Australian startup, Rentoid.com, seeded initial activity when the founder himself bought products as they were requested and lent them out to users. In its early days, oDesk hired a captive group of service providers to guarantee service provision and attract an initial set of clients. It subsequently used that initial traction to attract freelancers and set off the virtuous cycle of increasingly attracting more of both demand and supply

Use User – Facing Tools And Workflows While Faking It Even if an editorial team is employed to fake initial activity, the team should focus on using the same tools that the users would eventually use.

Fake It Well Dating communities do not fake it much anymore, but it was not uncommon to see a whole community of models ‘hanging out’ on dating websites

It is equally important not to indulge in any unethical behavior while faking traction.

Encourage Behavior That Is Desired On The Platform

Reddit cofounder, Steve Huffman, has gone on record stating that the link-sharing platform was initially seeded with fake profiles posting links to simulate activity. The links were posted by fake profiles and the vote counts assigned, to indicate activity, were fake as well. This fake activity was based on one principle: to ensure the seeding of content that the founders wanted the community to eventually discuss.

all attempts at faking supply – or even demand – should be executed carefully. When not done well, fake activity may destroy users’ trust in the platform and wreck it before it even gets started

Every Producer Organizes Their Own Party

Designing your platform so that your producers can bring along consumers helps to solve the chicken-and-egg problem,

This strategy works when the following design considerations are satisfied

The platform offers a compelling organic incentive for producers to bring consumers onto the platform. The ‘off-platform’ influence and following of the average individual producer is significant enough to attract a large number of consumers to the platform. The platform allows producers to interact with their followers (consumers) in a much more efficient way than currently allowed by alternative channels.

Kickstarter allows project creators to raise funding from their connections and followers. Skillshare allows teachers to teach a course to their followers (and subsequently others). These ‘follower harvesting’ use cases offer compelling incentives for producers to bring in their following.

From Loyalty To Markets

Merchants may use loyalty platforms to offer discounts to their existing customer base.

In turn, these customers stay more engaged with the merchant. As a result, merchants see value in promoting the consumer-facing applications among their customer base. As a result, every individual merchant brings their existing customer base onto the loyalty platform

The ‘vote Me Up’ Contest Gone Viral

Early traction on YouTube suggests that the platform conducted contests among its user base, asking creators to create videos. Creators were then encouraged to invite their friends to ‘upvote’ these videos. The videos with the maximum upvotes would win a prize.

Attracting a marquee tenant, by offering prime real estate helps to attract consumers to the mall, subsequently exposing them to smaller merchants as well This strategy works equally well for kicking off network effects on digital platforms.

The Ladies’ Night Strategy

Many dating platforms offer inorganic incentives to women to get them on board

Without appropriate curation, some of the most active members often tend to be the most undesirable ones: stalkers and spammers. CupidCurated tries to solve this by letting ‘real women’ curate the membership and determine the men who are allowed to register on the platform

On Sittercity, parents – consumers on the platform – pay a subscription fee for access to a curated list of babysitters.

Platforms that facilitate high-risk interactions often find it more difficult to attract the side that bears the risk of participating in the interaction. These platforms need to rely on one of two strategies. They can initially incentivize the side that is more difficult to attract, much like the Ladies’ Night strategy used by bars and pubs. However, to sustainably encourage high-risk interactions, these platforms must invest in curation, and must signal high-quality supply to the demand side. Solving the chicken-and-egg problem on such platforms requires solving quality control issues rather than gunning for a critical mass of users.

The Platform Is The Producer

Unlike the ‘fake-it-till-you-make-it’ strategy, the platform owner explicitly declares their role as the producer.

Apple, acting as a producer on its platform, launched the iPhone with a few apps,

platform seeking to match service providers with consumers.

Step 1. Source supply proxies Supply proxies are data points that represent true supply but which are not created by the producer. The platform, hence, does not own the supply side yet. Instead, it intends to have producers come in and claim their supply proxies, eventually creating true supply on the platform.

Step 2. Provide a superior interaction experience. The platform does not simply act as a directory of service providers. It provides a superior producer-consumer interaction – discovery, navigation, personalisation

Step 3. Gather consumer activity

The Challenge Of Horizontal Reputation Systems Craigslist is a horizontal platform, a one stop source for listings across categories. This compounds the problem of setting up a reliable reputation system. Trust and reputation tend to be very contextual. Factors that contribute to reputation in one interaction or use case may be irrelevant in another.

Airbnb famously leveraged Craigslist to solve its chicken-and-egg problem. It allowed hosts to post their listings to Craigslist and directed travelers back, from Craigslist to Airbnb, for the transaction. Additionally, it also lured sellers on Craigslist to list on Airbnb, offering a better transaction experience

Starting With Micro Markets A Leaf From Facebook’s Playbook

An enduring principle for growth on platforms is the following: Start with interactions and scale interactions

As far as network effects are concerned, small user bases with thriving interactions trump large user bases with low activity.

Etsy, a niche marketplace for arts and crafts, figured an elegant solution to this problem. Etsy is a two-sided market of buyers and sellers. The founders of Etsy, who had earlier built thriving forums and communities for arts and crafts creators, discovered that people who make crafts, also like to buy from other craftspeople. This insight helped them precisely target one group and spark transactions within that successfully.

In the specific case of networked platforms, launching at a technology industry event is unlikely to be very helpful.

Twitter needed to build concentration in time, similar to how Facebook built concentration in space by targeting Harvard. It needed a lot of users to come on board at the same time to discuss similar topics.

twitter: the best way to launch a platform business at a conference is to ensure that the core interaction on the platform is organically embedded into the conference experience. Location-based, real-time applications have a unique challenge while getting traction. To enable interactions, a lot of people need to be present at the same place at the same time. Traditional marketing does not help. The best way to develop network effects, in such scenarios, is to launch at an event and ensure the core interaction of the platform fits in with the activity at the event. This is what Tinder did by launching at college parties.

Airbnb gained initial traction by promoting itself around important conferences, in specific cities

Virality is a business design problem, not a marketing or engineering effort. It requires design before optimization.

All these offerings are designed to get greater exposure through usage, and that is a common design pattern that we see repeated across scalable startups. As more users use the offering, it gets exposed to new users, leading to greater.

They leverage users to expose their offering to more users. Many startups erroneously believe that getting users to send out invites equals creation of such a growth engine.

Instead, they rely on users to share elements of the offering – core value units created on top of the platform – with their network. YouTube users share videos, Kickstarter users share projects and Airbnb users share listings.

It needs to design growth that accelerates with usage.

YouTube users share videos, Kickstarter users share projects and Airbnb users share listings.

Instagram did not stop at taking pictures and applying filters onto them; it encouraged the photo creator to share the photo on an external network like Facebook. Converting a single-user activity to a social, multi-user activity was the key reason for Instagram’s growth. Leveraging Facebook, a network where users interact with photos, furthered the cause. Instagram achieved something quite remarkable – it succeeded in converting most of its users into marketers.

Every point of app usage worked as an instance of app marketing. In essence, Instagram achieved something quite remarkable – it succeeded in converting most of its users into marketers.

Misconception #1: Virality And Word Of Mouth Are Two Names For The Same Phenomenon

Organic virality, on the other hand, is a phenomenon where users spread the word about an offering, in the context of using it. Unlike word of mouth, virality is not a consequence of users loving the offering, it is a consequence of users using it.

Misconception #2: Virality And Network Effects Are The Same And Lead To Rapid Growth

there are many businesses that exhibit virality without exhibiting network effects

A sender using Gmail can send an email to a recipient using Hotmail.

closed network like LinkedIn, where users need other users to join the network before they can communicate with them. Both email providers and closed social networks like LinkedIn, benefit from virality, but email providers do not benefit from network effects, whereas closed networks like LinkedIn do.

Sellers may be discouraged from bringing in other sellers, because of competition, and may play no role in inviting buyers either. Likewise, buyers may not invite other buyers into the network without any clear incentive. Craigslist, arguably, has very high network effects but very low virality.

Misconception #3: Virality Is All One Needs For A Growth Strategy

Virality involves users bringing in other users.

Misconception #4: Virality Involves Manipulating Users To Send Out Invites To Other Potential Users Virality is a design challenge.

Startups still implement virality as an invite loop that can be slapped onto any offering. More often than not, this approach spams recipients and gets in the way of good user experience.

revisiting the Instagram example, mentioned earlier in this section, the following four elements are observed: 1.The Sender. A user on the platform sends out a message about the platform. 2.The Core Unit. The message is typically the core value unit that the user creates or consumes on the platform. A user taking a picture on Instagram shares it on Facebook. 3.The External Network. These units spread on an external network, connecting people. For Instagram’s growth, Facebook served as a very effective external network, enabling the spread of pictures (units) created on Instagram. 4.The Recipient. Finally, a recipient on the external network interacts with the unit and is brought back to the original platform. At this point, the user from Facebook gets intrigued by the picture and visits Instagram to potentially create a photo.

Airbnb reverse-engineered an integration with Craigslist that allowed hosts on Airbnb to post their listings (value units created on Airbnb) simultaneously on Craigslist. Travelers on Craigslist (the external network, in this case) would see the listing and join Airbnb to make a booking. How do we do this for our communities ?

Startups – as well as enterprises – building platforms, often make the error of engineering viral growth before designing the right incentives for users to stay on in an engaged fashion.

Sender Incentives. Why will the sender send units out of the platform?

Spreadable Unit. What is the minimum transferable unit on the platform that can move on an external network?

External Network. Where will the unit from the platform meet current non-users?

Recipient Incentives. Why will a non-user on an external network convert to a user on the platform?

Some games may enable users to unlock game levels or weapons if they comply by sending invites.

Senders are appropriately incentivized (usually organically), and the act of sharing these units externally enhances the value derived from the core interaction on the platform.

Producers may be driven to share their creations for the purpose of self-expression and self-promotion. Consumers may be driven to share content they associate with.

The most viral platforms often have two things in common: 1.Low friction in creating core value units: The easier it is to create units, the more often producers produce and share. 2.High percentage of producers: The most viral platforms have a high percentage of their user base creating units.

Producers never spread the word about the platform: they merely spread the word about their creations • Platforms that succeed with viral growth reward users with accelerating social feedback

The second point above is worth noting, as accelerating feedback encourages users to keep repeating their actions. Platforms like YouTube and Quora perform because of social curation. The videos and answers that get higher upvotes get greater exposure on the platform. While on-platform discovery of content leads to higher upvotes, sharing the content on an external network helps to gather a few initial upvotes.

Media companies like Upworthy and Buzzfeed scale solely on the strength of consumer-initiated viral spread. These outlets focus on creating content and headlines that inspire shock and awe among content consumers, encouraging them to spread the word on their respective social networks.

Are units on the platform designed for spread on an external network? The most misunderstood contributor to viral adoption is the core value unit created on the platform.

Word of mouth can work for any offering, irrespective of whether it is physical or digital, but viral adoption only occurs in the case of networked systems, where core value units, created on the system, can be spread on an external network.

When the founders of Hotmail inserted: “P.S. I love you. Get your free email at Hotmail” at the bottom of every email generated on Hotmail, they were adopting a design choice that would be repeated across multiple viral platforms. Every email (unit) created on Hotmail would travel to users of other email providers and act as a demonstration of the free email value proposition that Hotmail championed. YouTube videos embedded in Facebook feeds have accounted for the rapid spread of viral successes like Psy’s Gangnam Style, the many Harlem Shake videos, and the ALS Ice Bucket challenge, to name a few.

A business exchange platform enabling exchange of proprietary documents may not have units that are spreadable. Users are unlikely to be interested in sharing confidential documents the way they would share photos on Instagram.

A spreadable unit has the following characteristics:

1.It triggers an interaction on an external network.

YouTube explicitly created the functionality to embed videos

2.It plays on the producer-as-sender dynamic. Encouraging producers to spread their creation at the point of production drives growth for many content platforms.

The spread of the unit helps to complete an incomplete interaction. An unanswered question on Quora is a spreadable unit demanding social feedback in the form of an answer. A fresh survey on SurveyMonkey needs responses.

While not necessarily a requirement for all spreadable units, the incompleteness of the interaction creates an active call to action for the recipient, prompting them to act. Spreadable units remain the most important, yet least understood, element of designing for viral adoption.

These pictures work well with Pinterest boards and get spread around on Pinterest. The connections and/or interactions you want to enable on your platform may already exist elsewhere. Look for external networks that facilitate similar connections/interactions.

There are four key decisions that determine success of viral growth while leveraging an external network

Choice of network.

One is often tempted to believe that an effective external network for viral growth is likely to be one that publicly offers sharing buttons. Hence, Facebook, Twitter, Google + and their ilk are the first networks that often come to mind. However, any network where users are explicitly or implicitly connected, and which would allow an external party to insert a unit, is a possible choice for an external network. Email and the mobile phone contact list are implicit networks, as is the blogosphere (when imagined as a network connecting blog writers and blog readers, many of whom are writers as well). Viral applications and platforms have long leveraged chain mails, contact list integration, widgets, phone notifications and news feed update

In another example of an intelligent choice of network, LinkedIn chose to integrate with Microsoft Outlook,

Relevant look and feel: Pinterest is one of the largest external sources of traffic to Etsy.

On an Etsy profile page, users are explicitly encouraged to share on Pinterest, over other networks;

2.Add value to users on an external network.

While using an external network, one needs to add value to users on that network to achieve sustainable scale.

Unfair advantage. Companies that are first to leverage a new network often benefit from an unfair advantage.

WhatsApp used the phonebook, Airbnb used Craigslist, and PayPal used eBay.

Ease of integration.

Why will the recipient perform the desired action?

YouTube does not control the kinds of videos users create. It plays its part in ensuring that the best videos get greater exposure, and hence, spread further. However, as a platform, it cannot itself introduce interestingness and relevance into the content of the video in the way a publisher like Buzzfeed or Upworthy

There are two elements that need to be incorporated into a spreadable unit to incite conversions:

1.Pitch. The unit should serve as a compelling pitch for the platform.

2.Call To Action. There should be a targeted and compelling call to action, inciting conversions.

four key optimization priorities, for achieving sustainable viral growth.

Send: Maximize Outflow Of Units From The Platform The platform should constantly – and explicitly – promote the creation as well as the spread of new units. As more producers create and share from the platform, new cycles of viral growth get started. Producers need to be encouraged to create new units more often.
Spread: Ensure that units spread on the external network. The next priority for the platform is to maximize the spread of the unit on the external network. To a large extent, this spread is determined by the design of the external network. Facebook’s Share, Twitter’s Retweet and email’s Forward functions make units easily spreadable within these networks.

Click: Maximize Clicks On External Network.

Convert: Minimize Cycle Time. Virality works as a cycle with a sender sending out units, the receiver clicking, visiting the platform and eventually converting to the original sender, and starting a whole new cycle.

It is important to ensure that the number of steps between first exposure to a unit on an external network, and the start of a new cycle, is minimized. This ensures that users move from being recipients to initiators of a new cycle without much friction.

As quantity increases, platform managers often have to tackle a second issue: the quality of interactions may fall with increasing scale. Quality issues are often glossed over in most discussions of scale.

The core interaction consists of four key actions: Creation, Curation, Customization, and Consumption. Depending on the type of platform and the stage of evolution it is in, scaling interactions may involve scaling one or more of these individual actions.

Scaling Quantity: Creation

the platform needs to focus on fostering an active producer base,

The platform also needs to ensure repeat participation by producers.

Medium, the blogging platform, encourages frequent and repeated contributions from writers by constantly conveying feedback about the performance of their existing articles on the platform. This feedback encourages writers to create more content and to participate more often.

Scaling Quality: Customisation

The platform needs to strengthen its filters. It needs to capture better data about the consumer and use that data to make more relevant recommendations.

To strengthen filters, platforms need to constantly acquire data about users. A scaling strategy for platforms is incomplete without an ongoing data acquisition strategy.

Data acquisition must start right at the point of signing up, and must continue as the platform scales. For example, Pinterest asks users to ‘like’ a few boards and a few topics, as part of its on-boarding flow. This data helps Pinterest build out the initial filter. This filter needs to be strengthened throughout the life cycle of the user, through the explicit and implicit capture of data.

Scaling Quality: Curation

It needs to encourage actions that result in high-quality creations, and discourage actions that result in low- quality contributions. Wikipedia blocks IPs and accounts, which generate a lot of suspicious activity, in its bid to discourage undesirable actions. It also scales an editor’s rights on the platform as they perform desirable actions, to further encourage such actions.

Curation is managed in one of three forms:

1.Editorial: An editor, administration or community manager approves or rejects contributions to the platform.

2.Algorithmic: Algorithms make decisions on what is desirable and what is not, based on certain parameters.

3.Social: The community curates through signals about quality; signals may include rating and voting.

Scaling editorial curation.

On platforms, editorial actions scale well only when they are gradually moved out to the community over time. The editors do not become redundant; they simply take on more abstracted roles. These new roles may involve educating the community on how to curate and ensuring that the tools of curation (e.g. rating, reviewing, and reporting) are being used correctly and often enough.

Scaling algorithmic curation.

algorithmic curation should be implemented with care. A common approach to implementing algorithmic curation is to look for frequently repeated curative actions among editors, and identify repeated actions that can be automated as algorithms. With every iteration, algorithms take on repetitive curative actions and editors elevate themselves to a higher level of abstracted curation.

Scaling social curation.

Social curation mechanisms, especially on platforms needing strict curation, may scale by permeating a reputation model through the community. As a consequence of this reputation model, the opinions of experts are given more weight than that of novices. On platforms with lower curation needs, and those that gain traction faster, social curation may rely merely on the strength of numbers. On such platforms, all opinions have the same value. It is important to note that reputation models may be implicit or explicit, or a combination of the two. Explicit reputation manifests itself as a badge, score, level, rating or some other form externally, while implicit reputation is used solely within the mechanics of the platform to differentiate highly reputed users from others.

Viki is a platform that leverages an engaged community of translators to add subtitles to Asian soaps and movies. In Wikipedia-like fashion, translators add subtitles to videos and highly reputed translators moderate these insertions. Viki has created a virtual hierarchy across its community, to differentiate the actions of highly reputed subtitle creators from those of less reputed ones. Privileges on the platform are gradually phased out, from internal editors to highly reputed user-editors, and so on.

Scaling Quality: Corner Cases

A murderer using a dating site to find their next victim is engaging in an undesirable interaction, as is a contributor defacing the Wikipedia profile of a public figure. These corner cases can often be resolved through a combination of advance screening of producers before they access the platform and by allowing consumers to flag inappropriate actions. These can be implemented in tandem with a reputation model that carefully guards privileges on the platform and rewards users with privileges only when they have exhibited a successful track record on the platform.

Scaling Quality: Mitigating Interaction Risk

Depending on the degree of risk involved, the platform may have to invest heavily in offering centralized guarantees and insurance. Most ‘sharing economy’ platforms, like Airbnb and Uber, invest in creating insurance and trust mechanisms to ensure that users are not discouraged from participating.

a failure in any one of the four actions – Creation, Curation, Customization, and Consumption – may lead to a failure of the core interaction. When one or more of these actions start to fail with increasing scale, we see the onset of reverse network effects.

LinkedIn creates friction by preventing users from communicating with distant connections. It also marks out users whose connection requests have often been denied. This ensures that users do not receive unsolicited messages, and the ones who are sending unsolicited messages are appropriately discouraged from repeating the act.

Curation mechanisms may break down as the volume of content increases. This may happen because of one of the following reasons:

1.Excessive reliance on editorial moderation that fails to scale as the platform scales.

2.Curation algorithms that are too customized to the initial use cases of the platform, and do not scale well, as the platform expands to include more use cases.

3.A failure to spread the culture of curation throughout the user community as the user base scales

As Medium opened access to all writers, it transitioned the editorial function to the community. Writers now had to submit their creations to collections, moderated by user-editors, before the article could be published. In doing so, Medium moved the editorial function from a centralized, non-scalable model to a decentralized, scalable model. The editorial power of every user-editor was determined by their ability to gather a following for their collection.

As Quora expanded beyond the US and gained rapid traction in India, users in the US started experiencing customization failure. As an example, users in India would tag their questions and answers with the ‘Startups’ topic and this content would be delivered to readers in the US. Some questions would be so specific to Indian startups as to be irrelevant for a reader in the US.

The Many Roads to Failing With Scale

Feedback loops serve to power platform scale and lead to rapid traction. Conversely, they also serve to magnify poor design decisions in a manner that can eventually wreck most platforms.

seven specific manifestations of reverse network effects,

#1: Uber-Abandonment

ChatRoulette had absolutely no checks and balances to screen users,

Myspace’s relatively poorer privacy guidelines led to undesirable experiences for many users. The site also allowed users to play around with the HTML and customize their respective pages. By giving users too much power over the platform, the social network ended up compromising the navigation experience.

Platforms are often as valuable as the participants they connect with.

#2: Output Abuse

Wikipedia demonstrates that an online platform is open to abuse.

The presence of incorrect articles demonstrates the vulnerability of a user-powered platform

Over time, Wikipedia has strengthened the governance of its platform to prevent abuse. However, it has ended up creating a virtual, centralized hierarchy,

#3 Echo Chambers

Filters that customize the experience of every consumer on the platform can lead to inadvertent reinforcement of what they already believe in.

YouTube, for example, serves videos based on past views and interests. Facebook’s news feed works on similar parameters and is often criticized for reinforcing an echo chamber.

As a system scales, over-customization may lead to a constant plethora of information that is geared to what its users already believe in, not necessarily what they need. This can prevent those seeking a solution from being served a solution that is radically different (and effective), and may over-serve obvious solutions.

#4: The Hive Mind

If certain forms of behavior are encouraged during the early days and certain others are discouraged, the platform runs the risk of creating a hive mind. With scale, certain behaviors get reinforced and established as desirable behaviors. The governance on Reddit and Hacker News is so stringent that it overtly favors existing users (who have earned their karma) over new ones. These communities are often criticized for developing a hive mind.

#5: Crowd-As-A-Herd

On platforms, reputation and influence are often conferred by the community. The best answer to a question on Quora is decided by the community through upvotes and downvotes.

Curation by the crowd is often shown as being superior to that by experts, but it comes with its unique set of disadvantages. If enough curators accept something as true, it becomes the new truth, even if it is untrue. As a community scales, user-curators tend to help the rich get richer. A restaurant that is already rated well on Yelp may continue to get high ratings even if a patron’s experience may not be quite as good.

#6: The Rich Become Richer

experts are constantly created based on the community’s feedback on their past creations. As such platforms scale, they often find it increasingly difficult to identify new experts. Community sentiment tends to be biased towards early participants.

One-sided following follows a rich-becomes-richer dynamic. Those with higher counts attract even more followers, thereby growing their follower count further. A higher follower count signals legitimacy and credibility on the platform.

2.The platform itself features users with greater social proof and recommends new users to follow them. New users are prone to get deactivated and abandon the platform. To mitigate abandonment by new users, the platform recommends that they then connect with and follow seasoned users with strong social proof. This, in turn, feeds the rich-becomes-richer feedback loop.

Users who join later find it more difficult to develop a following and may stop using the platform. These platforms need a mechanism to ensure new users have equal access and exposure to the community, to develop influence. A portfolio-hosting platform for highly proficient photographers, 500px, differentiates Top creations from Upcoming creations, to expose recent activity (often from undiscovered users) to the community.

The Long Tail Abuse For all its efforts at curation, Wikipedia successfully controls the quality of only the top 20% of articles that account for 80% of the views. As any platform scales, curation methods tend to work very effectively for the ‘Head’ but not for the long tail of user contributions. This runs the risk of long tail abuse.

Platform managers must watch out for early signs of reverse network effects. This may involve reaching out to abandoners, especially those who were highly engaged in the past. It may also include proactive monitoring of users, whose activity falls drastically, and may involve creation of feedback loops to encourage them back to the platform. The

The Unscalable Social Network

Networks and platforms that fail to scale, by design, often exhibit one of the following three patterns:

1.The need to solve the chicken-and-egg problem multiple times, not just once:

In such cases, a typical growth graph looks like a series of steps rather than one that grows non-linearly throughout

2.A cap to organic virality: Existing users cannot bring in more than a certain number of other users.

3.Very low overlap between clusters within which network effects operate: This leads to a low probability of easily expanding from one cluster to the other

Network Clusters

Within a cluster, producers and consumers benefit from each other. Geographical limits create a common form of cluster. More Uber drivers in San Francisco do not lead to more rides in New York City.

LinkedIn also has network clusters, though not geographical. These clusters are industry-specific. However, unlike geographical clusters, industry boundaries are not quite as rigid.

Path: The Anti-Viral Network

Path is a network that mirrors very strong offline family ties.

Facebook benefits from high virality because a user obtains greater value out of the network by getting all their friends on board. In contrast, Path structurally requires users to invite only family members. The use case itself imposes a natural cap on virality.

Nextdoor: Solving Thousands Of Chicken-And-Egg Problems Nextdoor is a social network for the neighborhood and each neighborhood forms a unique network cluster. Since users are unlikely to be part of multiple neighborhoods, these network clusters do not overlap. Every neighborhood is insular.

City Networks: When Spillovers Do Not Happen City-specific networks and marketplaces like Uber, Yelp and OpenTable also have fairly insular network clusters.

Spillover helps networks scale across clusters. However, spillover is discouraged when a platform encourages the creation of insular non-interacting network clusters like families, neighborhoods or cities.

Cross-Cluster Interactions: The platform may create an interaction where a user in network cluster, A, needs to interact with a user in network cluster, B. The more often such interactions occur, the higher is the platform’s ability to scale.

Cross-Cluster Incentive: Groupon is another example of a buyer-seller network, where every city is an isolated network cluster.

Groupon combated this by creating national deals – a multi-cluster incentive –that attracted consumers in cities where Groupon had not yet launched.

By amassing consumers through national deals, Groupon had an initial base of consumers to start with while kick-starting a new city and just needed to get the merchants and deals on board.

A free app is a user benefit in exchange for data.

To be strategic, a free app should be a data acquisition interface that powers a larger business model.

10 Product Validation Experiments

Innovation Adoption Cycle. The cycle was created by Everett M. Rogers,

Your first set of customers are the so-called early adopters (or early evangelists). As they say, they are the ones who would pay for the shittiest version of your product and thank you for

Why are they like this? Well, because the problem you’re trying to solve is very important to them

They WANT to solve that problem and solve it NOW.

A lot of people underestimate the power of “feeling good” when it comes to digital products. They focus on functionality over experience.

What’s the point in implementing advanced features if you lose users because of a poor first-time experience, and they never become returning customers? It’s like building a big house with a beautiful back garden that has a poorly designed entryway

Fake Door testing. The concept is pretty simple: instead of building a product or feature, we build a façade, pretend it works, and measure how many people are getting hooked and buying into our idea

Conducting a Fake Door Experiment is mainly useful if you already have a product, and it works best for testing out new feature ideas.

upsetting users. It’s true; it’s not the best feeling when you realize things aren’t the way you thought they were

A word of advice, always try to deliver value to the users; think about how you would react if you encountered a Fake Door Experiment. Make an effort to have people leave feeling satisfied instead of feeling deceived

Collect email addresses from users. You definitely want to reach out to the people who fell into your trap; you need their email addresses. Reach out, provide content, provide support, build a relationship, and let them know when the feature becomes available.

Find out what would make your users happy after they realize that they have been part of a Fake Door Experiment. What content would be relevant? What support could you give them? What would make them feel good? If you have live chat support, make sure you chat with everyone who sees your experiment. This is a great opportunity to do some lightning user interviews! Ask them what made them click and what they were expecting to see. Chat about your feature idea! This way, you will also eliminate the feeling of deception simply by being human and nurturing the relationship.

The concept of the Wizard of Oz Experiment is to build the product and make it look like it’s working. Then, behind the curtains, you use human power to make the product work.

What you can do to test whether there’s a need for your concept at all is to be the chatbot! Sign up for an account, use a chat interface, and pretend you are the “bot.”

Behind the scenes, the staff of Zappos would go after the selected shoes, buy them in a store, and send them to you.

When should you build a Wizard of Oz Experiment? This experiment works well when the technical entry barrier of the product is high―in other words, when it costs you a lot of time and money to build the first version of the product and go to market.

I prefer to do “real” tests, where people have to pay―not because I’m greedy but because I want to see whether they would actually pay money for my solution or not. After signing up, they have to specify what type of content they want and for which social platforms (Instagram, Facebook, etc.). Then, select what keywords they like to focus on―doing all this using a simple Google Form. After that, my users would press ‘Submit’ and get the content in 12 to 24 hours. It might look a little bit strange, but I don’t think it would turn people away. Maybe I’d come up with something like “Your content is generated analyzing the latest trends and always using the freshest, most up-to-date content. It takes a bit of time, but you’ll see it’s worth your while!” Yep, that was bullshit. So, what’s next? I would sit down and create the content for them myself.

Tips and tricks

Offer Outstanding customer support. The more you do it, the quicker you learn, the more satisfied users you’ll have.

The focus of the Concierge Experiment is more toward learning about the users and finding out how to help them rather than validating a product concept

Food on the Table is a wildly successful business that offers complex meal planning and grocery shopping services.

The CEO of Food on the Table stepped in and visited that first set of customers personally, every week, to learn their likes and needs

After the first customer, it was easier to acquire the next one, and then the next, since they could use the knowledge they gained from these in-person sessions.

They went after similar customers who cooked recipes and bought their groceries in the same stores.

then they started to automate the process―fewer personal meetings, handling payments online, using templates for recipes, then introducing the first website, and drumroll, please, . . . the digital product was born. This story clearly illustrates that a product is not your website, an app, or even a service; it’s the solution you provide to the users.

When should a Concierge Experiment be used? As a rule of thumb, if you don’t know your market well enough, it’s wise to think through whether doing a Concierge Experiment would help you gain more insight. If you see a loophole in the market but are not certain about HOW to solve it, do a Concierge Experiment.

One important note here: though you can gain an immense amount of insight with the Concierge Experiment, it’s not possible to validate a product concept

You’re providing real-life assistance and sorting things out for people. That’s a greater value proposition than any digital product has to offer

if people are not interested in having you sort out a problem for them in person, they won’t use a digital tool to do it

The Concierge Experiment only lets you learn more about the users.

Experiment #4: Product Video

You can still see the original Dropbox video on YouTube

You need to consider whether your animated video would convey your message or turn people off

While an animated video would work well for an online marketing product, it could come across as strange in a medical environment

focus on how the product will make your audience feel.

product showcase video,

to show how a mobile app works. And it’s especially useful if you haven’t yet built the app, but you have some designs already in place

Combine this type of video with a landing page to tell all about your product; what it is, how it works, why it’s good for people. Oh, and put a CTA in there too.

remember the priorities―make sure that visitors understand what you’re talking about, know what to do next (CTA), and want to click on your CTA.

Include CTAs and promote them! If your video is on your landing page, put a CTA button on the site

Explainer videos

Be cautious with them, since they are not good for every product!

In most cases, they’re just painful to watch and look cheap.

Don’t forget to combine videos with other validation experiments (e.g., do a Fake Door Experiment and then use a video to explain how the feature would work)

Experiment #5: Landing Page

It’s not enough to build a landing page; you have to show it to the right people. It’s all about traffic and targeting.

Where are you going to get the traffic from? Let’s review some of your options: Paid ads (Facebook, Google) Social media Blogs, content-related activities Email lists

90% of people who choose this method of validation make one big mistake The number one mistake they make is putting together a landing page, throwing a couple hundred dollars into Facebook ads, then leaving disappointed after seeing no results

Let’s say that getting 100 people signed up to our mailing list and expressing their desire to be notified when the product launches would do it for us.

#1 What percentage of visitors will click on our CTA? A conservative number would be 5 to 10%, an optimistic number would be 10 to 15% or more. Let’s say 5 out of 100 visitors will sign up. That leaves us with a conversion rate of 5%. #2 How many visitors do we need in order to get our desired 100 signups? Basic math: X*0.05=100. X=2,000. Using a 5% conversion rate, we need 2,000 people to look at our site in order to get the 100 signups. #3 What would our click-through rate be? Click-through rate is the number of people clicking on our ad. According to industry averages, it’s going to be between 0.4 and 1%. Let’s stick with a conservative 0.5%. #4 How many people do we need to show our ad to in order to get enough clicks? Use the click-through rate! X*0.005=2000. X=400,000. We need to show our ad to 400,000 people in order to get 2,000 clicks. #5 How much do we need to pay for a click? Ultimately, this is the question. The CTR is more important when it comes to optimizing our ad and getting the most out of the situation. But at the end of the day, we’ll pay whenever somebody clicks on our ad. The number we’re looking for is the Average Cost Per Click (ACPC). Speaking very broadly, it’s awesome to have our ACPC between 1 and 5 dollars, we’re doing pretty good between 5 to 10 dollars, and we’re possibly doing something wrong if we’re spending more than ten bucks on a click. However, keep these as ballpark numbers. There are several factors affecting ad spending, and costs vary by industry. Let’s say we’re doing pretty good and stick with 5 dollars per click: 2,000*5=10,000. We would need to spend 10K to get 2,000 clicks (out of which 100 people will sign up to our mailing list).

the point here is to show you how unrealistic it is to think that running some ads for 400 bucks would do the trick for us

If you do a video, guess what? You need to put it on a website so people can subscribe

If you do a Concierge Experiment, it’s good to redirect people to a website where they can enter an email address to keep in touch with you. Having a website is a must.

I wouldn’t rely solely on landing pages when validating product ideas simply because they don’t give feedback and insight into what users want

Think of landing pages as a must-have complementary tool for validation―at the end of the day, you need to collect email addresses, and you’re going to put your product on a website where people can buy

Buffer is a platform that connects social media accounts and schedules posts all from one place.

would people actually pay money to use it?” Gascoigne updated the landing page with simple pricing included. He measured how many people would click on the paid options. Receiving positive feedback, he went ahead and invested in creating the first MVP for Buffer.

Experiment #6: Crowdfunding

Kickstarter, Indiegogo, and other such platforms are awesome for Product Validation Experiments.

There are products that work well in a crowdfunding campaign. But I haven’t seen a successful service start out using one. Trendy topics like tech gadgets, VR, and AR are well hyped on Kickstarter.

Kickstarter has millions of visitors every day, but the payments do not primarily come from the visitors; they’re mostly from outside people coming to the platform to support a campaign. Kickstarter can bring you exposure. If you build up a good campaign, it will “buy you” exposure (e.g., feature you in the trending campaigns) that will enable you to reach even more people. Also, don’t forget about the innovation adoption cycle! Innovators and early adopters come first. They’re the people who will pay you first so you can get momentum. When you have wild success on Kickstarter, it becomes exponential.

There are products that work well in a crowdfunding campaign. But I haven’t seen a successful service start out using one. Trendy topics like tech gadgets, VR, and AR are well hyped on Kickstarter.

Why is it good to do a Crowdfunding Experiment?

You’ll get good PR. Successful campaigns get a ton of exposure. Blogs and magazines will write about you and your product, and there’s your momentum. It’s especially handy when you NEED PR or PR is part of your marketing strategy

Experiment #7: Pre-Order

The premise is getting a better price in exchange for paying for a product (sometimes months) before it’s released

The biggest difference between pre-order and crowdfunding is commitment.

Experiment #8: Piecemeal Product

The idea behind the Piecemeal Product Experiment is to NOT build what you can REUSE as a starting point.

The most common objection at this point is, “My idea is SIMILAR but not THE SAME, there’s a lot to it that makes it unique.” I get it; that’s why you want to build it. But we’re talking about validation here, not about reselling another company’s software. If you can combine multiple products to validate your product idea before building it, you’re golden.

How can you make a good return on investment without reaching that critical mass of users?

The team behind Groupon put together a simple WordPress blog featuring offers from local restaurants and T-shirt makers. Whenever a user requested a discounted offer, they used FileMaker to create the coupon in PDF, and sent the coupon to the user. So the initial recipe was a WordPress blog + PDF + coupons (created manually).

You can do two things: reuse or repurpose already existing products.

Set up a Slack channel to communicate with my students. This will give me the ability to do one-on-one coaching (I can chat and make video calls through Slack) and provide feedback on the submitted work. I can also create student groups to keep track of their progress and put them into a community where they can support each other.

Use a Slackbot (like Meeting Bot) to schedule one-on-one sessions to minimize time spent on scheduling

To provide feedback on the designs, I’ll use the built-in markup tool of macOS―it works like a charm. To record videos, I’ll use Loom.

Don't Make Me Think, Revisited

“Don’t make me think!”

is my first law of usability

Things that make us think

Typical culprits are cute or clever names, marketing-induced names, company-specific names, and unfamiliar technical names.

Another needless source of question marks over people’s heads is links and buttons that aren’t obviously clickable. As a user, I should never have to devote a millisecond of thought to whether things are clickable—or not

Why are things always in the last place you look for them? Because you stop looking when you find them

FACT OF LIFE #1: We don’t read pages. We scan them.

FACT OF LIFE #2: We don’t make optimal choices. We satisfice,most of the time we don’t choose the best option—we choose the first reasonable option, a strategy known as satisficing.

As soon as we find a link that seems like it might lead to what we’re looking for, there’s a very good chance that we’ll click it.

So why don’t Web users look for the best choice?

(Back is the most-used button in Web browsers.)

Guessing is more fun. It’s less work than weighing options, and if you guess right, it’s faster.

FACT OF LIFE #3: We don’t figure out how things work. We muddle through.

people use things all the time without understanding how they work, or with completely wrong-headed ideas about how they work. Faced with any sort of technology, very few people take the time to read instructions.

If we find something that works, we stick to it. Once we find something that works—no matter how badly—we tend not to look for a better way

Billboard Design 101 DESIGNING FOR SCANNING, NOT READING

Conventions are your friends One of the best ways to make almost anything easier to grasp in a hurry is to follow the existing conventions—the widely used or standardized design patterns

Innovate when you know you have a better idea, but take advantage of conventions when you don’t.

CLARITY TRUMPS CONSISTENCY If you can make something significantly clearer by making it slightly inconsistent, choose in favor of clarity.

The more important something is, the more prominent it is. The most important elements are either larger, bolder, in a distinctive color, set off by more white space, or nearer the top of the page

Things that are related logically are related visually.

good visual hierarchy saves us work by preprocessing the page for us, organizing and prioritizing its contents in a way that we can grasp almost instantly

(Banner blindness—the ability of users to completely ignore areas they think will contain ads

A large part of what people are doing on the Web is looking for the next thing to click, it’s important to make it easy to tell what’s clickable.

People also rely on the fact that the cursor in a Web browser changes from an arrow to a hand when you point it at a link,

it doesn’t work on touch screens because they don’t have a cursor

Just don’t make silly mistakes like using the same color for links and non clickable headings.

The truth is, everything can’t be important. Shouting is usually the result of a failure to make tough decisions about which elements are really the most important and then create a visual hierarchy that guides users to them first.

When you’re editing your Web pages, it’s probably a good idea to start with the assumption that everything is visual noise (the “presumed guilty until proven innocent” approach) and get rid of anything that’s not making a real contribution

In the face of limited time and attention, everything that’s not part of the solution must go.

Format text to support scanning

important things you can do to make your pages scan-friendly:

Use plenty of headings. Well-written, thoughtful headings interspersed in the text act as an informal outline or table of contents for a page. They tell you what each section is about or, if they’re less literal, they intrigue you. Either way they help you decide which parts to read, scan, or skip.

If you’re using more than one level of heading, make sure there’s an obvious, impossible-to-miss visual distinction between them.

Even more important: Don’t let your headings float. Make sure they’re closer to the section they introduce than to the section they follow.

Keep paragraphs short. Long paragraphs confront the reader with what Caroline Jarrett and Ginny Redish call a “wall of words.”

Reading online is different. Even single-sentence paragraphs are fine

Almost anything that can be a bulleted list probably should be.

Highlight key terms. Much page scanning consists of looking for keywords and phrases.

Don’t highlight too many things, though, or the technique will lose its effectiveness.

WHY USERS LIKE MINDLESS CHOICES It doesn’t matter how many times I have to click, as long as each click is a mindless, unambiguous choice.

what really counts is not the number of clicks it takes me to get to what I want (although there are limits), but rather how hard each click is—the amount of thought required and the amount of uncertainty about whether I’m making the right choice.“three mindless, unambiguous clicks equal one click that requires thought.”

“scent of information.”1 Links that clearly and unambiguously identify their target give off a strong scent that assures users that clicking them will bring them nearer to their “prey.”

Ambiguous or poorly worded links do not

When you can’t avoid giving me a difficult choice, you need to go out of your way to give me as much guidance as I need—but no more. This guidance works best when it’s Brief: The smallest amount of information that will help me Timely: Placed so I encounter it exactly when I need it Unavoidable: Formatted in a way that ensures that I’ll notice it

Get rid of half the words on each page, then get rid of half of what’s left. —KRUG’S THIRD LAW OF USABILITY

Happy talk must die

It’s the introductory text that’s supposed to welcome us to the site

It focuses on saying how great we are, as opposed to explaining what makes us great.

Another major source of needless words is instructions. The main thing you need to know about instructions is that no one is going to read them

When instructions are absolutely necessary, cut them back to the bare minimum.

The Web equivalent of asking directions is searching—typing a description of what you’re looking for in a search box and getting back a list of links to places where it might be.

“search-dominant” users) will almost always look for a search box as soon as they enter a site

“link-dominant” users) will almost always browse first,

When we want to return to something on a Web site, instead of relying on a physical sense of where it is we have to remember where it is in the conceptual hierarchy and retrace our steps. This is one reason why bookmarks—stored personal shortcuts—are so important, and why the Back button is the most used button in Web browsers.

Navigation isn’t just a feature of a Web site; it is the Website, in the same way that the building, the shelves, and the cash registers are Sears. Without it, there’s no there there. The moral? Web navigation had better be good.

There is one exception to the “follow me everywhere” rule: forms.On pages where a form needs to be filled in, the persistent navigation can sometimes be an unnecessary distraction. For instance, when I’m paying for my purchases on an e-commerce site, you don’t really want me to do anything but finish filling in the forms. The same is true when I’m registering, subscribing, giving feedback, or checking off personalization preferences.

For these pages, it’s useful to have a minimal version of the persistent navigation with just the Site ID, a link to Home, and any Utilities that might help me fill out the form.

One of the most crucial items in the persistent navigation is a button or link that takes me to the site’s Home page. Having a Home button in sight at all times offers reassurance that no matter how lost I may get, I can always start over,

every page should have either a search box or a link to a search page.

If there is any possibility of confusion about the scope of the search (what’s being searched: the site, part of the site, or the whole Web), by all means spell it out.

But think very carefully before giving me options to limit the scope (to search just the current section of the site, for instance). And also be wary of providing options for how I specify what I’m searching for (search by title or by author, for instance, or search by part number or by product name)

one of the most common problems in Web design (especially in larger sites): failing to give the lower-level navigation the same attention as the top.

In so many sites, as soon as you get past the second level, the navigation breaks down and becomes ad hoc.

there’s a tendency to think that by the time people get that far into the site, they’ll understand how it works.

But the reality is that users usually end up spending as much time on lower-level pages as they do at the top. And unless you’ve worked out top-to-bottom navigation from the beginning, it’s very hard to graft it on later and come up with something consistent.

The moral? It’s vital to have sample pages that show the navigation for all the potential levels of the site before you start arguing about the color scheme.

There are four things you need to know about page names: Every page needs a name. Just as every corner should have a street sign, every page should have a name

The name needs to be in the right place. In the visual hierarchy of the page, the page name should appear to be framing the content that is unique to this page.

The name needs to be prominent.

The name needs to match what I clicked

“You are here” One of the ways navigation can counteract the Web’s inherent “lost in space” feeling is by showing me where I am in the scheme of thing

In this example, the current section (Bedroom) and subsection (Lighting) have both been “marked.”

Too-subtle visual cues are actually a very common problem. Designers love subtle cues, because subtlety is one of the traits of sophisticated design. But Web users are generally in such a hurry that they routinely miss subtle cues

Breadcrumbs Like “You are here” indicators, Breadcrumbs show you where you are

They’re most useful in a large site with a deep hierarchy

Three reasons why I still love tabs

They’re self-evident. I’ve never seen anyone—no matter how “computer illiterate”—look at a tabbed interface and say, “Hmmm. I wonder what those do?”

They’re hard to miss.

They’re slick.

For tabs to work to full effect, the graphics have to create the visual illusion that the active tab is in front of the other tabs. This is the main thing that makes them feel like tabs—even more than the distinctive tab shape.

When you’re designing pages, it’s tempting to think that people will reach them by starting at the Home page and following the nice, neat paths you’ve laid out. But the reality is that we’re often dropped down in the middle of a site with no idea where we are because we’ve followed a link from a search engine, a social networking site, or email from a friend, and we’ve never seen this site’s navigation scheme before.

Here’s how you perform the trunk test: Step 1: Choose a page anywhere in the site at random, and print it. Step 2: Hold it at arm’s length or squint so you can’t really study it closely. Step 3: As quickly as possible, try to find and circle each of these items: Site ID Page name Sections (Primary navigation) Local navigation “You are here” indicator(s) Search Try it on your own site and see how well it works. Then ask some friends to try it, too. You may be surprised by the results.

Compared to the early days of the Web, the Home page has lost its preeminence. Now people are just as likely— or more likely—to enter your site by clicking on a link in an email, a blog, or something from a social network that takes them directly to a page deep in your site.

Because of this, every page of your site should do as much as it can to orient them properly: to give them the right idea about who you are, what you do, and what your site has to offer.

The tagline. One of the most valuable bits of real estate is the space right next to the Site ID. When we see a phrase that’s visually connected to the ID, we know it’s meant to be a tagline,

Good taglines are clear and informative and explain exactly what your site or your organization does.

Good taglines convey differentiation and a clear benefit.

Bad taglines sound generic.

A motto expresses a guiding principle, a goal, or an ideal, but a tagline conveys a value proposition. Mottoes are lofty and reassuring, but if I don’t know what the thing is, a motto isn’t going to tell me.

ALL WEB USERS ARE UNIQUE AND ALL WEB USE IS BASICALLY IDIOSYNCRATIC

The point is, it’s not productive to ask questions like “Do most people like pull-down menus?” The right question to ask is “Does this pull-down, with these items and this wording in this context on this page create a good experience for most people who are likely to use this site?” And there’s really only one way to answer that kind of question: testing.

Repeat after me: Focus groups are not usability tests.

I’ve often had to work very hard to make clients understand that what they need is usability testing, not focus groups—so often that I finally made a short animated video about just how hard it can be (someslightlyirregular.com/2011/08/you-say-potato).

Testing one user early in the project is better than testing 50 near the end.

Be careful that your responsive design solutions aren’t loading up pages with huge amounts of code and images that are larger than necessary for the user’s screen.

Memorability can be a big factor in whether people adopt an app for regular use. Usually when you purchase one, you’ll be willing to spend some time right away figuring out how to use it. But if you have to invest the same effort the next time, it’s unlikely to feel like a satisfying experience.

Watching a test without seeing the participant’s fingers is a little like watching a player piano: It moves very fast and can be hard to follow. Seeing the hand and the screen is much more engaging.

Unless you’re going to make a blanket decision that people with disabilities aren’t part of your audience, you really can’t say your site is usable unless it’s accessible.

Mary Theofanos and Janice (Ginny) Redish

“Guidelines for Accessible and Usable Web Sites: Observing Users Who Work with Screen Readers.”6

Screen-reader users scan with their ears.

Web for Everyone: Designing Accessible User Experiences by Sarah Horton and Whitney Quesenbery.

Platform Revolution: How Networked Markets Are Transforming the Economy

Platforms beat pipelines because platforms scale more efficiently by eliminating gatekeepers.

The sharing economy is built on the idea that many items, such as automobiles, boats, and even lawnmowers, sit idle most of the time.

Platforms beat pipelines by using data-based tools to create community feedback loops

Platforms invert the firm. Because the bulk of a platform’s value is created by its community of users, the platform business must shift its focus from internal activities to external activities. In the process, the firm inverts —it turns inside out, with functions from marketing to information technology to operations to strategy all increasingly centering on people, resources, and functions that exist outside the business, complementing or replacing those that exist inside a traditional business. The

changes reflect the fact that marketing messages once disseminated by company employees and agents now spread via consumers themselves—a reflection of the inverted nature of communication in a world dominated by platforms

when there’s only one telephone in the world, you can’t call anyone. But as more people buy telephones, the value grows. With two telephones, one connection is possible. With four telephones, six. With twelve, sixty-six. And with 100 telephones, there are 4,950 connections. This is known as nonlinear or convex growth,

(Working in reverse, it explains the convex collapse of Blackberry in the 2000s: as users began to flee the Blackberry platform,

On PayPal, sellers attract buyers, and buyers attract sellers. And on Airbnb, hosts attract guests, and guests attract hosts. All of these businesses attract two-sided network effects with positive feedback.

platform businesses will often spend money to attract participants to one side of the market.weekly Ladies’ Night, When the women show up, the men appear

They know that, if they can get one side to join the platform, the other side will follow.

Two-sided network effects with positive feedback explain how Uber can afford to use millions of dollars of money from Bill Gurley and other investors to give away free rides worth $30 each.

familiar (non-tech) example is a local bar that holds a weekly Ladies’ Night, when discounted drinks are offered to female customers. When the women show up, the men appear—and they’re happy to buy their own drinks at full price.

Thus, in a two-sided market, it can sometimes make economic sense to accept financial losses—not just temporarily, but permanently!

in Market A if growing that market enables growth in a related Market B. The only proviso is that the profits to be earned in Market B must outweigh the losses incurred in Market A.

“free” to “premium” to “freemium” (free + premium) pricing of the product or service

Typically, only 1–2 percent of customers convert from free to paying.

Freemium models also create freeloaders than can be hard to monetize (that is, to profit from),

Virality can attract people to a network—for example, when fans of an irresistibly cute, funny, or startling video persuade their friends to visit YouTube. But network effects keep them there. Virality is about attracting people who are off the platform and enticing them to join it, while network effects are about increasing value among people on-platform.

Scaling a network requires that both sides of the market grow proportionally.

If one side becomes disproportionally large, coupons or discounting to attract more participants to the other side becomes good business.

The growth of a platform can be facilitated by an effect we call side switching. This occurs when users of one side of the platform join the opposite side—for example, when those who consume goods or services begin to produce goods and services for others to consume.

OkCupid implemented a curation strategy involving multiple levels of network matching. The first level addresses the obvious issue of matching compatible interests. Do both parties smoke? Do both parties like tattoos and horror movies? Do both parties believe in dinosaurs? This level eliminates many clearly unsuitable matches and reduces the number of participants in the process

“in her league” question. If OkCupid’s algorithm determines, based on reactions by other users, that Joe is significantly less attractive than Mary (for example), then Joe’s routine search for matches will not turn up Mary’s picture. (She might show up in a highly targeted search, but not otherwise.)

A two-sided network (i.e., one with both producers and consumers) has four kinds of network effects.

The first category, positive same-side effects, includes the positive benefits received by users when the number of users of the same kind increases

consumer-to-consumer side can be seen with a gaming platform

Adobe’s all-but-universal image production and sharing platform. The more people who are creating and sharing images using the PDF platform, the greater the benefit you get from using the same platform for your own image production needs

negative same-side effect.

As the number of competing suppliers on the Covisint platform grows, customers are attracted to the platform, which makes the suppliers happy. But when the list of suppliers grows too great, it becomes more difficult for appropriate providers and customers to find one another.

Positive cross-side effects occur when users benefit from an increase in the number of participants on the other side of the market. Think about a payment mechanism like Visa: when more merchants (producers) agree to accept the Visa card, the flexibility and convenience of the shopping experience increases for shoppers (consumers), creating a positive cross-side effect.

cross-side effects are not necessarily symmetrical. On OkCupid, women attract men more than men attract women. On Uber, a single driver is more critical to growth than a single rider. On Android, a single developer’s app attracts users more than a single user attracts developer apps.

negative cross-side effects

when the proliferation of messages from competing merchants on a platform site leads to unpleasant advertising clutter, the positive impact of expanding producer choice may be transformed into a negative cross-side effect

Deloitte published research that sorts companies into four broad categories based on their chief economic activity: asset builders, service providers, technology creators, and network orchestrators

where network effects are present, industries operate by different rules.

The management of human resources shifts from employees to crowds.18 Innovation shifts from in-house R & D to open innovation.19 The primary venue for activities in which value is created for participants shifts from an internal production department to a collection of external producers and consumers—which means that management of externalities becomes a key leadership skill.

So where do we start in designing a new platform? The best way is to focus on the fundamentals. What exactly does a platform do, and how does it work? As we’ve seen, a platform connects producers with consumers and allows them to exchange value.

In every such exchange, the producer and the consumer exchange three things: information, goods or services, and some form of currency.

As a result of the information exchange, the platform participants may decide to exchange valuable goods or services as well

On Facebook, photos, links, and posts with personal or other news are exchanged among users, while on YouTube videos are exchanged. Each item exchanged among platform users can be referred to as a value unit.
consumers “pay” producers in the world of platforms. Video viewers on YouTube or followers on Twitter pay the producer with attention, which adds value to the producer in a variety of ways. (If the producer is a political pundit or business leader, for example, he gains value in the form of growing influence as a thought leader; if she is a singer, actor, or athlete, she gains value in the form of a growing fan base.) Community members on sites like TripAdvisor, Dribbble, and 500px pay by enhancing the reputation of producers

Attention, fame, influence, reputation, and other intangible forms of value can play the role of “currency” on a platform.

the design of every platform should start with the design of the core interaction that it enables between producers and consumers. The core interaction is the single most important form of activity that takes place on a platform— the exchange of value that attracts most users to the platform in the first place. The core interaction involves three key components: the participants, the value unit, and the filter

All three must be clearly identified and carefully designed to make the core interaction as easy, attractive, and valuable to users as possible. The fundamental purpose of the platform is to facilitate that core interaction.

One nuance of platform design is recognizing that the same user may play a different role in differing interactions.

On YouTube, users may upload videos as well as view them. A well-designed platform makes it easy for users to move from role to role.

The value unit. As we’ve noted, every interaction starts with an exchange of information that has value to the participants

Videos on YouTube, tweets on Twitter, profiles of professionals on LinkedIn, and listings of available cars on Uber are all value units.

Participants + Value Unit + Filter → Core Interaction

Google’s search engine acts in a fundamentally similar way. Google’s crawlers search the web, creating web page indices (value units). A consumer types in a query. Google combines the query with other specified inputs, such as social signals—the volume of “likes,” retweets, comments, and other responses received by a particular posting on the Internet. This combination of inputs constitutes the filter, which determines which value units are delivered to the consumer.

When designing a platform, your first and most important job is to decide what your core interaction will be, and then to define the participants, the value units, and the filters to make such core interactions possible.

in cases like LinkedIn and Facebook, platforms often expand over time to embrace many kinds of interactions, each involving different participants, value units, and filters.

But successful platforms begin with a single core interaction that consistently generates high value for users. A

valuable core interaction that is easy, even enjoyable, to engage in attracts participants and makes the emergence of positive network effects possible.

in most cases, platforms don’t create value units; instead, they are created by the producers who participate in the platform. Thus, platforms are “information factories” that have no control over inventory. They create the “factory floor” (that is, they build the platform infrastructure within which value units are produced). They can foster a culture of quality control (by taking steps to encourage producers to create value units that are accurate, useful, relevant, and interesting to consumers). They develop filters that are designed to deliver valuable units while blocking others. But they have no direct control over the production process itself.

PULL, FACILITATE, MATCH: THE HOW OF PLATFORM DESIGN

Facebook, for example, discovered that users found the platform valuable only after they had connected to a minimum number of other users. Until then, they were likely to stop using the network entirely. In response, Facebook shifted its marketing efforts away from recruiting new members to helping them form connections

One kind of feedback loop is the single-user feedback loop. This involves an algorithm built into the platform infrastructure that analyzes user activity, draws conclusions about the user’s interests, preferences, and needs, and recommends new value units and connections that the user is likely to find valuable.

since the more the participant uses the platform, the more the platform “learns” about him and the more accurate its recommendations become.

In a multi-user feedback loop, activity from a producer is delivered to relevant consumers, whose activity in turn is fed back to the producer. When effective, this creates a virtuous cycle, encouraging activity on both sides and ultimately strengthening network effects.

Facebook’s news feed is a classic multiuser feedback loop. Status updates from producers are served to consumers, whose likes and comments serve as feedback to the producers. The constant flow of value units stimulates still more activity,

One aspect of facilitating interactions is making it as easy as possible for producers to create and exchange valuable goods and services via the platform. This may involve providing creative tools for collaboration and sharing, as the Canadian photography platform 500px does with its infrastructure, which allows photographers to host their entire portfolios on the platform

Not long ago, a Facebook user who wanted to share photos with friends had to use a camera, transfer the images to a computer, use Photoshop or another software package to edit them, and finally upload them to Facebook. Instagram enabled users to snap, modify, and share pictures in three clicks on a single device.

As part of the design process, platform companies need to develop an explicit data acquisition strategy. Users vary greatly in their willingness to share data and their readiness to respond to data-driven activity recommendations. Some platforms use incentives to encourage participants to provide data about themselves; others leverage game elements to gather data from users. LinkedIn famously used a progress bar to encourage users to progressively submit more information about themselves, thereby completing their personal data profiles. Data may also be acquired from third-party providers. Some mobile apps, such as the music streaming app Spotify, ask users to sign in using their Facebook identities, which helps the app pull in initial data to use in facilitating accurate matches. However, resistance from some users has led many app makers, including Spotify, to provide alternative ways to sign in that don’t require a Facebook link.

In its search for new drivers, Uber discovered that many of its best prospects were recent immigrants to the U.S. who were eager to supplement their incomes by driving for Uber but who lacked the credit histories and financial qualifications needed to finance car purchases. Andrew Chapin of Uber’s driver operations group came up with the idea of having Uber act as a middleman to guarantee car loans for its drivers, deducting repayments from driver revenue and sending them directly to the lenders. Finance companies like the program because loans backed by Uber’s massive corporate cash flow are almost risk-free,

in the long run, a successful platform must have a more modular approach.

Modularity is a strategy for organizing complex products and processes efficiently. A modular system is composed of units (or modules) that are designed independently but still function as an integrated whole. Designers achieve modularity by partitioning information into visible design rules and hidden design parameters. Modularity is beneficial only if the partition is precise, unambiguous, and complete. The visible design rules (also called visible information) are decisions that affect subsequent design decisions. Ideally, the visible design rules are established early in a design process and communicated broadly to those involved

the system is partitioned into a set of “core” components with low variety and a complementary set of “peripheral” components with high variety.

The implication is that subsystems can be designed independently so long as they adhere to overall design rules and connect to the rest of the system only through standard interfaces

application programming interfaces, or APIs. These are the standard interfaces that systems

use to facilitate access by external entities to core resources.16

When firms are pursuing narrow market windows with limited engineering resources, they can easily be tempted to skip the hard work of decomposing systems into clean modules and instead proceed as quickly as possible to a viable solution. Over time, however, this approach makes it much more difficult to mobilize an external ecosystem of developers who can build on top of the core platform and extend its offerings into new markets.18 Thus, a firm that has an integral architecture will likely have to invest in remaking its core technology.19

Videos on YouTube, tweets on Twitter, profiles of professionals on LinkedIn, and listings of available cars on Uber are all value units.

RE-ARCHITECTING THE PLATFORM

“design structure matrices” that allow a visual examination of the dependencies in complex systems.20

Platform designers should always leave room for serendipitous discoveries, as users often lead the way to where the design should evolve.

Airbnb works to lower the hurdles for its member-hosts by regularly conducting events and programs designed to illustrate and teach its best practices. Uber works to remove economic barriers that might discourage wouldbe drivers by providing financial incentives like sign-up bonuses.

When new platforms such as YouTube, Airbnb, and Wikipedia are launched, they are often widely criticized, even ridiculed. This is because, in their early stages, they fail to offer the quality and reliability provided by their traditional competitors. YouTube’s early content often bordered on pornography; much of it was pirated. Apartments listed on Airbnb would get raided by city inspectors responding to complaints about orgies. Wikipedia biographies declared many a living person deceased.

Once platforms start scaling, they need to ensure that the curation mechanism doesn’t break down. Platforms that successfully scale their curation efforts gather better data on their users and improve their matching algorithms over time.

three forms of platform-driven disruptions as de-linking assets from value, re-intermediation, and market aggregation.

Many corporations own massive fixed assets

de-link ownership of the physical asset from the value it creates. This allows the use of the asset to be independently traded and applied to its best use—that is, the use that creates the greatest economic value—rather than being restricted to uses specific to the owner

De-linking assets from value also allows expensive health care equipment such as MRI machines (each costing $3–5 million) to be used more efficiently. A single hospital may use just 40 to 50 percent of its own MRI capacity. Solution: time-slice the usage, and create a market for slices among other hospitals and small clinics that cannot afford their own machines. Separating the asset from the value it creates can drive the utilization rate to 70 or even 90 percent, producing incremental revenue for the machine’s owner. It’s

Re-intermediation. During the first stage of Internet-driven disruption, many business commentators predicted that the biggest impact of the new information and communication technologies would be widespread disintermediation—the elimination of middlemen, or intermediate layers, from industries, establishing direct connections between producers and consumers. Experts pointed to the decline of traditional businesses like travel agents and insurance brokers, as consumers learned to shop for airline tickets and insurance policies without intermediaries

The reality has proven to be somewhat different Across numerous industries, platforms have repeatedly re- intermediated markets, introducing new kinds of middlemen rather than simply eliminating layers of market participants. Typically re-intermediation involves replacing non-scalable and inefficient agent intermediaries with online, often automated tools and systems that offer valuable new goods and services to participants on both sides of the platform.

Networked platforms serve as more efficient intermediaries owing to their ability to use market-mediating mechanisms that scale. While traditional intermediaries relied on manual efforts, platform intermediaries rely on algorithms and social feedback, both of which scale quickly and efficiently. Moreover, their ability to gather data over time and use it to make the system more intelligent allows platforms to scale their intermediation in the market in a manner that was impossible for traditional middlemen.

Literary agents search for new authors on content platforms such as Quora and Medium. Small businesses run advertising campaigns without using traditional ad agencies or media channels by relying on Google’s AdWords platform. This, in turn, has led to the rise of an entire new range of intermediary agencies in Asia that manage AdWords campaigns for a fraction of the traditional price. Thus, while platforms displace large and inefficient intermediaries, they empower small and nimble service providers who leverage the platform to provide services to end users.

Market aggregation is the process whereby platforms provide centralized markets to serve widely dispersed individuals and organizations.

What can incumbents do to respond?

They’ll need to ask questions such as: • Which processes that we currently manage in-house can be delegated to outside partners, whether suppliers or customers? • How can we empower outside partners to create products and services that will generate new forms of value for our existing customers? • Are there ways we can network with current competitors to produce valuable new services for customers? • How can the value of the goods and services we currently provide be enhanced through new data streams, interpersonal connections, and curation tools?

The ability to sync contents and data over iTunes and iCloud makes the ownership of multiple Apple products particularly valuable,

Data acts as an integration glue to make all these products and services perform in concert.

Can any product or service become the basis of a platform business? Here’s the test: if the firm can use either information or community to add value to what it sells, then there is potential for creating a viable platform.

the chicken-or-egg problem might seem insoluble. PayPal solved the problem through a series of ingenious strategies. To start with, PayPal reduced the friction involved in accepting online payments. All a user needed was an email address and a credit card.

user commitment was more important than user acquisition.

Sellers, in turn, began displaying PayPal logos on their product pages to inform buyers that they were prepared to honor this method of online payment.

PayPal also introduced a referral fee for sellers, incentivizing them to bring in still more sellers and buyers

in the world of platform marketing, pull strategies rather than push strategies are most effective and important.

Traditionally, the marketing function was divorced from the product. In network businesses, marketing needs to be baked into the platform

Rather than pushing PayPal into the consciousness of users through, for example, television commercials, print advertisements, or email blasts, they created incentives that gave the platform itself a pull appeal.

During its initial days, YouTube conducted contests incentivizing content creators to upload videos.

Strengthening its focus on producers, YouTube even elevated top content creators to a partner status that entitled them to a share of ad revenue.

it created a curation dynamic on the platform to identify quality content by letting viewers vote up or down on the videos they watched.

most important, it created a set of content creators who had an investment in the platform, had a user following, and would not be easily incentivized to invest in another one

EIGHT STRATEGIES FOR BEATING THE CHICKEN-OR-EGG DILEMMA

chicken-or-egg problem still looms for virtually all platform founders. How to begin building a user base for a two-sided market when each side of the market depends on the prior existence of the other side?

building a platform business on the foundation of an existing pipeline or product business. This approach is known as: 1. The follow-the-rabbit strategy.

Consider Amazon. It never faced the chicken-or-egg problem because, as a successful online retailer, it operated an effective pipeline business that used online product listings to attract consumers. With a thriving consumer base, Amazon converted itself into a platform business simply by opening its system to external producers. The result is Amazon Marketplace, which enables thousands of merchants to sell their products to millions of consumers—with Amazon enjoying a small slice of revenue from every transaction.

Intel partnered with the Japanese telecom company NTT to demonstrate that a market existed. Once NTT showed that money could be made by catering to this market, dozens of other firms followed suit

these strategies involve three techniques:

Staging value creation.

The Huffington Post followed this strategy by hiring writers to create an initial array of high-quality blog posts for the site, thereby attracting readers. Some of these readers began contributing blog posts of their own, leading to the gradual development of a wider network of content creators and attracting even more readers.

Designing the platform to attract one set of users.

The restaurant reservation platform OpenTable used this strategy by creating useful electronic tools for restaurateurs.

Once a large number of restaurants were on board, consumers began to discover the site and started using it to make their dining plans.

Simultaneous on-boarding. To start, the platform creates conditions such that value units can be created that are relevant to users even when the overall size of the network is small. It then strives to stimulate a burst of activity that will simultaneously attract consumers and producers in sufficient numbers to create larger numbers of value units and value-producing interactions, so that network effects can begin to kick in.

The piggyback strategy. Connect with an existing user base from a different platform and stage the creation of value units in order to recruit those users to participate in your platform.

Another compelling example of the piggyback strategy is the way YouTube rode the Myspace growth wave by offering its powerful video tools to attract indie bands that were members of the social network.

The seeding strategy. Create value units that will be relevant to at least one set of potential users.

The value units may be “borrowed” from another source rather than created by the platform developer from scratch. Adobe launched its now-ubiquitous PDF document-reading tool in part by arranging to make all federal government tax forms available online.

Adobe induced the IRS to cooperate by suggesting that millions of dollars in printing and postage costs could be saved. Taxpayers, in turn, got fast, convenient access to documents that everyone needs, at least once a year. Impressed by the value provided, many adopted Adobe as their document platform of choice.

PayPal employed this strategy when it created bots that made purchases on eBay, thereby attracting sellers to the PayPal platform. This was especially clever, since a bot could then turn around and list for sale the item it had just bought, thereby covering both sides of the two-sided market—and precluding PayPal from ever having to warehouse and ship the item itself.

Dating services often simulate initial traction by creating fake profiles and conversations. Many skew their profiles to showcase attractive women, in a bid to attract men to the platform.

Reddit is a highly popular link-sharing community that circulates vast amounts of Internet content. When it first launched, the site was seeded with fake profiles posting links to the kind of content the founders wanted to see on the site over time.

The marquee strategy. Provide incentives to attract members of a key user set onto your platform.

For a number of years, software producer Bungie specialized in games, like the popular Marathon, for use on Apple computers.

In 2000, with the Xbox nearing launch, Microsoft bought out Bungie and repurposed a game then in development under the title Halo: Combat Evolved as an Xbox exclusive. Halo became the marquee app that sold hundreds of thousands of Xbox devices, as well as a billion-dollar franchise in its own right

The single-side strategy. Create a business around products or services that benefit a single set of users; later, convert the business into a platform business by attracting a second set of users who want to engage in interactions with the first set.

OpenTable solved the problem by first distributing booking management software

The producer evangelism strategy: Design your platform to attract producers, who can induce their customers to become users of the platform

Platforms that provide businesses with tools for customer relationship management (CRM) can often solve the chicken-or-egg problem simply by attracting one set of users—producers—who then take on the task of bringing along the other set—consumers—from their own customer base

sign up influential teachers, allowing them to easily host online courses and prompting them to get their students on board.

Mercateo, a German B2B platform for business and industrial supplies, employs a producer evangelism strategy with a novel twist. It shrewdly offers producers this invitation: “Bring us your customers, and you will have the last word in any bidding competition … but only for the customers you bring.” Thus, suppliers are incentivized to invite their customers to join Mercateo, and to do so promptly, before a competing company can claim them and enjoy the advantage of final-offer bidding.

The big-bang adoption strategy. Use one or more traditional push marketing strategies to attract a high volume of interest and attention to your platform.

Twitter invested $11,000 to install a pair of giant flat-panel screens in the main hallways at SXSW. A user could text “Join sxsw” to Twitter’s SMS shortcode number (40404) and find his or her tweets instantly appearing on the screens.Seeing the feedback on large screens in real time and watching as thousands of new users jumped into the fray created enormous excitement around Twitter and helped make it the hottest networking site in cyberspace.

The micromarket strategy. Start by targeting a tiny market that comprises members who are already engaging in interactions. This enables the platform to provide the effective matchmaking characteristic of a large market even in the earliest stages of growth.

Growth took off when Facebook started allowing cross-campus friend connections. This eliminated the need to solve the chicken-or-egg problem afresh in every new campus. Users coming onto the network at a new campus had an existing list of connections across other campuses to keep them engaged while they waited for others from their own campus to join.

Stack Overflow started out as a question-and-answer community for programming topics (category focus)

Now Stack Overflow has a voting mechanism that allows the community to choose topics they are interested in

four key elements are necessary to begin the process of viral growth for a platform business—the sender, the value unit, the external network, and the recipient.

The sender. A user on Instagram shares a picture that he has just created. This launches the cycle that will eventually bring in a new user. • The value unit. On Instagram, the value unit is the picture that the user shares with friends. • The external network. For Instagram, Facebook serves as a very effective external network, allowing value units (photos) to spread and be exposed to potential users. • The recipient. Finally, a user from Facebook gets intrigued by the picture and visits Instagram. This user may create her own photo and start the cycle all over again. Now the recipient is acting as the sender.

Dropbox,

offers free storage space to the sender as well as the recipient

company partners will not want to spread their confidential information

designing spreadable value units is a crucial step toward virality

leveraging an external network is not as simple as introducing a “Share on Facebook” button

Facebook has enforced limitations on the gaming apps that outside companies offer its users.

LinkedIn chose instead to engineer a more technologically challenging integration with Microsoft Outlook,

sometimes a platform can nudge users in directions that will make seeds more attractive to recipients. For example, Instagram provides photo editing tools to help users enhance the attractiveness of the images they post, and it encourages users to label their photos with hashtags that are specific and relevant—#vwbus for a photo of a Volkswagen van rather than the more generic #van or (worse yet) the self-explanatory #photo.11

founders shouldn’t charge either side to be listed on their platform

rather than charging users to join the platform, the founders should be subsidizing their participation— perhaps by providing tools and services to make it easy, fast, and effective for them to complete their profiles.

“scrapers”—automated software tools for collecting data from the Internet—to produce user profiles.

They can charge users for the value they accrue from the ecosystem, but the charge should be levied on deal completion, not at the time of listing.

They would make it possible for firms to post a deal risk-free by charging a fee only once the firms get what they need. The fee becomes performance-based, and it feels negligible because it simply skims off a small fraction of a transaction that’s occurring anyway

Why not charge ad agencies for a service that helps them do a postmortem to discover why they lost a deal?

Platforms may also offer free or subsidized pricing to one user base while charging full price to an entirely different user base. This makes the design of monetization models more complex, since the platform must ensure that the value it gives away to one side can be used to capture value on the other side

they invite users to join the platform—and then they seek to monetize the platform by charging for the value that the platform technology creates for those users. This value falls into four broad categories:

For consumers: Access to value created on the platform. Video viewers find the videos on YouTube valuable; Android users find value in the various activities made possible by the apps; students on Skillshare

For producers or third-party providers: Access to a community or market. Airbnb is valuable for hosts because it provides access to a global market of travelers. Company recruiters find LinkedIn valuable because it enables them to connect to potential job-seekers

For both consumers and producers: Access to tools and services that facilitate interaction. Platforms create value by reducing the friction and barriers that prevent producers and consumers from interacting

For both consumers and producers: Access to curation mechanisms that enhance the quality of interactions

Network effects as measured by numbers of visitors alone don’t necessarily reflect the monetary value of a platform. The interactions facilitated must generate a significant amount of excess value that can be captured by the platform without producing a negative impact on network effects.

Meetup’s leaders made a risky decision. They decided to start charging meetup organizers, despite the potential for drastically diminishing the scale of the platform and weakening its network effects

They reasoned that charging organizers would help them solve their monetization problem while weeding out organizers who weren’t serious about their goals.

fixed fee per transaction.

is simpler to administer, is particularly appealing when a high frequency of transactions is expected without a significant variation in the transaction size. Charging a transaction fee is a powerful way of monetizing the value created by the platform without hampering the growth of network effects. Because buyers and sellers are charged only when an actual transaction occurs, they are not discouraged from joining the platform and becoming part of the network. Of

As a result of avoiding the transaction fee, the consumer can obtain a discount on the service, while the provider gets to keep more of the total service charge. The only loser is the platform company itself. Platforms like Fiverr, Groupon, and Airbnb solve this problem by temporarily preventing participants from connecting.

Groupon does this by featuring services that are largely standardized, while the less-standardized Airbnb and Fiverr provide rating mechanisms and other social metrics that indicate the reliability of a service provider, making direct contact between the parties less necessary.

platforms that create a market for professional services, which often require discussions, exchanges, and workflow management before and during the provision of services. As a result, it may not be possible for the platform to retain control of all communications between the producer and the consumer, and charging the consumer ahead of the interaction may not be an option. In cases like these, the platform must extend its role as an interaction facilitator to include more value-creating activities. For example, Upwork provides tools for monitoring the service provider remotely. This enables consumers of professional services to monitor projects and make payments based on actual delivery of work.

To benefit producers, Clarity offers integrated payments and invoicing, making it simple for advice givers to generate income through small, one-off engagements. To benefit consumers, the call management software provides per-minute billing, which gives them the option to opt out of a call that isn’t proving useful.

to monetize the site, Dribbble has invited third parties to pay for access to the community. In this case, companies looking for designers are charged to post employment listings on the site’s jobs board.

CHARGING FOR ACCESS

Dribbble’s highly targeted job listings generate value for the community, enhance the core interaction, and strengthen network effects rather than adding noise and depleting value

Tumblr, a micro-blogging platform acquired by Yahoo in 2013, allows users to promote their posts to a larger audience for a fee.

Facebook was widely criticized for making curation changes that limit the reach of brands on the platform— except for those that pay extra for access to a wider audience

Skillshare began to allow students access to multiple courses via a monthly subscription fee. Teachers are paid “royalties” based on the number of subscription-paying students who sign up for their classes.

The growing number of students who choose this model get better value per course consumed, while generating recurring revenues for the platform.

vetting processes such as requiring recommendations from existing members) serve as curating techniques to guarantee member quality.

Carbon NYC, a platform for multimillionaire residents of New York City. However, in many social and business settings, “willingness to pay” and “quality” are far from synonymous, so this pricing system must be used very carefully and selectively.

Charging one side while subsidizing another.

bars and pubs in the offline world have long used this strategy by offering women free or discounted drinks on Ladies’ Nights. Many online dating websites follow a similar strategy, incentivizing memberships for women as a way of attracting male members who will pay full freight.

Charging most users full price while subsidizing stars. Certain platforms choose to subsidize or incentivize stars —super-users whose presence attracts large numbers of other users. In offline business, malls have been known to offer attractive lease terms to popular large retailers like Target, whose presence guarantees the customer traffic that other mall occupants will readily pay a premium

Charging some users full price while subsidizing users who are price-sensitive.

avoid reducing access to value that users have become accustomed to receiving. As we noted, Facebook was offering tremendous value for free and actually needed to cut down on that organic value when it decided to provide premium content promotion to paying producers. This led to complaints from both producers and consumers. Facebook’s enormous network effects enabled it to survive this course correction, but for many lesser platforms it might have been fatal.

If platform managers hope to monetize by charging for access to their user base, the platform should be designed to control the avenues through which content reaches the users as well as the flow of data about users.

Jobs liked to recast the open/closed dilemma as a choice between “fragmented” and “integrated,” terms that subtly skewed the debate in favor of a closed, controlled system. He wasn’t completely wrong: it’s true that, the more open a system becomes, the more fragmented it becomes.

When Facebook launched Facebook Platform to help developers create apps in May 2007, the big shift began. An ecosystem of partners willing to extend the capabilities of Facebook quickly took root.7 By November 2007, there were 7,000 outside applications on the site.

opened itself earlier to contributions from a wider community of outside developers—especially those who had world-class technology for specific functions

such as classified advertising, an effective spam filter, and user-friendly communication tools

There are three kinds of openness decisions that platform designers and managers need to grapple with. These are: • Decisions regarding manager and sponsor participation • Decisions regarding developer participation • Decisions regarding user participation

When the manager and the sponsor are separate, the manager is closest to the customer/producer relationship as well as to outside developers who may contribute to the platform. This gives the manager considerable influence over the daily operations of the platform. But, in general, the sponsor has greater legal and economic control over the platform and therefore a larger measure of power over its long-term strategy.

Google, for example, sponsors the “stock” Android operating system, but it encourages a number of hardware firms to supply devices that connect consumers to the platform.

three kinds of developers as core developers, extension developers, and data aggregators

Core developers create the core platform functions that provide value to platform participants. These developers are generally employed by the platform management company itself.

Extension developers add features and value to the platform and enhance its functionality. They are normally outside parties, not employed by the platform management firm, who find ways to extract a portion of the value they create and thereby profit from the benefits they offer. A familiar group of extension developers is the individuals and companies that produce apps sold via the iTunes store—games, information and productivity tools, activity enhancers, and so

If the platform is too open—if it is too easy for extension developers to appear on the site—then it’s likely that poor-quality service providers will join the platform. Furthermore, excessive openness may lead to too many providers of the same type of service, which will reduce the profit earned by any one provider and reduce the incentive to extension developers to customize services

To work toward the “open out” goal, the Guardian created a set of APIs that made its content easily available to external parties. These interfaces include three different levels of access. The lowest access tier, which the paper calls Keyless, allows anyone to use Guardian headlines, metadata, and information architecture (that is, the software and design elements that structure Guardian data and make it easier to access, analyze, and use) without requesting permission and without any requirement to share revenues that might be generated. The second access tier, Approved, allows registered developers to reprint entire Guardian articles, with certain time and usage restrictions. Advertising revenues are shared between the newspaper and the developers. The third and highest access tier, Bespoke, is a customized support package that provides unlimited use of Guardian content— for a fee.

The third category of developers who add value to the interactions on a platform are data aggregators. Data aggregators enhance the matching function of the platform by adding data from multiple sources. Under license from the platform manager, they “vacuum up” data about platform users and the interactions they engage in, which they generally resell to other companies for purposes such as advertising placement.

The platform that is the source of the data shares a portion of the profits generated.

For example, if a Facebook user has been posting information about plans for a vacation in France, a data aggregator might sell that data to an advertising agency that, in turn, would generate messages about Paris hotels, tour guides, discount airfares, and other topics likely to be of interest.

question: when does the power of an outside developer threaten that of the platform itself? And when this happens, how should the platform manager respond

If you are a platform manager, you don’t want to let an outside firm control a primary source of user value on your platform. When this happens, you need to move to take control of the value-creating app—most often by buying the app or the company that created it. On the other hand, when an extension app adds a modest amount of additional value, then it’s perfectly safe and generally very efficient to allow the outside developer to retain control of it.

platform managers should consider when weighing whether an extension app represents a threat to their economic power. First, if a particular app has the potential to become a powerful platform in its own right, the manager of the platform that hosts the app should seek to own it—or to replace it

if particular functionality is reinvented by a number of extension developers and gains widespread acceptance by platform users, the manager of the platform should acquire the functionality and make it available through an open API. Widely useful functions such as video and audio playback, photo editing, text cutting-and-pasting, and voice commands have often been invented by extension developers. Recognizing their broad applicability, platform managers have moved to standardize these functions and incorporate them into APIs that all developers can use.

many platforms are designed to facilitate side switching, which enables consumers to become producers, and vice versa;

How can Wikipedia establish high standards for the quality of the platform’s content? Guidelines are promulgated through articles like “Wikipedia: five pillars,”

VandalProof, a software program written especially for Wikipedia that highlights articles edited by users with a track record of unreliable work; tagging tools that draw attention to potentially problematic articles so that other editors can review and, if necessary, improve them; and a range of blocking and protection systems that can only be employed by users who have earned special privileges through the general consensus of the Wikipedia community.

Curation usually takes the form of screening and feedback at critical points of access to the platform. Screening decides who to let in, while feedback encourages desirable behavior on the part of those who have been granted entry. A user’s reputation, as shaped by past behavior both on and off the platform, is usually a key factor in curation: users rated positively by the rest of the community are more likely to pass through the screening process and to receive favorable feedback than those with poor reputations.

Facebook relies on users to flag objectionable content such as hate speech, harassment, offensively graphic images, and threats of violence. Service platforms like Uber and Airbnb incorporate user ratings into their software tools so consumers and producers can make informed choices about whom they choose to interact with.

Google closed the Android applications for functions such as search, music, calendar, keyboard, and camera, while also working hard to encourage handset manufacturers to join its so-called open handset alliance, dedicated to developing and maintaining open software and hardware standards for mobile devices

ADP has substantial customer relationships of its own and can serve as the platform host linking customers to a number of data/computing/storage partners. Thus, the partnership creates an opportunity for ADP to displace SAP as the primary manager of the customer relationship.

question of openness needs to be at the top of every platform manager’s agenda

three fundamental rules of good governance: • Always create value for the consumers you serve; • Don’t use your power to change the rules in your favor; and • Don’t take more than a fair share of the wealth

WHY GOVERNANCE MATTERS: PLATFORMS AS STATES

value-creating networks grow faster outside the firm than inside, ruling the ecosystem wisely puts a premium on not ruling it selfishly.

LinkedIn has angered its developers by turning off their access to APIs

In general, there are four main causes of market failures: information asymmetry, externalities, monopoly power, and risk.

Information asymmetry arises whenever one party to an interaction knows facts that other parties don’t and uses that knowledge for personal advantage.

Externalities occur when spillover costs or benefits accrue to anyone not involved in a given interaction. Imagine that one of your friends provides your private contact information to a gaming company in exchange for a few digital points

The concept of a positive externality is a bit more ambiguous. Consider what happens when Netflix analyzes the movie-watching behavior of someone whose tastes match yours and uses this data to give you a more accurate movie recommendation

Monopoly power arises when one supplier in an ecosystem becomes too powerful because of its control of the supply of a widely sought good,

At the height of its popularity (2009–10), game-maker Zynga became excessively powerful on Facebook, leading to conflicts over issues such as the sharing of user information, the split of gaming revenues, and the cost to Zynga of ads on the social network

view of platform governance

systems of control involve four main sets of tools: laws, norms, architecture, and markets.20

Laws.

Case law does not generally hold platforms accountable for misdeeds of platform users, even though the owners of the platform may be reasonably well positioned to regulate and control the behavior of the users

The “laws” of a platform are its explicit rules—for example, the terms of service drafted by lawyers or the rules of stakeholder behavior drafted by the platform’s designers.

Stack Overflow, the most successful online community for answering programming questions, offers an explicit list of rules for earning points as well as the rights and privileges those points confer. One point confers the right to ask and answer questions. Fifteen points confers the right to vote up someone else’s content. At 125 points, you gain the right to vote down content—which also costs one point. And at 200 points, you’ve added so much value that you earn the privilege to see fewer ads. This system of explicit, transparent laws solves a public goods problem by encouraging members to share their best insights with everyone else on the platform.

An exception to the principle of transparency applies to laws that might facilitate bad behavior. Dating sites discovered this the hard way. When the sites applied laws that gave stalkers a quick “hand slap” when they misbehaved, the stalkers soon learned to avoid the specific trigger that flagged them. If, instead, the platform delayed the negative feedback, the stalker had a harder time learning how he’d been caught, which led to a more powerful and lasting disincentive.

Smart platform managers started making nuisance posts invisible to everyone but the troll.

The underlying principle: Give fast, open feedback when applying laws that define good behavior, but give slow, opaque feedback when applying laws that punish bad behavior.

devised a system under which people who uploaded quality content could earn their way to becoming inspectors and community organizers.

Groups emerged to handle specific categories of images—for example, images linked to locations like “New York” or categories like “Food.”

Bruce himself worked relentlessly to praise, give feedback, and build his community. Under the online name Bitter, he regularly posted comments on the platform’s homepage promoting members and their work, such as when he noted “great new stuff from Delirium, also tasty food series from Izusek.”27

These norms included feedback, high-quality content, open engagement, and a natural role progression to greater levels of authority.

Finally, Pinterest asks Barbara, whom they just rewarded, to make a small investment. She may be asked to invite friends, state preferences, build virtual assets, or learn new Pinterest features.29 Any of these actions will set up a new set of triggers for Barbara and others, and the cycle starts over.

Recall the middlemen on eBay who took advantage of seller misspellings. Although one might lament the lost opportunity for the hapless sellers to complete the deal, these middlemen provided market liquidity (“thickness” in Alvin Roth’s formulation) through the process known as arbitrage. If no one bids on misspelled items, the interaction never happens—so arbitrageurs can be viewed as providing a valuable service

eBay now uses automated systems to provide spelling assistance,

Nakamoto’s invention has given birth to a new kind of platform—one with open architecture and a governance model but no central authority. Having no need for gatekeepers, it will put serious pressure on existing platforms that rely on costly gatekeepers. Financial services that claim 2–4 percent of transactions simply for passing them may in the future be hard pressed to justify their rake

Social currency, measured as the economic value of a relationship, includes favorites and shares.39 It also includes the reputation a person builds up for good interactions on eBay, good news posts on Reddit, or good answers on Stack Overflow. It includes the number of followers a user attracts on Twitter and the number of skill endorsements she garners on LinkedIn.

iStockphoto evolved a useful market mechanism based on social currency to manage exchange of photos. Every photo download cost the downloader one credit and earned one credit for the person who’d originally uploaded the photo.40 Credits could also be purchased for 25 cents each, and photographers received cash payment for accumulated credits valued at $100 or more. This system created a fair social exchange that allowed professional photographers and non-photographers to participate in the same market.

The enterprise management platform company SAP uses a social currency like that of iStockphoto or Stack Overflow to motivate developers to answer one another’s questions. Points earned when the employee of a development company answers a question are credited to a company account; when the account reaches a specified level, SAP makes a generous contribution to a charity of the company’s choice

The system has saved SAP $6–8 million in tech support costs, generated numerous new product and service ideas, and reduced average response time to thirty minutes from the one business day that SAP promises.

When SAP introduced a new customer relationship management (CRM) product, it offered double points on any answer, code, or white paper relating to CRM. During the two-month duration of this “monetary expansion” policy, developers found gaps in the software and devised new features at a vastly higher rate.

If a developer working on a platform invents a valuable idea, who should own it, the developer or the platform?

SAP has tackled this problem through two practices. First, it publishes an 18–24-month advance road map indicating what new products and services it intends to build to enhance its offerings to its corporate clients.

Second, SAP has made a policy of partnering with developers financially or buying them out at a fair price. This assures developers that they will be fairly compensated for their work, reduces partner risk, and encourages outside investment in the SAP platform.

Initially, Airbnb refused to indemnify hosts against bad guest behavior, and Uber refused to insure riders against bad driver behavior.46 Eventually, both companies realized that this refusal was hurting the growth of their platforms.

different divisions of Amazon kept having to develop web service operations to store, search, and communicate data.

varied projects should be combined into a single operation with one clear, flexible, and universally comprehensible set of protocols

AWS was born

A big principle of platform self-governance is participation. It’s crucial for platform managers to give external partners and stakeholders a voice in internal decision processes equal to that of internal stakeholders. Otherwise, the decisions made will inevitably tend to favor the platform itself, which will eventually alienate outside partners and cause them to abandon the platform.Do not promise to not change the platform. Do promise early notice. Have skin in the game, so change bites the platform, not just the partner. It’s okay to offer differential benefits to partners with differentiated assets. Just make sure everyone understands how to qualify. Promote the long-term financial health of partners, especially smaller ones

Fairness helps create wealth in two ways.52 First, if you treat people fairly, they are more likely to share their ideas. Having more ideas creates more opportunity to mix, match, and remake them into new innovations.fair governance leads participants in a market to allocate their resources more wisely and productively.

if good governance allows third parties to innovate, then, as they create new sources of value, they will simultaneously create new struggles to control that value.

When such conflicts arise, governance decisions should favor the greatest sources of new value or the direction where the market is headed, not where it used to be.

Governance should not be static. When signs of change appear on the horizon—such as new behaviors by platform users, unanticipated conflicts among them, or encroachments by new competitors—information about the change should spread rapidly through the organization, encouraging creative conversations about how the governance system may need to evolve in response.

What matters is activity—the number of satisfying interactions that platform users experience. If BranchOut had tracked the activity numbers as diligently as it tracked membership, it might have realized that its millions of members weren’t finding much value in the service

when a statistic like inventory turns unexpectedly plummets, it’s generally a sign of overstocking, product obsolescence, or marketing failure, while an excessively high rate of turnover may indicate understocking and consequent loss of sales

platform metrics need to measure the rate of interaction success and the factors that contribute to it. Platforms exist to facilitate positive interactions among users—particularly between producers and consumers of value. The greater the number of positive interactions the platform creates, the more users will be drawn to the platform, and the more eager they will be to engage in activities and interactions of various kinds on the platform. Thus, the most important metrics are those that quantify the success of the platform in fostering sustainable repetition of desirable interactions.

the platform manager is concerned with the creation, sharing, and delivery of value throughout the ecosystem— some occurring on the platform, some elsewhere.

In particular, firms in the startup phase must track the growth of their most important asset: active producers and consumers who are participating in a large volume of successful interactions. These users and the interactions they engage in are the key to generating the positive network effects that will ultimately make the platform successful.

Platform managers will need to devise metrics that focus on some of the key issues related to monetization, for example: Which user groups are enjoying the greatest value from platform activities? Which user groups may need to be subsidized to ensure their continued participation? What fraction of the value creation unleashed by the platform is occurring on the platform rather than outside it? How much additional value can be created through services such as enhanced curation? Which groups outside the platform might find value in access to specific user groups on the platform?

And most important, how can the platform capture and retain a fair share of the value being created on the platform without impeding the continued growth of network effects?

To define success or failure for a platform, and to identify how to improve it, there are three main metrics: liquidity, matching quality, and trust.

Liquidity in a platform marketplace is a state in which there are a minimum number of producers and consumers and the percentage of successful interactions is high. When liquidity is achieved, interaction failure is minimized, and the intent of users to interact is consistently satisfied within a reasonable period of time.

an interaction

on a professional networking platform, it might be the offer of a recommendation, the swapping of contact information, or a posted response to a question on a discussion page.

crucial category of metric for the startup platform is matching quality. This refers to the accuracy of the search algorithm and the intuitiveness of the navigation tools offered to users as they seek other users with whom they can engage in value-creating interactions

One way to measure the efficiency of the platform in successfully matching producers to consumers is by tracking the sales conversion rate, which can be expressed as the percentage of searches that lead to interactions.

majority of users who experience interaction percentage higher than 40 percent during their first week on the platform remain active members for at least three months

Building trust, of course, is central to marketplaces, especially those in which interactions carry some level of risk—and in the world of online platforms, where initial connections among users as well as many interactions are conducted entirely in cyberspace,

You might choose to measure engagement per interaction, time between interactions, and percentage of active users, all of which focus on the degree of user commitment to the ecosystem.

Alternatively, you might choose to measure number of interactions, as, for example, the graphics and design platform Fiverr does. Since Fiverr has a fixed value per interaction—every “gig” traded on the site is priced at five dollars

Platforms that focus on content creation require different metrics. For example, some measure co-creation (the percentage of listings that are consumed by users) or consumer relevance (the percentage of listings that receive some minimum level of positive response from potential consumers). These metrics focus on interaction quality and reflect the skill with which production is being curated.

other platforms focus on market access—the effectiveness with which users have been able to join the platform and find or connect with one another

Some measure producer participation—that is, the rate at which producers join the platform and the growth of this rate over time.

The platform should also monitor interaction failure—the percentage of cases in which interactions, such as sales, are initiated but fall through for some reason.

especially important to monitor instances of producer fraud—for example, the failure of a producer to describe a product offering accurately or to deliver it in a timely fashion.

Producer fraud is, of course, a particularly egregious, painful, and costly form of interaction failure. Examination of the characteristics of users and interactions repeatedly linked to fraud may be used to create predictive models that can help the platform prevent future fraud.

the value of a producer can be calculated using traditional lifetime value (LTV) models used in many kinds of businesses

Airbnb has also discovered that its best source of hosts is people who have been guests. Consequently, it is now working hard to convert consumers on its platform into producers. In this case, the side switching rate—the rate at which people convert from one type of user to another—offers an important metric that the platform can use to track the health of its user base

the size of a company’s advertising budget might be viewed as a reflection of the distance between the company and its customers

technology platforms that have reached the maturity phase should meet three major requirements: they should drive innovation, have a high signal-to-noise ratio, and facilitate resource allocation.14

embed into the platform multiple independent solutions to the same problem. Then this becomes common for everyone else. It’s a question of timing. If you do it right away, your ecosystem is scared that you’ll cannibalize their cash cows. If one provider builds a particular functionality, you don’t want to co-opt it. But if a whole slew of them have [developed the same capability], then competition reduces benefits anyway, and you can fold it in. 16

At one time, oDesk (now known as Upwork) had so many metrics (measuring job postings, registered workers, service variety, and many other factors) that one board member complained, “You’re over-measured and underprioritized.”

As a business leader you need to figure out the metric that matters most for your company and understand that the more you measure, the less prioritized you’ll be

HOW PLATFORMS COMPETE (1): PREVENTING MULTIHOMING BY LIMITING PLATFORM ACCESS

Platforms seek exclusive access to essential assets. They do this, in part, by developing rules, practices, and protocols that discourage multihoming

Multihoming occurs when users engage in similar types of interactions on more than one platform. A freelance professional who presents his credentials on two or more service marketing platforms,

Adobe Flash Player is a browser app that delivers Internet content to users, including audio/video playback and real-time game play. Flash could have been used by app developers on Apple’s iPhone operating system—but Apple prevented this by making its iOS incompatible

Adobe had designed Flash developer tools to allow content and program porting from Apple iOS to Google Android and to web pages more generally. Apps developed in Flash could multihome, reducing the iPhone’s distinctiveness

Early in the evolution of Alibaba,

great explosion” in network effects didn’t occur until it devised a policy requiring every employee to find and list 20,000 items for sale by some person or merchant. The resulting increase in product listings generated twosided demand.

HOW PLATFORMS COMPETE (2): FOSTERING INNOVATION, THEN CAPTURING ITS VALUE

Alibaba (rather than Baidu) owns search on its platform, why Facebook (rather than Google) owns search on its platform, and why Microsoft (rather than some outside software developer) owns Word, PowerPoint, and Excel on its platform

HOW PLATFORMS COMPETE (3): LEVERAGING THE VALUE OF DATA

tactically and strategically

An example of tactical data use is in the performance of A/B testing, to optimize particular tools or features of the platform.

Strategic data analysis is broader in its scope. It seeks to aid ecosystem optimization by tracking who else is creating, controlling, and siphoning value both on and off the platform and studying the nature of their activities.

When a new feature appears on an adjacent platform, it may represent a competitive threat, since there’s a possibility that users of your platform may find the new feature attractive enough to begin multihoming or even to abandon your platform altogether.

the platform manager can choose either to provide a similar feature directly or to offer it indirectly via an ecosystem partner.

the phenomenon we call platform envelopment

The four forces that most often characterize winner-take-all markets are supply economies of scale, strong network effects, high multihoming or switching costs, and lack of niche specialization.

Individually identifiable data about sensitive topics such as sexual orientation, prescription drug use, alcoholism, and personal travel (tracked through cell phone location data) can be purchased through data broker firms such as Acxiom

Blitzscaling

For many BS cos it’s provide only that customer service that does not come in the way to scale and thus many only have email service or no customer service and they rely only on blogs where customers help customers

Distribution is the biggest fire to douse

Referral …address book imports , users used LinkedIn page to prove their professional identity thus users viraled it

Dropbox gave extra space for those who referred it …PayPal paid $ 10 , then $5 for sender and receiver

High gross margin is key

Higher revenue should lead to higher margin which implies low to nil incremental cost when scaling

Potential gross margin is better then realised margin

Free or Freemium ? Free trumps over pricing…1 penny versus 15 cents , customers will go for 15 cents …but free versus 14 cents…customers go for free

Subscription allows scale…Netflix. as monthly cost is low for user and LTV high for brand

Digital goods like stickers….video game purchases …they have nearly 100% gross margins

Linkedin network effects….they became standard professional identity…corporates wanted employees and employees wanted corporations…..what would entrepreneurs want and pay for ?….

If linkedin would send weekly emails to its users to update profile it would have a backlash in user experience

Linkedin did Swiss knife approach by giving different value to different users ..they were criticised for having mish mash of revenue streams….they don’t have a single enough revenue stream ….a 5% gain of a billion dollar opportunity is better than 10 million dollar opportunity

Pull linkedin profile to thinc profile? Easier for LinkedIn users to copy paste

The Science of Managing Our Digital Stuff

define a three-stage model for curation—keeping, management, and exploitation

search everything, tag everything, and group organization.

PIM systems should exploit subjective (user-dependent) attributes in their design

What unifies this disparate data into a personal collection is that we judge that it may be valuable to us in the future

Curation involves three distinct processes: how we make decisions about what personal information to keep, how we organize that kept data, and the strategies by which we access it later.

Dewey decimal system

More importantly, theorizing within information and computer science has been concerned with the organization and retrieval of public data

Innovations in computer science include techniques to automatically index large online public collections, allowing user access via keyword search. PIM is different. Rather than developing theory and methods about how people access public collections, PIM curation focuses on how individual users select, organize, and access their personal collections.

Not Consumers, but Curators

We are sure that you personally have endured each of the following disturbing experiences with your own information:

Lost personal data:

Large, disorganized personal collections of unclear value:

Failing to deal with time-sensitive information that requires action:

Another common, depressing experience concerns time-sensitive personal information that requires you to act in some way. This is particularly pernicious in email, in which we often overlook time-sensitive requests for information or deadlines for action. Again, an infuriating aspect of this experience is that we have often taken great care to create reminders or to organize information so as to guarantee that these deadlines are registered and met.

Curation therefore can be seen as a special kind of communication: a solipsistic interaction between a person and him- or herself at two different times: the time of storage and the time of retrieval.

it is obvious that consumption is important for some types of rapidly changing transient public information (e.g., news, entertainment),

New technologies—such as ubiquitous sensors, medical or fitness trackers, digital video, and wearable cameras like Google Glass—make it increasingly easy to capture new types of personal data.

Between 58 percent and 81 percent of all user accesses are of pages that the user has accessed previously

Personal collections can also contain data that were originally accessed from public archives, such as maps, or links to useful online resources. This public data might be bookmarked or saved to a local disk to increase its availability.

What unifies all these disparate data types into a personal collection is their projected future value for a user. Users seek to preserve and organize personal data themselves because they want to ensure access to that data at some future time

we discuss important distinctions between different types of personal information that have direct implications for curation, such as whether information is unique and whether it requires action.

Keeping is a complex decision process influenced by many factors, including the type of information being evaluated, when we expect we will need it, and the context in which we imagine that it will be needed

Transient information encountered on a public web page will be judged differently than a personal document crafted over several days or an email sent by an important colleague.

curation is like a communication that we have with our future selves, in which the goal is to organize information to improve the likelihood that we will find it again.

To create effective organizations, users have to anticipate the context in which they will be accessing information.

Technologies such as Google Drive, Dropbox, and Microsoft OneDrive allow multiple users to co-organize shared repositories. This field is known as group information management or GIM

Exploitation is at the heart of curation practices. If we cannot successfully exploit the personal information we preserve, then keeping decisions and management activity will have been futile.

If retrieval is to be successful we have to understand what our past selves were trying to tell us.

Emerging technologies such as desktop search

or GIM

There is also a third approach, which analyses prior user actions. It capitalizes on the fact that many information items are repeatedly accessed in PIM and gives the user a direct way to retrieve recently accessed items. For files, lists of recent documents are available, either at the OS level or within an application.

If certain information is difficult to re-access, people may conclude that there is little point in keeping it in future.

People have to implement strategies to remind themselves about their commitments with respect to the undischarged action item. These reminding strategies might involve creating to-do email folders or leaving active documents on the desktop.

Aren’t social media, smartphones, and wearable devices creating vast new archives of personal data of radically different kinds that will require new theories and methods for PIM?

We know from various interview and survey studies that people find it difficult to decide what information they want to keep

Why are keeping decisions so difficult? One reason is that they require us to predict the future. To decide what to keep, we have to determine the probable future value of an information item

prediction requires people to reason about hypothetical situations, a task at which people are notoriously poor. People’s predictions are also subject to various types of bias. For example, they expect the future to be very much like the present, and their predictions are unduly influenced by recent or easily recalled events

People are also loss averse, so thinking about information in a context in which it might be deleted leads them to overvalue it

As the psychology literature on loss aversion

would suggest, there was a bias toward retention.

Second, they engage in deferred evaluation of what to keep—causing them to acquire large amounts of data that later turn out to be extraneous.

Nonurgent data are set aside, often in optimistically named “to read” piles, and accumulate indefinitely;

Three types of unique data accounted for 49 percent of people’s archives: working notes, archives of completed projects, and legal documents, such as contracts or tax documents.

To our surprise, only 49 percent of people’s original archive was unique—with 36 percent consisting of copies of publicly available documents.

Our paper study suggested four main reasons: availability, reminding, lack of trust in external stores, and sentiment.

Having a personal copy of a public document increases the likelihood that people will encounter that document, especially if the document is deliberately stored in a visible place.

Another potential reason for keeping personal copies of publicly available documents is that they contain personal annotations.

there may be less value to keeping annotated materials than people believe.

portion of the information we receive in email is actionable: We have to respond to it or process it, often within a specific time frame.

In our inboxes, we may see many different types of messages, including tasks or to-do items, documents or attachments, FYIs, appointments, social messages, and jokes.

Inbox by Gmail encourage users to make the keeping decision by “swiping” unimportant or discharged emails from view, allowing users to focus on more critical items.

One factor contributing to whether an informative message is read is its length:

Actionable messages demand that we do something specific.

Many important email tasks are too complex or lengthy to be executed immediately

Unless actions are discharged, messages are usually kept as reminders that they are still incomplete.

Our study mainly focused on contacts acquired through email, although we also looked at people’s address books, rolodexes, calendars, and contact management programs

Contact management requires decisions both about the people for whom you will keep detailed information and about the types of information that you will keep about those people.

It is difficult to distinguish important future contacts among the many people that you are exposed to on a daily basis.

Our investigation identified specific factors that were critical in determining important contacts.

People also noted how difficult it was to make decisions about a contact’s future value based on short-term interactions and scanty evidence

important contacts are those with whom we have repeated interactions over extended periods.

In spite of having huge archives of contacts (858 on average), participants rated only 14 percent (118) as important and worth keeping.

Participants chose contacts with whom they interacted frequently and recently, and for a long time, and those who were likely to respond to their email messages.

People are exposed to many more contacts than they can record systematic information about, so they reserve judgment and overkeep data about contacts they may not need.

people expend energy creating bookmarks that they never subsequently use. Tauscher and Greenberg (1997) showed that 58 percent of bookmarks are never used, suggesting poor decision making.

people create a new file folder every three days and make a new email folder every five days.

people are constantly reflecting on how their information is currently organized and finding it to be inadequate

people seldom engage in major reorganizations or extensive deletion. Instead, they tend to modify existing structures incrementally.

Email filing accounts for 10 percent of total time in email

yet information is usually accessed by browsing the inbox or searching, rather than via folder access

two fundamentally different types of organization that people apply to their personal files. The first type is semantic: information items are structured according to conceptual similarity. The second is temporal: it concerns reminding for actionable items, and the goal is to organize these items according to when they have to be processed

people prefer to organize and retrieve their documents spatially rather than by using keyword search

Semantic labels are stronger retrieval cues than spatial organization alone, although combinations of semantic and spatial organization can enhance performance

In addition, semantic and spatial cues are enhanced when they are self-selected, rather than being chosen by an external party

Organizing things within a consistent conceptual structure means that, at recall, remembering one item from that structure may trigger memory of a related one; therefore, applying semantic organization is highly effective in promoting recall

Scanning the contents of a folder can also remind people of where related information is stored, and related information can itself serve to remind people of where a target file is located

Human memory is highly context dependent, with successful long-term retrieval being reliant on reconstructing the specific context in which information was first remembered

Note also that folders usually contain a strong spatial component, with subfolders sitting inside folders; this too can help cue retrieval

Reminding is a critical PIM problem—especially in the case of email, in which actionable items are prevalent.

People can successfully retrieve documents by associating them with personal or public events (“landmarks”) that occurred close to when the documents were encountered or created

people often acquire information that turns out to be of little utility that must be discarded later. If filers are more likely to incorporate documents of uncertain quality into their filing systems, we might expect them to throw away more reference materials than pilers while preparing for the move. This was not true for all documents, but was true for reference documents.

Given their more systematically organized systems, we expected filers to have an easier time finding data and that they would access their data more often. Contrary to our expectations, pilers accessed a greater percentage of documents than filers over the previous year

both strategies had strengths and weaknesses. With a piling strategy, information is more accessible: It can be located in a relatively small number of piles through which people frequently sift.

The result is that valuable, frequently accessed information moves to the top of the piles, and less relevant material is located lower down. This pattern of repeated access allows people to identify important information, discarding unused or irrelevant information. A different reason that filers may access proportionally less of their data is simply that they have more stuff. There are finite constraints on how much data one can access. Filers have more data, and as a consequence they are able to access less of it.

even though filing is more systematic, it does not always guarantee easy access to information. With complex data, filing systems can become so arcane that people forget the categories they have previously created, leading to duplicate categories. Accessing only one of these duplicates leads to incomplete retrieval because some part of the original information has been overlooked.

filers discarded more reference information, they generally found it difficult to discard filed documents, partly because of the investment they had already made in managing that information. That is, filers seemed less disposed to discard information they had invested effort in organizing. In contrast, unfiled information seemed easier to discard.

People also used workarounds to make various types of information more salient—for example, labeling folders “aacurrent” instead of “current” to ensure that important information was more obvious, rising to the top when browsing an alphabetically ordered folder list.

tagging, which allows users to apply multiple labels to a given information item, rather than storing it in a single folder location.

Tagging has several intuitive advantages. It potentially provides richer external retrieval cues (because multiple labels are available as retrieval terms), and it allows users to filter sets of retrieved items in terms of their tagged properties (e.g., entering “pictures + personal” returns files with those tags). Tagging also does not require users to place items in a single unique storage location that may be hard to remember.

To be effective, people need to organize actionable information in such a way that they are reminded of what they need to do and when.

One important insight is that the email inbox is often treated like a pile in which actionable messages are not actively organized but are kept highly available for reminding. In contrast, email folders are generally used for informative messages that users have actively classified into files.

25 percent of users filed actionable items in a to-do folder. Whittaker and Sidner dubbed these people frequent filers.

However, in 95 percent of cases, the to-do folder was abandoned because it did not provide opportunistic reminders.

Gmail and Outlook, allow users to flag messages using “stars” to make certain messages more visible.

However, as we discuss in part III, such flagging is still dependent on having relatively few marked messages in order to allow flags to be visible.

Our own data (Whittaker and Sidner 1996) show that email filing often fails. Research combining multiple studies shows that people have an average of around thirty-nine email folders (Whittaker, Bellotti, and Gwizdka 2007). Whittaker and Sidner (1996) found that on average, 35 percent of email folders contain only one or two items. These tiny folders may be too small to be useful.

Folders can be too large, too small, or too numerous for people to remember individual folder definitions.

Most of the study’s informants reported major problems in organizing and managing their bookmark collections.

users who invested organizational effort, bookmarks seemed to be an indispensable tool.

Web 2.0 social tagging systems—such as Delicious, Dogear, Onomi, and Citeulike

These social tagging systems allow users to create multiple labels for the same data, providing potentially richer retrieval cues

More importantly, they allow tags to be shared among users, reducing the cost of tag creation for each user

Photos are very different

and are usually neither informative nor actionable

participants are able to exploit their familiarity with recently taken pictures to scan, sort, and organize them for sharing with others

Possibly because of these successful experiences with recent pictures, people may expect themselves to be very familiar with their entire picture collection, regardless of its age. As a result, they may not see the need to organize their collections carefully.

Participants universally preferred to view pictures in the thumbnail view

If participants had previously opened these folders, we would have expected to see thumbnails. Yet during retrieval, when participants first opened folders, photos almost always appeared in the “list” view (generally the default on most systems), suggesting folders had rarely been accessed.

attitude to photos was “collect now, organize later, view in the future.”

Actionable items often require deferral, so people need to be reminded about them. Various tracking strategies facilitate reminding, including leaving actionable information in one’s workspace as well as using dedicated task folders. There are trade-offs between these strategies: Keeping information in a workspace affords constant reminding, but it reduces efficiency, because that workspace can become cluttered with many unrelated actionable items. The disadvantage of dedicated to-do folders is that they need to be accessed and monitored deliberately.

To create effective retrieval cues, users need to anticipate successfully when and how they will reaccess information. Exploitation success depends whether the cues/structures that users have generated to anticipate future retrieval match the actual context at the time of retrieval.

researchers can measure structure at a certain point in time using dedicated software

users’ decisions to exploit both shallow structure and relatively small folders are adaptive

we can recommend that users avoid storing more than twenty-one information items per folder; they should create an additional level of subfolders instead.

Mac users are more likely to create shallower folder hierarchies than PC users. We also found that the default Windows presentation is suboptimal: Users are quickest to retrieve information when their default explorer view shows icons. This is important because if this default were changed, retrieval time would be reduced substantially.

modern email clients now allow users to configure their inbox to “snooze” actionable emails, making actionable items disappear from the inbox until their deadline arrives, when they reappear as inbox items

www.boomeranggmail.com/ or Inbox by Gmail).

People remembered content, purpose, or task-related information best, correctly recalling over 80 percent of this type of information—even when messages were months old. People were less good at remembering sender information;

Stuff I’ve Seen (SIS). SIS is a cross-format search engine allowing users to access files, email messages, and web pages by issuing a query in a single, unified interface.

SIS also supports sorting of results via attributes such as date or author.

In a large-scale deployment of SIS, Dumais et al. found that the majority of searches (74 percent) was focused on email as opposed to files. When searching for email messages, there was a very strong focus on recent items, with 21 percent of searched-for items being from the last week and almost 50 percent from the last month. Many of these searches (25 percent) included the name of the email sender in the query, suggesting (contrary to Elsweiler, Baillie, and Ruthven 2008) that sender name is a useful retrieval cue for email messages

We logged each instance of the following operations, along with its duration: Folder access: Whenever users opened a folder. Sort: Whenever users clicked various email header fields, such as sender, subject, date, time, attachments, and so on. Scroll: Whenever users scrolled for more than one second (a conservative criterion adopted to identify when scrolling is used for refinding). This duration was based on pilot data that observed different scrolling actions. Search: Whenever users conducted a search.

high filers are more reliant on folder accesses, which take much longer than the searches and sorts.

important findings. They show that although people who create complex folders indeed rely on these structures for retrieval, such preparatory behaviors are less efficient than opportunistic methods and do not improve retrieval success. In contrast, opportunistic behaviors such as search, scanning, and sorting promote faster and equally successful retrieval

keeping too many pictures, distributed storage across multiple devices leading to misidentifying where they had stored a picture, unsystematic organization, false familiarity, and lack of maintenance.

people who used meaningful labels were neither more successful nor faster at retrieving pictures. Participants’ comments and behaviors also suggested that the meaning of these labels had been forgotten over time.

Participants who consistently created time-based folder names (e.g., Spring13) were more successful than those using other naming schemes, although only a minority of participants used this strategy.

The system-generated date label may be inaccurate, either because of problems with camera settings or because the folder date represents the upload date as opposed to when the picture was actually taken.

In reality, however, it turns out that search is less frequent than we might expect. In addition, users focus on refinding rather than seeking novel information. Instead of foraging for new information, users tend to reaccess previously visited data using a variety of simple browser techniques, including following links, retyping URLs, or using the back button.

having multiple windows or tabs open was very common because reaccess was prevalent. In addition, the most commonly reported ways to reaccess information were to reaccess links, search for information again, directly type a URL, or save pages as local files.

documented a variety of general strategies used to access pages. The most common were using a hyperlink (44 percent of accesses), using forms—including the use of search engines (15 percent), using the back button (14 percent), opening a new tab or window (11 percent), and typing in the URL directly (9 percent).

the most common strategy for refinding information was to follow links (50 percent), with the back button being the next most common strategy (31 percent).

The remaining direct access strategies (using bookmarks, homepage links, history, or direct entry of URLs) accounted for the final 13 percent of accesses.

reaccesses tended to be for recently visited sites; 73 percent of revisits occur within an hour of the first visit, which makes the reported use of the back button appear rather low

For revisits occurring within an hour, the back button and links were the most common ways to refind data. Between an hour and a day, back button usage decreased hugely, with users becoming more reliant on links and direct access (typing in the URL). Between a day and a week, links and typing URLs were the most common strategies, and at intervals of greater than a week, use of links dominated.

the majority of revisits (73 percent) occur within an hour, 12 percent between an hour and a day, 9 percent between a day and a week, and 8 percent at longer intervals.

During exploitation, people’s preference is for manual methods (folder navigation/following links), whether this is for regular files or web data. Search is a less preferred option, even for web documents.

Search is infrequent with personal photos; content-based techniques are weak,

Most importantly, Lansdale (1988) argued that by imitating storage in the physical world, hierarchical folders wrongly force users to store a file in a single location when it may belong in several categories

Tags allow users to apply multiple categorizations to the same information item, thus avoiding having to classify and retrieve information using a single attribute.

The focus on search-based retrieval has led to the development of several experimental PIM search engines, such as Phlat (Cutrell et al. 2006), SIS (Dumais et al. 2003), Haystack (Adar, Karger, and Stein 1999), and Raton Laveur (Bellotti and Smith 2000), as well as commercial systems such as Einfish Personal, Copernic Desktop Search, Yahoo! Desktop Search, and Microsoft Desktop Search.

Other systems take a more radical approach to retrieving personal information by completely eliminating folder- based storage. Such systems include Lifestreams (Freeman and Gelernter 1996b), Canon Cat (Raskin 2000), Presto (Dourish et al. 1999), Placeless Documents (Dourish et al. 2000), MyLifeBits (Gemmell et al. 2002), and iMeMex (Blunschi et al. 2007).Advanced search engines (such as Google Desktop and Apple’s Spotlight) now generate a real-time index that is constantly updated,. Therefore, our results indicate that improved search engines do not affect the preference for navigation over search.

search was typically used as a last resort when users couldn’t remember a file’s location.

Tags enable multiple classification. For example, pictures from a conference in Copenhagen might be stored under Pictures, Trips, Conferences, or Copenhagen.

all information items are stored in a single, flat repository and are retrieved via nonhierarchical means, such as tag search, tag selection, or tag clouds

filing paper documents into physical folders) has a crucial disadvantage: filed documents lose their reminding function

Since most data stored in computers are declarative concepts, user-defined tags can be viewed as cognitive nodes in a concept network”

(Bloehdorn and Völkel 2006), Gnowsis (Sauermann et al. 2006), ConTag (Adrian, Sauermann, and RothBerghofer 2007), TapGlance (Robbins 2008), Zotero (Ma and Wiedenbeck 2009), TAGtivity (Oleksik et al. 2009), BlueMail (Tang et al. 2008; Whittaker et al. 2011) and TagStore (Voit, Andrews, and Slany 2012).

Web Favorites Delicious (mentioned in chapter 3) is web-based bookmarking software that uses tags instead of folders

At first, Gmail allowed users to use labels only as tags (hereafter tag-labels); users could (and still can) add as many tag-labels as they wanted to an email, thus allowing multiple classification.

Gmail users currently have two ways of using labels: tag-labeling, in which labels are dragged to an email, and folder-labeling, in which emails are dragged into labels.

Google results were derived from a vast population that used Gmail for everyday work. Results showed that when given the new possibility of folder-labeling, users’ chances of creating labels doubled, and the percentage of folder-label storage exceeded that of tag-label storage.

Folders vs. Tags Results showed a strong preference for folder over tag usage in PIM for both storage and retrieval. Regarding storage, 67 percent of all labeled messages in the Gmail study were folder-labeled, compared to 33 percent tagged-labeled

Moreover, the main reported reason for tagging behavior was a wish to keep emails visible in the inbox rather than a need for multiple classifications.

In the Gmail study, participants estimated that only one message out of a thousand was retrieved by using multiple labels, and in the Windows 7 study, participants (including the six who used tags for storage) stated that they never used multiple classification for retrieval.

classification by tags is cognitively more demanding because tags tend to be item-specific, whereas folder classification tends to be more generic.

In summary, we suggest that single classification is preferred because it is simpler than multiple classification. It is reasonable to assume that a one-to-one relationship (information item a is in folder x) is easier to remember than a one-to-many relationship (information item a can be retrieved by using tags x, y, or

Gmail introduced nested labels—the ability to create a hierarchical label structure. The Gmail blog noted that “a highly requested feature for labels, though, comes from the world of folders: the ability to organize labels hierarchically.”

Applications like Delicious allow individual users to tag web resources, applying labels that can be shared.

Group Information Management.

Among the individual differences they found were those between (a) purists who preferred to store each file in a single location versus proliferators who preferred to store files in all possible locations; (b) syntactists who based their structure on episodic cues and the context in which the information was used versus semanticists who based their organization on document meaning; (c) scruffies who wanted “only five” top-level categories versus neatniks who wanted “three hundred fine-grained” folders; and (d) savers who wanted to keep all possibly relevant documents versus deleters who thought that doing so would create clutter and thus wanted to keep a minimal set of documents.

Rader (2009) found that there is little feeling of common ownership in shared repositories. In a paper titled “Yours, Mine and (Not) Ours,” she described how her participants restricted activities to their own files in a common repository and were careful not to delete files that possibly might be useful to others. As a result, the repository became cluttered and poorly organized, and participants wasted time and effort when attempting to find information, especially information created by others. One of her participants said: “Probably the biggest problem we have with CTools is that people tend to organize information [in] different ways”

When using GIM, users’ chance of failing to find a file (22 percent) was significantly higher than when using PIM (13 percent). Using PIM instead of GIM makes sense; although with PIM each person in the collaboration needs to classify and manage a shared file individually, this additional effort substantially increases the chances of finding that shared file.

It therefore seems that the root of the problem is not cloud storage and GIM itself but the fact that other people created the folder.

the failure rate for shared folders created by others is also significantly higher than retrievals from default folders, such as My Documents and Dropbox root directories (17 percent), indicating that using other people’s organization leads to worse results than using no organization at all.

When retrieving PIM information, people can rely not only on semantic memory but also on episodic memory (i.e., specific memories of the occasion and context in which the document was stored, such as remembering working on a document over the holidays)

sharing via email does not require all collaborators to use the same email application, so a Microsoft Outlook user has no problems sharing file attachments with a Gmail user, for example. In contrast, sharing files in the cloud requires agreement to use a shared system; Dropbox users cannot share files with Google Drive users. our system to allow users to have different mail i.d together for folder creation

Navigation therefore can be performed semiautomatically, leaving the mind free to think of other tasks at hand. Search, on the other hand, requires thinking of a search term, which has been shown to be an attentiondemanding task

navigation resulted predominantly in bilateral activation of posterior regions of the brain, associated largely with real-world navigation, retrieving information from memory, and low-level sensory-perceptual processing.

On the other hand, search resulted in strictly left-lateralized activation in areas strongly associated with linguistic and working memory processing
it may be concluded that both virtual and real-world navigation requires little or no linguistic processing in the human brain.

PIM can be seen as a special kind of solipsistic communication between a person and him- or herself during two different activities: storage and retrieval (see figure 9.2). The user-subjective approach exploits this unique feature, arguing that PIM systems should make systematic use of subjective, user-dependent attributes in addition to the traditional use of objective attributes.

subjective attributes are user-dependent and cannot be derived directly from the information item itself. Instead, they often can be inferred from user–information interaction. For example, if a user frequently accesses a particular item, we might infer that item is subjectively important to that user.

The user-subjective approach identifies three specific subjective attributes: the importance of the information item to the user, the project to which it belongs, and the context in which the item is used.

Importance is user-dependent and thus subjective: an information item can be very important to one person and completely unimportant to another. The same item might also be important and relevant to a user today but unimportant (irrelevant) to him or her next month. One measure of relevance can be derived from users’ interactions with their information: Recently used information items are generally judged as more relevant than those that have not been used for a long time.

the promotion principle states that important information items should be highly visible and accessible, because they are more likely to be retrieved. The demotion principle proposes that information items of lower importance should be demoted (i.e., made less visible) so as not to distract the user, but should be kept within their original context just in case they are needed.

decision making process described in Prospect Theory (Kahneman and Tversky 1979

Losses loom larger than gains; thus, the possible loss of an information item emotionally affects the decision maker more than the gains of having fewer distracters or reduced retrieval time.

The user-subjective approach suggests that demotion interfaces need to keep information items within their original context. This is a critical point when comparing demotion with deletion or archiving (which can be either a user work-around or a design feature, as with email archiving in Microsoft Outlook and Gmail). In contrast to demotion, archiving removes the information item from its original context (e.g., the folder in which it was stored) to an archive folder. Preserving context is important,

three demotion designs we have already evaluated: GrayArea, DMTR, and Old’nGray

One problem mentioned repeatedly by participants in PIM studies (e.g., Bergman 2006; Boardman 2004) arises from the fact that users keep multiple versions of the same file. These versions are typically improved sequentially over time, so in the large majority of cases, users are interested in retrieving only the latest version. When seeking this latest version, users may become confused and distracted by previous versions of the file.

demotion interface, called DupliPix, which partially hides near duplicates of pictures

fragmentation: documents relating to a given project are stored in one folder hierarchy (e.g., in My Documents), emails in a separate mailbox hierarchy, and favorite websites in yet another browser-related hierarchy (these will be referred to as the three hierarchies)

The ProjectFolders system design is an instantiation of the project classification principle. It allows a user to store all project-related documents, emails, and web favorites as well as related tasks and contacts in a single folder, separated by tabs. This allows users to work in the context of their projects and retrieve all project-related items from a single location.

This approach is now implemented in both Mac OS X and Windows search engines.

commercial software such as OneNote, Snippets, and DragStrip

Our data show that users tend to think about their information items in terms of projects. They simultaneously retrieve information items of different formats when working on the same project and store files of different formats together according to projects when the system design allows them.

The subjective context principle suggests that information should be retrieved by the user in the same context in which it was previously used in order to bridge the time gap between retrieval and prior use.1

a common process in PIM involves users distilling complex information into a summary that is to be used at a future time. Typical examples might include taking notes in a meeting or summarizing a lecture or presentation. One frequently encountered difficulty in such situations is that these notes can be difficult to understand later because their original context is forgotten.

The user-subjective approach identifies four context attributes of an information item: internal, external, social, and temporal. Internal context relates to the user’s thoughts while interacting with the information item; the external context of an information item refers to the other items that the user was dealing with while interacting with a specific information item; social context refers to other persons relating to the information item, such as other people who collaborate with the user regarding that information item; and temporal context pertains to the state in which the user left the information item when she or he last interacted with it and to his or her working plans regarding that information.

ChittyChatty (Internal Context)

ChittyChatty allows users to reconstruct relevant parts of their original context by linking notes to recordings of that context.

The system records user notes along with speech from the original meeting and co indexes them. Clicking on a digital note accesses the original speech that occurred when the note was taken, allowing context to be regenerated.

ItemHistory (External Context)

ItemHistory is a feature that provides this functionality. When working on a specific information item (e.g., a student working on a course paper), a user may open several other information items related to the same task (e.g., web pages, emails, and other documents containing relevant information). In current designs, the connections between these information items are lost and the user needs to retrieve each of them separately. ItemHistory indexes these relations automatically.

ContactMap and PiccyChatty (Social Context)

users commonly relied on social attributes for organization and retrieval

ContactMap

identified groups of important social contacts by analyzing a user’s email interactions with those people, selecting contacts the user emailed both often and in the long term

PiccyChatty used social information to infer the relative importance of information items shared with others

PiccyChatty, users could actively annotate important parts of the lecture, but the system also allowed users to take photos, which could, for example, capture an important slide that the lecturer presented. As with the ChittyChatty system described earlier in this chapter, notes or photos were temporally coindexed to lecture recordings to allow recreation of initial context so that clicking on a note or photo would begin playback of what was being said when the note or photo was created.

In PiccyChatty, notes and photo annotations were pooled across all system users, and the system recorded social information about how many people had accessed a specific note or photo.

Many users may mark such messages as important (e.g., using a star in Gmail), but unless they are using a special inbox mode (e.g., “starred first” in Gmail), these messages may still be pushed out of sight—and also out of mind.

Starlight design

patent any of our design applications because we want users of all operating systems to benefit from them.

One obvious solution is to use machine-learning methods to organize all our personal data automatically, a concept known as the semantic desktop.

these approaches are being explored in cloud deployments, such as Facebook/iPhoto photo tagging, we think there are challenges in the PIM context.

Recent Documents list, which helps to reduce file retrieval time

They first developed a successful algorithm that predicted users’ next actions, including file accesses (Fitchett and Cockburn 2012). They then combined this with navigation and search (Fitchett, Cockburn, and Gutwin 2013), finding that this combined method reduced retrieval time

boomerang add-in for Gmail (http://www.boomeranggmail.com/), and more recently Inbox by Gmail. Both allow users to “snooze” their actionable emails, so they remain invisible until their deadline approaches and thus avoid inbox clutter.

Google Calendar Goals.

Search requires access to verbal working memory, whereas navigation relies on more primitive, locational brain processes.

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http://bit.ly/TechpreneurInterviewsBook

Software is usually protected under copyright law.

“What’s intellectual property got to do with me?” You can access it here: https://youtu.be/PMab4oRGaZc.

Freelance employment contracts

Here are some clauses you may wish to cover in an agreement: A clear description of the work to be done. Describe what you are hiring the developer to do, for example: “Develop a Social Media mobile app for Android devices, including all tasks associated with the build of the app and its launch, which should follow good industry practice and be delivered to a professional standard.”

Obligations might include agreeing to behave in an honest manner, to follow your instructions and to work with reasonable care and skill.

Working hours. Do you want to agree on specific days of the week which will be worked?

Payment cycles. Are you going to pay daily, weekly, monthly, or per project on a fixed fee basis?

or would you consider staged payments based on reaching specific project milestones? If staged payments are to be made, you might agree to split the development work into segments and pay based on the successful completion of each one.

Timesheets and invoicing. When should time sheets or invoices be submitted to you for payment, and in what format?

Termination and Serving notice. What are the terms (or scenarios) under which either party can end the agreement?

Employers often write into their contracts that all IP generated whilst working for their company belongs to them exclusively. You will want to protect your idea, and be recognised as the owner of your product’s source code and any other IP linked with your venture.

Confidentiality / Non-disclosure.

restrictions may include stating that an employee cannot set up and compete with your company in the same market after working for you, or that they may not approach your clients.

Final deliverables. At the end of the project, (or whenever you and your developer agree to part ways), there will be some final deliverables that you should receive and be given access to. These may include source code, designs, and digital assets (such as logos and images, files, databases and data) and any user names, passwords and access codes that your developer holds.

A good contract should also include a clause in which your developer agrees that the software they will provide for you does not infringe the Intellectual Property Rights (IPR) of any other parties.

If you want to create a SOW and use it to form part of your contract with a developer, keep it high level – no more than 20 points, absolute maximum. Your ideas will evolve if you are taking external feedback on board, so you’ll need the freedom to operate with a degree of flexibility, and being too rigid on paper can come back to bite you, as your developer may point out that you’re expanding beyond the scope of your original requirements as stated in the document, which might mean a longer delivery period, or that they are owed more money!

SEQ Legal offer a selection of free and pay-as-you-go legal documents for IT, Internet and Business Law, including documents for those creating mobile apps, NDAs, SaaS agreements, software licence agreements and more: http://www.seqlegal.com/

Public liability insurance

Employer’s liability insurance

Professional indemnity insurance

Cyber insurance

Hacks and data breaches,

Claims from injured parties.

Business interruption. Because loss of data can bring a business to a standstill, affected businesses may experience a loss of income.

Restoration and the repair of damage to websites, programs and data.

Ransom of data,

PR, crisis and reputation management.

Google Trends, https://www.google.co.uk/trends displays trends in the use of search terms over time (rather than providing specific figures). It’s possible to search for global trends and local trends by changing the search filters available at the top of the page. You can compare up to 5 different search terms at once and can search within a specific time-frame.

There are tools you can use to check the relative popularity of keywords used in searches on the web. These tools are generally used for SEM (Search Engine Marketing), which companies use when they wish to pay a search engine like Google or Bing to advertise their businesses by displaying them in people’s search results. However, they can be used to gather a lot of useful information, even if you’re not intending to pay for SEM.

Instakeywords; http://www.instakeywords.com/ The Google Keyword Planner tool, which is part of Google AdWords; used for SEM, paid advertising to help companies rank highly on Google, https:// adwords.google.co.uk/KeywordPlanner. (You may need Gmail and AdWords accounts to access this tool.) Wordtracker; https://www.wordtracker.com/?splash=true Wordstream.com; http://www.wordstream.com/ keywords/

meaning of the column headings shown in the Wordtracker example above: Volume. The number of times a keyword has been searched for in the previous month. IAAT (in anchor and title) shows how many web pages have a given keyword in both the title tag (the title of each search result) and anchor text (the clickable text in a link). Competition. This number ranges between 1 and 100, and represents the number of optimised pages on the internet for each keyword. (The higher the number, the more web pages there are that contain the keywords.) A high KEI indicates keywords which a lot of people are using when they search, but which have a lower competition in terms of the number of web pages that contain these keywords, measured on a 1 to 100 scale.

Look for product reviews using Google and some of the big software comparison review sites such as: Capterra; http://www.capterra.com, G2crowd; https://www.g2crowd.com, TrustRadius; https://www.trustradius.com, AlternativeTo; https://alternativeto.net/, GetApp; https://www.getapp.com, and Product Hunt; which is hugely popular with startups, https://www.producthunt.com/.

and business users hungry for new software – perfect for raising your profile, and getting your new product seen (and purchased) by the right audience!

Get serious about searching with the Google advanced search, https://www.google.com/advanced_search. Include exact words or phrases, or choose to exclude specific keywords from your search results. You can add a + (plus) sign next to words that must appear, and a – (minus) sign next to words that you don’t want to see in your search results.

Turn Google into your personal research assistant with Google Alerts, https://www.google.co.uk/alerts, useful for monitoring the latest news on your topic of interest. Put it to work collecting data from across the web for you 24 hours a day, 7 days a week! Enter the keywords you’re interested in, enter an email address, click on the “show options” menu and specify how often you want to receive notifications and you’re set. Once your app is “live” you could set up an alert to see who’s talking about it! Fig 9. Put Google Alerts to work for you and receive alerts via email or RSS. Google Scholar, https://scholar.google.co.uk/schhp? hl=en&as_sdt=2000b will help you locate research published on your topic of interest including journals and research from leading institutions. Set up an alert so you can receive email notifications about your preferred topic(s).

Google’s Consumer Barometer can be used to review high-level trends across populations. It also provides insights into different consumer groups and their behaviour and usage trends across smartphones, desktops and tablets: https://www.consumerbarometer.com/en/

The PESTLE acronym covers 6 types of external factors that you should consider and stands for – Political, Economic, Social, Technological, Legal and Environmental.

Technological advances can have a big impact on businesses, so watch out for new trends. These may result in software needing to be modified, or updated in order to keep pace with, or to take advantage of changes. Every time Google, Amazon, or Facebook change their algorithms or policies, companies of all sizes scramble to adapt!

Business model canvas; https://strategyzer.com/canvas/business-model-canvas?url=canvas/bmc, or https:// steveblank.files.wordpress.com/2010/10/business-model-canvas.jpg Lean canvas; http://3daystartup.org/wp- content/uploads/2014/04/lean-canvas.jpg Business model canvas; http://www.witszen.com/wp-content/uploads/ 2013/05/Business-Model-Canvas.png

What customers are doing when they aren’t using your product also matters. Learning about their preferences and the products and services that they like to use could have a bearing on how you present and position your own product.

This article contains some useful tips for reaching out to people online: https://www.linkedin.com/pulse/ 20130624114114-69244073-6-ways-to-get-me-to-email-you-back

“Agile” is actually an umbrella term The Agile family includes XP (eXtreme Programming), Scrum, Kanban, Lean and DSDM (Dynamic Systems Development Method) frameworks.

It is usually contrasted with Waterfall, a more traditional software development methodology.

There is an Agile Manifesto (see the link at the end of this chapter) that focuses on putting people, customer interaction and communication first.

Timeboxing is a time management tool used regularly in Agile teams to keep tasks, meetings and non- development activities focused.

recurring development cycles called iterations (meaning “to repeat”), which usually last anything from a week to 30 days before they end and then begin again. At the end of each iteration there is an expected output from the development team, which was defined at the start of the iteration. Agilists believe in making frequent releases of software (a mantra usually referred to as “release early, release often.”) The terms “to iterate,” or “iterate over” are used to describe the process of improving something (in our case, a product, or idea) in stages.

Agile teams use development spikes (which are timeboxed technical investigations), to gather information so that decision can be made, or to undertake research that answers questions such as: “Can we do it?”, “Should we do it?” and “How should we do it?”

Scrum, Scrumban (a Scrum/Kanban hybrid), Kanban and XP practices

Scrum’s repeating development cycles are called sprints. These are usually 2 or 4-week release cycles, where the team prepares and then builds a defined set of functionality pulled from a product to-do list called a product backlog.

Scrum has four “ceremonies”, sprint planning meetings, daily scrums (often called stand-up meetings), sprint review meetings, and sprint retrospective meetings (commonly known as retros). Stand-up meetings are daily micro-meetings that focus on what has been done, what will be done and raising any issues that prevent or impede progress, known as impediments, or blockers,

ScrumMaster, (this spelling is correct, but you’ll see it spelled Scrum Master too) servant leaders who act as facilitators, sometimes perform project management duties, but always help the team operate efficiently and effectively and shield them from distractions.

Product Owner, those responsible for setting the vision of the product and the prioritisation of tasks on the product backlog; the product to-do list. The Scrum team. The technical staff, (including developers) who work together to deliver the functionality.

XP (short for eXtreme Programming), is known for the practice of pair programming. This involves two developers working on a single task on a shared computer, writing code and solving problems together.)

XP has iterations (not sprints), which usually last 1 or 2 weeks.

Kanban, which means “card” in Japanese, emerged from the working practices at the Toyota car manufacturing plants, and favours JIT, (Just In Time planning.) This means not planning too far in advance due to the possibility of change, and setting limits on the number of tasks that each team member can have in their work queue to control throughput and avoid bottlenecks in the software development “production line”.

Scrumban is a hybrid of Kanban and Scrum, whilst Lean, like Kanban emerged from the manufacturing sector and places an emphasis on customer value and eliminating waste.

User stories are used across all the Agile frameworks as a way of breaking down requirements into very small components that can be more easily understood, managed and built because they have been simplified as much as possible.

Some product development teams will use the GWT (Given-When-Then) approach to write them. This can make it easier for developers to translate each user story into code.

A common format for summarising, or describing user stories at a high-level is: As a [insert type of customer / user / actor] I want to be able to [insert the goal] So that I can [insert the benefit]

Concept. This stage includes the birth of the initial idea, the exploratory work needed to decide whether the idea should be pursued and the development of the idea through customer interviews, market research and data analysis. (Some also call this the Discovery phase.)

Requirements gathering and analysis includes taking the initial concept and producing a set of requirements (the description of what the users of the software will need to be able to do, as well as the technical tasks that must be actioned if the software is to run reliably.) This stage involves mapping out the steps and processes involved in helping users get from “A to B” using your product, (these steps are called user journeys),

Design should not be confused with visual design. In this context, we mean architectural design, which looks at how the system needs to be architected to fulfil the requirements, and your vision for the app.

The SDLC does not always explicitly mention the user experience (UX) and visual design elements of the process. This would include the creation of wireframes (which outline the layout of the screens that users will interact with), and the design of the product, so it is easy and pleasant to use.

Build (also called the development or coding stage.) This involves writing code to fulfil the requirements gathered during the requirements gathering and analysis stage, and integration work to ensure that all the functionality that is part of the product (whether it was built by your developers, or bolted-on), all behaves as one cohesive unit. The build phase also includes solving any technical problems which arise as the product is built.

Test. This covers the discovery and management of issues and faults and identifying any parts of the product that don’t behave, or work together as intended.

Testing is an absolutely critical part of the cycle which is often denied the respect and attention it deserves.

Release. Releasing, going live, deploying, pushing to live, or shipping all mean the same thing – making a version of your product publicly available, or pushing specific pieces of functionality out to your customers or users.

Maintenance happens after the initial project to create the software has come to an end. Once a product is live and being used by customers, it needs to be maintained to ensure that it continues to deliver service consistently and to a high standard.

If you’re interested in learning more about Agile frameworks, you can find more resources here: The Agile Manifesto. http://agilemanifesto.org/ Scrum Alliance. https://www.scrumalliance.org/ Agile Alliance. https:// www.agilealliance.org/

Download the entire set of chapter challenges for this book, collated into a workbook with an activity log to help you keep track of important tasks: http://www.mylanderpages.com/ donthireasoftwaredeveloperuntilyoureadthisbook/Free-resource-1

Creating code and manually testing software are two different job roles, using different sets of skills.

Developers do not generally do manual testing as a key part of their work and there are very good reasons why code should not be tested by the person who created

Common software delivery team roles

Back-end developer. “Back-end dev’s” write code that works at the server or database level, rather than focusing on the user interaction and visual appeal of software, or websites, which is the domain of front-end developers. Even if you’re building a simple app, most will require some form of database skill. A back-end developer’s work might include capturing the information entered by a user on a web page and storing it in a database, and the retrieval of that data at a later date.

Business Analyst (BA). (Roles and responsibilities may be similar to a Product Owner, or Product Manager). Business Analysts investigate business problems and assess the pros and cons of business activities using various techniques, setting out conclusions and recommendations on the best course(s) of action.

Business analysts can have very different skill-sets, depending on whether they are wholly business focused, “crunch numbers,” or are involved with computer systems. Technical BA’s often act as the “bridge” between the business and development functions of a company and will document system or product requirements in written and diagrammatic forms using process flows, diagrams, charts or tables and may write the requirements, or user stories for the development team.

Content writer / technical copywriter / content editor. These professionals are skilled in producing content that attracts and resonates with customers. They also need to be able to write clear, simple instructions.

The content writer is usually the person that writes the help text or error messages for your app that explain how to perform activities within the app,

Client / Customer / Sponsor. Depending on the context, the client may be a sponsor – the person who “fronts the cash” to pay for a development project in an organisation, or they may be an eventual user of the product themselves.

In this case, you are the client of the software delivery team and the end-users (the people who will use the software) will be your customers.

Designer (or Visual designer). Designers are concerned with the visual appeal of the product,

They follow key design principles such as balance, contrast, emphasis, and unity and consider design elements such as lines, shapes, texture and colour.

Front-end developer. These developers are skilled at creating the elements of a website, or product that the customer sees and interacts with directly, also taking into consideration the look and feel of the product, and general presentation and style.

Full-stack developer. Developers proficient in both front and back-end skills are called full-stack developers.

Information Architect (IA). These skills are useful for projects where there will be a lot of information to organise, such as on large websites. The IA ensures that users are quickly and easily able to find what they are looking for and may carry out user tests to confirm that users understand the way information has been grouped or classified by the client or software team.

Product Manager. (Also known as Proposition Managers, with some crossover with the Product Owner role.) A product, or software delivery team will usually include one of these three roles, unless a business analyst is able to bridge the gap. Product Managers are usually responsible for setting the product vision and strategy.

Their role may also include managing the project’s budget, forecasting sales figures and keeping track of profits and losses. The product manager will also need to understand how the project should evolve as customer needs and market conditions change. They may be involved in marketing the product; describing and presenting its features (what it does) and benefits (the value to the customer), and answering the WIIFM; “What’s in it for me?” question for customers, by explaining how the product will solve a pain or bring about a desired result. In the early days, most tech founders will find themselves performing these tasks.

Product Owner (PO). This Scrum specific role may be equivalent to a Product Manager or Proposition Manager role in software development environments that do not use Scrum. They may be responsible for the vision for the product, writing user stories, and will maintain the product backlog, (or product to-do list) which keeps the development team supplied with work.

Project Manager (PM). PM’s are known as ScrumMasters in Scrum environments.

ScrumMaster. (Also see the Project Manager role.) ScrumMasters are often called servant leaders

They will organise and bring structure to the team, facilitate team decision making and generally support, coach and challenge the team. They play an important role in removing impediments (often known as blockers, that

prevent the team from making progress or doing their best.) ScrumMasters may perform traditional project management tasks too.

Technical Architect (TA.) These individuals define the architecture, or structure of a system, looking at its purpose from a high-level. They will consider the way data is stored, the future demands on the system as the number of users grow, the other systems the product may need to connect to, or rely upon to function.

The programming language to be used for the project may also be proposed by the TA.

Technical architects will communicate their plans to the development team in verbal, written and diagrammatic form to ensure that their vision is understood and actioned correctly.

Tester, (automation.) Automation testers are skilled at managing software and tools used to automate the testing of web browsers, software and systems, reducing (but not eliminating!) the need for manual testing by humans.

Tests, or test scripts first need to be written to cover all the bases, but once they exist, these scripts can be run at will. Automated tests can be used to check units of code, specific functionality or even to simulate many people performing key activities and important user journeys within your product!

Some developers have automated testing experience, and those with experience of TDD (Test Driven Development) will write tests for each user story based on the requirements of the story before they even start to write the code to complete the work.

Tester, (manual.) Also known as QA’s, (short for Quality Assurance) software testers, or manual testers.

Manual testing is the process of testing software for defects by hand, using the naked eye, checking that the work done by developers has been completed according to expectations, and the way functionality behaves is correct. Some bugs are difficult to pick up via automated tests, which is why manual testing still has value.

Neither customers, nor user testers should be used to help find bugs, so don’t present them with a product in poor shape – you’ll need to tidy it up first.

Tester, (performance, security and other specialised testing roles.) Some software testers perform very specific types of software test, including security testing, stress testing or other forms of test.

User experience designers (are also known by the acronyms UX or UXD).

User experience tester. Also known as UX Tester or Usability tester. These testers observe people’s behaviour to understand how to improve the UX of a product. They are skilled interviewers, and translate the results of user tests done on paper, or via a desktop, or mobile device into actions that can be used to improve, or redesign a product.

Other roles include User Interface design (UI) and User interaction which considers the interfaces, (or screens) we interact with on our devices and the knowledge and study of human behaviour when interacting with computer systems.

All the roles we’ve discussed can be placed into 4 categories. Let’s review each one in turn: Essential skills for your developer Essential roles to fill, or to be outsourced Skills that may be needed from time-to-time Skills you can survive without (with adequate planning)

Essential skills for your developer These should include: Back-end / full-stack development skills. You will definitely need either a back-end or full-stack developer if you are building an app from scratch. If you can find one with technical architecture experience, this may add value at the start of the project in terms of planning the best way for your app to be constructed. Although not quite essential, Automated test skills and Test Driven Development (TDD) experience should be seriously considered

Essential roles to fill, or to be outsourced

Business analyst / Product Owner. As a minimum, you’ll need someone to: i) manage the backlog of development tasks, ii) supply your developer with work to do, and iii) communicate your product requirements as clearly, accurately and in as much detail as possible. Miscommunication will cost you money if your developer builds functionality which isn’t what you wanted.

Project Manager / ScrumMaster. You should have your developer report to you and have a method of tracking their progress. You will also need to manage your budget, so you know how much money you have spent, what it was spent on, how much money you need to keep the project running each month (your burn rate) and how much you have left. Dealing with issues (and actively trying to avoid them in the first place) are activities that fall within the PM’s domain.

Product Manager.

Tester (Manual testing / QA). Testing is essential. If product testing is not up to scratch, your whole product may become unusable, and unstable. You have the option to ask your developer to help with testing, but this is a not necessarily a good idea –

This is why a fresh pair of eyes is so important. If you only have one developer, you’ll also be distracting them from writing code if you give them a range of tasks to do.

Usability or user testing / user experience testing. You can do the tests for usability and experience yourself if on a budget – often the simplest, most minimally designed products are the most usable, so keep your product simple to start with!

Skills that may be needed from time-to-time

Content writing.

Design / UX.

Front-end development skills. Whether you require a front-end developer or not will depend on the type of app you wish to build and the range of skills that your back-end, or full-stack developer has.

Tester, (performance, security and other specialised testing roles.) These types of tests are usually done towards the end of the project, when your app will be tested as a whole system, rather than as a number of small units. Therefore, having your developer do this type of work (if they have the skills to do it) won’t distract them on a daily basis.

Skills you can survive without (with adequate planning and workarounds)

Information architecture.

User interaction expert.

Please set aside a budget for non-functional requirements, and other technical tasks, because they are an important, even essential investment.

Requirements are usually defined as being either functional or non-functional: Functional requirements define how a system, or parts of a system works. They are focused on its features; what the system will do, who for and its behaviours. Non-functional requirements (NFRs) define constraints, control mechanisms or boundaries and set out criteria that can be used to judge the operation of your system.

Accessibility. Software should be easy to use for everyone, including those with disabilities including deafness, impaired vision, blindness, colour blindness, epilepsy, dyslexia or any combination of these.

Auditing and logging. What sorts of records does your app need to keep?

Availability. Let’s consider the availability of your service. When you need to do routine maintenance work on your app, what time of day, or night would be best?

Capacity. Software applications need to be robust and reliable. Your app should be able to handle sudden or unexpected spikes in traffic without crashing or slowing to a snail’s pace.

When your developer comes on board, ask them to estimate the number of transactions (or “requests”) per minute and per hour, and the traffic volumes that your app should be able to deal with, without breaking into a metaphorical sweat! They should also make sure the infrastructure that supports your app can not only handle the expected activity, but a significant percentage more, so it is always protected by a decent safety margin.

Data storage, back-up and recovery. If you’re going to be holding a lot of customer data, make sure your database can handle this.

If you’re going to use a 3rd party company for data storage, make sure you know where the servers that will hold sensitive customer data are located. For example, to comply with the European data protection laws regarding the collection, storage and safeguarding of customer data, UK companies should look to hold their customers’ data on servers located in the EU.

Read the terms and conditions of service carefully when you work with 3rd parties, so you know where their servers are based and which country’s rules they follow.

Disaster recovery. You should have a disaster recovery plan in place which lays out what should happen in the event of a disaster – digital, natural or otherwise and how your app will be made usable again as quickly as possible

Documentation. If you want your developer to create technical documentation for you, then this should be budgeted for. Try to avoid burning developer time on writing documents instead of writing code.

Error handling. In the event of unexpected problems when customers access your app, error handling is standard practice. If your app does fail, make sure it provides useful information to users in the process. This might include explaining what has gone wrong, who to contact or what the user might do to resolve the problem. Avoid the “system does not compute, error 117467699787” style of error message. Don’t allow this kind of messaging in your app – they are eyesores and provide a terrible customer experience!

HTTP response codes. Most people know about the infamous 404 page; which means that you’ve tried to access a web page that can’t be found.

Keep your app professional by asking your developer to provide basic ways to cater for the most common status code errors which arise. This is usually achieved via a customer friendly web page which indicates the type of error found and provides advice to the customer about what to do next – usually along with a link back to your Homepage so the customer can continue with their activities.

Integration. What other systems, tools or software will your product rely on? However many you’re using, your product should feel like one unified product to your customers.

Legal and compliance related requirements. Confirm the national or international laws that you need to comply with.

TermsFeed, https://termsfeed.com provides documents including Privacy Policies, Terms & Conditions, EULA’s (End User Licensing Agreements for software) and Cookie Policies, whilst Iubenda.com provides privacy policies using its custom privacy policy generator, https://www.iubenda.com/en.

EULAs form an agreement between anyone who instals, downloads or purchases software and the person or organisation that provides the software. Apple provides a sample EULA here: http://www.apple.com/legal/internetservices/itunes/appstore/dev/stdeula/ The Google Play store does not have a sample EULA, although they do provide a Developer Distribution Agreement (DDA): https://play.google.com/about/developer- distribution-agreement.html#showlanguages.

You will have to decide whether these will provide you with adequate cover in the event of losses, or the theft of your idea through software piracy or other methods. Consider what sort of losses could be claimed against you as a result of an issue caused by your app. If in doubt, discuss these issues with a lawyer and with your business insurance provider.

Monitoring, and monitoring tools. I’m a big advocate of asking developers to set up early warning detection systems when new products are built.

The monitoring you do will depend on the type of app you’re building. Examples of alerts you could set up include asking for you and your developer to be warned by email, SMS or other methods if: There are errors occurring within your app. The app is failing to process user requests. You are approaching a memory, processing or data storage limit. Your app, or the services that support it have gone down or are struggling for some reason. Page load speeds rise above a certain number of seconds. (Waiting even 3 seconds for a page to load is slow.) Server “pings” fail to get any response. (Server pings are like little pokes to the server asking it, “Are you there?” If the server doesn’t respond, then there is cause for investigation.)

Here are some monitoring tools that can be used for web and / or mobile apps: Uptrends covers websites, web apps, mobile apps and server monitoring; https://www.uptrends.com. Their uptime and availability checker will tell you the availability and page download speed for any web page, from almost anywhere in the world; https:// www.uptrends.com/tools/uptime. Montis specialises in websites, networks, servers and app monitoring; http:// www.monitis.com/product. Site24x7 monitors web apps, mobile apps, servers and more, https:// www.site24x7.com/ and Paessler is a network monitoring company, https://www.paessler.com/tools. Sentry’s calling card is that it provides real-time crash reporting for mobile apps, web apps and games, https:// getsentry.com/welcome/. You could also ask your developer if there are any tools that they would recommend.

Mobile app health monitoring and app crash alert tools. App crashes are a real nuisance.

Fabric, which includes a service called Crashlytics (owned by Twitter), currently serves over 2 billion devices. It includes daily alerts, anomaly detection (so you are alerted to any unusual activity within the app), plus additional stability alerts. This is currently a free service: https://answers.io/pricing. Apteligent, https:// www.apteligent.com/ provides app health dashboards which monitor the “vital signs” of your app and alert you to issues. They also provide crash reporting among other services.

Performance. Every customer expects your app to load and work quickly!

Reliability. In an ideal world, your app would only go down when you take it down.

Unplanned downtime, as it is known, can lead to complaints, reputational damage and general annoyance.

Unplanned downtime can be heavily influenced by the suppliers you use for your services, servers and web hosting, so check the terms and conditions and Service Level Agreements (SLAs) of the 3rd parties you work with, and confirm guarantees relating to service reliability. Uptime of 99.9 to 99.99% means that you can expect unplanned downtime to be between 8.8 hours and 50 minutes per year. If this is not acceptable, consider looking for 99.999% reliability. However, this will cost more and there will be less suppliers able to guarantee this.

Reporting. There are data analytics tools you can set up for mobile apps which will tell you how many downloads you are getting, along with other stats that will indicate how and when your app is being used.

Security. This will include considering your app’s vulnerability to some of the common security threats and forms of cyber-attack. If you have a website, you may want to increase security and apply for an SSL (Secure Sockets Layer) certificate. SSL is the certificate that will enable you to get the green padlock symbol on your web pages.

Brute force attacks (or brute force cracking). These attacks are the digital equivalent of systematically trying every combination on a safe until you crack the combination.

A longer password of at least 8 characters, containing a combination of upper and lowercase letters, numbers, and non-alphanumeric characters is best.

DoS (Denial of Service) attacks

DDoS (Distributed Denial of Service) attacks

SQLi (SQL injections)

XSS attacks (Cross site scripting)

Reverse engineering involves using information gathered from looking at the code in your app and engineering a way to steal the source code or data from the app, or to exploit any vulnerabilities discovered. Mobile apps can be reverse engineered so that the hacker has the elements needed to create a counterfeit version.

Exploitation of loopholes.

Authentication and session management flaws occur where these processes are broken, or deficient.

Cross-Site Request Forgery (also known as CSRF, or one click attacks) involves malicious links, web pages or software tricking a web browser into performing actions,

The Open Web Application Security Project (OWASP) is a community that provides a range of resources to support web application security. They have several cheat sheets available, organised by programming language: Ruby cheat sheet, https://www.owasp.org/index.php/Ruby_on_Rails_Cheatsheet PHP cheat sheet, https:// www.owasp.org/index.php/PHP_Security_Cheat_Sheet There was no cheat sheet available for the Python programming language at the time of writing.

SEO (ASO for mobile apps).

There are four main types of mobile app: Native mobile apps are apps designed specifically to run on mobile devices. They require device storage space and you may, or may not need Wi-Fi in order to use them. Apps that don’t require Wi-Fi and can be used “offline,” or in dual mode may be more convenient for users.

Mobile web apps are software applications that are accessible via the web browser on a mobile device. They are simply web pages that have been mobile-optimised for smaller devices,

Wi-Fi is generally required to use them.

Hybrid apps display characteristics common to both native apps and web apps. They are web apps and were not created to run on iOS or Android, but they can be used as mobile apps and downloaded via the app marketplaces*1. They aren’t as flexible as native mobile apps; the interactions and gestures that can be performed are more restricted and they may also be more dependent on Wi-Fi than native apps. There is often some form of synchronisation between the mobile app and the web app, which keeps the data across the apps consistent, but this can vary depending on the app. Hybrid apps are generally cheaper and quicker to build than native apps.

HTML5 apps. HTML5 is the latest version of Hypertext Markup Language (HTML),

These apps are built using HTML5, JavaScript and CSS.

As with hybrid apps, they are resource efficient; relatively quick to develop and once built, can be used on the web and submitted to the app marketplaces*2. They lack the benefits of native apps in terms of speed and the range of gestures available, and may not be as secure as native apps, being susceptible to cross-site scripting attacks

Mobile websites, for example, https://m.facebook.com are a copy of your website with its own mobile domain specifically for mobile devices. They are now regarded as quite old-fashioned,

Responsive design is now the gold standard and using this approach, one URL (i.e. web address) can be used to access your website, no matter which device is being used. The main reason to mention m. sites is to make sure that you’re aware that it is probably best to reject a proposal to set up your domains in this way!

Any software that can be accessed via a web browser, for example, Chrome, Firefox, Safari or Internet Explorer (I.E.) is known as a web app.

Microsoft Office 365 and Salesforce.com are examples of popular SaaS products which are available “in the cloud.”

Browser extensions (also known as add-ons) and plug-ins also belong to the web app family. Each web browser has its own set of extensions that only work with that specific browser and work by extending the browser’s functionality.

Here is a free Google resource for checking the “mobile-friendliness” of your website: https://www.google.co.uk/ webmasters/tools/mobile-friendly/.

Desktop apps run on a PC or laptop and generally, a web browser or an Internet connection is not required to use them.

payments to have ads or branding removed from content, or other services or conveniences that you might decide to sell to customers whilst they are “in” your app. Upgrading to a paid subscription in exchange for more services, also qualifies as an in-app purchase.

Google AdSense, which will display ads on your website. Just place the AdSense code on the pages where you want the ads to appear. You’ll need to apply to AdSense to do this, which can take several days. After that, you’ll be paid based on the number of clicks the ads receive.

Google’s AdMob for mobile apps

CTR is defined as the number of clicks on an ad, divided by the number of impressions (the number of times that the ad is shown).

You can find a mobile app monetisation directory here: http://appindex.com/app-monetization/. It contains a large network of advertisers who can produce rich media ads such as audio, video ads and other more interactive styles of ad, which entice users to listen, watch or click.

consider your options and attempt to find the optimum way to monetise your app via third parties.

Koum was introduced to a Russian iPhone developer found by a friend on RentACoder.com (now Freelancer.com), and hired him to build the app.

Focus on customer success. Send tips and suggestions to make sure new users get the most value possible from your app, and don’t stop using it.

Be aware that some customers will be deterred if you ask for a payment card up-front. To overcome that barrier, some companies very openly state that customers can sign up for a free trial with no credit card required.

mobile or web app can be made configurable by putting settings, also known as logic or rules, in place behind- the-scenes of your app. Configuration settings, also known as “config” can be adjusted to suit your needs and

can be set up by developers to control who can do what within your app, when they can do it and to impose limits and restrictions on users based on user roles (such as administrator vs. standard user), or according to the package, or payment plan a customer has signed up for.

The sales information you provide in the app marketplace will help people decide whether they want to download your app.

Prepare a title and description for your app which clearly explains: What it does and clearly outlines its features. The problems your app will solve and / or the benefits that customers will receive when they use it.

At the time of writing, WhatsApp uses several keywords in their store listing, including: free, messaging, call, SMS, photos, videos, documents, 4G, 3G, 2G, Edge, Wi-Fi, voice, send and receive.

Include some enticing images, or a video of your app “in action.”

Here’s some more information to help you maximise your marketplace listing from Apple; https:// developer.apple.com/app-store/product-page and the Google Play Store (scroll down to the “Set up your Store Listing” section); https://support.google.com/googleplay/android-developer/answer/113469?hl=en-GB and guidelines; https://developer.apple.com/app-store/guidelines/

If you’re wondering what the App Store equivalent looks like for WhatsApp, that’s a good question! It’s not very easy to display here, but here’s a link to the App Store Product Page for WhatsApp: https:// itunes.apple.com/gb/app/whatsapp-messenger/id310633997?mt=8

http://homescreen.is/

Favicons (short for favourites icons) are tiny icons that make your website easier to identify (especially when you have multiple browser windows open, like I do in the example below!) They too are part of your online branding.

http://www.favicon-generator.org/.

Write page title and meta-description tags for each one of your web pages. The page title is the title of your page and the meta description is a summary of the content on your page, which is displayed in search results. Make sure they are both “keyword rich” and contain the words or phrases your target customers might search for.

Set the headings for each of your web pages. Search engines rely on the headings used on websites and web apps to make sense of the structure of your web pages.

H1 defines the most important heading on your page (usually your product, brand name or business benefits) whilst h6 defines the least important heading, with headings 2-5 in between.

Your developer can set the relevant page headings for you. You don’t have to define all 6 headings, h1 and h2 are most important.

Write SEO friendly “body text.” The main body of content on each page should contain important and relevant keywords that increase the chances of that web page appearing in Google’s search results.

Write image and video descriptions. Images and videos should have descriptions and alt (or alternative) tags, which explain what they are. If your videos are tagged i.e. labelled with relevant keywords,

Some disabled users rely on screen readers and specialist software that will speak aloud the captions and tags on your images and videos to explain what the content is. This improves the accessibility of your website,

Register your website with Google (log in to a Gmail account first): https://www.google.com/webmasters/tools/ submit-url?continue=/addurl&pli=1. Submit your website’s sitemap to Google. Doing this invites Google’s bots or spiders to “crawl” your website or web app, so your pages show up in Google search results.

word of warning, don’t keyword stuff, (repeat the same keywords over and over to try and boost search rankings.) You could be penalised by Google for trying to game the system. They have ways of detecting unusual patterns in text, and the overuse of the same words and phrases, so make sure your content flows naturally.

Create descriptive page titles and good meta-descriptions: https://support.google.com/webmasters/answer/35624? hl=en – 1 SEO starter guide: https://static.googleusercontent.com/media/www.google.com/en//webmasters/docs/ search-engine-optimization-starter-guide.pdf Pro tip! Allow Google to promote your mobile app on the web using Firebase. As soon as you launch your mobile app, get it indexed by Google, so that it’s registered on Google’s servers. Once Google “knows” about your app, it can be launched or installed if it comes up in Google’s search results, https://firebase.google.com/docs/app-indexing/

Page speed is also important, both for SEO (as Google can penalise “slow” websites) and because anyone coming to your site will expect your pages to load quickly. Google has some analysis tools to assess web page loading times. Check periodically to see how your web pages perform: https://developers.google.com/speed/ pagespeed/insights/?hl=en.

Dropdown menus and pop-up boxes are not phone friendly, nor are websites with lots of tabs.

SSL, and HTTPS sites, whereby transfers of data are encrypted, carry the green padlock icon, and can increase customers’ trust in your business.

Push Notifications – a low-cost engagement tool for mobile and web apps

Push notifications for mobile apps are economical to send. Via Amazon Web Services, (AWS), the cost is $0.50 USD per million notifications: https://aws.amazon.com/sns/pricing/. Analytics tools such as Mixpanel https:// mixpanel.com/notifications/ can be used to monitor the effectiveness of the push notifications that you send.

Push notifications for web browsers. Websites and web apps can request permission to send notifications to customers.

If you’d like to see how businesses that sell mobile apps promote themselves online, take a look at these sites: Toshl Finance (iOS, Android, Windows, Blackberry and more), https://toshl.com/ The Headspace app (Android and iOS), https://www.headspace.com/headspace-meditation-app.

Plug-in examples include online review plug-ins, the ability to add PayPal buttons to the site to transform it into an e-commerce store and price plan comparison widgets

Double check that the template you select is responsive and will re-size for mobile.

Landing pages are 1-page websites used to perform a specific purpose such as promoting or selling a product or service, or to collect sales leads. Launchrock http://launchrock.com/ focuses on providing services for startups. Other landing page tools include: Landingi, https://landingi.com/ Leadpages, https://www.leadpages.net ActiveTrail, https://www.activetrail.com/ Mailerlite, https://www.mailerlite.com/full-feature-list Ontraport, https://ontraport.com/ Landerapp, https://landerapp.com/ All the tools offer a free trial, and prices start from around $29 per month, apart from ActiveTrail which currently starts from a budget-friendly price of $7 per month and supports email and SMS marketing and Mailerlite which offers a freemium package. Most of these apps will let you create as many landing pages as you like under the same account, and as a rule, most will allow you to connect domains you have already purchased to a limited number of landing pages. Some also offer A/B testing functionality, so you can compare two different versions of a landing page by displaying them both to customers on rotation. Where this is the case, a page showing the effectiveness of each one is presented within the app for you to review. My tip would be to sign up for 2 or 3 tools on a trial basis with the functionality you want. (Most will give you between 14 and 30 days for free.) See how much you can achieve with each one in a set period of time, then decide which product is right for you.

Mapping out user journeys will help you create useful prototypes

When you’re creating your user journeys, don’t forget to use the customer profiles that you put together in chapter 3 to remind yourself of the key problems that you are trying to solve.

Let’s imagine that we intend to create a software product for Human Resource Managers.

He logs in (step 1) checks the relevant employees’ start dates, (step 2) and then logs out (step 3.) This is just one user journey and each step needs to be investigated: How does an administrator like Sam log into the app? How will they log out? What about passwords and security? (For example, it may be above Sam’s paygrade to see certain information that Robert is permitted to see.) Where does the data Sam is checking come from? How do Sam and Robert want to see their company’s data presented on-screen? You can give each user journey a name that describes what it’s about and what the key activity is – Sam’s user journey might be named View employee information. That name could be improved upon really, it’s a bit vague, so this might become View employee start and end dates, for instance.

Later on, you may discover that you have Rob’s steps in the wrong order, that there are steps missing, or that not all the steps are necessary. If you’d just gone ahead and done what you thought was right, you may have gone off track – that’s the benefit of planning out what you’re going to build using user journeys, wireframes, (see Chapter 12) and prototyping. Once the build cycle starts, you can check that you’re on the right path with the help of user testing.

If you’re interested in B2B software development, always consider the hierarchy within an organisation and seek agreement from all the decision makers and influencers when doing market research.

You can also use an app like Lucidchart to create your diagrams. There is a plan available that will allow you to create a small number of diagrams free of charge. https://www.lucidchart.com/

If flowcharts don’t appeal, a mind map can help you to organise your thoughts. The important thing is to do some planning! Try Bubble https://bubbl.us, Mindmeister https://www.mindmeister.com, or Coggle, https:// coggle.it/ for free and low-cost mind mapping tools, which may be printed, shared, and downloaded.

Making sure you’re truly ready before you hire your developer, and II) Avoiding building too much functionality, are both measures that will help you to reduce your costs!

If you’re familiar with the Pareto Principle (also known as the 80/20 rule), you may be aware of how it applies to software: we use approximately 20% of the same functionality, 80% of the time.

https://www.forbes.com/sites/davelavinsky/2014/01/20/pareto-principle-how-to-use-it-to-dramatically-grow- your-business/.

To find out what your 20% is, listen carefully to what your target customers say about their essential and favourite features – before you pay to have any functionality built! The only way to truly know what functionality people will use is to build it and track what functionality is used, but the more people you ask and the more insight you can draw from their feedback, the closer you’ll get to the right answers. Whatever functionality you do decide to build, make sure that customers know it exists so they can get the maximum benefit from your app. If people can’t or don’t use the functionality you’ve provided, you will have wasted time, energy and money unnecessarily.

Your customers will appreciate clear signposting which confirms: How to start a process. How to continue with that process and what is going to happen next. Where they are right now in the process. (Users should know where they are within your app at all times.)

Here’s a tool that does a good job with user orientation and addresses many of the points that we’ve just covered. Now redesigned and rebranded to Mailshake, https://mailshake.com/ it’s a SaaS web app (formerly known as Connector) that can be used to send out emails.

I’ve worked with people in the IT industry who think being subtle and using lots of icons rather than text is better, but my experience is that people want to know where they are, what options are available and what to do next.

Don’t just “slot” information, buttons or other widgets onto a part of the screen where there’s free space, think about where people would naturally look for it when they need it.

Inline help text might be provided by some applications. This is a preventative measure, rather than a reactive approach to a user error.

Some apps will explicitly tell the user what the problem is using an error message.

Others will highlight the email address field in red and

Other apps will display their error messages right next to the issue so it is easy to spot. (Very helpful.)

Speak to a developer about the cost vs. the benefit of implementing less common gestures before you commit to doing the work.

Standard gestures and their use cases, tech speak for: “under what circumstances would someone need to do that?” include: Pulling / dragging down, to refresh content. Pinching in, to shrink content and make it smaller. Panning out, to enlarge content. Tap, used to confirm, enter, submit or select. Double tap, to zoom in or out, or jump if playing a game. Press and hold, to drag mobile apps to different locations or to see more information. Flick, for scrolling quickly or as a gaming command. Slide / swipe, to move to a new screen or reveal more content. Rotate screen, to switch from portrait to landscape. If it makes sense to do this, how should your app look and behave in landscape mode? If not, ask for screen rotation to be switched off, so the app looks the same even if the smartphone or tablet device is rotated. Scrolling, to bring new content (text, images, options etc.) into view.

You may find it useful to create a table containing all the gestures you want, which you can keep for reference and as a guide for your developer to check against, as they work on your app.

When using a website or web app, it should be possible to hit the tab key and see it highlight every field, button, and option on your page,

Dropdown menus are difficult to manipulate using a smartphone or tablet, so options that can be tapped on, or scrolled through are often used as an alternative.

Hover. Hovering over links with your cursor generally “underlines” that link and shows you the web address for the link in the bottom left-hand corner of your web browser, whilst hovering over menu items on a web page may cause their colour to change and change your cursor from a white arrow to a hand.

The hover action can also cause information to appear in a tooltip, usually where an i or ? is displayed. In this scenario, information usually appears on screen for several seconds.

the following icons are recognised as standard representations for: Image, Video, Menu (hamburger), Settings (cog, gear or wrench), Share, Home, Edit, Comment, Search, Buy (shopping cart), Profile, Location (pin /point), Secure (padlock), Information (i).

You can also try Googling: icons for [insert what you’re looking for]. There are websites that will allow you to use their icons for free.

explain where the colour should go and by providing them with the relevant hex numbers. Hex numbers, (short for hexadecimal numbers) are used to represent colours in computers and applications. For example, the shade of green named “Aquamarine 4” has a hex number, #458b74.

Be aware of colour blindness; green and red, green and brown, blue and purple, and green and blue are some of the worst combinations for colour blind people.

Mascots Tunnelbear have their bear, Trello has Taco the dog, and Zendesk has “The Mentor.” These are all relatively young companies with SaaS and mobile apps. Depending on the nature of your business and your preferences, you may wish to hire a designer and front-end developer to design and create a company or product mascot.

Carefully select the words you use on your website and within your app, including; company information, the copy on your app marketplace page or website, error messages, help information, button text, link text, warnings and calls to action. These can be used to communicate whether your company is relaxed, formal, playful, or serious, or any other characteristics that you feel are relevant.

Images liven up apps and bring a human element to them, but they are also a strong non-verbal way of communicating about your app and who it is for.

For example, you would have a mismatch if you selected images appropriate for a relaxed media agency if you wanted to sell your product to corporate finance companies.

For B2C customers, make sure the people in your images match the age range of your target market and focus on men, or women if the app is for a specific gender group, or are socially inclusive to reflect both genders and different races if it is not.

Googling “royalty free stock photos.” RF, or Royalty Free, means that you do not have to pay the person or company who owns the photo for each use of it, however, the images themselves are not necessarily free.

The Adobe and Depositphotos images must be paid for, but the other 2 sites have free images available: https:// stock.adobe.com/uk/ http://depositphotos.com/ https://stocksnap.io https://pixabay.com/

if your app is processing a request, inform the user, and if a customer enters data into your app, confirm that it’s been received with an on-screen message. Don’t keep users in suspense. Always acknowledge your customers’ requests!

(Note that it is possible to code apps in such a way that only the first click is registered. This will stop impatient clickers from slowing down your app!)

Displaying messages such as: “We’re working on it,” “Please wait”, or placing moving images on screen whilst the app is processing tasks serves two purposes: i) they confirm to the user that the system is working and ii) help them lose track of how long they’ve been waiting!

consider your audience and the type of interactions needed for the app, and ask yourself the following questions: How many user journeys are there? How many steps are there in this particular journey? Where does the journey begin? (The answer is often after the user has logged in, or signed up to use the app, but some mobile apps will automatically start up without the user having to log in at all, or needing to repeatedly log in each time the app is used.) What happens next? What triggers that to happen? Then what? What information needs to be provided by the customer at this stage and how will it get into the app? Where will the information be stored once the customer provides it? Do I need to present the customer with any of their own information at any point(s) in the process and if so, when and what will they expect to see? What options will the user have at this stage of the process? Do I need to provide any on-screen messages for the customer, such as errors, warnings, confirmation messages, or thank you messages? How will these messages be presented? If the customer gets stuck or confused at any point, what help, or information will be available? Will I need to rely on external (3rd party) tools and systems? What will they need to do and at which stage(s) of the process are they needed? (This question may take some time to resolve, just keep this in mind for now.) Where does the process end? What happens then? Is this logical? How can I make this journey quicker, easier and more straightforward for users? What colours do I want to have in my app? Do I want a company mascot?

You can see some examples of how others have managed the design of their web and mobile apps here: http:// nectafy.com/saas-website-design-examples/ http://www.webdesignerdepot.com/2013/07/20-beautifully- designed-smartphone-apps/

Here are some varied examples of menu options for tablets: Example 1: https://s3.amazonaws.com/ media.nngroup.com/media/editor/2015/09/22/sephora-swipe.png. Example 2: http://seanrice.net/media/2013/09/ burtonmenuUX.png. Example 3: https://s-media-cache-ak0.pinimg.com/736x/28/83/ e7/2883e72ac3ebc705549eadc00011da04.jpg. Example 4: https://scdn.androidcommunity.com/wp-content/ uploads/2012/04/Screen-Shot-2012-04-18-at-10.36.58-PM-540×448.png.

This video could be hosted in a number of ways, via: YouTube; https://support.google.com/youtube/answer/ 161805?hl=en-GB Wistia; https://wistia.com/pricing Vimeo; https://vimeo.com/join A service like AWS; https:// aws.amazon.com/media-sharing/

[It’s normal to have several ways to perform the same action. The text may be different, but the destination, or end result will be the same – they are just different ways to encourage people to go ahead and click.]

Explainer videos are good ways to showcase what your product can do, to provide help to users or to give a product tour or demonstration.

In fact, the code from prototypes is often thrown away. They are a tool for learning, for both you and your developer. Even if the code is thrown away, the lessons learned during the process will be preserved – your developer should keep these in the front of mind as they build the “real” product.

Set a time limit and stick to it. Explain what you want and ask your developer how long (realistically) it would take for the work to be done. Agree on a fixed price, or hourly fee for the work on top of the main development work that will come later. Once you agree on a time limit, confirm this verbally and in writing.

If you send information by email, consider marking the email private and confidential and emphasising that the content is not to be shared (unless you want it to be.)

PowerPoint or Paint format, or printed, and sketched on. You can find templates on these sites: Interactive logic, http://interactivelogic.net/wp/2009/09/iphone-wireframe-templates/ offers a range of templates that you can use.

The POP (Prototyping On Paper) mobile app. Available from the Google Play, Windows and Apple stores. Take photos of your screens, mark the clickable areas and your prototype is ready! https://popapp.in/. AppyPie provides mobile app building and prototyping software for iPhone and Android, with no coding required, http:// www.appypie.com/app-prototype-builder. Mockup Builder offers prototype creator software, http:// mockupbuilder.com/Gallery. Cacoo’s services include mind maps, process flow charts, and wireframes for web or mobile apps, https://cacoo.com/lang/en/sample. Mockingbird is a tool for creating clickable wireframes that can also be shared, https://gomockingbird.com/. UXPin can help you build wireframes, mockups and interactive prototypes for web or mobile apps, https://www.uxpin.com/examples.html. Balsamiq is a well-known wireframing and mockup tool, which supports prototyping for web and mobile apps, https://balsamiq.com/.

Marvelapp, is a well-established

Freebiesbug, https://freebiesbug.com/psd-freebies/ui-kits/ is a great source of UI templates for web

Reflector 3 will allow you to share a web or mobile app from your iPad, iPhone or Android device wirelessly to other devices,

http://www.airsquirrels.com/reflector/in-action/development/.

The tests, or exercises you ask participants to perform during the session should cover all the major parts of the prototype. It will be important to do this before you pay to have any functionality built, so you can avoid investing your money in the wrong functionality.

Try your best to get answers to fundamental questions, such as: “Do people understand the way this [insert functionality] works?” “Do people like the way [insert functionality] works?” “Are people able to complete this user journey quickly?” “Does this functionality truly make life easier or better for my target market?” “Does the product solve their major problem(s)?”

Make a point of emphasising when each exercise starts and ends – it’s easy to forget to explain things because they are so obvious to you. The

Watch for non-verbal communication. Observe the user’s facial expressions and body language, as well as what they say to get the full picture of what they are thinking and feeling, and what pleases or frustrates them. Actively encourage people to say what they are thinking as they work through an exercise.

If you have to intervene to help a user or show them what to do, this is a sign that there is an issue. If your product is easy to use, your help should not be needed.

Watch out for “polite” silences as you speak. Does this mean the person you are speaking to dislikes, or disagrees with your proposal? Or, are they just confused? Pause frequently after discussing functionality to ask: “What do you think?” or “Would that work?”

Ideally, you need a pool of people from whom you can get feedback, ideally quite quickly. If your developer has questions and you’re not sure what the correct answer is, you may find it helpful to speak with individuals from your target market to get answers. Consider setting up a Facebook group as a way to obtain feedback and to remain in contact with people.

Hand over a short questionnaire, which includes questions such as: i) The best and worst things about the app. (Which functionality should you put to one side and not pursue? Which should you focus your energies on? Remember Pareto’s 20%!) ii) Things which they expected to be able to do, but couldn’t. (This will help you to identify gaps in your product, where useful or important functionality is missing.) iii) Parts of the app that were confusing. (This will help you to improve your user interface and user journeys.) iv) Any apps they know of that do something similar. (This will bring you extra market research data.) v) Their recommendation for the number one thing that you could do to make your product idea better. vi) It is also very interesting to ask the question “Which people would this app be most useful for?” Assess how closely your product fits your target group from their perspective. Do they think the product is ideal for them, or do they think it would be better for some other group? Is it time to review your avatars and customer profiles, or have you found the right product – market fit?

Mixing positive and negative statements is a tool used by researchers to make sure that people are not answering questions on “auto-pilot” and are taking the time to consider each question.

Here’s an example of a user testing session to review specific aspects of a social media app. You might ask the people testing it to perform the following tasks: Sign in to your app and create a profile. Upload a profile photo. Post one comment from their profile. Post one video from their profile, along with a comment. Post one image from their profile, along with a comment. Post one link from their profile, along with a comment. Search for an imaginary friend (set this up in the app in advance) and ask them to “like” their friend’s post (prepare the friend’s post in advance.)

Try for a minimum of 5 user tests per avatar to be sure you’ve understood the needs of each target group. In other words, if you have 2 avatars, like Robert and Sam from chapter 10, then you would want to speak to 5 people like Sam who are administrators or office juniors and 5 people like Robert who are HR Managers.

Screen recorder software can be used during user testing. This may record users’ faces and their mouse or cursor activity. Make a note of all the issues you spot during each session and study the video footage later. It’s always an eye-opener to watch playback of users performing activities, you can see them thinking, frowning or looking relaxed, depending on how complex they find your tasks to be!

Adobe Captivate. www.adobe.com/Captivate‎. Camtasia. https://www.techsmith.com/camtasia.html.

The Minimum Lovable Product (MLP) concept has appeared more recently and those who support it say that the first release of a product should delight and excite customers rather than being basic and “just good enough.”

Review the market research, customer interviews and user tests that you have already done, then continue to consult with your target market throughout the build process to make sure that your product remains useful, usable and valuable to them.

MVP is all about making tough decisions

It’s o.k. if your MVP has a few niggles and annoyances initially, however, it should be free of any serious bugs when you present it to customers. I would define niggles as functionality or user journeys that “do the job”, but could be improved, or the absence of useful, but non-critical functionality which has been deferred beyond your initial launch.

Mingle, https://www.thoughtworks.com/mingle/ and JIRA https://jira.atlassian.com/secure/Dashboard.jspa are specialist task management and tracking systems used to store project requirements. They also allow work to be assigned to team members and can be used as issue tracking tools, so that bugs and other product faults can be either assigned to, or “claimed” by members of the team for fixing. Another tool you might consider is Trello https://trello.com/.

MoSCoW is a prioritisation method. It is used widely in Agile software development

MoSCoW consists of four priority categories; Must, Should, Could and Won’t.

Put every task you can think of that needs to be worked on by a developer into one of these 4 categories:

Must. This category is for core work that “must” be done. This list should include:

Your essential functional requirements.

Your essential non-functional requirements – including those related to security, performance, availability and compliance.

Any technical items required for your project, and any tools your developer needs to do their job, including maintaining, and supporting the product

Won’t. These are items you would like to work on, but won’t.

If keeping your “must” list small is a challenge, try and imagine the worst that could happen if you DON’T get certain functionality built. You’ll need to decide if the outcomes you imagine are risks you’re prepared to take

Let’s look at a few common scenarios.

A customer enters the wrong data in the wrong place (or the right data in the wrong place)?

You can have text in your app which is visible in the app all the time, called inline text, to advise users (a pro- active measure), or contextual help, which appears to help users at the relevant point in a process (also pro- active),

Tiobe Index, (Tiobe operate in the software quality arena),

YouTube, Dropbox and Google web apps were written in Python, Shopify, Kickstarter and Airbnb in Ruby, and Facebook, Wikipedia and Yahoo! in PHP.

The Android OS is itself written in Java and if you want to create a mobile app suitable for Android mobile smartphone and tablet devices, then you will need a Java developer. (Note that C and C++ can also be used to build Android apps, but this is not promoted by Google – Java is the recommended language.)

If you wish to create a mobile app for Apple mobile devices (and Macs and wearable devices too), then you will need a C, C++, Swift or Objective-C developer. C and C++ are Microsoft products, whilst Swift and Objective- C are owned and licensed by Apple. If you hire a developer with C or C++ skills, be aware that you’ll be “mixing and matching” to some extent in using tools created by Microsoft to build a product for Apple, instead of using tools designed by Apple for Apple. However, there are no laws against this and C or C++ developers with a good track record in building iOS apps could be considered.

Tools exist which allow developers to create applications for different purposes. These are called SDKs (Software Development Kits.) There are many types of SDK, including ones for Facebook and Spotify, as well as those for specific programming languages. The iOS SDK was created by Apple to build apps specifically for Apple mobile devices. The “kit” comes with a set of tools for developers to use, including an iPhone Simulator, which mimics the look and feel of the iPhone on a laptop or PC.

SDK’s may include an IDE (Integrated Development Environment), additional software which provides extra tools and a more visual environment for a developer to work

The iOS IDE is called Xcode.

Android’s IDE is called Android Studio.

Eclipse is an IDE used for Java development; Eclipse and Java can also be used together to create Android apps.

Areas of expertise – “front-end”, “back-end”, “full-stack”

Front-end (or client-side) skills are used to create the parts of apps that the user can see and interact with. Front end expertise might include controlling the layout, fonts, colours, call to action (CTA) buttons, such as “back”, “next” and “Go” and styling. The positioning and integration of copy, images, video and logos are also “front- end” tasks, as are boxes that “pop-up” on mobile screens and web pages. Interactive elements like social media icons that connect the user to Facebook or Twitter, or show the number of people who have ‘liked’ or ‘tweeted’ a post are also the domain of front end developers. Common examples of front-end skills include: CSS, CSS3 (the most recent version of CSS), JavaScript, jQuery, HTML, (Hyper Text Markup Language) and HTML 5 (the most recent version of HTML).

Back-end (or server-side) skills are used to perform actions which take place at the back-end, (also known as the server.) A back-end developer’s work might include capturing the information entered, or uploaded into an app by a user and storing it in a database, and the retrieval of that data when a customer requests it via the app. Their skills ensure that the database and the app’s front-end can communicate with each other. Back-end developers generally handle configuration tasks and the logic, or business rules coded into the app, which tells the app what it needs to do and what limits or rules apply when it comes across different scenarios.

A back-end developer will be skilled in a programming language; PHP, Python, Ruby or Java for example, and have experience with databases (nicknamed DBs). Oracle, Microsoft SQL Server (usually referred to as SQL Server), MySQL, MongoDB and Postgres (also known as PostgreSQL) are some of the most common databases that developers may have on their CVs.

Experience of using frameworks is a positive thing – they have common pre-packaged elements that can make development quicker and more straightforward.

Frameworks also introduce and maintain consistency and continuity, both in the way that your developer works, but also between developers – you could decide that each developer you hire must have experience of the same framework(s) as their predecessor.

Frameworks exist for both front end and back end programming languages.

GitHub, one of the largest developer networks on the web, name frameworks such as Bootstrap, Foundation and Semantic UI as some of the most popular front-end frameworks. When considering back-end frameworks – Laravel, Cake, Symfony and Zend for PHP, Django, Pyramid and Flask for Python and Sinatra and Rails for Ruby are all well-known.

The source code for your app needs to “live” somewhere and that place is called a source code repository or a Revision Control System. Often described in the development community as a repo, this holds all the files that your app needs in order to run and may be used for version control too, which involves storing, retrieving and merging changes to code. Popular repos include GitHub and BitBucket (owned by the company that created JIRA).

Revision control also makes it easier for multiple developers to work on your product at the same time and to add or check-in their code without affecting the work of other developers on the team. Repos may also help to get you and your developer out of crisis situations, by helping them “undo” mistakes (by rolling back to a previous version of your product) or possibly to recover deleted files.

If you have multiple developers, then Continuous Integration (CI) experience may be useful too. Popular CI tools include Travis https://travis-ci.org/, Jenkins https://jenkins.io/, Codeship, https://codeship.com/ and Bamboo, https://www.atlassian.com/software/bamboo. CI is the practice of integrating and merging code from different developers into a shared repository (such as Git or Bitbucket). Automated testing is done before the code is merged, to confirm that the code to be added to the shared repository has not broken any functionality or caused any issues.

Full project life cycle experience It will be advantageous if you can find developers who have experience of working on projects from beginning to end. This is called full project life cycle experience. Many developers will have this experience, but it is not a given. You’ll need someone who knows how to set up a development project from scratch, build the app and release it into the public domain successfully, so look for evidence of this.

If they have the know-how, developers can make use of 3rd party tools including APIs, code libraries and open source software and adapt or integrate with them for your benefit. These 3rd party tools can be used to enhance your product, or to speed up delivery of your project.

As an example, Google Maps, Facebook and Twitter all have their own APIs, which allow other companies to use elements of these apps alongside their own functionality.

Familiarity with code libraries can save developers time and make the development process more efficient.

Standards and protocols Focus on the skills you need the most as the priority, however, it may be useful if your developer has experience with the following: XML (Extensible Markup Language), pronounced ex-m-el, is a simple way of storing or transferring data between systems. JSON (JavaScript Object Notation), pronounced jay-sun, is a format for sending or receiving data that can be read and understood by humans or machines. RESTful Services (Representational State Transfer), or SOAP (Simple Object Access Protocol.) REST is not a tool, or software, but an approach used to help computers to communicate with each other. Some APIs are RESTful because they conform to REST standards. An alternative to REST is SOAP, which has a different set of communication standards. You can certainly look out for these on profiles and CVs. They suggest, (but do not guarantee) that the developer has a good range of experience and is probably not a junior.

Who should I hire? Here’s a summary of the technical skills discussed in Chapter 15: For Apple / iOS mobile app development, hire C, C++ or Objective C and / or Swift skills. Look out for use of the iOS SDK, Xamarin studio or other SDKs. For the Google Play store / Android, hire Java developers, (possibly with additional C++ and XML skills). Look out for Android SDK, Android Studio or Eclipse IDE experience. For back-end development, consider Ruby, PHP or Python developers with knowledge of frameworks (e.g. Laravel, Cake, Symfony and Zend for PHP, Django, Pyramid and Flask for Python and Sinatra and Rails for Ruby) and solid database experience with DBs such as Oracle, SQL Server, MySQL, MongoDB and Postgres. For front-end developers, core skills will be CSS / CSS3, JavaScript, jQuery, HTML / HTML 5 and knowledge of front end

frameworks such as Bootstrap, Foundation and Semantic UI. “Full-stack” developers should have a mix of both front and back-end skills. Look out for REST or RESTful services (or SOAP), APIs, JSON and / or XML, open source development and use of code libraries.

You can also run Google searches or visit the developer communities listed below using keywords like: “best programming languages for [insert type of product, industry sector or task]” or “top programming languages for [insert type of product, industry sector or task].”

developers does not mean 2x the output. It’s a common misconception that doubling the number of developers will double the amount of code that can be produced. This is not always the case, because some work can only be done in sequence. Where a relationship exists between tasks, and one must be completed before another can begin, this is called a dependency. At certain points in the project, tasks which have dependencies will result in one (or many) developers needing to wait for that task to be completed before they can begin a new one. In other words, this work must be done in sequence. Tasks that can be done in parallel are more flexible.

Free / low-cost job sites such as Workinstartups.com, will allow you to post ads for full and part-time workers, freelancers, interns or co-founders:

Co-founder websites and meetup groups.

Meetup.com can connect you with local groups. Try searching on the keywords “developers and entrepreneurs”, “co-founders”, “entrepreneurs”, or “startups,” http://www.meetup.com Founders nation, http://www.founders- nation.com Founder2be, https://www.founder2be.com/index.php/ideas CoFoundersLab, https:// www.cofounderslab.com/

Popular communities for developers include: GitHub, https://github.com Stack Overflow, http:// stackoverflow.com/ Google+ communities, https://plus.google.com/ (then search for the individual community by name e.g. Android, PHP, Python etc.) Dzone, https://dzone.com/ CodeProject, http://www.codeproject.com/ Codingforums.com, http://www.codingforums.com/ Programmer’s stack exchange, http:// programmers.stackexchange.com/ Facebook groups. There are also lots of Facebook groups for developers, named according to the relevant development language, and sometimes by location, e.g. The PHP developers’ group, or PHP developers in the Philippines. Here’s a guide which explains how to locate talented developers using GitHub: http://www.socialtalent.co/blog/how-to-use-github-to-find-super-talented-developers

freelancers online, https://www.upwork.com.

Freelancer.com

Guru.com.

Toptal.com.

Peopleperhour.com. This is another community of freelancers / remote workers. Web and mobile designers appear on the site in high numbers. These designers generally focus on the “look and feel” of the app and not the building of the app itself,

99designs.com

https://www.designcrowd.com/

If you hire a lone developer, there won’t be anyone else to check the quality of the code they produce, for example via a code review. This is not guaranteed at an agency, but you could try asking for it.

Writing and posting a job description Here’s a sample job description in blue text, with annotations and tips in italics. Experienced PHP or Ruby developer required to build a photo sharing web app. [Write a title for your job description. List the main skills you require and describe the project in a few words.] Hi, I’m looking for a reliable [PHP]/[Ruby]/[Python] / [Java] / [Swift]/[Objective-C] delete as appropriate developer with 3 – 5 years’ full project lifecycle experience to build a [insert type of app] from scratch. [Elaborate on the essential skills you require and the number of years of experience you want. Note that Swift has only been available since the Summer of 2014, so it’s still relatively new. Briefly discuss the project and the type of app you want built.]

Ideally, you should be able to start work within the next [4] weeks. [State how soon you need someone to start.] You will have used frameworks such as [Laravel, Cake, Symfony or Zend for PHP], [Django, Pyramid or Flask for Python], [Sinatra or Rails for Ruby.] [Leave in the frameworks related to the correct programming language and delete the rest.] You should have a minimum of 2 years’ experience using any of the following databases: MySQL, MongoDB, Postgres, Microsoft SQL Server or Oracle. You should have solid experience of CSS / CSS3, HTML / HTML 5, JavaScript (jQuery or Backbone.js), ideally used with a front-end framework such as Bootstrap, Foundation or Semantic UI. [Add these front-end skills if you’re looking for a front-end developer or a full-stack developer.] Experience of leading a small team would be useful, but not essential. [Earlier in the chapter, I explained why this skill may be useful. Leave this line in, or remove it as you see fit.] You should be experienced with Agile ways of working and test driven development (TDD) / automated testing. You will also have experience of version control / revision control systems such as Git, Bitbucket, Travis or Jenkins. [Add any other requirements here. List any desirable skills and any non-technical skills that are also important.] You should also have experience of developing responsive web apps. [Leave this line in if you want to build a web app, because your app must work on smaller devices like smartphones and tablets, but it is not relevant if you’re building a desktop app or a native mobile app.] Please include any available links to your portfolio. Many thanks, [Your name] Important: Please quote reference XYZ. [Create a reference here. This is a small test to see if a developer has taken the time to read your entire advert and if they are thorough and pay attention to detail.]

If you want to advertise for a front-end developer, then put the focus on the front-end skills and frameworks and request 3 – 5 years’ experience with those and remove the database skills. If you have multiple developers or believe you are going to need to hire more in future, then Continuous Integration, CI experience will be useful, so ask for that too.

Guru, Freelancer.com and Upwork allow you to “hide” your advert so that only those you invite can see your advert and contact you.

The downside to the invite-only approach is having to run keyword searches to find developers with the right skills that you can invite. Once you find some, check their profiles and decide whether they are a i) “yes”, ii) “maybe,” or iii) “no” by:

When reviewing profiles, consider: Feedback ratings. Consider the number, and quality of ratings. How recently the ratings were given. Prioritise those in the last three months vs. older ones. The type of work that has been done for previous clients. How complex does the work appear? Was it a very large project or did the job just involve writing a small amount of code? Do they look like they have solid and relevant experience in the areas you require? Written communication skills. Would you be happy to read emails or other messages from this person on a regular basis?

The evidence of the skills you require. Look for the skills that have been mentioned in the last two chapters and look across the projects the developer has listed on their profile. When, and how were the technologies used? How often have they used the skills you are looking for over the last few projects? Which versions of the technologies have they used?

Pay attention to the version(s) of a programming language that a developer has used. The “current” versions of some of the languages we’ve discussed are: HTML5, CSS3, PHP 5.6, Ruby 2.3.1 and Python 3.5.2, but this will change over time. Googling “latest version of [insert programming language of interest]” will give you the latest information about software versions.

Compare each developers’ relevance based on their skills “on paper,” previous projects and your initial impression.

If you want to go into detail about your project during an interview, or share user journeys, process flows and other information, then it may be best to get an NDA signed before the interview takes place.

The interview questions

Beginning the Interview Provide relevant information about yourself and explain the format of the interview, for example, a basic question and answer format with some scenario based questioning. Explain what the project is, what stage you are at and the information you have gathered so far. This could include prototypes, process flows or requirements. Remember that the developer has to choose you too, so demonstrate that you are organised and collaborative! If you have any important deadlines to meet, say so up-front. You’ll want to confirm whether any dates or timescales you have in mind are realistic. Request a summary of all the information you have just given them. This is a test. You can say something like, “I’d like to confirm that you got all that, and everything was clear. Could you please summarise my requirements?” Note how they handle this. If you get the right information back, or if they got most of it, but ask you to clarify a few points, this is all positive. You’ve got someone who pays attention, listens well and knows when to ask for clarification. If they start trying to pick up on details, and repeating your information back to you before you ask, even better, they’re pro-active too! Mid- Interview Questions What challenges do you foresee on a project like this? This is a great question to see what kind of insights and knowledge the developer has and whether they have the right personality, experience and skills to be able to help and advise you, or if they will just follow your instructions and write code. These are

two very different types of developer and the former will be great for your project: they are confident, will share their knowledge and are not shy about speaking up and giving their opinion. Do you have any experience working with apps (or on projects) of a similar type to this one? If so, ask them to tell you as much about the project and products as possible. The project’s duration, team size, their role and the part they played in the project and the key skills they used. This will give you a sense of whether the part they played was major or minor. Ask for website addresses or the names of any mobile app(s) they have worked on. Next, select some other projects from their profile or CV and ask them to talk you through them using the same questions (the project, the product, its duration, their role and the skills used, etc.). If they don’t have experience of working on a similar app, ask them to run through at least 3 projects they have worked on. Ask the same questions about each one. As they run through them, listen for evidence that they played a significant part in each project and note the key skills involved in each project. Do they match the skills you requested in your job description? Does their use of the skills you need seem comprehensive, or light? I’d like to ask you a few more questions about your technical skills… Ask your questions in priority order, starting with the most important skills in the job description you posted, and ask how long they have been using each one. Next, ask them to name their top 3 strongest technical skills, along with a rating out of ten for each. (Scoring is subjective, but it is a good indicator of the developer’s confidence and where they feel their strengths lie. If the top 3 skills mentioned were not skills that are essential for the role, this should be a red flag that the developer may not be a good match.) Ask about any other skills that you think may be relevant to the job, (see Chapter 15) and seek examples of when these skills were used, how they were used, and how long for. I’m very keen on having monitoring and analytics in place for my app… (See the NFRs in Chapter 6.) Ask: Are there any products you can recommend? What types of monitoring do you think are most important, and why? I want to make sure that my app performs quickly when people are using it, and that it will cope if many customers are using it at the same time… Ask: How would you help me achieve this? What types of performance testing, and performance tuning (identifying and completing tasks which increase the speed and efficiency of an app) have you done in the past? If you can’t find developers with strong performance testing and tuning skills, you may need to hire a tester with specialist experience in this area. (Refer to Chapter 6, and Chapter 23 before you do your interviews, so you’re aware of some of the terminology that you might hear about.) Maintaining a secure app is important, can you tell me which sort of hacks my app may be most vulnerable to, and why? How would you prevent, or minimise the risk of security problems occurring? Ask about their experience with creating secure apps and what role they specifically played in any security work. Find out what security measures they recommend when building apps like yours. Please provide some examples of challenges you have faced whilst building apps. How did you deal with them? In asking this question, you are trying to get a feel for whether you think the developer is proactive or not. Did they solve the problems they mention, was it a team effort, or did someone else in the team resolve the issues? Listen for any other indications they give about what kind of worker they are. Do you have any automated testing experience? If you would like to have automated testing in place to test your product, ask which tools they have used, how long for and how they used them. Who set up the tools? Was it them, or someone else? Ask their opinion about automated testing and its pros and cons. Can they provide a detailed explanation? What do you do when you encounter a challenging technical problem? How would the developer try to solve it? Here you are looking for evidence of any networks, forums, or communities that the developer uses to solve issues quickly and accurately, their thought processes, and how proactive they might be in seeking the right answers. This is very important as technical issues can become roadblocks that burn time and money: development work may slow or even stop completely if a problem is large or serious, and a problem which is not solved in the most effective way may reoccur. Have you ever worked on an Agile project? (See Chapter 4 to recap.) If they say yes, ask which framework(s) they have experience with. Ask how long they have been

following Agile development principles, whether they like them and any advantages and disadvantages of following Agile practices. Try asking for examples of how tasks were managed on Agile projects that they have worked on previously. You know some of the basic principles now, do they mention these? Did they seem confident and knowledgeable when discussing Agile, or vague and uncertain? You’ll be given a framework you can follow to manage your project using Agile philosophies in Chapter 22. What is your current employment situation? Why are they leaving their current project? How many projects are they working on at the moment, and when will they be available to start yours? Find out how many hours per day and days per week they can dedicate to your project. You may want a developer full-time and exclusively, or just part time, so decide whether their answer is positive or not based on what you need. If a developer is running between two or more clients, bear in mind that it might be difficult for them to focus!

What tools will you need in order to start building the app? Ask why each item is needed and note these down any product names, so you can research these later. Before the project starts, you may need to sign up, or pay for tools and services that will support your project. These are potential sources of expenditure, so keep track of them in your finance app (Chapter 1) or expense log, noting how much they cost and whether the expenses are one-offs, or will recur monthly, quarterly, or annually. We’ll talk about preparing a “technical shopping list” and taking stock of all the purchases you need to make in Chapter 21. If you were to get the job, what are the first tasks you would want to do? This question is to help you get a feel for how organised the developer is. Do they have a process in mind for how to start the project? Do they name a standard sequence of tasks? The range of answers you get to this question should tell you a lot about how organised (and experienced) each developer is. I’ll explain how you can proactively kick-off your project in Chapters 21 and 22. Finishing the interview Do you have any questions for me? Are you asked intelligent, insightful questions about the project? Note down all the questions raised. They may give you an insight into points you hadn’t yet considered, or where you need to do more research, or to gather more data before development work can start. If you got the job, how would you prefer to communicate with me? Find out which tools they like to use for communication and note these down. Are you happy with these? Tell them you would like a daily update (see Chapter 22) which will cover what they did “yesterday”, what they will do “today” and any issues they are facing that are “blocking” progress. Check that the developer is happy to do this. Mention that you would like to use Trello (or whatever task management tool you’ve chosen) to store the project requirements and ask if they have any concerns or questions about that. (I’ll show you how to use Trello to manage day-to-day activities in Chapter 22.) Just to confirm, your rate is $, isn’t it? Sometimes this can change, so check just to be sure! Ask how they normally track the hours they work on a project and any software they recommend. Some of the freelancer sites have tracking built into them and the details for a few time tracking tools were provided in Chapter 16.

Technical tests Technical tests may comprise of: A programming aptitude test. These can be used for developers of any level of seniority. They assess logical reasoning skills and the ability solve numerical problems. Written technical tests, which assess the developer’s grasp of the fundamentals of programming and their understanding of good coding or database practices, or tests with questions about specific programming languages or databases. A practical test which involves writing code to solve a specific problem assigned by the interviewer. A verbal technical interview, used to assess understanding of specific topics in the form of a “technical chat.” If you

know anyone with the same skills as the developers that you are interviewing, ask if they could do a technical interview on your behalf. There are technical tests available online for most languages. Technical tests can be obtained via: https://tests4geeks.com, https://www.interviewmocha.com/pre-employment-testing/software- development, https://mettl.com and http://www.w3schools.com/php/php_quiz.asp.

Mettl will email test results directly to you when a test has been taken: https://mettl.com/en/pre-built-tests/.

If you know anyone who can look at the quality of each developer’s code, even better as this will identify any bad habits and show whether a logical approach was taken in terms of the way the code was written.

Discuss some simple tasks that the developers could do from the MVP “Must” list

that could be prototyped quickly. Agree on exactly what you are expecting to see. Give all the developers in the work trial the same piece of work to do so you can compare one result directly with the other.

To manage your costs during the trial, agree on a strict time-limit with your developer – anything from a few days up to a week, and agree on a fixed price, since this is a short-term agreement.

Check if there is anything else the developers need from you before the work trials can start. You will also need a way to test the work done during the trial, so ask each developer how they intend to give you access to it.

Once the trial period comes to an end, test the work you’ve been given, asking the following questions: Have the task(s) been completed correctly? Does the work done match what you both agreed would be done? How were your requirements interpreted (or misinterpreted)? Was the work done within the agreed time-frame? Did each developer check-in with you during the trial period as you requested? Were you happy with the way they communicated? Did they ask any questions to check they were following the instructions you provided correctly? Did they contact you to seek confirmation if in doubt? A good sign. Or, did they just go ahead and guess what was needed without checking in with you? A bad sign! What were your impressions? What was it like working with each of the developers? Were they resourceful, with a can-do attitude, or difficult to communicate with? Did they seem professional and organised? Did they seem to know what they were doing? There

Qualities to look out for If you find a developer with these qualities, keep hold of them! Knowledgeable / skilled. The developer is aware of a range of technologies and tools relevant to your project and your requirements. They can explain the advantages and disadvantages of them in the context of your project. Their past projects are relevant to the type of app you wish to build, and the developer appears to have played a significant role in these projects. Consultative and communicative. Communicating with the developer is easy. They listen carefully and address your concerns, and can explain concepts to you in layman’s terms. Friendly. You feel at ease with them. Working together is a positive experience. Flexible, and a good problem solver. They make suggestions which are helpful or relevant. When issues arise, they are able to work through, and resolve them. Direct. Getting a “yes” to every question isn’t always a good sign. Software development isn’t simple, so if someone says yes to every question without providing much background information, I would be a little concerned!

Reliable and competent. The developer does what they say they will do, acts on your requests, and puts in the agreed hours. They provide regular progress reports and deliver quality work.

Consultative developers will come to you with this information without you having to ask, but if the information isn’t offered, here’s an example of a professional explanation: “Unfortunately, there is a problem delivering item A for reasons ————- and ————-. We could do item A if we had ——- and —— but you need to be aware of possible issues such as ————-if we go ahead. What we could do is try alternative B, or alternative C. The pros, cons and costs of doing B, are ————-. The pros, cons and costs of doing C, are ————- and in order to do B or C we will need ——-.”

You can also use this process to investigate project delays: “We have a delay for reasons — and —-. If we try doing —-, and —–, we might be able to speed things up… The pros, cons and costs of doing—– are ——, and —–.”

freely discuss topics via whichever communication channels you like, but to ensure that the final outcome or agreement is always logged in your task management tool, along with all the relevant information and details needed by your developer to complete the task at hand. Agreements should always be put in writing. Agile teams use the phrase “card, conversation, confirmation”, which means that before a new task is started by a developer, the requirements for the task should first be logged on a card, then discussed, and confirmed.

Technical documentation Whilst technical documentation can be extremely useful (especially during handovers), producing it can be expensive. Time spent preparing documentation must be paid for – either directly, or in terms of time taken away from building your software. Documentation can also become outdated as your app is built, which means an ongoing commitment to keeping it up-to-date, or taking some time after your MVP is built to do a full write-up. If you would like documentation to be provided, create a card for it in your task management system, (because it’s still a piece of work that you’d like your developer to do). Here are some fundamentals you might ask to have delivered to you in a document: The architecture of the entire system, including a high-level overview, and the details of the smaller, interconnecting components, including databases, servers, 3rd party software, hardware and any other critical parts. Request diagrams as well as a written description wherever possible. Any APIs, plug-ins or other 3rd party tools and services your app relies on (monitoring tools, performance management tools, web hosting services, analytics tools etc.) Your developer should explain what each service does, and how it is being used in the context of your app. Any important technical information and any configuration settings (system settings) that have been put in place and what they are for. All account information, logins and passwords related to your product. (You may wish to use password management software to keep your passwords safe, such as KeePass, LastPass, and others: http:// www.techradar.com/news/software/applications/the-best-password-manager-1325845. Any important, or useful

Develop your product idea, carry out customer interviews and do competitor research Create prototypes, prepare user journeys, run user testing sessions Decide on a visual design Gather and prioritise requirements for MVP Hire your developer Estimate MVP Build and test MVP User test MVP Launch MVP and run beta test Reflect, review and decide on next steps Post-launch bug fixes and adjustments. These usually take place between 0-4 weeks after launch, depending on customer feedback, and the severity of any issues found.

Shield your project from risks. Have back-up plans in place to keep your project afloat.

the management of risks can be put into one of 4 categories and you can choose to avoid, mitigate, transfer or accept risks:

Because situations and circumstances change during projects, it’s worth repeating the risk assessment process at least every few weeks.

If you needed to add 35% to your current project budget, could you do it?

If you don’t have the scope to add an extra 35% as a buffer, this means that there isn’t much tolerance within your project for things which might go wrong. As a result, it will be even more important to cut your MVP down to the absolute bare minimum and to minimise project risks and delays.

Know your monthly burn rate.

Plan for future expenditure. If you’d like to enhance your product further in the months after your launch, then you’ll need a budget for that too.

Monitor progress and take action if necessary. A key element of project management is monitoring whether things are going according to plan, and swiftly taking the right action if they’re not.

Tasks or cards (in other words, your requirements) constantly take longer to build than expected and run beyond their due date.

A build-up of untested tasks / cards.

Testing cards completed by your developer Your approach to testing your app can have an impact on your budget and increase the level of risk in your project.

Let’s imagine you score 1 point for every card from your MVP “must” list, which is completed. There is no other way to score points – cards must be completed first.

a card is ONLY completed when: Your developer has performed all the technical tasks and built all the required functionality connected with the card to your specifications, has checked it over, and sent it to whoever is taking on the QA or tester role, to be manually checked AND The QA / tester has checked all the requirements relating

to the card and confirmed that they are all present and working correctly, and that there are no bugs or issues that need fixing, and agrees to sign-off the work.

In Agile terms this is known as our DoD, or Definition of Done, and defines when a piece of work is finished. If you have 20 cards waiting to be manually tested, and none have been completed according to our definition of done, that’s 20 cards’ worth of uncertainty and 0 points. There could be bugs, issues, errors, unfinished work and all manner of problems lurking within those 20 cards.

The main point here is that even if you have 100 cards that have been worked on by your developer, if they are not fully completed, then you are not in a good position. Keep this in mind and convert your cards from sources of uncertainty to point-scoring positives every few days if possible, and on a weekly basis as a worst-case scenario.

Death by 1000 cuts The impact of these won’t be felt initially, but over time they can be fatal to a project.

Spending too much time building functionality for one part of your product can cause you to run out of money, or to overspend… and other parts of your app will suffer as a result. Once you have estimates, don’t spend more than the allocated time on each card and avoid going on the equivalent of a “spending spree” trying to perfect parts of the product until all the “musts” from your MVP have been completed.

Procrastination / Over-optimism. “It’ll work itself out” is not a business strategy! Try to squash problems when they arise rather than waiting,

Suddenly squeezing in more functionality or changes shortly before going live. This is when mistakes often happen because “last minute” tasks are performed at the worst time – when people are already busy, or under pressure. Before a deadline, you should be focusing on testing and ensuring that what you want to release works well. It is not the time to try and add in more work!

Ideally, you should stop adding new functionality to the version of the product you intend to release 3 to 5 days in advance.

If you find multiple issues, or 1 serious one that greatly reduces the quality of your product, then you should postpone your release. (Issues like these are sometimes known as “show stoppers.”)

It’s a common misconception that you can accelerate progress by adding more developers into the mix in an emergency.

Don’t forget that even with an army of coders you won’t make much progress if you have lots of work which can only be done in sequence.

Think about security. Data Protection laws must be considered. Could your 3rd party relationship result in any of your customer data being exposed to the 3rd party? If so, what does this mean from a legal standpoint when you are responsible for how you protect and store your customers’ data?

Terms and conditions and legal agreements. Do you need to sign any legal agreements or be granted a license to use the service? Ask to see the SLA (Service Level Agreement) and Terms of Business for the service that you’re going

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Estimation creates accountability

The impact of Parkinson’s Law. This law states that: “Work expands to fill the time available for its completion.” If there are no time limits or deadlines assigned to tasks, then there will be less urgency to complete them.

The process of estimation aids understanding. Because the estimation process requires you and your developer to review and discuss the work to be done, your developer will naturally start to get a better sense of what you are trying to achieve in terms of both the building blocks (the cards) and the big picture vision!

If feature (or task) A is estimated to take 4 times longer to code than B, would you still want to do it? Is it really worth the cost if it will take that long to build? The answers to these questions may still be yes, but this is an important evaluation process.

Before you begin estimating your MVP… Make sure you have ALL the essential items in your “must” queue. This should include all your functional requirements (covering the activities your target customers will want and need to be able to perform), non-functional requirements (performance, security, database storage, monitoring, legal requirements etc.), any customer care and administration functionality that you need to build, and any technical tasks you

Ask your developer to estimate each card in your “must” queue. There are many ways to estimate tasks, but a quick way to do this is to use t-shirt sizing. This is a popular estimation technique used by Agile teams. Estimates come in sizes XS, S, M, L, XL and XXL

Have you come across Hofstadter’s law? It states that things always take longer than you expect,

To begin estimating, take the first card and ask your developer whether it is an XS, S, M, L, XL, XXL*. Don’t debate about the first card too much. This is a relative scale, so the task will get easier as more cards are estimated. They just need to go with their gut as to its size. Note the estimate given and move to the next card and the next until all the cards have been assigned to a T-shirt group. Keep a note against each card of which T- shirt group they belong to. Now ask your developer whether they want to make any changes and if they are sure each card is in the right T-shirt group. Give them some time to review the cards and categories again. You can facilitate the process by asking questions such as: “Is this task definitely bigger than that one?”, “Are you sure that all the cards in this group are of approximately the same size? Make any adjustments needed. Next, we need to link the T-shirt sizes to time. This could be time blocks such as 1/2 a day, 1 day, 2 days, 3 days, 4 days and 5 days. Let your developer decide the number of days that should be associated with each T-shirt size: XS, S, M, L, XL and XXL. (Estimating work is a subjective exercise and as they are doing the work, this is their own personal estimation scale.) Now you can note down the T-shirt size on the front of each Trello card and calculate the number of days, weeks or months’ worth of work ahead.

*If any of the cards are bigger than XL, then the card is way too large and needs to be broken down into smaller more manageable pieces of work. Small, well-defined tasks are easier to define, estimate, build and test and there will be less chance of your developer getting stuck or lost whilst working on “smaller” cards.

Note down the cost estimate for each “must” card, add them up and then add your project management contingency value of 35% (see chapter 19): For example, if you have 7 cards each taking three days to build, that would be 21 days, plus 35% extra added as contingency, gives us a total of 29 days. 21 days x 35% = 7.35.

up to the nearest whole number. Given there are approximately 22 working days in a month, then the project will take just under 6 weeks to complete. Assuming you have one developer that costs $30 US dollars per hour: If they work 7 hours per day, they would cost you $210 per day to employ. 7 hours x $30 per hour = $210 per day.

Apply the worst-case time limit of 29 days. A 29-day project x $210 per day = $6,090. You could also use these figures to calculate that you will spend $4200 every 4 weeks (20 days x $210 = $4200), or approximately $4620 every calendar month (22 days x $210 = $4620).

Sprint 0 is actually a small, self-contained project, which allows the team to lay its foundations ready for build work to start.

Developers will use a lot of tools and software in the process of building your product and there are hardware and networking considerations to be factored in too. As a result, there will be some essential tasks to complete before they begin writing code for you.

arrange a pre-build planning meeting. The objective will be to find out about anything and everything that needs to be set-up, ordered, paid for, or arranged to support your project. The issue we are trying to avoid is having a developer start work, and in 3 days’ time, you are told that some software is needed, then 4 days after that, you find out about an account that needs to be opened with a service provider, then in 2 weeks, there is something else that urgently needs to be set up, and paid for, and so on.

At your planning meeting, ask your developer the following questions: “What technical tasks need to be completed before development work can start?” Find out what needs to be done, the duration of the tasks, and any associated costs. “Before you can write and deploy any code, what software, tools, or services need to be in place?” Find out about each task, and the time required to complete them, and ask about the related costs. “Will we be running unit and automated tests? If so, which tools will you use?” Find out about the set-up details, the time needed to set up an automated testing environment and the cost of the product(s). “Are there any tasks it would be better for us to deal with now, so that they don’t disrupt the development process?” Again, get a sense of what will be required, in terms of activities, time, and expense. Finally, wrap-up with the safeguard questions

from chapter 18: Is there anything missing? What issues do you foresee? Is there anything else I/we need to know, or consider?

Setting up developer accounts for the app marketplaces can take around 3 days, so if you want to build a mobile app, set up the account right at the start of Sprint 0 and then move on to other tasks whilst you wait for your confirmation to come through.

Sprint 0 should be timeboxed to ensure that it runs on for no longer than necessary. Agree what your timebox will be for completing the “musts”.

You’ll need access to a source code repository / revision control system Source code repositories, (or repos) can be used to “house” the code for your product. These repositories may offer additional services such as: Version control management (also called revision control) used to manage and merge changes to code The tracking of changes made within the repo (known as history tracking) Bug and issue tracking, and Release management, to assist your developer when they need to “release” code to the outside world, or to you for testing A number of these tools exist, including GitLab, SourceForge, Redmine, GitHub and BitBucket. GitHub and BitBucket are very user-friendly and reasonably priced. GitHub’s prices currently start from $7 USD per month for private projects for teams of five or less, and is free for public and open source projects. BitBucket has private repos and is free for up to 5 users. https://bitbucket.org/ https://help.github.com/articles/signing-up-for-a-new-github- account/ Speak to your developer and decide which repo you will use.

Be sure to retain access to your source code. Set up the account in your name and share the password with your developer. If new developers join, then they will need the repo password too. By setting things up this way, the code “lives” within your own repo account, which your developer(s) have access to. If a developer leaves, you should change any shared passwords.

If you do not want your project to be visible to other repo users, then be sure to set up a private repo account.

Once you grant someone access to a repo, they will be able to clone the project to their computer. If you have access to the repo, you may revoke other users’ access to it at any time. This will block access from that point, but will have no effect on any copies a person might have on their own computer. A degree of trust must be involved in the process – developers must have access in order to do their work. Seek legal advice if you’re concerned.

Amazon Simple Storage Service (Amazon S3), allows you to store data / content, including videos, audio files, documents and images for your website, web app or mobile app, which can be retrieved by you or your customers as needed;

AWS Mobile Services offers a selection of tools that you can use if you wish to build a mobile app. The services offered for mobile app development, include analytics, Amazon SDKs for mobile app development (see chapter 15 for a refresher), app testing (find out how to use Amazon to test your app in chapter 23), sign-in services that let users sign into your app via Google+ or Facebook, storage of your users’ data and management of push notifications that we discussed

Amazon Elastic Compute Cloud (Amazon EC2) is a web service akin to a cloud-based supercomputer that will allow your developer to install and run software applications on it. https://aws.amazon.com/ec2/.

Amazon Relational Database Service (Amazon RDS), offers what it describes as a “managed relational database in the cloud that you can launch in minutes https://aws.amazon.com/products/databases/. Amazon RDS can be used to store, manage and retrieve your customer data. Confirm that there are no legal restrictions that would prevent you from keeping customer data stored on the servers of any cloud database that you plan to use.

AWS Security will help you to enhance the security of your application.

AWS Elastic Beanstalk is a free service for web apps. It includes release management tools, statistics and alerting tools to help your developer monitor and manage various aspects of your product’s “health.”

Your developer will create multiple environments for your app.

Development environment. This is the environment where developers write their code.

QA environment (or test environment).

In this environment, you, (or a manual tester, if you have one) will be looking for bugs and issues with the released code, trying to “break” and strain the product to see if it can cope.

Demonstration / presentation environment. This environment may not be needed; however, it can be useful if you wish to allow customers to review and comment on new functionality that has already been tested by a manual tester in “QA”, but has not yet gone public.

Staging environment. If provided, this environment should be an exact copy of your “live” environment and is there to protect it.

Live environment (also known as the production environment). A live environment must be set up. This is the version of your app that your customers will interact with.

In some cases, your developer may not even be sure how to approach building the item.

Agile developers will undertake a technical investigation, (known as a development spike or spike for short), in order to delve more deeply into the issue. The investigation might involve Internet research, searching or consulting development forums, or speaking to the suppliers of 3rd party services to assess whether their tools could be used to bridge a gap. It

“My Mobile App” product backlog, and Development board. The “My Mobile App” board contains the following queues, or columns: TBC Must Should Could Won’t The Development Board has 5 queues, or columns: Blocked Ready for build (the developer’s inbox) Doing Released for testing (QA) Done

The build cycle Step 1

Make sure all your essential functional, non-functional and other technical tasks are in the Must queue, with the most important and urgent tasks at the top.

The most difficult and complex items should be tackled as soon as possible to reduce project risk.

Step 2 Prepare the cards in your “Must” queue, so they are ready to be assigned to your developer. To avoid misunderstandings and the likelihood of having to re-do work, the prioritised cards should be prepared for build before handing them over to your developer to work on.

To make the list of requirements in Trello easier to read, you can click on the “checklist” button to turn the requirements into an itemised list that your developer can tick off as each item is completed. Fig 80. Inside a Trello card with the checklist option activated and 50% of tasks completed. Note that some tasks may take longer than others, so the card may be more, or less than 50% complete in terms of the time remaining.

Step 3 Planning Take the top 10 cards from your prioritised product backlog and discuss each one with your developer: Check to see whether they have any outstanding questions that need to be answered and that they understand what they need to do. Check the time estimate (see Chapter 20) on each card. Has it risen? If so, and your budget is tight, discuss how the card might be simplified to reduce its complexity, and therefore its “cost.”

Step 4 Assign tasks from your product backlog board to your Development board. Create a second Trello board to manage your development tasks. I’ve called my board the Development board. Move the Must cards from your backlog board to the Ready for build queue on the Development board and arrange them in priority order, with the most important, urgent and technically complex tasks at the top of the list. (Chapter 19.) Ask your developer to always work on the cards at the top of the list first. You should discuss the order of tasks with your developer, but make sure they stick to working on tasks in the agreed order. If there is an issue with this, they should let you know. Monitor the Ready for build queue, and keep it filled with enough tasks to keep your developer busy without them having to wait for you to top up the queue again. To avoid project delays, you should have at least 5 cards in the queue at any time, more if you think the cards won’t supply them with enough work for a week, or more. When the cards in the Ready for build queue run low, repeat step 3 to top up the queue with new work that has been discussed and estimated.

If your developer cannot work on a card assigned to their Ready for build queue, then they (or you) should move it to the Blocked queue. This queue exists to highlight important items that require your attention.

These items will slow down development if they are not resolved swiftly – ideally, this queue should always be empty!

Release notes are simple documents written by developers to accompany an internal, or external “public” software release, and to outline the contents of that release. Public release notes are sometimes made available to customers via email, or posted online as a way of updating them about new functionality, changes, bug fixes and work done in response to customer feedback. Some of the repos discussed previously can be used to store your release notes. Make sure you know how to access the notes, so you can refer to them at any time. In the future, they will provide a useful summary of all the work ever done on your app!

Step 6 Test Once the code has been released into the QA / test environment, it’s time to start your manual tests to check if the work done matches the details on the card.

The tester then either approves the card, and moves it to the Done queue, or creates a bug card for each issue found, including a screenshot of the issue, (where this is useful), explaining the problem(s) found and what you were expecting to see, which of the cards the bug originated from, and how to reproduce the bug and make it happen again. This is important – bugs can’t be fixed if your developer cannot identify the cause of the issue. Observing bugs is a key part of understanding them. The bug card is then put into the Ready for build queue in order of importance.

Plug the gap between what was received and what you actually wanted. Create a new card, or cards covering the missing items and if they are essential, put them in your “Must” queue so they can be worked on by your developer. Keep moving. If you have a very tight budget, then if you’ve forgotten some of your requirements, unless the app is useless or severely compromised without them, don’t go back and add the missing items, just press on.

tools like TestFlight that will allow you to test your mobile app on smartphones and tablets.

Agile teams sometimes avoid running sprints from Monday to Friday for productivity reasons. This is about maintaining a consistent level of effort throughout the sprint and avoiding a double psychological dip on Fridays because it is the end of the week and the end of the sprint on the same day!

Confusion can be avoided when pages, functionality or parts of the app are described by the same names by all team members. Agree on common terminology for your app and stick to it. These names can also be useful when creating FAQs or product training materials for customers. Try simple names like the “options page” or the “send email screen” – something easy to remember that describes the purpose of the functionality.

If you and your developer have worked together to estimate your cards, ask them to add a due date to one card on the day the card moves into the Doing queue, based on the T-shirt estimate they provided for it. For example, if a card is started today and is estimated to require 3 days to build, then the due date should be set 3 days from now. In Trello, a yellow badge means that a task is within 24 hours of being due, a red one means it’s due

and a pink one means it is past due. Take note of how many cards are overdue in each development cycle. It’s important to stay on top of due dates, and to deal with issues and delays as quickly as possible. Every task that runs beyond its due date delays your project.

Agile teams usually have a short daily “stand-up” meeting every morning (a micro-meeting), which lasts for only a few minutes and focuses on 3 specific questions: What happened yesterday? What do you intend to do today? Any issues which are “blocking” and impeding development progress. (This portion of the meeting should also be used to discuss any cards in your blocked queue)

Weekly (or fortnightly) review meetings

“What has gone well this [week / fortnight / month]?” Identify positive habits, activities and ways of working that should be continued. “What hasn’t gone well?” / “Where have we struggled this [week / fortnight / month]?” This is your chance to get any issues that you’ve noticed out in the open and to discuss what isn’t working and what needs to change.

Apply the simple principles of keep doing, start doing, or stop doing,

Bitrix24 includes a social network, video and chat, task and calendar management and a CRM (Customer Relationship Management system), https://www.bitrix24.com/.

If you use Google Calendar, then a quick and easy way to access all your tasks and appointments is to Google the words “calendar today”, “calendar this week”, “calendar this month” or “calendar [insert the month you want]” to see your events appear in your search results. You can also search for “calendar last month” to view a summary of your past activities. Using the word “agenda,” plus the month you want also works.

You may wish to document how to use any tools or software relevant to your app, or how to release new functionality to your live environment.

Google Keep can be used to store notes or checklists. Make a copy of your original list and then you can strike through the tasks in the copy without affecting the master version: https://keep.google.com/

Process Street provides checklist software for businesses. There’s a free plan that provides a maximum of 5 active templates and 5 checklists, https://www.process.st/.

Wunderlist, allows you to create lists, assign tasks, attach documents.

Evernote is free for up to 60 MB of storage. You can create and share notes and checklists, which can be synced across 2 devices.

Another important habit that should become “the norm” during your project and afterwards, is user (usability) testing.

you may find later that your initial guess wasn’t right and functionality that you believed would be popular with customers isn’t.

Your product should be robust, and able to handle whatever is thrown at it “out in the wild.” Do some exploratory and destructive software testing and actively try to break your app. Be rough with it, and deliberately misuse it, so you know where it’s vulnerable.

Some common reasons for apps being rejected by Apple can be found here: https://developer.apple.com/app- store/review/rejections/ Here’s an App Store submission checklist https://developer.apple.com/app-store/review/ guidelines/#before-you-submit, Apple’s terms and conditions are here: https://developer.apple.com/terms/ How to submit your app for review to the App Store: https://developer.apple.com/library/content/documentation/ LanguagesUtilities/Conceptual/iTunesConnect_Guide/Chapters/SubmittingTheApp.html#//apple_ref/doc/uid/ TP40011225-CH33 Google Play Store Google Play / Android’s terms and conditions are here: https:// play.google.com/about/developer-distribution-agreement.html Here’s a submission checklist for the Google Play store: https://developer.android.com/distribute/tools/launch-checklist.html

Try to move, drag, tap, swipe or click haphazardly to see how your app handles this. If you repeatedly click or tap the buttons or links, does it crash? (Remember that users often get impatient and click buttons multiple times, but this can make the software run even more slowly. Apps can be built so that the first click counts and multiple clicks are ignored, so the app is not processing unnecessary requests.)

Insert the “wrong” types of information into your data entry fields, enter numbers where there should be letters and letters where there should be numbers. Put telephone numbers in your email address field, enter email addresses without the @ sign in it, and enter long names, or pieces of text into fields used to collect information. Leave fields or options that you were meant to respond to completely blank and try to progress to the next page or screen and see what happens. If you have date of birth fields, and your system is expecting structured data in a set format,

Regression testing.

A change can include a bug fix, new functionality, refactored (improved) code, or changes to the behind-the- scenes technical settings (called configuration settings) which affect the app. The building blocks of apps are usually interconnected and alterations can affect existing parts of the app in unexpected ways. Regression testing verifies that software previously developed and tested still works correctly.

Integration testing reviews how well the different “parts” work together as a system and whether there are any “weak links” across that system. APIs and other components not built by your developer may be integrated or bolted on to your app to save time.

From a user experience perspective, the app needs to feel unified, and not like a Frankenstein’s monster composed of different parts

Keeping track of your bugs No matter what type of app you’re building, if you think you’ve found a bug: Reproduce it. Bugs need to be reproducible. This means being able to prove that the steps needed to cause a bug to appear can be repeated. A bug needs to be reproducible in order for your developer to properly investigate it, trace its cause and fix it.

Prioritise it.

Log it.

add screenshots of the issue to the card if possible, because visual examples aid understanding. Add information about what should have happened – in other words, the correct behaviour you expected to see, to the card. For example: “When I click the start button, the app should display the profile page, NOT the payments page.”

Concurrency testing, (also known as multi-user testing) simulates many users accessing your app, all performing activities at the same time.

Stress testing (or peak testing) is performed to determine a system’s behaviour under “stress” conditions. The amount of load is systematically increased over time until the system can no longer cope, which will allow you to understand its limits.

Spike testing involves subjecting the app to a sudden high volume of load to see if it can cope.

Soak Testing (or endurance testing) is a type of performance test that verifies a system’s stability and performance over an extended period, for instance by simulating the activities of multiple users over several days.

Page load and mobile app performance tests. These performance tests look at the speed of your app rather than how efficiently it performs under stress.

Penetration testing. It’s time for some ethical hacking! Pen testing as it is also known, is the process of assessing (and even attacking) your own app to identify vulnerabilities that could be exploited by malicious third parties.

When all the functionality in your app has been fully tested and no further issues have been found, this stable version of your MVP (which is ready to be released to the public), is called a release candidate.

Automated testing adds a degree of reliability to your app as it grows. Specialist software can be used to control the execution of tests and the comparison of actual outcomes with expected outcomes. The tests specify what should happen when the tests are run and the test software compares this with what does happen, generating alerts or failure reports if any discrepancies are found.

Automated tests can be written (or amended) to cover all functionality and features and to cover gaps where bugs have arisen before. Tests can also be written to cover some, or all of the user journeys that exist within your app. The number of tests in place across the code that makes up your product is described as the test coverage.

Unit testing is a software development process in which the smallest testable parts of an application; the units, are individually tested. Unit testing can be automated or covered by manual testing.

If writing tests for everything poses a challenge, work smart by automating the key user journeys that customers use and value the most, then decide whether your developer should write other automated tests too. Try to find a good compromise between test coverage and practicality.

When it comes to personal use, the three most frequently used browsers worldwide are Chrome, Firefox and Internet Explorer for desktop use only, followed in much smaller numbers by Safari, and Edge. The order shifts to Chrome, Safari, UC Browser and Firefox when we look across desktop, mobile and tablet devices worldwide.

Remember that native mobile apps need to be tested on smartphones and tablets and web apps need to be tested on laptops / PCs, Macs, smartphones and tablets via different web browsers.

You can test your website’s functionality and design across a range of browser and operating system combinations using CrossBrowserTesting.com. http://crossbrowsertesting.com The AWS Device Farm is a mobile testing service from Amazon. You can test your app on physical devices via the Amazon Web Services cloud. The service will give you 1000 minutes of testing for free: https://aws.amazon.com/device-farm/ STF (Smartphone Test Farm) lets you test physical devices from your web browser: http://openstf.io/ Emulators (also known as Simulators) are tools which will display a representation of a mobile device on your computer so you can develop, and test mobile apps without a physical device. Here’s an Android emulator example: https:// developer.android.com/studio/run/emulator.html The App Store has a simulator, which comes with the Apple developer pack: https://developer.apple.com/programs/whats-included/. This will allow you to make your app available to 25 internal testers per app via their TestFlight Beta Testing service.

Google has run Beta tests with Gmail, as well as other Google applications; http://www.geeky-gadgets.com/wp- content/uploads/2009/07/google_beta-2.jpg, and did you catch the 2007 Beta version of Spotify? https:// tctechcrunch2011.files.wordpress.com/2015/07/spotify-beta-2007b.png?w=600 Firefox and Instagram have also beta tested their products.

Hootsuite, will allow you to connect and post to up to 3 social media sites from a choice of Instagram, Facebook, Twitter, LinkedIn, Google+ and YouTube

Pair this up with another social media tool like Likeable Hub (you can currently post to Facebook, Twitter and LinkedIn) https://likeablehub.com/, or Everypost http://everypost.me/pricing/ to cover a large number of sites at once from a mobile app or online.

If you want to know when you should post to different social media sites for maximum impact, take a look at this great post from HubSpot, who own a marketing and sales product by the same name, http:// blog.hubspot.com/marketing/best-times-post-pin-tweet-social-media-infographic.

ads. In the past, Yahoo! Mail has recruited visitors arriving on its home page to join its Beta test with a prominent “Try it now” button, a few selling points covering the benefits of the new version of the app and some encouraging testimonials. Add any positive feedback, or testimonials from user testing sessions to your website or landing page for extra credibility.

Finding business beta users

Promote your product by focusing on the WIIFM “What’s in it for me?” for your target customer group.

Don’t just state what the product does, emphasise the benefits it will bring and how it will remove those painful problems or allow the customer to enjoy those benefits that you identified back in chapter 3. This is a sales technique called telling a feature and selling a benefit, which keeps the focus on customers’ needs.

There is also a sales technique called SPIN Selling, which is very popular. This stands for: Situation, Problem, Implication and Need-payoff.

Beta testing Android apps You have the option of inviting specific people to the beta test (a closed beta), which you can do via their Gmail account or a Google group, or you can launch a beta version of your app on Google Play which anyone will be able to access (an open beta). You can find instructions here: https:// developer.android.com/distribute/engage/beta.html This is a launch checklist for Android apps: https:// developer.android.com/distribute/tools/launch-checklist.html

Beta testing iOS apps This can be done via a tool called TestFlight. You can make your app available to 25 internal users via TestFlight, but you can invite up to 2,000 people to test your app via email for beta testing, and they can test on their iOS smartphones or tablets.

Decide whether a beta agreement is required. Beta Agreements (also known as Beta Testing End User Licensing Agreements, or Beta Testing Software Licensing Agreements),

Manage expectations. Make beta testers aware that they might find issues. This is not an excuse for releasing a poor-quality product, but it is a caveat – anyone doing beta testing should know that it would not be unreasonable to come across bugs, or functionality that needs minor improvements. Confirm that you will be looking for as much feedback as possible.

Include a set of FAQs (Frequently Asked Questions) in your email, based on the things you think people will want to know to help them get the most from your product and from the beta period.

Have a system for logging issues.

The date and time that the issue occurred. (Cross referencing issues back to the time they happened can help your developer analyse the root cause of problems. Your app monitoring tools may be useful for this type of task.) The beta tester’s name and contact details. The device used to access your app e.g. a smartphone, tablet, PC, Mac or laptop. The web browser and the version used, if you’re beta testing a web app. The operating system used e.g. Android, iOS, Windows, Mac OS X etc. An issue category, so you can see what types of problems are arising most frequently. Useful categories might include: bug, question (or query), suggestion / request, complaint, issue. A description of the problem and how to reproduce it. Note down what happened, the part(s) of the app affected and whether the issue is still going on. Ask for a screen shot of the problem wherever possible; it’s much quicker to grasp what’s happening if you can see the issue for yourself. Even if the problem appears to have gone away, don’t be lulled into a false sense of security, bugs lurk! Sometimes only a very precise set of steps in a given order cause them to show up, so try to replicate the issue by repeating the steps the beta tester took. Can you make it happen again? If so, capture the step-by-step details of how to reproduce the bug on a bug card, and add it to your Ready for build queue for your developer to fix. (See chapter 22 for more details.) Add suggestions, requests and other issues to the TBC queue on your backlog, or to the “must”, “should”, “could” or “won’t” queue depending on your assessment of each one. Another option is to add all your

feedback to a new board for managing customer service related topics, so you can prioritise and categorise them later. I’ll show you how to do this in chapter 25. A severity rating. As an example, you could use ratings of “low”, “medium”, “high” and “severe” or a rating of 1-5, where 1 is the most severe and 5 is the least (or vice- versa). The more users are inconvenienced, or impacted by problems with your app, the higher the severity rating should be. If you have multiple issues, use your rating system to help you decide which you should resolve first. Watch out for issues which aren’t serious, but are annoying a large proportion of people. If it’s relatively easy to deal with these items, you could consider getting them fixed and out of the way. A customer care reminder / follow-up. Use this to confirm whether you have thanked users for their feedback and addressed their issue(s) as part of your customer care process.

If you receive lots of “How do I?” questions, then there is an issue.

go / no-go decision.

Have all the technical, functional and non-functional items on your “must” list been completed? Did you finish building all the cards and user journeys needed for MVP?

Was feedback from recent user tests positive?

Is the product stable? Have you finished testing all the cards and user journeys in your app?

Has contingency planning been done?

Are your beta testers prepped and ready? Have you given them sufficient notice about the beta? Do they know how they will access your product? Remember that business customers may expect to be given plenty of advance warning.

Are the 3rd party products, services or systems involved in making your product (and launch) a success in place?

Have you and your developer planned the release and done a dry-run?

(Please note that sometimes companies make their product fully available, yet leave a Beta stamp somewhere prominent on the application. This is done as an insurance policy against customers discovering larger issues with the product,

Regardless of the type of app you’re building, there’s no reason why you can’t have a website with some FAQs, “how to” screenshots or videos available on it. Not only does this information help customers who are stuck to resolve their own issues, it reconfirms your product’s features and benefits, and educates them about how to get the most out of using it. Reduce frustration amongst your customers by making sure they can find this information quickly and easily by using clear descriptions and labels.

Startup-friendly companies you can approach for live chat tools include: Zopim (now Zendesk Chat); https:// www.zopim.com/pricing/ the “Lite” plan is free. SnapEngage; https://snapengage.com/live-chat-pricing/ covers up to 4 agents at the lowest price tier. LiveChat; https://www.livechatinc.com/pricing/. Olark; https:// www.olark.com/pricing.

Send customers tips and advice to help them get more value from your product. When customers win, you win. Social media posts, or emails which help people to learn more ways they can benefit from using your product can improve customer retention.

Use tools to help you manage customer care and communication. Consider using a helpdesk tool to categorise and “triage” messages from customers. Freshdesk, https://freshdesk.com/pricing is a helpdesk management tool which is free to use for up to three customer service agents.

You could create categories such as “bugs”, “questions”, “complaints” and “suggestions” and group customer feedback in this way inside the helpdesk tool.

You could also include other categories such as “issues” and “testimonials.” This is a very simple, but effective way to see what is happening in your business and to organise customer

Reduce questions and suggestions

by communicating common queries and comments via a blog, social media, or by regularly updating your FAQs to cover all the questions that your customers are asking.

Dealing with technical issues or negative events

This information is particularly relevant if your software will be used by businesses, because if a major issue occurs during office hours, they are likely to be using your product. With an app for consumers, some people may not even know you had an issue, whilst others will be affected. Use your analytics and monitoring tools to decide how many people have been impacted and whether to contact everyone, or just to reply to anyone who contacts you.

If a serious issue is found, and an emergency bug fix is needed, your product should be tested to see that the emergency fix hasn’t broken any other parts of your app before you release the update to your customers.

Crazy Egg, https://www.crazyegg.com/pricing offer a number of products, including heatmaps, and overlays that indicate where customers are clicking on the page – and the parts of your website or web app that are most (and least) popular.

Website Grader will give you a simple report of your website’s performance in key areas such as speed (performance), mobile friendliness, SEO and security,

Free resource 6: Sample job advert for back-end / full-stack developer with crib notes. http:// www.mylanderpages.com/donthireasoftwaredeveloperuntilyoureadthisbook/resource-6-sample-job-advert

Free resource 7: Developer Interview Log to help you keep track of your interviews. http:// www.mylanderpages.com/donthireasoftwaredeveloperuntilyoureadthisbook/resource-7-interview-log

7 STEPUX®: The complete UX process from strategy to design

Lean UX, Don’t Make Me Think,

you don’t decide what it is your users Want. Instead, you try to find out what they Need and build a solution that works for them.

Findable

Accessible

Usable

Credible

think about a payment page. If it doesn’t seem trustworthy and legitimate, you probably won’t want to enter your card details.

Do visitors believe what you say about your product? Does your brand (and product) appear trustworthy?

Useful

Every single feature must convey value to the user while meeting their needs.

super annoying ad behaviors (like pop-up ads).

The visual designer is the interior designer. They’re often called UI (user interface) designers or even product designers.

After UX became popular, visual designers quickly jumped on the train and created the title “UX/UI designer.” To be honest, I’ve never liked this term, since most UX/UI designers know nothing about UX, strategy, business, or research. This is just a fancy way for them to say, “I design stuff that people love.” In

product designer has both the knowledge of a highly skilled UX professional and the abilities of a visual designer to create the final design for the product.

The title also has “product” in it to indicate that the designer is responsible for creating the design from A to Z and not just drawing some bits and pieces.

By “developers,” I mean programmers who will take the finished designs, sit down, and transform them into fully functional code

If something is easy to use, users will use it more often.

Research shows that 68% of users abandon a product or company because they don’t feel taken care of.

Every phase in the process represents a focus: Step Focus Plan Strategy Discover Collecting information Explore Idea generation Define Information architecture Design Visuality Validate Validating decisions

Deliver Organizing and QA

If you’re designing a new product, the first two phases are crucial.

the Plan phase is about three things: (1) understanding user needs, (2) mapping out business goals, and (3) deciding what features and functionality should go into the product.

Conduct user interviews; they’re great for understanding what your users need, think, and feel.

The canvas is not something that you do once and then forget about. In the beginning, you’ll use a lot of assumptions when filling in the canvas. You have to validate those assumptions and refine the canvas.

Existing Solutions section

if you were to automize something that people can do only with pen and paper, the existing solution is pen and paper. Don’t simply list the competing products! Instead, focus on the weaknesses. What’s missing?

Early adopters are the first and best customers. They’ll pay for the earliest viable version of your product. This is because they suffer from the problems the most. Early adopters are aware of their problems, and most likely, they’re on the hunt for solutions. Maybe

Users not only have positive feelings but also fears and worries. These are also important for the product. For example, speaking of an SAAS (software as a service) product, users might fear that it will be too complex and time consuming for them to learn, or maybe they worry that they won’t be able to migrate their data if they switch to new software.

ask yourself, What do my customers fear? What are they worried about? This can be related to the product and also to the problems they experience.

User goals are not really about what they “want,” in essence, but rather what outcome they hope to get. You have to uncover their needs and understand their goals so that you can design a product that fulfills their needs and helps them reach their goals.

A user persona is a fictive character that represents the targeted users. Usually, there are multiple personas for a product. They can differ in how they use the product, what problems they experience, or basically who they are.

As a product manager, it will help you focus on the user, come up with better feature ideas, and prioritize them. By maintaining and updating the persona, you can eliminate irrelevant features and focus every meeting and discussion on the product and its users.

Most of the products can be covered by two to three personas. The really complex products can take up to four personas. Just try to keep the number of personas as low as you can. By adding new ones, you lose focus.

Building up the user persona

Picture, name, title, description After you’ve created your personas, give them all names. This makes it easier to refer to them later on (e.g., “Joe would love this new feature!”). Finding a relevant photo also adds to the personality. The title can be a role (e.g., “event manager”) or job title. But get creative on this one. You can create a title that best describes the user.

we named the personas after the traffic source they visited the site from (e.g., “Facebook guy”). This was handy because the behavior and attitude of the users differed depending on how they got to the site.

You might also add a quick description explaining the role of the persona. For example, if you differentiate the personas based on what they do inside the product, it’s good to dedicate a few sentences to explain these roles.

Problems (or pain points) are one of the most important aspects of a persona. List the main problems encountered in this type of user experience. These are the problems that you want to solve with the product.

Needs

Note that these are not what people “want,” but it’s what they need in order to solve their problem.

Goals

The goals cover what end result or outcome the users are looking for. It’s important to distinguish needs, goals, and what users say they want. You have to understand and focus on what outcome they would like to achieve.

Demographics In the demographics section, we enter information about gender, age, location, and job responsibilities. Enter everything that describes who the user is

As a rule of thumb, only enter data that is relevant and can be used during design and research. For example, don’t include their favorite TV show unless it’s somehow related to the project.

Questions to ask yourself: What is the age of the target audience? What is their gender (mostly)? What is their professional background? Job responsibilities? What do they do on a daily basis? How do they collect information about similar products or related to their problems? Who do they ask for help? What are the typical traits of these people? Are they risk takers or risk avoiders? Are they tech savvy or tech dummy? Are they organized or spontaneous? Etc.

Context The context can refer to the context of usage (where, when, and how they would use the product) and the context of how they experience the problems we aim to solve (where, when, and how they experience them).

For example, if you’re going to design a cooking application, it’s likely that the product will be used in the kitchen. Therefore, the users probably want to use it on a mobile device, but they can only use one hand, or they might not even want to touch the screen because their hands might be dirty.

Knowing this, you can address these issues with the design (e.g., touch-friendly screens and perhaps voice control).

Questions to ask yourself: How are they currently solving the problem? Why are they viewing my product? When and how will they discover the product (e.g., from Facebook, search engines, or browsing the app store lists)? What device will they use to access the product (e.g., cell phone, laptop)? What kind of software and tools are they familiar with (you can build upon this knowledge)? What prior knowledge do they have about my product or the existing solutions and competing products?􏰀

Fears

Remember, fears can be connected to the problems the users experience or toward a product or solution.

Questions to ask yourself: What fears do users have? What are they worried about?

Map out functionality relevant to each user persona When you’re organizing information and collecting functionality, it’s helpful to put the user in the middle and collect the relevant features and functions that the given user type would use or benefit from; this way, you’re connecting each functionality to real user needs and goals.

Questions to ask yourself: Which features and functionality does the given user need? How could we solve the specific user needs? What is the biggest benefit in the product for the specific user?􏰀

what if you don’t know how many different personas you should create? If this is the case, create proto- personas. The point of proto-personas is to come up with different user types and sort them out so you can start creating the detailed user personas we discussed earlier. So, in essence, creating proto-personas is a brainstorming exercise.

Name: You have to call the kid something, and the name can provide a lot of information.

A name can tell you about the persona’s gender or even refer to an attribute (e.g.,

“Impatient John”). Title: The title can be a job title, position, or location, but be creative

on this one. You can use titles to enrich the persona and add bits of information. For

example, you can use persona titles, such as “Facebook user,” “Frequent coffee buyer,” or

“Tennis court owner.” My problem is… Most of the users can be split up by the types of

problems they experience. I mean, demographics are important, because teenagers and

forty-somethings use the same devices completely differently. But most of the time, the

problem and goals are the differentiators. You need to know and understand the problems

first in order to come up with a solution. So quickly jot down a sentence explaining the

specific problem or frustration these type of users experience. I want to… The other

cornerstones of design are needs and goals. You can complete the “I want to…” sentence to

reflect the most important user needs or describe the user’s goals. Uncovering different

user goals will help you prioritize and identify certain user types.

you have to prioritize and select the ones that you want to further refine and create user personas from them. Remember, you have to limit the number of personas to two or three

Dump the irrelevant or duplicated personas. Merge the ones with overlaps. At this stage, demographics isn’t really important since we know little to nothing about the users. So, for example, if you have two personas with

the same problem—but the gender or age is different—skip that. It’s one persona at this stage. Choose the most relevant ones for the project! Who is the paying user? Which user type would be an early adopter for the product?

The methods discussed above are great ways to identify your users and gather your initial assumptions about them. But you have to keep them as assumptions until you have proof that they’re valid. Why? Because if you have an invalid assumption about the users’ problems, this could easily mean that you’ve solved the wrong problem for them.

The less you know about the personas, the higher the potential risk is. This can have a big impact on the product (possibly in a very negative way).

go through your personas—start with the paying user—and identify the assumptions that would get you into trouble if you were wrong about them.

For example, if you’re going to build a mobile app because you think the solution for the problem would be a mobile product, then there’s a potential risk unless you have proof of two things: (1) The problem really exists and hurts the users bad enough to look for a solution, and (2) they want to use it on a mobile device for some reason. You have to know these to be true—and, the earlier the better.

Observation means that you go out to where your customers are and see how they’re currently solving the problem. This is a great way to get to know more about the users and observe their behaviors.

Draw the six sections of the persona (Problems, Needs, Goals, Demographics, Context, and Fears) on the whiteboard.

Once you have the strategy and goals set, it’s time to decide what goes into the product. The emphasis is on “what” and not on “how.” Basically, a user can do two things inside the product: Use a function (do something) Consume content (see, listen, or read something)􏰀

The best way to come up with great ideas is to make the user the starting point for brainstorming. Take a look at each persona and ask yourself: What feature would solve the persona’s problem? What feature is the persona looking for? What type of content do they need? What content would help resolve fears regarding the product? What information are they looking for?

Put your user personas on the whiteboard, and start to write functions and content ideas on each of the Post-its. A little hack is to use different colored Post-its for function and content ideas. This way, you can play around with ideas and see if all the business goals and user needs are covered.

Prioritize ruthlessly! UX is mostly about prioritization. When it comes to features, we have to prioritize ruthlessly. Go through each of the functions and ask yourself, Do I absolutely have to have this?

If it’s a new product, I like to ask my clients, “Okay, if you don’t have this feature, can you still go to market?”

A great method for selecting which feature to keep and which to discard is to do a card sorting exercise. To do this, you ask potential users to rank feature ideas based on how important they are to them.

You can use various tools for creating mind maps, but I prefer to use XMind. It’s free to get started, and it has all the functionality you need for this job.

sitemap displays the pages of a website and the logical relationship between them. It’s a good idea to create a sitemap if you feel like you might get lost in the sea of information that’s at your disposal. You can use sitemaps for keeping a record of the screens and content you’ve designed.

A user story is a one sentence statement about what the users want and why.

Here’s how it looks: As a [type of user], I want to […] so that […].

For example: As a product manager, I want to quickly find the right meeting time that works for everybody so that I don’t have to waste time and energy organizing. Why are user stories great? User stories will help you avoid dead ends in the product. User stories protect you from feature creep by focusing on user needs. Feature creep is when you keep adding feature after feature until the product becomes unusable. User stories make it simple and clear for everybody to know what each feature does and why it’s important􏰀􏰁

Step one: Start with “big-picture” stories (epics)

You can come up with big-picture stories first: “As a user, I want to quickly add a new lead to the CRM so that I can keep track of all information from now on.” As you can see, this is pretty general. It doesn’t tell you what type of information to enter for a lead and how you can access the feature. At first, just write out these big- picture stories for the product.

Step two: Break down each story

Sticking with the CRM example, we can break that functionality down: “As a user, I want to access the add new lead feature so that I can quickly add new leads to the system.” “As a user, I want to import existing data from an Excel sheet so that I don’t have to manually re-enter all the information.” “As a user, I want to save the entered data easily.”

Step three: Add extra details to the stories

This is when you add descriptions for the stories. In this case, I would add this: The user enters basic details: Name Upload profile picture (and remove or update) Email address Phone number LinkedIn URL

it’s best to start writing user stories before you start to design the screens. However, user stories constantly evolve throughout the process, so you have to update them.

Let’s not beat around the bush—a brief is meant to be brief!

Sum up the most important things regarding the design. Who are the users? What are the user needs and goals? What are the product/business goals? What functions should we design? Let’s break it down. 1. Who are the users? Sum up the most important points or ideas relating to your personas. The goal is that anyone who reads the design brief should be able to understand the different user types that need to be addressed with the designs. Don’t go into too much detail! After all, that’s what the user personas are for. For example: We have two different personas: (1) the product manager, who organizes global meetings on a weekly basis, and (2) the freelancer, who has an international clientele and who needs to organize meetings quickly, working across different time zones and maintaining a professional and organized approach to work. 2. What are the user needs and goals? List the top needs/goals for the personas. These will be addressed during the design. 3. What are the product/ business goals? Dedicate a few sentences explaining what you want to achieve during the project. Be as specific as possible. For example: Our goal is to increase user retention and bring users back frequently by finding new ways to engage with them on our website. 4. What functions should we design? The most important part of the design brief is the functionality. All the other information is for adding context to the story. So, start to list and describe every function that goes into the product. If you did the functionality map, you just have to open it up, add the functions from there, and add a quick description. Descriptions are very important. If you just write “book a lesson,” that’s not enough information. Everyone who reads the design brief should understand what the function does and how it works. If you skip this, there’s a chance that you won’t remember what the function or content was good for during the brainstorming session. The best way to describe the functions is to explain them through a story.

you should know that these research methods are not that hard to execute; it’s not rocket science. However, a lot of people use them in the wrong way or for the wrong purpose. For example, I’ve seen people doing usability tests to try to see if there’s a real need for a product. Guess what? That’s not what usability tests are for! Even worse, doing things this way could lead to false and misleading findings and bad product decisions later on.

when we discuss a method, we’ll take a look at when to use it, what that method is good for, and what it’s not good for.

When I say “research,” I can mean three different things. UX research UX research is for gathering information about the users, their problems, and the product. These are qualitative methods, and they can be used to

understand underlying reasons, problems, and opinions. To put it simply, qualitative research tells us the “whys.” The rule here is to “shut up and listen!” The methods include user interviews, observation, card sorting, and much more. Tests Tests help us validate a design or a product that we’ve built. Even though you will learn a lot about who the users are and what they want, the primary focus here is to test out an idea. Tests include usability tests, A/B tests, five-second tests, etc. This pretty much includes anything that has the word “test” in it somewhere. We’ll explore these in detail in the Validate chapter. Analytics Have you heard about the build- measure-learn cycle? Well, you will in this book. Analytics and measurement are the cornerstones of product development. Analytics will tell you how the product performs. For example, if you say you want to optimize conversions, that’s a measurement process. You set the initial value, the percentage of the conversion, do improvements on your website that you hope will boost conversions, and then measure the effect to see whether the new version is performing better or not. Analyzing data is a separate discipline; however, we can still learn a lot from using analytics in a smart way.

With UX research you’ll end up with fewer unnecessary features, and you can lower the cost of development. To put it simply, the primary goal of UX research is to build the product that users will want—not just something somebody thinks the users will love.

How can I recruit existing customers?

Reach out via social media! Another great source for recruiting is social media. Do you have a Facebook page with thousands of followers? Put up a post! But it’s not just about Facebook! You can successfully recruit people through Instagram and LinkedIn (mainly for B2B) as well. The trick is to make the post engaging. Explain why it’s great if they apply, why their feedback is important to you, and how you’ll use the feedback to create a better product for them.

called intercept pop-ups

There are dedicated solutions for this like Ethnio,

Using these techniques, you can not only reel in your existing customers but also reach out and invite potential users

There are a lot of people who write or call customer service because they have a question, some feedback, a problem, or some remarks. If you think about it, it’s easier to involve somebody who has already decided to contact you and tell you about their problems or needs. They took the time, so it’s important to them. There’s a good chance that they’ll be willing to participate and give you their feedback. Use customer support to reach out to your customers and invite them for a test.

I see three reasons a potential user would accept your invitation. There could be more, but these are the most common reasons. The first reason is that people who experience a problem love to talk about it; it’s human nature. If I’m concerned about something, and you ask me to discuss it with you, I probably will because it might help me find a solution for my problem. The second reason is that people want to appear smart. If you approach them stating that you need their expertise and opinion (and it doesn’t sound like the usual marketing bullshit), a lot of people will be happy to help you. And lastly, people are curious and user research is fun. I have recruited a lot of people who were just keen to try an interview or a usability test.

one of the most powerful ways of recruiting people is to use social media. The trick is to find the platform that your potential users are actively using. It could be a Facebook group, a Twitter hashtag, a subreddit, a LinkedIn group, or any other little nook or cranny hidden away on a social platform.

89% of Pinterest users are female. If I were to create a photo app, I would first take a look around on Instagram; there are even ads on Instagram that can be helpful for recruiting.

What meetups and conferences do your users visit? Is there a place they frequently go? If so, this is a good way to capture them and even do a quick guerrilla test on the spot. For example, if my users are B2B and, let’s say, designers, I would fire up Meetup, search for relevant UX or design meetups, go there, and collect leads to contact.

Pay testers on freelancing sites.

People are kind and don’t want to disappoint you, and in UX research, you really want the harsh truth. However, you can find people on Mechanical Turk or Fiverr who, for a few spare bucks, will do your tests. If you choose

this option, limit your tests to usability. Never try to validate a problem or idea with this method. It’s only good for finding out whether your product is usable or not.

recommend you check out ineedusers.com. This is the first UX recruitment service run by UXers.

Here are a few remote testing platforms that will help you recruit test participants: Test type Service providers Online usability testing Usertesting.com, Whatusersdo, Userpeek Card sorting Optimal Workshop, UserZoom Five-second tests, Click tests UsabilityHub, Optimal Workshop, UserZoom

drop by a café and ask a few people to test your designs in exchange for a good cup of coffee.

Guerrilla tests are only good for testing the usability of the product. A guerrilla test will give you a rough idea of what’s usable and what’s convenient in your product.

Build a participant database. If you conducted a usability test and let the participant just walk away,

Don’t let them walk away until you’ve asked them if they’d be willing to come for another test later on.

if you do interviews with a participant, you can invite them for a usability test next time. And when you go live with your product, their feedback is still valuable.

You need to set criteria so you’ll know who to recruit for a test. It all comes down to your user personas. For example, the criteria can be that the user is a Facebook user, someone over 30, or someone who uses Twitter on a daily basis.

Let’s say you want to recruit active Twitter users who use the platform on a daily basis, not people who have Twitter but haven’t logged in for a while. The benchmark would be users who post at least three times a day on Twitter. Now that’s something measurable!

Be indirect and ask open-ended questions! Instead of asking if they use Twitter on a daily basis, ask how many times a day they tweet on Twitter.

At the end of each test, ask them if they will come again. If the answer is yes, make a note in the participant database!

Interviews can answer a lot of questions about how the users behave. How do they search for information? Who do they go to if they need information? What pages do they visit? Who influences their decisions? What existing solutions are they familiar with?

One of my favorite prompts for an interview is, “Tell me about the last time you did x.”

Always have that tiny voice in your head that’s asking, Did he say it because he feels this way, or does he just want to make me feel better?

if somebody is uncertain on a topic, take it as a “no.” You want solid information to validate your assumptions; it’s dangerous to count on “maybe” or “probably.”

Always avoid leading questions! “Do you think this design is good?”

What interviews are not good for You also have to know the limits of each research type. For example, during an interview, you shouldn’t ask someone if they would use or buy the product. If you were to do so, it would lead to false results.

Example of a good question (for yourself

Kill the leading questions! For example, don’t ask, “Do you find it difficult to understand web analytics?” This is a yes/no question that will bias the interview.

As a rule of thumb, if you can answer a question with a yes or no, it’s a leading question. Got it? Now, that was a leading question.

Always consider whether the users have given you their honest opinion or were just trying to make you happy.

if I were to ask you how you use Facebook or Google, it would be a difficult question to answer because you do it almost instinctively, which makes it hard to recall. So, instead of asking a question, I would ask you to show me how you do it. This will give me a lot of valuable insight.

During an observation, you sit down with your users and ask them to show you how they perform a task or how they solve a problem. It’s important that you do this on-site, in the field. You have to understand the context and see the environment where the users are facing the problem and using existing solutions.

This is not a usability test; I’m not measuring the success of the task. Instead, I’m trying to learn how they’re using the product. What features are they using? How are they interacting with them? What obstacles are they facing? What are the repetitive, time-consuming ways they’re using to solve their problems? What existing solutions are they using to solve their problems?􏰀

So, what can you use observation for? Here are a few things: To see and understand the current, existing solutions people are using To observe how they’re using the product To get new feature ideas and even new product ideas based on real user needs To learn the users’ language—what jargon they use, what they know, and what they don’t know To identify their usual behaviors and the workflows they use To understand the real user needs􏰀

When doing an observation, make sure the user is using the product where they would naturally do so—if it’s in the kitchen, observe them in the kitchen. If it’s on the street, go out and do your observation there. The location

and the context have a huge impact on how we use something. If you’re in a shop using an app, you might be distracted and unable to give it your full attention. It’s a completely different context when you’re in a café—a relaxed environment—having a nice cappuccino, and reading the news.

Method 1: Open card sort The simplest method is to leave the cards unsorted. Create a bunch of cards, write labels on them, and lay them on the table. Then, invite the users to identify the cards (explain what they’re able to make of them) and group them logically. Once they’re ready, ask them to name the groups. For example, you would write out every element from your website navigation on the cards. After this, you would ask the users to create categories and name them.

Designers and stakeholders tend to build up navigation (e.g., the product categories on an e-commerce site) based on what seems logical to them; however, it’s not often logical and convenient for the users. Many times, users look for information in an entirely different place than you would expect.

Method 2: Closed card sort When you perform a closed card sort, you give the users predefined groups, and they have to place the cards in the groups. This is a great method to see how users place information within an existing structure. Returning to the e-commerce example, you can use a closed card sort to find out which product category people would place each product in.􏰀

Method 3: Reversed card sort or tree testing Take the idea of grouping the information and reverse it. We take an existing information architecture and ask the user to find information in the structure. This is often called “tree testing” because a website is usually organized in a hierarchy of topics and subtopics—like a tree. For example, you show the users the navigation of the e-commerce site. Then, you give tasks like, “Please show me how you would find product X.”

The structure is based on two things: (1) the placement of the information and (2) the wording. The structure could be great, but the users might not understand the function or navigation due to the wording. Card sorting and tree testing help test the wording.

Method 4: Ranking cards

Create a few groups like “important,” “not really important,” and “not important at all.” Then, ask users to identify each function (so you can check whether they understand what the function does) and put them in a group.

You should apply ruthless prioritization when it comes to functionality. You have limited resources and time, so you want to make sure you only deal with functionality that’s important to the users. Doing a card rank is a good way to eliminate useless functions.

Tree testing will show you how users search for information. With tree testing, you can test out the navigation of a website. Ask yourself, Can people find what they’re looking for? Can they find it quickly enough? If not, Where do they get lost? What can be misleading to users?

One of the most important aspects of UX is wording. But, oftentimes, this is the most overlooked aspect.

Are the names of the functions straightforward enough that people can understand them? Do they know what each function does based on the name or description? Do they understand the jargon being used?

Be aware that if they don’t understand something, they might not tell you. This is why you have to ask them to identify each card and explain what they think that card represents.

You can also use a card sort just for the wording. For example, if you’re not sure about the jargon the users are familiar with, do a closed card sort.

Here are a few areas where card sorting excels: Testing wording and jargon Ranking functionality Creating a bonus system. What prize or achievement is important to users? This is a great help when creating gamified products; you have to understand what users think about the benefits and what makes achievements attractive to them. Discovering emotions and feelings. What words do they use to describe the brand, function, or piece of content? Using images. For example, if you want to learn what words and emotions users connect with an

image, use a card sort. This is a great help when designing a landing page. Prioritizing content. What information should go where? Card sorting is a great tool to help you out with arranging information, such as determining what content to put on the main page.

Start with an in-person card sort to understand how people think and get a better understanding of the “whys.” When you start to see patterns, go remote with a bigger sample size.

If you want to collect information and see how people organize data, do an open sort. If you have an existing structure and you want to see where to place new information, do a closed sort. If you want to test if users can easily find the information they’re looking for, go with the tree testing method. If you want to know which features to build and what information is relevant for the users, do a ranking.

Create the cards and define the groups (if you’re doing a closed sort). For a tree test, you have to build up the structure (e.g., add topics, then subtopics). It’s worthwhile to limit the cards in a session to between 20 and 30; otherwise, things can become overwhelming.

If you’ve done multiple rounds with 30 to 40 participants and still don’t see patterns, either the test was too vague or the task was not straightforward enough.

Analyze the results. When analyzing the results, look for patterns. If you’re doing an open sort, examine the cards that were frequently grouped together and find out if there are patterns between the naming of the groups as well. In a closed sort, look for cards that are frequently put in a certain group. The more that happens, the more evidence there is to suggest a pattern. Here are a few additional things to look for: Which cards do users find confusing or difficult to place in a category? Were there any ideas for new cards? Was the wording clear?

The biggest pitfall when it comes to analytics is to jump in and collect data without having questions and setting goals first. It’s easy to get excited about the latest analytics tools because they’re fancy and can show everything you need for your job. But without questions and goals, you’ll end up not knowing how to interpret the data and how to use it to design better products—it will simply end up in a report to be forgotten.

It’s like going to a supermarket without a list of ingredients

From the UX perspective, we can have four types of goals: Make the process measurable Find problems to be solved with UX expertise Support qualitative research Validate assumptions about users and the product􏰀

Make the process measurable. Analytics make product performance and goal achievement measurable. Taking a look at how many users you have, how much time they spend on your pages, and conversion rates are considered measurement. Measurement shows us whether we’ve reached the product and business goals.

Find problems to be solved with UX expertise. As UXers, we use analytics to dig for problems in the product. Quantitative data can tell us “where” the problem is, but most of the time, it won’t tell us “why” there’s a problem. For example, analytics can help you identify the pages with high bounce rates. You know that there’s a problem causing people to abandon that product page, but you don’t know why. What changed their minds? Is there a technical issue? Could they not find the information they were looking for? Is it a usability issue?

lack of an SSL drives them away. More and more people are now aware that they have to check for the small green padlock at the top left corner.

there are mobile-specific analytics tools like Appsee or Flurry.

Heatmaps, scroll maps, and video session recordings are all visual analytics.

Hotjar offers a wide range of visual analytics tools.

What can a heatmap tell you? It can help you understand what’s important to users. This will help you make sure that your priorities are in the right place. You’ll be able to tell if they don’t see or don’t pay attention to content.

To identify whether something is missing from a page. If people spend a lot of time on a page scrolling back and forth, but there are just a few clicks, that’s a strong sign that they’re looking for something that they can’t find (or they can’t find fast enough).

This behavior can also indicate that something is holding them back from taking the next step.􏰀 Highlight

There are tools that record a video showing what the users are doing on your website. They record every user session so you can sit down and watch. This is a huge opportunity,

Okay, I know it all sounds great. But, when I tell this to people, most of them say, “I want it now!” Then they sit down, start watching the recordings, and realize that they have no idea what to do with the information. This is what happens if you start to use this tool without a purpose or goal.

Fullstory

FullStory can also sync with your user base so you can identify and create segments for your existing customers. Not sure what this means? Just imagine that you can identify what first-time users are doing and what your returning visitors are doing inside your product.

Smartlook

you saw something interesting during the observation or in the interviews, and you want to find out if it’s a pattern among the target users. Surveys allow for larger sample sizes. This is what surveys are best for!

determine whose opinion is not relevant at that moment. Always add screening questions to the survey. These questions will help you sort out the useful answers that are relevant to the project.

Tools of the trade Google forms:􏰀

Typeform:

Surveymonkey:􏰀

SurveyMonkey also has a paid service for recruiting participants from all over the world.

Get instant feedback with polls

Your users are on your site searching for information they can’t find; a poll appears asking, “What information is missing?” Or, when they’re browsing the pricing page but not taking the next step, you can ask, “What’s holding you back from signing up?” We can use polls to look inside people’s heads when they’re using our product or browsing our site. Inside a poll, you can put a single line or long-text answer, give options for the users to choose from, or provide a rating scale.

Where should the poll appear

if we see that users are spending too much time on the homepage, we can create a poll that appears 30 to 35 seconds after the visitor lands on the page. Then, we can ask them what information they’re looking for or what’s keeping them from moving forward.

You can also make a poll appear on a certain page. For example, you can create a poll for the FAQ page to understand why users are going there and find out what information they’re missing.

You can address different user types, such as visitors, first-time users, and returning customers. Segmenting based on traffic source is also crucial. For example, you see that the visitors coming from Facebook don’t

convert well. Create a poll that only targets finding out what they don’t like, what they’re missing, or what’s holding them back from becoming a customer.

As a rule of thumb, apply polls when you’re thinking, Gosh, it would be great to know what they think about this page. Visual analytics will give you insight into the behavior of the users, but polls can help you discover what they’re thinking.

Tools of the trade Hotjar

Qualaroo

When To Use Which Type Of Research Test type Good for Alternatives Participants User interviews Interviews are great when you want to learn more about the target customers and validate feature ideas. Do interviews remotely or create a UX survey. 10–15 participants Observation Use the observation method when you want to see how users solve the problem at the moment. It’s smart to do observations on existing products to find out how users are actually using the products. Do in-person interviews and remote interviews. 8–10 participants Open card sort Use open card sorts when you’re curious about how people would group information with no constraints. This is a great technique to get a high-level idea for navigation. Do it remotely. 15 participants if conducted live, 20–30 if done remotely Closed sort Use closed card sorts when you want to see how users would group information with given groups. This is especially useful to fine-tune navigation. Do it remotely. 15 participants if conducted live, 20–30 if done remotely Tree testing Reverse (or tree) testing is useful when you want to find out if the information architecture is easy to understand for users. Do it remotely. 50–60 responses per test UX surveys This is similar to user interviews, but on a larger scale. Use surveys to back up your interview findings with more data. Do it remotely. Aim for at least 100–150 responses Polls Use these mini “surveys” to intercept visitors and ask for bits of information right on the spot. n/a Aim for at least 100–150 responses, but in most cases, 30–40 responses will probably be significant Analytics Identify low-performing pages and places in the user journey where improvement is needed. n/a n/a Visual analytics Gain visual insight to how users are interacting with the website or app. This is useful for backing up usability test findings. n/a Depends on the type of analytics and traffic

Before creating a digital wireframe, it’s best to start by sketching it out on paper or a whiteboard. The point of sketching is to experiment with different ideas and sketch a screen, or a set of screens, in a fraction of the time it takes to do a digital wireframe.

we had to experiment with two to three different layouts until we found the right solution, then we moved into digital wireframing. It would have been a huge waste of time to do digital wireframes, since they’re harder to iterate.

Step 1: Collect the elements Before you can start sketching the screen, you have to know which elements (functions and content) to display on the screen. This is like a checklist for the design. You can write this checklist in a spreadsheet or simply make a list on a sheet of paper. To get started, use the materials you already have: The design brief Relevant user stories Storyboards Task flows

Step 2: Design the individual elements An interface is built up of two things: elements and layout. Designing each element first is good for making sure each element is usable on its own (e.g., a button, form, or function).

In addition, the layout must not determine how an element should work. A huge number of usability issues come up because of this. For example, a designer leaves very little room for the search bar at the top right corner of the screen. This is a poor design, and you will have to rethink the structure to fit everything in.

Step 3: Creating the layout The layout and the elements build up the information architecture itself. When you design the information architecture and the layout, you have to decide which elements to put where. This question comes down to hierarchy and prioritization. Which elements should get more attention? What are the priorities on the screen? How will the layout help users navigate, and how will it serve the business goals?

Here are a few tips for creating a better layout: Sketch blocks of content (like headers, navigation, etc.)—don’t design the individual elements. Use vertical prioritization. The higher you position an element, the more attention it gets. As a rule of thumb, the more important a function or piece of content is for the users (and for the business), the higher you should place it. Look up design patterns and what people are used to. It’s crucial to build on information that people already know. If something works as we expect, we feel relieved that it’s not taxing to use. Try two to three different layouts before jumping into the details. I know from professional experience that the first version is usually not the one that works best.

EXPERT ADVICE: Run five-second tests!

show the wireframes or designs to the users for exactly five seconds, then do the following: Ask them to identify what each page is about. Ask them to tell you what they think they can do on the page. Ask them to show you how they would move forward.

Practical tips for creating better sketches

When creating the list of elements, list them on the side of the paper or whiteboard as a checklist.

Don’t use too much space at once! On A4 paper, you can draw five to six desktop or mobile screens. This way, you’ll get a better overview of the screens and save a lot of space (and paper).

Nurturing new habits Holding a Design Studio session one time is good; doing it regularly is great. Regularity is especially important when somebody is stuck with a problem. I know from experience that it’s difficult to stop the production line and run over to help somebody, but having a regular meeting time for a Design Studio workshop will provide you with a good framework.

if you spend too much time on a wireframe, it’s much harder to throw it away when you find out it’s not working. Throwing away a paper sketch? No problem!

Start with the most complex interface you have (or the most important one). This can be your main page, the product page of an e-commerce site, the dashboard of a mobile app, or the most complex screen in your web application. Pick the one that has the most elements (functions, buttons, content, etc.). The benefit of starting with the most difficult screen is that you can see and solve the biggest challenges in the product right away.

There are several icon libraries to help you get started. I recommend the Noun Project.

There are also wireframing tools that offer thousands of built-in icons (e.g., UXPin).

an app called Sketch Mirror that shows your design on mobile while working on it in real time.

InVision’s Craft allows you to generate different types of text like names, headlines, and articles. It also allows you to define the text you’ll use in the designs.

Microcopy is the secret weapon of UX. It’s secret because, unfortunately, this is the most overlooked aspect in product design. Microcopy can make or break your product experience.

microcopy plays a crucial role in usability.

You have to help the users understand the product quickly. This includes how to navigate and perform certain tasks. Also, it’s crucial to think about what happens if the users make a mistake. How can you get them back on track again?

Why is microcopy so important? It provides users with information on how to do something (how to fill in an input field, how to choose a payment method, or what to do if they’ve made a mistake). Badly placed or poorly written microcopy will confuse visitors. This can easily result in making the users leave the website or abandon the product.

For example, Veeam noticed that a lot of visitors were asking for a price. They had a “Request a quote” option on their site. They decided to test what would happen if they changed the phrase from “Request a quote” to “Request pricing.” They saw an increase in clicks on their lead generation form of 161.66%. What happened here? Visitors wanted to find out the price of the product. “Request a quote” might have sounded intimidating to them.

Monitor and learn from competitors. Sometimes, this will show you how NOT to explain something. Microcopy is pure UX; it’s about being useful over being pretty. Be as clear and straightforward as possible. Only say what you truly need to say. Believe me, the users will be thankful for this!

Pay extra attention to what happens when the user makes a mistake. A great error message can help people get back on track and convert them. A personalized success message will drive engagement and build a stronger connection between you and your users.􏰀

If the users don’t see it, then it doesn’t matter how good your copy is. A classic example of this is not displaying error messages where the error actually occurred.

Do A/B tests to test just the microcopy. Create different versions with more text or less text or a more personal or more corporate style. Remember that microcopy alone can improve your conversions. So, if you have an e- commerce site with a complex checkout, start working on the microcopy first. Focus on labels, button text, input field placeholders, and instructional text.

If I asked you where to find the login on a website, you would probably say, “It’s on the top right corner.” If I asked you where the logo is, you’d say, “It‘s on the top left corner of the page.” These are conventions that we come across every day on millions of websites.

If something works the way we expect, based on past experiences, it makes us happy and thankful because deep down human beings are lazy.

Don’t fall for design patterns just because you see them used in a lot of products. That doesn’t mean that they’re good or convenient. If a multibillion dollar internet company starts to use something, it doesn’t guarantee that it will work for you.

All in all, look for design patterns and use them, but always think from the users’ perspective. Do they know that pattern? Is it convenient? Does it speed up the learning process? Don’t follow a practice just because others (especially huge companies) are using it.

if you know your target regularly uses Instagram, you can be sure they know how to use it and can learn from it.

Calltoidea.com collected lots of great designs and categorized them.

The word prototyping is mostly used for solutions that are not created using the final technology. They are rapidly modeled to test out the ideas we have. That’s why it starts with “proto,” which means “first,” ”source,” or “parent.”

When it comes to wireframing tools, we can divide them into three categories: Tools in the first category are only good for wireframing; the outcome is an image and not a clickable prototype. The second category is only good for prototyping; you need to create the wireframes with another tool. In the third category, there are tools that are great for creating wireframes (sometimes even visual design) and prototyping at the same time.􏰀

there are a lot of wireframe templates and icon sets for Sketch. Figma also offers a wide range of plugins and ready-to-use icon libraries and templates.

Best overall wireframing and product design tool: Figma

From the UX perspective, we can divide prototypes into three categories: Click-through prototypes High-fidelity prototypes Coded prototypes􏰀

The idea behind the click-through prototype is taking the designs as images, creating hotspots, and linking them together so that you can click through them.

A high-fidelity prototype is usually based on the final visual designs and not on the wireframes. You can make the product look like the finished, real-life version with animations, transitions, and complex interactions.

coded prototypes. HTML, JavaScript, or any other programming language you prefer. Sometimes you need a coded prototype to model complex interactions.

two prototypes: the wireframe and the design prototype. Both are click-through prototypes. The wireframe prototype is created from the wireframes. The goal with this prototype is to get feedback on the structure and copy before moving forward to implement the visual design. Design prototypes are based on the visual design and are good for testing the final layout of the product.

The biggest benefit with prototypes is that they allow you to show the designs to your users and let them take them for a spin.

The first prototype we create during the design is the wireframe prototype.

What are the tools for prototyping? If you’ve chosen to use a wireframing tool that’s also great for prototyping, this is easy. Pick UXPin, Axure, or Justinmind. However, if you’ve decided to stick with a design tool like Sketch or Photoshop, you’ll need a prototyping tool that will make the designs clickable. A couple of great tools for this are InVision and Marvel (both work in a similar way).

Exercise: The Design Review

We have four different roles. Each of the roles is represented by a color.

White looks at the facts. Black looks for problems and potential risks. Yellow looks at what’s good in the designs. Green looks for ways to improve the product􏰀􏰁

The White Hat:

What can we see on this screen? What can I do here? What’s clear? What isn’t clear? Do the designs fulfill every user need? Look at the design brief, the personas, and the user stories to help you figure this out. Do the designs support the business goals?

Are the designs consistent? Are we using elements consistently across designs? Where do we need more input on the designs (from users, stakeholders, or clients)? Is the content clear and straightforward? Are the microcopies well-written and well-placed?􏰀

The Black Hat:

What’s not going to work? (e.g., “Users won’t understand this screen because…”) What are the potential risks? (e.g., “This element is great on desktop, but it doesn’t work on mobile because…”) What are the disadvantages of a particular design?􏰀

Saying “It’s not good,” “It looks awful,” or “I don’t like it” without a viable argument is not feedback.

Put all of this in the context of the users; at the end of the day, we’re not building products for stakeholders— we’re building products for the users.

The Yellow Hat:

Identify what’s good about the designs. Give an explanation as to why it is good and why it works. Identify the advantages of a particular design solution.

The “why” is crucial here. You have to know why a design is good (e.g., “This blue is great here because…”) or why users will love a particular feature.

The Green Hat:

This is where innovation happens. The green hat has to be fresh and generate new ideas.

What new features could we add to make the product better? How could we improve the designs?􏰀

The reason I prefer to use prototypes for review (compared to printed out designs or still images) is that the team can preview the designs on the actual device. If it’s a mobile app, they can preview it on their phones. So, go with a prototyping tool like InVision.

Don’t explain what each screen is good for (let them figure this out).

We’re not using a color because it looks great, we’re using it because it works for the particular element or screen. We’re not choosing a font because it looks neat, we’re choosing it because it’s easy to read, works well in different sizes, and appeals to the users.

Being simple in visual design means that we don’t increase the cognitive load of the user. An example of this is using colors for the sole purpose of helping the user navigate and identify the important elements. Adding too much color leads to loss of focus

Be simple and clear. Most people think of a clean interface as something that’s easy to use.

when you’re using a button with a certain style, you’ll use that style across all the designs. Applying consistency makes it easier for the users to understand the design.

When you look at a website or mobile app, there are things that you see right away and things you notice later on. Visual hierarchy influences the order in which the human eye perceives a design. What does it see first? What draws your attention? In other words, visual hierarchy is a tool for designers to define what’s important in a design and what’s not (it’s more like a scale than a yes or no question).

there are focus zones and blind spots on a website (check out the famous “F-shaped pattern” of reading the web).

Remember, people don’t read on the web; they scan through the pages. Using different font sizes and formatting (like bold or italics) will make this process easier.

The text should always be readable! This is extremely important. No light gray text, please. And no lightweight fonts for non-retina displays. Not everybody has a Mac with a beautiful retina display. Think about poor quality displays and what happens when somebody turns down the brightness on their phone. Gray text becomes unreadable.

Don’t forget about glyphs. This one’s special. There are languages that require glyphs (e.g., German, Spanish, and Hungarian).

multiple tests have shown that one of the best converting CTA colors is orange. Now, don’t go running to your designs and changing the color to orange; just make a mental note of this. Orange is vivid, bright, saturated, and has a slight “caution” feel (just like red does).

In Western culture, white represents purity, cleanness, and safety. In Far Eastern culture, white is the color of mourning.

Use the main color for the most important interactions (e.g., CTA buttons). Don’t use more than two or three strong colors.

Use contrast when you want to draw the visitors’ attention. For example, applying high contrast on your homepage can make it look catchy. However, on a shopping cart page, the layout should be bright and clean, and the text should be the only thing with contrast.

A great way to start playing around with colors is to use Coolors. It’s online and free; you’ll also find a lot of premade color themes to use in your designs there.

What kind of feelings and emotions do you want to create in the users? Should the design be sophisticated or simple? Do you want it to feel more luxurious or more affordable?

Come up with five adjectives that will reflect the designs

In the 7STEPUX® Resource Center you can find a template called the Design Questionnaire for both the spectrum and the adjectives. Feel free to add attributes to the spectrum that better cover your project.

I know it can be a challenge, but try for at least three different design concepts. It’s best if they’re done by multiple designers, since they’ll naturally create different designs. The goal is to have diverse design concepts. Don’t just change a color or the typography; redo it completely so it will have a different feeling.

Atomic design is a specific way to build design systems. It has five levels: Atoms Molecules Organisms Templates Pages Atoms are components that can’t be broken down any further.

Some typical examples of atoms are Buttons Checkboxes Radio buttons Input fields Menu items Sliders

Here are some examples of molecules: Search bar (using an input atom and a button atom) Save and cancel buttons (these are often used together—make them into a molecule!)

Organisms are extremely valuable and reusable components. Here are some examples of organisms: Pop-ups; modals Success messages Headers; footers Dropdown menus

The next level is templates. A template is made by grouping organisms together. This is when the screen of a website or application starts to make sense. Basically, templates are pages without real content. For example, if you have a blog, you have a template for the article page. Every article that appears on your blog will use the same template. Next, there’s the pages level, the final design. Pages are actual screens with real content.

In my experience though, you’ll probably have significantly fewer molecules, and that’s okay! You only need to build molecules (and components from other levels) if you’re going to want to reuse them later. Moving forward, organisms are very frequently used—just think of all the examples of pop-ups, headers, and footers we talked about. Then there’s the templates and pages levels, which are merged in a lot of cases.

the perfect moment to build your design system is when you have your wireframes ready and the “Look and Feel” design you want to go with.

I recommend creating the color palette as one of the first steps when creating the design system. Take the “Look and Feel” design and map out all the colors you’re going to need. Think through the use cases of the colors. Colors for validation (error or success states and messages) Lighter, softer colors for dividers, drop shadows, and outlines Colors for disabled states and less prominent elements on the screen

Let’s say you’re a designer working on an existing product and you need to design a new feature. All the elements and assets are at your fingertips. Why go back and create wireframes when you can build final designs instead? This is a trick question! Don’t fall for it! Even though I have tons of experience, I still always do sketching and/or wireframing. Why? Because the point of the sketching and wireframing is to allow your mind to focus on the ideal solution without having to worry about components, design systems, and what’s feasible for development.

When you have a good design system, it’s vital to create sketches and wireframes before you create visual designs.

You can discuss with developers whether to implement changes in the design system, implement the designs individually or revert back to using a component from the design system.

Design decisions should be influenced by three factors: the users’ point-of-view (UX), the business goals, and the technical feasibility. At the end of the day, it’s going to be a business decision.

Maybe the particular problem you’re trying to solve isn’t important from the user or business point of view, so there’s no harm in using a less “perfect” solution from the design system because you win more with the time saved on development.

software that we already talked about that checks all the boxes, works on every platform, and makes collaboration easy—Figma.

Figma is the only tool that can help you build and scale a design system without having to subscribe to other tools.

There’s Sketch and Adobe XD as the other big shots in this arena, but they’re a bit of a bumpy ride, and you need other tools like Zeplin and InVision to make up for the functionality that Figma offers.

be aware that people love to ignore pop-ups. It’s like developing banner blindness.

One of the most powerful tools are the so-called empty states. An empty state is what you show to the users when you have no data because they haven’t started using the product yet

The goal here is to minimize the amount of information that we ask for from the users. Remember, they want to get in as fast as possible. My first suggestion is that you always ask yourself if you really need to ask for a piece of information and, if so, if you could ask for it later on.

reality is that what users truly hate is when they’re forced to enter a lot of information on an overwhelming interface. If you break the information down into chunks, you can take the user by the hand and enable them to quickly enter bits of information.

When it comes to onboarding, you have to let the users skip it. If you create smart and engaging onboarding, there will be users who complete

Do you have designs for the 404, 403, and 500 error messages? Well, you should.

You have to always keep in mind how people will use, hold, and tap on a device. Limitations mean that we have to prioritize. You have to decide how important an element is and how often users will use it. This will tell you how accessible the element should be.

As a rule of thumb, the navigation and the CTA should always be easy to reach and tap.

Sketch offers a mobile app called Sketch Mirror, which will show the designs on your mobile; you can follow the changes in real time. Figma has a similar app called Figma Mirror.

Photoshop has a similar solution called Device Preview.

“What kind of content should I show to visitors?”

To answer this question, you have to ask yourself these five questions: Who is the content for? Where will the users see it? When will the users see it? Why is it important to the users? How should you display the content?􏰀

Remember that people don’t really want to read on the web, they want information ASAP. This means you have to condense the communication and focus on what’s really important.

Sixty-five percent of the population are visual learners. This is fascinating, since the human mind can process visual information 60,000 times as fast as written text.

Check out Pexels.com and Unsplash.com.

few high-fidelity prototyping tools

Proto.io

UXPin

Framer

Flinto for Mac

Adding too much color leads to loss of focus (that is to say, everything looks important, so nothing is important).

Atomic design is a specific way to build design systems. It has five levels: Atoms Molecules Organisms Templates Pages Atoms are components that can’t be broken down any further. For example, an atom is a button or a checkbox.

Some typical examples of atoms are Buttons Checkboxes Radio buttons Input fields Menu items Sliders

Atoms can form molecules.

Search bar (using an input atom and a button atom) Save and cancel buttons (these are often used together— make them into a molecule!)

Organisms are formed from molecules—adding another layer of complexity.

Here are some examples of organisms: Pop-ups; modals Success messages Headers; footers Dropdown menus

templates are pages without real content.

Pages are actual screens with real content.

Figma is the only tool that can help you build and scale a design system without having to subscribe to other tools.

Adding a nice tooltip and showing the users exactly what to do and where to find something can be great practice too. Just make sure you don’t overdo it

Do you have designs for the 404, 403, and 500 error messages? Well, you should.

Both Figma and Sketch have an app that you can download to your phone and see the changes in the designs in real-time without having to sync or upload the designs. Photoshop has a similar solution called Device Preview. These

UXPin is not only a wireframing tool but also a pretty advanced prototyping tool.

Framer is for advanced users, since you have to know CoffeeScript to use it.

Flinto is a lightweight desktop tool for Mac.

Wireframe prototype Shows the basics of the product. Saves you time and money because the most important issues will surface at this stage. Use wireframe prototypes to usability test the product in the early stages.

Figma UXPin, Axure RP Marvel Adobe XD Justinmind InVision Design prototype Lets you see and test out the final visual design of the product. Saves you time and money because plenty of issues can be resolved before implementing the designs. Figma UXPin, Axure RP, Marvel, Adobe XD, Justinmind, InVision High-fidelity prototype Great to show how a single feature, animation, or transition should look. It’s primarily for experimenting when the click-through prototypes aren’t enough. Framer, Principle, Flinto, Origami Studio􏰀

important thing you have to know is that people don’t read a website—they scan it.

Show only the necessary text, and break it down into chunks so it’s easy to read.

Since users make up their minds very quickly, we need a test that’s very fast. During a five-second test, we show an image to the users (e.g., a screenshot of a website) for exactly five seconds. Then, the image disappears, and we ask a couple of questions.

Multiple platforms like UsabilityHub and Optimal Workshop offer five-second testing (along with other testing methods).

I recommend starting with UsabilityHub. It’s easy and free to get started and offers a recruitment service to invite test participants. You can even specify demographics. Simply create the screenshots or images you want to test and upload them to UsabilityHub.

What words would they use to describe the design? Do they find it trustworthy? Do they like the logo or design? If you’re designing a landing page, it’s crucial that users understand what the site is about in under five seconds.

All the tools will create a unique link that you can send to potential users. They open the link, find the instructions, and take the test. If you do the test on UsabilityHub, you can choose to use their recruitment service. This means that you specify who you want to test (gender, location, level of education, and age), and they send the test out to high-quality test participants.

Click tests are like micro-usability tests. We can only ask one question, and the users can only perform one task at a time. During a click test, we show a design to the users and give them a task to perform. The goal is to learn where the users would click on the designs to perform a certain task.

When analyzing the results of a click test, you should consider the following:

Accuracy of clicks Accuracy is a measure of how many people clicked on the right place compared how many people clicked elsewhere.

I recommend aiming for greater than 90% accuracy.

How much time it takes to do the tests

If you give them a task, in time they’ll figure out how to solve it. But remember, our goal is to make it as quickly solvable as possible because in real life users won’t spend time figuring out how to use something if they don’t get it right away.

If the average time for completion is between 0 and 10 seconds, you can be happy.

Click-sequence test You can add more screens in a test and link them together (like in InVision). This is called a click-sequence test. This way, you can show a flow to the users (e.g., a checkout flow). The users can select an item, put it in the cart, proceed to checkout, and hit pay. In this test, we have to examine each step individually (accuracy, time, and confidence level).

Decide which interaction or task to test. The first thing to do is to choose what you want to test. An easy way is to start by testing the CTA buttons. Identify what your users have to do on each screen, and look for complex solutions or solutions that aren’t straightforward. Create the images and upload them to UsabilityHub. After you’ve uploaded the images, you have to tell the software where people should click. It’s just like creating hotspots in InVision. You can also specify how many times the users can click on a screen. Write the scenario. Write a short and informative scenario. Tell the users how they arrived at the screen and what they should do there. Then, add a specific task to perform (Show me how you would do x, or Where you would click to do x). Be short and helpful. Send it to the users. Just like the five-second tests, you can either use the UsabilityHub recruitment service, or you can send the test to a list of potential users using the link generated by the tool. Aim for 20 to 50 responses for this test. Run the test and analyze results. UsabilityHub will present the results in a heatmap format. You’ll see where the users clicked. The more users clicked on the spot, the “hotter” it will appear. Start by analyzing the ratio of good to bad clicks. You can even segment the clicks and analyze different user groups. Remember to pay attention to the time as well!

The rule of thumb for usability tests is to give it to people who have never used or seen the interface before.

Eighty-five percent of usability issues surface after testing with three to six participants. Above five to six users, you’re going to see the same problems and issues again and again.

do a round of usability tests with five users, then make changes to the product and test again. This way, you can test out the changes and keep improving the product step by step.

many things to improve that you’re not sure

InVision has a function called LiveShare. It allows you to co-browse the designs—you can see where the users click and what they do with the designs. There are also co-browsing tools like Surfly that let you browse a website or web app together with the users and see the same screen.

you must only test mobile designs on mobile devices.

You can use an application like UX Recorder or Lookback to record the device screens.

The simplest solution is to use another phone or camera to record the test on video. The advantage of this solution is that you can also see how the users hold the phone and how they move their fingers.

Write tasks and scenarios. During a usability test, you can ask the users to do three things: Perform a specific task. Discover the product. Answer open-ended questions.􏰀

For product discovery, simply ask users to start using the product as they normally would, and ask them to narrate their thoughts.

Ask the participants to explicitly speak every thought and impression they have out loud during the test—what they see, where they are, what they’re doing, and why they’re doing it. This is called the think-aloud protocol, and it’s a cornerstone of usability tests. You want to hear things like this: “I click on read more to see more information on this product. Okay, now this confuses me. I expected to see a new page, but I don’t know what this is. Ah, okay, so I have to scroll down to see the rest of the information.”

You need to record the screens, both video and audio. Make sure you clearly ask the participants to agree to be recorded.

Always record the user screens during the test. This enables you to re-watch the session later to focus on the details. You’ll also be able to focus on the user (their emotions and gestures) and not have to jot down everything you observe right at that moment.

Lookback, for example, lets you test on any device and any platform (mobile, desktop, MacOS, Windows, iOS, and Android). When you’re done with the test, you simply hit stop. The program will automatically upload it to the cloud where you can see it, comment on it, and share it. Lookback is a professional choice for people who often conduct usability tests.

However, giving a gift to the participants is good practice; it can be a gift card or something related to the company. Users will be surprised and happy to receive it, which boosts their engagement.

there are pieces of software that will let you mirror the screen of a device so people in the next room can view it without disturbing the participant. Try the Reflektor app,

Instructions for testers: Get the users to talk! This is vital. Tell them to narrate their thoughts. If they’re not narrating their thoughts, tell them again and again until they start doing it.

Task evaluation

Did the users solve the task successfully? How many users solved the task? How much time did they spend on the task? How confident were they while completing the task?􏰀

Create a backlog of the usability issues. You’ll notice a lot of issues during the test, and you’ll get feedback from the users.

Description Describe the issue or feedback in one sentence.

Location Where did the problem occur

Link to the video Linking to the video will enable others to see what the user did.

P1 – P5 P1 – P5 stands for the participants.

Evaluation Based on the feedback, you have to evaluate each issue:

Serious issue􏰀

Annoying issue􏰀

Minor issue􏰀

Comment/Need There will be feedback that isn’t about an issue or problem.

A money pit can be a feature idea that seems great, but users want something different.

I’ve seen people get excited by new feature ideas (after a usability test) that would only affect a small percentage of users.

During an A/B test (also called a split test or multivariate test), you test out two different versions of a design and see which of them performs better.

The difference between the versions can be small (like a button or color) or huge (like testing two different designs against each other).

The downside of A/B tests is that they don’t tell you why a variation performed better. They’re just a measurement technique that you can use to test out the designs.

It’s very easy to put together an A/B test, but most people do it incorrectly. They think it’s all about changing the color of a button and seeing the results. The truth is, they won’t. The truth is that most A/B tests fail. So, before we get started, I’m going to walk you through how Not to do an A/B test!

Don’t just test small changes (like colors)!

The solution Don’t push pixels and test button colors.

If the information architecture of your landing page sucks, do you think it would make any difference if you had the right color for a button? Instead, focus on the information architecture, the copy, and the microcopy.

Test the things that could have a great impact on the experience first.

Don’t give up after the first fail! Do you want to see the biggest roller coaster drop ever? Just look at the number of people who abandon A/B testing after the first fail.

Don’t give up after the first unsuccessful test! Don’t give up after the second one either! It takes time and practice to do good A/B tests. Even professionals have more unsuccessful tests than successful ones. Do yourself a favor—don’t expect great results at first.

If you only have a couple hundred visitors a day, don’t run A/B tests because they will probably take too long to be significant.

Click tests and five-second tests are good alternatives to A/B tests.

Just create multiple versions of a landing page and run separate tests. The logic is the same as with A/B tests, but you can see results in hours rather than months.

only use them as a springboard. You have to focus on finding the problems in your product, not going through a checklist.

most businesses that focus on identifying and resolving issues within their product are 74% more likely to reach success with A/B tests.

images are content. If they’re not relevant, they’re just decoration.

Test the success and error messages. A great error message will lead the users and can put them back on track again.

If you’ve ever downloaded an app, you know that you only see the icon and title of the app with some screenshots and a few lines of description before you download it.

Optimizely This is one of the most recognized A/B testing tools out there.

Visual Website Optimizer (VWO) VWO was created for marketers without IT support.

Unbounce Unbounce focuses on landing pages. They offer a tool to create landing pages from templates and A/ B test them.

The benefit of this tool is that you don’t need developers and engineering to create a simple landing page for you; you can do it on your own with Unbounce.

A lot of people think of A/B tests as the last trial an idea has to withstand. The only problem with this approach is that if you fail, you’ll be disappointed. And chances are, you will fail at first. Instead, think of A/B tests as steps that take you toward completing your goals. It takes a lot of steps to get there.

You need to hand these five things off to developers: Visual designs Design assets Prototypes Interactions Microcopy􏰀

Bonus #1: Hi-fi prototypes Bonus #2: Specification􏰀

you need to send the designs to the developers.

Since Figma files are updated in real time, the handoff happens automatically. You just need to grant view-only access to developers, and there you go—they can see the designs, export assets, and start working. Figma also has a direct integration with Zeplin

Avocode was among the first tools out there to help with communication and handoffs between designers and developers.

Zeplin is also a collaboration tool for designers and developers.

InVision added a new feature called “Inspect,” which does almost the exact same thing as the above tools, but it does it inside the tool you’re already using. You can measure the distance between elements, export assets, and copy CSS the same way.

the goal is to show the designs to developers in a form they can work with.

What they need is a flexible environment where they can measure the distance between elements and easily get the styling information to write the CSS code.

Sometimes you need to add a bit more of an explanation to the designs in order to be straightforward. If you’re using InVision, check out Tour Points. Add your comments on the screens—but instead of regular comments, choose to add Tour Points.

Don’t delete; archive!

You never know if you’ll need that design in the future.

I like to add an “Archive” page to every Figma file I’m working with and send every frame and design asset to it that I don’t need at the moment.

Add intuitive names for the layers. Trust me, you’ll thank me for this later on. No more “Layer Copy 23,” please!

Wireframing is important, but it’s not wireframes that make a better and smarter design process. I’m not saying you shouldn’t start doing wireframes. I’m saying that before you do, start thinking about flows and stories instead of screens. Every function in a product is a story. Behind every function, there are user needs and goals as well as context (where, when, and how will the users use it). You need to think of these first. Try storyboarding, draw task flows, and write out users’ stories for your product. By applying flow-based thinking, you can avoid dead ends. You’ll also create better and smarter designs.

If you want to build a mobile application, creating the first version of the app is not a PVE. That would be your MVP. But creating a video showcasing what the app could do and putting that on a website is a good example of a PVE.

Think Again

Intelligence is traditionally viewed as the ability to think and learn.3 Yet in a turbulent world, there’s another set of cognitive skills that might matter more: the ability to rethink and unlearn.

we often prefer the ease of hanging on to old views over the difficulty of grappling with new ones. Yet there are also deeper forces behind our resistance to rethinking. Questioning ourselves makes the world more unpredictable. It requires us to admit that the facts may have changed, that what was once right may now be wrong. Reconsidering something we believe deeply can threaten our identities, making it feel as if we’re losing a part of ourselves.

We refresh our wardrobes when they go out of style and renovate our kitchens when they’re no longer in vogue. When it comes to our knowledge and opinions, though, we tend to stick to our guns. Psychologists call this seizing and freezing.11 We favor the comfort of conviction over the discomfort of doubt, and we let our beliefs get brittle long before our bones.

We listen to views that make us feel good, instead of ideas that make us think hard.

Discarding your equipment means admitting failure and shedding part of your identity. You have to rethink your goal in your job—and your role in life.

Constitution, allows for amendments. What if we were quicker to make amendments to our own mental constitutions?

Progress is impossible without change;1 and those who cannot change their minds cannot change anything. — GEORGE BERNARD SHAW

As we think and talk, we often slip into the mindsets of three different professions:13 preachers, prosecutors, and politicians.

We go into preacher mode when our sacred beliefs are in jeopardy: we deliver sermons to protect and promote our ideals.

We enter prosecutor mode when we recognize flaws in other people’s reasoning: we marshal arguments to prove them wrong and win our case.

We shift into politician mode when we’re seeking to win over an audience: we campaign and lobby for the approval of our constituents.

Just as you don’t have to be a professional scientist to reason like one, being a professional scientist doesn’t guarantee that someone will use the tools of their training. Scientists morph into preachers when they present their pet theories as gospel and treat thoughtful critiques as sacrilege. They veer into politician terrain when they allow their views to be swayed by popularity rather than accuracy. They enter prosecutor mode when they’re hell-bent on debunking and discrediting rather than discovering.

One study investigated whether being a math whiz makes you better at analyzing data. The answer is yes

Being a quant jock makes you more accurate in interpreting the results—as long as they support your beliefs. Yet if the empirical pattern clashes with your ideology, math prowess is no longer an asset; it actually becomes a liability. The better you are at crunching numbers, the more spectacularly you fail at analyzing patterns that contradict your views.

In psychology there are at least two biases that drive this pattern. One is confirmation bias:23 seeing what we expect to see. The other is desirability bias:24 seeing what we want to see. These biases don’t just prevent us from applying our intelligence. They can actually contort our intelligence into a weapon against the truth.

26 The brighter you are, the harder it can be to see your own limitations. Being good at thinking can make you worse at rethinking.

When we’re in scientist mode, we refuse to let our ideas become ideologies. We don’t start with answers or solutions; we lead with questions and puzzles. We don’t preach from intuition; we teach from evidence. We don’t just have healthy skepticism about other people’s arguments; we dare to disagree with our own arguments.

It means being actively open-minded.27 It requires searching for reasons why we might be wrong—not for reasons why we must be right—and revising our views based on what we learn.

the purpose of learning isn’t to affirm our beliefs; it’s to evolve our beliefs.

If knowledge is power, knowing what we don’t know is wisdom.

Scientific thinking favors humility over pride, doubt over certainty, curiosity over closure.

We fall victim to the fat-cat syndrome,32 resting on our laurels instead of pressure-testing our beliefs.

Our convictions can lock us in prisons of our own making. The solution is not to decelerate our thinking—it’s to accelerate our rethinking.

Research shows that when people are resistant to change, it helps to reinforce what will stay the same. Visions for change are more compelling when they include visions of continuity. Although our strategy might evolve, our identity will endure.

they weren’t trying to turn Apple into a phone company. It would remain a computer company—they were just taking their existing products and adding a phone on the side.

The curse of knowledge is that it closes our minds to what we don’t know.

Dunning-Kruger effect, it’s when we lack competence that we’re most likely to be brimming with overconfidence.

There’s a less obvious force that clouds our vision of our abilities: a deficit in metacognitive skill, the ability to think about our thinking.

This might be one of the reasons that patient mortality rates in hospitals seem to spike in July,24 when new residents take over.

overconfidence cycle, preventing us from doubting what we know and being curious about what we don’t.

a crucial nutrient for the mind: humility. The antidote to getting stuck on Mount Stupid is taking a regular dose of it. “Arrogance is ignorance plus conviction,”

humility is a permeable filter that absorbs life experience and converts it into knowledge and wisdom, arrogance is a rubber shield that life experience simply bounces off of.”

Humility is often misunderstood. It’s not a matter of having low self-confidence. One of the Latin roots of humility means “from the earth.” It’s about being grounded—recognizing that we’re flawed and fallible.

What we want to attain is confident humility: having faith in our capability while appreciating that we may not have the right solution or even be addressing the right problem.

Great thinkers don’t harbor doubts because they’re impostors. They maintain doubts because they know we’re all partially blind and they’re committed to improving their sight. They don’t boast about how much they know; they marvel at how little they understand. They’re aware that each answer raises new questions, and the quest for knowledge is never finished. A mark of lifelong learners is recognizing that they can learn something from everyone they meet.

Growing up, I was determined to be right.

My friends found this annoying and started calling me Mr. Facts.

It got so bad that one day my best friend announced that he wouldn’t talk to me until I admitted I was wrong.

It was the beginning of my journey to become more accepting of my own fallibility.

when ideas survive, it’s not because they’re true—it’s because they’re interesting. What makes an idea interesting is that it challenges our weakly held opinions.

When an idea or assumption doesn’t matter deeply to us, we’re often excited to question it. The natural sequence of emotions is surprise (“Really?”) followed by curiosity (“Tell me more!”) and thrill (“Whoa!”).

great discoveries often begin not with “Eureka!” but with “That’s funny….”

To unlock the joy of being wrong, we need to detach. I’ve learned that two kinds of detachment are especially useful: detaching your present from your past and detaching your opinions from your identity.

Who you are should be a question of what you value, not what you believe. Values are your core principles in life—they might be excellence and generosity, freedom and fairness, or security and integrity.

“Although small amounts of evidence are sufficient to make us draw conclusions,31 they are seldom sufficient to make us revise them.”

If being wrong repeatedly leads us to the right answer, the experience of being wrong itself can become joyful.

If you want to be a better forecaster today, it helps to let go of your commitment to the opinions you held yesterday.

The world is unjust and the expertise you spent decades developing is obsolete!

If we’re insecure, we make fun of others. If we’re comfortable being wrong, we’re not afraid to poke fun at ourselves. Laughing at ourselves reminds us that although we might take our decisions seriously, we don’t have to take ourselves too seriously.

When you form an opinion, ask yourself what would have to happen to prove it false. Then keep track of your views so you can see when you were right, when you were wrong, and how your thinking has evolved.

It’s one thing to admit to ourselves that we’ve been wrong. It’s another thing to confess that to other people. Even if we manage to overthrow our inner dictator, we run the risk of facing outer ridicule.

Their opinions were their identities. An assault on their worldviews was a threat to their very sense of self. Their inner dictator rushed in to protect them.

“The absence of conflict is not harmony,14 it’s apathy.”

Relationship conflict is destructive in part because it stands in the way of rethinking. When a clash gets personal and emotional, we become self-righteous preachers of our own views, spiteful prosecutors of the other side, or single-minded politicians who dismiss opinions that don’t come from our side.

Although productive disagreement is a critical life skill, it’s one that many of us never fully develop. The problem starts early: parents disagree behind closed doors, fearing that conflict will make children anxious or somehow damage their character. Yet research shows that how often parents argue has no bearing on their children’s academic, social, or emotional development. What matters is how respectfully parents argue, not how frequently.

They developed the courage to fight for their ideas and the resilience to lose a disagreement without losing their resolve.

The ideal members of a challenge network are disagreeable, because they’re fearless about questioning the way things have always been done and holding us accountable for thinking again.

We learn more from people who challenge our thought process than those who affirm our conclusions. Strong leaders engage their critics and make themselves stronger.

At X, Google’s “moonshot factory,”33 there’s a rapid evaluation team that’s charged with rethinking proposals: members conduct independent assessments and only advance the ones that emerge as both audacious and achievable.

volume of the arguments between the two highly accomplished leaders might drown out the voices of people who were less comfortable speaking up: newcomers, introverts, women, and minorities.

It’s common for people who lack power or status to shift into politician mode,36 suppressing their dissenting views in favor of conforming to the HIPPO—the HIghest Paid Person’s Opinion.

Agreeableness is about seeking social harmony, not cognitive consensus. It’s possible to disagree without being disagreeable.

GETTING HOT WITHOUT GETTING MAD

major problem with task conflict is that it often spills over into relationship conflict.

Experiments show that simply framing a dispute as a debate rather than as a disagreement signals that you’re receptive to considering dissenting opinions and changing your mind,

A disagreement feels personal and potentially hostile; we expect a debate to be about ideas, not emotions. Starting a disagreement by asking, “Can we debate?” sends a message that you want to think like a scientist, not a preacher or a prosecutor

When they argued about the propeller, the Wright brothers were making a common mistake. Each was preaching about why he was right and why the other was wrong. When we argue about why, we run the risk of becoming

emotionally attached to our positions and dismissive of the other side’s. We’re more likely to have a good fight if we argue about how.

Asking people to explain how those policies would work in practice—or how they’d explain them to an expert— activated a rethinking cycle. They noticed gaps in their knowledge, doubted their conclusions, and became less extreme; they were now more curious about alternative options.

Exhausting someone in argument is not the same as convincing him.

Changing your mind doesn’t make you a flip-flopper or a hypocrite. It means you were open to learning.

When we’re trying to persuade people, we frequently take an adversarial approach. Instead of opening their minds, we effectively shut them down or rile them up. They play defense by putting up a shield, play offense by preaching their perspectives and prosecuting ours, or play politics by telling us what we want to hear without changing what they actually think.

average negotiators: they brought too many different weapons to battle. They lost ground not because of the strength of their most compelling point, but because of the weakness of their least compelling one.

started by emphasizing common ground. When he took the stage for his rebuttal, he immediately drew attention to his and Debra’s areas of agreement. “So,” he began, “I think we disagree on far less than it may seem.”

Being reasonable literally means that we can be reasoned with, that we’re open to evolving our views in light of logic and data.

Yet it hadn’t learned to agree with elements of the other side’s argument, apparently because that behavior was all too rarely deployed across 400 million articles by humans.

Most people immediately start with a straw man, poking holes in the weakest version of the other side’s case. He does the reverse: he considers the strongest version of their case, which is known as the steel man.10 A politician might occasionally adopt that tactic to pander or persuade, but like a good scientist, Harish does it to learn. Instead of trying to dismantle the argument that preschool is good for kids, Harish accepted that the point was valid, which allowed him to relate to his opponent’s perspective—and to the audience’s.

“If you have too many arguments, you’ll dilute the power of each and every one,”

effectiveness of these approaches hinges on three key factors: how much people care about the issue, how open they are to our particular argument, and how strong-willed they are in general. If they’re not invested in the issue or they’re receptive to our perspective, more reasons can help: people tend to see quantity as a sign of quality.11 The more the topic matters to them, the more the quality of reasons matters.

It’s when audiences are skeptical of our view, have a stake in the issue, and tend to be stubborn that piling on justifications is most likely to backfire.13 If they’re resistant to rethinking, more reasons simply give them more ammunition to shoot our views down.

A single line of argument feels like a conversation; multiple lines of argument can become an onslaught.

As important as the quantity and quality of reasons might be, the source matters, too. And the most convincing source is often the one closest to your audience.

When we point out that there are areas where we agree and acknowledge that they have some valid points, we model confident humility and encourage them to follow suit. When we support our argument with a small number of cohesive, compelling reasons, we encourage them to start doubting their own opinion. And when we ask genuine questions, we leave them intrigued to learn more. We don’t have to convince them that we’re right— we just need to open their minds to the possibility that they might be wrong. Their natural curiosity might do the rest.

In the hierarchy of disagreement created by computer scientist Paul Graham,18 the highest form of argument is refuting the central point, and the lowest is name-calling.

When someone becomes hostile, if you respond by viewing the argument as a war, you can either attack or retreat. If instead you treat it as a dance, you have another option—you can sidestep.

“Let’s agree to disagree” shouldn’t end a discussion. It should start a new conversation, with a focus on understanding and learning rather than arguing and persuading. That’s what we’d do in scientist mode: take the long view and ask how we could have handled the debate more effectively.

Research shows that in courtrooms, expert witnesses and deliberating jurors are more credible and more persuasive when they express moderate confidence,21 rather than high or low confidence.

On the calls, she asked about experiments they’d run recently that had surprised them. The question itself surprised the team—they ended up talking about times when they were sure they were right but were later proven wrong. Michele got the job, thrived, and was promoted to lead product development. This success isn’t unique to her: there’s evidence that people are more interested in hiring candidates who acknowledge legitimate weaknesses as opposed to bragging or humblebragging.

As stereotypes stick and prejudice deepens, we don’t just identify with our own group; we disidentify with our adversaries,8 coming to define who we are by what we’re not.

We don’t just preach the virtues of our side; we find self-worth in prosecuting the vices of our rivals.

In every human society, people are motivated to seek belonging and status. Identifying with a group checks both boxes at the same time:

Psychologist George Kelly observed that our beliefs are like pairs of reality goggles.18 We use them to make sense of the world and navigate our surroundings. A threat to our opinions cracks our goggles, leaving our vision blurred.

we become especially hostile when trying to defend opinions that we know, deep down, are false.

Rather than trying on a different pair of goggles, we become mental contortionists, twisting and turning until we find an angle of vision that keeps our current views intact.

If you ever leave the planet Earth, you’ll probably end up rethinking some of your feelings about other human beings.

“You develop an instant global consciousness . . . an intense dissatisfaction with the state of the world, and a compulsion to do something about it,”

This reaction is known as the overview effect.

“You’re actually rooting for the clothes,”32 Jerry Seinfeld quipped. “Fans will be so in love with a player, but if he goes to a different team, they boo him. This is the same human being in a different shirt; they hate him now. Boo! Different shirt! Boo!”

Eo bombay

We found that it was thinking about the arbitrariness of their animosity—not the positive qualities of their rival— that mattered. Regardless of whether they generated reasons to like their rivals, fans showed less hostility when they reflected on how silly the rivalry was.

Although the founder started out resistant to my argument, after considering how she might hold different stereotypes if she lived in China, she recognized a familiar pattern. She’d seen an entire group of people mistreated as a result of the positions of the sun and the moon on the day they happened to enter the world. Realizing how unfair discrimination based on zodiac signs was, the founder ended up jumping in to help me build my case.

This is a common problem in persuasion: what doesn’t sway us can make our beliefs stronger.

Much like a vaccine inoculates our physical immune system against a virus, the act of resistance fortifies our psychological immune system.8 Refuting a point of view produces antibodies against future influence attempts.9 We become more certain of our opinions and less curious about alternative views. Counterarguments no longer surprise us or stump us—we have our rebuttals ready.

motivational interviewing.11 The central premise is that we can rarely motivate someone else to change. We’re better off helping them find their own motivation to change.

motivational interviewing is used around the world by tens of thousands of practitioners—there are registered trainers throughout America and in many parts of Europe,

In motivational interviewing, there’s a distinction between sustain talk and change talk.29 Sustain talk is commentary about maintaining the status quo. Change talk is referencing a desire, ability, need, or commitment to make adjustments. When contemplating a change, many people are ambivalent—they have some reasons to consider it but also some reasons to stay the course. Miller and Rollnick suggest asking about and listening for change talk, and then posing some questions about why and how they might change.

Say you have a friend who mentions a desire to stop smoking. You might respond by asking why she’s considering quitting. If she says a doctor recommended it, you might follow up by inquiring about her own motivations: what does she think of the idea? If she offers a reason why she’s determined to stop, you might ask what her first step toward quitting could be.

The objective is not to be a leader or a follower, but a guide. Miller and Rollnick liken it to hiring a tour guide in a foreign country: we don’t want her to order us around, but we don’t want her to follow us around, either.

Listening well is more than a matter of talking less. It’s a set of skills in asking and responding. It starts with showing more interest in other people’s interests rather than trying to judge their status or prove our own.

“How can I tell what I think till I see what I say?”38

the Difficult Conversations Lab.2

Knowing another side exists isn’t sufficient to leave preachers doubting whether they’re on the right side of morality, prosecutors questioning whether they’re on the right side of the case, or politicians wondering whether they’re on the right side of history. Hearing an opposing opinion doesn’t necessarily motivate you to rethink your own stance; it makes it easier for you to stick to your guns (or your gun bans). Presenting two extremes isn’t the solution; it’s part of the polarization problem.

Psychologists have a name for this: binary bias. It’s a basic human tendency to seek clarity and closure by simplifying a complex continuum into two categories.

A fundamental lesson of desirability bias is that our beliefs are shaped by our motivations. What we believe depends on what we want to believe.

Although no more than 10 percent of Americans are dismissive of climate change, it’s these rare deniers who get the most press. In an analysis of some hundred thousand media articles on climate change between 2000 and 2016, prominent climate contrarians received disproportionate coverage:17 they were featured 49 percent more often than expert scientists. As a result, people end up overestimating how common denial is—which in turn makes them more hesitant to advocate for policies that protect the environment.

When the middle of the spectrum is invisible, the majority’s will to act vanishes with it. If other people aren’t going to do anything about it, why should I bother?

Psychologists find that people will ignore or even deny the existence of a problem if they’re not fond of the solution.30 Liberals were more dismissive of the issue of intruder violence when they read an argument that strict gun control laws could make it difficult for homeowners to protect themselves. Conservatives were more receptive to climate science when they read about a green technology policy proposal than about an emissions restriction proposal.

If you want to get better at conveying complexity, it’s worth taking a close look at how scientists communicate. One key step is to include caveats.

We can also convey complexity by highlighting contingencies. Every empirical finding raises unanswered questions about when and where results will be replicated, nullified, or reversed.

Acknowledging complexity doesn’t make speakers and writers less convincing; it makes them more credible.

In social science, rather than cherry-picking information to fit our existing narratives, we’re trained to ask whether we should rethink and revise those narratives. When we find evidence that doesn’t fit neatly into our belief systems, we’re expected to share it anyway.

I regret not having done enough to emphasize areas where evidence was incomplete or conflicting. I sometimes shied away from discussing mixed results because I didn’t want to leave readers confused.

Research suggests that many writers fall into the same trap, caught up in trying to “maintain a consistent narrative rather than an accurate record.”37

In the moral philosophy of John Rawls, the veil of ignorance asks us to judge the justice of a society by whether we’d join it without knowing our place in it.48 I think the scientist’s veil of ignorance is to ask whether we’d accept the results of a study based on the methods involved, without knowing what the conclusion will be.

Across twenty-five experiments, imagining other people’s perspectives failed to elicit more accurate insights— and occasionally made participants more confident in their own inaccurate judgments.50 Perspective-taking consistently fails because we’re terrible mind readers. We’re just guessing.

The greater the distance between us and an adversary, the more likely we are to oversimplify their actual motives and invent explanations that stray far from their reality. What works is not perspective-taking but perspective-seeking: actually talking to people to gain insight into the nuances of their views.

It turns out that even if we disagree strongly with someone on a social issue,52 when we discover that she cares deeply about the issue, we trust her more. We might still dislike her, but we see her passion for a principle as a sign of integrity. We reject the belief but grow to respect the person behind it.

Like art, emotions are works in progress. It rarely serves us well to frame our first sketch. As we gain perspective, we revise what we feel. Sometimes we even start over from scratch.

What stands in the way of rethinking isn’t the expression of emotion; it’s a restricted range of emotion. So how do we infuse our charged conversations with greater emotional variety—and thereby greater potential for mutual understanding and rethinking?

the complex reality that racism is a function of our actions, not merely our intentions.

“Racist and antiracist are not fixed identities.58 We can be a racist one minute and an antiracist the next.” Humans, like polarizing issues, rarely come in binaries.

It shouldn’t be up to the victim to inject complexity into a difficult conversation. Rethinking should start with the offender.

think like fact-checkers:7 the guidelines include (1) “interrogate information instead of simply consuming

it,” (2) “reject rank and popularity as a proxy for reliability,” and (3) “understand that the sender of information is often not its source.”

Lectures aren’t designed to accommodate dialogue or disagreement; they turn students into passive receivers of information rather than active thinkers.

experiments have shown that when a speaker delivers an inspiring message, the audience scrutinizes the material less carefully and forgets more of the content—even while claiming to remember more of it.

Social scientists have called this phenomenon the awestruck effect,12 but I think it’s better described as the dumbstruck effect.13 The sage-on-the-stage often preaches new thoughts, but rarely teaches us how to think for ourselves. Thoughtful lecturers might prosecute inaccurate arguments and tell us what to think instead, but they don’t necessarily show us how to rethink moving forward. Charismatic speakers can put us under a political spell, under which we follow them to gain their approval or affiliate with their tribe. We should be persuaded by the substance of an argument, not the shiny package in which it’s wrapped.

I had changed the rules: now they were being rewarded for rethinking instead of regurgitating.

active learning—students make decisions in simulations and negotiate in role-plays, and then we debrief, discuss, debate, and problem solve.

It’s been demonstrated repeatedly that one of the best ways to learn is to teach.28 It wasn’t until I let my students design a day of class that I truly understood how much they had to teach one another—and me. They were rethinking not just what they learned, but whom they could learn from.

the students hosted a day of “passion talks” on which anyone could teach the class about something he or she loved.

Ron wanted his students to experience the joy of discovery, so he didn’t start by teaching them established knowledge. He began the school year by presenting them with “grapples”—problems to work through in phases. The approach was think-pair-share: the kids started individually, updated their ideas in small groups, and then presented their thoughts to the rest of the class, arriving at solutions together.

When students confront complex problems, they often feel confused.

Confusion can be a cue that there’s new territory to be explored or a fresh puzzle to be solved.32

His vision was for them to become leaders of their own learning,

identify problems, develop hypotheses, and design their own experiments to test them.

“Quality means rethinking, reworking, and polishing,”

need to feel they will be celebrated, not ridiculed, for going back to the drawing board…. They soon began complaining if I didn’t allow them to do more than one version.”

Ron wanted to teach his students to revise their thinking based on input from others, so he turned the classroom into a challenge network.

Every week—and sometimes every day—the entire class would do a critique session.

One format was a gallery critique: Ron put everyone’s work on display, sent students around the room to observe, and then facilitated a discussion of what they saw as excellent and why.

The other format was an indepth critique: for a single session, the class would focus on the work of one student or group. The authors would explain their goals and where they needed help, and Ron guided the class through a discussion of strengths and areas for development.

The class didn’t just critique projects. Each day they would discuss what excellence looked like.

Along with rethinking their own work, they were learning to continually rethink their standards. To help them further evolve those standards, Ron regularly brought in outside experts.

good teachers introduce new thoughts, but great teachers introduce new ways of thinking.

education is more than the information we accumulate in our heads. It’s the habits we develop as we keep revising our drafts and the skills we build to keep learning.

Rethinking is not just an individual skill. It’s a collective capability, and it depends heavily on an organization’s culture.

In psychologically unsafe teams, people hid their mishaps to avoid penalties, which made it difficult for anyone to diagnose the root causes and prevent future problems. They kept repeating the same mistakes.

psychological safety is not a matter of relaxing standards,6 making people comfortable, being nice and agreeable, or giving unconditional praise. It’s fostering a climate of respect, trust, and openness in which people can raise concerns and suggestions without fear of reprisal. It’s the foundation of a learning culture.7

“They fear their expertise will be questioned in a way that’s embarrassing to them. It’s that basic fear of looking like a fool, asking questions that people just dismiss, or being told you don’t know what you’re talking about.” To combat that problem and nudge the culture toward learning, she started carrying a 3 × 5 note card in her pocket with questions to ask about every launch and important operational decision. Her list included: What leads you to that assumption? Why do you think it is correct? What might happen if it’s wrong? What are the uncertainties in your analysis? I understand the advantages of your recommendation. What are the disadvantages? A decade later, though, the same lessons about rethinking would have to be relearned in the context of spacewalk suits.

By admitting some of their imperfections out loud, managers demonstrated that they could take it—and made a public commitment to remain open to feedback. They normalized vulnerability, making their teams more comfortable opening up about their own struggles. Their employees gave more useful feedback because they knew where their managers were working to grow. That motivated managers to create practices to keep the door open: they started holding “ask me anything” coffee chats, opening weekly one-on-one meetings by asking for constructive criticism, and setting up monthly team sessions where everyone shared their development goals and progress.

In performance cultures, people often become attached to best practices. The risk is that once we’ve declared a routine the best, it becomes frozen in time.

Organizational learning should be an ongoing activity, but best practices imply it has reached an endpoint.

what sometimes stood in the way of exploring better practices was a performance culture that held people accountable for outcomes.

Focusing on results might be good for short-term performance,18 but it can be an obstacle to long-term learning. Sure enough, social scientists find that when people are held accountable only for whether the outcome was a success or failure, they are more likely to continue with ill-fated courses of action. Exclusively praising and rewarding results is dangerous because it breeds overconfidence in poor strategies, incentivizing people to keep doing things the way they’ve always done them. It isn’t until a high-stakes decision goes horribly wrong that people pause to re-examine their practices.

A good process is grounded in deep thinking and rethinking, enabling people to form and express independent opinions. Research shows that when we have to explain the procedures behind our decisions in real time, we think more critically and process the possibilities more thoroughly.

Process accountability might sound like the opposite of psychological safety, but they’re actually independent. Amy Edmondson finds that when psychological safety exists without accountability, people tend to stay within their comfort zone, and when there’s accountability but not safety, people tend to stay silent in an anxiety zone.

at Amazon, where important decisions aren’t made based on simple PowerPoint presentations. They’re informed by a six-page memo that lays out a problem, the different approaches that have been considered in the past, and how the proposed solutions serve the customer. At the start of the meeting, to avoid groupthink, everyone reads the memo silently. This isn’t practical in every situation, but it’s paramount when choices are both consequential and irreversible.

In too many organizations, leaders look for guarantees that the results will be favorable before testing or investing in something new.

Requiring proof is an enemy of progress. This is why companies like Amazon use a principle of disagree and commit.

instead of demanding convincing results, experiments start with asking people to make bets.

The goal in a learning culture is to welcome these kinds of experiments, to make rethinking so familiar that it becomes routine.

Process accountability isn’t just a matter of rewards and punishments. It’s also about who has decision authority.

Rethinking is more likely when we separate the initial decision makers from the later decision evaluators.

For years, NASA had failed to create that separation. Ellen Ochoa recalls that traditionally “the same managers who were responsible for cost and schedule were the ones who also had the authority to waive technical requirements.

“it’s not just that we’re encouraged to speak up. It’s our responsibility to speak up,”

In the past, the onus would’ve been on her to prove it was not safe to launch.

Now the onus was on the team to prove it was safe to launch. That meant approaching their expertise with more humility, their decision with more doubt, and their analysis with more curiosity about the causes and potential consequences of the problem.

When we dedicate ourselves to a plan and it isn’t going as we hoped, our first instinct isn’t usually to rethink it. Instead, we tend to double down and sink more resources in the plan. This pattern is called escalation of commitment.

Evidence shows that entrepreneurs persist with failing strategies when they should pivot,

Sunk costs are a factor, but the most important causes appear to be psychological rather than economic. Escalation of commitment happens because we’re rationalizing creatures, constantly searching for self- justifications for our prior beliefs as a way to soothe our egos,10 11 shield our images, and validate our past decisions.

There’s a fine line between heroic persistence and foolish stubbornness. Sometimes the best kind of grit is gritting our teeth and turning around.

Kids might be better off learning about careers as actions to take rather than as identities to claim. When they see work as what they do rather than who they are, they become more open to exploring different possibilities.

Even prekindergarten students express more interest in science when it’s presented as something we do rather than someone we are.23

Choosing a career isn’t like finding a soul mate. It’s possible that your ideal job hasn’t even been invented yet.

Identity foreclosure can stop us from evolving.

In some ways, identity foreclosure is the opposite of an identity crisis: instead of accepting uncertainty about who we want to become, we develop compensatory conviction and plunge head over heels into a career path.

I’ve noticed that the students who are the most certain about their career plans at twenty are often the ones with the deepest regrets by thirty. They haven’t done enough rethinking along the way.

it’s better to lose the past two years of progress than to waste the next twenty.

My advice to students is to take a cue from health-care professions. Just as they make appointments with the doctor and the dentist even when nothing is wrong, they should schedule checkups on their careers. I encourage them to put a reminder in their calendars to ask some key questions twice a year. When did you form the aspirations you’re currently pursuing, and how have you changed since then? Have you reached a learning plateau in your role or your workplace, and is it time to consider a pivot? Answering these career checkup questions is a way to periodically activate rethinking cycles.

There’s even evidence that placing a great deal of importance on happiness is a risk factor for depression.31 Why? One possibility is that when we’re searching for happiness, we get too busy evaluating life to actually

experience it. Instead of savoring our moments of joy, we ruminate about why our lives aren’t more joyful.32 A second likely culprit is that we spend too much time striving for peak happiness, overlooking the fact that happiness depends more on the frequency of positive emotions than their intensity.

A third potential factor is that when we hunt for happiness, we overemphasize pleasure at the expense of purpose.

This theory is consistent with data suggesting that meaning is healthier than happiness,34 and that people who look for purpose in their work are more successful in pursuing their passions—and less likely to quit their jobs— than those who look for joy.

We can take you on a hike. We cannot turn you into someone who likes hiking. Remember, you’re still gonna be you on vacation.37 If you are sad where you are, and then you get on a plane to Italy, the you in Italy will be the same sad you from before, just in a new place.

passions are often developed, not discovered.

writing out a plan for your life “is like driving at night in the fog. You can only see as far as your headlights, but you can make the whole trip that way.”

top thirty practical takeaways.

Develop the Habit of Thinking Again
Think like a scientist. When you start forming an opinion, resist the temptation to preach, prosecute, or politick. Treat your emerging view as a hunch or a hypothesis and test it with data. Like the entrepreneurs who learned to approach their business strategies as experiments, you’ll maintain the agility to pivot. 2. Define your identity in terms of values, not opinions. It’s easier to avoid getting stuck to your past beliefs if you don’t become attached to them as part of your present self-concept. See yourself as someone who values curiosity,

learning, mental flexibility, and searching for knowledge. As you form opinions, keep a list of factors that would change your mind. 3. Seek out information that goes against your views. You can fight confirmation bias, burst filter bubbles, and escape echo chambers by actively engaging with ideas that challenge your assumptions. An easy place to start is to follow people who make you think—even if you usually disagree with what they think.

Calibrate Your Confidence
Beware of getting stranded at the summit of Mount Stupid.
Harness the benefits of doubt. When you find yourself doubting your ability, reframe the situation as an opportunity for growth.
Embrace the joy of being wrong.
Invite Others to Question Your Thinking
Learn something new from each person you meet.

Ask people what they’ve been rethinking lately, or start a conversation about times you’ve changed your mind in the past year.

Build a challenge network, not just a support network.
Don’t shy away from constructive conflict.
Ask Better Questions
Practice the art of persuasive listening.

How can you show an interest in helping people crystallize their own views and uncover their own reasons for change? A good way to start is to increase your question-to-statement ratio.

Question how rather than why.
Ask “What evidence would change your mind?”
Ask how people originally formed an opinion.

Many of our opinions, like our stereotypes, are arbitrary; we’ve developed them without rigorous data or deep reflection. To help people reevaluate, prompt them to consider how they’d believe different things if they’d been born at a different time or in a different place.

Approach Disagreements as Dances, Not Battles
Acknowledge common ground.

Admitting points of convergence doesn’t make you weaker—it shows that you’re willing to negotiate about what’s true, and it motivates the other side to consider your point of view.

Remember that less is often more.

Instead of diluting your argument, lead with a few of your strongest points.

Reinforce freedom of choice.
Have a conversation about the conversation.
Have More Nuanced Conversations
Complexify contentious topics.

There are more than two sides to every story. Instead of treating polarizing issues like two sides of a coin, look at them through the many lenses of a prism. Seeing the shades of gray can make us more open.

Don’t shy away from caveats and contingencies.
Expand your emotional range.
Teach Kids to Think Again
Have a weekly myth-busting discussion at dinner.
Invite kids to do multiple drafts and seek feedback from others. Creating different versions of a drawing or a story can encourage kids to learn the value of revising their ideas.

They might learn to embrace confusion—and to stop expecting perfection on the first try.

Stop asking kids what they want to be when they grow up.
Create Learning Organizations
Abandon best practices.

If we want people to keep rethinking the way they work, we might be better off adopting process accountability and continually striving for better practices.

Establish psychological safety.

In learning cultures, people feel confident that they can question and challenge the status quo without being punished.

Keep a rethinking scorecard. Don’t evaluate decisions based only on the results; track how thoroughly different options are considered in the process. A bad process with a good outcome is luck. A good process with a bad outcome might be a smart experiment.
Stay Open to Rethinking Your Future
Throw out the ten-year plan.
Rethink your actions, not just your surroundings

Chasing happiness can chase it away. Trading one set of circumstances for another isn’t always enough. Joy can wax and wane, but meaning is more likely to last. Building a sense of purpose often starts with taking actions to enhance your learning or your contribution to others.

Schedule a life checkup.
Make time to think again.

Swipe to Unlock: The Primer on Technology and Business Strategy

Steve Jobs (who, by the way, never wrote any code for Apple)

check out productalliance.com/resources, where we’ve compiled some useful videos and articles.

Google doesn’t actually visit every page on the internet every time you ask it something. Google actually stores information about web pages in databases (tables of information, like in Excel), and it uses algorithms that read those databases to decide what to show you.

Instead of keyword density, Google’s core innovation is an algorithm called PageRank, which its founders Larry Page and Sergey Brin created for their PhD thesis in 1998.[13] Page and Brin noticed that you can estimate a webpage’s importance by looking at which other important pages link to them.[14] It’s like how, at a party, you know someone is popular when they’re surrounded by other popular people. PageRank gives each webpage a score that’s based on the PageRank scores of every other page that links to that page.

For instance, if we made a brand-new webpage about Abraham Lincoln, it would initially have a very low PageRank. If some obscure blog added a link to our page, our page would get a small boost to its PageRank. PageRank cares more about the quality of incoming links rather than the quantity,[17] so even if dozens of obscure blogs are linked to our page, we wouldn’t gain much. But if a New York Times article (which probably has a high PageRank) linked to our page, our page would get a huge PageRank boost.

The Discover Weekly algorithm starts by looking at two basic pieces of information. First, it looks at all the songs you’ve listened to and liked enough to add to your library or playlists. It’s even smart enough to know that

if you skipped a song within the first 30 seconds, you probably didn’t like it. Second, it looks at all the playlists that other people have made, with the assumption that every playlist has some thematic connection; for instance, you could have a “running” playlist or a “Beatles jam” playlist.

Spotify uses two methods to find songs you might like. The first method involves comparing the two datasets to figure out which new songs are related to the ones you like. For instance, suppose someone made a playlist with eight songs on it, and seven of those are in your library. You probably like this type of song, so Discover Weekly might recommend the one song that isn’t in your library.[32] This technique is called “collaborative filtering,” and it’s the same technique that Amazon uses to suggest items you might like based on your purchase history and the purchases of millions of other users.

Spotify needs something to differentiate itself from competitors. And Spotify’s recommendation system certainly fits the bill — it’s widely considered better than Apple Music’s.

The more you use Spotify, the more the algorithms know about your tastes, and hence the better they can recommend music to you. So if you use Spotify a lot, your recommendations would be pretty good, and you’d lose a lot by jumping to Apple Music, which doesn’t know you at all. So this high “switching cost” makes you less likely to jump.

How does Facebook take the hundreds (or thousands) of updates you get every day and sort them for you?

The first factor is who posted it. Facebook will show you more posts from people you’ve interacted with more (e.g. people you’ve messaged more or tagged more), with the assumption that you’re more likely to engage with their future posts.[47]

Second is the post’s quality. The more people have engaged (e.g. liked or commented) with a post, the more interesting Facebook thinks it is, so the more likely it is to appear at the top of your news feed.

Third, the type of post. Facebook figures out what kinds of posts (videos, articles, photos, etc.) you interact with a lot and shows you more of those.

The fourth major factor is “recency”: newer stories get ranked higher.

Use a phone with a slow mobile connection and you may see less video. Writing ‘congratulations’ in a comment signals the post is probably about a big life event, so it will get a boost. Liking an article after you clicked it is a stronger positive signal than liking before, since it means you probably read the piece and enjoyed it.[51]

Everyone wants their posts to show up atop their friends’ news feeds, and since Facebook boosts viral posts, people are incentivized to make posts that get shared a lot.[54] More sharing on Facebook leads to more posts, which means Facebook can slot in more ads.

Fake news mongers took advantage of this to attack politicians they didn’t like, posting outrageous and demonstrably false news articles around Facebook. These articles naturally drew many clicks and comments, so Facebook’s news feed algorithm propelled them to the top of many people’s news feeds.[57]

In 2018, Facebook announced it would change its algorithm to focus on “meaningful social interactions,” meaning it would promote updates from your friends instead of just feeding you news stories. As Facebook admitted, though, measuring “meaningful social interactions” is far harder than just measuring likes and clicks on articles.[58]

The first kind of API, which we’ll call “feature APIs,” lets one app ask another specialised app to solve a particular problem, like calculating driving directions, sending text messages, or translating sentences. It’s like how you could call a plumber or carpenter to fix problems around your house instead of trying to do it yourself. Apps use all kinds of feature APIs. It’s a pain to write code that sends emails or text messages, so when apps like Venmo need to send confirmation emails or texts, they’ll just use a specialised API.[65] Processing credit card payments is pretty difficult, so Uber outsources this to PayPal’s Braintree API,[66] which lets anyone use PayPal’s credit card-processing algorithm with just a few lines of code.[67]

The second type of API, which we’ll call “data APIs,” lets one app ask another app to hand over some interesting information, such as sports scores, recent Tweets, or today’s weather.

ESPN offers an API that lets you get rosters for every major-league sports team and scores for every game.[68] New York’s subway system lets you track where trains are and predict when the next train will arrive at a station.

The final kind of API, “hardware APIs,” lets developers access features of the device itself. Instagram taps into your phone’s Camera API to zoom, focus, and snap photos. Google Maps itself uses your phone’s Geolocation API to figure out where in the world you are. Your phone even has sensors called accelerometers and gyroscopes, which fitness apps use to determine which direction you’re walking and how fast you’re moving. [71]

you can log in with your Facebook account before setting up a profile. Once you connect your Facebook profile, Tinder imports information like your profile picture, your age, your list of friends, and the Facebook pages you like.[73] As you might have guessed, this is done through an API that Facebook offers. With this single sign-on (SSO) API, any app can let users create accounts by linking their Facebook profiles.[74]

it ensures that there are no empty profiles (which no one would want to swipe on) since some basic information always gets imported from Facebook.

requiring Facebook login helps them stop bots and fake accounts, since Facebook already does a lot of work to shut these down.

By gathering your friend list, Tinder can show you how many mutual friends you have with each potential match, and that sense of connection probably encourages people to swipe more.

Finally, by getting the Facebook profiles of all their users, Tinder can get some deep insights into their user base, such as how old they are, where they live, or what they’re interested in.[77] These insights can help Tinder tweak its app’s design or advertising strategies.

When you use Facebook’ single sign-on (SSO) API to register for Tinder, Facebook realises that you’re a Tinder user. Facebook gets similar data points when you use Facebook to log into other websites. Facebook can then use this data to target ads at you more effectively, for instance by showing more dating-related ads to Tinder users.

In 2018, Tinder announced that it would let users sign up with their phone number instead of their Facebook account, if they chose.Why? In a word, competition. In 2018 Facebook announced a new dating service, widely seen as a competitor to Tinder,

Not sure which marketing catchphrase will get people to buy? Instead of endless debating, just run an A/B test! Not sure if a red or green “sign up” button will get more people to click? Run a test!

Tinder even lets you run A/B tests to figure out which of your photos, when shown as your main profile picture, gets you the most right swipes.

A BuzzFeed competitor called Upworthy actually tries up to 25 versions of the same headline in its quest to find the perfect one.

According to Upworthy, the difference between a decent headline and a perfected one is 1,000 vs. 1,000,000 views.

There’s one important caveat to keep in mind whenever you’re doing statistical tests: you need to check whether your observed findings happened because of something meaningful or were just due to chance.

For instance, if you flip a coin six times and get five heads, you can’t be confident that the coin is unfairly weighted toward heads — it could just be dumb luck. But if you flipped the coin six hundred times and got five hundred heads, you might be onto something.

When companies perform A/B tests, experimenters report how one version changed a particular metric compared to the other version. They also report a statistic called a p-value, which shows the probability that the

difference they observed was due to chance.[99] Usually, if p < 0.05 (i.e. there’s a less than 5% chance that the difference was just random), they can assume the change was meaningful, or “statistically significant.”[100] Otherwise, they can’t be sure that their results weren’t just dumb luck.

For example, say Amazon made the “Add to Cart” buttons a bit bigger for half their users and found a 2% increase in sales, with p = 0.15. While the bigger button seems like a great move, there’s a 15% chance that the sales boost was caused by dumb luck, not the button. That 0.15 is greater than 0.05, so Amazon’s testers won’t roll out the bigger button.

With greater access to iPhones, people started carrying two phones: BlackBerries for work but iPhones for personal use.Soon, businesses realised they could save money and keep employees happier by just letting employees use their personal phones for work purposes.Slowly but surely, iPhones started creeping into BlackBerry’s treasured enterprise market — a perfect example of the trend known as “consumerization of the enterprise.”BlackBerry realised that for smartphones, everyday users, not businesspeople, called the shots.

Android is literally open-source to the core; it’s built around the “kernel” of the open-source operating system Linux, which is also used in some of the world’s biggest supercomputers.The kernel is a bit of software that lets apps talk to the device’s hardware, like by reading and writing files, connecting to the keyboard and Wi- Fi, and so on.A kernel is like a car’s engine: the computer literally wouldn’t run without a kernel.

KaiOS, a lightweight OS for internet-connected feature phones. It’s specifically targeted at India,

Check out productalliance.com/videos/voice to watch a video about the next big type of operating system

In-app purchases usually refer to extra features or virtual items in the app that you can pay real money

Fortnite players shell out hundreds of dollars to customise their avatars with things like shirts and dance moves.

Snapchat, for instance, lets you buy your own customized geofilters for special events.

Once you’ve built your app or game, it costs basically nothing to give a user virtual items like outfits or geofilters (in other words, the marginal cost is zero).

Because the heaviest users of an app are the most likely to pay, most in-app purchases or subscriptions are aimed at the most dedicated users.

First, apps and websites can charge advertisers a small fee every time someone views an ad, a strategy called Pay-Per-Impression, or PPI…. Since so many people view ads, apps and websites usually charge in increments of 1,000 views; that is, the pricing for an ad campaign could be $5 for 1,000 “impressions.” Because advertisers often pay per thousand views, Pay-Per-Impression is more often called Cost-Per-Mille, or CPM. (Mille comes from the prefix milli, as in millimeter.)

Alternatively, apps and websites can charge advertisers whenever someone actually clicks an ad, which is called Cost-Per-Click, or CPC. CPC is less frequently known as PPC, or Pay-Per-Click.

Google and Facebook offer both Cost-Per-Mille (CPM) and Cost-Per-Click (CPC) advertising to earn money from ads.

Google and Facebook — and most other software companies that use ads — don’t sell your data to advertisers.

Sponsored.”Sponsored content, also called “native advertising,” means ads that blend in with normal content,

Sponsored content is growing especially quickly in the world of journalism.

“Marketplace” or “platform” apps like these, which connect buyers to sellers (or riders to drivers, etc.), earn commission by sneaking some fees into the purchases you make.

For example, Airbnb includes a “services fee” whenever you make a booking. Hosts pay 3%, and guests pay another 6-12%. These fees provide most of Airbnb’s revenue.

Uber grabs 20-25% of the money that drivers earn. Amazon takes a cut when third-party sellers list and sell their items on the platform.

The exact cut varies by product, but one that we can tell you from experience is that Amazon takes between 30% and 65% of book revenues.

Robinhood earns interest from unused money sitting in users’ accounts in much the same way that you earn interest by stashing your unused money in a bank.

How can apps make money without showing ads or charging users?

The travel-booking service Wanderu, for instance, helps you find the best bus tickets and refers you to the websites of bus lines like Greyhound and Megabus to purchase them. Wanderu doesn’t charge shoppers anything, but it takes a small commission from the bus lines for the privilege of sending customers their way.

Some apps just live on borrowed time (and venture capitalist money), providing free service until they get large enough that they can start earning — in other words, “grow first, monetize later.”For instance, Venmo makes no money from your payments to friends. It charges nothing if you transfer money between bank accounts, and if you’re transferring money from your credit card, it only charges you the same fee (3%) that it’s required to pay to the payment processing company.

in 2018, Venmo decided it had a big enough user base to start monetizing. It announced that you could now pay for Ubers with Venmo and rolled out a Venmo-based debit card. In both cases, Venmo charges merchants a small fee. Some have also speculated that Venmo could start targeting ads at users since it now knows exactly what they spend money on.

productalliance.com/videos/airbnb

The default protocol is HTTP, the HyperText Transfer Protocol, which shows up as http:// in URLs. The more secure, encrypted version of HTTP is HTTPS, the HyperText Transfer Protocol Secure, which shows up as https:// in URLs.[342] They’re pretty much the same, except HTTPS indicates that your browser should encrypt your information, which keeps it safe from hackers. If you’re ever filling in a password or giving your credit card number, the website should be using HTTPS.[343] In this case, your browser knows to use HTTPS instead of HTTP

Google’s servers send all this code back to your browser as a “response.” Then your browser uses this code to draw the proper elements on your screen, make them look nice, and make them interactive.[354]

As it turns out, the hot sauce shipping process we just mentioned is very similar to how information travels across the internet. A pair of protocols, called TCP (Transmission Control Protocol) and IP (Internet Protocol), work together to send information between computers.

Because webpages are usually too big to send all at once, TCP splits them into many little “packets” and attaches labels to each (like “1 of 10.”)

Once the packets reach you, TCP reassembles them in the proper order and notices if any of them got lost, in which case it’ll ask the website to send the missing packets again.

stuff is broken into smaller chunks (via TCP), sent to you through several intermediate shipments (via IP), and then reassembled into the original content (again via TCP).

(This process even happens if you’re talking to your Echo speaker or tapping your Apple Watch — again, anything that uses the internet uses this process.)

HTTP and HTTPS are actually built right on top of TCP and IP.[361] HTTP and HTTPS say, “get me this webpage,” and TCP and IP team up to actually deliver it. In the hot sauce example, HTTP and HTTPS are like you placing the order for Cholula hot sauce. TCP is like the employee splitting up and packaging your items, and IP is like the postal service.

Want to try this for yourself? Use an online traceroute tool to look up how a packet would travel from the tool’s servers to a website of your choice. You just need to provide an IP address; you can look up your own IP address[366] or try sample ones like 23.4.112.131 (mit.edu, based in Massachusetts) or 216.58.219.206 (google.com, based in northern California).

Computers store all information as 1’s and 0’s, just like we store text using the 26 letters of the alphabet. When your computer wants to send information to another computer (using TCP, IP, and HTTP/HTTPS), it needs to move those 1’s and 0’s over the cables. Your computer converts the 1’s and 0’s into tiny flashes of light. 1’s might mean to keep the light on for a fraction of a second, while 0’s might mean to keep the light off for the same amount of time.

These flashes of light then travel through the fiber-optic cable. Since the fiber-optic cable is made of clear glass, information can travel incredibly fast: about two-thirds the speed of light.

on 365, a customer keeps paying by default and has to make an active choice to cancel — versus with “frozen-in- time” versions, the customer stays with the old version by default and has to make the active choice to upgrade (and pay).

Amazon Web Services is actually a family of applications, the biggest of which are the Elastic Compute Cloud (EC2) and Simple Storage Service (S3). In a nutshell, EC2 lets you run your app’s code on Amazon servers, while S3 lets you store all your app’s data on those servers.

AWS, Azure, and Google Cloud Platform are all infrastructure-as-a-service (IaaS; we have no idea how to pronounce it),

There’s a third kind of cloud service that falls somewhere between IaaS and SaaS: platform-as-a-service (PaaS, pronounced like pass).[469] These platforms often include extra useful features like databases, advanced analytics, and entire operating systems.

PaaS examples aren’t as famous, but one is Heroku, a service that lets you just send in your app’s code and then automatically sets up the website, with minimal setup required.

PaaS sits in between SaaS and IaaS: you give someone your ingredients and recipe, and they’ll prepare the food for you.

free “loyalty cards” or “savings cards,” which they scan when you check out. By tracking your buying habits this way, they can create targeted offers for you.

Target[518] and Walmart[519] assign each credit card a unique code, which they can track to understand a customer’s purchase history and start targeting coupons. Internally, Target calls their code the “Guest ID number.”

“If you use a credit card or a coupon, or fill out a survey, or mail in a refund, or call the customer help line, or open an e-mail we’ve sent you or visit our Website, we’ll record it and link it to your Guest ID,”

The challenge for retailers like Target is capitalising on these customer insights without coming across as “creepy.”

The company would still send prenatal vitamin coupons, but they would be nestled between, say, a charcoal coupon and a lawnmower ad to make these targeted ads appear “random.”

Amazon changes product prices 2.5 million times a day,

One useful strategy Amazon has found is to undercut their competitors on popular products but actually raise the prices on uncommon products, such as by discounting bestsellers while jacking up prices on obscure books.

That’ll hook customers on Amazon and get them to pay more for the less-common things they’ll buy down the road.

Amazon can even use the words you highlight on the Kindle to predict what you’re going to buy.

Amazon’s patented technique called the “Anticipatory Shipping Model.”When Amazon predicts that you’re going to buy something (like how Target predicts when women are going to deliver their babies), they can ship that item to a warehouse near you, so that when you ultimately buy it, they’ll get to you quickly and cheaply.

https://bankofamerica.com.

To protect yourself, experts recommend using a VPN,

We encourage using VPNs whenever you’re on a public Wi-Fi network!

computers only have two letters — 0 and 1 — and store all kinds of information, from text to images to movies, using a series of 1’s and 0’s. Each 1 or 0 is called a bit. Bits are too small to be of much use on their own, so we usually measure data in bytes, which are groups of eight bits.[707] For instance, the number we’d call 166 is 10100110 in binary (that number is 8 bits, or 1 byte, large).

A byte is a unit to measure file size, like how a yard is a unit to measure football fields. For instance, the average photo is 3 to 7 million bytes, [708] the average Android or iOS app is 38 million bytes,[709] and high-definition movies can be up to 25 billion bytes.[710]

A kilobyte (KB) is a thousand bytes, a megabyte (MB) is a million bytes, and a gigabyte (GB) is a billion bytes.

a photo is 3-7 MB, an app is 38 MB, and an HD movie is up to 25 GB.

Beyond the “standard” units of KB, MB, and GB, there are terabytes (a trillion bytes), petabytes (a quadrillion bytes), and the exotic exabytes (a quintillion bytes).

CPUs are made of several smaller sections, called “cores,” each of which can run computations separately.[720] CPUs with more cores are faster and can do more tasks at once.

CPUs also have a clock speed, which is the number of calculations per second they can carry out.[722] Clock speeds are usually measured in gigahertz (GHz), which is a billion calculations per second.

In theory, a higher clock speed means a faster CPU. But most people don’t really use clock speed to compare CPUs anymore, largely because there are too many other factors that determine CPU speed and because you can’t really compare clock speeds across different brands of CPUs.[724]

Both Apple Pay and Android Pay are built off a technology called NFC, or Near-Field Communication.[793] With NFC, two devices (whether phones, cards, or payment terminals) containing a particular chip can exchange small amounts of information when touched together.

There are a huge variety of things you can start paying for using NFC. San Francisco has started letting you pay for parking metres by tapping your phone against an NFC sticker. And Chicago has started letting you use Apple Pay to pay for the subway.Furthermore, with NFC, you can tap your phone against anything with a special sticker to get more information about it. Marketers could embed NFC stickers into advertisements or flyers, and people could just tap their phone against the stickers to learn more. In certain French cities, you can tap your phone against NFC stickers to get maps of the area. And NFC could also help in retail shopping: tap your phone against a package to comparison shop or find coupons, for instance.

Check out productalliance.com/videos/apple to watch a video on how Apple ensures its hardware products like AirPods always sell well,

technique called triangulation, which, incidentally, is also how your GPS system knows where you are.[859] Triangulation starts when you’re connected to three hotspots. Each hotspot will see your MAC Address and notice it’s the same, so they’ll all know it’s you. Then each hotspot will measure the strength of the radio signal from your phone to the hotspot to calculate how far your phone is from the hotspot; the farther away you are, the weaker the radio signal.

Offering Wi-Fi gets shoppers to turn on their phones’ Wi-Fi connections, which makes them start shooting radio waves at Wi-Fi hotspots. The store can then use triangulation to track their movements.

stores can make you sign in with your email address before you can use their free Wi-Fi, which lets them tie your MAC Address with your email address. Then, stores can link your in-store activity with your online activity. For instance, if you were browsing for scarves on macys.com, you could, in theory, get a coupon for scarves as soon as you walked into a Macy’s store.

Stores could make this data even more powerful by combining it with video surveillance. Some new video cameras installed in stores are reportedly so good that they can guess your age, gender, and ethnicity just from video footage.[869] They can also tell which specific products you looked at and how long you looked at them.

Eventually, stores could even start sending you targeted coupons via push notifications if you start looking at a product but start walking away.[871] This would probably only work for shoppers connected to the store’s Wi- Fi network — which is another reason to offer free Wi-Fi.

once people commit the $119 a year for Prime, they feel the need to buy a lot of stuff (and get a lot of free shipping) to justify that spending.[893] Data seems to support this theory: one study found that loyalty programs increase sales by 20%.[894]

Microsoft knows that its future (and present) is in enterprise software, or tools built for businesses; Azure (Microsoft’s cloud computing platform aimed at businesses) and Office 365 are the company’s most profitable and fastest-growing segments.

First, acquiring LinkedIn helps Microsoft become the center of the businessperson’s world, much like Facebook or Instagram might be the center of your online social life.[938]

Making a presentation with PowerPoint? You’re using a Microsoft product. Taking a Windows laptop to a meeting? You’re again using a Microsoft product. Looking up potential clients or employees? You’re probably using LinkedIn, which is now a Microsoft product.

Microsoft could mix LinkedIn’s data and profiles into tools like Office apps. For example, your Outlook calendar could show the LinkedIn profile of the next person you’re meeting with, and Cortana (Microsoft’s version of Siri or Alexa) could give you tips on how to impress them. Salespeople using Microsoft’s customer relationship management tool, Dynamics CRM, could use potential clients’ LinkedIn profiles to have a better idea of how to pitch their product. Or, Office 365 could analyze a company’s organization chart on LinkedIn to see what kinds of talent they need to add.

By beefing up Dynamics CRM with LinkedIn’s treasure trove of data, Microsoft was suddenly able to compete on even footing with Salesforce’s top-notch CRM solution.[948] (Had Salesforce gotten LinkedIn, Microsoft would have been at an even greater disadvantage.)

Dominating the world of photos is one of Facebook’s core goals,

WhatsApp users sent 500 million pictures a day in 2014, which was more than Facebook and Instagram combined.[988] Snapping up WhatsApp was a smart way for Facebook to regain dominance over photos.

despite being blocked from China, Facebook still manages to make money in the country: a tenth of Facebook’s global revenue comes from China.[1019] This is because Chinese companies are eager to advertise to Facebook’s international customers, buying billions of dollars in Facebook ads

just releasing an app in English (or even Hindi) isn’t enough. Other modifications Western apps have needed include preferring tapping to typing (since typing on phones is cumbersome), reducing data usage,[1037] and even reading articles aloud (to handle lower literacy rates in India).

Brazil has been called the “social media capital of the universe”[1057] because 97% of all internet-connected Brazilians use social media.

with M-Pesa, you load cash into your account at an M-Pesa outlet (there are 65,000 of them in Kenya, usually in gas stations or corner stores), send money to friends with a text, and withdraw cash by going to another outlet.

First, WeChat knew how to create fun, viral features. Shortly after its founding in 2010, WeChat started letting you shake your phone to randomly connect with other users. You could also write a digital “message in a bottle” and send it to a random WeChat user in the hopes they’d respond.

in 2014 the app digitized the ancient tradition of hongbao, where Chinese people send red envelopes full of money to each other for special occasions like Lunar New Year.[1096] People loved sending the envelopes to friends,

WeChat (“get an account on this app so I can send you money” never fails).[1097] What’s more, WeChat made it a game — you can send random amounts of money to friends, which makes users eager to open any hongbao sent their way on WeChat.[1098] There’s even a game where you can send money to a group chat — but only the first member of the group to open the chat gets the money.[1099] That game itself made people check their WeChats obsessively, never wanting to miss a hongbao sent to their groups.

Private industries can’t build the satellites and radar needed to take millions of accurate weather measurements, but the government can provide this data. In exchange, weather companies create forecasts and tools that help citizens and businesses.For instance, AccuWeather built software that lets them pinpoint severe weather risks so precisely that they can tell which segments of a railroad will be hit.

Thanks to the ATM, banks needed fewer human tellers in their branches. But this made branches cheaper to operate, which led to banks opening more branches. And that, in turn, led banks to employ more tellers.

how can you make fake video and audio footage? These “deepfakes” are generated by a mysterious technology called “generative adversarial networks,” or GANs.

To make computers more powerful, computer scientists have tried to simulate your brain’s neural network inside a computer. It’s called an “artificial neural network,” but many technologists (somewhat confusingly) just call it a “neural network.”

Neural networks are incredibly powerful: they can autocorrect text on your phone, catch spam emails, translate languages, or read your handwriting, among many other things.[1400]

Neural networks are great at recognizing things, but they aren’t designed to generate new stuff,

In a “generative adversarial network,” or GAN, you create two neural networks and make them face off. The “generator” network tries to make something fake, and the “discriminator” guesses whether or not the

generator’s creation is real or not.[1402] The networks get into a sort of arms race, with the generator trying to make more convincing forgeries and the discriminator trying to get better at policing fakes.[1403] The networks learn from each other, constantly improving, until the generator is churning out incredibly convincing fake things.

Amazon isn’t a tech company or a cloud company or a diapers or books or healthcare company. It’s an infrastructure company.

Amazon’s decades of success in e-commerce has led it to build up hundreds of strategically-placed warehouses, titanic distribution centres staffed with tens of thousands of workers,and a ground and air transportation network that can compete with FedEx or UPS.

https://webworkshop.net/pagerank.html

http://smallbusiness.chron.com/differences-between-pay-clicks-pay-impressions-34126.html [270]

https://www.codefuel.com/blog/website-monetization-pay-per-play-vs-pay-per-impression-vs-pay-per-click/

https://www.portent.com/services/ppc/pay-per-click-explained

https://blog.hubspot.com/marketing/google-adwords-ppc

https://neilpatel.com/blog/beginners-guide-to-running-facebook-ads-that-convert/ [274]

https://adespresso.com/ academy/blog/everything-need-know-facebook-ads-bidding/ [275]

https://adespresso.com/academy/blog/ everything-need-know-facebook-ads-bidding/ [276]

http://www.investopedia.com/ask/answers/120114/how- does-facebook-fb-make-money.asp [277]

https://www.imediaconnection.com/articles/ported-articles/red-dot- articles/2013/may/why-untargeted-ads-are-a-terrible-investment/

https://www.searchenginejournal.com/50-strategies-increase-click-rate-via-ppc-advertising/85019/ [280]

https:// www.linkedin.com/pulse/higher-ctrs-hispanic-targeted-seo-social-media-ads-matt-o-hern?articleId=8830805767803412881 [281]

https://techcrunch.com/2013/05/01/facebook-mobile-ad-revenue/ [282]

https://www.statista.com/statistics/544001/facebooks-advertising-revenue-worldwide-usa/ [283]

https://venturebeat.com/2018/04/25/over-90-of-facebooks-advertising-revenue-now-comes-from-mobile/ [284]

http://www.pcworld.com/article/168224/google.html [285]

https://www.computerworld.com/article/2551008/networking/what-google-knows-about-you.html [286]

https://www.computerworld.com/article/2551008/networking/what-google-knows-about-you.html [287]

https://www.forbes.com/sites/marketshare/2012/03/05/if-youre-not-paying-for-it-you-become-the-product/#242bc98f5d6e [288]

http://mediashift.org/2016/09/4-graphs-illustrate-facebook-google-dominate-revenue/ [289] https://www.thestreet.com/technology/retailer-now-ad-giant- why-investors-should-keep-an-close-eye-on-amazon-ads-14846278 [290] https://www.geekwire.com/2017/ amazon-continues-grow-lead-google-starting-point-online-shoppers/ [291] https://www.nytimes.com/ 2019/01/20/technology/amazon-ads-advertising.html [292] https://adage.com/article/digital/amazon-tops-list- google-s-25-biggest-search-advertisers/294922/

Measure What Matters: OKRs: The Simple Idea that Drives 10x Growth

Google had yet to unlock the value of keyword-targeted ads. As the eighteenth search engine to arrive on the web, the company was way late to the party.

An OBJECTIVE, I explained, is simply WHAT is to be achieved, no more and no less.

KEY RESULTS benchmark and monitor HOW we get to the objective. Effective KRs are specific and time- bound, aggressive yet realistic. Most of all, they are measurable and verifiable.

“It’s not a key result unless it has a number.”) You either meet a key result’s requirements or you don’t; there is no gray area, no room for doubt.

Where an objective can be long-lived, rolled over for a year or longer, key results evolve as the work progresses. Once they are all completed, the objective is necessarily achieved. (And if it isn’t, the OKR was poorly designed in the first place.)

“Hard goals” drive performance more effectively than easy goals. Second, specific hard goals “produce a higher level of output” than vaguely worded ones.

no single factor has more impact than “clearly defined goals that are written down and shared freely …. Goals create alignment, clarity, and job satisfaction.”

four OKR “superpowers”: focus, align, track, and stretch.

Superpower #1—Focus and Commit to Priorities

Superpower #2—Align and Connect for Teamwork

Superpower #3—Track for Accountability

Superpower #4—Stretch for Amazing

CFRs (Conversation, Feedback, Recognition),

It’s what you can do with whatever you know or can acquire and actually accomplish [that] tends to be valued

It almost doesn’t matter what you know …. To claim that knowledge was secondary and execution all-important —well,

In general, each objective should be tied to five or fewer key results.

Set goals from the bottom up. To promote engagement, teams and individuals should be encouraged to create roughly half of their own OKRs, in consultation with managers.

To encourage risk taking and prevent sandbagging, OKRs and bonuses are best kept separate.

“as measured by,” or a.m.b.—into Intel’s company OKRs. For example, “We will achieve a certain OBJECTIVE as measured by the following KEY RESULTS ….”

Objectives and key results were embedded in the management system at Intel, but they were also a philosophy, a seminal teaching system. We were all taught that if you measured it, things got better.

“I couldn’t get a plane ticket from Chicago to Arizona approved in the time you took to launch your campaign.”

Intel excelled at declaring great generalisations and translating them into actionable, coordinated programs.

I can’t tell you how many times I’ve seen people walk out of meetings saying, “I’m going to conquer the world” … and three months later, nothing has happened. You get people whipped up with enthusiasm, but they don’t know what to do with it.

OKRs, heavily driven from the top, but with input from below.

Measuring what matters begins with the question: What is most important for the next three (or six, or twelve) months?

leaders commit to those choices in word and deed.

(Wrong decisions can be corrected once results begin to roll in. Nondecisions—or hastily abandoned ones— teach us nothing.)

OKRs require a public commitment by leadership, in word and deed.

When you’re the CEO or the founder of a company … you’ve got to say ‘This is what we’re doing,’ and then you have to model it. Because if you don’t model it, no one’s going to do it.”

The more ambitious the OKR, the greater the risk of overlooking a vital criterion. To safeguard quality while pushing for quantitative deliverables, one solution is to pair key results—to measure “both effect and counter- effect,”

Don’t allow the perfect to be the enemy of the good.fn2 Remember that an OKR can be modified or even scrapped at any point in its cycle. Sometimes the “right” key results surface weeks or months after a goal is put into play. OKRs are inherently works in progress, not commandments chiseled in stone.

Key results should be succinct, specific, and measurable.

Once contributors have consulted with their managers and committed to their OKRs for the quarter, any add-on objectives or key results must fit into the established agenda. How does the new goal stack up against my existing ones? Should something be dropped to make room for the new commitment?

The one thing an [OKR] system should provide par excellence is focus. This can only happen if we keep the number of objectives small …. Each time you make a commitment, you forfeit your chance to commit to something else.

We listed three metrics: Weekly Active Teachers (WAT), Monthly Active Teachers (MAT), and retention.

Then I’d squeeze in a few quarterly initiatives: migrate the databases, build the app, hire four people.

As an ex-Googler, I was sold on the power of objectives and key results. But I underestimated what it took to introduce them, much less to execute them effectively. You need to build your goal muscle gradually,

incrementally. As I know too well from my own private wellness OKR to run a marathon: Doing too much too soon will definitely end in pain.

Research shows that public goals are more likely to be attained than goals held in private. Simply flipping the switch to “open” lifts achievement across the board.

In an OKR system, the most junior staff can look at everyone’s goals, on up to the CEO. Critiques and corrections are out in public view.

Meritocracy flourishes in sunlight. When people write down “This is what I’m working on,” it’s easier to see where the best ideas are coming from.

Soon it’s apparent that the individuals moving up are the ones doing what the company most values.

If sales hates the latest marketing plan, they won’t be simmering inside their silo; their differences will be aired out in the open. OKRs make objectives objective, in black and white.

Transparency seeds collaboration. Say Employee A is struggling to reach a quarterly objective. Because she has publicly tracked her progress, colleagues can see she needs help. They jump in, posting comments and offering support.

As general manager, I cascade my goal down to the next level of management,

My key results become their objectives.

The SVP’s key results are a mess. Unlike the head coach’s KRs, they’re unmeasurable. They’re not specific or time bound.

How do we define “improvement,” for example, in the team’s media coverage? (Five special features on ESPN? One cover spread in Sports Illustrated? Fifty percent more followers on social media?)

In moderation, cascading makes an operation more coherent. But when all objectives are cascaded, the process can degrade into a mechanical, colour-by-numbers exercise, with four adverse effects:

loss of agility.

A lack of flexibility.

Marginalised contributors. Rigidly cascaded systems tend to shut out input from frontline employees.

One-dimensional linkages. While cascading locks in vertical alignment, it’s less effective in connecting peers horizontally, across departmental lines.

If it serves the larger purpose, multiple levels of hierarchy can be skipped over.

Rather than laddering down from the CEO to a VP to a director to a manager (and then to the manager’s reports), an objective might jump from the CEO straight to a manager, or from a director to an individual contributor.

Or the company’s leadership might present its OKRs to everyone at once and trust people to say, “Okay, now I see where we’re going, and I’ll adapt my goals to that.”

We have a market-based approach, where over time our goals all converge because the top OKRs are known and everyone else’s OKRs are visible. Teams that are grossly out of alignment stand out, and the few major initiatives that touch everyone are easy enough to manage directly.

As Andy Grove observed, “People in the trenches are usually in touch with impending changes early. Salespeople understand shifting customer demands before management does; financial analysts are the earliest to know when the fundamentals of a business change.”

Micromanagement is mismanagement. A healthy OKR environment strikes a balance between alignment and autonomy, common purpose and creative latitude.

An optimal OKR system frees contributors to set at least some of their own objectives and most or all of their key results. People are led to stretch above and beyond, to set more ambitious targets and achieve more of those they set: “The higher the goals, the higher the performance.”

When goals are public and visible to all, a “team of teams” can attack trouble spots wherever they surface.

OKRs are not islands. To the contrary, they create networks—vertical, horizontal, diagonal—to connect an organisation’s most vital work.

We created company OKRs for people instead of matching people to our OKRs—we had it backward.

We saw the need for more alignment between teams. Our OKRs were well crafted, but implementation fell short. When departments counted on one another for crucial support, we failed to make the dependency explicit.

Every OKR has a single owner, with other teams linking up as needed. As I see it, co-ownership weakens accountability. If an OKR fails, I don’t want two people blaming each other. Even when two or more teams have parallel objectives, their key results should be distinct.

At times we’d see our team choosing lower-risk key results, like sending emails here or push notifications there. The more ambitious the stretch in the objective, the more conservatively people made their KRs—a classic unintended consequence. So we learned to design our goals to fit the context. Where appropriate, we went for the incremental. But there were times when we told the team, “Don’t worry about monthly active user impact on this one. Just build the best feature you can. We want you to swing for the fences.”

As the meeting unfolded, Albert and I were surprised to discover that the ecommerce team was counting on us to drive significant traffic from our apps. The data team assumed we’d deliver a mass of data. The media sales team had marked us down for a set dollar amount in new ad revenues. All three had preconceived notions of what they could expect from us, with no visibility into what other teams were asking. Nor could anyone see how their targets might align with our own growth objectives, much less the bigger company picture. There were unacknowledged dependencies wherever we looked. It was our old problem at MyFitnessPal, on steroids.

as Intuit moved to the cloud, Atticus introduced OKRs to his direct reports. The following quarter, he rolled the system down to the director level; the quarter after that, to all six hundred IT employees. He was determined not to force the new process. “We didn’t want bureaucratic compliance,” Atticus says. “We wanted enthusiastic compliance.

Contributors are most engaged when they can actually see how their work contributes to the company’s success.

Quarter to quarter, day to day, they look for tangible measures of their achievement. Extrinsic rewards—the year- end bonus check—merely validate what they already know.

For an OKR system to function effectively, the team deploying it—whether a group of top executives or an entire organisation—must adopt it universally.

Yes, there will be late adopters, resisters, and garden-variety procrastinators. To prod them to join the flock, a best practice is to designate one or more OKR shepherds.

Daniel Pink, the author of Drive, agrees: “The single greatest motivator is ‘making progress in one’s work.’

When an objective gets dropped before the end of the OKR interval, it’s important to notify everyone depending on it.

Then comes reflection: What did I learn that I didn’t foresee at the beginning of the quarter? And: How will I apply this lesson in the future?

OKRs do not expire with completion of the work. As in any data-driven system, tremendous value can be gained from post hoc evaluation and analysis.

These wrap-ups consist of three parts: objective scoring, subjective self-assessment, and reflection.

Googlers are encouraged to use their OKRs in self-assessments—as guides, not as grades.

The point of objectives and key results, after all, is to get everyone working on the right things.

In the end, the numbers are probably less important than contextual feedback and a broader discussion within the team.

The philosopher and educator John Dewey went a step further: “We do not learn from experience … we learn from reflecting on experience.”

When a goal is too aspirational, it’s bad for credibility.

In philanthropy, I see people confusing objectives with missions all the time. A mission is directional. An objective has a set of concrete steps that you’re intentionally engaged in and actually trying to go for.

Although subjects with very hard goals reached their goals far less often than subjects with very easy goals, the former consistently performed at a higher level than the latter.” The studies found that “stretched” workers were not only more productive, but more motivated and engaged:

Google divides its OKRs into two categories, committed goals and aspirational (or “stretch”) goals.

Committed objectives are tied to Google’s metrics: product releases, bookings, hiring, customers. Management sets them at the company level, employees at the departmental level. In general, these committed objectives— such as sales and revenue goals—are to be achieved in full (100 percent) within a set time frame.

Aspirational objectives reflect bigger-picture, higher-risk, more future-tilting ideas. They originate from any tier and aim to mobilise the entire organisation.

By definition, they are challenging to achieve. Failures—at an average rate of 40 percent—are part of Google’s territory.

To succeed, a stretch goal cannot seem like a long march to nowhere. Nor can it be imposed from on high without regard to realities on the ground. Stretch your team too fast and too far, and it may snap.

In pursuing high-effort, high-risk goals, employee commitment is essential. Leaders must convey two things: the importance of the outcome, and the belief that it’s attainable.

OKRs require organisation. You need a leader to embrace the process and a lieutenant to ride herd over scoring and reviews.

The guidance for OKRs at Google was often top-down, but with lots of discussion with experts on the team and significant give-and-take on key results: This is the direction we want to go, now tell us how you’re going to get there.

Engineers struggle with goal setting in two big ways. They hate crossing off anything they think is a good idea, and they habitually underestimate how long it takes to get things done.

The most important things need to get done first or they won’t get done at all.

leadership was saying, “All of your ideas are wonderful. But could we please identify a few of them as our big rocks for this quarter, and for the year?”

Satya Nadella has pointed out: In a world where computing power is nearly limitless, “the true scarce commodity is increasingly human attention.”

YouTube and types the query “How do I tie a bow tie?” And we have two videos on the topic. The first is one minute long and teaches you very quickly and precisely how to tie a bow tie. The second is ten minutes long and is full of jokes and really entertaining.

Our job was to keep people engaged and hanging out with us. By definition, viewers are happier watching seven minutes of a ten-minute video (or even two minutes of a ten-minute video) than all of a one-minute video. And when they’re happier, we are, too.

Stretch goals can be crushing if people don’t believe they’re achievable. That’s where the art of framing comes in.

Continuous Performance Management: OKRs and CFRs

Annual performance reviews are costly, exhausting, and mostly futile. On average, they swallow 7.5 hours of manager time for each direct report. Yet only 12 percent of HR leaders deem the process “highly effective” in driving business value. Only 6 percent think it’s worth the time it takes.

What business leaders have learned, very painfully, is that individuals cannot be reduced to numbers.

manager’s “first role,” Drucker said, “is the personal one. It’s the relationship with people, the development of mutual confidence … the creation of a community.”

continuous performance management. It is implemented with an instrument called CFRs, for: • Conversations: an authentic, richly textured exchange between manager and contributor, aimed at driving performance • Feedback: bidirectional or networked communication among peers to evaluate progress and guide future improvement • Recognition: expressions of appreciation to deserving individuals for contributions of all sizes

BetterWorks, the pioneer in bringing both of these tools to the cloud and smartphones and in helping hundreds of organisations make the processes their own.

Divorce compensation (both raises and bonuses) from OKRs.

These should be two distinct conversations, with their own cadences and calendars.

A data-driven summary of what someone has achieved can be a welcome antidote to ratings biases. And since OKRs reflect a person’s most meaningful work, they’re a source of reliable feedback for the cycle to come. But when goals are used and abused to set compensation, employees can be counted on to sandbag. They start playing defence; they stop stretching for amazing. They get bored for lack of challenge.

At Google, according to Laszlo Bock, OKRs amount to a third or less of performance ratings. They take a backseat to feedback from cross-functional teams, and most of all to context. “It’s always possible—even with a goal-setting system—to get the goals wrong,” Laszlo says. “Maybe the market does something crazy, or a client leaves their job and suddenly you have to rebuild from scratch.

Google is careful to segregate raw goal scores from compensation decisions. Their OKR numbers are actually wiped from the system after each cycle!

A key point about a one-on-one: It should be regarded as the subordinate’s meeting, with its agenda and tone set by him …. The supervisor is there to learn and coach.fn1

The supervisor should also encourage the discussion of heart-to-heart issues during one-on-ones, because this is the perfect forum for getting at subtle and deep work-related problems affecting his subordinate. Is he satisfied with his own performance? Does some frustration or obstacle gnaw at him? Does he have doubts about where he is going?

Based on BetterWorks’ experience with hundreds of enterprises, five critical areas have emerged in conversation between manager and contributor: Goal setting and reflection, where the employee’s OKR plan is set for the coming cycle. The discussion focuses on how best to align individual objectives and key results with organisational priorities. Ongoing progress updates, the brief and data-driven check-ins on the employee’s real- time progress, with problem solving as needed.fn3 Two-way coaching, to help contributors reach their potential and managers do a better job. Career growth, to develop skills, identify growth opportunities, and expand employees’ vision of their future at the company. Lightweight performance reviews, a feedback mechanism to gather inputs and summarise what the employee has accomplished since the last meeting, in the context of the organisation’s needs. (As noted earlier, this conversation is held apart from an employee’s annual compensation/ bonus review.)

Sheryl Sandberg notes: “Feedback is an opinion, grounded in observations and experiences, which allows us to know what impression we make on others.”

In developing organizations, feedback is generally led by HR and often scheduled. In more mature organizations, feedback is ad hoc, real-time, and multidirectional, an open dialogue between people anywhere in the organization.

Modern recognition is performance-based and horizontal. It crowdsources meritocracy.

At Zume Pizza, the Friday all-hands “roundup” meeting concludes with a series of unsolicited, unedited shout- outs from anyone in the organization to anyone else who’s done something remarkable.

Establish clear criteria. Recognize people for actions and results: completion of special projects, achievement of company goals, demonstrations of company values. Replace “Employee of the Month” with “Achievement of the Month.”

Make recognition frequent and attainable. Hail smaller accomplishments, too: that extra effort to meet a deadline, that special polish on a proposal, the little things a manager might take for granted.

Tie recognition to company goals and strategies. Customer service, innovation, teamwork, cost cutting—any organizational priority can be supported by a timely shout-out.

Ditching Annual Performance Reviews: The Adobe Story

“Check-in,” Adobe’s new mode of continuous performance management.

Now we treat every manager as a business leader. They are allocated budgets for base incentives and equity, a pool of money to be distributed as they see fit.

It’s super-empowering for them to know they are truly responsible for their reports.

From Adobe’s experience, I’d say that a continuous performance management system has three requirements. The first is executive support. The second is clarity on company objectives and how they align with individual priorities—as set out in our “goals and expectations,” which equate to OKRs. The third is an investment in training to equip managers and leaders to be more effective. We’re not shipping people out to courses. We’re steering them to one-hour sessions online, with role-played vignettes:

People aren’t wired to be nomads. They just need to find a place where they feel they can make a real impact.

“Roboticized, artisanal pizza”

OKRs can’t be effective unless the people at the top are unconditionally committed—like a religious calling.

What’s neat about OKRs is that they formalize reflection.

At least once each quarter, they make contributors step back into a quiet place and consider how their decisions align with the company. People start thinking in the macro.

Then when the day comes and someone says, “Okay, you’re a manager,” you’ve already learned how to think like one. And that’s huge.

train people to think like leaders from the start, when their departments have a staff of one.

Vaibhav Goel, our product manager,

Before rolling OKRs out to our individual contributors, we put in two full quarters at the exec level. We had to establish the culture first.

you’re swimming in tumultuous seas and it’s easy to lose sight of land. But those OKR meditations helped me reset my compass: How do I contribute to the scheme of things? Then it’s not just another report or campaign or field event. It connects to something bigger and more meaningful.

Early on, our fielders were marketing and product—but who was responsible for Zume’s revenue targets?

new revenue (marketing) and repeat revenue (product),

Every two weeks, each person at Zume has a one-hour, one-on-one conversation with whomever they report to.

It’s a sacred time. You cannot be late; you cannot cancel. There’s only one other rule: You don’t talk about work. The agenda is you, the individual, and what you are trying to accomplish personally over the next two to three years, and how you’re breaking that into a two-week plan.

I like to start with three questions: What makes you very happy? What saps your energy? How would you describe your dream job?

“This goal seems very important to you, but you didn’t make a lot of progress on it the last two weeks. Why is that?” It may seem paradoxical, but these nonwork, touchpoint one-on-ones are a forum for ongoing performance feedback.

When you’re fund-raising and making pizza with robots and building out kitchens, there’s a lot of rapid context switching. It can feel a little frenetic at times. But when you know your company objectives like you know your last name, it’s very calming. OKRs help me to be that focused, clear-headed leader. No matter how crazy things get, I can always default back to what matters.

In Project Aristotle, an internal Google study of 180 teams, standout performance correlated to affirmative responses to these five questions: 1. Structure and clarity: Are goals, roles, and execution plans on our team clear? 2. Psychological safety: Can we take risks on this team without feeling insecure or embarrassed? 3. Meaning of work: Are we working on something that is personally important for each of us? 4. Dependability: Can we count on each other to do high-quality work on time? 5. Impact of work: Do we fundamentally believe that the work we’re doing matters?

At Google, teams assume collective responsibility for goal achievement—or for failures. At the same time, individuals are held responsible for specific key results. Peak performance is the product of collaboration and accountability.

As continuous performance management rises to the fore, once-a-year employee surveys are giving way to real- time feedback. One frontier is pulsing, an online snapshot of your workplace culture. These signal-capturing questionnaires may be scheduled weekly or monthly by HR or made part of an ongoing “drip” campaign.

What if a goal-setting platform could pulse two or three questions to employees whenever they log in? What if it merged quantitative data on goal progress with qualitative input from frequent conversations and pulsing feedback? We’re not far away from software that will prompt a manager: “Talk to Bob, something’s going on with his team.”

Dov Seidman published a groundbreaking book on culture, HOW: Why HOW We Do Anything Means Everything … in Business (and in Life).

A rulebook can tell me what I can or can’t do. I need culture to tell me what I should do.”

“Because if you measure something, you’re telling people that it matters.”

annual HOW reports.

Dov has found a way to quantify seemingly abstract values like trust. His “trust index” measures specific behaviors—the direct “hows” of transparency, for example. “I avoid asking people about their perceptions,”

“I don’t ask, ‘Do you feel your company is honest with you?’ I look at information flows. Does the company hoard information, does it mete it out on a need-to-know basis, or is it flowing freely? If you go around your boss and talk to somebody more senior, are you punished or celebrated?”

As of 2016, the HOW report covered seventeen countries and more than sixteen thousand employees.

there was no more powerful cultural force than “active transparency,” where “human beings are opening up, sharing the truth, bringing others in, being vulnerable,”

Vision-based leadership beats command-and-control. The flatter the org chart, the more agile the organization.

When I examined people’s objectives, they weren’t connected to the actual work. I’d go to managers and ask, “Why does this show up in your OKRs?” In many cases, they had no idea how their objectives linked up to what we were working to achieve. There was so much window dressing.

I’d diagnosed our root problem, a passive-aggressive approach.

No one had addressed a basic question everyone at Lumeris was asking: “What’s in this for me?”

I knew that OKRs could eventually be our lingua franca, a way to connect everyone’s goals, but that would need to wait. Without cultural alignment, the world’s best operational strategy will fail.

“You have the right—no, the obligation—to hold your executive team accountable for what we’re saying our culture should be. If we’re not following through, make an appointment or send an email. Or just walk up to us in the hallway and tell us we are not getting it done.” It

But culture change can be very personal. It took one conversation at a time to convince our employees that collaboration, shared accountability, and transparency would be rewarded.

Time is the enemy of transformation. We took less than eighteen months to replace 85 percent of our HR professionals. Once senior management and frontline employees were fully on board, we tackled the tougher nut: strengthening middle management. That’s typically a three-year process, from start to steady state. When it’s complete, your new culture is assured.

Winning our troops over to OKRs wasn’t easy or instantaneous, far from it. Transparency is scary. Admitting your failures—visibly, publicly—can be terrifying. We had to rewire people from how they’d been raised since kindergarten. It’s like your first scuba dive, when you go thirty-five feet down and the adrenaline is pumping and you’re scared out of your wits. But when you come back up, you’re exhilarated. You have a new insight into how things work beneath the surface.

We had a cultural agenda, as well. • Why is transparency important? Why would you want people across other departments to know your goals? And why does what we’re doing matter? • What is true accountability? What’s the difference between accountability with respect (for others’ failings) and accountability with vulnerability (for our own)? • How can OKRs help managers “get work done through others”? (That’s a big factor for scalability in a growing company.) How do we engage other teams to adopt our objective as a priority and help assure that we reach it? • When is it time to stretch a team’s workload—or to ease off on the throttle? When do you shift an objective to a different team member, or rewrite a goal to make it clearer, or remove it completely? In building contributors’ confidence, timing is everything. There is no handbook to address these questions. The wisdom resides in leaders with personal connections to their teams, to managers who can show what success looks like and know when to declare victory. (My advice: Not too soon.)

Art doesn’t like yellows, so every OKR is either green (on track) or red (at risk).

Little time is spent on people’s greens. Instead, they “sell” their reds. The team votes on the most important at- risk OKRs for the company as a whole, then brainstorms together as long as it takes to get the objectives back on track. In the spirit of cross-departmental solidarity, individuals volunteer to “buy” their colleagues’ reds.

“OKRs make you focus on working on the business, instead of just working in the business,”

Publish What You Pay collective,

Is there a downside to OKRs? Well, if you read them incorrectly, I suppose you could get too organized. ONE mustn’t get institutional; we need to stay disruptive. “If everything’s green, you failed.”

The Cold Start Problem: How to Start and Scale Network Effects

Metcalfe’s Law is painfully irrelevant. Although clever for its time, it has not aged well.

Metcalfe’s Law leaves out important phases of building a network, like what you do right at the beginning when no one is using your product. Nor does it consider the quality of user engagement, and the multi-sidedness of many networks—buyers and sellers, for example. Nor the difference between “active users” versus just people who have signed up, or the degraded experience of a product as too many users start to overcrowd a network.

Meerkat’s Law

Meerkats like to hang out in a gang because if one of them sees a predator approaching, they stand up on their two little hind legs and vocalize a complex set of predatory alarm calls to alert the group.

More meerkats then beget more, and even if predators occasionally pick one or two individuals off, as long as the overall population stays high, it will keep growing. But that can’t last forever, because there’s only so many resources—like the meerkat favorites, bugs and fruit—to support a finite population. As the population increases, eventually there is a natural limit based on the environment—often called a carrying capacity. For social animals like meerkats and goldfish, overpopulation looks like this, starting flat, then hitting a tipping point before growing quickly and then saturating and falling once again:

The Allee Curve at Uber

But eventually, the value of the network plateaus—there’s a diminishing return to having more density of drivers. It doesn’t matter if you can get 4 minutes versus 2 minutes versus having a driver instantly outside. In fact, it’s kind of inconvenient, since you need a little time to get your keys and jump out the door to meet your driver.

Cold Start Theory lays out a series of stages that every product team must traverse to fully harness the power of network effects.

There are five primary stages:

The Cold Start Problem

Tipping Point

Escape Velocity

Hitting the Ceiling

The Moat

Humans are the networked species. Networks allow us to cooperate when we would otherwise go it alone. And networks allocate the fruits of our cooperation. Money is a network. Religion is a network. A corporation is a network. Roads are a network. Electricity is a network.

Technology startups adopted us early because they have the belief, whether naive or not, that software can better their lives. These startups were just like us—many of the early teams had fewer than 10 people, just like Slack.

Even once Slack publicly launched, Stewart personally handled the lion’s share of 10,000 tweets per month and 8,000 customer support tickets.

Each of these beta customers formed an atomic network—a stable, self-sustaining group of users who can drive a network effect.

Each workspace might be a business unit or subsidiary, and each smaller team might independently have a ringleader or early adopter who set up the product, invited coworkers in, and started initiating conversations with others.

Tiny Speck built individual stable networks, piecing together a network-of-networks at larger companies.

First, I start with the principal dilemma, which I call “Anti-Network Effects.” It’s a myth that network effects are all powerful and positive forces—quite the opposite. Small, sub-scale networks naturally want to self-destruct, because when people show up to a product and none of their friends or coworkers are using it, they will naturally leave. What solves this? “The Atomic Network”—the smallest network where there are enough people that everyone will stick around.

The most important part of any early network is attracting and retaining “The Hard Side” of a network—the small percentage of people that typically end up doing most of the work within the community.

To attract the hard side, you need to “Solve a Hard Problem”—design a product that is sufficiently compelling to the key subset of your network. Tinder did this for the most attractive users in its network,

Slack works with just 2 people, but it takes 3 to make it really work. There are long-running 3 person groups that are stable—that’s the minimum required to be called a customer.

“Based on our experience of which companies stuck with us and which didn’t, we decided that any team that has exchanged 2,000 messages in its history has tried Slack—really tried it,” Butterfield says. “For a team of around 50 people that means about 10 hours’ worth of messages. For a typical team of 10 people, that’s maybe a week’s worth of messages. But it hit us that, regardless of any other factor, after 2,000 messages, 93% of those customers are still using Slack today.”

Cofounder Nate Blecharczyk is highly quantitative and had determined that 300 listings, with 100 reviewed listings, was the magic number to see growth take off in a market.

For new products, it’s important to have a hypothesis for the size of your network even before you begin. Communication apps can be 1:1, so the network is small, and you can plan accordingly. Contrast that to products that are highly asymmetrical, with content creators and viewers, or marketplaces with buyers and sellers—these are likely to require a much bigger number to hit the threshold, and require a much bigger effort to get started. The size of an initial network helps determine a launch strategy.

Ten people using Slack all from the same team is better than ten random people in a larger company. Density and interconnectedness is key.

Getting this initial network off the ground is the key, and the key is the “atomic network”—the smallest, stable network from which all other networks can be built.

Bank of America issued all the credit cards on the same day, so that there would be a tipping point of people with the cards in their wallets,

After getting the cards in the hands of consumers, they focused on a specific segment of small merchants in the downtown corridor of the town, to complete the other side of the network.

The strategy of many early-stage networked products is a series of short-term boosts—often called “growth hacks”—which are important in forming the initial atomic networks. In Slack’s case, it was their incredible buzz within the early-adopter startup community, and their invite-only launch.

“Uber Ice Cream” promotions letting people order soft-serve ice cream, on demand, via the rideshare app. In the early days, local newspapers and social media would often cover the ice cream promotion, which helped build out the rideshare network.

The next big thing will start out looking like it’s for a niche network.

Networked products often look like toys, and moreover, toys for a weird niche. This is why they are easy to underestimate.

for Uber, whose networks we tend to talk about as “San Francisco” or “New York,” but in the earliest days, the focus was on narrow, ephemeral moments—more like “5pm at the Caltrain station at 5th and King St.”

The general managers and Driver Operations had an internal tool, called Starcraft—referring to the real-time strategy game popular at the time—that allowed them to click on a group of cars, text them “Go to the train, lots of riders!”

The more users you need to get to an atomic network, the harder it is to create. There are networked products with small minimum size requirements, for example the telephone, a communications product like Snapchat, or Zoom for video conferencing. This makes it much easier to get started—because as long as you can get each new user to find a friend that’s already on the network, or to invite a friend, then it’ll work.

But there are drawbacks, too, because what’s easier for you will be easier for your competitors—they just need a few users to get started as well, which is why there are so many messaging apps and chat features inside larger products.

There is a minority of users that create disproportionate value and as a result, have disproportionate power. This is the “hard side” of your network.

For workplace apps, these are the managers that author and create documents and projects, and who invite coworkers to participate. For marketplaces, these are usually the sellers and providers who spend their entire day attracting users with their products and services.

Sometimes the hard side is obvious, but I encourage you to think deeply about which side is which, because it can be nuanced. For instance, large-scale job listings marketplaces are inverted compared to most other marketplaces. The companies looking to hire—the buyers—are the hard side, whereas the supply of talent is generally easier to acquire.

Nearly every network has them, and the hard side must all be happy for the network to function.

Even though there are hundreds of millions of users, there are only about 100,000 active contributors per month, and when you look at the small group of writers who make more than 100+ edits in a month, it’s about 4,000 people. As a ratio, it means that active contributors represent only 0.02% of the total viewer pool.

The motivations of these contributors are worth studying.

Users on the hard side have complex workflows, expect status benefits as well as financial outcomes, and will try competitive products to compare. As a result, their expectations are higher, and it’s difficult to engage and retain them.

In a widely read essay called “Creators, Synthesizers, and Consumers,” Bradley Horowitz, now a vice president of product at Google,

“1/10/100” rule,

Evan Spiegel, CEO and cofounder of Snap, described his understanding of the content creation pyramid for Snap and Instagram, versus TikTok: You can imagine a pyramid, if you will, of internet technology or communications technology, where the base of the pyramid—the very broad base—is self-expression and communication. And that’s what Snapchat is really about. Talking to your friends, which is something everyone is comfortable doing. They just express how they feel. As the pyramid gets narrower, you have the next layer, which is status. Social media in its original construct is really about status, representing who you are, showing people that you’re cool, getting likes and comments. Those sorts of things. And that’s less accessible to the broad base of humanity, and has a narrower base of appeal. [There’s a] more limited frequency of engagement, because people only do some things that are cool once a week or once a month, and not every day. At the top of the pyramid, which I think is represented by TikTok, is really talent. People who have spent a couple hours learning a new dance, or think about a funny new creative way to tell a story. They’re really making media to entertain other people.

Users become addicted to the “social feedback loop”—you publish content, and others see it and engage in the form of likes, shares, and comments. When this feedback is positive, it drives the creator to generate even more content.

It’s important to focus on this tiny slice of users so that messaging, product functionality, and business model are all aligned to serve them. Without this group, the atomic network will collapse—a social network can’t exist without its content creators, and a marketplace can’t exist without its sellers.

Wikipedia’s content creators are likely motivated by the community itself. Social feedback, status, and other community dynamics encourage editors to keep creating content. Wikipedians, as they call themselves, can show their expertise in a topic by maintaining comprehensively written pages, and people within the community will thank and appreciate them.

This provides status. They can make edits to correct others, which offers another form of status and satisfaction. There’s teamwork and a feeling of camaraderie, which create bonds that retain users over months and years.

It’s important to have a thesis for why your product will appeal to them starting on day one.

The answer is by building a product that solves an important need for the hard side.

Tinder was different—it made dating fun. You could sign up without filling in a bunch of forms.

It’s visual, you just swipe back and forth, and you could take five minutes to do it while you were waiting in line or something like that. It’s a form of entertainment.

Tinder started by making everyone connect their Facebook, so that we could show the number of mutual friends you had, which built trust.

These were people with mutual friends living around you, the sort of person you might meet in real life! Connecting with Facebook also made sure you would never be shown to friends, or vice versa, if you were worried about that. This all created trust. Tinder also had built-in messaging so that you didn’t have to give out your number. If the conversation didn’t go anywhere, you could just unmatch without worrying about getting harassed.

For marketplaces, the hard side is usually the “supply” side of the network, which refers to the workers and small businesses who provide the time, products, and effort and are trying to generate income on the platform. They use digital marketplaces as a side hustle, selling collectibles or coaching sessions. They often do this as an alternative to hourly jobs, of which there are nearly 80 million in the United States.

To solve the Cold Start Problem for marketplaces, often the first move—as it was for Uber—is to bring a critical mass of supply onto the marketplace. For a marketplace like eBay, you start with sellers of collectibles. For a marketplace like Airbnb, you might start with people with a few extra rooms in their place. For a social platform like YouTube, it might be video creators. For a more esoteric category, like GitHub, it’s helpful to bring on some prominent open-source projects and key developers. But once the supply has arrived onto the network, it’s time to bring in demand—the buyers and users that will form the bulk of the network. Once that’s working, though, it becomes all about supply again. Thus the order of operations, at least for most consumer-facing marketplaces, is “supply, demand, supply, supply, supply.”

The hard side of a network is, by definition, hard to scale.

The key insight in the stories of Homobiles or Tinder is—how do you find a problem where the hard side of a network is engaged, but their needs are unaddressed? The answer is to look at hobbies and side hustles.

They are smart, motivated, early adopters who are finding opportunities to make themselves useful. They are the developers behind the open-source movement who have built Linux, WordPress, MySQL, and many of the other technologies that underpin the modern internet. They are the millions of eBay sellers that have created jobs and companies by buying and selling goods that people want. For photo-sharing and messaging products like Instagram and YouTube, they stem from the countless amateur photographers and videographers

What people are doing on their nights and weekends represents all the underutilized time and energy in the world. If put to good use, this can become the basis of the hard side of an atomic network.

Sometimes the army is built on people with excess time, but sometimes it is built on people with underutilized assets as well.

The trick is to look closer—to segment the hard side of the network and figure out who is being underserved. Sometimes this is a niche, like a passionate subcommunity of content creators for makeup or unboxing that might be better served with additional commerce features. It could be a low-production-quality, amateur part of the community, like those who are doing #whateverchallenge of the week, who would benefit from basic video editing tools.

For networks that are derived from underutilized assets, it might be the niche of those who like to have new side hustles every weekend to make money online.

Networked products are fundamentally different from the typical product experience—they facilitate experiences that users have with each other, whereas traditional products emphasize how users interact with the software itself.

Traditional products grow by building better features and supporting more use cases. It’s why products like Twitter and Zoom and others often seem so simple, and are critiqued as “features not products” that seem trivial at first.

They have one magical core experience

books, The Selfish Gene.

Zoom’s investment in video codecs, compression, and more.

The Magic Moment is a nice concept, but it would be even more useful if you could measure it. The best way to do this might be surprising—you start with the opposite of magic, the moments where the network has broken down, and you start solving the problem from there.

At Uber, we call these moments Zeroes. A zero at Uber was the worst experience you could have, when a rider opens the Uber app with the intent to pick an address and pick up a ride—but there aren’t any drivers in the area!

When the point of the product is to interact with other participants in the network, a zero means that its value can’t be fulfilled, which means users will bounce and possibly never come back again. It’s obvious when there are not enough users, listings, or videos to make a product engaging.

To consistently ensure that people never experience zeroes, the network needs to be built out substantially, and it needs to be active, too! Drivers on a network have to respond when there’s a ride request and if they aren’t actively using the app, it’s an unfulfilled request—just another form of a zero.

The real cost of a zero is not just at the moment where it’s experienced, but rather, the lingering destructive effects afterward. Users who get “zeroed” often churn and worse, they come to believe the service isn’t reliable.

Thinking about zeroes and unfulfilled requests was such a useful concept at Uber that we baked it into many of our more common dashboards, split by city and region so we could understand how often it was happening. I encourage product teams to develop their own form of this metric, laid out as a dashboard of networks—whether that’s divided by geography, product category, or whatever else makes sense. Within each, it can be useful to track the percentage of consumers that are seeing zeroes.

Even if there are enough users in the IT department of a company to enjoy Slack, it may not be enough for someone to join from the marketing team. All those users will churn unless enough density is built across the organization, network by network.

The Cold Start Problem doesn’t need to just be solved once; it needs to be dealt with over and over.

They concocted a plan: Tinder would work with Justin’s younger brother to throw a birthday party for one of his popular, hyperconnected friends on campus, and use it to promote Tinder. The Tinder team would do all the work to make it an incredible party.

It’s not just the number that matters here, but that it was “500 of the right people”—Sean would explain to me later.

There were Valentine’s Tinder parties, cocktail Tinder parties, sorority Tinder parties, and more—and it kept working.

the discussion of the Tipping Point, I’ll start with a prominent strategy, “Invite-Only,” that is often used to suck in a large network through viral growth. Another method to tip over a market is with a “Come for the Tool, Stay for the Network”

Some have espoused the invite-only tactic as a method to generate hype, since potentially a buzzy new product might cause people to head to social media to ask their friends for invites. Others say the value of invites comes from a method of limiting audience growth so that teams can fix bugs and scale a product’s infrastructure, before going to market more fully.

Invite mechanics work like a copy-and-paste feature—if you start with a curated network, and give them invites, that network will copy itself over and over automatically.

The Welcome Experience Invite-only mechanics provide a better “welcome experience” for new users as well. To explain why, imagine arriving at a large dinner party. A good friend welcomes you at the door, and as you step in, you see acquaintances, close friends, and a number of new people who’ve been curated to be absolutely fascinating.

You often ask users to import email and phone contacts as part of the invite process, often presented as a “Find Friends” screen while signing in.

Invite-only mechanics are also closely associated with creating buzz on social media. People with an invite to an exclusive product will post praise, critiques, and other commentary. People without an invite will ask for it, prompting discussion and sometimes controversy, driven by scarcity and exclusivity dynamics. This in turn attracts more attention and engagement. It works!

It might seem silly to fight for early access, but there are permanent benefits for getting on in the first few months. Earlier users could grab the username that they wanted. An address like frank@gmail.com might be claimed right away,

Robinhood, the commission-free online brokerage, had a hot and widely anticipated launch, and launched by signing users up to a wait list. On the back end, the team slowly let people in, pacing the growth so servers weren’t overwhelmed. The Robinhood mechanic asked wait list users to tweet or post to social media in order to jump ahead, ultimately bringing a million users in before a widespread release.

Another variation of this is to ask users on the wait list to fill out detailed information about themselves, including their potential use cases, giving the teams a way to let a curated, small trickle of users in to form the initial network.

Invite-only is a powerful strategy. When executed well, the people in an initial atomic network become a magnet for even more users.

A good product designer wouldn’t allow a random set of feature ideas to be added to the final version of a new app, and in the same way, a mindful designer of networks wouldn’t allow a random set of users to initially join.

For networked products, the curation of the network—who’s on it, why they’re there, and how they interact with each other—is as important as its product design.

Come for the tool, stay for the network

A killer app, released at the dawn of a new platform. It had millions of users, and was far ahead of any of its competition—it was bound to be a huge success, right? This app was—drumroll, please—called Hipstamatic. No, not Instagram!

“Instagram’s 2.2 million users upload 3.6 million new photos per week (or 6 photos per second).”38 In other words, Instagram was being used first as a tool—a free Hipstamatic with a better design. The network would come later.

While photo filters kicked off Instagram’s rise, it would not sustain. Similarly, over time, the “tool” part of the product—the photo filters—have waned in importance, as users often post photos with the “#nofilter” tag.

Chris Dixon’s 2015 essay “Come for the tool, stay for the network.”

Tool, network Create + share with others (Instagram, YouTube, G Suite, LinkedIn) Organize + collaborate with others (Pinterest, Asana, Dropbox) System of record + keep up to date with others (OpenTable, GitHub) Look up + contribute with others (Zillow, Glassdoor, Yelp)

This is hard because the conversion rate from tool to network might be low—there are thousands of photo apps that tried to add feeds, profiles, and social features after Instagram showed the way.

Uber began—similarly to Van Camp’s Milk—with a subsidy to the driver side. The beginning of this started with buying listings in the Craigslist Jobs section, offering $30/hour guaranteed payment, regardless of how many trips they did. They just needed to leave the app on. The common wisdom was, “If you have a chicken and egg problem—buy the chicken.”

The Uber driver app would ask drivers to participate in their referral programs (“Give $200, get $200 when a friend signs up to drive”) to create leverage on their Craigslist spend.

No one wants to live in a ghost town. No one wants to join an empty community. In the early days, it was our job each day to make sure there was good content on the front page. We’d post it ourselves, using dozens of dummy accounts. Otherwise the community might dry up.

I wrote some code that would scrape news websites and post them with made-up usernames. That way, it looked like there was an active community.

There could have been a world where Reddit built many internal studios—one for their “cute” sub-Reddit community, another for sports, yet another for music—and hired full-time moderators as employees of those studios to create the necessary content.

We also latched onto local events that were bigger than us whenever possible. Online campaigns such as “Make $1,000 in one weekend renting your apartment to Oktoberfest attendees” instead of more generic campaigns like “Rent your apartment to strangers” dramatically improved supply-side conversion metrics. And because one of the most powerful ways to bootstrap supply is to guarantee demand, we encouraged employee travel to unreviewed listings.

Every new city launch in the early days was a Cold Start Problem, and the city teams were structured to be autonomous and decentralized, able to react quickly to new ideas on the ground. The goal was to tip over the entire market, one network at a time.

For example, the launch team would often execute a playbook that would enlist a local celebrity to be “Rider Zero”—the first Uber rider in the market—alongside local press coverage. The Ops team also came up with special promotions like Uber Puppies and Uber Kittens—a way to request a truck full of puppies or kittens, depending on your preference—to show up at your office for an hour at a time. Or Uber Ice Cream, where a soft- serve truck would arrive. On the supply side, the Ops team would call local limo service companies one by one, stand outside major local events to pass out flyers, and text drivers to get them to start driving, among dozens of other highly manual tactics.

The Ops team culture rewarded experimentation, and after ice cream came Uber Puppies, Uber Mariachi Band, Uber Health (for flu shots), Uber Lion Dance (to celebrate Chinese New Year!), and dozens of other variations from around the world. The Ops teams would “holidize” their efforts, aligning special dates with product features that promoted growth.

There are a trio of network effects: Engagement, Acquisition, and Economics.

“The Engagement Effect” is what happens when a product gets stickier, and more engaging, as more users join.

“The Acquisition Effect,” on the other hand, is the network effect that powers the acquisition of new customers into your product—in other words, viral growth.

“The Economic Effect.” Network effects can help improve business models over time, in the form of improved feed algorithms, increased conversion rates, premium pricing, and more.

The “Acquisition Effect” is the ability for a product to tap into its network to acquire new customers.

The ability for users in its network to tell others in their own personal networks. This keeps customer acquisition costs low over time, fighting against the natural rise that comes with market saturation and competition. The types of projects that amplify the Acquisition Effect are oriented around viral growth: referral features that reward users when they invite others, tapping into contacts to create suggestions for who to add to an app, and improving conversion along the key moments in the invitation experience. All of these help increase metrics like new user sign-ups, the so-called viral factor of a product, and bring down the cost of acquiring a customer (CAC).

The “Engagement Effect” describes how a denser network creates higher stickiness and usage from its users—it is a more specific form of the classic description of network effects

The “Economic Effect” is the ability for a networked product to accelerate its monetization, reduce its costs, and otherwise improve its business model, as its network grows.

As a rough benchmark for evaluating startups at Andreessen Horowitz, I often look for a minimum baseline of 60 percent retention after day 1, 30 percent after day 7, and 15 percent at day 30, where the curve eventually levels out.

It’s usually only the networked products that can exceed these numbers.

In Dropbox’s case, this segmentation revealed that a user who has installed the product across multiple devices— home and work computers, or on their mobile devices—is more valuable

To reduce friction further, we allowed sellers to enter their eBay credentials and we would automatically insert the button into all their auctions. In other words, we productized the idea.

Measuring the Acquisition Network Effect To increase the Acquisition Effect, you have to be able to directly measure it. The good news is that viral growth can be rolled up into one number. Here’s how you calculate it: Let’s say you’ve built a new productivity tool for sharing notes, and after it launches, 1,000 users download the new app. A percentage of these users invite their colleagues and friends, and over the next month, 500 users download and sign up—what happens next? Well, those 500 users then invite their friends, and get 250 to sign up, who create another 125 sign-ups, and so on. Pay attention to the ratios between each set of users—1000 to 500 to 250. This ratio is often called the viral factor, and in this case can be calculated at 0.5, because each cohort of users generates 0.5 of the next cohort. In this example, things are looking good—starting with 1,000 users with a viral factor of 0.5 leads to a total of 2,000 users by the end of the amplification—meaning an amplification rate of 2x. A higher ratio is better, since it means each cohort is more efficiently bringing on the next batch of users. Once you have calculated this metric, you can use A/B testing and implement new product features to try to improve

If you increase the viral factor of your product to 0.6, then the product will 2.5x the users you bring. At 0.7, then the product will 3.3x the users you bring. The real magic starts to happen as the viral factor starts to approach 1.

Once a metric like this has been defined, it becomes much easier to understand what changes in the product drive it higher. Retention is usually the strongest lever.

Acquisition Can’t Exist without Engagement

By “landing,” viral growth can start new atomic networks, as a Dropbox invite from an ad agency to their client brings a new company into the collaboration network.

Dropbox’s High-Value Active Users is an example of this—users were found to upgrade into paid subscriptions when they had collaborative use cases with their coworkers, like shared folders and collaboration around documents. If sharing folders on Dropbox becomes the norm in a team, the more paid users emerge, and eventually the entire company might upgrade. Premium features can be designed in a way where they are more useful as the network gets larger, as opposed to being based on individual usage. Thus, the larger the network, the greater the incentive to convert to premium.

The biggest thing was to focus on streamers, whereas originally it was more about the audience. This meant we worked on tools for streamers, which we improved over time. Making money was important to streamers, even small amounts, so we added tipping features. This was a big deal, because Justin.tv gave streamers some social status by having lots of viewers, but it was a big deal to even be able to make an extra $50/month.

The skills needed to be entertaining in real time are different from the skills needed to edit and upload videos.

Neeraj Agarwal, a venture capitalist and investor in B2B companies, first calculated this growth rate by arguing that SaaS companies in particular need to follow a precise path to reach these numbers:

Establish great product-market fit Get to $2 million in ARR (annual recurring revenue) Triple to $6 million in ARR Triple to $18 million Double to $36 million Double to $72 million Double to $144 million

This provides another way to think of Facebook’s famous “7 friends in 10 days” heuristic. Getting to 7 connections is great, but what about 14—is that better? Definitely. But is it 2x better? Probably not. And if you take it to its logical extreme, every person having 10,000 friends won’t lead to 1,000x the engagement—in fact, it might start to lead to less engagement, as overcrowding effects take over.

The Adjacent Users are aware of a product and possibly tried using it, but are not able to successfully become an engaged user. This is typically because the current product positioning or experience has too many barriers to adoption for them. While Instagram had a product-market fit for 400+ million people, we discovered new groups of billions of users who didn’t quite understand Instagram and how it fit into their lives.

the approach was to constantly figure out the adjacent set of users whose experience was subpar.

For some networks, it might be the features of the product, like Instagram not having great support for low-end Android apps. Or it might be because of the quality of their networks—if the right content creators or celebrities hadn’t yet arrived. You fix the experience for these users, then ask yourself again, who are the adjacent users? Then repeat.

When I started at Instagram, the Adjacent User was women 35–45 years old in the US who had a Facebook account but didn’t see the value of Instagram. By the time I left Instagram, the Adjacent User was women in Jakarta, on an older 3G Android phone with a prepaid mobile plan. There were probably 8 different types of Adjacent Users that we solved for in-between those two points.

The solution to the Law of Shitty Click Throughs is to embrace its inevitability. When new products launch, there are usually one or two acquisition channels that work—but they might not scale.

The usual response is simply to pour more money into marketing—but this often creates problems. Well- intentioned teams start with a highly efficient marketing spend, forecasting every dollar invested will pay back in six months. But the costs creep up over time. As more money is invested into marketing, it performs worse, so the team then shifts the payback period to allow for twelve months before recouping costs. Then eighteen, then onward, until the economics are severely upside down. Eventually the team puts a cap on marketing spend and can’t invest more,

The best practice is for products—whether they have network effects or not—to constantly layer on new channels.

Whereas a traditional product might lean more deeply into spending on sales and marketing, networked products can be more efficient by growing without spending, by optimizing their viral loops. For example, in Twitch’s journey, the team deeply focused on creators, giving them better tools and monetization, which in turn caused them to become more active. More satisfied creators meant they would broadcast live video streams more often, bringing in more viewers, which drove further engagement and monetization.

Reddit’s moderators of its communities—their hard side, who organize, create, and curate the people and content —have protested policies by “going dark,” substantially reducing the site’s engagement and traffic.

Slack’s S-1 filing showed less than 1 percent of Slack’s total customers accounted for 40 percent of the revenue, and Zoom’s indicated that 30 percent of revenue came from just 344 accounts, again less than 1 percent of their customer base.

The most organized YouTube channels and Instagram influencers might start out as individuals, but eventually scale their production so that their millions of viewers see professionally created content. Reddit has these dynamics within moderators, who organize the largest communities with 20 million subscribers each!

early Usenet pioneer Dave Fischer noted: September 1993 will go down in net history as the September that never ended.

This flood of inappropriate content, spam, and newbies eventually made Usenet difficult to use. The breakdown of netiquette meant that it became harder to discover the pockets of high-quality conversation that defined Usenet’s early years.

a cautionary tale for when networked products hit scale—they suffer from the combined anti-network effects of spam, trolling and other bad behaviors, and most important, context collapse.

Every network, if it starts with a focused atomic network, has a concept like “netiquette.”

When you first join a social network with your close friends, it’s easy to use it a lot. You might post photos and comments all the time—full of in-jokes and shared stories. You and your friends like it so much you invite your other friends, and then their siblings, too. And so on. But eventually, photos and content meant for your close friends might attract comments from people you don’t know well. Your parents get invited, and maybe your teachers, or your boss. Those photos of a party you went to might get you in trouble.

replace close friends, parents, teachers with colleagues, managers, other teams, and executives, and it works. What you say in one context—like giving constructive feedback to a colleague 1:1, or venting about a project— might seem impolitic when everyone is watching. This includes what kinds of content you post, how you interact with people, and what constitutes an appropriate comment.

Context collapse doesn’t just affect social networks. All atomic networks start with their own version of “netiquette” and isolated subsets of users. This could be Craigslist’s culture of low prices and no frills, Airbnb’s early focus for unique places to rent, or Slack’s early use by the early-adopter tech community. These are three different categories—a classifieds site, a travel marketplace, and a SaaS workplace product—and yet they face the same thing. As the network grows, the hard side is often forced to participate less.

In the case of collaboration tools, the context collapse might be driven by going from the network made up of your immediate team to far more networks as the product lands and expands. When far-off remote offices, more managers, and many hundreds of other employees are added, your usage might become more muted, as a poorly phrased joke or overly casual remark that might be fun for your team might land poorly for others.

For a marketplace product, an early community of high-end sneaker enthusiasts might grow and eventually find itself inundated with casual buyers who care more about affordability. If they don’t appreciate the products as much, or say the wrong things, this could turn off the initial sellers. On the other hand, new sellers might start to list more affordable but less cool products, making it harder for the early community of buyers to find what they want. What is an attractive product in one context might be less so to another, which is one of the reasons why context collapse can hurt the matchmaking at the core of marketplaces.

growth. At its heart, this is the tension: network effects versus anti-network effects. And when the anti-network effects become strong enough to cancel out the efforts of the team, the network hits its ceiling.

So how do you prevent context collapse? Products like iMessage or WhatsApp give us a clue. Messaging apps are resistant to context collapse. You talk to your dozen or so friends and family, and even if the network adds millions more people, it doesn’t change your experience. Slack channels offer a different model—as more and more people within a company join, people set up smaller spaces to interact with their close teammates.

If one of these channels gets too big, then people can just reconstitute an even smaller one.

When users are able to group themselves, they prove particularly resilient.

Product features can also make users aware when they are interacting across different contexts. When you type a message into a Slack channel and it warns you that your recipients are in another time zone, that helps you become aware that your context may be different from that of your recipient.

There is a natural tension that comes with creating many smaller, private spaces. It’s not a silver bullet. Split a network into pieces that are too small, and you’ll soon have many one-off inactive channels or groups that aren’t useful. Similarly, discoverability can become a problem as the number of channels and direct message conversations increases

Some networks reward those who gain a lot of followers early on with so much added exposure that they continue to gain more followers than other users, regardless of whether they’ve earned it through the quality of their posts. One hypothesis on why social networks tend to lose heat at scale is that this type of old money can’t be cleared out, and new money loses the incentive to play the game.

a social network should continue to prioritize distribution for the best content, whatever the definition of quality, regardless of the vintage of user producing it.

My friend Aatif Awan, formerly vice president of growth at LinkedIn—who helped them scale to hundreds of millions of users and spearheaded their acquisition by Microsoft—explains how their algorithm works: People You May Know was a key part of LinkedIn’s success, generating billions of connections within the network. It started with “completing the triangle”—if a bunch of your friends have all connected with Alice but you haven’t yet, then there’s a good chance you might know Alice, too. Later, we incorporated implicit signals—maybe Alice just updated her profile to say she works at your same company. Maybe she’s viewed your profile multiple times over several days. Putting all of these inputs into a machine learning model continued to give us mileage on this feature over many years.

On TikTok, the For You feed reflects preferences unique to each user. The system recommends content by ranking videos based on a combination of factors—starting from interests you express as a new user and adjusting for things you indicate you’re not interested in, too—to form your personalized For You feed. Recommendations are based on a number of factors, including things like: User interactions such as the videos you like or share, accounts you follow, comments you post, and content you create. Video information, which might include details like captions, sounds, and hashtags. Device and account settings like your language preference, country setting, and device type. These factors are included to make sure the system is optimized for performance, but they receive lower weight in the recommendation system relative to other data points we measure since users don’t actively express these as preferences.

When Airbnb first launched, there were already several adjacent competitors. First, VRBO—the acronym for “Vacation Rental by Owner”—was founded in 1995 to rent the founder’s ski resort condo. It had effectively the same idea as Airbnb in matching homeowners and guests, but the product UI was less polished, with more friction to list and transact.

The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.

For software products with network effects, a strong moat means something different: how much effort, time, and capital does it take to replicate a product’s features and its network?

It’s the difficulty of cloning their network that makes these types of products highly defensible.

it’s common to standardize on a single product for convenience. For example, within the workplace, a team and sometimes an entire company will converge on the same set of products. They will use the same collaboration tools to store important documents, message coworkers, or edit spreadsheets. A single app in each category tends to receive the lion’s share of engagement, so that the team that uses Slack will not spend an equal amount of time in Microsoft Teams as well

It’s also not about whose network is bigger, a counterpoint to jargon like “first mover advantage.” In reality, you see examples of startups disrupting the big guys all the time. There’s been a slew of players who have “unbundled” parts of Craigslist, cherry-picking the best subcategories and making them apps unto themselves. Airbnb, Zillow, Thumbtack, Indeed, and many others fall into this category. Facebook won in a world where MySpace was already huge. And more recently, collaboration tools like Notion and Zoom are succeeding in a world where Google Suite, WebEx, and Skype already have significant traction.

it’s important to acknowledge a common myth about defensibility and moats: that somehow, network effects will magically help you fend off competition. This is a myth repeated again and again in startup pitch presentations to investors and entrepreneurs. It’s a lie that entrepreneurs tell to themselves.

if your product has them, it’s likely that your competitors have them, too.

The question is, who is doing the best job amplifying and scaling their Acquisition, Engagement, and Economic effects.

MySpace was the biggest social network in the mid-2000s and lost to Facebook, then a smaller, newer entrant with a focus on college networks with stronger product execution.

HipChat was ahead in workplace communication, but was upended by Slack. Grubhub created a successful, profitable multibillion-dollar food-ordering company, but has rapidly lost ground to Uber Eats and DoorDash.

In the earliest days of the social network category, multiple players—MySpace, Bebo, Hi5, Tagged, and a dozen others—all looked to be growing like weeds. But as the market matured, competition turned zero sum.

competition creates a vicious cycle alongside the virtuous one, where network effects provide a boost to the winner and simultaneously generate strong negative effects to the losing networks.

Trying and failing many times is part of the startup journey—it only takes the discovery of one atomic network to get into the market.

a larger company, which has obvious advantages in resources, manpower, and existing product lines. But there are real disadvantages, too: it’s much harder to solve the Cold Start Problem with a slower pace of execution, risk aversion, and a “strategy tax” that requires new products to align to the existing business. Something seems to happen when companies grow to tens of thousands of employees—they inevitably create rigorous processes for everything, including planning cycles, performance reviews, and so on. This helps teams focus, but it also creates a harder environment for entrepreneurial risk-taking.

“unbundling of Craigslist.” This was coined by Andrew Parker, then a New York–based startup investor, who made the observation in 201085 that Craigslist was getting “unbundled” by an emerging crop of startups—from Indeed for the Jobs section, StubHub for tickets, Etsy for selling arts and crafts, and so on. Years later, this ragtag collection of upstarts has consolidated around a few billion-dollar players—including Airbnb, Tinder, Zillow, Reddit, and a number of other companies.

network of networks—the people who use the Seattle Craigslist are not the same as users in Miami. And within a geography, the Seattle Jobs section has a network around it that’s distinct from the Seattle Community network. Jobs is a network that connects companies and consumers looking for work, whereas Community is about consumers meeting each other—yes,

Every dominant network might seem invincible, but the networks-of-networks framing argues that some parts of the network are weaker than others. Some are serving their customers well,

Only one entry point is needed for an upstart to build their initial atomic network, whereas the incumbent has to protect all its entry points.

It would have been more natural for Craigslist to focus on features that might help horizontally across the entire site, rather than to follow one particular company into a vertical.

Initially, Craigslist seemed huge, both in audience size and the maturity of the features, relative to the smaller niche of renting rooms. However, as Airbnb built a dense community, city by city, it wasn’t long before a given city had more comprehensive inventory than Craigslist, even if the aggregate number of listings was lower. Network density beats total size, a theme we’ve seen throughout the examples of this book.

Dropbox’s initial features gave it a boost in acquiring new users, thanks to its viral folder sharing. Of course, shared folders had been part of many products before—including the core Windows operating system—but Dropbox was able to carve off a key use case that was sticky, ultimately monetized well, and was inherently shareable.

The Big Bang Launch is convenient for larger, more established companies as a method to launch new products

for networked products, this is often a trap. It’s exactly the wrong way to build a network, because a wide launch creates many, many weak networks that aren’t stable on their own.

When a networked product depends on having other people in order to be useful, it’s better to ignore the top-line aggregate numbers. Instead, the quality of the traction can only be seen when you zoom all the way into the perspective of an individual user within the network. Does a new person who joins the product see value based on how many other users are already on it?

established companies naturally want to only win in huge markets.

by itself, the first network often looks like a tiny market that doesn’t deserve the attention.

eBay started out in the collectibles verticals, and built an atomic network focused there. This was a popular, early reaction to the business, by venture capital firm Bessemer Ventures: “Stamps? Coins? Comic books? You’ve GOT to be kidding,” thought David Cowan. “No-brainer pass.”

Fred Wilson at Union Square Ventures, one of the greatest venture capitalists of all time,

At that time, Airbnb was a marketplace for air mattresses on the floors of people’s apartments. Thus the name. They had ideas for taking on other listings but they had not yet made much progress on them. We couldn’t wrap our heads around air mattresses on the living room floors as the next hotel room and did not chase the deal. Others saw the amazing team that we saw, funded them, and the rest is history.

In a simplistic retelling of network effects, the market is said to be winner-take-all, and the larger network is destined to win.

Instead, the larger networked product often needs to execute an all-out effort to compete against a smaller player, and in the end, it still often loses! Just look at MySpace in social networking, Hipchat in workplace chat, or Billpoint, eBay’s competitor to PayPal—at one point each of these was the largest network, and yet they lost.

Bing is another example, when Microsoft wanted to get into search. It was the default search engine across the operating system, not just in Internet Explorer but also MSN and everywhere Microsoft could jam it. But it went nowhere. The distribution advantages don’t win when the product is inferior.

Tapping into Facebook’s social graph became very powerful when we realized that following your real friends and having an audience of real friends was the most important factor for long-term retention.

Facebook has a very rich social graph with not only address books but also years of friend interaction data.

Using that info supercharged our ability to recommend the most relevant, real-life friends within the Instagram app in a way we couldn’t before, which boosted retention in a big way.

For consumer mobile apps, bundling new features to compete with Snapchat Stories, TikTok, or other popular apps has generally come with the downside of adding clutter to the design. New tabs, pop-ups, push notifications, and other tactics have to be used to let users know about the new bundled feature—it can work to drive some early traffic, but it can result in a worse product.

Product-Led Onboarding: How to Turn New Users Into Lifelong Customers

When a product’s onboarding is neglected, it’s like throwing a massive party with balloons, fireworks, and a bouncy castle in your backyard, yet no one can get past the front door.

The product team may have spent days and hours planning and building the most exciting party in town. The marketing team may have spent ad dollars to promote it. The sales team may have focused their time and energy on providing a customized party experience to everyone invited.

Building a cross-functional onboarding team. Identifying your onboarding success criteria. Minimizing the time it takes for users to experience the value of a product. Simplifying the signup process and designing the first product experience for new users. Creating behaviour-based onboarding emails, in-app messages, and additional communication methods. Involving sales and high-touch support in the onboarding process.

If you think the first “Aha” moment happens after users sign up, then it usually means you’ve lost a lot of people already. Because the majority of users never actually make it that far.

These “Aha” moments start at the first touchpoint. A touchpoint is any interaction that users have with a business; whether it’s seeing the link on a search results page, watching a video ad on Facebook, or reading a newsletter their colleague forwarded them. A successful first touchpoint helps people visualise a product in the context of their own situation.

Successful users go through a series of “Aha” moments before, during, and after they sign up for a product. With each “Aha” moment, users receive increasing value from a product in a series of steps;

Here’s what an “Aha” journey might look like: While surfing a website: “Aha! I understand how this product can help me.” Once they’ve signed up: “Aha! I’ve tried the product out for the first time and it’s useful.” After using the product several times: “Aha! I’ve adopted this product into my workflow and it’s saving me a ton of time.” Finally, once they start telling others about it: “Aha! I’ve invited my colleagues and we’re working more efficiently together.”

easy way to categorise the user journey in five steps: Acquisition, Activation, Revenue, Retention, and Referral —AARRR for short

The Acquisition Step is when a product’s positioning and perceived value are communicated.

If unattainable or confusing expectations are set during the Acquisition Step, good luck with successfully onboarding new users.

if the marketing and sales team overpromise features that the product can’t do, it’d be almost impossible to successfully onboard new users.

Another example is when there’s a mismatch between what users think your product is (a.k.a. the product’s positioning) versus what they experience after signing up.

you need to plant the seed of future value at the very first touchpoint

With crystal clear product positioning and messaging, you can screen out people who shouldn’t be signing up for a product early on and be able to focus more time and resources on providing incredible experiences for people who should be using it.

Another common misconception is that user onboarding ends the moment they become a paying customer. The problem with this is that users could be paying for a product even though they’re not getting any value from it.

paying users are not the same as successfully onboarded users:

don’t assume a paying customer equates to a happy customer.

you know you ́ve encountered this problem if you see a high volume of new, paying customers cancel their account soon after their first payment.

Based on the experience of which companies stuck with us and which didn’t, after any team has exchanged 2,000 messages, 93% of those customers are still using Slack today.

they need to keep coming back.

User onboarding is the process that takes people from perceiving, experiencing, and adopting the product’s value to improve their lives.

help users improve their lives. It’s important and helpful to view onboarding not as an exercise in teaching users about a product but rather how it makes them successful.

How are you helping enhance users’ lives with your product? Are you helping them relax like Netflix, or communicating within teams like Slack?

To successfully onboard new users to a product, they have to achieve three key milestones: The Moment of Value Perception (MVP): This is when users first visualise a product in the context of their situation. For the initial onboarding of new users, the MVP usually occurs before signing up. The Moment of Value Realisation (MVR): This is when users first experience a product’s value and achieve their desired outcome with the product for the first time. The Moment of Value Adoption (MVA): This is when users start using a product regularly and integrate it into their life or workflow.

One of the big goals of onboarding is helping users let go of the old way they performed tasks to embrace new habits with a product.

The final implication is that user onboarding is a process. It involves a series of actions that uses both tools and people to provide new users the knowledge, skills, and behaviors to interact with a product effectively. User onboarding is not a linear process. Instead, it’s cyclical. Because it never actually ends.

You can’t just slap on a product tour, send a few onboarding emails, and believe you’re going to move the needle. That’s risky behaviour. It would help if you had a specific strategy in place based on user research and data. Otherwise, you risk losing users with annoying product tours or spammy emails.

Furthermore, you can’t just work on improving your user onboarding once a year. As you introduce new features to your product, you have to seamlessly integrate these into your onboarding without it becoming bloated.

Examine your analytics to determine if new users are getting stuck in the signup process. Are you asking them for a bunch of information that has nothing to do with their initial use of the product? These are called non- essential fields.

What’s a good free-to-paid conversion rate? For freemium businesses, aim for a rate of 2% to 5%.17 For sales- assisted accounts that include products with free trials, aim for a 15% trial-to-paid conversion rate. For self- serve, unassisted users, this rate will sit a bit lower, at 4%.18

In the first 15 seconds of every new experience, people are lazy, vain, and selfish.

they’re all looking out for number one first – themselves.

“How will this product help me?” “How is this product better than what I’m doing right now?” “How would I look if my friends or colleagues found out I’m using this product?” “Why would I want to drop what I’m currently doing and replace it with this?”

We are selfish. Even when we’re trying out a product that could help the team be more productive or protects the environment, we want to know what’s in it for us. That’s why assisting new users to achieve quick wins is critical, regardless of a company’s long-term vision.

One of the most impactful tactics to improve user onboarding is to minimise the time-to-value (TTV) as much as possible. This is the amount of time it takes a new customer to realise value from a product.

The EUREKA Framework

Establish your onboarding team:

Understand your user’s desired outcomes: The best way to successfully onboard new users is to figure out why they signed up in the first place.

Refine your onboarding success criteria: Your team needs a clear picture of what it means to successfully onboard new users.

Evaluate and optimise your onboarding path:

minimise the time it takes for new users to experience a product’s value,

Keep new users engaged: To help guide new users to experience a product’s value, consider using triggers both inside and outside of the product. These could include product tours, welcome messages, progress bars, onboarding emails, SMS, and in-app notifications.

Apply the changes and repeat: User onboarding is a continuous process.

User onboarding should not be a solo effort but rather a team sport. You can’t approach it as James Bond does. It’s important to build a dream team like Marvel’s Avengers by bringing together the “superpowers” of different departments or functions. This way, you’re taking a holistic approach, which allows you to deliver an effective, immersive, and seamless onboarding experience for new users.

Often, this is exactly what happens within companies. Marketing works on a few onboarding and product marketing emails. Product focuses on UI tweaks in the signup process and first-use workflow. The sales team touches base with users once in a while, trying to convince them they need an upgrade. Support waits until a user needs help. Every team is contributing to the user onboarding experience, but they’re all doing it in isolation.

Product Managers

Product managers typically orchestrate the in-app user onboarding experience with designers and engineers: from the signup to the first-use workflow. They oversee implementing any triggers inside your product. This includes (but is not limited to) progress bars, product tours, and checklists that help guide new users to their desired outcomes.

Marketers

Marketers communicate the value of a product. They use tools, resources, and content to educate new users to become effective, regular users. This could include crafting and managing lifecycle email campaigns, templates, case studies, and helpful tips – each designed to draw the user’s attention to the core actions of a product.

Marketers are critical in the user onboarding process because no matter how good the in-app user onboarding experience is, 40% to 60% of users will sign up once and never come back.

A marketing team needs to create a cohesive and consistent content strategy that amplifies the need for a product or the pain of their situation to help them overcome their anxieties and objections.

Customer Success

Those responsible for customer success and happiness should lend a huge hand in the onboarding process. Understanding a user’s wants and needs is crucial during onboarding. Customer success teams are usually equipped with the empathy and product know-how necessary to show users immediate value.

When users stumble during the user onboarding process, it’s up to customer success to reach out and measure how they feel as they progress. Since they’re the first point of contact for issues and problems new users face, they can provide invaluable user feedback for the business. Every support question and survey response should be recorded and relayed to where it’s needed to enhance the user onboarding experience.

Sales

With hybrid or sales-assisted onboarding, it’s the sales team who reaches out to potential customers to ensure they’re receiving a ton of value from a product. Salespeople tend to take special care of individual users while laying out expectations for further features of the product to motivate them to build a deeper, more frequent habit with a service, such as premium features or subscription benefits.

Using product engagement data from the product and marketing teams, sales teams often use demos to provide customized walk-throughs of the product. This is how two teams can work hand-in-hand: the sales team can build on the relationships first initiated by the marketing team.

ask yourself which team or person is responsible right now for:

Defining your product’s positioning and messaging.
Running acquisition campaigns.
Creating and maintaining onboarding communication such as emails, in-app messages, external notifications, or direct mail.
Designing and implementing the user experience for the signup and first use workflows.
Converting the free users to paying customers.
Supporting new users if they get stuck during the user onboarding process.

it’s not about owning but more about championing user onboarding within an organization. It depends on which team is the closest to the customer and has the best ability to pull in people from different departments to focus on delivering an immersive and seamless experience for new users:

The key is that whoever owns user onboarding needs to ensure it’s a cross-functional effort.

signing up for a new product is an expression of hope. When users sign up, they’re opening themselves up to the possibility that things could be better. Whether that hope ends in disappointment or excitement ultimately boils down to how well you understand what exactly they’re hoping for. What is it about their current situation that motivated them to sign up for your product?

What were they hoping to achieve with your product that they couldn’t already do?

It’s critical your onboarding team has a crystal-clear picture of what exactly your users’ desired outcomes are.

If you get this step wrong, everything else will fail. Because once you’re able to fully understand what users truly want, you can design a reliable onboarding flow that turns hope into excitement.

When you boil it down, onboarding is really about changing someone’s behaviour so that they can experience a better life. Users are frustrated or annoyed with something, and they sign up for a product to make their lives easier.

Remember, the primary goal of user onboarding is to help users become better versions of themselves. If we go back to the Super Mario analogy, onboarding shouldn’t focus on the product (the fire flower) or its characteristics (green stem and easy to pick up), even though they are important. It should focus on creating a better life.

Upgrade your user, not your product. Don’t build better cameras – build better photographers.

The idea of “upgrading” a user’s life is at the core of the Jobs-to-be-Done (JTBD) theory by Clay Christensen, innovation expert and bestselling author of Competing Against Luck.

There are three implications of the JTBD framework. Customer Jobs are solution agnostic.

When thinking about a product’s Customer Job, make sure it focuses on users’ needs and problems instead of the solution. You can’t start by looking at the product or what they’re currently using. You have to dig to the root of the problem that caused them to start looking for a solution in the first place. What were the circumstances around a person’s life that led them to start looking for a solution?

The circumstances in people’s lives lead to “job openings.”

Understanding the circumstances and pain points in users’ lives are more important than the product features and customer characteristics.

To build a great user onboarding experience, it’s important to know: What are the circumstances in users’ lives that triggered them to start looking for a solution like yours? What is their desired outcome? What does success look like? What’s holding users back from achieving their desired outcome? What else did they consider or try, and why didn’t it work for them? In other words, people try out products because there is a gap between their current circumstances and their final aspiration.

User onboarding is the Customer Job “interview.”

To nail the job interview with users, you must first know what job a product is being hired to do. For that, it’s essential to understand the three interconnected reasons users could be signing up for a product.

The Three Components of Customer Jobs

Functional

Functional jobs involve specific outcomes the users experience after working with a product.

Another famous example is from Harvard Business School professor Theodore Levitt: “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” The quarter-inch hole is the functional job the drill must do.

Functional jobs are as complex as the number of market segments served. Segmenting and personalising the user onboarding experience for different Customer Jobs is one of the low-hanging fruits of improving onboarding.

This is exactly why Canva asks new users what they’ll be using the app for during the user onboarding: Segmentation is an important concept for the remainder of the EUREKA framework.

Emotional The second component of a Customer Job is emotional: how users feel (or what they want to avoid feeling) after they’ve accomplished their desired outcome.

Revlon isn’t selling lipstick or nail polish; it’s selling a “better you.”

The ad barely mentions any product. Instead, it prominently features a picture of model Dorian Leigh. You need to look closely to notice lipstick and nail polish, both located near the bottom of the page. This ad was designed on purpose to amplify the emotional component of Revlon’s Customer Job. In

Social

We communicate our values when we make a purchase, but we also signal to others how we want to be perceived.

Take, for instance, one of Canva’s social ads, which reads, “No design experience? No problem. Canva makes it easy for anyone to create professional designs that are sure to get you noticed.”

For your product, how does it impact how others perceive your customers? Are they seen as more knowledgeable? Do you make them look more professional? Do you help them become the hero in their workplace?

Pioneered by Bob Moesta and Chris Spiek of The ReWired Group, these four forces influence people to stick with the status quo or take the leap forward with a new solution: The push to find a new solution due to current problems. The pull from what could be achieved with this new product. The anxiety around the risks of moving to a new product. The inertia of not wanting to change.

To onboard customers successfully to a complex product, you need to understand the push, strengthen the pull, calm anxiety, and overcome inertia.

During user onboarding, Canva’s team needs to amplify the pain of their current situation (the push) while at the same time explaining the benefits of the product (the pull). They need to provide guidance for complicated tasks, which helps calm anxiety while also overcoming the inertia of not wanting to change. This approach to user onboarding helps new users deeply understand the value a product can provide while defeating the emotions that stand in the way of moving forward, no matter how complex it is.

Companies that invested in customer research grew two to three times faster than companies that didn’t! Understanding your users through customer research is the key to improving user onboarding and retention. Find the patterns in the stories of people who understand your product and understand what got them so excited to continue using it.

To do this, talk to five types of people: New users – people who just signed up Shoppers – people who are evaluating your product Active customers – people who are regularly using your product Inactive customers – people who are still paying for your product but stopped using it Churned customers – people who have cancelled their account

You can’t help new users perceive, experience, and adopt a product’s value if you don’t know what value means to them. Value is not determined by a company and definitely not by the expansiveness of the feature set. Value is determined by users based on their context of use.

Refine Your Onboarding Success Milestones If you do not know where you are going, every road will get you nowhere.

There are three moments that matter the most to measure onboarding success: When users complete the signup process. When users experience the value of a product for the first time. When they begin to use it consistently.

the Moment of Value Perception, Moment of Value Experience, and Moment of Value Adoption.

Product Adoption Indicator,

At Facebook, users who add seven friends in 10 days are more likely to continue using Facebook.In the early days of Twitter, the rule “Users who follow 30 people” was a retention and growth driver.At Dropbox, users who added a file in one Dropbox folder on one device were more likely to add more files to their Dropbox.

The Five Steps To Determine Your PAI

Get a baseline measurement of your retention.

Before making any changes to the user onboarding, you’ll want to first define what retention looks like. One way to do this is to perform a cohort analysis using a retention chart and curve. This reflects the percentage of users who come back and perform any action with a product several days or weeks after signing up.

With analytics tools like Mixpanel or Amplitude, you should have readily available reports to visualise a product’s retention curve.

Create a PAI hypothesis. Once you’ve identified the baseline retention curve, it’s time to create a hypothesis about your retention indicator. It should look something like this: If new users perform at least X number of [the one key product action] during the first Y days/weeks of signing up, they’re more likely to continue using our product after Z days/ weeks.

If new Whatsapp users send at least three messages on the day of signing up, they’re more likely to continue using it after 21 days.

Gather data to validate your hypothesis. What we’re looking for here is to maximise the overlap between the following two segments: Users who continue to use Whatsapp after 21 days. Users who have sent at least X messages on the first day of signing up.

The goal is to find the sweet spot that maximises the overlap between these two segments. To do this, we want to gather data for three segments: Users who continue using Whatsapp after 21 days but did not send at least X messages on the day of signing up. Users who continue using Whatsapp after 21 days and send at least X messages on the day of signing up. Users who did not continue using Whatsapp after 21 days but did send at least X messages on the day of signing up.

Compare the retention curves and validate the PAI.

Communicate your PAI.

The intention is to make it dead simple to talk about. Communicate this to the marketing and sales teams to ensure they’re not just pursuing signups. They should also focus on reaching the Moment of Value Adoption and achieving the PAI.

Product Qualified Leads and the PAI

Unlike Marketing Qualified Leads (MQLs), which base buying intent on arbitrary factors like email opens, whitepaper downloads, and webpage visits, PQLs are users who have achieved meaningful value in a product. It’s often used as a way to identify high-value users to help the sales and support teams discover which users they should focus their efforts on.

Whereas the PAI focuses on one key product action so that it’s easy to communicate within the organization, the PQL could involve multiple product engagement metrics. This includes but is not limited to the following: The number of times the user has returned to a product. The number of other features that the user has tried out. How soon the user tries out the other features after signing up.

Yes, a PQL could be the same thing as a PAI, but it doesn’t have to be. It really depends on the organization and whether the resources are available to provide high-touch support to more leads.

Whether it’s Mixpanel, Heap Analytics, Amplitude, Pendo, or another product analytics tool, it is important to track meaningful product events and metrics.

For a social networking application, key product engagement metrics could be connections made, published content, posts liked, and comments made.

When it comes to user onboarding, bumpers help new users achieve their First Strike. Bumpers include conversational triggers (such as onboarding emails, SMS, browser notifications) and in-app triggers (such as welcome messages, product tours, and progress bars).

The goal is to decrease the time-to-value (TTV), the amount of time it takes a new customer to realise the value of a product.

Another remarkable aspect about Canva’s onboarding path is that users don’t have to sign up at all to experience Canva’s First Strike; their growth team has clearly optimized their user onboarding experience.

onboarding process with Trello at bit.ly/canva-path.

evaluate each onboarding step for three components: a) Necessity b) Ease c) Simplicity

Necessity: remove or delay any steps that don’t lead to the First Strike

Green labels are steps that are absolutely necessary for new users to achieve the First Strike. I.e., asking for an email address during the signup process.

Yellow labels are steps that can be delayed after the First Strike, like setting up an advanced feature or running split tests.

Red labels are steps that can be removed completely. This could be adding a backup email address or asking for a nickname when setting up their account.

About 30% of new users never confirmed their email addresses. Once we did some simple maths, we realized that with the removal of this activation step from the beginning of the onboarding flow, we’d be able to generate a 6-figure annual recurring revenue (ARR) outcome.

Does someone really need to add an image to send out party invites? One could argue that if the party invitation templates are well designed, users might not need to add a photo. Without any data, remove this for now.

“save the online invitation,” could be replaced with an autosave feature. It might seem small, but anything you can do to relieve people from performing another task could help

We’ve now narrowed the touchpoints down: Enter email address Enter name Enter password Click “Create Account” Confirm your email address Sign back in Click “Create New Invitation” Select a party invitation template Add an image for the party Add a description for the party Add the date and time for the party Add the location of the party Save the online invitation Add the email address of your friends Send the online party invitation Share ready-to-go party invitation link Are there any steps in your onboarding that can be removed or delayed after the First Strike?

Wave (an invoicing and payroll software) does during the user onboarding process. It asks for a logo. Once they have it, they automatically identify the brand colours and update the invoice template to match the branding.

IKEA Effect in action. It’s a cognitive bias in which consumers place a disproportionately high value on products they partially created or customized.

Before you cut a step out of your onboarding, ask yourself three questions: Does it direct users to the next step in the onboarding process and get them closer to the First Strike? For example, Canva shows relevant design templates to users based on their response to the signup questions. Instead of offering too many choices, this step helps speed up the design process.

Does it add to and help personalise the onboarding experience for users? One of Canva’s onboarding questions is, “What will you be using Canva for?”

Based on this response, Canva suggests relevant designs and templates based on your needs that you saw in the previous example.

Does it delight users and get them excited about the product?

The Principle of Commitment and Consistency states that the smaller the initial ask from someone, the more likely they are to agree to bigger requests. This principle can be applied to user onboarding by reorganising the steps from easiest to hardest.

ask users to create an account after they’ve already picked a party invitation template and filled in the details of their party. This is the Sunk Cost Effect in action. When people invest time, money, or effort into something, they’re motivated to make it work.

“Click ́Create an Account to Save Your Invite’” Select a party invitation template Add a description for the party Add the date and time for the party Add the location of the party Click “Create an Account to Save Your Invite” Enter name Enter email address Enter password Click “Create Account” Share ready-to-go party invitation link We’ve now shrunk the onboarding path by 33% from 15 to 10 steps.

There are situations where it’s not possible to remove or delay the bottlenecks in the user onboarding experience. In that case, simplify as much as possible. According to Hick’s Law, the time it takes for users to make a decision increases logarithmically as you increase their number of choices. Thus, more choices lead to users becoming overwhelmed and abandoning the signup altogether.

concept called progressive disclosure, where only a few essential options are shown to users, but a broader set is displayed upon request. In Shopify’s signup process, only three fields are visible.

For most companies, their user onboarding is precisely this – a one-size-fits-all, linear experience for everyone. They’ve built their user onboarding for the “average” new user. This might work with early-stage products, where that kind of focus helps channel all resources to reach product-market fit. But a product’s features will inevitably grow, expand, and mature. Shoppers will sign up for many different reasons.

The mediocre teacher tells. The good teacher explains. The superior teacher demonstrates. The great teacher inspires. – William Arthur Ward

user onboarding needs – to educate, explain, and inspire users.

The BJ Fogg Behavior Model is the key to unlocking behaviour change and product adoption for new users.

It emphasises three elements that must converge simultaneously for a behavioural switch to occur: Motivation (M): The desire or willingness to do the new behavior. Ability (A): The ease in doing the new behavior. Prompt (P): The cue or trigger to do the new behavior.

If users are falling off during the user onboarding, the BJ Fogg Behavior Model provides a framework to boost those numbers: Is the new behavior as easy to do? Are users motivated to perform the behavior? Are there prompts inside and outside the product to help users perform the desired behavior to complete the user onboarding?

It’s divided into three sections: Section 1: Learn how to use visual cues, empty states, and content templates to make user onboarding easier. Section 2: Discover different ways to increase your users’ motivation inside and outside the product. Section 3: Create behavior-based prompts for user onboarding

Section I: Make It Easy

Provide visual cues to guide them to the next onboarding step

Basecamp adds some fun to their onboarding by using a cartoon character to point out where users complete the signup form.

Tours often walk users through a critical workflow or point out a few key steps that users might otherwise miss.

Tooltips isolate elements such as form fields or buttons to guide a user through the account setup. Once a user completes a step, they are referred to the next one.

Hotspots are often used to give a bit of contextual help to encourage new users to activate certain product elements or features.

They can have unique pulsing animations to catch a user’s eye. Hotspots are a nice alternative to tooltips because they are less invasive to users; they don’t open automatically and can be easily ignored.

Others include checklists, progress indicators, and welcome messages

Be careful of using Product Bumpers as a band-aid for bad user experience. One of my biggest pet peeves with product tours is that it’s often used to point out all the bells and whistles of the app. They tell you what the button or feature does (i.e., “Click here to do X.”) and not explain why they are important to help users achieve their desired outcome. When they’re added on as an afterthought, product tours can do more damage by disrupting the momentum for users rather than getting them excited to use the product.

Regrettably, they have become deeply associated with user onboarding, to the point where many companies believe adding them will automatically improve it. This is flat-out wrong.

Show a helpful empty state When users are just starting out, they’ll often see pages within a product without any activity, history, or data because it’s their first time interacting with it. These moments are called empty states.

Instead, you want to paint a picture of what it will look like once the user is actively using the product. Emphasize the value of taking action. Go beyond showing users the benefits of your app. Direct them to the desired action as well.

Take a look at Dropbox Paper’s empty state. It describes how it can help you “brainstorm, review design, manage tasks or run meetings.” There’s a clear, primary call-to-action to direct users to begin using Dropbox Paper. A word of warning: avoid using “dummy data” to generate fake activity and statistics in the empty areas. While it’s tempting to cover empty states with fake data to bring the dashboard to life, it presents an entirely new problem of overwhelming users. You’re opening up the door to questions such as:

“Where did this data come from?” “Where do I put in my data?” “How do I know it’s my stuff that I’m looking at?”

Basecamp does an excellent job of doing this to explain how their product works. Each piece actively guides you through using the product.

Provide templates, cheat sheets, and other resources Content is like cheat codes to your onboarding. Templates, cheat sheets, and educational articles are often overlooked as a way to make it easier to onboard new users.

One way for users to quickly fill in empty states is to provide them with templates to copy and paste easily. There is no need to build from scratch.

For example, Instead of Canva dropping its users into an empty state, they prompt them to pick a template.

The Userlist team goes further by providing super simple copy-and-paste templates of emails and in-app messages users can use for onboarding.

External rewards like money, fame, and praise sometimes actually work against people completing a task. Since they’re only interested in the reward, they won’t complete the task on their own initiative if it isn’t there.

Speak to your users’ desires

The ultimate motivation is to show users how the product can help improve their lives. Every word in the entire user onboarding experience is an opportunity to speak to users’ needs and desires. Use content to amplify the solution to their current pain points, calm their anxieties, and remind them they can overcome their existing habits.

For example, the third step in the signup process with Wave reminds new users of the value of their invoicing software. The copy reads, “Send professional invoices. Designed to get you paid 3x faster, with over $24 billion in invoices sent each year.”

Progress indicators work so well because humans are wired to set goals, and we inherently feel good when we accomplish them. It turns out that when you finish a complex task, your brain releases massive quantities of endorphins.

There’s also an internal tension that occurs when a checklist or progress bar appears incomplete. This is called the Zeigarnik Effect: when people feel the need to finish incomplete tasks.

Usually, we’re more likely to say “yes” to requests from people we like and are attracted to, whether they’re our closest friends or strangers. But what exactly causes attraction? Persuasion science tells us there are three important factors. We like people who are similar to us, people who pay us compliments, and people who cooperate with us to attain mutual goals.

Many products ignore this critical step. But imagine walking into a dinner party without the host greeting you and giving a tour. Most likely, you’d feel snubbed and hurt! Welcome messages also set the tone. They give customers a sense of how they’ll be treated during their relationship with the product.

Personal videos are great at humanising the experience while implying someone is personally involved in the users’ success. Fiverr’s welcome message reads, “Welcome to Fiverr. You’re now part of a global community of doers. Fiverr is a marketplace of talented online freelancers who pride themselves on getting it done for you. On time. On budget. Get everything from custom websites to fresh, original content, stunning graphics, and much more.”

Fiverr does three things well here: They welcome users to the “global community of doers” to emphasize the message that they are not alone. They reiterate their value – helping to find freelancers who deliver projects “from customer websites to fresh, original content and much more” on time and on budget. With the profanity in the primary call-to-action, their personality shines through. Fiverr knows their target audience is casual, so don’t shy away from a little bit of profanity. When writing welcome emails, consider setting expectations for upcoming content and giving instructions on how they can reach out for help. And for goodness sake, please don’t use an email address people can’t reply to, like with Fiverr’s email from “no-reply@fiverr.com.” Emails should be two-way communication and an opportunity for users to ask for help.

The more users come to view your product as an ingredient in their own success, the more traction you’ll have in the long term. When users achieve a meaningful milestone, congratulate them with an in-app message or email.

Once the first invoice is sent with Wave, a screen pops up that reads, “Congratulations! Get ready to see more invoicing goodness.” It doesn’t end there. They then encourage new users to download the Wave mobile app to track invoices on the go. A field appears to enter a phone number with a CTA that reads, “Text me the link.”

Did you notice how they phrase this? It’s exactly what users want to know after sending an invoice (the tracking information). They’ve also made it easy to download the app by sending a text message with a direct link to it.

Consider sending congratulatory onboarding emails.

“Congratulations from Buzzsprout! 1st episode published.” The show’s cover art is presented above the message, and they ask you to spread the cheer by sharing the good news on Facebook or Twitter.

Another simple example is to add this after users upgrade their accounts. At Chess.com, they send an email as a reminder of all the benefits you receive once you become a premium member: unlimited access to chess lessons, an ad-free playing experience, as well as tools to analyze the games and more.

For your user onboarding, have you identified the wins, milestones, and success moments to congratulate new users?

When people are uncertain, they’ll look to the behaviors of others to determine their own. This is known as social proof. For instance, if we see a particular restaurant is always full, we’re more likely to eat there.

Add social proof to onboarding emails. This can be in the form of case studies, reviews, endorsements, or testimonials from happy customers.

Shopify uses a testimonial from Fred, Luca, and Danni to show how easy it is to start an eCommerce business: “Shopify lets us build an eCommerce platform without having prior knowledge or allocating significant resources.”

From my experience, most products only include social proof on their landing pages. But you should be going beyond that: Use social proof as supporting copy near a CTA or at a point of friction. Use social proof to counter objections. What are the reasons someone might not convert? Use social proof to support the value of a product. Use social proof to humanize your marketing. A one-line testimonial from John Smith is meaningless. Put names to faces, list companies, link to their Twitter pages. Don’t leave out social media. Use social proof in your in-app content and onboarding emails.

Whether you realise it or not, most habits start with a Prompt. Another way to put it – no prompt, no action. In the user onboarding experience, prompts are critical during two moments: To help users achieve their desired outcome and experience the value of a product soon after signing up. To help users continue to use a product until they adopt it into their life and workflow.

Successful and effective onboarding prompts have three qualities: First, Prompts should be omnichannel, involving cohesive, thoughtful messaging across multiple channels that considers where users are in the onboarding journey.

Second, Prompts should be personalized and timely.

To avoid coming across as annoying and spammy, trigger emails based on the actions users have or have not taken inside the product.

Third, Prompts should reiterate the value of your product.

Value is defined by your users based on their context of use. That’s why it’s important to segment email flows based on the product’s Customer Job. Since each user has unique friction points, a product may have multiple onboarding email flows, all based on specific user behaviors.

use a three-step process to use Prompts in the onboarding process.

Step 1: Identify the key milestones in your Straight-Line Onboarding This could be: Right after users sign up, so you can welcome them. Critical onboarding steps users need to complete to experience the value of the product. The moment users achieve their First Strike. Before, during, and after the free trial period ends. Here’s the Straight-Line Onboarding users experience when they sign up for Canva from the homepage: Click “Sign Up” on the homepage On the “Get started” modal, click “Sign up with email” Enter your full name Enter your email Enter your password Click “Get started” Select an option from “What will you be using Canva for?” Click “skip” on “Try Canva Pro” modal Click “skip” on “Add team member” modal Select a template Edit a template Add your own photos Click on download Click on print, download, or share Try “Canva Pro” for 30 days From my perspective, there are seven key milestones in Canva’s onboarding: User signs up Select a template Edit a template Add your own photos Download design Start Canva Pro Trial Canva Pro Free Trial Ends

Step 2: Add behavior-based prompts based on the actions users take inside the product The next step is to add behavior-based prompts to the Straight-Line Onboarding milestones. Not all user journeys are the same. One visitor could sign up for the product and then immediately become distracted by a phone call. Others might sign up, play around with a few core features and decide not to convert. By sending relevant emails filled with juicy content related to a user’s specific needs, the product is kept at the top of mind and kickstarts their motivation to use it again.

There are a ton of powerful tools out there that can help you create behavior-based emails. For better segmentation, look for ones that target based on product and user data such as Intercom, Userlist, or ActiveCampaign.

Let’s apply this process to Canva. The first important onboarding step after users sign up with Canva is selecting a design template. Ask yourself, why might new Canva users not select a template? Maybe they lack inspiration. In that case, use an email to send relevant design templates or inspiration.

Once again, ask yourself why users might not edit a template they’ve selected. Maybe they’re confused about how to do it. Perhaps they need help from the support team.

Repeat this process for the remaining milestones. And don’t forget to send welcome messages!

Take a peek at Appendix II: Conversational Bumpers for easy copy-and-paste templates. Value-based emails focus on communicating the functional, emotional, or social job of a product. How will your product make the user’s life better? Usage tips are helpful nudges that direct users to take steps that will set them up for success. Case studies share customer success stories to inspire users to continue using the product and become paying customers. Share stories to overcome objections. Trial expiration warning emails remind users how many days are left in the trial period and emphasizes the value of upgrading to a paid account. Trial extension emails ask users if they want a trial extension. You’d be surprised how many trial extension requests end up turning into paying customers. Sales touches are when the sales or customer success teams reach out to users. These can be automated or manual emails.

Step 3: Fill in the details

Set one primary CTA for each onboarding email. This should be simple enough to do since each email in the behavior-based email flow corresponds to a key milestone in your Straight-Line Onboarding. Create clear, compelling CTAs for each email that effectively helps users complete the step they haven’t finished yet. Make it personal. Just because a brand targets enterprise customers doesn’t mean the emails can’t be fun. Avoid talking like a robot. Copy like “You’re in!” or “Let the fun begin,” or “Get the latest fashion — and help local charities” are simple yet effective messaging that gives readers that “good feeling” when supporting your brand. Keep it simple. Onboarding emails don’t have to be super short, but they should be easy to digest. Keep copy concise and include eye-catching visuals or gifs to guide readers through the email. Optimise for mobile. Nowadays, the majority of emails (67%!) are opened on mobile. Create emails that render well on mobile. Knowing the ideal subject line length, button size, and CTA position is essential. Don’t forget about the preview text! Segment your emails. Not all user journeys are the same. Some will arrive via a social media promotion. Others will discover you from the app store. Some users will download your app, sign up, and immediately start poking around. Others will download and forget to ever open it. By segmenting new users and tailoring your welcome messages to their experience, you’ll see up to 100.95% higher click-through rates and 18x more revenue.

The kindergartners took a different approach. Instead of strategizing, analysing hypotheticals, debating, proposing, and asking questions, they simply start building. They rarely spoke to each other, and when they did, it was in short bursts, “Here! Now, here!” By the time the 20 minutes were up, they had experimented with 8 to 10 different structures before landing on the most stable one.

The problem in the growth process doesn’t lie with Ideation but in the Prioritization of growth ideas.

For that, I use the Action Priority Matrix:

It’s critical to iterate quickly. If you’re stuck at this step due to engineering bandwidth, consider tools like Appcues, Pendo, UserGuiding, and UserPilot to implement Product Bumpers. Userlist, Intercom or Drift can enact conversational bumpers.

Different entry points to your product will require a different onboarding experience. The journey and knowledge of someone who signed up from an ad will likely be completely different from someone who signed up through a Google search or a webinar campaign. Different Customer Jobs will also require personalized onboarding. Invited users should be treated differently. You’ll need to give them more information about why they’re being invited and why they should use your product. New UI and product changes for existing users should be communicated thoughtfully. You’ll find the most engaged users will be the most resistant to change.

After the initial onboarding is completed, you can onboard users to go deeper or wider with your product. Going Deeper First, go deeper by educating new customers about advanced configurations and features to help them do a Customer Job more effectively. For example, for sales executives who signed up for Calendly to meetings with prospects, the First Strike occurs when a prospect schedules a meeting using their Calendly link. For the next onboarding iteration, you could inform them about advanced features that would help them close more deals, such as: Embedding Calendly on a landing page. Sending SMS notifications to prospects so they don’t miss meetings. Automatically distributing meetings to their team based on availability, priority, or equity. Integrating Facebook pixel code to the Calendly page to launch retargeting campaigns for those who viewed the Calendly page but didn’t book a meeting.

Going Wider The other option is to go wider by introducing solutions to different problems that your customers face.

onboarding customers to additional capabilities and use cases of a product is critical for revenue expansion.

Approach each customer with the idea of helping him or her to solve a problem or achieve a goal, not of selling a product or service.

It’s a bit tricky to know when to get a salesperson involved once a lead becomes an SQL. An overly aggressive sales team could turn off prospects who only want to use the product and be left alone. Instead, the goal is to recreate the kind of experience we’ve come to expect from the Apple store—a friendly environment filled with experts who are ready to answer your questions, teach you about products, and help solve your problems.

Sales outreach in a PLG model generally fits into two buckets: hand-raisers and proactive campaigns. Hand- raisers are those who ask for help. Maybe they’ve filled out a form, asked a question using the in-app chat, requested a high-value feature, or sent you an email. In these instances, sales reps should act more like a customer success team. Their role should be seen as a coach who works hand-in-hand with the customer to resolve blockers. They need to have a strong grasp of the product and customer use cases to cater to the distinct needs of different audiences. These team members should be motivated by understanding the product in a deep and meaningful way, not just crushing their quota.

On the other hand, proactive campaigns are manual or automated outreach to current users that generate demand for paid or higher-tier plans.

Celebrate wins: when users achieve something meaningful, such as completing their First Strike or setting up their account correctly, sales should show them some love and congratulate them. It’s an opportunity for sales to offer additional support by guiding them to the next step or showing a demo of other helpful product features.

Once enough users sign up from one company, sales can initiate an outreach. The pitch should be tailored to the executive pain point. Ideally, lead with personalized insights based on the usage behavior of existing users from that account. This is what a communication tool for companies, Yammer, did to layer sales on top of their freemium offering. They prompted users to invite their coworkers. Once enough workers joined, their sales team would reach out.

Predictable Revenue by Aaron Ross and Marylou Tyler

The Sales Acceleration Formula by Mark Roberge

Spin Selling by Neil Rackham

Establish your onboarding team: To deliver an effective, immersive, and seamless onboarding experience for new users, your approach needs to be collaborative across functions and departments. Onboarding can’t just be

quilted together from the work of different departments. It must be holistic. If it’s not, users receive a fractured experience. Understand your user’s desired outcomes: The best way to get users to perceive, realise, and adopt the value of a product is to figure out the reason they signed up in the first place. Particularly, you need to define what value means to your users. Refine your onboarding success milestones: Your team needs to have a clear picture of what it means to successfully onboard new users. Evaluate and optimise your onboarding path: To minimise the time it takes for new users to experience a product’s value, you have to map out your user’s journey and determine which steps should be delayed or eliminated. Keep new users engaged: To help guide new users to experience your product’s value, consider using triggers inside and outside your product. These could include product tours, welcome messages, progress bars for in-app triggers and onboarding emails, SMS and app notifications. Apply the changes and repeat: User onboarding is a continuous process, and you need to continue to iterate on the onboarding experience.

Accelerate: The Science of Lean Software and DevOps: Building and Scaling High Performing Technology Organizations

Common traps were stepped in—like trying a top-down mandate to adopt Agile, thinking it was one size fits all, not focusing on measurement (or the right things to measure), leadership behavior not changing, and treating the transformation like a program instead of creating a learning organization (never done).

the focus was moving to outcome-based team structures, knowing our cycle time (by understanding our value stream map), limiting the blast radius (starting with one to two teams vs. boiling the ocean), using data to drive actions and decisions, acknowledging that work is work (don’t have a backlog of features and a backlog of technical debt and a backlog of operational work; instead, have a single backlog because NFRs are features and reducing technical debt improves stability of the product).

capabilities are classified into five categories: Continuous delivery Architecture Product and process Lean management and monitoring Cultural

DevOps emerged from a small number of organizations facing a wicked problem: how to build secure, resilient, rapidly evolving distributed systems at scale.

maturity models focus on helping an organization “arrive” at a mature state and then declare themselves done with their journey, whereas technology transformations should follow a continuous improvement paradigm.

The most innovative companies and highest-performing organizations are always striving to be better and never consider themselves “mature” or “done” with their improvement or transformation journey

maturity models are quite often a “lock-step” or linear formula, prescribing a similar set of technologies, tooling, or capabilities for every set of teams and organizations to progress.

capability models are multidimensional and dynamic, allowing different parts of the organization to take a customized approach to improvement, and focus on capabilities that will give them the most benefit

Teams have their own context, their own systems, their own goals, and their own constraints, and what we should focus on next to accelerate our transformation depends on those things.

capability models focus on key outcomes and how the capabilities, or levers, drive improvement in those outcomes—that is, they are outcome based. This provides technical leadership with clear direction and strategy on high-level goals (with a focus on capabilities to improve key outcomes). It also enables team leaders and individual contributors to set improvement goals related to the capabilities their team is focusing on for the current time period.

what is good enough and even “high-performing” today is no longer good enough in the next year.

capability models allow for dynamically changing environments and allow teams and organizations to focus on developing the skills and capabilities needed to remain competitive.

There are disagreements about which capabilities to focus on. Product vendors often favour capabilities that align with their product offerings. Consultants favor capabilities that align with their background, their offering, and their homegrown assessment tool. We have seen organizations try to design their own assessment models, choose solutions that align with the skill sets of internal champions, or succumb to analysis paralysis because of the sheer number of areas that need improvement in their organization.

When compared to the 2016 results, the gap between high performers and low performers narrowed for tempo (deployment frequency and change lead time) and widened for stability (mean time to recover and change failure rate). We speculate that this is due to low-performing teams working to increase tempo but not investing enough in building quality into the process. The result is larger deployment failures that take more time to restore service. High performers understand that they don’t have to trade speed for stability or vice versa, because by building quality in they get both.

There have been many attempts to measure the performance of software teams. Most of these measurements focus on productivity. In general, they suffer from two drawbacks. First, they focus on outputs rather than outcomes. Second, they focus on individual or local measures rather than team or global ones.

three examples: lines of code, velocity, and utilisation

Some companies even required developers to record the lines of code committed per week.1 However, in reality we would prefer a 10-line solution to a 1,000-line solution to a problem. Rewarding developers for writing lines of code leads to bloated software that incurs higher maintenance costs and higher cost of change.

it’s even better if we can solve a problem without writing code at all or by deleting code (perhaps by a business process change).

However, minimizing lines of code isn’t an ideal measure either. At the extreme, this too has its drawbacks: accomplishing a task in a single line of code that no one else can understand is less desirable than writing a few lines of code that are easily understood and maintained.

velocity. In many schools of Agile, problems are broken down into stories. Stories are then estimated by developers and assigned a number of “points” representing the relative effort expected to complete them. At the end of an iteration, the total number of points signed off by the customer is recorded—this is the team’s velocity. Velocity is designed to be used as a capacity planning tool; for example, it can be used to extrapolate how long it will take the team to complete all the work that has been planned and estimated.

Using velocity as a productivity metric has several flaws. First, velocity is a relative and team-dependent measure, not an absolute one. Teams usually have significantly different contexts which render their velocities incommensurable. Second, when velocity is used as a productivity measure, teams inevitably work to game their velocity. They inflate their estimates and focus on completing as many stories as possible at the expense of collaboration with other teams

Not only does this destroy the utility of velocity for its intended purpose, it also inhibits collaboration between teams

productivity. The problem with this method is that high utilization is only good up to a point. Once utilization gets above a certain level, there is no spare capacity (or “slack”) to absorb unplanned work, changes to the plan, or improvement work. This results in longer lead times to complete work. Queue theory in maths tells us that as utilization approaches 100%, lead times approach infinity—in other words, once you get to very high levels of utilization, it takes teams exponentially longer to get anything done.

Since lead time—a measure of how fast work can be completed—is a productivity metric that doesn’t suffer from the drawbacks of the other metrics we’ve seen, it’s essential that we manage utilization to balance it against lead time in an economically optimal way.

A successful measure of performance

is rewarding developers for throughput and operations for stability: this is a key contributor to the “wall of confusion” in which development throws poor quality code over the wall to operations, and operations puts in place painful change management processes as a way to inhibit change

our measure should focus on outcomes not output: it shouldn’t reward people for putting in large amounts of busywork that doesn’t actually help achieve organizational goals.

In our search for measures of delivery performance that meet these criteria, we settled on four: delivery lead time, deployment frequency, time to restore service, and change fail rate.

The elevation of lead time as a metric is a key element of Lean theory. Lead time is the time it takes to go from a customer making a request to the request being satisfied.

In the context of product development, where we aim to satisfy multiple customers in ways they may not anticipate, there are two parts to lead time: the time it takes to design and validate a product or feature, and the time to deliver the feature to customers.

Table 2.1 Design vs. Delivery Product Design and Development Product Delivery (Build, Testing, Deployment) Create new products and services that solve customer problems using hypothesis-driven delivery, modern UX, design thinking. Enable fast flow from development to production and reliable releases by standardizing work, and reducing variability and batch sizes. Feature design and implementation may require work that has never been performed before. Integration, test, and deployment must be performed continuously as quickly as possible. Estimates are highly uncertain. Cycle times should be well-known and predictable. Outcomes are highly variable. Outcomes should have low variability.

Shorter product delivery lead times are better since they enable faster feedback on what we are building and allow us to course correct more rapidly. Short lead times are also important when there is a defect or outage and we need to deliver a fix rapidly and with high confidence.

The second metric to consider is batch size. Reducing batch size is another central element of the Lean paradigm.

keys to the success of the Toyota production system. Reducing batch sizes reduces cycle times and variability in flow, accelerates feedback, reduces risk and overhead, improves efficiency, increases motivation and urgency, and reduces costs and schedule growth

In software, batch size is hard to measure and communicate across contexts as there is no visible inventory. Therefore, we settled on deployment frequency as a proxy for batch size since it is easy to measure and typically has low variability.By “deployment” we mean a software deployment to production or to an app store. A release (the changes that get deployed) will typically consist of multiple version control commits, unless the organization has achieved a single-piece flow where each commit can be released to production (a practice known as continuous deployment)

Delivery lead times and deployment frequency are both measures of software delivery performance tempo.

Traditionally, reliability is measured as time between failures. However, in modern software products and services, which are rapidly changing complex systems, failure is inevitable, so the key question becomes: How quickly can service be restored?

Finally, a key metric when making changes to systems is what percentage of changes to production (including, for example, software releases and infrastructure configuration changes) fail

lead to service impairment or outage, require a hotfix, a rollback, a fix-forward, or a patch)

The four measures selected are shown in Figure 2.1.

Cluster analysis is a foundational technique in statistical data analysis that attempts to group responses so that responses in the same group are more similar to each other than to responses in other groups.

This technique has no understanding of the semantics of responses—in other words, it doesn’t know what counts as a “good” or “bad” response for any of the measures.

Table 2.2 Software. Delivery Performance for 2016 2016 High Performers Medium Performers Low Performers Deployment Frequency On demand (multiple deploys per day) Between once per week and once per month Between once per month and once every six months Lead Time for Changes Less than one hour Between one week and one month Between one month and six months MTTR Less than one hour Less than one day Less than one day* Change Failure Rate 0-15% 31-45% 16-30%

Much dogma in our industry still rests on the false assumption that moving faster means trading off against other performance goals, rather than enabling and reinforcing them.

measures for lead time, deployment frequency, time to restore service, and change fail rate, and ask your teams to set targets for these measures.

In organizations with a learning culture, they are incredibly powerful. But “in pathological and bureaucratic organizational cultures, measurement is used as a form of control, and people hide information that challenges existing rules, strategies, and power structures.

’whenever there is fear, you get the wrong numbers’”

Organizational culture can exist at three levels in organizations: basic assumptions, values, and artifacts (Schein 1985)

At the first level, basic assumptions are formed over time as members of a group or organization make sense of relationships, events, and activities. These interpretations are the least “visible” of the levels—and are the things that we just “know,” and may find difficult to articulate, after we have been long enough in a team. The second level of organizational culture are values, which are more “visible” to group members as these collective values and norms can be discussed and even debated by those who are aware of them. Values provide a lens through which group members view and interpret the relationships, events, and activities around them. Values also influence group interactions and activities by establishing social norms, which shape the actions of group members and provide contextual rules (Bansal 2003). These are quite often the “culture” we think of when we talk about the culture of a team and an organization. The third level of organizational culture is the most visible and can be observed in artifacts. These artifacts can include written mission statements or creeds, technology, formal procedures, or even heroes and rituals (Pettigrew 1979)

(Westrum 2014): Pathological (power-oriented) organizations are characterised by large amounts of fear and threat. People often hoard information or withhold it for political reasons, or distort it to make themselves look better. Bureaucratic (rule-oriented) organizations protect departments. Those in the department want to maintain their “turf,” insist on their own rules, and generally do things by the book—their book. Generative (performance oriented) organizations focus on the mission. How do we accomplish our goal? Everything is subordinated to good performance, to doing what we are supposed to do. Westrum’s further insight was that the organizational culture predicts the way information flows through an organization. Westrum provides three characteristics of good information: It provides answers to the questions that the receiver needs answered. It is timely. It is presented in such a way that it can be effectively used by the receiver

Pathological (Power-Oriented) Bureaucratic (Rule-Oriented) Generative (Performance-Oriented) Low cooperation Modest cooperation High cooperation Messengers “shot” Messengers neglected Messengers trained Responsibilities shirked Narrow responsibilities Risks are shared Bridging discouraged Bridging tolerated Bridging encouraged Failure leads to scapegoating Failure leads to justice Failure leads to inquiry Novelty crushed Novelty leads to problems Novelty implemented

“who is on a team matters less than how the team members interact, structure their work, and view their contributions” (Google 2015). In other words, it all comes down to team dynamics.

Continuous delivery is a set of capabilities that enable us to get changes of all kinds—features, configuration changes, bug fixes, experiments—into production or into the hands of users safely, quickly, and sustainably

five key principles at the heart of continuous delivery:

Build quality in.

“Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place”

In continuous delivery, we invest in building a culture supported by tools and people where we can detect any issues quickly, so that they can be fixed straight away when they are cheap to detect and resolve.

Work in small batches.

By splitting work up into much smaller chunks that deliver measurable business outcomes quickly for a small part of our target market, we get essential feedback on the work we are doing so that we can course correct.

Computers perform repetitive tasks; people solve problems.

One important strategy to reduce the cost of pushing out changes is to take repetitive work that takes a long time, such as regression testing and software deployments, and invest in simplifying and automating this work. Thus, we free up people for higher-value problem-solving work, such as improving the design of our systems and processes in response to feedback.

Relentlessly pursue continuous improvement. The most important characteristic of high-performing teams is that they are never satisfied: they always strive to get better. High performers make improvement part of everybody’s daily work.

Everyone is responsible.

in bureaucratic organizations teams tend to focus on departmental goals rather than organizational goals.

A key objective for management is making the state of these system-level outcomes transparent, working with the rest of the organization to set measurable, achievable, time-bound goals for these outcomes, and then helping their teams work toward them.

In order to implement continuous delivery, we must create the following foundations: Comprehensive configuration management. It should be possible to provision our environments and build, test, and deploy our software in a fully automated fashion purely from information stored in version control. Any change to environments or the software that runs on them should be applied using an automated process from version control. This still leaves room for manual approvals—but once approved, all changes should be applied automatically.

Continuous integration (CI). Many software development teams are used to developing features on branches for days or even weeks. Integrating all these branches requires significant time and rework. Following our principle of working in small batches and building quality in, high- performing teams keep branches short-lived (less than one day’s work) and integrate them into trunk/master frequently. Each change triggers a build process that includes running unit tests. If any part of this process fails, developers fix it immediately.

Continuous testing. Testing is not something that we should only start once a feature or a release is “dev complete.” Because testing is so essential, we should be doing it all the time as an integral part of the development process. Automated unit and acceptance tests should be run against every commit to version control to give developers fast feedback on their changes. Developers should be able to run all automated tests on their workstations in order to triage and fix defects. Testers should be performing exploratory testing continuously against the latest builds to come out of CI. No one should be saying they are “done” with any work until all relevant automated tests have been written and are passing.

we modelled and measured a number of capabilities: The use of version control for application code, system configuration, application configuration, and build and configuration scripts Comprehensive test automation that is reliable, easy to fix, and runs regularly Deployment automation Continuous integration Shifting left on security: bringing security—and security teams—in process with software delivery rather than as a downstream phase Using trunk-based development as opposed to long-lived feature branches Effective test data management

We ask respondents to report, on a Likert scale, the extent to which they agree or disagree with the following statements: Our application code is in a version control system. Our system configurations are in a version control system. Our application configurations are in a version control system. Our scripts for automating build and configuration are in a version control system.

We then use statistical analysis to determine the extent to which these capabilities influence the outcomes we care about.

When teams practise CD, deployment to production is not an enormous, big-bang event—it’s something that can be done during normal business hours as a part of regular daily work.

A loosely coupled, well-encapsulated architecture (this is discussed in more detail in Chapter 5) Teams that can choose their own tools based on what is best for the users of those tools We show these relationships in Figure 4.1.

The Visible Ops Handbook,

John Seddon, creator of the Vanguard Method, emphasizes the importance of reducing what he calls failure demand— demand for work caused by the failure to do the right thing the first time by improving the quality of service we provide. This is one of the key goals of continuous delivery, with its focus on working in small batches with continuous in-process testing.

The following practices predict IT performance: Having automated tests that are reliable: when the automated tests pass, teams are confident that their software is releasable. Furthermore, they are confident that test failures indicate a real defect. Too many test suites are flaky and unreliable, producing false positives and negatives— it’s worth investing ongoing effort into a suite that is reliable. One way to achieve this is to put automated tests that are not reliable in a separate quarantine suite that is run independently. Or, of course, you could just delete them. If they’re version-controlled (as they should be), you can always get them back. Developers primarily create and maintain acceptance tests, and they can easily reproduce and fix them on their development workstations.

It’s interesting to note that having automated tests primarily created and maintained either by QA or an outsourced party is not correlated with IT performance. The theory behind this is that when developers are involved in creating and maintaining acceptance tests, there are two important effects. First, the code becomes more testable when developers write tests. This is one of the main reasons why test-driven development (TDD) is an important practice—it forces developers to create more testable designs. Second, when developers are responsible for the automated tests, they care more about them and will invest more effort into maintaining and fixing them. None of this means that we should be getting rid of testers. Testers serve an essential role in the software delivery lifecycle, performing manual testing such as exploratory, usability, and acceptance testing, and helping to create and evolve suites of automated tests by working alongside developers.

TRUNK-BASED DEVELOPMENT Our research also found that developing off trunk/master rather than on long-lived feature branches was correlated with higher delivery performance. Teams that did well had fewer than three active branches at any time, their branches had very short lifetimes (less than a day) before being merged into trunk and never had “code freeze” or stabilisation periods. It’s worth re-emphasizing that these results are independent of team size, organization size, or industry.

We have heard, for example, that branching strategies are effective if development teams don’t maintain branches for too long—and we agree that working on short-lived branches that are merged into trunk at least daily is consistent with commonly accepted continuous integration practices.

We should note, however, that GitHub Flow is suitable for open source projects whose contributors are not working on a project full time. In that situation, it makes sense for branches that part-time contributors are working on to live for longer periods of time without being merged.

ADOPTING CONTINUOUS DELIVERY

implementing these practices often requires rethinking everything—from how teams work, to how they interact with each other, to what tools and processes they use. It also requires substantial investment in test and deployment automation, combined with relentless work to simplify systems architecture on an ongoing basis to ensure that this automation isn’t prohibitively expensive to create and maintain. Thus, a critical obstacle to implementing continuous delivery is enterprise and application architecture.

According to Google Trends, Scrum overtook Extreme Programming around January 2006, and has continued to grow in popularity while Extreme Programming has flatlined.

The key pattern which connects these feedback loops is known as a deployment pipeline, see https:// continuousdelivery.com/implementing/patterns/

TYPES OF SYSTEMS AND DELIVERY PERFORMANCE

Greenfield: new systems that have not yet been released Systems of engagement (used directly by end users) Systems of record (used to store business-critical information where data consistency and integrity is critical) Custom software developed by another company Custom software developed in-house Packaged, commercial off-the-shelf software Embedded software that runs on a manufactured hardware device Software with a user- installed component (including mobile apps) Non-mainframe software that runs on servers operated by another company Non-mainframe software that runs on our own servers Mainframe software We

We can do most of our testing without requiring an integrated environment.1 We can and do deploy or release our application independently of other applications/services it depends on. It appears that these characteristics of architectural decisions, which we refer to as testability and deployability, are important in creating high performance.

the biggest contributor to continuous delivery in the 2017 analysis

is whether teams can:

Make large-scale changes to the design of their system without the permission of somebody outside the team.
Make large-scale changes to the design of their system without depending on other teams to make changes in their systems or creating significant work for other teams.
Complete their work without communicating and coordinating with people outside their team.
Deploy and release their product or service on demand, regardless of other services it depends upon.
Do most of their testing on demand, without requiring an integrated test environment.
Perform deployments during normal business hours with negligible downtime.

teams which scored highly on architectural capabilities, little communication is required between delivery teams to get their work done, and the architecture of the system is designed to enable teams to test, deploy, and change their systems without dependencies on other teams.

To enable this, we must also ensure delivery teams are cross-functional, with all the skills necessary to design, develop, test, deploy, and operate the system on the same team.

“organizations which design systems . . . are constrained to produce designs which are copies of the communication structures of these organizations”

The goal is for your architecture to support the ability of teams to get their work done—from design through to deployment—without requiring high-bandwidth communication between teams.

Architectural approaches that enable this strategy include the use of bounded contexts and APIs as a way to decouple large domains into smaller, more loosely coupled units, and the use of test doubles and virtualization as a way to test services or components in isolation. Service-oriented architectures are supposed to enable these outcomes, as should any true microservices architecture.

Unfortunately, in real life, many so-called service-oriented architectures don’t permit testing and deploying services independently of each other, and thus will not enable teams to achieve higher performance.

The goal of a loosely coupled architecture is to ensure that the available communication bandwidth isn’t overwhelmed by fine-grained decision-making at the implementation level, so we can instead use that bandwidth for discussing higher-level shared goals and how to achieve them.

To measure productivity, we calculated the following metric from our data: number of deploys per day per developer. The orthodox view of scaling software development teams states that while adding developers to a team may increase overall productivity, individual developer productivity will in fact decrease due to communication and integration overheads. However, when looking at number of deploys per day per developer for respondents who deploy at least once per day,

As the number of developers increases, we found: Low performers deploy with decreasing frequency. Medium performers deploy at a constant frequency. High performers deploy at a significantly increasing frequency. By focusing on the factors that predict high delivery performance—a goal-oriented generative culture, a modular architecture, engineering practices that enable continuous delivery, and effective leadership—we can scale deployments per developer per day linearly or better with the number of developers

ALLOW TEAMS TO CHOOSE THEIR OWN TOOLS

When teams can decide which tools they use, it contributes to software delivery performance and, in turn, to organizational performance.

That said, there is a place for standardization, particularly around the architecture and configuration of infrastructure.

Another example is Steve Yegge’s description of Amazon’s move to an SOA, in which he notes, “Debugging problems with someone else’s code gets a LOT harder, and is basically impossible unless there is a universal standard way to run every service in a debuggable sandbox”

Another finding in our research is that teams that build security into their work also do better at continuous delivery. A key element of this is ensuring that information security teams make pre approved, easy-to-consume libraries, packages, toolchains, and processes available for developers and IT operations to use in their work.

ARCHITECTS SHOULD FOCUS ON ENGINEERS AND OUTCOMES, NOT TOOLS OR TECHNOLOGIES.

Discussions around architecture often focus on tools and technologies. Should the organization adopt microservices or serverless architectures? Should they use Kubernetes or Mesos? Which CI server, language, or framework should they standardize on? Our research shows that these are wrong questions to focus on.

What tools or technologies you use are irrelevant if the people who must use them hate using them, or if they don’t achieve the outcomes and enable the behaviors we care about. What is important is enabling teams to make changes to their products or services without depending on other teams or systems.

INTEGRATING INFOSEC INTO THE DELIVERY LIFECYCLE

Infosec is a vitally important function in an era where threats are ubiquitous and ongoing. However, infosec teams are often poorly staffed

and they are usually only involved at the end of the software delivery lifecycle when it is often painful and expensive to make changes necessary to improve security. Furthermore, many developers are ignorant of common security risks, such as the OWASP Top 10,1 and how to prevent them.

SHIFTING LEFT ON SECURITY

What does “shifting left” entail? First, security reviews are conducted for all major features, and this review process is performed in such a way that it doesn’t slow down the development process. How can we ensure that paying attention to security doesn’t reduce development throughput?

This means infosec experts should contribute to the process of designing applications, attend and provide feedback on demonstrations of the software, and ensure that security features are tested as part of the automated test suite.

make it easy for developers to do the right thing

This can be achieved by ensuring that there are easy-to-consume, pre approved libraries, packages, toolchains, and processes available for developers and IT operations.

there is a shift from information security teams doing the security reviews themselves to giving the developers the means to build security in. This reflects two realities: First, it’s much easier to make sure that the people building the software are doing the right thing than inspecting nearly completed systems and features to find significant architectural problems and defects that involve a substantial rework.

Second, information security teams simply don’t have the capacity to be doing security reviews when deployments are frequent. In many organizations, security and compliance is a significant bottleneck for taking systems from “dev complete” to live.

THE RUGGED MOVEMENT

Rugged DevOps is the combination of DevOps with the Rugged Manifesto.

we modeled Lean management and its application to software delivery with three components

Limiting work in progress (WIP), and using these limits to drive process improvement and increase throughput Creating and maintaining visual displays showing key quality and productivity metrics and the current status of work (including defects), making these visual displays available to both engineers and leaders, and aligning these metrics with operational goals Using data from application performance and infrastructure monitoring tools to make business decisions on a daily basis.

What is most interesting is that WIP limits on their own do not strongly predict delivery performance. It’s only when they’re combined with the use of visual displays and have a feedback loop from production monitoring tools back to delivery teams or the business that we see a strong effect.

In the case of WIP, we’re not just asking teams whether they are good at limiting their WIP and have processes in place to do so. We’re also asking if their WIP limits make obstacles to higher flow visible, and if teams remove these obstacles through process improvement, leading to improved throughput. WIP limits are no good if they don’t lead to improvements that increase flow.

ask whether information on quality and productivity is readily available, if failures or defect rates are shown publicly using visual displays, and how readily this information is available. The central concepts here are the types of information being displayed, how broadly it is being shared, and how easy it is to access.

IMPLEMENT A LIGHTWEIGHT CHANGE MANAGEMENT PROCESS

We asked about four possible scenarios: All production changes must be approved by an external body (such as a manager or CAB). Only high-risk changes, such as database changes, require approval. We rely on peer review to manage changes. We have no change approval process.

Teams that reported no approval process or used peer review achieved higher software delivery performance.

In short, approval by an external body (such as a manager or CAB) simply doesn’t work to increase the stability of production systems, measured by the time to restore service and change fail rate. However, it certainly slows things down. It is, in fact, worse than having no change approval process at all.

use a lightweight change approval process based on peer review, such as pair programming or intra team code review, combined with a deployment pipeline to detect and reject bad changes. This process can be used for all kinds of changes, including code, infrastructure, and database changes.

What About Segregation of Duties?

First, when any kind of change is committed, somebody who wasn’t involved in authoring the change should review it either before or immediately following commit to version control. This can be somebody on the same team. This person should approve the change by recording their approval in a system of record such as GitHub (by approving the pull request) or a deployment pipeline tool (by approving a manual stage immediately following commit).

Second, changes should only be applied to production using a fully automated process that forms part of a deployment pipeline.1 That is, no changes should be able to be made to production unless they have been committed to version control, validated by the standard build and test process, and then deployed through an automated process triggered through a deployment pipeline.

much of what has been implemented is faux Agile—people following some of the common practices while failing to address wider organizational culture and processes. For example, in larger companies it’s still common to see months spent on budgeting, analysis, and requirements-gathering before work starts; to see work batched into big projects with infrequent releases; and for customer feedback to be treated as an afterthought.

In contrast, both Lean product development and the Lean startup movement emphasize testing your product’s design and business model by performing user research frequently, from the very beginning of the product life cycle.

four capabilities which make up our model of a Lean approach to product development.

The extent to which teams slice up products and features into small batches that can be completed in less than a week and released frequently, including the use of MVPs (minimum viable products). Whether teams have a good understanding of the flow of work from the business all the way through to customers, and whether they have visibility into this flow, including the status of products and features. Whether organizations actively and regularly seek customer feedback and incorporate this feedback into the design of their products. Whether development teams have the authority to create and change specifications as part of the development process without requiring approval.

Working in Small Batches The key to working in small batches is to have work decomposed into features that allow for rapid development.

TEAM EXPERIMENTATION Many development teams working in organizations that claim to be Agile are nonetheless obliged to follow requirements created by different teams.

One of the points of Agile development is to seek input from customers throughout the development process, including early stages.

if a development team isn’t allowed, without authorization from some outside body, to change requirements or specifications in response to what they discover, their ability to innovate is sharply inhibited.

In software organizations, the ability to work and deliver in small batches is especially important because it enables teams to integrate user research into product development and delivery.

where code deployments are most painful, you’ll find the poorest software delivery performance, organizational performance, and culture.

If developers or testers aren’t aware of the deployment process, there are probably barriers hiding the work from them. And barriers that hide the work of deployment from developers are rarely good, because they isolate developers from the downstream consequences of their work.

teams that implement comprehensive test and deployment automation; use continuous integration, including trunk-based development; shift left on security; effectively manage test data; use loosely coupled architectures; can work independently; and use version control of everything required to reproduce production environments decrease their deployment pain.

In particular, be aware that if deployments have to be performed outside of normal business hours, that’s a sign of architectural problems that should be addressed.

It’s entirely possible—given sufficient investment—to build complex, large-scale distributed systems which allow for fully automated deployments with zero downtime.

Fundamentally, most deployment problems are caused by a complex, brittle deployment process. This is typically the result of three factors. First, software is often not written with deployability in mind. A common symptom here is when complex, orchestrated deployments are required because the software expects its environment and dependencies to be set up in a very particular way and does not tolerate any kind of deviation from these expectations, giving little useful information to administrators on what is wrong and why it is failing to operate correctly. (These characteristics also represent poor design for distributed systems.) Second, the probability of a failed deployment rises substantially when manual changes must be made to production environments as part of the deployment process. Manual changes can easily lead to errors caused by typing, copy/paste mistakes, or poor or out-of-date documentation. Furthermore, environments whose configuration is managed manually often deviate substantially from each other (a problem known as “configuration drift”), leading to significant amounts of work at deploy time as operators debug to understand configuration differences, potentially making further manual changes that add to the problem. Finally, complex deployments often require multiple handoffs between teams, particularly in siloed organizations where database administrators, network administrators, systems administrators, infosec, testing/QA, and developers all work in separate teams. In order to reduce deployment pain, we should: Build systems that are designed to be deployed easily into multiple environments, can detect and tolerate failures in their environments, and can have various components of the system updated independently Ensure that the state of production systems can be reproduced (with the exception of production data) in an automated fashion from information in version control Build intelligence into the application and the platform so that the deployment process can be as simple as possible Applications designed for a platform-as-a-service, such as Heroku, Pivotal Cloud Foundry, Red Hat OpenShift, Google Cloud Platform, Amazon Web Services, or Microsoft Azure, can typically be deployed using a single command.

University of California at Berkeley and a pioneering researcher on job burnout, found six organizational risk factors that predict burnout (Leiter and Maslach 2008):

Work overload: job demands exceed human limits.
Lack of control: inability to influence decisions that affect your job.
Insufficient rewards: insufficient financial, institutional, or social rewards.
Breakdown of community: unsupportive workplace environment.
Absence of fairness: lack of fairness in decision-making processes.
Value conflicts: mismatch in organizational values and the individual’s values.

HOW TO REDUCE OR FIGHT BURNOUT

Organizational culture. Strong feelings of burnout are found in organizations with a pathological, power-oriented culture. Managers are ultimately responsible for fostering a supportive and respectful work environment, and they can do so by creating a blame-free environment, striving to learn from failures, and communicating a shared sense of purpose. Managers should also watch for other contributing factors and remember that human error is never the root cause of failure in systems. Deployment pain. Complex, painful deployments that must be performed outside of business hours contribute to high stress and feelings of lack of control.4 With the right practices in place, deployments don’t have to be painful events. Managers and leaders should ask their teams how painful their deployments are and fix the things that hurt the most. Effectiveness of leaders. Responsibilities of a team leader include limiting work in process and eliminating roadblocks for the team so they can get their work done. It’s not surprising that respondents with effective team leaders reported lower levels of burnout. Organizational investments in DevOps. Organizations that invest in developing the skills and capabilities of their teams get better outcomes. Investing in training and providing people with the necessary support and resources (including time) to acquire new skills are critical to the successful adoption of DevOps. Organizational performance. Our data shows that Lean management and continuous delivery practices help improve software delivery performance, which in turn improves organizational performance. At the heart of Lean management is giving employees the necessary time and resources to improve their own work. This means creating a work environment that supports experimentation, failure, and learning, and allows employees to make decisions that affect their jobs. This also means creating space for employees to do new, creative, value-add work during the work week—and not just expecting them to devote extra time after hours. A good example of this is Google’s 20% time policy, where the company allows employees 20% of their week to work on new projects, or IBM’s “THINK Friday” program, where Friday afternoons are designated for time without meetings and employees are encouraged to work on new and exciting projects they normally don’t have time for

Net Promoter Score is calculated based on a single question: How likely is it that you would recommend our company/product/service to a friend or colleague?

Customers who give a score of 9 or 10 are considered promoters.

Those giving a score of 7 or 8 are passives. Passives are satisfied, but much less enthusiastic customers.

Those giving a score from 0 to 6 are detractors. Detractors are more expensive to acquire and retain, they defect faster, and can hurt the business through negative word of mouth.

We asked two questions to capture the employee Net Promoter Score: Would you recommend your ORGANIZATION as a place to work to a friend or colleague? Would you recommend your TEAM as a place to work to a friend or colleague?

Employee engagement is not just a feel-good metric—it drives business outcomes. We found that the employee Net Promoter Score was significantly correlated with the following constructs: The extent to which the organization collects customer feedback and uses it to inform the design of products and features The ability of teams to visualise and understand the flow of products or features through development all the way to the customer The extent to which employees identify with their organization’s values and goals, and the effort they are willing to put in to make the organization successful.

When employees see the connection between the work they do and its positive impact on customers, they identify more strongly with the company’s purpose, which leads to better software delivery and organizational performance.

NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. For example, if 40% of employees are detractors and only 20% are promoters, the Net Promoter Score is -20%.

a key point is that identity includes values alignment with the goals of the team and organization.

burnout is a mismatch of personal and organizational values.

a sense of identity can help reduce burnout by aligning personal and organizational values.

This is in contrast to the way many companies still work: requirements are handed down to development teams who must then deliver large stacks of work in batches. In this model, employees feel little control over the products they build and the customer outcomes they create, and little connection to the organizations they work for.

our measure of job satisfaction looks at a few key things: if you are satisfied in your work, if you are given the tools and resources to do your work, and if your job makes good use of your skills and abilities.

Automation matters because it gives over to computers the things computers are good at—rote tasks that require no thinking and that in fact are done better when you don’t think too much about them. Since humans are so bad at these kinds of tasks, turning them over to computers allows people to focus on the things they’re good at:

Anita Borg Institute has excellent tools for advancing women in technology. It includes the Grace Hopper Conference. Though not without its issues, it’s an empowering experience for many women to be able to attend an all- or largely-women technical conference, pulling over 18,000 women in 2017 alone.2 Geek Feminism is a great online resource for supporting women in geek communities.3 Project Include is a fantastic resource to support diversity along several axes, all online and open source.

Digital Body Language: How to Build Trust and Connection, No Matter the Distance

to suss out the body language of audiences. Blank expressions mean that I’m going too fast and need to slow down. Crossed arms signal defensiveness or resentment. As for me, I know that gesturing or adjusting my hair too much signals my own lack of confidence.

Being a good leader today means not only being aware of other people’s signals and cues but also mastering this new digital body language that didn’t exist twenty years ago,

I’d wasted entire mornings endlessly re-reading a single email, trying to figure out what an ellipsis or the single word query Thoughts? meant. I’d heard about friendships imploding over a WhatsApp conversation. What about the “like” on Facebook or Instagram from a colleague who hadn’t returned your two recent phone calls? (Did it signal “I’m sorry”? Was it a prelude to calling you back, a way of testing the friendship waters? Or was it a signal that from now on, you and that person would now be communicating exclusively via social media?

Most people have good intentions. They just may not know how to convey those intentions

Here’s another: A positive, enthusiastic female boss headquartered in New York is assigned to lead a remote team based in Dallas. One of its members, a young guy named Sam, flies to New York a few months later for his first face-to-face meeting with his new boss. After a good preliminary discussion, the boss asks, “So what were your first impressions of me?” Sam hesitates, then admits they weren’t all that good. Almost all of his boss’s communications were no frills and to the point, leading Sam to believe she was unfriendly, withholding, and probably cold. In person, though, she’s the opposite. What made him feel that way? she asks. Sam had to confess it was because she didn’t use abbreviations or exclamation marks. !!!!!!!!!

book You Just Don’t Understand: Women and Men in Conversation.

nonverbal cues make up 60 to 80 percent of face-to-face communication.7 Anthropologist Edward T. Hall called these signals and cues—posture, proximity, smiles, pauses, yawns, tone, facial expressions, eye contact, hand gestures, and volume—“the silent language.”

Our ability to care is compromised. Remember how a handshake after a job well done used to go a long way toward making you feel valued?

Our timing is off. When someone standing two feet away asks us a question, we respond instantly. We also know when a conversation has come to a natural end. But today, we are no longer obliged to respond to someone immediately (we have stuff to do!). At the same time, responding to employees’ or clients’ “urgent” texts five hours later may leave them feeling ignored and resentful.

How can we find the balance between busy inboxes and response times that convey respect?

technology creates masks. Today we all have the option of concealing what we really feel and think. Choosing to email or text can cloak uncomfortable feelings—but it can also create a whole lot of ambiguity and misunderstanding.

What is implicit in body language now has to be explicit in our digital body language.

Traditional Body Language involves: a head tilted to one side, signaling that another person is listening attentively. Digital Body Language involves: “liking” a text. Praising another person’s input in an email. Making a detailed comment verbally or in the chat box during a video call when someone expresses an idea, instead of just saying, “I agree.” Traditional Body Language involves: stroking your chin or pausing for a few seconds, signaling that you’re thinking about what’s just been said. Digital Body Language involves: taking a few extra minutes to respond to a text, indicating respect for what it says. Writing a long or detailed response to an email that shows thought and focus. Pausing during a conference call to take in what’s been said instead of blurting out the first thing that comes to mind. Traditional Body Language involves: smiling. (It’s contagious. Our smile lights up the areas of the brain linked to happiness, which is why the people we smile at tend to smile back and/ or feel a stronger sense of connection with us.) Digital Body Language involves: using exclamation points and emojis (well, within reason). Adding a simple Have a great weekend to the end of an email. Laughing during a video meeting. Traditional Body Language involves: nodding. Bobbing our heads up and down makes us seem both interested and approachable. Nods, like smiles, are infectious, meaning that if we nod while we’re speaking, others are more likely to go along with what we say. Digital Body Language involves: responding promptly to a text, showing engagement by replying to an email with substantive comments. Writing I completely agree with what you’re saying in the group chat during a Microsoft Teams meeting. Using a thumbsup emoji in a video meeting.

four laws of digital body language: Value Visibly, Communicate Carefully, Collaborate Confidently, and Trust Totally

Valuing Visibly means we’re always sensitive to other people’s needs and schedules. Valuing Visibly means we understand that reading the emails in our inbox with care and attention is the new art of listening. When we Value Visibly, we’re willing to sit with others’ discomfort without feeling the need to fix or resolve it. Valuing Visibly means recognizing other people—and not being in a hurry about it either

Imagine you’ve just pulled an all-nighter on a project, and your boss responds with ty or tx. It’s not enough, right? In fact, it can be enraging. Now, imagine handing this same project to your boss in person, and getting a smile and a “thank you.” You’d feel better. Valuing Visibly is about making the time and effort to communicate the equivalent of a smile or “thank you” across digital channels.

Communicating Carefully allows for a consistent understanding of each team member’s requirements and needs, helping to streamline communication and reduce inefficiencies in teamwork

time is wasted, energy is sapped, and the workplace mood shifts from buoyant to discouraged. Why did no one realize this was an issue? Answer: there was no clear communication between silos.

Communicating Carefully means that people have to agree on whether or not a given project is necessary or in sync with the organization. Communicating Carefully means keeping employees and teams informed and up-to-date, and then checking in consistently to support their efforts. Who is working on what, and why? Personally, I’ve lost count of the number of times team members jump into projects without taking ten minutes to consider the principals involved, only to find out three months later that another team has been doing the exact same work.

Collaborating Confidently means empowering people to respond with care and patience instead of pressing them to respond to everything immediately in a 24/7 workplace.

Collaborating Confidently means prioritizing thoughtfulness while reducing groupthink behavior. What does that look like? Well, it might mean allowing the one remote member of a team to moderate a live meeting, creating a sense of inclusion and also reducing the bias we tend to have toward teammates who are physically present in the room. It might mean using the virtual chat tool in a video meeting to collect team opinions before calling on people with different ideas to speak up instead of listening to the loudest people who agree with one another first.

The fourth and final law of digital body language, Trust Totally, happens only after the first three laws have been implemented,

Trusting Totally means you have an open team culture, where everyone knows they are listened to, where everyone can always ask one another for help, and where everyone can grant favours whose returns may or may not be immediate.

Trust Totally doesn’t mean we extend unconditional trust to everyone—especially people with whom we’ve had negative or unresolved experiences in the past. Instead, Trust Totally refers to a workplace environment where no one wastes time sweating the small stuff, where an ambiguously worded message or late-to-arrive response doesn’t automatically give rise to fear, anxiety, or insecurity, and where we confidently assume everyone is on our side. This is a pretty big ask these days, but Trust Totally works.

Empowerment means everyone feels safe to speak up, to introduce a controversial perspective, or to simply say, “This isn’t working for me” without fearing they’ve created new enemies. Empowerment implies high levels of psychological safety, clear channels of information flow, candid discussions about how comfortable people are with failure, and clear ways forward that embed respect, alignment, and action across the workplace.

… TRUST: Traditional Body Language: keep your palms open; uncross your arms and legs; smile and nod. Digital Body Language: use language that is direct with clear subject lines; end emails with a friendly gesture (Text me if you need anything! Hope this helps.); never bcc anyone without warning; mirror the sender’s use of emojis and/or informal punctuation. …

ENGAGEMENT: Traditional Body Language: lean in with your body as another person is talking; uncross your arms and legs; smile; nod; make direct eye contact. Digital Body Language: prioritize timely responses; send responses that answer all questions or statements in the previous message (not just one or two); send a simple Got it! or Received if the message doesn’t merit a longer response; don’t use the mute button as a licence to multitask; use positive emojis like thumbs-up or smiley faces. …

EXCITEMENT: Traditional Body Language: speak quickly; raise your voice; express yourself physically by jumping up and down or tapping your fingers on your desk. Digital Body Language: use exclamation points and capitalization; prioritize quick response times; send multiple messages in a row without getting a response first; use positive emojis (smiley faces, thumbs-up, high fives). …

URGENCY: Traditional Body Language: raise your voice; speak quickly; point your finger (or make any other exaggerated gesture). Digital Body Language: use all caps paired with direct language or sentences that end in multiple exclamation marks; opt for a phone call or a meeting over a digital message; skip greetings; use formal closings, Reply All, or Cc to direct attention; issue the same message on multiple digital channels simultaneously.

used I instead of We on team projects in email exchanges). What if all our com allows tagging / marking those that contributed

In the digital sphere, power play behaviors can be harder to interpret. They might show up as cursory, one-word answers to emails, long delayed responses to simple questions, overly formal language, or a failure to reply at all.

When dealing with a lack of clarity from someone else, here are two questions that can help you decide what to do next: Who has more or less power in the relationship? How much do we trust each other?

Power = Speed Think about how fast you might respond to a request from your boss who has power over you. In this case, your quick response acknowledges that power. Hop to! Now, think about how fast you would respond to your secretary or junior report, who don’t have as much power. We may prioritize speed, clarity, and substantive messages with our bosses and clients but deliver one-liners with no subject line to a junior report. Our tools allow tagging seniority, age,gender, time gap to suggest answers and ea stuff to ensure responses are more efficient , eq, time driven.

How—and what—we signal also depends on how much we trust the person we’re communicating with. If you email a close colleague who has worked with you for years and the trust between you is high, he’s likely to interpret a curt message as a signal that you’re busy. But if the trust between you is low because of a turf war at work, he may interpret your brevity as a sign of resentment or anger. Trust goes much deeper too—variables like age, gender, culture, and race play key factors in whether we assume good intent in others’ messages

If you’re in quadrant A (meaning you have more power and low trust), it’s important that you show others why they are appreciated. Simple things like Thank you for your message or I can’t look at this now but I’ll get back to you go a long way in helping others manage expectations. If you’re in quadrant B (meaning you have more power but benefit from well-developed trust), you may become comfortable overusing brevity in your communications with this person. Be clear on deadlines and expectations and don’t assume that others “get what you mean.” If you’re in quadrant C (meaning you have less power and low levels of trust), prioritize quick, thoughtful responses to tasks and don’t be afraid to ask for clarity. Your goal should be to increase the trust in the relationship. And if you are totally lost, find someone who can guide you on what to do. Lastly, if you’re in quadrant D (meaning you have less power and a very trusting relationship), don’t drop your guard and let your messages and work get

The widespread disconnection between intention and interpretation in the digital world is exacerbated by a phenomenon known as the online disinhibition effect. This occurs when we drop our guard, forego formalities, and express ourselves online in frank, uncensored ways we never would dream of doing in person.

When you and I interact in person, our social cues—facial expressions, tone of voice, gestures, etc.—act as behavioral curbs.

In my teaching years at Harvard, I noticed one student who always, always, paused before he spoke. Whether he was answering a question or presenting to the class, you could see how much time and care he took to think before speaking. Then and now, it struck me as a critical leadership skill, one that made him stand out from the pack. Being impeccable with your words involves really listening to and understanding what someone else says before responding with thought and consideration—both online and off.

When writing to others, always ask yourself the following questions: Is my message clear? Is there another way (or two or three ways) that the recipient might interpret my message? If my message is confusing, is there another medium and style I could use to convey it more clearly? If I have more power, am I unintentionally terse, vague, or rushed?

SINCE WHEN IS AN EMAIL A RORSCHACH TEST?

the four most common types of anxiety-provoking digital body language. In no particular order, they are: Brevity Passive-aggressiveness Slow Responses Formality BREVITY what does this mean????? we need to talk CAN U SEND ME THAT TODAY Brief? Yes. Have you placed a chill on my heart? Again, yes!

I couldn’t do the work I felt I was capable of since (a) I never got proper digital feedback, and (b) the power imbalance left me in no position to demand it. I was left with constant project-related anxiety that only ended when I left.

Brevity from the upper echelons of power isn’t exactly uncommon. At Morgan Stanley, there was a running joke that the more senior you were, the fewer characters you needed to express your gratitude in a text or email. You started your career with Thank you so much! and after a promotion or two, this was cut down to Thanks. Another promotion produced Thx or even TX. One senior leader just wrote T. He was so important, rushed, and in demand his own mother couldn’t expect any more keystrokes.

Senior leaders have a well-deserved reputation for sending sloppy texts and sloppier emails. Poor sentences, bad grammar, atrocious spelling—we don’t have time to care! Brevity can make a person appear important, but it can also hurt your business. Getting a slapdash email means that the recipient has to spend time deciphering what it means, which causes delays and potentially leads to costly mistakes.

Janet and I were planning for an upcoming event that was still a few months away. I sent her an agenda for us to review two days before our call. She replied with an email saying, Yes, let’s talk. Also need to discuss the budget. My heart fell. I assumed she planned to say that her budget had dried up and I wouldn’t be paid adequately for my work. I was furious, I barely slept that night, and I was still in a bad mood when I got on the phone. “I forgot what I committed to pay you,” Janet said at once. “Can you remind me so I can put it in my budget?” I’d unnecessarily wasted time and energy preparing for the worst. My relationship with Janet was intact, but because of the power imbalance, I was prone to anxiety about our business arrangement, which served to waylay my focus from what I really needed to get done.

HOW DO I RESPOND TO CONFUSING MESSAGES? Here are some things you can do if you receive unclear, brief messages: If it’s a work request, ask clarifying questions such as Can you share what you need from me? or Thanks for this. When do you need this by? If you’re not sure about something, ask for the details you need to get a better idea of the other person’s intent, as well as the task at hand. Change the channel of communication to a phone call, video chat, or face-to-face meeting for additional context. If you consistently feel like there’s a disconnect between your messages and the responses you’re getting: Ask yourself: Is it clear what the recipient needs to do, why they need to do it, and when they need to do it by? Ask yourself: Am I using the right communication channel? Would a quick phone call provide more context than an email?

PASSIVE-AGGRESSIVENESS As per my previous email, I’ll take it from here … Am I missing something????? We’ve all felt it

subtle ways people use everyday digital language to denigrate one another.4 Per my last email was the top choice

Passive-Aggressive Feelings Behind Common Phrases Per my last email You didn’t really read what I wrote. Pay attention this time! For future reference Let me correct your blatant “mistake” that you already knew was wrong. Bumping this to the top of your inbox You’re my boss, this is the third time I’ve asked you. I need you to get this sh*t done. Just to be sure we’re on the same page I’m going to cover my ass here and make sure that everyone who refers to this email in the future knows that I was right all along. Going forward Do not ever do that again.

in our workplaces, it’s essential to establish agreed-upon norms around messaging apps and time frames so we don’t end up “ghosting” one another over, say, a simple communication about an upcoming meeting.

Psychologist James Pennebaker found that “[i]n any interaction, the person with the higher status uses I-words less (yes, less) than people who are low in status.”6 Pennebaker

Mike, the president of a large technology company, told his employees that any message on which he was cc’d ended up in a separate email folder that he checked weekly and to which one shouldn’t expect a response.

the most important digital body language signals we send out every day, and what they correspond to in real life: Priority = Choice of Medium Emotion = Punctuation and Symbols Respect = Timing Inclusion = To, Cc, Bcc, Reply All Identity = Your Digital Persona

“phone-phobia.” As a 40-something female, she’d gotten so accustomed to colleagues and friends communicating via text and email that she would get flustered, even panicked, when her phone would ring out of the blue.

Many of us (who grew up with IMs and texts as our primary form of communication) are so used to controlling when and how we respond to texts and emails that when a phone call comes in, we treat it like a bomb that’s set to detonate on the sidewalk. We feel vulnerable, unready, and even invaded, especially if we haven’t already established a relationship with another person via email.

We all have our preferences for certain mediums—texting, of course, is universally popular—and a distaste for others, say, Zooming, or talking on the phone. Sarah, a 25-year-old who works at an advertising agency, once vented her frustrations about her boss’s choice of medium: “Every time I email my boss a report, he calls me back with his comments and questions instead of just emailing me back! Ugh!

While phone and video calls are a popular medium, they also give rise to rampant multitasking, not to mention the fact that the awkward pauses endemic to these mediums often make us perceive people differently, especially if we’re meeting them for the first time.1 “Hey! Can you hear me?” “… What? … Oh, yeah I can hear you! Hi!” “I said can … oh great! Okay then, let’s dive—” “What’s great?”

Within each medium, it’s important to respect boundaries. Non-emergencies can generally wait until work hours. If a last-minute email about a meeting scheduled for the next morning is sent outside of reasonable work hours (7:00 a.m.–7: 00 p.m.), it probably warrants a text message too. Avoid sending a dozen instant messages in a row if you haven’t gotten a response to the first one or two. Choose email for directional updates or work requests (this also ensures that there are records of your communication). Phone calls or video meetings are best for deeper collaborative discussions and decision-making.

Even on Zoom or Webex calls, tools like chat or the thumbs-up button convey our energy and even humanity.

exclamation marks call out, “Yo! Listen! I’m talking to you!” Among digital natives, however, their use is far less tortured, or meaningful. They are an almost obligatory emblem of friendliness, more “I come in peace” than “There’s a foot-long rat in our garage!” Women use a lot more exclamation points than men do, as the exclamation point serves as a text-based version of the nods, smiles, and laughs that typically suffuse female friendships.

Although we generally interpret exclamation points as positive, most writers, editors, and traditional style manuals recommend using them as discerningly as ever (meaning we should try not to use them ever). If you do, and today we all do, you should use them judiciously, since in serious situations they can be interpreted as overly intense and even immature.

Will Schwalbe, co-author of the book Send: Why People Email So Badly and How to Do It Better

Research shows that women feel compelled to use exclamation points to come across as friendly, warm, and approachable, whereas men are more likely to use them to signal urgency

Emojis are nothing more than little faces designed to mimic the emotional range of our human ones.

Yaniv Dahan got a series of smiley texts from two prospective renters, he was convinced he had found the ideal tenants. They were both so positive and enthusiastic! Their texts radiated optimism and even joy—a smiley face, a bottle of champagne, a couple waltzing. After a few more of these emoji-heavy text exchanges, Dahan took his apartment off the market and waited for the couple to sign the lease.

Dahan had been ghosted

Every time James shared a new insight, Ivy responded with a smiley face emoji. Every. Single. Time. These short symbolic responses made John doubt Ivy’s intentions. Was she really that excited, or was she being sarcastic? For her part, Ivy was simply using a shorthand that was common with her Chinese friends and trying to show her support.

One recent study showed that the overuse of emojis implied incompetence at work, and that younger women were more likely to be unfairly implicated.

Can you walk my dog tonight? Sure! Can you walk my dog tonight? Sure. Can you walk my dog tonight? Sure…

The ellipsis is the most passive-aggressive punctuation mark, so use it cautiously

To achieve optimal clarity, avoid them unless they effectively signal an unfinished thought

For digital natives (those born after 1985), ellipses can convey a whiff of sarcasm when read online.

Her experience with Reply All left a lasting scar. These days, she says, “I triple-check every email I send, and I definitely don’t use my personal phone for work!”

The Four Laws of Digital Body Language

Value Visibly Stop Disrespecting Me! ]

In the digital workplace, we Value Visibly by being attentive aware of other people and clearly communicating

Jim’s usual email quick response—Sounds good—gave me confidence that he had everything under control. (And my typical Thx response made me feel like he knew I appreciated it.)

His sounds good emails didn’t signal, “I will take this on happily.” They were code for “I will do this begrudgingly, but I really want to talk about my learning goals too.” My Thx emails, intended to communicate “I really appreciate your hard work,” were interpreted by Jim as dismissive.

With up to 60 percent of teamwork today conducted digitally and via the written word, we can no longer rely on assumptions to gauge feelings of mutual respect.

move from relying on a single conversation per project to multiple touchpoints and from unstated appreciation to stated recognition

scheduled weekly video check-ins to review work and ensure he felt valued and supported.

whereas we once talked and shared information across a table or phone line, we now converse in written form. Instead of listening as others share their ideas, we read what they have to say in an email or on another digital medium.

we comprehend less when reading on a screen than we do when reading print.3 We devote less time to reading an onscreen passage, are more inclined to multitask, and tend to skim and search instead of reading slowly and carefully.4

HOW CAN I SHOW ACTIVE LISTENING IN A DIGITAL CONVERSATION? Prioritizing quick response times, even if only to say you’ll respond later. Answering all the questions and comments in the message, not just one or two. Asking Can I call you? or setting up a face-to-face meeting for more complex issues.

Do you think we should add more research on oncology to the presentation? In her own mind, she was convinced she’d said, Let’s add an extra two bullet points on this slide—but her brain was playing tricks on her.

Bottom line: if you’re the boss, be mindful of writing “think-alouds,” and separate them from true marching orders. If you’re on the receiving end, don’t be afraid to ask clarifying questions up front.

HOW TO CONNECT WITH INTROVERTS Schedule down time between long meetings. Practice waiting five seconds before jumping in to speak. Send questions a few days before a meeting so they have time to process and prepare. Encourage them to email or message you with their thoughts after a meeting. Create a time limit so that louder voices don’t monopolize the conversation. Stop interrupting. Use tools like a chat bar or hand-raising feature to designate who has the floor to speak, and choose a moderator to ensure that it’s upheld. HOW TO CONNECT WITH EXTROVERTS Set up regular face-to-face or video meetings so they can talk things through with you. Use breakout groups so they get a chance to talk out their ideas before reassembling as a larger group. Maintain watercooler spaces in your office or online so that they can recharge with social interaction between blocks of work,

Doug preferred to discuss the budget alone with Sue. Needless to say, this caused her team to feel excluded from the project they had all worked so hard to accomplish. Even more demotivating, there was never any recognition of the team’s work or any explanation of subsequent budget changes.

When people communicate, without being aware of it, they make use of a broad range of “contextualization” cues that help others assess the meanings behind their words. For instance, the phrase “I love that film” accompanied by a head nod signals something entirely different from “I love that film” paired with an eye roll or a wink.

“If you don’t define what success looks like, and you are not engaging in mutual validation, how do you know when you’ve succeeded?”

The complaints range from “Our departments have no common language” to “Nobody knows what our division is up to.”

clarity trumped politeness and would also help her colleagues thrive. She changed her feedback style to be more direct—even including a bullet-pointed list of requests.

Once, people could “clarify” what others were saying by picking up on their physical reactions—a quizzical expression, a stunned stare, the hint of a smile.

The universal chaos of unread emails, IMs, texts, and calendar invites makes most of us crave a simpler, easier era of phone calls, office drop-ins, and uninterrupted client dinners

COMMUNICATE CAREFULLY: THE PRINCIPLES

Think Before You Type

once we press Send, we cede control over where our words end up. A private email we send to an acquaintance might show up later in a post on his or her public Facebook page. Messages and posts can be copied, forwarded, altered, and updated in ways that distort their fundamental meaning, not to mention translated instantly (and not always correctly) into almost any language. An email can show up from a customer or client without us knowing that our boss’s boss is included as a Bcc.

The first rule of Communicating Carefully? Slow down,

my research has shown that perpetrators of this particular crime of digital body language come in all ages and occupy all levels in organizations, including (and especially) executives, who are responsible for communicating so many messages that most settle for speed over clarity.

ROM, or “Respond on Monday.” This way, Joe doesn’t have to wait to send the email (and risk forgetting it altogether), but his team still gets their weekend.

HOW DO I WRITE MESSAGES PEOPLE WILL ACTUALLY UNDERSTAND? Assign email tasks using the “3 Ws.” Every message should have a clear Who (the name of a specific person instead of a group); a clear What (an explicit description); and a clear When (the exact time and date, 4H = 4-hour deadline, 2D = 2-day deadline). Specify in the subject line or first sentence of a message if it’s an FYI, a Decision Request, or a Request for Information. Create clear acronyms (NNTR = No Need To Respond; WINFY = What I Need From You). Write the perfect subject line. Summarise the body of your email, use prefix modifiers, and stick to the same subject line unless the subject changes (this isn’t the place to throw in new or tangential questions). If the subject does change, create a new email thread with its own subject line. Break long messages into two parts. Label them “Quick Summary” and “Details.” Know what you really want first, then get to that point at the top of the email. Make your messages scannable. Use bullet points, subheadings, white space, highlights, and bold text. Show instead of tell by attaching screenshots. They are valuable when you need to give someone instructions, or to highlight slides in a deck. Use if/then statements to increase accountability, create expectations, and provide clarity on next steps. Present options: ask, “Do you think we should do A, B, or C?” Try not to ask open-ended questions like “What do you think about this?” or “Thoughts?”

Video calls eliminated the miscommunication that resulted from their wildly different email styles while adding visual cues that conveyed their emotions and (it’s true) mutual good intentions.

Zapier has seemingly cracked the code for using the right collaboration channels, even coming out with a guide to help other companies do the same thing.

the instant messaging platform Slack serves as Zapier’s virtual office, i.e., “if you’re in Slack, then you’re at work.”

company employees have created both work- and non-work-related channels (messaging chains), ranging from “marketing” and “hacking” to “water cooler.”

it’s best to end your message with an invitation for a phone call or an in-person meeting to go over the smaller details.

The #killduplication phrase is now a staple in the team culture, helping to eliminate wasted time and ensure colleagues optimize the use of each digital medium.

To reduce confusion, I always advise writing down and tracking individual and team commitments. At every stage of a project, list your key ongoing commitments. For example, “I will provide my team with the resources they need in these areas: website updates, product rollouts, and communications.” Under those, list your specific promises, such as “I will hire two new engineers by the end of September.

responses from a CEB workforce survey of over 23,000 employees, a recent Fortune study reported that 60 percent of all employees have to consult with at least 10 colleagues daily just to get their jobs done.1 Half of that same 60 percent needs to engage with more than 20 colleagues to do their work.2 Over the past five years, the time required for one company to sell something to another has risen 22 percent.

We Collaborate Confidently when we state our needs clearly, including when and why we need something, leaving no room for misinterpretation (or fear, or anxiety).

Collaborating Confidently begins by understanding what other departments do—and establishing clear norms on how they interact with one another.

At the beginning of any project, Shalett advises asking: “Who’s going to need to know all the things we’re thinking about doing? Where are the risks? Where are people going to really need to understand the processes, the requirements, the regulations?”

Most critically, she advocates identifying and prioritizing the right people who can make a project better, as well as those who can best anticipate bottlenecks, or call out the BS. Posing the simple questions “Who could derail this?” and “Who will need to approve this?” can avoid leaving out important individuals who could later slow down your efforts, from a frontline cashier to a new customer representative to a risk manager.

HOW TO BUILD TEAM CONFIDENCE Measure success in results, not hours. Avoid hounding people over not working enough or working too many hours. If you tell them they need to work eight-hour days, but they know they can get the work done in five, they will spend more time getting sidetracked instead of getting the job done. Set clear roles and expectations. Tasks should be framed as steps to accomplish a common goal. Be clear on the direct line between the two. Typically I end all phone calls with a question: Who is doing what—and by when? That way the entire team is clear, and individuals feel a sense of accountability toward their peers as well as the team leader. As tasks are getting done, I like to use a project-tracking software like Trello to increase accountability. Agree on what success looks like. At the start of a project, ask three questions: What does great look like? What does done look like? What is out of scope? From there, work backward as a group to decide on a realistic deadline. Be available. If team members can’t reach you with a question about a task, they are more likely to lose steam. Think of all the hours that could potentially be wasted if you don’t make yourself.

fight thoughtless deadlines; eliminate chronic cancellations; and practise patient responses.

The word “deadline” can be traced back to the American Civil War—who knew? Back then, prisoner-of-war camps had boundaries known as “dead-lines”—prisoners who crossed them would be killed.8 In short, deadlines were serious.

Mary welcomed email from employees who didn’t speak up in meetings. Email gave those employees the psychological safety they needed to contribute to the conversation, helping them accept her final deadlines even when their opinions didn’t change anything.

cancelling meetings can have company-wide repercussions, including lowered morale, lost team brainstorming time, and a general loss of confidence in leadership.

Almost worse than the meeting getting cancelled was the curt email announcing the news with no explanation. While you will inevitably have to cancel some meetings, when you do, there is a right way to do it. He should have sent a direct note saying I’m sorry and explaining why the meeting was cancelled. He also should have been respectful in how he communicated his reason, such as I understand how important this is … or Let’s reschedule this as soon as possible …

I NEED A RESPONSE. HOW DO I FOLLOW UP WITHOUT BEING A NAG? Amend the subject line to clarify that the email is a follow-up request and not a new task. Don’t cc new people (unless you absolutely have to). Suggest another way to communicate (e.g., Can we schedule a phone call?).

WHAT DOES EXECUTIVE PRESENCE LOOK LIKE ONLINE? You set deadlines in collaboration with your team. You send clear messages with a clear ask, not confusing brevity with clarity. You have a background on video calls that is not distracting to the group conversation. You acknowledge individual differences among team members and account for those needs. You set and enforce norms for team communications in a collaborative way. You serve as a facilitator, not a monopolizer, of team discussions. You are consistent in your words and your actions in a way that is authentic to you

it’s essential that leaders follow Satya Nadella’s lead in addressing mistakes or bad ideas: criticize the action instead of the person while giving your team your unwavering support.

Research shows that we also believe women are more expressive than men in their online communications. Writer Elizabeth Plank said it best: “I feel like I need to be nice and warm and inviting, even if I’m having a conversation about an issue I want corrected or taken care of. When I have to ask someone to do something, I feel like I need to sugarcoat it with my lady language (!!!, emojis, GIFs) so I don’t come off as shrill, bitchy, or any other stereotype about women. Men can be direct. Women often don’t have that luxury.”

MASCULINE DIGITAL BODY LANGUAGE … Confidently transfers conversations between mediums. Refrains from using emojis or excessive punctuation. Ensures messaging is short, well organized, and to the point. Uses bullet points and clear subject lines in emails. Often cc’s superiors on emails, even when unnecessary, with the goal of receiving praise. Uses boosters to make their messages more assertive and definite (e.g., “always,” “definitely,” “obviously”). Has quick response times. FEMININE DIGITAL BODY LANGUAGE … Prefers face-to-face meetings over digital mediums. Uses niceties and politeness as tools, along with hedging language (e.g., “perhaps,” “might,” “I think maybe”). Uses intensive adverbs, nonstandard spelling, and punctuation to reveal emotion (e.g., “sooo,” “?!?!?!” “ridiculously,” “Nooo waaay”). Always proofreads messages. Has slower response times.

WHAT WILL HELP ME SHOW CONFIDENCE? Don’t over-apologize. (I’m so sorry about this; Hope I’m not bothering you; Hope you don’t mind but …) Avoid hedging language. (Probably; I think that maybe; I guess; I’m not sure, but …) Limit excessive flattery or subservience. (I’m sure you are busy; Is there any way I can have a few minutes of your time?; I know you have a lot on your plate …)

the team use a template of “Who/What/When” for all their emails. This eliminated the “need for niceties” that many working women feel, a need that can create gaps in a team’s ability to Communicate Carefully.

starting emails with WINFY, short for “What I Need From You.” This reduced cross-gender misunderstandings,

FILLER WORDS THAT DON’T ADD VALUE TO YOUR MESSAGES: It’s my feeling that … I feel maybe … I guess … I’m not sure how strongly I feel about this, but … In my opinion … I guess my question is … I just …

Gmail plug-in called Just Not Sorry,

Just Not Sorry lets users hover over an underlined phrase and explains how others are likely to perceive it

Communicating online can create advantages in overcoming the perceived (and often real) biases against women that make many of us feel too inhibited to say something.

Similarly, in my experience, women in lower parts of the corporate hierarchy are often more likely to provide input by email than speak up in face-to-face business meetings

In male-dominated workplaces, it offers an effective and even unprecedented way for women to share power and decision-making authority—a phenomenon that can begin to level the gender-imbalanced playing field

While it’s true that many mixed-gendered groups foster support and encouragement, the fact remains that many women still feel more at ease conversing among, well, other women.

Before choosing a primary mode of communication, leaders should consider asking everyone on their team which mediums they prefer—or simply present different options. Use a poll or survey to gather preliminary thoughts from team members before meeting.

leadership there observed a very low percentage of female candidates applying for developer jobs—less than 2 percent of all candidates.

A shift from “We are a dominant engineering firm that boasts many leading clients” morphed into “We are a community of engineers with many satisfied clients.” Qualifications changed from “ability to perform individually in a competitive environment” to “collaborates well in a team environment.”

Textio, a company that uses customers’ hiring data to help figure out if a company’s language is gendered

“work hard, play hard” as masculine and “we value learning” as feminine.27 Words like enforcement and exhaustive skew masculine, while transparent and catalyst skew feminine.28

Bear in mind that PowerPoint slide images, photos of the leadership team on a company website, and even colors chosen for a visual presentation can affect our perception of a business as exclusive—or inclusive.

nearly all the female respondents reported that they disliked the contentious style and tone of the digital discussion, and found participating in it to be unproductive. Herring finds this same dynamic on crowdsourced Wikipedia articles,36 concluding what a lot of people (especially women) know already, namely that “some contributors, anonymous and otherwise, use rude and haranguing language. Such environments are—if not outright intimidating—unappealing to many women.”

YOU’RE LIKELY A DIGITAL NATIVE IF YOU PREFER … Texting back and forth even when setting up a call or meeting might be easier. Texting to ask if you can call (instead of just calling). Texting to tell someone that an email has been sent, rather than just waiting for a reply or cc’ing. Responding to a phone call with a text or email instead of calling back. Leaving voicemails unread and unanswered. Avoiding phone or face-to-face meetings in general. Being more responsive to social media posts than direct email requests. Using shorthand like LOL Thx ttyl (talk to you later) or kk. YOU’RE LIKELY A DIGITAL ADAPTER IF YOU PREFER … Insisting on a call or meeting in lieu of a text or email. Not answering texts quickly (e.g., within an hour). Asking for details from an email to be summarized again, this time verbally. Using formal language and punctuation, including “signing off” at the end of a text as if it were an email or letter. Sending overlong emails without hyperlinks or relevant information. Sending curt text messages that lack context and seem alarming to natives—I’m worried. Call me

digital adapters seldom treat a ringing phone as an intrusion. Digital natives, in contrast, do not appreciate getting a call out of the blue. It feels presumptuous and potentially alarmist. The way they see it, callers should first request permission to call via text or email, or else schedule a call in advance using a calendar invite request. When a digital native gives you their cell phone number, they are providing implicit permission for you to text them. For natives, texting with a new acquaintance is less invasive than getting a phone call out of the blue. For digital adapters, texting can feel invasive—like it’s stepping across the boundaries of an “intimacy firewall.”

In his late fifties, the coach was a digital adapter who kept pushing Adette’s team “to hit the phones and pester your prospects for meetings. Leave a voicemail if they don’t answer.” Adette remained skeptical, especially since she knew that her clients (most of whom were in their thirties) mostly texted her, and would in all likelihood ignore phone calls. Her instincts were right. “Not one person picked up the phone or responded. It failed miserably. So we trusted our original intuition and decided to ask for permission before calling.

engagement for her multigenerational teams. “If you need me, text me, and we can get on a call. If you leave me a voicemail, I will never hear it. I tell them I’m better with email because it’s a better reminder for me to respond, versus text which can get lost when I’m in transit running between meetings. If it’s urgent, ping me on Slack and tell me you emailed. If it’s anything that requires complex thinking, it needs to be in an email.”

“Once upon a time, junior people would come talk to me rather than shoot me an instant message. I remember the days when if someone started a discussion, they finished the discussion.”

A study conducted by Grammarly “found workers under 35 were 50 percent more likely than older workers to be told their tone was too informal, even though more younger workers said they spent time agonizing over meaning, tone and grammar in their emails.”5 Why is this? First, a surprising digital rule of thumb is that whenever the latest, most informal channel of communication comes along (e.g., texting), the channel preceding it (e.g., email) becomes obsolete overnight—at least in the minds of digital natives—formal, inefficient, and a potential source of fear. Younger people typically regard email as a formal mode of communication,

when older people respond with friendly one-liners, digital natives are often put off.

My advice for teams? Leverage the power of emojis

HOW TO COMMUNICATE IN HIGH-CONTEXT CULTURES Include every detail of the business discussion. Ask for a response to confirm work tasks. Always cc a manager or ask them first before sending their report a work request. Include a personal non-work-related note. Always greet the other person before you ask for something

HOW TO COMMUNICATE IN LOW-CONTEXT CULTURES Be direct and to the point. Use bullet points and bold text to highlight the important details. Only say yes to a task if you plan on following through. Don’t mix in non-work-related notes with work requests. Make sure it’s readable on a smartphone.

within America, alongside dialects and accents. East Coasters, for example, have a well-deserved reputation for directness and tend to write emails so short they can come across to non-East-Coasters as borderline unfriendly.

Communicating successfully with other cultures often involves the adaptation of so-called feminine language. If you make a mistake—and we all do—don’t simply justify yourself and move on. Apologize. “I’m sorry for my misstep. Is there a better way?” Acknowledge your mistake, and ask for clarifications and corrections. Use the opportunity to learn something new.

Dear Joan is always safe. Joan on its own, without a dear or hello before it, and with no punctuation in its wake, can come across as brusque or even rude.

In low-context cultures (again, like Germany, the United States, and Canada), opening an email with Hi Joan is perfectly appropriate. Using hi is, as Will Schwalbe, editor and author, put it, “perfectly friendly and innocuous.”16 Hi is a safe and familiar way to address someone, whether you know them or not.

But don’t be surprised when you’re in conversation with someone from another culture and the greeting just isn’t there.

“I had to explain that when they don’t write a ‘hi’ or ‘hey’ in the greeting, they’re not being rude. They’re just being German!”

When communicating with German or Japanese colleagues, ensure that you sign off with your title appearing directly beneath your name, since your status decides how quickly and carefully others respond to you. In more egalitarian cultures, there’s no need to trumpet the fact that you’re the “Visionary Founder” of blah-blah-blah.

Taimur decided to prioritize one divide in particular—the perceptions of respect and equality. Those at the company’s New York office, where the boss was headquartered, believed its employees did “all the important work,” whereas other, more far-flung teams, like the one based in Nairobi, felt left out.

When they did manage to contribute something, they felt like the New York office took all the credit. As for the team in Amsterdam, they all agreed that the New York office was oblivious to what their European clients wanted and needed. The lone San Francisco team member never even got noticed.

First, he started embedding inclusive language such as “embrace difference” and “our shared purpose” throughout his communications. He began referring to all his teams as a single “we,” creating project metrics of success that would require disparate teams to put their differences aside and work together.

equal airtime to each office. To ensure credit was given where it was due, he produced a monthly one-page slide highlighting the contributions of each office and their relation to the entire division.

phone calls or sending emails weekly across all global divisions to thank individual employees for their hard work.

SHOW EMPATHY ACROSS CULTURES Humanize the person on the other end of the screen by using a mixture of personal (where appropriate) and professional check-ins as tools to get to know them. Even if you are texting or emailing a longtime colleague or a loyal customer, be wary of using an informal tone unless they first go the more casual route. Avoid using abbreviations and emojis that may not translate to the other person’s language or culture.

Don’t be Afraid to Discuss Differences If you ignore gender, generational, or cultural differences, they’ll simply grow in size. It’s better to discuss these topics up front rather than pretend they’re not there.

the best way to fast-track a meeting, ensure results, and Communicate Carefully is to distribute an agenda beforehand, regardless of whether the meeting is in person, over the phone, or on video. This is especially true when working with teams of people with different levels of fluency in the language you speak.

Remember that colleagues will probably vary across cultures, genders, and age groups, and that, for some, asking for clarification during a call isn’t only embarrassing, it’s also considered impolite in their culture.

Rotate the responsibility of facilitating your meetings across time zones, age groups, and continents. For example, after two years of trying and failing to draw in greater engagement from his team, a leader based in Amsterdam asked a different team member to draft the agenda and define the group’s dialogue. He did this on a weekly basis. This gave him the opportunity to hear from people he might not have heard from otherwise. A team member from Asia led the first meeting, highlighting the behind-the-scenes work completed by local colleagues. Another asked colleagues who weren’t based in headquarters to be the first to share their updates. A third asked everyone present to chime in, even if they had nothing work-related to say or add. By rotating power and driving engagement, your team is that much more likely to Collaborate Confidently.

One good tip to ensure that everyone’s on the same page and to Value Visibly after the meeting? Send out notes and ask for feedback via chat or even on the phone.

“HBR's 10 Must Reads on Platforms and Ecosystems (with bonus article by "Why Some Platforms Thrive and Others Don't")

The move from pipeline to platform involves three key shifts

From resource control to resource orchestration.

With platforms, the assets that are hard to copy are the community and the resources its members own and contribute, be they rooms or cars or ideas and information. In other words, the network of producers and consumers is the chief asset.

From internal optimization to external interaction.

Platforms create value by facilitating interactions between external producers and consumers.

From a focus on customer value to a focus on ecosystem value.

platforms seek to maximise the total value of an expanding ecosystem in a circular, iterative, feedback-driven process. Sometimes that requires subsidising one type of consumer in order to attract another type.

Understanding when external forces may either add or extract value in an ecosystem is central to platform strategy.

Most successful platforms launch with a single type of interaction that generates high value even if, at first, low volume.

the fact that network effects are often strongest among interactions of the same type (say, book sales) than among unrelated interactions (say, package pickup and yardwork in different cities mediated by the odd-job platform TaskRabbit).

A fair reward system is key. If managers open the architecture but do not share the rewards, potential platform participants (such as app developers) have the ability to engage but no incentives. If managers open the rules and rewards but keep the architecture relatively closed, potential participants have incentives to engage but not the ability.

Consider these pricing strategies:

Subsidise quality- and price-sensitive users. For example, if PDF document readers were charged even a tiny amount, Adobe Acrobat Reader’s immense user base would be much smaller,

Secure “marquee” users’ exclusive participation in your platform. Providing incentives for marquee users (for instance, anchor stores in a mall) to participate exclusively in your platform (the mall) can attract more users from the other user group (retailers who lease space in malls with prestigious anchor stores). Result? Your platform’s growth accelerates.

To deal with the competition:

Decide whether the two-sided market you’re eyeing will eventually be served by a single platform. The answer’s “Yes” if using more than one comparable platform would be costly to users and if special features don’t increase value to users.

Example: The DVD industry

Decide whether to share the single platform or fight for proprietary control. Sharing has benefits: Total market size expands and rivalry lessens, reducing market outlays.

Want to fight for proprietary control? You’ll need deep pockets, a reputation for past prowess, and preexisting relationships with prospective users.

Avoid Envelopment Many platforms have overlapping user groups, tempting some related platform providers to swallow others’ users. Mobile phones, for instance, now incorporate music and video players, PCs, and credit cards.

To avoid being swallowed, consider changing your business model.

Example: Under attack from Microsoft, RealNetworks (which pioneered streaming media software) ceded the streaming media business. It leveraged existing relationships with consumers and music companies to launch Rhapsody—a $10-per-month subscription music service that offers unlimited streaming to any PC from a library of a half-million songs. It now profits from consumers versus subsidising them.

Challenge 1: Pricing the Platform

If the platform provider can attract enough subsidy-side users, money-side users will pay handsomely to reach them.

The presence of money-side users makes the platform more attractive to subsidy-side users, so they will sign up in greater numbers.

Ability to capture cross-side network effects Your giveaway will be wasted if your network’s subsidy side can transact with a rival platform provider’s money side. That’s what happened to Netscape, which subsidized its browser to individuals in the hope of selling web servers to companies operating websites. However, website operators didn’t have to buy Netscape’s server in order to send pages to Netscape’s big base of users; they could buy a rival’s web server instead.

Rather than charge the side that strongly demands quality, you charge the side that must supply quality

Such a strategy is evident in video games. To deliver compelling quality, game developers incur enormous fixed costs. To amortize these costs, they must be assured that the platform has many users. Hence the need for a consumer subsidy.

If a strong willingness to pay does not materialize on the money side, a giveaway strategy with high variable costs can quickly rack up large losses. FreePC learned this lesson in 1999 when it provided computers and internet access at no cost to consumers who agreed to view internet-delivered ads that could not be minimized or hidden. Unfortunately, few marketers were eager to target consumers who were so cost conscious.

In most markets, sellers would be happy to see fewer direct rivals; the same can be true for buyers when goods are scarce.

Covisint stalled, as did many other B2B market makers that failed to recruit enough sellers. In the face of strongly negative same-side network effects, platform providers should consider granting exclusive rights to a single user in each transaction category—and extracting high rent for this concession. The platform manager then must make sure that sellers do not abuse their monopoly positions; otherwise, buyers will avoid the network

A platform provider can accelerate its growth if it can secure the exclusive participation of marquee users in the form of a commitment from them not to join rival platforms.

multisided platforms (MSPs),

You become an MSP by making it possible for those third parties to connect with your customers. “Connect with” can mean advertise or sell (or both) to them. The third-party products may be independent of your product or service or may be apps or modules that work in combination with your offerings

Quickbooks is used by both small businesses and accounting professionals. Intuit is in the process of adding a matchmaking function within QuickBooks that would enable small businesses to find and contact accountants with relevant expertise in their geographic area and would allow already-matched business-accountant pairs to exchange documents through the product.

Nielsen offers “watch” products to media companies (data on consumers’ viewing habits) and “buy” products to consumer goods manufacturers (data on consumers’ purchasing habits).

Before leaping onto an MSP, you should carefully consider one major risk: the potential for the company (or companies) that owns or controls an MSP to hold you up—to use its power against you to capture more value for itself.

Reduce the risk of an MSP using its power against you Example: When Google launched a social networking application development platform, OpenSocial, it invited other social networking sites to use OpenSocial applications. Social networking site LinkedIn joined in, but to preserve its distinctiveness compared with other networking sites, it has been selective about which OpenSocial applications it will allow to work with LinkedIn. In addition, LinkedIn continues to offer unique applications; for instance, an events calendar that allows a LinkedIn member to find which members from LinkedIn and other networks are attending events.

resist the herd mentality. Think twice before you join a popular platform. And remember that MSPs are moving targets and regularly review your strategy. The Google of tomorrow is unlikely to be the same platform as the Google of today. What’s more, today’s player can become tomorrow’s platform. Until the iPhone was invented, most cell phone companies were players on the platforms of cellular networks.

An ecosystem-focused framework, as opposed to a firm-focused one, needs to answer five questions.

Can You Help Other Firms Create Value?

What Role Should You Play?

To be the orchestrator and prime mover of an ecosystem, you need a superior product or service that is hard to replicate. This means some combination of IP protection, a large network of users, and strong branding.

If you lack the qualifications to build an ecosystem but have an IP-protected product or service that could anchor one, your best bet most likely involves attracting the interest of a large company that could buy into or license your idea.

What Should the Terms for Participation Be?

governance failures are easy to identify.

Nokia neglected to take other parties’ interests into account.

There are two key governance choices.

Access: Early in the process an ecosystem builder needs to decide whether the system should be open, managed, or closed. In an open ecosystem (such as Uber’s drivers), complementors need only meet certain basic standards to participate. In a managed ecosystem (such as Apple’s App Store), there are clear criteria for complementors and possibly some limits on their number, along with specific guidelines—on functionality and pricing, say. In a closed ecosystem (such as VW’s connected cars and Philips’s digital health), approval of complementors and rules of participation are tightly controlled.

Attachment : As you determine how accessible to make your ecosystem, you’ll also need to consider how exclusively attached to it you want your complementors to be—how much they need to co specialize with you.

Can Your Organization Adapt?

After the arrival of Fitbit and other competing products, Nike discontinued production;

Nike was slow to recognize the inevitable, and thus it lost its chance to orchestrate the wearables ecosystem.

Nest got this right: Concerned that by opening up the alarm function it would compromise its ability to control the home, it made a strategic decision to engage in alarm and monitoring itself rather than link up with Alarm.com or Honeywell.

How Many Ecosystems Should You Manage?

To understand why some new technologies quickly supplant their predecessors while others catch on only gradually, we need to think about two things differently. First, we must look not just at the technology itself but also at the broader ecosystem that supports it. Second, we need to understand that competition may take place between the new and the old ecosystems, rather than between the technologies themselves. This perspective can help managers better predict the timing of transitions, craft more-coherent strategies for prioritizing threats and opportunities, and ultimately make wiser decisions about when and where to allocate organizational resources.

What is the co-innovation risk—the extent to which the success of the new technology depends on the successful commercialization of other innovations?

What is the adoption-chain risk—the extent to which other partners need to adopt and adapt to the new technology before end consumers can fully assess its value proposition?

Consider Uber. Drivers in Boston care mostly about the number of riders in Boston, and riders in Boston care mostly about drivers in Boston. Except for frequent travelers, no one in Boston cares much about the number of drivers and riders in, say, San Francisco.

Travelers don’t care much about the number of Airbnb hosts in their home cities; instead, they care about how many there are in the cities they plan to visit. Hence, the network more or less is one large cluster.

So breaking into Airbnb’s market becomes much more costly.

Disintermediation, wherein network members bypass a hub and connect directly, can be a big problem for any platform that captures value directly from matching or by facilitating transactions.

Airbnb, for example, withholds hosts’ exact locations and phone numbers until payments are made.

Such strategies aren’t always effective, though. Anything that makes a platform more cumbersome to use can make it vulnerable to a competitor offering a streamlined experience.

Some platforms try to avoid disintermediation by enhancing the value of conducting business on them. They may facilitate transactions by providing insurance, payment escrow, or communication tools; resolve disputes; or monitor activities. But those services become less valuable once trust develops among platform users—and the strategies can backfire as the need for the platform decreases.

trust between clients and freelancers grew stronger, and disintermediation became more frequent, offsetting the revenue gains from better matching.

Customers post requests on the site, and service providers send them quotes and pay Thumbtack fees if those customers respond.

That model captures value before the two sides even agree to work together

Taobao didn’t charge listing or transaction fees and even set up an instant-messaging service, Wangwang, that allowed buyers to ask questions directly of sellers and haggle with them in real time.

Taobao today continues to offer its C2C marketplace services free of charge and captures value through advertising revenues and sales of storefront software that helps merchants manage their online businesses.

Chinese outsourcing marketplace ZBJ, which launched in 2006 with a model of charging a 20% commission, began looking for new revenue sources. In 2014 it discovered that many new business owners used its site to get help with logo design. Typically, the next job those clients would need done was business and trademark registration, which the platform started to offer. Today ZBJ is the largest provider of trademark registration in China—a service that generates more than $70 million in annual revenue for the firm.

When disintermediation is a threat, providing complementary services can work a lot better than charging transaction fees.

It’s easier to ask for forgiveness than to get permission. This rule flouting is a phenomenon we call “spontaneous private deregulation,”

No marketplace we know of has dealt with all its regulatory challenges perfectly, but four interconnected guiding principles—developed by David Hantman, Airbnb’s former head of global public policy—can help.

Define Yourself before Your Opposition or the Media Does Marketplace entrepreneurs should develop a clear vision of their business model and find the most positive—yet accurate—way to describe it to the outside world. Then they should engage regulators and the media to ensure that they are understood on their own terms.
Pick the Time and Place to Engage with Regulators Entrepreneurs operating in industries subject to heavy and national regulation should consult an industry attorney before launch in order to fully understand all relevant laws. As soon as their buyer-seller proposition is clear, they should initiate a dialogue with regulators in order to obtain either explicit legal clearance (ideal) or an implicit safe haven (second best) for continuing to develop the service.
Don’t Just Say No; Offer Constructive Ideas

When confronted with regulatory gray areas—an all-too-common occurrence—marketplace entrepreneurs have an opportunity to turn a potentially adversarial relationship with regulators into a partnership.

Speak Softly and Carry a Big Stick

Entrepreneurs should avoid engaging in acrimonious disputes with regulators; at the same time, they should have effective weapons at their disposal to defend their position.

The first is the power of satisfied buyers and sellers, who are voters and taxpayers likely to resent government interference with a service.

The second lever is tax revenue.

“Software” every activity.

The first step is to build a model of how humans currently make decisions and find ways to replicate the simpler elements of that process using software—which

One of the first major software tools built on Taobao was an instant message tool called Wangwang, through which buyers and sellers can talk to each other easily. Using the tool, the sellers greet buyers, introduce products, negotiate prices, and so on, just as people do in a traditional retail shop.

Principle 1: Don’t ignore the potential for discrimination

A regular report (and an occasional audit) on the race and gender of users, along with measures of each group’s success on the platform, is a necessary (though not sufficient) step toward revealing and confronting any problems.

Principle 2: Maintain an experimental mindset Platforms should do what they do best—experiment.

Design decision 1: Are you providing too much information?

Design decision 2: Could you further automate the transaction process? When using Uber, you tap the screen to order a ride; only after confirming do you learn who will pick you up. In theory, you can then cancel if you don’t like the driver’s rating or looks. But that takes effort, and this small “transaction cost” is probably just enough to deter most looks-based cancellations.

Uber could just as easily have allowed riders to see the driver before tapping confirm or cancel, but it chose not to.

Airbnb feature known as “instant book,”

A host using it allows renters to book her property without her having first approved them. Instant book is an opt in feature: Landlords must sign up for it. Research has shown that default bias is strong: Most hosts will use whatever option is set up as the default. If Airbnb switched its default to instant book, requiring hosts to actively opt out of it, discrimination would most likely be lessened.

Design decision 3: Could you make discrimination policies more top-of-mind?

people would be less likely to cheat if they signed at the very beginning of the form—before filling it out. Indeed, signing at the top led to less cheating in both a lab experiment and a real-world experiment with an auto insurance company. It also worked in the context of tax returns.

There’s a lesson here for marketplaces: If you want people to do something, think carefully about when to prompt them.

Design decision 4: Should your algorithms be discrimination-aware?

For example, suppose Uber noticed that some passengers consistently gave low ratings to black drivers who received five stars from most of their other riders. The company could underweight ratings from those passengers —who have revealed themselves to be discriminatory—when calculating black drivers’ overall feedback scores.

A Lesson from Symphony Orchestras.

Instead of conducting auditions face-to-face, they seated musicians behind a screen or other divider.

“Girl Decoded: My Quest to Make Technology Emotionally Intelligent – and Change the Way We Interact Forever”

EQ is the ability to understand and control our emotions and read and respond appropriately to the emotional states of others.

Affective Computing, by Rosalind Picard,

six basic universal emotions: anger, disgust, fear, happiness, sadness, and surprise (he later added contempt).

My point is that there are more nuanced emotions beyond Ekman’s six basic emotions—for example, distraction, curiosity, patience, confusion

And then there are degrees of emotion.

The way to teach a computer to recognize a face—or to identify any object, animate or inanimate—is first to “show” it lots of faces, which means inputting lots of pictures of faces, all kinds of faces. And not just a whole face—I had to break the faces down into their components: the eyes, the brows, the forehead, the lips, and so SHow computer lots of data points , wearbles, loction like hospitals to identify state of mind

Try it out for yourself; the test is online (autismresearchcentre.com/arc_tests)

the face portrayed more than just purely emotional signals. It also conveyed behavioral and mental states—like fatigue, boredom, and confusion—that might not necessarily be considered emotions, but nonetheless are communicated nonverbally and required an appropriate response

language of emotion down to the key words that really matter most?

Baron-Cohen’s group settled on 412. The 412 emotions and mental states were then divided into 24 “families,” or distinct categories of emotions,

Tal Sobol-Shikler, an Israeli PhD

Seth Raphael’s research on “In Search of Wonder: Measuring Our Responses to the Miraculous.”

It was once again a reminder that my work in the tech space was primarily about connecting people together at a deeper level.

I wanted to spend the rest of my career surrounded by fearless, bold, imaginative people who weren’t frozen in place for fear of making a mistake.

how to decode human emotion, I had missed my own husband’s emotional cues.

In my life, work and kids had come first.

There are typical steps in the machine learning “assembly line,” requiring different types of expertise.

Data is now readily available, but it has to be collected; this is the job of the data acquisition specialist. In our case, we get face videos or audio files.

Second is data ingestion: These terabytes of data need to be stored somewhere, most often in the cloud. Data engineers are responsible for that.

Third is data annotation: These videos and audio files are not useful unless they are labeled or annotated by human experts—labelers. The labeler’s job is to mark when important events happen, like a smile or a smirk or a frown.

Fourth, machine learning scientists are the ones who build the algorithm, as I did when I was working on my PhD at Cambridge. The machine learning scientists team up with quality assurance engineers to test the accuracy of the models. This involves quantitative testing on hundreds of thousands of examples as well as qualitative testing. Our quality assurance engineers will spend hours in front of a camera making faces, trying to break the algorithm.

A researcher in Boston wanted to create an app to predict and ultimately prevent suicide. An online education company wanted to use our technology to monitor student engagement and predict learning outcomes. A human resources company saw our technology as the perfect tool for screening new hires. A group of entrepreneurs wondered if we could create emotion-aware classrooms. A professional career coaching company thought it would be an excellent training tool.

Beyond Verbal is a Tel Aviv–based company that specializes in vocal analytics.

Now I was completely confused. “What’s a mortgage?”

I wish one of these apps was able to figure out an Emotion AI algorithm that tells the user if you are going to get butterflies in your stomach when you meet a person—that, I would pay for.

Switching off is something I don’t do well, even on vacation.

The reality is that even the most well-meaning employers—we are human, after all—may not recognize the bias in their midst.

Ben Waber, PhD, an author of the study, is founder of Humanyze, a behavioral science research firm

Waber explains. “We capture the patterns and rhythms of work, which is incredibly important information to a company,

Getting hired is half the battle. Moving up in an organization requires social skills—EQ. If you lack the ability to interact well with others, you could be stuck in a job that you do well, but have little opportunity for advancement or to move out of your space and into something new.

Hoque is passionate about providing AI assistance to people who are most vulnerable to this disruption in the workplace, who need to cultivate soft skills to remain employable.

job, talking to your peers, or giving a formal talk. If you don’t want to fork over thousands for a human coach, you can turn to ROC Speak, an automated AI coach designed by Hoque that can help improve your storytelling and presentation skills.

you can deliver your talk at home, using your computer webcam and microphone. When you’re finished recording, you receive a personalized automated analysis of your talk, including a word cloud and graphs of smile intensity, body movement, volume modulation, and variation in pitch. You can opt for private mode, which means your video will not be stored or shared with anyone else; or you have the option to share the video and receive comments from friends or anonymous members online. Machine learning algorithms rate your performance using the most constructive and respectful comments. (Wouldn’t that be a great tool for Twitter?) And you can rehearse your talk as often as you like, until you feel absolutely confident that you’ve nailed it.

This is the future of Emotion AI, and one where there is the greatest payoff for human beings. We can use this science as a tool to improve our interactions, help us see past our own biases, and judge people on the basis of their potential, not on stereotypes.

Tega, a furry (and very cute), almost cartoonish-looking classroom teaching assistant that sits on top of a child’s desk;

Such a robot could go a long way toward leveling the playing field for students whose families can’t afford to hire tutors or who are stuck in subpar schools,

Some people are simply curious about such robots, but others may be more comfortable starting a conversation with a robot than a human being.

After that, they may feel ready to talk to a human employee and by which point, they will be able to have a more informed conversation with that sales associate.

Taniya Mishra, PhD, is speech scientist and director of AI research at Affectiva.

When it comes to our interactions with technology, frustration can play a major role in how we respond to our virtual experiences. If a consumer’s frustration goes unchecked, it can harm a company’s reputation and brand, and cost it sales.

My team and I recognize that Emotion AI technology knows lots about you: your emotions, your facial and vocal expressions. It will know when you deviate from your norm and when you are having a bad day.

Partnership on AI to Benefit People and Society (PAI), a tech industry consortium

Originals: How Non-conformists Change the World

Of course, nothing is completely original, in the sense that all of our ideas are influenced by what we learn from the world around us.

We are constantly borrowing thoughts, whether intentionally or inadvertently. We’re all vulnerable to “kleptomnesia”—accidentally remembering the ideas of others as our own.5 By my definition, originality involves introducing and advancing an idea that’s relatively unusual within a particular domain, and that has the potential to improve it

“People who suffer the most from a given state of affairs are paradoxically the least likely to question, challenge, reject, or change it.”

Justifying the default system serves a soothing function. It’s an emotional painkiller: If the world is supposed to be this way, we don’t need to be dissatisfied with it. But acquiescence also robs us of the moral outrage to stand against injustice and the creative will to consider alternative ways that the world could work.

The starting point is curiosity: pondering why the default exists in the first place

Child prodigies, it turns out, rarely go on to change the world.

Although child prodigies are often rich in both talent and ambition, what holds them back from moving the world forward is that they don’t learn to be original.

Practice makes perfect, but it doesn’t make new.

Child prodigies are hindered by achievement motivation.

When achievement motivation goes sky-high, it can crowd out originality: The more you value achievement, the more you come to dread failure.

George Washington had been focused on managing his wheat, flour, fishing, and horse-breeding businesses, joining the cause only after Adams nominated him as commander in chief of the army. “I have used every endeavor in my power to avoid it,” Washington wrote.

one of the attendees nominated King for the presidency. “It happened so quickly that I did not even have time to think it through. It is probable that if I had, I would have declined the nomination,”

When the pope commissioned him to paint a fresco on the ceiling of the Sistine Chapel, Michelangelo wasn’t interested. He viewed himself as a sculptor, not a painter, and found the task so overwhelming that he fled to Florence

We can only imagine how many Wozniaks, Michelangelos, and Kings never pursued, publicized, or promoted their original ideas because they were not dragged or catapulted into the spotlight.

“On matters of style, swim with the current,” Thomas Jefferson allegedly advised, but “on matters of principle, stand like a rock.” Style would be same as UX, habits

The word entrepreneur, as it was coined by economist Richard Cantillon, literally means “bearer of risk.”

if you don’t swing for the fences, it’s impossible to hit a home run

If you’re risk averse and have some doubts about the feasibility of your ideas, it’s likely that your business will be built to last. If you’re a freewheeling gambler, your startup is far more fragile.

Although Google founders Larry Page and Sergey Brin figured out how to dramatically improve internet searches in 1996, they didn’t go on leave from their graduate studies at Stanford until 1998. “We almost didn’t start Google,” Page says, because we “were too worried about dropping out of our Ph.D. program.”

In 1997, concerned that their fledgling search engine was distracting them from their research, they tried to sell Google for less than $2 million in cash and stock. Luckily for them, the potential buyer rejected the offer.

Half a century ago, University of Michigan psychologist Clyde Coombs developed an innovative theory of risk. In the stock market, if you’re going to make a risky investment, you protect yourself by playing it safe in other investments. Coombs suggested that in their daily lives, successful people do the same thing with risks, balancing them out in a portfolio. When we embrace danger in one domain, we offset our overall level of risk by exercising caution in another domain. If you’re about to bet aggressively in blackjack, you might drive below the speed limit on your way to the casino.

As Polaroid founder Edwin Land remarked, “No person could possibly be original in one area unless he were possessed of the emotional and social stability that comes from fixed attitudes in all areas other than the one in which he is being original.”

Having a sense of security in one realm gives us the freedom to be original in another. By covering our bases financially, we escape the pressure to publish half-baked books, sell shoddy art, or launch untested businesses.

“The best entrepreneurs are not risk maxi-mizers,” Endeavor co founder and CEO Linda Rottenberg observes based on decades of experience training many of the world’s great entrepreneurs. “They take the risk out of risk taking.”

Originals do vary in their attitudes toward risk. Some are skydiving gamblers; others are penny-pinching germophobes. To become original, you have to try something new, which means accepting some measure of risk. But the most successful originals are not the daredevils who leap before they look. They are the ones who reluctantly tiptoe to the edge of a cliff, calculate the rate of descent, triple-check their parachutes, and set up a safety net at the bottom just in case.

Originality is not a fixed trait. It is a free choice. Lincoln wasn’t born with an original personality. Taking on controversy wasn’t programmed into his DNA; it was an act of conscious will. As the great thinker W. E. B. DuBois wrote, “He was one of you and yet he became Abraham Lincoln.”

the biggest barrier to originality is not idea generation—it’s idea selection

Justin Berg, is now a wunderkind professor at Stanford who has spent years investigating this question. Berg specializes in creative forecasting, the art of predicting the success of novel ideas.

When we’ve developed an idea, we’re typically too close to our own tastes—and too far from the audience’s taste

To some degree, entrepreneurs and inventors have to be overconfident about the odds of their ideas succeeding, or they wouldn’t have the motivational fuel to pursue them.

Even when they do learn about their audience’s preferences, it’s too easy for them to fall victim to what psychologists call confirmation bias: they focus on the strengths of their ideas while ignoring or discounting their limitations.

On average, creative geniuses weren’t qualitatively better in their fields than their peers. They simply produced a greater volume of work, which gave them more variation and a higher chance of originality.

In the same five-year window that Shakespeare produced three of his five most popular works—Macbeth, King Lear, and Othello—he also churned out the comparatively average Timon of Athens and All’s Well That Ends Well, both of which rank among the worst of his plays and have been consistently slammed for unpolished prose and incomplete plot and character development.

In science, Einstein wrote papers on general and special relativity that transformed physics, but many of his 248 publications had minimal impact. If

“Original thinkers,” Stanford professor Robert Sutton notes, “will come up with many ideas that are strange mutations, dead ends, and utter failures. The cost is worthwhile because they also generate a larger pool of ideas —especially novel ideas.”

Upworthy’s rule is that you need to generate at least twenty-five headline ideas to strike gold.

The best way to get better at judging our ideas is to gather feedback. Put a lot of ideas out there and see which ones are praised and adopted by your target audience.

Conviction in our ideas is dangerous not only because it leaves us vulnerable to false positives, but also because it stops us from generating the requisite variety to reach our creative potential.

Managers tend to be too risk averse: they focus on the costs of investing in bad ideas rather than the benefits of piloting good ones, which leads them to commit a large number of false negatives.

When managers vet novel ideas, they’re in an evaluative mindset. To protect themselves against the risks of a bad bet, they compare the new notion on the table to templates of ideas that have succeeded in the past.

As we gain knowledge about a domain, we become prisoners of our prototypes.

In practice, though, Justin Berg finds that test audiences are no better than managers at predicting the success of new ideas: focus groups are effectively set up to make the same mistakes as managers. When you watch a show in your living room, you get absorbed in the plot. If you find yourself laughing throughout, you’ll end up pronouncing it funny. When you watch it in a focus group, however, you don’t engage with the program in the same way. You’re conscious of the fact that you’re there to evaluate it, not experience it, so you’re judging it from the start.

There is one group of forecasters that does come close to attaining mastery: fellow creators evaluating one another’s ideas.

We often speak of the wisdom of crowds, but we need to be careful about which crowds we’re considering.

Instead of attempting to assess our own originality or seeking feedback from managers, we ought to turn more often to our colleagues.

“We were a good match, because we didn’t know what rules we weren’t supposed to break.” His outsider status gave him enough detachment from the standard format

It is when people have moderate expertise in a particular domain that they’re the most open to radically creative ideas.

The first time Steve Jobs stepped on a Segway, he refused to climb off.

Three major forces left him overconfident about the Segway’s potential: domain inexperience, hubris, and enthusiasm.

To accurately predict the success of a novel idea, it’s best to be a creator in the domain you’re judging.

our intuitions are only accurate in domains where we have a lot of experience.

When Steve Jobs had a gut feeling that the Segway would change the world, he was seduced by an impulsive attraction to its novelty rather than a careful examination of its usefulness.

products don’t create value. Customers do.”

intuitions are only trustworthy when people build up experience making judgments in a predictable environment.

There’s a stable, robust relationship between the patterns you’ve seen before and what you encounter today. But if you’re a stockbroker or political forecaster, the events of the past don’t have reliable implications for the present.

experience helps physicists, accountants, insurance analysts, and chess masters—they all work in fields where cause-and-effect relationships are fairly consistent. But admissions officers, court judges, intelligence analysts, psychiatrists, and stockbrokers didn’t benefit much from experience.

The more successful people have been in the past, the worse they perform when they enter a new environment.

If we want to forecast whether the originators of a novel idea will make it successful, we need to look beyond the enthusiasm they express about their ideas and focus on the enthusiasm for execution that they reveal through their actions.

Individual creators have far better odds over a lifetime of ideas. When we judge their greatness, we focus not on their averages, but on their peaks

to exercise power without status elicited increasingly negative reactions. Status cannot be claimed; it has to be earned or granted.

Francis Ford Coppola observed, “The way to come to power is not always to merely challenge the Establishment, but first make a place in it and then challenge and double-cross the Establishment.”

idiosyncrasy credits—the latitude to deviate from the group’s expectations.10 Idiosyncrasy credits accrue through respect, not rank: they’re based on contributions. We squash a low-status member who tries to challenge the status quo, but tolerate and sometimes even applaud the originality of a high-status star.

Intellipedia, a classified variation on Wikipedia that would be accessible across the intelligence community.

The Sarick Effect

four reasons, it’s actually more effective to adopt Griscom’s form of powerless communication by accentuating the flaws in your idea.

The first advantage is that leading with weaknesses disarms the audience.

When people presented drawbacks or disadvantages, I would become an ally. Instead of selling me, they’ve given me a problem to solve.”

people rated the critical reviewer as 14 percent more intelligent, and having 16 percent greater literary expertise, than the complimentary reviewer. People think an amateur can appreciate art, but it takes a professional to critique it.

“Prophets of doom and gloom appear wise and insightful,” Amabile writes, “while positive statements are seen as having a naïve ‘Pollyanna’ quality.”

Even if reviewers loved a book, they felt an obligation to add a paragraph at the end noting where it fell short. According to Griscom, it’s their way of saying, “I’m not a chump; I was not totally snowed by this author. I am discerning.”

The third advantage of being up front about the downsides of your ideas is that it makes you more trustworthy.

Of course, highlighting weaknesses can backfire if the audience doesn’t already recognize them; it can give them ammunition to shoot down your idea.

A fourth advantage of this approach is that it leaves audiences with a more favorable assessment of the idea itself, due to a bias in how we process information.

By acknowledging its most serious problems, he made it harder for investors to generate their own ideas about what was wrong with the company.

“The listeners can’t hear that tune—all they can hear is a bunch of disconnected taps, like a kind of bizarre Morse Code.” This is the core challenge of speaking up with an original idea. When you present a new suggestion, you’re not only hearing the tune in your head. You wrote the song. You’ve spent hours, days, weeks, months, or maybe even years thinking about the idea. You’ve contemplated the problem, formulated the solution, and rehearsed the vision. You know the lyrics and the melody of your idea by heart. By that point, it’s no longer possible to imagine what it sounds like to an audience that’s listening to it for the first time. This explains why we often under communicate our ideas. They’re already so familiar to us that we underestimate how much exposure an audience needs to comprehend and buy into them.

Harvard professor John Kotter studied change agents years ago, he found that they typically under communicate their visions by a factor of ten. On average, they spoke about the direction of the change ten times less often than their stakeholders needed to hear

If we want people to accept our original ideas, we need to speak up about them, then rinse and repeat

There is no such thing as the Sarick Effect, and there was no social scientist named Leslie Sarick. I made them up to demonstrate the mere exposure effect

The mere exposure effect has been replicated many times—the more familiar a face, letter, number, sound, flavor, brand, or Chinese character becomes, the more we like it.

“Familiarity doesn’t breed contempt,” says serial entrepreneur Howard Tullman. “It breeds comfort.” One explanation for this effect is that exposure increases the ease of processing. An unfamiliar idea requires more effort to understand. The more we see, hear, and touch it, the more comfortable we become with it, and the less threatening it is.

Just as film is ruined when it’s overexposed, and songs we hear too often become irritatingly stuck in our heads, too much familiarity with an idea can lead to boredom. But in the context of speaking up, people rarely oversaturate their audiences. Overall, the evidence suggests that liking continues to increase as people are exposed to an idea between ten and twenty times, with additional exposure still useful for more complex ideas. Interestingly, exposures are more effective when they’re short and mixed in with other ideas, to help maintain the audience’s curiosity.

It’s also best to introduce a delay between the presentation of the idea and the evaluation of it, which provides time for it to sink in. If you’re making a suggestion to a boss, you might start with a 30-second elevator pitch during a conversation on Tuesday, revisit it briefly the following Monday, and then ask for feedback at the end of the week.

Whether you’re unhappy with your job, your marriage, or your government, decades of research show that you have a choice between exit, voice, persistence, and neglect.

Exit means removing yourself from the situation altogether:

Voice involves actively trying to improve the situation:

Neglect entails staying in the current situation but reducing your effort:

Fundamentally, these choices are based on feelings of control and commitment.Do you believe you can effect change, and do you care enough to try? If you believe you’re stuck with the status quo, you’ll choose neglect when you’re not committed, and persistence when you are. If you do feel you can make a difference, but you aren’t committed to the person, country, or organization, you’ll leave. Only when you believe your actions matter and care deeply will you consider speaking up.

As much as agreeable people may love us, they often hate conflict even more. Their desire to please others and preserve harmony makes them prone to backing down instead of sticking up for us. “Because agreeable people value cooperation and conform to norms, they should not be inclined to make waves and upset interpersonal relationships,” management researchers Jeff LePine and Linn Van Dyne wrote

As a Google employee put it, disagreeable managers may have a bad user interface but a great operating system.

Agreeable people were happiest in the moments when they doled out compliments and praise, smiled and laughed with others, expressed affection, reassured others, and compromised or made concessions to please others.Disagreeable people, in contrast, experienced the greatest joy when they were criticizing, confronting, or challenging others.

In the decision to speak up, whom we choose as our audience matters as much as how we deliver our message.

Instead of speaking up to audiences who are highly agreeable, we’re better off targeting suggestions to people with a history of originality. Research shows that when managers have a track record of challenging the status quo, they tend to be more open to new ideas and less threatened by contributions from others.

Find such for team and vc

Social scientists have long demonstrated this middle-status conformity effect.36 If you’re perched at the top, you’re expected to be different and therefore have the license to deviate. Likewise, if you’re still at the bottom of a status hierarchy, you have little to lose and everything to gain by being original. But the middle segment of that hierarchy—where the majority of people in an organization are found—is dominated by insecurity.

Now that you have a bit of respect, you value your standing in the group and don’t want to jeopardize it. To maintain and then gain status, you play a game of follow-the-leader, conforming to prove your worth as a group member

“Middle-status conservatism reflects the anxiety experienced by one who aspires to a social station but fears disenfranchisement.” The fall from low to lower hardly hurts; the fall from middle to low is devastating.

Sociologists Damon Phillips of Columbia and Ezra Zuckerman of MIT found that security analysts were significantly less likely to issue negative stock ratings when they or the banks that employed them had middle status. Making a recommendation to sell a stock can anger corporate executives and investors who value the stock. Analysts with poor track records at minor banks have nowhere to fall by taking this risk, and star analysts at elite banks have a safety net. But for moderately successful analysts at average banks who are trying to advance themselves, a negative recommendation could be a career-limiting move.fn4

it was more effective to voice ideas upward and downward, and spent less time attempting to make suggestions to middle managers.

Interestingly, though, Rosette and her colleagues found that when black women acted dominantly, they didn’t face the same penalties as white women and black men. As double minorities, black women defy categories.Because people don’t know which stereotypes to apply to them, they have greater flexibility to act “black” or “female” without violating stereotypes.

If you become known as someone who delivers, you do your job and do it well, you build respect.” She had earned status before exercising power, so she had idiosyncrasy credits to cash in.

Stanford psychologist Zak Tormala finds that audiences are more convinced when experts express doubt than certainty, due to the element of surprise.We expect an entrepreneur or a change agent to be certain. When they’re not, we’re intrigued, and we pay more attention to the message—which means we’ll get on board if the idea is compelling. The Sarick Effect only holds if you have a persuasive message to deliver.

counterbalance the exercise by asking the executives to name three or twelve bad things about their lives. Naming three bad things is easy; it leaves us thinking that life isn’t so great. But it’s actually pretty challenging to come up with a dozen things that are wrong, which leads to the realization that life could be a whole lot worse. Another way to make the point is to ask people to judge someone famous. In an experiment by psychologist Geoffrey Haddock, people generated a list of two or five negative attributes of Tony Blair. After coming up with more reasons to dislike him, they actually liked him more.It was more difficult to think of many negative attributes, so they assumed he must not be that bad.

You don’t have to be first to be an original, and the most successful originals don’t always arrive on schedule. They are fashionably late to the party.

When you procrastinate, you’re intentionally delaying work that needs to be done. You might be thinking about the task, but you postpone making real progress on it or finishing it to do something less productive. Shin proposed that when you put off a task, you buy yourself time to engage in divergent thinking rather than foreclosing on one particular idea.

As a result, you consider a wider range of original concepts and ultimately choose a more novel direction.

It was only when they began thinking about the task and then deliberately procrastinated that they considered more remote possibilities and generated more creative ideas. Delaying progress enabled them to spend more time considering different ways to accomplish it, rather than “seizing and freezing” on one particular strategy.

Procrastination didn’t always fuel creativity: if the employees weren’t intrinsically motivated to solve a major problem, stalling just set them behind. But when they were passionate about coming up with new ideas, putting off the task led them to more creative solutions.

In ancient Egypt, there were two different verbs for procrastination: one denoted laziness; the other meant waiting for the right time.

Productive mediocrity requires discipline of an ordinary kind. It is safe and threatens no one. Nothing will be changed by mediocrity…. But genius is uncontrolled and uncontrollable. You cannot produce a work of genius according to a schedule or an outline.5

Zeigarnik effect.

In 1927, Russian psychologist Bluma Zeigarnik demonstrated that people have a better memory for incomplete than complete tasks. Once a task is finished, we stop thinking about it. But when it is interrupted and left undone, it stays active in our minds.

Great originals are great procrastinators, but they don’t skip planning altogether. They procrastinate strategically, making gradual progress by testing and refining different possibilities

Being original doesn’t require being first. It just means being different and better.

First-mover advantages tend to prevail when patented technology is involved, or when there are strong network effects (the product or service becomes more valuable when there are a greater number of users, as with telephones or social media).

The time at which we reach our heights of originality, and how long they last, depends on our styles of thinking. When Galenson studied creators, he discovered two radically different styles of innovation: conceptual and experimental. Conceptual innovators formulate a big idea and set out to execute it. Experimental innovators solve problems through trial and error, learning and evolving as they go along. They are at work on a particular problem, but they don’t have a specific solution in mind at the outset. Instead of planning in advance, they figure it out as they go.

According to Galenson, conceptual innovators are sprinters, and experimental innovators are marathoners.

When he studied economists who won the Nobel Prize, on average the conceptual innovators did their most influential work at forty-three, whereas the experimental innovators did theirs at sixty-one.

The inability of … aging conceptual innovators to match the brilliant achievements of their youth is not a product of their depletion of a stock of some magical elixir of artistry. Instead, it is caused by the impact of accumulating experience…. The real enemies of conceptual innovators are the establishment of fixed habits of thought…. Conceptual innovators may become the captives of an important early achievement.

As psychologist Abraham Maslow noted, when you have a hammer, everything looks like a nail.

Conceptual innovators tend to generate original ideas early but risk copying themselves. The experimental approach takes longer, but proves more renewable: instead of reproducing our past ideas, experiments enable us to continue discovering new ones.

To sustain our originality as we age and accumulate expertise, our best bet is to adopt an experimental approach. We can make fewer plans in advance for what we want to create, and start testing out different kinds of tentative ideas and solutions. Eventually, if we’re patient enough, we may stumble onto something that’s novel and useful.

one of the reasons that halftimes can be so influential in basketball and football: They allow coaches to intervene when teams are most amenable to new strategies.

Building effective coalitions involves striking a delicate balance between venerable virtues and pragmatic policies.

common tactics can be more influential than common values,

it’s often wiser to partner with enemies than frenemies.

To form alliances with opposing groups, it’s best to temper the cause, cooling it as much as possible. Yet to draw allies into joining the cause itself, what’s needed is a moderately tempered message that is neither too hot nor too cold, but just right.

We assume that common goals bind groups together, but the reality is that they often drive groups apart.

concept of horizontal hostility. Even though they share a fundamental objective, radical groups often disparage more mainstream groups as impostors and sellouts.

Sigmund Freud wrote a century ago, “It is precisely the minor differences in people who are otherwise alike that form the basis of feelings of strangeness and hostility between them.”

In the eyes of the more extreme vegans, the mainstream vegetarians were wannabes:

Orthodox Jews evaluated conservative Jewish women more negatively than Jewish women who didn’t practice or observe religious holidays at all. The message was clear: if you were a true believer, you’d be all in. The more strongly you identify with an extreme group, the harder you seek to differentiate yourself from more moderate groups that threaten your values.

The group that sang together shared significantly more.They reported feeling more similar to each other and more like a team than participants in the other conditions.In seeking alliances with groups that share our values, we overlook the importance of sharing our strategic tactics.

emergence of unusual alliances between social movements—like coalitions between environmental and gayrights activists, the women’s movement and the peace movement, and a marine base and a Native American tribe.

Even if they care about different causes, groups find affinity when they use the same methods of engagement

Her physics professors said it was impossible. Ultrasonic engineers agreed; it couldn’t be done. Some of the world’s most respected scientists told her she was wasting her time on the effort.

Three years later, I met Perry at a Google event. After landing $750,000 in seed money from Mark Cuban, Marissa Mayer, and Peter Thiel’s Founders Fund, her team had just finished its first functional prototype. It could power devices faster than a wire, at longer distances, and would be ready for consumers in two years.

she simply stopped telling experts what it was she was trying to create. Instead of explaining her plan to generate wireless power, she merely provided the specifications of the technology she wanted. Her old message had been: “I’m trying to build a transducer to send power over the air.” Her new pitch disguised the purpose: “I’m looking for someone to design a transducer with these parameters. Can you make this part?”

To succeed, originals must often become tempered radicals.They believe in values that depart from traditions and ideas that go against the grain, yet they learn to tone down their radicalism by presenting their beliefs and ideas in ways that are less shocking and more appealing to mainstream audiences.

When she couldn’t persuade engineers to take a leap, she convinced them to take a few steps by masking her purpose.

Shifting the focus from why to how can help people become less radical.

In a series of experiments, when people with extreme political views were asked to explain the reasons behind their policy preferences, they stuck to their guns.Explaining why gave them a chance to affirm their convictions. But when asked to explain how their preferred policies work, they became more moderate.

insiders and outsiders have distinct ideas about who represents a coalition.For insiders, the key representative is the person who is most central and connected in the group.

But for outsiders, the person who represents the group is the one with the most extreme views.

Negative relationships are unpleasant, but they’re predictable: if a colleague consistently undermines you, you can keep your distance and expect the worst. But when you’re dealing with an ambivalent relationship, you’re constantly on guard, grappling with questions about when that person can actually be trusted.

ambivalent relationships are literally unhealthier than negative relationships

Our instinct is to sever our bad relationships and salvage the ambivalent ones. But the evidence suggests we ought to do the opposite: cut our frenemies and attempt to convert our enemies.

we’re often more sensitive to gains and losses in esteem than the level of esteem itself.

When someone always supports us, we take it for granted—and can discount it. But we regard someone who began as a rival and then became an enthusiastic supporter as an authentic advocate.

“A person whose liking for us increases over time will be liked better than one who has always liked us,”

While we’ll have an especially strong affinity toward our converted rivals, will they feel the same way toward us? Yes—this is the second advantage of converting resisters. To like us, they have to work especially hard to overcome their initial negative impressions, telling themselves, I must have been wrong about that person.

Beginning with a novel template was the key to originality, but it also posed a challenge.

Although a novel starting point does help foster the originality of our ideas, it doesn’t necessarily make them palatable and practical to our audiences.

a novel starting point followed by a familiarity infusion led to ideas that were judged as 14 percent more practical, without sacrificing any originality.

Radical thinking is often necessary to put an original stake in the ground. But once the radical idea of voting was planted, the original suffragists needed a more tempered mediator to reach a wider audience.

we need to think differently about values. Instead of assuming that others share our principles, or trying to convince them to adopt ours, we ought to present our values as a means of pursuing theirs. It’s hard to change other people’s ideals. It’s much easier to link our agendas to familiar values that people already hold.

If it’s too original, it may be hard for the audience to understand. The goal is to push the envelope, not tear the envelope.”

described how they were entering professions, taking care not to compare them to men.

Don’t compare or try to dislodge existing giants

conflicts between two groups are often caused and intensified by conflicts within the groups.

“Those who cannot remember the past are condemned to repeat it,”

tempered radicalism

In an experiment led by Yale psychologist Erica Boothby, people liked chocolate better when they tasted it at the same time as another person. I hate chocolate, so this experiment would not have worked with me—but their follow-up study showed that eating disgustingly bitter chocolate was even more unpleasant when tasted simultaneously with someone else. Apparently, both positive and negative experiences are amplified when we share them, leading to even greater feelings of similarity.8

Shared tactics only facilitate alliances up to a point. When the overlap in tactics between groups was more than 61 percent, coalitions became less likely. When their methods are pretty much the same, groups simply have less to learn and gain from one another; their efforts are more likely to be redundant.

status differences mattered: Movements were more likely to align when one had moderately higher status than the other, as opposed to when there was no status difference or an extreme status difference.

It’s obvious that a lower-status movement would pursue the visibility associated with a higher-status partner, but there are benefits to the higher-status group, too.

“As challengers to the established social order, movements need to refresh and update their agenda continuously in order to be seen as cutting-edge, authentic, and relevant. If they fail to innovate their movement agenda and engage with new ideas, a movement can become obsolete and lose touch with its original constituency. For this reason, high-status movements may seek to absorb newly emerging or previously ignored vintage issues.”

birth order predicted which brother tried to steal more bases. Younger brothers were 10.6 times more likely than their older siblings to attempt to steal a base.

The key difference was the propensity to take risks.

We assume that younger scientists will be more receptive to rebellious ideas than older scientists, who become conservative and entrenched in their beliefs with age. But remarkably, birth order was more consequential than age.

Sulloway observes. “Laterborns have typically been half a century ahead of firstborns in their willingness to endorse radical innovations.”

According to eminent Stanford professor James March, when many of us make decisions, we follow a logic of consequence: Which course of action will produce the best result? If you’re like Robinson, and you consistently challenge the status quo, you operate differently, using instead a logic of appropriateness: What does a person like me do in a situation like this? Rather than looking outward in an attempt to predict the outcome, you turn inward to your identity.14 You base the decision on who you are—or who you want to be.

Birth order doesn’t determine who you are; it only affects the probability that you’ll develop in a particular way.

In one study, people ranked their siblings and themselves on school achievement and rebellion. High academic achievers were 2.3 times as likely to be firstborn as lastborn. Rebels were twice as likely to be last-born as firstborn.

When a younger sibling arrives, firstborns risk being “dethroned” and often respond by emulating their parents: they enforce rules and assert their authority over the younger sibling, which sets the stage for the younger child to rebel.

laterborn children actively seek to be different. But there’s more to this story than children’s attempting to stand out. As hard as they may try to be consistent, parents treat children differently based on birth order, which wedges their personalities even further apart.

firstborns grow up in a world of adults, while the more older siblings you have, the more time you spend learning from other children.

When older siblings serve as surrogate parents and role models, you don’t face as many rules or punishments, and you enjoy the security of their protection. You also end up taking risks earlier: instead of emulating the measured, carefully considered choices of adults, you follow the lead of other children.

Even when the parenting role isn’t delegated to children, parents tend to start out as strict disciplinarians with firstborns and become increasingly flexible with laterborns.

“I didn’t know I was supposed to be scared. And in a nutshell, that is why I dove into everything headfirst,”

“Then as now, I looked at life’s challenges as dares rather than uphill battles,

lastborns, they are protected fiercely, which leaves them “freer to become radicals themselves.”

The evidence on birth order highlights the importance of giving children freedom to be original. But one of the dangers of doing so is that they might use that freedom to rebel in ways that put themselves or others at risk.

“Guilt is the gift that keeps on giving.”

The dual moral emotions of empathy and guilt activate the desire to right wrongs of the past and behave better in the future.

a significant difference: merely mentioning patients instead of you led medical professionals to wash their hands 10 percent more often and use 45 percent more soap and gel.

“He made me see that if I continued with the gang it would hurt my mother,” Robinson wrote. “He said it didn’t take guts to follow the crowd, that courage and intelligence lay in being willing to be different.

The last time you saw a child engage in good behavior, how did you respond? My guess is that you praised the action, not the child. “That was really nice. That was so sweet.” By complimenting the behavior you reinforce it, so the child will learn to repeat it.

Children who received character praise were subsequently more generous.

When our character is praised, we internalize it as part of our identities. Instead of seeing ourselves as engaging in isolated moral acts, we start to develop a more unified self-concept as a moral person.

instead of “Please don’t cheat,” they changed the appeal to “Please don’t be a cheater.”

When you’re urged not to cheat, you can do it and still see an ethical person in the mirror. But when you’re told not to be a cheater, the act casts a shadow; immorality is tied to your identity, making the behavior much less attractive. Cheating is an isolated action that gets evaluated with the logic of consequence: Can I get away with it? Being a cheater evokes a sense of self, triggering the logic of appropriateness: What kind of person am I, and who do I want to be?

“Don’t Drink and Drive” could be rephrased as: “Don’t Be a Drunk Driver.”

When a child draws a picture, instead of calling the artwork creative, we can say “You are creative.”

When we shift our emphasis from behavior to character, people evaluate choices differently. Instead of asking whether this behavior will achieve the results they want, they take action because it is the right thing to do.

Role models have a foundational impact on how children grow up to express their originality.

The paradox of encouraging children to develop strong values is that parents effectively limit their own influence. Parents can nurture the impulse to be original, but at some point, people need to find their own role models for originality in their chosen fields.

If we want to encourage originality, the best step we can take is to raise our children’s aspirations by introducing them to different kinds of role models.

explanations of our impact on others are most likely to have a lasting effect if they’re coupled with a statement of principles.”42 She’s crying because she wants to play with your toys” doesn’t do much good alone; the more meaningful statement is: “She’s crying because she wants to play with your toys, and in this family, we always share.”

praising the person in the moral domain but the behavior in the skill domain? Praising character can lead children to think, “I’m a good person, so I can do a bad thing”—or, more frighteningly, “I’m a good person, so how could this be a bad thing?” This is why it’s so important to exercise discipline as described above: it motivates children to develop clear moral standards and emotions that discourage bad behaviors. My bet is that character praise coupled with discipline leads to the most moral choices.

Polaroid fell due to a faulty assumption. Within the company, there was widespread agreement that customers would always want hard copies of pictures, and key decision makers failed to question this assumption. It was a classic case of groupthink—the tendency to seek consensus instead of fostering dissent. Groupthink is the enemy of originality; people feel pressured to conform to the dominant, default views instead of championing diversity of thought.

Men who handled national security affairs became too close, too personally fond of each other. They tended to conduct the affairs of state as if they were a gentlemen’s club…. If you are very close … you are less inclined, in a debating sense, to drive your opponent to the wall and you very often permit a viewpoint to be expressed and to go unchallenged except in a peripheral way.

what got you here won’t get you there.7 When organizations mature, what goes wrong in commitment cultures?

“Commitment firms have greater difficulty attracting, retaining, or integrating a diverse workforce,

organizations tend to become more homogeneous over time.8 As they attract, select, socialize, and retain similar people, they effectively weed out diversity in thoughts and values. This is especially likely in established firms with strong commitment cultures, where similarity is the basis for hiring, and employees face intense pressure to fit in or get out.

Dissenting opinions are useful even when they’re wrong.

He built the company to last, but his blueprint unwittingly doomed it to perish. Land knew how to “think different,” yet he created a company that didn’t.

In 2010, Bridgewater’s returns exceeded the combined profits of Google, eBay, Yahoo, and Amazon. Bridgewater’s secret is promoting the expression of original ideas.

Bridgewater has prevented groupthink by inviting dissenting opinions from every employee in the company.

At Bridgewater, employees are expected to voice concerns and critiques directly to each other. “Don’t let ‘loyalty’ stand in the way of truth and openness,”

At Bridge-water, they’re evaluated on whether they speak up—and they can be fired for failing to challenge the status quo.

In a cult, core values are dogma. At Bridgewater, employees are expected to challenge the principles themselves. During training, when employees learn the principles, they’re constantly asked: Do you agree? “We have these standards that are stress tested over time, and you have to either operate by them or disagree with them and fight for better ones,”

confirmation bias: When you have a preference, you seek out information supporting it, while overlooking information that challenges it.

When people are designated to dissent, they’re just playing a role.19 This causes two problems: They don’t argue forcefully or consistently enough for the minority viewpoint, and group members are less likely to take them seriously.

In the language of futurist Paul Saffo, the norm is to have “strong opinions, weakly held.”

a culture that focuses too heavily on solutions becomes a culture of advocacy, dampening inquiry.22 If you’re always expected to have an answer ready, you’ll arrive at meetings with your diagnosis complete, missing out on the chance to learn from a broad range of perspectives.

Bridgewater is not a democracy. Voting privileges the majority, when the minority might have a better opinion. “Democratic decision making—one person, one vote—is dumb,” Dalio explains, “because not everybody has the same believability.”At Bridgewater, every employee has a believability score on a range of dimensions.

Dalio wanted Bridgewater to work the same way, so he created baseball cards that display statistics on every employee’s performance, which can be accessed by anyone at the company. If you’re about to interact with a few Bridgewater colleagues for the first time, you can see their track records on seventy-seven different dimensions of values, skills, and abilities in the areas of higher-level thinking, practical thinking, maintaining high standards, determination, open-mindedness yet assertiveness, and organization and reliability.

When you express an opinion, it’s weighted by whether you’ve established yourself as believable in that dimension. Your believability is a probability of being right in the present, and is based on your judgment, reasoning, and behavior in the past. In presenting your views, you’re expected to consider your own believability by telling your audience how confident you are. If you have doubts, and you’re not known as believable in the domain, you shouldn’t have an opinion in the first place; you’re supposed to ask questions so you can learn. If you’re expressing a fierce conviction, you should be forthright about it—but know that your colleagues will probe the quality of your reasoning. Even then, you’re supposed to be assertive and open-minded at the same time. As management scholar Karl Weick advises, “Argue like you’re right and listen like you’re wrong.”

When Principles Collide What happens, though, when believable people don’t agree?

At the software company Index Group, CEO Tom Gerrity asked a consultant to tell him everything he did wrong in front of his entire staff of roughly a hundred employees.By role modeling receptivity to feedback, employees across the company became more willing to challenge him—and one another.

In a study of over one hundred professional theaters by researchers Zannie Voss, Dan Cable, and Glenn Voss, leaders rated the importance of five values: artistic expression (innovative plays), entertainment (audience satisfaction), giving to the community (providing access, outreach, and education), achievement (being recognized for excellence), and financial performance (fiscal viability).

A compelling vision was necessary but not sufficient for strong health and financial performance.

The more principles you have, the greater the odds that employees focus on different values or interpret the same values differently.

If that proved to be an issue with five to ten principles, wouldn’t it be an even greater problem with two hundred or more?

“I can see that I might not have been clear enough that there’s a hierarchy, because these 200 are not all the same. A principle is just some type of event happening over and over again, and how to deal with that event.

We have lots of categories to describe people’s personalities, but few frameworks for describing the personalities of situations.

The number one principle is that you must think for yourself.”

This time, Dalio disagreed. “I might be wrong,” he qualified, but he explained that he favored the debate format between believable people, because it was the fastest way to reach the right answer and it enabled them to learn from each other’s reasoning.

He believes that thoughtful disagreement between experts creates an efficient marketplace of ideas, where the best ones emerge over time.

Dalio places more faith than I do in the triangulated opinions of experts. For me, a critical test would be assigning some units to rely on believability-weighted debate and others to run experiments, and see which units make better decisions. Then, every unit would try the opposite method and analyze the results again. As a social scientist, my bet is that, on average, groups that make decisions based on experiments will outperform those guided by debate between experts. But only the data will tell.

“Shapers” are independent thinkers: curious, non-conforming, and rebellious. They practice brutal, nonhierarchical honesty. And they act in the face of risk, because their fear of not succeeding exceeds their fear of failing.

The greatest shapers don’t stop at introducing originality into the world. They create cultures that unleash originality in others.

There’s a common belief that creativity flourishes when criticism is withheld, but this turns out to be false.

The assumption was that criticism would discourage people from trying wild ideas, yet original breakthroughs come after more criticism, not less.

Research suggests that in the most successful microbiology labs, when scientists present new evidence, their skeptical colleagues don’t applaud; they challenge the interpretations and propose alternatives.

as long as members feel that their colleagues are looking out for one another’s best interests.

Although this seems like a natural solution, it’s not effective. Changing a blueprint is both difficult and dangerous. In the Silicon Valley study, half of the startups altered their blueprints—and those that did more than doubled their chances of failing.

If you hire people who fit your culture, you’ll end up with people who reinforce rather than challenge one another’s perspectives.

“Cultural fit has become a new form of discrimination,”

Valuing transparency doesn’t mean employees should speak up about everything. “It has to be goal relevant,” one employee explains. “You can tell people you don’t like their jeans, but then you’ll get criticized. How is that relevant?!” To hold employees accountable for being transparent, virtually all meetings and calls at Bridgewater are videotaped. If you’re slamming people, they deserve the opportunity to learn from your perspective. When everything you say is being recorded, you might as well be open about it—and if you’re not, they’ll find out anyway. As a Bridgewater employee, if you talk behind someone’s back, they’ll call you a slimy weasel to your face. If you do it more than once, you might be sent packing. Fn7

“knowing others’ preferences degrades the quality of group decisions.”24 Next, instead of discussing alternatives one at a time, they compared and contrasted each of the alternatives. Evidence shows that when groups consider options one at a time, a majority preference can emerge too early.25 It’s better to rank order the options, because comparing your third and fourth choice might surface information that shifts the entire decision.

when groups are instructed to rank order the alternatives, instead of choosing the best alternative, they’re more likely to consider each option, share information about the unpopular ones, and make a good decision.

“I learned that courage was not the absence of fear, but the triumph over it…. The brave man is not he who does not feel afraid, but he who conquers that fear.”1 Nelson Mandela

The Positive Power of Negative Thinking

When outstanding U.S. government leaders described their most difficult decisions, they reported struggling not with complex problems, but with choices that required courage.

strategic optimism and defensive pessimism. Strategic optimists anticipate the best, staying calm and setting high expectations.6 Defensive pessimists expect the worst, feeling anxious and imagining all the things that can go wrong

“Defensive pessimism is a strategy used in specific situations to manage anxiety, fear, and worry,” Norem explains. When self-doubts creep in, defensive pessimists don’t allow themselves to be crippled by fear. They deliberately imagine a disaster scenario to intensify their anxiety and convert it into motivation. Once they’ve considered the worst, they’re driven to avoid it, considering every relevant detail to make sure they don’t crash and burn, which enables them to feel a sense of control.

When they don’t feel anxious, they become complacent; when encouraged, they become discouraged from planning. If you want to sabotage the performance of chronic defensive pessimists, just make them happy.

“The trick is to make fear your friend,” he notes. “Fear forces you to prepare more rigorously and see potential problems more quickly.”

defensive pessimism is a valuable resource when commitment to the task is steadfast. But when commitment flutters, anxiety and doubt can backfire.

calm versus excited—was sufficient to significantly alter the quality

Reframing fear as excitement also motivated

“Try to get excited” instead of “Try to remain calm.”

Instead of helping them accept fear, it reinforced that they were afraid. Calling it excitement was enough to spike accuracy

To overcome fear, why does getting excited work better than trying to calm yourself down? Fear is an intense emotion: You can feel your heart pumping and your blood coursing. In that state, trying to relax is like slamming on the brakes when a car is going 80 miles per hour. The vehicle still has momentum. Rather than trying to suppress a strong emotion, it’s easier to convert it into a different emotion—one that’s equally intense, but propels us to step on the gas.

Physiologically, we have a stop system and a go system.10 “Your stop system slows you down and makes you cautious and vigilant,” explains Quiet author Susan Cain.11 “Your go system revs you up and makes you excited.” Instead of hitting the stop switch, we can motivate ourselves to act in the face of fear by pressing the go switch. Fear is marked by uncertainty about the future: We’re worried that something bad will happen.

When we’re not yet committed to a particular action, thinking like a defensive pessimist can be hazardous. Since we don’t have our hearts set on charging ahead, envisioning a dismal failure will only activate anxiety, triggering the stop system and slamming our brakes.

Neuroscience research suggests that when we’re anxious, the unknown is more terrifying than the negative.

once people have imagined the worst, “they feel more in control.

“Proper revolutions are not cataclysmic explosions,” Popovic observes. “They are long, controlled burns.”

When originals come up with a vision for transforming anxiety into excitement, they usually take it upon themselves to communicate it. But just because it’s your idea doesn’t mean you’re the best person to activate the go system. In a series of experiments, Dave Hofmann and I found that the most inspiring way to convey a vision is to outsource it to the people who are actually affected by it

The amount of money the average caller raised more than tripled, however, when leaders outsourced inspiration to a scholarship student, who described how the callers’ efforts had enabled him to afford university tuition and study abroad in China.

When the same message came from a scholarship student, they found it more authentic, honest, and truthful. They empathized with the student, and instead of being anxious about asking for money, they were excited to solicit donations to help more students like him.

I found that people are inspired to achieve the highest performance when leaders describe a vision and then invite a customer to bring it to life with a personal story.17 The leader’s message provides an overarching vision to start the car, and the user’s story offers an emotional appeal that steps on the accelerator.

As they grasped that Skype was about connecting people, the team’s anxiety gave way to excitement.

The easiest way to encourage non-conformity is to introduce a single dissenter.

“The first follower is what transforms a lone nut into a leader.”19 If you were sitting with seven other people and six group members picked the wrong answer, but the remaining one chose the correct answer, conformity dropped dramatically.

Merely knowing that you’re not the only resister makes it substantially easier to reject the crowd

Blueprint for Revolution, Popovic

Popovic and his friends were able to transform fear into another strong positive emotion: hilarity.

Popovic sees a role for amusement wherever fear runs rampant. Instead of trying to decelerate the stop system, he uses laughter to rev up the go system. When you have no power, it’s a powerful way to convert strong negative emotions into positive ones. In

Executives underestimate how hard it can be to drive people out of their comfort zones,” Kotter writes. “Without a sense of urgency, people … won’t make needed sacrifices. Instead they cling to the status quo and resist.”

If you want people to modify their behavior, is it better to highlight the benefits of changing or the costs of not changing?

it depends on whether they perceive the new behavior as safe or risky.27 If they think the behavior is safe, we should emphasize all the good things that will happen if they do it—they’ll want to act immediately to obtain those certain gains. But when people believe a behavior is risky, that approach doesn’t work. They’re already comfortable with the status quo, so the benefits of change aren’t attractive, and the stop system kicks in.

Instead, we need to destabilize the status quo and accentuate the bad things that will happen if they don’t change. Taking a risk is more appealing when they’re faced with a guaranteed loss if they don’t.

This “kill the company” exercise is powerful because it reframes a gain-framed activity in terms of losses.28 When deliberating about innovation opportunities, the leaders weren’t inclined to take risks.

When they considered how their competitors could put them out of business, they realized that it was a risk not to innovate.

If you want people to take risks, you need first to show what’s wrong with the present. To drive people out of their comfort zones, you have to cultivate dissatisfaction, frustration, or anger at the current state of affairs, making it a guaranteed loss.

“The greatest communicators of all time,” says communication expert Nancy Duarte—who has spent her career studying the shape of superb presentations—start by establishing “what is: here’s the status quo.”29 Then, they “compare that to what could be,” making “that gap as big as possible.”

when we’re experiencing doubts on the way toward achieving a goal, whether we ought to look backward or forward depends on our commitment.34 When our commitment is wavering, the best way to stay on track is to consider the progress we’ve already made

As we recognize what we’ve invested and attained, it seems like a waste to give up, and our confidence and commitment surge.

When we’re determined to reach an objective, it’s the gap between where we are and where we aspire to be that lights a fire under us.

“Instead of courage,” management guru Tom Peters recommends fostering “a level of fury with the status quo such that one cannot not act.”35

Anger doesn’t just activate the go system; it drops a heavy brick on the gas pedal. It’s a force that motivates people to speak up and act, but it can also make them less effective in doing so.

the key is to be “simultaneously hot-and cool-headed.36 The heat fuels action and change; the coolness shapes the action and change into legitimate and viable forms.” But once the heat is on, how do we keep our cool?

if you’re feeling an intense emotion like anxiety or anger, there are two ways to manage it: surface acting and deep acting.37 Surface acting involves putting on a mask—modifying your speech, gestures, and expressions to present yourself as unfazed. If you’re a flight attendant, and an angry passenger begins yelling at you, you might smile to feign warmth. You’re adjusting your outward appearance, but your internal state is unchanged

In deep acting, known as method acting in the theater world, you actually become the character you wish to portray.38 Deep acting involves changing your inner feelings, not just your outer expressions of them. If you’re the flight attendant in the above example, you might imagine that the passenger is stressed, afraid of flying, or going through a messy divorce. You feel empathy for the passenger, and the smile comes naturally to you, creating a more genuine expression of warmth.

Venting doesn’t extinguish the flame of anger; it feeds it. When we vent our anger, we put a lead foot on the gas pedal of the go system, attacking the target who enraged us.

venting doesn’t work even if you think it does—and even if it makes you feel good. The better you feel after venting, the more aggressive you get: not only toward your critic, but also toward innocent bystanders.

One of the fundamental problems with venting is that it focuses attention on the perpetrator of injustice. The more you think about the person who wronged you, the more violently you want to lash out in retaliation. “Anger is a powerful mobilizing tool,”

To channel anger productively, instead of venting about the harm that a perpetrator has done, we need to reflect on the victims who have suffered from it.

Focusing on the victim activates what psychologists call empathetic anger—the desire to right wrongs done unto another. It turns on the go system, but it makes us thoughtful about how to best respect the victim’s dignity. Research demonstrates that when we’re angry at others, we aim for retaliation or revenge. But when we’re angry for others, we seek out justice and a better system. We don’t just want to punish; we want to help.

If you’re seeking to unleash originality, here are some practical actions that you can take. The first steps are for individuals to generate, recognize, voice, and champion new ideas. The next set is for leaders to stimulate novel ideas and build cultures that welcome dissent.

Individual Actions: A. Generating and Recognizing Original Ideas 1. Question the default. Instead of taking the status quo for granted, ask why it exists in the first place. When you remember that rules and systems were created by people, it becomes clear that they’re not set in stone—and you begin to consider how they can be improved. 2. Triple the number of ideas you generate. Just as great baseball players only average a hit for every three at bats, every innovator swings and misses. The best way to boost your originality is to produce more ideas. 3. Immerse yourself in a new domain. Originality increases when you broaden your frame of reference. One approach is to learn a new craft, like the Nobel Prize–winning scientists who expanded their creative repertoires by taking up painting, piano, dance, or poetry. Another strategy is to try a job rotation: get trained to do a position that requires a new base of knowledge and skills. A third option is to learn about a different culture, like the fashion designers who became more innovative when they lived in foreign countries that were very different from their own. You don’t need to go abroad to diversify your experience; you can immerse yourself in the culture and customs of a new environment simply by reading about it. 4. Procrastinate strategically. When you’re generating new ideas, deliberately stop when your progress is incomplete. By taking a break in the middle of your brainstorming or writing process, you’re more likely to engage in divergent thinking and give ideas time to incubate. 5. Seek more feedback from peers. It’s hard to judge your own ideas, because you tend to be too enthusiastic, and you can’t trust your gut if you’re not an expert in the domain. It’s also tough to rely on managers, who are typically too critical when they evaluate ideas. To get the most accurate reviews, run your pitches by peers—they’re poised to spot the potential and the possibilities. B. Voicing and Championing Original Ideas 6. Balance your risk portfolio. When you’re going to take a risk in one domain, offset it by being unusually cautious in another realm of your life. Like the entrepreneurs who kept their day jobs while testing their ideas, or Carmen Medina taking a job to protect against security leaks when she was pushing the CIA to embrace the internet, this can help you avoid unnecessary gambles. 7. Highlight the reasons not to support your idea. Remember Rufus Griscom, the entrepreneur in chapter 3 who told investors why they shouldn’t invest in his company? You can do this, too. Start by describing the three biggest weaknesses of your idea and then ask them to list several more reasons not to support it. Assuming that the idea has some merit, when people have to work hard to generate their own objections, they will be more aware of its virtues. 8. Make your ideas more familiar. Repeat yourself—it makes people more comfortable with an unconventional idea. Reactions typically become more positive after ten to twenty exposures to an idea, particularly if they’re short, spaced apart by a few days, and mixed in with other ideas. You can also make your original concept more appealing by connecting it with other ideas that are already understood by the audience—like when the Lion King script was reframed as Hamlet with lions. 9. Speak to a different audience. Instead of seeking out friendly people who share your values, try approaching disagreeable people who share your methods. In the U.S. Navy, a young aviator named Ben Kohlmann created a highly effective rapid-innovation cell by assembling a band of junior officers who had disciplinary actions brought against them for challenging authority.1 They had a history of principled dissent, and although they held different objectives, their habits of loyal opposition meshed well. Your best allies are the people who have a track record of being tough and solving problems with approaches similar to yours. 10. Be a tempered radical. If your idea is extreme, couch it in a more conventional goal. That way, instead of changing people’s minds, you can appeal to values or beliefs that they already hold. You can use a Trojan horse, as Meredith Perry did when she masked her vision for wireless power behind a request to design a transducer. You can also position your proposal as a means to an end that matters to others, like Frances Willard reframing the right to vote as a way for conservative women to protect their homes from alcohol abuse. And if you’re already known as too extreme, you can shift from leader to lightning rod, allowing more moderate people to take the reins. C. Managing Emotions 11. Motivate yourself differently when you’re committed vs. uncertain. When you’re determined to act, focus on the progress left to go—you’ll be energized to close the gap. When your conviction falters, think of the progress you’ve already made. Having come this far, how could you give up now? 12. Don’t try to calm down. If you’re nervous, it’s hard to relax. It’s easier to turn anxiety into intense positive emotions like interest and enthusiasm. Think about the reasons you’re eager to challenge the status quo, and the positive outcomes that might result. 13. Focus on the victim, not the perpetrator. In the face of injustice, thinking about the perpetrator fuels anger and aggression. Shifting your attention to the victim makes you more empathetic, increasing the chances that you’ll channel your anger in a constructive direction. Instead of trying to punish the people who caused harm, you’ll be more likely to help the people who were harmed. 14. Realize you’re not alone. Even having a single ally is enough to dramatically increase your will to act. Find one person who believes in your vision and begin tackling the problem together. 15. Remember that if you don’t take initiative, the status quo will persist. Consider the four responses to dissatisfaction: exit, voice, persistence, and neglect. Only exit and voice improve your circumstances. Speaking up may be the best route if you have some control over the situation; if not, it may be time to explore options for expanding your influence or leaving. Leader Actions: A. Sparking Original Ideas 1. Run an innovation tournament. Welcoming suggestions on any topic at any time doesn’t capture the attention of busy people. Innovation tournaments are highly efficient for collecting a large number of novel ideas and identifying the best ones.2 Instead of a suggestion box, send a focused call for ideas to solve a particular problem or meet an untapped need. Give employees three weeks to develop proposals, and then have them evaluate one another’s ideas, advancing the most original submissions to the next round. The winners receive a budget, a team, and the relevant mentoring and sponsorship to make their ideas a reality. 2. Picture yourself as the enemy.3 People often fail to generate new ideas due to a lack of urgency. You can create urgency by implementing the “kill the company” exercise from Lisa Bodell, CEO of futurethink. Gather a group together and invite them to spend an hour brainstorming about how to put the organization out of business—or decimate its most popular product, service, or technology. Then, hold a discussion about the most serious threats and how to convert them into opportunities to transition from defense to offense. 3. Invite employees from different functions and levels to pitch ideas. At DreamWorks Animation, even accountants and lawyers are encouraged and trained to present movie ideas.4 This kind of creative engagement can add skill variety to work, making it more interesting for employees while increasing the organization’s access to new ideas.5 And involving employees in pitching has another benefit: When they participate in generating ideas, they adopt a creative mindset that leaves them less prone to false negatives, making them better judges of their colleagues’ ideas. 4. Hold an opposite day. Since it’s often hard to find the time for people to consider original viewpoints, one of my favorite practices is to have “opposite day” in the classroom and at conferences. Executives and students divide into groups, and each chooses an assumption, belief, or area of knowledge that is widely taken for granted. Each group asks, “When is the opposite true?” and then delivers a presentation on their ideas. 5. Ban the words like, love, and hate.6 At the nonprofit DoSome thing.org, CEO Nancy Lublin forbade employees from using the words like, love, and hate, because they make it too easy to give a visceral response without analyzing it. Employees aren’t allowed to say they prefer one Web page over another; they have to explain their reasoning with statements like “This page is stronger because the title is more readable than the other options.” This motivates people to contribute new ideas rather than just rejecting existing ones. B. Building Cultures of Originality 6. Hire not on cultural fit, but on cultural contribution. When leaders prize cultural fit, they end up hiring people who think in similar ways. Originality comes not from people who match the culture, but from those who enrich it. Before interviews, identify the diverse backgrounds, skill sets, and personality traits that are currently missing from your culture. Then place a premium on those attributes in the hiring process. 7. Shift from exit interviews to entry interviews. Instead of waiting to ask for ideas until employees are on their way out the door, start seeking their insights when they first arrive. By sitting down with new hires during onboarding, you can help them feel valued and gather novel suggestions along the way. Ask what brought them in the door and what would keep them at the firm, and challenge them to think like culture detectives. They can use their insider-outsider perspectives to investigate which practices belong in a museum and which should be kept, as well as potential inconsistencies between espoused and enacted values. 8. Ask for problems, not solutions. If people rush to answers, you end up with more advocacy than inquiry, and miss out on the breadth of knowledge in the room. Following Bridgewater’s issue log, you can create an open document for teams to flag problems that they see. On a monthly basis, bring people together to review them and figure out which ones are worth solving. 9. Stop assigning devil’s advocates and start unearthing them. Dissenting opinions are useful even when they’re wrong, but they’re only effective if they’re authentic and consistent. Instead of assigning people to play the devil’s advocate, find people who genuinely hold minority opinions, and invite them to present their views. To identify these people, try appointing an information manager—make someone responsible for seeking out team members individually before meetings to find out what they know. 10. Welcome criticism. It’s hard to encourage dissent if you don’t practice what you preach. When Ray Dalio received an email criticizing his performance in an important meeting, copying it to the entire company sent a clear message that he welcomed negative feedback. By inviting employees to criticize you publicly, you can set the tone for people to communicate more openly even when their ideas are unpopular. Parent and Teacher Actions: 1. Ask children what their role models would do. Children feel free to take initiative when they look at problems through the eyes of originals. Ask children what they would like to improve in their family or school. Then have them identify a real person or fictional character they admire for being unusually creative and inventive. What would that person do in this situation? 2. Link good behaviors to moral character. Many parents and teachers praise helpful actions, but children are more generous when they’re commended for being helpful people—it becomes part of their identity. If you see a child do something good, try saying, “You’re a good person because you ___.” Children are also more ethical when they’re asked to be moral people—they want to earn the identity. If you want a child to share a toy, instead of asking, “Will you share?” ask, “Will you be a sharer?” 3. Explain how bad behaviors have consequences for others. When children misbehave, help them see how their actions hurt other people. “How do you think this made her feel?” As they consider the negative impact on others, children begin to feel empathy and guilt, which strengthens their motivation to right the wrong—and to avoid the action in the future. 4. Emphasize values over rules. Rules set limits that teach children to adopt a fixed view of the world. Values encourage children to internalize principles for themselves. When you talk about standards, like the parents of the Holocaust rescuers, describe why certain ideals matter to you and ask children why they’re important. 5. Create novel niches for children to pursue. Just as laterborns sought out more original niches when conventional ones were closed to them, there are ways to help children carve out niches. One of my favorite techniques is the Jigsaw Classroom: bring students together for a group project, and assign each of them a unique part.7 For example, when writing a book report on Eleanor Roosevelt’s life, one student worked on her childhood, another on her teenage years, and a third on her role in the women’s movement. Research shows that this reduces prejudice—children learn to value each other’s distinctive strengths. It can also give them the space to consider original ideas instead of falling victim to groupthink. To further enhance the opportunity for novel thinking, ask children to consider a different frame of reference. How would Roosevelt’s childhood have been different if she grew up in China? What battles would she have chosen to fight there?

Never Eat Alone: And Other secrets to Success, One Relationship at a Time

Go on a Learning Safari: Everyone has something to teach. Everyone has something to learn. Take an intellectual, spiritual, and creative journey

Build Friendships: Summit Series isn’t about networking; it’s about building lifelong friends. The people around you are amazing. Get to know them. Embrace Synchronicity: The unexpected moments are often the most meaningful. Embrace them. Show Love: Summit Series is about character, not résumés. Show love to the startups, and don’t fanboy the big-timers. Have Fun: If it’s not fun, it doesn’t count.

“Networking,” once a dirty word, has become the lingua franca of our times, acknowledged as an inherently human pursuit—not ugly or exploitative, but inherent to the forces of reciprocity that drive human development and a collaborative economy.

Science has validated the equation

Success In Life = (The People You Meet) + (What You Create Together)

i learned that real networking was about finding ways to make other people more successful.

At first I tried to draw attention away from my people skills for fear that they were somehow inferior to other more “respectable” business abilities.

Lifetime corporate employment is dead; we’re all free agents now, managing our own careers across multiple jobs and companies. And because today’s primary currency is information, a wide-reaching network is one of the surest ways to become and remain thought leaders of our respective fields.

The more people you help, the more help you’ll have and the more help you’ll have helping others.

Information, unlike material resources, is fluid: it can appear (be discovered or communicated) or disappear (become outdated)

Where employees once found generosity and loyalty in the companies we worked for, today we must find them in a web of our own relationships. It isn’t the blind loyalty and generosity we once gave to a corporation. It’s a more personal kind of loyalty and generosity, one given to your colleagues, your team, your friends, your customers.

we’re not just connected to others. We are the very product of the people and networks to which we are connected.

Mr. Pidgeon understood the value of introducing people to people, Kiski boy to Kiski boy.

Relationships are solidified by trust. Institutions are built on i

The more specific you are about what you want to do, the easier it becomes to develop a strategy to accomplish it.

And I was scared. For the first time in ages, I had no company to attach to my name. I loathed the thought of meeting new people without a clear explanation of what I did.

Change is hard. You might lose friends, encounter seemingly insurmountable obstacles, and face the most troubling hurdle of all—your own self-doubt. Change is hard. You might lose friends, encounter seemingly insurmountable obstacles, and face the most troubling hurdle of all—your own self-doubt.

“I’m going into politics and plan to run for governor of Arkansas, and

In fact, as an undergraduate at Georgetown, the forty-second president made it a nightly habit to record, on index cards, the names and vital information of every person whom he’d met that day.

Setting out to know someone inevitably means understanding what their problems or needs are. Here there’s still no substitute for asking questions and listening carefully.

Find a way to become part of those things that are of most interest to them, and you will have found a way to become part of their life.

I have lists by geographical location, by industry, by activity (other runners, for instance, or people who like to go out on the town), whether they’re an acquaintance or friend, and so on.

One great resource for making lists is—it almost sounds absurd—other people’s lists. Newspapers and magazines do rankings of this sort all the time.

I clip out lists of top CEOs, most admired marketers, the nation’s most progressive entrepreneurs—all

true genius of LinkedIn: the ability to comprehensively map not just your network, but the networks of entire industries. You’ve got to take the long view. Search its more than 200 million users by any keyword you can think of. Every profile you visit displays “People Similar to [Contact]” and a handy map of that person’s network that you can sort by company, region, and so on. And the site immediately tells you whether you share connections with any given person.

Credibility is the first thing you want to establish in any interaction,

ultimately, no one will buy from you unless you establish trust

recognize the importance of gatekeepers, and turn them into allies with respect, humor, and compassion, there will be few gates that aren’t open to you.

The more bloated our virtual communities become, the more that people are going to use in-person contact as a filter for true relevance.

Or set up a weekly accountability group of three to four people who set goals together and share quick personal and professional updates.

Once a month, ask group members to bring a friend to introduce to the group.

spent developing a relationship with the customer.

The slickest PowerPoint presentation can’t compete with the development of real affection and trust in capturing the hearts and minds of other people.

the partners got one-page bios on the people assigned them, listing who they were, what they did, their accomplishments and hobbies, and the potential challenges their company faced that Deloitte might be able to address

The more active you become in playing “host” of your own conference within a conference, the better you’ll be at helping other people make connections, making you a center of influence.

Take pictures of the people you meet and the parties and sessions you attend—both for tweeting and to help you remember.

Take notes on everything, and when the event is over, whip it all into a story or a photo series for posting on your blog,

Granovetter discovered that 56 percent of those surveyed found their current job through a personal connection. Only 19 percent used what we consider traditional job-searching routes, like newspaper job listings and executive recruiters. Roughly 10 percent applied directly to an employer and obtained the job.

“the strength of weak ties” by showing persuasively that when it comes to finding out about new jobs—or, for that matter, new information or new ideas—“weak ties” are generally more important than those you consider strong.

Helping others find good employees is a real currency.

A typical well-established politician will have a host committee of doctors, lawyers, insurance professionals, college kids, and so on. Each committee is made up of well-connected people in their respective worlds who organize parties and events granting the politician access to all their friends. To my mind, it offers a great template for people looking to expand their own network.

book called Daring Greatly: How the Courage to Be Vulnerable Transforms the Way We Live, Love, Parent, and Lead,

What you talk about is ultimately less important than how.

Share your passion, but don’t preach it

Every person’s Johari Window can be more or less open depending on the circumstances

In a meeting with, say, investment bankers, who are typically hard-driving and analytical, I ratchet down the excitement and focus on being more deliberate and precise. If we address someone with the wrong style, the window may close shut with nothing revealed. No connection is made.

One helpful technique I use is to try to envision myself as a mirror to the person with whom I’m speaking

By adjusting your behavior to mirror the person you are talking to, she’ll automatically feel more comfortable.

“The deepest principle in human nature is the craving to be appreciated.”

always, always, remember the other person’s name. Nothing is sweeter to someone’s ears than his own name.

I visually attach a person’s name to his face. Seconds later, I’ll repeat his name to make sure I got it, and then again periodically throughout the conversation.

Adopt a casual, conversational tone for virtual chat—reading your lines out loud will help you get there.

Have a joke handy. Find ways to inject some levity into the workflow—just enough to enhance productivity while not becoming a distraction to yourself and others.

If all else fails, five words that never do “You’re wonderful. Tell me more.”

The highest human need, said Maslow, is for self-actualization—the desire to become the best you can be

Give to Givers: Smart givers recognize takers and are cautious about giving to them, preferring to focus their efforts on those who might pay it forward. Feed Your Network First: They channel giving to bolster their social ties—in other words, they are aware of the need to nurture their own networks. Calendar Time for Giving: They “consolidate their giving” into chunks of energy and attention, which increases their sense of gratification and allows them to protect other time for productive work on their own projects.

To paraphrase Dale Carnegie: You can be more successful in two months by becoming really interested in other people’s success than you can in two years trying to get other people interested in your own success.

Pinging—All the Time

How many times have you asked yourself, “What’s his face … ya know, that guy …” or “I know her, I just can’t remember her name …”

I divide my network into five general categories:

“Personal,” I include my good friends and social acquaintances

“Customers” and “Prospects” are self-explanatory.

“Important Business Associates” is reserved for people I’m actively involved with professionally.

“Aspirational Contacts,” I list people I’d like to get to know, or I’ve met briefly

How often do you contact each person on the list?

I’ll go down my master list and add the numbers 1, 2, or 3 next to each name.

“1” gets contacted at least each month. This means I’m actively involved with the person, whether it’s a friend or a new business associate. With new relationships, a “1” generally means I have yet to solidify the relationship with at least three different forms of communication. Each time I reach out to a person, I like to include a very short note next to their name telling me the last time I contacted them and how. If last month I sent an e-mail saying hello to a potential customer rated “1,” this month I’ll give a call. Also, contacts designated “1” I add to my cell phone’s Favorites list. It allows me quick reference and an easy way to get in touch fast. If I have a free moment in a cab, I’ll just go down my Favorites and make several calls or send texts to keep in touch with people I’ve not spoken to recently.

A “2” rating indicates my “touch base” people. These are either casual acquaintances or people whom I already know well. They get a quarterly call or e-mail, and I monitor their social media updates to keep up with their news and find opportunities where I can be useful.

I try to include these people in occasional mass emails about my business. And like the rest of my network, they get either an annual holiday card or a birthday call.

Those people rated “3” are people I don’t know well, who, because of time and circumstance, I’m unable to devote any significant energy to pinging. These people are strictly acquaintances, people I’ve met in passing but who have found their way into my address book. I hope to reach this group, in some direct way, at least once a year.

The third step is segmenting your network into tagged lists.

They can be organized by your number ratings, by geography, by industry, and so on.

If I’m flying to New York, for example, I’ll print out a “New York list” and make a few calls to my “1”s when I get off the plane.

I put each e-mail, when I receive it, in one of my categories, and my e-mail program records whether I’ve returned the e-mail or not.

the women in the Carter administration were pioneers who needed supportive networking, so I decided to limit my guests to women only. “What I did was simply expand my Sunday cooking to include preparations for a Monday-night meal for twelve.

We talk—or argue—about U.S. foreign policy or discuss problems common to women in management positions, such as how to combat stereotypes or sexism in the workplace

Robert Scoble.

What we’re talking about is content, the one true vehicle for building trust online. Content is how people come to know who you are, what you’re about, what you want, what you can provide, whether you’re cool,

Articles, blog posts, profiles, status updates—every bit and byte that’s produced and associated with you and your name adds up to something.

The better prompt would be this: What’s got your attention?

These days the challenge of companies isn’t to scale efficiency, but to scale learning, our ability to master and remaster new rules of business as they explode around us.

Today’s employees need to become whizzes when it comes to identifying, developing, and integrating the new and the better.

“context creates intent,”

The Power of Pull, by John Hagel, John Seely Brown, and Lang

Consider what Google, a company that’s become synonymous with innovation, did to maximize the possibility of serendipitous exchanges between employees. The buildings are shaped like bent rectangles, a design that was intended to increase “casual collisions”

To this day, I face rejection on a regular basis. If you’re going to be creative, cutting edge, out of the mainstream, you’d better get used to rockin’ the boat.

Creativity is worthless if it can’t be applied. The bottom line for your work has to be: This will make us more money.

Journalists do less sleuthing for their stories than you’d imagine. They get a majority of their stories from people who have sought them out, and not the other way around. And like everyone else in any profession, they tend to follow the herd. Which means once you get written about, other reporters will come calling. Assign you as a subject, they’ll do a quick Google search, and presto: They’ll find you are an already cited source and will seek you out to cite you again.

Almost every day, some ambitious young man or woman sends me an e-mail that states all too directly, “I want a job.” Or, “I think you can help me. Take me on as your mentee.” I shudder at how deeply these young folks misunderstand the process. If they’re going to get my help, and they haven’t even offered their help in return, then at minimum they should attempt to endear themselves to me.

Don't Just Roll The Dice - A usefully short guide to software pricing

Once you’ve determined what your product is, you need to consider its value to your customers.

The perceived value of a product may be higher than its objective value.

In 2003, Gartner released a report that claimed that almost half of all customer relationship management (CRM) systems lie unused. That’s several billion dollars of software that smart people thought was worth it, but wasn’t.

A product’s perceived value may be lower than its objective value too.

somebody who insisted on using Excel as a word processor. According to this user, the additional expense of buying Microsoft Word wasn’t worth the benefits he’d gain.

People base their perceived values on reference points. If you’re selling a to-do list application, then people will look around and find another to-do list application.

This doesn’t mean you need to copy the reference point. If your product genuinely is better than your competitors’, and you can demonstrate the value of this difference, or create a perception of that value, then you can charge more.

Just as $1.99 seems much less than $2 in a supermarket queue, $1995 seems significantly less than $2000 on a web site.

Increasing perceived values

Glaxo decided to spend heavily on saturating their sales and marketing channels. This ubiquitous promotion increased Zantac’s perceived value,

Here are some more ways of increasing the perceived value of your product: Increase its objective value. Perceived and objective values aren’t identical, but they’re still correlated.

I can tell you that nothing we have ever done at Fog Creek has increased our revenue more than releasing a new version with more features. Nothing.

When a new version comes out with new features, we see a sudden, undeniable, substantial, and permanent increase in revenue.”

Give your product a personality.

Want an extra feature? Tough. If you want features, buy something else.

Link your product to yourself, and then define, and promote, yourself as an expert.

Make people love your product. When Black and Decker introduced its DeWALT line of drills, it went to building sites and lumber yards at lunch times to hand out pulled pork sandwiches, give product demos and hold drill-off competitions, with prizes. They went to NASCAR races and rodeos, where their end users hung out. They made people love the brand, not just the product.

Provide a better service. When somebody buys software, they want reassurance that it’s going to work and that you’ll be around if it doesn’t.

Provide reassurance, through your reputation. Originally, brands were a mechanism for creating trust.

Create a tribe. Products can be symbols of belonging.

If you can turn your product into a badge that people wear to make a statement about who they are, which groups they belong to, and which they don’t, then that’s valuable.

Remind people of how much work you’ve put into your product. People are more likely to pay for years of your time than for an easily-copied software product.

“Almost a year ago, Paul Allen and myself, expecting the hobby market to expand, hired Monte Davidoff and developed Altair BASIC. Though the initial work took only two months, the three of us have spent most of the last year documenting, improving and adding features to BASIC.

Appeal to people’s sense of fairness.

Sell more than just the physical product.

We realized a long time ago that what you make people feel is just as important as what you make.

Ultimately, it comes down to differentiating your product.

customers will find reference points to compare your product’s price against, you should do all you can to encourage favorable references and discourage unfavorable ones. If you want to sell a to-do list at $200, when the market price is $100, then you need to add a couple of features so your customers cannot make a direct comparison, and then promote comparisons to other companies’ $300 productivity suites, not their to-do lists.

If your customers can’t find a reference point for your product, then they look for proxies, or signposts. Supermarkets take advantage of this: consumers decide whether luxury ice cream (something they don’t buy regularly) is reasonably priced based on whether diet coke (something they buy all the time) is good value. If a supermarket sells a can of diet coke for $2, consumers assume all their other products will be expensive too.

Let’s say the Time Tracker 3000 has no competitors, but the Task List 400 has plenty.

Your customers will judge your Time Tracker 3000 price on how you’ve priced the Task List 400.

If you are going to compete on price, then you should minimize the possibility of a counter-reaction from your competitors. Don’t bang your drum and tell the press how you’re going to destroy them (a mistake that Marc Andreessen of Netscape made when he said “we’re gonna smoke ‘em”, referring to Microsoft (or “those idiots up in Redmond” as Andreessen put it). Focus on their marginal customers and hope that by the time they notice you it will be too late.

Microsoft is famed for this. They wait for competitors (and often partners) to prove markets with low volume, high price products – whether it’s CRM, testing tools or business intelligence – and then jump in with a low cost, high-volume model.

If your price is way off whack, you will provide an opening for a special type of competitor: the pirate. Price software too high, or at a price point that most people judge ‘unfair’, then be prepared to be ripped off in return

Most people aren’t natural crooks, but high prices can force them to do things against their better nature. Apple realized that the success of illegal download sites indicated the need for cheap, downloadable music. Their strategy of satisfying people’s needs worked far better than the ostrich-like behavior of the music labels.

If you’re trying to persuade people to switch to your product from a competitor’s then you’ll need to position the price to overcome the switching costs your customers face. Say you’re trying to persuade a customer to switch from his garbage $500 word processor to your superior $100 one. First of all, you’ll need to price to overcome the economic switching costs. It’ll take him time, and therefore money, to convert his files to a new format and to learn the new menu layouts. Secondly, you’ll need to overcome the psychological switching costs. People overvalue what they have, and undervalue what they don’t have.

Another powerful psychological factor people struggle to overcome is the emotional attachment to money they’ve already spent. Rationally, it’s gone. It’s a sunk cost. Your customer shouldn’t care that he’s already spent $500 on his garbage word processor. But he does.

There are some things you can do to mitigate switching costs, and even to use them in your favor. Here are a couple of examples. Open Office, which includes open source word processing and spreadsheet applications, lets you open files saved by Microsoft Word.

Here’s another example. If you decide to stop using FogBugz within ninety days of your free trial expiring, then Fog Creek will refund you all the money you’ve spent. These strategies have two effects: first of all, they reduce the psychological and economic impact of switching to Word or Fogbugz. Secondly, once you have switched, you’ll have invested time and energy into using the new software, and will have incurred a whole load of new switching costs, which will then stop you from switching back.

If you’re planning on not charging the majority of your users, then think very carefully about the cost of each additional user.

If the price your customers are willing to pay is lower than what it costs you to sell your software, then you haven’t got a business and your product will flop. You need to cut your cost of sales, or change your pricing mechanism so customers end up paying more over the lifetime of the product.

Your up-front cost is different. You might have spent one hundred dollars developing your product, or a million, but that money is all spent. Gone. It’s a sunk cost. What matters now is not how much you’ve spent, but what people are prepared to pay.

If there had been some way to sell the product to each customer at the maximum price that they could afford to pay,

That’s what versioning is about. It’s a mechanism of segmenting your users according to their willingness to pay. You figure out if you can group your customers in different ways, and then see if those groups are willing to pay different prices for your product.

By availability. Some of your customers might be prepared to pay more to get your product quickly.

By demographic. Students have less money than businesses, hobbyists than professionals and school kids than baby boomers.

You could provide a version of the Time Tracker 3000 which students could get, but only if they prove they’re in full time education.

The Time Tracker 3000 might be available in India for 10% of its US cost, but be localized into Hindi, rendering it useless to Westerners.

By industry. Perhaps architects, or software developers or aircraft designers have specific needs, and perhaps your software can be customized to suit them.

By platform. Mac users might be willing to pay more money for your software than Windows users, or vice versa

if you introduce a ‘Lite’ version of your product, you need to be sure that professional users won’t downgrade to it.

Consumers see the ‘small’ drink, and consider the ‘medium’ drink a bargain (a lot more drink for just a few more cents).

Adding more choices at the edges drives people to the middle of the range. They don’t want to appear stingy, or greedy, so go for the safety of the middle. In this example, adding a ‘jumbo’ version on top shifts where the middle lies, so makes more money.

This only works if people can easily compare the products being versioned.

But the effect reverses if people struggle to compare the different versions of the products. In that case, people flee the middle and head for the extremes. Take laptops.

This counter-intuitive behavior has some interesting consequences.

If they are asked to choose a microwave from a selection that contains a single Panasonic and multiple versions of the Sharps, then one of two things can happen. If they can easily compare the Sharps (for example, because they differ solely in price and one other attribute, such as size or power), then more people will buy the Sharp than the Panasonic. This is a demonstration of how providing multiple versions of a product will increase the product’s sales. On the other hand, if they cannot easily compare the Sharps then the effect is reversed. For example, if one Sharp has an adjustable speed turntable, another has a moisture sensor, one has programmable menus and another has a ‘hold warm’ feature, then consumers will shun the Sharp, reject confusion and go for the Panasonic.

Bundling is another way of giving your customers better value, persuading them to buy and generating more revenue. Most straightforwardly, people love a bargain.

However, bundling has drawbacks too. When you bundle software together it becomes harder for your customers to understand what they’re paying for. In turn, that might mean they are less likely to use it.

For example, a diner eating a fixed price menu is more likely to skip coffee than a diner who’s paid explicitly for the coffee. The coffee is bundled, so the disconnect between what the diner is paying for and what he is consuming makes it easier to not consume.

For software, if a customer is less likely to use a piece of bundled software then he might be less likely to buy a future version, or to continue to spend money on maintenance contracts. One way of counteracting this effect is to continue to be explicit about the worth of each item in a bundle.

Multi-user licenses are one more way of bundling software.

Larger companies also have more money and tend not to be so price sensitive

Larger companies might have more money, but they can also have stricter purchasing policies.

If you sell a product at $10 or under then an end user will charge it to his personal credit card and not claim it back. Up to $50, he might charge it to his card and claim it back from the company he works for.

At each stage, not only does the cost increase, but the hassle does too. If you can figure out where these thresholds lie (and they move around as the state of the economy changes, and according to the characteristics of your customers), then it’s worth pricing your software just under a threshold rather than just over it.

People like getting something for nothing. Bundling is a type of free. When you buy Windows, you get Internet Explorer for free.

To work best, bargains should be limited to specific products, or specific times.

Paying lots of small amounts is psychologically easier than paying one large amount.

Recurring payments promote regular usage

Adobe follows a similar strategy with Acrobat. It’s free to read documents, but you need to pay to create them.

Giving your customers a choice of licensing models can make sense. For example, if you’re buying Microsoft’s SQL Server 2008 then you can choose to license per processor, or buy a server license and then pay per client who connects. The first model will cost you $5,999 per processor. For the second option, you’ll need to pay $885 to run it on a single server, and then $162 for each additional user to access the database.

Red Gate combines a one-off fee with an annual 10% – 25% support and upgrades fee. That way, we get both up-front revenue and a recurring yearly income.

If you choose to do this, you need to be aware of the pitfalls. Support and upgrades fees aren’t just a cheap way of generating cash, and they can pressure you into releasing software just for the sake of it, at times that are not right for you, your customers or your product.

If you’re going to charge your customers regularly, then you need to make sure they get – or perceive – value regularly.

license your software as your customers expect it to be licensed – fit in with their business model.

A high price can signal that you have a quality product.

A low price can tell customers that you’re value for money, or that you’re special.

your competitors are selling software at $10,000 a seat, and you’re selling yours at $100, then that says something about you. Of course, you might be saying ‘game changing’, but your customers might be hearing ‘toy’.

Copy your competitors and you could be indicating that you’re just a ‘me too’ product.

There’s no point using a high price to signal that you have a quality product if you’re not willing to spend marketing dollars sustaining that brand, development dollars making that quality a reality and customer service dollars providing the level of service people expect from a quality brand.

We attempted a low-price, high-volume approach in a market dominated by high-price solutions. We figured that consumers would love a product that they could just download, try and then buy, but it turned out that our customers wanted much more handholding than we were able to provide. For the most part, they didn’t want a product, they wanted a people-intensive service and the reassurance that a big-name, expensive vendor could provide.

The exact price almost doesn’t matter – get it broadly right, don’t screw up totally – and you can tweak it later.

Don’t forget that it’s not just the software that you’re selling. It’s the entire package around it.

Product-Led Growth: How to Build a Product That Sells Itself

“Product-Led Growth is about prioritizing the user experience in everything you do: your product, pricing, marketing, customer engagement and even buying experience.

“Organizations that adopt product-led strategies don’t just have higher customer satisfaction ratings, they scale faster all while spending a fraction on acquisition when compared to traditional sales-led organizations. Product is now the single biggest lever for growth

“Product-Led Growth means that every team in your business influences the product. Your marketing team will ask, “how can our product generate a demand flywheel.” Your sales team will ask, “how can we use the product to qualify our prospects for us?.” Your customer success team asks, “how can we create a product that helps customers become successful beyond our dreams?.” By having every team focused on the product, you create a culture that is built around enduring customer value.”

The product-led way of buying software: Just start using the product. Ask for help if you get stuck. Based on your usage and profile, receive personalized recommendations.

Waterloo, Ontario (a.k.a. the tech capital of Canada).

We were using the same-old marketing playbook that everyone else did: Create content; use landing pages to capture leads; and nurture those leads with automated emails until, one day, they converted into paying customers (or unsubscribed). Sound familiar?

By making it easy for people to experience the value of our product, we transformed it into a powerful customer acquisition model.

Product-Led Growth means that every team in your business influences the product.

The entire onboarding and upgrade experience was handled by the product. No need for human intervention.

A main lure of a sales-led GTM is that you can close customers with a high Annual Contract Value (ACV). This sounds great but can often lead to poor revenue diversity, with several customers making up a large percentage of your Annual Recurring Revenue (ARR).

It often makes sense to start with a sales-led approach to better understand the customer’s pain points, objections, and core problems implementing your solution. If you jump too quickly to a product-led model with a new category, you risk a high churn rate because you simply don’t understand what it takes for customers to succeed.

If you don’t have successful customers, a product-led model may amplify the problem. Before you go down the product-led route, make sure you know what goes into customer success.

To make sure the high-touch sales model remains profitable, the LTV of a customer has to be high enough to recoup the investment in acquiring each new customer. To reach that LTV, most sales-led businesses charge their customers a hefty premium. That premium price isn’t because the solution is more valuable but because the customer acquisition model is more expensive.

“The more it costs you to sell something, the more it will cost others to buy it.”

What makes a product-led business unique is that all teams leverage the product to hit their goals.

A product-led marketing team asks, “How can we use our product as the #1 lead magnet?” A product-led sales team asks, “How can we use the product to qualify our prospects for us?

The product-led customer success team asks, “How can we create a product that helps customers become successful without our help?” While the product-led engineering team asks, “How can we create a product with a quick time-to-value?”

“Freemium is like a Samurai sword: unless you’re a master at using it, you can cut your arm off.”

A freemium model is a customer acquisition model that provides access to part of a software product to prospects free of charge, without a time limit.

Market Strategy: Is your growth strategy dominant, disruptive, or differentiated?

You can use a free trial with a disruptive growth strategy, but it weakens the “magnetic draw” enjoyed by the freemium model.

Questions to ask yourself when deciding on your market strategy: Do you want to offer the best solution for the lowest price? (Dominant strategy) Do you want to offer the best-customized solution for the highest price to underserved customers? (Differentiated strategy) Do you want to offer the simplest product for the lowest price to over-served customers? (Disruptive strategy) Or are you planning on using a hybrid strategy?

Slack is a perfect example of a bottom-up selling strategy. The product spreads organically, typically starting with one user who invites a colleague—then an entire team—to join. Product use reaches a tipping point at which the team manager invests in Slack because it has become invaluable.

If you have the resources, hire a Product-Led Growth expert or consultant to help launch and optimize your free trial or freemium model. It may be expensive upfront, but they can save you hundreds of hours and millions in sales. If you don’t have the resources, expect to spend lots of time experimenting and trying to figure out what works.

Hybrid Model 2: Go freemium, with a trial If you have a product with lots of features, this strategy can work well.

HubSpot has been doing this successfully for a while now. When you sign up for the free marketing and sales tools, you get immediate value from the product. But, as you get more value from the free product, they tempt you with free-trial landing pages for blocked features.

Understand your value. Communicate the perceived value of your product. Deliver on what you promise.

Let’s say you’re selling live-chat software like Intercom. You’re not really selling live-chat software (fun fact). You’re selling a new and better way to acquire customers.

The difference is that we’re selling an outcome.

Most technology companies get caught up in the features and don’t really know why people buy their product. So, they create bland headlines that read, “We sell live-chat software for website and mobile support.”

The three reasons that people buy a product 1. Functional Outcome: the core tasks that customers want to get done.

Emotional Outcome: how customers want to feel or avoid feeling as a result of executing the core functional outcome
Social Outcome: how customers want to be perceived by others by using your product.

For a business intelligence tool, this could be sharing a weekly revenue report to your executive team that makes you look like a professional designer. Co-workers ask how you put together such an incredible presentation.

doubleyourtrials.com. It’s a free customer research course that has helped thousands identify the three main outcomes behind why people buy their product.

There are two types of value metrics: functional and outcome based. Functional value metrics are “per user” or “per 100 videos.” Pricing scales around a function of usage. Outcome-based value metrics charge based on an outcome, like how many views a video received or how much money you made your customer.

value metrics outperform feature differentiation with up to 75% less churn. Outcome-based value metrics take this a step further with an additional 40% reduction in churn.

Sometimes it’s hard to perfectly measure how much money someone gained from using your product or how much that time you saved them is worth.

a great value metric must pass three tests.

It’s easy for the customer to understand.

When someone visits your pricing page, will they immediately understand what they’re paying for and where they fit in your packaging? If not, you need to pick a new value metric

If you’re in an established market, it makes sense to view how your competitors charge. A common value metric might be used by most competitors.

if you’re in an emerging space like artificial intelligence, you’ll want to opt for a more data-driven approach to discover your value metric,

In addition to making it easy for your customers to understand your value metric, make sure that your value metric aligns with the value that customers receive by using the product.

It’s aligned with the value that the customer receives in the product.

Consider the low-level components of your high-level outcome. If that sounds confusing, let me reframe it. Let’s say you have a live-chat solution. If you want to acquire more customers, you need to monitor how many messages customers have on their website with your live-chat solution.

By monitoring the number of conversations, you’re able to see, at a high level, how much value they’re getting.

When it comes to your product, what core components lead someone to experience a meaningful outcome?

make sure that your value metric grows with your customer.

Grows with your customer’s usage of that value.

Slack created the fair billing policy—you get charged only for active users

The Mistake that So Many Make: User-Based Pricing One of the most common traps is charging per user. For many businesses, charging per user is like tying a rope to an anchor that’s already tied to your feet, then tossing the anchor overboard. You’re going to get dragged down until you figure out how to cut the rope and pick a new value metric.

If you get charged by the user, are you going to share that product throughout your entire team? Or are you going to limit the usage to a select few? If you have a messaging application like Slack, it’s perfectly fine to charge by the user—the product has network effects and gets more valuable with more people.

Why is user pricing still the most common way people price solutions, according to the Pacific Crest Survey? Part of the reason is that companies just don’t know better. Most companies don’t have anyone to evaluate objectively if per-user pricing makes sense. Why? “It’s counterintuitive,” Campbell notes, “but because pricing touches on every single part of your business, it’s often ignored. That’s because it’s at the intersection of marketing, sales, and product—so nobody in the organization owns it.”

Per-User Pricing Scratch Pad

I’ll go through two different strategies that—depending on your company size—can help define your value metric. For best results, I’d recommend using both approaches in unison. Step 1: Subjective Analysis By now, you should have at least a couple of hypotheses about your value metric: Is it messages sent? Number of users? Total revenue generated? Pull out a piece of paper and jot down everything you think could be a value metric. Once you have the list, run it through the value metric scratch pad. Value Metric Scratch Pad How did your value metrics stack up? Did you find a value metric that works?

Step 2: Data-Driven Approach

You’ll have users who churn quickly, users who barely use your product, power users, and users with an extremely high lifetime value

if we look at the product data for your best customers, we could streamline the onboarding experience for your perfect-fit customers while simultaneously filtering out bad-fit customers. We might decrease our signup-to activation metric but increase our free-to-paid conversion rate.

look for patterns among your best and worst customers.

What do my best customers do regularly in the product? What do my best customers not do in the product? What features did my best users try first during onboarding? What similarities among my best users— demographics, team structure, ability—led to success?

For churned customers, ask: What were some of the main differences between their user journey and that of your best customer? Specifically, what activities were different? What outcomes did your churned users achieve and not achieve? Were these churned customers in your target market? Why did the majority of these customers churn?

How to Stress Test Your Value Metrics

Value Metric Scratch Pad However, there’s a downside: A simple scratch pad is based on your insights, not your customers’. To take it a step further, use a relative preference analysis. This is a simple statistical method to measure value in your product. You force people to make a decision between what they most and least want.

Which of the following when it comes to pricing is most preferred? Least preferred? Once you’ve asked enough people, you can identify the ideal value metric.

Communicating your value is at the crux of a Product-Led Growth strategy.

in a product-led business, your revenue and customer acquisition model are married together

Before signing up for a free trial or freemium model, most users check out your pricing page. If it can’t pass the five-second test (i.e. users understand which plan is right for them almost immediately) you’re hurting customer acquisition.

It may sound simple, but we send a triggered automatic message to visitors simply saying “Have any questions about our pricing?” when people have been on our pricing page for more than 30 seconds. It’s helped us convert 100s of visitors in real-time.

Even if you have a simple pricing plan, you may still run into the trap of giving away too much for free. Don’t create a free plan with no incentive to upgrade.

On the other hand, it’s also way too easy to give away too little. By doing so, you make it extremely hard for new users to see value in your product—the powerful, fun features are hidden behind closed doors.

Some will say you should go with your gut. Others say that you should go with your gut, then double it. Either way, it seems most pricing advice out there is gastrointestinal-based rather than brain-based. So, how do you pick the right pricing strategy? Let’s explore the four main options for SaaS businesses.

Best-Judgement Pricing This is much like it sounds. You and your team decide your price based on what you think is reasonable. Having a low sales month? Discount. Making too many sales but can’t support new customers? Increase prices. It’s simple supply and demand. Best judgment pricing is the least effective pricing strategy because you rely on the collective experience of your team, and you make assumptions about what your buyer values and is willing to pay. This guessing leads to fewer sales, and—the real killer—it’s easy to sell unprofitable products without knowing it. The next best pricing model is cost-plus pricing. At the very least, it’ll help sell at a profit.
Cost-Plus Pricing Cost-Plus Pricing works when you calculate the cost of selling and delivering the product, then add a profit margin on top. Now we’re making money! The problem with cost-plus pricing for SaaS businesses is that although you could charge $100 per customer each month, your marginal costs of supporting a new customer may be quite low (e.g. $1–5)
Competitor-Based Pricing Competitor-based pricing benchmarks your pricing based on their data. It’s relatively simple if your competitors publicly show their pricing. Even if your competitors don’t show their pricing, you can be a bit sneaky and find it. Here’s the problem: Regardless of how you conjure up your competitor’s pricing info, you’re assuming that you sell to the exact same customer who has the exact same problem that you can solve with your exact same product.
Value-Based Pricing Value-based pricing bases your price on the value you provide. You determine this by taking into account how prospects value your product. A significant benefit of value-based pricing—and, as part of the process, doing pricing and customer research—is that you’ll learn what to include in each package.

In SaaS, the only viable option is value-based.

To determine your price, go through both options below:

Option 1: Pricing Economic Value Analysis. How you can use an economic value analysis to come close to the perceived value of your product. This analysis is perfect if you’re just starting out, don’t have a lot of data, or don’t have buy-in to talk to your customers about pricing.

Option 2: Market and Customer Research. A battle-tested method used by Simon Kucher & Partners, Openview, and Price Intelligently to figure out your customers’ willingness to pay. If you have lots of customers, I’d recommend choosing this option. It’s more accurate than an economic value analysis.

avoid bombing with your new pricing model, break down your customer’s perceived value across the three core outcomes your product solves for: functional, emotional, and social.

a functional outcome breaks down into factors such as incremental revenue, reduced cost, reduced risk, or time savings.

Emotional Outcome: How customers want to feel—or avoid feeling—as a result of executing the core functional job

B2B buyers may, in fact, be even more emotional than their B2C counterparts.

Social Outcome: How customers want to be perceived by others

It’s extremely hard to place a number on what a promotion is worth to someone, or how much it’s worth to feel like a “professional” during a presentation.

One of the most powerful ways to do this is to make the customer look like a badass for choosing your product.

A very good way to determine your price is to follow the 10x Rule. “We charge this much because our customers get at least 10x that much value.”

To refine this pricing model, continually ask your customers about the value they get from the product. If you use an outcome-based value metric tied to revenue, you’ll quickly uncover how much value your product provides. However, if you use a functional value metric or feature differentiation, you need to talk to customers regularly to find out how valuable they find your solution.

Basing your pricing on market and customer research is one of the best ways to understand how much your customer is willing to pay for your product or service. The model I’m going to share with you is based on the Van Westendorp Price Sensitivity Meter.

This is the same model that pricing experts at ProfitWell, Openview, and Simon-Kucher rely on to help SaaS businesses nail their pricing.

One of the most significant benefits of using the Van West Model is that it will help you find an acceptable price range.

consequences: We set our price too high and lose out on the majority of sales. We set our price too low and lose out on the majority of profits (while also hurting our brand, which appears “cheap”).

Step 1: Prepare Questions to Ask

You want to know at what point people find your product too expensive or cheap: Too Expensive. At what price point would you consider [our product] to be so expensive that you would not consider buying it? Expensive. At what price point would you consider [our product] so expensive that, while not out of the question, you would give it some thought before buying? Bargain. At what price point would you consider [our product] to be a great deal for the money? Too Cheap. At what price point would you consider [our product] so inexpensive that you would feel the quality couldn’t be excellent?

While the proper technique involves four categories of questions, I focus on two: what the buyer considers an “acceptable” price (good value for the money) and at what point the price would start to get “expensive” (they’d have to think twice about buying it).

Step 2: How to Ask

There are two main ways: Survey tools (Typeform, SurveyMonkey); Interviews.

you’re unlikely to schedule an interview with a customer to ask them only four questions about pricing. I would frame interviews as a way to improve the product and better understand customers’ needs.

Crunch the Numbers With the Van West Model, your X-axis includes the prices people said they’d be willing to pay. The Y-axis has the percentage of people who selected each price range. Pay attention to the points of intersection. Between the “Not a Bargain” and “Too Cheap” price ranges, the Point of Marginal Cheapness (PMC) shows where people consider our product cheap. Don’t charge less than that.

At the intersection of “Too Expensive” and “Not Expensive,” we find the Point of Marginal Expensiveness (PME). This is an excellent place to be—the point where people start to consider our product expensive.

Once you know your PMC and PME, you’ve found your acceptable price range: the space between both points.

Putting together a pricing page doesn’t have to be complicated. You need four elements to make it work: Value Metric; Willingness to pay for all packages; Valued features; Demographic Information.

if you have a functional- or outcome-based value metric, it must be a core component of your pricing page.

According to Kyle Poyar, there are only three main categories: Leaders “are the hamburger in your McDonald’s value meal; they are what everyone wants and comes to you to buy. These must be included in all packages.” Fillers “are the fries and coke. They are seen as nice-to-have and sweeten the deal. Customers will cherry pick fillers when sold a la carte, and so a bundle helps drive uptake and a higher average revenue per user (ARPU).” Bundle killers “are the coffee of your value meal. Few people want a value meal with a burger, fries, coke AND a coffee, and adding coffee to the value meal might even turn people off from buying entirely because they’d end up with more than they need. There will be a handful of caffeine-starved customers who do want the coffee, though, and they can purchase it a la carte outside of the value meal.”

Often, savvy businesses will name the pricing tier after each of their personas or give it a similar nickname to signify the type of buyer who regularly purchases that plan.

This serves two purposes: It allows your audience to self-segment quicker. It helps you prioritize the features and benefits that are most valuable to the target audience.

What we promise in our marketing and sales is the perceived value. What we deliver in our product is the experienced value. Ideally, the perceived value aligns with the experienced value.

The Three Value Gaps You Need to Crush

Value Gap 1: Ability Debt. Ability debt is the price you pay every time your user fails to accomplish a key outcome in your product.

spaghetti analogy. If your company was a restaurant, the outcome people value is food. People are coming into your business expecting to buy a hot plate of spaghetti, and then they get ushered by the customer service team into the kitchen with all the tools and features to make it yourself.

To chip away at your ability debt, you need to be ruthless about reducing friction. Even non-trivial steps like activation emails can crater your free-to-paid conversion rate.

27% of signups never activated their email. Users never saw the product.

As you remove pain and friction from your user’s experience of attaining their valued objective, your total addressable market grows.

Ask yourself these questions while going through your product experience:

Does the first product experience lead to a specific, relevant, meaningful “quick win”?

Do tooltips and hotspots spur meaningful action in the product, not just point at buttons?

Do social and directional cues indicate high-value behaviors?

Are key task completions indicated with a success state, such as Mailchimp’s famous high-five?

Are all unnecessary points of friction and distraction removed from critical workflows?

Value Gap 2: You Don’t Understand Why People Buy Your Product. If you don’t know where someone wants to go, you can’t help them get there.

Canva, a simple visual editor, does a brilliant job at shortcutting the time it takes to achieve a particular outcome in their product

When it comes to onboarding, most businesses walk you through the entire product but bring you no closer to achieving a meaningful outcome in the product. That isn’t too different from inviting your friends over to your house for dinner and, when they show up, you show them around the house but forget to give them anything to eat.

Value Gap 3: You Suck at Communicating Your Value If someone signs up for your product thinking that it’s a live-chat solution when it’s actually a telemarketing solution, you’re going to confuse users.

After your first onboarding session, here are the next steps: 1. Write down the key outcome(s) that someone wanted to accomplish.

If you’re looking for an “Aha!” moment, you’ll get it—in real time.

Over time, you’ll find out what needs to be automated by the sheer number of requests and how painful they are for your team to manage.

Focus on where you need to offer a helping hand.

When reviewing onboarding sessions, take special notes of when people mess up.

Lastly, clear the damn path.

When it comes to your onboarding, every step that doesn’t help your user experience a meaningful outcome should be removed.

Develop an Optimization Process

The First “A”: Analyze High

“In order to build a growth machine for your business, you need to analyze your inputs and outputs.” Until you know the inputs (e.g. trade shows, advertising, email marketing) that drive desired outputs (e.g. ARR, customers, MRR),

Where to Start Analyzing Your Business Create a recurring calendar notification to remind yourself to analyze your previous month’s results on the first workday of each new month. Block off one or two hours so that you’ll have the time to do a thorough job. You’ll get into a rhythm of analysis.

Start measuring your outputs. Outputs are a reliable indicator of whether you’re doing the right thing—they don’t lie.

In a product-led business, these are the macro outputs you need to track: Number of signups; Number of upgrades; Average Revenue Per User (ARPU); Customer Churn; ARR; MRR.

The Second “A”: Ask

To optimize any business, you need to ask three questions:

Where Do You Want to Go?
Which Levers Can You Pull to Get There?

According to Jay Abraham’s multiplier perspective, there are three levers you can pull for growth: Multiplier 1: Churn; Multiplier 2: Average revenue per user (ARPU); Multiplier 3: Number of customers.

Which Inputs Should We Invest In?

ICE prioritization method, developed by Sean Ellis, to score each input on three elements: Impact. How big of an impact could this input have on an output I want to improve? Confidence. How confident am I that this input will improve my output metrics? Ease. How easy is it to implement?

The Third “A”: Act

The Bowling Alley Framework is a powerful onboarding strategy.

To master the Bowling Alley Framework, you need to do three things: Develop your straight line. Create a product bumper. Build a conversational bumper.

We want to take people from Point A to Point B in their lives.

The problem, however, is that most users never make it to Point B—that promised land

Common product bumpers:

Welcome Messages

Product Tours

Progress Bars

Checklists

Onboarding Tooltips

Empty States

Common conversational bumpers:

User Onboarding Emails

Push Notifications

Explainer Videos

Direct Mail

Out of the two bumpers, product bumpers are arguably the most important. That’s because if you help people accomplish something meaningful in their life with your product, they’ll come back on their own.

Welcome Messages

a message from the CEO that personally welcomes the user to the product.

Key Takeaways: Welcome messages are your opportunity to greet new users and make them feel invited—you are the host, after all. In addition to saying hello, use them as an opportunity to restate your value proposition and increase users’ motivation before they use the product. Welcome messages can also set expectations for what users will experience with your product.

Product Tours

They eliminate distractions and give you only a few important options.

I recommend using only three to five steps in your product tour.

If you have a multi-product business, using a product tour at the beginning of your onboarding can be a gamechanger. You catapult people into the areas of the product that they care most about.

I recommend using a “focus mode” that hides background elements to minimize the initial number of choices. Such product tours are extremely effective because they leverage Hick’s Law (decision time increases with every additional choice) and the Paradox of Choice (more choices make people less likely to choose)

When structuring your product tour, don’t reinvent the wheel. Include some of the required green steps in your straight line to help your product deliver on its value faster.

Key Takeaways: Product tours should ask users what they’re trying to accomplish in the product. Product tours should cover important step(s) that set users up for success with the product. High-performing product tours often use a “focus mode” that strips away unnecessary elements, like the navigation bar, until the user completes the product tour. Product tours are typically between three and five steps.

Progress Bars Progress bars indicate how far a user has come, and how far they need to go.

Zeigarnik Effect,our tendency to think about incomplete tasks more than completed ones. Not finishing a task nags at us. Researchers call this “task tension.” Only completing the task can relieve it.

It’s why crossing off an item on your to-do list feels satisfying. It’s also why seeing 59 unread Facebook Messages might freak you out.

Key Takeaways: Checklists can motivate new users to complete crucial set-up tasks. Checklists can turn complex, multi-step processes—such as scheduling a month of social media content—into simple, achievable tasks. Onboarding checklists employ the Endowed Progress and Zeigarnik Effect.

Onboarding Tooltips

Show first-time users how to use the product. Offer helpful tips to new users. Think of this like coaching. Show experienced users new areas of the product they might never have tried otherwise.

a lot of companies use onboarding tooltips incorrectly. Tell me if this sounds familiar? You log in to a product for the first time, then a tooltip pops up and tells you to click on a feature. Then, the tooltip prompts you to click on another feature. Once clicked, another tooltip offers to show you yet another feature until you’ve explored the entire product. This is tooltip abuse. None of the activity leads the user toward experiencing meaningful value in the product.

Empty States Upon first login, most software applications are boring.

One of the benefits of empty states is that you immediately show users what needs to be done.

Gmail uses an empty state to help users set up and personalize their account: Story Chief has an empty state to encourage users to craft their first story:

Do you have to use empty states, onboarding tooltips, checklists, and product tours? Absolutely not. Use product bumpers only when there’s a need.

Conversational bumpers educate users, bring them back into the application, encourage them to upgrade their account, and notify users of new features. Whether you’re using email, push notifications, explainer videos, direct mail, or even SMS, any communication medium can be a bumper.

Here’s why you need conversational bumpers in your onboarding: Educate users. Set the right expectations. Meet users where they are and pull them back into your app. Increase motivation to use and buy your product.

the end goal of user onboarding emails is to eventually not need them, in the same way that you don’t permanently install training wheels — the point is to help see the adjustment period through, then let the “real” use take over

For software, that means habitual & unprompted use.

nudge people along through the most critical inflection points of the journey from signup to thriving user.

a list of the top nine user onboarding emails: Welcome Emails; Usage Tips; Sales Touches; Usage Reviews; Case Study; Better Life; Post-Trial Survey; Expiry Warning/Trial Extension; Customer Welcome Emails.

Your welcome emails have two purposes. First, you need to train your audience to open your emails. Second, you need to set expectations for what’s coming next.

make sure your welcome email has a clear call to action.

Welcome Email 1 Subject: a personal hello Body: Hey, I’m one of the co-founders of [Your Company], and I’m excited you’ve decided to sign up. The [Your Company] Team and I have poured our heart and soul into making [key outcome your product solves for] suck less, so I get really fired up when someone new, like you, joins the ranks. My top priority is to make sure that you’re able to [insert value proposition], so if you have any questions about our product, the website, or even my lackluster mustache, feel free to reply directly to this email. I hope you can [accomplish key outcome in product]! Stay in touch! P.S. Yes, I’m a real human. – Wes, Co-Founder

Welcome Email 2 Subject: you’re in — [ company name ] Body: Hey, thanks again for checking out [Your Company]. We help you: Customer benefit 1 (“You don’t have to worry about X anymore.”) Customer benefit 2 (“You can finally actually achieve Y, and in less time.”) Customer benefit 3 (“It’s free for the first month.”) But none of that’s going to happen if you don’t get started. ==> create your first dashboard here <== (your actionworded CTA) Talk soon, Wes

Welcome emails shouldn’t be complicated.

Usage-tip emails are helpful nudges that direct users to take steps in the product that set them up for success.

Be careful about what you encourage. For instance, if an activity you’re encouraging doesn’t help them experience meaningful value in the product, you dampen user motivation. Don’t send emails that ask users to complete items that aren’t part of your straight-line onboarding track.

Don’t send emails that ask users to complete items that aren’t part of your straight-line onboarding track.

usage-tip emails should do three things: Direct users to a specific product page (e.g. “Manage Users” page). Link to specific help-center articles or blog posts (e.g. “How to invite a user from outside your company”). Give actionable best practices or invite abandoned users to return.

Wistia’s Soapbox product is a perfect example. After I created my first video, they sent a usage-tip email to encourage me to share it with someone.

Sales-Touch Emails

These emails can be automated, but the most important part is timing. If you send your sales-touch emails too soon, you’ll turn people away.

The sweet spot for sending sales-touch emails is as soon as you deliver on your value, according to the UCD Model we covered in Part II.

Sales Touch Email 1 Subject: The hard part is over… Body: Hi Wesley, You already did all the work to customize Databox and the hard part is over… Were you left with any questions? If so, let me know and I will answer them. Here are some common questions I get: How to visualize goals and events from Google Analytics Can I build dashboard with data stored in Google Sheets Is it possible to push custom data via API Do you offer a partner program for agencies Would love to learn more about you and what are you looking to accomplish with Databox. Just hit “reply” and let me know. Thanks, Andrew

Notice how the email doesn’t come across as “salesy.”

For your sales-touch emails, try two things: Frame your sales-touch emails as a “success meeting” to celebrate the user achieving their desired outcome and to show them how to get more out of the product. Invite inactive users to an orientation demo (e.g. “30-minute crash course on how to share documents and collaborate between teams”).

Sales Touch Email 2 Subject: [Intriguing phrase about how a paid feature will make their lives easier.] Hi {{user.first_name | default: “there”}}, [Pain point referenced in subject line] is no fun. [Describe a few problems the pain point causes, e.g. keeps them at the office late in the evening, forces them to delete important files or scatter them across multiple locations, wastes precious hours each week preparing for meetings and then having to reschedule.] With [paid feature], you’ll [get huge benefit, e.g. have the freedom to take Friday afternoons off, rest easy knowing their files are all in one place, increase productivity by 18%]. Since [paid feature] is part of our [paid plan name] plan, you’ll just want to upgrade to [paid plan name] and you’ll be good to go! Just head to your billing page now, so you can start [getting benefit] [link]. Talk soon, [Signature]

Case-Study Emails

be a good storyteller: Open with a hook. Lure the reader from one line to the next. Start in the middle of the action. Create compelling characters. Set the story around a central conflict.

Whether you send a case-study email that includes a video testimonial, customer stories, or old-fashioned case study, tell your customer’s story about using the product.

How do you decide which testimonials to showcase? One of the best ways to decide is based on the objections you regularly receive when selling your product. These objections could be: The price is too high. We don’t have the budget. It’s not important right now.

Pair your top objection with a testimonial that addresses the objection head on.

For instance, if your top objection is that the price is too high, include a testimonial that showcases the amount of value the customer received from using your product.

If you send case-study emails before selling users on your product, you’ll improve your free-to-paid conversion rate.

Make sure that each case-study email answers “What’s in it for me?” for users.

Better-life emails communicate the benefits of the product.

The main call to action in these emails is often to upgrade an account. But you can also direct people to try specific features

Better-life emails don’t tell a customer story. They focus on communicating the benefits of the product.

Showcase how your product improves a user’s life. If you’re selling a business intelligence tool, highlight how the user will no longer need to spend countless hours crunching numbers in Excel.

A common mistake with better-life emails is focusing only on the functional outcome of your product. Remember: You need to account for functional, social, and emotional outcomes.

Functional outcome. The core tasks that customers want to get done. Emotional outcome. How customers want to feel, or avoid feeling, as a result of the functional task. Social outcome. How customers want to be perceived by others.

Before writing your better-life emails, ask yourself these questions: When talking to potential buyers, what benefits get them most excited? What benefits make it a no-brainer for people to upgrade?

Expiry-warning emails remind the user to upgrade before a free trial ends.

Freemium models don’t use expiry-warning emails because part of the product is free forever. That said, if you have a hybrid model (with a free trial and freemium offer), expiry emails can still motivate users to upgrade.

If you have an opt-out free trial(you require a credit card upfront), you must send expiry-warning emails.

as a general rule, make it easy for users to cancel their account.

expiry-warning emails have three goals

Set clear expectations.

Make sure to give them a few days notice about the charge so they aren’t surprised.

Make it easy for users to upgrade, cancel, or do nothing.

most people won’t upgrade, so it should be easy for users to cancel their account.

Communicate how users can get help.

Once a customer decides to use your software, they want to make the transition seamless. When will they be charged? How can they get approval from their team? In some cases, they may also wonder if they can maintain data from their current trial.

Make sure that customers know that they can get help and know where to find it.

Common mistakes with expiry-warning emails

Trial expiration emails serve two very different user types: People who want to become paying customers; People who don’t. In the same email, you need to address the needs of both groups—without making the email confusing.

Most mistakes in expiry-warning emails stem from these conflicting goals. 1. Failing to provide enough advanced notice

I recommend sending an expiry-warning email at least three days before the end of each user’s trial.

Assuming that the recipient wants to begin paying for the product

One of the biggest mistakes I see companies make with expiry-warning emails is not including the product’s main value proposition. Offering a compelling reason to take action results in (surprise) more people taking action.

You need to include compelling reasons for someone to upgrade.

Your expiry-warning emails should be able to answer these questions:

Why should I upgrade?

How do I upgrade?

How much time do I have left?

What happens when the trial is over?

How do I cancel? (if you require a credit card)

Where can I go if I need help?

You must send expiry emails if you have an opt-out free trial. If you don’t, users will forget they signed up and get mad when they get charged for a product they haven’t been using.

Customer-Welcome Emails

When you buy something from a brand you don’t trust, waiting for a confirmation email can feel like an eternity. Your new customers feel the same way.

use customer-welcome emails: Reassure users that they made the right decision. Remind users of what they can do with the platform. Set expectations for what comes next (e.g. Will a customer success rep reach out?)

Spotify welcomes users as soon as they upgrade to premium:

One thing Spotify has done really well is to remind users why they upgraded, showcasing the value of the platform. This email increases user motivation to check out the product

Post-Trial Survey Emails : Even with the most amazing free-trial experience, most users won’t convert.

Post-Trial Survey Email 1 Subject: Wesley, have 60 seconds to share why? Body: Hi Wesley, I noticed that you have not purchased Autopilot so far. I’d love to hear your thoughts on your trial experience in this super quick survey. It will only take 60 seconds (we have measured it!) Your response will help us focus on improving your trial experience and better meet your needs. Thanks in advance, Lauren

Based on your response, Autopilot enrolls you in an automated sequence. Autopilot recommends starting with this list:

Still evaluating → Offer a trial extension

Not a fit → Drop into nurture

Too complex → Schedule a customer success call

Too expensive → Provide a one-time discount

Went with another solution → Send top-of-funnel lead-nurturing emails to stay top-of-mind if the other service doesn’t work out

Just doing research → Add to nurture (notice the nurturing trend?)

Missing product feature or integration → See if it’s on your product roadmap; if so, let them know when it’s live

if your onboarding experience lacks personalization, you’ll lose out on conversions.

imagine what must be going through my head when you send me an email on how to complete a very basic step in your onboarding process—one that I’ve already completed.

For most free trials, here’s what a user onboarding email sequence looks like:

Day 1: Welcome email;

Day 3: Content to educate user;

Day 5: Check-in demo;

Day 8: Product features;

Day 12: Expiry-warning email.

This is a one-size-fits-all approach. It doesn’t serve any of the outliers below: If you’re a power user and keep receiving product-feature emails for a feature you’ve already used, they’re pointless. If you’ve never logged into the product, why should you receive advanced lessons on how to use it? If you already upgraded and continue to receive these emails, how does that feel?

Create a Smart Conversational Bumper System

Here are the four main signals: Signup; Quick win; Desired outcome; Customer.

If someone experiences a quick win in the product, we can send emails on how to dive deeper into the product. Or, if someone experiences a desired outcome, we can send sales-touch and case-study emails to encourage users to upgrade.

Conversational Bumper Track 1: Quick Win

A sign-up should trigger a welcome email immediately. Depending on how complex your product is, you might need one or even five usage-tip emails to support account setup.

usage-tip emails do three things: Direct users to a specific product page (e.g. “Manage Users” page). Link to help-center articles or blog posts (e.g. “How to invite a user from outside your company”). Give actionable best practices or invite back abandoned users.

In the first onboarding track, the only thing we care about is getting someone to experience a quick win in the product. If we operate a business intelligence software solution, our first quick win might be setting up a dashboard to visualize our analytics.

You don’t need to send usage-tip emails to users if they accomplish the quick win the first time they use your product. Remember, product bumpers also guide users toward achieving their desired outcome. Conversational bumpers are there only if users don’t take the required actions we’ve set out in our straight line

Remember, product bumpers also guide users toward achieving their desired outcome. Conversational bumpers are there only if users don’t take the required actions we’ve set out in our straight line.

Conversational Bumper Track 2: Desired Outcome

Conversational Bumper Track 2 starts as soon as someone gets a quick win and ends when someone experiences a desired outcome in your product.

Do you really need Track 2? It really depends on your product. If you have a simple product like Netflix, sending usage-tip emails on how to click “Play” is overkill. On the flip side, if you have a complex product, your quick win might have been uploading a piece of JavaScript. Track 2 can drive users closer to their desired outcome.

Conversational Bumper Track 3: Convert

You see, most people go wrong with their conversational bumpers by trying to monetize users too quickly. Skipping the first two bumper tracks, as the English would say, “is a bit forward.” If that’s you, go back and implement the first two conversational bumper tracks. Without that solid foundation, the strategies and tactics in Track 3 won’t be nearly as effective.

Most people go wrong with their conversational bumpers by trying to monetize users too quickly.

Without that solid foundation, the strategies and tactics in Track 3 won’t be nearly as effective.

Conversational Bumper Track 3 looks a bit overwhelming

Sales-touch emails; Case-study emails; Trial-expiry emails; Trial-extension emails; Post-trial surveys; Customerwelcome emails. One of the best parts about Track 3 is that each email focuses on upgrading the user to become a paying customer.

Each bumper track is trigger-based. So, if your user experiences a quick win in the product during the first visit, you won’t send any usage-tip emails, and you’d auto-enroll them in Conversational Bumper Track 2.

if your user experienced the desired outcome in the first-run onboarding experience but never came back, you’d enroll them in Track 3 to bring them back and upgrade.

The true beauty of the Conversational Bumper Track is that you meet your users where they are in their journey. As soon as a user upgrades, you automatically stop sending them upgrade emails.

Increase Your Average Revenue Per User (ARPU)

On average, a repeat customer will spend 67% more than a new customer.

It focuses on the quality rather than quantity of customers.

If you have a freemium model, only paying users would qualify as “users” when calculating ARPU.

Average Revenue Per Paying User (ARPPU) to signal that a user has paid within their billing system.

Once you know your ARPU, you’ll better understand: How to market your business; If direct sales makes sense; Who your most profitable customers are

if you have a low ARPU, you might want to consider SEO; paid marketing channels might be too expensive. Or, if you have an extremely high ARPU, you can consider hiring an enterprise sales team.

Don’t weigh yourself down with bad revenue. Gorge yourself on customers who are an incredible fit for your business.

Paradox of Choice,a term coined by Barry Schwartz. It boils down to this: The more choices you have, the less likely you are to choose.

Adding more choices unknowingly adds more stress and anxiety to a decision. What happens then? Analysis paralysis. The easiest decision is maintaining the status quo.

Most entrepreneurs undervalue the elasticity of demand—which results in them undercharging for their products. Simply increasing your prices for inflation can have

Treat Your Best Users Like the Queen

optimizing conversions for all users is a fool’s errand.

When designing experiments to improve onboarding, we forget to ask whether the experiment will help our best leads become successful users.

They expect the best enterprise leads to fill out lengthy forms to self-qualify so that sales reps don’t waste time talking to bad leads. They provide great leads with the same generic onboarding experience instead of building one that speaks to their specific motivations

Upselling encompasses the sale of additional features, product add-ons, and services. Cross-selling refers to completely different products or services.

Not all customers are created equal. Learn whom to ignore.

You’ll never kill your churn beast, but you can starve it of the environment it needs to grow.

Otherwise, a few bad-fit customers or a terrible onboarding experience can grow your creature into an unforgiving monster.

“Much like it’s more exciting to buy a new car than to maintain a current vehicle, it’s a lot easier to celebrate new customers than retain customers.”

Shift from an acquisition-first mindset to a retention-first mindset can have an incredible impact on growth.

customer churn is the percentage of your customers or subscribers who cancel or don’t renew their SaaS subscription during a given time period.

you could have a churn rate of less than 1% but see your MRR drop by 40% if your biggest customer leaves.

A holistic approach measures churn in three ways: Customer Churn. The number of customers lost in a given time period. Revenue Churn. The amount of revenue lost in a given time period. Activity Churn. The number of users at risk of churning due to red-flag activity (e.g. not logging into your application for two months).

According to ProfitWell, there are more than 43 ways to calculate churn.

“Don’t approach churn by trying to put lipstick on a pig

your customer churn percentage will vary significantly depending on your target audience,

Enterprise clients will churn less often—these are

Churn Buster,

Typically customers gradually stop using products, from using it every morning to every week to once a month. At some point down the road you’ll remember you’re paying for something you don’t need and don’t use, and then you ‘churn’, even though the decision was made months ago.

If a user hasn’t used your product in six months, they’re at risk of churning. Or, if a user is exporting all of their data from their account, they might be salvaging what they can before canceling.

you don’t need to send a “We miss you” email to every user who goes a week without using your application.

How do you calculate activity churn?

Step 1: Define Engagement for Your Product

For example, if you’re a B2B productivity tool, you could define engagement as a certain number of “projects created,” “tasks completed,” “team members added,” “comments left,” “files uploaded,” “projects completed,” etc. A social networking application could define engagement as “connections made,” “content posted,” “posts liked,” “comments made,” etc

The first step is to list engagement activities that a user can take in your product. For example: Logged in; Added photo; Shared photo; Invited friend; Commented on photo; Edited photo; Posted to Facebook; Posted to Twitter; Opened email; Clicked on email.

Step 2: Start Tracking These Product Activities

Step 3: Weigh Each “Engagement” Event

not all activity is created equal.

Think about it: Inviting a new user to your product is a more engaging act than simply logging in. Writing a long post on a social media site is more engaging than simply liking a post.

Then, for each user, add a column for the number of times they triggered each event over a period of time (for example, the past seven days): Next, simply multiply the event weight by the number of events. Your result should look something like this: The total for individual event values will give you an engagement score for an individual user. Finally, run this calculation for each user. You’ll have the basis for a quantified user engagement score.

Step 4: Give It Context by Normalizing Raw Scores If you’re going through the exercise of creating an engagement score, it’s essential that it’s usable across your organization. This metric needs to be “operationalized” by your various teams.

Your score needs to be in a format that’s easily understood and consumed by anyone. Simply telling your marketing team that a user has a score of 458 isn’t helpful. How are they supposed to know if 458 is good or bad? Is that high or low? But telling them that a user has a score of 91 on a scale from 1 to 100 is something they can understand. This

Step 5: Apply the Scores to Make Them Actionable

Rank Your Users When every user has an engagement score, you can do something amazing: actually rank users based on engagement.

This opens up so many opportunities. For example, you can: Discover your power users and find out what makes them great. Prioritize customer-success efforts to drive great support, identify problem users, and spot growth opportunities. Drive more personalized marketing programs. Identify great user research targets.

Score and Rank Your Accounts

being able to rank your accounts will allow you to: Understand the overall health of your business. Prioritize sales efforts by knowing which trial or freemium accounts are more likely to convert. Prioritize customersuccess efforts by focusing on accounts that are ripe for expansion and those that need support. Identify which features are most important to your best accounts.

Calculate the Overall Score for Your Product

By tracking this average score over time, you can determine whether the work you’re doing on your product is actually driving engagement. You also might be able to make board-level decisions about when (or whether) to make further investments in the business.

Compare Populations or Cohorts

Unlike customer and revenue churn—which look in the rear-view mirror—activity churn looks ahead and can save accounts before it’s too late

One of the main reasons that no one focuses on churn is that it’s always seen as someone else’s problem.

“If churn is everybody’s job, then it’s nobody’s job.” Once someone in the company owns churn—and takes responsibility for measuring it and reporting it, you can move on to other tasks, like getting your customers started on the right foot.

How common is it to sign up for a new product and have the only welcome email be a receipt confirming your purchase? For a lot of companies, this is the norm. They focus on creating an experience that converts you into a customer, but almost no thought goes into welcoming you as a customer and making sure you get value from the product.

A robust customer onboarding process is one of the most powerful ways to reduce churn.

If your product is difficult to use, customers will churn because they can’t experience the full value of your product. To chip away at your ability debt, you need to be ruthless about removing friction.

Usage Review Email Subject: Your [Product] weekly activity report Hi {{user.first_name | default: “there”}}, [Statement about what they accomplished with your product. E.g… Here’s how many tasks your team accomplished last week Here’s the current status of your proposals (drafted, sent, and accepted) Here’s how many hours of work [Product] saved you last week ] [Activity section. Rule of thumb: only show activity that will make your user feel accomplished. A good barometer: is it an activity they’d feel proud of, or want to show to their boss? If so, it’s probably a good activity to show. E.g… Number of new proposals sent Number of new proposals accepted Increased productivity Increased traffic Increased engagement with their content or product Increased sign-ups or revenue ] Happy [verb your product does]ing! – Signature

Restate your value when invoicing. When you send invoices, remind people that they’re paying for a product that they may or may not be using. If the latter, remind them why they signed up in the first place.

Zapier knows that invoicing can trigger cancellations (especially if users are inactive), so they maximize every opportunity to reinforce the value their customers get from their product.

hurn-prevention campaigns could include ac remarketing campaign to users with low activity,

Have a robust cancellation process. Not knowing why your customers churned is a missed opportunity.

Your survey could be a single question: Why did you decide to cancel your account?

Tie proactive action items to each potential response: Still evaluating → Offer a trial extension. Not a fit → Drop into a nurture funnel. Too complex → Schedule a customer success call. Too expensive → Provide a one-time discount. Went with another solution → Send top-of-funnel lead-nurturing emails to stay top-of mind if other service doesn’t work out. T

According to ProfitWell, roughly 20–40% of MRR churn is due to failed credit cards. Putting a system in place to recover these customers can be incredibly valuable.

Invest in customer success. Many founders confuse “customer success” and “customer support.” Customer support is reactive and focused on answering tickets and fixing bugs. Customer success actively looks for ways to help customers succeed

Steve Jobs: The Exclusive Biography

Jobs’s father had once taught him that a drive for perfection meant caring about the craftsmanship even of the parts unseen.

“The Apple Marketing Philosophy” stressed three points.

The first was empathy, an intimate connection with the feelings of the customer: “We will truly understand their needs better than any other company.”

The second was focus: “In order to do a good job of those things that we decide to do, we must eliminate all of the unimportant opportunities.”

The third and equally important principle, awkwardly named, was impute. It emphasized that people form an opinion about a company or product based on the signals that it conveys. “People DO judge a book by its cover,” he wrote. “We may have the best product, the highest quality, the most useful software etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities.”

The first step in this process was convincing the Valley’s premier publicist, Regis McKenna, to take on Apple as a client.

“The best way to predict the future is to invent it”

Osborne. “This guy just doesn’t get it,” Jobs repeatedly railed as he wandered the Apple corridors. “He’s not making art, he’s making shit.” One

we’re going to make things in our lives, we might as well make them beautiful.’”

International Design Conference in Aspen.

“People know how to deal with a desktop intuitively. If you walk into an office, there are papers on the desk. The one on the top is the most important. People know how to switch priority.

“Great art stretches the taste, it doesn’t follow tastes,”

He also admired the design of the Mercedes. “Over the years, they’ve made the lines softer but the details starker,”

His guiding principle was “Form follows emotion,” a play on the familiar maxim that form follows function.

There was one other advantage, he believed, to eliminating the cursor keys: It forced outside software developers to write programs specially for the Mac operating system, rather than merely writing generic software that could be ported to a variety of computers.

The Pepsi Generation campaign, he said, sold not a product but a lifestyle and an optimistic outlook.

whether it made sense to organize the company around product lines or markets or functions.

was a pro at cultivating and stroking prideful reporters.

intuitive sense of how to stoke the excitement, manipulate the competitive instincts of journalists, and trade exclusive access for lavish treatment.

a great company must be able to impute its values from the first impression it makes.

It was designed to celebrate not what the computers could do, but what creative people could do with the computers.

“Steve and I spend a lot of time on the packaging,” said Ive. “I love the process of unpacking something. You design a ritual of unpacking to make the product feel special. Packaging can be theater, it can create a story.”

“If something isn’t right, you can’t just ignore it and say you’ll fix it later,”

“Simply handing over your iPod to a friend, your blind date, or the total stranger sitting next to you on the plane opens you up like a book,” Steven Levy wrote in The Perfect Thing. “All somebody needs to do is scroll through your library on that click wheel, and, musically speaking, you’re naked. It’s not just what you like—it’s who you are.”

they liked what we were doing with iTunes, and they thought we could promote them to a younger audience.”

“If a building doesn’t encourage that, you’ll lose a lot of innovation and the magic that’s sparked by serendipity,”

“So we designed the building to make people get out of their offices and mingle in the central atrium with people they might not otherwise

The front doors and main stairs and corridors all led to the atrium, the café and the mailboxes were there, the conference rooms had windows that looked out onto it, and the six-hundred-seat theater and two smaller screening rooms all spilled into it. “Steve’s theory worked from day one,” Lasseter recalled. “I kept running into people I hadn’t seen for months. I’ve never seen a building that promoted collaboration and creativity as well as this one.” Jobs even went so far as to decree that there be only two huge bathrooms in the building, one for each gender, connected to the atrium. “He felt that very, very strongly,”

The iPad commercials were not about the device, but about what you could do with it.

“We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”

Sam Walton: Made In America

“Friend, we just got after it and stayed after it,”

It never occurred to me that I might lose; to me, it was almost as if I had a right to win. Thinking like that often seems to turn into sort of a self-fulfilling prophecy.

one of the secrets to campus leadership was the simplest thing of all: speak to people coming down the sidewalk before they speak to you.

The Eagle never made much money, but I figured I’d rather have a small profit than have my competitor over there in a big store.

“I guess Mr. Walton just had a personality that drew people in. He would yell at you from a block away, you know. He would just yell at everybody he saw, and that’s the reason so many liked him and did business in the store. It was like he brought in business by his being so friendly.

so I did something I would do for the rest of my run in the retail business without any shame or embarrassment whatsoever: nose around other people’s stores searching for good talent.

First, he gets up every day bound and determined to improve something. Second, he is less afraid of being wrong than anyone I’ve ever known. And once he sees he’s wrong, he just shakes it off and heads in another direction.”

Once I took to the air, I caught store fever.

If you had, say, a $50,000 investment in a store, and the manager put in $1,000, he’d own 2 percent. Gary Reinboth: “He would never let us buy more than $1,000 per store. I think $600 of it was a loan, and $400 of it was four shares of privately owned stock at $100 a share. All he would guarantee was that he would pay us interest every year,

In many of my core values—things like church and family and civic leadership and even politics—I’m a pretty conservative guy. But for some reason in business, I have always been driven to buck the system, to innovate, to take things beyond where they’ve been.

1962, the year which turned out to be the big one for discounting. In that year, four companies that I know of started discount chains. S. S. Kresge, a big, 800-store variety chain, opened a discount store in Garden City, Michigan, and called it Kmart. F. W. Woolworth, the granddaddy of them all, started its Woolco chain. DaytonHudson out of Minneapolis opened its first Target store. And some independent down in Rogers, Arkansas, opened something called a Wal-Mart. At the time, and for quite a while after that, I can guarantee you that hardly anybody noticed that last guy. Heck, within five years, Kmart had 250 stores to our 19, and sales of more than $800 million to our $9 million. Here’s what makes me laugh today: it would have been absolutely impossible to convince anybody back then that in thirty years most all of the early discounters would be gone, that three of these four new chains would be the biggest, best-run operators in the business, that the one to fold up would be Woolco, and that the biggest, most profitable one would be the one down in Arkansas.

The first big lesson we learned was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of.

The idea was simple: when customers thought of Wal-Mart, they should think of low prices and satisfaction guaranteed.

I don’t mind saying that we were the victims of a good bit of arrogance from a lot of vendors in those days. They didn’t need us, and they acted that way. I never could understand it. To me, it always seemed like a customer was a customer, and you ought to try to sell them what you could.

The basic discounter’s idea was to attract customers into the store by pricing these items—toothpaste, mouthwash, headache remedies, soap, shampoo—right down at cost. Those were what the early discounters called your “image” items.

That’s what you pushed in your newspaper advertising—like the twenty-seven-cent Crest at Springdale—and you stacked it high in the stores to call attention to what a great deal it was. Word would get around that you had really low prices.

Everything else in the store was priced low too, but it had a 30 percent margin. Health and beauty aids were priced to give away.

and I usually felt that if a fellow could manage his own finances, he would be more successful managing one of our stores.

“Sam had us send our sales report in every week, and along with it we had to send in a Best Selling Item. I mean we had to. What he was doing was teaching us to look for what’s selling all the time. You had

We used to say you could sell anything if you hung it from the ceiling. So we would buy huge quantities of something and dramatize it. We would blow it out of there when everybody knew we would have only sold a few had we just left it in the normal store position.

in? Sam was a dime store man so at first he wanted to make a certain percentage of profit on everything. But he came around to the idea that a real hot item would really bring them in the store so we finally started running things like toothpaste for sixteen cents a tube. Then we’d have to worry about getting enough of it in stock.”

“We have a lot of fun with all this item promotion, but here’s what it’s really all about. The philosophy it teaches, which rubs off on all the associates and the store managers and the department heads, is that your stores are full of items that can explode into big volume and big profits if you are just smart enough to identify them and take the trouble to promote them.

In retail, you are either operations driven—where your main thrust is toward reducing expenses and improving efficiency—or you are merchandise driven. The ones that are truly merchandise driven can always work on improving operations. But the ones that are operations driven tend to level off and begin to deteriorate.

I guess that was the forerunner of our Saturday morning meetings. We wanted everybody to know what was going on and everybody to be aware of the mistakes we made. When somebody made a bad mistake—whether it was myself or anybody else—we talked about it, admitted it, tried to figure out how to correct it, and then moved

on to the next days work. Another way we tried hard to make up for our lack of experience and sophistication was to spend as much time as we could checking out the competition. It’s something I did from the beginning, and it’s something I insisted all our managers do.

Check everyone who is our competition. And don’t look for the bad. Look for the good.

We’re really not concerned with what they’re doing wrong, we’re concerned with what they’re doing right, and everyone is doing something right.”

But there was a great big open trash bin out behind that store, and at night, after both stores were closed, John and Larry would go over to Gibson’s and get down in their trash and check as many prices as they could find.”

Sam had an equation for the trips: our expenses should never exceed 1 percent of our purchases, so we would all crowd in these little hotel rooms

If you don’t want to work weekends, you shouldn’t be in retail.

enabled Wal-Mart to fly under everybody’s radar until we were too far along to catch.

I started thinking about what really brought them down, and why we kept going. It all boils down to not taking care of their customers, not minding their stores, not having folks in their stores with good attitudes, and that was because they never really even tried to take care of their own people. If you want the people in the stores to take care of the customers, you have to make sure you’re taking care of the people in the stores. That’s the most important single ingredient of Wal-Mart’s success. Most of these

Wal-Mart was too small and insignificant for any of the big boys to notice, and most of the promoters weren’t out in our area so we weren’t competitive. That helped me get access to a lot of information about how they were doing things. I probably visited more headquarters offices of more discounters than anybody else—ever.

I’d ask lots of questions about pricing and distribution, whatever. I learned a lot that way.

So I enrolled in an IBM school for retailers in Poughkeepsie, New York.

merchandise assembly, in which we would order centrally for every store and then assemble their orders at the distribution center, and also cross-docking, in which preassembled orders for individual stores would be received on one side of our warehouse and leave out the other.

our key strategy, which was simply to put good-sized discount stores into little one-horse towns which everybody else was ignoring. In those days, Kmart wasn’t going to towns below 50,000, and even Gibson’s wouldn’t go to towns much smaller than 10,000 or 12,000. We knew our formula was working even in towns smaller than 5,000 people,

the method was to saturate a market area by spreading out, then filling in.

the big guys were leapfrogging from large city to large city, they became so spread out and so involved in real estate and zoning laws and city politics

We figured we had to build our stores so that our distribution centers, or warehouses, could take care of them, but also so those stores could be controlled. We wanted them within reach of our district managers, and of ourselves here in Bentonville, so we could get out there and look after them. Each store had to be within a day’s drive of a distribution center. So we would go as far as we could from a warehouse and put in a store. Then we would fill in the map of that territory, state by state, county seat by county seat, until we had saturated that market area.

We never planned on actually going into the cities. What we did instead was build our stores in a ring around a city—pretty far out—and wait for the growth to come to us. That strategy worked practically everywhere.

saturation helped us to save a fortune in that department. When you move like we did from town to town in these mostly rural areas, word of mouth gets your message out to customers pretty quickly without much advertising.

Our main real estate effort should be directed at getting out in front of expansion and letting the population build out to us.

From up in the air we could check out traffic flows, see which way cities and towns were growing, and evaluate the location of the competition—if there was any. Then we would develop our real estate strategy for that market.

then. That’s another good reason I don’t like jets. You can’t get down low enough to really tell what’s going on, the way I could in my little planes.

One way I’ve managed to keep up with everything on my plate is by coming in to the office really early almost every day,

If you take someone who lacks the experience and the know-how but has the real desire and the willingness to work his tail off to get the job done, he’ll make up for what he lacks. And that proved true nine times out of ten. It was one way we were able to grow so fast.”

the more you share profits with your associates—whether it’s in salaries or incentives or bonuses or stock discounts—the more profit will accrue to the company. Why? Because the way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies,

we started calling our store workers “associates” instead of employees.

Profit sharing

Every associate of the company who has been with us at least a year, and who works at least 1,000 hours a year, is eligible for it.

shrinkage, or unaccounted-for inventory loss—theft,

We decided the best way to control the problem was to share with the associates any profitability the company gained by reducing it. If a store holds shrinkage below the company’s goal, every associate in that store gets a bonus that could be as much as $200.

took a lot of the department managers out of that store, out of that losing environment, and got them to rubbing shoulders with some of the folks from the successful stores in his district. They had a weekend meeting, and they talked about their departments, and he made these folks participate. Then he had them set their own goals. And maybe while they were having lunch with these winners from the other stores, maybe they started to dream a little and think a little about how they could improve the mess they were in.

makes me feel better than when I visit a store and some department head comes up to me with pride and shows me all her numbers and tells me she’s number five in the company but she plans to be number one next year.

Keeping so many people motivated

one simple thing that puts it all together: appreciation. All of us like praise. So what we try to practice in our company is to look for things to praise. Look for things that are going right. We want to let our folks know when they are doing something outstanding, and let them know they are important to us.

way. I have always cross-pollinated folks and let them assume different roles in the company, and that has bruised some egos from time to time. But I think everyone needs as much exposure to as many areas of the company as they can get, and I think the best executives are those who have touched all the bases and have the best overall concept of the corporation.

to make Wal-Mart a fun proposition.

We like to see them do wild things in the stores that are fun for the customers and fun for the associates.

Back then, we tried literally to create a carnival atmosphere in our stores. We were only in small towns then, and often there wasn’t a whole lot else to do for entertainment that could beat going to the Wal-Mart.

we’d have these huge sidewalk sales, and we’d have bands and little circuses in our parking lots to get folks to those sales. We’d have plate drops, where we’d write the names of prizes on paper plates and sail them off the roofs of the stores. We’d have balloon drops. We’d have Moonlight Madness sales,

At store openings, we’d stand on the service counters and give away boxes of candy to the customers who had traveled the farthest to get there. As long as it was fun, we’d try it. Occasionally it blew up in our face.

We want the associates and the management to do things together that contribute to the community and make them feel like a team, even if they don’t directly relate to selling or promoting our merchandise.

we thrive on a lot of the traditions of small-town

accidentally ordered four or five times more Moon Pies than he intended to

came up with the idea of a Moon Pie Eating Contest

Take our Saturday morning meetings, for example. Without a little entertainment and a sense of the unpredictable, how in the world could we ever have gotten those

If we can, we find heroes among our associates in the stores and bring them into Bentonville, where we praise them in front of the whole meeting.

For the meeting to work, it has to be something of a show. We don’t ever want to let it become predictable. One day, we might do a few calisthenics. Another day we might sing. Or maybe do the Razorback cheer. We don’t want to plan it all out. We just want it to unfold. It is so unconventional that I don’t think anyone could really duplicate it even if they wanted

“One of the real values of our meeting is its spontaneity. We never really have an agenda. Of course the chairman always has his yellow legal pad with notes scribbled on it of things he wants to discuss, and some of the rest of us do the same thing. But one of the things Sam will do is just call someone up at the start and say, ‘Okay, you conduct the whole meeting today.’ And that meeting will take on the personality of whoever’s running it. That way, there’s always a sense of anticipation. Something unusual may happen, or somebody may pull off something great.”

When the whole thing is over, the guest associates are sent a videotape of the meeting, and they’re supposed to share that, and their impressions of the meeting, with their associates who didn’t get to go.

But a culture like ours can create some problems of its own too. The main one that comes to mind is a resistance to change.

“Saturdays around the Bentonville square were really something special. Dad always had something going on out on the sidewalks or even in the streets, and there was always a crowd. That’s where Santa Claus would come, and that’s where we had all the parades. To me, as a kid, it seemed like we had a circus or a carnival going on almost every weekend. I loved Saturdays. I had my popcorn machine out on the sidewalk, and I was covered up in business. Everybody wanted some of that popcorn, and of course a lot of my customers would go on into the store. It was a great way to grow up.”

Except they weren’t really moving to the cities; they were moving to the suburbs and commuting into the cities to work.

It was this kind of strong customer demand in the small towns

and hours that were realistic for the way people wanted to shop,

The small stores were just destined to disappear, at least in the numbers they once existed, because the whole thing is driven by the customers, who are free to choose where to shop.

you have to focus on something the customer wants, and then deliver it.”

The same thing can be done with fabrics: offer higher quality material and throw in some sewing classes.

Our guy sent the customer along to the paint store because it was the right thing to do. He was taking care of the customer.

Our philosophy on this has always been simple: we are the agents for our customers. And

we need to use middlemen to deal with smaller manufacturers and make the process more efficient.

P&G could monitor Wal-Mart’s sales and inventory data, and then use that information to make its own production and shipping plans with a great deal more efficiency. We broke new ground by using information technology to manage our business together, instead of just to audit it.”

We pulled ourselves together and designed a big plan—a promotional program and a people program and a merchandising program—for

We do no advertising, but our whole business is based on selling the concept. We sell small business operators on the idea that for $25 a year they can have a just-in-time warehouse with all the same price advantages for goods that large companies get.

I don’t want our competitors getting too comfortable with feeling like they can predict what we’re going to do. And I don’t want our own executives feeling that way either. It’s part of my strong feeling for the necessity of constant change, for keeping people a little off balance.

Jack Shewmaker,

Today, he does international consulting work,

we need drivers who are part of our team, drivers who are as dedicated to serving our customers as the associates in the stores.

He’s not just driving a truck. He’s dedicated to servicing those stores, and he knows he’s an ambassador of WalMart and everything we stand for out on the road.

“Our drivers

report back to Wal-Mart continually on things like merchandise thrown out behind the store that looked like it was good, attitude and morale problems in the stores.

The drivers see more stores every week than anybody else in this company.

If the merchandise mix is really going to be right, it has to be managed by the merchandisers there on the scene, the folks who actually deal face to face with the customers, day in and day out, through the seasons.

Communicate, Communicate, Communicate If you had to boil down the Wal-Mart system to one single idea, it would probably be communication, because it is one of the real keys to our success.

we’ve got this one rule I hope we never give up enforcing: our buyers here in Bentonville are required to return calls from the stores first, before they return the calls of vendors or anybody else, and they are required to get back to the stores by sundown of the day they get the call.

I want you to promise that whenever you come within ten feet of a customer, you will look him in the eye, greet him, and ask him if you can help him.

a computer can tell you down to the dime what you’ve sold. But it can never tell you how much you could have sold.

we have eighteen regional managers, all of them based here in Bentonville.

They stay out three to four days, usually coming back in on Thursday. We’ve drummed into their heads the belief that they should come back with at least one idea that will pay for the trip.

we have a rule. We never leave an item hanging. We will make a decision in that meeting even if it’s wrong, and sometimes it is. But when the people come out of that room, you would be hard-pressed to tell which ones oppose it and which ones are for it. And once we’ve made that decision on Friday, we expect it to be acted on in all the stores on Saturday.

Once a quarter, every buyer has to go out to a different store and act as manager for a couple of days in the department he or she buys merchandise for.

reading the work of W. Edwards Deming,

We let them see how their store ranks with every other store in the company on a constant, running basis, and we give them incentives to want to win.

percent of sales should have been enough to carry our buying office, our general office expense, my salary, Bud’s salary—and after we started adding district managers or any other officers—their salaries too.

IBM, he decided they would never have more than four layers from the chairman of the board to the lowest level in the company.

do it right the first time. The natural tendency when you’ve got a problem in a company is to come up with a solution to fix it. Too often, that solution is nothing more than adding another layer. What you should be doing is going to the source of the problem to fix it, and sometimes that requires shooting the culprit.

If you’re not serving the customer, or supporting the folks who do, we don’t need you.

Outliers: The Story of Success

Michael Howe in his book Genius Explained,

Practice isn’t the thing you do once you’re good. It’s the thing you do that makes you good.

A basketball player only has to be tall enough — and the same is true of intelligence. Intelligence has a threshold.

In the end, only one thing mattered: family background.

If you work hard enough and assert yourself, and use your mind and imagination, you can shape the world to your desires.

an opportunity to transform their relationship to their work.

“I tell my students, ‘You’re going to have a two-week take-home exam. I know your habits. You’re going to do nothing for the first week and start it next week, and I want to warn you now: If you only spend one week on this, you’re not going to solve it. If, on the other hand, you start working the day I give you the midterm, you’ll be frustrated. You’ll come to me and say, ‘It’s impossible.’ I’ll tell you, Keep working, and by week two, you’ll find you’ll make significant progress.” We sometimes think of being good at mathematics as an innate ability. You either have “it” or you don’t. But to Schoenfeld, it’s not so much ability as attitude. You master mathematics if you are willing to try.

Now, here’s the interesting part. As it turns out, the average number of items answered on that questionnaire varies from country to country. It is possible, in fact, to rank all the participating countries according to how many items their students answer on the questionnaire. Now, what do you think happens if you compare the questionnaire rankings with the math rankings on the TIMSS? They are exactly the same. In other words, countries whose students are willing to concentrate and sit still

long enough and focus on answering every single question in an endless questionnaire are the same countries whose students do the best job of solving math problems. The person who discovered this fact is an

KIPP Academy

Virtually all of the advantages that wealthy students have over poor students is the result of differences in the way privileged kids learn while they are not in school.

There’s probably just a television.

She may still have a wonderful vacation, making new friends, playing outside, going to the movies, having the kind of carefree summer days that we all dream about. None of those things, though, will improve her math and reading skills, and every carefree summer day she spends puts her further and further behind Alex. Alex isn’t necessarily smarter than Katie. He’s just out-learning her: he’s putting in a few solid months of learning during the summer while she watches television and plays outside.

The problem with math education is the sink-or-swim approach. Everything is rapid fire, and the kids who get it first are the ones who are rewarded. So there comes to be a feeling that there are people who can do math and there are people who aren’t math people.

Outliers are those who have been given opportunities — and who have had the strength and presence of mind to seize them.

The Infinite Game

Page No. 17

With a finite mindset firmly entrenched in almost all aspects of the organization, a sort of tunnel vision results. The result of which pushes almost everyone inside the company to place excessive focus on the urgent at the expense of the important.

Page No. 20

Finite-minded leaders place unbalanced focus on near-term results, they often employ any strategy or tactic that will help them make the numbers. Some favorite options include reducing investment in research and development, extreme cost cutting (e.g., regular rounds of layoffs, opting of cheaper, lower quality ingredients in products, cutting corners in manufacturing or quality control), growth through acquisition and stock buybacks. These decisions can, in turn, shake a company’s culture. People start to realize that nothing and no one is safe. In response, some instinctually behave as if they were switched to self-preservation mode. They may hoard information, hide mistakes and operate in a more cautious, risk-averse way. To protect themselves, they trust no one. Others double down on an only-the-fittest-survive mentality. Their tactics can become overly aggressive. Their egos become unchecked. They learn to manage up the hierarchy to garner favor with senior leadership while, in some cases, sabotaging their own colleagues. To protect themselves, they trust no one.

Page No. 24

Any leader who wants to adopt an infinite mindset must follow five essential practices:

Advance a Just Cause
Build Trusting Teams
Study your Worthy Rivals
Prepare for Existential Flexibility
Demonstrate the Courage to Lead

Page No. 26

Just as it is easier to focus on a fixed, finite goal than an infinite vision of the future, it is easier to lead a company with a finite mindset, especially during times of struggle or downturn.

Finite-mindedness nearly destroyed all of these companies. Only the lucky ones that were rescued by an infinite-minded leader have gone on to become even stronger versions of themselves, more inspiring to the people who work there and more appealing to the people who buy their products.

Page No. 33

A Just Cause is not the same as our WHY. A WHY comes from the past. It is an origin story. It is a statement of who we are— the sum of our values and beliefs, A Just Cause is about the future. It defines where we are going. It describes the world we hope to live in and will commit to help build.

Page No. 34

Unlike a WHY, of which there can be only one, we can work to advance more than one Just Cause.

Think of the WHY like the foundation of a house, it is the starting point. It gives whatever we build upon it strength and permanence. Our Just Cause is the ideal vision of the house we hope to build.

Page No. 37

A Just Cause must be:

For something— affirmative and optimistic
Inclusive—- open to all those who would like to contribute
Service oriented— for the primary benefit of others
Resilient— able to endure political, technological and cultural change
Idealistic— big, bold and ultimately unachievable

Page No.38

Being for something is about feeling inspired.

Being for focuses our attention on the unbuilt future in order to spark our imagination.

Imagine if instead of fighting against poverty, for example, we fought for the right of every human to provide for their own family.

Where the first offers us a problem to solve, the second offers us a vision of possibility, dignity and empowerment.

Page No. 40

A Just Cause is a specific vision of a future state that does not yet exist; a future state so appealing that people are willing to make sacrifices in order to help advance toward that vision.

“Hire for culture and you can always teach the skills later.”

Page No. 41

A Just Cause must involve atleast two parties—- the contributors and the beneficiaries.

Page No. 45

In the Infinite Game of business, a Just Cause must be greater than the products we make and the services we offer. Our products and services are some of the things we use to advance our Cause.

Publishers saw themselves in the book business instead of the spreading-ideas business and thus missed the opportunity to capitalize the new technology to advance their cause. They could have invented Amazon or the digital e-reader. Had the music industry defined themselves as the sharers of music rather than sellers of records, tapes and CDs they would have had an easier time in a world of digital streaming. By defining themselves by a cause greater than the products they sold, they could have invented services like iTunes or Spotify.

Page No. 49

A Just Cause that is preserved on paper can be handed down from generation to generation; a founder’s instinct cannot.

Page No. 51

It is also common to find organizations confusing their corporate social responsibility (CSR) program for a Just Cause. Any of these may or may not work in the finite game, but they absolutely cannot lead an organization to survive and thrive in the Infinite Game.

A true Just Cause is deeply personal to those who hear it, and it must be deeply personal to those who espouse it.

Page No. 52

BHAG, a big, hairy, audacious goal. It’s easy to mistake BHAG for a Just Cause because they can indeed be incredibly inspiring and can often take many years to achieve.

Simply choosing another big, audacious goal is not infinite play, it’s just another finite pursuit.

Page No. 53

Senior executives who seem to suffer from a kind of “finite exhaustion.”

Page No. 55

Leaders with a finite mindset often confuse having a successful product with having a strong company.

Having a great player, a popular product or a killer app does not mean we are equipped for the Infinite Game.

Page No. 56

A Just Cause should direct the business model, not the other way around.

Page No. 65

Martin Luther King Jr. gave the “I have a dream” speech, for example. He didn’t give the “I have a plan” speech.

The responsibility of the most senior person in an organization is to look beyond the organization.

Page No. 70

The average life of a company in the 1950s, if you recall, was just over 60 years. Today it is less than 20 years.

Page No. 71

It is not technology that explains failure; it is less about technology, per se, and more about the leaders’ failure to envision the future of their business as the world changes around them. It is the result of shortsightedness.

Page No. 75

“A business that makes nothing but money is a poor kind of business.” Companies exist to advance something— technology, quality of life or anything else with potential to ease or enhance our lives in some way, shape or form.

Page No. 77

Does ethical custom mean that if we do something frequently enough it becomes normalized and is thus no longer unethical?

Page No. 81

Though today futurists still exist in the business world, they are usually tasked with helping a company predict trends that can be marketed to rather than assessing future impacts of current choices.

Page No. 82

Turn on CNBC on any given day and we see discussions dominated by talk of trading strategies and near-term market moves. These are shows about trading, not about owning.

Logically, for a company to get bigger, stronger or better at what they do, executives must ensure that the benefit provided by investors’ money or employees’ hard work should, as Adam Smith pointed out, go first to those who buy from the company. When that happens, it is easier for the company to sell more, charge more, build a more loyal customer base and make more money for the company and its investors alike.

Page No. 92

Throughout the day, managers will walk past me and ask me how I’m doing, ask me if there is anything I need, anything they can do to help. Not just my manager . . . any manager.

Page No. 93

“How do I get the most of my people?” This is a flawed question, however.

A better question to ask is, “How do I create an environment in which my people can work to their natural best?”

Page No. 95

Most of us have sat in a meeting and listened to a leader present their priorities . . . and it often looks something like this: 1. Growth. 2. Our customers. 3. Our people. Though that leader will insist that they do care about their people (“our people” is one their priorities), the order in which they appear on the list matters.

Page No. 105

Day after day, for hours, members of the URSA crew would sit in circles and talk about their childhoods and their relationships. Their happy memories and their not-so-happy memories.

Page No. 116

A Circle of Safety is a necessary condition for trust to exist. It describes an environment in which people feel psychologically safe to be vulnerable around their colleagues. Safe to admit mistakes, point out gaps in their training, share their fears and anxieties and, of course, ask for help with the confidence that others will support them instead of using that information against them.

Page No. 117

Even on strong, Trusting Teams there are still some who refuse to step in, especially on teams with an entrenched history of prioritizing performance before trust. This does not mean they are toxic, it just means they need more time.

Page No. 118

The Truth Shouldn’t Hurt

Human beings are hardwired to protect ourselves. We avoid danger and seek out places in which we feel safe. The best place to be is among others around whom we feel safe and who we know will help protect us. The most anxiety-inducing place to be is alone— where we feel we have to protect ourselves from the people on our own team. Real or perceived, when there is danger, we act from a place of fear rather than confidence. So just imagine how people act when they work in constant fear of missing out on a promotion, fear of getting in trouble, fear of being mocked, fear of not fitting in, fear of their boss thinking they’re an idiot, fear of finding themselves on a short list for the next round of layoffs.

Page No. 121

To build a culture based on trust takes a lot of work. It starts by creating a space in which people feel safe and comfortable to be themselves. We have to change our mindset to recognize that we need metrics for trust and performance before we can assess someone’s value on a team.

Page No. 127

In weak cultures, people find safety in the rules. They believe a strict adherence to the rules provides them with job security. And in the process, they do damage to the trust inside and outside the organization. In strong cultures, people find safety in relationships. Strong relationships are the foundation of high-performing teams. And all high-performing teams start with trust.

Page No. 128

The Marine Corps uses the LRC to evaluate the leadership qualities of their future officers.

The Marine Corps focuses on assessing the inputs, the behaviors, rather than the outcomes. And for good reason. They know that good leaders sometimes suffer mission failure and bad leaders sometimes enjoy mission success. The ability to succeed is not what makes someone a leader. Exhibiting the qualities of leadership is what makes someone an effective leader. Qualities like honesty, integrity, courage, resiliency, perseverance, judgment and decisiveness.

Page No. 129

Leaders are not responsible for the results, leaders are responsible for the people who are responsible for the results.

Page No. 146

When Structure Replaces Leadership

When problems arise, performance lags, mistakes are made or unethical decisions are uncovered, Lazy Leadership chooses to put their efforts into building processes to fix the problems rather than building support for their people.

Page No. 147

“Process will always tell us what we want to hear.”

Submitting a false report of compliance helps keep the system running smoothly and keeps their careers on track. And because the punishment for being honest is sometimes greater than for lying.

Page No. 154

Common Threads Initiative, a promise to repair their products for free, so that people don’t throw them out (which reduces waste); a partnership with eBay, so that people can “reuse,” buy and sell secondhand products (which reduces waste); and when a product finally does come to the end of its life, Patagonia will take it off your hands to recycle it rather than have us throw it in the garbage (which reduces waste).

Page No. 160

The truth is, even though we do similar things, he isn’t my competitor, he is my rival.

Page No. 161

If we are a player in an infinite game, however, we have to stop thinking of other players as competitors to be beaten and start thinking of them as Worthy Rivals who can help us become better players.

Page No. 162

Traditional competition forces us to take on an attitude of winning. A Worthy Rival forces us to take on an attitude of improvement. The former focuses our attention on the outcomes, the latter focuses our attention on process.

An excessive focus on beating our competition not only gets exhausting over time, it can actually stifle innovation.

Page No. 180

Worthy Rivals are is the best way to help us improve and adapt before it’s too late.

Without a Worthy Rival we risk losing our humility and our agility.

Page No. 186

Without that sense of infinite vision, strategic shifts, even extreme ones, tend to be reactive or opportunistic. Existential Flexibility is always offensive. It is not to be confused with the defensive maneuvering many companies undergo to stay alive in the face of new technology or changing consumer habits.

Though necessary to stay alive, that kind of change rarely inspires the people inside the organization or reignites their passions. An Existential Flex does.

Page No. 215

Organizations will also find themselves at a crossroads when their leaders start to believe their own myths— that the success that the company enjoyed under their leadership was a result of their genius rather than the genius of their people, who were inspired by the Cause they were leading.

Page No. 216

When performance necessarily starts to suffer.

In order to “fix” the problem, their faith in the people is replaced with faith in the process. The company becomes more rigid and decision-making-powers are often taken away from the front lines. It can’t be a good thing when the captain of the ship, who is supposed to be on deck navigating toward the horizon, is now in the ship tinkering with the engine trying to make it go faster.

The Obama Movement

The world’s hope is to rely on youth. The cruelties and the obstacles of this swiftly changing planet will not yield to obsolete dogmas and outworn slogans. It cannot be moved by those who cling to a present, which is already dying, who prefer the illusion of security to the excitement and danger, which comes with even the most peaceful progress. This world demands the qualities of youth: not a time of life, but a state of mind, a temper of the will, a quality of imagination, a pre-dominance of courage over timidity, of the appetite for adventure over the life of ease…It is the young people who must take the lead.

Page 4 & 5

Young voters were alternately described as “self-absorbed,” “naïve,” and “disaffected.”

State after state largely

Youth vote finally began gaining recognition as a force to be reckoned with.

Youth Turnout” ran one headline

Articles on youth vote

February 2008 cover story by Time entitled, “Why Young Voters Care Again.”

Rock the Vote

Millennials most commonly describe those born between 1978 and 2002.

Page 6 & 7

Greatest Generation.

Are characterized by their general optimism, ingenuity and civic engagement.

Millennials tend to be skeptical of some of the essentialist ideology and excesses of the era, while embracing many of the causes it championed, including racial and gender equality, gay rights, non-violence and environmental sustainability.

Millennials, speaking in general terms, tend to be less radical and idealistic; they have seen the best-laid plans fail miserably. They tend not to be as cynical and disillusioned as Generation X, but remain rather cautious, pragmatic and deliberate. They are willing to work within existing institutions and systems, rather than demand wholesale revolution.

Millennials often blog, tweet, email and network.

Michael Connery, author of Youth to Power.

Page 8 & 9

Suddenly the luxury of cynicism seemed censurable.

the Howard Dean internet phenomenon; the visionary 50 – state strategy;

what he represented to that moment

the fierce urgency of now

We are at a defining moment in history

And I believe there is such a thing as being too late

Young, open-minded, multi-cultural, post-partisan and optimistic. He spoke differently

Page 10 & 11

He was hipper, more culturally attuned. He seemed genuine.

Who wasn’t painfully phony or wooden, a candidate who

Represent the new America to the world.

Obama’s post partisan rhetoric is profoundly appealing.

Page 12 & 13

Organized group called Students for Barak Obama also began organically, constituting state-by-state, campus-by-campus, creating local chapters, establishing leadership, and developing sophisticated communication networks.

The entire event was actualized through online mobilization and student ingenuity.

The words reverberated.

Page 14 & 15

This campaign can’t only be about me

It must be about us

Reclaiming the meaning of citizenship restoring our sense of common purpose.

Because of this new community-based, bottom-up vision, many young people saw his candidacy as holding the potential to not just win an election, but “change the way the game is played.”

He became a cause

What if a politician were to see his job as that of an organizer.

Canvassing, phone-banking, donating, and voting.

Page 16 & 17

The site allows users to create groups, blog, fundraise, and network with other supporters.

They’ll have 100,000 people in a state who have signed up on their Web site and put in their zip code. Now, paid organizers can get in touch with people at the precinct level and help them build the organization bottom up.

Viral videos like the “Vote Different” ad (an adaptation of the legendary 1984-themed Apple commercial, “Think Different”) the “I’ve Gotta Crush On Obama” music video, and the will.i.am-produced. “Yes, We Can” mashup were seen by tens of millions of viewers on YouTube.

Young supporters, meanwhile, created their own artwork, slogans, shirts, poetry, and music. Street artist Sheperd Fairey’s “HOPE” poster – a stylized, social realist-inspired pastel portrait – became the defining icon of the campaign and a pop cultural phenomenon, acquiring “the kind of instant recognition of Jim Fitzpatrick’s Che Guevara poster”

I attend panels, discussions, and grassroots, ‘Support Senator Obama’ meetings.

We have found a man willing to think about solutions from the citizen’s perspective.

“Obamamania.

Page 18 & 19

I feel uplifted by him

Found a somebody who is not offering a handout that would only serve to demoralize me more but a hand up to realize my full potential as a somebody.

I found a somebody who offers me hope and a chance to be part of something greater than myself.

Barack the Youth Vote

Students for Barack Obama

(It eventually dissolved into the official youth wing of Obama for America.)

I knocked 190 doors today.

That’s a personal record for one day. I’ve knocked on over 500 doors since arriving here on Tuesday. Tomorrow I’m hoping to break my record again.

Page 20

Why Obama?

Our moment is now. And our time for change has come.

Page 28 & 29

Obama’s finest speeches do not excite…They elevate.

I am not voting for “good enough” or “not the other guy.

Page 30 & 31

It means that good man with a dream and specific plans to achieve it can be recognized as a leader.

I saw in Obama a symbol of change, a leader, our FUTURE.

On Barack Obama’s website the euphoria likewise spread throughout the message boards.

We are happy that change won and status-quo lost.

Page 32 & 33

For the first time, I actually believe what a politician is

I can’t wait to cast a vote and actually feel good about it!

Page 35

Making change is not about what you believe; it’s not about a speech you make. It’s about working hard…I want to make change, but I’ve already made change. I will continue to make change. I’m not just running on a promise for change. I’m running on thirty-five years of change. So, I think it is clear that what we need is somebody who can deliver change. And we don’t need to be raising the false hopes of our country about what can be delivered.

Page 36 & 37

“Over the last week, I listened to you”………and in the process I found my own voice.

Mashup music video called “Yes We Can”

Page 41

“We ran throughout the city of Columbia, posting signs, increasing visibility, knocking on doors, walking with people to the actual polling places.

It is also an indication that the American people can stand against the power of the establishment in order to usher in a new attitude and approach to uplifting the greater good.

Obama took direct aim at those trying to “divide and distract.

We are up against the idea that it’s acceptable to say anything and do anything to win an election. We know that this is exactly what’s wrong with our politics, this is why people don’t believe that their leaders say anymore; this is why they tune out And this election is our chance to give the American people a reason to believe again. And what we’ve seen in these last weeks is that we’re one campaign, but feed the hibits that prevent us from being who we want to be as nation.

It’s the politics that uses religion as a wedge, and patriotism as a bludgeon. A politics that tells us that we have to think, act, and even vote within the confines of the categories that supposedly define us. The assumption that young people are apathetic.

I did not travel around this state over the last year and see a white South Carolina or a black South Carolina.

Page 43

The choice in this election

It’s about the past versus the future.

The Clinton’s had tried to make race an issue, along with a continuing barrage of attacks about his “delusional” promises for change. But Obama responded by sticking to an inclusive, optimistic message and out-organizing and out-working Clinton on the ground.

Page 44 & 45

For many, the Kennedy-Obama alliance was a sort of symbolic “passing of the torch.

Someone has special ability to get us to believe in ourselves, to tie that belief to our highest ideals and imagine that together we can do great things.

We had a new president who inspired the nation, especially the young, to seek a new frontier.

They realized that when they asked what they could do for their country, they could change the world.

I asked one of those young Americans why they had volunteered. And I will never forget the answer. It was the first time someone asked me to do something for my country.

My friends, I ask you to join in this historic journey – to have the courage to choose change. It is time again for a new generation of leadership. It is time now for Barack Obama.

Page 46

United with the service generation of the One Campaign. The grandparents and children united against the parents.

Page 48 & 49

I like you, can still be inspired. I can still hope.

Door-knocking in the frigid North Dakota winter really makes an impression.

The atmosphere among Obama supporters was something akin to a non-violent revolution, especially among young people.

Page 53

Young people were disenchanted with politics largely because of this very systemic corruption which made participation and social change seem futile.

Page 55

She had neither the boots on the ground nor the money to recoup.

Page 56 & 57

Obamamania

Obama’s “style” versus Clinton’s “substance”

New meme was that because of the unprecedented enthusiasm he was generating, the Obama movement was becoming “creepy”, “messianic”, “a cult”.

Obama’s people are so taken with their messiah that soon they’ll be selling flowers at airports and arranging mass weddings.

Obama the Messiah of Generation Narcissism.

The presumption for Parker and others seemed to be that millions of people engaging in politics for the first time, participating in something larger than themselves, and hoping to shape a better country and world somehow equated to being “narcissistic” or “fanatic”.

Page 58

This (narrative)

Needs to be pushed back against. Hard. Not only is it the height of hypocrisy (apparently we’re damned if we don’t turnout, and damned when we show too much enthusiasm)

It reaffirms stereotypes of young people as superficial and uninformed, a notion that the impressive rise in youth turnout in the year’s primaries had started to undermine.

Talk versus action, speeches versus solutions.

Page 60 & 61

Critics called it Clinton’s “No, we can’t speech. She wasn’t attempting to win voters’ hearts and minds; rather. She was trying to deflate Obama, to make him and the movement he inspired seem silly and without substance.

The main tool to combat Obama’s hope was fear. Barack Obama was not simply less qualified than Clinton, they now argued; he was not even fit to be commander-in-chief.

They released the notorious “3am Phone Call” ad, in which an ominous voice speaks of some unknown horror (Nuclear threat? Terrorist attack?), that could happen at any moment. The video scans stock footage of children sleeping in their beds. The obvious message is that their lives are somehow in imminent danger. As the phone rings, the narrator suggestively asks, “It’s 3am. Who do you want answering the phone?”

Page 67

“Reverend Wright is a child of the 60s, and he often expresses himself in that language of concern with institutional racism and the struggles the African-American community has gone through. He analyzes public events in the context of race. I tend to look at them through the context of social justice and inequality.”

Page 68 & 69

The speech was titled “A More Perfect Union,” and laid out Barack Obama’s vision for racial healing and reconciliation.

The idea that America is more than the sum of its parts. He spoke of affirmative action and racial resentment. He spoke of the segregation and misunderstandings that still exist in black and white churches. He spoke of bitterness born of rejection and humiliation, of hatred and fear born of both ignorance and experience. He spoke of a “racial stalemate” and trying to move beyond some of the old wounds. “For we have a choice in this country.

But if we do, I can tell you that in the next election, we’ll be talking about some other distraction. And then another one. And then another one. And nothing will change.

If we really wanted change and improvement, Barack Obama submitted, we must work for it. We must refuse to say and do the same old things. “It requires all Americans to realize that your dreams do not have to come at the expense of my dreams; that investing in the health, welfare, and education of black and brown and white children will ultimately help all of America prosper.

Page 70

Others in the group did the same, each with unique stories and reasons.

Does not say that he was there because of Barack Obama. He simply says to everyone in the room, ‘I am here because of Ashley.’

It is not enough to give health care to the sick, or jobs to the jobless or education to our children. But it is where we start.

Page 73

He’s really good….He’s saying good things…He’s good young man..

Page 74 & 75

Most folks don’t hate most other folks.

America was on the cusp of taking a big leap into the unknown. Barack Obama didn’t look like any of the forty-three presidents that preceded him; his name didn’t sound like their names; his personal history didn’t resemble their histories. Even his policies were unlike any nominee, Republican or Democrat, since the 1960s.

Page 82 & 83

King, after all, reminded his audience in 1963 that “we can never be satisfied” as long as there is injustice, poverty and discrimination in the world.

“What the nay-sayers don’t understand,” said Obama that night, “is that this election has never been about me. It’s been about you.

Change happens…..because …….people demand it.

Fix our eye not on what is seen, but what is unseen, that better place around the bend.

That promise is our greatest inheritance.

Our destiny is inextricably linked, that together our dreams can be one. We cannot walk done……And as we walk……….we shall always march ahead. We cannot turn back.

America, we cannot turn back….

At least in this moment, his words rang with beautiful conviction; the air seemed to pulse with possibility. The future was ours to imagine.

Page 98 & 99

I wonder if portions of my trust in this man are implicitly connected to our shared multiracial experiences, or what I deem as shared. I find myself shocked but admiring of a man who looks almost like me accomplishing what he has.

We not only offer education and opportunity but that we as a nation offer a platform for a new culture.

Page 101

Farouk Aregbe is the founder of One Million Strong for Barack, an online group that generated national attention for garnering over 300,000 young people in a matter of weeks.

Page 102 & 103

And pay little attention to the real problems at hand.

He is the one who has the audacity to put aside his pride and get answers from anyone who might have them in order to find meaningful solutions to the problems that we face as a country.

Students for Barack Obama.

Page 105

He was an impressive and convincing speaker. He was very knowledgeable, but very humble.

He seemed like he was ambitious, but comfortable. He was someone who really believed that politics could do good.

Page 106 & 107

MoveOn.org

It was Barack Obama himself that made me feel that a single person could make a difference and that I had a responsibility to participate in the political process.

Page 110 & 111

Has allowed me to again believe, in the possibility that “there are better days ahead.

People will work hard,…the entire economy will grow, everyone will benefit and more resources will be available for all, not just select groups.

We have a stake in one another, and…what binds us together is greater than what drives us apart.

He challenges the government and the American people to invest in public education, make college affordable, modernize out health care system, use energy resources responsibly, and devise new strategies to protect our nation from terror. Because our collective Americans, we need a president that is devoted to the realization of these goals.

Page 113

www.atthatdrop.com

Page 117

The possibility that we have found a man willing to think about solutions from the citizen’s perspective.

Page 118 & 119

I figured none of those Washington big shots cared about a poor kid in Van Wert, Ohio.

He is the voice of hope, the voice of reason, and the voice of the future.

The voice of hope.

Page 121

I knew something horrible had happened to our country…….(Ref. 26/11)

Page 125

I found a somebody who is not offering a handout that would only serve to demoralize me more but a hand up to realize my full potential as a somebody.

Page 127

The kind of change that comes along once in a generation.

Morality?

Rhetoric

Experience

Don’t have to imagine in vain

Obama reminds us that “values are faithfully applied to the facts before us, while ideology overrides whatever facts call theory into question.

Page 128

Americans want action. Americans wants subsutance.

Remind us that we are all interconnected.

Page 132

For many of us, the only president we have known as adults is George W Bush.

Page 210

It was here we learned to disagree without being disagreeable – that its possible to compromise so long as you know those principles that can never be compromised; and that so long as we’re willing to listen to each other, we can assume the best in people instead of the worst.

We feel most productive when we complete a to-do list rather than make a material impact on long-term creative pursuits.

asks himself, “If I didn’t have this, how much effort would I put in to obtain it?”

Detaching your self-worth from what you create is complicated,

Unplug Challenge.” It was an open dare for participants to go one day without technology.

Stress-test your opinions with radical truthfulness.

Ambiguous intrigue has a way of garnering interest better than any product description or list of features ever will. I call this force the “magic” of engagement.

All too often, our time is spent on tasks with quicker rewards. The decisions we make on how to spend our time are normally more heavily influenced by our desire to feel productive rather than to adhere to our values.

A maximizer is the type of person who will spend an entire day schlepping around from shop to shop, searching for the best option for the best price, whereas satisficers “settle for something that is good enough and do not worry about the possibility that there might be something better,”

Don’t start to question your gut solely because it is different.

American psychologist Barry Schwartz. In his revered 2004 book The Paradox of Choice: Why More Is Less,

The benefits of soliciting wisdom from others is indisputable, but the real value of advice comes from reconciling its contradictions.

The danger of getting attention is that you stop paying attention.

The first round of doubts boil down to, “I don’t get it,” “I wouldn’t buy it,” and the general belief that “most start-ups fail.” Then people will doubt your product decisions and marketing as “strange.”

You are not your work. One common struggle among successful entrepreneurs and artists is that their identity is wrapped up in their work.

the fear of decoupling self and work (which is an essential step in developing generativity). How do you build something that is a creative expression of yourself but not fail if it fails?

the problem with this relentless drive for productivity is surrendering your flexibility. Without a certain amount of capacity left idle, you are less able to accommodate circumstantial opportunities as they arise.

Don’t feel loyal to routines—question their continued relevance and effectiveness. Some routines become outdated, and nearly all routines can be optimized if you take a moment to question them. Every now and then, break a routine and decide whether doing so was in any way liberating.

To complicate matters, sometimes the doubt you receive from others—early customers, investors, and family included—is actually a positive sign. One of my favorite examples is the early reviews for the iPod when it was first released in 2001. One letter to the editor of Macworld deemed it “another one of Apple’s failures just like the Newton … Apple could have done more-innovative things with an MP3 player than just make it look cool and give it some fast features.” More succinctly, one Slashdot iPod review read: “No wireless. Less space than a Nomad. Lame.” People love taking down something that is new and unfamiliar.

When you don’t feel ready for an outcome or wonder whether or not you deserve it, you may unknowingly fight it. Our subconscious mind acts upon the insecurities and doubts that we are not willing to admit to our more conscious and rational selves. And if we subconsciously don’t believe we deserve it, we are liable to act accordingly.

What if every opinion you and your team had was openly scrutinized and had its biases identified? We would reach a point where great ideas and insights transcended politics and prejudices. What if arguments motivated by insecurity or fear were called out as such? What if the best idea had the best chance of happening?

Their best clients ask for different services, and new clients come in seeking services that differ from their core offering.

Keep reminding yourself that success doesn’t mean you know what you’re doing. Success means that many forces aligned in your favor, that your team outperformed itself, and that you kept yourself from screwing it up. When you feel yourself becoming headstrong and invincible, shift your focus away from yourself and onto your team.

Most best practices are, in fact, just potential practices to consider employing. The more potential paths you have to consider, the better you can triangulate your own approach.

Data is only as good as its source, and doesn’t replace intuition.

But even if the data quality is high, some problems require having a bias toward your own intuition. If there are numbers backing up your direction, it can be easier to feel justified in moving forward. But I have also seen and heard too many stories of product decisions, made from instincts, that initially defied logic but led to success.

The truly differentiating factors of your project are the ones most likely to be different, misunderstood, or underestimated by everyone else.

Don’t underestimate the value of adding a brick.

Bridgewater has developed impressive and astonishing in-house tools for fostering such truth and self-awareness. Employees undergo psychological tests, snap polls after meetings to comment on their peers’ contributions, daily quizzes related to management challenges they face, and routinely rate one another’s performance in areas such as “listening.”

“I am not my Twitter bio.”

Whenever there’s a curtain in front of you, you want to know what’s behind it, simply because of the fact that there is a curtain. When you launch a new product or service, presenting unanswered questions may be a more effective means of engaging prospective customers than explicitly explaining your product, which leaves customers with no questions at all.

great advice in one context is horrible advice in another. Not only must you discern criticism from cynicism, you must also determine when “best practices” become antiquated.

When the odds are against you, without revenue or margin to protect you, teams and relationships are different. It’s not work; it’s survival and self-discovery.

When you fail to disconnect, your imagination pays the price.

You may be measuring foot traffic to your store, visitors to your website, or clicks on your ads, but perhaps your real goal this year is to make a sales number or establish your brand?

many new ideas are distinctly unpopular before they become popular. So when you’re bearing the brunt of naysayers, it’s normally a good sign. When everyone thinks you’re crazy, you’re either crazy … or really onto something.

When it comes to values, so much of what we tell ourselves is different from what we actually do. For example, if you believe that “nothing is more important than people” in your business but spend most of your day looking at spreadsheets,

Apple product designer Dave Morin once told me, “Mystery makes history.” When you leave something behind the curtain, people are more desperate to see the full picture.

Even if all you add is a brick to the foundation of such an institution, your contribution will stand the course of time.”

In almost all cases, best to ignore sunk costs.

Resist the urge to play to the middle.

Mine contradictory advice and doubt in order to develop your own intuition.

exploring contradictions and realizing how every insight is situation dependent.

The idea of squeezing in a few more meetings and getting through a few more emails evokes a sense of pride.

“I am not my work.”

Avoid too many measures, because the more numbers you’re tracking, the less attention you pay to any of them. Some teams I’ve worked with, especially in large companies, have built large digital dashboards of dozens of metrics that become the focus of every executive meeting. The problem with reviewing so many measures at once is that the conversation and suggestions are split across all of them rather than focused on the few that matter most.

Schwartz divides people into the two groups of decision makers we learned about earlier: maximizers and satisficers

Maximizers need to be assured that every purchase or decision was the best that could be made,”

A great founder isn’t necessarily a great finisher. The final mile is a different sport, which means you need to bring on new kinds of coaches and employ different training tactics.

“I am not my company.”

The only constant throughout the journey is doubt. If you’re governed by it, you’ll be paralyzed and your industry will stop progressing.

We love data. It answers questions. But the definitive nature of data means you must use it with caution. When presented with a statistic that has broad implications, your first question should be about its integrity. Where did it come from? What was the sample size, time range, and breakdown of people from whom the stat was captured? What is the context around the collection of the data? Only when you have interrogated your data sufficiently should you consider how to use it.

When a start-up or product team realizes they’re headed nowhere and decides to change everything, the loss of years of work combined with the feeling of starting all over again is soul crushing. And yet, some of the greatest modern companies we know and love today were second incarnations of completely different ideas.

How do you keep changing (and often killing) parts of your business without destroying morale?

The thought of friction may make us bristle, but it’s not synonymous with difficulty.

When you’re putting everything on the line, your business and art becomes intertwined with your identity and self-esteem. Nothing is more humbling than everyone passing by your three-foot cube that represents your future without even taking a second look.

Without any customers or evidence of progress, the continuous validation and encouragement that motivates teams will be absent. Without a steady stream of rewards, you will feel empty. You must supplement this void with manufactured optimism. You will have to endure anonymity and a persistent state of frustration.

Once the honeymoon period of starting a new journey dissipates, reality hits you. Hard. You feel lost and then you find a new direction; you make progress and then you stumble.

But after the excitement of a new idea dissipates, reality sets in. You’ll become mired in logistics and daunted by the unknown. You’ll frantically attempt to level out your overworked synapses. You’ll be in a freefall without knowing how far away the bottom is—and that’s when the headwinds kick in. Everyone will doubt you. You will struggle to see your own progress. You’ll realize that your industry, your team, and your competitors don’t like change—and society doesn’t, either. Not even your customers. And then finally: The bottom arrives, and you hit hard.

In Zen, the Buddha says you cannot travel the path until you have become the path yourself. Only by embracing the middle will you find your way through.

You’ll have to generate a unique and intrinsic sense of belief in yourself as you manage the blows to your plan and ego. Sure, your passion for the problem you’re solving will help. But running a marathon while hungry requires supernatural sustenance in the form of some key insights and convictions

Did more people sign up today than yesterday? Did engagement go up this week versus last week? How many more followers did we gain on Twitter? These are important metrics to track, but I was looking only for the positive trends rather than objectively reviewing all the trends.

This is where the journey truly begins.

starting a company is a roller coaster of suffering. You need to be comfortable with hearing ‘no’ over and over and not let that destroy your will. You need to be able to withstand low periods that are inevitable—unexpected customer or employee losses, investor rejections, tax bills, fights with cofounders.

Would people think I got fired from my real job? If I told people my vision, would I lose respect if I failed? My family and friends always offered to help me, but there was nothing they could do. I felt the weight of every decision, and the careers of those who quit their jobs to join me, on my shoulders. My shoulders alone.

Breaking through anonymity is a game of endurance, so you have to hack your reward system so that the absent short-term rewards you typically rely on, like revenue or new customer goals, are replaced by something else.

Instagram as we know it today was an attempt to salvage the situation, designed with such extreme simplicity as a reaction to what they had learned the hard way with Burbn.

these years felt lost because we ran in circles. We had to rebuild the Behance Network’s core technology three times. We switched vendors, hired some of the wrong people, and made countless bad decisions. Keeping our product functional was a game of Whac-A-Mole: Every fix seemed to break something else.

in such periods of struggle, our preoccupations and emotions take up so much mind share that the events themselves become a blur?

We act as magicians, helping our coworkers feel incremental progress when there is none. The dirty little secret that entrepreneurs hate to admit is just how fine the line is between their success and failure.

Our aversion to obstacles, setbacks, disagreements, and other forms of resistance is a bit ironic, because this friction is what builds our tolerance for future friction.

YouTube was originally a dating site that never took off, despite relentless efforts to get people to sign up. Twitter started as a podcasting network called “Odeo” that was going nowhere, and Instagram’s team started with a hard-to-use check-in game called “Burbn.”

Society has a grand immune system designed to suppress new ideas. To keep the water running and sustain life’s other necessities, society’s natural resistance to ingenuity surfaces in the form of doubt, cynicism, and pressure to conform.

What’s in the middle? Nothing headline-worthy yet everything important. Your war with self-doubt, a roller coaster of incremental successes and failures, bouts of the mundane, and sheer anonymity.

In order to fight against the resistance, you’ll need more than passion and empathy. You’ll need to commit to suffering for the years required to push your idea to fruition. Not just a willingness to suffer, but a commitment.

Without a fight against fate (aka the status quo), you’ll never venture beyond the expected. You can stretch your potential only by enduring the volatility of the journey, by getting curious about the bumps, and by optimizing every aspect of your product, team, and self.

You tell everyone about it like an excited parent and every single person congratulates you for the news and tells you it’s flawless. In hindsight, seeking positive feedback was toxic, because it was giving us the impression we were on the right track.

How do you stomach years of anonymity and blank stares when you tell others what you’re doing?

You can piece together something resembling the truth only from many different perspectives. How would a skeptical investor look at your numbers? How would an impatient new customer attempt to navigate your product? What are competitors saying about your product? Actively seek out the negative trends as well as the positive, as your longevity over time will be determined by your awareness of weaknesses as much as your strengths.

Volatility is good for velocity. The faster you move and the more mistakes you make, the better your chances of learning and gaining the momentum you need to soar above competitors. Moving fast means conducting lots of experiments—many of which will fail—and making quick turns that are liable to leave you and your team dizzy. This volatility can hurt morale and cause anxiety, but you have a better chance of extraordinary results.

cringed when the “what do you do?” conversation came up. I knew my answer—building a company to help organize the creative world—would get a blank stare.

The necessary but difficult task of embracing the gray area means willingly wrestling with uncertainty on a daily basis. I struggled with this in my early years spent bootstrapping Behance, with no end in sight and no sure sense of traction. I remember many occasions when I valiantly fought to disconnect: Christmas, the week of my wedding, and even the birth of my daughter. And while I was “there” for all of these moments, 20 percent of my mind’s processing power was preoccupied. It wasn’t any specific deal or issue that stuck with me. On the contrary, it was the stuff I didn’t know that ate away at me—the “unknown unknowns.” The lack of a map for the voyage ahead caused an existential angst that meant I felt the need to live and sleep with one eye on the compass.

Success is misattributed to the moments we wish to remember rather than those we choose to forget.

It usually takes at least two years before you have any reasonable traction to show that your business might be working, then another few years of driving growth to create something that looks like a moat.

the myth of a successful journey is that it starts with the excitement of an idea, followed by a ton of hardship, and then a gradual and linear rise to the finish line.

Rubbing in opposition to something instinctively sounds like an undesirable experience—a disagreement, a struggle, a fight—and so over time, we’ve come to connote friction with negativity. But on the whole, rubbing things together creates, not destroys. Friction gives us heat and fire. It quite literally moves mountains.

When I think back to those lost years, I recall a constant somber loneliness, a suffering from the feeling that nobody else could relate. The struggle was further compounded by the optimism I had to exude to my team and potential customers and partners.

Your progress will feel rewarding, but only relative to your most recent struggle. The best you can do is harvest and integrate the insights you need to keep moving in the right direction up the slope.

Persevering long enough to transform vision into reality was harder than I ever thought it would be; anything that challenged the status quo was an uphill battle, and the natural forces of rejection that kill new ideas didn’t discriminate between the good and the bad. Innovation has a nasty headwind, rarely a tailwind.

After scrambling to get your bearings and not lose too much time, money, or face, you’ll look back up to see a monstrous peak in front of you.

Despite whatever hacks and strategies you employ, you will get burned repeatedly. Society’s immune system is powerful and indiscriminate. Suffering is inevitable, but by expecting it, you can manage your expectations and those of your team.

The more neurally complex the animal, the more social groups are used to enhance survival. Humans band together for physical and psychological protection. “In ancient history and prehistory, tribes gave visceral comfort and pride from familiar fellowship, and a way to defend the group enthusiastically against rival groups,” E. O. Wilson, a biologist, writes in Newsweek. “Modern groups are psychologically equivalent to the tribes of ancient history. As such, these groups are directly descended from the bands of primitive humans and pre-humans.”

the early Roman emperor Marcus Aurelius once quipped, “The impediment to action advances action. What stands in the way becomes the way.” Indeed, the frictions we encounter help us find a better way so long as we face them.

I had taken some design classes in college, but I was not an engineer, and I had never led a company.

Inconsequential changes will prove to be profoundly important while thoroughly deliberated decisions will prove insignificant. You need to be open to surprises, insanely curious about why things happen, and optimize the hell out of everything that gets traction.

Duckworth explains that what determines whether you succeed or fail is grit, a special blend of passion and perseverance directed at accomplishing long-term goals.

“I think there are two kinds of resets, one which is product spec based, not meeting the customer needs, and the other which is engineering based, not having a way to implement the plan with the current team or current technology inside or outside the company. We did a lot of resets along the path from iPod to iPhone, like going from iPod to an iPod Phone, to an iPod with a big screen, to a touch screen Mac, and then putting it all together to make iPhone—always searching for the right mix of technology and user experience.” It sounds like a normal process in retrospect, but spending months if not years pursuing one path and then hitting the reset button can exhaust and demoralize a team.

In fact, in the early days, antinausea medication was my only way to keep an appetite. Everyone doubted us—if they ever cared—and I endured bouts of self-doubt as well.

Industry incumbents lose their position because their success limits their efforts to optimize. Big companies typically spend their time solving problems and sustaining—rather than improving—whatever it is that made them big.

Imagine, for a moment, that all your self-doubts are simply a function of society’s immune system, designed to extinguish nonconforming actions. You’re questioning yourself because you’re doing something different and society is trying to stop you—your body is trying to reject the thing that is taking it out of its comfy homeostasis. There can be only so much innovation and change in a world that runs on consistency and people falling in line. Remind yourself that progress is vision paired with initiative. The hopelessness you’re feeling is a common phase that precedes progress; we often feel the weakest just before our immune response kicks in. Sometimes you need to make yourself swallow a big OBECALP to get through that time. A big part of overcoming doubt is suspending your disbelief. You want to stay grounded as you make decisions, but sometimes you need to escape the gravity of reality to imagine the possibilities.

While a great strategy can be conceived quite quickly in a vacuum void of time and reality, it can be executed only over a long period of iteration, agony, and harsh reality (the messy middle!).

The notion of having a bold idea and making consistent incremental progress is impossible.

Friction is a positive force in all walks of life precisely because it’s only when we’re in opposition to something that we learn how to move forward. In order to advance both individually and societally, we need more friction in our lives, not less.

so long as you’re gaining confidence in the opportunity and absorbing the lessons learned, you have a renewable energy source.

When you pursue something on the fringe that uniquely fascinates you, you’ll repel those who just don’t relate. You may be shunned. And most people won’t understand. But the future always starts as fringe. When front-running the future, the trick is to aspire for a small audience that loves your product rather than aim to please the masses.

The purpose of reducing the hours you spend on insecurity work is to free up your mind, energy, and time for generating and taking action on new ideas instead of checking in on old ones.

Don’t succumb to society’s gravitational force toward what is common and familiar. One of the worst tendencies of the messy middle is pulling wildly fresh insights back toward the mean of normalcy. Don’t let this happen to you. While society wants you to conform, it needs you to break the mold to help us see differently and make life better for the rest of

Whenever I meet with a team that lacks clarity or feels stuck, their breakthrough often comes from a new question or problem to solve rather than a better answer to the original question. When making a decision with limited time and resources (and stress), we’re liable to accept the original premise and charge ahead to create new products or features without even asking questions—or questioning the problem we’re trying to solve in the first place.

Creating something from nothing is a contact sport. The endless debates you endure iron out your team’s preconceived notions, and your vehement disagreements force you to explore unpopular options.

“Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years, and working really hard to make that future a reality. Grit is living life like it’s a marathon, not a sprint,”

KEEP YOUR STARE AHEAD Whether managing one of the most difficult periods of your life or just the everyday ups and downs, you can make progress only by focusing forward and removing yourself from the constant concern for what has already happened.

In tough moments when your prospects feel grim and hope is fading, your mind will only make it worse. You’ll begin to question your ideas and tell yourself that you’re not qualified and that your team isn’t good enough. You’ll become your own worst enemy and you’ll stop believing in your own plan and abilities. When this happens, what you need is 20 milligrams of OBECALP. Stat.

Strong teams tend to be effective recruiters of new talent. But the stronger the team, the more challenging it is to integrate new talent—especially great talent. Leaders spend too much time recruiting and so little time grafting.

When you’re anxious about your business, there is no easier quick-relief antidote than checking things. The problem is that you could spend all day checking things and fail to do anything to change things. I call it insecurity work—stuff that you do that has no intended outcome, does not move the ball forward in any way, and is quick enough that you can do it unconsciously multiple times a day.

It’s extremely difficult to halt all progress and start all over again, but the boldest projects have multiple such “resets.” Perhaps one of the most challenging and important consumer product creations of our lifetime was the iPod, and subsequently the iPhone.

Whether you are sharing an idea with colleagues or pitching an idea to investors, be less polished and more real. A little texture in the form of uncertainty and admission of challenge is helpful for everyone. The right partners will see your challenges as potential rather than weakness, and your honesty will set the right tone for future collaboration and navigating the ups and downs of the journey together.

As you contemplate new approaches to a problem rather than quitting altogether, it’s important to let go of past conclusions proven wrong.

The juxtaposition of the intensity of a start-up and feeling invisible and despondent was soul crushing. Staying positive was exhausting, and there were times when I felt depressed.

While many people paint an incredible long-term vision for their teams, the prospect of long-term rewards is insufficient for long-term motivation.

Leading a reset happens in six phases: feeling anger, removing yourself, dissecting the situation, acknowledging your role, drafting your narrative, and then getting back in the game.

Rather than expending almost all energy on problems and putting out fires, you can increase your velocity by optimizing what is already propelling

In nonhierarchical teams or in big matrixed projects that include leaders from different parts of a company, another problem emerges: Employees struggle because they don’t have control over what they are ultimately responsible for. Perhaps your project is dependent on work done by people in other departments, and you have no idea who is responsible for what. Without knowing who is responsible for every dependency, your team will not feel in control of their own responsibilities. Your job is to find and identify a single person to be responsible for every kind of task being completed.

Momentum is an especially effective distractor, as are press accolades. But finding a positive metric or getting glowing press coverage does not make a hard truth go away. Our thirst for good news means we focus on it, or worse, manufacture it. Sometimes when leaders are trying to rally confidence and support, they are actually blunting a blow that must be felt in order to feel the reality and make difficult decisions.

Don’t just recruit great members; graft them, too. This is about a lot more than onboarding new employees: It’s about identifying with their experience, shining the spotlight on their strengths, and becoming a thought partner, coach, and advocate for them.

“I am not my résumé.”

This is the same reason I dislike angel groups, which are groups of people who come together to hear start-up pitches, discuss, and invest as a group. What a horrible model. Groups make us too rational, especially when the constituents are too similar. Groups are even more destructive to innovation—and investing in innovation—when they require consensus to proceed.

When something actually works—a new work habit improves your productivity, a key decision improves your team, or a tweak to your product delights your customers—you need to tenaciously evaluate it. Why did that work? How do you do it again? How do you spread it to your team?

The best optimizers are always trying to figure out why something works. Pinterest’s Ben Silberman describes this process as “always reflecting backward and incorporating forward.”

Amazon founder Jeff Bezos, legendary for his long-term vision, reiterated this point. “Invention requires a long-term willingness to be misunderstood,”

“When you do something that you genuinely believe in, that you have conviction about, for a long period of time, well-meaning people may criticize that effort.”

There are a million reasons why something can fail, but usually very few reasons why something can work. When you want to learn to be a great runner—do you study slow people or fast people? I think taking time to understand why things succeed—whether they are your successes or others—is time well spent … you learn the most from things that go really well by asking why.

Charles Duhigg describes productivity in his book Smarter Faster Better

I’ve always ascribed to the philosophy, often attributed to Carl Jung, that “everything that irritates us about others can lead us to an understanding of ourselves.” Chances are your reaction to others is as much about you as it is about them.

At Benchmark we called these CEOs “promoters.” They would come in with a seemingly perfect story, broad generalizations about their industry, and would presumptuously disqualify competitors. It was hard to engage with their pitch emotionally, as we couldn’t see room for ourselves within it, so we spent our time trying to poke holes in it. We couldn’t grasp how they would react during the inevitable tough times that were to come. Would they be able to face reality when it hit? Would they gloss over conflicts and ignore concerning data in favor of sustaining the perfect story?

So long as they share your mission, these instigators are your greatest protection from groupthink and harmful compromise.

Who are the free radicals? We do work that is, first and foremost, intrinsically rewarding. But when we make an impact, we expect extrinsic validation. We don’t create solely for ourselves—we want to make a real and lasting impact in the world around us. Whether we work within companies or on our own, we demand the freedom to run experiments, participate in multiple projects at once, and move our ideas forward. We thrive on flexibility and are most productive when we feel fully engaged. We make stuff often, and we therefore fail often. Ultimately, we strive for little failures that help us course-correct along the way, and we view every failure as a learning opportunity that’s simply part of our experiential education. We have little tolerance for the friction of bureaucracy, old-boy networks, and antiquated business practices. We question standard operating procedures and assert ourselves. And when we can’t, we don’t surrender to the friction of the status quo: Instead, we find clever ways (and hacks) around it. We expect to be fully utilized and constantly optimized, regardless of whether we’re working in a start-up or a large organization. When our contributions and learning plateau, we leave. But when we’re leveraging a large company’s resources to make an impact in something we care about, we are thrilled! We want to always be doing our best work and making the greatest impact we can. We consider open-source technology, APIs, and the vast collective knowledge of the internet to be our personal arsenal. Wikipedia, Quora, and open communities for designers, developers, and thinkers were built by us and for us. Whenever possible, we leverage collective knowledge to help us make better decisions for ourselves and our clients. We also contribute to these open resources with a pay-it-forward mentality. We believe that networking is sharing. People listen to (and follow) us because of our discernment and curatorial instinct. As we share our creations as well as what fascinates us, we authentically build a community of supporters that gives us feedback, encouragement, and lead us to new opportunities. For this reason and more, we often (though, not always) opt for transparency over privacy. We believe in meritocracy and the power of communities to advance our ability to do what we love, and do well by doing it. We view competition as a positive motivator rather than a threat, because we want the best idea—and the best execution—to triumph. We make a great living doing what we love. We consider ourselves both artisans and businesspeople. In many cases, we are our own accounting department, Madison Avenue marketing agency, business development manager, negotiator, and salesperson. We expend the necessary energy to invest in ourselves as businesses, leveraging the best tools and knowledge to run ourselves as a modern-day enterprise.

Every advance reveals a new shortcoming. Major upsets give rise to new realizations that lead to breakthroughs in progress. At best, you move two steps forward, one step back—at worst, you realize you’ve been walking the wrong path entirely for months. This is what that journey actually looks like.

Take driving, for instance: Even when you think you’ve worked out the fastest route from A to B, a local cabdriver will always know a way to get you there faster. When you think you already have the answer, you don’t experiment with other options—if only for the sake of efficiency. The problem with large, well-resourced businesses is that they have a well-defined path for everything—and tons of people employed to keep it clear and wide. The probability of discovering a new detour therefore disintegrates with time, as the known path becomes more established.

To sustain yourself over this time, you can’t look for accolades, and you can’t rely on being understood. Playing the long game is a test of your fortitude, your ability to persevere, and just how genuine your interests are.

Grafting talent is about empathy, integration, psychological safety, and real-time communication.

Whether you’re an author suffering from writer’s block or a start-up team struggling to satisfy its customers, the solution is to change the question you’re asking. If the original question plaguing you is “Why aren’t people signing up for our product?” maybe the better question is “What kinds of people would benefit most from our product?”

Not only does a strong culture tolerate some necessary ruckus, it gains its edge from it. People disagree and fight for their beliefs only when they are engaged enough to care. Those who are especially argumentative, opinionated, and polarizing therefore play an important role in your company, as they prevent you from settling for the familiar or easy solution and keep you questioning your norms.

Culture is created through the stories your team tells.

“If we have a good quarter, it is because of the work we did three, four, five years ago, not the work we did this quarter.” There is a huge lag between great innovations and results.

Great creative minds have their demons. After all, if creativity is born from struggle, you must be willing to tolerate the residue. In my experience, some degree of stubbornness and frustration are common attributes of technical geniuses; people who are ahead of their time are intolerant of business practices behind the times.

When you spend 30 minutes going down a rabbit hole to answer a particular question, be sure to ask yourself, “Why is this question important and how is the answer actionable?” If the answer is just self-assuring but not actionable, it is likely insecurity work.

“In most cases, if the fundamental reasons for why the product or service should exist are still valid, then the team will always take on the challenge, assuming you didn’t burn way too much time or cash and it was an intelligent—albeit sometimes crazy and unexpected—way to get to the learnings.

Companies like Airbnb, Uber, and others have done just this. Their founders were outsiders but had a strong opinion or vision about what should change. They then stayed alive long enough to become experts and compete with better technology, a superior path to market, and a lower cost structure.

The trick is to separate the hardship from what you’re learning. If you’re learning that your assumptions were wrong—that customers don’t want your product or that you’re building the wrong thing—then you should ask yourself: Knowing all that I know now, would I pursue the project all over again? Would I invest the money and energy all over again to get as far as I’ve come in solving this problem? If the answer is yes, don’t quit. Keep at it. Feeling impatient with progress and deflated by process is fine, so long as you still have conviction.

But comfort also breeds complacency. As learning curves plateau, we lose interest in learning for the sake of learning, and our curiosity wanes. We stay engaged as we attempt to master something that interests us, but we start to disengage as soon as we gain control over tasks and our interest dissipates. Periodic disruptions of various kinds provide perspective and make people stay fresh and alert. The only way to stay strong is therefore to keep shaking things up. As a young manager, I viewed my job as keeping people engaged with their respective responsibilities. But I eventually realized that careers cannot sit stagnant—people want to see opportunity ahead of them, even if they’re comfortable with where they’re currently standing. If you don’t give them that opportunity—or occasionally challenge them to step up to it—you lose the upward mobility of junior people who are waiting for promotions and new opportunities, and your senior staff can tend to get bored and start looking for new jobs.

Present your ideas, don’t promote them.

There is a point in every project, especially among highly collaborative and passionate teams, when everyone’s desire to discuss and influence every decision backfires. Decisions stop getting made out of fear of excluding someone. The quick solution is to assign a DRI to everything—answering emails from customers, handling press, recruiting functions, every major part of the product. While titles are all-encompassing and matter very little in early-stage teams, let alone large companies, DRIs are assigned at the task level. The more collaborative your team, the more important it is to know who is responsible for what.

If we take the easy option, how quickly will our competitors be able to catch up? Is this an opportunity for us to make an investment that others cannot make to truly separate ourselves from the rest?

A lot of big problems don’t get solved because we can solve small problems faster.

General Electric is known for their rotational programs, where leaders in the turbine business will be moved to the lighting business. The programs are designed to not only spread best practices across business units and develop leadership capability but also to retain key talent. Other companies assign “stretch assignments,” which are special projects that take people out of their expertise and comfort zones, like exploring new business opportunities or regions. These assignments expose team members to other parts of the company or industry and help retain them by presenting new challenges and steepening the learning curve.

Remember that customers don’t engage with functionality. They engage with experiences. They are moved not by features but rather by their experience of using your product. Moving a mile a minute is great, so long as you slow down when you’re crafting something that will ultimately become your competitive advantage.

Teams benefit from changes to their environment and processes. As you observe your coworkers and glance around your office, look for the things that were once exciting but have now become commonplace. Are there outdated charts on the wall that once monitored progress? Take them down and redo them. Are certain regular meetings or rituals now taken for granted? Switch up the format. Have little cliques formed based on where people sit? Move desks around. Though having a sense of community is important in the workplace, if your staff become too comfortable socializing only in small groups, you lose the opportunity for cross-collaboration and overall team building that comes from chance meetings. In order to promote this, consider redoing seating assignments every nine to twelve months (or, in a larger company, every few years). Sitting next to new people in a different part of the office is an easy way to prompt new relationships and perspectives and keep things fresh.

Similarly, when your team makes meaningful progress, you should merchandise their achievements back to them. Give your team the gratification of seeing their progress rather than just moving on. At Behance, we had “Done Walls” that were decorated with a collage of completed project plans, checklists, and sketches that literally surrounded us with the sensation of progress. And whenever I’m presenting a forward vision presentation to my team, I try to start with a few slides recapping what the team has already accomplished. Progress is the best motivator of future progress, but it must be merchandised sufficiently so that people feel it.

Every team has a few “culture carriers” that are especially good at capturing great stories and retelling them. Culture carriers embody the themes that these stories represent, and their unique abilities to reinforce team culture need to be encouraged and celebrated. As the founder of a project or team, take stories seriously and inject yourself into them—even if it means breaking a twenty-year streak as a vegetarian. Stories are what you make of them, so take some poetic justice and mine every experience for the little gems characteristic of your team, the moments that made an impact. Culture is a naturally occurring phenomenon and simply needs to be nourished, inclusive, and celebrated.

leaders in various marketing and product teams gravitated toward the smaller problems they could solve more quickly.

Code for America, which taps the country’s design and engineering talent for the public good.

Most people’s natural tendency is to please and accommodate others. In the process of creating a product, this tendency often manifests itself as a generalized product vision that accommodates too many kinds of customers a little rather than one particular kind of customer a lot. The more wide open a product vision, the less likely it is to revolutionize one particular use case.

When you’re proposing a solution to a problem and meet resistance, take a step back to make sure everyone understands the problem first. People tend to dislike solutions until they feel like they understand the problem itself. Proposals must come after personally postulating the problem and the consequences of not solving it.

I decided to develop our business plan as a tabloid-size, single-page graphic document rather than the usual document in Microsoft Word: I wanted something visual and alluring, even if it was “internal only.”

as a team grows, misalignment happens. People’s engagement slips to varying degrees. Objectives are clear to some and less to others—and can change regularly. Deadlines need to be mandated rather than suggested. Communication is inconsistent by the sheer fact that everyone isn’t sitting together. As goals and priorities become crooked, performance suffers. What’s the solution to the misalignment that comes with growth? Process—the very thing you didn’t need in the early days. Training programs, daily staff meetings, organizational structure diagrams, approval processes: These are the mechanisms we throw at misalignment to ensure that a group of people think and act in tandem.

in advocating for design principles that would keep our products simple yet powerful, we would repeat the phrase “Powerful enough for professionals, accessible enough for everyone”

Here are some principles that drive effective attribution in a team: Rather than just publicly acknowledging the leader of every project, you should list the broader leadership teams of every project. By explicitly calling out the leader responsible for each function area—whether it be design, engineering, or legal—you can provide a sense of satisfaction for all levels involved and help the group track the output in each area to the person responsible for it. The people who deserve the credit then get it. The person who did the work should present the work. For example, if a product manager is presenting his or her team a series of mock-ups and wireframes that were designed by a designer on the team, the designer should present that portion of the deck. This gives your staff ownership over their work and also allows the most knowledgeable person to lead the discussion. False attribution can wreak havoc in a team. This applies just as much to congratulating the wrong person as it does putting a success down to circumstance instead of skill. In our effort to optimize whatever seems to work, we’re liable to conflate correlation with causation. If things go well, it doesn’t necessarily mean someone’s tactics worked. Go a level deeper to understand whether a success resulted from good timing, external market forces, great skills and execution, or some combination of the above. Attribute success at the element level: the skills, decisions, tactics, relationships, and hard work that contributed to the outcome. Don’t make the mistake of abstracting away the forces driving the success.

The feeling of being “done!” is seductive. Extinguishing a small brush fire will make you feel accomplished more quickly than making a small dent tackling a forest fire. But one causes much more damage when left unchecked than the other.

Despite Pinterest’s success, Ben’s interest is still in studying what works and in fixing what’s broken. He wants to engage people, not impress them.

Over the years, whenever I hastily constructed a deck for a team meeting, Matias would insist on redesigning it despite the rush and small internal audience. Every internal cue to our team, he felt, mattered. We had no budget but took great care of what we liked to call “the Behance experience.” We knew that the environment we worked in would influence the products we created and the type of people we hired.

When you must implement a new process, give it some beauty. Loyalty to a new system comes from believing in it and being attracted to it. The design, nomenclature, virtual confetti that explodes from a completed task—these little touches can go a long way in spurring utilization.

Someone could be making bolts and you could say, ‘Why do you do it? What’s your job?’ And they’ll say, ‘Oh, I’m making these bolts so that we can have a landable vehicle, because if we do a landable vehicle, then we can get to Mars. And if we can get to Mars, then humanity will da-da-da-da …’ ” When people know where their small part fits in the whole, they recognize how indispensable their work is. They feel more accountable.

the role of progress begetting future progress. “Of all the things that can boost emotions, motivation, and perceptions during a workday,” she concluded, “the single most important is making progress in meaningful work.” She went on to explain, “The more frequently people experience that sense of progress, the more likely they are to be creatively productive in the long run. Whether they are trying to solve a major scientific mystery or simply produce a high-quality product or service, everyday progress—even a small win—can make all the difference in how they feel and perform.”

accountability is about understanding why something didn’t work and what needs to happen to make sure it doesn’t happen again.

get a sign someday for my office that simply states NO ELEPHANTS.

Their thesis was that if you’re too organized with your administrative tasks, you’re liable to not be as present and focused with your patients.

“the principle is ‘what needs to happen to make sure this doesn’t happen again and maintain the expectation that people will meet their responsibilities?’

The fact of the matter is that we are constantly battling time, whether to save or spend it. We’re fiercely aware and protective of our time. The only time we’re not focused on time is when our natural human tendencies—like wanting to look good, satisfy curiosity, or be recognized by others—make us lose track of it. Natural human tendencies are the twilight zone for time. When you account for these tendencies when developing your product, you win your customer’s time.

For all the emphasis around obsessing over your customers and your public brand and message, there is surprisingly little focus on the internal brand and message. What do your employees think of their work, the team’s productivity, and their mission? Do they even know the mission?

I’m wary of adding processes as the perpetual solution for internal challenges. However, I have also learned over the years—often the hard way—how important it is to let people have their own process.

The stories a team recalls and shares about itself serve as a continual reminder for everyone of why they’re there and what makes the team special; they reinforce the foundations of a business and the aspirational elements that tie people together. Stories also teach lessons and create texture in time. Without stories, the past is just a blur, never revisited and refined. But with stories, the past becomes something tangible you can stand on. They orient new employees and provide institutional knowledge. Even amid long periods of ambiguity and uncertainty, a healthy culture built on stories provides the context and comfort everyone needs to stick together and keep moving forward. As a company grows, culture becomes less impacted by everyday stories and is floated on the remnants of the stories that happened early on. Tales from “in the beginning” tend to have an outsized impact on culture as they reflect the core, founding values of why and how this whole thing got started in the first place.

The conundrum of process is we all need some, but too much is lethal. The more aligned your team is, the less process you need. Here are some principles to consider as you thoughtfully apply process: Install process for your team, not for you. A lot of wasteful and painful processes are born from anxiety. When leaders feel insecure about losing touch with parts of their business, they’re liable to create more bottlenecks. I’ve seen some leaders schedule redundant “sign-off” meetings, run daily check-ins, and implement other mechanisms just to achieve peace of mind—for themselves, not for the team. But process tolls imagination and agility and should be applied only to prevent problems. If deadlines are being missed, goals are variable, or legal and financial functions are being sidestepped, installing a process will help. But when you introduce process to your team, do it to solve their problems rather than quell your own anxiety. Spend more time on achieving alignment than imposing process. Doing more work to help everyone understand the goals and plan will foster a natural alignment among the team. How often are you merchandising your mission and road map to your team? Likely not enough. Are you ensuring that every new member of your team is adequately caught up? Are you proactively identifying people who seem misaligned and taking the time to get them up to speed? Such alignment will expedite progress and boost quality better than any formal process could. Audit your processes frequently and always try to cut them down. Just because a process was necessary at one point in time doesn’t mean it always will be. Constantly question the necessity of the policies and procedures you impose on your team. Do you still need to have that morning scrum meeting? Do people still need your sign-off on certain actions? Periodically audit the processes around you and look for ways to either kill or improve them to free up your employees’ time where you can.

It is healthy to have some degree of process intolerance—an innate disdain for undue procedures and waiting; after all, waiting for a green light never gets you there first (though red lights certainly prevent accidents). But interfering with the order of operations of those around you has negative consequences, even if you think your initiative will save time and effort in the long run. People incorporate process into their work as a patch for their own misalignments, and to override such mechanisms without considering why they are there is problematic.

Creative writing is a war between simplicity and possibility. An effective plot and engaging characters who drive it must be simple enough for readers to follow, but the creative process of developing a fascinating story line is all about following the whims of imagination. As a result, writers find themselves having to cut beautiful passages and extraordinary characters that fail to support the central plot. Junior writers try to weave them in or justify their existence because they love them so much, but the best writers summon the courage and discipline to kill these “darlings.”

Process can and should be augmented over time, but it shouldn’t be aggressively ripped away.

The founders I get most excited about are the ones who are grounded in reality and equally focused on both problems and solutions.

for every function and project in his company having a “DRI”—a Directly Responsible Individual—whom the entire team knows to go to and rely on for that particular area.

Ease of engagement and quick return to one’s ego are two tried-and-true tenets of any successful social product, regardless of its purpose.

Challenge yourself to move on when you sense yourself obsessing out of passion rather than reason. Engage emotionally as you create, but detach from your creations when evaluating them.

Shorter emails get faster response times. Fewer words go further (and are listened to more intently). Standing meetings (where your knees get weak) prioritize the point. The less preamble, the more focused your team will be on your message. Most attention spans don’t even make it to the end. Start with your point; don’t end with it.

It is easy to kill things that straight up don’t work, but it’s disheartening to nip a blooming bud—something that is showing early promise but isn’t good enough to merit your singular focus. Most teams keep nurturing any features or projects that show any capacity for potential, if only to keep their options open.

If only to feel like you’re doing your job, you’ll explore solutions to the problems they voice instead of focusing on the opportunities to engage the customers you have yet to reach. In the process, your prioritization and judgment is liable to be taken hostage by the vocal minority, whose desires stem from a deep relationship with your product, and you fail to take your newest customers into consideration.

Customers are more forgiving than you might think when you share your thought process with them.

Your competitive advantage is a conscious admission and acceptance of your weaknesses as well as a recognition of your strengths; it’s as much about what you focus on as it is about what you choose to let go.

Ironically, when something goes wrong or a member of your team was careless, sometimes they need more authority, not less. By giving them more autonomy and control, they’ll either seize it and work hard to keep it, or they will fail faster, which is a good thing for weeding out who is on your team for the right and wrong reasons.

“A good team does a lot of friendly front stabbing instead of backstabbing. Issues are resolved by knowing what they are.” Straightforward conflict happens when people care enough about their work and bring tensions, ambiguities, and tough realities to the surface. Confrontation tends to be most needed when it is most uncomfortable.

This local maxima trap plagues individuals and teams both large and small. Consider Twitter, an extraordinary social product that has toppled regimes and has given both global glory and strife by connecting the world to information in real time. What was once a rapidly growing viable competitor to Facebook has stalled in recent years, as growth in monthly active users has topped out. I believe this is because the company attempted incremental improvements, like optimizing profitability, monthly engagement, and spam controls over bolder moves, such as exploring new markets and redefining the product. Rather than becoming the future of media, reinventing television, or becoming the ultimate source of real-time information on any given topic, the product looks much like it did ten years ago.

It’s understandable to seek validation, but actively searching for positive feedback provides false positives. If you keep searching for something positive, you’ll find it—but often at the expense of more important truths.

The first mile of your customer’s experience using your product cannot be the last mile of your experience building the product.

While you want to avoid layering on too many processes, you must respect the work styles that people adopt to keep themselves aligned and engaged. “Give your staff the context they need for why you’re asking them to do what you’re asking them to do, and then get out of their way and make sure other distractions are removed from their plate so they can focus on what matters most,”

Delegation and job titles aren’t enough—employees must feel empowered.

This could come in the form of a graphic representation of milestones and deadlines hung on walls, a communications campaign that repeats goals and the progress to date, or in the form of pithy time-bound declarations, like Pinterest’s “Year of Going Global,” which pushed every team across the company to reprioritize efforts to internationalize the business, or Uber’s “Year of the Driver,” which they rolled out when they realized they had fallen behind on developing tools and better policies for drivers on their platform.

Break incrementalism by questioning core assumptions.

Pursuing a few paths in parallel keeps your options open, and it feels safe. But it’s not. The flaw with pursuing and preserving many options is that doing so stunts your progress in any particular direction. When your energy is split, so is your speed and focus, and the resources around you are harder to tap when your narrative is too broad.

sustained, organic “viralness” happens only when a product is polished enough to elicit trust and love from customers who are busy. I encourage teams to engage viral customers only when they feel that their product is ready for it, as these customers may not give you a second chance.

Jocelyn Glei explains in her book Unsubscribe,

Conviction > Consensus Optimization requires decisiveness. As you improve your product, you will be torn between appeasing your customers and sticking to your own beliefs. You will look to groups for decisions when you should be looking to them only for guidance. The best decisions tend to be the hardest and least popular. When you feel like you’re on your own, you’ll question yourself. As humans, we find comfort in groups. And while no great achievement is possible without a group working together, very few critical and difficult decisions can be made by a group. As comedian Milton Berle once quipped, “A committee is a group that keeps minutes and loses hours.”

Culture is not something that begets success, rather, it is a product of it. All companies start with the espoused beliefs and values of their founder(s), but until those beliefs and values are proven correct and successful they are open to debate and change. If, though, they lead to real sustained success, then those values and beliefs slip from the conscious to the unconscious, and it is this transformation that allows companies to maintain the “secret sauce” that drove their initial success even as they scale. The founder no longer needs to espouse his or her beliefs and values to the ten thousandth employee; every single person already in the company will do just that, in every decision they make, big or small.

Too much scrutiny creates flaws.

Why is it so hard to keep a product simple? A big part of the problem is that you become intimately familiar with your “power users,” the small number of customers who use your product the most. This group of customers is also often referred to as the “vocal minority.” Power users have so much to say about the product you’re responsible for, and as a result, you will start to consider their complaints and requests.

It’s also why we are such fools for instant gratification, but struggle to manage slow-burning success.

the evolution of our brains accounts for our tendency to intensely respond to immediate threats, while struggling to focus on long-term dangers or goals. This is why we take such alarm to terrorism but much less to global warming, even though the chances of a plane bomber, Dan Gilbert claims, are far less than the chances of the ocean consuming parts of Florida or Manhattan.

While some concerns are reasonable, most are excuses to delay the inevitable. Killing a product by ignoring it only prolongs its death. Customers will always be upset. As Aaron Levie, founder and CEO of cloud-storage company Box once noted, “To make everyone happy with the decision, you’ll make no one happy with the outcome.” When the stakes are high, your natural inclination is to wait as long as necessary to be sure of the choice you’re making. You trade decisiveness for certainty, even if it means compromising productivity and your team’s engagement in the process. Ripping off the Band-Aid quickly compartmentalizes your pain and gives you more energy to focus on creating what’s next.

Depending on the severity, accountability could be poking fun at someone, a postmortem, or a serious conversation, or an apology to the whole company, or a change in role, or a termination.”

Beware of creativity that compromises familiarity.

for mature businesses, the drive is increasing profitability. You will prefer customers who require the least resources to attract and maintain over time. Customers who pay the most and demand the least will drive your profit margin, while earlier customers who may have required more costly hand-holding become less attractive. At this later stage, companies focus on driving value from existing customers more than engaging new customers, which opens up the door for new start-ups to compete and win over the “less profitable” customers whom large companies may ignore. It is wise in the short term, but it can backfire in the long term as new and less profitable customers may flock to a new and shiny competitor.

Your challenge is to create product experiences for two different mind-sets, one for your potential customers and one for your engaged customers. Initially, if you want your prospective customers to engage, think of them as lazy, vain, and selfish. Then for the customers who survive the first 30 seconds and actually come through the door, build a meaningful experience and relationship that lasts a lifetime.

The millions of portfolios hosted on Behance didn’t belong to us. Our job was to protect and enrich the network, but we didn’t own it.

Once new users know these three things, they have reached a place in your product experience where they are willing to invest time and energy to build a relationship with your product. They don’t need to actually know how to use your entire product at the beginning—they just need to trust you and know what their immediate next step is.

Don’t be creative for the sake of it, despite the urge to do so. Popular terms and actions are popular for a reason. Adopt simple patterns, proven to be successful, whenever possible, and train your customers only when it’s a new behavior that is absolutely core to what differentiates your product. Familiarity drives utilization.

The paradox of product success is that when you focus on pleasing your most engaged users, you stop engaging new ones. The sad reality—and the opportunity for start-ups—is that most established products take their large user bases for granted and fail to maintain simplicity over time.

You need to prime your audience to the point where they know three things: Why they’re there What they can accomplish What to do next

We feel most productive when we complete a to-do list rather than make a material impact on long-term creative pursuits.

asks himself, “If I didn’t have this, how much effort would I put in to obtain it?”

Detaching your self-worth from what you create is complicated,

Unplug Challenge.” It was an open dare for participants to go one day without technology.

Stress-test your opinions with radical truthfulness.

Ambiguous intrigue has a way of garnering interest better than any product description or list of features ever will. I call this force the “magic” of engagement.

All too often, our time is spent on tasks with quicker rewards. The decisions we make on how to spend our time are normally more heavily influenced by our desire to feel productive rather than to adhere to our values.

A maximizer is the type of person who will spend an entire day schlepping around from shop to shop, searching for the best option for the best price, whereas satisficers “settle for something that is good enough and do not worry about the possibility that there might be something better,”

Don’t start to question your gut solely because it is different.

American psychologist Barry Schwartz. In his revered 2004 book The Paradox of Choice: Why More Is Less,

The benefits of soliciting wisdom from others is indisputable, but the real value of advice comes from reconciling its contradictions.

The danger of getting attention is that you stop paying attention.

The first round of doubts boil down to, “I don’t get it,” “I wouldn’t buy it,” and the general belief that “most start-ups fail.” Then people will doubt your product decisions and marketing as “strange.”

You are not your work. One common struggle among successful entrepreneurs and artists is that their identity is wrapped up in their work.

the fear of decoupling self and work (which is an essential step in developing generativity). How do you build something that is a creative expression of yourself but not fail if it fails?

the problem with this relentless drive for productivity is surrendering your flexibility. Without a certain amount of capacity left idle, you are less able to accommodate circumstantial opportunities as they arise.

Don’t feel loyal to routines—question their continued relevance and effectiveness. Some routines become outdated, and nearly all routines can be optimized if you take a moment to question them. Every now and then, break a routine and decide whether doing so was in any way liberating.

To complicate matters, sometimes the doubt you receive from others—early customers, investors, and family included—is actually a positive sign. One of my favorite examples is the early reviews for the iPod when it was first released in 2001. One letter to the editor of Macworld deemed it “another one of Apple’s failures just like the Newton … Apple could have done more-innovative things with an MP3 player than just make it look cool and give it some fast features.” More succinctly, one Slashdot iPod review read: “No wireless. Less space than a Nomad. Lame.” People love taking down something that is new and unfamiliar.

When you don’t feel ready for an outcome or wonder whether or not you deserve it, you may unknowingly fight it. Our subconscious mind acts upon the insecurities and doubts that we are not willing to admit to our more conscious and rational selves. And if we subconsciously don’t believe we deserve it, we are liable to act accordingly.

What if every opinion you and your team had was openly scrutinized and had its biases identified? We would reach a point where great ideas and insights transcended politics and prejudices. What if arguments motivated by insecurity or fear were called out as such? What if the best idea had the best chance of happening?

Their best clients ask for different services, and new clients come in seeking services that differ from their core offering.

Keep reminding yourself that success doesn’t mean you know what you’re doing. Success means that many forces aligned in your favor, that your team outperformed itself, and that you kept yourself from screwing it up. When you feel yourself becoming headstrong and invincible, shift your focus away from yourself and onto your team.

Most best practices are, in fact, just potential practices to consider employing. The more potential paths you have to consider, the better you can triangulate your own approach.

Data is only as good as its source, and doesn’t replace intuition.

But even if the data quality is high, some problems require having a bias toward your own intuition. If there are numbers backing up your direction, it can be easier to feel justified in moving forward. But I have also seen and heard too many stories of product decisions, made from instincts, that initially defied logic but led to success.

The truly differentiating factors of your project are the ones most likely to be different, misunderstood, or underestimated by everyone else.

Don’t underestimate the value of adding a brick.

Bridgewater has developed impressive and astonishing in-house tools for fostering such truth and self-awareness. Employees undergo psychological tests, snap polls after meetings to comment on their peers’ contributions, daily quizzes related to management challenges they face, and routinely rate one another’s performance in areas such as “listening.”

“I am not my Twitter bio.”

Whenever there’s a curtain in front of you, you want to know what’s behind it, simply because of the fact that there is a curtain. When you launch a new product or service, presenting unanswered questions may be a more effective means of engaging prospective customers than explicitly explaining your product, which leaves customers with no questions at all.

great advice in one context is horrible advice in another. Not only must you discern criticism from cynicism, you must also determine when “best practices” become antiquated.

When the odds are against you, without revenue or margin to protect you, teams and relationships are different. It’s not work; it’s survival and self-discovery.

When you fail to disconnect, your imagination pays the price.

You may be measuring foot traffic to your store, visitors to your website, or clicks on your ads, but perhaps your real goal this year is to make a sales number or establish your brand?

many new ideas are distinctly unpopular before they become popular. So when you’re bearing the brunt of naysayers, it’s normally a good sign. When everyone thinks you’re crazy, you’re either crazy … or really onto something.

When it comes to values, so much of what we tell ourselves is different from what we actually do. For example, if you believe that “nothing is more important than people” in your business but spend most of your day looking at spreadsheets,

Apple product designer Dave Morin once told me, “Mystery makes history.” When you leave something behind the curtain, people are more desperate to see the full picture.

Even if all you add is a brick to the foundation of such an institution, your contribution will stand the course of time.”

In almost all cases, best to ignore sunk costs.

Resist the urge to play to the middle.

Mine contradictory advice and doubt in order to develop your own intuition.

exploring contradictions and realizing how every insight is situation dependent.

The idea of squeezing in a few more meetings and getting through a few more emails evokes a sense of pride.

“I am not my work.”

Avoid too many measures, because the more numbers you’re tracking, the less attention you pay to any of them. Some teams I’ve worked with, especially in large companies, have built large digital dashboards of dozens of metrics that become the focus of every executive meeting. The problem with reviewing so many measures at once is that the conversation and suggestions are split across all of them rather than focused on the few that matter most.

Schwartz divides people into the two groups of decision makers we learned about earlier: maximizers and satisficers

Maximizers need to be assured that every purchase or decision was the best that could be made,”

A great founder isn’t necessarily a great finisher. The final mile is a different sport, which means you need to bring on new kinds of coaches and employ different training tactics.

“I am not my company.”

The only constant throughout the journey is doubt. If you’re governed by it, you’ll be paralyzed and your industry will stop progressing.

We love data. It answers questions. But the definitive nature of data means you must use it with caution. When presented with a statistic that has broad implications, your first question should be about its integrity. Where did it come from? What was the sample size, time range, and breakdown of people from whom the stat was captured? What is the context around the collection of the data? Only when you have interrogated your data sufficiently should you consider how to use it.

When a start-up or product team realizes they’re headed nowhere and decides to change everything, the loss of years of work combined with the feeling of starting all over again is soul crushing. And yet, some of the greatest modern companies we know and love today were second incarnations of completely different ideas.

How do you keep changing (and often killing) parts of your business without destroying morale?

The thought of friction may make us bristle, but it’s not synonymous with difficulty.

When you’re putting everything on the line, your business and art becomes intertwined with your identity and self-esteem. Nothing is more humbling than everyone passing by your three-foot cube that represents your future without even taking a second look.

Without any customers or evidence of progress, the continuous validation and encouragement that motivates teams will be absent. Without a steady stream of rewards, you will feel empty. You must supplement this void with manufactured optimism. You will have to endure anonymity and a persistent state of frustration.

Once the honeymoon period of starting a new journey dissipates, reality hits you. Hard. You feel lost and then you find a new direction; you make progress and then you stumble.

But after the excitement of a new idea dissipates, reality sets in. You’ll become mired in logistics and daunted by the unknown. You’ll frantically attempt to level out your overworked synapses. You’ll be in a freefall without knowing how far away the bottom is—and that’s when the headwinds kick in. Everyone will doubt you. You will struggle to see your own progress. You’ll realize that your industry, your team, and your competitors don’t like change—and society doesn’t, either. Not even your customers. And then finally: The bottom arrives, and you hit hard.

In Zen, the Buddha says you cannot travel the path until you have become the path yourself. Only by embracing the middle will you find your way through.

You’ll have to generate a unique and intrinsic sense of belief in yourself as you manage the blows to your plan and ego. Sure, your passion for the problem you’re solving will help. But running a marathon while hungry requires supernatural sustenance in the form of some key insights and convictions

Did more people sign up today than yesterday? Did engagement go up this week versus last week? How many more followers did we gain on Twitter? These are important metrics to track, but I was looking only for the positive trends rather than objectively reviewing all the trends.

This is where the journey truly begins.

starting a company is a roller coaster of suffering. You need to be comfortable with hearing ‘no’ over and over and not let that destroy your will. You need to be able to withstand low periods that are inevitable—unexpected customer or employee losses, investor rejections, tax bills, fights with cofounders.

Would people think I got fired from my real job? If I told people my vision, would I lose respect if I failed? My family and friends always offered to help me, but there was nothing they could do. I felt the weight of every decision, and the careers of those who quit their jobs to join me, on my shoulders. My shoulders alone.

Breaking through anonymity is a game of endurance, so you have to hack your reward system so that the absent short-term rewards you typically rely on, like revenue or new customer goals, are replaced by something else.

Instagram as we know it today was an attempt to salvage the situation, designed with such extreme simplicity as a reaction to what they had learned the hard way with Burbn.

these years felt lost because we ran in circles. We had to rebuild the Behance Network’s core technology three times. We switched vendors, hired some of the wrong people, and made countless bad decisions. Keeping our product functional was a game of Whac-A-Mole: Every fix seemed to break something else.

in such periods of struggle, our preoccupations and emotions take up so much mind share that the events themselves become a blur?

We act as magicians, helping our coworkers feel incremental progress when there is none. The dirty little secret that entrepreneurs hate to admit is just how fine the line is between their success and failure.

Our aversion to obstacles, setbacks, disagreements, and other forms of resistance is a bit ironic, because this friction is what builds our tolerance for future friction.

YouTube was originally a dating site that never took off, despite relentless efforts to get people to sign up. Twitter started as a podcasting network called “Odeo” that was going nowhere, and Instagram’s team started with a hard-to-use check-in game called “Burbn.”

Society has a grand immune system designed to suppress new ideas. To keep the water running and sustain life’s other necessities, society’s natural resistance to ingenuity surfaces in the form of doubt, cynicism, and pressure to conform.

What’s in the middle? Nothing headline-worthy yet everything important. Your war with self-doubt, a roller coaster of incremental successes and failures, bouts of the mundane, and sheer anonymity.

In order to fight against the resistance, you’ll need more than passion and empathy. You’ll need to commit to suffering for the years required to push your idea to fruition. Not just a willingness to suffer, but a commitment.

Without a fight against fate (aka the status quo), you’ll never venture beyond the expected. You can stretch your potential only by enduring the volatility of the journey, by getting curious about the bumps, and by optimizing every aspect of your product, team, and self.

You tell everyone about it like an excited parent and every single person congratulates you for the news and tells you it’s flawless. In hindsight, seeking positive feedback was toxic, because it was giving us the impression we were on the right track.

How do you stomach years of anonymity and blank stares when you tell others what you’re doing?

You can piece together something resembling the truth only from many different perspectives. How would a skeptical investor look at your numbers? How would an impatient new customer attempt to navigate your product? What are competitors saying about your product? Actively seek out the negative trends as well as the positive, as your longevity over time will be determined by your awareness of weaknesses as much as your strengths.

Volatility is good for velocity. The faster you move and the more mistakes you make, the better your chances of learning and gaining the momentum you need to soar above competitors. Moving fast means conducting lots of experiments—many of which will fail—and making quick turns that are liable to leave you and your team dizzy. This volatility can hurt morale and cause anxiety, but you have a better chance of extraordinary results.

cringed when the “what do you do?” conversation came up. I knew my answer—building a company to help organize the creative world—would get a blank stare.

The necessary but difficult task of embracing the gray area means willingly wrestling with uncertainty on a daily basis. I struggled with this in my early years spent bootstrapping Behance, with no end in sight and no sure sense of traction. I remember many occasions when I valiantly fought to disconnect: Christmas, the week of my wedding, and even the birth of my daughter. And while I was “there” for all of these moments, 20 percent of my mind’s processing power was preoccupied. It wasn’t any specific deal or issue that stuck with me. On the contrary, it was the stuff I didn’t know that ate away at me—the “unknown unknowns.” The lack of a map for the voyage ahead caused an existential angst that meant I felt the need to live and sleep with one eye on the compass.

Success is misattributed to the moments we wish to remember rather than those we choose to forget.

It usually takes at least two years before you have any reasonable traction to show that your business might be working, then another few years of driving growth to create something that looks like a moat.

the myth of a successful journey is that it starts with the excitement of an idea, followed by a ton of hardship, and then a gradual and linear rise to the finish line.

Rubbing in opposition to something instinctively sounds like an undesirable experience—a disagreement, a struggle, a fight—and so over time, we’ve come to connote friction with negativity. But on the whole, rubbing things together creates, not destroys. Friction gives us heat and fire. It quite literally moves mountains.

When I think back to those lost years, I recall a constant somber loneliness, a suffering from the feeling that nobody else could relate. The struggle was further compounded by the optimism I had to exude to my team and potential customers and partners.

Your progress will feel rewarding, but only relative to your most recent struggle. The best you can do is harvest and integrate the insights you need to keep moving in the right direction up the slope.

Persevering long enough to transform vision into reality was harder than I ever thought it would be; anything that challenged the status quo was an uphill battle, and the natural forces of rejection that kill new ideas didn’t discriminate between the good and the bad. Innovation has a nasty headwind, rarely a tailwind.

After scrambling to get your bearings and not lose too much time, money, or face, you’ll look back up to see a monstrous peak in front of you.

Despite whatever hacks and strategies you employ, you will get burned repeatedly. Society’s immune system is powerful and indiscriminate. Suffering is inevitable, but by expecting it, you can manage your expectations and those of your team.

The more neurally complex the animal, the more social groups are used to enhance survival. Humans band together for physical and psychological protection. “In ancient history and prehistory, tribes gave visceral comfort and pride from familiar fellowship, and a way to defend the group enthusiastically against rival groups,” E. O. Wilson, a biologist, writes in Newsweek. “Modern groups are psychologically equivalent to the tribes of ancient history. As such, these groups are directly descended from the bands of primitive humans and pre-humans.”

the early Roman emperor Marcus Aurelius once quipped, “The impediment to action advances action. What stands in the way becomes the way.” Indeed, the frictions we encounter help us find a better way so long as we face them.

I had taken some design classes in college, but I was not an engineer, and I had never led a company.

Inconsequential changes will prove to be profoundly important while thoroughly deliberated decisions will prove insignificant. You need to be open to surprises, insanely curious about why things happen, and optimize the hell out of everything that gets traction.

Duckworth explains that what determines whether you succeed or fail is grit, a special blend of passion and perseverance directed at accomplishing long-term goals.

“I think there are two kinds of resets, one which is product spec based, not meeting the customer needs, and the other which is engineering based, not having a way to implement the plan with the current team or current technology inside or outside the company. We did a lot of resets along the path from iPod to iPhone, like going from iPod to an iPod Phone, to an iPod with a big screen, to a touch screen Mac, and then putting it all together to make iPhone—always searching for the right mix of technology and user experience.” It sounds like a normal process in retrospect, but spending months if not years pursuing one path and then hitting the reset button can exhaust and demoralize a team.

In fact, in the early days, antinausea medication was my only way to keep an appetite. Everyone doubted us—if they ever cared—and I endured bouts of self-doubt as well.

Industry incumbents lose their position because their success limits their efforts to optimize. Big companies typically spend their time solving problems and sustaining—rather than improving—whatever it is that made them big.

Imagine, for a moment, that all your self-doubts are simply a function of society’s immune system, designed to extinguish nonconforming actions. You’re questioning yourself because you’re doing something different and society is trying to stop you—your body is trying to reject the thing that is taking it out of its comfy homeostasis. There can be only so much innovation and change in a world that runs on consistency and people falling in line. Remind yourself that progress is vision paired with initiative. The hopelessness you’re feeling is a common phase that precedes progress; we often feel the weakest just before our immune response kicks in. Sometimes you need to make yourself swallow a big OBECALP to get through that time. A big part of overcoming doubt is suspending your disbelief. You want to stay grounded as you make decisions, but sometimes you need to escape the gravity of reality to imagine the possibilities.

While a great strategy can be conceived quite quickly in a vacuum void of time and reality, it can be executed only over a long period of iteration, agony, and harsh reality (the messy middle!).

The notion of having a bold idea and making consistent incremental progress is impossible.

Friction is a positive force in all walks of life precisely because it’s only when we’re in opposition to something that we learn how to move forward. In order to advance both individually and societally, we need more friction in our lives, not less.

so long as you’re gaining confidence in the opportunity and absorbing the lessons learned, you have a renewable energy source.

When you pursue something on the fringe that uniquely fascinates you, you’ll repel those who just don’t relate. You may be shunned. And most people won’t understand. But the future always starts as fringe. When front-running the future, the trick is to aspire for a small audience that loves your product rather than aim to please the masses.

The purpose of reducing the hours you spend on insecurity work is to free up your mind, energy, and time for generating and taking action on new ideas instead of checking in on old ones.

Don’t succumb to society’s gravitational force toward what is common and familiar. One of the worst tendencies of the messy middle is pulling wildly fresh insights back toward the mean of normalcy. Don’t let this happen to you. While society wants you to conform, it needs you to break the mold to help us see differently and make life better for the rest of

Whenever I meet with a team that lacks clarity or feels stuck, their breakthrough often comes from a new question or problem to solve rather than a better answer to the original question. When making a decision with limited time and resources (and stress), we’re liable to accept the original premise and charge ahead to create new products or features without even asking questions—or questioning the problem we’re trying to solve in the first place.

Creating something from nothing is a contact sport. The endless debates you endure iron out your team’s preconceived notions, and your vehement disagreements force you to explore unpopular options.

“Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years, and working really hard to make that future a reality. Grit is living life like it’s a marathon, not a sprint,”

KEEP YOUR STARE AHEAD Whether managing one of the most difficult periods of your life or just the everyday ups and downs, you can make progress only by focusing forward and removing yourself from the constant concern for what has already happened.

In tough moments when your prospects feel grim and hope is fading, your mind will only make it worse. You’ll begin to question your ideas and tell yourself that you’re not qualified and that your team isn’t good enough. You’ll become your own worst enemy and you’ll stop believing in your own plan and abilities. When this happens, what you need is 20 milligrams of OBECALP. Stat.

Strong teams tend to be effective recruiters of new talent. But the stronger the team, the more challenging it is to integrate new talent—especially great talent. Leaders spend too much time recruiting and so little time grafting.

When you’re anxious about your business, there is no easier quick-relief antidote than checking things. The problem is that you could spend all day checking things and fail to do anything to change things. I call it insecurity work—stuff that you do that has no intended outcome, does not move the ball forward in any way, and is quick enough that you can do it unconsciously multiple times a day.

It’s extremely difficult to halt all progress and start all over again, but the boldest projects have multiple such “resets.” Perhaps one of the most challenging and important consumer product creations of our lifetime was the iPod, and subsequently the iPhone.

Whether you are sharing an idea with colleagues or pitching an idea to investors, be less polished and more real. A little texture in the form of uncertainty and admission of challenge is helpful for everyone. The right partners will see your challenges as potential rather than weakness, and your honesty will set the right tone for future collaboration and navigating the ups and downs of the journey together.

As you contemplate new approaches to a problem rather than quitting altogether, it’s important to let go of past conclusions proven wrong.

The juxtaposition of the intensity of a start-up and feeling invisible and despondent was soul crushing. Staying positive was exhausting, and there were times when I felt depressed.

While many people paint an incredible long-term vision for their teams, the prospect of long-term rewards is insufficient for long-term motivation.

Leading a reset happens in six phases: feeling anger, removing yourself, dissecting the situation, acknowledging your role, drafting your narrative, and then getting back in the game.

Rather than expending almost all energy on problems and putting out fires, you can increase your velocity by optimizing what is already propelling

In nonhierarchical teams or in big matrixed projects that include leaders from different parts of a company, another problem emerges: Employees struggle because they don’t have control over what they are ultimately responsible for. Perhaps your project is dependent on work done by people in other departments, and you have no idea who is responsible for what. Without knowing who is responsible for every dependency, your team will not feel in control of their own responsibilities. Your job is to find and identify a single person to be responsible for every kind of task being completed.

Momentum is an especially effective distractor, as are press accolades. But finding a positive metric or getting glowing press coverage does not make a hard truth go away. Our thirst for good news means we focus on it, or worse, manufacture it. Sometimes when leaders are trying to rally confidence and support, they are actually blunting a blow that must be felt in order to feel the reality and make difficult decisions.

Don’t just recruit great members; graft them, too. This is about a lot more than onboarding new employees: It’s about identifying with their experience, shining the spotlight on their strengths, and becoming a thought partner, coach, and advocate for them.

“I am not my résumé.”

This is the same reason I dislike angel groups, which are groups of people who come together to hear start-up pitches, discuss, and invest as a group. What a horrible model. Groups make us too rational, especially when the constituents are too similar. Groups are even more destructive to innovation—and investing in innovation—when they require consensus to proceed.

When something actually works—a new work habit improves your productivity, a key decision improves your team, or a tweak to your product delights your customers—you need to tenaciously evaluate it. Why did that work? How do you do it again? How do you spread it to your team?

The best optimizers are always trying to figure out why something works. Pinterest’s Ben Silberman describes this process as “always reflecting backward and incorporating forward.”

Amazon founder Jeff Bezos, legendary for his long-term vision, reiterated this point. “Invention requires a long-term willingness to be misunderstood,”

“When you do something that you genuinely believe in, that you have conviction about, for a long period of time, well-meaning people may criticize that effort.”

There are a million reasons why something can fail, but usually very few reasons why something can work. When you want to learn to be a great runner—do you study slow people or fast people? I think taking time to understand why things succeed—whether they are your successes or others—is time well spent … you learn the most from things that go really well by asking why.

Charles Duhigg describes productivity in his book Smarter Faster Better

I’ve always ascribed to the philosophy, often attributed to Carl Jung, that “everything that irritates us about others can lead us to an understanding of ourselves.” Chances are your reaction to others is as much about you as it is about them.

At Benchmark we called these CEOs “promoters.” They would come in with a seemingly perfect story, broad generalizations about their industry, and would presumptuously disqualify competitors. It was hard to engage with their pitch emotionally, as we couldn’t see room for ourselves within it, so we spent our time trying to poke holes in it. We couldn’t grasp how they would react during the inevitable tough times that were to come. Would they be able to face reality when it hit? Would they gloss over conflicts and ignore concerning data in favor of sustaining the perfect story?

So long as they share your mission, these instigators are your greatest protection from groupthink and harmful compromise.

Who are the free radicals? We do work that is, first and foremost, intrinsically rewarding. But when we make an impact, we expect extrinsic validation. We don’t create solely for ourselves—we want to make a real and lasting impact in the world around us. Whether we work within companies or on our own, we demand the freedom to run experiments, participate in multiple projects at once, and move our ideas forward. We thrive on flexibility and are most productive when we feel fully engaged. We make stuff often, and we therefore fail often. Ultimately, we strive for little failures that help us course-correct along the way, and we view every failure as a learning opportunity that’s simply part of our experiential education. We have little tolerance for the friction of bureaucracy, old-boy networks, and antiquated business practices. We question standard operating procedures and assert ourselves. And when we can’t, we don’t surrender to the friction of the status quo: Instead, we find clever ways (and hacks) around it. We expect to be fully utilized and constantly optimized, regardless of whether we’re working in a start-up or a large organization. When our contributions and learning plateau, we leave. But when we’re leveraging a large company’s resources to make an impact in something we care about, we are thrilled! We want to always be doing our best work and making the greatest impact we can. We consider open-source technology, APIs, and the vast collective knowledge of the internet to be our personal arsenal. Wikipedia, Quora, and open communities for designers, developers, and thinkers were built by us and for us. Whenever possible, we leverage collective knowledge to help us make better decisions for ourselves and our clients. We also contribute to these open resources with a pay-it-forward mentality. We believe that networking is sharing. People listen to (and follow) us because of our discernment and curatorial instinct. As we share our creations as well as what fascinates us, we authentically build a community of supporters that gives us feedback, encouragement, and lead us to new opportunities. For this reason and more, we often (though, not always) opt for transparency over privacy. We believe in meritocracy and the power of communities to advance our ability to do what we love, and do well by doing it. We view competition as a positive motivator rather than a threat, because we want the best idea—and the best execution—to triumph. We make a great living doing what we love. We consider ourselves both artisans and businesspeople. In many cases, we are our own accounting department, Madison Avenue marketing agency, business development manager, negotiator, and salesperson. We expend the necessary energy to invest in ourselves as businesses, leveraging the best tools and knowledge to run ourselves as a modern-day enterprise.

Every advance reveals a new shortcoming. Major upsets give rise to new realizations that lead to breakthroughs in progress. At best, you move two steps forward, one step back—at worst, you realize you’ve been walking the wrong path entirely for months. This is what that journey actually looks like.

Take driving, for instance: Even when you think you’ve worked out the fastest route from A to B, a local cabdriver will always know a way to get you there faster. When you think you already have the answer, you don’t experiment with other options—if only for the sake of efficiency. The problem with large, well-resourced businesses is that they have a well-defined path for everything—and tons of people employed to keep it clear and wide. The probability of discovering a new detour therefore disintegrates with time, as the known path becomes more established.

To sustain yourself over this time, you can’t look for accolades, and you can’t rely on being understood. Playing the long game is a test of your fortitude, your ability to persevere, and just how genuine your interests are.

Grafting talent is about empathy, integration, psychological safety, and real-time communication.

Whether you’re an author suffering from writer’s block or a start-up team struggling to satisfy its customers, the solution is to change the question you’re asking. If the original question plaguing you is “Why aren’t people signing up for our product?” maybe the better question is “What kinds of people would benefit most from our product?”

Not only does a strong culture tolerate some necessary ruckus, it gains its edge from it. People disagree and fight for their beliefs only when they are engaged enough to care. Those who are especially argumentative, opinionated, and polarizing therefore play an important role in your company, as they prevent you from settling for the familiar or easy solution and keep you questioning your norms.

Culture is created through the stories your team tells.

“If we have a good quarter, it is because of the work we did three, four, five years ago, not the work we did this quarter.” There is a huge lag between great innovations and results.

Great creative minds have their demons. After all, if creativity is born from struggle, you must be willing to tolerate the residue. In my experience, some degree of stubbornness and frustration are common attributes of technical geniuses; people who are ahead of their time are intolerant of business practices behind the times.

When you spend 30 minutes going down a rabbit hole to answer a particular question, be sure to ask yourself, “Why is this question important and how is the answer actionable?” If the answer is just self-assuring but not actionable, it is likely insecurity work.

“In most cases, if the fundamental reasons for why the product or service should exist are still valid, then the team will always take on the challenge, assuming you didn’t burn way too much time or cash and it was an intelligent—albeit sometimes crazy and unexpected—way to get to the learnings.

Companies like Airbnb, Uber, and others have done just this. Their founders were outsiders but had a strong opinion or vision about what should change. They then stayed alive long enough to become experts and compete with better technology, a superior path to market, and a lower cost structure.

The trick is to separate the hardship from what you’re learning. If you’re learning that your assumptions were wrong—that customers don’t want your product or that you’re building the wrong thing—then you should ask yourself: Knowing all that I know now, would I pursue the project all over again? Would I invest the money and energy all over again to get as far as I’ve come in solving this problem? If the answer is yes, don’t quit. Keep at it. Feeling impatient with progress and deflated by process is fine, so long as you still have conviction.

But comfort also breeds complacency. As learning curves plateau, we lose interest in learning for the sake of learning, and our curiosity wanes. We stay engaged as we attempt to master something that interests us, but we start to disengage as soon as we gain control over tasks and our interest dissipates. Periodic disruptions of various kinds provide perspective and make people stay fresh and alert. The only way to stay strong is therefore to keep shaking things up. As a young manager, I viewed my job as keeping people engaged with their respective responsibilities. But I eventually realized that careers cannot sit stagnant—people want to see opportunity ahead of them, even if they’re comfortable with where they’re currently standing. If you don’t give them that opportunity—or occasionally challenge them to step up to it—you lose the upward mobility of junior people who are waiting for promotions and new opportunities, and your senior staff can tend to get bored and start looking for new jobs.

Present your ideas, don’t promote them.

There is a point in every project, especially among highly collaborative and passionate teams, when everyone’s desire to discuss and influence every decision backfires. Decisions stop getting made out of fear of excluding someone. The quick solution is to assign a DRI to everything—answering emails from customers, handling press, recruiting functions, every major part of the product. While titles are all-encompassing and matter very little in early-stage teams, let alone large companies, DRIs are assigned at the task level. The more collaborative your team, the more important it is to know who is responsible for what.

If we take the easy option, how quickly will our competitors be able to catch up? Is this an opportunity for us to make an investment that others cannot make to truly separate ourselves from the rest?

A lot of big problems don’t get solved because we can solve small problems faster.

General Electric is known for their rotational programs, where leaders in the turbine business will be moved to the lighting business. The programs are designed to not only spread best practices across business units and develop leadership capability but also to retain key talent. Other companies assign “stretch assignments,” which are special projects that take people out of their expertise and comfort zones, like exploring new business opportunities or regions. These assignments expose team members to other parts of the company or industry and help retain them by presenting new challenges and steepening the learning curve.

Remember that customers don’t engage with functionality. They engage with experiences. They are moved not by features but rather by their experience of using your product. Moving a mile a minute is great, so long as you slow down when you’re crafting something that will ultimately become your competitive advantage.

Teams benefit from changes to their environment and processes. As you observe your coworkers and glance around your office, look for the things that were once exciting but have now become commonplace. Are there outdated charts on the wall that once monitored progress? Take them down and redo them. Are certain regular meetings or rituals now taken for granted? Switch up the format. Have little cliques formed based on where people sit? Move desks around. Though having a sense of community is important in the workplace, if your staff become too comfortable socializing only in small groups, you lose the opportunity for cross-collaboration and overall team building that comes from chance meetings. In order to promote this, consider redoing seating assignments every nine to twelve months (or, in a larger company, every few years). Sitting next to new people in a different part of the office is an easy way to prompt new relationships and perspectives and keep things fresh.

Similarly, when your team makes meaningful progress, you should merchandise their achievements back to them. Give your team the gratification of seeing their progress rather than just moving on. At Behance, we had “Done Walls” that were decorated with a collage of completed project plans, checklists, and sketches that literally surrounded us with the sensation of progress. And whenever I’m presenting a forward vision presentation to my team, I try to start with a few slides recapping what the team has already accomplished. Progress is the best motivator of future progress, but it must be merchandised sufficiently so that people feel it.

Every team has a few “culture carriers” that are especially good at capturing great stories and retelling them. Culture carriers embody the themes that these stories represent, and their unique abilities to reinforce team culture need to be encouraged and celebrated. As the founder of a project or team, take stories seriously and inject yourself into them—even if it means breaking a twenty-year streak as a vegetarian. Stories are what you make of them, so take some poetic justice and mine every experience for the little gems characteristic of your team, the moments that made an impact. Culture is a naturally occurring phenomenon and simply needs to be nourished, inclusive, and celebrated.

leaders in various marketing and product teams gravitated toward the smaller problems they could solve more quickly.

Code for America, which taps the country’s design and engineering talent for the public good.

Most people’s natural tendency is to please and accommodate others. In the process of creating a product, this tendency often manifests itself as a generalized product vision that accommodates too many kinds of customers a little rather than one particular kind of customer a lot. The more wide open a product vision, the less likely it is to revolutionize one particular use case.

When you’re proposing a solution to a problem and meet resistance, take a step back to make sure everyone understands the problem first. People tend to dislike solutions until they feel like they understand the problem itself. Proposals must come after personally postulating the problem and the consequences of not solving it.

I decided to develop our business plan as a tabloid-size, single-page graphic document rather than the usual document in Microsoft Word: I wanted something visual and alluring, even if it was “internal only.”

as a team grows, misalignment happens. People’s engagement slips to varying degrees. Objectives are clear to some and less to others—and can change regularly. Deadlines need to be mandated rather than suggested. Communication is inconsistent by the sheer fact that everyone isn’t sitting together. As goals and priorities become crooked, performance suffers. What’s the solution to the misalignment that comes with growth? Process—the very thing you didn’t need in the early days. Training programs, daily staff meetings, organizational structure diagrams, approval processes: These are the mechanisms we throw at misalignment to ensure that a group of people think and act in tandem.

in advocating for design principles that would keep our products simple yet powerful, we would repeat the phrase “Powerful enough for professionals, accessible enough for everyone”

Here are some principles that drive effective attribution in a team: Rather than just publicly acknowledging the leader of every project, you should list the broader leadership teams of every project. By explicitly calling out the leader responsible for each function area—whether it be design, engineering, or legal—you can provide a sense of satisfaction for all levels involved and help the group track the output in each area to the person responsible for it. The people who deserve the credit then get it. The person who did the work should present the work. For example, if a product manager is presenting his or her team a series of mock-ups and wireframes that were designed by a designer on the team, the designer should present that portion of the deck. This gives your staff ownership over their work and also allows the most knowledgeable person to lead the discussion. False attribution can wreak havoc in a team. This applies just as much to congratulating the wrong person as it does putting a success down to circumstance instead of skill. In our effort to optimize whatever seems to work, we’re liable to conflate correlation with causation. If things go well, it doesn’t necessarily mean someone’s tactics worked. Go a level deeper to understand whether a success resulted from good timing, external market forces, great skills and execution, or some combination of the above. Attribute success at the element level: the skills, decisions, tactics, relationships, and hard work that contributed to the outcome. Don’t make the mistake of abstracting away the forces driving the success.

The feeling of being “done!” is seductive. Extinguishing a small brush fire will make you feel accomplished more quickly than making a small dent tackling a forest fire. But one causes much more damage when left unchecked than the other.

Despite Pinterest’s success, Ben’s interest is still in studying what works and in fixing what’s broken. He wants to engage people, not impress them.

Over the years, whenever I hastily constructed a deck for a team meeting, Matias would insist on redesigning it despite the rush and small internal audience. Every internal cue to our team, he felt, mattered. We had no budget but took great care of what we liked to call “the Behance experience.” We knew that the environment we worked in would influence the products we created and the type of people we hired.

When you must implement a new process, give it some beauty. Loyalty to a new system comes from believing in it and being attracted to it. The design, nomenclature, virtual confetti that explodes from a completed task—these little touches can go a long way in spurring utilization.

Someone could be making bolts and you could say, ‘Why do you do it? What’s your job?’ And they’ll say, ‘Oh, I’m making these bolts so that we can have a landable vehicle, because if we do a landable vehicle, then we can get to Mars. And if we can get to Mars, then humanity will da-da-da-da …’ ” When people know where their small part fits in the whole, they recognize how indispensable their work is. They feel more accountable.

the role of progress begetting future progress. “Of all the things that can boost emotions, motivation, and perceptions during a workday,” she concluded, “the single most important is making progress in meaningful work.” She went on to explain, “The more frequently people experience that sense of progress, the more likely they are to be creatively productive in the long run. Whether they are trying to solve a major scientific mystery or simply produce a high-quality product or service, everyday progress—even a small win—can make all the difference in how they feel and perform.”

accountability is about understanding why something didn’t work and what needs to happen to make sure it doesn’t happen again.

get a sign someday for my office that simply states NO ELEPHANTS.

Their thesis was that if you’re too organized with your administrative tasks, you’re liable to not be as present and focused with your patients.

“the principle is ‘what needs to happen to make sure this doesn’t happen again and maintain the expectation that people will meet their responsibilities?’

The fact of the matter is that we are constantly battling time, whether to save or spend it. We’re fiercely aware and protective of our time. The only time we’re not focused on time is when our natural human tendencies—like wanting to look good, satisfy curiosity, or be recognized by others—make us lose track of it. Natural human tendencies are the twilight zone for time. When you account for these tendencies when developing your product, you win your customer’s time.

For all the emphasis around obsessing over your customers and your public brand and message, there is surprisingly little focus on the internal brand and message. What do your employees think of their work, the team’s productivity, and their mission? Do they even know the mission?

I’m wary of adding processes as the perpetual solution for internal challenges. However, I have also learned over the years—often the hard way—how important it is to let people have their own process.

The stories a team recalls and shares about itself serve as a continual reminder for everyone of why they’re there and what makes the team special; they reinforce the foundations of a business and the aspirational elements that tie people together. Stories also teach lessons and create texture in time. Without stories, the past is just a blur, never revisited and refined. But with stories, the past becomes something tangible you can stand on. They orient new employees and provide institutional knowledge. Even amid long periods of ambiguity and uncertainty, a healthy culture built on stories provides the context and comfort everyone needs to stick together and keep moving forward. As a company grows, culture becomes less impacted by everyday stories and is floated on the remnants of the stories that happened early on. Tales from “in the beginning” tend to have an outsized impact on culture as they reflect the core, founding values of why and how this whole thing got started in the first place.

The conundrum of process is we all need some, but too much is lethal. The more aligned your team is, the less process you need. Here are some principles to consider as you thoughtfully apply process: Install process for your team, not for you. A lot of wasteful and painful processes are born from anxiety. When leaders feel insecure about losing touch with parts of their business, they’re liable to create more bottlenecks. I’ve seen some leaders schedule redundant “sign-off” meetings, run daily check-ins, and implement other mechanisms just to achieve peace of mind—for themselves, not for the team. But process tolls imagination and agility and should be applied only to prevent problems. If deadlines are being missed, goals are variable, or legal and financial functions are being sidestepped, installing a process will help. But when you introduce process to your team, do it to solve their problems rather than quell your own anxiety. Spend more time on achieving alignment than imposing process. Doing more work to help everyone understand the goals and plan will foster a natural alignment among the team. How often are you merchandising your mission and road map to your team? Likely not enough. Are you ensuring that every new member of your team is adequately caught up? Are you proactively identifying people who seem misaligned and taking the time to get them up to speed? Such alignment will expedite progress and boost quality better than any formal process could. Audit your processes frequently and always try to cut them down. Just because a process was necessary at one point in time doesn’t mean it always will be. Constantly question the necessity of the policies and procedures you impose on your team. Do you still need to have that morning scrum meeting? Do people still need your sign-off on certain actions? Periodically audit the processes around you and look for ways to either kill or improve them to free up your employees’ time where you can.

It is healthy to have some degree of process intolerance—an innate disdain for undue procedures and waiting; after all, waiting for a green light never gets you there first (though red lights certainly prevent accidents). But interfering with the order of operations of those around you has negative consequences, even if you think your initiative will save time and effort in the long run. People incorporate process into their work as a patch for their own misalignments, and to override such mechanisms without considering why they are there is problematic.

Creative writing is a war between simplicity and possibility. An effective plot and engaging characters who drive it must be simple enough for readers to follow, but the creative process of developing a fascinating story line is all about following the whims of imagination. As a result, writers find themselves having to cut beautiful passages and extraordinary characters that fail to support the central plot. Junior writers try to weave them in or justify their existence because they love them so much, but the best writers summon the courage and discipline to kill these “darlings.”

Process can and should be augmented over time, but it shouldn’t be aggressively ripped away.

The founders I get most excited about are the ones who are grounded in reality and equally focused on both problems and solutions.

for every function and project in his company having a “DRI”—a Directly Responsible Individual—whom the entire team knows to go to and rely on for that particular area.

Ease of engagement and quick return to one’s ego are two tried-and-true tenets of any successful social product, regardless of its purpose.

Challenge yourself to move on when you sense yourself obsessing out of passion rather than reason. Engage emotionally as you create, but detach from your creations when evaluating them.

Shorter emails get faster response times. Fewer words go further (and are listened to more intently). Standing meetings (where your knees get weak) prioritize the point. The less preamble, the more focused your team will be on your message. Most attention spans don’t even make it to the end. Start with your point; don’t end with it.

It is easy to kill things that straight up don’t work, but it’s disheartening to nip a blooming bud—something that is showing early promise but isn’t good enough to merit your singular focus. Most teams keep nurturing any features or projects that show any capacity for potential, if only to keep their options open.

If only to feel like you’re doing your job, you’ll explore solutions to the problems they voice instead of focusing on the opportunities to engage the customers you have yet to reach. In the process, your prioritization and judgment is liable to be taken hostage by the vocal minority, whose desires stem from a deep relationship with your product, and you fail to take your newest customers into consideration.

Customers are more forgiving than you might think when you share your thought process with them.

Your competitive advantage is a conscious admission and acceptance of your weaknesses as well as a recognition of your strengths; it’s as much about what you focus on as it is about what you choose to let go.

Ironically, when something goes wrong or a member of your team was careless, sometimes they need more authority, not less. By giving them more autonomy and control, they’ll either seize it and work hard to keep it, or they will fail faster, which is a good thing for weeding out who is on your team for the right and wrong reasons.

“A good team does a lot of friendly front stabbing instead of backstabbing. Issues are resolved by knowing what they are.” Straightforward conflict happens when people care enough about their work and bring tensions, ambiguities, and tough realities to the surface. Confrontation tends to be most needed when it is most uncomfortable.

This local maxima trap plagues individuals and teams both large and small. Consider Twitter, an extraordinary social product that has toppled regimes and has given both global glory and strife by connecting the world to information in real time. What was once a rapidly growing viable competitor to Facebook has stalled in recent years, as growth in monthly active users has topped out. I believe this is because the company attempted incremental improvements, like optimizing profitability, monthly engagement, and spam controls over bolder moves, such as exploring new markets and redefining the product. Rather than becoming the future of media, reinventing television, or becoming the ultimate source of real-time information on any given topic, the product looks much like it did ten years ago.

It’s understandable to seek validation, but actively searching for positive feedback provides false positives. If you keep searching for something positive, you’ll find it—but often at the expense of more important truths.

The first mile of your customer’s experience using your product cannot be the last mile of your experience building the product.

While you want to avoid layering on too many processes, you must respect the work styles that people adopt to keep themselves aligned and engaged. “Give your staff the context they need for why you’re asking them to do what you’re asking them to do, and then get out of their way and make sure other distractions are removed from their plate so they can focus on what matters most,”

Delegation and job titles aren’t enough—employees must feel empowered.

This could come in the form of a graphic representation of milestones and deadlines hung on walls, a communications campaign that repeats goals and the progress to date, or in the form of pithy time-bound declarations, like Pinterest’s “Year of Going Global,” which pushed every team across the company to reprioritize efforts to internationalize the business, or Uber’s “Year of the Driver,” which they rolled out when they realized they had fallen behind on developing tools and better policies for drivers on their platform.

Break incrementalism by questioning core assumptions.

Pursuing a few paths in parallel keeps your options open, and it feels safe. But it’s not. The flaw with pursuing and preserving many options is that doing so stunts your progress in any particular direction. When your energy is split, so is your speed and focus, and the resources around you are harder to tap when your narrative is too broad.

sustained, organic “viralness” happens only when a product is polished enough to elicit trust and love from customers who are busy. I encourage teams to engage viral customers only when they feel that their product is ready for it, as these customers may not give you a second chance.

Jocelyn Glei explains in her book Unsubscribe,

Conviction > Consensus Optimization requires decisiveness. As you improve your product, you will be torn between appeasing your customers and sticking to your own beliefs. You will look to groups for decisions when you should be looking to them only for guidance. The best decisions tend to be the hardest and least popular. When you feel like you’re on your own, you’ll question yourself. As humans, we find comfort in groups. And while no great achievement is possible without a group working together, very few critical and difficult decisions can be made by a group. As comedian Milton Berle once quipped, “A committee is a group that keeps minutes and loses hours.”

Culture is not something that begets success, rather, it is a product of it. All companies start with the espoused beliefs and values of their founder(s), but until those beliefs and values are proven correct and successful they are open to debate and change. If, though, they lead to real sustained success, then those values and beliefs slip from the conscious to the unconscious, and it is this transformation that allows companies to maintain the “secret sauce” that drove their initial success even as they scale. The founder no longer needs to espouse his or her beliefs and values to the ten thousandth employee; every single person already in the company will do just that, in every decision they make, big or small.

Too much scrutiny creates flaws.

Why is it so hard to keep a product simple? A big part of the problem is that you become intimately familiar with your “power users,” the small number of customers who use your product the most. This group of customers is also often referred to as the “vocal minority.” Power users have so much to say about the product you’re responsible for, and as a result, you will start to consider their complaints and requests.

It’s also why we are such fools for instant gratification, but struggle to manage slow-burning success.

the evolution of our brains accounts for our tendency to intensely respond to immediate threats, while struggling to focus on long-term dangers or goals. This is why we take such alarm to terrorism but much less to global warming, even though the chances of a plane bomber, Dan Gilbert claims, are far less than the chances of the ocean consuming parts of Florida or Manhattan.

While some concerns are reasonable, most are excuses to delay the inevitable. Killing a product by ignoring it only prolongs its death. Customers will always be upset. As Aaron Levie, founder and CEO of cloud-storage company Box once noted, “To make everyone happy with the decision, you’ll make no one happy with the outcome.” When the stakes are high, your natural inclination is to wait as long as necessary to be sure of the choice you’re making. You trade decisiveness for certainty, even if it means compromising productivity and your team’s engagement in the process. Ripping off the Band-Aid quickly compartmentalizes your pain and gives you more energy to focus on creating what’s next.

Depending on the severity, accountability could be poking fun at someone, a postmortem, or a serious conversation, or an apology to the whole company, or a change in role, or a termination.”

Beware of creativity that compromises familiarity.

for mature businesses, the drive is increasing profitability. You will prefer customers who require the least resources to attract and maintain over time. Customers who pay the most and demand the least will drive your profit margin, while earlier customers who may have required more costly hand-holding become less attractive. At this later stage, companies focus on driving value from existing customers more than engaging new customers, which opens up the door for new start-ups to compete and win over the “less profitable” customers whom large companies may ignore. It is wise in the short term, but it can backfire in the long term as new and less profitable customers may flock to a new and shiny competitor.

Your challenge is to create product experiences for two different mind-sets, one for your potential customers and one for your engaged customers. Initially, if you want your prospective customers to engage, think of them as lazy, vain, and selfish. Then for the customers who survive the first 30 seconds and actually come through the door, build a meaningful experience and relationship that lasts a lifetime.

The millions of portfolios hosted on Behance didn’t belong to us. Our job was to protect and enrich the network, but we didn’t own it.

Once new users know these three things, they have reached a place in your product experience where they are willing to invest time and energy to build a relationship with your product. They don’t need to actually know how to use your entire product at the beginning—they just need to trust you and know what their immediate next step is.

Don’t be creative for the sake of it, despite the urge to do so. Popular terms and actions are popular for a reason. Adopt simple patterns, proven to be successful, whenever possible, and train your customers only when it’s a new behavior that is absolutely core to what differentiates your product. Familiarity drives utilization.

The paradox of product success is that when you focus on pleasing your most engaged users, you stop engaging new ones. The sad reality—and the opportunity for start-ups—is that most established products take their large user bases for granted and fail to maintain simplicity over time.

You need to prime your audience to the point where they know three things: Why they’re there What they can accomplish What to do next

The Catalyst - How To Change Anyone's Mind

friend of mine used to gripe about how his wife asked his opinion but then shot down his suggestions. She’d ask, “Where do you want to go to dinner?” or “What do you feel like doing this weekend?” But if he responded, “Mexican sounds good” or “Let’s check out that festival that’s happening on Sunday,” she’d always say no: “We just had Mexican last week” or “I think it’ll be too hot on Sunday to be outside all day.”

catalysts encourage people to persuade themselves.

People have a need for freedom and autonomy. To feel that their lives and actions are within their personal control. That, rather than driven by randomness, or subject to the whims of others, they get to choose.

Restriction generates a psychological phenomenon called reactance. An unpleasant state that occurs when people feel their freedom is lost or threatened. And reactance happens even when asking people to do something rather than telling them not to. Whether made to encourage people to buy a hybrid car or save money for retirement, any effort is often unintentionally seen as impinging on people’s freedom. It interferes with their ability to see their behavior as driven by themselves. In the absence of persuasion, people think they are doing what they want. They see their actions as driven by their own thoughts and preferences.

When the status quo is terrible, it’s easy to get people to switch.

The truth campaign got teens to stop smoking because it didn’t tell them to stop smoking.

Rather than trying to push prospects, smart companies often let their existing clients do the talking. They host events, such as dinners, where, in addition to hearing from thought leaders or sitting through demos, potential clients can interact with current ones to get an outside perspective. An unbiased view of what working with the company is really like.

The more a commercial seems like it’s trying to persuade people, the more likely they are to change the channel.

Whenever people think about changing, they compare things to their current state. The status quo. And if the potential gains barely outweigh the potential losses, they don’t budge.

For decades, adults had been telling kids not to smoke. Smoking is bad. Cigarettes will kill you. Stay away from them. Again and again and again. Other public health campaigns had taken similar approaches. Sure, there was some variation. Some appeals emphasized health (“Don’t smoke: it will kill you”) while others focused on vanity (“Don’t smoke: it will give you yellow teeth”). Some highlighted athletics (“Don’t smoke: it will make you worse at sports”), while others focused on peers (“Don’t smoke: you’ll get left out”).

Reactance, Endowment, Distance, Uncertainty, and Corroborating Evidence can be called the five horsemen of inertia. Five key roadblocks that hinder or inhibit change.

referendums face a messaging challenge. The status quo is fundamentally easier to explain.

the online ecosystem is increasingly tailored to one’s existing views. Facebook prioritizes information from your closest contacts, who often share similar perspectives. Twitter only shows you information from the people you follow, who often already agree with you.

Why big changes require asking for less, not pushing for more.

Sources that are similar enough to the target but different enough from one another offer the perfect combination. Similarity makes the feedback seem diagnostic and relevant. Independence increases the chance that each adds additional value rather than being seen as redundant.

the assumption is that pushing harder will do the trick. That if we just provide more information, more facts, more reasons, more arguments, or just add a little more force, people will change.

The status quo bias is everywhere. People tend to eat the same foods they’ve always eaten, buy the same brands they’ve always bought, and donate to the same causes they’ve always supported.

Trump famously used this idea in his 2016 presidential run. Rather than saying he would make America great, he said he would make America great again.

All the “Remain” campaign had to do was tell people to stay the course. Do what they had always done. Just don’t mess things up.

once we have something, once we’re endowed with it, we start to become attached to it. And consequently we value it more.

to change minds and ease endowment, catalysts surface the cost of inaction. They make it easier for people to see the difference between what they are doing now and what they could be doing. And rather than focusing on how much better the new thing is than the old, or the potential gain of action, catalysts do the opposite. They highlight how much people are losing by doing nothing.

people are attached to things they’re already doing. Whether it’s the products they own or beliefs they hold, the suppliers they work with or the initiatives they support. Catalyzing change isn’t just about making people more comfortable with new things; it’s about helping them let go of old ones. Easing endowment. Like financial advisor Gloria Barrett, we need to surface the cost of inaction, helping people realize that inaction and the status quo aren’t as costless as they seem.

To get a sense of whether something is more like a pebble or a boulder, think about how easy it is to change. The more expensive, time-consuming, risky, or controversial something is, the less likely it is to be a pebble and the more likely it is to be a boulder. Something that requires more proof.

The fact that hip twenty-two-year-olds like the hotel isn’t as useful.

how to overcome inertia, incite action, and change minds—not by being more persuasive, or pushing harder, but by being a catalyst. By removing the barriers to change.

to reduce reactance and make the change feel more voluntary, Lewin tried small group discussions instead of lectures. Rather than telling homemakers what they should do, he brought them together and asked them to share their opinions. How could “housewives like yourself” overcome the obstacles that stood in the way.

catalysts start with a more basic question: Why hasn’t that person changed already? What is blocking them?

Questions do a couple things. First, like providing a menu, questions shift the listener’s role. Rather than counterarguing or thinking about all the reasons they disagree with a statement, listeners are occupied with a different task: figuring out an answer to the question. How they feel about it or their opinion. Something most people are more than happy to do. Second, and more importantly, questions increase buy-in. Because while people may not want to follow someone else’s lead, they’re much more likely to follow their own. The answer to the question isn’t just any answer; it’s their answer. And because it’s their own personal answer, reflecting their own personal thoughts, beliefs, and preferences, that answer is much more likely to drive them to action.

To reduce reactance, catalysts allow for agency—not by telling people what to do or by being completely hands-off, but by finding the middle ground. By guiding their path.

smart agencies share multiple directions—not ten or fifteen but two or three—and let the client pick which one they like the best.

Questions encourage listeners to commit to the conclusion. To behave consistently with whatever answer they gave.

it helps to look to a completely different domain: chemistry.

Same reason they can’t beat diabetes or cancer. It’s an addiction, it’s an illness, it’s something you can’t overcome yourself. The same can often be said for changing minds.

Once this sunk in, Nafeez started guiding the conversation to where he wanted to end up in the first place: how much they needed to study. “So, to get a score that places you in that top percentile, how many hours a week do you think you’ll need to study?” Nafeez asked. Rather than just guessing or throwing out numbers offhand, the students realized they didn’t know the answer. So they started asking Nafeez questions. “You’ve done this for a while, what do you think?”

When people feel like someone is trying to convince them, their guard goes up. They counterargue against the persuasion.

“good is the enemy of great… We don’t have great schools, principally because we have good schools. We don’t have great government, principally because we have good government.

seasoned negotiators don’t start with what they want; they start with whom they want to change. Working to gain insight into where that person is coming from. Comprehending and appreciating that person’s situation, feelings, and motives, and showing them that someone else understands.

The Confirmation Bias When trying to change minds, we often want big change right away. We want a big raise now. We want detractors to immediately become supporters. We think that if we just give people enough information, they’ll come around. If we just share more evidence, list more reasons, or put together the right deck, people will switch. But just as often this blows up in our faces. Rather than shifting perspectives, people dig in their heels. Rather than changing, they become even more convinced they’re right.

The intuition is simple. Data should lead people to update their thinking. They should consider the evidence provided and shift their opinions accordingly. Unfortunately, that doesn’t always happen.

the coworker recommending a show. If they tell you how much they love it, and another coworker says something similar the next day, it’s hard not to at least consider checking out the show. It’s a hot topic, lots of people are talking about it, so you infer that the show must be pretty good. Spread those conversations out a bit more, though, and their effect is muted. If one coworker says something today, and another mentions the show three weeks from now, it’s less likely to drive action. It’s been a while since you heard about the show, so you’re less likely to infer it’s widely popular. You’ve probably heard about a lot of other shows in the meantime. And if enough time passes, you may not even remember hearing about the show in the first place.

The Smoking Kid campaign worked because it highlighted a gap, a disconnect between what smokers were suggesting to others (kids) and what they were doing themselves.

Four key ways to do that are: (1) Provide a menu, (2) ask, don’t tell, (3) highlight a gap, and (4) start with understanding.

Principle 5: Corroborating Evidence Sometimes one person, no matter how knowledgeable or assured, is not enough. Some things just need more proof.

It’s not a change; it’s a refresh.

Principle 4: Uncertainty Change often involves uncertainty. Will a new product, service, or idea be as good as the old one? It’s hard to know for sure, and this uncertainty makes people hit the pause button, halting action. To overcome this barrier, catalysts make things easier to try. Like free samples at the supermarket or test drives at the car dealership, reducing risk by letting people experience things for themselves.

So whenever people get a recommendation or see someone else doing or liking something, they try to figure out—to translate—what it means for them.

But when endowment is really strong, sometimes change requires going one step further. And those situations may warrant burning the ships.

how do we ease endowment? Two key ways are to (1) surface the cost of inaction, and (2) burn the ships.

Similarity matters for changing minds, as we know, but it turns out diversity is also important. People were more likely to donate when the prior donors they knew came from separate, independent groups. If one was a family member and another was a coworker, people were more than twice as likely to donate. But if they were two family members or two coworkers, multiple sources didn’t have as much impact.10 Because it’s not just about how many others are doing something; it’s about whether those others provide additional information. More sources doing or supporting something can provide corroborating evidence, but repeated signals from the same group can be redundant. If two people who both like comedies say a show is good, it’s still easy to write it off as hitting only a certain group. Same with two people who are good friends. You assume one person already told the other, so the second recommendation doesn’t add much. But if they have differing tastes, or come from different areas of your life, the second source provides more proof. In fact, if multiple sources are too redundant, they’re often grouped together and treated as just a single source. If two people from Accounting recommend the same supplier, for example, people may cluster them into one “Accounting recommendation” rather than treating them as separate pieces of evidence. The more independent the sources are, the more corroborating evidence they provide.

Rather than thinking about whether a given new thing is better than the old one, by helping to take inaction off the table, burning the ships encourages people to set aside the old and instead think about which new thing is worth pursuing.

To shrink the distance between where people were and where the government wanted them to be, Lewin’s team asked for less. Rather than demanding that Americans eat beef brains every day, they asked people to try organ meat once in a while.

They did the division and realized that they were not going to be able to pack in three hundred or so hours over a ten-week course in five hours a week. They had to adjust their plans.

Whenever the status quo is okay but not stellar, or mediocre but not terrible, change doesn’t seem worth the effort. Because the current state of things doesn’t seem that bad. But surfacing the cost of inaction helps make people realize that sticking with the status quo isn’t as costless as it seems. Sure, manually writing an email sign-off doesn’t take that long. Two to three seconds tops. So it doesn’t seem worth investing the time to change. But add those seconds up across four hundred emails a week, and it takes between ten and twenty minutes. Over a year it’s more than ten hours. Suddenly an email sign-off seems less like a headache and more like something more severe.

To ease endowment, Lewin’s group surfaced the costs of inaction: how sticking with steaks and pork chops was hurting the troops.

This approach works even when the dissonance isn’t as obvious. People who deny climate change exists are unlikely to want polluted air for their kids. Employees who are wedded to old, inefficient processes are unlikely to recommend the same approach to new hires. There’s a disconnect between what people are saying or doing and what they would want or recommend for others.

What’s more effective is getting the robber to feel that the solution was their idea. Getting them to convince themselves. Vecchi uses the bank robber’s own words and mirrors them back to make it fit what he wants. Encouraging the bank robber to come to his own conclusion that coming out with his hands up is the best way to go. This doesn’t just mean doing whatever the bank robber wants.

Without realizing it, friends and family members may be unintentionally enabling the problem. So for change to stick, the whole system has to change as well.2

Because rather than feeling like a declaration that’s imposed on them, it’ll be a shift they feel they participated in.

By moving beyond caricatures and stereotypes and engaging with someone who disagrees, both sides will benefit. Rather than snowflakes or deplorables, people will start to see the other side as real human beings. By understanding where the opposition is coming from, we’ll all gain more nuanced views. But does that actually work?

when Nafeez tried to tell students that, all he got back were blank stares.

These questions highlighted that their own behavior was less than ideal.

When Warnings Become Recommendations

But when things aren’t terrible, or are just okay but not great, it’s harder to get people to budge.

Consequently, when more corroborating evidence is needed, using a fire hose is more effective. Rather than targeting one person in two markets (i.e., person A and person E), concentrate all the efforts in one place (i.e., person A and person B). Both recipients will tell their friends, and because each prospect has heard from two others, they’ll change as well. It will take more time to eventually reach the second market, but the fire hose will provide enough proof for people to change.

But in this instance, rather than telling people to do something, most posts just contained information. So why didn’t information help?

just like geographic regions, social ties tend to be stronger within groups than between them. Teenagers tend to be friends with other teens, and moms tend to hang out with other moms. The accounting department folks talk to each other more than they talk to the marketing team, and human resources representatives spend more time with each other than they do with IT. Whether it’s better to concentrate resources in one group or spread them out across two or more groups depends on the threshold for change. If a little proof is enough to drive action, then a sprinkler strategy is ideal. Go after each group simultaneously without much depth. But when corroborating evidence is needed, concentrating resources becomes more important. Focus on teens first and later go after moms. Target just the Accounting group initially, then move on to Marketing. Create social incubators where people can’t help but hear from multiple sources, increasing the likelihood that they’ll switch too.

Sometimes concepts that change one also change the other, but other times we don’t need to change minds to drive action. Sometimes people are already open to changing their behavior; we just need to remove roadblocks and make it easier to happen.

For stronger attitudes, “boulders,” or cases where more proof is needed, the sprinkler strategy won’t garner as much traction. Reach person A in New York and they’ll still tell B, C, and D. But because people need to hear from multiple sources before they’ll change, hearing from just person A won’t be enough. Target just one person in each market and they’ll tell everyone they know, but no one else will change.

Beyond similarity, however, another factor is at play. Recently a researcher from the Netherlands investigated how social ties influence political donations.

whether considering time, intellectual property, or a host of other things, people demand more to give them up than acquire them. Ownership even increases the perceived value of beliefs and ideas. When something is ours, we value it more.

But as her partner guided her through the course, helping her through each step, she felt something shift. She found herself caring in a way she never thought possible. “He is just as human as me,” she realized. “Up on the high ropes, I didn’t care that he was Israeli and that I disagreed with him; I cared that we wouldn’t fall.”

But even when there is no attempt to persuade, sometimes even just providing information backfires.

Reactions happen when molecules collide. But rather than increasing the frequency of collisions, as adding energy does, catalysts increase their success rate. Instead of bouncing around on a bunch of blind dates, hoping something sticks, a catalyst acts as a matchmaker, encouraging reactants to encounter each other at the right orientations for change to occur.

losses loom larger than gains. Losing $10 feels worse than gaining $10, and becoming less efficient feels worse than becoming more efficient.

the kids turned to walk away. But before they did, they handed the smoker a piece of paper. A small note, folded into fourths, almost like a secret passed under the table at school. “You worry about me,” it said, “but why not about yourself?” And at the bottom was a toll-free number smokers could call to kick the habit.III

One way to deal with this is to give candidates the tradeoffs. An extra week of vacation is equivalent to $5,000 less salary. Ten thousand more in salary is equivalent to this much less in equity.

Rather than holing up inside one’s online bubble, talking to someone who sees things differently.

But when thinking about where to seat a prospect at dinner, or how best to change their mind, it’s important to mix similarity and diversity. Seat them between an existing client in the same industry and another one who’s in a different industry but of similar size. Encourage them to talk to one existing client with similar technical needs and another based in the same region.

they knew that health information by itself wouldn’t solve the problem. It wasn’t like teens thought smoking was healthy. Teens knew it was bad for them and they were doing it anyway.

Car manufacturers don’t refuse to make replacement parts for older vehicles, but once a reasonable time has passed, they stop making as many. Prices go up, and consumers are encouraged to transition to something new. Manufacturers don’t force consumers to change, but they also don’t subsidize the prices on the old parts, leaving them artificially low. They pass the cost on to the consumer, making it less likely those consumers will stick with the status quo.

Sure, one person endorsed something, but what does their endorsement say about whether I’ll like it? To overcome this barrier, catalysts find reinforcement. Corroborating evidence.

Label Emotions Changing minds is often as much about emotion as information. Facts and figures are fine, but if you don’t understand the underlying emotional issues, it’s hard to get people to move. Emotional labeling helps identify the issues and feelings that are driving someone’s behavior. Statements like “You sound angry” or “You seem frustrated” help show that you’re listening and trying to understand. Even if the emotion is misidentified, the response provides background that helps identify the root issue.

instead of telling students what they needed to do, Nafeez started asking about what they wanted. The next time he taught a class, he started by asking, “Why are you here? What’s your goal? Why are you taking the GMAT?” “I want to get into a top business school,” one student said. “Okay. Do you know what it takes to get into a place like that?” Nafeez asked. “I’ve got to get a 720,” one student replied. “A 750,” said another. “How’d you get to that number?” Nafeez asked. Different students chimed in, and the group started having a conversation. Through the process, it came out that around 250,000 people take the GMAT every year. For the top twenty MBA programs, the enrollment is around 10,000.

School districts talk about how their curriculums are “back to basics.” Organizations talk about how a new approach or focus helps them return to their roots.

Going back was no longer an option. Now everyone had to forge ahead.

Instead, what is so powerful about Greg’s approach is that he gets the bank robber to comply, not by telling them what to do, but by making them feel like Greg is looking out for them.

Two aspects are important to note. First, the new thing doesn’t have to be twice as good as the old one; the upside (i.e., benefits or gains) just has to be twice as large as any downsides (i.e., costs or losses). For example, a new service doesn’t need to be twice as fast as the old one, but the increase in speed or other benefit needs to be at least twice as large as any monetary cost to acquire it, time spent learning how to use it, etc. Second, perceived gains and losses are what matter: the service may be twice as fast, but if the customer doesn’t care about speed, it doesn’t matter. Similarly, if some consumers actually like a larger phone, then the increased size wouldn’t be a loss; it would actually be a gain. Loss aversion doesn’t operate on attributes but on changes. If a new car is perceived to have all the benefits of the old one, there is no loss, even if some of the attributes differ. Truly understanding someone’s needs and values helps determine whether a particular change will be perceived as a gain or loss.

Change is hard, because people tend to overvalue what they have: what they already own or are already doing.

Warning people about health risks has been a standard approach for decades. Eat less fat. Don’t drink and drive. Wear your seat belt. Pick any health concern, add an admonishment to do it (if it’s good) or not do it (if it’s bad), and you’ve basically captured the essence of public health messaging for the last fifty years.

Whether it’s about shifting minds, changing behavior, or inciting action, catalysts REDUCE roadblocks. REACTANCE When pushed, people push back. So rather than telling people what to do, or trying to persuade, catalysts allow for agency and encourage people to convince themselves. ENDOWMENT People are attached to the status quo. To ease endowment, catalysts surface the costs of inaction and help people realize that doing nothing isn’t as costless as it seems. DISTANCE Too far from their backyard, people tend to disregard. Perspectives that are too far away fall in the region of rejection and get discounted, so catalysts shrink distance, asking for less and switching the field. UNCERTAINTY Seeds of doubt slow the winds of change. To get people to un-pause, catalysts alleviate uncertainty. Easier to try means more likely to buy. CORROBORATING EVIDENCE Some things need more proof. Catalysts find corroborating evidence, using multiple sources to help overcome the translation problem.

A video filming these interactions went viral, gaining more than 5 million views in barely more than a week.

Ask Open-ended Questions Questions get discussion going and build trust. Looking at a range of situations, from getting-to-know-you conversations to speed dating, people who ask more questions are liked more.2 Questions also help collect useful information so people can better understand their conversation partners. But not all questions are equally good. Why questions (“Why didn’t you take out the trash?”), for example, can make people defensive or feel like they are being interrogated. Yes-no questions, or those that encourage one-word answers (“Do you have a gun?”), are also less effective because they fail to advance the conversation. Open-ended questions (“Can you tell me more about that?” or “Wow, how did that happen?”) not only show people you’re listening but generate details and information that can be helpful later.

In the dialogue group, he had been so outspoken and steadfast that she couldn’t establish a single point of common ground. She didn’t trust him, and now, blindfolded, she had to completely depend on him for her balance, thirty feet up in the air. She had a choice. Rely on someone she wasn’t sure she could trust, or risk falling.

You might like “juvalamu” more (most people do) or prefer “chakaka,” but more importantly you probably don’t care that much about either. Opinions toward these nonsense words are examples of what are called weak attitudes. Preferences or opinions that people don’t find very important, that haven’t received much thought, or that are relatively easy to change. If I told you that Juvalamu was the name of a dictator who murdered his political enemies, you probably wouldn’t like that word anymore. That one piece of information would be enough to change your view. How do you feel about pine trees? Prime numbers? Serif versus sans serif fonts? For most people, these are examples of weakly held attitudes. You have an opinion, but it’s not that important to you and it’s relatively easy to change. Contrast that with how you feel about different political parties or your favorite sports team. How you feel about your favorite brand of beer. Or abortion. These are examples of strong attitudes. High-involvement issues, topics, or preferences that you’ve thought a lot about or hold with great moral conviction. Things you feel aren’t just a matter of opinion but have a right or wrong answer. Not surprisingly, strong attitudes are much more resistant to change. Imagine that an article suggests your favorite celebrity said something racist. What’s your first reaction? It’s probably one of disbelief or denial. There’s no way that person could be racist. Unlike hearing that Juvalamu was a dictator, our anti-persuasion radar rushes to protect our strong beliefs. Rather than giving up or changing our mind, we discount information that goes against our existing views, picking it apart rather than revising our perspective. Just like a really bad headache needs stronger medicine, some issues, products, and behaviors need more before people will change. More proof or evidence is required.

It’s providing a menu: a limited set of options from which people can choose.

Visiting with stakeholders, getting their perspectives, and engaging them in the planning process. This approach has two benefits. First, it gathers information about the problem—not

You need to go to the doctor to get a shot; do you want it in the right or left arm? You need to get ready for bed; do you want to take a bath now or after you brush your teeth?

“When examining evidence relevant to a given belief, people are inclined to see what they expect to see, and conclude what they expect to conclude… For desired conclusions… we ask ourselves, ‘Can I believe this?,’ but for unpalatable conclusions we ask, ‘Must I believe this?’ ”

Initially, answering a couple of questions over the phone might have been the most that someone was willing to do; it was at the edge of their zone of acceptance. But agreeing to that ask shifted their position. It changed where they stood on the field.

There’s also an issue of fit. Yes, someone may have lots of expertise in a certain domain, but preferences are heterogeneous.

university administrators were desperate to get students to save water by taking shorter showers.

Here is a checklist that will help mitigate common barriers. REDUCE REACTANCE How can you allow for agency? Like the truth campaign, encouraging people to chart their path to your destination? Can you provide a menu? Like asking kids whether they want their broccoli or chicken first, can you use guided choices? Like Smoking Kid, is there a gap between attitudes and behavior, and if so, how can you highlight it? Rather than going straight for influence, have you started with understanding? Have you found the root? Like Greg Vecchi, built trust and use that to drive change? EASE ENDOWMENT What is the status quo and what aspects make it attractive? Are there hidden costs of sticking with it that people might not realize? Like financial advisor Gloria Barrett, how can you surface the costs of inaction? Like Cortés, or Sam Michaels in IT, how can you burn the ships to make it clear that going back isn’t a feasible option? Like Dominic Cummings and Brexit, can you frame new things as regaining a loss? SHRINK DISTANCE How can you avoid the confirmation bias by staying out of the region of rejection? Can you start by asking for less? Like the doctor who got the trucker to drink less soda, chunking the change and then asking for more? Who falls in the movable middle and how can you use them to help convince others? What would be a good unsticking point and how can you use it to switch the field? Like deep canvassing, by finding a dimension on which there is already common ground to bring people closer? ALLEVIATE UNCERTAINTY How can you reduce uncertainty and get people to un-pause? Can you lower the barrier to trial? Like Dropbox, can you leverage freemium? Like Zappos, how can you reduce the up-front costs, using test drives, renting, sampling, or other approaches to make it easier for people to experience something themselves? Rather than waiting for people to come to you, can you drive discovery? Like the Acura experience, by encouraging people who didn’t know they might be interested to check it out? Can you reduce friction on the back end by making things reversible? Like Street Tails Animal Rescue did with a two-week trial period, or as others do with lenient return policies? FIND CORROBORATING EVIDENCE Are you dealing with a pebble or a boulder? How expensive, risky, time-consuming, or controversial is the change you’re asking people to make? How can you provide more proof? Like interventionists, by making sure people hear from multiple sources saying similar things? What similar but independent sources can you call on to help provide more evidence? How can you concentrate them close in time? Making sure people hear from multiple others in a short period? For larger-scale change, should you use a fire hose or a sprinkler? Concentrate scarce resources or spread them out?

Principle 1: Reactance When pushed, people push back.

Provide a Menu One way to allow for agency is to let people pick the path. Let them choose how they get where you are hoping they’ll go.

Addiction researchers note that even when multiple friends and family members try to get an addict to change, their efforts are usually spread out. After noticing some erratic behavior, a friend may make an offhand comment. Two months later a different friend may say something else. It’s not until something more serious happens, like an accident or arrest, that a more direct conversation occurs. But the separation between these expressions weakens their collective impact. If two people say different things at different times, it’s easier to shrug them off as unrelated incidents, or come up with alternate attributions. Forget they happened or discount the last interaction by the time the next one occurs.

Principle 2: Endowment As the old saying goes, if it ain’t broke, don’t fix it. People are wedded to what they’re already doing. And unless what they’re doing is terrible, they don’t want to switch. To ease endowment, or people’s attachment to the status quo, catalysts highlight how inaction isn’t as costless as it seems.

Gradually lowering the suspect’s fear, uncertainty, and hostility, until they look at their situation and realize that the best option is likely the one that seemed unthinkable at the start: coming out with their hands up.

For security purposes, any machines that were still running Windows 7 in two months would have to be disconnected from the network. And because most employees had newer machines, and it was tough for IT to stay up to date on issues with older ones, at that point IT would no longer be able to support machines older than a certain vintage. If the machine broke down or had an issue, employees would have to address it themselves.

Reactance even happens when people had wanted to do what was suggested in the first place. Take a new workplace initiative to get people to speak up in meetings. Some people may want to speak up already, so the initiative should be an easy sell. People want to speak up; the company wants people to speak up; everybody wins. But if the initiative crowds out people’s ability to see their behavior as internally or freely driven, it can backfire. Someone who is thinking of speaking up now has an alternate explanation for that thought: that they’re doing so not because they want to but because the initiative told them to. It interferes with their ability to see their decisions as their own. And if they don’t want to feel like they’re just going along with a directive, they might end up staying silent.

less drastic versions can be applied to a broad set of situations in which people are stuck on the status quo. Not completely taking the old option off the table, but making people realize and bear more of its true costs.

Second, and more importantly, when it comes time to roll things out, everyone is more likely to be on board.

Trying to change company culture or to get a team to go along with a tough reorganization?

Then, after signing the poster, students were asked a few brief questions about their own water use, such as “When showering, do you always turn off the water while soaping up or shampooing?”

To avoid reactance and the persuasion radar, then, catalysts allow for agency. They stop trying to persuade and instead get people to persuade themselves.

People have a range, or zone around their beliefs that they are willing to consider.

“You and I are going to work this out.” “We’ve got to keep working together, because we don’t want it taken out of our hands, right?” Inclusive pronouns create a world where Greg is going to help and protect the person as much as he can, but the person needs to help him do that. It’s hard for people to remain angry at someone trying to help them.

he tried a slightly different tack. Rather than suggesting one thing, he suggested two. Rather than just suggesting Mexican, he would say either Mexican or sushi sounded good.

the region of rejection not only impacts change, it shapes how people perceive and react to information. People search for, interpret, and favor information in a way that confirms or supports their existing beliefs.

To overcome endowment, then, we need to help people realize the cost of doing nothing—that, rather than being safe or costless, sticking with the status quo actually has a downside.

Start with Understanding

listeners were more likely to laugh and smile at the comedian’s jokes when they heard other people laughing.

To reduce uncertainty, they tried to make organ meats more widely available, providing recipes and cooking tips wherever organ meats were sold.

When trying to change minds, it’s important to be able to judge the difference between pebbles and boulders. Between attitudes and opinions, products and services, behaviors, ideas, and initiatives that need only a little proof versus ones that need a lot more.

special substances take a different approach. Rather than pushing, they lower the barriers to change. And these substances are called catalysts.

That they sometimes wasted water while showering.

But that’s not what happened. Exposure to the other side didn’t make people more moderate. In fact, just the opposite. Exposure to opposing views did change minds, but in the opposite direction. Rather than becoming more liberal, Republicans exposed to liberal information became more conservative, developing more extreme attitudes toward social policies. Liberals showed similar effects. Democrats who followed a conservative account became more liberal, not less.

The Web and social media have combined to create a state of intellectual isolationism where people are rarely exposed to conflicting viewpoints. Combined with people’s penchant for clicking on information that supports their perspectives, these algorithms can lead humanity to become more and more isolated in their own echo chambers.

The Science of When

People are impatient. They want the good stuff faster and the bad stuff later. So if changing means costs now and benefits later, they do nothing.

Warning labels and public health campaigns often provide information, but they do so in the form of declarations: “Junk food makes you fat” or “Drunk driving is murder.” The goal is to be direct, but these approaches often come across as preachy, which generates reactance and activates defensive responses: There’s no way junk food makes you fat; I know lots of people who eat at McDonald’s and they never seem to gain weight. Or: The ad is exaggerating. My friend drove drunk last week, and no one died. Particularly if people feel strongly about the issue, being too forceful can make them feel threatened and lead the messages to backfire. The same content, though, can be phrased in terms of a question: Do you think junk food is good for you?

But, regardless of flavor or style, the subtext was the same. Whether explicit or not, there was always a request, demand, or suggested action: We know what’s best for you and you should behave accordingly. And it wasn’t working.

Terrible things get replaced, but mediocre things stick around. Horrible performance generates action, but average performance generates complacency.

below that message, in slightly smaller font, Cummings placed the rallying cry for the entire Leave campaign. The slogan started as just two words: “Take control.”

Rather than trying to persuade, start by understanding. Why is the supplier’s price higher than desired? Perhaps their costs have gone up. What about dirty dishes in the sink makes your spouse so upset? Maybe it’s the dishes themselves, but maybe it’s a constant reminder of a larger, unresolved issue. When people feel understood and cared about, trust develops.

People strive for internal consistency. They want their attitudes, beliefs, and behaviors to align. Someone who says they care about the environment tries to reduce their carbon footprint. Someone who preaches the virtues of honesty tries not to tell lies. Consequently, when attitudes and behaviors conflict, people get uncomfortable. And to reduce this discomfort, or what scientists call cognitive dissonance, people take steps to bring things back in line. Thai smokers faced exactly this discord.

A research assistant stood outside the women’s locker room at the University of California, Santa Cruz, and asked students who were about to shower if they would sign a poster encouraging other people to save water. “Take shorter showers,” it read. “If I can do it, so can you!” Support a pro-social cause? Students were more than happy to help.

Just like hearing the same thing from multiple family members at once encourages action, we found that receiving multiple website invitations within a shorter period catalyzed change.

Instructing jurors to disregard inadmissible testimony can encourage them to weigh it more heavily.

science of reactance, how warnings become recommendations, and the power of tactical empathy.

So how do we solve the translation problem?

losses loom larger than gains. When deciding whether to take a bet, buy a new phone, or make any change at all, potential disadvantages are weighed more heavily than potential advantages. Losing $100 feels worse than winning $100. Losing $100 even feels worse than winning $110. In fact, research suggests that the potential gains of doing something have to be 2.6 times larger than the potential losses to get people to take action. Chance of losing $100? The potential win has to be at least $260 before most people will take that bet.

This strategy isn’t always easy to apply. It may not be immediately obvious how a new drug or manufacturing process can be framed as helping to regain a loss.

people don’t just roll with it when you try to push them. They push back. Rather than saying yes, the client stops returning our calls. Rather than going along, the boss says they’ll think about it, which is a nice way of saying “Thanks, but no way.”

Seeing how much time or money is being lost is more motivating than seeing how much could have been gained. Making it less likely that people will stick with the status quo.

So rather than assuming they had the answers, Wolfe’s team asked teens for their perspective. In March 1998 they convened a Teen Tobacco Summit, where students came together to talk about and understand the problem. And rather than tell teens smoking was bad, Chuck and the organizers let the teens take the lead. All the organizers did was lay out the facts: how the tobacco industry used manipulation and influence to sell cigarettes; how companies manipulated the political system and used sports, television, and movies to make smoking seem aspirational. Here is what the industry is doing, they said. You tell us what you want to do about it. Many things came out of that summit. A new statewide organization called Students Working Against Tobacco, or SWAT, was formed to coordinate youth empowerment efforts. Workbooks were created to bring information about the tobacco industry into the classroom (e.g., if a carton of cigarettes generates $2 of profit, how much money would a tobacco executive make if they sold fourteen cartons of cigarettes?). And a different approach to media was formulated.

by letting them make those decisions, rather than telling them what to do, they’d be more likely to make good decisions in the end.

many improvements in customer experience involved some sort of surprise and delight. Surprising people with small gifts and actions made them see that they were recognized and valued. A high-end hotel, for example, greeted customers by name when they walked in and had their favorite beverage waiting in the hotel room.

Conventional canvassing is a lot like being a mailman. Drop off the information, then on to the next house. Canvassers want to get in and out as quickly as possible.

In politics, smart campaigns don’t try to change every mind; they focus on swing voters who are open to facts and arguments. Undecideds, or pockets of people who, given the candidate, circumstance, or issue, are receptive to being swayed.

After trying again and again to get him to use an email signature, I tried a different approach. “How many emails do you think you write a week?” I asked. “I don’t know,” he replied. “Maybe around four hundred.” “Okay, and how long does it take to manually write each sign-off?” I asked. “A couple seconds at most,” he answered. “So how much time do you spend each week writing email signatures?” He paused.

Catalysts reduce Reactance, ease Endowment, shrink Distance, alleviate Uncertainty, and find Corroborating Evidence

while “Take control” was fine, it implicitly agreed to the premise that leaving the EU was action and staying was inaction. Which played right into his opponents’ hands. If only he could flip things around… make it seem like leaving was the status quo… So, in a stroke of insight, he changed the slogan. It wasn’t much: just an extra word in between “Take” and “control.” But it completely changed the reference point. He added the word “back.” As in “Take back control.”

being a catalyst—changing minds by removing roadblocks and lowering the barriers that keep people from taking action.

Who is this guy to tell me I need to study more?

Before people will change, they have to be willing to listen. They have to trust the person they’re communicating with. And until that happens, no amount of persuasion is going to work.

Shot in a first-person perspective, the simulator shows a beautiful day on a sailboat. You’re having fun on the water, talking to your friend—but not wearing a life jacket. Suddenly a swinging mast knocks you into the water. Your friend tries to turn the sailboat around to get you, but the wind picks up and the boat gets carried away, leaving you stuck treading water. And the only way to stay afloat, to keep yourself from drowning, is to scroll with your mouse without stopping. Scrolling your mouse sounds like no big deal, even fun for few seconds. But soon it becomes exhausting. So people give up. And when they stop scrolling, they see themselves slowly sinking to the bottom of the ocean. The experience is creepy, to be sure, but that’s exactly the point. Think scrolling for a couple minutes is tough? Imagine what trying to tread water for hours would be like. Might be worth wearing a life vest.

He surfaced the costs of inaction and made it clear that soon those costs were going to increase. He made it clear that employees could still use the old ships, but if they wanted to do so, they would have to do it by themselves. The same idea applies more broadly.

People like to feel they have control over their choices and actions. That they have the freedom to drive their own behavior. When others threaten or restrict that freedom, people get upset. When told they can’t or shouldn’t do something, it interferes with their autonomy. Their ability to see their actions as driven by themselves.

The psychologists were interested in a problem everyone faces daily. How to get people to do something they’d rather not do.

And when data isn’t already available, test and learn. Take a sample of people, test a particular approach, and record key characteristics on various dimensions. Using that to identify subgroups or pockets where the approach was particularly effective can help determine what types of people to go after in the population more broadly.

Rather than changing false beliefs, exposure to the truth often increased misperceptions. Giving people correct information made them more likely to believe the exact opposite. So when does information work and when does it backfire?

Not sure whether a lawn care company can fix those brown spots in the yard? Might as well just skip it. Unclear whether management will reward people for “thinking outside the box”? Might as well not rock the boat and keep doing things the way they’ve always been done.

Take one of the first “truth” ads that ran soon after. Two regular teens, sitting in their regular-looking living room, call a magazine executive to ask why the publication accepted tobacco advertising, given they have a youth readership. The executive says the magazine supports anti-tobacco ads, but when one of the teens asks whether the magazine would run some as a public service, the executive says no. When asked why not, he says, “We’re in this business to make money.” When the other teen asks, “Is this about people or about money?” the executive responds incredulously. “Publishing is about money,” he says before quickly hanging up. That’s it. The ad didn’t demand anything from teens. There was no message at the end telling them not to smoke, what to do, or what would or wouldn’t make them cool. The spot just let them know that, whether they realized it or not, cigarette companies were trying to influence them—and that the media was in on it. Rather than trying to persuade, the messages simply laid out the truth and left it up to teens to decide. And decide they did.

So Cummings bought a big red bus for Vote Leave. He had politicians drive around the country, speaking to voters. And on the side of the bus in large white letters it read: “We send the EU £350 million a week; let’s fund our NHS [National Health Service] instead.”

Switching the playing field from one where two teams are dug in on different ends to one where everyone is on the same team.

Unfortunately, when it comes to trying to create change, people rarely think about removing roadblocks. When asked how to change someone’s mind, 99 percent of the answers focus on some version of pushing. “Present facts and evidence,” “Explain my reasons,” and “Convince them” are common refrains.

Imagine I offered you a chance to win $100 on a coin flip. If it lands heads, you win a hundred dollars; and if it lands tails, you lose a hundred. Would you take that bet? If you’re like most people, you’d probably say no. Sure, there’s the chance of winning $100, but there’s an equal chance of losing $100, so the potential gain doesn’t seem worth the risk. Might as well stay put and do nothing.

Neither professor tried to convince Silvia that her beliefs were wrong or pushed her to believe that theirs were right. They didn’t tell her what to do or how to think. They simply showed her that there was another path. That there was a different approach.

Everyone has something they want to change.

Most people who picked up the phone were happy to help. Sure, answering a few questions wasn’t their favorite thing to do, but it wasn’t in the region of rejection, either.

Whenever change fails to happen, we think we need more horsepower. Employees not adopting that new strategy? Send out another email reminding them why they should. Customers not buying the product? Spend more money on advertising or give them yet another sales call. But with all that focus on pushing on the gas, we often overlook an easier and more effective way: identifying what is blocking or preventing change. And eliminating these obstacles to action. Sometimes change doesn’t require more horsepower. Sometimes we just need to unlock the parking brake.

But change is hard.

The scientists started by asking for less.

they did so because of the person who asked. Because the person who made the request was a child.

That’s exactly what hostage negotiators do. Anyone faced with a SWAT team bearing down on them is bound to feel trapped. Whether they’re a Russian mobster or a would-be bank robber holding three hostages at gunpoint. Push them too hard and they’ll snap. Tell them what to do and they’re unlikely to listen. Good hostage negotiators take a different tack. They start by listening and building trust. They encourage the suspect to talk through their fears and motivations and who’s waiting for them back home. Even talking about pets in the middle of a tense stand-off, if that is what’s required.

I realized that most perspectives out there took the same traditional approach. Coax, convince, and encourage. Push, push, push. And if that doesn’t work, rinse and repeat. Step on the gas and push harder. And they weren’t working.

to reestablish a sense of autonomy, people often react against persuasion. They do the opposite of whatever is being requested.I Want me to buy a hybrid? No, thanks, I’ll get a gas guzzler instead. Want me to save money for retirement? I’ll show you. I’ll buy whatever I want!9 Pushing, telling, or just encouraging people to do something often makes them less likely to do

Take a message from Ford about its F-150 Truck: “CLASS-LEADING CAPABILITY… The Ford F-150 outperforms every other truck in its class when hauling cargo in the bed or towing a trailer. No wonder the competition is always in a scramble to follow the leader.” Rather than taking the message at face value, people contest its contents and source, scrutinizing the claims and arguing against them.

Deep canvassing works because it switches the field. Rather than starting with the contentious issue, or the field on which people are far apart, it finds a dimension where people are closer together. Where they agree rather than disagree. An unsticking point.

Highlight a Gap Giving people a menu, or asking rather than telling, avoids usurping their sense of control. But another route to self-persuasion is to highlight a gap—a disconnect between someone’s thoughts and actions or a disparity between what they might recommend for others versus do themselves.

When trying to change minds and overcome such inertia, the tendency is to push. Client not buying the pitch? Send them a deck of facts and reasons. Boss not listening to the idea? Give them more examples or a deeper explanation.

When people’s ability to make their own choices is taken away or even threatened, they react against the potential loss of control. And one way to reassert that sense of control—to feel autonomous—is to engage in the forbidden behavior:

And rather than using the same arguments on everyone, catalysts use a more surgical approach. They target people with specific messages that are most relevant to them.

Uncertainty is even worse than certain negative outcomes. Knowing you’ll be late to a meeting certainly feels bad, but wondering whether you’ll make it on time usually feels worse. Getting fired isn’t fun, but wondering if you’re about to be fired is worse still.

Principle 3: Distance People have an innate anti-persuasion system, but even when we just provide information, sometimes it backfires. Why? Another barrier is distance. If new information is within people’s zone of acceptance, they’re willing to listen. But if it is too far away, in the region of rejection, everything flips.

The more they become attached to it, the harder it becomes to give it up.

She never liked both options he suggested, and she’d still come up with some reason why one option was less than ideal, but at least she’d pick one.

These biases make changing minds all the more difficult. Not only do people have to be willing to change, they have to be willing to listen to information that might open them up to that possibility. When ideas or information comes in, people compare it to their existing view. They consider and weigh it to understand how it fits with existing beliefs. If it falls within the zone of acceptance, it gets the seal of approval. It’s marked as trustworthy, safe, and dependable. And it shifts people in that direction. But if the ideas or information falls in the region of rejection, it faces deeper scrutiny. It’s seen as unreliable, anecdotal, and erroneous, or, even worse, ignored completely.11 And shifts attitudes in the opposite direction.

Can I get a light? Talk to any smoker, even someone who smokes casually, and they’ve probably heard this question at least once if not hundreds of times. It’s a modest request from one fraternity member to another, like asking someone to hold the elevator. Most people are happy to oblige. But when smokers in Thailand were stopped on the street and asked this question, their responses were nowhere near as positive. “I’m not giving it to you,” said one smoker. “Cigarettes contain poison,” responded another. “They drill a hole in your throat for cancer. Aren’t you afraid of surgery?” lectured a third. Smoking makes you die faster, leads to lung cancer, and causes a variety of other ailments, they replied.

rather than inhabiting someone else’s shoes, deep canvassing encourages voters to find a parallel situation from their own experience. Not imagining what it’s like to be someone else, but a time the voter felt similarly. A straight-A student may have a tough time understanding what it’s like to struggle academically, but they’ve probably struggled at some point in their life. Whether in sports, dating, or some other domain, thinking about how that felt will help them better understand what someone struggling academically is going through.

You can ask most forty-five-year-old white men to imagine what it’s like to be discriminated against, but they’re unlikely to truly get it.

The Power of Inertia

Note that not every situation involves all five roadblocks. Sometimes reactance is the key barrier. Other times uncertainty plays a larger role.

persuasive attempts often induce reactance.

Sam’s email worked because he burned the ships.

The same holds for change. When things are good, it’s easy to stick to the status quo. Change is costly and requires effort, so as long as things are good enough, the impetus to switch is muted.

Ask, Don’t Tell

The easier it is to try something, the more people will use it, and the faster it catches on.

Salespeople focus on one benefit the first time they call and mention another the second time around. Unfortunately, this usually fails. Salespeople think they’re providing “more context” or “sweetening the deal,” but to listeners it’s just another flavor of the same pitch.

But beyond the mere presence of laughter, the scientists also manipulated who listeners thought was laughing. One group of listeners was told that the laughers were people like them, or other La Trobe University students. Another group of listeners were told that the laughers were different: members of a political party with whom the students did not identify. Even though the laughter sounded exactly the same, whoever the listeners thought was laughing shaped their reaction. When listeners thought the laughers were not like them, the fact that those people were laughing didn’t matter. It didn’t change their behavior. Listeners laughed the same amount as when there was no laugh track at all. But when listeners thought the laughers were people like them, they changed their behavior. They laughed nearly four times as long.

Three ways to mitigate distance are to (1) find the movable middle, (2) ask for less, and (3) switch the field to find an unsticking point.

New things almost always involve uncertainty, so if it’s not clear how much better something new will be, might as well play it safe and stick with the status quo.

instead of pushing, savvy parents give their toddlers a choice: Which do you want to eat first, broccoli or chicken? By giving kids options, the kids get to feel like they are in control: Mom and Dad aren’t telling me what to do; I’m picking what I want to eat.

Trialability works because making things easier to try lowers uncertainty. It makes it easier for people to experience and evaluate new things.

Deep canvassing takes longer. The goal, first and foremost, is to get the voter to be honest. To have a frank, candid interaction about a complex and often emotionally charged issue. And that’s not happening in a couple minutes.

But if multiple sources say or do something, it’s harder not to listen. Because now there’s corroborating evidence. Reinforcement. Multiple sources concur. They have the same view, response, or preference. And this consistency means it’s much more likely that you’ll feel the same way.

Be a catalyst and lower the barrier to trial. Be an ice cream parlor, not a supermarket.

People were more likely to donate if they knew someone else who had already donated.

A theory about not just agricultural innovations and farmers but what would make any new invention, technology, or idea diffuse through any population.

Take Buick. They saw themselves as a premium brand, but the public disagreed. They saw Buick as a boring, fuddy-duddy car that their grandparents drove. So Buick did what many large companies do when they’re stuck: they bought a Super Bowl ad.

Trial-size toothpastes in first-class airline amenity kits, or shaving cream samples in hotel bathrooms, serve the same function. Even if someone isn’t looking to switch toothpastes, anyone who forgets theirs at home will try the sample, increasing the chance that they will change brands

Simply put, trialability is how easy it is to try something. The ease with which something can be tested or experimented with on a limited basis.

When trying to change those who are further away, we need to start by asking for less, as Dr. Priest did. Take big change and break it down into smaller, more manageable chunks or stepping-stones. Ask for less before asking for more. And finally, like Dave Fleischer’s deep canvassers, we need to find an unsticking point. Start with a place of agreement and pivot from there to switch the field.

And as the scientists noted, the most common way of attacking this problem is through pushing: “Exert as much pressure as possible on the reluctant individual… to force him to comply.” Tell them they should do it. Punish them if they don’t do it. Pay them so that they will

the more change involves uncertainty, the less interested people are in changing. The more ambiguity there is around a product, service, or idea, the less valuable that thing becomes.

sitcoms like Seinfeld and Friends often used so-called laugh tracks to get both the live audience and viewers at home to join in.)

This devaluing of things uncertain is called the “uncertainty tax.” When choosing between a sure thing and a risky one, the risky option has to be that much better to get chosen.

But as anyone who has left the room when a TV commercial came on for the umpteenth time can attest, there are downsides to multiple exposure.

So how can we get people to un-pause?

We’re looking for that silver bullet pitch that will immediately get someone to quit drinking soda or switch political parties overnight. But look closer at big changes, and they’re rarely that abrupt. Instead, they’re often more of a process. A slow and steady shift with many stages along the way. Asking for less is about committing to that process.

When faced with a challenge like this, companies often resort to a standard approach: advertising.

As the old adage goes, “If one person says you have a tail, you laugh and think they’re crazy. But if three people say it, you turn around to look.”

It’s easy to discount one person’s perspective. Make them the crazy one. Sure, you might think I have a drinking problem, but you’re only one person, so that might just be your opinion. And when there is one of you and one of me, who am I going to trust? That’s easy. Me. But it’s harder to discount a chorus. If multiple people are saying the same thing at the same time, it’s harder to ignore. A group carries the necessary weight to break through. If a bunch of friends and family members are all sitting there saying there’s a problem, it’s harder to think they’re all biased and misguided. Even though the addict might disagree, the fact that they’re all consistent makes it harder not to at least consider what they are saying.

If people would go on vacation if they passed and go on vacation if they failed, then not knowing whether they passed or failed shouldn’t matter. Even if they’re uncertain about the outcome of the exam, they should still go on vacation. But adding uncertainty changed what people chose. Rather than buying the vacation package, most people decided to defer choice and wait until things became more certain. They decided to do nothing rather than move forward.

Imagine you couldn’t test drive a car before you bought it. Having to pay tens of thousands of dollars before knowing whether you liked the handling or were comfortable in the front seat would make you much less likely to switch from your existing car and buy anything new.

When dealing with issues that people feel strongly about, start by finding the movable middle. Individuals who, by virtue of their existing positions, are more likely to shift because they’re not so far away to begin with. One way is to look for behavioral residue. Clues that indicate conflicting opinions or a willingness to change.

Existing customers loved the brand.

Multiple sources saying or doing the same thing solves the translation problem. If just one source suggests or does something, it’s hard to translate. Hard to know if their opinion is diagnostic. Hard to know what their reaction means for your own.

Pebbles and Boulders To understand how substance abuse counselors get addicts to change, we need to start outside the realm of drugs and alcohol. To learn about the distinction behavioral scientists make between weak and strong attitudes.

Ask for Less The movable middle is a great place to start, but sometimes we want to change minds of people who are further away. So how do we do that?

Client still wavering on whether to make an order? Call again in a week. And indeed, following up works. Sometimes.

A military veteran talked about how companies didn’t want to hire him because he had post-traumatic stress disorder. This was only one aspect of who he was, but potential employers couldn’t see beyond it.

From Vision to Product Market Fit: The Startup Product Builder's Playbook

Southwest Airlines: To become the world’s most loved, most flown, and most profitable airline.

Southwest

● Vision: To become the world’s most loved, most flown, and most profitable airline.

● Mission: Southwest connects people to what’s important in their lives through friendly, reliable, and low-cost air travel.

Who has the problem?

● What are their demographics?

● What are their psychographics?

● What is their financial situation?

● What is their decision-making authority?

● How badly do they need the problem solved?

● How are they solving the problem today?

too often, customers don’t know exactly what their problems are, they just know how those problems manifest themselves. There’s a huge difference between relieving symptoms and offering a cure.

Customers are also pretty bad at ranking their own pain points.

How do you define a key benefit? So in its simplest sense, your customer does X. Their problem is that over time, doing X is too expensive. Your solution is Y, which does 80% of what X does, but is 50% less expensive. Furthermore, your gut and your market research tells you that the other 20% that Y does not do is just bloat and almost your entire market could live without that 20%. In

this very simple example – which I am not endorsing as enough to start a company around – those are your key benefits: ● 50% less expensive. ● Accomplishes 80% of the task (and probably in less time). ● Is the new way of doing X that eliminates a lot of bloat. Those benefits can be categorized: ● They cut costs. ● They simplify. ● They can be sold as aspirational (the new way of doing things).

Now, to prioritize those benefits, I’ve come up with a matrix of where most general key benefits fit into major categories, and here they are, listed by general priority: ● Top line benefit, the customer can: ○ Generate revenue/money directly. ○ Gain knowledge that leads to more sales/money indirectly. ○ Add function/value that leads to higher customer lifetime value (LTV) and/or smaller customer acquisition costs (CAC) – mainly for B2B. ○ Open/enter a new market or niche – mainly for B2B. ● Bottom line, the customer can: ○ Cut costs directly. ○ Eliminate resources – people, services, third-party products, etc. ○ Save time, increase efficiency. ○ Simplify – save time taken by education, training, mistakes – increase productivity. ○ Note: If any of these savings contribute directly to a customer’s margins, they can become a top line benefit. ● Aspirational, the customer improves their: ○ Social standing. ○ Psychological well-being. ○ Brand awareness – mainly for B2B. ○ Marketability, either personal or professional. ● Psychological, the product can: ○ Reduce stress. ○ Reduce complexity. ○ Increase control. ○ Increase comfort. ○ Be used without impact to loyalty – in other words, the customer does not have to give anything up to realize the benefit. Don’t sleep on any of these, but you want to prioritize the ones at the top, where money is involved.

Good product management means serving the customer, not the product. So to summarize a theory I touched on under key benefits, the incremental value of a new feature should be measured in terms of that additional value to the customer, not in terms of additional function of the product.

there’s a reason Hollywood studios make trailers. It’s not to get people into the theaters, it’s to get people talking.

Word of mouth doesn’t happen on its own, it happens when your best customers get excited about your solution.

Nothing helps generate this excitement more than getting them on the inside and letting them know what’s coming next.

Even if you’re selling hammers, you should be constantly engaging with people on new ways to use a hammer. You should be creating hammer enthusiasts.

Product-Market Fit (Super Guides Book 30)

article titled “The Only Thing that Matters.”

The definition and concept of product-market fit can be broken down into five different core areas that come together to make up the concept.

Identifying a value proposition

“Identifying a value proposition” means essentially that you should first determine your value hypothesis (an assumption about what value your product gives customers) before figuring out your growth hypothesis (how potential customers will learn about your product or service).

Building something you need

When people design goods that meet their own needs, this is the beginning of a successful product-market fit.

Having a problem worth solving

Winning word-of-mouth growth

Do you have customers who are so enthusiastic about your product that they advise their friends and family members to give it a try?

A pull from the market

Uber’s original approach to establishing product-market fit consisted of offering free rides between a number of regional tech events that were hosted in San Francisco. These events were held simultaneously.

When people started using the Uber app more often, the company made the decision to offer first-time users discounts of up to fifty percent off.

The ability of Uber to solve an issue while simultaneously generating demand for its services is praised by professionals in the relevant sector. Even though customers did not indicate a need for enhanced taxi service, consumers progressively began to rely on the idea as a more practical and clear alternative became accessible. The network effect began to take effect, and customers started chatting about their experiences on social networks, which supplied the company with social proof.

Attend to the feedback of your clients. Deliver your wares to the end user and make an effort to close the deal with them.

The first step is to create a map of your customer’s journey from the beginning, all the way from product onboarding and referrals. This map should include the whole customer journey, beginning with the issue that prompted the search and ending with the brand discovery.

It is essential to have a crystal clear idea of what it is that your target clients desire by monitoring how they respond to rival alternatives already on the market.

By reading articles, user behavior studies, the publications of industry groups, and browsing social media platforms like Facebook and Twitter, it is possible to get a significant amount of information about the market and the preferences of customers.

If you want to identify prospective clients on Twitter who could be interested in purchasing your goods, you can try searching for relevant hashtags on Twitter.

having direct encounters with consumers who are already using your product or with customers who would be the ideal users for the product that you want to build.

Here are a few things to keep in mind as you prepare for the discussion: Guide the conversation in a way that, if there are any misalignment in the layers of your pyramid, they will be brought to light; Ask your customers if they have a clear understanding of your value proposition, making sure to first ensure that it has been properly outlined; You should inquire as to whether they believe the product lives up to its value proposition or not, and if they don’t, you should inquire as to what kinds of improvements they would recommend making the product more valuable. Inquire about the product’s ease of use.

your capacity to attract those consumers is dependent on the geographical region that you service, which is known as your Service Addressable Market (SAM);

Your Service Obtainable Market (SOM) is a component of your Service Addressable Market (SAM) and refers to the number of people that you are likely to obtain.

After that, multiply the number of SOM by the average revenue per user (ARPU), and this will give you an estimate of the total projected revenue for your company.

The SaaS rule of 40 is a business tenet that asserts your company’s growth rate and profit are inversely connected, and the sum of these two numbers will typically equal 40. As an example, if your company is growing at a pace of 30% either year over year or month over month, your profit could only be 10% of your total sales. When you increase the price that the consumer is required to pay, your profit will go up, but your growth rate will go down since existing customers and future customers will be put off by the new price point. But what will happen if the sum of your growth rate and profits is less than forty percent? It is likely that it is time to review your message or to establish whether your target customer or their unmet needs are as broad as you had originally anticipated they would be. If your product has a profit margin that is greater than forty percent, you should be proud of yourself, since it is still managing to expand its market share. Of course, 40 is not the only possible number to employ, and it will vary depending on the product that you are selling as well as the market that it serves.

One method for calculating a business’s Net Promoter Score is through a survey of a company’s existing clientele, in which the respondent is asked the following question: “How likely are you to refer our product to a friend or colleague?”.

Who is the typical buyer of your product or service, and what are some of the goals that they have in mind when they do so? Why are your customers going to need your product or service in order for them to be successful in reaching their objectives? How do customers get their hands on your goods or make use of your services? In order to get the most out of your product or service, what does your customer need to do with it?

How are customers currently accomplishing their tasks, and what kinds of methods and tools are they utilizing? Which components does your product or service require in order to fulfill the requirements of your customers and provide answers to the challenges they face? How will this distribution channel benefit from the fact that your product is being offered and sold through it? What will you measure to determine whether your customers are receiving actual value from your product or service or not?

Traction: A Startup Guide to Getting Customers

Some other suggested columns to help round out your thinking: How probable does it seem that this idea could work (1–5)? What is the expected cost to acquire a customer through this idea? How many customers can you expect to acquire at that cost (before saturation)? What is the timeframe needed to run tests?

At any stage in a startup’s lifecycle, one traction channel dominates in terms of customer acquisition. That is why we suggest focusing on one at a time,

In the early days, the tactics of sponsoring mid-level bloggers in the financial niche and guest posting allowed them to acquire their first 40,000 customers.

“The number one reason that we pass on entrepreneurs we’d otherwise like to back is their focusing on product to the exclusion of everything else. Many entrepreneurs who build great products simply don’t have a good distribution strategy. Even worse is when they insist that they don’t need one, or call [their] no distribution strategy a ‘viral marketing strategy.’”

spend 50% of your time on product and 50% on traction.

To reiterate, the biggest mistake startups make when trying to get traction is failing to pursue traction in parallel with product development.

Many entrepreneurs think that if you build a killer product, your customers will beat a path to your door. We call this line of thinking The Product Trap: the fallacy that the best use of your time is always improving your product. In other words, “if you build it, they will come” is wrong.

Your traction strategy should always be focused on moving the needle for your company. By moving the needle, we mean focusing on marketing activities that result in a measurable, significant impact on your company. It should be something that advances your user acquisition goals in a meaningful way, not something that would be just a blip even if it worked.

Phase I is very product focused and involves pursuing initial traction while also building your initial product as we discussed above. This often means getting traction in ways that don’t scale – giving talks, writing guest posts, emailing people you have relationships with, attending conferences and doing whatever you can to get in front of customers.

The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all startups have to. You can’t wait for users to come to you. You have to go out and get them.”

In phase II, it is getting enough customers where you’re knocking on the door of sustainability. And, in phase III, your focus is on increasing your earnings, scaling your marketing channels, and creating a truly sustainable business.

Some traction channels will move the needle early on, but will fail to work later. Others are hard to get working in phase I, but are major sources of traction in the later phases (PR is a good example). On the other hand, some channels will be great in phase I but useless in phases II and III because they simply don’t have the volume required to move the needle.

A single tweet from a well-respected individual or a speech to a few hundred people at a meetup can result in a meaningful jump in users.

After your growth curve flattens, what worked before usually will not get you to the next level.

As you hone your product, you are effectively plugging leaks. Once you have crossed over to phase II, you have product-market fit and customers are sticking around. Now is the time to scale up your traction efforts: your bucket is no longer leaky.

The definition of traction keeps changing as the environment gets competitive. That’s why it is actually useful to look at AngelList and look at companies who just got funded; that will give you an idea of where the bar is right now.”

you’re not seeing the traction you want, look for bright spots in your userbase, pockets of users that are truly engaged with your product. See if you can figure out why it works for them and if you can expand from that base. If there are no bright spots, it may be a good time to pivot.

Constantly running small traction tests will allow you to stay ahead of competitors pursuing the same channels.

you might be able to take advantage of new marketing platforms while they are still in their infancy. Zynga did this with Facebook,

How much does it cost to acquire customers through this channel strategy? How many customers are available through this channel strategy? How well do these customers convert? How long does it take to acquire a customer?

For example, for targeting blogs you might have questions about which blogs, what type of content, etc. For search engine marketing, the questions would be more about keywords, ad copy, and landing pages, whereas with social ads they would be

more about target demographics, ad copy and landing pages.

devise specific tests to validate them as cheaply as possible. These first tests in a channel are often very cheap: for instance, if you spend just $250 on AdWords, you’ll get a rough idea of how well the search engine marketing channel works for your business.

With limited resources, it’s almost impossible to optimize multiple strategies at once. Running ten social ads and testing everything about them (ad copy, landing pages, etc.) is a full-time endeavor. That is optimization, not testing. Rather, you should be running several cheap tests (perhaps two social ads with two landing pages) that give some indication of how successful a given channel or channel strategy could be.

Really focusing on a channel takes significant time and resources. This time is valuable and should only be used after you have some indication that a given traction channel or strategy within it will likely work.

Determining the success of a customer acquisition idea is dependent on an effective tracking and reporting system, so don’t start testing until your tracking/reporting system has been implemented.”

This “effective tracking and reporting system” can be as complex as an analytics tool that does cohort analysis or can be as simple as a spreadsheet, but it must exist.

The purpose of an A/B test is to measure the effectiveness of a change in one or more variables – for example, a button color, an ad image, or a different message on one of your web pages. You create one version of your page for your control group and a second version for your experimental group.

As you track how each page performs, you can find out whether your changes are having an impact on a key metric like signups. If, after a period of time, the experimental group performs significantly better, you can apply the change, reap the benefits and run another test.

Making A/B testing a habit (even if you just run 1 test a week) will improve your efficiency in a traction channel by 2–3x. There are many tools to help you do this type of testing, such as Optimizely, Visual Website Optimizer, and Unbounce. These tools allow you to test optimizations without making complex changes to your code.

What are the demographics of my best and worst customers? Are customers who interact with my support team more likely to stay customers longer?

include the columns of cost to acquire a customer and lifetime value of a customer within a given traction channel.

You can assess what can move the needle with some simple calculations. For example, how many customers do you think a given traction channel strategy could deliver? How many new customers do you need to really move the needle?

Quantifying the number of users you might add becomes even more important in phase II and phase III when you already have product-market fit. In that case most channels will give you some users, and so they are all tempting to some degree.

You should always have a traction goal you’re working towards. This could be 1,000 paying customers, 100 new daily users, or 10% of your market.

The right goal is highly dependent on your business. It should be chosen carefully and align with your company strategy.

If you reach this goal, what will change significantly?

Getting to break-even was the company significance that was aligned with that traction goal.

The path to reaching your traction goal with the fewest number of steps is your Critical Path.

These milestones need not be traction related, but should be absolutely necessary to reach your goal.

In DuckDuckGo’s case, their traction goal was to get to 100 million searches/month. They believed milestones they needed to hit included a faster site, a

more compelling mobile offering and more broadcast TV coverage

In your company, your milestones will be different, but the point is to be critical and strategic in deciding what to include. That’s why it is called the Critical Path. For example, you may think to reach your traction goal you will need to hire three people, add features A, B and C to your product, and engage in marketing activities X, Y, and Z. These are the milestones you need to do to get where you want to go.

Next, order your milestones by which need to be done first, second and so forth.

you want to run small tests to validate assumptions about a traction channel before focusing on it.

In your product, you may need to build feature A before B because B depends on A. In other words, you’re identifying dependencies. You should also strive to figure out the shortest path.

In particular, work on the first step(s) and nothing else. After these first steps are complete, re-assess your critical path using the market knowledge you just learned from achieving that milestone.

Your original plan is often wrong. For example, you thought you had to build features A, B, C to get to your traction goal, but after building A and getting market feedback you realize you need to skip B and build C and D. That’s why a hard re-assessment after each step is necessary.

departments can have their own traction goals and milestones.

example, they had a traction goal one million app users and decided after running tests through Bullseye that getting featured in the iOS app store was the next marketing strategy milestone.

When creating this part of the Critical Path, many founders unfortunately ignore promising traction channels due to natural biases.

the nineteen channels: Viral Marketing Public Relations (PR) Unconventional PR Search Engine Marketing (SEM) Social and Display Ads Offline Ads Search Engine Optimization (SEO) Content Marketing Email Marketing Engineering as Marketing Target Market Blogs Business Development (BD) Sales Affiliate Programs Existing Platforms Trade Shows Offline Events Speaking Engagements Community Building

Why spend time and money on a channel you know little about, or you think is irrelevant to your business? This bias may be preventing you from getting traction.

A major function of this book is simply helping you overcome your biases against particular traction channels. There are three reasons why founders ignore potentially profitable traction channels: Out of sight, out of mind. Startups generally don’t think of things like speaking engagements because they are usually out of their field of vision. Some founders refuse to seriously consider channels they view negatively, like sales or affiliate marketing. Just because you hate talking on the phone doesn’t mean your customers do. Bias against schlep – things that seem annoying and time consuming. Channels like business development and trade shows often fall in this category.

“I’ll bet you a lot of your competition will refuse to even try these channels. And if that’s true, that’s even more reason to go try those channels! It can almost be a competitive advantage (at least a temporary one) if you can acquire customers in channels that others cannot, or refuse to try.

On each video page, YouTube provides the code snippet necessary to embed a video on any website.

your product is being shared but not generating new users, you won’t go viral.

As with invites, if you double your conversion percentage (by doing things like testing different signup flows), you double your viral coefficient.

Viral cycle time is a measure of how long it takes a user to go through your viral loop. For example, if it takes an average of 3 days for invites to convert into users, your viral cycle time is 3 days.

Shortening your viral cycle time drastically increases the rate at which you go viral, and is one of the first things you should focus on improving if using this channel. To shorten it, create urgency or incentivize users to move through your viral loops.

That’s why YouTube provides embed codes for each video: to make it simple for any user to add videos to their site or blog.

“Even expert teams will take 1–2 engineers working 2–3 months, minimum, to implement and optimize a new viral channel to the point where it’s growing quickly without any ad spend.

you will want to map out every aspect of your viral loop. How many steps are in the loop? What are all the ways people can enter into the loop (landing pages, ads, invites)? Draw a map of the entire process and try cutting out unnecessary steps (extra sign up pages, unnecessary forms or fields to fill out, etc.) and increase areas or mechanisms where users can send out invitations.

some startups like Quora allow people to use portions of their product without signing up. This allows potential users to test-drive the product without making any sort of commitment.

Conversion pages work best when they use the same messaging as the invitations that preceded them. For example, if in the invitation you say so-and-so referred you to this product, you can put the exact same message on the conversion page. It really helps in both cases (invitations and conversions) to think about the psychology of the new user. You will want to run tests to help you find out why people are deciding to use your product. Understanding exactly why people are clicking on your links and signing up (e.g. curiosity, obligation, etc.) will help you think of better ways to improve your viral loop. Surveys, sites like usertesting.com and asking users directly are great ways to uncover this psychology.

Things to Test Here are some of the more common items to test and optimize: Button vs. text links Location of your call to actions Size, color, and contrast of your action buttons Page speed Adding images Headlines Site copy Testimonials Signs of social proof (such as pictures of happy users, case studies, press mentions, and statistics about product usage) Number of form fields Allowing users to test the product before signing up Ease of signup (Facebook Connect, Twitter login, etc.) Length of the signup process (the shorter you can make the process, the higher your conversion percentage will

First focus on changes that, if they worked, would result in a 5–10x improvement in a key metric. This could be something like an entirely new email auto-responder sequence, a new website design, or a new onboarding flow. Once you’ve made big changes, then optimize. Almost no optimization is too small to test: even changing one word in a headline can have a significant impact. Because viral growth compounds, a 1% improvement can make a big difference over the long-term.

you may be taking off in Indonesia while not doing as well in Australia. Once you find a viral pocket, you may want to cater to this group by optimizing text in their native language or some other way that will improve their experience.

Since most viral loops are not self-sustaining, you need a constant stream of new users entering your viral loop. This process is called seeding. When seeding new users for your viral loop, you’re looking for people in your target audience who have not been exposed to your product.

Viral Mistakes

Not doing enough A/B tests to really find improvements (assume 1–3 out of every 10 will yield positive results)

Not understanding how users are currently communicating/sharing, and bolting on “best practice” strategies (Just add Facebook “like” buttons!)

Not getting coaching/guidance from people who’ve already done it

Public Relations (PR)

Starting out, an article in TechCrunch or a feature in The Huffington Post can boost your stature in the eyes of potential users, investors, or partners. These mentions lead to larger features in news outlets like The Washington Post or The New York Times, which can move the needle for you in a matter of days.

author of Trust Me, I’m Lying,

“The news has fundamentally changed. Think of The New York Times. When they decide to publish an article about you, they are doing you a huge favor. After all, there are so many other people they could write about. There are a finite number of spots in the paper. Blogs are different, as they can publish an infinite number of articles and every article they publish is a chance for more traffic (which means more money in their pockets). In other words, when Business Insider writes about you, you are doing them the favor.”

Most sites make their money from advertisements, so they want to drive as many page views as possible. If you have a fascinating story with broad appeal, media outlets now want to hear from you because you will drive visits and make them more money. This is why sites like The Huffington Post now churn out hundreds of articles a day: it drives page views, which allows them to charge more to advertisers.

“It’s better to start smaller when targeting big media outlets. For them, the direct approach is rarely the best approach. Instead, you approach obliquely. So, you find the blogs that TechCrunch reads and gets stories ideas from. Chances are it will be easier to get that blog’s attention. You pitch there, which leads The New York Times to email you or do a story about you based on the information [they’ve seen] on the news radar.”

Next thing you know, you can put “As seen on CNN” on your website.

“Blogs have an enormous influence over other blogs, making it possible to turn a post on a site with only a little traffic into posts on much bigger sites, if the latter happens to read the former. Blogs compete to get stories first, newspapers compete to ‘confirm’ it, and then pundits compete for

airtime to opine on it. The smaller sites legitimize the newsworthiness of the story for the sites with bigger audiences.”

Sites like TechCrunch and Lifehacker often pick up stories from smaller forums like Hacker News and reddit. In turn, The New York Times often picks up content from TechCrunch and wraps it into a larger narrative they’re telling.

What gets a reporter’s attention? Milestones: raising money, launching a new product, breaking a usage barrier, a PR stunt, big partnership or a special industry report.

Jason advises bundling smaller announcements together into one big announcement whenever possible. Breaking a useage barrier is great. Releasing a new version is noteworthy. But releasing a new version and breaking a usage barrier in the process is even more compelling.

solid example of a good pitch

short, to the point,

Hey Mike, Launching PadPressed tomorrow at noon EST and TC gets free reign on an exclusive before then. PadPressed makes any blog look and behave like a native iPad app. We’re talking accelerometer aware column resizing, swipe to advance articles, touch navigation, home screen icon support, and more. We’ve built some pretty cool tech to make this happen smoothly, and it works with your existing layout (iPad layout only activated when the blog is accessed from an iPad). Okay, I’ll shut up now and you can check out the demo links/feature pages below, which are much more interesting than my pitch. PS – Would also be happy to do giveaways to TC readers. Thanks again and feel free to reach out if you have any more questions (Skype, phone, etc. listed below).

some suggestions to make this pitch even better. He said the email comes across as a “wall of text,” something busy reporters who receive hundreds of emails get tired of seeing. He also mentioned that the timing of the launch is unclear. Be succinct and clear.

If you can craft a narrative (e.g. how we just doubled our userbase through x, y, and z) and present it well, you greatly increase your chances of getting a story.

it’s not interesting enough to elicit an emotion, you don’t have a story worth pitching.

“satisfaction is a non-viral emotion” – you want readers to do something after reading your piece, not just feel satisfied.

Once you pick an angle that works, Ryan offered this template email he’s used to pitch reporters successfully: Subject: Quick question Hey [name], I wanted to shoot you a note because I loved your post on [similar topic that did a lot of traffic]. I was going to give the following to our publicist, but I thought I would go to you with the exclusive because I read and really enjoy your stuff. My [company built a userbase of 25,000 paying customers in two months without advertising / book blows the lid of an enormous XYZ scandal]. And I did it completely off the radar. This means you would be the first to have it. I can write up any details you’d need to make it great. Do you think this might be a good fit?

If so, should I draft something around [their average] words and send it to you, or do you prefer a different process? If not, I totally understand, and thanks for reading this much.

PR Tactics After coverage in small blogs, you’re in a good position to start pitching larger and more influential media. Follow influencers in your industry and reach out to the blogs they often link to. Those blogs are likely the starting points for much of the news that filters up to the larger outlets.

If you want funding, or if your target users are the startup/tech crowd, TechCrunch and re/code are good places to go. If you are trying to get users outside of the tech world, pitch the blogs and news outlets your users frequent.

the best way to get PR is to start small. A good first step is using a service like Help A Reporter Out (HARO), where reporters request sources for articles they are working on. While you won’t be the centerpiece of the article, assisting a reporter this way will get you a mention in the piece and help establish your credibility. Plus, you can put the logo of another publication on your site or deck.

Another starting point is to offer reporters commentary on stories related to your industry. One of your (many) jobs as a startup founder is to stay on top of market trends. If you have a good feel for the pulse of your market, you can follow-up with insights on specific stories and let them know that you are available as an industry source.

You can also use Twitter to reach reporters online. Almost all reporters have Twitter accounts and you’d be surprised at how few followers many of them have. This limited audience can work to your advantage: you have a better chance of standing out when you contact them. Staying in contact with them over Twitter then gives you a leg up when you eventually reach out to them with your more formal pitch. This is exactly how DuckDuckGo was recognized as one of Time Magazine’s top 50 sites in 2011: Gabe interacted with the reporter on Twitter and was then included in the feature piece

Amplifying Once you have a solid story, you want to draw as much attention to it as you can. Here are a few ways to do it: Submit a small story to community sites (like Digg, reddit, Hacker News, etc.) with larger audiences. Share it on social networks to drive awareness, which you can further amplify with social ads (see chapter 10). Email it to influencers in your industry for comment. Some of them will share it with their audience. Ping blogs in your space and show that you have a story that’s getting some buzz. These writers may then want to jump in themselves to cover you. Once your story has been established as a popular news item, drag it out as long as you can. Email blogs that covered the story (as well as ones that didn’t) and offer an interview that adds to the original story. “How We Did This” follow-up interviews are popular. Fundraising In addition to driving traffic, PR can have a substantial

A good PR firm can help you: Figure out the best messaging and positioning to the press. Unify your messaging to the press. Do a lot of the legwork in setting up press engagements (especially bigger media tours and events). Break into outlets that are traditionally harder to break into like broadcast TV and radio, where relationships with reporters and producers are harder to form. However, before making the choice to focus on PR, exercise caution; many of the (print) reporters we talked to said they ignore almost all pitches from PR firms but do listen to most founders.

Figure out the specific reporters covering your startup’s market and focus on building real relationships with them (e.g. read what they write, comment, offer them industry expertise, follow them on Twitter, etc.).

Reach out to reporters only when you have newsworthy milestones to share, and package those milestones in a compelling emotional story. When you do make a pitch, keep it short and sweet!

There are two different types of Unconventional PR. You’re probably familiar with the first type: the publicity stunt.

The second type of Unconventional PR is customer appreciation: small, scalable actions (like sending cookies or hand-written notes to customers) that increase goodwill and word of mouth.

Publicity Stunts

it already ranks as the third result for the Google search “shave.” This ranking is largely thanks to the 1,500+ sites that linked to their video.

Customer Appreciation

Customer appreciation is a simple way of saying “be awesome to your customers.”

Gifts

Hipmunk, a travel booking site, he sent out luggage tags and a handwritten note to the first several hundred people who mentioned the site on Twitter.

Contests and Giveaways

Shopify.com, a popular ecommerce platform, is famous for their annual Build A Business competition (and its six-figure prize).

Good customer support is so rare that, if you simply try to make your users happy, they are likely to spread the news of your great product.

Rather than spend money on marketing, Zappos focuses on creating the best customer experience possible, especially with their support team.

If Chargify is going to Austin, they email some of their customers in Austin and invite them out to dinner.

This has been one of the best ways to interact with their customers, understand how they can improve, and form real relationships with people who might otherwise be numbers in a customer database.

Search engine marketing (SEM) refers to placing advertisements on search engines

basic PPC terminology

Click-Through Rate (CTR) – the percentage of ad impressions that result in clicks to your site. For example, if 100 people see your ad and 3 of them click on it, you have a CTR of 3% (3/100).

Cost per Click (CPC) – the amount it costs to buy a click on an advertisement. CPC is the maximum amount you’re willing to pay to get a potential customer to your site.

Cost per Acquisition (CPA) – CPA is a measure of how much it costs you to acquire a customer, not just a click.

The 10% in this equation is known as the conversion percentage, which is the rate at which people “convert” by taking the action you want (in this case making a purchase).

For paid search in particular this measure is calculated with the following formula: CPA = CPC / conversion percentage.

The basic SEM process is to find high-potential keywords, group them into ad groups, and then test different ad copy and landing pages within each ad group. As data flows in, you remove under-performing ads and landing pages and make tweaks to better performing ads and landing pages to keep improving results.

Google’s Keyword Planner, you can discover the top keywords your target customers use to find products like yours. When you enter a term in this tool, it tells you how often your keyword (and similar terms) are searched. Other tools like KeywordSpy, SEMrush, and SpyFu are valuable for discovering keywords your competition uses to attract customers.

you will want to limit yourself to keywords with profitable conversion rates.

Running a Campaign A campaign is a collection of ads designed to achieve one high-level goal, like selling shoes.

You first create different ad groups. For example, if you’re an ecommerce store, you might create an ad group for each product type (e.g. sneakers, loafers, etc.). You then select keywords you want your ad groups to appear for (e.g. “Nike sneakers” for sneakers). After you’ve determined the ad groups and keywords you are targeting, create your first ad. When you write an ad, the title should be catchy, memorable, and relevant to the keywords you’ve paired with it. You will also want to include the keyword at least once in the body of your ad. Finally, you will want to conclude with a prominent call to action (e.g. Check out discounted Nike Sneakers!).

Once you set up your ads, you should use the Google Analytics URL Builder tool to create unique URLs (web addresses) that point to your landing pages. These URLs will enable you to track which ads are converting, not just the ones that are receiving the most clicks.

someone just starting out in this channel should begin testing just four ads. Four ads will give you a good baseline for the performance of SEM as a whole, while still allowing you to test different messaging, demographics, and landing pages.

tools like Optimizely or Visual Website Optimizer to run A/B tests on your landing pages.

Each of your ads and ad groups as well as your whole AdWords account have a quality score associated with it. This score is a measure of how well customers are responding to your ads. It includes many factors including CTR and how long people stay on your site after seeing your ad. A high quality score can get you better ad placements and better ad pricing. The quality score is Google’s way of rewarding advertisers for high quality advertisements.

Click-through rate has the biggest influence on quality score by a wide margin. Because your ad’s relevance to a particular keyword has the biggest impact on your CTR, you should tailor your ads to the keywords they’ll appear against, either manually or dynamically (for example by using AdWords’ Dynamic Keyword Insertion feature).

Several sources have mentioned that an average CTR for an AdWords campaign is around 2.0% and that Google assigns a low quality score to ads with CTRs below 1.5%. If any of your keywords are getting such low CTRs, rewrite those ads, test them on a different audience or ditch them altogether. Inflection makes it a priority to have a strong quality score, which gives them an advantage over less established companies. It also means they have more runway to optimize their ads and conversions.

When you set up a campaign, you can choose to advertise on the Google search network (traditional paid SEM), the Google content network (ads on non-Google sites), or both. For beginners and for those just testing this traction channel, the content network can be difficult to navigate. Yet once you have established profitable campaigns, you should consider expanding them to the content network, which includes millions of non-Google sites that serve Google’s ads.

Retargeting You should also consider luring people back to your site by retargeting through Google AdWords, or other sites like AdRoll or Perfect Audience. With retargeting, users that visit your site will see your ads elsewhere on the Internet. These ads often convert at a higher rate, as they are aimed at prospects who have already visited your site at least once.

For example, suppose you’re a shoe store and a customer put some Nikes in her cart, but didn’t complete the checkout process. With retargeting, you could show her an ad for that type of shoe. This personalization makes such ads particularly effective, often generating 3–10x higher CTRs.

However, be forewarned that it may feel a little creepy to certain people depending on what data you are using to retarget. People increasingly don’t like ads following them around the Internet, especially those that are a reflection of activities they consider personal or private.

Google’s Conversion Optimizer. It analyzes your conversion tracking data and automatically adjusts your ads to perform better. After you’ve been running a campaign for a while, using this tool can make your CPAs and keyword targeting better than you would be able to on your own.

If you decide to use the Conversion Optimizer, know that it can take time for Google to build a robust prediction algorithm for your campaign. Also, it cannot build a fresh campaign for you to target an entirely new group of customers. However, if you’re looking to optimize a long-running campaign you’ve been running for a while, the Conversion Optimizer is a great way to reach your goals.

You can use negative keywords to prevent your ads from showing for certain keywords. You specify words that you don’t want your ads to appear for: if you’re selling eyeglasses, you want to prevent your ads from showing to people who search “wine glasses” or “drinking glasses,”

One more advanced tactic is using programming scripts to automatically manage your ads. You might use scripts to set up new ads for certain keywords or to change existing ads. Scripts are especially helpful if you are managing a large number of ads or keywords.

The largest display ad networks are Google’s Display Network (also known as the content network), Advertising.com (owned by AOL), TribalFusion, ValueClick, and Adblade.

“The interesting thing about display advertising is that somebody doesn’t have to be directly related to whatever your product is to find out about it. For instance, if you’re selling some sort of weight-loss product, you don’t have to use terms in your display campaign about losing weight. You can use terms relating to nutrition or carbohydrates, because you know if someone starts to read about those things, they have an interest in maintaining or losing weight in some way.”

Mike tests ads in groups of 5 and looks for places where conversions are below 10%. If that’s the case, there’s likely a mismatch between the ads and the sales page, so he either heavily tweaks or stops running them altogether. He also uses survey tools to ask users on his landing pages why they opted into an offer, and uses that information to further improve his landing pages.

The Deck, which targets the niche audience of Web creatives and enforces a rule of only one ad per page.

Another network, BuySell Ads, offers advertisers a self-service platform for buying ads directly from publishers. In addition to buying and selling display advertising, BuySell Ads allows advertisers to purchase space on mobile websites, Twitter accounts, mobile apps, email newsletters, and RSS feeds. With their flexibility and low starting cost, BuySell Ads is an easy way to start testing this traction channel.

He approached bloggers whose readers likely would enjoy Mint and offered to pay $500 to put a banner ad on their site.

To get started in display advertising, first understand the types of ads that work in your industry. Tools like MixRank and Adbeat show you the ads your competitors are running and where they place them. Alexa and Quantcast can help you determine who visits the sites that feature your competitors’ ads. Then you can determine whether a site’s audience is the right fit for you.

Social ads, by contrast, work especially well for demand generation, i.e. generating interest from new potential customers. People who see these ads may not have any intention of purchasing now – they may not even be familiar with the company or its products. That’s ok. The goal of social ads is often awareness-oriented, not conversion-oriented. A purchase takes place further down the line.

Adaptly gives companies one platform to manage and place social ads across many sites.

You should only employ social advertising dollars when you’ve understood that a fire is starting around your message and you want to put more oil on it. Getting that spark started is based on what you’re trying to say: startups do the opposite of this all the time where they waste tens of thousands of dollars trying to push a message that nobody cares about.

With one $5,000 video, Dollar Shave Club (mentioned in chapter 8) reached the same number of people as Gillette does in a year with their $60 million marketing budget. That’s because their video was so engaging that viewers felt compelled to share it.

Warby Parker has done this well. They sells eyeglasses by mail, let you try them on, and then send them back for free. When you receive your glasses, they encourage you to post pictures of yourself to social sites for feedback from others. It is a fun, useful and engaging process.

content distribution networks like Outbrain and Sharethrough. Each of these ad networks promotes your content on popular partner sites like Forbes, Thought Catalog, Vice, Gothamist and hundreds more. These native ad platforms make your content look like any other piece of (native) content on the target site.

LinkedIn ads allow targeting by job title, company, industry and other business demographics,

Twitter also has roughly 250 million users. Twitter’s ads come in the form of sponsored tweets that appear in users’ feeds. They also have a Twitter cards ad unit that allows advertisers to capture user’s emails who opt-in.

effective approaches on Twitter is to turn on paid advertising around real-time events that your audience cares about (e.g. sportswear ads during major sporting events).

“When you buy a Facebook ad, you’re buying more than just a targeted fan; you’re buying the opportunity to access that fan’s social graph. With the proper incentives, fans will share and recommend your brand to their connections.”

StumbleUpon – With over 25 million “stumblers,” StumbleUpon has a large potential userbase looking for new and engaging content. A recent case study showed that StumbleUpon was the #2 referrer of social media traffic, just behind Facebook.

The downside to traffic from StumbleUpon is that its users are difficult to engage – most users are likely to click off your page as quickly as they came to it. This means you have to make sure to engage these users right away. Blog posts, infographics and video content can do well on the site.

Foursquare – With over 45 million users, Foursquare is the largest location-based social network. Foursquare ads can work well if you wish to engage a targeted, local population.

Tumblr – Tumblr is all about helping its 100+ million users discover high-quality content.

reddit – With over two billion monthly page views and a thriving community, reddit is one of the most popular content sites in the world. reddit ads can take the form of sponsored links that hover at the top of reddit’s pages or sponsored ads along the sidebar. The most successful reddit advertisements are controversial or funny. These types of ads encourage redditors (the unofficial name of reddit users) to engage with it by leaving comments and upvoting as if it were any other content on the site.

YouTube

There are plenty of other major sites you can target for social ads – BuzzFeed, Scribd, SlideShare, Pinterest, etc.

To run cheap tests you look for remnant advertising. Remnant advertising is ad space that is currently being unused. For example, publications accept almost any price when selling empty inventory near print deadlines: after all, it is a complete loss for them if they don’t sell that space.

“If dealing with national magazines, consider using a print or ‘remnant ad’ buying agency such as Manhattan Media or Novus Media that specializes in negotiating discounted pricing of up to 90% off rate card. Feel free to negotiate still lower using them as a go-between.”

if you’re selling a product geared towards twenty-somethings, you are throwing your money away if you advertise in a newspaper.

there are some ad campaigns that are uniquely suited for a newspaper setting. A few examples are time sensitive offers (like for events or sales), awareness campaigns (often as part of a larger marketing effort across multiple channels), and widely publicized announcements (like for product launches).

It may surprise you to learn how effectively you can target customers through direct mail. You can build up a list of customers on your own or buy a list from a mailing organization. Simply do a web search for “direct mail lists” to find companies selling such information.

Here are a few good direct mail tactics to use if you are interested in pursuing direct mail:

self-addressed envelope to increase the number of recipients that respond (if doing a postal direct-response campaign).

Include an intriguing and compelling offer.

Have a clear action you want the recipient to take (visit your website, come into your store, buy a certain product, sign up for an email list, etc.).

Local print ads include buying space in local publications (church bulletin, community newsletter, coupon booklet, etc.), flyers, directories, or calendars.

Unorthodox strategies like hanging flyers in areas where your potential customers visit can be a surprisingly effective way to get some early traction for your company.

For example, InstaCab hired cyclists to bike around San Francisco and hand out business cards to people who were trying to hail taxis.

billboards are extremely effective for building awareness around events – concerts, conferences, or other activities coming to an area.

Transit ads are placed in or on buses, taxis, benches, and bus shelters. Most ads of this kind can be effective as a direct-response tool because people in transit are a captive audience.

Traditionally, products in the following categories have used infomercials to gain serious traction: Workout equipment or programs Body care products Household products (kitchen, cleaning) Vacuum cleaners Health products (e.g. juicers) Work from home businesses

In SEO, there are two high-level approaches to choose from: fat-head and long-tail strategies. Both refer to different parts of the Search Demand Curve.

A fat-head strategy involves trying to rank for search terms that directly describe your company. For example, a toy company that specializes in wooden toys might try to rank for “wooden toys.” With regards to the figure above, this strategy means working in what is labeled the “Fat Head” and the “Chunky Middle.” On the other hand, a long-tail strategy involves trying to rank for more specific terms with lower search volumes. That same toy company might try to rank for searches in the “Long Tail” like “poisonous chemicals in wooden toy blocks” or “wood puzzles for 3 year olds.” Even though these searches have lower volumes, in the aggregate they account for the majority of all searches.

The best way to determine if a fat-head SEO strategy is worthwhile is to research what terms people use to find products in your industry, then see if the search volumes are large enough to make it a worthwhile growth opportunity. Google currently provides a useful tool for this process called Keyword Planner (part of Google AdWords). You can type in search terms that describe your products, and then see the search volumes for these terms. You can also get keywords by looking at your competitors’ websites and seeing what words they use in their homepage titles and headers.

You want to find terms that have enough volume so that it would be meaningful if you captured ten percent of the searches for that term.

You don’t want to spend resources ranking for a term that only gets 200 searches per month.

If, however, your product is so new that there’s no search demand for it yet, a fat-head SEO strategy will not be as effective.

as an example: “The problem with Uber is that there’s not a lot of search demand for it. I mean nobody searches for ‘alternatives to taxi cabs that I can hire via my phone.’ It’s just not a thing. And this is a problem with a lot of startups that are essentially entering a niche where nothing had existed previously… There’s just not search volume.

What works is finding the topics and the people that will be customers and building content to attract them, rather than just finding the keywords that work in Google.”

If you find keywords with good volume, test them by buying Google ads for your chosen keywords

other words, there is no point wasting time on terms that don’t yield traction. A common example is for ecommerce stores that rank well for terms with “free” in them – usually those visitors won’t pay!

go over to Google Trends to see how your keywords have been doing. Have these terms been searched more or less often in the last year? Are they being searched in the geographic areas where you’re seeking customers? You can also use Google Trends to compare keywords to one another and see which have higher relative search volumes.

The next step in selecting keywords is determining the difficulty of ranking highly for them. Using tools like Open Site Explorer, determine the number of links competitors have for a given term. This will give you a rough idea of how difficult it will be to rank highly. If a competitor has thousands and thousands of links for a term you want to rank for, just realize it will likely take lots of focus on building links and optimizing for SEO to rank above them.

For example, it will be extremely difficult to rank for the term “accounting software.” However, you can focus on ranking for more niche terms (e.g. “accounting software for hairdressers”) by making your keywords more focused.

Once you’ve settled on a few terms that will move the needle, there are only two steps left. First, orient your site around terms you’ve chosen. If you are an accounting software site and “small business accounting software” is your main term, include that phrase in your page titles and main site.

Second, you want other sites to link to your site, ideally using the terms you want to rank for. The more links you can get that utilize the terms you want to rank for, the better. That is, an article may read something like “XYZ Company releases version of small business accounting software” (where ____ denotes the link).

Long-Tail SEO Strategy The majority of searches conducted through search engines are “long-tail” searches. Essentially, long-tail searches are sets of keywords that are highly specific – things like “owls of eastern Pennsylvania”

the Google Keyword Planner is the first way to evaluate whether a long-tail SEO strategy may be effective for you.

What are search volumes for a bunch of long-tail keywords? Do people search for many variations of your keywords?

look at the analytics software you have on your site (such as Google Analytics or Clicky). These applications will tell you some of the search terms people are using to get to your site right now.

If you do not have any content that is drawing users to your site via long-tail keywords, you have two choices. First, you could create some and see which search terms are bringing people to your site. Second, look at competitors’ websites to determine if they are getting meaningful long-tail SEO traffic. Here are two signs that they are: They have a lot of landing pages. You can see what types of pages they are producing by searching site:domain.com in a search engine. For example, if I wanted to see how many landing pages Moz has created targeting long-tail keywords, I could search site:moz.com and get a sense of how many landing pages they have. Check out Alexa search rankings and look at the percentage of visitors your competitors are receiving from search. If you look across competitors and one site receives a lot more visitors from search than others, you can guess they have some kind of SEO strategy.

Long-Tail SEO Tactics

“You build a machine that takes money on one end and spits rankings out the other. For example, with Bingo Card Creator I pay money to a freelancer to write bingo cards with associated content about them that get slapped up on a page on the website. Because those bingo cards are far too niche for any educational publisher to target, I tend to rank very well for them. For 10–20 dollars per search term, you can pay someone to write an article that you won’t be embarrassed to put on your website. For many SaaS [Software as a Service] startups, the lifetime value of a customer at the margin might be hundreds or thousands of dollars. So, they [articles and landing pages] don’t need much traffic at all on an individual basis to aggregate into a meaningful number to the business.

built up a series of subpages on his site, each of which targeted a bucket of keywords he wanted to rank for.

For each of these subpages, he hired a freelancer to research the term and create a unique set of bingo cards and associated landing pages.

You can implement this tactic by designing a standard landing page with some basic content and a simple layout structure. Then use oDesk or Elance to find freelancers willing to churn out targeted articles for long-tail topics that your audience is interested in.

One tactic that startups have succeeded with (especially if your product involves geography in any way) is to choose several keywords and target them with geographically modified content. For example, if you want to reach individuals searching for “foreclosed homes,” creating landing pages for targeting terms based on geography would work well. This means generating landing pages for searches like “recently foreclosed homes in Queens, New York City.”

Automation Another way to approach long-tail SEO is to use content that naturally flows from your business. To evaluate whether you could use this tactic, ask yourself: what data do we collect or generate that other people may find useful? Large businesses have been built this way: Yelp, Trip Advisor, Wikipedia have all gained most of their traffic by producing long-tail content. This tactic was also the main channel for Gabriel’s last startup, Names Database (which he sold to Classmates.com for $10 million). When people searched for old friends and classmates, they would come across the Names Database page of the individual they were searching for. These pages were automatically generated from the data that was naturally gathered by the product. After they were indexed by search engines, they sent a great deal of organic traffic from individuals doing long-tail searches for individual names.

Sometimes this data is hidden behind a login screen and all you need to do is expose it to search engines.

Link Building Whether you pursue a fat-head or long-tail strategy, SEO comes down to two things: content and links. The more aligned your content is with the keywords it’s targeting, the better it will rank.

Here are some ways to build links: PR – when you are covered by online publications, reporters will link to your website (see chapter 7). Product – with some products, you can produce web pages as part of your product that people naturally want to share. A great example is LinkedIn profile pages. Content marketing – creating strong, relevant content that people want to read, and thus share (see chapter 13).

Widgets – giving site owners useful things to add to their sites, which also contain links back to yours.

The point of creating amazing content in this context is to make it remarkable enough that people actually link to it. Rand suggests using infographics, slideshows, images and research to drive links.

general people who run blogs are big social sharers. Reporters are usually good targets as well.

Links from more reputable places like newspapers carry more weight with search engines than lesser-known sites.

To sum up, links between sites are the currency of SEO.

Open Site Explorer can tell you how many links you are getting and where they are coming from. You can also look at your competitors’ link profiles to get ideas of other places to target for links.

In SEO, there are few big don’ts. The biggest: don’t buy links.

Content Marketing

Rick Perreault, founder and CEO of Unbounce, told us how Unbounce started using their blog as a marketing platform the day they started building their application. In fact, they began blogging a year before they even had a product!

Unbounce’s blog raised their profile in the online marketing industry and is still their main source of traction.

Rick Perreault, founder, made a full-time blogger his first hire. From day one (literally), Rick began sketching out the product features for Unbounce on the company blog.

if I had spent money on advertising in January, that’s it. That money is spent. If you invest in content, it gets picked up by Google. People find it, they share it, and it refers customers almost indefinitely.

By the time we launched in the summer of 2010, we were doing 20,000 unique visitors per month to the blog… It was up and running for almost a year before we launched.

The Unbounce team relied heavily on social media to drive readers to their blog. After every post they wrote, they’d ping influencers on Twitter asking for feedback and thoughts. They also engaged with their target customers by writing useful answers on targeted forums like Quora.

They gave away free infographics and ebooks, like 101 Landing Page Optimization Tips, to grow their email list. This meant that when they finally opened up their product beta, they were swamped with customers.

Sam Yagan, the founder of OkCupid, mentioned that they tried several different channels before launching the blog. For example, they hired a PR firm to pitch interesting news stories based on OkCupid’s data – stories such as how higher gas prices led to a lower willingness to meet potential matches or how women found Eli Manning more attractive than Tom Brady. Using a PR firm in this manner didn’t work out. However, writing these same types of stories on their own blog did. They found that presenting stories on their blog and pitching them to media afterwards was far more effective. Keeping the stories in house also allowed them to deal with controversial topics traditional PR firms were shying away from.

They intentionally wrote controversial posts (e.g. How Your Race Affects the Messages You Get) to generate traffic and conversation. Each of their posts took a month to write and drew on the data they had from studying the usage patterns of their members.

The most common hurdle in content marketing is writers block. To overcome it, simply write about the problems facing your target customers.

Every single industry has issues people struggle with. In Unbounce’s case, they wrote posts about landing page optimization, PPC (pay-per-click) conversions, and so on. OkCupid’s posts like “Exactly What to Say In Your First Message” addressed the concerns of online dating users in an entertaining, even controversial way.

Unbounce mixes mini-courses, ebooks, and infographics with their typical blog posts, often in exchange for a reader’s email address. They’ve found that infographics are shared about twenty times more often than a typical blog post and have a higher likelihood of getting picked up by other online publications.

For example, in 2012 Unbounce released the “Noob Guide to Online Marketing.” This infographic drove tens of thousands of downloads and thousands of paying customers. One year later it was still shared on Twitter about once an hour.

If what you’re writing isn’t useful to people, it doesn’t matter how hard you try to spread your content on Twitter. It just won’t spread.

it’s unlikely that your blog will see much traffic, regardless of content quality. Even Unbounce was receiving less than 800 monthly visits after six months of consistently putting out content. It took a while for them to grow to 20,000 monthly visitors.

Unbounce engaged in any online forum where conversations were taking place about online marketing, and did their best to contribute. They were particularly successful reaching out to influential people on Twitter. They would simply follow marketing mini-celebrities and ask them for feedback on recent posts.

One of the best methods of growing your audience is guest posting. This tactic is especially powerful in the early days when you essentially have no audience to work with yourself. Unbounce started doing guest posts on other popular blogs after just three months of blogging on their own.

monitor social mentions and use analytics to determine which types of posts are getting attention and which are not.

Quick: name three venture capitalists or ask your startup friends to do so. Many people will mention Fred Wilson, Brad Feld or Mark Suster. Why? Because they have popular blogs.

Recognition as a primary voice in an industry leads to opportunities to speak at major conferences, give press quotes to journalists, and influence industry direction.

benefits of having a strong company blog came in the form of co-marketing opportunities.

Having a strong company blog can positively impact at least eight other traction channels – SEO, PR, email marketing, targeting blogs, community building, offline events, existing platforms and business development.

Email Marketing

Customer.io, a startup that makes it easy for companies to send email based on actions your customers take

At the bottom of your blog posts and landing pages, simply ask for an email address.

Another popular approach to building an email list is creating a short, free course related to your area of expertise. These mini-courses are meant to educate potential customers about your problem space and product. At the end of the course you have a call to action, which depends on your product needs. You could ask users to purchase your product, start

consider advertising on email newsletters complementary to your product, or via other channels (SEM, social and display ads). Many email newsletters accept advertisers, and if not you can reach out directly.

User activation is a critical and often-overlooked component of building a successful product. The meaning of “activation” depends on the product. For Twitter, it means sending out a tweet or following five people. For Dropbox, it means successfully installing the application and uploading at least one file.

A popular approach is to create a sequence of emails that slowly exposes your new users to the key features in your product.

Instead of throwing everything at them right away, you can email them five days after they’ve signed up and say, “Hey, did you know we have this feature?”

lifecycle emails, where the email cycle begins when a customer signs up for your product and ends when the customer becomes active (i.e. the “lifecycle” of the customer).

Let’s take Dropbox as an example. If you create an account but never upload a file, you are not active.

For those who fail to complete step one, create a message that automatically emails them when they’ve dropped off. Repeat this at every step where users could quit,

With tools like Vero and Customer.io, you can create email messages like these tailored to specific groups of users.

If you’re an active Twitter user, think of every email you’ve ever gotten from them about someone mentioning you in a tweet, a friend of yours who just signed up, or their weekly digest of popular tweets you may have missed.

if you have a social networking product, you could send a simple email to users who haven’t signed in for two weeks. Dating services often showcase profiles or mention unread messages. More business-oriented products usually focus on reminders, reports, and information about how you’ve been using (and getting value) from the product.

Mint sends you a weekly financial summary that shows your expenses and income over the previous week.

Planscope (a project planning tool for freelancers) sends a weekly email to his customers telling them how much they made that week.

Over the course of a month, WP Engine will then send that prospect an email course about WordPress speed and scalability – three quick ways to improve your site speed, why hosting is important for business, etc. Near the end of this mini-course, WP Engine will make a pitch to sign up for their premium WordPress hosting service.

Email retargeting is another tool you can use for revenue. For example, if one of your users abandoned a shopping cart, send them a targeted email a day or two later with a special offer for whatever item they left in the cart. Targeted emails will always convert better than an email asking for a sale out of the blue.

For feature-based freemium products, emails that explain a premium feature a customer is missing out on can have high conversion rate. For example, if you ran a dating website, you could explain that upgrading to a premium plan will lead to more dates. If you have a subscription product, ask them to upgrade to annual billing, which guarantees they will not cancel within the next year.

Timing is especially relevant to get higher open rates: many marketers suggest sending emails between 9 a.m.–12 p.m. in your customer’s time zone or scheduling emails to reach them at the time they registered for your email list (e.g. for users who signed up for your list at 8 p.m., email them at 8 p.m.). This is another variable you should test yourself, as its efficacy varies depending on the product.

One trick Colin told us about was not to send any email that comes from a “Noreply” email address (e.g. noreply@facebook.com). Instead, use that opportunity to send the automated email from a personal address and allow the recipient to reply with questions or problems they have.

Effective Engineering as Marketing

When you enter your site’s web address into Marketing Grader, you get back a customized report about how well you’re doing with your online marketing (social media mentions, blog post shares, basic SEO). This tool is free and gives you valuable information. It also provides HubSpot with information they use to qualify you as a potential prospect. After all, someone who wants to evaluate the success of their site’s marketing is a good candidate for HubSpot’s marketing tool. These are quality leads!

Like Marketing Grader, each solves a problem that an ideal Moz customer has. Followerwonk allows users to analyze their Twitter followers and get tips on growing their audience. Open Site Explorer allows users to see where sites are getting links, which is valuable competitive intelligence for any SEO campaign.

WP Engine has cornered the market on high-end WordPress hosting. This is thanks in part to their free tool that checks how fast your WordPress site loads.

The WP Engine speed testing tool asks for only an email address in exchange for a detailed report about your site’s speed. It also gives you the option to opt in for a free mini-course about improving the speed of your blog. Once they have a user’s email, they send them tips about improving their site speed and end with a sales pitch, as described in the email marketing chapter.

marketing channels that have high leverage (i.e. write it or build it once – and get value forever).

We think of each piece of content (blog article, app, video, whatever) as a marketing asset.

This asset creates a return – often indefinitely.

We contrast that to buying an ad which does not scale as well. When you advertise, the money you’re spending is what drives how much attention you get.

Contrast this to inbound marketing whereby the cost of producing a piece of content is relatively constant. But, if it generates 10x more leads in a month, your marginal cost for those extra leads is almost zero.

One tactic to really maximize impact is to put your tools on their own website. This simple technique does two things. First, it makes them much easier to share. Second, you can do well with SEO by picking a name that people search often so your tool is more naturally discoverable

domains like cohortanalysis.com and querymongo.com,

Here are several tools you can use to find all the influential bloggers in your space: Search Engines – Simply search for things like “top blogs for x” or “best x blogs.” YouTube – Doing a simple search for your product keywords on YouTube shows you the most popular videos in your industry. These videos are often associated with influencers that have blogs, and you use references to their videos as an icebreaker to start building a relationship with them. This tactic can be applied to other video sharing sites, such as Vimeo and Dailymotion. Delicious – Delicious allows you to use keywords to find links that others have saved, which can unearth new blogs. Twitter – Using Twitter search is another easy way to find blogs in a niche. You can also use tools like Followerwonk and Klout to determine the top Twitter accounts in your industry. Social Mention – Social Mention helps you determine the sites that have the most frequent mentions for your keywords.. Talk to people – The most effective way to figure out what your target audience is really reading online is by asking directly!

phase I goal was to get 100,000 users within six months.

Noah created a quant-based marketing spreadsheet. His spreadsheet listed traction channels Mint planned to mine for potential users. Then, Noah ran the numbers in terms of traffic, click-through rates (CTR), and conversions (actually signing up for their product in this case), and calculated the number of expected users from each channel strategy.

Next, he confirmed the channels Mint would focus on by running tests that seemed promising. To test blogs, he contacted a few that were representative of different customer segments, and got them to write articles about Mint. This method is a version of the Bullseye Framework we presented in the introduction: he systematically set out to determine which channel would allow him to accomplish his specific traction goal.

created a long list of blogs to target, and set about contacting those blogs about guest posts, coverage, and placing Mint badges on their sites.

VIP Access Mint did something that few startups had done before them to increase awareness and build excitement for their launch: they asked people on their pre-launch waiting list to recommend Mint to their friends in return for priority product access.

As part of the signup process, users could embed an “I want Mint” badge on their personal blogs, Facebook, or other websites. Users that drove signups through these badges were rewarded with VIP access before other invites were sent out.

Mint had 600 blogs display the badge and 50,000 users signed up through them. This tactic also gave Mint an SEO boost from the hundreds of new links pointing to mint.com.

sponsoring blogs. Each sponsored blog would put a small Mint advertisement on their site for a period of time. Noah tracked each advertisement to see which blogs were most effective and how many people signed up.

Many personal bloggers have strong readerships but don’t make money from their writing. Noah offered them a way to show off a cool new service and make some money doing it. Noah simply sent them a message with “Can I send you $500?” as the subject and told them a bit about the product and what Mint was trying to do. Most were happy to share a useful product with their audiences and make some money in the process.

Mint also created content partnerships with larger sites like The Motley Fool, a personal investing site. With this content partnership (each site contributed content to the other), Mint exposed their valuable, free product to over three million readers who would likely be interested in their service.

To get traction, Noah pulled together free bundles for blogs and conferences, such as SXSW. One of the first bundles AppSumo did was specifically for Lifehacker, a popular productivity blog. Rather than just trying to pitch Lifehacker on his new startup, Noah built a product bundle for them before reaching out. Lifehacker couldn’t turn down a bundle geared specifically towards their users.

Sharing links is at the heart of many large communities on the web (e.g. reddit, Hacker News, Inbound.org and Digg).

Quora, reddit, Codecademy, and Gumroad saw similar success from initial postings on Hacker News because their products were a good fit for users of that site. The

There are a variety of tools you can use to uncover relevant blogs including YouTube, Delicious, StumbleUpon, Twitter, search engines, Google Alerts and Social Mention.

major types of business development partnerships:

Standard Partnerships

two companies work together to make one or both of their products better by leveraging the unique capabilities of the other.

Apple/Nike partnership

Joint Ventures

two companies work together to create an entirely new product offering. These types of deals are complex and often require large investments, long periods of time, and (sometimes) equity exchanges.

Licensing Licensing works well when one company has a strong brand an upstart wants to use in a new product or service.

Distribution Deals In these deals, one party provides a product or service to the other in return for access to potential customers. Groupon’s core business is structured like this: they work with a restaurant or store to offer a discount to Groupon’s mailing list.

Kayak used their search technology to power an AOL-owned travel search engine, which drove a lot of traffic right out of the gate.

At Half.com, they identified three key things needed to succeed: technology, inventory, and distribution. With these in mind, Chris formed strategic partnerships to increase their chances of success.

“Create an exhaustive list of all of your possible [partners]. Don’t ever list Condé Nast without listing every single other publisher you can think of. Make a very simple spreadsheet: Company, Partner Type (Publisher, Carrier, Reseller, etc.), Contact person/email, Size, Relevance, Ease of Use, and then a subjective priority score. That list should be *exhaustive*.

There’s no reason why any company shouldn’t have 50 potential business development partners in their pipeline, maybe 100, and be actively working the phones, inboxes, and pounding the pavement to get the deals you need to get – be it for distribution, revenue, PR, or just to outflank a competitor.

If you go in and impress the top 50 folks in your space, it makes it that much harder for a competitor to get a deal done – because you’re seen as the category leader.”

Once you have a list of potential partners, send it to your investors, friends, and advisors for warm introductions.

I’d encourage people to think about the attributes of your partner. So rather than saying ‘I want to go after XYZ brand’, say ‘we want to go after Internet retailers that are between 50 and 250 on the IR [Internet Retailer] 500 – because that puts them in this kind of revenue range – and have a director of ecommerce.”

key to scaling is that “C deals” should get no time from sales. They should be owned by marketing.”

Affiliate Programs An affiliate program is an arrangement where you pay people or companies for performing certain actions (like making a sale or getting a qualified lead).

It is much more convenient for online retailers to go through existing retail affiliate networks if they want to use this traction channel.

generally fall into the following major categories:

Coupon/Deal sites. These sites (e.g. RetailMeNot, CouponCabin, BradsDeals, Slickdeals) offer discounts to visitors and take a cut of any sale that occurs.

For example, when you search for “Zappos discount,” RetailMeNot is likely to rank highly for that search term. When you visit the RetailMeNot page that comes up, you get coupon codes for Zappos. If you click through and buy something using a code, RetailMeNot gets a percentage.

Upromise and Ebates have reward programs that offer cash back on purchases made through their partner networks. They earn money based on the amount their members spend through retail affiliate programs. For example, if 1,000 members buy gift certificates to Olive Garden, Upromise will get a percentage, of every dollar spent. Then, they pay part of what they earn back to their members.

Aggregators. These sites (e.g. Nextag, PriceGrabber) aggregate products from retailers. They often add information to product listings, like additional ratings or price comparisons. Email lists. Many affiliates have large email lists they will recommend products to, and take a cut when subscribers make purchases. Vertical sites. There are hundreds of thousands of sites (including individual blogs) that have amassed significant audiences geared towards a vertical (e.g. parenting, sports, electronics, etc.).

Information products include digital products like books, software, music, and (increasingly) education. Since it doesn’t cost anything to make another digital copy, selling info products through affiliate programs is quite popular. Creators will give large percentages to affiliates that promote their products.

far the largest affiliate network for information products is Clickbank, where affiliate commissions often reach 75%. ClickBank has over 100,000 affiliates and millions of products.

Lead Generation Lead generation is a $26 billion dollar industry. Insurance companies, law firms and mortgage brokers all pay hefty commissions to get customer leads. Depending on the industry, a lead may include a working email address, home address, or a phone number. It may also include more qualifying information like a credit score.

Affiliate programs are popular with financial services and insurance companies because the value of each customer is so high. Think of how much you spend on auto or health insurance annually: that should give you a sense of why a lead is so valuable. In fact, insurance companies are top Google AdWords spenders, often paying $50–100 for a single click!

popular lead-gen networks like Affiliate.com, Clickbooth, Neverblue and Adknowledge.

Creating Your Own Affiliate Program The other option is to build your own affiliate program independent of an existing network. With such a program, you recruit partners from your customer base or people who have access to a group of customers you want to reach. One benefit of this approach is you don’t have to pay your affiliates all in cash. Instead, you can use the features of your product as currency. For example, if your startup has a freemium business model you could give away certain features or extend subscriptions. In chapter 6 (on viral marketing) we explained how Dropbox’s referral program involves giving people free storage space. Another example is QuiBids, a top penny auction site. They built out a referral program for their current users that gives free bids to users who refer other users.

After getting customers involved in your affiliate program, you will want to contact content creators, including bloggers, publishers, social media influencers and email list curators. Monetizing blogs can be difficult, so these content creators often seek other ways to make money.

We interviewed Maneesh Sethi, popular blogger at HackTheSystem, to talk about how companies can build relationships with people like him. Maneesh has been an affiliate for many products he’s personally used, including a program that taught SEO tactics. He loved the program, so he contacted the company and worked out a deal with them to give him a commission for each new customer he sent their way. After agreeing to terms, Maneesh sent out an email to his list mentioning how the SEO program had helped him get better rankings on Google. That single offer has made him nearly $30,000 in two years.

the best way to reach someone like him is by building a relationship: help the content creator where you can, write guest posts, provide free access to your product, etc. In turn, they’ll happily promote you if you have a truly great product.

The simplest approaches are to pay a flat fee for a conversion (e.g. $5 for a customer that purchases something) or pay a percentage of a conversion that occurs (e.g. 5% of the price a customer pays).

More established affiliate programs get more complex by segmenting products and rewarding top affiliates. eBay gives coupon codes to their affiliates for product categories they want to push. Tiered payout programs are also popular among larger programs. In this structure, affiliates get paid a percentage (or flat fee) of each transaction. The percentage is based on the number of sales you make – if you drive more transactions, your rate goes up, and you make more money.

Commission Junction – CJ has many of the largest Internet retailers on their platform. They are also somewhat pricey: it costs upwards of $2,000 to sell your product through their network.

ClickBank – The leading platform for anyone selling digital products online (courses, ebooks, digital media).ClickBank is relatively cheap to start with,

Affiliate.com – Affiliate.com promises a very strict affiliate approval process, which they claim means higher quality traffic for their advertisers.

the Pepperjam Exchange encompasses multiple channels (mobile, social, offline retail, print, etc.). They promote their customer support and transparency as selling points for their network, which costs $1,000 to join.

ShareASale – This affiliate network has over 2,500 merchants and allows advertisers to be flexible in determining commission structures. It costs about $500 to get started.

Adknowledge – They offer traditional ad buying services in addition to affiliate campaigns.

Linkshare – They play in both the affiliate and lead generation spaces. They help companies find affiliates and build lead gen programs for them.

MobAff – A mobile affiliate network that companies can use for both CPC and CPA.

Neverblue – Neverblue is targeted toward advertisers that spend more than $20,000 per month.

Clickbooth – Clickbooth uses search, email, and many websites to promote brands like DirecTV, Dish Network, and QuiBids.

WhaleShark Media – This media company owns some of the most popular coupon sites in the world, including RetailMeNot and Deals2Buy.com. Companies can partner with them to drive coupon-based affiliate transactions through their sites, which often appear near the top of Google for any “term + coupon” search.

figure out where your potential customers hang out online. Then, create a strategy to target users these existing platforms.

the company’s engineers developed a “Post to Craigslist” feature that would allow you to list your bed on Craiglist. Though it eventually shut down this feature, it drove tens of thousands of Craigslist users back to AirBnB to book a room.

“Every year there’s a new platform, new device, new something, and as somebody who’s starting a company you should consider if there’s something really cool you can do on an upcoming platform.

I think people see this as gambling. People take the ‘I will support this platform when it has a million users’ type of approach. That’s a fine thing to do if you are EA or Adobe or something like that.

But for a startup, you really aren’t in that position. When a platform is popular, it’s crowded… A lot of people have cool apps and could do really, really well if they were to get this initial push, and that initial push is free if you do it early.

he schedules at least one dinner for Grasshopper customers at every event they attend. One step beyond dinners is throwing a party near the show center. Like dinners, these are a great way to loosen up and chat with others at the event. You could co-sponsor these with other startups to keep costs reasonable.

attracted its customers by sponsoring hackathons, conferences, and meetups large and small.

Attracting these customers to one location or going to a place where they meet in person can be the most effective way to reach them.

We created a Twitter visualizer and negotiated with the festival to put flat panel screens in the hallways… We paid $11K for this and set up the TVs ourselves. (This was about the only money Twitter’s *ever* spent on marketing.) We created an event-specific feature where you could text ‘join sxsw’ to 40404. Then you would show up on the screens. And, if you weren’t already a Twitter user, you’d automatically be following a half-dozen or so “ambassadors,” who were Twitter users also at SXSW. We advertised this on the screens in the hallways.”

he organized his own conference and invited founders of successful companies to talk about how lean principles worked in their startups.

First, Eric tested demand for his conference by asking his readers if they would be interested.

The Startup Lessons Learned conference was about promoting Lean Startup ideas.

Eric live-streamed the conference to meetup groups across the country.

Small meetup groups are more effective than you may expect, especially in the early stages. Seth Godin used meetups when launching his book Linchpin he organized Linchpin meetups in cities all across the country through his blog. In total, more than 10,000 people attended these events, where they connected over ideas that Seth wrote about and built relationships with each other.

Great meetups can create lasting community connections. The meetup groups that watched the livestream of the first Lean Startup conference continues to meet years after: over twenty cities still have regular “Lean Startup Circle” meetups. These events allow practitioners to continue to connect over the ideas in Eric’s book; they’ve also helped keep Eric’s book on the bestseller list.

Evite did this when they helped stage one of the largest parties in the Bay Area for Internet celebrity Mahir Cagri. The party was one of the premier social events of the year, and Evite was responsible for organizing and sending out all invitations. This event exposed Evite to their target customer in a memorable manner. Who doesn’t want a party invite? Attendees were then likely to use Evite when throwing their own parties.

They would throw parties where Yelp Elites (their term for top Yelp users) were allowed to RSVP first, given free food and swag, and treated like VIPs.

local university lecture hall is a good place to hold an event like this. Often, universities are willing to open their facilities if it’s for an educational purpose and if some of their faculty or students can attend. This type of mini-conference can be done for less than $500.

Sponsors may be interested in helping you cover the cost of the event. For MicroConf, companies with products built for startups offset the cost of putting on the conference.

Keeping attendee quality as high as possible is crucial so that those who attend the conference will learn a great deal from both the speakers and from other audience members. Rob has found the best way to do this is to make the ticket price relatively high, so that individuals with successful businesses are more likely to attend than those just starting out.

The structure of an event also plays a critical role in whether the experience works for you and the attendees. With MicroConf, Rob intentionally keeps it small so that attendees have a chance to meet everyone else at the event and the speakers could get to know the attendees.

Speaking Engagements

It’s relatively easy to get started in this channel – simply start by giving free talks to small groups of potential customers or partners. Speaking at small events can improve your speaking ability, give you some early traction, and spread your story or message.

Dan Martell is the founder of Clarity, an advice platform that connects founders with successful entrepreneurs.

Event organizers need to fill time at their events. If you have a good idea for a talk and see an event that aligns with an area of your expertise, simply pitch your talk to the event organizers. If your ideas are solid, they will want you.

Rather than pitch them directly on what he wants to talk about, he contacts them and asks them about the ideal topics they want to have speakers cover at an event. Once known, he then crafts the perfect pitch: one that hits on key points the organizers want to cover.

Start by speaking for free at co-working spaces, nonprofits, and smaller conferences or events. Use these smaller scale appearances to refine your talks and build your speaking reputation.

When you start a talk, the audience is usually thinking about two questions – why are you important enough to be the one giving a talk? What value can you offer me? These questions will be burning in their minds until you address them, so answer them immediately. For this reason, Dan told us he does his own introductions and talks to highlight how he started and sold his two previous companies (Flowtown and Spheric) for millions.

Once you’ve captured the audience’s attention, keep it with a compelling story. All successful talks tell a story: otherwise, the audience loses interest.

Your story is about what your startup is doing, why you’re doing it, and specifically how you got to where you are.

Leveraging Your Talks Record your speaking engagements. If you’re at an event of 250 people and you have given your best speech ever, you’ve still only reached 250 people. However, if you can record your best speech ever, you can post clips, thereby exposing your story to thousands of people who would never have seen it otherwise. Among this group will be conference organizers who will book you for future events.

Leveraging social media to reach people outside of the conference is a similar tactic. Rand Fishkin of Moz tweets his slides before every presentation, which lets his followers find out what he’ll be talking about. Then, when he posts a video of his talk, there is already some buzz and interest in hearing what he talked about.

Dan will even try to leverage social media during his talk. He asks for the audience’s “divided attention,” meaning he wants them to tweet and share good content from his presentation as he gives it. To facilitate this, he includes his Twitter handle on every slide and asks people to tweet at him if they really identified with something he said. This way, he can find out the content his audience enjoyed the most, while also growing his reach.

On top of asking his audience to tweet and text, Dan also gives the audience a call-to-action at the end of his presentations. This is a simple request of the audience – something like asking them to sign up to a mailing list or to check out a link where they can see his slides. This tactic tells him whether or not members of the audience found the information engaging enough to act on it.

Reusing Slides We already mentioned that Dan only prepares two talks that he delivers at speaking engagements. But, what if one conference asks for a twenty-minute presentation and another asks for sixty? It’s time-consuming to prepare a whole new talk: it’s more efficient to tailor your existing slides to a specific audience or event. As Dan said: “The best talks I’ve ever seen are where each slide is essentially a 7 minute story with a beginning, middle, and end. Once you get good at that, and you have these canned slides, you can change a 60 minute talk to a 20 minute talk just by taking slides out.”

the main driver for being a speaker in the first place is to build relationships. At most conferences there is a speaker’s dinner, where presenters get to meet each other and network. If there isn’t one scheduled, Dan usually takes the liberty of scheduling one. Often, this can be the most valuable part of a conference – you get to meet other individuals doing cool things.

Chris McCann started Startup Digest by emailing twenty-two friends in the Bay Area about local tech events. As the list grew, Chris started giving twenty-second Startup Digest pitches at events he attended. His pitches proved effective: membership grew into the low thousands in a matter of months. Today there are over 250,000 members of the Startup Digest community, and it all started with those 22 friends.

Meta is, of course, the place where you go to discuss the place. Take a moment and think about what that means. Meta is for people who care so deeply about their community that they’re willing to go one step further, to come together and spend even more of their time deciding how to maintain and govern it. So, in a nutshell, I was telling the people who loved Stack Overflow the most of all to basically … f**k off and go away.”

You can probably guess that every current Stack Exchange site launches with a Meta: a place where users can discuss how they can make the community better.

People who care enough about your startup’s mission to discuss with others are your coveted evangelists. They are the people you want to support in every possible way.

any individual that wrote about reddit would get an email from Alexis Ohanian (the founder), thanking them for their writing. Alexis also sent shirts, stickers, and other gifts to early users. He went so far as to coordinate an open bar tour for redditors, where redditors connected (and drank) on reddit’s dime.

Stack Overflow wanted to create the best question and answer site for developers – a community that truly helped developers get better at their jobs. Upon launch, Jeff established strict guidelines (decided on in tandem with the community) so that only practical, answerable questions would be allowed. Then he placed these guidelines on the Stack Overflow FAQ.

Every founder we talked to emphasized the importance of maintaining community quality. Wikipedia developed strict guidelines for everything from the types of articles to include on the site to how conflicts of interest should be handled.

Like Stack Overflow, reddit developed a karma system based on voting that determines what links and comments are displayed prominently.

Unfortunately, a common occurrence is that the quality of communities starts out strong but gets diluted over time as evangelists either leave or get drowned out by newer community members. This decline in the overall quality of the community causes more good people to leave, which creates a downward spiral from which many communities don’t recover. To prevent this negative cycle, it is important to focus on quality early on and set standards that can be maintained as the community grows.

Inbound Hiring Communities are excellent for recruiting and hiring. Everyone working at Gabriel’s startup DuckDuckGo was a member of the DuckDuckGo community first. He calls this inbound hiring because everyone comes in from the community.

In the Plex: How Google Thinks, Works, and Shapes Our Lives

Donald Norman’s classic tome The Psychology of Everyday Things,

“On a single machine I had one thousand threads, independent processes asking things and not stepping on each other’s toes.”

One of the early versions of BackRub had simply counted the incoming links, but Page and Brin quickly realized that it wasn’t merely the number of links that made things relevant. Just as important was who was doing the linking.

The more prominent the status of the page that made the link, the more valuable the link was and the higher it would rise when calculating the ultimate PageRank number of the web page itself.

“The idea behind PageRank was that you can estimate the importance of a web page by the web pages that link to it,”

We convert the entire web into a big equation with several hundred million variables, which are the PageRanks of all the web pages, and billions of terms, which are all the links.” It was Brin’s mathematic calculations on those possible 500 million variables that identified the important pages.

The PageRank score would be combined with a number of more traditional information retrieval techniques, such as comparing the keyword to text on the page and determining relevance by examining factors such as frequency, font size, capitalization, and position of the keyword.

Such factors are known as signals, and they are critical to search quality. There are a few crucial milliseconds in the process of a web search during which the engine interprets the keyword and then accesses the vast index, where all the text on billions of pages is stored and ordered just like an index of a book.

For queries consisting of multiple words, documents containing all of the search query terms in close proximity would typically get the nod over those in which the phrase match was “not even close.” Another powerful signal was the “anchor text” of links that led to the page. For instance, if a web page used the words “Bill Clinton” to link to the White House, “Bill Clinton” would be the anchor text. Because of the high values assigned to anchor text, a BackRub query for “Bill Clinton” would lead to www.whitehouse.gov as the top result because numerous web pages with high PageRanks used the president’s name to link the White House site.

computer scientist named Jon Kleinberg

For instance, if you typed in “newspaper,” AltaVista would not give you links for The New York Times or The Washington Post. “That’s not surprising, because AltaVista is about matching strings, and unless The New York Times happened to say, ‘I’m a newspaper!’ AltaVista is not going to find it,” Kleinberg explains. But, he suspected, he’d have more luck if he checked out what those 200 sites pointed to. “Among those 200 people who were saying ‘newspapers,’ someone was going to point to The New York Times,”

Kleinberg was trying to understand network behavior. Page and Brin were building something. “Kleinberg had this notion of authority, where your page can become good just by linking to the right pages,” says Page. “Whereas what I was doing was more of a traffic simulation, which is actually how people might search the web.”

Yanhong (Robin) Li.

devised a search approach that calculated relevance from both the frequency of links and the content of anchor text. He called his system RankDex.

“The unfair advantage that Stanford has over any other place in the known universe is that we’re surrounded by Silicon Valley.”

It was not uncommon for its professors to straddle both worlds, maintaining posts in the department while playing in the high-tech scrum of start-ups striving for the big score. There was even a joke that faculty members couldn’t get tenure until they started a company.

Brin and Page were reluctant at that point to strike out on their own. They had both headed to Stanford intending to become PhDs like their dads. But licensing their search engine wasn’t easy. Though Brin and Page had a good meeting with Yahoo founders Jerry Yang and David Filo, former Stanford students, Yahoo didn’t see the need to buy search engine technology.

for the next year and a half, all the companies they approached turned them down. “We couldn’t get anyone interested,” says Page. “We did get offers, but they weren’t for much money. So we said, ‘Whatever,’

“The web server couldn’t handle more than ten requests or so a second because it was written in Python, which is a great idea for a research system, but it’s not a high-performance solution,”

In barely a year since Brin and Page had formed their company, they had gathered a group of top scientists totally committed to the vision of their young founders. These early employees would be part of team efforts that led to innovation after innovation that would broaden Google’s lead over its competitors

Google had taken ill. The problem was the index storing the contents of the web in Google’s servers. For a couple of months in early 2000, it wasn’t updating at all. Millions of documents created during that period weren’t being collected. As far as the Google search engine was concerned, they didn’t exist. The problem was a built-in flaw in the crawling and indexing process. If one of the machines devoted to crawling broke down before the process was completed, indexing had to begin from scratch. It was like a role-playing computer game in which you would spend hundreds of hours building a character and then lose all that effort if your character got killed by a stray beast or a well-armed foe.

Google would buy discounted consumer models without built-in processes to protect the integrity of data.

Another innovation that came a bit later was called the in-RAM system. This involved putting as much of the index as possible in actual computer memory as opposed to the pokier, less reliable hard disk drives. It sped things up considerably, allowed more flexibility, and saved money.

What helped make this possible was Google’s earlier improvement in infrastructure, including the techniques that Jeff Dean and Sanjay Ghemawat had developed to compress data so that Google could put its index into computer memory instead of on hard disks.

a breakthrough late in 2002 that utilized Ludwig Wittgenstein’s theories on how words are defined by context.

As Google crawled and archived billions of documents and web pages, it analyzed which words were close to each other. “Hot dog” would be found in searches that also contained “bread” and “mustard” and “baseball games”—not “puppies with roasting fur.”

by 2009, Google would say it made use of more than two hundred signals—though the real number was almost certainly much more—including synonyms, geographic signals, freshness signals, and even a signal for websites selling pizzas.) The code badly needed a rewrite; Singhal couldn’t even stand to read the code

This spurred a multiyear effort by Singhal and his team to produce a name detection system within the search engine.

To improve search, Google often integrated external databases, and in this case Google licensed the White Pages, allowing it to use all the information contained in hundreds of thick newsprint-based tomes where the content consisted of nothing but names (and addresses and phone numbers). Google’s search engine sucked up the names and analyzed them until it had an understanding of what a name was and how to recognize it in the system.

One had to take context into effect. Consider the query “houston baker.” Was the user looking for a person who baked bread in Texas? Probably. But if you were making that query very far from the Lone Star State, it’s more likely that you were seeking someone named after the famous Texan. Google had to teach its search engine to tell the difference. And a lot of the instruction was done by the users, clicking millions of times to direct their responses to the happy zone of long clicks.

Early in Google’s history Page and Brin had decided that ten links was the proper number to show on a page, and numerous tests over the years had reinforced the conviction that ten was the number that users preferred to see.

Audrey Fino problem. The key to understanding a query like this, Singhal said, was the black art of “bigram breakage”: that is, how should a search engine parse a series of words entered into the query field, making the kind of distinctions that a smart human being would make?

For instance, “New York” represents two words that go together (in other words, a bigram). But so do the three words in “New York Times,” which clearly indicate a different kind of search. And everything changes when the query is “New York Times Square,” in which case the breakage would come…

“Deconstruct this [Siwek] query from an engineer’s point of view,” says Singhal. “Most search engines I have known in my academic life will go ‘one word, two words, three words, four words, done.’ We at Google say, ‘Aha! We can break this here!’ We figure that ‘lawyer’ is not a last name and ‘Siwek’ is not a middle name,” he says. “And by the way, lawyer is not a town in Michigan. A lawyer is an attorney.” This was the hard-won view from inside the Google search engine: a rock is a rock. It’s also a stone, and it could be a boulder. Spell it rokc, and it’s still a rock. But put “little” in front of “rock,” and it’s the capital of Arkansas. Which, is not an “ark.” Unless “Noah” is around. All this helped to explain how Google could find someone whose name may have never appeared in a search before. (One-third of all search queries are virgin requests.) “Mike Siwek is some person with almost no Internet presence,” says Singhal. “Finding that needle in that haystack, it just happened.”

In every one of the four aspects of search—crawling, indexing, relevance, and speedy delivery of results—Google made advances.

If a web page required users to fill out a form to see certain content, Google had probably taught its spiders how to fill out the form. Sometimes content was locked inside programs that ran when users visit a page—applications running in the JavaScript language or a media program like Adobe’s Flash. Google knew how to look inside those programs and suck out the content for its indexes. Google even used optical character recognition to figure out if an image on the website had text on

Eventually he found himself in an office with Amit Singhal, Ben Gomes, and Krishna Bharat. It was like entering the high temple of search.

Udi Manber.

He was also amazed at how pampered employees were. Every search engineer had exclusive use of a set of servers that stored an index of the entire web—it was the digital equivalent of giving a physicist her own particle accelerator.

One of the first things that happened on Manber’s watch was something called Universal Search. In its first few years, Google had developed a number of specialized forms of search, known as verticals, for various corpuses—such as video, images, shopping catalogs, and locations (maps). Krishna Bharat had created one of those verticals called Google News, a virtual wire service with a front page determined not by editors but algorithms. Another vertical product, called Google Scholar, accessed academic journals. But to access those verticals, users had to choose the vertical. Page and Brin were pushing for a system where one search would find everything. The key engineer in this project was David Bailey, who had worked with Manber at A9.

bright product manager named Johanna Wright.

Over the years, Google evolved a set process for search engine tweaks. After an engineer identified a flaw, he or she would be assigned a “search analyst” to manage the next several weeks, during which the improvement would be implemented. The engineer would determine the problem and recode the relevant part of the search algorithm. Maybe it would require adjusting the importance of a signal. Or perhaps altering the interpretation of multiword “bigrams.” Or even integrating a new signal. Then the counselor would submit it to testing.

Artificial Intelligence: A Modern Approach, the standard textbook in the field.

statistical machine translation, which Och embraced. “The basic idea is to learn from data,” he explains. “Provide the computer with large amounts of monolingual text, and the computer should figure out himself what those structures are.” The idea is to feed the computer massive amounts of data and let him (to adopt Och’s anthropomorphic pronoun) do the thinking.

The next step was to work with texts in different languages that had already been translated and let the machines figure out the implicit algorithms that dictate how one language converts to another. “There are specific algorithms that learn how words and sentences correspond, that detect nuances in text and produce translation. The key thing is that the more data you have, the better the quality of the system,”

Just as with its search engine, Google was letting its users teach it about the world.

Alfred Spector, who joined in 2008 to head Google’s research division. “That kind of machine learning has just not happened like it’s happened at Google.”

Ben Gomes, one of the original search rock stars, showed a visitor something he was working on called “Search-as-You-Type.”

What Google was hiding was how it had cracked the code to making money on the Internet.

Google’s first stab at selling advertising began in July 1999. When Jeff Dean arrived from DEC—a

Dean worked with Marissa Mayer and another engineer to set up a system that could eventually be used for Google to sell such ads to big companies.

Amit Patel, who had focused on the importance of Google’s search logs,

says Eric Veach, the Google engineer who created the most successful ad system in history.

Sergey made a compelling argument that Google wanted its ads to be not fluff that imposed itself on users but important information that its users wanted.

AdWords prices were fixed according to the position on the page an ad would occupy. If it was in the most desirable position, the top ad on the right, the client would pay $15 per thousand exposures. The second position cost $12, the third $10. There was one feature built in to try to ensure that the most useful ads would appear: advertisers couldn’t pay their way to secure the best positions. Instead, the more successful ones—the ones that lured the most people to click on them and go to the advertiser’s landing page—would get priority. The percentage of people exposed to ads who responded to them became known as the click-through rate.

Veach believed that a well-placed search ad could be more useful than a search result.

Page was adamant that the system be simple and scalable. He thought that the system should be so easy for advertisers that all they would need to do was give their credit card number and point Google to their website. They shouldn’t even get involved with choosing keywords—Google would choose them. That was an idea that made sense, though many advertisers always want a say in choosing keywords.

auctions to sell ads.

(For its nonpaid results, GoTo licensed search engine technology from Inktomi.)

Veach devised a different model: the winner of the auction wouldn’t be charged for the amount of his victorious bid but instead would pay a penny more than the runner-up bid. (Example: If Joe bids 10 cents a click, Alice bids 6, and Sue bids 2, Joe wins the top slot and pays 7. Alice is in the next slot, paying 3.)

it eliminated the fear of “winner’s remorse,” where the high bidder in an auction feels suckered by paying too much.

Vickrey second-bid auction!”

It would become the least understood, most controversial, and ultimately most powerful component of AdWords Select: a built-in function to regulate ad quality. The new system instituted financial incentives for better ads. It lowered the price for effective ads and meted out monetary punishment and even an online ad version of the death penalty for bad ads. It also opened Google to the charge that it had created a “black box” in which advertisers could never understand, or trust, the calculations that Google made to place their ads.

Here was the rub: The bids submitted by contenders for the ad slots were only half of what ultimately determined the winners of the auction. The other half was the quality score. This metric would assure that the ads Google showed on its results page were helpful to its users—a high quality score meant that the ad was relevant to the user’s quest. Low quality scores were for ads that were irrelevant, misleading, or even spamlike. In the early version of AdWords, the sole determinant of the quality score was Google’s guess at the percentage of times a user would click on an ad when it appeared on a results page—the click-through rate. Later Google used a more complicated formula to determine quality score by adding factors such as the relevance of the ad to the specific keyword and the quality of the landing page. But the biggest factor remained the predicted click-through rate.

Say that Alice, Juan, and Ted are all bidding for the keyword “hand lotion.” Alice is selling an artisanal form of hand lotion popular in upscale spas. Juan owns a big drugstore that sells hand lotion, among many sundries. Ted has a travel site. He isn’t selling hand lotion at all but wants to expose his ad to the kind of person who buys hand lotion. Alice bids ten cents per click. Juan bids fifteen cents. Ted bids fifty cents. If you think that Ted’s high bid automatically puts him in the top position, you’re wrong. It’s quite possible that Alice, the low bidder, would get the favored spot. Google’s calculations might determine that users who click on her site are more likely to find what they want and thus assign her a very high quality score. Juan’s quality score would be downgraded—as would his effective bid—because users may go to his site and have difficulty finding hand lotion. He may be in position two, paying a little less than Alice. Ted would have an even lower quality score. People looking for hand lotion are unlikely to click on a travel ad. His bid would be downgraded even more. (He may even be required to pay a prohibitively high “minimum bid”—a practice that ultimately engendered a lot of grumbling among certain advertisers.)

You paid less if your ads were more relevant. So you had a reason to work on your keyword, your text, your landing page, and generally improve your campaign.”

Every AdWords Select ad would be the winner of a unique auction requiring the execution of a complicated formula. The auction would be conducted in stealth, generated the instant someone typed a keyword into the Google search box, with the result shown in a fraction of a second.

Google innovated circles around Overture, focusing on its core obsessions of speed and scale.

Google would match an ad to many keywords, some of them with subtle connections discovered by analysis of the behavior of its millions of users.

one of Google’s star engineers, Sanjay Ghemawat,

system that would match keywords to web pages. (If a page was full of information about winter sports, for instance, Phil would extract keywords like “skis,” “ice skates,” and “hockey pucks.”) Jeff Dean pitched in to merge Phil with the AdWords technology, while another team tried to build all of this into a complete self-service system for advertisers.

In March 2003, Google announced the pilot product, saddled with the awkward moniker Google content-targeted advertising.

In 2003, a Santa Monica–based start-up called Applied Semantics posed a threat to Google in contextual advertising. Founded by Caltech graduates Adam Weissman and Gil Elbaz, it had patented technology that, according to its own description, “understands, organizes, and extracts knowledge from websites and information repositories in a way that mimics human thought.”

It was an easy sell, because publishers could use AdSense for only the spots on their pages that otherwise would go unsold. Advertisers loved it because it gave them a chance of getting their ads on prestigious sites, such as The New York Times or Forbes.

“We didn’t foresee that there were times when you don’t want to target ads to the content,” says Georges Harik. “We would analyze a page about a plane crash and happily place an ad for airline tickets. I think we rapidly discovered that this was a bad idea.”

In 2008, a story about the Mumbai attacks headlined “Terrorists kill the man who gave them water” was accompanied by an ad that read “Terrorism: Pursue a certificate in terrorism 100% online. Enroll today. Ads by Google.” An account of massive food poisoning at an Olive Garden restaurant in Los Angeles was accompanied by a coupon offering a “FREE Dinner for Two at Olive Garden.”

Gokul Rajaram, the AdSense product manager.

“With a program like AdSense, Google was able to make money from its partners—it was kind of a moat that protects the king’s castle.”

Kim Malone had,

“Here’s the deal,” she’d say. “You take ten seconds to put a little snippet of code on your website, and from that moment on, Google sends you a check every month.”

As more and more auction-based ads trumped the hand-sold premium ads, Kamangar argued that Google should entirely end the practice of selling premium ads by a sales force that set prices and charged by impression. He set up a project, code-named D4, to implement the idea. Most Googlers called the plan Premium Sunset. Even as he argued for it, Kamangar had his concerns about the shift. Customers used to certain prerogatives might balk at a system determined totally by auction and algorithms. For instance, it was common for a big advertiser to insist that its ad be the first one to appear above the search results, so that its impact wasn’t mitigated by a competitor’s ad above it. Also, moving to auctions would introduce uncertainty. Clients and agencies were used to guarantees that if they budgeted a specific sum of money they’d get a specific number of ads in predictable positions. Finally, some advertisers didn’t want to budge from impression-based ads. They would insist that their ads were intended to build up their brands and having a percentage of people clicking on their ads wasn’t as important as having lots of people see the ads.

AdWords Premium even had a way to enforce ad quality, a daily email called the underperforming keyword list. Even though Google was charging by how many people saw the ad, it tracked very closely how many people actually clicked on the ads.

If the rate was under 1 percent, Google would pull the ad.

The policy reflected the different philosophy Google brought to advertising in general. Google ads were answers. They were solutions.

Ultimately, since the engineers in Mountain View had made good on their promises so far, the salespeople trusted them on this one. They weren’t going to be replaced. They were going to assume a new role as mediators between advertisers and algorithms.

Then propose a partnership, because any company worth buying really doesn’t want to sell itself.

Finally, switch the rules and ask the founders if they want to join Google. All along, you had to operate a second front—getting the Google brain trust to okay the purchase.

Even though Google Analytics didn’t require a client to be an AdWords customer, the data it provided revealed the value of the Google ad world, enticed new customers, and kept current ones assured that their investment in Google ads was a genius purchase.

“Every advertising should be measurable,” says Susan Wojcicki. “You should be able to adjust it, right? Then you should be able to tune it, track the right users, and target it to the right people.”

search is a huge system, but it’s stateless—you can easily serve it from ten different places in the world, and if this version is slightly different than that version, the user won’t know, nobody will notice. But with advertising, the state is important, because advertisers are always updating their campaigns, and microtransactions are happening at ferocious rates per second, and all that has to be synchronized.”

Serious math and statistics were required. In order to figure out the critical ad quality score, Google had to estimate in advance how many users would click on an ad. That involved building systems that could process an incredible amount of data and accurately predict a future event millions of times a day. Since the Google ad model depended on absolute mastery in predicting click-through,

A new arrival at Google would act as a godfather to the advertising effort. His name was Hal Varian, and he would eventually hold the title of Google’s chief economist.

With Carl Shapiro, he wrote a popular book called Information Rules: A Strategic Guide to the Network Economy,

One of the classic papers in the field was a 1983 study by the Harvard economist Herman Leonard that dealt with matching problems such as assigning students to dorm rooms. It was called a two-sided matching market. “Ironically, the mathematical structure of the Google auction is the same as one of those two-sided matching markets,” says Varian.

hired computer scientist and mathematician from Stanford named Diane Tang to create Google’s search-word advertising equivalent of the stock market, called the Keyword Pricing Index. “It’s like a consumer price index,”

“But instead of a basket of goods like diapers and beer and doughnuts, we have keywords.” Different categories were ranked by the cost per click that advertisers generally have to pay and then separated into high-cap, midcap, and low-cap bundles. “The high caps were very competitive keywords like flowers and hotels,” Tang says.

Meanwhile, Google had an equivalent to the Dow Jones Industrial Average: the average cost per click, which was calculated by summing up all the ad revenue and dividing by the total of paid clicks. “If you change the mix or get more low-cap ads, it can go down even though your pricing is going quite well,”

Google collected a phalanx of statisticians, physicists, and data miners to unearth every twist and turn in the Google economy.

“We have Hal Varian, and we have the physicists,” says Eric Schmidt. “Hal’s interaction with his group is like a professor and his students. His job is to get them to deeply understand an issue and then move it forward. And the physicists’ job is to figure out the lifetime flow of a click.”

Varian referred to his team as “econometricians.” “Sort of a cross between statisticians and economists,” he says. Of the early statisticians hired, Daryl Pregibon joined Google in 2004, after twenty-three years as a top scientist at Bell and AT&T labs. “We needed a class of mathematical types that had a rich tool set for looking for signals in noise,”

“The rough rule of thumb here is one statistician for every hundred computer scientists,” he says.

Brin and Page began with data mining. That shaped Google’s mind-set from the start.

Google populated not just its search business but its ad business with scientists like Pregibon.

Google developed a product available to advertisers (like other tools to analyze the success of ads, it was free) called conversion optimizer that shared this information with customers.

Google needed to know everything. “We are trying to understand the mechanisms behind the metrics,” says Qing Wu, a decision support analyst at Google. His specialty was forecasting. He could predict patterns of queries from season to season, in different parts of the day, and the climate. “We have the temperature data, we have the weather data, and we have the queries data so we can do correlation and statistical modeling.”

“With a dashboard you can monitor the queries, the amount of money you make, how many advertisers we have, how many keywords they’re bidding on, what the ROI is for each advertiser.”

relentless attention to removing the impediments to productive work time.

Protruding out of that slot are snakes of cables from computer chargers for both Macintosh and Windows laptops. Thus no meeting will be delayed while someone dashes back to his office to get a charger. There are also cords that plug the computer into a projector that beams the display onto the wall—a standard companywide system so no one has to fumble while figuring out which protocol this room happens to demand.

when Googlers complained that the expenses process was a time-wasting drudgery, Google set up a corporate “G-Card” that automated the work.

“The G-Card is a Visa card accepted galaxywide. The Federation pays the bill for you. The charges teleport directly into the new expense reporting tool.”)

The idea was to create a charged intellectual atmosphere that makes people want to come to work.

It was something that Joe Kraus realized six months after he arrived, when he took a mental survey and couldn’t name a single dumb person he’d met at Google. “There were no bozos,” he says. “In a company this size? That was awesome.”

“Lake Wobegon Strategy,” which he defined as “only hiring candidates who are above the mean of your current employees.”

“They know there’s no correlation between [performance and] where you went to school and your GPA, because we’ve done correlation studies,” says Sullivan. “But we still like to ask, because it is an important data point.” Marissa Mayer was a defender of the practice. “A GPA is worth looking at, because it shows an element of diligence,” she says. “Can you meet deadlines, do you have good follow-through? We know that good students will get their work done on time, they’ll get their presentations done, they’ll get their code done right.”

recall having trouble hiring someone in international sales—until she noted that his résumé cited a foosball championship in Italy. “That’s pretty good,” said Sergey. “We can hire him.” If the guy worked that hard at something, the logic went, he’d probably be pretty good at selling ads.

Laszlo Bock, Google’s director of People Operations.

the application went to a hiring council made up of people with some expertise in the area—but not those who would directly manage the new employee. Otherwise, the temptation would be too great to give an offer to a substandard employee because “every manager wants some help rather than no help,”

“We read through about eight pieces of feedback—each is more than a page—that discuss analytical ability, overall intelligence, technical skills, cultural fit, résumé, and sort of an overall summary piece,” says Marissa Mayer.

Brin and Page’s idealistic views of a corporate culture impressed Campbell, but he worried that as the company grew, those values would be diluted, misinterpreted, or ignored as more layers wedged between the founders and a workforce of thousands. At Intuit, a group of employees had compiled a set of corporate values that could be shared both inside and outside the company. Campbell convinced the executives at Google that they should do something similar.

Hypersensitive about leaks, Google worded each letter to a bank slightly differently, so that it could later identify which banks couldn’t be trusted to keep their mouths shut.

The company had come up with a way to implement a Dutch auction, in which the final bid—the amount paid by all winners—would be the lowest bid that would raise the required amount of money to buy the offered shares.

as Googlers became richer, they became more conservative. That was exactly the downside of the IPO that the founders had dreaded.

Information was the great leveler at Google. “Because the APMs work with people who are so much more senior and more experienced, they don’t have the authority to say, ‘Because I said so.’ They need to gather the data, lobby the team, and win them over by data,”

data was at the center of decision making. (Google further cemented this hierarchy by creating a position called UTL, or über tech lead—a wizard-level engineer on a bigger team who really calls the shots.) If an APM had an idea, he or she could order up a 1 percent A/B experiment (in which one out of a hundred users gets a version of the product with the suggested change), then go to the über tech lead and the team and say, “Users with this new experience are doing 11 percent more page views and clicking on ads 8 percent more.” With ammunition like that, a decision to include the new feature in the product wouldn’t be based on a power struggle but on a mathematical calculation.

a simple formula to distribute its engineering talent: 70–20–10. Seventy percent of its engineers would work in either search or ads. Twenty percent would focus on key products such as applications. The remaining 10 percent would work on wild cards, which often emerged from the 20 percent time where people could choose their own projects. For all the talk about its other, well-publicized fraction—the 20 percent of free time that supposedly gestated Google’s big innovations—70–20–10 became Google’s magic allocation algorithm.

They saw the OKRs as data, a means of putting a number on the traditionally gooey means of assessing performance. It was essential that OKRs be measurable.

“It’s not a key result unless it has a number,” says

Even worse than failing to make an OKR was exceeding the standard by a large measure; it implied that an employee had sandbagged it, played it safe, thought small.

At the end of every quarter, employees set their OKRs for the next quarter, and six weeks later, they saw their managers and gave a progress report, using a traffic-light system for grading. “Green light, I’m good to go on that one. Red light, I’m having serious issues. Yellow, possible danger,” says McCaffrey. Toward the end of the quarter, all the OKRs were graded, and if an employee was hitting 100 percent, he or she needed something else to do.

went through his email, trying to pick out a subject and then typing the word into the search engine to see which ads came up. They discovered that Google had plenty of ads in its inventory to produce ads relevant to at least some emails. Then he began figuring out how to automate the process.

He downloaded a program from the web that used semantic analysis to distill blocks of text into a few keywords. Then he accessed Google’s AdWords system, replacing the keywords that advertisers requested with the keywords he’d extracted from the text analysis.

Gmail didn’t seem to have a delete button.

Omitting a delete button was supposed to teach you to view email—and information itself—the way Google did. The implicit message was that the only thing that should be deleted was the concept of limited storage.

“Internally, we thought of ‘cloud computing’ as a marketing term,” says Urs Hölzle. (“Marketing” being pejorative in this context.) “Technically speaking, it’s cluster computing that you do.” (At Google, people refer to a “cluster” as a large number of servers—well into the thousands—usually representing the minimum number of machines needed to serve search results from a query.)

data storage. Jim Reese, then the caretaker of the company’s infrastructure,

the disk drives Google purchased were “poorer quality than you would put into your kid’s computer at home.” But Google designed around the flaws. “We built capabilities into the software, the hardware, and the network—the way we hook them up, the load balancing, and so on—to build in redundancy, to make the system fault-tolerant,” says Reese.

The Google File System, written by Jeff Dean and Sanjay Ghemawat, was invaluable in this process: it was designed to manage failure by “sharding” data, distributing it to multiple servers.

If Google search called for certain information at one server and didn’t get a reply after a couple of milliseconds, there were two other Google servers that could fulfill the request.

(Page himself considered it unexceptional to be able to detect lags of 200 milliseconds, generally thought of as the limit of human perception.)

When things go slowly, says Urs Hölzle, “people are unconsciously afraid of doing another search, because it’s slow.

Or they are more likely to try another result than rephrase the query.

during the half second or more that the results are delayed, the users have begun to think about something else and have to refocus before they get around to clicking on a result.)

To help meet its goals, the company created a market-based incentive program for product teams to juice up performance—a cap-and-trade model in which teams were mandated latency ceilings or maximum performance times. If a team didn’t make its benchmarks, says Hölzle, it accrued a debt that had to be paid off by barter with a team that exceeded its benchmarks. “You could trade for an engineer or machines. Whatever,”

But you couldn’t keep borrowing forever. “People have definitely been yelled at,” says Hölzle. If a team got too deep in the hole, the latency police would close down the casino. “There’s a launch gate where if you’re too far in the negative, you can’t launch features. From that point on, you need to focus on latency alone until you’re close to your goal.”

everything was monitored by a series of software scripts. The computer scientists remained in Mountain View, while a skeleton crew of local technicians was on site. When a metric deviated from the norm, the software checked out what was happening in other data centers to compare.

By not knowing what Google is spending, Microsoft CEO Steve Ballmer, for instance, will have no target to aim at when apportioning his own cost estimates for infrastructure.

One reason Sanjay Ghemawat loved Google was that when researchers were looking to solve problems a year out, Larry Page demanded that they work on problems that might be a decade out, or maybe even a problem that would come up only in a science fiction novel.

project MapReduce.

Google policy requires engineers to write in tandem, doing code checks of each other’s work.

MapReduce offered a way to do what was otherwise unthinkable: empower a single programmer to efficiently make use of those humongous, googolesque data sets.

multiprocess architecture. This is the system that helps a computer keep going when an application crashes or freezes. Why not extend that idea to browsers, so if one tab crashes, the other tabs would be unaffected?

Google didn’t want to be beautiful.

a stunning design submitted to her. “It looks like a human was involved in choosing what went where,”

Google products are machine-driven. They’re created by machines. And that is what makes us powerful. That’s what makes our products great.”

In other words, the message Google wanted to convey was that its products had no human bias.

Chrome optimized to run web applications—fast. When you run a program faster by an order of magnitude, you haven’t made something better—you’ve made something new.

When a Google user searched for Nike shoes, he was told, there were sets of algorithms that determined search results and another set that figured out which ad should appear alongside the results; then another set of algorithms would run an instant auction.

Google launched its Knol project in 2008, when the head of search engineering, Udi Manber,

Knol never took off, and Wikipedia remains the web encyclopedia of choice.

project called Wooki.

Many cheeky activities that had once seemed so refreshing began to assume an aura of calculation when they became routine.

How many scavenger hunts can you attend before it becomes a chore?

Brin felt that the cuts addressed a creeping sense of entitlement he’d noticed. “I actually thought carefully about all the benefits,” he says, “and they did start to proliferate out of control. It was a two-year battle to essentially cut down the microkitchens.”

“Eric and Larry want anybody to be able to tell someone, ‘You’re wrong,’ and give ten reasons why.” Titles got in the way of that.

A Google security officer could search employees without probable cause in issues where physical well-being was threatened—such as looking for weapons—but not to safeguard information. “You can do it to keep people safe, not to keep property safe,” says Whitten.

In accordance with best practices, there would be “reasonable audit trails,” in the words of Alma Whitten. But Google would not submit itself to a lockdown mentality. Could you really be a Googler if the company eyed you like a shoplifter and rummaged through your bag as you left?

Google hired another world-class computer scientist, Yossi Matias, to head the Tel Aviv office. (In 2009, during Google’s austerity push, the company would merge the engineering centers and Maarek would depart.)

if a company failed to block information that the Chinese government didn’t want its citizens to see, it could lose its license. That was actually an interesting problem, and if nothing else, Googlers loved to solve such brain-twisters. In this case, they came up with an elegant solution. Google would exhaustively examine and probe the sites of competitors, such as China’s top search engine, Baidu, testing them with risky keywords, and see what they blocked. It was a speedy means of determining forbidden information, and best of all, it scaled.

Dory, the program used at Google to handle questions for Page and Brin during TGIF sessions.

You gave thumbs-up for your favorite questions and thumbs-down for the ones you liked least. A positive vote would count twice as much as a negative one.

To avoid intellectual property conflicts with Disney, it had renamed the product Moderator.

Ideas, he explained, were like babies—everything about their environment said they shouldn’t exist. But they do.

You can’t dwell on problems too early, or they will swamp the virtues and you will decide not to do the project.

Google liked to give young people massive responsibility, but it also relied on world-class scientists for its operational innovations. It was like a university: the top executives were equivalent to professors. Facebook preferred kids, figuring that what the sharpest undergrads lacked in experience, they would make up for in audacity.

Dodgeball was a pioneering service that let mobile phone users turn their city into a giant hide-and-seek game where they could discover (or avoid) nearby friends.

In theory, Twitter was so simple that Google could simply write its own version. “The question of the day was ‘Why don’t we build Twitter?’ Three guys could do it in a weekend!” said Glazer in 2009. But, he explained, that would have been a case of chasing taillights.

“The problem is that—by default—the people you follow and the people who follow you are made public to anyone who looks at your profile… someone could go in your profile and see the people you email with and chat with most.”

Secrets of Sand Hill Road: Venture Capital—and How to Get It

approach to portfolio construction was pioneered by David Swensen at Yale, whose methods have been widely adopted, as you’ll read about in chapter 2). What that means is that the amount of resources our society currently invests in innovation is based on the percentage of assets that need to be invested according to this formula, rather than on the number of investable opportunities that exist.

There are far too many important nuances in the field, with lots of different firms that invest at different stages, under different investment theses, with different portfolio constructions, and different return expectations. Not to mention different personalities.

Entrepreneurs and VCs are not on opposing sides,

we are partners, and once we agree to work together (and even if we don’t), we are on the same side. What we share is a desire to create benign businesses, see them have an impact on and improve the world, and together realize some financial benefit along the way.

The story of venture capital is really a subset of the story of entrepreneurship.

What trade-offs are you willing to make, and what are the downstream implications of those decisions, particularly if you need to raise subsequent capital when the business develops at a different pace than you expect?

you get only a few real shots on goal in your lifetime while we VCs get several. Because of this imbalance, specifically regarding investment decisions, information asymmetry can come into play (often at the expense of the founder). The VCs are repeat players and thus have the benefit of lots of years of developing their understanding of the various mechanics (especially when negotiating term sheets), whereas founders have been through the process only a handful of times, at most.

On March 10, 2000, the Nasdaq index,2 the barometer for technology stocks, peaked just above 5,000. More interesting, the price-to-earnings ratio (P/E ratio) of the companies listed in the Nasdaq index stood at 175. This means that stock market investors were valuing one dollar’s worth of a company’s earnings at $175.

Lucky for me, a friend had just taken a job at Credit Suisse First Boston, a scrappy investment bank that had brought on Frank Quattrone to build out their technology banking practice. Frank is a legend in the technology banking world,

He is still a dominant figure in the technology space, having founded in March 2008 a leading mergers and acquisitions advisory firm named Qatalyst.

Though timing isn’t everything, timing is definitely something—it’s a big reason why we now see many ideas that failed in the dot-com bubble being reincarnated as successful businesses two decades later.

constantly reminded us in very simple terms of the critical role that cash plays in a startup’s life cycle: “It’s not about the money. It’s about the F-ing money.” Enough said.

In most cases, tech startups represent an amalgamation of engineers who identify some innovative way to solve an existing problem or create a new market by introducing a product or service that consumers didn’t even know could exist.

to increase the odds of ultimately building a widely successful and valuable company, Marc and Ben had a thesis that founders should ultimately be product/engineering types and that there should be a tight coupling between the product visionary and the individual responsible for driving the company’s strategy and resource allocation decisions.

Those latter responsibilities are typically the province of the CEO. Therefore, Marc and Ben had a predilection for backing CEOs who were also the source of the company’s product vision.

while technical founding CEOs might be great at product development, they might often lack the rest of the skills and relationships required to be all-around great CEOs—technical recruiting, executive recruiting, PR and marketing, sales and business development, corporate development, and regulatory affairs, among others.

Institutional investors (i.e., professionals who manage large pools of capital) often have a defined asset allocation policy by which they invest. They might for example choose to invest 20 percent of their assets in bonds, 40 percent in publicly traded equities, 25 percent in hedge funds, 10 percent in buyout funds, and 5 percent in VC funds.

Why do lots of companies recruit heavily from Ivy League universities, even though we know there are lots of smart students who graduate from non–Ivy League schools? Well, because they’ve had success before with hiring Ivy League graduates and believe that the university itself has done a good job in the admissions process of screening the student for high intellect and good character. Essentially, we often use signaling as a shorthand way of informing judgments. And as with all forms of generalization, sometimes we have false positives.

This happens when we overfit on the curve and ascribe success to individuals or companies that might in fact not be as good as we have presumed them to be.

50 percent of the investments are “impaired,” which is a very polite way of saying they lose some or all of their investment. Think about that for a second—VCs are completely wrong about half the time and lose most or all of the money that their investors entrusted to them as a result.

Over time, funds that generate two and a half to three times net returns to their investors will be in the good portion of the power-law curve distribution and continue to have access to institutional capital.

to achieve two and a half to three times net returns (after all fees), VCs probably need to generate three to four times gross returns. That means if a VC has a $100 million fund, she needs to realize a total of $300– $400 million in proceeds from her investments in order to give $250–$300 million in net returns to the institutional investors.

In VC, all we really care about is the at bats per home run. That is, the frequency with which the VC gets a return of more than ten times her investment—which we consider a home run.

three categories: people, product, and market.

1. People and Team Let’s start with people, as this is by far the most qualitative and, for early-stage investing, likely the most important evaluation criterion. When the “business” is nothing more than a very small collection of individuals—in some cases only one or two founders—with an idea, much of the VCs’ evaluation will focus on the team.

In particular, many VCs delve deeply into the backgrounds of the founders for clues about their effectiveness in executing this particular idea. The fundamental assumption here is that ideas are not proprietary. In fact, VCs assume the opposite—if an idea turns out to be a good one, assume there will be many other founders and companies that are created to pursue this idea.

what matters most is, why do I as a VC want to back this particular team versus any of the x-number of other teams that might show up to execute this idea? The way to think about this is that the opportunity cost of investing in this particular team going after this particular idea is infinite; a decision to invest means that the VC cannot invest in a different team that may come along and ultimately be better equipped to pursue the opportunity.

John Doerr, a VC from the firm Kleiner Perkins, is famous for purportedly saying that a cardinal rule of venture capital is “No conflict, no interest,” but the reality of modern VC is that conflict is king. Venture capitalists are de facto unable to invest in businesses pursuing the same opportunity, though of course the definition of conflict is always in the eye of the beholder.

every investment decision has infinite opportunity cost in that it likely prevents you as a VC from investing in a direct competitor in that space; you have picked your horse to ride.

Check conflict of interest of each vc we approach

among the cardinal sins of venture capital is getting the category right (meaning that you correctly anticipated that a big company could be built in a particular space) but getting the company wrong (meaning that you picked the wrong horse to back).

“product-first company” versus a “company-first company.”

In the product-first company, the founder identified or experienced some particular problem that led her to develop a product to solve that problem, which ultimately compelled her to build a company as the vehicle by which to bring that product to the market. A company-first company is one in which the founder first decides that she wants to start a company and then brainstorms products that might be interesting around which to build one.

The equivalent in founder evaluation for VCs is founder-market fit. As a corollary to the product-first company, founder-market fit speaks to the unique characteristics of this founding team to pursue the instant opportunity. Perhaps the founder has a unique educational background best suited to the opportunity.

In a strange way, sometimes familiarity can breed contempt—and conversely, the distance from the problem that comes from having a completely different professional background might actually make one a better founder.

Kelleher quipped: “I knew nothing about airlines,1 which I think made me eminently qualified to start one, because what we tried to do at Southwest was get away from the traditional way that airlines had done business.”

Whatever the evidence, the fundamental question VCs are trying to answer is: Why back this founder against this problem set versus waiting to see who else may come along with a better organic understanding of the problem? Can I conceive of a team better equipped to address the market needs that might walk through our doors tomorrow? If the answer is no, then this is the team to back.

The third big area of team investigation for VCs focuses on the founder’s leadership abilities. In particular, VCs are trying to determine whether this founder will be able to create a compelling story around the company mission in order to attract great engineers, executives, sales and marketing people, etc. In the same vein, the founder has to be able to attract customers to buy the product, partners to help distribute the product, and, eventually, other VCs to fund the business beyond the initial round of financing. Will the founder be able to explain her vision in a way that causes others to want to join her on this mission? And will she walk through walls when the going gets tough—which it inevitably will in nearly all startups—and simply refuse to even consider quitting?

you have to be partly delusional to start a company given the prospects of success and the need to keep pushing forward in the wake of the constant stream of doubters.

there are good ideas that look like good ideas. These are tempting, but likely can’t generate outsize returns because they are simply too obvious and invite too much competition that squeezes out the economic rents. Bad ideas that look like bad ideas are also easily dismissed;

The tempting deals are the bad ideas that look like good ideas, yet they ultimately contain some hidden flaw that reveals their true “badness.” This leaves good VCs to invest in good ideas that look like bad ideas—hidden gems that probably take a slightly delusional or unconventional founder to pursue. For if they were obviously good ideas, they would never produce venture returns.

Execution ultimately matters, and execution derives from a team’s members being able to work in concert with one another toward a clearly articulated vision.

Will this product solve a fundamental need in the market (whether or not that need is known currently to customers) such that customers will pay real money to purchase it?

most VCs assume that the product that is initially conceived of and pitched is not likely the product that will ultimately prevail. Why is that? Simply because until the startup builds a version of the product and gets it into market with early adopter customers, any notion that the company has about the fitness of the product to the market need is purely hypothetical. Only through iterative testing with real customers will the company get the feedback needed to build a truly breakthrough product.

much of what an early VC is evaluating at this stage is the founder’s idea maze: How did she get to the current product idea, incorporating which insights and market data to help inform her opinions?

Assuming that the product will in fact change many times over the course of discerning product-market fit, it’s the process of the idea maze that is the better predictor of the founder’s success than the actual product idea itself.

you’ll often hear VCs say that they like founders who have strong opinions but ones that are weakly held, that is, the ability to incorporate compelling market data and allow it to evolve your product thinking. Have conviction and a well-vetted process, but allow yourself to “pivot” (to invoke one of the great euphemisms in venture capital speak) based on real-world feedback.

what matters most to VCs is the ultimate size of the market opportunity a founder is going after.

Second, sins of omission are worse than sins of commission. It’s okay for a VC to invest in a company that ultimately fails—as we’ve discussed, that’s par for the course in this business. What’s not okay is to fail to invest in a company that becomes the next Facebook. Remember, you can’t risk-averse your way to success in this business.

VCs must invest in big-market opportunities. Success against a small market just won’t get a VC the type of returns she needs to generate to stay in business.

Andy Rachleff, a founder of Benchmark Capital, has said that companies can succeed in great markets even with mediocre teams but that great teams will always lose to a bad market.

Market size estimation is easiest when a new product is positioned as a direct substitute for an existing product.

In 1840s New Bedford, “agents” (today’s VC equivalent) would raise capital from corporations and wealthy individuals (today’s limited partners) to fund ship captains (entrepreneurs) to launch a whaling venture (startup company)

VC firms exist by the grace of limited partners who invest some of their own funds into specific VC funds.

venture capital is intended to produce what investment managers refer to as alpha—excess returns relative to a specific market index.

categories of LPs,

University endowments

Foundations

Corporate and state pension funds

Family offices

Sovereign wealth funds

Insurance companies

Funds of funds (e.g., HarbourVest, Horsley Bridge)—These are private firms that raise money from their own LPs and then invest in venture capital or other financial managers.

The fund of funds aggregate small LP assets and deploy the capital into VCs.

Where LPs Invest

Growth assets

There are several subcategories of assets within growth:

Public equities

Private equities—Stocks that do not trade on public exchanges but are instead managed by funds that transact in privately held companies. Buyout firms are a big category of private equities; VC is in this category as well.

Hedge funds—Funds that invest mostly in publicly traded equities but have the ability to take both long (i.e., buy a stock) and short (i.e., bet that a stock will decline in price) positions.

Inflation hedges—These are investments meant to protect against the decreasing value of a currency. In other words, in an inflationary environment, they are expected to earn a rate of return in excess of inflation. There are several subcategories of assets within inflation hedges:

Real estate

Commodities

Natural resources

Deflationary hedges—When prices drop (deflation), the purchasing power of currency actually increases.

Bonds—In general, interest rates fall with deflation and, because the value of a bond is inversely correlated with interest rates, bond prices increase. Cash—A dollar tomorrow in a deflationary environment is worth more than a dollar today. Thus, holding some assets in cash provides a hedge against unexpected deflation.

One of the best examples of modern asset allocation is the Yale University endowment. Its current, and long-standing, chief investment officer is David Swensen, whom people credit with designing the allocation model

Yale uses what’s called a “smoothing model” to determine the amount of money it contributes each year to the university’s budget. This enables the university to plan its expenses with more certainty and allows the endowment to plan its asset allocation model with more certainty as well. By definition, the smoothing model says that the endowment will give the university an amount equal to 80 percent of the prior year’s spending rate plus the product of 20 percent of the board-determined spend rate and the value of the endowment from two years prior. Currently, this adds up to an overall spend rate of around 5.25 percent of the endowment’s value, but it has ranged over time between 4 and 6.5 percent.

Yale has a heavy concentration in illiquid assets—Yale targets to have about 50 percent of its endowment in illiquid assets (essentially funds where the money is tied up for longer periods of time).

VC firms—they need to either sell or take the companies in their portfolio public at some point in time in order to realize cash to provide back

one thing for you as an entrepreneur to consider is how old the fund is from which you are receiving your investment. This is a perfectly fair question to ask of your potential VC partner at the time you are deciding whether you want to work with them.

it’s reasonable to ask where the firm is in the life cycle of that particular fund. If they are early in the fund, then they should have less pressure to return capital to, say, Yale (or their other LPs) and thus should put less pressure on you as the CEO to generate a near-term exit. But if they are later in the fund cycle and haven’t generated sufficient liquidity from other investments, the pressure for a more near-term exit could be more intense.

partner, there are some ways to get insight into these questions. First, you should ask about the specific fund from which the VC is proposing to invest in your company—most funds are serially numbered with Roman numerals. You can then check the initiation of that fund to determine its age. As you’ll see later, funds tend to be ten years in life and often can get extended for a few years beyond that. But VCs are generally limited in how late into the fund they can make new investments (often only through years five or six).

if you are taking money from a VC and they are in the first three or four years of the fund, they are more likely to have both time and available capital to live with you for many years hence. But if they are just investing in your company for the first time in year five or six, things may be different.

VCs tend not only to invest capital in startups earlier in the life of a fund, they also generally set aside “reserves,” expected monies that they anticipate they might invest in a startup over the course of its next several financing rounds. Thus, the later in a fund cycle your investment occurs, the greater the likelihood that the VC may also not have sufficient reserves to set aside for subsequent financing rounds.

VCs can and often do invest in the same portfolio company in a subsequent fund, particularly if they run out of reserve capacity in the original fund that made the investment. However, this is not as easy as investing reserves out of the same fund as the original investment, in part because the mix of LPs could be different from one fund to the next and thus create potential conflicts between the funds.

For example, the VC may have invested originally in your company via its Fund I, a $300 million fund with twenty LPs who each invested $15 million in the fund. Several years later, your VC may have raised Fund II, a $500 million fund with fifty LPs (thirty of which were brand new to the VC), each investing $10 million. In this case, if the VC proposes to invest additional monies into your company from its Fund II, the Fund I LPs might object because they feel as though they “own” that investment opportunity and will be receiving a smaller proportionate allocation of the investment if it goes into Fund II. By the same token, the Fund II LPs might object to the investment in their fund for fear that this new investment isn’t a great opportunity for the fund relative to other investments you could make;

venture firms need to be able to generate high absolute rates of return to their LPs and ultimately do so via cash (versus just marking up the value of the illiquid investments on their financial statements). So if you are thinking that you might need more capital from your venture firm in the future—and in particular if you are receiving an investment later in the life cycle of a fund—you’ll want to assess the likelihood of the firm being able to raise its next fund.

This is admittedly a hard thing to dig into, in large part because the financial results of VC funds are generally not publicly available. In some cases, if the fund has public investors—e.g., public universities or state-run pension funds—these entities are required to disclose some level of financial performance on their websites or otherwise make it available to those who inquire. But in the vast majority of cases, your best bet here is to just do reference checks on your proposed VC partners with others in the community to at least get a sense, reputation-wise, for how the firm is doing.

The LPs in fact have a “limited” role in the affairs of the fund in two important ways. First, they have limited governance over the affairs of the fund. In the main, this means that LPs have no say over the investments that the fund chooses to make. As long as the fund invests in the set of things that are prescribed by the fund parameters, the LP is essentially investing in what’s often called a blind pool—blind, that is, to the LP itself, which has no ability to weigh in on investment decisions.

Similarly, the LP has limited ability to influence the decision to exit an investment and determine the manner and timing of whether to distribute the proceeds of that investment.

but the fundamental way to think of LPs is as passive investors—they are along for the ride on which the venture fund decides to embark.

Second, as a result of their limited governance, LPs enjoy the protection of limited liability from a legal perspective if something goes wrong.

Incentives drive behavior, and how a VC gets paid will affect how she interacts with your startup.

economics, “calling capital.”

When a GP closes a $100 million fund, it doesn’t collect $100 million up front from LPs. Rather, the LPs make a financial commitment over the life of the fund to provide the capital when “called” by the GP. The reason for this practice is simple—keeping cash idle in the GP’s bank account depresses the ultimate rate of return a GP can earn for its LPs. Just-in-time calling of capital eliminates this drag on returns. Typically most of the capital will be called over the first three to four years of the partnership, since that is when the lion’s share of the investing is likely being done by the GP. So even though the GP is not investing (and thus not calling) all of the $100 million up front, the GP is able to take a 2 percent management fee, or $2 million per year, on the full amount of the committed capital.

(It’s true that some VC funds charge the management fee on a pay-as-you-go basis, collecting the fee only against the actual monies invested. However, the typical pattern is to charge on committed capital.)

As the fund ages and more of the GP’s activity shifts to managing existing investments (versus finding new ones), many funds start to have a step-down in the fee.

In the first instance, the 2 percent fee often gets reduced by 50–100 basis points in the later years of the partnership. The second mechanism to reduce fees is to change the application of the fee against committed capital to apply the fee only to the cost of the investments remaining in the portfolio. So, for example, if we were in year eight of our $100 million fund and all but one investment (for which we invested $10 million) had been sold off, the management fee might be applied only against the remaining $10 million versus the $100 million committed amount.

It’s pretty unusual in VC funds (although more common in buyout funds), but sometimes a GP gets compensated by a portfolio company for her engagement with the company.

for example, the company grants the GP some equity or cash incentive for being on the board of directors. The question then becomes: What does the GP do with that compensation? In most modern LPAs, the GP can keep the compensation if she wants, but she needs to credit that fee against the management fees otherwise being charged the LPs. In other words, no double-dipping; if you get paid by the company, you deduct that compensation from what you charge the LPs so that the GP ultimately has the same amount of disposable fee income in either case.

carried interest in the VC context refers to the portion of the profits that the GP generates on her investments and that she is entitled to keep. As with the management fee, the actual amount of carried interest varies among venture funds but often ranges between 20 and 30 percent of the profits.

As with fine wine, VC funds should get better with age. In fact, that’s why people in the industry refer to funds by their “vintage year” (or birth year),

Venture firms (as is the case for other financial companies) are required under generally accepted accounting principles (GAAP) to “mark to market” the value of their underlying company holdings on a quarterly basis. But, unlike a hedge fund, for example, where the mark is based on the actual, marketable value of a public security, VC marks vary highly based on multiple valuation methods

That means that for every company in a GP’s portfolio, there is likely another VC invested in the same company that marks it at a different valuation

primary methods used by venture firms:

Last round valuation/waterfall—Some firms value their companies by taking the last round valuation in the private market and assigning that value to the firm’s ownership in that company. For example, if a firm owned 10 percent of a company and the last round valuation was $200 million, a firm that utilized the last round/waterfall method would report the value of its holdings as $20 million (0.10 × $200 million).

Comparable company analysis

For example, if a portfolio company is generating $100 million of revenue and its “comparable” set of companies are valued in the public markets at five times the revenue, a venture firm would then value the company at $500 million ($100 million × 5).

Often, a firm will then also apply what’s affectionately known as a “DLOM” (a discount for lack of marketability) to reduce the carrying value of the company—basically, this discount says that because the stock is private and can’t be freely traded, it’s worth less than that set of comparable public companies.

Option pricing model—

“option pricing model” (OPM). This one is the most complicated mathematically and uses the Black-Scholes option model to value a portfolio company as a set of call options whose strike prices are the different valuation points at which employee options and preferred shares convert into common stock.

quick example: If our hypothetical company raises a Series C financing at five dollars per share, the OPM says that all we know for certain is that anyone who holds Series C shares should value them at five dollars—simple enough. But if you own a Series B or a Series A share, the OPM says those are worth some fraction of five dollars—why? Well, to really answer that question you’d need to have a Nobel Prize in economics (as does Myron Scholes, the co-inventor of Black-Scholes), but the not-too-mathematical answer the OPM generates is that those Series A or B shares could be worth many different values based on a series of probabilistic outcomes if/when the company ultimately gets sold or goes public. So the OPM will assign a value to the Series A and B that is a substantial discount to the price of five dollars per share that is assigned to the Series C.

So which accounting methodology is right? Well, the answer is that they are all theoretically “right” in that different accounting firms would likely sign off on these as consistent with GAAP. But, at the same time, they are all “wrong” in that none of them actually tells an LP anything about what the company might ultimately be worth to the fund

Unfortunately for our GP, she overdistributed profits to herself and is now subject to what’s called a clawback—the money needs to be returned by the GP to the LPs. That sucks, but it is fair in that the GP never would have been entitled to that money had she waited to distribute the $60 million until the fund was over. She didn’t, after all, really generate any profits on the $100 million of capital the LPs gave her to invest. (To avoid this problem, some LPAs restrict the GP’s ability from being able to take any carry until she has returned the full $100 million in LP commitments back to the LP in cash. Admittedly, this is pretty rare.)

most GPs contribute 1 percent of the fund’s capital, and many times they will contribute 2–5 percent of the capital. Thus, over the life of a $100 million fund, between $95 million and $99 million will be contributed by the LPs, and between $1 million and $5 million will come from the GP.

it is not that common among VC funds (though much more so in buyout funds)—involves the opportunity cost of money.

To account for this, some LPAs introduce the concept of a “hurdle rate” into the profits calculations. A hurdle rate says that unless the fund generates a return in excess of the hurdle rate (this is a negotiated number, but often around 8 percent), the GP is not entitled to take her carried interest on the profits. If the fund exceeds the hurdle rate, then the GP can start collecting her carried interest as if the hurdle rate didn’t exist. So, as long as you clear the bar, you are good; fall short and you get nothing.

A “preferred return” is another mechanism to accomplish this, but it is more LP favorable. Unlike the “clear the bar and take the money” aspect of a hurdle rate, a preferred return doesn’t just fall away when you clear it. Rather, if the preferred return were 8 percent, the LPs would get 100 percent of the money back until the preferred return is met, and then the GP participates in any profits above the preferred return. In our ten-year, $100 million fund, an 8 percent preferred return would amount to about $216 million [$100 million/(1.08)10] at the end of ten years; thus, a $200 million total fund return would garner our GP a big fat zero in profits!

If the fund is doing well—meaning the GP is on her way to her desired rate of return and thus likely to be able to raise a next fund from her LPs—she might be more interested in taking a gamble on your fund-raising and see whether you can help her generate even more profits for the fund.

if your company is the lone shining star in an otherwise poor portfolio and you receive an acquisition offer that would meaningfully help the GP to get cash back to her LPs (and therefore increase the likelihood of her being able to raise a next fund), she might be more inclined to push you to take that deal, even if you think there is still more upside to come from running the business. Or if your GP is close to being in a clawback situation and you receive an acquisition offer that, while not that exciting for you, might give the GP just enough money to get herself out of that pickle, she might think differently about the offer.

LPA does put in place a few guardrails.

Investment Domain

For example, is this a life sciences fund or a generalized information technology fund? Are there restrictions on stage—i.e., can the GP invest in seed-versus early-stage venture companies versus later-stage companies?

when you investigate whether a particular GP is appropriate for your business, you’ll want to understand whether you fit into their investment domain.

Best Ideas

how do we make sure the GP’s best ideas go into the fund itself versus her taking them directly for her own benefit?

So, many firms have a restriction in their LPA that limits this activity or, at a minimum, requires disclosure to the LPs at the time of the investment.

I Work Hard for the Money

the LPs have a few mechanisms to hold the GP’s feet to the fire.

direct your energies full-time to investing on behalf of the LPs.

Being a GP should be a full-time job.

In VC land, “suspension” is our version of separation. Suspension comes into play if any or some combination of the GPs are no longer devoting substantially all their time to the affairs of the fund. We call these GPs (or combination of GPs) the “key men”

GP-to-GP Relationships: The Equity Partners Agreement

But not all partners are created equal. Some partners may have only an economic interest in the fund but not have any other governance rights. This means that they cannot legally bind the fund to make an investment (or get rid of it), nor be involved in hiring or firing other partners.

as an entrepreneur, are unlikely to know any of this since these agreements are not publicly filed, but it’s an important thing for you to understand.

The equity partners agreement also spells out the economics of the partnership; that is, how does the carried interest pie get split? There are a ton of flavors here, but they range from fully equal partnerships (where everyone has the same share of carry) to multitiered partnerships (where longevity or performance might dictate differing shares of the pie).

Just as is the case with founders and employees of startup companies (more on this later), most GPs have to vest their share of the carry pool over time. “Vesting” means that you accrue ownership over a specific period of time, such that if you leave the firm before that time expires, you would have earned only that proportion of the carry that equates to your time at the firm. Recall that the life of most of the funds is ten years, so naturally some venture firms want to ensure that GPs are financially incented over the life of the fund

you as an entrepreneur may be affected if the partner who sits on your board (or sponsored your investment) leaves the firm.

To incent people to want to be VCs (just as we do with boards of directors), GPs can be indemnified from legal liability, meaning that they do not have to worry that their personal financial resources could be called upon to satisfy financial liabilities of the fund.

C corps allow you to have different classes of shareholders with different rights.

Under US tax laws, pass-through entities (e.g., partnerships or limited liability companies) can cause even tax-free entities to have to pay tax on what is called “unrelated business income.” (“UBIT” is what the cool kids say.)

If GPs invest in pass-through entities, they can therefore create this potential tax risk for LPs; investing in C corps raises no such issues. Thus, most GPs will avoid investing in pass-throughs as much as possible.

given the much longer runway most private companies will have before they get to their public market debut, founders should think about whether four years is enough time.

Equity is intended to provide long-term incentives, so the question is whether the definition of “long-term” needs to change. Admittedly, this is a hard thing to change because most companies want to have consistent vesting policies for both their founders and the rest of the employee base.

have instituted blanket transfer restrictions on stock sales from the founding of the company. A blanket transfer restriction means that shareholders cannot sell without some form of company consent—often the board’s consent is required to do so.

To implement transfer restrictions post hoc requires consent of the shareholder; you’re unlikely to get that because you are asking her to give up a valuable right that she already has.

most companies have a right-of-first-refusal (ROFR) agreement.

Equity that is unvested at the time a cofounder or employee leaves essentially expires. However, that expired equity can be returned to the company in a manner that permits shares to be reissued to someone else who is currently employed by the company.

in the acquisition scenario, founders will often have single-trigger or double-trigger acceleration provisions. In a single-trigger provision, the founder’s stock is accelerated upon the closing of an M&A event; in a double trigger, both the closing of the deal and the acquirer’s decision not to retain the founder in the new entity are required for acceleration.

A single trigger is suboptimal for the company for the same reasons that accelerating vesting post-employment without an M&A event is: you are consuming equity for an individual who is no longer contributing to the success of the company. And in the event that your cofounder elects to stay with the acquiring company as an employee, the single trigger is equally problematic. The acquirer will of course want to have an economic incentive in the form of equity to entice your cofounder to stay with the new company, but because her original stock vesting was accelerated, creating this incentive will require the issuance of additional shares. This has an economic cost to the acquiring company that they would rather not incur.

If your cofounder has the option to accelerate on a single trigger, the acquirer will need to offer additional cash/equity incentives to retain your cofounder. There are no free lunches: that additional consideration must come from somewhere when the purchase-price pot is fixed. A double trigger solves that problem. If the acquirer wants to retain your cofounder, they can just continue the vesting of her original shares as a condition of her continued employment. And, if the acquirer decides not to extend an offer to your cofounder to be part of the post-acquisition team, the double trigger will protect the cofounder by fully accelerating her stock vesting. It’s only fair in this case that she not be penalized by losing unvested equity since she was not given the option to stay on as an employee with the acquiring company.

Stock options are a contract that gives the option holder the right, but not the obligation, to purchase the stock at a future date, at a specified price. That price is called the “exercise price.” So, if a startup gives you an option to purchase one hundred shares of stock at an exercise price of one dollar per share and that option is valid for ten years, that means that any time over the next ten years, you can pay the company one dollar per share of stock (or one hundred dollars for the full option exercise) and therefore own the stock. So why would you do this?

if you joined the company when the stock was actually worth one dollar per share and, say, four years later the price of the stock has increased to five dollars per share, you are “in the money.” That is, you can pay only one dollar per share for stock that is worth five dollars per share

The act of buying the stock at the exercise price is called “exercising” the option. If, however, the stock is worth only fifty cents per share, you would never pay one dollar to buy the stock and then lose money by selling it at fifty cents per share. Thus the “option” gives you the choice to not buy the shares as well.

two types of stock options that startups can issue.

One is called an “incentive stock option,” or ISO.

With an ISO, the employee does not have to pay taxes at the time of exercise on the difference between the exercise price of the option and the fair market value of the stock (though there are cases sometimes where the alternative minimum tax can come into play). This means that an employee can defer those taxes until she sells the underlying stock.

“Non-qualified options,” or NQOs,

the employee must pay taxes at the time of exercise, regardless of whether she chooses to hold the stock longer term.

there are a few restrictions on ISOs, including the fact that there is a limit of $100,000 of market value that can be issued to any employee within a single year.

ISOs also have to be exercised by the employee within ninety days of the employee’s leaving the company. As companies are staying private longer, this can create challenges for departing employees.

They may have ISOs that have appreciated, meaning that the value of the stock is much higher than the exercise price, but to exercise the stock requires that the option holder pay out of pocket for the exercise price.

As a result, more companies have been extending the post-termination option exercise period from ninety days to a longer period of time, often as long as seven to ten years.

This has the negative effect of automatically converting ISOs into NQOs (because it violates the ninety-day post-termination rule that is required of ISOs), but still gives employees a much longer window in which to exercise their stock options post-employment.

Most startup stock options vest over a four-year period. There are various bells and whistles that can apply to stock options, but the most common we see is a one-year cliff vest—meaning that if the employee leaves before the first anniversary of her employment, she vests nothing—followed by monthly vesting over the next three years at a rate of one thirty-sixth per month. Thus, at the end of a four-year period, the employee is free to leave and take her vested stock options with her.

In lieu of longer vest periods, however, most companies utilize some form of refresher option grants for high-performing employees. That is, perhaps at the end of year two (when half of the employee’s original stock option grant has vested), the company may award her a new option grant that will vest over a four-year period from the new grant date. Thus, good employees may often have some amount of options always continuing to vest, providing a greater economic incentive for longer-term retention.

Tesla generally provides smaller stock option grants to its employees upon hiring and, for top-performing employees, grants increasingly larger amounts of options as part of their refresher program.

How Much Money Should You Raise?

The answer is to raise as much money as you can that enables you to safely achieve the key milestones you will need for the next fund-raising.

What will you need to demonstrate to the next round investor that shows how you have sufficiently de-risked the business, such that that investor is willing to put new money into the company at a price that appropriately reflects the progress you have made since your last round of financing?

let’s assume you are building an enterprise software application. The Series B investor is likely to want to see that at least the initial version of the product is built (not the beta version, but the first commercially available product, even though the feature set will of course be incomplete).

You probably don’t need to have $10 million in customer business, but something more like $3 million to $5 million is likely sufficient to get a Series B investor interested

the decision you need to make at the A round is how much money you will need to raise to give yourself a realistic chance of hitting those milestones over the one-to-two-year period before you try to raise the B round. This, of course, is partly a spreadsheet exercise, but also includes a gut check from you as CEO to build in some cushion for things that just might not go according to plan (because nothing ever goes exactly to plan). A

Of course, you might say, I should raise the money at the highest valuation at which I can get a VC to invest. But that’s not always the right answer.

the current round of financing should be driven by the milestones needed to achieve the next round of financing at a higher valuation that reflects the progress (and de-risking) of the business. If you allow yourself or a VC to overvalue the company at the current round, then you have just raised the stakes for what it will take to clear that valuation bar for the next round and get paid for the progress you have made.

I’ve had the following conversation with many founders over the years: “I’ve more than doubled my business since the last fund-raising, but the valuation I am receiving in the current round is way less than double the last round valuation. What gives?” Well, what gives is that your next round valuation is not a function of your last round valuation. Rather, it reflects the current state of business as valued within the current state of the financing world.

although you may have doubled your business, the new investor may look at your last valuation and feel as though you had been given forward credit for that type of success. As a result, that new investor might decide that tripling is the new doubling; in other words, the new investor is not that impressed that you only doubled the business coming off of the previous round’s valuation and capital resources; they expected more.

one very important thing to do as an entrepreneur—assuming you do decide to optimize for valuation—is to make sure that you raise a sufficient amount of money to give you plenty of time to achieve the now-higher expectations that the next round of investors may have.

One big mistake we at a16z have seen entrepreneurs make is to raise too small an amount of money at an aggressive valuation, which is precisely the thing you don’t want to do. This establishes the high-watermark valuation, but without the financial resources to be able to achieve the business goals required to safely raise your next round well above the current round’s valuation.

Third, competition drives valuation. Whether we like to admit it or not, valuation is more art than science, and “deal heat” can drive VCs to pay more than they might otherwise think is appropriate for a company at a particular stage. And a higher valuation hurdle from the last round may scare away competition. The potential B round investor might like the business but see what valuation you achieved at the last round and fear that she will not be able to match your expectations for the current round. Much of this unfortunately goes unsaid and is a result of people interpreting others’ expectations without engaging in a full dialogue, but this happens nonetheless.

Most VCs have websites that provide an email address for you to contact if you have a business idea. But, as with a lot of businesses, that’s not the recommended path to get in front of a decision-maker.

Angel or seed investors are often an important source of referrals for VCs. It helps that they are upstream from the VCs in that they are typically investing at an earlier stage in the company’s development than might a traditional VC. As a result, many VCs develop relationships with angel and seed investors, with whom they live in a symbiotic relationship in the venture world. Angel and seed investors have a direct interest in seeing the companies in which they have invested raise additional (and usually bigger) capital downstream from VCs, and the VCs are interested in a curated pipeline of interesting opportunities in which to invest.

Law firms also tend to be important avenues into venture firms.

lawyers are often upstream of the VCs and in a position to see opportunities at their most nascent state.

You should be industrious enough to find someone who knows someone who has some relation to a VC.

Pitch Essential #1: Market Sizing

Pitch Essential #2: Team

Once you’ve established that the market opportunity is in fact big, the real question for a VC now becomes “Why you?” That is, “Why do I want to back this set of entrepreneurs versus waiting for the next set that might walk into my office tomorrow tackling the same idea?” After all, ideas are a dime a dozen; execution is what sets the winners apart from the pretenders. Recall that there’s not a lot for a VC to diligence at any early stage; much of the analysis is qualitative. But team is one area where VCs can truly dig in.

what makes you as a person uniquely qualified to win the market? Some entrepreneurs are hesitant to do this, and believe that touting one’s own abilities is a form of self-aggrandizement. But VCs don’t see it that way; rather, they view this as a way to learn about the unique set of skills you have that will make you best suited for the opportunity at hand.

you should relate your prior accomplishments or experiences to the current business you are pitching—what do they say about your likelihood of success in the current venture?

Don’t be shy to talk about your failures—after all, experience is what you get when you don’t accomplish what you set out to do—and relate what you learned. VCs love infinite learners.

not everyone is going to have a PhD in the area in which they want to start a company, but you do need a convincing story as to why you are the best fit to start a company in a competitive market.

Or maybe you have a special skill that enables you to tell stories in a compelling way—not tall tales, but a way to articulate a vision that is likely to lead employees, customers, and financiers to want to come along for the ride.

the star power that Jack possessed could provide the company unfair advantages in the marketplace. For example, Jack was so well-known that he was able to secure a spot on The Oprah Winfrey Show and use that as a way to tell his story to a broader audience; essentially, it was free marketing available only to someone with his brand appeal. He also was able to get directly to Jamie Dimon, CEO of J.P. Morgan, and convince Jamie to bundle the Square dongle with the J.P. Morgan credit card business in a way that generated tons of Square customers at very low cost.

No matter how great a product genius any founder may be, she can’t build a large business without employees and other business partners.

Maybe you’re a repeat entrepreneur and thus can point to having done all of the above before. But many entrepreneurs are doing so for the first time, so think about other leadership-like opportunities you’ve experienced before that might be good indicia of your ability to be a CEO-leader.

We talk a lot at Andreessen Horowitz about storytelling skills as a good indicator of potential success in an entrepreneur. And to be clear, we are using the word “story” in its purest sense; that is, the ability to captivate an audience (whether that audience is employees, customers, partners, financiers, etc.) and take them along for the proverbial ride.

Pitch Essential #3: Product

they are evaluating the process by which you came to your initial product plan. VCs are fascinated to learn how your brain works. We want to see the idea maze. What data have you incorporated from the market; how is it more aspirin than vitamin; how is this product ten times better or cheaper than existing alternatives?

Walk them through your thought process and demonstrate that you have strong beliefs, weakly held; that is, that you will adapt to the changing needs of the market but remain informed by your depth of product development experience.

Pitch Essential #4: Go-to-Market

how will you acquire customers, and does the business model support customer acquisition profitably?

You don’t need to have robust financial models at this stage of your company’s development, but you ought to have a framework that gives a VC enough fodder to understand your thinking around customer acquisition.

You are not expected as an entrepreneur to have all the correct answers figured out, but you do need to have theories grounded in reasonable assumptions against which you can then apply real-world experience. Again, strong opinions, weakly held.

this is really important—you do need to demonstrate to the VCs that you are the master of the domain you are proposing to attack and that you have thought about every important detail of your business in a way that shows depth of preparation and conviction.

if you are pitching a VC and she suggests that your go-to-market plans are all wrong and should instead be done differently from how you have pitched, the wrong reaction is to immediately abandon your plan.

Pitch Essential #5: Planning for the Next Round of Fund-Raising

clearly articulate the milestones you intend to accomplish with the money you are raising at this round.

VCs care about the achievability of the milestones you are laying out; in most cases, they don’t want to be, or can’t afford to be, the only capital provider at the next round of financing, so they are trying to estimate the risk of you (and them) getting stranded at the next round.

sample term sheet for a Series A financing for hypothetical XYZ Company to be led by Venture Capital Fund I (VCF1.)

Security: Preferred Shares

VCF1 is going to purchase Series A preferred shares of the company. These are distinct from common shares (which is what the founders and employees typically hold) and they are also different from potential future series of preferred stock (that will likely be labeled “Series B,” “Series C,” ad infinitum). As you’ll see as we progress further in the term sheet, the whole reason for creating a new class of stock is to give it “preferred” economic and governance rights relative to those enjoyed by the common shareholders.

Aggregate Proceeds

VCF1 is going to invest $10 million into the company in exchange for a 20 percent ownership interest. The second part of the section is intended to make sure that, to the extent the company has any other debt outstanding, in connection with this investment, all those notes will convert into equity under the terms of this financing. The reason VCs care about this is that notes (or debt) are generally senior to equity; that is, if the company were to go out of business, the notes would get paid back out of any remaining proceeds before the equity.

valuation is $50 million “post-money”—what does that mean?

So, mathematically, pre-money + amount of investment = post-money (in our example, since VCF1 is investing $10 million and has said that the post-money valuation is $50 million, the pre-money must be $40 million).

how did VCF1 come up with the $50 million post-money valuation in the first place?

Comparable Company Analysis

company analysis method of valuation requires that we find other publicly traded companies (or companies whose valuation and financial metrics are publicly known) that look and feel like the startup we are trying to value—so-called comparable companies.

We would then look at how those companies are valued as a function of certain financial metrics: for example, Yahoo might have been valued at five times its revenue, while Google might have been valued at eight times its revenue. We then apply these revenue multiples to Facebook’s revenue to arrive at an estimate of how the public markets would value Facebook.

Easy math, hard comparison. Maybe Facebook has a higher growth rate than these companies. Maybe Facebook has a higher margin structure. Maybe Facebook has a larger market opportunity to go after.

This analysis is doubly hard as applied to startups because (we hope) startups are by definition unique, and the ability to forecast revenue is inherently unpredictable. So even if we get the comparables right, who knows if we will get our revenue forecast right—garbage in, garbage out.

Discounted Cash Flow Analysis

Financial theory says—and who are we to argue with it—that over the long run, the value of a company equals the present value of its future cash flows. That is, whatever annual cash a company can generate in the future, if we discount that cash to present-day values, an investor should be willing to pay no more than the current value of that stream of future cash.

it requires that you build out a financial forecast for your company, estimating how much cash flow the company will generate in each future year. Keep in mind that cash flow means “cash”—so we need to estimate not just what the accounting income will be for the company but also how capital expenditures will affect cash and how the timing of collecting cash from customers and paying cash to vendors and employees (otherwise known as “working capital”) works.

we then need to discount those cash flows back to present day using what’s called a “discount rate.” The simple way to think about discount rate is that it is the opportunity cost for a company’s investments—so, if the company could earn 10 percent on alternative investments, then we should discount the future cash flows at least at that rate.

It’s really tough to do this for an early-stage startup given that the financial forecasts for the business are probably not worth more than the Excel spreadsheet on which they were created. VCs often joke that “we can make the spreadsheet say whatever we want.”

More significantly for startups—for those of you familiar with discounted cash flow models—because they tend to consume cash in the early years and (hopefully) generate cash in the mature years, most of the value in a discounted cash flow model will come from the far-out years, where the certainty of forecasts gets even more fuzzy.

know where it is in the investment life cycle of the fund from which the firm is investing into your company. This discussion of reserves helps articulate why that matters—if a firm is early in its life cycle, it probably has the ability to reserve additional dollars to participate in subsequent rounds of financing for your company. If it is later in the fund life and thus the firm needs to start thinking more about distributing cash back to its LPs, it may be less willing to set aside reserves.

VCs often ask the CEO to generate a head-count growth plan for the next twelve to eighteen months (the likely time frame until the company pursues another financing round) and estimate how much stock is required to grant to those planned hires. The CEO would like to keep the pool size as low as possible because increasing the pool size before the current financing round dilutes her (and other existing common shareholders). The VC wants to make the pool size as large as possible because if the company needs to increase the pool after she has invested her money, she will also share in the dilution. This is the dance.

if and when the company’s board decides to dividend out cash to shareholders—which it will likely never do—the dividend will be equal to 6 percent and will go to the preferred shareholders (i.e., the VCs) first before going to the common shareholders (i.e., founders and employees). The whole reason for this section—at least in my humble opinion—is to prevent the founders from dividending out money to themselves at the expense of the preferred shareholders.

Liquidation preference is a fancy way of saying who gets their money back under certain circumstances.

It’s true that there are corner cases where the company could have a change of control (i.e., selling more than 50 percent of its stock) that doesn’t involve an acquisition,

The specific type of liquidation preference in our sample term sheet is called “1x nonparticipating.” Let’s break that down. It’s “1x” because VCF1 gets its original investment amount back first, but no more. Liquidation preferences can be structured to be 1.5x, 2x or any “x” the company and VC agree upon. In those cases, the VC would be entitled to that multiple of its original investment off the top of any sale proceeds. Having a liquidation preference greater than 1x can be a big hurdle for startups, because it increases the acquisition price by that multiple of the monies invested by the VCs.

VCs that invest at later stages of a company’s development may demand more than a 1x preference. Why is that? The idea is that if a VC is investing at a much later stage, she might be worried that there will not be enough upside on the investment if the company were to sell itself in close proximity to the financing, before the business has had a chance to grow to a point where its value is some greater multiple of the valuation paid in the financing round.

“Nonparticipating” means that the VC doesn’t get to double dip. Rather, she gets a choice: take her liquidation preference off the top or convert her preferred shares into common shares and take the equity value of her percentage ownership of the company. “Participating” is the opposite flavor—not only does the VC get her liquidation preference first (her original investment back), but then she also gets to convert her shares into common and participate in any leftover proceeds as with any other shareholder. Double-dipping is pretty unusual in the standard venture capital financing.

Let’s do a quick example to illustrate the difference. Assume that VCF1 has invested its $10 million (for which we said it owns 20 percent of the company) and a year later the company gets sold for $40 million. Because we have a 1x nonparticipating liquidation preference, VCF1 has to choose between taking its 1x off the top or converting into common. Which does she choose? The answer is the liquidation preference, because that nets her $10 million, whereas if she were to convert into common, she would receive only $8 million (0.20 × $40 million). That will leave $30 million for the common shareholders to take from the acquisition. Hopefully you can see that her indifference point is at a $50 million acquisition—she would get $10 million in liquidation preference or $10 million from converting into common and getting her 20 percent of the $50 million acquisition price. This makes sense because she invested at a $50 million valuation, so we would expect that to be the indifference point. Last example. Assume VCF1 successfully negotiated for a 1x participating liquidation preference. How does that change the math? Well, in the $40 million acquisition scenario, VCF1 would first get its $10 million liquidation preference, and then it would convert into common. As part of the common shareholder base, VCF1 will get an additional $6 million (0.20 × the remaining $30 million in proceeds). So you can see how the rest of the common shareholders are affected in this scenario—they get to share only the $24 million remaining after VCF1’s double-dipping versus the $30 million in the nonparticipating example.

order of preference among the various parties who enjoy the liquidation preference.

This preference is known as “seniority,” which means that someone has a preference to acquisition or liquidation proceeds ahead of the other preferred holders.

The opposite of seniority is pari passu, which is a fancy Latin saying that means we are all treated the same.

In practice, though, this term does matter in that it can create different incentives for your various VCs and thus cause them to think differently about an acquisition offer.

For example, assume you have a total of $30 million in liquidation preference and two different series of preferred stock (A and B) representing two different venture capital firms. Assume also that each firm has invested $15 million in its respective class of preferred stock. If you receive an acquisition offer for $25 million, all those proceeds would go to the preferred holders because the acquisition price is less than the $30 million in preferences. If the preference were pari passu, the VCs would split it fifty-fifty, each getting $12.5 million back on their original investments of $15 million. If the B shares were senior to the A shares, though, the B holders would receive their full $15 million back and the A holders would then get only the remaining $10 million.

Redemption

redemption is extremely unusual in VC. But, for completeness, if it existed in the term sheet, it would basically allow VCF1 to give back its stock to XYZ Company at some future time period in exchange for getting its money back (and sometimes with interest).

Redemption rights, if they exist, are likely to come into play at precisely the worst time for the company. Why would a VC, who is playing for home runs, want to redeem? Only if she felt as though the company were walking dead, and thus getting her money back was a better option than watching it slowly being vaporized.

Conversion/Auto-Conversion

Recall that VCF1 is investing in a different security (Preferred Series A) than the founders/other employees likely have (common shares). So, at some point, VCF1 might want to convert its shares from preferred into common and, at other points, the founders (and maybe other later venture investors) might want to force VCF1 to convert into common. Why would a VC ever want to do this (and why would the company/others ever want to force you to do this), given that the preferred shares have so many more rights and privileges than do common? In the former case, a VC might want to do this as part of the IPO of the company. To take a company public, you will want to clean up the capital structure of the company by having everyone convert into common shares. It’s not impossible to have multiple types of shares as a public company—in fact, more recently we have seen many technology companies implement “dual-class stock” as part of their IPO, which often splits common stock into a high-voting class and a low-voting class. For example, Google and Facebook each have dual-class voting structures, and Snap actually has a tri-class structure. This notwithstanding, preferred shares generally need to go away at the time of the IPO.

Recall that we talked earlier about the reduction in the overall number of IPOs in the last twenty years and, in particular, the decline in the number of smaller-capitalization IPOs. Among the reasons for this are that smaller-cap public companies don’t have great trading liquidity. This means that the volume of shares traded on any given day is small, making it hard for a shareholder who has a lot of shares to be able to sell that stock without moving down the price of the stock. To combat this, the IPO conversion term often includes a provision that the IPO be of a specific minimum size, which equates to a minimum expected market capitalization of the company intended to avoid being stuck in a low-trading-volume, small-cap stock.

the Series A stage of investing, it would be hard for VCF1 to argue for a significantly higher initial IPO market capitalization. Presumably, as there are other, later financing rounds, this minimum IPO threshold will increase.

Another flavor of the IPO auto-convert is to put in place a specific per-share price or a return on investment threshold to force conversion. For example, VCF1 could have said that it would only auto-convert on an IPO where the return on its $10 million investment was at least 3x. You sometimes see these return-based terms in later-stage venture financings where a new investor might be coming in close in time to an IPO and worries that the company might go public too soon before it has seen enough appreciation on its investment.

voluntary conversion. In this case, the term sheet says that a vote of a majority of the preferred stock is another way to convert preferred into common.

When would a VC ever want to do this? Mostly, in a bad situation.

the company may have raised several different rounds of venture capital and thus has different investors who’ve invested different amounts and at different valuations. As a result there might be $30 million or $50 million or more in combined liquidation preference on the company.

Often, in order to restart the company, you want to clean up the capitalization table by getting rid of some or all of that liquidation preference.

Who gets to vote on whether the preferred convert into common and thus give up liquidation preference?

Notice that the term sheet is very specific in using capital “P” Preferred Stock as the group that has to get to a majority vote as part of the voluntary conversion mechanism.

“Preferred Stock” is defined as “any prior series of preferred stock, Series A Preferred Stock, and all future series of preferred stock.” This means that no matter how many different classes of preferred stock may exist over the life of the company, they all vote together as a single group in determining whether a majority of them wants to voluntarily convert into common.

There is of course another alternative to help this new investor get comfortable with the size of the existing preference stack—allow that new investor to have a senior liquidation preference.

There may be times when giving different classes of preferred stock makes sense—and you do see this oftentimes as companies get more mature and raise larger amounts of capital at higher prices. But, doing so for XYZ Company at such an early stage is generally not recommended. Once you set the precedent of giving individual series of preferred stock their own votes, it’s very hard to take that back. So for a Series A term sheet like we have here for XYZ Company, having the capital “P” Preferred vote on voluntary conversion is a smarter path to pursue.

in the event that the company raises money at a valuation below that at which a VC invested. We call this a “down round,”

Contrast that with the true insurance policy that provides the VC a complete price reset—that’s called a “full ratchet.” In a full ratchet, using our five-dollars-per-share/two-dollars-per-share example from above, our VC would essentially ignore its original five-dollar price and reset its stock holdings based upon the two-dollar price.

Voting Rights

Important to note here, though, is that each share—both common and preferred—has one vote.

As dual-class stock has started to proliferate among some public technology companies (e.g., Facebook, Google, Snap), some startups have been thinking about whether to adopt these structures as a private company.

There are two flavors of this

First, some founders would like to have a high-vote stock that applies to their shares only.

What has happened in a very small number of cases is that some founders have asked certain investors to enter into what’s called a “voting proxy” in connection with their investment. This means that the investor hands the voting authority for her shares to the founders,

we do sometimes see this with very-late-stage, passive investors who are interested in the financial investment opportunity only

springing dual-class structure in anticipation of an IPO. This means that we keep the one person, one vote construct while the company is private, but that immediately prior to an IPO, the dual class springs into being.

there is typically what’s known as one “lead” investor who is driving the negotiation of the term sheet with the CEO and, as a result, is typically investing at least half of the total amount of the round.

you want to avoid smaller minority investors in later rounds having greater governance control than they have economic interests. The way to do this is to lump all the independent series of preferred stock together into a single voting class versus allowing each series of preferred to have their own votes. Doing the latter means that each series of preferred can block the other—as we said, that’s not a good place to be. Now,

intermediate way of addressing this concern is to not provide a separate series vote for all corporate actions, but rather to enumerate a specific list of things that the new investor is most concerned about for which she can have a separate class vote.

long list of things that the protective provisions give the Preferred shareholder a right to vote on. We won’t cover all the items, but let’s talk about a few:

(iii) Authorization of new classes of stock—This one is pretty important because it is the mechanism that ensures that the Preferred get a chance to vote on future financings for the company.

the Preferred only get to vote on a new class issuance if it has rights equal to or greater than the rights that the current classes of Preferred have. For example, if XYZ Company wanted to issue a new class of preferred stock that had a liquidation preference that was junior to the preference of the VCF1 stock, arguably they could do that without consent of the Preferred.

(v) Corporate actions

It permits the Preferred to vote on an acquisition of the company and a sale of its intellectual property. This makes sense in that VCF1 likely invested in the company in part based on its intellectual property and thus would want to have a say in a sale of that and a sale of the company itself (which would likely include the intellectual property).

Liquidation or recapitalization

If XYZ Company is going to get shut down (liquidated) or recapitalized (meaning that the current capitalization structure is going to get turned on its head), the Preferred will also get to have a say in these matters.

Leadership Lessons from the Chilean Mine Rescue

Hope and reality
Decisive and consensus
Multiple different strategies for same problem

Dividing mission critical teams to allow focus

Expertise without leadership is never enough

Enlist specialists, they should leave behind pre conceived notions and pre packaged solutions

To ensure followers, leaders must repeatedly present their vision of the end state. By reminding what they are trying to accomplish and whats at stake, infuses fresh meaning into work , recharging effort and ingenuity

It is as important to exclude unhelpful people and approaches as it is to invite in the needed ones

Just as leaders span boundaries to invite innovation they must also patrol them to increase the chances of successful execution. Clear boundaries give people the space they need to think , organise, experiment, and reflect.

Engagement is about action, diving in, doing the work.. leaders drive that process through an unusual mix of disciplined execution and rapid innovation

Short assessment cycles minimized time and resources spent pursuing fruitless paths . Fail.fast, learn fast, executing multiple ideas at the same time not sequentially

To facilitate engagement organisation design that combined centralized and decentralized components.

Rather then creating a schedule in advance, leqdership call short meetings as needed, especially to discuss on failed tests and efforts.

Executives leading change efforts tackle 3.key tasks . A) envision the future B) Enroll Change agents C) Engaging in the work of change

Envisioning, enrolling and engaging thus constitute overlapping leadership tasks. Changes in any one task will necessitate changes in the other two, so work on all three will coeveolve over the course of the effort . This means companies must shift from an orderly and sequential process to a dynamic iterative one

Since no one realy knows how the process will unfold the need for rapid learning is central .

It isn’t easy for leaders to make a shift to an iterative process, most systems and cultures will stifle their attempts

Executives will have to shed the deeply embedded beliefs that important business challenges and opportunities are well defined., are technical in nature, and yield to the disciplined application of expertise and that quarterly performance measures are the right way to assess how well they have been addressed.

When looking for a crises leader…triangulate….several people ask same question seeking leadership to many people, allowing suggestions to come thru

Pay It Forward

Hooked

Zero to One

Blue Ocean Strategy

Billion Dollar App

Running Lean

Lean Start Up

Exponential Organizations

The Inevitable

Innovator's DNA

Lessons from Private Equity Any Company Can Use

Platform Scale

10 Product Validation Experiments

Don't Make Me Think, Revisited

Platform Revolution: How Networked Markets Are Transforming the Economy

Blitzscaling

The Science of Managing Our Digital Stuff

Don't Hire a Software Developer Until You Read this Book

7 STEPUX®: The complete UX process from strategy to design

Think Again

Swipe to Unlock: The Primer on Technology and Business Strategy

Measure What Matters: OKRs: The Simple Idea that Drives 10x Growth

The Cold Start Problem: How to Start and Scale Network Effects

Product-Led Onboarding: How to Turn New Users Into Lifelong Customers

Accelerate: The Science of Lean Software and DevOps: Building and Scaling High Performing Technology Organizations

Digital Body Language: How to Build Trust and Connection, No Matter the Distance

“HBR's 10 Must Reads on Platforms and Ecosystems (with bonus article by "Why Some Platforms Thrive and Others Don't")

“Girl Decoded: My Quest to Make Technology Emotionally Intelligent – and Change the Way We Interact Forever”

Originals: How Non-conformists Change the World

Never Eat Alone: And Other secrets to Success, One Relationship at a Time

Don't Just Roll The Dice - A usefully short guide to software pricing

Product-Led Growth: How to Build a Product That Sells Itself

Steve Jobs: The Exclusive Biography

Sam Walton: Made In America

Outliers: The Story of Success

The Infinite Game

The Obama Movement

The Messy Middle - Finding Your Way Through the Hardest and Most Crucial Part of Any Bold Venture

The Catalyst - How To Change Anyone's Mind

From Vision to Product Market Fit: The Startup Product Builder's Playbook

Product-Market Fit (Super Guides Book 30)

Traction: A Startup Guide to Getting Customers

In the Plex: How Google Thinks, Works, and Shapes Our Lives

Secrets of Sand Hill Road: Venture Capital—and How to Get It

Leadership Lessons from the Chilean Mine Rescue

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