The Startup Strategy Matrix

I’m currently writing an “extended essay” – a core part of the International Baccalaureate Diploma, which I’m in my last year of. The essay can be on any official subject that the IB offers, and I’m doing mine in business and management. Specifically, I’m writing on scenarios where lean startup methods should and should not be used – trying to discover set cases where it would make more sense to use “fat startup” methods.

The essay requires that I write about “commonly accepted business and management theorists and their theories”. In researching for relevant business theories I came across Ansoff’s Growth Matrix. It’s a simple grid showing the actions that companies should take when trying to grow by entering new or existing markets with new or existing products.

It looks like this:

In terms of startups, the matrix is pretty useless. The vast majority of Internet startups are in the bottom right-hand corner – they are entering new markets with new products. Ansoff’s Matrix tells them that they should “diversify”. Diversification isn’t a term I associate with startups, and it doesn’t actually give us a great deal of information about what precisely the company should be doing.

However, I do think the fundamentals of the matrix (the axes) could be usefully applied to a startup-specific context.

In my research I’ve found out about a lot of startups that have used lean startup strategies (because everyone’s talking about them and they’re meant to be best for startups), only to fail by missing out on an opportunity or spreading themselves too thin. From looking at them more, these startups that failed in such a manner were either entering a new market with an existing product, or entering an existing market with a new product. I don’t believe that lean startup methods are appropriate for startups in these categories.

I believe that only startups in the bottom-right corner should utilize lean startup methods. They know absolutely nothing about their market and therefore should use the strategies to learn about their market (along with Steve Blank’s Customer Development model). Startups that are in the top-right or bottom-left corners should use “fat startup” methods. They will likely need to raise a lot and spend fast, as if they are entering a new market with an existing product they simply need to be there first, and if they are entering an existing market with a new product they need to carry out traditional product development with marketing on top to attract new customers.

Startups entering existing markets with existing products are not startups at all. There is no uncertainty – they can just get a bank loan to fund everything as there is such a high degree of certainty.

I did this up quickly, and think it should be called the Startup Strategy Matrix.

It’s very simple, but if a few startups that I’ve been looking at had taken a look at this before they began, they might have dodged failure and be doing millions in revenues. Think of Groupon clones as an example – a local Groupon clone that I saw here in Wellington began using lean startup methods, even though they were entering a new market with an existing product. They didn’t need to learn a thing about their market – they just needed to get to the market first. Nevertheless, they spent frugally and spent a lot of time testing aspects of the website. Missed opportunity and an epic failure – stupid.

What do you guys think?

Saving Time (Quitting Facebook)

From now on, I am only going to use Facebook for two things: managing Pages, and private messaging people.

It’s been a long time in the making. Facebook has frustrated me and annoyed me more than it’s ever helped me. But at the same time I’ve kept thinking that I’d suffer if I didn’t have it, so I’ve never actually stopped using it.

There are a few reasons why I’ve stopped using Facebook for anything other than these two things. Firstly, in all honesty, and in exactly the same way that I’d say this in real life, I just don’t give a shit about what the majority of my “friends” post. I care about what my close friends and family are saying and doing – and Path has given me a medium that is a million times better for hearing about those things. Hearing about other stuff is just a waste of my time, and Facebook is only getting more and more noisy since they introduced Subscriptions.

I also care about hearing business, technology, and world news from some of my friends on Facebook. But all of these friends on Facebook that share that sort of news, I also follow on Twitter. Facebook is redundant.

The truth is that what I’ve loved about Facebook is having all of my friends in one place. I use Facebook to private message friends who I’m not super close to, but want to catch up with once in a while. I don’t have their email addresses or phone numbers, but I know I can always Facebook them. I also need to manage some Facebook Pages which are very useful professionally. That’s the only other way I’ve found Facebook useful.

So, I’m going to stop wasting my time and give up everything about Facebook that I hate, and I’m going to hold onto what I do find useful about Facebook.

You can no longer post on my wall. You can no longer view my photos (apart from wall photos which Facebook makes it way too hard to make private). You can no longer view my conversations with others on my wall. You’ll no longer see me commenting or liking. And you can be sure that I’m not going to read anything on my News Feed.

You can still private message me. And you can get in touch with me in lots of other ways that I’ll probably pay more attention to.

Just thought I’d let you all know why I’m doing this and why you won’t see me active on Facebook anymore (if you’re my friend). I’m also interested in finding out if anyone else is doing anything similar, or if you’ve quit Facebook entirely. If so, why?

Chronic Unemployment

Structural unemployment is a form of unemployment that occurs because worker’s skills are outdated, or not desired by employers. Technological unemployment is in some ways a type of structural unemployment caused specifically by advances in technology – as technology automates jobs, workers become unemployed with no skills to gain other employment.

Both of these types of unemployment are traditionally fixed through supply-side policies such as training and educating workers so that they have skills desired by employers. This fix is costly to taxpayers as it is not cheap to provide education. However, in most cases, it is a fix – workers will be able to find employment after being trained and educated. Structural and technological unemployment are in most cases temporary because of the government’s supply-side efforts.

But what if technology advances so much that employers simply don’t need as many workers, no matter what their skills?

I’m not just talking about manual labour here. Obviously manual jobs are being replaced by robots and others forms of technology. But again, these people can be up-skilled and subsequently find re-employment. I’m talking about when technology becomes so advanced that people cannot up-skill to a point above the capacity of the technology so as to become desirable to an employer.

Technology is starting to cause people with university degrees to become unemployed. Law firms don’t need as many lawyers because much of the research can be done in one-hundredth the time it previously took. R&D departments need less engineers and managers because the processes have been automated. Teachers are becoming irrelevant as we learn online. I’m talking to friends of mine who have masters degrees and cannot find a job. It’s a global problem that most people are blaming on the economic downturn. I don’t fully believe that. It may be a part of it, yes – but I believe the main cause of this unemployment is simply advances in technology.

It’s only going to get worse because technology will never stop advancing. We’re going to see technology continue to progress at faster rates every single year than it ever has previously. And the technology is going to become (already is becoming) so advanced that it will render people with masters degrees “unskilled”. No company will hire an individual whose skills can be done by a form of technology at a tenth of the cost. Technology also doesn’t require healthcare and stock options.

Where is this going to lead? If people simply are not needed and therefore cannot gain a form of income, what happens? How do they live?

In the short-term, governments won’t realize that the problem is advances in technology. They’ll keep paying benefits to more and more people, while funding supply-side efforts to train workers. They will subsidize university. They’ll focus on education to begin with. They also might try demand-side policies – by increasing government spending, they can fund more jobs. So we’ll see governments employing more people. But none of these solutions are long-term. They’ll simply lead to a waste of resources in every country.

And when governments do realize that the problem is advances in technology? Well, stopping advances in technology to save jobs is ludicrous. I hope that no government ever considers that.

I think this is a massive problem that will start to show just how serious it is in a couple of decades. This will be one of the major problems facing economies (excluding, ironically, developing economies) in this century. And I don’t have an answer to the problem.

Personally, I want to be at the forefront of developing these technologies. I guess it’s a kind of “If you can’t beat ‘em, join ‘em” mentality. I also think that entrepreneurship is going to explode in societies as a result of this problem. People who can’t find jobs will simply create one for themselves. In this sense, this may be a blessing to modern societies.

After I began thinking about this issue, I tried to find more writing on the topic. I couldn’t find much, other than a book by one Martin Ford, called The Lights in the Tunnel. I’m reading it now, and will likely write another post once I’ve finished it. If you know of any other writing done on this topic, please share it with me – I want to find out as much as I can.

Selling Lifestyles

To use Jim Collins’ phrase, I believe that these days the difference between “good and great” companies is how they manage to sell the idea of a lifestyle. I’ll explain why I think this using two companies in two different industries.

Firstly, Abercrombie & Fitch. They died as a company two times before becoming the phenomenon that they are now. They’ve always been known to sell incredibly high-quality products made from good materials. But that didn’t stop them from filing for bankruptcy once and then being bought out. Abercrombie then brought in a new CEO, Mike Jeffries, who created the new concept for A&F. He wanted this new concept to allow people to think that they’re in a movie. He also wanted the brand to “sizzle with sex”. Abercrombie sells the lifestyle of sexy college students.

Look at the difference in approach. When the brand failed, it focussed on product first and foremost. It made a great product, but with no image or lifestyle, people didn’t buy it. After Jeffries came in, A&F put their lifestyle image first, backed up by a super high quality product. And now they’re smiling all the way to the bank (they’re a multi-billion dollar company).

Look at Apple, too. Apple has always made high-quality products. But it almost failed years ago, because it didn’t have a lifestyle with which people could buy into. Then Jobs came back, and created the “think different” lifestyle that creative people could buy their products to become a part of. I don’t need to explain their success since then.

The point is, you can’t be a great company with just a great product. There are thousands of companies with high-quality, functional products, that are on the verge of failing because no one will buy the product. To be a great company, you need to have a lifestyle that people want to buy into by buying your product. The more compelling the lifestyle that you sell, the more you can charge for your product and the more people will want it. Abercrombie raises its prices every single year, and yet demand for their products rises faster every single year – the Abercrombie lifestyle is so strong that it even makes the law of demand invalid (in economics, it’s called a Veblen Good). This is the situation you want to be in as a company. Think about it – you raise your prices and even more people want to buy your products!

I don’t think that selling a lifestyle is something that only physical-good companies can do. I believe that web apps can do it as well, and indeed many should think about it more seriously. One app that I believe should really focus on creating a lifestyle to sell is Path. The new version of their app is fantastic, and they’re seeing huge numbers of people begin to use it. But Path, to me, is about sharing my life with the people who are close to me. Path’s job, then, is to make me want to share more of my life. And I think the best way for them to do that is to create a broad lifestyle image for people to want to buy into. They should create an image that means when someone sees me using Path, it says something about me and my lifestyle – “I’m tech savvy, value my close friends and family, and want to share my life with them as well as see their lives”.

Every web app can sell a lifestyle of some sort. It might not be as elaborate as Abercrombie’s, as you don’t have a physical store for people to walk around in, but you can create it through your app and website.

I’ll repeat the key point I’m trying to make in this post – that it’s not enough to make a fantastic product. To make your company great, I believe you need to sell a lifestyle through a high-quality product.

How To Bring Handwriting Into The 21st Century

I think better when I’m physically writing with pen and paper. There’s something about it that lets me map out my thoughts more effectively, and think in broader terms. When I’m writing on a computer, or an iPhone as I am now, I feel more confined and stuck within a specific format.

I can’t explain why this is, beyond saying that it’s either personal preference or a result of the fact that I wrote on paper before I typed. But because of it, I usually map out my thoughts on paper before I take to a computer to type. By doing this, I find that the end result of my writing is usually always better.

If you read my blog often, you’ll know that I have a love-hate relationship with paper. I try desperately to eliminate it from my life (and do pretty well) but love writing on it. I want all of my writing to be stored digitally (in Evernote), even things that I’ve handwritten.

There are ways for me to do this, and I’ve tried them. Livescribe is one solution, but it’s too much of a hassle to make it worthwhile.

For those of you who don’t know, Livescribe is a specific pen (a very chunky, uncomfortable to hold one), that allows you to write on a specific type of paper and have your notes converted into a digital format when you plug the pen into your computer. You cannot write on your own paper  - it has to be Livescribe’s paper, which is covered in tiny dots that the pen can read.

I’ve tried Livescribe a few times and have never been taken with it. I want to use my own paper, and write with a normal-sized pen, and have all my notes automatically converted into a digital format and sent to my Evernote account. I’ve even thought up a concept that I believe could work, which I’ll explain here in case a brilliant engineer or inventor happens to read this. Please bear in mind that I do not have an engineer’s brain, and I don’t have a proper idea of how this would be built or the exact technology involved in it.

I envisage a normal-sized pen, that is comfortable to hold. It has a small screen on the side (similar to Livescribe) and is connected to the Internet via 3G (like Amazon Kindles). Inside the pen is an accelerometer and a gyroscope. You simply write on any paper you want, and the accelerometer and gyroscope pick up the movements that your hand is making and convert those movements into letters, which are then sent wirelessly to Evernote’s servers. This, in my opinion, is the best solution. It means you don’t have to be locked into using Livescribe’s paper, plus it removes most of the hassle from the process.

To be honest, I’m only guessing as to whether an accelerometer and gyroscope can pick up the movements that our hands make. But it’s an educated guess – from seeing what an iPhone can do, which has the same technology inside it, it seems likely that this could work.

If this was built, I’d be a bloody happy guy. I could write with pen and paper, which I love, but never have to worry about keeping the paper or having it with me, as I’d have all my notes accessible on my iPhone in Evernote, wherever I am. I believe this is a way that handwriting can be brought up to date with modern technology.

If you’re an engineer and read this – would you mind letting me know your view on the feasibility of producing a pen like this? And if any of you have heard of an existing technology like this, or another alternative, please let me know!

The Unfairness of Tech Startup Coverage

Here at LeWeb Andrey Andreev, the founder of a company called Badoo, was just interviewed by Loic LeMeur on stage. I follow the vast majority of all tech news in the week, and for some reason Badoo has just escaped my radar. Either it was just a weird accident that I’ve never read anything about Badoo, or there’s something else going on.

If Badoo was a brand new company with hardly any users, it may be more easy to believe that I just missed news about them. However, Andrey announced on stage that they have 150million users and are doing over US$100million in revenues. That’s hard to miss. That’s pretty monumental.

For those of you who don’t know, Badoo is a social network that lets you “meet people around you”. In other words, it’s an app to let you meet people and flirt. Not quite a dating site, but close to one.

The issue I want to tackle here is why I hadn’t heard about Badoo, when they’re one of the top European company success stories of the past year or so.

It seems as though we hear in great detail all the news about every tech startup in Silicon Valley, but don’t hear much about startups elsewhere. There are probably a few reasons for this. Firstly, Silicon Valley itself IS the tech industry. For that reason, there’s a huge amount of media there that solely focusses on reporting on new startups. This means that we are sure to hear about Silicon Valley startups. On the other hand, cities in Europe or Asia aren’t solely tech focussed. Therefore there isn’t the same amount of media that cover new tech startups, and many hot new startups get missed by the international media.

Secondly, I believe that other cultures idolize tech startups less. In the US, especially after Facebook and The Social Network movie, it’s “cool” to be a tech startup. This means that the media there actively look out hot new startups so that they can get a scoop. But in other countries its not cool to the same extent, and again we see less coverage of tech startups.

There’s a huge list of tech startups in Asia and Europe that we just haven’t heard about. Many of them are far more successful than startups receiving extensive coverage on TechCrunch or any of the other Silicon Valley news sources. But because no local media is that interested in them, they don’t get covered as often or to the same extent, and the international media never hears about them. I’m by no means just talking about Badoo here.

TechCrunch has writers on the ground in many different cities, but they aren’t in all of them. We can’t just expect coverage of international startups. And unless there is more interest in local cities in Asia and Europe in the tech industry, we can’t expect more coverage from local media. So what’s the answer?

I don’t really believe there is one. I think that the reason Silicon Valley startups receive so much press is because that’s what makes Silicon Valley great. It’s part of the reason why startups go to Silicon Valley – so that they can receive press coverage and interest that they simply wouldn’t receive elsewhere.

Therefore perhaps the only way to increase local media coverage of startups elsewhere in the world is to turn those cities into tech hubs. That’s a huge task, and I’ve written a post with my thoughts on it before. I don’t actually see any cities being turned into a tech hub anytime soon. The media coverage is part and parcel of Silicon Valley, and if you want that type of coverage you’re just going to have to go there.

This got me thinking at the very least. Interested in everyone’s thoughts!

Exam & Concentration Tricks

I used to think that a desk was a desk, and it didn’t matter where I worked or studied as long as I had a good chair and a good desk. But I found myself struggling immensely to study after doing some work, or vice versa, while working at the desk I have in my room. Leading up to my exams this was getting infuriating. I’d do an hour’s work after school, then try and study for a few hours, but just couldn’t concentrate. My mind would keep wandering back to the work I’d been doing, no matter how hard I tried to concentrate.

Someone suggested that I set up another desk in a different room and use it to study, while continuing to use the one in my room for work. I took the advice, willing to try almost anything.

It worked brilliantly.

By physically moving desks and location when I switched from working to studying, I found myself not as distracted and able to concentrate more on whatever I was studying. It seemed weird initially – I didn’t quite understand how the desk I was working at could make such a difference to my concentration. But the results really were great.

I’ve thought about it afterwards, and talked about it with a few people. It seems that the reason why this works so well is because our minds attach a certain activity or task to a physical location. Therefore trying to do a different task from the same location where your mind is trained to do a different activity just doesn’t work well. But by moving locations, your brain can attach the new task to that location, and you won’t be as distracted.

Another problem I was having was that I needed to use my computer for studying, but really didn’t want to have to use it as it’s so easy to be distracted by other websites and applications. I searched Google for a program that could allow me to block certain applications and websites when I’m studying. I discovered an application called Concentrate (http://getconcentrating.com/).

It’s fantastic.

Concentrate lets you create a “task”, and then set “rules” for that task. So, for example, I created the “Study” task. Then for this task, I set rules of blocking all social networking and general distraction websites, and blocked Twitter and Mail applications. Then when I hit “Study”, these rules are applied and you can no longer access any of those websites or applications that you’ve blocked.

You can also set Concentrate to open certain applications for you, or do things like change your computer background. And the best thing about it is that once you’re finished with a task, like studying, Concentrate will return your desktop to the way it was before you began that task, by re-opening applications that it closed when you applied the rules. So it really just removes all the hassle from closing applications etc.

If you think you have enough willpower to avoid clicking on Twitter or Mail while studying, I’d like to see you actually do it. It’s only a few second click – but the number of times you’ll click it while studying will amaze you. Concentrate just removes the temptation.

These two tricks really helped me study for my exams, which ended last week. If you’re doing exams, I hope they help you too! And if you’re a few years past exams, these tricks can help with anything else in life too.