- Who is the one user or customer ? also called the unit of one. Name him or her.
- What is the job that he is trying to do in his life in the context of the product idea ? Many times this job could be non functional such as an emotional or a social one
- What is the friction and the barriers in those jobs.
- How does the product in question help solve or address the friction ?
- How would this be framed in terms of benefit in customers life. i.e before and after the product, improvement in customers life.
- What is the measure of improvement in customers life also called as customer benefit metric.
- What emotions are triggered by the use of the product i.e how does the use of the product make the user feel.
- What are the magic moments, i.e in the journey of delivering the customer benefits what are the the unexpected delight that comes up.
- What is the shortest path to the first magic moment in the use of product and what are subsequent magic moments ?
- What aspects about the product will the user want to talk about. How easy is it to share that story
I get to meet and hangout with many product entrepreneurs in India across a wide variety of spectrum (wannabe, early stage all the way up to category leader). I have been one and have crossed a few early stages myself, based on my experience I see 3 type of founders
The Surfer, Voyager & Fisherman
Surfer is someone who is riding a tide, has unique skills, most often flamboyant but certainly a great story teller. Some may call him lucky for the tide is responsible for his greatness and he may have been only there at the right place and time.
He however believes that he can read the wind & the wave and that he has his board in so much control that can swerve smoothly against the biggest tide.
Investors could be referred to as bystanders on the beach making bets on surf board, tide or surfer himself to win.
Press makes a celebrity of him for it becomes a sport worth paying attention to for the adrenaline kick that it can produce.
They however have the same fate that movie industry mete to its heros & heroines, i.e post their short lived hotness they are relegated to the archives of history.
Many yesteryear consumer internet and e-commerce stalwarts are good examples of this. We are yet to find our Rockstar/Shehenshah/Thalaiva heroes that are timeless in this category.
Voyager is like the columbus, an italian in spain, a master storyteller as well. He is going for the glory and riches but also believes and leverages his experience of past expedition by a previous voyager.
He sets sail to find India but discovers America. He also finds other backers to to chase the dream.
After the Surfers, Voyager becomes a great story to write about so they get their share of press as well.
Good examples are engineers, product managers from other successful big product companies like Yahoo, Veritas, Symantec, Google, Microsoft (MNCs) & Zoho, Tally (Indian Companies) etc.
He is someone who also faces the vagaries of the sea but goes to catch fish. His work is not sexy and it may stink but feeds him and so many others. He may choose to fish where nobody is fishing or have to compete and jostle with other fishermen going after the same fish. His journey is a long one.
Story of a fisherman comes only when stories of other two types have been repeated to boredom. Many call this as the bootstrapped entrepreneur.
They are different but have few things in common. Each involves skills but given the odds has self doubt. Some play the game for 3-4 years, other spend decades.
- Surfer does not create the tide
- Voyager can only envision his prized destination in a rear view mirror.
- Fisher man does not create the fish.
Many first time entrepreneurs are confused on what persona they would like to choose or what choices are even available to them. As the startup ecosystem ebbs through greed and fear the god that founder look up to changes, in times of boom the surfer is the god, in times of gloom fisherman is the god. Also when one type is treated god the other type is berated.
Wish there was more understanding amongst them and about them to reduce the pain they go through. For contribution they do to society through society they all deserve salute.
Rants are not worth responding but
I have known Nikhil for 10 years and have the highest respect for him, after Om Malik he is my most favourite technology journalist for his deep and incisive views. I also admire his courage to deliberate topics which are normally deemed outside the ‘overton window’ (non discussable topics)
So despite the rant I had to sit down and had to think on this because this is Nikhil asking these questions. However after reflection I found that I can’t agree with him on several counts, well this is not our first time
I also feel more compelled to do so because while he talks technology & politics in the title of his post but it seems to be a complaint against iSPIRT. And I am on the side of iSPIRT, have been part of iSPIRT from the day it officially started and many years before that. Moreover now I am a full time ‘Fellow In Residence’ since last four months running the M&A Connect program.
His rant has many factual errors including about UPI that Nikhil Kumar already points out in his tweets.
If I understand it right the following seems to be major points he rants about
- Unsettling adoption pace in Digital Identity & Payments
- Muddled debate on digital colonization
- Subversion of choice in technology diffusion
- Close relationship of technology and politics
Technology is the yin, policy the yang of new markets
Technology as Kevin Kelly beautifully points out is a force of evolution, it is an unstoppable force of nature. Definition of politics or policies in this context is it is allocation of scarce resources in the face of change. Technology creates new possibilities while policies moderates those by setting up the new rules of game. Looking across time or geography this relation has been so empirical that technology and policy have been the yin and yang of new market creation.
Sometimes policies or regulation kills a market. Peer to peer music file sharing – Napster anyone ? DMCA killed it. Closer home about 5-7 years ago every mobile payment startup in India died because it was not clear who defined the policies when it came to mobile payments (RBI or TRAI)
Over time this is the reason why the ‘challengers’ just like the ‘incumbent’ have learnt to engage not only to understand the new game (technology) but to also influence the rules of the game (policies). More pronounced recent debate of defining the rules of the game for being challenger friendly is Net Neutrality of which Nikhil was the chief crusader himself.
Makes me wonder what makes one crusade(er) more noble than another.
Poor understanding of Digital colonization
Digitization is going to happen to everyone in the world, that is the force of technology. Digital or not is not the choice we have, how in the new digital world can we influence net positive societal impact is a more apt question.
I am not in favour of a state hand in speeding the process of digitization but in the digital world does one want to be in control of a private hand whom you can’t influence. I would rather prefer to yield in to the power of who I can vote out not a global private lord that dictates a feudal system.
In face of creative destruction it is indeed the responsibility of the state and the society to rehabilitate the farmer or the cobbler that loses a job because of change in technology. To shoot the messenger that warn about the creative destruction and is helping preparing everyone for the change is naive.
Dealing with Illusion of Choice
It is easy to score a debate by calling something as ‘attack on choice’. In world with natural monopolies (key digital infrastructure) options out there are merely illusion of choice. Many other countries are discovering now that Google, Facebook control identity than most countries would like to yield it. These countries have already yielded their choices and data to large corporation. Internet is fundamentally a aggregation of private data which is retailed to highest bidder. Due to India’s ability to leapfrog an architecture around data for the first time we can even enter into a dialogue about data and privacy. The debate and the policies on this has not been settled. Questions on these are great, rolling sleeves with an alternate solution even better. Standing by the side and only complaining the least useful.
Debating Issue Vs pointing fingers without facts is not cool
People in iSPIRT are rooting for positive change like Nikhil and everyone involved feels responsible for the consequence of change that takes place especially those that get influenced by them. They think deeply about the societal impact and have had major share of disagreement with the Government as well. To cherry pick links and blog post to say things iSPIRT is very close to just one stakeholder is totally unwarranted and uncool.
India stack – one of four building blocks for Product Nation
iSPIRT is a part of the ecosystem and works with everyone within it – entrepreneurs (entire spectrum of ‘new’ to ‘seasoned’ ones), policymakers, global corporates, academic researchers, developers, investors, banks, other industry bodies, global think tanks and more.
The vision for iSPIRT is building India as a Product Nation, our thoughts captured in the annual letter 2016 here. For realizing that vision building public goods is a declared motto. Four type of these building blocks of public goods is Technology (India Stack), Policy , Market Catalyst (InTech50, M&A Connect), Playbooks (Roundtable, PNGrowth, iKEN). Belief systems formalized to make this happen as credo has stood us for last four years.
As much impact as India Stack if not more is happening in other blocks as well – Innofest that is championing support of grass root innovators that will help build the ‘India 2’ (beyond metro) market. A fintech leapfrog council (FTLC) that is helping public sector banks navigate the nonlinear change, a huge step in helping banks arrest the negative impact of technology disruption. Startup Bridge India a roadshow for Indian startups in the valley declaring the arrival new global category leaders from India that silicon valley should take note of and partner. Helping grooming the next ring of category leaders in India through PNGrowth bootcamp led by practitioner entrepreneur who are few years ahead (senior doing group study for juniors). How do we know that this is creating an impact, NPS (Net Promoter Score) of each of the initiative hovers around +80.
Of course iSPIRT works with policy makers as well to ensure that when rules of game are drafted the challenger is not endowed with a structural disadvantage. When iSPIRT supported Nikhil on similar rules creating exercise with respect to Net Neutrality I do not understand why engaging other stakeholder should not be done.
I have gone through many red pill moment myself to later realize that it is also recursive, it feels smart to have the first red pill moment but is humbling when there is realization that there is a red pill’s red pill (Matrix Revolution gives a more detailed picture than just the first Matrix movie). In times of unprecedented change cognitive dissonance is bound to happen, wisdom is measured by how much cognitive dissonance one can handle.
“Nikhil, do continue to ask tough questions on important topics regardless of how discomforting they are, for we all will benefit by finding answers to it. However to attribute wrong intent to people and organization especially without facts is uncool even in a rant for you have been the gold standard of teaching India to form points of view supported with facts.
Also I would encourage you to define why should one crusade be called more noble than another one”
Think about endgame, chess grandmasters do so to win.
Studies point out that chess grandmasters visualize the chess board state few steps away to a ‘winning game’ and make moves based on memory pattern that can lead to that board state and thus help them win the game.
Many startups however operate in a game where the rules are dynamic and change unexpectedly. An unanticipated flood of competition could sweep in, or the ground gets shaken underneath because of a regulation or policy change. Due to such unpredictability most of the founder’s move is extremely tactical, the focus is in on surviving and not getting killed as opposed to planning to grow like rabbits.
Data from 20 years of startups in US suggest mean time to exit is 4th and 6th year.
This is simply because If investors don’t do that then they can’t return the capital to their own investors (i.e limited partners) within the 10 year fund cycle.
Same data also reveals that after 1997 there has been more exit through M&A than IPO both in terms of count and value which means that it is more likely for a startup to have an exit via M&A rather than an IPO as the most likely route
In India with no IPO route, M&A is the most likely endgame
On decade long VC scale, Indian ecosystem is quite young and thus historical data is not available to compare however similar forces broady apply.
Also while scale can become large but technology market growth rates in India are not as fast the US. Add to this the fact there is no IPO market in India for the technology companies. Some efforts are underway to open it such as the new ITP platform by SEBI but nothing has kicked in practice. That makes M&A option all the more important to consider for an Indian startup founder.
From limited data that is available about the Indian ecosystem we can that $14.5 billion of VC money has been invested in last 4 years and $2.5b of exits have happened in the same period spread over 300 deals. This ratio are still very skewed when compared to other ecosystem.
All of this build the strong case for why an Indian startup founder should think about exits via M&A
A reason they don’t think about it is because they don’t know much about exits or the playbook involved in doing that. Second likely reason could be that advisors actively discourage founders from thinking about exits by labeling them opportunistic and not being a visionary founder.
Paradoxically the right time to think about exits is exactly when an exit is not needed.
Founders should think about exit before they are forced to think about it
Starting point of a startup is an idea and it goes through a journey of product releases and pivots to reach its product market fit and further scale. Source of this idea is a brainstorming session or hot flavor of the season (foodTech, fintech etc) or even comes from past work experience of the founder, in rare some cases it is rooted in an unsolved customer pain point.
For Indian software product startups regardless of the origin of the idea when looked at through the lens of market segments a pattern seems to emerge that is too hard to ignore.
A 2 X 3 matrix
Parsing the market map
- Before 2009 India consumer was not a major open digital market. There were few online ticketing sites, many attempts in the e-commerce space that did not fan out big, telecom VAS a closed market which also existed only because of regulation gap around strong consumer privacy laws . However in 2009 something happened along with the birth of Flipkart where consumers changed behavior, i.e started believing that they could trust making transactions online and swiped their cards. It would be hard to attribute a causal reason of whether it was ‘Cash on Delivery’, critical mass of people on internet or myriad of other reasons. It is suffice to say that market behavior changed since then. Today there are countless new ideas being tried out because this market has opened up.
- India SMB market on the other hand is yet to witness its Flipkart moment. I have been a close observer on two industry (read multiple organizations collaborating efforts) attempts to wrench open this and closely involved in my last role in leading multiple experiment in creating this market. While I am very bullish about this market but the fact of the matter is that this market is yet to open up. Just like how consumers shifted mindset about transacting online, small business need to change their buying ‘tailored shirt’ mindset to buying ‘branded shirt’ mindset for this market to explode. Open API based GST system in India may cause to be a major reason of change here.
- If India consumer has already exploded and India SMB is around the corner, it would not be completely wrong to say that India Enterprise is yet to germinate. There are handful few startups that have been able to sell to Indian CIO however those are exceptions than the rule.
- In the global consumer market there is hardly any precedence of a startup from India building a global force i.e. equivalent to a Facebook or Snapchat. Not that this may not happen, it is just that it is not happened so far because it is very hard to understand global culture nuance when based in India alone and when there are gaps in the kind of risk capital that is available to try out radical business models. There are handful instances where this is being attempted such as Zomato, Hike but the jury is still out.
- Indian startups are rocking the global SMB market, strategic inflection point that has made this possible is small business are searching for solution to their problems online. When solution is possible to be delivered online through Saas, the purchase consideration is based on the experience of solution (try and buy) and not based on the trusting the salesman who delivers the CD. Given this dynamic it does not matter if the solution was built in Alabama or Alwarpet in Chennai. Comparative cost advantage of doing desk based selling from India makes it possible for price points unimaginable in other parts of the world and which in turn opens many low end markets that have been earlier priced out. Companies that are trend setter here are Zoho, Freshdesk, Wingify, KissFlow, Kayako, ChargeBee, Hotelogix and many others.
- There is also good precedence of traction for the global Enterprise with more than handful examples. The pattern here has been to prove product with pilot customers in India and scale it faster with global markets. This involves migration of feet on street sales team globally, iflex has been the Zoho equivalent grand daddy to set the precedence here but recent examples are Druva, Eka and newer folks like Innovaccer, Unbxd are following suit.
There are startup ideas that are tech components and may sell into a value chain into one of these market and not directly, for example a developer toolchain. The effect of traction in the market has same implication for them.
The above map is not going to be static map and is bound to change. Certainly past is not an indicator of future however history of technology has taught that path dependency plays a huge role in shaping of markets. Thus realization of this map has allowed few startups have change their gear in reaching product – market fit or scale. Also this map helps understand that playbook for winning a market is a different than a playbook for creating a market.
To quote Marc Andreessen
When a great team meets a lousy market, market wins.
When a lousy team meets a great market, market wins.
When a great team meets a great market, something special happens.
What are the market maps that you are seeing ?
Innovation Accounting for startups was introduced by Eric Ries in his famous book ‘The Lean Startup’, however is as case with many thing written about in the book it is poorly understood even if it is acknowledged as an important and useful thing to do.
Before one can do the accounting, i.e. tracking, a good understanding of what it is that is being tracked is needed ?
Defining something as complex as Innovation turns out to be hard. Lets try address this by asking a few simple questions
What name, object, people or thing comes to mind when the term innovation is utterance.
Typical keywords as part of the answers include Google, Apple, iPhone, Steve Jobs, Something Different, New, Solving Problem, Doing in a Better way, Novelty etc
Where do you start when you start with innovation ?
It would be great if one starts with a problem, however most people start with an idea. Key again is that it is different from something that exists. However being different by definition makes it uncertain in terms of the value it brings.
Who decides something as an innovation ?
The day iPhone was launched or any product is released in the market it does not become an innovation. The declaration of it is an innovation happens almost unconsciously when it delights the target user. Important thing to note is that it is the end user that decides something as innovation
What is the difference between an invention and an innovation ?
A key difference between an invention and innovation is that invention is declared as so by the inventor or the patent office whereas an innovation is declared so by the target user for whom it is intended for.
So in a nutshell you start with a new and different idea that has potential value but with high amount of uncertainty and after some time when it delivers value to a certain audience it is meant for it gets declared innovation. It is this journey of going from uncertain business value to certain business value that is called as Innovation.
Thing to note is that this journey is an extremely hard and only one in tens of thousands succeed.Many people confuse the journey to innovation as innovation itself. Innovation can only be look through the rear view mirror, not through the front glasses.
Now coming back to accounting innovation.
Any simple method where this degree of uncertainty is methodically listed and addressed to reduce the degree of uncertainty and confidence of business value is increased where business value can be counted through money, those would be called as Innovation tracking. To make these abstract sounding concept a little more real. Here is an example from a peer group of startups that I meet with regularly that practice Leanstartup.
|May 24 – June 6 ( 2 weeks)|
Overall Learning Goal Goal/Objective
|Learning Goal/Objective||Customers Spoken/Experiment||Validated Learning||Surprise Learnt|
Learning Goal is something that you intend to know about the assumptions you are making.
Anything that you have done that helps track your startup’s journey of innovation.
One of the most difficult things in a product startup is to know when has progress happened and if it is in the right track. This is an even more difficult problem for first time product entrepreneurs. Not to say that it easy for a second time entrepreneur but in that case experience intuitively guides.
Most prevalent thinking is to go from idea to a product build phase leading to a launch in alpha & beta followed by several product releases. Sales & marketing gets somewhat sprinkled on top of this mostly spread after the beta release.
Another way to think about this that I have found very useful is the following.
When the anatomy of an idea is examined it leads to revealing of problem and solution hypothesis inside it.
The first stage or milestone therefore lends itself to a problem/solution fit. This is the stage when product idea under question has established that it addresses a large pain point and demonstrated a solution that works well for the problem faced for a specific set of users/customers. For a B2C company this occurs when a few 1000 of users exists and some amount of recurrence or stickiness exist. In case of B2B or SMB product 1- 5 paid or evangelist customers.
Subsequently this milestone involves having identified the right architecture/flow, copywriting that connects & forms right positioning in the mind, visual and graphic design to create an element of identity for perception and recall. Essentially providing an experience to the identified user/customers that truly delights and helps improve acquisition and create retention.
Product/Market Fit is a term that was coined by Marc Andreessen. It means being in a market with a product that can satisfy the market. It is the stage where the product is used or adopted repeatedly by a sizable number of users/customers
Sean Ellis further refined the definition to say that in a survey with customers they are told that product that they are have been exposed would be discontinued and if at least 40% of customers will revolt at that the thought.
In B2B/SMB it is few 50-100 customers and beyond, In B2C it is at least 200,000 users with a good repeat usage could be roughly called to.
Business Model/Scale Fit
It is the growth stage where the right business model for growing at scale is identified at which truly phenomenal growth happens.
Up until the Product/Market fit it is phase of learning and discovery and several iterations & pivots can and do happen. While this happens it is also important to keep in mind another stage though not related to the product but an important one.
Sometimes founder starts with a big vision about the product idea however having to identify a problem that is truly worth solving can be highly iterative process and can look very different from what was originally envisioned. It is important for the founder to re-establish that the revised version is indeed something that continues to motivate to build. This stage ideally should be post problem/solution fit and before user/experience fit.
This model is not an original one or not even the only model of thinking about stages of a product startup but it helps frame answers for many things.
- Each successive stage marks reduction of uncertainty and better modeling of risks in product success journey.
- Visits, Page Views, number of downloads are not good enough for product/market fit. It may be necessary but not sufficient.
- Product/market fit success is not equal to business success. In my previous startup I built a mobile app (turn phone into webcam) with over 1.5 million downloads and very high daily active usage and along with an excellent NPS. Product was super success but with no business model ( in the pre iOS era of no app store or mobile ads) the business did not succeed.
- Early business traction is not equal to product success (not even problem/solution fit). Ex: Several of the Indian e-commerce companies.
- Job of an accelerator is to help take companies beyond Problem/Solution fit. If the market structure allows smaller cycle feedback loop then it should even achieve User/Experience fit by the time startups graduate from these accelerators. Unfortunately many view accelerator as a way to get funded forward.
- In India most of the product startups are stuck at just before reaching problem/solution fit and also just before product/market fit.
What are the mental map of your product startup progress ?