by John Smith-Ricco
Despite the obvious duplicability of its business model, Rent the Runway has aggressively protected its position as first-mover through investment in technology and operations management. Providing women with the “Cinderella” moments that accompany wearing otherwise inaccessible designer dresses may be Jen and Jenny’s mission, but their company’s expertise lies in the less sexy areas of inventory management, quality control and maintaining high utilization rates of each garment.
Rent the Runway was the case I anticipated the most as a student in Launching Tech Ventures. The RTR story is wonderfully hopeful, a feel-good MBA cautionary tale on the type of success risk-averse capitalists might miss out on by taking the safe route [insert finance/consulting/CPG career path here]. Rent the Runway has the potential to democratize the world of luxury ready-to-wear. However, in order to maintain the “magic” and keep would-be competitors at bay, RTR must avoid becoming TJ Maxx for the Netflix generation.
Technology is not enough
Hyman appropriately acknowledges that technology is at the core of the company. This poses a problem if a competitor were to enter the space with better technology in the form of faster turnarounds, better size matching, etc. So far this threat is unrealized, but one can imagine there are retailers and other players in the fashion ecosystem whose current expertise might overlap with and surpass that of RTR.
Fashionistas are fickle
The technological advantage that Rent the Runway currently enjoys may undermine its appeal among its most discerning customers. The business model is such that higher utilization of dresses yields more profits. In class, I opined that dresses are seasonal and therefore not utilizable year round, but learned that a significant fraction of inventory did not follow seasonal pattern. Furthermore, RTR purposefully leaves out dresses’ release dates (e.g. Fall 2010) so that dresses can be used year after year as trends start in New York and drift from the coasts to the heartland, thus spreading fixed costs even further.
While a Marchesa gown from a three-year old collection may be fine for the consumers in middle America, the 25 year old Manhattan PR girl may not be so impressed. Since RTR’s original focus groups included “it” girls and “almost it” girls from Harvard an Yale, I suspect this discerning consumer still comprises a sizeable portion of sale and it would be a disservice to alienate her. Doing so will commoditize the service and invite competition on the basis of technological execution rather than the elusive Cinderella wow.
Relationships matter
Ultimately, I’m still quite optimistic in my outlook on RTR. They have a head start on technology and by maintaining strong relationships with key design houses the team can keep the “it girl” consumer engaged. The key will be to avoid profitable shortcuts that will damage the brand in the long term.
There’s nothing wrong with being the TJ Maxx for the Netflix generation; TJX (the holding co. for Marshalls and TJ Maxx) has an impressive $30Billion market cap and its stock has outperformed the market over the last two years. However, if Rent the Runway is to be a premium service it must continue to deliver cutting edge fashion while using technology to make the overall operation more profitable.
Showing posts with label Case study. Show all posts
Showing posts with label Case study. Show all posts
Mukela.com: Selling the Dream
by Tawanda Sibanda
Mukela Overview for Hotels from Mukela on Vimeo.
I am the co-founder of an Africa-focused hotel reservation site called Mukela.com (mukela is derived from the Zulu word emukela, meaning welcome). Essentially, the site is hotels.com for the African hotel market. If you were to go to expedia.com and search for hotels in Harare, Zimbabwe only 5 hotels will be displayed. Our database, on the other hand, contains over 150 accommodation options in Harare alone. Western online travel agents only scratch the surface of accommodation in most African countries, and are overwhelmingly weighted towards the most luxurious. Mukela.com’s value proposition is to provide the intrepid traveler access to a wide spectrum of comfortable but more affordable mid-tier hotels. Why aren’t hotels.com and expedia.com adequately serving the African market? The hotel market in Africa is extremely fragmented with few hotel chains. Achieving broad coverage in the region requires reaching out and forming relationships with hotels individually and is prohibitively expensive for the large players.
The success of Mukela.com hinges on our ability to cheaply grow our network of hotels in the region. As part of my Harvard Business School Launching Technology Ventures class, I designed and executed an experiment to determine the cheapest acquisition method for hotels (focusing on my native Zimbabwe). I experimented with three different methods: a PR launch in Harare, an e-mail marketing campaign and a telemarketing campaign. Rather than go into the details of the experimental methodology and business results, I would like to present two key lessons from my experience.
Firstly, iteration does not end with product development. Prior to running my sales experiment, I viewed product development thus: team iterates and pivots furiously in the early stages to achieve product market fit; then team uses out-of-the-box sales and marketing methods to sell the product. My experience with Mukela.com is that product development is actually the easy part. Selling the idea is significantly more challenging. I iterated my sales materials constantly in response to customer feedback. For example, consider my e-mail campaign. I was proud of my first e-mail draft. [Note: this link and several more that follow will download files from my Dropbox account]. It captured the reader’s interest in the first paragraph, articulated his/her problem, presented Mukela.com as the solution, and provided the reader with some actionable next steps. However, within hours of sending it to my product team for review, I was told to use my own name in the e-mail signature (to add a personal touch) and include a testimonial from an existing customer (as validation). See version 2 of the e-mail here. At this point I thought I was done and sent the e-mail to about 50 hotels. Within days, I received initial feedback from a few hotels that bandwidth in Zimbabwe was limited (more on that later) and they could not view the videos links in my e-mail. In response, I rewrote the sales email, scrapping the catchy intro and adding significantly more content about Mukela.com directly in the text. I went through similar iterations with my customer videos, sales pitch, and telephone script (version 1, version 2).
All this to say: do not stop iterating when you create your sales materials. Just as in product development, listen to customers, and tweak the design until you have created content that is good enough to effectively communicate the product to the client (in essence until you have a minimal viable sales product).
Moreover, be prepared to iterate on sales execution, not just design. As an example: please listen to my first hotel cold-call. Notice how I rambled and wasted time pitching Mukela.com to someone with no decision-making power at the hotel. After listening to myself, I tightened my script. Now listen to my second recording and notice the difference.
My second significant learning from the sales experiment is the importance of truly understanding not just your customer but your customer’s context. In designing my sales materials and strategy I was inspired by RentJuice, a startup targeting rental real estate agents that we studied in class. They relied on Webinars and videos to boost sales conversion figures. I created a series of videos introducing Mukela.com. My dream was to use a combination of blast e-mail and rich interactive content to convert hotels with minimal telephone or in-person contact. However, my first couple of interactions with actual customers dashed my hopes. The bandwidth available in Zimbabwe is so low that it took one hotel owner over two hours to download a 3 minute video. Many of my potential clients could barely access the website. Clearly, a web-intensive sales strategy is incompatible with the context of my customers. Moreover, Zimbabwean cultural norms frown upon cold-emailing. Out of 50 e-mails I sent to hotels, only 2 were opened. Zimbabwean businesses rely more on trust built through actual human interaction than webinars and videos.
In conclusion, remember: the lean startup methodology is a philosophy that applies to every part of your business: from product development to sales design and execution. Secondly, don’t blindly copy marketing strategies from Western companies if you plan to build businesses in emerging and frontier markets.
Finally, for those in the process of launching technology ventures I leave you with my top 4 more tactical takeaways:
- Use Camtasia Studio for your demo videos.
- Start using project management software early in your product development cycle. I emerged from 3 years at Microsoft with an aversion for process and tried to run Mukela product development without formal bug tracking or work planning software. The result was chaos, missed milestones, tons of e-mail, and forgotten phone calls. You need process. Power without form is anarchy.
- When you create demo videos, remember to get royalty-free music to prevent any potential legal issues. A good site for royalty-free music: incompetech
- In an early-stage startup, everyone needs to be a tester. Testing is not just trying the product and seeing if it works: it’s understanding the corner scenarios (what happens if you enter in a very large number of guests for a hotel room, or you try checkout before you checkin etc.). I recommended reading Agile Testing: A Practical Guide for an introduction.
The 5 hour start-up: BrownBagBrain
by Humberto Ayres Pereira (republished from his personal blog)
This is the first of (I hope) many contradictions in my opinions in regard to entrepreneurial matters.
A few posts back I talked with some disdain about the Lean Start-Up movement. Essentially my argument was that while it may be easier than ever to build a service/company nowadays, and people can and are starting such companies, the result is a massive and hard to navigate world of start-ups and apps, many of which reach success status because of the extensive guidance and care of VCs and their networks. There is, I argue, a false perception of the start-up world as being easy. But while people see it as a gold rush, I'd warn that it is a very creative but also numbers-driven environment. It may seem as if this or that company is having a grace period where the founders can just be creative and eat pizza and blow thousands of VC-backed dollars while not delivering numbers, both bottom-line and in terms of user growth. But when this happens, and it is not common that any type of financiers allow such graces, most likely you will find that the team has a track-record of reaching those numbers. It may seem that VCs play a hunch driven game, but in fact it is always more analytical then you imagine.
Despite all this live and opinionated criticism, this is the story of how I and a Fellow of the Advanced Leadership Initiative at Harvard University took the plunge and built a start-up in less than 5 hours.
Background:besides my obsession with building stuff I am a 2nd-year MBA student. At Harvard Business School we're taught a variety of subjects, and in the second year they're elective: the only one I have that's not related to entrepreneurship or the online world is Managing Change. In Managing Change we are exposed to mainly huge companies dilemmas and how they cope with alliances, mergers and acquisitions from the point of view of culture and integration. You get the picture. One of the most awesome things at HBS is that many of the classes (we call them cases) have a protagonist that actually sits in the class and tells the story of what really happened and how it felt to be there, and sometimes other people attend too. So in a case about integration in 2 Brazilian banks we had a visitor called Gilberto Dimenstein. Gilberto is an award-winning journalist from São Paulo who is also extremely active in the social enterprise world. In fact, he was invited by Harvard to come to Boston to expand his project's ambitions and resources.
On the aftermath of that case I talked with him for a bit and found some of his projects fascinating. One of his projects, Catraca Livre (Portuguese for "Open Turnstyle") is an aggregator of immense social value: with it, people across neighborhoods (starting in very impoverished ones) can aggregate, distribute and use skills, services and arts that a very distributed audience is willing to provide. Imagine a favela with hundred of thousands of people living in it: how can you find if there are any vicinity' college students willing to help kids with their studies? Well, Catraca Livre partners with the universities to access such students, and then distributes the information in cleverly engineered TV-ads in Buses. You can learn more here. Now he is working to expand such a service to more cities in Brazil, and eventually worldwide - for now the project is called OpenCity Labs. The assumption, which Gilberto proved right in São Paulo, is that there is a lot of inexpensive human, social and economical potential inside communities of any size and class, but that such assets are dispersed. He wants to make more accessible.
To explore the idea at Harvard (in Boston) itself could prove it works on the other end of the spectrum too. We talked about ways to do it. What did we put together in about 2 hours?
This is the first of (I hope) many contradictions in my opinions in regard to entrepreneurial matters.
A few posts back I talked with some disdain about the Lean Start-Up movement. Essentially my argument was that while it may be easier than ever to build a service/company nowadays, and people can and are starting such companies, the result is a massive and hard to navigate world of start-ups and apps, many of which reach success status because of the extensive guidance and care of VCs and their networks. There is, I argue, a false perception of the start-up world as being easy. But while people see it as a gold rush, I'd warn that it is a very creative but also numbers-driven environment. It may seem as if this or that company is having a grace period where the founders can just be creative and eat pizza and blow thousands of VC-backed dollars while not delivering numbers, both bottom-line and in terms of user growth. But when this happens, and it is not common that any type of financiers allow such graces, most likely you will find that the team has a track-record of reaching those numbers. It may seem that VCs play a hunch driven game, but in fact it is always more analytical then you imagine.
Despite all this live and opinionated criticism, this is the story of how I and a Fellow of the Advanced Leadership Initiative at Harvard University took the plunge and built a start-up in less than 5 hours.
Background:
On the aftermath of that case I talked with him for a bit and found some of his projects fascinating. One of his projects, Catraca Livre (Portuguese for "Open Turnstyle") is an aggregator of immense social value: with it, people across neighborhoods (starting in very impoverished ones) can aggregate, distribute and use skills, services and arts that a very distributed audience is willing to provide. Imagine a favela with hundred of thousands of people living in it: how can you find if there are any vicinity' college students willing to help kids with their studies? Well, Catraca Livre partners with the universities to access such students, and then distributes the information in cleverly engineered TV-ads in Buses. You can learn more here. Now he is working to expand such a service to more cities in Brazil, and eventually worldwide - for now the project is called OpenCity Labs. The assumption, which Gilberto proved right in São Paulo, is that there is a lot of inexpensive human, social and economical potential inside communities of any size and class, but that such assets are dispersed. He wants to make more accessible.
To explore the idea at Harvard (in Boston) itself could prove it works on the other end of the spectrum too. We talked about ways to do it. What did we put together in about 2 hours?
- Pain 1: people need to eat; students are people, so students need to eat. Cities like Boston are very expensive, and students are not the richest people on earth (hence the term starving students)
- Pain 2: students want to learn (duh)
- Pain 3: professors, lecturers and companies want good audiences for their knowledge, ideas and products; students are one of the most desired audiences
- Solution: pair students and content providers through brown-bag lunches (and breakfasts and dinners)
- Solution available: currently brown-bag's are organized by a multitude of schools and departments, and information about university events is a mess
- Test: luckily we had two other students with us who were pretty convinced. Quick polling!
- Features needed: portal with aggregate information about brown-bag events
- Technological side: there are plenty of calendar mashing tools, and even better, there's needlebase (acquired by Google), a tool that you teach how to get specific types of information on the web which then is made available in a self-updating format
- Business model: most of the info is free, tools are free or almost there, so this is essentially a 1-hour-per-week cost operation. There are plenty of ways to monetize this. If you have 10 events per day, and 20 people attending from your website, that's 4.000 eyeballs/ converts per month (this is for one university, now multiply). Students. Worth money to a lot any deal-oriented business or platform. For the type of costs this venture has (more on that below), we could turn this cash-flow positive in less than a week
Afer we quickly discussed this, I came home at 7pm and started working on a rough prototype. By 10pm it was live and kicking. I presented it in class the next day. In the first day I got 1,500 views and 800 people actually searching on the map for the location of a brown-bag event (let's hope they all didn't crash the same conference). You can and should check the website at BrownBagBrain.
Warning: This is very alpha and sometimes the calendar is down (I think Harvard is blocking some of my requests), but you can get the idea (A screenshot of an event below). We don't know where to go from here, and in all fairness it's Gilberto who should be commanding that ship.
But, anyway the wind blows, it feels great to have played a small part in the Lean Start-Up World.
From Flirting to Adopting: A First-Time Entrepreneur’s Experience with Lean Start-Up Methods
by Shavi Goel
As I begin to understand more about Lean Start-up tools, I decided to learn from someone who is making real-time, active decisions about using these tools in start-up. I spoke to Ashish Rangnekar, a first-time entrepreneur who co-founded the online test prep service Water Melon Express (WMX) in 2009. I first met Ashish last summer when he was raising Series A funding. I found it very exciting to speak to someone who is practicing what we are learning in the class, and hope you find it useful too.
I have presented our conversation in Q&A format. The exchange below is not a verbatim record, but it captures the essence of Ashish's experiences.
SG: How did you first learn about Lean Start-up methodologies? How did you think about using these tools as you started WMX?
AR: When I started WMX, I had heard of lean start up methodology through friends and general internet reading and Eric Ries’s blog. But in all honesty did not fully understand the concepts.
As I was building our first product for WMX, I did not try to forcefully align the product to notions of lean start-up either.
My objective in our initial days was to get to the market quickly and get ‘my version’ of MVP which was our first test preparation app for iphone launched through iTunes.
SG: How much time elapsed from the point you first seriously started thinking of Lean methodologies?
AR: After the First 2 months of launching our app, we started thinking about the overall business not just a single app.
I and my co-founder had developed our business plan along the lines of standard waterfall methodology. It started becoming very frustrating with the speed of process. Our developers were based in India and I felt much removed from the process. Once we discuss our immediate programming needs, developers will go into the caves for long time.
Honestly, there was period of 4 months when we were not lean. Our approach was to identify features and work towards implementing all of them. Not surprisingly, we realized later some of those features were not used by customers at all.
With this, we began to get very concerned about spending all our resources (which were very much personal savings) on the right things. So it was very challenging period but it was then that we decided – continuous deployment model and iterative is important for our team and we want that in our company
SG: What resources did you tap into to learn more about Lean?
AR: I started actively researching lean start-up techniques. I read Steve Blank’s book and attended meetings with other people who were using lean start-up tools in their start-ups. I attended conferences and talks where Eric Ries was speaking.
I found meeting entrepreneurs particularly most helpful. Hearing from the Grubhub guys in Chicago was very helpful; they are big advocates of lean methodologies and helped me in understanding them.
SG: What is your definition of MVP? Please share an example.
AR: We defined MVP as – what will be the minimum thing customer will pay for and what are the hypotheses we want to test.
For example: when were developing one of our new app, we identified all the design and features the team considered good to have. There were ~15, out of these 3 were critical to customers for which they would have paid.
But there were many features we wanted to test. So we built it around hypothesis we wanted to test which were
a) Users’ readiness to spend 30 min on iphone and take practice test,
b) Value of detailed performance analysis for our users
Eventually we worked and launched the new app with only 6 features, including the 3 which mattered to users and 3 which helped us test how much analysis will test-takers use.
I can tell you, now we think very much in terms of incremental features and test scenarios.
SG: Describe an important pivot you have made and what was the ‘aha’ moment which led to it?
AR: As I look back, I think we have made 2-3 big pivots in last 2 years.
One of the most important pivots we made is linked to the business model decision. Once we attained some scale we had to chose between becoming a B2B app developer for content providers versus owning our apps through an integrated platform. It was an important but a difficult choice for WMX.
The former model seemed easy to test and it required licensing WMX technology to the large content companies and then managing technology in the background for them.
In the spirit of lean start up, we tried doing the first model in a subtle way with a large publisher, though we did not exactly license WMX technology but we used content from the publisher exclusively. We discovered a few reasons why this model was not suited for WMX. Our product was not ready for the enterprise model. Also, in order to improve and accelerate our product we wanted access to customer data which is difficult to get from the large publishers. That was our ‘aha’ moment was very early on through practical challenges in working with large companies and knowing that access to primary data was long term requirement for succeed.
And hence we decided against B2B model instead to develop our own integrated test platform.
SG: Could you please share one of the key challenges in adopting lean start-up methodology as a founder.
AR: The biggest challenge is the desire to have a perfect product. Once you release something to users and get a good feedback, you start feeling your product is best. The validation from market makes you feel this. You don’t want to release any sub-optimal product anymore, which is very contrary to continuous deployment. Rather than using a 2 week product release cycle, you want to launch a phenomenal product.
I, too, struggled with this ‘FASCINATION with Perfection’ the beginning. When you start, you are thinking a lot about the product and you get emotionally attached. You want to feel it is best-in-class at all time.
I, too, struggled with this ‘FASCINATION with Perfection’ the beginning. When you start, you are thinking a lot about the product and you get emotionally attached. You want to feel it is best-in-class at all time.
SG At the outset, did you make an active decision NOT to adopt lean methodologies?
AR. I don’t ever remember deciding not to choose lean methodology. It was a resource constraint that eventually pushed us toward lean.
One decision was to not adopt a common lean tool involved Pivotal Tracker, even when I knew about its advantages. Back in the early days, our development was outsourced from India and we were rushing to get apps out on iTunes. I wanted to start using Pivot Tracker. But we kept delaying the decision because it takes 10 days to set up and I thought I lacked that time due to launch pressures.
Now looking back, that reason doesn’t look good enough to me.
SG: What are some lean start-up tools you have actively use?
AR: At WMX, we now use religiously use Pivotal Tracker. We leverage a lot of existing tools and platforms including Github (a social network for programmers which aims at collaborative development of software) and many Google apps. We are big on Cloud computing. We also adhere to a 2 week deployment – release cycle.
-------------------
About Water Melon Express
Watermelon Express ('WMX') is world's first cross-platform interactive educational apps publishing platform. WMX's content-agnostic publishing solution delivers interactive, social and adaptive educational apps on smart phones (iPhone, Android), tablets (iPad, Kindle), desktop (Windows, Mac) and web.
Within the last 18 months, more than 100,000 students across 20 countries have used our educational apps.WMX has worked with 6 educational publishers and created 66 apps for more than 8 subjects.
Within the last 18 months, more than 100,000 students across 20 countries have used our educational apps.WMX has worked with 6 educational publishers and created 66 apps for more than 8 subjects.
They recently won the New Venture Challenge competition at Booth School of Business, University of Chicago. The platform was voted "most innovative and best-in-class test prep and assessment platform" at Education Innovation Summit 2010. They have been voted top 5 startups of the Midwest and selected as one of the most innovative companies in education technology space at Venture Capital in Education conference.
About Ashish Rangnekar
Ashish is first time entrepreneur and co-founder of WMX. He is a mechanical engineer from India’s top engineering college (IIT Bombay) and currently finishing his MBA from University of Chicago (Booth School of Business).
Building a Lean Startup in a Developing Country
by Aldi Haryopratomo
In this post I’d like to use the lens to evaluate how would I have applied course concepts like lean start-up, product market fit, etc, in the developing world based on my experience setting up Ruma in Indonesia, which coincidentally has the second largest number of Facebook users in the world. Ruma’s goal is to create an app-store for low-end phones that sell useful applications like job search. (e.g., www.kerjalokal.com).
Based on the precept that start-ups shouldn’t scale until the hypothesis has been validated, the natural move when I started Ruma would be to start hiring engineers and start developing the product and try to get users in the system. Unfortunately, this is more difficult to do in developing markets mobile phone industry for a couple of reasons. First, most users access the Internet via mobile phones and to get access to a lot of users we’d need to partner with a Telco operator. Naturally few telecommunications operators would be willing to partner with a startup. Second, the lack of a venture capital market means that you need to be able to generate revenue almost immediately.
So we started by selling a basic product, prepaid cellular minutes, which generated instant revenue despite having very low margins. The goal was to stay lean and that we would grow our network of customers to the point that an operator would finally notice us. The bad news was that we almost went broke trying to get there as we fell into the common pitfall of thinking that costs such as labor should be low in a developing country. It turned out that the costs for the top talent were not wildly different because equity or options type compensation is not yet common. We were thus stuck with a high salary base and began leasing access to our customers for market research to consumer goods companies to make payroll. This need for immediate monetization distracted us from building, testing, and refining our products with our customers.
The good news is that after two years, we did grow to be big enough to be noticed as we now have over 5,000 resellers serving half a million customers. This enabled us to raise modest funding and sign a partnership deal with a Telco. Now our focus has shifted back to building our original products: the app store and its first few apps. It was during this phase that I realized how important product market fit is, especially if you’re focusing on low-end mobile devices (basic Android/Java phones). There is such a limit on the capability of the phone that it’s key to iterate and get feedback on which ones are the most important for the users. What was interesting though that our customers were very willing to work with a buggy product because the alternative to the product is to not have the application.
Ruma is still a long ways away from being a home run, but the learning experience has been rewarding. Some key lessons related to the course are: 1. Immediately find low cost ways to create scale so you get noticed. 2. Monetize immediately and don’t underestimate labor costs. 3. Drop unnecessary features. 4. Don’t be afraid to launch a buggy product if you’re competing against non-consumption.
In this post I’d like to use the lens to evaluate how would I have applied course concepts like lean start-up, product market fit, etc, in the developing world based on my experience setting up Ruma in Indonesia, which coincidentally has the second largest number of Facebook users in the world. Ruma’s goal is to create an app-store for low-end phones that sell useful applications like job search. (e.g., www.kerjalokal.com).
Based on the precept that start-ups shouldn’t scale until the hypothesis has been validated, the natural move when I started Ruma would be to start hiring engineers and start developing the product and try to get users in the system. Unfortunately, this is more difficult to do in developing markets mobile phone industry for a couple of reasons. First, most users access the Internet via mobile phones and to get access to a lot of users we’d need to partner with a Telco operator. Naturally few telecommunications operators would be willing to partner with a startup. Second, the lack of a venture capital market means that you need to be able to generate revenue almost immediately.
So we started by selling a basic product, prepaid cellular minutes, which generated instant revenue despite having very low margins. The goal was to stay lean and that we would grow our network of customers to the point that an operator would finally notice us. The bad news was that we almost went broke trying to get there as we fell into the common pitfall of thinking that costs such as labor should be low in a developing country. It turned out that the costs for the top talent were not wildly different because equity or options type compensation is not yet common. We were thus stuck with a high salary base and began leasing access to our customers for market research to consumer goods companies to make payroll. This need for immediate monetization distracted us from building, testing, and refining our products with our customers.
The good news is that after two years, we did grow to be big enough to be noticed as we now have over 5,000 resellers serving half a million customers. This enabled us to raise modest funding and sign a partnership deal with a Telco. Now our focus has shifted back to building our original products: the app store and its first few apps. It was during this phase that I realized how important product market fit is, especially if you’re focusing on low-end mobile devices (basic Android/Java phones). There is such a limit on the capability of the phone that it’s key to iterate and get feedback on which ones are the most important for the users. What was interesting though that our customers were very willing to work with a buggy product because the alternative to the product is to not have the application.
Ruma is still a long ways away from being a home run, but the learning experience has been rewarding. Some key lessons related to the course are: 1. Immediately find low cost ways to create scale so you get noticed. 2. Monetize immediately and don’t underestimate labor costs. 3. Drop unnecessary features. 4. Don’t be afraid to launch a buggy product if you’re competing against non-consumption.
When RDF Doesn't Allow Lean: A 1st-Hand Account
by Ashwin Limaye
I would like to question the compatibility of "reality distortion fields" (RDFs) and lean startups through my personal experience working at the Management Innovation eXchange (MIX) this summer. MIX was an ambitious idea – building an online platform to share management ideas, bring together leading CEOs, managers and thinkers and ‘reinvent management for the 21st century’.
Prima facie, MIX had three major ingredients of a lean startup: Leverage, Iterations and Low burn. The MIX generated phenomenal leverage: the founder was a highly-regarded management thinker, the CEO held contacts within a large consulting Firm and the ‘friends and advisors’ comprised prominent CEOs and business professors. Together, they brought rich contact lists, an initial customer base and sponsors who were able to offer favorable deals such as funding for the web development team and informal partnerships with leading industry associations. The MIX was quite lean: a five person team, two of them wealthy enough to not draw salary, one an intern and all of them working out of their own home or office space donated by a generous corporate sponsor. With major costs covered, the team had enough cash in the bank to last 12 months. Most importantly, the MIX team iterated: The team started with a basic, admittedly cumbersome product launched in April 2010 and made heavy use of google-analytics, expert input and customer interviews over the next 4-6 months to refine the portal and add new features to improve the user experience.
Despite all the above, the MIX was unable to generate the kind of takeoff the team expected. User growth was slow, response rates low, referral rates even lower, and while usage was high, contribution rates were merely 3-4%.
In hindsight, I believe that living in an RDF was the fuel that drove us yet also the smoke that blinded us. Building a web portal for knowledge sharing was hardly new. To drum up the interest of investors and partners, we needed a grand vision: “Management is becoming outdated and should no longer be the exclusive of grey haired CEOs and academics … time to for new ideas to come forward … Management 2.0… ”. It kept us motivated around the basic hypothesis that managers out there have new ideas and will find value in sharing and debating them and helped us rope in some elements crucial for success – sponsors, supporters who sent out the initial invites and thinkers who provided content (blogs, videos, etc) for free.
But the target customer did not swarm to the MIX to register and contribute, despite the fact that they said they loved the idea and visited often. Blinded by our own reality, we missed out on some critical customer testing, setting extremely high standards for our customers in believing that they would take time to pen down their management experiences and idea, and that they would have the editorial competence necessary to make insightful, well-structured contributions. That they might not should have been a hypothesis but instead became a ‘customer selection criteria’. We forgot to let the customer define the product. Another assumption induced by RDF was that of virality: we thought an excited customer would get us many more, kicking in the network effect needed to ‘wikipedia’ our concept. Only a customer living in our reality would have contributed thus, and most of them did not.
I contend that for such ‘big-idea’ startups, the RDF becomes an essential component of their energy and existence and necessitates behaviors and decisions that cannot be ‘lean’. Maybe a non-lean approach –more marketing dollars and a decision to trust one’s gut and unveil the final product – is better suited and more likely to succeed. Whatever it may be, it doesn’t look lean to me.
