Hello!
All new posts since March 2014 are no longer on Blogger.
You can find my new blog at http://norrisnode.com (it's on the Ghost platform).
Thanks!
Tuesday 11 March 2014
Monday 10 March 2014
Fit For Purpose
Thanks to Eric Ries, Steve Blank and the whole lean startup movement, increasing numbers of founders and investors are more aware of the need for validating ASAP that a new business has a "Product - Market Fit".
Today, thanks to some mental prods from reading @RobFitz, I'm reminded that there are 3 words in that phrase and that each word matters.
Product Fit, Market Fit and Product Market Fit are worth each understanding in their own right. As a founder or investor, it's worth knowing the difference and which matter to your business.
An emphasis on Product Fit is most important when the market is already understood. For example, when we know that people want to play games online, the important thing is to work on building a great game. Product Fit.
An emphasis on Market Fit is important when the customers' needs are not yet fully understood. For example, if a startup was to focus on improving tools for events and event organisers, they would need to understand the current pain points and identify something real and tangible that they can improve and which people are willing to pay for it. Understanding that is first of all understanding your market. Market fit.
Product Market Fit brings the two together.
In some startups, deep research both is required to validate the business model. In others, more emphasis on product or market may be more relevant.
The most relevant word of all is "fit". Any business that succeeds needs to be fit for purpose. This "fitness" relates being adapted to the current and future environment. It's precisely the fact that the environment in which we find ourselves is constantly changing (technological trends, social trends, legislative changes etc.) that gives businesses new opportunities to exploit.
Just as an athlete can train to be fit for a certain event, a startup needs to be fit to exploit their opportunity. Usually a training schedule for boxing won't help win a swimming race. Training to run a marathon won't win the 100m sprint.
In the earliest phase of a business, research therefore needs to focus on defining the opportunity and figuring out what's needed to win that opportunity. Then it's time to get fit.
Product Fit, Market Fit and Product Market Fit are worth each understanding in their own right. As a founder or investor, it's worth knowing the difference and which matter to your business.
An emphasis on Product Fit is most important when the market is already understood. For example, when we know that people want to play games online, the important thing is to work on building a great game. Product Fit.
An emphasis on Market Fit is important when the customers' needs are not yet fully understood. For example, if a startup was to focus on improving tools for events and event organisers, they would need to understand the current pain points and identify something real and tangible that they can improve and which people are willing to pay for it. Understanding that is first of all understanding your market. Market fit.
Product Market Fit brings the two together.
In some startups, deep research both is required to validate the business model. In others, more emphasis on product or market may be more relevant.
The most relevant word of all is "fit". Any business that succeeds needs to be fit for purpose. This "fitness" relates being adapted to the current and future environment. It's precisely the fact that the environment in which we find ourselves is constantly changing (technological trends, social trends, legislative changes etc.) that gives businesses new opportunities to exploit.
Just as an athlete can train to be fit for a certain event, a startup needs to be fit to exploit their opportunity. Usually a training schedule for boxing won't help win a swimming race. Training to run a marathon won't win the 100m sprint.
In the earliest phase of a business, research therefore needs to focus on defining the opportunity and figuring out what's needed to win that opportunity. Then it's time to get fit.
Friday 7 March 2014
Friday Feeding Vol. 2
Each Friday I post an article highlighting the 5 best posts that I've read over the week that I'd like to share.
Here's Volume 2...
Oliver Emberton @oliveremberton
If you’re not pissing someone off, you probably aren’t doing anything important
- The biggest smiles of the week by far from this blog post. An good point made well. In fact, hilarious.
Forbes @forbes
The Future of Venture Capital, Tech Valuations and the Fate of Tech Incumbents - Conversation with Bill Janeway
- Interesting interview with Bill Janeway of Warburg Pincus bringing 40 years of experience to the table
Kinjal Adeshara via Brandwatch @adeshara_kinjal
10 Powerful Ecommerce Marketing Trends that will Dominate 2014
- Trends in the eCommerce space to be aware of, useful overview
Teresa Torres @ttorres
The 3 Pillars of Building Great Products
- sound advice for Product Managers, especially those running teams
Pedro Pereira @InovPedro
TOP UK Startup Events
- A very useful list of UK events relevant to startups and internet businesses
Here's Volume 2...
Oliver Emberton @oliveremberton
If you’re not pissing someone off, you probably aren’t doing anything important
- The biggest smiles of the week by far from this blog post. An good point made well. In fact, hilarious.
Forbes @forbes
The Future of Venture Capital, Tech Valuations and the Fate of Tech Incumbents - Conversation with Bill Janeway
- Interesting interview with Bill Janeway of Warburg Pincus bringing 40 years of experience to the table
Kinjal Adeshara via Brandwatch @adeshara_kinjal
10 Powerful Ecommerce Marketing Trends that will Dominate 2014
- Trends in the eCommerce space to be aware of, useful overview
Teresa Torres @ttorres
The 3 Pillars of Building Great Products
- sound advice for Product Managers, especially those running teams
Pedro Pereira @InovPedro
TOP UK Startup Events
- A very useful list of UK events relevant to startups and internet businesses
Thursday 6 March 2014
3 Tips For Startups To Win Over Top Candidates In London's War For Talent
I was at an event last night hosted at Lyst, a gathering of COOs in the London tech scene.
I introduced myself to the group as a "recovering COO" and it was good to see some old friends and make some new ones.
The topic of talent comes up every time we meet. All agreed that hiring great people in London is getting more difficult. There are many opportunities for smart team players who want to make a difference, especially in tech, product and design.
Part of the challenge is finding great candidates. Equally difficult is getting a "yes" after having made an offer. Good candidates invariably have more than one offer to choose from.
Startups are competing with each other and the wider job market for the best talent. Having a strong vision of what the team are trying to achieve is a must. Finding candidates that buy into that vision is the first challenge. Putting a package together that closes the deal is another challenge.
A startup usually has to be frugal with cash. Big salaries are not usually an option. Even offering mid range salaries, a vision and story isn't enough to win the best candidates.
To complicate matters, many candidates don't understand or value the main lever that a startup has to work with, (stock options) and in many cases.
A couple of tips then from the group on how to close a deal with frugal resources...
Tip 1 - the three way offer
To preserve your option pool for those that will value it most, make a three way offer like this.
We can offer you either
a) higher salary, no stock options
b) mid range salary, a few stock options
c) lower salary, generous stock options
This method often works as the candidate will choose what matter most to them. It's a simple risk/reward choice. By only offering stock options to candidates that appreciate their value you can maximise use of the option pool and offer compelling packages to those that want to share the upside.
It's also a great negotiation tactic. In many cases people will choose the middle option. That means the middle option should be constructed on terms that work best for the company.
Tip 2 - offer benefits, but use a menu
In the same way that candidates may or may not value stock options, there are certain benefits which are valued differently by different candidates.
Gym membership, life insurance, critical illness cover, pension contribution, private healthcare. All of these things can cost a company less to buy than it would cost to an individual. Offering benefits as part of a package can increase the overall perceived value without increasing the actual cost to the same degree.
A simple example is healthcare. It might cost someone £100 a month to take out private healthcare if they were to apply directly but under a company scheme the company would only pay say £60.
By offering benefits it means that a modest salary with a high perceived benefits package can be worth more to a candidate than a higher salary with no benefits. Plus, the overall cost to the employer can be lower.
The key to is to structure a benefits package with the maximum value to the candidate that has a minimal cost to the company. To do this, you can create a "flexible" benefits scheme and one way to do this is to use a points system.
A points system works like this. Each team member would have a number of points to spend (e.g. 1,000). Each benefit has a number of points allocated. The points relate to the relative cost to the company. A pension contribution of 1% of salary might cost 500 points for example, maybe an extra holiday day costs 200 points of maybe private medical care costs 300 points. The numbers I've just given are just examples.
The point is that the company only spends money on benefits that the team member actually values. I've built this type of benefits system on two previous occasions and a great package need only cost 5% of salary. The perceived value is more like 10%.
You can also reward loyalty by adding more points for long service.
This kind of scheme works better for growth companies (as opposed to early stage companies) as some degree of setup and administration overhead is added.
Tip 3 - avoid making an offer via a recruiter
Everyone loves to hire direct and avoid recruiter fees but the reality is they are difficult to avoid altogether.
If a recruiter is rewarded with a % of base salary beware of making an offer via the recruiter. They will sometimes bump up the salary demands of the candidate to get a better % cut. If you talk directly with the candidate, you'll get a better negotiation experience and a better result. Make this clear when you engage a recruiter that you intend to work this way. Alternatively, negotiate a fixed fee with a recruiter to avoid any ulterior motives disrupting the offer.
The London talent war has no signs of easing. If you have any other tips, do leave a comment below.
I introduced myself to the group as a "recovering COO" and it was good to see some old friends and make some new ones.
The topic of talent comes up every time we meet. All agreed that hiring great people in London is getting more difficult. There are many opportunities for smart team players who want to make a difference, especially in tech, product and design.
Part of the challenge is finding great candidates. Equally difficult is getting a "yes" after having made an offer. Good candidates invariably have more than one offer to choose from.
Startups are competing with each other and the wider job market for the best talent. Having a strong vision of what the team are trying to achieve is a must. Finding candidates that buy into that vision is the first challenge. Putting a package together that closes the deal is another challenge.
A startup usually has to be frugal with cash. Big salaries are not usually an option. Even offering mid range salaries, a vision and story isn't enough to win the best candidates.
To complicate matters, many candidates don't understand or value the main lever that a startup has to work with, (stock options) and in many cases.
A couple of tips then from the group on how to close a deal with frugal resources...
Tip 1 - the three way offer
To preserve your option pool for those that will value it most, make a three way offer like this.
We can offer you either
a) higher salary, no stock options
b) mid range salary, a few stock options
c) lower salary, generous stock options
This method often works as the candidate will choose what matter most to them. It's a simple risk/reward choice. By only offering stock options to candidates that appreciate their value you can maximise use of the option pool and offer compelling packages to those that want to share the upside.
It's also a great negotiation tactic. In many cases people will choose the middle option. That means the middle option should be constructed on terms that work best for the company.
Tip 2 - offer benefits, but use a menu
In the same way that candidates may or may not value stock options, there are certain benefits which are valued differently by different candidates.
Gym membership, life insurance, critical illness cover, pension contribution, private healthcare. All of these things can cost a company less to buy than it would cost to an individual. Offering benefits as part of a package can increase the overall perceived value without increasing the actual cost to the same degree.
A simple example is healthcare. It might cost someone £100 a month to take out private healthcare if they were to apply directly but under a company scheme the company would only pay say £60.
By offering benefits it means that a modest salary with a high perceived benefits package can be worth more to a candidate than a higher salary with no benefits. Plus, the overall cost to the employer can be lower.
The key to is to structure a benefits package with the maximum value to the candidate that has a minimal cost to the company. To do this, you can create a "flexible" benefits scheme and one way to do this is to use a points system.
A points system works like this. Each team member would have a number of points to spend (e.g. 1,000). Each benefit has a number of points allocated. The points relate to the relative cost to the company. A pension contribution of 1% of salary might cost 500 points for example, maybe an extra holiday day costs 200 points of maybe private medical care costs 300 points. The numbers I've just given are just examples.
The point is that the company only spends money on benefits that the team member actually values. I've built this type of benefits system on two previous occasions and a great package need only cost 5% of salary. The perceived value is more like 10%.
You can also reward loyalty by adding more points for long service.
This kind of scheme works better for growth companies (as opposed to early stage companies) as some degree of setup and administration overhead is added.
Tip 3 - avoid making an offer via a recruiter
Everyone loves to hire direct and avoid recruiter fees but the reality is they are difficult to avoid altogether.
If a recruiter is rewarded with a % of base salary beware of making an offer via the recruiter. They will sometimes bump up the salary demands of the candidate to get a better % cut. If you talk directly with the candidate, you'll get a better negotiation experience and a better result. Make this clear when you engage a recruiter that you intend to work this way. Alternatively, negotiate a fixed fee with a recruiter to avoid any ulterior motives disrupting the offer.
The London talent war has no signs of easing. If you have any other tips, do leave a comment below.
Wednesday 5 March 2014
How Customer Data Collection For Startups Transitions From Qualitative to Quantitative
On day one of a startup there is very little customer data. The founders have an understanding of a problem that exists and they have an idea of how they might solve that problem.
This is a simplistic model and reality will be different on a case by case basis. At no point would I advise any company to rely purely on qualitative or quantitative data sources.
Whereas, in a later stage internet business in a high growth phase there can be stacks of useful data.
My observation is that there is a transition that happens from the early days of a company to it's later growth stages in terms of the types of customer data gathered and used.
In simple terms the transition is like this; useful customer data at the beginning is mainly qualitative. At the later stage the emphasis turns to quantitative.
This is a simplistic model and reality will be different on a case by case basis. At no point would I advise any company to rely purely on qualitative or quantitative data sources.
- Qualitative data is the useful data gathered from unstructured sources such as customer interviews. Sentiments, intentions, motives and behaviours can be understood (to a certain degree).
- Quantitative data on the other hand is the useful data gathered from structured sources such as clicks, conversion rate, basket size, repeat visit rates, net promoter score, cost per conversion etc.
At Forward Partners, we help our entrepreneurs to uncover as much useful customer data as possible at each step of the journey. In the early days our team can help conduct customer interviews. Landing page experiments can be conducted to capture customer contact details. We can then ask these customers questions and start to really understand their needs.
We'd also help make sure from the earliest days, the product is set up with analytics baked in so activity data can be gathered. This quantitative data becomes more reliable as more visits and transactions take place.
Once transactions are becoming more frequent and predictable our team can help set up optimisation tests such as split tests.
The questions that entrepreneurs ask change along the way. It starts with questions such as "how do we know our customers have a problem?" and "are our customers willing to pay for solving that problem?". Later on questions are different, such as "are we improving conversion?" and "what is the cost of customer acquisition?"
An emphasis on "who, why, what" moves towards "when, how often, how much". To answer these questions, sometimes you need conversations and sometimes you need tracking tools and numbers.
Both are important.
We'd also help make sure from the earliest days, the product is set up with analytics baked in so activity data can be gathered. This quantitative data becomes more reliable as more visits and transactions take place.
Once transactions are becoming more frequent and predictable our team can help set up optimisation tests such as split tests.
The questions that entrepreneurs ask change along the way. It starts with questions such as "how do we know our customers have a problem?" and "are our customers willing to pay for solving that problem?". Later on questions are different, such as "are we improving conversion?" and "what is the cost of customer acquisition?"
An emphasis on "who, why, what" moves towards "when, how often, how much". To answer these questions, sometimes you need conversations and sometimes you need tracking tools and numbers.
Both are important.
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