October 25, 2010

64) The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich

危 wēi  danger

Timothy Ferriss, an American writer, educational activist, and entrepreneur wrote a semi-autobiographical self-help book in 2007 that was well received by friends and family.  Ferriss’ working title, ‘Drug Dealing for Fun and Profit’, wasn’t as well received.  He decided to proceed with the name anyway, liking it because it polarized opinion.  However, once he had secured distribution, Wal-Mart vetoed the title’s use so Ferriss was back to the drawing board.  He found it relatively easy to whittle the list down to 12 but found it tough to select a final name: everyone had an opinion on the best, including his agent and distributor but none agreed.  Surely he would be best going with his gut feel and upsetting either his distributor or agent?

机 jī opportunity

Instead, Ferriss decided to look for some data. He took 6 prospective titles that everyone could live with:  including ‘Broadband and White Sand’, ‘Millionaire Chameleon’ and ‘The 4-Hour Workweek’ and developed an Google Adwords campaign for each.  He bid on keywords related to the book’s content including ‘401k’ and ‘language learning’: when those keywords formed part of someone’s search on Google the prospective title popped up as a headline and the advertisement text would be the subtitle.  Ferriss was interested to see which of the sponsored links would be clicked on most, knowing that he needed his title to compete with over 200,000 books published in the US each year.  At the end of the week, for less than $200 he knew that “The 4-Hour Workweek” had the best click-through rate by far and he went with that title.

His experimentation didn’t stop there, he decided to test various covers by printing them on high quality paper and placing them on existing similar sized books in the new non-fiction rack at Borders, Palo Alto.  He sat with a coffee and observed, learning which cover really was most appealing.

My colleague in New York, Joe Gerber has been using this approach recently with real success, it’s a reminder to me that every part of a business (including the virtual) can be prototyped.

How About…

  • Prototyping every part of your business before launch?
  • Placing advertisements into existing online networks before launch for feedback?  e.g. as Joe says how about using Foursquare to figure out “if this is worth stopping for?”

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source video: http://vimeo.com/3934635

October 13, 2010

63) Netflix

危 wēi  danger

Great businesses continually improve, prototyping new offers and services before rolling them out to the relevant customer base.  But, success criteria for innovations are often vague and ‘success’ is therefore highly subjective, particularly when innovation teams only prototype to small groups of customers.  The alternative, rolling out to large numbers of customers immediately is too risky though?  And anyway, given how quickly markets change how could the team say with confidence that any change in performance was attributable to the change in strategy?

机 jī opportunity

In my previous post about Netflix I sang the praises of the company placing a top-level strategy summary in the public domain – you can see it here.  Slide 20 particularly caught my eye, a brief slide on customer satisfaction:

I love the idea of breaking customer bases into equal sized groups, allocating each to different employees or teams and then giving them free reign to attempt to improve their group’s experience.  I imagine that this enables more offers to be prototyped and creates a competition internally to deliver quantifiable results.  I also admire the size of these groups in this case – many companies would be tempted to limit the trial to a handful of customers at most, going with groups of 10,000 enables Netflix to really quantify the benefit and assess relative performance.

The approach establishes what would be called a ‘control set’ in a science experiment and encourages agreement in terms of what success metrics might be in advance.  In fact, my colleague Elizabeth said in a talk recently that she likes to approach piloting using the scientific method:

set a hypothesis -> agree variables -> agree metrics -> agree duration -> feedback and conclusions

That makes sense, and contrary to many people’s perceptions it doesn’t need to stifle creativity. After all, the development of new approaches to pilot and the spotting of interesting new patterns in any results depend on creativity.

How About…

  • Taking a scientific approach to piloting new offers?
  • Thinking how you might divide your business into comparable units for benchmarking?
  • Tasking teams with innovating the offer to different units, then rolling out the most effective new approaches?

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October 11, 2010

62) diaspora* and Kickstarter

危 wēi  danger

Four students at New York University’s Courant Institute of Mathematical Sciences listened to a lecture on cloud computing and privacy and began to worry about relinquishing ownership of their data to Facebook and other social networks.  They believed that they should retain all of their personal data, after all once you give up control initially you effectively lose the option to regain control over it permanently.   The students believed that they could build a distributed social networking service to overcome this which they called diaspora*. Users would set up their own server (or “seed”) to host content; seeds would then interact to share status updates, photographs and other social data.  The team wanted to test whether anyone else shared its concerns and to raise $10k seed capital to build the product.  Surely the inexperienced team would struggle to get the idea off the ground without giving up huge amounts of equity?  And how would they test demand more broadly than just in their close social groups?

机 jī opportunity

Instead of testing the idea with potential users in face to face discussions and tapping into angel funding the team decided to place a request for funding on Kickstarter, a platform that enables crowd-funding of creative projects.  The team set their goal at $10k, recorded a video outlining why the project was important to them and explained what donors would receive in exchange for any backing.  For example, those that pledged $25 or more would receive “a CD, note, a bunch of cool diaspora stickers, and an awesome diaspora t-shirt!”.  As with all Kickstarter projects no equity was offered in exchange for funding (conveniently reducing the need for financial regulation of the Kickstarter platform) and the project had to be fully funded before its time expired or no money changes hands. diaspora* was fully funded within 12 days and within a few weeks the team had received pledges of over $200,000 from over 6500 backers.

Here’s the Kickstarter widget for the Diaspora project:

The team had proven that their product had appeal and had raised 20 times the capital they had aimed for without giving up a single percent of equity. diaspora* is now in build: a developer preview was released on the 15 September 2010 and a consumer alpha is planned for October 2010.

This approach is developing into a business model itself – just look at American Idol or X-Factor (read more in my article here).

How About…

  • Crowd-funding new ideas – testing demand and perhaps eliminating the need to give up equity?

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