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Wednesday, March 17, 2010

A Simple Model for Innovation

by Thomas Petersen

A Simple Model for InnovationFinding the next big thing is probably one of the biggest challenges in the world of startups. Countless companies, entrepreneurs and VC's spend a considerable amount of time plus money figuring out where and what to invest in. Yet often the game changers seem to be coming out of nothing and from unexpected areas. Is it luck or do those who change the world know something we don't?

In my last post I talked about some principles that can be used to design better digital products. In this post I will look at a model to map and explore what different kind of product you should do.

Most of the businesses spawned in the first bubble, where based on the belief that taking any business from the physical world and putting it online was enough to be successful. Any assessment regarding logistics, economy of scale, or competition with offline brands, was naively optimistic if not absent. A lot have changed since then.

It's easy to be a wisecrack in retrospect. There is no shortage of expert analysis for why something became a success after the fact. It's much harder to know what products or services will become a success before they hit mainstream. Yet some people seem to be doing just that. Do they know something that we don't or are they just plain lucky?

Even though luck does have something to do with it (timing?) it's not all just random. As a matter of fact there are some very good models to help you better understand the art of innovating. Some of them complex others rather simple. The one I find most useful is this two-way matrix which covers four different types of innovation.

Exploring opportunity by mapping your idea on this matrix.

Innovation Matrix

Do what others do, but do it better.

This is the most popular category to invent within. The basic premise is to create something that outperforms either on price, features, ease-of-use or performance. For instance: Sony Ericsson and Nokia competing on features or MS Office and Sun StarOffice competing on price (Free vs. expensive) This category is the easiest (on paper) to compete in, but also the category with the fiercest competition. With the introduction of the free price-tag this haven't gotten easier

Advice: Be better by being different. Think about how your product solves the jobs that your customers are trying to get done with your product, rather than simply thinking about what jobs you are solving. See what Steepster did for tea-connoisseurs

Do what others do, but do more.

This category is a little bit trickier. The basic idea here is to create an ecosystem for your product or service. The category takes advantage of easing the usage of a given product or service on different platforms.

Take the iPod as an example. You don't only get a music player. You also get the software to create play-lists plus access to buy music. Recently with the introduction of the iPhone and the AppStore this have created an even stronger ecosystem.

Another example is HP digital cameras, HP Snapfish for online picture storage and HP Snapfish print service that allow you to create albums with your own pictures and get them printed.

For a pure digital ecosystem Google is a good example. Google Search, AdWords and Google Analytics.

This category often has some "hero" product (the iPod, Google search, or the HP Camera) and often with a mixture of hardware and software and services.

From a company point of view this is often called vertical integration. Simplified meaning that a given company, own all the parts of the production that are needed to deliver to their customers.

The challenge with this category is that it often requires a successful product to build the ecosystem around. For a startup this is a difficult area to deliver in.

Advice: But even though you often do need a hero product, there are ways around it. Create an API that allows others to interfaces with your product. Then they will help you build your ecosystem. You won't necessarily have complete control (vertical integration) but you will become an important part of it.

37 signals API, FaceBook API and Google API all provide opportunity for interfacing with their products.

Do what others do, but for a new audience.

This is the most interesting type of innovation IMHO. Basically you are trying to find non-consumers and turn them into consumers by either making the product affordable or by making the product less specialized so that non-experts can use it.

An example on the latter is WYSIWYG editors such as Dreamweaver from Adobe. Mint.com took the idea of managing your own money to a new level allowing people without financial skills to suddenly understand their money in a different light. SalesForce.com basically created a SAP like product and broke it into pieces thus allowing access to the power of data-warehousing without the price that normally comes with it.

Leasing is an example on the former with its different financial plans are used to give non-consumers access to products they couldn't originally afford. The subsidizing that comes with most cell-phones is also an example of giving non-consumers access to your products.

Sometimes technologies that have previously been available for government or the scientific community find its way to the consumer market. It is interesting that rarely the original usage of the technology that ends up being the way consumers use it.

The very Internet we are using right now is an obvious example. GPS is another, both originally military systems.

But perhaps the best example is in the mobile industry with SMS (Texting if you're from the US).

Originally used by technicians to send test messages around the network. Then mobile customers began sending messages between each other. Later someone figured out a way to turn the SMS messages into commands that a server would understand (Look at any reality show). Then banks started using SMS for mobile banking (Large parts of Africans access their banks primarily through their cell-phone). Lately I have been buying ferry tickets with my cell. Ring-tones can be purchased through SMS. And last but by no means least, Twitter turned SMS into a broadcasting service.

Basically this approach to innovation is ripe with possibilities. Either a market has been proven (HTML editors, accounting, car markets and housing market) or an infrastructure is in place (Internet, GPS, Mobile net, Fiber).

This means that a lot of the hard work has been done already and you can focus on exploring different alternative uses of these to turn non-consumers into consumers.

Advice: Look around you and find areas that are served by only one type of customers and see if you can make that product available for what what previously non-consumers. As an example wordy.com to quote: "Let professional copy-editors check your text for grammar, spelling, punctuation and structure". Looking at the amount of typos, spelling and grammar mistakes, I normally do, be sure to sign me up when it's available!

Do what no other is doing

This is normally considered to be the holy grail of businesses innovation. Inventing something new that does not exist on the market already.

Classic example would be the light bulb, the car, the computer, the telephone. But also many types of software and services such as the OS and the spreadsheet. The innovations either create a demand or tap into jobs people are already trying to accomplish but with arbitrary tools.

It's hard to find something new, but not impossible.

By using the 2way matrix you can start to think more methodically about your startup. It won't guarantee success but it will help you gain a better understanding of your products and thus allow you to better explore different approaches to become a success.

To dig deeper and get a firmer understanding of innovation without the marketing hype I suggest you read some of the work from Clayton C. Christensen, Tony Ulwick or Peter F. Druckert.

And remember. The art of innovation is not just about finding something completely new but as much to connect two known areas in new ways.

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Thomas PetersenThomas Petersen is the co-founder of hello, a digital creative agency that designs and develops products and services. He writes on Black&WhiteTM and on twitter @hello_world.

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Tuesday, March 16, 2010

8 Design Tips for Startups - Moving Beyond Aesthetics

by Thomas Petersen

8 Design Tips for Startups - Moving Beyond AestheticsDon't panic, this is not going to be a lecture on typography or what color palette you should use. It's not going to require you to have the latest Creative Suite from Adobe either. In fact you don't need to be a designer or UXD expert to use these principles. This is an attempt to cut through the noise from the art directors, usability experts, designers, developers, Venture Capitalist and family members to help you design better products.

So what does it take to design a successful digital product or service? Is it the brand, the choice of colors, the functionality, the chosen platform, or the social features?

Well all of the above certainly have some importance, but it's going to be very hard to prove that one particular element is why company X is a success. All too often we become attached to this idea that there is a recipe for success. That if you just get the right idea or if your design is cool or uses a certain technology you will be successful.

Nothing in my experience, supports that belief. In fact what means success for one company might spell failure for another.

For instance WordPress.com is based on PHP, a server side language that many "real" developers loathe. They claim it's not a real programming language and that it doesn't scale well. None-the-less, a whole plethora of successful companies uses PHP, including FaceBook.

Google isn't exactly winning design prizes for their look and feel, yet they are so successful that many companies are copying their style.

Hulu.com was a success long before they started to add more complex social features. Joost was designed primarily around social features and have joined the deathpool.

In other words, there are as many ways to design a successful product, as there are ways to design a failure.

Large companies almost never allow for failure, which partly explains why their solutions most of the time are as bland as they are.

They have the money to continue down a dead-end and will invest millions in doing all the right things from user research, to usability tests to 5 different design proposals to establishing brand guidelines, then launch something two years too late to great fanfare and unfortunately often to great obscurity.

If you are a startup, you are normally not allowed (and shouldn't be) to spend that much time and money building spaceships no one want to fly.

So what to do.

Take the design process seriously, but don't get too attached to one particular part of it and don't rely on any one particular discipline to give you the right answers. Get to the point where you have real users or customers as quickly as possible. It's these users that will provide you with the information that will get you you in a position to make better design decisions.

The following principles should help you get in a position:

1. Start simple, stay simple.

It cannot be said enough. Less is more - much more, and there is a very good reason that it pays to understand.

"If you do less you can measure more. If you can measure more you can better experiment with what works."

Most products are simple, based on simple insights.

Make sure that you stay true to those insights, until you know you tried out every different interpretation of them. Don't add new features just because you think that it will help, it won't, not yet. If your product becomes a success it's not because of how many features it has.

2. Don't confuse change with improvement.

One of the biggest challenges record artist face when producing a new album is fatigue. They get this from listening to the same riffs, passages, drum tracks, choruses etc. over and over and over. It's actually one of the reasons why many have a problem listening to their own album when it's finally out. Startups as intense and time consuming as they are, have similar problems. It's very tempting after a couple of months of looking at the same design to want to change it and think you are improving your product. You aren't, so don't succumb to the temptation. It's not worth it.

Furthermore, if it goes like it does in most cases, you will soon enough have to spend resources on changing things after you launch.

3. Build to integrate.

Think about whether your product could be a good extension to already existing products/services. That way you can tap into already existing digital ecosystems and leverage on their popularity and reach this will give you some standards to adhere to. Remember that the more you are able to interface with other services the more trust you will establish. Guilt by association works both ways.

4. Don't do everything that is possible only what is necessary.

Constrain yourself. A good product has limitations. It doesn't just succumb to every temptation that comes along. Focus on what makes your product the product and only add features if you get clear signs that it is needed. Most users will have to learn your product anyway so don't try to impress them with features before they understand what your product is all about. iTunes may have many flaws, Basecamp from 37Signals leaves a lot to be asked for, but when all is said and done, their products are rock solid and there is no feature like the rock solid feature.

5. Usability studies and focus groups are for refinement not for innovation.

Let me be perfectly clear. Running a successful and informative usability study or focus group wont help you understand whether the market wants your product or whether you have solved your interaction flow satisfactory. I know there is a lot of buzz around User Centered Design (UCD) and that a hoard of usability experts will claim that they can help you design more successful products if you just ask the user (Which I find ironic). Don't believe the hype, I say this as someone who also makes a living doing usability tests. There are a few situations where usability studies make sense for startups, but most likely it wont be in your situation.

I will write a separate post about UCD but leave you with a few observations.

There is no one-to-one relationship between what people say in a focus group and what they actually do. It's way to complex and there are way to many psychological elements and social dynamics involved to allow you to extrapolate important data out of it at an early stage.

In most cases you are testing in a pseudo environment with mock-ups, html prototypes or even paper prototypes. Just imagine how Twitter, SMS, Google or LastFM in its early days would have scored. So many products need to be experienced before users will provide you with any valuable insights to build on.

It would be like trying to determine the usage and usability of a hammer by looking at a piece of paper with a drawing of it. You get the picture.

6. A feature is not a product.

Speaking of hammers.

Don't just think about your product as a bunch of features. Instead focus on what it is your are selling at its core. What is needed for your product to function? How much can you take away from it without sacrificing the core product.

Think about features as something to add after you have launched.

Features are something to add after launch
A hammer has one purpose, which is to help you knock in nails. Everything on top of that are features. Therefore understand when you are working on your core product and when you are working on adding features.

The benefits of thinking like this, is that it will help you establish a very clear an precise picture of what makes your product your product. Which means you will much better be able to understand why you are adding features when you are and won't get caught in the "me to" behavior that can drive companies out of business very fast.

7. Think how, not what.

What matters is not what functionality your product has, but how it works. A sign-up process is not just a sign-up process, a checkout process is not just a checkout process, a button is not just a button, a rating system is not just a rating system.

Think about how you can stand out by introducing something that everyone else might have but in a unique way. That's what Steepster did when they re-designed their rating system (see how they did here). Skype was not the first VOIP provider, far from, but Skype managed to make it stand out and look like a product not just a technology. In other words they productified a technology

You will be surprised how much the "how" can help improving your product.

8. It's not innovation to use the latest technology.

It's tempting to try and set yourself apart by using the latest build of some framework or technology. But don't do it just because it's the latest. Make sure that you understand the implications of what you are introducing. Is it processor intensive, is it increasing load time, does it improve the experience, is it understood by enough developers so that you can optimize it.

If you can't answer the above, you probably shouldn't do it.

All too often companies get caught in thinking that new technology in itself is the differentiation factor. But as most successful businesses know. Innovations have an introduction curve and not everyone should take advantage of a given technology just because it's available.


Designing successful products has more to do with understanding what doesn't work than with what works. If you can get your company in a position where you can "feel" the state of your product, you are able to make smarter decisions and in effect will have a better chance of success.

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Thomas PetersenThomas Petersen is the co-founder of hello, a digital creative agency that designs and develops products and services. He writes on Black&WhiteTM and on twitter @hello_world.

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