Really, product only matters?(kamil.rudnicki.info)
kamil.rudnicki.info
Really, product only matters?
http://kamil.rudnicki.info/post/28121846349/brad-smith-you-said-that-product-only-matters-really
4 comments
Great example to support your thinking. I hope that I understand that correctly - you are saying that product as a some bigger thing then some code is the main thing startup should focus on, and you have to get >1 in "expirience" with it? :)
"E(N)" is not experience but "expected value." The expected value of the number of fissions caused by a fission must be greater than 1, then you explode.
Basically, suppose you can market more. Each time you market a given amount M, you create a new convert. 2M, two new converts. 3M, three new converts.
As E(N) gets close to 1, these converts create their own new converts. There's a sort of multiplying factor for the final number of converts if E(N) < 1, it's 1/(1 - E(N)).
So if every convert ends up converting, on average, 2/3 of a new convert, then M now generates 1/(1 - 2/3) = 3 converts total. That's a multiplication of your investment in marketing by 3. So you can spend one third the marketing money! If you can boost this rate from 66.7% to 80% your marketing becomes 5x more effective. If each convert creates, on average, 0.9 converts, you're now 10x more effective with your marketing money. The moment you get to 1.0 or higher, the system goes viral and spreads to everyone with no investment necessary (think Wikipedia, Google, Facebook).
Basically, suppose you can market more. Each time you market a given amount M, you create a new convert. 2M, two new converts. 3M, three new converts.
As E(N) gets close to 1, these converts create their own new converts. There's a sort of multiplying factor for the final number of converts if E(N) < 1, it's 1/(1 - E(N)).
So if every convert ends up converting, on average, 2/3 of a new convert, then M now generates 1/(1 - 2/3) = 3 converts total. That's a multiplication of your investment in marketing by 3. So you can spend one third the marketing money! If you can boost this rate from 66.7% to 80% your marketing becomes 5x more effective. If each convert creates, on average, 0.9 converts, you're now 10x more effective with your marketing money. The moment you get to 1.0 or higher, the system goes viral and spreads to everyone with no investment necessary (think Wikipedia, Google, Facebook).
A good product will help make selling way, way easier. If we see a sale as a pie composed of two pieces(the actual product and then the marketing or pitch), the better and more self-explainable the former is, the easier the latter becomes.
Let's say you have a product that is sold once every hour per sales/rep for $30/month. A good product's main job is to increase your retention and thus to increase your revenue. A super shitty product, even if sold like cupcakes because of your selling skills, will likely result in higher cancellations and less revenue overall than a product that can be sold AND is useful.
The two things are not mutually exclusive and they both are critical in making revenue.
Let's say you have a product that is sold once every hour per sales/rep for $30/month. A good product's main job is to increase your retention and thus to increase your revenue. A super shitty product, even if sold like cupcakes because of your selling skills, will likely result in higher cancellations and less revenue overall than a product that can be sold AND is useful.
The two things are not mutually exclusive and they both are critical in making revenue.
To provide a good case study, I'll share my own personal experience.
I created the website http://drivingtests101.com/, a free driving test prep website for all vehicles types across 11 countries, this past year, as well as mobile apps for 4 countries.
Lets take a look at the website only. I believe the quality of the product is very good and this is proved by reaching the #2 downloaded education app in a country. However, despite this success on the app side, it was very slow on the website side because it was not marketed well, no one knew about it and no one could do find it.
In my experience, it is very rare for a product to become truly viral from the start.
If you want to grow fast, you need to spend resources on marketing to reach your customer, whether it be through paid or non-paid (eg - social media) means, although every case is specific.
For the website, spending money on SEO and taking the time to write a few articles increased traffic tenfold in the first month!
You learn by doing, but I would highly recommend throwing a few marketing things against the wall to see what sticks.
Good luck!
I created the website http://drivingtests101.com/, a free driving test prep website for all vehicles types across 11 countries, this past year, as well as mobile apps for 4 countries.
Lets take a look at the website only. I believe the quality of the product is very good and this is proved by reaching the #2 downloaded education app in a country. However, despite this success on the app side, it was very slow on the website side because it was not marketed well, no one knew about it and no one could do find it.
In my experience, it is very rare for a product to become truly viral from the start.
If you want to grow fast, you need to spend resources on marketing to reach your customer, whether it be through paid or non-paid (eg - social media) means, although every case is specific.
For the website, spending money on SEO and taking the time to write a few articles increased traffic tenfold in the first month!
You learn by doing, but I would highly recommend throwing a few marketing things against the wall to see what sticks.
Good luck!
Great, thanks for concrete example
When I'm approached to join an 'idea', I look for three things. Without these three, the idea has a tough time becoming a product.
Technical expertise: someone needs to be able to build something people want (and ideally will pay for). Things like lean methodology help provide the focus and direction to find this.
Marketing expertise: someone needs to be able to reach your market so they find you and convert.
Money: either you have some, make some with the product, or someone brings it to the table.
These things can be done by 1-3+ people, if they aren't there, I hesitate.
Maybe this is why I like pursuing ideas that make money. I'm open to ideas but they are just that, resource hungry ideas that need money.
Technical expertise: someone needs to be able to build something people want (and ideally will pay for). Things like lean methodology help provide the focus and direction to find this.
Marketing expertise: someone needs to be able to reach your market so they find you and convert.
Money: either you have some, make some with the product, or someone brings it to the table.
These things can be done by 1-3+ people, if they aren't there, I hesitate.
Maybe this is why I like pursuing ideas that make money. I'm open to ideas but they are just that, resource hungry ideas that need money.
Thanks for answer. But, I'm thinking what is marketing expertise in practice, maybe you can write a case study...
He did a pretty good job describing it - somehow, we need to reach the market.
There's probably an infinite number of possible routes to do this, everything from "viral growth" to direct marketing to "one of the co-founders is good friends with our 30 halo customers."
One thing that product can do that marketing can't - an amazing product can grow itself. (Slowly, but still...)
There's probably an infinite number of possible routes to do this, everything from "viral growth" to direct marketing to "one of the co-founders is good friends with our 30 halo customers."
One thing that product can do that marketing can't - an amazing product can grow itself. (Slowly, but still...)
"Both of these companies can easily be wiped out by a company that's driven by programmers and organized to put programmers in the driver's seat, but which have an excellent abstraction that does all the hard work to convert code into products below the decks."
Notice the emphasis on the difference between the code and how it is packaged into a whole experience. The "product" is not just something which developers contribute to in Joel's world, but something which lots of people are involved in.
I try to tell people about the truly mad ideas, as I see them, in science. One of them occurs in electronics and nuclear chain reactions and biological evolution: it's the idea of "feedback". Here's the nuclear version: you've got all of these nuclei which are too heavy, they "want" to fall apart, they just need a little disturbance. (It helps to think of mousetraps: they're in a metastable state and they just need a good jostle to collapse to a new equilibrium, releasing a bunch of energy.) This disturbance usually has to come from a free neutron which smacks into the nucleus. Nuclei are small, and so you might think this is excessively unlikely, and that there would be complex probability arguments involved in understanding the procedure. Actually, it's much more simple.
To get a chain reaction, the neutrons formed by one fissioning nucleus need to cause other nuclei to fission. If each fission creates, on average, even a little more than one other fission, then you have positive feedback, and an exponential growth -- unbounded energy. If each fission creates on average less than one, then you will have exponential die-off of any reaction, with finite energy. (The "special case" of exactly one is what you need to simulate if you want to create a stable nuclear reactor; you need another feedback system sitting on top of your existing one which lowers the expected value if it gets too high, or raises it as it gets low.) The same principle viewed different ways is evolution by natural selection (the genes which characterize the population are precisely those which cause themselves to be more likely), or the psychology of neurosis (paranoia is defined by the fact that it causes those you love to fail you, thus feeding the paranoia). In the language of probability, if N is the number of events caused immediately by one event, you need E(N) > 1. That's the entire mathematics for positive feedback.
The reason that you want to focus on product is, I think, because you are struggling and struggling to get this value as high as possible. You need the expected value of converts, given one convert, to get greater than one. If you can do that, then traction builds automatically, as people who hear about it contact others to join further. In the long run, the people with the best product have the exponential advantage.
This is not to invalidate the problem-in-the-street of "how do I survive the times when E(N) < 1?". I am often reminded of the Chinese formulation of Buddhism, where you have an abstract goal (realize that all things are empty), but a concrete goal (there is a lot of meaning here and now), and you must form a synthesis of these two opposites. Your long-run abstract goal is certainly "chain reaction"; your short-run concrete goal is simply to stay afloat.