Think Big, Start Small, Scale Fast & Always, Always Focus on the User Experience

I recently had a meeting with two senior executives at a very well-respected firm located in Austin TX. These are my favorite kind of meetings: The topic of the meeting was how to do something together that makes a “Big Impact”. And, by Big Impact, we mean that this project would have a significant positive impact on their company, their specific area of the business, their clients and their client’s clients. A win that helps everyone up and down the line. Lastly, by extension, and unspoken, the Big Impact would also help advance their careers in this company.

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

January 15, 2019

I recently had a meeting with two senior executives at a very well-respected firm located in Austin TX. These are my favorite kind of meetings: The topic of the meeting was how to do something together that makes a “Big Impact”. And, by Big Impact, we mean that this project would have a significant positive impact on their company, their specific area of the business, their clients and their client’s clients. A win that helps everyone up and down the line. Lastly, by extension, and unspoken, the Big Impact would also help advance their careers in this company.

So, now that the cards are on the table, how do we proceed? These are two capable executives who have successfully implemented projects throughout their careers. But, as they confessed, given they want to create a first in their industry: A webinar-based educational Path to Digital Savvy, they faced two challenges:

  1. They were not the most Digital Savvy people to begin with; and
  2. Building an educational product in the Digital Age is a new experience for them.

Now, the fun begins. As I told them, here’s the mantra for building anything – a product, service or company – in the Digital Age:

Think Big, Start Small, Scale Fast
& Always, Always Focus On The User Experience

Let’s break it down:

THINK BIG

If you can describe the pain that people are experiencing better than they can, then these people are likely to believe that you have the solution. In a Digital Age, this connection between people and their problem, need or desire, can become pure gold. Further, the problem, at first glance, may appear simple or mundane. Think of the tech giants that started out solving a simple, sometimes, obscure problem or two:

  • Facebook: People want to connect as groups without a physical gathering.
  • Amazon: People want to conveniently buy books for less.
  • Google: People want an easy way to find something on the Internet.
  • Zappos: People want to buy shoes without going to the store.
  • Netflix: People want to rent movies from their home.
  • Square: People want to process credit card transactions anytime, anyplace.
  • Twitter: People want to broadcast short messages at any time.
  • Robinhood: People want to trade stocks without paying commissions.

What’s fascinating about these, and other digital companies like them, is that they leveraged solving a simple problem, need or desire into companies with multi-billion dollar valuations. Further, almost every founder on this list can tell stories about the dozens (or, in Airbnb’s case, hundreds) of rejection letters they received from venture capital firms. Despite this discouragement, these founders and their companies stayed true to their “Think Big” vision and that is why we are talking about them today.

START SMALL

One of the most insightful learning experiences for entrepreneurs is Eric Ries’ definition of a startup in his 2011 book The Lean Startup:

A startup is a human institution designed to create a new
product or service under conditions of extreme uncertainty.

Let’s be clear: Extreme uncertainty is the assumed environment for startup development. As such, Ries’ book outlines a process to resolve this extreme uncertainty by using a process of continuous experiments to create data that constitutes validated learning. These experiments are performed using a Minimum Viable Product (MVP), that is, the smallest version of the product that enables experimentation and valuable user feedback. By implementing continuous experiments through an MVP, the startup engages in a Build – Measure – Learn cycle to help the startup properly define the market need and how their product or service fits this need. Sometimes, the validated data tells the startup their original idea does not work, and that they should “pivot” to address a different need – as defined by validated data from continuous experiments using their MVP in a Build – Measure – Learn process.

Simply put, in any new venture, you do not know what you do not know. The result is that new products and services are best built under a cloak of humility. It is best to assume that even the best idea in the world – the surefire ‘can’t miss’ – will somehow transform once it hits the market.

Therefore, the goal at the early stages of building a new product or service is two-fold:

  1. Keep the misses small – because, as they cost time and money, you do usually not get a lot of them; and
  2. Learn from experiments, data and failure (yes, there will be failure!) what is the Product – Market Fit is and, just as important, is not.

Lastly, let’s talk about failure. Most experiments will fail. No one likes it, but it is an inevitable part of the startup process. The most important factor in evaluating failure is how it came about. Was it the result of a pig-headed “damn the torpedoes, I’ll show the world I am right” approach? Or, was it part of a systematic, carefully planned and calibrated process of continuous experiments and measurements that created valuable validated data? A pig-headed approach is highly problematic while a process of continuous experiments creates confidence that a management team is responding to the market in a clear, focused and logical manner. Guess which approach gains additional funding?

SCALE FAST

Today, the cost of a starting a company is often less than $5,000. There are several reasons: The Internet offers low cost incorporation services such as Rocketlawyer.com; low-cost branding services are available through fiverr.com or at brandroot.com; open source (free) software eliminates the need for large up-front software acquisition expenses and startup incubators and accelerators provide low-cost office space, community and mentorship to entrepreneurs. Meanwhile, the Cloud eliminates the need to buy expensive servers and the high cost of maintaining data center infrastructure and personnel. In fact, Cloud companies often give away free Cloud user credits to startups in the hope of retaining their business as they grow.

By far, the most significant of these advantages is the Cloud. There are two ways of looking at the Cloud. The first is the cost savings from no longer needing to build, operate and staff a data center. This benefit is valuable, but it misses the larger second benefit: A company can scale up its product or service at the turn of a dial on an Amazon Web Services (AWS), Microsoft Azure, Google Cloud or IBM Cloud dashboard. The expense, hassle and time commitment of building and expanding a data center is replaced by a flick of the wrist. This immediate and always available flexibility is the most important and dramatic impact of the Cloud.

What this also means is that, from a business point of view, a product or service (from a technology infrastructure standpoint) can quickly scale up from 10 to 10,000 to 100,000 to 1 million users. This means a person creating a new product or service – at an existing company or startup – should “Think Big, Start Small and Scale Quickly.”

ALWAYS, ALWAYS FOCUS ON THE USER EXPERIENCE

Now, these two executives and I have our plan: We will Think Big, Start Small and Scale Fast. Is that it or is there more?

Yes, there is more, and it is the most important step of all because it carries through all of the above steps:

Always, Always Focus On The User Experience

Here’s why: In the Digital Age, one must always remember that the Consumer is King. A competitor’s product is just a website visit away. So, the User Experience (UX) is the most critical piece of all. I often refer to the User Experience as the Digital North Star. As such, I built my definition of Digital Transformation in my book Winning in the Digital Tornado around the User Experience (UX):

The impact on people and business from prioritizing and elevating
the user experience (UX), through the convergence of enabling
information, social collaboration and real-time connectivity.

This means that people are invited to engage with the experience you offer, not brow-beaten until they submit. The risk to the user shifts back to the product or service provider. This means that the product or service is easy to sign up for, easy to learn, enjoyable to use, valuable or rewarding to the user and easy to drop if they are not satisfied.

Digital marketing employs a strategy called “content marketing”, which differs from traditional advertising.
Traditional advertising is repetition-focused. Think of a man standing on the side of the street all day long with a bull-horn to tout his product. In 1885, Thomas Smith wrote a pamphlet entitled Successful Advertising, which provides valuable (and still valid) insights into the human psychology behind modern advertising strategy. Mr. Smith walks us through the thinking of a person viewing the same ad each of the twenty times they see it until, after the twentieth time seeing the ad, they buy the product. These include:

The first time people look at any ad, they don’t even see it.
The second time, they don’t notice it.
The fifth time, they actually read the ad.
The tenth time they ask their friends and neighbors if they’ve tried it.
The twentieth time the prospects see the ad, they buy what is offered.

Back then, if there were ten steps in a process behind a product or service, you shared the first two or three and let the consumer buy the product to learn the remaining steps.

Now, using content marketing, the consumer is treated with more respect. A company places all ten steps into a PDF, video or webinar that can be downloaded or viewed for free by anyone potentially interested in the product or service. The goal is to build authority (that you are the expert in the area) and validation (that you can be trusted to deliver what is promised). The consumer is invited into a relationship with you and rewarded for their interest. Once authority and validation are earned, the consumer will then engage in a transaction with you.

However, Successful Advertising does not focus on what happens during the next twenty times the ad is seen after the person buys the product. But, in a Digital Age, this is a critically important part of the User Experience (UX). The goal, after the purchase, is to build advocacy for the product or service by the consumer. That is, the goal is for the consumer to start telling other people – in personal conversations and with posts on social media – how happy they are with the product or service and how great the company is to work with. This is the most valuable advertising of all – and it’s free!!!

WRAPPING UP

With an approach that emphasizes Think Big, Start Small and Scale Fast combined with Always, Always Focus on the User Experience (UX), a new product or service is poised for success as goals and strategies are properly aligned to fit the development stage of the venture. With this alignment, the product development process is optimized and the probabilities of success are maximized.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.

Gradually, Then Suddenly, Then Gone: Why “Fast Follow” is a Path to Doom in a Digital Age.

One of the things I enjoy as an author is that I get to talk to a lot of senior executives about their business. As you can imagine, I naturally steer the conversation to their digital transformation strategy.

Sometimes, we get into great conversations about what the cutting edge is and where it is going. Other times, my jaw drops to the floor in exasperation. For example, I had a recent conversation with an executive that I have a great respect for, but who told me: “Well, we do not know where digital transformation is heading. So, our plan is to wait until it is clear and then be a fast follower.”

By Allan Thomas Chiulli, DigElearn
www.DigElearn.com

January 1, 2019

One of the things I enjoy as an author is that I get to talk to a lot of senior executives about their business. As you can imagine, I naturally steer the conversation to their digital transformation strategy.

Sometimes, we get into great conversations about what the cutting edge is and where it is going. Other times, my jaw drops to the floor in exasperation. For example, I had a recent conversation with an executive that I have a great respect for, but who told me: “Well, we do not know where digital transformation is heading. So, our plan is to wait until it is clear and then be a fast follower.”

Then came a second statement that caused my jaw, again, to hit the floor: “Yep, we are great at execution and we will respond to digital disruption with full force.”

My response is best summarized below:

Most business executives who do not comprehend the true nature of digital disruption have these assumptions:

  1. The resulting change will occur on a manageable timeline and scale;
  2. The disruption will come from expected directions; and
  3. The needed response will be clear, easily achievable and success simply requires good execution.

This executive, who relishes a challenge, and I debated the validity of these three assumptions. In closing, I recommended that he take a close read of one of my favorite articles in the digital thought leadership space: “Gradually, Then Suddenly” by the Anand Sanwal, CEO of CB Insights. Much of what follows borrows from this piece and I thank Mr. Sanwal and his Team for their great work!

There are three trends that form the basis of my discussion with this executive:

  1. Technology Is Eating Every Industry

I began by pointing out that the top five publicly traded companies (by market cap) had dramatically changed from 5 and 10 years ago and there had also been a pronounced swing towards technology companies (Apple, Alphabet, Microsoft, Amazon and Facebook) and away from traditional manufacturing, oil and banks (Exxon GE, Citi, PetroChina and Total).

  1. Technology Adoption is Quicker Than Ever

Not long ago, one generation created the invention and the subsequent generations adopted it. The telephone and the auto took well over 60 years to reach an 80% adoption (by households) in the U.S. Meanwhile, air conditioning took about 50 years and electricity took about 35 years.

In contrast, the cell phone took about 15 years and the Internet reached about 60% adoption in only 10 years. Furthermore, the adoption of disruptive technology has exploded. For example, the iPod sold about 600,000 units during its first full year in 2002, the iPhone sold about 1 million units per quarter shortly after its introduction in 2008 and the iPad, introduced in 2010, sold 50 million units in less than three months.

Meanwhile, disruptive user platforms have experienced incredible spikes in user growth following their launch:

  • Robinhood, a platform offering free equity trading, added 4 million users in four years.
  • Coinbase, a cryptocurrency trading platform, added 25 million users in five years.
  • Alipay, the mobile payment app used by Alibaba’s e-commerce empire, added 700 million users in seven years.
  • WhatsApp, the message app, added 800 million users in five years.

The takeaway is that, once a digital business gets it right, there is no oxygen left in the room for anyone else.

Clayton Christenson at Harvard coined the term “Disruptive Innovation” in the early 1990’s to describe how a new startup may initially target less profitable, underserved market segments. The established players are often amused by the concept. But, over time, the startup improves and begins to move upscale with a better product, superior user experience and lower price than the established competitors. At some point, they begin to target the established competitors’ customers. By then, it is often too late for the established companies. They are trapped by legacy systems, hierarchical management structure, high fixed costs, long development cycles, limited flexibility and, most important, the absence of a culture of innovation. A great example is Borders laughing at tiny Cadabra, who started out with the crazy idea of selling books online, who is now known as Amazon.

  1. Enter The Unusual Suspects

One (hopeful) assumption that executives have in sticking with a “fast follower” approach to their digital transformation strategy is that they think they know their neighborhood. Many of these executives have decades of experience in their industry and know all the players incredibly well. What they are missing, however, is the fact that ‘born digital’ companies will come at them from all sorts of unexpected directions.

For example, Amazon has entered the lending space:

The very mention of Amazon entering a business can create a tidal wave of bad news for the existing participants. Look at the impact on Walgreens’ stock price after a rumor (just a rumor) emerged that Amazon was entering the pharmacy business: The stock price plummeted from $76.95 to $70.87 in two days! And, this was without an actual announcement by Amazon.

Large companies, many of whom believe that their size and scale provide moats of protection from competition, are also now subject to this incredible disruption. Mercedes Benz has long considered BMW and Lexus as its competitors, but is now concerned about ‘born digital’ companies like Tesla, Uber and Google.

Walmart thought it’s competitors were Target and Costco, but is now engaged in a global brawl with Amazon and Alibaba.

Hertz used to dominant the car rental business (vis-à-vis Avis and Enterprise), but now must compete with Uber and Lyft.

The Digital Age has not been kind to Hertz. In June 2014, Hertz’s market cap was $10 billion. By mid-2018, it was $1.3 billion. Uber is now estimated to have a valuation about 50 times higher than Hertz.

BOTTOM LINE: The Speed of Disruption is Gradually, then Suddenly, Then Gone

This company suffered when Apple launched its iPhone, as it stock price dropped dramatically from $120 to $30 and then stabilized into a band around $60 for about two years. Was it out of the woods?

No, it wasn’t. In 5 months beginning in late 2010, the stock price fell from $60 to about $5.

This company, Blackberry, went from global leader to a shadow of its former self, even as the press continued to award it accolades. Their mistake? They thought Nokia and Motorola were their main competitors, so a “fast follow” strategy made sense.

Here’s another company: Their stock price, due to pressure from unexpected digital competitors, saw a drop from $30 to the low teens, only to settle in a trading band in the high teens for several years.

Then, in a five-month period, the stock price plummeted from $15 to $10 and began a slow and steady drop to zero as the company went bankrupt.

Still, this company, Blockbuster, did not consider Netflix or Redbox to be competition. Their mistake? They thought Hollywood Video and Movie Gallery were their main competitors, so a “fast follow” strategy made sense.

We already discussed Hertz, but look at their stock price during its battle with digital competitors. Their stock price fell from $120 to below $90 and appeared to stabilize around $70 for a couple of years. Then, the stock price was slammed to $30 and continued its slide to $10.


Their mistake? They thought Avis and Enterprise were their main competitors, so a “fast follow” strategy made sense.

ONE MORE THING: This Is Just Beginning

Please understand: These companies are highlighted, but they are not exceptions. In the last 15 years, 52% of the S&P 500 companies have disappeared. That’s over half!

If this is happening to the large players with size and scale to protect them, how does a small and medium size business (SMB) have a chance once the ‘born digital’ disruptors arrive? Smaller companies, without size or scale to buy them time, face the same challenge of digital disruption, but with far smaller margins of error. If a small company has a “fast follow” strategy towards digital transformation, then they are skating on very thin ice.

HERE’S WHY: The Structure of Disruption Has Changed

One reason is digital disruption has rapidly accelerated is that the cost of launching a new company has decreased by orders of magnitude. The Cloud, often provided for free to startups, eliminates the need for a data center along with the cost, staff and long planning horizons. Now, scale is achieved by turning a dial on an AWS, Google Cloud or Microsoft Azure dashboard. The gig economy enables new entrants to add people under short-term work contracts with specific skills for specific tasks. Large staffs and their associated costs become unnecessary, even as the Internet allows people to work at home. Incubators and accelerators provide a wide range of low-cost services and mentoring to startups. Finally, the Lean Startup Method provides a reliable blueprint to building a product and company. This new flexibility enables digital companies to easily and quickly enter new fields of play at low cost, maximum flexibility and, most important, without having to follow the old rules. Many of these ‘born digital’ companies fail, but the ones that succeed can rapidly scale up in a manner that blows away traditional competitors.

The result is that traditional R&D-driven product refinement, with long development cycles, corporate hierarchies, large-scale ownership of assets, large staffs and high overhead no longer cuts it.

And, this is especially true in an age with unexpected competitors emerging daily. Look at how Amazon is attacking everything a bank does (short of becoming a bank itself – so far).

PLEASE LISTEN: So, To The Fast Followers

Please stop and think about what you are doing. We began with a picture of Mike Tyson standing over a boxer he had punched to the ground. The fact is, even when Tyson’s punch was a half-inch away from this poor man’s head, the impact was well on its path and with a ton of momentum, that punch still did not hurt. But, once it landed, the fight was over. Quickly and beyond all doubt. Today, digital disruption works in the same way. It will not hurt until it arrives. Thus, it is “gradually, then suddenly, then you’re gone”.

The “fast follower” strategy simply does not work once the ‘born digital’ competition arrives and it will be even less effective as time goes on. Please think of your digital transformation strategy as something you must actively engage in. Companies and executives need to develop their digital transformation strategy from a proactive perspective that looks out, to the side and ahead, as a reactive response is a likely guarantee of disaster.

Allan Thomas Chiulli is the co-founder of DigElearn, an online digital learning membership experience at www.DigElearn.com and the author of Winning in the Digital Tornado. Both are guides to digital transformation for business and technical people needing to catch up and stay ahead of digital transformation. Readers may take a free quiz to measure their Digital Savvy at www.DigElearn.com.