Measure Behavior. Stop Asking for Feedback

“Hey Twitterverse! Check out our new awesome app concept. Enter your email address to be included in our arbitrarily limited beta. We’ll nag you for feedback after you’ve barely used our hastily assembled product. It’s going to be epic! We’ll make billions and you’ll get this rad t-shirt.”

Does this sound familiar? There’s a good chance you’ve heard of some new concept before, making big claims about what they are eventually going to do for the world. Often, the people who build these concepts have no experience doing so. The lucky ones have guidance from mentors, folks who have founded, built, and sold companies before. Maybe it’s more accurate to say that some mentors are lucky enough to work with startup founders who listen. In nearly every case of entrepreneurial failure I’ve witnessed, the founders were reluctant to hear any advice that put them outside their plans and expectations about their business. Some died a quick painless death. Others managed to collect revenue, only to wallow in the pit of customer retention despair.

What was their primary mistake? Asking for feedback.

Many first-time entrepreneurs build immediately, based on their intuitions and (hopefully) years of experience dealing with some pain in a specific industry. They do not take time to survey potential customers. They are often blinded by the belief that they must be first to market. It never hurts to be first to market, unless you’ve rushed to get there. Typical bootstrappers have no budget, which means they choose to skip important steps, such as persona development and user research. Instead, they go straight to visual design so they can have pretty pictures to show investors. From there, they hire code monkeys to make software that looks like the pictures. This is exhausting for everyone involved, as no high level awareness of the core product exists without sketches and storyboards, which were skipped to keep costs low. Eventually, they send out those beta invites to the few hundred people who have expressed interest.

“Tell us what you think!” might as well be “share your deepest concerns about your edge case, so we can focus our time building things only one user requested instead of the one thing we set out to do in the first place.”

Publishing a product and allowing it to grow organically is a great way to gauge customer interest. It’s also an excellent path to information that will serve far greater purpose than customer feedback. By reviewing analytics of actual user behavior, we see a pure unfiltered stream of high quality information. Communication is hard. People lie. They don’t ask for what they really want. They are inarticulate. Behavior data never lies. Ask for feedback, and you’ll hear many suggestions for features. You’ll need to interpret the feedback, collect similar ideas, prioritize the resulting feature requests, and make difficult choices about which features to add and in what order. Look at behavior analytics, and you’ll see precisely the point in your workflow where users give up. If 75% of your users click cancel at the end of an interaction, there’s a good chance the interface is hard to use.

Focus on what you know, not what you think you know, nor what you hope to be true. Hope is not a business model. Feedback is at best a distraction. User research and behavior analytics are your salvation.

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Face The Bear Or Die In Obscurity

Most of our lives, we coast through, thinking how great we have it. Occasionally, we hit a bump. Some of us react to bumps with panic, grasping for the first opportunity to seek solace in the barely-certain. Some react with grace, bending in the wind of inevitability. Those folks who seek graceful ends certainly survive, whether through terror- or courage- or maybe foolish-driven courage. Still, there is a place for the resolute. It isn’t for the faint of heart. Weak-willed folks should seek an early exit, as this road is fraught with treachery and doubt. If you can not survive the uncertainty of everyday life, you will not reach the summit. You will not defeat the bear. And you must if you’re to defeat the avalanche. If you’re unprepared, you’ll beg to trade the unrelenting avalanche for a chance to tango with a yeti. His company lends much better company than the embarrassment of dying like a bitch.

This may seem like a negative way of looking at the world, but I offer you this perspective. At the right time, overwhelming confidence can be exactly what the world needs. Without leaders willing to risk everything they are, everything they have, we are lost. We rally behind the unrelenting commitment to glory our leaders show us. And with that direction, with that vision, we find ourselves willing to leap over certain death to strike at the bear, even when everything we know says we’re doomed to that death. We find some way to trounce the bear. It’s never something we plan to encounter. We don’t sit in a conference room and define a strategy for this. It jumps over the wall and stabs your brother in the neck, and you’re left to command your forces while he bleeds out in your arms. Still, you must make the choice. Will you honor his memory with glory or hide in anonymity? What will you say to the bear when it threatens you? Will you draw your blade or your running shoes? Make your mark.

Why Apple Has Already Won

Hopefully, after reading the title, you’re now thinking I’m an obnoxious Apple fanboy. In many respects, you’re not wrong. I’ll ask you to set that aside for a moment, though. I promise this post is objective (mostly).

Opening Thoughts

Let me start off by stating the obvious. Apple started first. Before the iPad, the next best thing was a netbook (yawn). Sure, iPhones were very popular, but there was a big gap between the phone and laptop form factors, and most manufacturers questioned the value of introducing a product in the middle. Before the iPhone hit the market, there were some stylus-based convertible laptops, but they never really captivated the market. Netbooks offered an inexpensive option with less power and smaller screens, in exchange for better battery life. However, they suffered from the same isolation problem that all laptops had prior to the App Store. Getting apps for a netbook is virtually impossible if you are not tech savvy. Knowing where to go to find apps for your netbook was easy for DIY folks with lots of free time to learn the intricacies of Linux. Common folks are not apt (pun intended) to use a command-line tool to install software on their device. They don’t know how a virtual machine works or why they would need Java to run something they downloaded from some dark corner of the internet. For them, it must be simple.

Ecosystem

If Microsoft is to have any success with their Surface tablet, they must offer an easy centralized way to find apps for people to buy, download, and use on their tablet. They can not rely on the hope that the user only needs word processing, web browsing, social networking, and photo sharing. They must offer customers the ability to find and easily install software that is not preloaded, software that is designed specifically for the device by a third party. Apple already has 6yrs of experience doing exactly that.

With over half a million apps, Apple has a more diverse collection of software than all other sources on the planet combined (I have no proof for this, but I believe it to be true), and it’s all available for sale in one place on every user’s device. More importantly, it’s a curated list. There are no viruses, spyware or malware apps, or even trojan horses. Apple has strict rules for publishing apps, and they’re very serious about security. Their policies promoted an ecosystem that attracted developers and customers in droves. Microsoft has yet to announce anything like this.

Developer Relations

The best hardware in the world with the most sophisticated interface and the cleanest, prettiest display won’t make a lick of difference if there’s no software to run on it. If you can’t inspire developers to publish apps on your platform, you’re dead before you ever take off. Apple was very wise to launch to developers first, before they ever spent a penny in consumer advertising. By approaching key developers from a wide variety of software genres (games, productivity, etc), Apple guaranteed that when it came time to launch a few months later, consumers would have a substantial collection of apps to browse. This included many popular and familiar titles from the desktop/laptop world.

Yes, it’s true that the very first iPhone launched with only apps developed by Apple, but remember we’re talking about iPad, not iPhone. There were over 200k apps on the App Store when the iPad launched. Today, there are over half a million. As of about a month ago, there were 883 titles available on the Xbox 360 (source: http://www.statisticbrain.com/xbox-statistics/). As a point of reference, there are over 90k iOS developers.

Marketing

Apple has always been masters of design and usability, but their real strength is in marketing. When they launch a product, they hold an event where they literally put it on a pedestal on stage, point a camera at it, and say “behold!” They highlight the feature offering, and give the audience just enough to get excited before moving on. Then, at the end, they tell you how much it costs and when it will be available. People stand in a queue for hours, waiting for the slim chance that the Apple Store will have enough iPads for them. Mock these people if you like (I do), but you can’t deny the statement they’re making.

Today’s Microsoft event, unveiling the Surface tablet, involved a lot of repetition. Balmer really seemed to want to hammer home how awesome this product is. The harder he tries to sell it, though, the less exciting it is. There are some interesting features being introduced with this tablet, but there was no mystery or magic in this launch. Plus, they didn’t bother to tell anyone when it would be available nor how much they would cost. This means people can certainly yearn for it, but they can’t start saving for it or planning their budget for it.

Conclusion

Microsoft has had plenty of opportunity to plan the “iPad killer” product that would shift the balance of the tablet space back toward the middle. They’ve seen three generations of iPads launched. They’ve seen the meteoric rise in sales figures that Apple publishes each quarter. They needed to do everything at least as well as Apple does, and they fell short. This is why they’ll always be playing catch-up, hoping to find that magic formula that inspires millions to buy their product, but never quite getting there.

The only thing that would change this analysis is end-user price. If Microsoft offers this device at $150-200, that would put it at or below the price of most Android tablets, but with better features. I expect the price to be closer to $400, which is low enough to beat the low-end iPad. Don’t be surprised, though, if they achieve this by cutting corners on built-in storage (4gb?) and hyping up the SD card slot.

Life Lessons Learned Through Gaming

I’m a gamer. I’ve always loved games. There’s something about the natural exhilaration of competition, whatever the stakes, that motivates the soul. It’s also great for the ego. Games give us the ability to tell our loves ones “I am your superior” in a harmless and well-bounded context. When the game is over, everyone goes back to the real world, where we’re all equals. All the hateful, spiteful, vengeful energy is checked at the door on the way off the battlefield. All that negative energy is easily switched off because the context of the game as a distinctly different universe with different rules gives our brains clear boundaries for the factual and emotional memories we develop in-game. This allows us to be civil, even friendly, with our fellow gamers, despite the intensely negative trash talking that happens frequently in social gaming.

This boundary, though, represents a rule that itself can be broken. Sometimes, folks take offense to things said in-game, thus breaking the boundary by allowing their personal identity to be assaulted. Social gaming is every bit as cruel as elementary and middle school. Ad hominem reigns supreme in the world of results-based ego identity. For those without a healthy respect for the identity boundary and a thick skin in general, it can be challenging to remember it’s just a game. At the other end of the spectrum, there are many benefits we can derive from gaming. We can learn valuable skills, anything from time management to logistics planning to resource allocation and beyond. In fact, many of the skills required to be a successful entrepreneur have direct analogs in the gaming world. Here are some highlights.


Tactic: Misdirection

Analog: Corporate Espionage

In a poker game, misleading your opponents to believe you have cards you don’t have is a central focus of most winning strategies. The same applies to public relations with rival companies. When two companies compete for share of a polarized market, it’s often important for each company to know what the other is planning before the public knows about it. This can be done through social engineering – calling the company posing as a news representative, asking about upcoming technology, or posing as a candidate for an interview in order to gain access to sensitive information. Counter offensive strategies might include advertising open positions that indicate shift in corporate culture or development focus, but never actually filling the positions.


Tactic: Bottleneck

Analog: Simulated Demand

Spies call this a choke point. It’s a physical barrier that prevents or dramatically reduces freedom of movement and/or clear line of sight of the disadvantaged party (them) without affecting that of the advantaged party (you). A good example of this is a hallway. Hallways are defensive disasters in a gunfight. All the shooter needs to do is stand at the end of the hallway, and they can pretty much guarantee a clear shot of anyone who enters the other end. Hallways are also bad for escape from a gunfight, for similar reasons. Once you enter the hallway, you must reach the end before your pursuer reaches the beginning, or you get shot in the back. Savvy business owners use this effect to profit from the desperate. For example, the cost of plywood tends to spike when the news warns of an imminent hurricane, just as the per-night cost of a hotel spikes during an annual conference. Business leaders go one step further, by manipulating the market to create the bottleneck, thus driving customers into the net. Apple, by asserting through advertising that people wanted mobile digital music players, created the demand for a product that otherwise had no existing market, and the iPod was born.


Tactic: Resource Balance

Analog: Hiring Policy

Many games use a system of economy, promoting certain key items as standard currency. In various combinations, much like atoms joining together in specific ratios to form molecules, these resources can be traded for other valuable things. The winner of the game is often the player who acquires and spends resources most effectively. In the card game, Gin, the object is to take turns drawing a card and discarding one. The winner is the player who accumulates a valid complete set of cards, plus one card to discard. By thinking ahead, weighing the possibilities of certain combinations, and discarding a card that contributes least to a winning hand, a player can gain advantage. In real-time strategy games, like Starcraft, players must have harvested resources ready before buildings and units can be made. Those buildings and units provide offensive and defensive capabilities, such as point defense, unit creation, or upgrades. The winner is the player who harvests and spends resources most effectively, allowing them to attack the enemy base before they have adequate defenses. The analog in the business world is hiring policy. Sometimes, when you know the situation calls for lots of unskilled labor, it’s better to hire the cheapest available workers. Other times, a small group of experts can run circles around an army of beginners.


Tactic: Fluidity

Analog: Market Pivoting

Often, competition brings out a “fight to the last man” mentality. We can use that to our advantage. Any martial artist will tell you that pulling when your enemy is pushing is an easy way to gain advantage. A well-trained judoku can convert an incoming punch into an opportunity for a devastating hip throw, leaving their attacker on their back with a knee on their throat. Revisiting the Starcraft analogy, when your opponent’s army is at your doorstep, attacking your base, it is sometimes best to counter by attacking their base. This forces them to make a choice – either stay and attempt to destroy your base at the risk of the loss of theirs or retreat to protect their base. Staying means a damage race, where both sides hope to destroy all enemy buildings first. Retreating means they lose the time it takes to move their army back to their base, but they stand a better chance of keeping their base. In cases where the attacker has superior forces, defense is a poor choice, and it’s better to counter. The analog here is the decision to pivot and adjust product development strategy to target a different market. When an aggressive challenger enters a market, it is sometimes better for the existing vendors in that market to pivot toward a less crowded market, rather than ramping up production in hopes of fending off the challenger. The number one lesson I’ve learned through gaming was acknowledging when you’ve lost long before the game is actually over.


Games can teach us a lot about real world dynamics, giving us advantages in project management, contract negotiation, strategic planning, and more. It’s important that we remember that the skills we learn in games can apply to real situations, but that we must be careful to decouple our in-game identity from our real identity. I’ll leave you with two quotes:

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” -Sun Tsu

“Lose your first fifty games quickly.” -Unknown, an old proverb describing the game of Go

The Essence of Minimum Viable Product

“Perfect is the enemy of good enough.” -unknown

I wish I knew the person who coined that expression. I have lived that philosophy for the last several years, and I am very pleased with where that path has led me. I have learned to walk away from partners and/or clients who demand perfection before they will publish a product, favoring instead those who see, as I do, the arrogant futility of believing you can solve everyone’s problems.

I’m proud to be a part of Gazelle Lab (http://gazellelab.com), which has given my team an incredible opportunity to make a significant impact on a largely untapped, unhappy market. Having access to seed funding allowed us to focus all our attention on building a solid product and making sure the market was ready. This gave us time to refine the business model, find the market that was most in need, and narrow our goal to solving one key problem that affects a lot of people. This is the essence of a minimum viable product (MVP).

Once we found that, we built all the pieces we needed to support the MVP. Then, we shifted our attention to customer acquisition, where we’ve been wildly successful, so far attracting three dedicated content producers, one of whom is using our platform to build a channel, launching at CES 2012 (http://www.cesweb.org) in January with at least ten shows. In fact, as a result of our overwhelming initial success, we’re backlogged through February. We are asking for $500k at Demo Day tomorrow to expand the team, so we can aggressively seek new channel partners and bring their apps to market. We can survive without this seed capital, and we are on target to be sustainable by the end of Q2 2012. With extra sales and support resources, though, we believe we can reach the break-even point even sooner.

What all this illustrates is that technology is only a piece of the puzzle. Laptop computers, while incredibly powerful and influential in the modern world, are completely nerfed without access to wireless network and, eventually, electricity. Without the support infrastructure, even the most magnificent of technical marvels fails to find its full audience. Without an introduction to our tools, content producers will continue to be frustrated with ad-based publishing systems. The sales and support resources need to be a major focus on the MVP effort.

In many cases, it is possible to produce a feature-limited beta in a few weeks. Sales and marketing staff can hit the streets with this beta product to get customers excited, while development staff are busy collecting and organizing beta feedback. If, instead, the focus is on making a “perfect” 1.0 product, the project loses precious early stage time. More importantly, this results in a critical delay in user feedback. Iteration is the single most important quality of a successful early stage company.

What you’re building is exactly what it sounds like. You’re building a product to sell to customers who want to buy it, but may not know about it yet. You’re sensitive to the viability of this product, and you want to be sure the market is ready to buy what you’re selling. Finally, you’re not building a Cadillac with fifty luxury features. Your MVP must be as simple as a hammer. It doesn’t need to be complicated. You’ll have plenty of opportunities to add features once you’re selling enough units to keep the lights on. Just remember to ask your customers what they think about your proposed features, so you can focus on what they actually need and be first to market with relevant innovation, not get bogged down in a morass of “what if”.

Bundle Existing Products to Make More Money

In late January, I released Scorched Earth 1.1 for the iPhone (App Store link). This included two new weapons, and bundling options repackaging existing products as new bundle products. This allows the user to buy a single weapon upgrade individually or all available weapon upgrades as a bundle, saving them the time and hassle of going through the checkout process for each product. Bundle options are presented along with individual products as a “buy this/buy all” prompt.

Since the bundle feature was rolled out, the “all weapons” bundle jumped immediately to the top as the number one most popular in-app purchase. The bundle doesn’t cost less (sometimes, there are sales, but there’s no prompt in the app to promote the sale). It is simply a mechanism of packaging multiple products into a single convenient transaction. Of course, you could choose to offer a bundle at a discounted price if that suits your needs. In my case, it’s a packaging thing, and I couldn’t be happier with the results. My in-app purchasing revenues have more than doubled since I introduced this feature.

The take-away here is clear. You don’t necessarily need to offer a new product to increase in-app purchase revenue. You may be able to make significantly more money by repackaging your existing products into bundles and giving the user the option to buy individually or as a bundle.

This is the sort of analysis I do for clients. This advice is free. If you are considering introducing in-app purchase products into your app, or you’d like to develop a strategy to expand your current mobile business, please schedule a consult (http://migrantstudios.com/about/consult). I can work with your business analysts to define and organize products and then show your developers how to integrate InventoryKit (available on github) into your app. With a little expert advice and the power of free open source software, your team can have in-app purchasing ready for testing in as little as a few hours. This small investment can generate significant revenue over the life cycle of your product.

But don’t take my word for it. Look at the number one top grossing app in the App Store for the last six months (at least). Tap Zoo is a free app with in-app purchasing of consumable products, and it’s making more money than Angry Birds.

Do You Have an Idea or a Business Plan?

With modern application development frameworks, like Ruby on Rails and the iOS SDK, first iteration app development can be measured in double digit man-hours. As an example, I built Uptimetry™ (press releasewebsiteiTunes) from scratch in around 12hrs, including the web app, web service API, and iOS app. The app is very simple, so this is not to say that your app concept could be built in a similar time frame. In all likelihood, it will take a few months and cost you $20-50k.

The reason I built it was not because I thought it might be cool to do, but rather because I knew there was a market for it. More specifically, I built it because I knew the amount of time I would spend building it would be well spent, given the prospect of the possible revenue I could generate from that bounded effort. I didn’t have a business plan formally drawn up. I didn’t try to pitch it to investors. I didn’t need to. I was willing to invest a weekend to build an app that might never make any money, but probably would make at least enough to justify the investment. But that’s one case, and it’s not likely to fairly reflect yours.

The following is an excerpt from an email thread with a pro bono client, who pitched an idea to me today, hoping it might be a viable business.


While i agree that a new app desperately needs users and metrics on how those users interact with the system, that should be a natural progression, not a forced phenomenon. In fact, i would argue that a lack of early adoption indicates a deficiency in your business model. Successful businesses don’t usually grow in a vacuum. They arise from a clear and present need in an existing marketplace. I’ll give you a real world example. No one hires a maid service because they show up at your house unannounced, ready to clean, asking if you need your house cleaned. People who don’t want to clean their house seek out a service provider to do it for them and happily pay the fee. This effect is context-sensitive. It doesn’t work for a maid or car repair service, but it does work for a lawn service or an ambulance chaser. Even the most opportunistic lawn service and ambulance chaser ultimately make the sale based on the service they provide, not on their pitch. If you don’t have a clear product to sell that solves a problem in an existing market, you’re at a substantial disadvantage.

Believe me when i tell you you do not want to invent your own market. You’ll spend a lot of time preaching to your potential customers, telling them how awesome your product is, only to see them ignore you repeatedly. The few who do sign up don’t stick around long enough to develop anything resembling a user community. Loyalty is derived almost exclusively from perceived value. It’s easier to attract users when your app is free, but it is more difficult to retain them with a free app than with a paid app. When the user pays for an app up-front, they make an investment in something they value. If they get the app for free, whether they keep it or not is dependent on the perceived value of the service being provided. A free app can continue to be perceived as valuable if it provides or facilitates a net positive value to the user.

Groupon is free (valueless). Its perceived value is derived from the ability to find discounts on things you already wanted to buy, like meals at your favorite restaurant. That may be a bad example, since brand recognition plays a large part. I don’t think so, though, because a big part of what makes Groupon great is the emotional component. I have enjoyed their offerings for the last year, and i tell people about it because it’s exciting. It would be more difficult to market their iPhone app if it were not free. In terms of customer satisfaction and loyalty (which i firmly believe go hand in hand), the top examples in my list are Groupon and Netflix. Both offer free apps. One facilitates fantastic deals. The other delivers tons of content for an almost ridiculously low monthly fee. Neither is ad-supported.

If you have an idea you think might make money, chances are you’re wrong. If, on the other hand, you’re already shooting fish in a barrel, and you want to expand to a second barrel or use a different gun in the same barrel, you’re probably going to make money. We can take a tip from Sun Tsu here. If you only choose to fight the battles you are certain to win, you have a fighting chance, and you still might lose. If you rush in blindly without a plan, the city will seek out a service provider to come clean your festering corpse off the stained pavement, and your soul can rest knowing someone made a profit, even if it wasn’t you.