Release Early & Release Often

"Release Early, Release Often" is a principle that is now adopted by some of the most successful companies in internet. I've known of it, incorporated it in the develop strategy of KnolSoft's internet product but I never actually knew how amazing it was until I started my little mashup experiment Googview.

GoogView Started off with a simple question: if people like Google search yet they keep going to Bing for the daily image, what would happen if we combined the two? The first iteration was simply the current Google Search with a background that I selected from Wikipedia picture of the day. People who I gave the simple pitch to loved it but other people didn't quite get it. After this I kept tweaking the site based on user suggestions daily. The rapid changes kept even the people who weren't that into it at first interested and I was able to keep the communication going. The result was a significantly better website design, users participation and a lot of fun. So, what were the lesson I got out of this?

1. Iterative development is an extremely powerful tool and it must be incorporated into your product strategy.
2. You have to iterate fast and work hard to keep dialogue going and maintain user interest.
3. If you don't have the infrastructure in place to go through this cycle rapidly, you're not ready to launch. If it means more manpower, get it.
   

Evolutionary Economics & How Small Business Can Survive Among Giants

Building my company has made me think a lot on how a potential entrant to a market dominated by giants should position itself. After a couple weeks of pounding my head against the wall, I thought of a Discovery special that I saw on the rain forest, where the canopy created by 300 ft trees stifled the growth of life on the ground. This seemed to be a perfect analog to my conundrum, and two questions came to mind: 1) How did certain species evolve to position themselves for growth when no sunlight was available and 2) In such a stifling environment, how did the Amazon become one of the most diverse ecological systems in the world?

Here were some of my findings (I came across a U.Michigan website that summarized some fascinating studies on competition in the evolutionary biology context):

1. In answering the first question, it seems natural selection offers two answers. Some plants did not compete with the big guys, simply adapting to living on the forest's floor with less sunlight. Other plants actually used the gargantuan trees, and climbed up them towards the bright sun over the canopy. These very elegant solutions reminded me of small business either positioning in a niche market or partnering with larger firms to leverage their distribution channels.
   
2. The answer to the second question proved much more interesting, as it went to the heart of the studies summarized in the aforementioned website. Findings showed that whenever competition over limited resources existed within any system, all interactions were destructive (ie: no two species could co-exist). The dominant species always exterminated the subordinate one. The key to survival in competition was always adapting to position a species in a way that minimized overlap in resource consumption with the dominant ones. This suggests that adaptation is not a way of survival but the only way to survive, and that diversity is an inevitable state in any perfectly competitive environment.
   

The lesson from this analog, in my opinion, seems to be that going after Microsoft P&G or any competing giant is suicide (no kidding!). Yet evolution does seem to offer one glimmer of hope for small businesses that cannot afford an outright war with the big guys: the vine. Nature's solution to our problem was to adapt in a way that made partnership with the dominant player possible, and this should be a key option for any small business entering a multibillion dollar market should consider before taking the niche approach.

The Consulting Question or the Entrepreneurial Question?

Over the past few weeks I'd been working on a business problem with someone who had decades of experience in the consulting industry. Our approaches towards solving the problem seemed to be notably different for the first part of the discussion, but at the end of the day the data uncovered by each ended up being the ying to each other's yang. From this experience came two conclusions: 1) That the consulting and entrepreneurial mindset were different and that 2) neither necessarily proved superior to the other. This made me wonder what it was that made our approaches so different, how our experiences played into it and whether a start-up or consulting practice could possibly survive without having both mindsets in the game. These were some observations:

1. Consultants are problem driven while entrepreneurs are opportunity driven. Consultants are ready to delve into mountains of data until they start finding some kind of pattern and go from there. It's guaranteed to work every time but risks missing out on the big picture. Think tuning an engine (figuring out the fuel to air mix, timing of each stroke, etc) instead of asking whether it's the right engine for the car, whether it's the right car for the user and what an alternate engine might be. The entrepreneur is much more opportunity and customer driven and is eager to go out and start talking to customers, understanding the potential of the product and then looking at the numbers to see if their findings make sense. Think of a multi-function product like compressed air; sales to existing clients may be stagnant due to a price point issue but what else can you do with it?! The downside: it can be hit or miss and might fail to consider small changes that can have big impacts (ie: changing the price would be so much easier/cheaper than chasing a new market.)
2. At the end of the day a winning solution is an innovative idea that is supported by evidence (or perhaps evidence that is supported by innovative ideas). It is unclear to me which way of thinking is more likely to succeed but I did learn something very useful last week: That the creative tension that results from having both on a team can not only be highly productive but essential.
   

A Decision Rule To Live By

Over the past year I've found my decision-making to have become much more sharp and it's really really been based on one decision rule. It has been so powerful in my personal and professional life (ranging from R&D decisions, to managing employees and to maintaining relationships with my business partner.)

I always ask myself the following:

"What is the worst possible case that could happen if I make this decision? If it happened, would I be kicking myself or could I live with it?"

If the answer is the former, can I do anything to mitigate the risk and make the worst state more acceptable? If it's the latter, accept the decision because no matter what you're taking a calculated risk and the negative outcome will be out of your control.

A New Day, A New Blog

I've been gone from the blogosphere for a very long time. Why? To be frank, nothing good to say. Over the past few months I've found that in the start-up world all people do is talk about the theoretical when the field is purely about execution and results. Therefore, I've decided to move the blog in a new direction and will now make the following pledge to my readers:

Anything read on this blog from here on will be original and a reflection of my personal experiences in the start-up world. I will not regurgitate anything that's well documented elsewhere and all discussion will be result-oriented instead of theoretical.

Sourcerer Makes it into Wharton VIP!

The venture that I've been developing with my partner Atish was recently admitted into the Wharton Venture Initiation Program. We're extremely grateful for the opportunity and are looking forward to joining this entrepreneurial community.

Could Facebook Charge Money?

I've been pondering our venture's pricing strategy lately, and it's sparked all kinds of thoughts about the free web 2.0 world. At a time when companies that serve free web apps, like Facebook, are having trouble monetizing (and having their valuations lowered as a result), one of the questions that they are surely asking themselves is whether they could move to some kind of subscription model to create new revenue streams and increased profitability. Before discounting this idea completely with arguments of Koppelman's 'penny-gap' theory and low switching costs between social networking services, let us consider the fundamental idea behind pricing and ask ourselves what price facebook could charge in exchange for their services, if anything.

Price is a direct reflection of value. The more something adds value to a customer's life, the more he is willing to pay for it. Therefore the first question is what value does Facebook add to my daily life?

The ComScore results in march suggested that on average people spend a total of 20 minutes EACH DAY on the service. It is a tool for organizing our social lives, networking, chatting, organizing photos and, increasingly, a platform for sharing information; a center for all things Web 2.0 that has driven internet use through the roof. Then we should have no doubt that Facebook adds considerable value to our lives. The question then is how does that translate to a price?

Though it may be a gross oversimplification, the price point would be the one we'd be willing to pay just before switching to a rival service. While some might argue that switching costs are negligible, Facebook has a number of competitive advantages that make these costs substantial. These include the network effect, unwillingness to manage multiple profiles, loyalty, inability to transfer all photos and profile, etc. So then let's imagine that Facebook were to implement a policy that either forced us to pay 1 cent per month or to watch an additional advertisement to receive 12 cents in revenue over the course of the year per customer. That means that with 100+ million users, they increase revenue by over a million dollars each month!

Now let's ask ourselves, is that 'charge' that facebook imposes on its customer in exchange for a very useful service likely to drive people away? Probably not. What the ideal price point would be will require a lot of research but it does leave us wondering why they wouldn't consider implementing a comparable policy to boost their revenues and valuation. What amazes me even more is the fact that they haven't created less invasive premium-service based revenue stream, such as bringing SmugMug type functionality to the photo app, which would certainly generate even more substantial revenues than charging subscription fees.

All signs are now pointing to targeted advertisements not being an optimal revenue source for web 2.0 tech. With companies like Facebook issuing equity valued at hundreds of millions of dollars, investors should really be pushing to develop the business in order to maximize shareholder value. Whether they would is another story, but from the logic described above I believe that they could make a strong case to do so.