Electronic Objects and the future of the web

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Electronic Objects EO1 is a beautiful, connected frame for the home.

Sometimes the device is dumb glass, driven by the cloud. And sometime the cloud is dumb storage, driven by the device.

— Benedict Evans (@BenedictEvans) May 27, 2014

I’ve been having the ‘dumb glass or smart device’ conversation with a number of friends lately, and everyone seems to have a really strong opinion on this (I don’t, but I thought it was worth writing about since it’s come up so much).

The debate

The question most asked is if the future of the internet will be one of smart-clouds-dumb-devices, or if hardware is going to play a meaningful role in the future of the web.  To oversimplify with current companies, if you believe the former you’re probably long Google and short Apple, since you believe that all of the innovation and value will be created in the software layer. If you believe hardware really matters, you think Apple has a bright future, particularly in the short-to-mid term, because there are elements of physical products that make one better than the other, and software is a smaller piece of the equation.

My friends fall into two camps, with distinctly different views of the future:

Dumb Glass People are often software engineers, venture capitalists and technology enthusiasts. They make the argument that the cloud is increasingly where innovation is happening, and where iteration can happen quickly enough to find product-market fit faster than hardware designers and manufacturers can keep up. Therefore, software will ‘eat the world’ and reduce hardware to a commodity space of dumb glass.

There’s some strong evidence for this, notably this week Microsoft laid off 18,000 employees, mostly from Nokia, and Samsung has started bleeding.

Fred Wilson also often talks about fast replacement cycles for smartphones being a strong driver to keep larger devices (e.g. TVs) dumb, and allow them to be controlled by the smartphone.  This is a bit of a middle-ground thesis, but I’d place it in the dumb glass camp.

Smart Glass People are generally everyone who thinks about consumer products, and consumer motivations – marketers and product enthusiasts. While the hypothesis of the smart cloud makes a ton of sense form an efficiency standpoint, this camp believes that consumers want specific use cases for their glass. Electronic objects, I would argue, is in this camp, and their promotional video paints a great vision for use-case specific glass:

While it’s true that this device is generally dumb after its setup, most of the value is in the form factor, not the software. There is a specific use case for this unit, so it makes sense as a place to put artwork, and it makes sense as a piece of glass for your wall. Could we all have been doing exactly what EO offers for years with TVs and tablets? Yep. Does anyone ever do that? Nope.

The current device selection is insufficient for this use case – everything on the market is either to big, too small, too glossy, too clunky or just obviously designed for different purposes. It would look dumb on your wall and this looks beautiful. For a product like this, I think it’s probably that simple.

In the short- and mid- term I think hardware is about to explode. In the longterm we’ll probably drive towards some dumb glass standards, but until then, entrepreneurs are going to need to tell people what to do with their glass, and that’s going to open up tons of opportunity.

 

 

 

This Week – 01.13.13

– CES was this past week and everyone already wrote about it, streamed it and talked about it. I liked Tomasz Tunguz’s summary – it’s short but insightful. Read it if you’re looking for a quick recap of what happened and what to look out for in the next year. Link

– Someone hacked Snapchat and leaked 4.6mm names, usernames and phone numbers.  I was one of the users who had their info leaked, and I have to admit that it changed my attitude towards security on web services. Perhaps as breaches increase over the next few years, we are going to trust this info to fewer and fewer services, creating a defensive barrier for companies that already have much of it (Google, FB, Apple). Existing incumbents are pouring resources against increased security; strategically a great place to invest if you’re one of the early winners.

– Biz Stone (Founder at Twitter and Blogger) released his new ‘social search’ app Jelly (Link), which uses images, location and users’ existing social networks to deliver answers on visual questions. The product seems early and I haven’t gotten great answers yet, but I’m going to keep the app around to see how the community evolves.

– AT&T unveiled sponsored data this week, in a move that would subsidize data costs for users, and simultaneously took a swipe at the open Internet. (Link). Albert Wenger from Union Square Ventures also wrote a great editorial piece encouraging us all to work to keep the Internet and open place in 2014. (Link). I get the sense that selling money via free sponsored Internet sponsored is going to be a huge hit and a strong headwind against the open Internet. If the markets are allowed to evolve naturally, this is going to be the end state – great for business, but questionable how this works out for humanity at large.

– Aereo raised an additional $34mm in Series C investment, as the great unbundling of media continues. With Aereo, Netflix and a few other packages I have very little need for a full cable package anymore (HBO the obvious holdout). With that said, making the assumption, as many of my colleagues have, that cable operators are going to lay down and die in the content delivery space is a huge mistake – if anything I expect to see the better companies raise their game significantly in the coming years. My prediction: the next five years will be epic for consumers.  Link

Managing Startups: Objective-Key-Results (OKRs)

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Having spent the past year working with and incredible team on a product I love, I thought I’d share a management tool that we adopted from Google called Objective-Key-Results (OKRs).  OKRs are a quarterly panning tool that help you and your team focus priorities and align around a common set of objectives.

Before I lay this out, I want to point out that this gets trickier if your company is pre product-market fit (defining P/M fit is all over the web, so I’m not going to get into it here). Until you have P/M fit, your only objective is likely to find that. Everything else is such a distant second that your process should probably be a little more organic and less structured on quarterly goals.

With that caveat, here’s how to manage with Objective-Key-Results. To illustrate, I’ll use a baseball team as an example startup:

1. Define, at a high level, what you want to accomplish over the next three months

This should be qualitative and narrative based. If you’re in between financing rounds, your goals should help you get to where you need to be in order to raise your next round.  I always like to look at runway, subtract six months to raise and decide what the company should look like at that point. How many quarters you have until that milestone date should inform this process.  For our baseball team startup, let’s define this as ‘build a world class team with a rabid fan-base and huge profits’.

2. Define three high-level objectives that support your goals

Some people recommend that these objectives are narrative based, e.g. ‘improve our first-time user retention’, or ‘surprise and delight our customers’.  We tried that at first but we ended up making our objectives measurable outcomes that required results from multiple teams.  Coming back to our team,  one of our objectives might be ‘win the World Series’.  Winning the World Series is measurable – it’s a binary outcome, but it requires results from multiple teams: pitching, batting, coaching and owners.

3. Define three measurable results that support each objective

These should be very specifically measurable and, to the extent that’s possible, owned mostly by a single team. They should also be results of actions, not action items. Lastly, they should directly support the objective.  An example result that would support winning the World Series might be ‘sign a five-tool player with an OBP over .325’ or ‘get a team-wide OBP of .150’. That’s a result of scouting, budgeting, deal making and finally signing a player or set of players who can get you the result you’re looking for.

Make sense?

A few other notes:

– get team input and buy-in. The important work in defining OKRs is the process of defining and prioritizing objectives. Handing these down from above doesn’t include the team in the processes, and if there’s no buy in then no one feels accountable for the results.

– these should be stretch objectives. You should expect that you’ll hit 60-70% of these.

– notice the use of three (three months, three objectives, three results-per objective). Stick to this. If you have three objectives and three results for each, you’re basically asking people to internalize twelve points. This is hard enough. If you start throwing a few bonus results in there the process will become unwieldily and ineffective.  Keep it simple.

– try to create objectives that will actually drive your business. This sounds obvious, but on our first shot at this we set vanity metrics as goals. The problem with vanity metrics isn’t so much that they don’t drive your business, but they really don’t tend to inspire your team.  As an example, try to focus on a metric that supports both growth and engagement – returning users might be one. It requires both growth and retention, so it’s both more challenging and more valuable to hit.

Have fun and happy managing!

Want To Work in Startups? Go Work For The Man First

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I had an economics professor who used to talk about the value of unique skills as a competitive advantage. He would use Kobe Bryant as a metaphor, saying “The Lakers pay Kobe Bryant because there are very, very few people who can do what Kobe Bryant does”.

I’ve been reflecting on that in terms of my career, and also because I’ve recently been working with some young people right out of school and looking to break into the startup scene. I look at the generalist vs. specialist debate from the perspective of my career, and also from the perspective of having to hire people at startups.

My Own Experience

I have always been a generalist. This was not a conscious decision. It was more a result of being  kind of geeky, a little ADD and not particularly sure of what I wanted to do when I grew up.

So, I’ve now held roles in marketing, product management, UX research, strategy, business development, sales and bartending.

I can say without question that I would have risen faster from a career standpoint if I had specialized in a functional area. Working in early stage startups, I’ve been able to get by because I’ve learned a lot of ways to add value to an organization, but I suspect I’ve also been pretty lucky and have a tendency to out-grind people.

As A Hiring Manager

Most of my experience hiring has also been in early stage startups. I’ve been in a half-dozen environments that we’re ‘in utero’ in terms of their  infancy. In all of them, almost without exception, I would prefer to hire people with some type of domain expertise rather than a ‘jack of all trades’ employee who I can put on anything.

Here’s my advice if you want to work in startups:

DRIVE A WEDGE [OR A BEACHHEAD IF YOURE INTO THE WAR ANALOGY] AND BUILD FROM YOUR BASE.

You can always go more general. Getting specialization as your career advances is significantly more difficult. I suggest that young entrepreneurs get great at something and be able to deliver in a functional area. Learn to code front end, learn BD or acquisition marketing, get your design on. The idea that specialists can’t run companies is a complete myth.

Go Work For A Big Company To Break Into Startups

If you’re out of school and you want to get into a great startup, you should consider going work at a big name brand company and get some functional specialization or a year or two.  Why?

  1. You can add a name brand to your resume. This matters when you’re raising money or trying to work at a startup. People will tell you it’s not important but it matters.  The girl who worked at Google out of school is going to get funding over the exact same person who worked at a failed startup out of school.
  2. You’ll get a structured process for skill development. I realize that there are a ton of online tool for learning skills, but the structure and process that big companies place on employees can actually be pretty beneficial when you’re just getting out into the world.
  3. It’s easier to go from big to little than little to big. It’s hard to spend ten years in early stage start ups and then get a job at Bloomberg.  It’s far easier to spend 2 years at Bloomberg and get a senior role at an early stage startup [or raise funding] because of your functional expertise and the brand on your background.

Being Fair With Equity

I met with a friend last night who is considering a role in a pre-Seed stage startup that she was excited about.  She had a lot of great questions about how she should structure a negotiation for coming on board.  I gave her the answers I had from my experience, but wanted to dig into the topic a little this morning to see if there are some good guideposts out there to leverage.

It turns out Joel Spolsky pretty much closed the book on this topic with this response.  I wish I had this five years ago, so I’m sharing it here in the hopes that it helps someone else along the way.

I’m not going to repeat Joel’s entire framework here (you should go read his response), but I will call out a few points that resonated with me:

  • His ‘risk-layer’ approach is the right way to think about equity. The 2-3 people who start out with a blank page are taking all of the early risk and are entitled to the largest share of equity. If you are coming into a startup with a salary, you are probably not in that first risk layer and shouldn’t have an expectation that you are.  At the same time, if you are the first ‘non-founding’ employee and you’re a catch, you should think about that second layer and what you feel is the right amount to ask for.
  • The notion that ideas are essentially worthless is a great point, and this is a movie I’ve seen a number of times in the past.  It’s not that ideas are worthless, nothing could happen without them, it’s just that they aren’t worth valuing in terms of founding equity because it’s too difficult to assign value to them, and outcomes will be 99% determined by execution.
  • All equity (founders included) being subject to their equity vesting is a great idea.  To be perfectly honest, I’ve never, ever seen this and I don’t think it will ever become the rule, but it’s a really smart idea.

Most importantly, the theme on fairness and transparency really resonated with me.  Fairness, above everything else, is the most important piece of this equation.  Not that everything in these negotiations has to be perfectly ‘fair’, but in the end everyone needs to feel that they were treated fairly and with respect.  The probability of success from early stage to liquidity event is so, so low and the only thing propelling the company forward is the team.  If great people feel that they’ve been treated unfairly, they will bolt when a better opportunity comes along.  The subject of equity can be the most important conversation you have with your employees, be transparent and be fair.

Analytics Won’t Get You To Product Market Fit

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In the new world of big data, everyone in the startup community seems obsessed with collecting data and making data-driven decisions. For the most part, this is a healthy obsession. New analytics platforms like KISS, Mixpanel and Localytics are providing great tools for product managers and marketers to better understand what’s happening inside their apps and web products.

We’ve also developed great processes for defining success from a metrics standpoint.  Aside from K-factor for viral apps and standard retention metrics for paid services, we have frameworks like Dave McClure’s Startupp Metrics For Pirates that help any startup with customers think about their product-market fit goals from an analytical view.

These innovations have been net positive for business building, but they can also enable a bigger problem:  they allow entrepreneurs to analyze  metrics as a replacement for talking to real customers.  in truth, it’s way easier to look at a Mixpanel screen than it is to talk to a person about your product. First, no one wants to face judgement directly, they’d much prefer to have it distilled into a bad retention metric. Second, talking to users is noisy – it’s really hard to pull actionable insights from a handful of conversations.

Analytics can provide us a window, but they don’t give us a narrative for how people think about our products, how they think about competing products, or even what they think of our value proposition (assuming they even know what our value proposition is).  The narrative around a given product will inevitably be the leading indicator of success or failure, but analytics will only give us a sliver of insight around it.

Depending on your product type (consumer and enterprise startups should handle this problem differently), there are a few tactics you can employ to get more narrative-based feedback on your product.  None of these will cost you much more than time, but they can save you months of incorrectly deploying your resources.

1. Follow Michael Margalis’ Quick and Dirty Consumer Research. Michael is a partner at Google Ventures’ Design Lab.  In this video, he offers a wealth of information about how to find and interview users. The video is 90 minutes and every single minute is worth watching. I cannot recommend this video enough for the discovery phase of your product development.

2. Have Users Test Competitive Products. If you want to build a great product, see where people are getting tripped up with your competitors’ products. The best part about this is that you don’t have to build anything to test competitors’ products.  Aside from identifying UX / UI opportunities, you’ll quickly understand how users feel about products in your category, and how they fit them into their lives. Most technology products are used to satisfy a need – understanding how people  think about their needs and solutions is as important as any metric in your analytics dashboard.

3. Talk To Your Existing Users.  There are two primary ways to get in front of your existing users –  phone calls and email surveys. I’ve found that both are great for different goals. Survey’s tend to get you ‘crowd-sourced’ style data points, general sentiment towards your product (e.g. satisfaction scores, net promoter scores, etc.). They can also help influence your product roadmap.  Interviews are better for the narrative questions – how do your users think about your product, when do they use it and what need(s) does it satisfy?

Get An MBA, But Not Until You’re Useful

As an MBA working in early stage tech, I’m ambivalent about the current conversation in the community about the value of these degrees. On one hand, I’ve met enough MBA founding teams to understand where the vitriol comes from, but I also believe that my graduate business education has been the most rewarding investment I’ve made to date.

Why Many MBAs Are Bad For Startups

An MBA education teaches students to analyze markets and assess opportunities from a high level [e.g. crowd-funding is going to be a huge opportunity and disrupt traditional business financing, an $xx bn. annual market in the U.S. alone!]. That thinking is fine, but it can only get you so far in the early stage.

The best consumer-facing products satisfy an unmet need. Consumers don’t care where a particular market is headed,  they often don’t even know how to articulate the problem that they want fixed. Nothing in an MBA program really equips students to develop products that solve real world problems, so MBAs tend to create products that wedge themselves into what they view as a market opportunity.  That approach often produces low quality products that don’t solve real problems.  The best products start with an acute, definable consumer ‘problem’ and grow into market-disrupting companies, it’s never the other way around.  While the difference in approach might sound trivial, it results in products that are usually worlds apart in execution.

Also, in the early stage there are very few day-to-day activities where having an MBA is actually useful.  At most early stage companies, people are either building the product or selling it.  Neither of those functions require an MBA, so the other skills become ‘nice to have’, but they don’t necessarily drive the business forward.

Why MBAs Can Be a Really Useful Tool

On the other side, I view MBA programs as a safe place in an unsafe world.  I think they’re safe in two ways:

First, MBA programs tend to lag trends in the business world and that can be a good thing for your career arc, especially if you’re working in an industry that’s very fast-paced.  Skills like strategic thinking, data-analysis and an understanding of the broader business world and global economy don’t run out of funding, they don’t exit and they don’t become irrelevant when the market is disrupted.  MBA programs have curriculum in place that helps students navigate the business world for decades.  That’s extremely valuable in the long term.

Second, MBA programs are a place to learn things that you’ve never understood and that the real world isn’t going to let you learn on the clock.  If you’re an engineer, there are very few on-the-job opportunities to understand option values, venture financing, accounting, macro economics or product marketing.  While it’s true that you can learn many of these things on your own, having a curriculum and a classroom are incredibly helpful aides to the process.  Just having to show up with your homework done will propel you forward.

MBAs Are Useful After You’re Useful

Everyone has a unique set of inputs that should drive their decision about a graduate business education, but my broad advice to most young people interested in early stage tech and considering an MBA is to go for it, but only if you’ve already developed practical skills that will make you invaluable an early-stage company.   An MBA alone will never be enough.