Point: Use technology to get real-time, full-time feedback from users

Story: Designing new products seems like a guessing game: which features do users want? In the early days, engineers had to guess. Then came market research: asking people which features they’d like to have or which they prefer from among the choices. Of course, users often have difficulty articulating what they want.

Next, some companies hired ethnographers to observe users in action. Software maker Intuit, for example, sent software engineers to watch how users tried to use accounting software. Intuit’s QuickBooks succeeded because its developers had watched users struggle with traditional accounting software and solved the difficulties they were having.

Other companies built usability labs, which have the advantage of measurement but are in controlled settings. Ethnographic techniques and usability labs improve upon market research, but they are expensive and can only watch a small sample of users for a short time.

Now, technology lets companies go one better. Software companies who host their applications in the cloud can see what customers are doing – in real time, all the time. They can see which features really get used and which don’t. They can notice if users hit the “undo” button frequently, which suggests that the feature isn’t doing what users expect it to do. Sam Shillance, co-creator of Writely, found that what users of his word processing tool wanted most was a way to let several people edit a document together. (The Writely app was bought by Google and is now in Google Docs). Finally, as new types of users adopt the product or as new uses arise, developers can continue to adapt their software from the stream of feedback of usage patterns.

Action

• Think about how you can put more of your product or service? on the web or in cloud media so that you can watch user behavior.
• Look for evidence of frustration (e.g., use of “Undo,” help requests, problem reports)
• Watch which features users use first, and keep those simple. That will make your product easy to adopt and will reduce first-use frustration.
• Improve the functionality of the most-used features.
• De-emphasize (or rework) the least-used features.

For further information: The Netbook Effect by Clive Thompson

Point: Too much VC funding can be just as bad as too little

Story: As a small young company, ViaWest had only $34 million in funding. But it faced massive competitors with $300 million and $800 million in war chests, respectively. These big competitors used their deeper pockets to “get big fast” — acquiring other companies, buying big office buildings, and investing in lots of shiny new large datacenters. But sales didn’t materialize and the big companies went bankrupt. In many ways, the money distracted these companies — they were looking for ways to spend it rather than focusing on their core innovation and business fundamentals.
In contrast, ViaWest used its money carefully and made positive cashflow a major goal. ViaWest focused on low-cost, efficient web-based tools to help it out-innovate — not out-spend — its bigger rivals. ViaWest also watched its asset investments carefully, only adding new capacity as needed when demand appeared. After the big competitors cratered, ViaWest bought some of the competitors’ lightly-used datacenter assets for pennies on the dollar.

Action: Use Web-based tools that let you innovate much faster at less cost. Create positive cashflow sooner rather than later. Create business forecasts for investment performance and stick to them — don’t invest more if the first investments aren’t meeting targets.

Point: Get to the Point Fast

Story: Jason Mendelson, Managing Director of the Foundry Group, gave the following advice last night to entrepreneurs seeking funding:

1. Send an executive summary, not a business plan – VCs are short on time. Grab their attention quickly. They don’t want to wade through a 90-page business plan at the get-go.
2. Know your business better than anyone.
3. Don’t ask for an NDA – that’s a rookie mistake. VCs look at so many business plans a year that if they signed an NDA, they’d almost certainly get sued.
4. Have a 3-sentence elevator pitch about your business ready if you meet the VC informally.
5. Be smart, but don’t be arrogant. Saying your product “has no competitors” is not believable.

Action: Do your homework before you approach the VC. VCs like Jason enjoy talking with entrepreneurs informally, such as at Boulder Open Coffees, but don’t have the fundraising conversation before you’re ready. When you are ready, be crisp and concise in your communication.

For more about Jason Mendelson, read his blog: http://www.jasonmendelson.com/wp/
Learn more about the Foundry Group: http://www.foundrygroup.com/
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