Lean$tart.ch - Vincenzo Pallotta

There is a lot of buzz around the topic of robots stealing jobs to humans, or differently said, when robots and AI will outperform humans in their activities. Actually they already do, but for low-skilled jobs! 

I don't quite understand why people are so worried about robots playing Angry Birds better than humans, when there would be a huge benefit from a robot capable of sorting garbage for efficient recycling or from a robot that does weeding thus avoiding the use of pesticides: https://www.ecorobotix.com/en/ 

Robots and AI are a unique chance to fight global issues and make this planet not just a better place, but a livable one. 

I believe that the detractors of Robots and AI are those who want to preserve slavery of lower income people who have to accept heavy work just for making a living. Also, they fear that AI can (hopefully) replace them in taking better and more ethical decisions, reducing their power of controlling the world! 

Spreading fear of robots stealing jobs, is just way to keep control over the population. Much in the same way of spreading hate against minorities or to different people. I am not saying that there no risks with robots and AI, but benefits will be much bigger than them. 

Lean is nowadays a very catchy word. Everybody wants to be lean (I mean in business sense...). 

But Lean is often a prefix for other words such as:

1. Management

2. Manufacturing (or Production)

3. Startup

While the underlying principles are the same, they have a very different goals and methodologies. I think it’s time to try to clarify these concepts.

First of all, the common principles. 

Lean is a way of achieving effectiveness efficiently. 

Now, being effective and efficient may vary in different contexts.

1. Management: effectiveness is about quality of outcomes. In other words, maximizing KPIs. Efficiency is about minimizing costs, or maximizing throughput. This can be done by optimizing processes, by improving them through continuous improvement methodologies. 

2. Manufacturing/Production: this is actually a special case of management where outcomes are products or artefacts. Here quality is very simple to grasp. The efficiency is achieved through the minimisation of waste in the production lines. One can waste several types of resources at different levels. Time, for instance is a valuable resource that can be wasted in case of re-work. Therefore, maximizing quality can be a way to both being effective and efficient. But time can be wasted because in a production line, the capacity of the input in a step of the process does not match the output flow of the previous step. Here is where Theory of Constraints applies: adapt the flow of production to the capacity of consumption. 

3. Startup: in the case of business development, effectiveness is about achieving Product-Market Fit. Efficiency is about being able to achieve it with the available (limited) resources in situation of extreme uncertainty. Here the key success factor is being able to de-risking through learning from (cheap and quick) validation experiments where relevant metrics are measured, which will allow the entrepreneur to take strategic decisions for rapidly converging to Product-Market Fit. 

There are other cases where Lean applies. For instance in Project Management where effectiveness is about achieving the goals and efficiency is about minimizing overtime and over expenses. 

STarmac is the newly launched initiative for promoting and supporting innovation and entrepreneurship at HEIG-VD. 

A short introduction is available (in French) here: 

Yes, being an entrepreneur is not for everybody. But everybody should get their chance to try. And even several times. Please, stop discouraging startups and entrepreneurs!

We all have ideas and most of us would like to make impact with them. But who could say that our ideas are bad? Who could say that "they will never work"?

Unfortunately, there are people around, who qualify themselves as "experts", who try to stop potential entrepreneurs before they even try.  

We all know that in those periods when big advances in our civilization have occurred, so many attempts have been made even if only few of them were successful. Most innovations emerged from multiple failures, and not necessarily from the same people who succeeded in the end. Failures are great opportunities to learn. The more we try, the more we learn, and thus the probability to succeed increases. This because the trials are not independent. 

But knowledge from the past is not sufficient to innovate successfully. Innovation is the result of crossing-over, serendipity and randomness. Successful innovation comes from unexpected results that at first analysis might look as failures. True innovators are able to turn issues into advantages, like the case of the so-called "Innovation by Accident". There are so many examples of accidental innovations that changed the world such as Penicillin, Viagra, Nylon, etc.

My point is that entrepreneurs do need advice, but not from experts. They need advice from people who are capable to see the sparks of new value in their innovations. Best people for that are obviously potential customers. However, they will not tell you what to do. At least not in the way an expert would do it. They will see your innovation from their perspective and propose possible changes to make them adaptable to their needs. They usually trust you on the feasibility, but they will try to bring you in their own world, which is, very often, different than yours.

Unfortunately, they will not be able to fund you with $1M, but nevertheless they can provide you with TRACTION!

Also consider that the wisdom of the crowd is much higher than that of o single experts. You thus need to listen to MANY potential customers. They will help you in turning your innovation into the RIGHT thing, which might be considerably different from what you have imagined at the beginning.

I have seen so many "experts" in the short period of time I worked with startups and most of them are truly experts in turning entrepreneurs' enthusiasm off.

In this new year's first post, I would like to share with you a video message I recorded for the BRINGITON 2014 conference in Iasi, Romania. This message was featured to an audience of young Romanian entrepreneurs last november 2014.

I think that this would be the perfect way to wishing you well for the new year 2015. I think that YOUR PASSION will make the difference in achieving your goals. However, doing it in a "Lean" way, might help you to achieve it, faster and better!

I also believe that Lean (startup, innovation, product development, management, etc.) is not just another "theory". It is the recognition that innovation must have a purpose and that its purpose is the creation of new value. Lean thinking helps you in better understanding how to create new value for people and organizations effectively (with less risk of failure) and efficiently (with a wiser use of available resources). 

Inspired by a quote from Sam Altman (co-founder of YCombinator) and Dusting Moskovitz (co-founder of Facebook) mentioned during the first lecture of the Startup Class:

It’s better to build something that a small number of users love than a large number of users like.

I felt compelled to express my point of view on this topic.

I think that the right question is:

Why people fall in love with products? Especially with products that never existed before.

My guess is that people are mostly driven by 2 forces in purchasing products:

1. Utility, i.e. the satisfaction of an unsatisfied need (all along the Maslow's pyramide, from very basic needs to more ephemeral and emotional-related needs). This sounds quite obvious, but it is often overlooked by products developers and marketers.

2. Recognition, i.e establishing a social status and thus social acceptance. This is not true only for luxury products, but also for less expensive products. Think of kids who beg their parents to buy a new toy just because fellow kids own that toy.

Very often, these two element are mixed together in a unique (and possibly effective) blend. I suspect that utility is more pertaining to quality of the product, while recognition is more related to branding. Of course, I also see an interdependence between the twos, such as the fact that brand reputation can be built (but not exclusively) on product's quality, and that utility might be induced by branding: after all social recognition is a need that people want to be satisfied.

Startups are so fragile that they cannot afford making mistakes. But what type of mistakes a startup needs to avoid?

The following three are mistakes that are commonly considered very important by entrepreneurs:

1. Not protecting Intellectual Property well enough

2. Launching imperfect products that can destroy company's reputation

3. Diluting equity too early and loose control of the company.

I do believe that these points are very important but they are not the MOST important ones at the start up stage. Startups forget other elements that are much more crucial. Here they are:

1. Taking too much risk in developing a product that is not validated as being a solution for a problem

2. Overcharging products with non-essential features such that its selling price will be non-competitive

3. Building a team that consumes resources but does not deliver value

4. Launching too late so that the cost of rework after that the product is not fit for the market is too high.

5. Premature scaling, that is investing too much resources in "unnaturally" acquiring customers (e.g. through aggressive marketing) and building unjustified capacity.

I advocate for the above 5 mistakes to avoid (instead of focusing exclusively on the previous 3) because these are the issues that can truly destroy a company. Burn rate dramatically increases if those mistakes are made and commitment of resources to that activities do not guarantee any tangible return. 

I throw the question to my audience in this short post.

I have met many startups who focus on product development. They told:

The market is clear. The problem is obvious. We don't need to validate it.

We cannot spend our precious time talking to people to discover that what we do is exactly what they want.

If we talk to potential customers we have to show something that works, otherwise we are not credible.

I also discovered that finding Problem-Solution Fit become relevant only when product launch miserably fails. With no excuses on lack of quality, those who don't blame the "uneducated" customer, will accept that Customer Discovery is an essential step before even think to start the product development.

On July 10th, Satya Nadella, the new Microsoft's CEO, sent a corporate memo to his employees stating the, allegedly new vision for the company. It's a very long memo of 3000+ words. This appears to be, at the very least, an articulated strategy.

My point is that Microsoft is company that is loosing ground in the market. If the CEO needed to produce such a long document, there is a justified suspect from my side that things are not going well at Microsoft.

When a company is at a cross-road, the CEO is compelled to clearly state the vision and re-align the strategy to that vision. But not in 3000 words!

What is the essence of this memo? It is hard to figure it out. It sounds that Microsoft needs to change, but still what is established should remain the same. There is no change actually. 

Throughout the memo, there is an apology of Microsoft past leadership. But beyond much of rhetoric, there is only one serious statement:

"Microsoft is the productivity and platform company for the mobile-first and cloud-first world. We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more"

Which, unfortunately does not mean anything. It does not highlight a change, but a reinforcement (and maybe an improvement) of everything that existed already at Microsoft.

There is some information about research projects. But this does not make a commercial strategy. Yes, because Microsoft is a commercial company, not a research institution.

Let's be clear, I appreciate the effort he made to better connect with his employees and re-build morale. But, as I said, it is more a rhetorical exercise, rather than a real strategy. At least, the strategy is well hidden behind the fireworks.

Why I am talking about that? I would like to compare that to a similar situation that happened 18 years ago. It was the historical Microsoft's rival: Apple. Although in 1996, Apple was in dire straits, the return of Steve Jobs as CEO implied a full strategic change that turned Apple into the company as we know it today. The vision was the original one: the Steve Jobs one. But the strategy was completely new. And more, it was LEAN!

Lean is about "doing much more with much less". For it was about "doing enough with not so much left"!

You can read the full story here. But the most important thing was the way the strategy was designed and communicated. He used the KISS principle and created this simple diagram:

There is very little rhetoric here and the message is clear. What that enough to re-build the Apple's employees morale and motivate them to embrace change? Apparently yes. 

Think also at other strong moves:

1. Partnership with Microsoft (the historical enemy now is an ally).

2. Drop premature research prototypes from the market (i.e. Newton).

3. The famous Think Different marketing campaign.

4. Full re-design of Apple products for the (new for Apple) consumer market.

That what I call a Strategy. A bold and lean Strategy!

Now it is Microsoft's turn to decide if the want to just survive (yes, they luckier than Apple in 1996) or if they want to thrive. In my opinion, they need to understand what should be dropped, what should be completely changed and what can be kept unchanged. If they fail in identifying these three areas of concern, chances are little that they can come back as leaders and compete with Google, Amazon, Apple, IBM and Oracle.

Microsoft is an obese company that needs fundamentally to slim down. One way is getting rid of those products that "suck" and innovate radically.

If I were in Nadella's shoes, I would only keep Xbox unchanged (because it sells well) and re-focus on Software. Microsoft was primarily a software company. That is its DNA. Now switching to hardware (the surface pro) is probably a lack of focus. Instead they really need to refresh the enterprise and professional productivity line. Office has changed only in the interface during the last 10 years. There is no breakthrough in that technology ever since.

Of course, who am I to give suggestions to Mr. Nadella? For me it's a good learning. I make my predictions and I will read again this post in a couple of year to check if I was right.

In this post I would like to point out the differences between two practices in (new) products development.

Most companies focuses on features. This simply means that they maximize the number of features they can stick into a single product. They presume that the more the features, the higher the number of customer will be attracted. This might be a reasonable assumption because if one product is capable to satisfy more needs and desires, it will be purchased by more people. This is mainly the logic behind this type of approach.

Unfortunately, adding more features increases development and maintenance costs (induced by accrued complexity) and does not guarantee itself a return on investment. The issue lies on the fact that not all features have the same impact on customer's adoption and therefore a prioritization is needed.

Only a few companies focus on overall delivered value from their products, regardless if they have all (or most) features implemented. They follow the ubiquitous Pareto 20-80 law where 20% of possible features will produce the 80% of satisfied customers. Moreover, it provides two additional advantages:

It leaves the product open for future improvements.

It reduces the product's complexity to its minimum.

In this post I would like to address two related topics:

1. What is mentorship and coaching for startups

2. What are the credentials of a mentor or a coach

For the first question, I found the Mentor manifesto from TechStars. I think this is a useful document that will help mentors in their activity.

But the key issue here is what is the right experience a mentor need to become useful to startups. Is it more the ability in coaching through the processes or is about inspiring the founders by showing their successes?

Regarding the mentor's or coach's credentials, I would like to tell you what happened to me a few weeks ago. I met two founders of a startup that was about to launch an online service. I asked them about their competitors and they answered that their website was much simpler than competitors' so that with no doubt everybody would switch to it. I also asked them if they tested this hypothesis and they answered that of course they did some surveys. Since time was short, I proposed them to coach them because I had the feeling that they needed guidance in dealing with probable pivots. 

The reaction to my proposal was somehow rude. They challenged my credibility and reputation by asking me about my "credentials" and if I was a successful entrepreneur myself. Actually, the exact question they asked was: "how many successful companies did you create?"

Well, I was quite embarrassed. I haven't created any successful company so far, but one which consumed all the resources in trying to execute a business plan without having reached product-market fit (sigh :-(). But at the same time I told them: "Well, if I had created a successful company, probably I would not be here offering mentorship to you."

This is definitely a chicken-egg problem: Startups look for seasoned and successful entrepreneurs as mentors, and available mentors are not successful or not even entrepreneurs (not always, of course).

Is there any way out from this circle? Well, I believe that ideally mentors should demonstrate their entrepreneurial skills with their successes in creating successful full-scale startups. However, as I already pointed out, those kind of mentors might be a very scarce resource and not available to most startups. 

But mentors should not be confused with startup coaches!

Coaching is different than mentoring, but startups tend to blur that difference.

A coach does not need to be a successful entrepreneur. Coaches are those who are capable to motivate entrepreneurs and push them to do the "hard work" of validating their business model. Therefore, a coach should have pedagogical, project management, leadership and definitely empathy skills in order to provide the adequate support in stressful situations.

One big difference between mentors and coaches is that the former get quickly frustrated by team that do not perform as they expect. Instead, coaches should show patience and compassion, and definitely encourage and appreciate the team's efforts. At the same time, they have to be pushy and provide honest feedback. Finding this balance is not easy. I believe that people who have worked in education understand what I am talking about.

Four years ago, I took the Clifton's StrengthsFinder personality test from Gallup.

Here is my signature theme, which I think it provides a good outlook of my professional and interpersonal skills. As I am supposed to do coaching and mentoring, I believe my current and future coachees/mentees will find it useful. 

Activator

You can see how ideas can be turned into action.

You want to do things now, rather than simply talk about doing them.

You can be very powerful in making things happen and getting people to take action.

Other people may criticize you for being impatient and seeming to “run over” them. You will probably struggle with people who try to control you.

Activator talents are valuable because they generate the energy to get things going and then done. This theme brings innovation and creative approaches to problem solving.

Communicator

You like to talk, and you are good at it.

You can explain things and make them clear.

You may have an ability to tell particularly captivating stories by constructing mental images in the minds of others.

You may have been criticized because you like to talk a lot.

Communication talents are valuable because your abilities in this area enable you to reach out and connect with people. Your storytelling ability builds images in the minds of others and makes you a powerful person as you connect and bond with people.

Learner

You want to continuously learn and improve.

You enjoy the process of learning as much as what you actually learn.

You get a thrill out of learning new facts, beginning a new subject, and mastering an important skill. Learning builds your confidence.

You can get frustrated about wanting to learn so many different things because you fear you’ll never be an expert.

Learner talents are valuable because they propel you to thrive in a dynamic world where learning is a necessity. You can learn a lot in a short period of time.

Self-Assurance

You are confident about your ability to manage your life.

You can “bounce back” from disappointments and crises.

You believe that your decisions are right and that your perspective is unique and distinct.

Other people may see your self-assurance as a type of pride or arrogance.

Some people may criticize you when they wish that they had your confidence. Sometimes people want to get close to you because they hope that some of your confidence will rub off on them. But other people will keep you away because they don’t have your confidence and are afraid that you will see through them.

Self-Assurance talents are valuable because they keep you strong as you withstand many pressures, as you stay on your course, and as you willingly claim the authority to form conclusions, make decisions, and act.

Winning Others Over

You have the capacity to quickly connect with people and generate positive responses from them.

You can enter a crowd of people and easily know what to do and what to say.

You see no strangers, only friends you haven’t met yet.

Because you know so many people, some may believe that you form only shallow relationships. Others, however, will envy the way you make friends.

The startup's goal is to achieve Product-Market Fit, but unfortunately you cannot set a deadline for it. In other words, you cannot say: "in 6 months our company has to achieve Product-Market Fit".

We all know that speed is essential in startups in order to achieve and maintain a competitive advantage. Therefore startups' projects look more like "Relay Races" rather than typical projects with deadlines and milestones. The sooner we go to market, the better,

Also, uncertainty is very high. Especially in innovation and R&D, who could say that results will be ready on a given date? Of course, pushing the deadline forward will reduce the risk of missing it. But do you really want to do that? Remember, we said: "the sooner, the better".

Lean Startup was very clear about the iterative nature of the validated learning process. But within a cycle, can we do some planning? Of course we can, but not with classical deadlines and milestones.

Since we want to minimize the time-to-market, we not only need be able to avoid rework, but we also need to speed up the time needed for setting up "experiments" in the validated learning loop.

Moreover, since many hypotheses must be validated, we need a method that will help us in dealing with multi-tasking, which is known being a big cause of delays in projects. 

Complexity in product and business development can be high even in startups, depending on the industries. Therefore, you might expect to have to manage large projects, with the constraints of uncertainty, time-pressures, and shared resources.

These types of constraints are addressed in an "unorthodox" project management scheduling technique called the "Critical Chain". In this post, I will advocate Critical Chain Project Management (CCPM) as a possible tool for speeding up and properly manage Lean Startup projects.

To learn more on CCPM, I recommend reading two books (actually novels):

1. Eli Goldratt's "Critical Chain".

2. Andreas Scherer's "Be fast or be gone".

Reading the Ash Maurya’s book Running Lean, I stumbled upon a sentence that suggested entrepreneurs to recruit “visionary advisors”. This is the excerpt:

“Much like early adopters want to help when you nail their problems, visionary advisors will want to help when you present them with interesting problems that trigger their strengths and passion. You’ll know if there’s a fit based on their answers and body language. If so, consider bringing them on as formal advisors”.

I think I am a visionary advisor.

That means that I will encourage you to go where nobody else would dare to go and experiment with new ideas. But you will need to do it fast! I will help you in not wasting resources, especially time. Speed in startups is key. 

I will also help you in chasing customers, not just investors. You will eventually "attract" investors once you have already "convinced" your customers (many and ever growing). That's is your first and sole objective: reaching product-market fit. The only way to achieve it is through your customers.

My advisees need to understand that they have to validate all their assumptions and build a robust, scalable and profitable business model. I'll give them a sound opportunity and a framework to do that, by helping them in gathering data points from real potential customers. But in order to achieve that, they have to be ready do leave their comfort zone.

However, I will never tell them that their ideas are unfeasible or crazy (the crazier, the more interesting are for me). I will support their vision and l always encourage them to pursue it as long as they will invest their energy in validating their underlying hypotheses of its business model.

With me you get two main things:

1. Support, especially in hard times when your assumptions are invalidated and you need to pivot.

2. Ideas expansion. I might bring you in unexplored territories where you might find the nuggets you are looking for. This because I am able (and I like) to build conceptual bridges between ideas in order to generate more powerful ideas.

Thanks to all our readers and followers for your support and insightful comments.

This year, after a few pivots, we realized what startups need from us. Our Business Model is far from being perfect, but it evolved towards something more adapted to our users.

Remain tuned as many new things will be unrolled in the next weeks.