Business Intelligence for Startups

Spending 6 to 12 months with a 4-5 person team to develop the first release of your product is way too long. You can’t wait that long to get market feedback.

These were just a few golden nuggets of wisdom in Dave McClure‘s presentation yesterday at SD Forum’s BI SIG meeting. At one point, Dave said — “I come from an engineering background, I used to write code.. and I can’t believe that I’m saying this to you — but all the architecture, algorithms and engineering behind your product don’t matter as much as how strong your marketing is, which starts with user experience.. we all tend to develop a lot of cool features which the user never ends up discovering” — reminded me of that tree that fell in the middle of a big forest (did it really fall?)

Much of Dave’s talk may seem like web analytics 101. He’s got a (cleverly named) “Startup Metrics for Pirates” called AARRR (stands for Acquisition, Activation, Retention, Referral, and Revenue) to measure your overall success. Then as a startup, you focus on improving these metrics one step at a time (here is his detailed presentation):

1. Make a Good Product: Activation and Retention
2. Market the Product: Acquisition and Referral
3. Make Money: Revenue and Profitability

Personally, I get the step 2 and 3, but it is the first step where a great many of us falter because it is not so easy as it sounds.

Part of making a great product is to have inspiration, vision, and an intense passion to solve a particular problem — and then you hope that there are millions of others out in the market who see the problem with the same high priority as you do — and then also hope that your solution beats the competition by being in a completely different league, either by being the first of its kind, or by introducing a completely superior technology, er, user experience.

So can you do all that in 3 months or less? Seems like you have to, if you want to survive in the web 2.0 world (or whichever version we are on these days)

This clearly does not apply to everything. It only applies to a certain class of products/services where customers can experience the
product on the web, and where the quality of user experience can
be measured (even if it is a model of lead generation online and fulfillment being offline)

So if you are building a new product/service today — can you fit it into this model? Well, one way to try it out is to strip away all the features until you are left with just one or two that are your core differentiators, and see if you can create a version of it that can be experienced completely online. But the point is, if you can do this, you have a framework to measure success a lot earlier in the game. One key edge that startups generally have over bigger organizations is the speed of their product development iteration. How soon can you release a feature to your customers, get feedback and go through a series of subsequent iterations and releases?

Dave’s “Pirate Metrics” are about tracking the effectiveness of these iterations, but first you have to configure your business practice so this model can fit. Not a bad thing if you can.