Pathology is defined as “the precise study and diagnosis of disease.” The subject’s name is derived from the Greek word pathos, which means “experience” or “suffering.” Medical students typically take up this course on illness in their first year of medical school. They study the varying afflictions that grieve the human body, and are trained to identify and differentiate what these sufferings might be.
In fact, most of what an early medical student is taught (anatomy, histology, biochemistry) is not the medicine that they will eventually prescribe, but the nature and dynamism of the patient they will encounter. Only after understanding the human body and its intricacies at a detailed level should she conclude a diagnosis and prepare a suitable treatment.
If I can draw a parallel from medical literacy to the technology sector today, my sense is that technologists are delivered a highly reversed set of instruction. If programming holds the potential “tech medicine,” then our community rushes to equip itself before first clarifying what it will be used to address. So its not the subject of computer science itself that I contend with, but more the sequence and relative weight of its given importance.
The value of the discipline feels quite clear to me. The rationale is that to solve problems one needs to have command of the range of potential (technological) solutions. To go out and actually effect change you need a grasp of the complexity of tools needed. Another equally important reason: you need to speak the language of those on your team who are building as well. I’ve learned the hard way on that one.
Part of the importance of programming literacy is the problem-solving mentality it induces, but more importantly, the ability to build and/or understand systems that automate work or make work efficient is increasingly valuable in today’s business climate, where tech touches everything. -Shane Snow, Why You Need To Know Code
I love that. I completely agree, which is why I’ve made strides to learn myself. I’ve taken an intro CS class. I had an informal iOS tutor. Earlier last year, with significant mentorship from a fellow IDEO’r, I was able to build a rough version of a social app in iOS I was curious to test.
But since I’ve grown in the venture and technology space over the past seven years, I’ve heard with increasing intensity, perhaps now to a reckless level, the need to develop a computer science proficiency (“Everyone should learn to code. Especially “business people” should learn to code”).
Yet the underlying and glaring assumption in almost all these calls to action is that you’ve sufficiently diagnosed the problem you’re solving. We tend to assume the entrepreneur has surfaced a resonance within a market around whom she plans to build. But this is not frequently the case.
So might the order of operations here be a bit off? Is it possible that we should be attempting to first learn and understand the techniques to surface such human / user / customer resonance, and then assemble the tools with which to build? The order as it is currently stands may significantly underestimate the subtleties required to create truly innovative products. We see time and time again when a product, not attacking a new problem by any means, breaks into mainstream consumption because of a narrow set of features that users “just get”. The Mailbox app comes first to mind. I’ve come to believe that the founders who go on to grow successful businesses are either innately attune to these needs, arrive at them through a slower, iterative learning process, or in other cases get lucky.
And to be sure, some of this empathic thinking has emerged. As entrepreneurship has flourished, there’s more written for technologists toget out and talk to users. But its still in many cases an afterthought and still not spoken at a volume that many founders hear or in the sequence that may be appropriate. The Google Ventures design team, who borrow some of IDEO’s philosophies for their approach, have one of the best resources on how to do this in a more methodical way.
Software is indeed the backbone of innovation in the digital era. Teams that can harness computer science in powerful ways will continue to transform the world. But please, bring the sociologists and ethnographers into the room. Let’s get better trained in diagnostics to better interpret user needs and then develop the technical skills, by learning or through partnership, to put the desirous solution together. Bring on the pathology.
I’ve been reading Daniel Kahneman’s book, “Thinking, Fast and Slow" over the past few weeks. It’s a fascinating read on the way we interpret the world around us and how we believe what we believe. But it’s a long read, chock full of studies and illustrative examples. So many that I find myself fearing that I’m going to lose them almost as soon as I’m done reading them. In an attempt to help remember, I decided to pause from the reading and go back and type out a few of the parts I had initially underlined:
When confronted with a problem … the machinery of intuitive thought does the best it can … When the question is difficult, and a skilled solution is not available intuition still has a shot: an answer may come to mind quickly- but it is not an answer to the original question. The question that hte executive faced (should I invest in Ford stock?) was difficult, but the answer to an easier and relationed question (do I like Ford cars?) came readily to his mind and determined his choice. This is the essence of intuitive heuristics: when faced with a difficult questions, we often answer an easier one instead, usually without noticing the substitution.”
As you become skilled in a task, its demand for energy diminishes. Studies of the brain have shown that the pattern of activity associated with an action changes as skill increases, with fewer brain regions involved. Talent has similar effects, highly intelligent individuals need less effort to solve the same problems, as indicated by both pupil size and brain activity. A general “law of least effort” applies to cognitive as well as physical exertion. The law asserts that if there are several ways of achieving the same goal, people will eventually gravitate to the least demanding course of action. In the economy of action, effort is a cost, and the acquisition of skill is driven by the balance of benefits and costs. Laziness is built deep into our nature.
The psychology of accurate intuition involves no magic … Herbert Simon, who studied chess masters and showed that after thousands of hours of practice they come to see the pieces on the board differently from the reset of us … “The situation has provided a cue; this cue has given the expert access to information stored in memory, and the information provides the answer. Intuition is nothing more and nothing less than recognition.”
Simple common gestures can also unconsciously influence our thoughts and feelings. In one demonstration, people were asked to listen to messages through new headphones. They were told that the purpose of the experiment was to test the quality of the audio equipment and were instructed to move their heads repeatedly to check for any distortions of sound. Half the participants were told to nod their head up and down while others were told to shake it side to side. The messages they heard were radio editorials. Those who nodded tended to accept the message they heard but those who shook their head tended to reject it. Again there was no awareness, just a habitual connection between an attitude of rejection or acceptance and its common physical expression. You can see why the common admonition to “act calm and kind regardless of how you feel” is very good advice; you are likely to be rewarded by actually feeling calm and kind.
A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. Markets have always knows this fact. But it was psychologists who discovered that you do not have to repeat the entire statement of a fact or idea to make it appear true. People who were repeatedly exposed to the phrase “the body temperature of a chicken” were more likely to accept as true the statement that “the body temperature of a chicken is 144 degrees” (or any other arbitrary number.)
Storytelling is the single most valuable founder trait. I believe this. It’s priority as a skill varies by the role in the organization, but it is remarkably under-discussed as a distinct and broadly appreciated proficiency. At it’s best, storytelling is “vision.” At it’s worst, storytelling is hype. Worse still, it’s lying. But there is a significant space within these extremes that captures the magic of translating a founder’s version of the future to those around them.
Magic might actually be the right word for it. The definition of magic is “the power of apparently influencing the course of events by using mysterious or supernatural forces.” The most important word in that sentence is “apparently.” Thatis where the storytelling lives. It is inspiring belief in something that hasn’t presented itself yet. It renders the unseen into a digestible substance.
The way a founder performs storytelling surfaces itself in a few key areas:
team- Early on, every founder is spending the majority of their time relaying their version of the future to potential team members. Inspiring them to help build with her. The best founders will make you question what you thought you knew. It’s like being handed a pair of 3D glasses and realizing that you had previously been watching a different (and less interesting) movie altogether. The most persuasive founders tell enough of the story to draw intrigue, but leave the space necessary for you to feel like you can inform the ending. This is certainly what brings people on board, but it’s also what keeps teams motivated when the business invariably oscillates between good times and bad.
customers- Some say a genius is someone who takes a complex thing and makes it look simple. I was recently conducting research for a startup I was working with and speaking to one of their potential customers. I was trying to understand what elements of the product were most relevant to his business and how much it should cost. He said to me, “You have to assume I don’t know anything. I need to know why it’s important and how it helps me. Thats it.” The most artful storytelling is one that optimizes for ease of comprehension. It is about making your complex product, one that might not even exist yet, feel immediately useful and intuitive in essence.
investors- I speak to many founders as they are getting ready to raise capital- sometimes it’s help with introductions, crafting the right strategy/amount, or just with their presentation. In either case I almost always end up explaining that the most significant and surprising takeaway I’ve had working in venture is that the ability to secure a (seed) round is almost completely reliant on a founder’s ability to tell the right story. To detail their grand vision.The failed attempts I’ve seen almost always focus on the product in its current form… a plan to take one thing and place it in the hands of as many people as possible. The most successful founders through that process are almost always more concerned with where the current product will take us from where we are today. Those that tell a story about how their product builds a bridge to enter a future where things look much different.
themselves- I think most importantly, storytelling is an ongoing conversation with ourselves. Even the biggest visionary is constantly reminding themselves why they’re doing what they do. Why they’re bothering to push the envelope. Why they’re good enough. One of my most favorite anecdotes:
E. B. White was amused to learn from a farmer friend that many electrified fences don’t have any current running through them. The cows apparently learn to stay away from them, and after that you don’t need the current. “Rise up, cows!” he wrote, “Take your liberty while despots snore!”
We get to decide what we want to believe. There is a narrative that will help us remember that there is actually no current in the fence.
“ "Invention requires a long-term willingness to be misunderstood. You do something that you genuinely believe in, that you have conviction about, but for a long period of time, well-meaning people may criticize that effort. When you receive criticism from well-meaning people, it pays to ask, ‘Are they right?’ And if they are, you need to adapt what they’re doing. If they’re not right, if you really have conviction that they’re not right, you need to have that long-term willingness to be misunderstood. It’s a key part of invention." - Jeff Bezos”
impulsiveness in the face of steep disruption
Highly successful companies over-emphasize existing customer behaviors and create dependencies on currently lucrative products, and in so doing fail to recognize emerging needs or technological advances before its too late.
An overused rationale, perhaps, but this is nonetheless the regularly identified cause of death for many companies as explained by “The Innovator’s Dilemma.”
Today though, the disruptive climate has intensified. And while it isn’t new to see bold, fresh companies displace uninspired incumbents, it’s happening more often, and much more quickly. Across virtually every industry, from Uber in transportation to Square in payments,larger firms are observing highly disruptive companies ascend into public view at a breakneck pace.
Some credit the now cost-effectiveness of starting a business, or the culture that a few visible successes have infused in the entrepreneurial spirit. Catalyst aside, this accelerated pace has shifted a near reversal of Clay Christensen’s diagnosis. It is no longer inaction that firms are suffering from, its the fear that swift action is necessary to maintain relevance to outpace these more nimble players.
Companies today are essentially turning the innovator’s dilemma into innovator’s paranoia, a distinct yet as acutely paralytic a condition.
This corporate FOMO dynamic is motivating focus and investment in strategies awfully out of line with stated long-term objectives. Such an over-dialed course correction, without proper checks and balances, is potentially leading teams further adrift from eventual viability.
I found a wonderful call-out of this narrow thinking in the latest debates over the optimal strategy for Nintendo. A long-time powerhouse of hardware-software gaming, Nintendo has been urged by many to abandon hardware and focus on iOS, given mobile’s strength of engagement over the last several years. A response fromJohn Gruber, drawing a parallel to Apple in the 90’s as they were facing stiff competition from Microsoft:
..it was common advice then for Apple to do what Microsoft was doing: license their operating system rather than make their own hardware.Microsoft is the most successful company in the industry, therefore Apple should do what Microsoft does and just license software to commodity hardware makers. But if we applied that line of thinking to Apple analysts giving advice to Nintendo today, would not the advice be for Nintendo to stay the course? Apple is the most successful company in the industry, therefore Nintendo should continue doing what Apple does by making its own hardware and software.
Apple succeeded not because it emulated a then-successful strategy, but by digging in their heels and embracing a long-term strategy consistent with their integrated hardware and software competency.
Examples of these detours are numerous, and also seem to arrive in waves. Each cycle presents a solution that proposes to cure a scheduled corporate fall from grace:
- Twenty-four months ago, “social” was evidently how businesses needed to reshape their brands. The holy trinity of icons (f, t, t), as it were, was embraced by nearly everyone. And then along with Facebook, Twitter, and Tumblr came Pinterest, and so faith in adding the P icon prevailed. This was happening without much regard to what kind of conversation (short vs long-form? image-based?) with consumers, if any, was most appropriate to engage with consumers.
- Around the same time came the “app” phenomenon. Does your digital experience require a controlled environment that leverages GPS and can deliver value in a tightly framed interface? Does a customer’s frequency of use warrant a download? All too many strategies have shifted to mobile without asking those fairly high-level questions.
- More recently, companies are seeking saving grace from developing a wearable computing device. From Samsung to Microsoft to Google, each day welcomes a new entrant to the category.
- Venture, be it via investment, acquisition, or incubation, is now another high-traffic category. Yahoo has spent billions on almost twenty acquisitions in under a year. As of this month, 7-Eleven has a venture fund. Even traditional venture firms have felt pressure to innovate: just last week, Foundry Group announced a $2.5 million pledge to invest in AngelList’s syndicate program, not more than a week after the platform was announced.
A rapidly shaping landscape has incited maneuvers that are highly inconsistent and uncoordinated. This much feels clear. But the way out of innovator’s paranoia will be through thoughtful and measured experimentation. To be sure, some of the above examples are likely just that. Seeking inspiration through calculated risk-taking may ultimately provide the seeds of clarity for a new way forward. But while strategies must necessarily evolve, companies should not let outside forces dictate their stated long-term vision.
In the end I am not sure which is the lesser of two evils: an adherence to entrenched governing principles or hyper-experimentation in the face of increased activity. I do know, however, that regret from failure is exceedingly heralded as far superior than regret for having not tried. This may just tell us which way things are headed.
I ran into an old colleague on the street last night. She and I used to work together in the venture capital and private equity fund placement business. Our job was to evaluate fund portfolios, advise on emerging investment strategies, and help raise capital for upcoming financings and fund launches.
We only chatted for a bit, but being one of the sharpest people I’ve worked with, I asked her what she made of all the recent regulation changes around crowd-funding and whether she thought it threatened her business.
She immediately dove into a story from earlier that day- she was speaking with a large institutional investor who explained they don’t have any new capital to allocate in new areas and are taking some time away from the venture capital asset class. My old colleague began explaining to them the latest group she was working with, and by the time the meeting was over, they were debating the size of the allocation and setting up a time to meet the team.
What my old colleague was saying, without actually saying it, is that there will always be a need for stories to be told. For visions to be expressed. And regardless of whether there is an intermediary involved as she is in this case, that narrative can often times make all the difference.
I think whats been forgotten with the latest excitement around AngelList’s innovation is that there is great nuance to these discussions. There is a significant human element. We shouldn’t treat investments, or funds for that matter, as a spec sheet. Particularly as the volume of ideas continues to intensify as it has been, the signal-to-noise ratio is at an all-time low, and we cannot pretend to glean signal as we scroll through an open-syndicates feed. The reality is that gleaning this in person is hard enough as it is.
The innovation community likes to remind itself that ideas are a dime a dozen. That success is about team and vision. Then perhaps to liken the relationship-driven process of funding to a commodity exchange is to undermine what our community heralds as most valuable.
Founders are often criticized for solving too insignificant a problem, or for too small a market. “Don’t build a feature, build a business”. It feels like such an obvious directive to agree with, though as I’ve spent time thinking through it, I’m not sure I do. I think the question should be much more about why than what. Forget big or small— is what you’re building filling a pressing void or latent desire? If what you’re solving for is truly resonant, there will surely be room to grow.
How founders go about identifying that singular user need has always been fascinating to me. Are founders talking to people? Directly? Indirectly? Are they viewing them in their habitat? Are they stitching together insights from a broad range of observations? What I’m learning is that the process is often much less formulaic and involved than I usually assume. It should differ by category, but I’ve come to learn the power of a structured flow for how these macro and micro insights are pulled together into the kernel of idea that informs the business case. Certainly to start out, but it also serves as a valuable set of guard rails that disciplines founders when distractions and “new, shiny” paths inevitably present themselves.
what v why
Assuming a founder is attempting to build somewhat of a scientific process, what are they seeking out? A significant misconception here, one that I’ve learned much from IDEO’s human factors process, is the emphasis of what over why. So many resources for startups highlight the importance of measurement and monitoring of metrics: bounce rate, time on site, churn, repeat visits, etc. to collect insights on how a product can be better. There is real value in that. But that is the capture of what your users are doing. And it almost always is conducted after a product that assumes too much has already been built.
Beneath these activities, and much earlier in the process, is another layer that is rarely discussed about why any of this is even happening. The why essentially informs all of these “what” behaviors. Zeroing in on the why can be much more powerful and insightful at arriving at a motivation for your business. If a founder has skipped asking why, and are then presumably addressing the “hacks” people have found to scratch the original itch, then they may be too late, or addressing a mutation of the original, core desire.
The questions to understand why are slightly different. They ask what sensitivities people have, what they are excited and annoyed by, what the highs and lows of their daily routines are. What about during their “emergencies”? Solving for these latent needs and desires, or knowing that your product or service is narrowly attempting to, strengthens the thesis by several orders of magnitude.
In the past few years I’ve spent with founders, my takeaway is that user understanding is best when centered around resonance, essentially asking, how can you isolate the why of a behavior and then determine how to solve for it? If you can check yes to resonance, a founder can explore so much before they need to worry about market size. Push your elbow through until you can pull your whole self across. It may not make business sense at the outset, but whether a founder can ladder that feature up into a broader value proposition will be a test of their ability to continually listen, build and iterate upon that initial foundation of insight.
"what job did you hire that milkshake to perform?"
The title and inspiration for this post is from a short talk by Clay Christensen that captures this idea so well:
Startups are often synonymous with risk. They’re started by founders with very unrealistic expectations of positive outcomes and who have little desire (or ability) to weigh actual probabilities of failure. If they did, they would likely be deterred from the visions they’ve laid out. By sharp contrast, the professional investors who examine whether to come along for the ride stay keenly aware of downside. Different sectors and models are subject to varying types of risk and in some cases form the basis by which certain investors choose to participate. For example, some risks are more intrinsic to the nature of the model, as seen in online marketplaces, where a network effect is your worst enemy long before it can be your best friend. Some investors find this or other specific styles of risk to be too large a threat and look elsewhere for outsized opportunities. One constraint and risk that is relevant to all businesses, however, is the issue of capital-efficiency.
In short, capital-efficiency is a relative measure of the capital required to initially build and scale a business. If a business can create an initial working prototype that secures a level of market validation for a relatively small sum, the business can be considered capital-efficient. The more capital required to build and sustain a business, the more risky it becomes to support such a venture (as its evidence of success can only be determined after significant capital has already been spent). Current conventional wisdom says that if the upside achievable in any given venture is the same, better to invest a smaller allocation of your investment pool and thereby minimize your exposure.
Given the precipitous (and well-documented) fall of traditional startup costs over the last few years, the issue of capital-efficiency has become a smaller slice of investment committee discussions. It’s not that cost structure of portfolio companies isn’t a very serious consideration, but more the idea that “software” businesses are generally now considered quite cheap relative to their “hardware” counterparts. But capital-efficiency is an investor term, not a founder term. Chris Dixon most recently illustrated this dichotomy by contrasting the “finance lens” from the “product lens”. VCs must see through the finance lens, while entrepreneurs, though they can’t ignore the finance lens, need mostly be concerned with product.
So while the costs around building a hardware business are still considerable (but falling, see below), “makers" everywhere, are feeling empowered. A powerful confluence of factors (also now well-documented) have given the space resurgence and fed founders a resolve around pursuing these paths over the next web or app phenomenon. Paul Graham of Y Combinator has affectionately called it a renaissance. Albert Wenger of Union Square Ventures sees the writing on the wall, but admittedly isn’t sure how to participate as an investor. Amanda Peyton, a founder looking to capitalize on the space, has a nice steady outline of the opportunity on her blog as well. They’ve been articulately laid out in some of the aforementioned links, but factors giving rise to this shift include:
- Open-source hardware initiatives and communities like Arduino, Raspberry Pi, Sparkfun, Adafruit. Makershed, and SmartThings’ “Open Physical Graph”
- Ability for rapid prototyping with 3D printing
- Crowdfunding platforms (Kickstarter, IndieGoGo, etc) affording hardware tinkerers the ability to assess demand and raise proof-of-concept-money (that professional investors may still be reticent to deploy)
staying capital-efficient within hardware-
For the most part, this entire backdrop has been covered in recent months. What I’ve found most interesting among the debates though is that it has been a fairly binary discussion around whether we can expect true (venture-backed) growth in the category. You either accept hardware in all of its capital inefficiencies and believe that today’s climate is different (SoftTech / True Ventures’ FitBit, Venrock’s Nest, Lerer’s Romotive, etc.), OR you continue to believe that you’re better off focusing on software’s feasting of the world (as Kleiner partner Trae Vassallo put it, “Hardware is hard”). While I tend to agree with the former, I also see a significant and largely under-discussed category of businesses that is being formed around hardware. These are mostly software businesses: marketplaces, tools/services, curated commerce, infrastructure - that are all flourishing to support this maker movement.
This pocket of opportunity is unique in that it satisfies capital efficiency requirements of most investors under the traditional software paradigm, but also provides a meaningful way to participate in the growing hardware revival. Kickstarter, to a small extent, satisfies this definition, though it certainly has not made hardware its exclusive focus (in fact, it recently imposed changes that make it harder for product concepts to raise). Investors in Kickstarter will benefit from successful hardware ideas without having to invest directly into the businesses themselves. There are also growing (software) platforms that sit at the front and back of the Kickstarter life-cycle participating in a similar way. There are those that enable founders to build the prototype that get them Kickstarter-ready, and those that help fuel manufacturing and sales once they’ve achieved success post-Kickstarter. Not to mention the tools and services that will surely surface to allow all of these disparate devices to seamlessly communicate, finally creating the online-to-offline bridge we’ve heard so much about. My sense is that these areas—infrastructure tools that help hardware founders operate and platforms that help them reach targeted customers— will become a significant focus for investors in the new year.
At IDEO, hardware is perhaps more than any other category at the core of our DNA. While today over 50% of IDEO’s work is digital, it is a sensibility that has strengthened from the firm’s inception (designing the first laptop and the first Apple mouse). We’ve monitored this hardware resurgence in the maker and startup worlds over past months, and are energized by the conversations we’ve been having. While we’re comfortable exploring the traditional hardware categories, we’re also very excited to see what comes of this broader software ecosystem.
The products themselves are (rightfully) getting the most attention. The hardware devices and gadgets are clearly the most exciting fruits of the movement. Though equally as important will be the market that will be built around it. From an investor’s perspective, it may just be where the best risk-adjusted returns lie.
Some of the links that inspired this post (some above, others not):
Paul Graham - The Hardware Renaissance
Albert Wenger - The Return of the Capital Intensive Startup
Massimo Banzi, TED talk
Amanda Peyton - Hardware Disruption: Same Movie, Different Era
Steve Schlafman - The Era of Pervasive Computing
Chris Dixon - The Product Lens
Antonio Rodriguez - Changing the world is not always profitable
Joe Rizk - Kickstarter is Not a Store
“A Comprehensive Database of American Manufacturers Fast Company”, Fast Company
“Maker Movement" TIME
“The Next Industrial Revolution?" New Tech City
“Kitchen Table Industrialists" New York Times
“SmartThings Grows Community of Smart Object Developers”, TechCrunch
“The maker movement isn’t just for hackers anymore”, VentureBeat
“The Maker Movement”, Raising Geeks
“The Zombie Apocalypse of Smart Devices”, Wired UK
I watched the Lincoln movie yesterday, New Years Day, and have found myself repeatedly returning to one quote in particular. At a time where I’m challenging myself about personal commitments for the upcoming year, it is a strong reminder that the blind pursuit of any ideal can often be misleading:
"A compass, I learnt when I was surveying, it’ll - it’ll point you True North from where you’re standing, but it’s got no advice about the swamps and deserts and chasms that you’ll encounter along the way. If in pursuit of your destination you plunge ahead, heedless of obstacles, and achieve nothing more than to sink in a swamp, what’s the use of knowing True North?"
- Abraham Lincoln (from the movie “Lincoln”, 2012)