Archive for April 16th, 2009
Startups should be Built to Learn
Eric Ries has published a few great posts (click here, here, and here) on his April 1st lean startup presentation at Web 2.0 Expo. The title of this post is actually borrowed from his response to a comment made by one of his readers. According to Eric:
[This] point is the one that seems to have had the biggest impact from the talk as a whole: that startups should be built to learn. That’s the essence of so many of the lean startup techniques I’ve evangelized: customer development, the Ideas/Code/Data feedback loop, and the adaptation of agile development to the startup experience.
As learning and learning through experimentation are central themes in Agile, I encourage readers of this blog to take a good look at what Eric writes. I would also like to add a few quick reflections:
- It does not really matter whether you are part of a tiny startup or working for a $100B company. Eric’s heart seems to be in startups, but his insights are broadly applicable.
- Jean discusses the “goal of improving my notion of learning” in a recent blog post and accompanying dialog. Her thinking as well as many of the references she cites nicely complement Eric’s ideas.
- In The Living Company, author Arie de Geus strongly emphasizes institutional learning as a critical capability. Learning to de Geus is about sensitivity to the surrounding environment and willingness to change to be in harmony with it.
All these threads about learning indicate a company is more likely to survive for the long haul if it has the capacity to learn. The threads are linked in a fascinating manner to Jared Diamond’s book Collapse: How Societies Choose to Fail or Succeed. It seems that learning as a survival imperative applies equally well to the individual, the team, the corporation and society.
Companies make shoes!
Peter Drucker made an astute observation which is quite relevant to the current business situation during a September 1998 interview with Fortune:
Securities analysts believe that companies make money. Companies make shoes!
Readers of this blog might have said “software” instead of “shoes.” The point would have been similar to Drucker’s. Good financial management is no doubt important for your company’s success. It is no substitute, however, to focusing on the business you are in, the technology(ies) that drives the business and the effectiveness of the underlying systems and processes.
The current macro-economic situation gives you an opportunity to soberly assess the viability of your business design (as distinct from doing a lot of financial engineering). With asset inflation corrected, measuring the effectiveness of your business model in terms of the ratio Market Value/Revenues is much more meaningful now then it used to be prior to September 2008. As pointed out by Slywotzky in Value Migration, a market value to revenues ratio lower than 0.8 indicates value outflow for your company and possibly for your industry.
For software companies, the impact of “good enough” Open Source Software should be assessed in conjunction with close examination of the market value to revenues ratio. Twitting from the recent OSBC conference in San Francisco, colleague Andrew Dailey of MGI Research reported “… ERP/CRM are viewed as least susceptible to open source disruption… due to high transaction volumes and high integration needs.” Conversely, Andrew considers office productivity software as ripe [for the picking by Open Source Software]. I am personally of the opinion numerous Application Life-cycle Management tools could be massacred by Open Source Software.
The confluence of the threads highlighted above poses a fairly unique opportunity for the Agilist to convey a major premise of Agile to his/her executives. Like a thriving Open Source Software community, a hyper-productive Agile team can pick a ripe market faster and cheaper than an old fashioned software company could. Moreover, if a company is in one of the markets that are susceptible to an Open Source Software onslaught, Agile can (up to a point) provide defense against such onslaught. Whether you choose to attack or defend, Agile software gives you the advantages of proprietary software at a fraction of the traditional cost.
The Agile Executive 