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Startup Lessons Learned Conference

I attended the Startup Lessons Learned Conference (http://www.sllconf.com/) in SF on May 23rd. Hosted by Eric Ries—the man who coined the term, “lean startup,”—it was an interesting, information-packed event. While none of the info was life-changing there were quite a few “oh-yeah’s”—stuff that I had done, or knew, but saw restated in a way that helped emphasize its importance.

As Mitch Kapor put it, “Our capacity for self-delusion is unlimited. Lean methodology can help compensate for this basic human fallibility.”

As an example, one thing that impressed me was how customer development methodology enabled companies with “non-groundbreaking” ideas to achieve (some modicum of) success. Dave Binetti founded a company called, Votizen, which was conceived of as a social lobbying platform for registered voters. His initial idea was to build a Facebook for Politics, postulating that people want a stronger voice in politics and community affairs, and hosting a donation engine (the business model) that would allow Votizen to take a cut of funds donated. Really—it doesn’t strike me as the world’s most compelling business proposition. It’s very unclear that figuring out how to donate to causes, is a hard problem that needs solving.

Over the course of 18 months, Votizen did 4+ different pivots, moving to a campaign management tool (pseudo-enterprise) and finally to a tool they described as Ad Words for Activism—a tool that allowed individuals to email representatives (and causes to email
individuals?). They charge for every email, and this business model (although arguably no more compelling than the original)—has been a money-maker from day one.

18 months, $120 k spent, 4 different pivots and numerous optimizations. They found a profitable business model. Nice work.

The other interesting aspect to this success is that we often think we have to “swing for the trees,” with our business ideas in order to be successful. That is–you can’t start something unless and until you have a “billion dollar concept.” Many of the companies presenting at the conference had very modest ideas that they had exploited to good measure—and proved they could be profitable. So, you’ve got to get on base before you can score a run.

One of the more inspiring presentations at Startup Lessons Learned, came from Brad Smith—the CEO of Intuit. Brad described how Intuit has institutionalized innovation; how they germinate it and nurture it.

According to Brad, the two most dangerous words in business are, sounds good.” “A culture of analysis and planning is a culture of
politics.”

While I’m not sure that I completely agree with that sentiment, his larger point is that when big companies become big, they tend to lose their entrepreneurial spirit. And, you have to make a conscious effort to ensure that doesn’t happen.

At Intuit, they break their product efforts into 3 categories:

1) Horizon 1, Existing businesses: These are large businesses like Quicken, which account for the bulk of company revenue. They generally have developed their own metrics, are growing slowly and run themselves like the mature businesses that they are. Their job is to become more efficient and to find and exploit incremental market opportunities.

2) Horizon 2: Emerging businesses: These are business that have come out of incubation, have gained market traction and are growing rapidly. These have the promise of becoming Horizon 1 businesses and their job is to find the product and customer combinations that drive this growth.

3) Horizon 3, Intuit Labs: Intuit Labs is like an entrepreneur’s fund. It’s composed of “2 pizza” teams (no more than 6 people). The ideas these team work on come from their “unstructured time,” which is time that Intuit gives people for exploration and ideation. Their charter is to “go fast,” and come up with a prototype in 6 weeks or less.

The businesses that Intuit Labs pursues are startup businesses. Most will not be successful—but, some will turn into Horizon 1 & 2 opportunities, and somewill make a material impact to existing businesses. At Startup Lessons Learned, Brad Smith cited “Live Community Chat” in TurboTax as one of the Lab’s ideas. Community Chat let’s members of theCommunity pose questions and get answers from people who are using TurboTax. Who would want to use that? It turns out that 40% of questions were answered more accurately by the Community. The engagement drove customer satisfaction higher.

Intuit SnapTax is another product that Labs incubated. The team originally planned to allow customers to scan their W2 and 1099 forms and to automatically assemble a tax form from the results of those scans. After some brainstorming and customer research (i.e. most people don’t have scanners), the team decided to create an iPhone app than let people scan their W2’s and create a 1040EZ tax form which could then be automatically submitted to the IRS. Who needs to pay money to create a 1040EZ? Lots of people want to at $19.99. The product has gotten an incredible response and is growing rapidly.

The moral of Brad Smith’s story was that innovation and entrepreneurship at big companies is possible—but, it doesn’t happen on its own. Intuit invests 60% of their resources in Horizon 1 businesses, 30% in Horizon 2 and 10% in Horizon 3. They try to keep things fast, fun and innovative. They host “Entrepreneur Days,” to give employees the opportunity to get mentoring on ideas and business models. And, they do over 10,000 hours of customer visits a year (including Brad) to ensure they’re in touch with the market.

Having worked for big and small companies, it was inspiring to see how the CEO of a major software company helps preserve a small company spirit, and how that strategy helps drive top-line growth. As Brad said:

It’s not the answers you have it’s the questions you ask.” Set up an environment of experimentation, and find out what delights your customers and grows your business.

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