Scott Adams, the creator of Dilbert, wrote an interesting post on startups and pivoting this week. You should read the whole thing. Here is his main point:
The Internet is a psychology experiment.
Building a product for the Internet is now the easy part. Getting people to understand the product and use it is the hard part. And the only way to make the hard part work is by testing one psychological hypothesis after another.
Experience and history give start-ups their ideas on what to test first. But the thing that worked for the last business often doesn’t work for the next because no two situations are identical. So psychology on the Internet is an endless series of educated guesses and quantitative testing. Every entrepreneur is a behavioral psychologist with the tools to pull it off.
In this environment, quality is less important than speed. So the most prized technical people are the ones who can work quickly and produce one buggy prototype after another.
This has some interesting implications, both for startups and for the firms that compete with them.
First off, we all need to be more skeptical of our ideas. Instead of banking on getting everything right from the start, we need to be more suspicious of our initial assumptions. That was a failure that we made in the startup I was in.
If we’re a startup, we need to be using lean startup techniques to build evolving business models. You won’t be the only person working on your idea – so the critical thing is to find the right business model fastest. This means that you have to move beyond the obsession with features that is so common amongst founders (especially technical founders).
If we’re an established firm, things are a bit tougher – we need to build dynamic business models, but that is challenging.
In a terrific post on responding to disruptive innovation, John Hagel recommends planning beyond the short-term time horizons that are the norm these days:
Another question is what incumbent players can do to more effectively respond to these disruptive approaches (short of resorting to regulation and other public policy measures). This is a topic for a much longer post. While I certainly don’t pretend to have all the answers to this, I believe that one key requirement for incumbent players is to find ways to expand the horizons of their leadership team beyond the next quarter or next year and to challenge on a sustained basis the key assumptions, often unstated, that they bring to the table regarding what is required for business success.And, perhaps most basic of all, they need to acknowledge the growing force of disruption and resist the temptation to dismiss or deny that it exists.
There’s that bit about questioning assumptions again, too.
Another important skill to build is experimenting. Fast Company published a fascinating interview with Tobias van Schneider from Spotify on using side projects to discover new things. Spotify is a innovating a lot in management, and van Schneider has some great ideas on how to build this skill in larger firms. Here are some of the key ideas:
The best thing a startup can do to maintain its creative edge and keep its most talented employees invested in the company is make time and space for stupid side projects, van Schneider says. While larger companies like Google and Apple can build this into people’s jobs on a regular basis, more and more startups are providing time in the form of hack weeks and hack days.
“At Spotify, we host week-long hackathons which are basically paid vacations during which people can hack on anything they want,” says van Schneider. “A lot of what gets made comes out of frustrations–things people want the product to do or things they have always wanted to make possible.”
The corollary to this is that a company needs to have a system to take the ideas produced by Hackathons and do something productive with them. In general, Spotify chooses the top three ideas, and entrust the teams who create them with making them a reality. “There’s nothing more discouraging than saying, ‘Oh, you worked hard on that for a week? That’s nice, now go back to work.’ Even if you tell them you’re going to archive it and come back to it later, that’s something.”
Most importantly, companies need to thank hackathon participants for their effort, and for pouring their passion into these projects. Gratitude goes a long way toward keeping people fulfilled and investing their full hearts in their work. You’d be surprised how many people come up with ideas at hack events and then decide to pursue them on their own when they don’t get support, van Schneider says.
Right now, Spotify is working to develop one of the projects that came out of a recent hackathon. The three people responsible for the idea were given a full year to flesh it out and implement it–they own it end-to-end.
The final idea is to figure out how to use this iterative approach to finding out what people really need. Greg Satell writes about this in a great post on developing iterative strategy. He says:
In a fast moving world, where technological cycles outpace planning cycles, we need to continuously reevaluate the context in which we operate.
That’s why I’ve argued for a more Bayesian approach to strategy in which we’re not trying to “get it right” as much as we are trying to become less wrong over time. That requires a more adaptive approach, but also substantive differences in how we operate—less hierarchical, more agile, and more sensitive to changes in the marketplace.
It also compels us to make important changes to our business systems that enable us to integrate prediction and planning into normal operations. It’s no longer possible to separate strategy work from everyday activities…
Hagel clearly explains why the competitive environment is more turbulent these days. If we are in established organisations, this means that we will eventually be competing against startups that are taking advantage of the approach outlined by Adams – rapid iteration based on hypothesis testing and data.
To combat this, we need to build these skills as well. If doing this is a psychology experiment, then it’s time for us to be psychologists.