Facebook was right to run its test

Lately, there has been an uproar over Facebook’s study on emotional contagion in a large number of users’ feeds. The study seemed to indicate that Facebook had the ability to make people happier or sadder – that is, manipulate their emotions – by manipulating the content of their feeds.

Lots of people don’t like the idea of being unwitting lab rats for experiments, or at the prospect of a corporation having the ability to control our thoughts and emotions, or just the danger of conducting such a study:

In my mind, however, these arguments rest on a faulty assumption, which is that Facebook isn’t already manipulating our emotions, at least by accident. Indeed, the studies done on this topic seem to suggest the opposite; Facebook already impacts its users’ emotions significantly. (onetwo)

In addition, Facebook has to use some algorithm to show content to its users. I think it’s a mistake to assume that there is a “neutral” scenario, especially when all evidence is to the contrary.

Then this issue really becomes a question of understanding what’s already happening, not about doing something different qualitatively different, and it’s clear to me that in this frame Facebook should be conducting experiments like this (within limits, obviously).

The take by some, though, is that it’s not the experiment itself that’s troubling, but that it was conducted without its users knowing:

But again, if there really is no neutral scenario, and your emotions are going to be manipulated in any sort of consumption of Facebook, then even before any intentional tests have been done, you’ve already opted in to having your emotions manipulated. Indeed, you opted in when you started using Facebook, and every time you added something to your Facebook universe, via a like or added friend, you increased the scope of what could impact you.

So I’m glad Facebook is doing this research, and I’m really glad they’re publishing it for external consumption.

Being your own customer

Recently I’ve been idly thinking about companies that have the good fortune of being their own customer. I think this is an extremely valuable place to be, because it gives you the best possible insight into your product, and insulates you from losing touch with your product’s market.

Some examples I think of:

  • Salesforce’s use of their own CRM product with a team of salespeople that sell their product. Not only do they get great feedback on their own product, but the fact that they have a best-in-breed sales team is great marketing itself, and they get to be a thought leader in their space.
  • I bet Dropbox and Box use their own file-sharing services internally. By doing this, they get great insight into how a corporate might use their product and what features they’d need. Same with Evernote and Google Apps.

I wonder though, if this is possible only for B2B (or even more narrowly, enterprise) products. Can consumer-product companies be their own customers. Of course their employees can; but is that enough?

Experiential Companies

This post was prompted by a recent article about design at Google in Fast Company. Apparently, prior to Larry Page becoming CEO, there was real fragmentation in Google’s design across its various products. When Page took the helm, he made unifying the design vocabulary, in order to provide a consistent experience, a major priority. The goal was to become an “experiential” company, like Apple – one whose relationship with customers transcended isolated uses of their products and interfaced with whole swaths of their lives.

Experiential companies are a category beyond “product” companies. Rather than being oriented around a particular “job” in a customer’s life, they are oriented around many categories of the customer’s life, and build linkages between their products to make it easier for the customer to bring the company with them (i.e. to continue to use the company’s products) when they change contexts in their lives.

For example, a powerful “linkage” between products is to have a common user interface or user-facing design vocabulary – if you know how to use one product, you know how to use another – making it massively easier to adopt new products from the same company. Sharing data between products, or providing native interactions between them, also strengthen the relationship. A company’s products become a network in and of themselves with all the attendant competitive benefits.

To qualify, the company needs to have clearly different products – not just different features or offshoots of the core product. Otherwise you’re not breaking into new customer contexts.

As a note, I’m mainly thinking of consumer-facing companies, not enterprise companies – but if you think creatively it’s possible to view these thoughts applying to the latter, and indeed I’m sure there are enterprise-facing firms that would fit this bill.

Apple is the quintessential “experiential” company, but I would argue that this aspect of it is in decline. You don’t just use Apple products, you experience “Apple”. Apple has come to define so much of our lives because their many products serve different jobs in our lives – to play music and movies, surf the web, make calls, etc. Apple’s products are great in isolation, but the linkages helped fuel their expansion. Your iPod connected to the iTunes store on your Macbook, which was backed up by your Time Capsule, for example.

But over time, Apple’s products are losing their relationship with each other. You use your iPhone, but its relationship to your Macbook Air is becoming more tenuous.

Google is becoming, I think, the most pre-eminent experiential company. There are extremely strong linkages across their products, and they capture our interest in so many different contexts of our lives – pretty much whenever we use the Internet, for whatever purpose. Send an important email? Watch a funny video? Get car directions? How about get a funny video sent over gchat right after you send that important email – you can watch it right there.

Yahoo, on the other hand, is a poor example of this. It’s hard to see how Flickr and Tumblr (admitted only recently acquired) mesh together or how Delicious did when it was alive.

The bar is high. There aren’t that many companies that can (a) make multiple successful products and (b) create deep linkages between them.

My understanding of the product / business development sequence

Stage Product Goals Strategy Type Optimal Financing Tidbits from Clay Christensen
Problem / Solution Fit  Listen to market. Initial prototypes.  Emergent. Iterate quickly and find what works.  Seed. Want patient investors. Don't want investors that will demand growth.  Find a customer “job” that is either not served, or overserved by existing products (and that can be adequately served at much lower price point).
Product / Market Fit  Release MVP. Iterate. Place “offers” in front of customers and validate both WTP and that necessary margins can be met.  Emergent Seed  Be patient for growth, impatient for profit.
Scale  Capture market share.  Deliberate. Once what works has been found, memorialize it and develop process model around it.  Series A / Expansion capital. At this stage, taking larger sums of money from investors that will demand growth is in alignment with the business goals.  Pay attention to the weakest and strongest points in the value chain, as opportunity will migrate from strong to weak over time.

 

Twitter #conversation

A comments platform powered by Twitter.

Twitter is everywhere on the web. Twitter cards and other features allow Tweets to get distributed off of Twitter’s properties into other websites, where they can be interacted-with. I propose that Twitter develop a simple comments platform, based on Twitter’s existing functionality, that could be integrated into any website desiring a comments feature.

Goals:

  • Engagement – this product would allow Twitter users to discover interesting conversations about content they are interested in (indeed – are in the process of consuming) while they are not on Twitter’s main feed. In addition, it would enable content providers to capture and display conversations happening on Twitter about their content on their own property (while still in a feed controlled by Twitter).
  • Acquisition – web users consuming content will be exposed to Twitter in a new channel and invited to participate in a novel way.
  • Revenue – this feature would provide more Tweet impressions and would also expose a new set of “timelines” with which to integrate native ads.

Functionality

  • List of Comments. User avatars and handles listed along with comments.
    • Comments will not be displayed chronologically.
    • They will be displayed by a custom ranking having to do with activity and influence, designed to surface the most interesting conversations going on about the content
  • Before a comment is made, the user is asked to sign in. If the user is signed in on the browser they will comment with that account
  • Before a comment is made, the user will have the option of replying to a user or not.
  • When a comment is made, it is published both as a Tweet (which goes into Twitter’s “main feed”) and as a Comment (which stays on the site).
  • When making a Comment, the user will not be restricted to any character limit (or the character limit will be longer than 140 characters, at some length appropriate to a comment). If the length of the comment/Tweet, with the appropriate handles, is longer than 140 characters, the Tweet version of the Comment will be automatically shortened and will include a link to the larger Comment
  • Tweets made outside Twitter #conversation that fit any of the following criteria will also be displayed in the comments section on the web property
    • include the link to the page, or
    • are a reply to
      • a Tweet with a link to the page, or
      • a Tweet originating from a Comment on that page
  • There are at least two and potentially three “views” to consider for this content:
    • In the comments section on the web property using Twitter #conversation
    • Twitter’s “main feed”
    • The “conversation” view for Tweets that are replies to each other
  • Ads could be displayed in the feed of Comments

Product management is a dark art

At least according to Ty White.

My primary career objective is to conceive and commercialize new products.

So, post startup, I’m looking to work in product management. I love the cross functional role and the fact that you’re responsible for delivering (I like having the ball).

I’ve been speaking with as many product managers as possible. Through my conversations with people in that role I now believe the title is a pretty accurate statement.

It’s an art, not a science

The way that Angelist became a huge success and is reshaping the startup funding space is very different from, for example, how Tesla got its start. Angelist started out as an email-only product that served a community and kept adding features. It’s very easy to see how Angelist followed a “lean” model of product development. It’s very hard to see how Tesla followed any development model other than simply imagining, and then building, the future. Both are successes. So what’s the lesson?

To borrow a phrase from Warren Buffett, it seems that every product management team has their own “batting stance”.

It’s dark (as in obscure)

Product managers don’t have as much of a community – either online or offline – as other product development and corporate functions. From the outside, it’s harder to see exactly what a PM does. (And it definitely means different things in different companies).

Engineers have Github, designers have Behance and Dribbble – what do PMs have to show off new product concepts? If you know the answer, please post it as a response to this Quora question.

I’ll note: Quirky is pretty cool for physical products. But it’s less about showcasing your skill than it is about actually developing a product with a community input. And at the risk of entering a meta-cycle, Quirky’s main goal is to upend the product development cycle at large consumer brands like Proctor & Gamble.

Help me (and others)

Even arts can have well-understood processes and paradigms. In software development, some programmers might use Java and take an object-oriented approach while others might use Clojure and use a functional approach, or use Go and write procedural code. Between those three, and others, there’s no “right” or “wrong” but there are paradigms that other developers understand. Although I don’t know design nearly as well, I’m sure there are similar paradigms that define different approaches.

Amazon, for instance, has a fairly standard PM approach outlined here. This seems to be a great process. Is it an instance of a particular PM paradigm? If so, what are the other paradigms that PMs understand?

Shutting Down Building Hero

Or, the difference between Solar and Energy Efficiency Business Models

As sustainability buffs, it’s been hard not to notice the success of new solar business models in the US. Numerous large companies, like SolarCity, SunRun, SunEdison, Sungevity, Clean Power Finance – and others – have been formed to deliver solar energy in innovative ways. Third party financing is a central component, and has been huge to solar’s success in the US. In 2012, over 75% of California’s new solar systems were leased as opposed to owned outright [1].

We thought of this business model as Solar-as-a-Service; not only is there third-party financing, but maintenance and equipment replacement are also transferred from the homeowner to the solar distributor. It’s a powerful model because it “transforms a complex investment into a money-saving service” [1]. Boom. That’s an easy decision to make.

Our premise for Building Hero was that Energy Efficiency as a Service (EE-aaS) could be an even bigger opportunity. It was an easy idea to articulate: “SolarCity for Energy Efficiency”. As energy efficiency nerds and idea guys, we loved the concept and viewed it as a “no brainer” – no money down and energy savings from Day 1? How could customers possibly say no? All of our energy efficiency nerd friends agreed that it was an awesome idea and we were off to the races.

Predictably, with an approach like that, most of our target customers did in fact say no. Although we had some minor success with the model, we never attained product-market fit with our approach. Unfortunately, the reasons that Solar-aaS succeeds didn’t hold true as we dug deeper into the EE-aaS model.

We learned a ton of lessons along the way that are particular to the difficult to solve problem of EE-aaS that we wanted to share as future entrepreneurs approach this tough problem.

Want to chat? We’d be happy to. Feel free to email us geoffplewis [at] gmail or thomas [dot] vladeck [at] gmail

Inside v. Outside

The most important operational difference between Solar and EE that we encountered is what we dub “the inside v. outside problem”. Solar devices are “standalone” – not only are they on the outside of the building, but they are entirely new systems that are added to the building. They are not replacing anything. They are also invisible from the inside (where decision makers spend their day).

Considering adding something new is a different type of decision than considering replacing something you have with something different. Not only is the customer considering what they are getting, but they also must consider (and often dwell on) what they are losing. Making a core change to the aesthetic or functioning of the space is a more difficult decision to make, and that was a difficult barrier for us to overcome.

For many of our customers, the idea of having work done inside their space, no matter the benefits, immediately put a stop to the whole process.

Relative Advantage of Financing

Many energy efficiency investments produce better returns with less required financial engineering to make sense. So it follows that they should be better investments and even more financeable – right?

The mistake here is that – at least with LED lighting – financing has a lesser relative advantage over purchasing cf. solar. Solar investments have two features that make financing very valuable:

  • High capital cost relative to the assets of the decision maker

  • Complicated or inaccessible incentives that are required for the investment to make sense – tax credits chief among them

For LED lighting, the capital costs relative to the assets of the decision-maker are smaller. In addition, in the case of LED lighting, the investment can be done in stages, lowering the capital burden at any given time (something our would-be customers often proposed doing – and many have done).  Second, incentives are often not required for the investment to make sense, and they are usually made available as lump-sum cash rebates as opposed to tax credits.

The result is that the delta between investments in LED lighting (and we think this is a problem general to the energy efficiency space) that make sense without financing, and those that make sense only with financing, is much smaller than it is in solar.

Note that we are not mentioning the problems with energy efficiency investments from the perspective of the financier, namely the “negative cash flow” problem (returns come from money not spent) and the suitability of the physical investment as collateral. These have been discussed at length elsewhere, and frankly were not a factor in the success of our business.

Residential v. Commercial

Energy efficiency investments, by definition, only address part of the overall load in the building. Solar, on the other hand, is often net metered, meaning that the value of the investment is only loosely coupled with the existing energy consumption in the building. And even if the system is not net-metered, it can offset the entire building load as opposed to just the system being replaced. In residences, since people are typically out of the house during the day, many systems simply don’t get enough use to warrant an investment in more efficient equipment.

Energy efficiency investments in residences still often make sense! But take lighting, for example: lights in homes are often only on for a few hours a day. Lights in a retail store may be on for 12 hours or more every day. In a warehouse, it may be all day, every day.

The result is that energy efficiency investments make relatively more sense in commercial spaces than residences.

Residences and commercial buildings are very different from a business perspective: occupancy patterns, decision making, internal capabilities, buying patterns, etc., are all very different between the two.

Decision-making and Ingrained Buying Patterns

Solar is not only a “standalone” system that is an addition to the building, not a replacement of a system – it’s also a completely new product for most decision makers. For existing products, like lighting (or HVAC systems, or windows, etc.), a new business must disrupt existing vendor relationships.

In lighting, the barrier is especially strong. Until now, with LEDs, lighting has been a relatively “fast-moving” good. Especially in retail spaces, which use halogen lamps, lighting purchases are frequent. This has led to strong relationships between our targeted customers and their existing distributors.

Many of our customers “had a guy” that did their lighting. For this segment, the option of considering a new relationship for that portion of their space was dismissed off-the-bat. Many of these distributors offer LED lighting, but:

  • None of them offer financing (so far as we know!)

  • LED lighting options are not “what they know”, and it is much easier to keep selling the same products that have been sold for the last thirty years; and finally,

  • Distributors rely on frequent ongoing business from their relationships. Once a distributor sells their contact LED lights, they will most likely not hear from that contact for a number of years. So there is an incentive not to sell LED lighting.

From our perspective, the problem was simply that the customers wouldn’t consider our alternative. From a policy or market-structure perspective, there is the further problem that decision makers are not seeing all the available options that may convince them to switch to LEDs. In some cases not even knowing about all the LED options, and in nearly all cases not considering financing options for an investment in LEDs.

Conclusion

We both strongly believe that there are better business models out there for energy efficiency than those that exist today. We caution, though, to look beyond financing. Building energy efficiency is a huge resource and we encourage other entrepreneurs to continue attacking this market with new technologies and business models.

Both of us are happy to speak further with anyone that would like to hear more about our experiences. Our emails are geoffplewis [at] gmail [dot] com and thomas [dot] vladeck [at] gmail [dot] com.

 

[1] http://climatepolicyinitiative.org/wp-content/uploads/2013/07/Improving-Solar-Policy-Lessons-from-the-solar-leasing-boom-in-California.pdf

BSPW

What follows is the central lesson I learned from two years of working on a startup and making a ton of mistakes. A few caveats: I’ve never had a successful startup, and this resonates with my experiences and view of the world.

It’s commonly said and written, at least in the Bay Area: “build something people want” (BSPW). Yet, for my startup (Building Hero), this was the central, original reason we did not succeed. We built things, but they were not things that enough people wanted badly enough.

Why can it be hard to BSPW? It’s really two problems that reinforce each other:

1. Building a product (BS) produces tangible results whereas validating a problem (the PW part) does not

2. It’s less clear how to validate a problem then it is to build a product

So the BS part is both more tangible and more fun. You can show it to your friends and feel good about the progress you’ve made. Not only that, if you’re an entrepreneur, it’s probably because you’re excited about technology and because you have fun building things. It’s also easier for you, probably, because you’re excited about it and it’s closer to what you normally do (i.e., writing code or designing mockups). And once you have a working product, it’s very easy to get excited about its capabilities. If you’re smart, you can probably convince yourself that it’s awesome.

The PW part is much less tangible. The result of validating a problem is a clear idea of what opportunity exists, an empathic connection with your potential market, and the beginnings of an understanding of how you might solve the problem. It’s a lot harder to show people; it’s harder to get excited about; by itself it’s unfulfilling both personally and socially.

Finally, because BS is so tangible, there is significantly less cognitive overhead in figuring out how to build the product then in validating the problem. It doesn’t take too long to put together a roadmap for how you’ll build something. PW is much less tangible; it’s not clear how to begin or even what you want to end up with.

So, when faced with the choice of finishing up a webapp, which you can show your friends and pitch to investors, or individually emailing 100 people in your target market (much tougher to show your friends), it’s easy to see why many would choose the former and not the latter.

Building Something Arbitrary

If you don’t PW before you BS, it’s likely that what you’re building is arbitrary. Through a commercial lens, it doesn’t have a reason for existence. It’s just one of the infinite things that could exist. Not one of the subset of things that needs to, or should, exist.

Sometimes entrepreneurs may get lucky and build something and find out that people want it too. Or some entrepreneurs may have such a strong creative vision that they can “see the future” and build into it. I guess I’m just not that way, so I need a more defined approach.

The other issue is that starting with BS before PW is that it doesn’t equip you to evaluate how well you are doing. Really validating a problem should leave with you with an understanding of the assumptions that must be met before a product will succeed to the level you desire. Without this work below the tip of the iceberg, you’ll lack critical navigational ability: knowing what assumptions are being proven right and wrong.

In our case, we got fooled by “vanity metrics” – the number of projects we were doing and the amount of revenue we were bringing in. We didn’t have defined assumptions at the outset that we could prove right or wrong. So we made decisions based on the wrong things.

Find out what people want, then build it

Startups and Photography

My principle creative outlet is photography. I’m (slowly) getting my photos up on Flickr – but most of my photos are up at @tvladeck on Instagram, and on tomvladeck.tv – my “media” domain.

I’ve noticed recently that there a number of philosophical parallels between running an early-stage startup and being a photographer:

Two things really matter.

A photo captures a moment in time through the view of a composition. A startup attacks a market with a product designed to solve a key problem. In both cases, there is a function of perception, and a function of action. You perceive the moment, and then compose the shot. You find the problem in a market, and design a product to solve it.

Category Photography Startups
Perception Moment Market
Action Composition Product

So what about the team? And marketing? And… everything else? Remember I’m talking about an early stage startup. You are the team. You haven’t achieved product/market fit yet. And until you do, nothing else matters.

There are lots of things to worry about.

And even though only two things really matter, there are so many things to worry about. Especially if you’re really interested in photography or business more generally. But remember, these things only matter if they help you do better in the two things that really matter. These are means to an end – not ends themselves.

Photography Startups
Lens Tech Stack
Aperture/shutter settings PR
White Balance Finance
ISO Settings Accounting

It is an art of exclusion

You define a photo by what you decide to leave out of the frame. You can’t create things in the frame, you can only eliminate all but a certain portion of the view in front of you. That portion becomes your shot.

A startup is in a similar place. Instead of a hemisphere of light to whittle down, there are endless problems and markets to choose from. But you can only choose one. You have to exclude.