Anyone familiar with product development should recognise the image below. It’s a schematic for a start-up idea I was working on several years ago – for an employee engagement, reward and recognition app. It was the result of a number of workshops with a digital agency covering problem statements, user scenarios, workflow solutions, personas, UX/UI design and back-end architecture frameworks.
At the time, the cost quoted to build the MVP was easily 5-6 figures – and even to get to that point still required a load of work on story boards, wire frames and clickable prototypes….
Now, I would expect the developers to use something like a combination of open-source and low-cost software applications to manage the middle-ware functions, dial-up a basic cloud server to host the database and connect to external APIs, and commission a web designer to build a dedicated front-end. (I’m not a developer, programmer or coder, so apologies for any glaring errors in my assumptions…)
The growth in self-serve SaaS platforms, public APIs and low-cost hosting solutions (plus the plethora of design marketplaces) should mean that a developer can build an MVP for a tenth of the cost we were quoted.
There are obvious limitations to this approach: anything too complex, too custom, or which needs to scale quickly may break the model. Equally, stringing together a set of black boxes/off-the-shelf solutions might not work, if there are unforeseen incompatibilities or programming conflicts – especially if one component is upgraded, and there are unknown inter-dependencies that impact the other links in the chain. Which means the product development process will need to ensure a layer of code audits and test environments before deploying into production.
I was reflecting on the benefits and challenges of hermetically sealed operating systems and software programs over the weekend. In trying to downgrade my operating system (so that I could run some legacy third-party applications that no longer work thanks to some recent systems and software “upgrades”), I encountered various challenges, and it took several attempts and a couple of workarounds. The biggest problem was the lack of anything to guide me in advance – that by making certain changes to the system settings, or configuring the software a certain way, either this app or that function wouldn’t work. Also, because each component (the operating system, the software program and the third party applications) wants to defend its own turf within my device, they don’t always play nicely together in a way that the end user wants to deploy them in a single environment.
App interoperability is something that continues to frustrate when it comes to so-called systems or software upgrades. It feels like there needs to be a specialist area of product development that can better identify, mitigate and resolve potential tech debt, as well as navigate the product development maintenance schedule in anticipation of future upgrades and their likely impact, or understand the opportunities for retrofitting and keeping legacy apps current. I see too many app developers abandoning their projects because it’s just too hard to reconfigure for the latest system changes.
Taking its cue from some of the economic effects of the current pandemic, the latest Startupbootcamp Melbourne FinTech virtual demo day adopted the theme of financial health and well-being. When reduced working hours and layoffs revealed that many that people did not have enough savings to last 6 weeks, let alone 6 months, lock-down and furlough have not only put a strain on public finances, they have also revealed the need for better education on personal finance and wealth management. Meanwhile, increased regulation and compliance obligations (especially in the areas of data privacy, cyber security and KYC) are adding huge operational costs for companies and financial institutions. And despite the restrictions and disruptions of lock-down, the latest cohort of startups in the Melbourne FinTech bootcamp managed to deliver some engaging presentations.
Datacy allows people to collect, manage and sell their online data easily and transparently, and gives businesses instant access to high quality and bespoke consumer datasets. They stress that the data used in their application is legally and ethically sourced. Their process is also designed to eliminate gaps and risks inherent in many current solutions, which are often manual, fragmented and unethical. At its heart is a Chrome or Firefox browser extension. Individual consumers can generate passive income from data sales, based on user-defined permissions. Businesses can create target data sets using various parameters. Datacy charges companies to access the end-user data, and also takes a 15% commission on every transaction via the plugin – some of which is distributed to end-users, but it wasn’t clear how that works. For example, is it distributed in equal proportions to everyone, or is it weighted by the “value” (however defined or calculated) of an individual’s data?
Harpocrates Solutions provides a simplified data privacy via a “compliance compliance as a service” model. Seeing itself as part of the “Trust Economy”, Harpocrates is making privacy implementations easier. It achieves this by monitoring and observing daily regulatory updates, and capturing the relevant changes. It then uses AI to manage a central repository, and to create and maintain tailored rules sets.
Mark Labs helps asset managers and institutional investors integrate environmental and social considerations into their portfolios. With increased investor interest in sustainability, portfolio managers are adopting ESG criteria in to their decision-making, and Mark Labs helps them in “optimising the impact” of their investments. There are currently an estimated $40 trillion of sustainable assets under management, but ESG portfolio management is data intensive, complex and still emerging both as an analytical skill and as a practical portfolio methodology. Mark Labs helps investors to curate, analyze and communicate data on their portfolio companies, drawing on multiple database sources, and aligning to UN Sustainable Development Goals. The founders estimate that there are $114 trillion of assets under management “at risk” if generational transfer and investor mandates shift towards more ESG criteria.
MassUp is a digital white label solution for the property and casualty insurance industry (P&C), designed to sell small item insurance at the consumer point-of-sale (POS). Describing their platform as a “plug and sell” solution, the founders noted that 70% of portable items are not covered by insurance policies, and many homes and/or contents are either uninsured or under-insured. MassUp is intended to simplify the process (“easy, accessible, online”), and will be launching in Australia under the Sorgenfrey brand in Q2 2021. For example, a product known as “The Flat Insurance” will cover items in and out of your home for a single monthly premium. As MassUp appears to be a tech solution, rather than a policy issuer, underwriter or re-insurer, I couldn’t see how they can achieve competitive policy rates both at scale and with simplicity (especially the claims process). Also, as we know, vendors love to “upsell” insurance on tech appliances, but many such policies have been seen to be redundant when considering existing statutory consumer rights and product warranties. On the other hand, short-term insurance policies (e.g., when I’m traveling, or on holiday, or renting out my home on AirBnB) are increasingly of interest to some consumers.
Ontrack provides B2B white label digital retirement planning solutions for financial institutions to help their customers in a more personalised way. There is a general consumer reluctance to pay for financial advice, but retirement planning is deemed too complicated. Taking an “holistic” approach, the founders claim to have developed a “best in class simulation engine” – founded on expected retirement spending priorities (rather than trying to predict the cost of living in 20 years’ time). Drawing on their industry experience, the founders stated that a key challenge for many financial planning providers is getting members comfortable with your service. I would also add that reducing complexity with cost-effective products is also key – and financial education forms a big part of the solution.
In Australia, the past 10 years has seen a major exit from the financial planning and wealth management industry – both at the individual adviser level (higher professional qualification requirements, increased compliance costs, and the end of trailing sales commissions in favour of “fee for advice”); and at the institutional level (3 of the big 4 banks have essentially withdrawn from offering financial planning and wealth management services). At the same time, there have been a number of new players – including many non-bank or non-financial institution providers – offering so-called robo-advice and “advice at scale”, mainly designed to reduce costs. In addition, the statutory superannuation regime keeps being tweaked so it is increasingly difficult to plan for the future, with the constant tax and other changes. Superannuation (a key success story of the Keating government) is just one of the “pillars” of personal finance in retirement: the others are the Commonwealth government aged pension (means-tested), personal wealth management (e.g., investments outside of superannuation); and retirement housing (with the expectation of more people opting to remain in their own homes). I would also include earnings from part-time employment while in “retirement”, as people work longer into older age (either from choice or necessity) – how that aligns with the aged pension and/or self-funded retirement is another part of the constantly-shifting tax and social security regime.
This product describes itself as a customer data platform that powers stored value, and was described as a “Safe harbour” solution (I’m not quite sure that’s what the founders meant in this context?). According to the pitch, consumers gain a fair and equitable outcome (consumer discounts), while retailers get targeted audiences. The team have created a vertically integrated gift card platform (working with MasterCard, Apple Pay and GooglePay), and launched JamJar, a cashback solution.
Similar to Harpocrates (above), RegRadar is a regulatory screening platform that helps companies “to set routes and avoid crashes”. The tool monitors regulatory changes (initially in the financial, food and healthcare sectors) and uses a pro-active process to developing a regulatory screening strategy, backed by analysis and a decision-support tool.
Having worked in legal, regulatory and compliance publishing for many years myself, I appreciate the challenge companies face when trying to keep up with the latest regulations, especially where they may be subject to multiple regulatory bodies within and across multiple jurisdictions. However, improved technology such as smart decision-support tools for building and maintaining rules-based business systems has helped enormously. In addition, most legislation is now online, so it can be searched more easily and monitored via automated alerts. Plus services such as Westlaw and Lexis-Nexis can also help companies track what is currently “good” or “bad” law by tracking court decisions, law reports and legislative updates.
As with the recent Startupbootcamp Virtual Demo Day, the Antler incubator program also ran its Demo Day Rewired as a live webcast. Both online events were an opportunity to see what their respective startup teams could achieve in less than 3 months, and a chance to interact in real-time with the founders themselves. The main difference was that Antler decided to stream the event live (rather than broadcast pre-recorded presentations) which worked surprisingly well in the circumstances – and not just the technology; it must have been really challenging to pitch to an empty room, with no ability to “read” the audience.
Like Startupbootcamp, the majority of teams were only formed at the start of this cohort, and to do this during the current pandemic lock-down must have been especially challenging.
Of the 12 teams to present, half were SaaS solutions, two were curated marketplaces, two were related to carbon offsets, while the remaining pitches offered a support platform for people suffering addiction, and an investment solution aimed at Millennials.
All of the SaaS teams, deal in some way with managing other SaaS applications, as follows:
Intalayer – streamlining software development and product management tools
motiveOS – streamlining CRM, accounting and billing systems to track sales commissions
meetric – streamlining productivity and collaboration tools
CloudOlive and Hudled – streamlining the procurement, provisioning and management of SaaS stacks themselves
Given the similar nature of these concepts, there was some commonality in their approach to problem identification, solution design, and market sizing. A number of the audience questions also asked why existing incumbents in each of the specific verticals wouldn’t simply come up with their own solution (even if it was simply to offer 3rd party plug-ins, which leading SaaS platforms such as Xero and Salesforce already do)?
Both Pathzero and Traceaim to make it easier/cheaper to go carbon neutral (via carbon credits and offsets) for SMEs and consumers respectively. Both solutions are essentially curated services, to help customers access, evaluate and verify carbon offsets and make informed decisions about going carbon neutral. Other traditional solutions involve repackaging wholesale schemes (often expensive to administer, since they are not designed for small businesses and retail consumers), or they lack transparent reporting and certification. Blockchain (as a form of immutable distributed ledger) and tokenisation (to streamline the origination, structuring and distribution of carbon offset assets) are also concepts that are being explored.
In the curated marketplaces, Mys Tyler is a platform for women’s fashion, and RightPawis designed to help dog breeders connect with prospective dog owners. The former may find an opening now that Amazon has decided to decommission the Echo Look (an AI-supported camera offering fashion advice) although Amazon claims most of the features have been incorporated into the main Amazon Shopping app. While the latter made the point that during Covid19 lock-down in April, online pet scams increased 5-fold.
Combining clinical research, community networking and self-help solutions, Aurelius is designing an online support system for people who suffer from addiction, or living with family and friend who do. It’s quite an ambitious goal, given the value will be in providing highly personalized, proven and achievable outcomes for their users, but the team are not, and do not claim to be, medically qualified professionals. It was not clear from the pitch how the service will be funded.
Finally, Yolo ex is designed to be an investment platform aimed at Millennials. On the one hand, it was suggested that younger people don’t have access to investment products and services suited to their needs, since current solutions are geared towards older investors. On the other, Millennials are said to be more likely to research and do their own analysis on investment choices and opportunities. Part of me thinks that if it was that easy, superannuation brands and financial planners would find it easy to engage with this demographic (remember those colourful ads for Kinetic Super, before it ended up merging with Sun Super?). Another part of me is encouraged by what I have seen after more than four years working in the Blockchain and crypto space – the adoption of Bitcoin and other digital assets by younger people demonstrates that they looking for alternatives to what the major banks and traditional wealth management providers offer them. And not all of them are looking to make a quick buck via RobinHood and Hertz….
As a follow up to last week’s post on business strategy, this week’s theme is product development – in particular, the perennial debate over “product-market fit” that start-up businesses and incumbents both struggle with.
The link between business strategy and product development is two-fold: first, the business strategy defines what markets you are in (industry sectors, customer segments, geographic locations etc.), and therefore what products and services you offer; second, to engage target customers, you need to provide them with the solutions they want and are willing to pay for.
The “product-market fit” is a core challenge that many start-ups struggle to solve or articulate. A great product concept is worth nothing unless there are customers who want it, in the way that you intend to offer it, and which aligns with your go-to-market strategy.
I appreciate that there is an element of chicken and egg involved in product development – unless you can show customers an actual product it can be difficult to engage them; and unless you can engage them, how can they tell you what they want (assuming they already know the answer to that question)? How often do customers really say, “I didn’t know I needed that until I saw it”? (Mind you, a quick scan across various crowd-funding platforms, or TV shopping channels, can reveal thousands of amazing products you didn’t know you couldn’t live without!) Of course, if your product development team can successfully anticipate unmet or unforeseen needs, then they should be on to a winner every time! In fact, being ahead of the curve, and understanding or even predicting the market direction is a key aspect of business strategy and product development for medium and long-term planning and forecasting.
Then there is the “build it and they will come” strategy. A bold move in most cases, as it involves upfront deployment of capital and resources before a single customer walks through the door. The image above is the only visual record I can find of a soft drink marketed in South Australia during the late 1960s and early 1970s. And you read the label correctly – a chocolate flavoured carbonated beverage (not a chocolate milk or soy concoction). It was introduced when the local manufacturer faced strong competition from international soft drink brands. No doubt it was designed to “corner the market” in a hitherto under-served category and to diversify against the competitor strongholds over other product lines. Likewise, is was launched on the assumption that people like fizzy drinks and people like chocolate, so hey presto, we have a winning combination! It was short-lived, of course, but ironically this was also around the time that soft drink company Schweppes merged with confectionery business Cadbury, and commentators joked that they would launch a chocolate soda, or a fizzy bar of chocolate….
With data analysis and market research, it may be possible to predict likely successes, based on past experience (sales history), customer feedback (solicited and unsolicited) and market scans (what are the social, business and technology trends). But obviously, past performance is no guarantee of future returns. In my early days as a product manager in publishing, we had monthly commissioning committees where we each presented our proposals for front list titles. Financial forecasts for the new products were largely based on sales of relevant back catalogue, and customer surveys. As product managers, we got very good at how to “read” the data, and presenting the facts that best suited our proposals. In fact, the Chairman used to say we were almost too convincing, that it became difficult to second guess our predictions. With limited production capacity, it nevertheless became imperative to prioritise resources and even reject some titles, however “convincing” they seemed.
Then there is the need to have a constant pipeline of new products, to refresh the range, retire under-performing products, and to respond to changing market conditions and tastes. In the heyday of the popular music industry from the 1960s to the late 1990s, the major record labels reckoned they needed to release 20 new song titles for every hit recording. And of course, being able to identify those 20 releases in the first place was a work of art in itself. For many software companies, the pipeline is now based on scheduled releases and regular updates to existing products, including additional features and new enhancements (particularly subscription services).
An important role of product managers is knowing when to retire an existing service, especially in the face of declining or flat sales. Usually, this involves migrating existing customers to a new or improved platform, with the expectation of generating new revenue and/or improving margins. But convincing your colleagues to give up an established product (and potentially upset current customers) can sometimes be challenging, leading to reluctance, uncertainty and indecision. In a previous role, I was tasked with retiring a long-established product, and move the existing clients to a better (but more expensive) platform. Despite the naysayers, our team managed to retire the legacy product (resulting in substantial cost savings), and although some clients chose not to migrate, the overall revenue (and margin) increased.
Finally, reduced costs of technology and the abundance of data analytics means it should be easier to market test new prototypes, running proofs-of-concept or A/B testing different business models. But what that can mean for some start-ups is that they end up trying to replicate a winning formula, simply in order to capture market share (and therefore raise capital), and in pursuit of customers, they sacrifice revenue and profit.