Achieving product market fit in startup context - The-state-of-practices and underlying theories
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The presentation was given in a Computer Science conference at Pakistan, about several empirical studies on building Minimum Viable Product (MVP), challenges and common practices among software startups. Also, it presents how to use Design Thinking, Cynefine model and Technical Debt in startup context.
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Achieving product market fit in startup context - The-state-of-practices and underlying theories
- 1. Achieving product-market fit in software startups – theories and practices Dr. Anh Nguyen Duc Software Innovation Lab, IDI Norwegian University of Science and Technology Keynote @International Conference on Computing and Information Sciences (ICCIS2016)
- 2. Agenda • Norway – NTNU – Myself • Evolution of computing • Startups – concepts and challenges • Theories and practices on achieving product market fit • Take away lessons
- 5. Department of Computer and Information Science Source: https://www.ntnu.edu/idi/research/
- 6. My research profile • Design metrics and defect prediction • Component based Requirement Engineering • Coordination in Socio Technical system • Software Startup
- 7. The evolution of computing 1950-1960s 1970s 1980s 1990s 2000s 2010s First computer Mainframe- based Client-server Internet- based Social computing IOT Source:https://www.interaction- design.org/literature/book/the-encyclopedia-of-human- computer-interaction-2nd-ed/socio-technical-system-
- 8. The evolution of computing Source: https://www.interaction- design.org/literature/book/the-encyclopedia-of-human- computer-interaction-2nd-ed/socio-technical-system-design
- 9. Source: http://digest.dx3canada.com/2015/08/05/gartner- hype-cycle-2015-preview-predictions/ “maturity, adoption and business application of specific technologies” Gartner’s Hype Cycle
- 11. Product-Market Fit Product-Market Fit Customer and Market Match Constraint
- 13. Startup Companies are unique … a newly emerged, fast-growing business that aims to meet a market demand by developing or offering an innovative product, process, service… Source: Sutton, Stanley M. "The role of process in a software start-up." IEEE Software 17.4 (2000): 33-39.
- 14. in US and Europe combined for startup companies in private investments ~570 Billion USD Source: Pitchbook.com Why should we care?
- 15. “A startup is a temporary organization formed to search for a repeatable and scalable business model.” - Steve Blank
- 16. “A startup is a temporary organization formed to search for a repeatable and scalable business model.” - Steve Blank Ok. This is a definition but what do the startups strive for?
- 19. 19 What are the key challenges software startups are dealing with?
- 20. SURVEY – APPROACH 20 • 90 countries around the world – United States 52,60% – Canada 7,94% – United Kingdom 6,71% – Israel 5,30% – India 4,50% • Cover different market sectors (predominately in the consumer market, such as mobile and Internet, i.e. 64,40%). • Young and small in size
- 21. SURVEY – RESULT 21 0 200 400 600 800 1000 1200 Reaching the Break-even Point Staying Focused and Disciplined Targeting a Niche Market Defining Minimum Viable Product Managing Multiple Tasks Delivering Customer Value Building Entrepreneurial Teams Acquiring Initial Funding Acquiring First Paying Customers Thriving in Technology Uncertainty # of Responses Challenges List of top 10 key challenges of early-stage software startups Source: Wang et al. (2016). Key Challenges in Software Startups Across Life Cycle Stages, XP 2016, Springer LNBIP
- 23. The Lean Startup Main idea: manage startup as a series of conrolled experiments
- 24. 24 Minimum Viable Product … just enough features to gather validated learning about the product
- 25. 25 How are Minimum Viable Products (MVPs) were built in reality?
- 27. Common types of MVP Source:NgyuenDuc,A.,&Abrahamsson,P.(2016).MinimumViable ProductorMultipleFacetProduct?TheRoleofMVPinSoftware Startups,XP2016,SpringerLNBIP A B C D E
- 28. Common types of MVP
- 29. Four dimensions of MVPS
- 30. Product market fit is achieved by a successful MVP. What is next ?
- 31. Source: Bajwa et al. (2016). “Failures” to be Celebrated: An Analysis of Major Pivots of Software Startups, Journal of Empirical Software Engineering Software Startups Before Pivot(s) After Pivot(s) Android Operating system for cameras Operating system for smartphone (mobile handsets) Flickr Neverending: a massive multiplayer online role-playing game Sharing photos online Groupon thepoint.com: Social goods fund raising site based on tipping point Group buying site working on same tipping point Instagram Burbn: Location based service Photo sharing app having different filtration criteria Paypal Confinity: help Palm Pilot users exchange money electronically Online monetary exchanges Pinterest Window shopping using mobile Collection of favourite items, and sharing it with friends Twitter Odeo: Personal podcasting service A microblogging platform YouTube Video dating platform Sharing videos online All startups change directions
- 32. The Hunter Gatherer Model Source:Steinert,M.,Leifer,L.J.2012.‘FindingOne’sWay’:Re-Discovering aHunter-GathererModelbasedonWayfaring.InternationalJournalof EngineeringEducation,28,2,251-252
- 33. Cynefin framework of sense making Source:Snowden,D.,Boone,M.2007.ALeader’sFrameworkfor DecisionMaking.HarvardBusinessReview,69–76
- 34. A Greenfield Startup Model Source: Giardino, C. et al. (2016). Software development in startup companies: The greenfield startup model, IEEE Transactions on Software Engineering, 42(6). • 13 cases (5 US, 8 EU, 1 NZL) • Grounded Theory Method • The model is formed by 128 sub-categories, • clustered in 35 groups, • and finally in 7 categories
- 35. Summary: Key Takeaways • Customer value drives the invention and adoption of technology • Software startups often fail due to both technological and market issues • Product-market fit changes over time • It is critical to have a light-weight, cheap and fast way of experimenting MVPs • Much further studies needed to understand and support software startups
- 36. Customer Product Fit Market Product Fit Growth First paying customer First active users Defining MVP Initial funding Delivering user value Reaching break even point Technical Debt Growing teams Targeting niche market Transforming organization
- 37. Acknowledgement • Department of Computer and Information Science, NTNU • Software Startup Research Network • Muml AS
- 38. Thank You! You can reach me at anhn@idi.ntnu.no
Editor's Notes
- My presentation is about achieving product market fit in startup context, state of practice challenges and underlying theories. So first let have a look at this photo. This is iceberg, orgignal is German word and in English means ice mountain. You see only a small fraction of an iceberg is visible above the water line, whereas the larger part of an iceberg is hidden beneath the water This is a good metaphor What come to your mind when seeing this photo ? In Computer Science it is applicable to many things, front end back end design, Recommendation system, … This gap refers to the fact that by the time a high-tech product gets to market, it is fundamentally dated. This may mean that the product is too slow or doesn’t have the full suite of features currently demanded by the market. We will discover what the metaphor says during the presentation.
- Here is brief overview I will tell a bit about myself about Norway and our university Then I will make a bit argument here to bridge the gap from technology business gap The main part will be about software startups, What do we know about achieving product market fit Underlying theories vs state of practice in companies
- This is Stig, he is a taxi driver in oslo. He is running a Tesla for his work. Tesla is selling very well in Norway. In Trondheim ... This partly due to the electric vehicle movement in Norway … But the main point here is excellence user experience and customer value. Stig is happy about the big screen with a lot of supporting features. It helps him a lot in his daily job. He might not know about all the technologies behind 4g, sensors, autopilot, …what he sees is this car brings him a wow experience. Norway is a small country in scandinavia but quite rich interm of GDP per capita. The country is known for high end technology development and adoption
- You may know that Oslo is the capital of Norway but people consider Trondheim is the technical capital of the country. Where I working is Norwegian University of Science and Technology, after a merge with three university colleges, the student population reaches 27000 and we are the largetst university of the country. There are five noble prizes afflicated with NTNU. It was convenient for prize holder to get their medal in a day trip to Oslo. Total funding for research is about 673 mil. Eur in 2015, mostly from domestic fund. … NTNU has four out of 21 Norway center of excellence to promote world class research quality.
- I worked at Department of Computer and Information Science, one of the most active department in publishing research results. You can see there is a wide range of research area, from hardware side like Computer Architecture , Graphics, to more Software and Information System side. Research activities in the deparment often crossing organizational borders. It is current interest on smart cities, digital ecosystems health information and wireless sensor networks
- My research focus is Empirical Software Engineering to investigate and experiment with software engineering methods, processes, practices. We use methods like exepriments, case studies, survey, action research to confirm, build and validate theories in Software Engineering. My early research focus was on data mining and prediction techniques, like statistical regression model, bayesian network and classification trees. We collected metrics from code and design level and applied the techniques to predict the quality and defects of software products. Then I was driven by a research project on requirement engineering in .l.. The special with CBSE is the focus on finding a component and use it to satisfy the customer requirements. It is about decision buy or build More recently in our research group we looked at socio technical system in context of global distributed team, how to govern the team coordination and collaboration across locations. The latest work, is also a part I want to present today is about Software Startups. We establish a network of Software startup researcher and practitioner aim to understand and validate practices of a successful startup. Most of the research about software startups available is written by our network members.
- There are still discussion about the earliest operationable computer. But among 50 60s of last centuries there were first computers that can perform operations with loops, branches, subroutines, In the 1970s, a hardware company called IBM was a computing leader. In the 1980s software became more important, so by the 1990s a software company called Microsoft took the computing lead, Everyone are now so familiary with Windows and Office. During the 1990s, computing became more personal with the bloom of internet and search engine. Google offered the ultimate personal service, free access to online content and became the new computing leader. The 2000s computing evolved yet again, to become a social medium as well as a personal tool. So now Facebook challenges Google, as Google challenged Microsoft, as Microsoft challenged IBM. In 2010s we have heard a lot about Ubiquitous computing, about internet of things, industry 4.0 with the evolution from chip and semi conductors level.
- What began as just hardware became about software, then people, and now communities. This offer another view of computing This offers different layer of abstraction. In the mechanical view, we look at computer, mobile phone , car and other stuffs as a hardware unit. In the informational view, it is all about data. On a mobile phone we do not look at how the phone is built from but about what mobile application it has. we a computer is all hardware, but in the informational view it is all data In the psychiological level, we look at the human factor in adopting the technology including software and hardware. The focus of this layer is on how human interact with IT system. Finally, people can form an online community with hardware, software, personal and community levels. If the first two levels are technical and the last two social, the result is a socio-technical system (STS)
- You may all familiar with the Gartner's Hype Cycle Chart that shows their prediction on the maturity, adoption and business application of specific technologies The Hype Cycle is not about the usefulness or the quality of the technology or whether people will actually use it in the future. Instead Gartner calls it an evaluation of “the market promotion and perception of value” of these technologies. Internet Of Things made some important leaps in 2014-15 But now we havent seen real adoption of IoT in daily life. Research about human factors in development, deployment and adoption of IoT is still infancy. And this will be similar for … Technologies comes and goes but the importance always lies in the relationship between the technology and human who adopt it
- Come back to the concept of abstraction level in computing world, I need to mention about a relevant concept which is socio technical gap This has been a challenge for so many years of research. This is a gap between functionalities, experience provided by IT system and what actually required from human and social sides. Why we have this gap ? There are so many IT system and service providers in the world. But there is still so much trouble with socio technical gap This comes partly from the limitation of technical capability in each context of operation and also from the complexity of context by it sefl.
- Let s look at the diagram from customer value point of view. There is no more society and community, it ill customer and market. It is not only about adoption but also purchase. In the opposite of socio technical gap is product market fit. By definition Product/market fit is the degree to which a product satisfies a market demand What do
- Product/market fit has been identified as a first step to building a successful business in which the company meets early adopters, gathers feedback and gauges interest in its product(s).
- Product market is essential for startups Innovation can be seen from both product process, services or market Product . In our department we have research groups inventing quantum computation is analog and uses quantum bits. They can make transitor based computer history .. Process: improving ways of production or delivery method Service innovation on the go service with uber or peer to peer rent with airbnb Market is
- Why are we caring about 1st Software startups are in mainstream , gain a lot of attentions from invsetors , cooperations and nations It is expected to be source of innovation, job creations and economic growth. High value and high impact sector Research that improves the sucessful rate of startups by an odd will still be significant for the world
- To here: 24mins To clarify the scope here, startups are different from SME and large more established companies Blank is recognized for developing the Customer Development methodology, which launched the Lean Startup movement.[
- The first condition for every startups is a business idea. We have talked about ideas that have changed the world, Transformation is what startups are continually looking for. Can the idea change attitudes, beliefs and behaviors? Simple enough to be spread out
- A technology push means the ideas from new inventions or R&D result, this is gone through production and sale to the market. Market pull, in the other hand, is the product idea coming from observing market needs and put into research and production. Is an entrepreneur with a market need in mind need better positioned for success than an entrepreneur who starts with a technology but “needs” a need? So, tech-push and market-pull are two sides of the same coin for entrepreneurs. A successful startup requires both a well-defined problem to solve and a well-formed solution that addresses the problem.
- We assume that startups have an idea in mind. So is it straight forward to them getting their product launch and get milllon dollars cash flow? It is known that startups often fail. so many startups fail? We conducted an empirical study to understand what are key challenges that … Our idea was to identify the challenge that related to technical and engineering domain so we can focus on solving.
- We test the survey in small scale and after that we sent out the survey through linkedin, quora, github, 4100 respondent A web-based survey advertised by means of blogs etc. , on average 10 months, and , predominantly having 2 founding members. So what do you think is the most common challenge for a startup ?
- You see from the chart the top 10 key challenges for software startups. The most common one is about technology uncertainty. Technology changes so fast, you don’t know what will be the trend in tomorrow. Augment Reality, Vertual Realtiy, Internet of Things all of them can create a revolution in the society. There is also risk and hope when developing a high tech product. Acquiring first paying customer is definitely a challenge. There are many mobile apps, that grow very well with number of free account but struggling with getting early cash flow. Acuiring fundings getting more diffiult over time. In last five ten years it is easy when you have a good idea and a good pitch. But now the investors are more picky with seeing evidence, seeing your prototypes and some KPIs. Interestingly, we found the challenges coming from all dimenstions, some challenges about technology, somes about product, some about team, finance and market. 63,98% challenges are perceived during problem evaluation phase 48,23% challenges are perceived when product become mature Many startups have problem with acquiring first paying customers. The The set of problems are not the same in all startups, classified by domain, geographical location, startups types, etc.
- After years working in journalism domain, the CEO recognize the need for change the way news business is doing. Journalist are slow in reporting news, not able to cover all sectors, reading news in facebook now are much faster To develop a platform that citizens can report news and can validate news from other people. When I join the team, we have an attempt to provide the technology pull factor. We are experimenting with different recommendation technologies and geotagging. Thrving through technical uncertainty: iphone vs android, vs cross platform, video vs. imange vs text, Acquiring first paying customers: first user yes, we don’t even think about getting money from users. It is critical in the early phase to get a mass of reading Initial funding: In Norway is not a problem Building team: Deliver customer value
- No validated learning process to identify the real need of the customers The methodology aims to shorten product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and validated learning. The central hypothesis of the lean startup methodology is that if startup companies invest their time into iteratively building mvp or services to meet the needs of early customers,
- Purpose: To obtain a general overview of challenges that early-stage software startups face Tao co so tham chieu mot cac khach quan nhat co the. Xac dinh cac van de pho bien nhat, quan trong nhat de tap trung nghien cuu. A web-based survey advertised by means of blogs etc. Multiple Choice Questions (MCQs) having following parts: Introduction Background information Learning and product development status Challenges
- Purpose: To obtain a general overview of challenges that early-stage software startups face Tao co so tham chieu mot cac khach quan nhat co the. Xac dinh cac van de pho bien nhat, quan trong nhat de tap trung nghien cuu. A web-based survey advertised by means of blogs etc. Multiple Choice Questions (MCQs) having following parts: Introduction Background information Learning and product development status Challenges
- Case A product is a market place for photographers selling their photos. The team quickly build a website providing minimum features for posting, selling and tracking transaction. The website was incrementally developed to cope with changes of customer segment. Case B product is also a market place for students to sale their homemade food. Several wireframes were done before the team actually created a first working mobile application. Case C product was firstly a document management apps for building construction business. The product was totally outsourced from day 1. and the current solution offers a solution for collaboration among people working with construction. Case D product is a sale visualization and management solution. Case D team has grown to 20 people currently and adopt Agile for in-house product development. Case E is a bit special, they offer software side solution for under water camera.
- Simulate for the hunting and gathering activitities of prehistoric people 1Go hunting in teams, small, agile teams with a maximum of skill diversity that includes a good hunter but also a gathering specia- list 2 never go home prematurely . Though the journey has been long, the hunters refuse to go home and they are able to continue the quest searching for preys. The hunters are able to shift their target coordinates and in fact change the prey targeted 3 ‘bring it home’. This is the time to freeze coordinates/ requirements, to make and execute plans,
- The Cynefin (/ˈkʌnᵻvɪn//kun-ev-in) framework is an approach to decision-making and knowledge management that helps managers and policy makers incorporate complexity into their decisions. Developed in the early 2000s within IBM, it has been described as a "sense-making device".[1]