A startup company is a high-tech business that tries to build a scalable business model in tech-driven industries. A startup company usually follows a lean methodology, where continuous innovation, driven by built-in viral loops is the rule. Thus, driving growth and building network effects as a consequence of this strategy.
Aspect
Explanation
Definition
A Startup Company, often simply referred to as a “startup,” is a young business enterprise founded by entrepreneurs to develop and bring innovative products, services, or solutions to the market. Startups are characterized by their pursuit of growth and scalability within a relatively short timeframe. These companies typically operate in dynamic and emerging sectors, such as technology, biotechnology, or e-commerce, and aim to disrupt existing markets or create entirely new ones. Startups often face high levels of uncertainty and risk but also have the potential for rapid expansion and substantial financial returns. They typically seek funding from venture capitalists, angel investors, or crowdfunding to support their growth and innovation efforts. The startup ecosystem is marked by innovation, experimentation, and a culture of agility and adaptability.
Key Concepts
– Innovation: Startups focus on developing novel products, services, or solutions that address unmet needs or challenges. – Growth: Rapid growth and scalability are central to a startup’s objectives. – Risk-Taking: Startups often embrace risk and uncertainty in pursuit of their goals. – Entrepreneurship: The entrepreneurial spirit drives the creation and development of startups. – Investment: Funding from investors is crucial to fuel growth and innovation.
Characteristics
– Limited Resources: Startups typically operate with limited financial and human resources. – Lean Operations: Efficiency and cost-effectiveness are emphasized to make the most of available resources. – Innovation-Centric: A focus on innovation and creativity sets startups apart. – High Risk: Startups face a higher risk of failure due to the uncertainty of the market. – Adaptability: Flexibility and adaptability to market feedback are essential.
Implications
– Economic Growth: Successful startups can contribute significantly to economic growth and job creation. – Innovation: Startups drive innovation by introducing new products and technologies. – Market Disruption: They can disrupt traditional markets and industries. – Risk and Uncertainty: Startups must navigate and manage high levels of risk and uncertainty. – Investor Returns: Investors may realize substantial returns if a startup succeeds.
Advantages
– Innovation: Startups are at the forefront of innovation and technological advancement. – Job Creation: They create job opportunities and drive economic growth. – Market Opportunities: Startups identify and seize untapped market opportunities. – Entrepreneurial Spirit: The startup culture fosters entrepreneurship and creativity. – Potential for High Returns: Successful startups can generate significant returns for founders and investors.
Drawbacks
– High Failure Rate: Many startups fail due to market challenges and competition. – Financial Uncertainty: Limited funding can lead to financial instability. – Resource Constraints: Startups often operate with resource constraints. – Market Competition: Competitive landscapes can be fierce. – Stress and Pressure: Founders and team members may experience high levels of stress and pressure.
Applications
– Technology: Technology startups develop software, hardware, and digital solutions. – Biotechnology: Biotech startups work on innovations in healthcare and life sciences. – E-commerce: E-commerce startups disrupt traditional retail by operating online. – SaaS (Software as a Service): SaaS startups provide software solutions on a subscription basis. – Green Energy: Startups in renewable energy focus on sustainable solutions.
Use Cases
– Tech Startup: A group of software engineers creates a tech startup to develop a new mobile app, securing seed funding to build and launch the app. – Biotech Innovation: Scientists found a biotech startup to develop a groundbreaking medical device for detecting diseases early. They secure venture capital funding to support clinical trials. – E-commerce Disruption: Entrepreneurs start an e-commerce company to disrupt the traditional retail industry, leveraging online sales and direct-to-consumer strategies. – SaaS Solutions: A group of entrepreneurs creates a SaaS startup offering project management software on a subscription basis, attracting customers worldwide. – Clean Energy Startup: A startup pioneers innovative solar technology to make renewable energy more accessible and cost-effective, securing grants and investments for research and development.
When I interviewed Jimmy Soni, author of The Founders (major research and book about PayPal of the early days), a few key points came up about the PayPal story, which made it one of the companies that built the startup playbook of the last decades.
We can argue that PayPal (and a few other companies of the early Internet) built what we call today “a startup.”
The reason why I picked PayPal as an example it’s because it tried to build a valuable company in an industry (that of payments) for which the Internet was not necessarily a native technology (as we’ll see the first killer commercial applications comprised browsing, searching, media, and e-commerce) and not necessarily payments.
The story of PayPal is so interesting, for a few reasons that we can sum up below.
The story of PayPal has so many turns of events, that seem so improbable it survived in the first place, in hindsight.
To give you a bit of context, we are in the late 1990s, and Internet startups were proliferating. We are in the midst of the dot.com bubble.
This bubble opened up in full swing with the IPO of Netscape IPOing in 1995. Netscape was the first commercial web browser (Mosaic was not commercialized initially), and it was built by James H. Clark, Marc Andreessen (now in charge of venture capital fund a16z), and the development team that had also coded the Mosaic browser (the founding team).
In fact, Andreessen, called up by entrepreneur James H. Clark, built the team to put together Netscape. It was a massive success. Netscape figured that if they took over the whole browsers’ market, they could leverage overtime on their platform, to make wide margins and eventually be profitable (Netscape never reached profitability, until it sold to AOL in 1998).
Browsing turned out to be a killer application of the Internet, as explained in the History of AOL.
The Original Sin of The Internet
Thus, the Internet at the time had turned pretty interesting for commercial applications related to browsing, searching, and e-commerce.
While payments represented another area where the Internet could innovate, the commercial applications that were developing behind that were way more complex to implement. In fact, while it was possible to build a valuable Internet business based on media, entertainment, and e-commerce.
It was way more complex at the time to enable the Internet to be a breakthrough when it came to payments. That’s because in order for it to succeed you needed the involvement of the legacy system comprised of banks, credit cards, and traditional institutions that didn’t want to be part of that game at all.
Later on, Marc Andreessen called that “The Original Sin of The Internet” (we edited the text below to make it more readable). As Andreessen explained:
We tried to build payments in the browser and it was not possible…we made a huge mistake, we tried to work with the banks, and with the credit cards companies, and let me start by saying that those organizations have come in a long way…
He went on with the story. He explained how also Microsoft was working for a solution to embed payments into the browser and they also had failed. As Andreessen further explained:
We allied with MasterCard, Microsoft allied with Visa.
We [at Netscape] sat down and had our first meeting with MasterCard in 1994, and they want to work with us, and we asked whom from MasterCard should we meet with, and they said we got this guy, ‘our technology visionary’, we sat ‘Joe’ down in front of a PC, hooked up the Internet with the browser and we said ‘click on this link’ and he takes his finger and push it into the screen. It’s 1994, it’s nine years since Apple has invented the Macintosh, and he’s never seen a mouse! And he’s the technology visionary at MasterCard, oh god, we’re completely hosed!
I’m telling you the story above to have you understand the context of the last 1990s, where the Internet was taking over media and e-commerce but was still far from taking over payments (it would still take one decade for this commercial use case to become fully viable).
In that context, two startups, in 1999, were trying to do just that, enabling the Internet to become a native place for payments. Yet they did it with two completely different approaches.
Tackling The Hardest Commercial Application on The Internet: Payments
In 1999, two startups (Confinity and X.com) were operating in the internet payment industry.
Yet, while they were neighbors (initially their offices were in the same building), they also recognized how different they were from each other. Musk (founder of X.com) thought Confinity was “dumb” and Confinity thought X.com hadn’t a chance to make it!
Confinity had started to build a valuable company by looking at a narrow application: enabling payments through the PalmPilot.
PalmPilots are maybe the distant ancestors of your iPhones, and they were handheld devices that were very popular in the mid-1990s and they had introduced an infrared port as one update in the latest series of PalmPilots and Max Levchin’s idea was we can do cryptographically secure transactions between this. So if I’m sitting at lunch with you and I want to send you $10, how cool would it be if I could do that through the infrared port on my PalmPilot?
The other side of the origin story, which is really never really gotten truly, I think explored is Elon Musk had successfully built and then sold a company called Zip2. And he was thinking about what would come next for him. And from his days as an intern at a bank in Canada, he had thought a lot about how the financial system was running on old technology and that there were unnecessary fees, unnecessary bloat, middlemen, bureaucracy within that financial system.
And he thought, well, look, the internet is fundamentally reducing a lot of that in other industries, it should do so in finance, so he built and found three co-founders for a site that was X.com and X.com was going to be a revolution in finance; banking, insurance mortgages. It was going to do everything. At one point I had employees tell me he would say, “We’re going to be the federal reserve. We’re going to be the world’s financial system.” It was a vast ambition, certainly different from beaming money, but those were the two predecessor companies of the company that becomes PayPal.
Therefore, the two companies not only had a fundamentally different vision, but they also had a different philosophy in terms of the underlying technological infrastructure they had developed (X.com leveraged the Microsoft stack, where Confinity leveraged Linux, open-source software).
Eventually, those two companies ended up merging to become one: PayPal.
The Merger: From Grandiose Vision To Commercial Killer Application
Elon Musk and Peter Thiel, the founding members of two Internet startups, who were trying to redefine banking, were going to the meeting that sealed the two companies as one: PayPal.
In 2000, the meeting was at Sequoia Capital, one of the most influential VC firms in the Valley.
Elon Musk was driving his McLaren F1 (a one-million-dollar car) up Sand Hill Road. He was with Peter Thiel, as they were going to seal the merge between X.com (the company Musk had founded a year earlier) and Confinity (the company Thiel had established a couple of years before) to create PayPal.
As the story goes, Peter Thiel asked Musk, “what can this do?” (referring to the McLaren F1).
Musk replied, “watch this!”
Musk floored the car and did a sudden lane change. Yet he lost control of the vehicle, which started spinning until it hit an embankment on Sand Hill Road, thus wrecking it off!
Musk and Thiel were ok, and Thiel had a lift to Sequoia offices. Musk waited for the car to be picked up and met at Sequoia.
Pretending as if nothing had happened, they closed the deal!
While both companies had some grandiose visions, the market also turned out in a direction that none of them had foreseen. Enabling email payments which were supposed to be a “side feature” became the killer commercial applications for both companies.
They also figured that their tools had become extremely relevant on eBay. This triggered an irreversible journey. Where both startups understood the path to growth, leveraged virality to get there, and eventually decided to merge to tackle the market.
So Different And Yet Running According To The Same Business Playbook
As the two companies merged, and became officially PayPal, dramas didn’t end up there.
As the companies merged, in the coming months, PayPal faced many near-death experiences.
Among these is the fact that they completely depended on a platform, eBay, which while could not shut them down, as the PayPal service was such a great product for eBay power users, the company was trying to build and launch (unsuccessfully) its own payment service.
And the drama only got worse, when Musk who had led the company since the merger, eventually got ousted with a coup from Thiel, Levchin, and Sachs (and this happened Musk was on honeymoon, and on an airplane, thus it was impossible for him to rebuke).
As an interesting side note, as Musk was hosted (we are in September 2020), this gave Musk the freedom to start thinking about his next startup, which would later become the space exploration company: SpaceX! (here is the full story).
Eventually, PayPal would be bought by eBay in 2002, for $1.5 billion.
The money from the purchase gave to the early founders, what later was called The PayPal Mafia, the resources, know-how, and understanding of the tech world that gave them the bandwidth to build up what today we call Web 2.0.
Founding Web 2.0
The founding members of PayPal would go on to build many other valuable companies and found the next wave of the Internet, what we now call Web 2.0 or Web2.
I noted some below. And beyond the people below, it’s worth mentioning that many of the PayPal employees that stayed at eBay helped its further growth and many others flew to many tech companies in Silicon Valley:
While Confinity and X.com were completely different companies, from a philosophical standpoint. They were similar in the kind of business playbook to follow.
They understood continuous iteration vs. perfectionism. They knew how to balance vision with short-term goals. They knew how to build distribution into their products.
All these things that we give for granted at the time, didn’t exist in theory back then. They were figuring things out on the fly!
During this process, a new business playbook has been developed.
Again, today we give some of those methodologies, frameworks, and ideas for granted but at the time they didn’t exist.
That is why PayPal’s history is so instrumental to the commercial Internet.
Let’s explore some of these frameworks, tools, and the mindset that connected them all.
Viral growth
In the Lean Startup, Eric Ries defined the engine of growth as “the mechanism that startups use to achieve sustainable growth.” He described sustainable growth as following a simple rule, “new customers come from the actions of past customers.” The three engines of growth are the sticky engine, the viral engine, and the paid engine. Each of those can be measured and tracked by a few key metrics.
When PayPal’s growth exploded it did that through two-sided viral loops.
The company sent $10 to both invitees and the inviters if the former signed up. Thus, both sides got incentivized.
This might seem a trivial strategy now, but at the time it was quite counterintuitive and seemingly expensive.
Many other startups (Dropbox and a bunch of other startups would use this as the main growth driver).
Product-Market Fit
Marc Andreessen defined Product/market fit as “being in a good market with a product that can satisfy that market.” According to Andreessen, that is a moment when a product or service has its place in the market, thus enabling traction for the company offering that product or service.
Andy Rachleff who cofounded the firm Benchmark Capital, and also a co-founder and CEO of Wealthfront in an interview with Mike Maples explains the origin of the term. As Andy Rachleff explained:
I learned it from Sequoia Capital. Don Valentine really invented it.
Don used to say, “I’m looking to invest in companies that can screw everything up and still succeed because the customer pulls the product out of their hands.”
I’m paraphrasing. I’m not sure I got that exactly right. He felt that way because the startup will screw everything up. I want a company that has such demand from the market that they can literally screw everything up and still succeed.
Don Valentine was an American venture capitalist, founder of Sequoia Capital, who shaped Silicon Valley and helped build companies like Oracle, LSI Logic, and Cisco Systems.
At any given startup, the team will range from outstanding to remarkably flawed; the product will range from a masterpiece of engineering to barely functional; and the market will range from booming to comatose.
In other words, Andreessen takes into account three major factors for the success of any startup:
He argues that if you asked Entrepreneurs and VCs of the three elements what mattered the most, they would have picked the team.
On the other hand, if you asked engineers about the most crucial element, they would argue that the product matters the most (Andreessen mentions Apple and Google as an example of that).
He takes a third path though. Rather than the team or the product, what matters is the market!
In a great market — a market with lots of real potential customers — the market pulls product out of the startup.
From here he introduces the concept of MVP or minimum viable product.
He defined it as:
The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along…
…The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.
From here it is essential to understand two concepts that help startups and entrepreneurs in general to launch successful products:
We’ll also see a third element that has become critical even before an MVP can be developed: the problem/market fit.
In other words, where the lean methodology is the “How,” the MVP becomes the “What” and the problem/market fit becomes the “Why.”
Freemium
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
In March 2006, venture capitalist Fred Wilson wrote an article entitled “My Favorite Business Model” which said:
Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.
He mentioned examples of this successful business model at Skype, Flickr, and a few others.
According to Fred Wilson, the core advantage of a “Freemium business model” is fast customer acquisition. But he made clear that it had to be as frictionless as possible:A customer is only a click away and if you can convert them without forcing them into a price/value decision you can build a customer base fairly rapidly and efficiently. It is important that you require as little as possible in the initial customer acquisition process. Asking for a credit card even though you won’t charge anything to it is not a good idea. Even forced registration is a bad idea. You’ll want to do some of this sort of thing once you’ve acquired the customer but not in the initial interaction.
The main aim was to “eliminate all barriers to the initial customer acquisition.” He didn’t have yet a name for this kind of revenue model.
At the end of his article, Fred Wilson had clear in mind what the Freemium business model looked like. However, he didn’t have a name for it.
That is why he invited people to comment and to come up with a proper name for this business model. A commenter, Jarid Lukin suggested the name Freemium model.
Thus, service and product are wholly free and frictionless, where most users don’t pay, and a small base of users pay for a product that has premium features.
Over the years Fred Wilson kept emphasizing the importance of freedom. Today the freemium business model has taken over also the gaming industry. But it has also become the most debated business model in the software industry.
Building a free product and making it available to anyone and then expecting to make money isn’t the right strategy.
Instead, the “free” within the freemium, if appropriately used, can be a lever for quick success.
As Fred Wilson pointed out in October 2008 “freemium is far from dead, in fact, it may be the business model de rigueur.“
What did he mean? He recounted in a later article:
Facebook is a perfect example of freeconomics at work. A woman who works for a major media company was in my office recently. She quoted her CEO as saying “why doesn’t Facebook just charge a monthly subscription fee, they’d be making money hand over fist?”. Well I believe that if Facebook did that, they’d be vulnerable to other networks offering a free service. And certainly not every one of those 200mm+ users are going to cough up a monthly subscription. But by offering a friction free service, they have built a powerful and growing network that they are now starting to monetize in various ways and that they will monetize even further in additional ways. And they are super hard to compete with because they are free.
Agile methodology and MVPs
Agile started as a lightweight development method compared to heavyweight software development, which is the core paradigm of the previous decades of software development. By 2001 the Manifesto for Agile Software Development was born as a set of principles that defined the new paradigm for software development as a continuous iteration. This would also influence the way of doing business.
The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.
And he continued:
MVP, despite the name, is not about creating minimal products. If your goal is simply to scratch a clear itch or build something for a quick flip, you really don’t need the MVP. In fact, MVP is quite annoying, because it imposes extra overhead. We have to manage to learn something from our first product iteration. In a lot of cases, this requires a lot of energy invested in talking to customers or metrics and analytics.
Ash Maurya also described it as:
The smallest thing you can build that delivers customer value (and as a bonus captures some of that value back).
As pointed out by Eric Ries, a minimum viable product is that version of a new product that allows a team to collect the maximum amount of validated learning about customers with the least effort through a cycle of build, measure, learn; that is the foundation of the lean startup methodology.
Continuous Innovation
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.
One of the biases that that many entrepreneurs fall run into is this premature love of the solution. Like the first principles in science, you almost have to deconstruct an idea. We have to start with the basics. In this case, when we look at our business, we have to break it down into customers and problems.
If you don’t have the right customers who are trying to get sorted and problem solved, and no matter what solution you build, it doesn’t matter because we know that unless you’re solving a problem, customers are not going to use it.
This is a common mistake, happening especially in the startup world, where it becomes easy to focus on providing technical solutions rather than focusing on the problem that might solve.
That is why you need to make sure to understand the problem first.
What problem are you solving? For whom? What alternatives are the people for which you will solve the problem using? Why and what can you do way better than existing alternatives?
Those are the right questions. Yet, many still focus on how to build a feature, product, and service without validating or understanding what problem is solving in the first place.
As Ash Maurya further highlighted when I interviewed him on FourWeekMBA:
They’re not going to pay money. Even if you can reach them.Even if you have a patent or an unfair advantage, it doesn’t matter at the end of the day because your customers don’t care.So that is the way we logically break it down, but that innovator’s bias is one of those sneaky things.
Growth hacking
Growth hacking is a process of rapid experimentation, coupled with the understanding of the whole funnel, where marketing, product, data analysis, and engineering work together to achieve rapid growth. The growth hacking process goes through four key stages of analyzing, ideating, prioritizing and testing.
As the story goes, in 2007, Brian Chesky and Joe Gebbia couldn’t afford the rent on their San Francisco apartment that is why they decided to transform their loft into a lodging space.
Yet instead of relying on Craiglist, they built their site, which they called Airbed & Breakfast and leveraged on Craigslist to drive users back to their website,
I wish I could tell you that this is how that idea turned into a multi-billion company, known under the name of Airbnb.
Airbnb didn’t grow in a multi-billion business from one day to the next with a single magic trick. Instead, they had to undertake several experiments before seeing their listings grow.
More importantly, they had to master a process of continuous iteration that spanned across product’s features, to marketing channels which eventually spurred an impressive growth track for the company.
Sean Ellis, one of the fathers of the discipline, called this process of continuous experimentation to achieve exponential growth: growth hacking.
Let me further define what’s not Growth Hacking so we can avoid falling into the trap of a few myths surrounding the discipline; appreciate its full potential.
Growth hacking follows a few key premises. From setting a north start metric to building a multidisciplinary team, and speeding up experimentation through data.
However, there is a key point about growth hacking that made it so important for tech companies. This discipline starts from the premise of wrecking down the walls between marketing, product development/engineering, and distribution.
So that the product itself has built-in distribution mechanisms, to enhance its viral growth and build what we like to call network effects within the product!
Blitzscaling
Blitzscaling is a business concept and a book written by Reid Hoffman (LinkedIn Co-founder) and Chris Yeh. At its core, the concept of Blitzscaling is about growing at a rate that is so much faster than your competitors, that make you feel uncomfortable. In short, Blitzscaling is prioritizing speed over efficiency in the face of uncertainty.
Blitzscaling is prioritizing speed over efficiency in the face of uncertainty.
The name Blitzscaling comes from a World War II association with the term “blitzkrieg” or lightning war, where the attacker risks it all to either win or lose the battle.
Understanding Blitzscaling might mean having a framework that can help your small organization to scale up or your large company to also benefit from a new and reinvigorated acceleration, which is critical to survival in a market that changes at a faster pace.
However, the origin story started in the late 1990s.
Steve Blank, a retired serial entrepreneur had the time to think through what he had missed in terms of business frameworks, during the years, as he started several high-tech companies.
He had noticed that the only tool available at the time was the business plan. However, not only the business plan was a static document that didn’t survive the first contact with the real world.
That document was also plenty of untestable and untested assumptions.
The patterns he noticed would be all gathered into what became a manifesto, and the foundation for the lean startup movement.
It’s a methodology called the “lean start-up,” and it favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development.
In a nutshell, the lean startup methodology aims at creating a repeatable process for product development to minimize the time it takes to build a product that the market wants.
This process consists of three phases:
Build.
Measure.
Learn.
Once you go through the build > measure > learn that will need to be repeated over and over, thus creating a virtuous cycle or feedback loop.
Steve Blank also highlights a few core principles at the core of the lean startup methodology:
Business plans rarely survive first contact with customers.
Five-year plans are worthless and a waste of time.
Start-ups are not smaller versions of large companies.
The lean start-up movement is about agile development.
Thus, the primary purpose is to come up with a minimum viable product (MVP) that helps companies reduce the time to market.
Key Highlights
Startups and Lean Methodology:
Startups aim to build scalable business models in tech-driven industries.
They often follow a lean methodology that emphasizes continuous innovation and viral loops for growth.
PayPal’s Early Days:
PayPal’s story is significant in the history of startups and the commercial Internet.
In the late 1990s, Internet startups were emerging during the dot-com bubble.
PayPal’s founders aimed to enable online payments on the Internet, a challenging task due to the involvement of traditional financial institutions.
Original Sin of the Internet:
While the Internet was successful in applications like browsing and e-commerce, payments were complex due to the involvement of banks and credit card companies.
The story of Marc Andreessen’s attempt to embed payments in browsers highlights the challenges faced by early Internet innovators.
PayPal’s Beginnings:
Two startups, Confinity and X.com, were working on internet payment solutions in 1999.
Confinity focused on secure transactions through handheld devices like PalmPilots.
X.com, led by Elon Musk, aimed to revolutionize finance by reducing fees and bureaucracy in the financial system.
Merger and Growth:
Confinity and X.com eventually merged to become PayPal.
PayPal’s initial challenge was to achieve traction and growth on platforms like eBay.
PayPal’s email-based payments gained popularity, driving its growth and relevance on eBay.
PayPal Mafia and Web 2.0:
The founders of PayPal went on to create other successful companies, known as the PayPal Mafia.
This group contributed to the development of Web 2.0 and the next wave of the Internet.
Frameworks and Strategies:
Key concepts emerged from PayPal’s history, including viral growth, product-market fit, freemium model, agile methodology, MVPs, growth hacking, and blitzscaling.
PayPal exemplified the importance of understanding customer problems, continuous innovation, and building in distribution mechanisms.
Lean Startup Methodology:
The lean startup methodology emphasizes experimentation, customer feedback, and iterative design over elaborate planning.
It involves the Build-Measure-Learn cycle to develop a minimum viable product (MVP) that meets market demand.
Startups are encouraged to adapt and pivot based on real-world feedback.
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.
AIOps is the application of artificial intelligence to IT operations. It has become particularly useful for modern IT management in hybridized, distributed, and dynamic environments. AIOps has become a key operational component of modern digital-based organizations, built around software and algorithms.
Agile started as a lightweight development method compared to heavyweight software development, which is the core paradigm of the previous decades of software development. By 2001 the Manifesto for Agile Software Development was born as a set of principles that defined the new paradigm for software development as a continuous iteration. This would also influence the way of doing business.
Agile Program Management is a means of managing, planning, and coordinating interrelated work in such a way that value delivery is emphasized for all key stakeholders. Agile Program Management (AgilePgM) is a disciplined yet flexible agile approach to managing transformational change within an organization.
Agile project management (APM) is a strategy that breaks large projects into smaller, more manageable tasks. In the APM methodology, each project is completed in small sections – often referred to as iterations. Each iteration is completed according to its project life cycle, beginning with the initial design and progressing to testing and then quality assurance.
Agile Modeling (AM) is a methodology for modeling and documenting software-based systems. Agile Modeling is critical to the rapid and continuous delivery of software. It is a collection of values, principles, and practices that guide effective, lightweight software modeling.
Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.
Agile leadership is the embodiment of agile manifesto principles by a manager or management team. Agile leadership impacts two important levels of a business. The structural level defines the roles, responsibilities, and key performance indicators. The behavioral level describes the actions leaders exhibit to others based on agile principles.
Bimodal Portfolio Management (BimodalPfM) helps an organization manage both agile and traditional portfolios concurrently. Bimodal Portfolio Management – sometimes referred to as bimodal development – was coined by research and advisory company Gartner. The firm argued that many agile organizations still needed to run some aspects of their operations using traditional delivery models.
Business innovation is about creating new opportunities for an organization to reinvent its core offerings, revenue streams, and enhance the value proposition for existing or new customers, thus renewing its whole business model. Business innovation springs by understanding the structure of the market, thus adapting or anticipating those changes.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.
A design sprint is a proven five-day process where critical business questions are answered through speedy design and prototyping, focusing on the end-user. A design sprint starts with a weekly challenge that should finish with a prototype, test at the end, and therefore a lesson learned to be iterated.
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
DevOps refers to a series of practices performed to perform automated software development processes. It is a conjugation of the term “development” and “operations” to emphasize how functions integrate across IT teams. DevOps strategies promote seamless building, testing, and deployment of products. It aims to bridge a gap between development and operations teams to streamline the development altogether.
Product discovery is a critical part of agile methodologies, as its aim is to ensure that products customers love are built. Product discovery involves learning through a raft of methods, including design thinking, lean start-up, and A/B testing to name a few. Dual Track Agile is an agile methodology containing two separate tracks: the “discovery” track and the “delivery” track.
Feature-Driven Development is a pragmatic software process that is client and architecture-centric. Feature-Driven Development (FDD) is an agile software development model that organizes workflow according to which features need to be developed next.
eXtreme Programming was developed in the late 1990s by Ken Beck, Ron Jeffries, and Ward Cunningham. During this time, the trio was working on the Chrysler Comprehensive Compensation System (C3) to help manage the company payroll system. eXtreme Programming (XP) is a software development methodology. It is designed to improve software quality and the ability of software to adapt to changing customer needs.
The ICE Scoring Model is an agile methodology that prioritizes features using data according to three components: impact, confidence, and ease of implementation. The ICE Scoring Model was initially created by author and growth expert Sean Ellis to help companies expand. Today, the model is broadly used to prioritize projects, features, initiatives, and rollouts. It is ideally suited for early-stage product development where there is a continuous flow of ideas and momentum must be maintained.
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.
The Agile methodology has been primarily thought of for software development (and other business disciplines have also adopted it). Lean thinking is a process improvement technique where teams prioritize the value streams to improve it continuously. Both methodologies look at the customer as the key driver to improvement and waste reduction. Both methodologies look at improvement as something continuous.
A startup company is a high-tech business that tries to build a scalable business model in tech-driven industries. A startup company usually follows a lean methodology, where continuous innovation, driven by built-in viral loops is the rule. Thus, driving growth and building network effects as a consequence of this strategy.
Kanban is a lean manufacturing framework first developed by Toyota in the late 1940s. The Kanban framework is a means of visualizing work as it moves through identifying potential bottlenecks. It does that through a process called just-in-time (JIT) manufacturing to optimize engineering processes, speed up manufacturing products, and improve the go-to-market strategy.
RAD was first introduced by author and consultant James Martin in 1991. Martin recognized and then took advantage of the endless malleability of software in designing development models. Rapid Application Development (RAD) is a methodology focusing on delivering rapidly through continuous feedback and frequent iterations.
Scaled Agile Lean Development (ScALeD) helps businesses discover a balanced approach to agile transition and scaling questions. The ScALed approach helps businesses successfully respond to change. Inspired by a combination of lean and agile values, ScALed is practitioner-based and can be completed through various agile frameworks and practices.
The Spotify Model is an autonomous approach to scaling agile, focusing on culture communication, accountability, and quality. The Spotify model was first recognized in 2012 after Henrik Kniberg, and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility. Therefore, the Spotify model represents an evolution of agile.
As the name suggests, TDD is a test-driven technique for delivering high-quality software rapidly and sustainably. It is an iterative approach based on the idea that a failing test should be written before any code for a feature or function is written. Test-Driven Development (TDD) is an approach to software development that relies on very short development cycles.
Timeboxing is a simple yet powerful time-management technique for improving productivity. Timeboxing describes the process of proactively scheduling a block of time to spend on a task in the future. It was first described by author James Martin in a book about agile software development.
Scrum is a methodology co-created by Ken Schwaber and Jeff Sutherland for effective team collaboration on complex products. Scrum was primarily thought for software development projects to deliver new software capability every 2-4 weeks. It is a sub-group of agile also used in project management to improve startups’ productivity.
Scrumban is a project management framework that is a hybrid of two popular agile methodologies: Scrum and Kanban. Scrumban is a popular approach to helping businesses focus on the right strategic tasks while simultaneously strengthening their processes.
Scrum anti-patterns describe any attractive, easy-to-implement solution that ultimately makes a problem worse. Therefore, these are the practice not to follow to prevent issues from emerging. Some classic examples of scrum anti-patterns comprise absent product owners, pre-assigned tickets (making individuals work in isolation), and discounting retrospectives (where review meetings are not useful to really make improvements).
Scrum at Scale (Scrum@Scale) is a framework that Scrum teams use to address complex problems and deliver high-value products. Scrum at Scale was created through a joint venture between the Scrum Alliance and Scrum Inc. The joint venture was overseen by Jeff Sutherland, a co-creator of Scrum and one of the principal authors of the Agile Manifesto.
Stretch objectives describe any task an agile team plans to complete without expressly committing to do so. Teams incorporate stretch objectives during a Sprint or Program Increment (PI) as part of Scaled Agile. They are used when the agile team is unsure of its capacity to attain an objective. Therefore, stretch objectives are instead outcomes that, while extremely desirable, are not the difference between the success or failure of each sprint.
The waterfall model was first described by Herbert D. Benington in 1956 during a presentation about the software used in radar imaging during the Cold War. Since there were no knowledge-based, creative software development strategies at the time, the waterfall method became standard practice. The waterfall model is a linear and sequential project management framework.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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