The wisdom of crowds

NXNEi - Day 2 - Kickstarter.com

NXNEi – Day 2 – Kickstarter.com (Photo credit: Jason Hargrove)

The idea of a collection of people chipping in to raise enough money to make something happen is not a new one. Charities have relied on the concept for years, as have mutuals or building societies. The earliest documented such endeavour is Ketley’s Building Society which grew out of the inns, taverns and coffeehouses of 18th century Birmingham.

The funds in that case were for building houses, but similar societies cropped up to pay out money in the case of misfortune such as bereavement or loss of limbs at sea. The members paid a small subscription hoping against hope that they would never need of the society’s services. Many famous modern insurance companies can trace their roots back to such humble origins.

Mention crowd funding to most people and they will not think of charities, building societies or insurance companies. They will immediately think of crowd funding websites. Just as Amazon and eBay have revolutionised selling over the internet, so have kickstarter.com and indiegogo.com have taken crowd funding to a whole new level.

By combining the reach of the internet with the viral effect of social media, crowd funding websites are ruthlessly efficient funding models. If your target audience likes your pitch, you will probably get funded. If your target audience looks at your pitch and gives a collective “meh!” then your funding deadline will pass with nary a whimper. Successful projects tend to snowball as stretch goals are reached adding more and more swag to the booty on offer.

I recently took part in funding this kick-starter project which went on to become the third most successful ever. It is fast becoming a poster child for the kind of innovation that crowd funding can unlock for successful pitchers. In this particular case, the pitch was for plastic miniatures (used for war-games or table top games). The original funding target for this project was $30k. They went on to raise about $3.5m

The upfront costs in making tooling for plastic miniatures is ruinously expensive. The ongoing unit costs per miniature are very low. Funded traditionally, it makes for a risky business because you never know how many units you will sell and whether you will cover your initial outlay. Crowd funding is perfect because if there is no interest for your product, you find out without spending a fortune. If you are lucky, you will end up with a runaway success.

I believe that crowd funding could offer a much more efficient mechanism for companies to build the right products. Using the same kind of mechanism, product managers could design pitches for new products. Salesmen (or maybe even customers) could commit to delivering a certain sales target. If the project reaches the profitability target, it gets funded.

There is even scope for the project to work in reverse with the consumers designing the pitch and when enough people say “I’d like one too” – a company takes up the mission of delivering the product.

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Stop polishing nose cones!

Rocket Engine, Liquid Fuel, H-1

Rocket Engine, Liquid Fuel, H-1 (Photo credit: cliff1066™)

Working on a “nice to have” feature when there are more important requirements to fulfil is a crime. It becomes a heinous crime when it happens in a resource constrained environment. And yet – I see it all the time. If you ever find yourself working on a nice to have feature – stop, and ask yourself “is this the most urgent problem that needs solving?”

We have a special term for such work which, according to my trusted sources, originated in the IBM lab’s. We call it “polishing nose cones“.

Imagine if you will, a factory building rockets. The man in charge runs a tight ship and he organises his factory into departments. The engine department takes care of the bottom of the rocket, the propellant and coolant department takes care of the mid-section of the rocket and the nose cone department takes care of the very top of the rocket.

The guys down at the business end of the rocket, the engine department, have their work cut out. They have to develop the rocket engine (or more correctly the rocket motor) which involves some tricky engineering. The engine guys have to come up with a rocket motor that will get the vessel into space without running out of fuel and without blowing the rocket into smithereens. Their work takes a long time.

The coolant and propellant guys also have a mountain to climb. They have their specifications from the engine guys and they are pretty demanding. Some how, they have to provide enough coolant to stop the engine consuming the rocket in a ball of flame, but enough fuel to make sure that the rocket can make it to orbit. Not only that, but they have to operate within strict weight criteria.

The nose cone guys have the easiest job of all. All they need to do is manufacture the pointy end. Sure they have weight constraints, but their only job is to make something aesthetically pleasing. So the nose cone guys finish long before the coolant and propellant guys and the engine guys still have a ton of work to do.

So do they go and help the other guys – no – because they are in the nose cone department. Once they have finished the essentials, they start on the “nice to haves”. They start polishing their nose cone.

If I ran the factory, I would get away from the department idea and create a resource pool. All the engineers would constantly be picking up the most important tasks on whatever part of the rocket. OK – so maybe my nose cone wouldn’t look quite as good – but I bet my rocket would be ready for launch first.

Who are they?

Clockwise from top left: Marge, Homer, Bart, S...

Clockwise from top left: Marge, Homer, Bart, Santa’s Little Helper (dog), Snowball II (cat), Lisa, and Maggie. (Photo credit: Wikipedia)

One of my favourite episodes of the Simpsons is where Homer discovers he has a long-lost brother called Herb. Of course Herb is the complete antithesis of Homer. He is successful, slim with a full head of hair. He runs a successful car (or automobile in the native American) manufacturing company called Powell Motors in Detroit. Herb is overjoyed to learn of his brother and they start to spend a lot of time together.

After a while, Herb realises that Homer is the epitomical average American guy and therefore the best person to design a car for ordinary Americans, so he lets Homer loose and gives him free rein to design the next car from Powell Automobiles. Of course, being the Simpsons, it is an unmitigated disaster. The car that Homer designs appeals to absolutely no-one and Powell Automobiles ends up going bust.

 So where did Homer go wrong. Quite simple really – he did not focus on who his customer were or what they might want. He simply kept adding features until he could think of nothing else to add. What this did was inflated the cost (because there were so many features) and reduced the appeal, because who wants something that is average at everything.

Every time we develop a product, we need to ask ourselves some basic questions. Who is going to use this product?  What are their needs?  What are they going to want to do? It’s a really good idea to define these things in an audience statement so that everyone involved in the product is left in no doubt as to the niche you are trying to fill. It’s also a good idea to express the requirements for the product in terms of use cases.

A really simple idea, a use case is almost a story that defines what the user will end up doing with the product. The benefit in doing this is that everyone can visualise exactly what the product will do. The use cases “As a racing driver I want to get around a lap in the quickest time possible” will yield a very different product to “As a commuter I want to complete long journeys comfortably without using too much fuel”.

The benefits don’t end with development of the product either. If we have the use cases, testers can immediately understand the natural paths through the system and can make sure their tests fully cover these paths (as well as looking for where the users might stray off the path. Because use cases are written in plain English, Sales & Marketing can immediately understand what the product is about and gear up their materials accordingly.

So if you want to end up with a Bugatti Veyron (and not a Homer special) – it’s a very good idea to think about who’s going to use your product.