Driving digital era lean innovation

by Chandika Mendis

According to the Sri Lanka Association of Software Service Companies (SLASSCOM) the vision for Sri Lanka's IT services sector is to facilitate 1,000 start-ups by 2022, a reasonable goal in an industry as the Sri Lankan IT/BPM Review 2014, has seen exponential growth in workforce (123%) and revenue (238%) since 2007.

However, if we were to take into consideration the Allmand Law study that concluded 90% of start-ups fail, then the industry will only succeed in creating 100 viable start-ups. This need not be the case. Years of studying start-ups have provided us with insights into the pitfalls that engulf most start-ups, which, if avoided, can dramatically improve the chances of success.

The primary reason start-ups fail is that they make a product no one wants and they spend almost all their time and money perfecting this product which no one wants. This is because they end up focusing on the wrong question, "Can this product be built?" taking for granted the assumed value and growth propositions as confirmed.

The idea and the product may seem innovative at first glance but if nobody wants it then what use is it? Ideas are cheap but building a sustainable business model is hard.

Lean start-ups

This is where the concept of lean start-up comes into play. It's an innovative methodology championed by Eric Ries that minimizes risk and increases the chance of success.

Ries is the Entrepreneur-in-Residence at Harvard Business School, an IDEO Fellow and Business Week's 2007 Best Young Entrepreneur in Tech.

He developed lean start-up based on his previous experience in start-ups and based it upon systems from the automotive sector. The main goal of the methodology is creating a product that will fit the current market, thereby increase the start-up's possibility of success.

This is done by implementing a feedback loop which allows you to know, as quickly as possible and with minimum investment, the answers to two key questions: "Can I create enough value my target users will appreciate enough to pay for?", and "will I have enough of those customers to make a viable business model?".

This mindset forces you to work with your target customers as early as possible and open lines of communication between the developer and the customer during the development period.

The feedback loop begins with launching a product. This will be the minimum viable product (MVP) to validate the key hypotheses. And this MVP may not even actually be a product. It could even be a video asking people to sign up for a service, or a 'simulation' of the value proposition you hope to provide to the customer, where the 'backend work' will be done manually instead of by a system.

It really is the base minimum of what is needed to validate your proposed value proposition.

And it is their interactions with this MVP that will feed into the next step of the loop - Learn. At this stage the feedback from the previous stage are measured and conclusions are drawn.

Finally, we must Adapt. This is the last stage of the loop and will determine the future of your product. Depending on what you learnt from customer interactions, you may choose to tweak your strategy or change (or pivot) the product altogether. And then your newly adapted product is launched to continue the loop until you've created a product that fills a market need. The key is to do it fast with minimum investment.

Lean development

While lean start-up holds many promises for the IT services sector it is only one aspect of a set of methodologies currently percolating in the industry. The other two are lean development and growth hacking. The former derives from a development process that revolutionised the auto industry in the '80s.

The process was based on optimizing flow, increasing efficiency, decreasing waste, and using empirical data to determine needs and changes.

The principles of the method were then translated to software development by Tom and Mary Poppendieck in 2003. The pair had decades of experience in the IT industry and used their experience in software and product development to counter the prevailing opinions in their award winning book. This resulted in seven principles of lean software development; eliminate waste; amplify learning; decide as late as possible; deliver as fast as possible; empower the team; build quality in; and see the whole.

Apart from these principles, which are largely embedded in today's agile development techniques, there are a few changes taking place that create significant opportunities in disrupting the software development process.

First is the simplification of the development technology. The J2EE era introduced significant complexities to the development process compared to the simplistic client-server era: object-relational impedance mismatch, and the need for lots of platform-centric specialised knowledge around each of the different architecture layers.

Today, this complexity is being un-winded with new ways of thinking: objects/javascript across all tiers, cloud scalable no-SQL data stores, HTML5 and responsive design. These changes provide the opportunity to significantly simplify software development.

In the future, software will not be built from scratch but on top of platforms that provide reusable functionality and abilities out of the box.

Cloud based software development platforms similar to force.com will take on the technology plumbing, deployment and even monetization complexities and simplify software development to its simplest possible form of creating a functional specification.

Growth hacking

The final methodology is growth hacking which is based on the principle that, after validating the value proposition early on, a start-up only needs one thing: growth.

There is no need for elaborate marketing plans to achieve corporate objectives or manage large marketing teams. Growth is a singular goal that every decision, every strategy and tactic that a hacker makes is towards achieving it.

The term was coined by Sean Ellis in 2010 and came to represent people who focused on low cost, high impact and innovative alternatives to traditional marketing that resulted in growth/exposure for the start-up. Ellis is the founder of Qualaroo, a behavioural insight survey software for the web and mobile, and was the first marketeer at Dropbox and Lookout.

Growth hacking is an intersection of three areas: programming and product development, marketing and data analytics and these areas are closely intertwined to move towards the growth objective.

The process is heavily data oriented where every decision or experiment is validated against measurable goals and tweaked or changed based on the outcome. A/B testing, landing page and user experience optimization, email marketing, search engine and ad-word optimization are common techniques used in this area.

Growth hackers look at every customer interaction as an opportunity to achieve growth - for example referrals, integration with social media, meet-ups and user group sessions with relevant subject matter experts are all leveraged to build awareness and achieve growth.

What should be evident now is that start-ups today have a set of new lean-inspired tools that cover the entire spectrum of 'what to build', 'how to build' and 'how to capture the market'.

This enablement comes at a time when the digital era has opened significant opportunities across every industry due to changing customer demographics and demands. These techniques, if applied correctly, can have a dramatic impact of giving start-ups a David's advantage against the Goliaths of the world.

While I have only touched the tip of the iceberg, there is a huge opportunity for innovators to learn and adopt these techniques fully to propel Sri Lanka into an era of innovation-led growth and prosperity.

The writer is Senior Vice President - technology at Virtusa. With over 15 years of experience in IT, he leads Engineering Excellence and Innovation for Virtusa and is responsible for global engineering standards, metrics and tools and driving a technology innovation culture.