Dave Mongan Says

Netflix’s recent quarterly results showed tremendous year-over-year growth, nearly 31% in revenue and 52% in subscribers as they transition away from the by-mail model and into a streaming-first company (press release here).  The news propelled their stock north of $150/share, and they’re showing no signs of slowing down.

What fascinates me most is that it’s proof positive that Netflix’s peculiar culture, designed to attract and retain high achievers, is working.  Nearly two years ago, they released a presentation detailing the theories behind their rapidly evolving company culture.  

At more than 100 slides, the presentation shocked a lot of people.  They pay above market rate, dread standardization and seek a smaller, more autonomous staff.  Rather than hire two good people to crank out boatloads of work, they hire one amazing person to both do the work and make quality decisions.  And, they pay them nearly 5% more than the going rate with typical bonus compensation incorporated directly into their salary.  It’s remarkable both in its simplicity and genius, and because it’s the polar opposite of most large corporations.  Even more remarkable, it appears to be working.

See the presentation on Slideshare here.

Last week, I had a few articles come through that sort of demystified the Tea Party concept, but none so much as one from its supposed founder.  I’ve decided to compile them into one post so that I don’t look like I’m some rabid Glenn Beck supporter.  I’m not a Tea Partier, but I find it interesting to read up about opposing views.  Call me crazy, but I think it helps to at least understand, even if I don’t agree.  Here we go:

1. Tea Party ‘founder’: Palin, Gingrich a ‘joke’

The true “Tea Party” was all about being financially conservative, and now it’s gone AWOL thanks to the Republican Party.  The founder riffs on this, including this gem: ”Yeah, that’s a joke,” he writes. “But so are you. All of you. Especially Sarah Palin, Newt Gingrich, Bob Barr, and douchebag groups such as the ‘Tea Party Patriots.’”

2. What the Tea Partiers Really Want

This is about the existing Tea Party (not the original one), which seems to want social and financial karma.  It’s an interesting read.

On Sunday, I had an interesting conversation regarding unemployment with someone looking to begin contract work (freelancers unite!).  This person was told that all wages he claims as a contractor count directly against his monthly unemployment checks, meaning the net financial effect of his contract work is zero until he exceeds his monthly allotment.   This has put him in a moral pickle, since working harder doesn’t actually benefit him for the foreseeable future.  I know what I’d do, but I’m not so naive as to think that others will milk it for all its worth.  After all, I’ve seen people take full-blown vacations on theirs.

Read More →

Wesabe founder Marc Hedlund’s recent post recounting why Wesabe lost to Mint.com is an interesting parable in product design and customer development. Amongst the many interesting and undoubtedly valuable realizations involving management structure, user acquisition targets and product design, perhaps the most compelling point is his discussion is what he points out as the intent between the two: Wesabe wanted to educate and empower users; Mint wanted to make financial management as easy as possible.  From Hedlund:

“Second, Mint focused on making the user do almost no work at all, by automatically editing and categorizing their data, reducing the number of fields in their signup form, and giving them immediate gratification as soon as they possibly could; we completely sucked at all of that. Instead, I prioritized trying to build tools that would eventually help people change their financial behavior for the better, which I believed required people to more closely work with and understand their data. My goals may have been (okay, were) noble, but in the end we didn’t help the people I wanted to since the product failed. I was focused on trying to make the usability of editing data as easy and functional as it could be; Mint was focused on making it so you never had to do that at all. Their approach completely kicked our approach’s ass.”

Ultimately, it comes down to the fact that most people hate to work. Sites should demonstrate high value with little work. As Keith Rabbois said on Quora regarding why most startups fail, “There are only 24 hours in a day and most are already claimed by family obligations, work, sleep and existing entertainment options; even if you get a user’s attention your new product needs to be so compelling that he is willing to forego something else he is already invested in.”

Awhile back, I was fortunate enough to sit in on a product design discussion between friends, led by Rob Spiro of Aardvark (acquired by Google for $50 million last year). Of the many approaches Rob introduced, there’s one that immediately came to mind when I read that part of Hedlund’s post, which Rob called “unboxing”.  I’ll show you the philosophy behind it, then loop back and show how it’s applicable.

Similar to opening a new iPad, the unboxing approach has three components with the goal of making the process as gratifying and smooth as possible. The three steps are as follows (forgive me if I butcher the names):

1. Saran Wrap – The packaging of your site. It should be both pretty to look at and follow an intuitive path to get the package unwrapped and onto the next phase. iPad example: unwrapping box, opening it, removing the plastic wrapping and pressing the “on” button.

2. Scaffolding – Getting the user up to speed with your product and way of operation. The goal is to minimize the complexity and number of inputs necessary to make a user feel like an expert. This too should be intuitive, quick and convey where the user is in the process. This phase is where most users dropout of the signup process. iPad example: Going from first boot to surfing the Web.

3. Expert – User feels confident that he or she knows how to navigate and use the product and is able to quickly derive value. iPad example: Takes iPad with them, downloads apps, surfs the Web, dorks out in coffee shops.

In the case of an iPad, nay all Apple products, the unboxing phase typically takes about five minutes. It’s yet another way that they create a pleasant user experience through simplicity and super engineering.

In regards to Mint vs Wesabe, it seems Hedlund admits that Mint’s unboxing experience was superior in almost every way—faster, better looking and demonstrated value right off the bat. It was the Steve Young to Wesabe’s Joe Montana.  This is a tremendous failure from a product standpoint.  (Whether Mint had any impact on personal spending habits is a moot point, because they fulfilled their goal as a startup when Intuit purchased them for $170 million.)

Forgetting the Customer

The reasons for this failure stem from a vertical reporting structure (according to Hedlund) and, it would seem, a lack of customer research/development. Hedlund had his vision of what users wanted and unflinchingly stuck to it.  Had Hedlund sat users down and watched them run through the registration processes of both products, he likely would’ve seen why users were choosing Mint.   Then, he could’ve retooled the existing product or resegmented and gone after another market, such as more advanced users.  Instead, he assumed that users wanted accurate information and hands-on, quant-like data involvement, when in fact they really just wanted help—quickly.  He clung to his vision like a proud captain does the mast of his sinking ship and rode it all the way down to oblivion.  (The fact that he wrote this post-mortem recap means he’s obviously no dummy.)

Customer Surveys

What else could Wesabe have learned from customer surveys? Perhaps that the people in financial trouble weren’t necessarily smart enough to draw their own conclusions. Perhaps they had short attention spans or were disinterested in their personal finances. Naturally, this is pure speculation.  

Personally, the Mint users I know fell into two categories: smart people looking for confirmation and lazy people whose lack of interest in their finances got them in trouble. The first group quickly lost interest, while the second group was much more interested and used the product longer. This pithy observation, should it ring universal, is the core driver of both user retention and word-of-mouth marketing.  (Aside: People say Mint had an extremely low viral coefficient, but it was certainly better than Wesabe’s. I routinely heard people talk about Mint, both on and offline, whereas I never once heard Wesabe mentioned.)

A different management structure might have helped, as would hiring better product managers or even having friends like Rob to ask tough question.  Customer development is now the foundation of Internet startups and Wesabe learned it the hard way.  Segment, destroy, then move outward.  Solve real problems that your core users are having, create value for those users and then branch out.  Wesabe may have had great success as a more intelligent Mint.com for advanced users.  But the world may never know…