Monkey Mind Labs

The Reality Distortion Field, Institutionalized Empiricism and New Product Development

In a great post   Eric Ries proposes that some of the characteristics that make entrepreneurs take risks makes them especially vulnerable to making bad product decisions .  Specifically, he states:

The difficulty lies in this paradox: many of the attributes that increase the likelihood of becoming an entrepreneur actually impede startup success ...It is in the psychological factors that we find the most paradox. For example, consider the propensity for risk-taking. Research has demonstrated the obvious: that people who have greater tolerance for risk or ambiguity are more likely to attempt entrepreneurship. That’s not too surprising. But does a risk-taking attitude actually lead to more startup success? The studies that have looked at this question in particular have found a negative correlation between risk-taking behavior and startup success.

That doesn’t strike me as shocking. And, although this hasn’t been subjected to a great deal of study (yet), I believe this same pattern will be found in a variety of other entrepreneurial characteristics: overconfidence, determination to succeed, perseverance, and even the desire to be in control. All of these factors are helpful in getting people to take the plunge, but all of them cause serious impairment of decision-making down the road. Think of the startups you know who are caught in a reality distortion field, heading full-speed off a cliff. Most likely, you will find the above attributes in excess supply.

 

Eric's "reality distortion field" is very real when launching a new product or business.    You're completely excited about the idea - only the data that supports your product/business concept  gets noticed.  The data that doesn't support your idea gets lost.  This confirmation bias is a problem for a lot of new companies and new products.  Eventually, if your initial idea isn't the right one,  the reality of the situation will make itself known - usually when you cannot sell the thing you've just built.  Hopefully this won't be before you've spent too much money or run out of cash.

The antidote is and institutionalized empiricism that requires you to test your ideas.

At Return Path we've borrowed heavily from Steve Blank's Four Steps to the Epiphany, the excellent Entrepreneur's Guide to Customer Development and Randy Komisar and John Mullins' Getting to Plan B.  One of the common themes across these three books is that your initial idea has a significant probability of being wrong.  Your job as an entrepreneur is to find the least expensive and least labor intensive way to test your assumptions.  There are going to be a few "Leap of Faith Assumptions" (Mullins/Komisar) that are make or break assumptions that you need to test. 

So how do we do it at Return Path?  We haven't completely codified how we develop new products, but typically a new product project will contain:

• A very detailed hypothesis document - We've taken a lot of the contents of the hypothesis document from the Four Steps to the Epiphany.  The document covers the customer, the problem and the solution.  Because in our world, a lot of the risk is in market acceptance, we focus a lot of the assumptions about how we're going to market, sell and service the product. Ideally, this document is worked on by the product management, sales, marketing, channel and product development teams.  It becomes the   basis for conversation around the product and go to market strategy.  During those conversations, you will unearth some key assumptions that must be closely tested.

• A "dashboard" that focuses our attention on testing the key assumptions -  We pull some of the key assumptions out of hypothesis document that are absolutely critical for the success of the project and define a test for each assumption.  For example, let's say that a key assumption is that we're going to generation a certain number of marketing qualified leads over the course of a month.  To test this hypothesis we will generate a lead generation program that might lead a customer to download a whitepaper around the problem that our product addresses.  This is a form of "dry testing" that allows us to get a feel for whether we can create marketing qualified leads without having to develop a full product.  Remember the goal is to test hypotheses at the lowest cost.

There's a lot more to applying the customer development philosophy that is well described in the books listed above.   However, for me, one of the most important elements is the institutionalized empiricism that a well run customer development process can provide.

Book Review: Multipliers: How the Best Leaders Make Everyone Smarter

I'm talking with my co-founders at Return Path about the stage of maturity of our company, I like to say that we're an "promising but awkward teenager" - we're not yet a fully mature company but we're not a startup anymore.

One of the most interesting problems we face in this "in between" state is how do we grow the group of managers and "managers-of-managers" that are going to be the key to growing our business. In reviewing "Multipliers: How the Best Leaders Make Everyone Smarter". I see a lot of techniques that could be very useful when applied to our team.

I'd summarize the key beliefs of "Multipliers" as follows:

• If I can find someone's genius, I can put them to work
• There are smart people everywhere who will figure difficult challenges out and get even smarter in the process
• Therefore, your job as a leader: extend challenges to your team and give them the space to fulfill their responsibilities
• With enough minds we can figure tough business challenges out.

As I think of the formative experiences of my business life, they have almost universally come when I was given a clear challenge and given the space to acheive the challenge. The seven years I spent in management consulting and starting a couple of businesses have given me a lot of challenging projects that called me to do things that even I wasn't sure I could do -but ended up doing.

It's worth a read.

Increasing the Attendance at Board Meetings

Last week at Return Path we had one of our roughly quarterly in person board meetings in our Colorado office.   For this meeting we extended the management participation to some key members of our team that don't frequently attend board meetings.  They each had an important part of the agenda and (I thought) did a great job at leading their part of the conversation.

Each of these folks told me that the experience was really useful for them - they now see the business a little differently and from a broader perspective. 

Seems like a win-win to me: the board gets a better feel for some of the key people in our business and these folks understand the business from a different perspective.

Return Path and Myspace

This week is definitely an exciting week for mail. MySpace announced the introduction of MySpace Mail, a uniquely MySpace twist on mail that blends the best of social networking and traditional mail. Return Path has contended for some time that social networking is not a death knell for mail. In fact, we have always believed that people would want to have mail integrated into their social networking experience and have grown tired of siloed communications (i.e. mail via MySpace to people who aren't already MySpace friends). We applaud this move by MySpace as it's giving consumers what they want: Full-fledged mail integrated within their MySpace experience. MySpace, meanwhile, has created a mail system that has a lot of anti-spam technology built right in. And they are doing this, in part, with help from Return Path. The new @myspace.com mail service will be integrated with the Return Path Blacklist to keep out spam, phishing scams and other junk. They will also be implementing Return Path Certification to make sure that MySpace members get the email they request. They will also be contributing data in our Return Path Reputation Network, the cooperative database that powers our Sender Score. The introduction of mail at MySpace is likely to be good news for marketers. Today, consumer's attention is often split between many different communication platforms. MySpace users who embrace the new MySpace mail won't have their attention divided -- checking MySpace updates, dipping quickly into their outside email inbox. With mail integrated into MySpace, marketers may gain consumers attention. But marketers will need to move cautiously. While some people will appreciate an integrated mail experience - including transactional messages and even some promotions that are relevant - others may be very sensitive to marketing messages intruding on the social networking space. Of course, beyond the marketing impact, this new mail space is unlikely to be like anything we've seen before as MySpace has created a more meaningful, fun, and social experience around one of the most popular activities on MySpace. We have one early prediction: As MySpace integrates mail, we will see an even bigger explosion in word-of-mouth and viral marketing. Sure, email forward-to-a-friend has been around for years, but the MySpace and social network connections will make it easier and faster to share information with wider groups of people. Whatever they come up with, we are sure it will be very interesting, especially for consumers who have embraced social media with such passion.

Return Path: One of the Best Places to Work in Colorado

One of Return Path's core values is that the employee comes first.   It's a somewhat heretical notion.  However, we've found that putting the employee first give our clients and excellent experience and drives financial results that our shareholders are happy about.

Therefore, it was very gratifying to be voted as one of the best places to work in Colorado.  More details on the Return Path blog.

2009 Deliverability Benchmark Report: Don't Be a Statistic

This week Return Path released a new Email Deliverability Benchmark Report. It's been a few years since we published this kind of data and the big news is that the news hasn't changed much in that time. On average, commercial email is still being blocked at a rate of about 20%. There are a number of reasons that deliverability is still a crisis for email marketers, and we outline those reasons in the report, which you can download here. But one reason I'd like to talk about here is that the changes that are required to improve deliverability are sometimes perceived as difficult for a company to implement. Not because they are, I would contend, but because internal complacency can be a roadblock to marshaling even the small amount of resources needed. And in today's economy that isn't totally surprising. It's hard to justify, for example, spending time and energy on fixing a sub-optimal unsubscribe process when activities that are perceived as having a bigger revenue impact are fighting for space at the top of the to-do list. But I would argue that the time, money and energy spent on improving deliverability IS a revenue-generating activity. Or, at the very least, it's a revenue-preserving activity, and in this economy is there really a difference? In our press release about this report we do some simple, back of the envelope math. Let's say you have 100,000 email addresses in your database. Now let's say that you generate $1 in revenue per email you send. If your inbox placement rate is 80% then you are losing $20,000 every single time you send an email. Even marketers with more modest lists can lose thousands of dollars when their email does not get to its destination. For bigger companies this cost can sky-rocket into the millions. The good news is that it does not have to be so. We have plenty of clients who achieve and maintain average inbox placement rates of 100%. They reap the rewards of high deliverability, but they also reap the rewards from having a great email program. That's the best news of all - the changes you may need to make to improve your inbox placement rates are usually changes that also lead to a better subscriber experience. This, in turn, leads to better response and more revenue. So my advice to email marketers reading this report is this: Don't be discouraged. Be inspired. You do not have to die by these numbers. They are, after all, an average. You can be better than average - way better than average, actually. I see it happen every single day.

Why Seedlist-based Monitoring Makes Sense

We recently had a client at an Email Service Provider ask us - why do you need to use seed addresses to monitor your inbox placement?  We can just monitor inbox placement with our 'regular' delivery reporting (based on SMTP logs).   The short answer is that mail will be accepted for delivery but not be put into the inbox - it's placed in the junk mail folder or accepted for delivery and simply deleted (in my experience, that is less common).

So how frequently is that a problem? Pretty frequently it turn out.  We took a look at all our clients' campaigns using our mailbox monitor tool for the last 30 days.  We found that across all ISPs, about 55% of the time,  a delivery problem meant having a message put in a junk mail or bulk mail folder.   That number is larger at the some of  largest mail providers:

So, that's why you need to monitor mail streams with seed lists.

Gmail To Prioritize Your Inbox for You?

Interesting article about a potentially upcoming Gmail feature that prioritizes your inbox for you.

Learning to Pivot: Yogi Berra on Startups

Redeye VC had a great post  on how startups need to "pivot" - to rethink their initial business plan when things don't quite work out the way they had intended.  The history of Return Path is the history of the pivot.  Now that we're at our ~ third incarnation, I finally feel like we have products, positioning and team to really do something special. 

Long live the pivot.

Death of Email Meme: Do the Kids Get Email?

The death of email hypothesis goes something like this:

• Younger generations use other methods to communicate than email.  They text to communicate. They IM to communicate. They use social networks to communicate.  The only time they use email is to talk to old folks.
• When the younger generations make it into the workforce, email will be supplanted by other media.

I love the data that the Pew Center for Internet research produces (good AND free).  Recently they released their "Generations Online in 2009" study about how different age groups use the internet.  So what can we glean from the study?

Major findings:

1. Teens and Generation Y find entertainment and social networks online
2. Older generations use the internet as a tool for research, shopping and banking

So that's not too surprising, right?  When you're young you have more of a social life (or at least that's true for me).  More free time = more time spent on entertainment.

As you get older, your life can get more complex and time is more scarce.  You use the tools you have to provide as much of that glorious free time you remember from when you were younger.

So what about email?

I think the chart below says it best.  Email and search are the core activities of every online segment.  I would say that email's days are not yet numbered.