Google's Edge Explained: The Eric Ries Factor
Danny is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you're like my brother, you're always discovering another mystery in software production yet find yourself bereft of hours for more research. Not all of us can intimately familiarize ourselves with the project management of high-profile tech companies, no matter how much we want to appease our inner Phillip A. Fisher.
Luckily, there's a new doctrine being adopted to address a historical ambiguity in software development. It's why I'm not selling my Google (NASDAQ: GOOG) shares despite the all-time highs, and -- through the below 3 cases -- it's how you'll learn to better inform yourself about tech development. Thanks to Eric Ries and the principles outlined in his book "The Lean Startup," investors can identify patterns in product development to ensure that their money is in competent hands. Should a product be built, and will it allow a sustainable business to be built around it?
One of Google's recent innovations is a pair of glasses that could replace your smartphone by presenting data directly on the lens. Does this sound like something that the company should be building? Can Google build a sustainable business in this yet-unestablished market? By considering Lean Startup principles, we can find promising indicators to answer these questions. It's a simple experiment: form the hypothesis, then validate it.
As an investor looking at this unproven product, my first questions may be: will people buy these glasses and will independent developers support this platform? My hypothesis: Google enthusiasts will buy these glasses. Developers will flock to the platform.
Lucky us; this year's Google I/O conference offers some indicators for those questions! Google offered pre-orders for an early version of Google Glass at a price point of $1,500, but only for attendees. My first promising sign was that I, as an experienced developer, wished I could preorder them while watching the conference at home. By then following the developer activity around the project, we find confirmation about hundreds of interested developers scrambling to move on this platform.
With this single event's information, we're much more informed on this innovation than we would be with ancient specs-dictated development, where the product would only be released after some executive's definition of "completion." Instead of a gut check on whether future customers will want a project you're hearing about, we've systematically validated some form of demand, support, and even a price point!
Back in July, Google announced their entry into the internet and TV service provider space -- except they didn't deploy it in the traditional sense of widespread availability and immediate fulfillment. Instead, they took an incremental step that answers questions and hypotheses around the product and its potential for a sustainable business.
Thanks to Google Fiber, Kansas City would become the coveted residence for nerds all over the world since it was the first and only city in which Google Fiber would be available. As a savvy investor looking at it from a Lean Startup perspective, Kansas City is the trial that answers valuable questions around this new push for the company. Among many lessons learned, Google has gauged and confirmed an interest in the service, knows whether each plan's price point sells, and is now informed about difficulties in deployment. Who would have guessed, for example, that future competitor Time Warner Cable would actively pay money to spy on the service or the politics around a clamor for discounts (along with AT&T) in the city without having pushed the bar themselves?
Tech is full of uncertainty, but this first trial means a better, gradual deployment in future cities after the product is confirmed as viable in the first. Seeing as how the service has expanded into its second city and has more lined up, your demand hypothesis might sound pretty good; seeing the fear from the competition can help inform questions around alternatives for customers.
Down to the signup page that records an interested user's city (a.k.a. the best future market targets), Google's rollout of Google Fiber is exemplary in terms of following an incremental deployment that fits Lean Startup principles. If the company continues this pattern, investors can easily approach each project with Eric Ries' principles to validate the success or failure of their investment.
"Google Plus" is Google's social network facing off against rivals like Facebook, Twitter, and MySpace. If you haven't tried it, or don't know the reasons why it should be tried, don't worry: you're not uninformed. It's not a surprise, since Google+'s launch is better characterized by a massive execution of a specified feature set rather than by the incremental, hypothesis-validating framework that Lean Startup principles provide.
The world's first view of Google+ was through a very traditional "beta" period that allowed only a limited number of users on the network prior to its official launch. Features were available that you can find on Facebook, with a focus on a "Circles" system that was drawn from observations about how real people interact with others. You have circles of friends in real-life; Google+ spent a lot of time and effort into designing that on the Internet for you.
Now being savvy Lean-Startup-informed investors, the questions, overlooked hypothesis validations, and conclusions might become apparent. Do people want another option for a social network? Will people use Circles to organize their relationships? Does it allow for a sustainable business?
What did customer usage and feedback show? Apparently, Google+ was huge with photographers thanks to its visual layout. Also, Circles were interesting but categorizing and drawing thresholds was simply too much work for most users. In other words, the best usage case was a surprise and the fundamental product differentiator wasn't being used.
Unfortunately, substantial money and developer time had already been sunk into building this project o' surprises. The result was an expensive social network that struggles with its competition and its identity both within and outside of the company. It does not show signs of becoming the leader our other Lean-Startup-driven considerations could become.
Surpassing Century-Old Management
As a software developer, I've always had a problem with the high failure rate of tech companies. Management science, which today is simply taken for granted as "the way things are," is over a century old and was adopted with a mindset that never knew the concept of software.
Peter Lynch provides great categories for companies, but stalwarts like Google are starting to find their way back to the "fast grower" label through startup-minded innovations. This is not a failing of Lynch's categories; it is the new landscape of the tech business. Tech giants must innovate to stay relevant. Investors must learn to gauge appropriately.
Measure whatever your company is building with particular goals in mind as to what your customers can reveal. This analysis of projects, and discoveries of companies where this development pattern is used, will arm you better than past failures built on the antiquated management practices inherited in tech.
dfavela owns Google stock. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.