strategy

Since the Slush'09 event I have been touring with the IBP (International Business Program) across Finland, listening to startups, coaching, giving feedback and trying to give a few ideas on how to get things going. This has been interesting to me, as I am not a consultant, but an entrepreneur by class and nature. Usually I work with a few chosen companies, typically as an owner, board member, advisor etc. I have 10 successful funding rounds and several exists behind me so I know a thing or two about pitching, presenting and shaping a company to be interesting and successful. Semi-frequently I also get asked to act as a judge in a pitching competition, I'm up there presenting and talking myself about once every two weeks nowdays. So, it's been good fun with the IBP!

The project describes its own goal as : "International Business Program is offering help for digital business companies which have proved to be growth willing and estimated to have potential global competitiveness."

In essence; we try to make promising companies sprout, grow and be more internationally successful.

We have been touring Helsinki, Hämeenlinna, Kouvola, Tampere and Vaasa. The whole program has been free for the companies (sponsored by public ESR funding) and the format has been quite effective varied format: pitches, feedback, Q&A, written analysis from experts, one-on-one coaching, and plenty of good talks. It's not necessary to be a startup to participate, tho many have been clear startup cases, some even pre-incorporated ideas. While others have been actual corporations and well-established companies.

All together we'v had 33 companies participating so far. Here's my list:

Siltaloppi Productions - Videoarkisto.fi
Fitness Media (Maximal.tv)
Elixir
JoinMeTube
Advant Games
Citynomadi
KLOK
Steam Republic
XMLdation.com
Kutalab (djonline.fi)
Wavesum
Solver
Pallo.com (in stealth mode, therefor no link)
CTS Engtec
Jalusta Technologies / Aptual
TWID
Simosol, Ltd
Mediamaisteri
IT-Palvelu.net
Mikrolinna
Webbinetti S&T Ky (kaitafilmi.fi)
Viestix, Ltd (Breeze Tags)
SongHI Entertainment
Red Tail
Rolohub
Zokem
Floobs
Illtags
Ball-IT
BRIIM
Futuuns
Fambit
Aito Technologies

We also had a bunch that joined up, but bailed out for some reason or the other ;-)

I have been there throughout all the sessions and have listened to each of those companies pitch, given them all feedback, and written them some notes. There have been a few other established industry people doing the same. Namely the crew of Accelerando. and Timoteus Tuovinen from DOORStories.

After hearing 33 companies pitch (and naturally bunch of others outside this program as well) it becomes quite apparent what we need to focus more on here in Finland. One of the main points in illustrated here in this picture:

Which candy is the most delicious? The best thing, based on solid Finnish technology? Can't say huh?

Often enough neither can I.. This repeated quite a few times in the pitches and presentations of our companies: not really paying enough attention to differentiation, competition, competitive response and uniqueness..

If all the competitors in your market are like bridesmaids dressed up in their pretty black dresses. Then your startup simply HAS TO BE the gorgeous white bride that clearly stands out from the crowd.

Sounds simple enough? Differentiation, uniqueness and standing out clearly from your competition is one of the most essential things any company should have figured out. Also when you pitch your company it should be one of the first things you illustrate. Illustration can happen (or should happen) through captivating action; like showing the audience a demo of your product etc. It is OK to say it, but even better to show it; how much you differentiate from your competition.

In 2008 Jason Calacanis wrote these two (first here, second here) excellent posts about presenting and "how to demo your startup". Read them. Study them religiously. Take them seriously and act on them. This is amongst the best advice I have seen out there.

Differentiation for a startup is more important than things like relevance or price. It's more important than your revenue model. Get it figured out first and worry about the revenue model later.

I also like two kinds of companies: those that pick an opponent and go and pick a fight, and those that just ignore all the competition and mold themselves to be so different from anybody else that they just about create a category of their own; they go their own way.

If you have longer than a few minutes to demo or pitch your startup (some of the 33 companies there had a full 30 minutes), then you can go a bit deeper and use a structure like the one here by Sequoia Capital. It is also simultaneously one of the best structures to follow as your business plan slide deck.

Many companies I heard pitches from have excellent products, existing customers, many references and showcases on the market. But did they show them? Almost universally; NO. only very rarely did anybody show us any proper real cases and executed references at all.

One of the best things you can show in a pitch is a real demo of your product. Engage the audience with a story, a real showcase, show them a reference, talk about what you did for that customer, how valuable it is, and how it's different from the ability of your competition to deliver the same amazing value. You should do this as the first thing of your presentation (you should start with this) the rest is much more interesting if this first part arouses the interest of the audience.

What's the worst kind of presentation then? Here's a small list:

- Starting with your name, title and industry background (usually everybody in the audience can read; and they have been reading some preparatory material already and know your name for example).
- Going through the general market first and not even mentioning what it is that you do (general market is only interesting if the product is).
- Using only bulletpoint slides, preferably in black and white (boring everybody to death)
- Not showing your excellent product, despite the fact that you do have it
- Speaking only technical stuff and ignoring the minor things such as competition, differentiation, customer value, and revenue model... etc

A 17 part list of good pitching.

The opposite of this is an engaging exciting presentation that goes right to the point and really leaves the audience reeling from sheer awesomeness of it. What could it include then?

1. Start with a real demo or real reference case, show your product
2. Immediately explain what we see, how awesome and easy it is
3. Followup by what value it creates (problem it solves), how vital it is to the customer (how well it solves it)
4. Go into differentiation; show a few key competitors and explain why you are superiorly unique to them
5. Head into how much money you make and how
6. Next only one or two sentences about the market opportunity (why this is hot now?)
7. Showcase your excellent team in a memorable way
8. Throw in all the awesome customer references and wins you have accomplished. Show pictures, video or live demos of each quickly
9. Do the grande finale with a call to action: do you seek funding? customers? partners? state it!

In a short pitch my opinion is that you should totally ignore these:

10. No long introductions of yourself and your work history, plz. (it may be interesting that you are a paramedic by training, but it's certainly more interesting after you tell us about your amazing company first)
11. Explaining the history and evolution of the market (forget it, no time)
12. Financials (boring, forget it. If they like your company, they will ask and talk about the finances later on.)
13. Technical stuff about the product (unless its globally patented and very very cool like an anti-gravity machine, forget it. It doesn't matter how exactly it works underneath, it only matters what you use it for).

Besides the content, what else should you concentrate on?

14. Good open and exciting body language. Move around, engage the audience, make it SHOW that you are excited about the opportunities of your company!
15. maintain a good contact with the audience: have constant eye contact. Don't stand behind a podium or a laptop. Always use a wireless presenter when pitching so that you don't have to be there to push keyboard buttons.
16. Answers all questions after the pitch in a short efficient and honest manner. Challenge the people asking them: ask for justifications, more details and examples of what they really mean etc. Engage them in an intelligent rapid-fire conversation
17. Make your presentation materials very visual. All pictures and video and live demos would be the best. No text (except single words or a few words at the maximum) and absolutely NO bullet points and boring slides. A decent tool to use for this would be www.prezi.com

.. OK enough about pitching. What else did I learn from ICP clinics?

We have great companies and great products here in Finland. We need to be much much better in presenting them. We also need to think about differentiation, uniqueness, competition and summarizing it all much more. Growth potential is there, we just need to shape it out!

If this post has managed to grasp your attention and you want in; good news! That can be done. There will be a full day IBP camps coming up that you and your company can join:

IBP Camp Helsinki: 20.4.2010 (topic: internationalization and funding)
IBP Camp Hämeenlinna: 7.5.2010 (topic: partnerships and networks)
IBP Camp Tampere: 6.10.2010
IBP Camp in UK September/2010

The camps cost a negligible sum each (200 EUR + VAT) and there's room for only 20 companies: so joint up now! (there's a link below)

There are also more up and coming clinics (these pitching and coaching sessions):

Clinic Tampere 17.-18.5.
Clinic Helsinki 8-9.9.
Clinic Vaasa 23.9.

There's also a full GoToMarket package that you can apply for; the best companies get it. That means very competent people to help you out for a strongly supported fee (ESR public funding up to 75% and 10.000 EUR)

You can apply to all of those through this form here.

Don't be tied up with your digibusiness! Join us and we'll tackle the challenges you have together. I hope that the links and lists on this blog post would be a good start to take your company further.

Godspeed!

Xiha Life (www.xihalife.com) is a multi-lingual social network enjoying 1M+ monthly unique visitors and expanding rapidly.

XIha has been making revenue by selling casual games from their website (amongst other models). Recently they slashed their game pricing;

http://en.xihalife.com/b/webmaster/blog/new-game-pricing/

..to half or less than half of what it used to be (from 20 EUR to 7-10 EUR)

www.arcticstartup.com wrote about it here:

http://www.arcticstartup.com/2009/02/06/xiha-life-drops-prices-to-attrac...

..saying that "If you look at pricing on a larger scale - it doesn’t make much sense to try and sell casual games at 20-30 dollars"

And Xiha's case would seem to prove this; since making the change the average revenue Xiha gets from this source has gone above the average. Which can only mean that lower prices actually broaden the "market" and more consumers than ever before are buying the products.

It is just about as classical pricing strategy dilemma as anything could be; figuring out your optimal volume versus your optimal price tag is rarely a cakewalk. Questions like; would you business need 10K transactions at 10 EUR each? or 100K transactions at 1.2 EUR each? are really hard to work out in practice.

Consumer Internet services and online communities however offer an ideal experimental ground in this regard; they either love what you are doing, or hate it. Sometimes the response is lukewarm and you can't tell. What ever the case there is usually an immediate reaction to everything you do; the results being instantly visible in your business and key metrics.

Ilja Laurs (http://www.mobileattitudes.org/) the CEO GetJar in our Slush panel (http://tane.li/2008/panel-slush) really stressed the importance of having good metrics and KPI's in place from the beginning when you are building your online business. Very much agree with that; figuring out your KPIs early and building a culture of daily check on them is important and can help you make smarter decisions in situations where the visibility otherwise is near zero (which it almost always is with Startups).

Way to go Xiha Life!

Brain Alliance Ltd announced today that me and Mr. Asmo Halinen (ex-CEO of Apaja/PlayRay, etc). Have joined the company's Board of Directors.

There a finnish language press release here.

Brain Alliance is the largest PHP-specialized programming house in Finland, with emphasis on agile web projects etc. They are the main representative of Zend Technologies in Finland. And they have for example made the tech for this blog of mine.

The company has been growing by the rate of 3231% over the past 3 years and the new board members' role is to facilitate further growth and help the company to continue their success story. Their CEO Jukka Hassinen still owns 96% of the company and has managed to grow it very fast without any outside financing etc.

I am so much involved in consumer Internet projects and in social networks that I consider it quite healthy to get heavily involved in a proper B2B business and professional services organizations for a change.

So, if you have a web-project that needs agile and prompt execution; please be in touch ;-)

I was recently asked by one of the Dopplr team members to answer a series of questions regarding Ye Olde IRC-Galleria strategy stuff for a master's thesis she is currently writing.

www.irc.fi is commonly known as one of the clear success cases in the local market here in social media. I have been writing a few blog entries about that in the past. I haven't been with the company since about mid 2007, after the tradesale to Sulake Corporation. Current strategy is being shaped by different folks than myself, but yet still much of what's visible now was part of the plans and known back then - thou I'm sure with their dedicated and competent team the future will be even more bright for them.

I thought of posting the answers to the thesis questions here on my blog

.. so I did ;)

1. What was the idea behind IRC-gallery?

IRC-gallery is IRC-Galleria in it's "proper" original-language form, so I'm using that in my answers here.

IRC-Galleria's idea is quite simple: share your photos, blogs, stories and comments among friends (and strangers) and discover new ones through active communities and shared interests. Basically the classic kind of hub of social media and social activity online. IRC-Galleria has a heavier emphasis on the groups, interests and communities than is immediately apparent. IRC-Galleria is also very different from Facebook: it's a place to really actively encounter new interesting people with similar hobbies, sense of humor, or what ever - it very strongly isn't just a place to be active with people whom you already know.

2. How did you start the company? Closed betas etc.?

The company was started as a hobby originally. Then it ran as a non-profit organization, and finally became a company after that. It had its "beta" (if you can call it that) with a group of the founders' friends. They were pretty much dragged in and forced to try out the service, which they liked and found simple and fast to use. The usability and focus on the ease of the experience was there from the beginning, and the service jumped into immediate growth mode.

3. What was your growth strategy?

IRC-Galleria's growth strategy was moderate (as opposed to explosive and out-of-control) growth with strict control on quality (quality of both; people and content). For example: IRC-Galleria has never just openly accepted memberships. It takes bit of an effort to register into the site: you either have to have a reliable verified email (like a corporate/school email), or verify your cell phone number to the site, or have one of the admins to check you out manually and approve you. This is quality control and ensures that the kind of people who become members are more likely to actually be active and positively contributing part of this much-loved hyperactive community. IRC-Galleria grew through word of mouth and through spreading school by school, class by class. The growth has always been fast - but linear, never quite exponential. Since the beginning the service has placed heavy emphasis on moderation, clear understandable guidelines and active administration. Quality really helps to produce good activity levels and maintains a great service experience for everyone.

4. How did you build the strategy?

The strategy was build as an intuitive consensus-decision pretty much. People who directed the future of the service strongly felt that this was the right option to take. And you can argue in hindsight that it was. It's a group of smart people who really know their product inside out. So; it was built by talent and vision.

5. How was the strategy implemented in practice?

Growth strategy was implemented in practice by couple of things: The summary of them really being; emphasis on quality and on the unique product, with these components:

1) high quality screening of new members joining the service,

2) active moderation and administration that also frequently removes content and people from the service if necessary,

3) all the employees of the company are very active users of their own product, including all the new and latest features of it. Helps maintain a clear grasp of what's going on and focus on the quality again.

4) IRC-Galleria's personnel growth was also moderate; the company has always generated plenty of positive cash flow, but has still hired based on a conservative growth strategy and getting quality instead of quantity. The aim was always to reach to become the largest and most active Internet site in Finland; the "most active" part was already passed years ago when in 2006 TNS, the large multinational that measures different websites, announced in a press release that IRC-Galleria is the most active and frequently loaded site in all of Scandinavia - surpassing such as Aftonbladet and Lunarstorm (successful back then) in Sweden. The jury is still out on the "largest" -part thou ;)

CC Attribution: TheScream@Flickr

6. Did you have to make changes to the original strategy plan? If so, what kind?

The biggest change IRC-Galleria had to make to the original strategy was the addition of more products to the company portfolio and the opening up of the internationalized versions of the service. The original growth strategy proved day after day constantly that it DID work and there was no need to make drastic changes - growth was strong, linear and steady. Instead the strategy was amended to include other products based on the same tech-platform and international versions of the service.

7. When did you reach the goals / milestones of the strategy? In advance, in schedule, late?

The goals and milestones of the strategy were reached quite precisely on schedule regarding the Finnish primary service the company was running. However on the international versions growth was more demanding to obtain and the company was a bit late in meeting targets. The international versions were never projected to grow as fast as the finnish one had one - so there was no unrealistically high optimism around, but still success was lukewarm. Now, in December 2008, this looks quite different; the company is taking on foreign markets strongly.

8. What could have you done differently? Lessons learned?

IRC-Galleria is the kind of case that is widely known and recognized as a success. Thus hindsight is not 20-20 in this particular case; it is sometimes hard to point out what could have been done better. Naturally there's still a bunch of stuff and I could go deep into details with this, allow me to pick just a few:

1) Internationalization could have started earlier and with a more iterative-adaptive approach. This might have resulted in teaching the company the stuff it needed to learn a bit faster and with less effort.

2) IRC-Galleria has almost (but not quite yet) reached the saturation point of its current target group: it is after all being used very actively by just about the entire finnish youth, so it would need to extend beyond the youth: doing this with the same service or coming up with a separate one for a different target audience is the kind of strategic game you have to play here. The company might have done good with starting to plan all this a bit earlier and as a result possibly end up with an even stronger position in the marketplace. However do not underestimate how strong they are now: they are absolutely the top youth media in Finland, and they outsell every other website in advertising - especially sponsored campaigns with high yield results. That's not an easy (nor bad) position to end up in.

9. What is your growth startegy at the moment, different from the previous plan?

IRC-Galleria's growth strategy at the moment is better known by people who actually plan and execute it; like Mr. Ville Mujunen, senior vice president of Sulake Corp who is now responsible of the IRC-Galleria business. However I do know something about where they are headed and its twofold: 1) keep and strengthen their current top position in the domestic market, and 2) really seriously go for the international markets (or should I say: certain international markets). That's it in brief, the rest you will have to ask from the executives there directly. I'm sure they are also keeping the product unique and high quality.

10. Did you involve users in the development and if so, how much? How have the users enabled the growth?

IRC-Galleria involves (and always has involved) users in development very much. First off: all the employees are very active users of the service themselves. So they frequently test out pre-alpha stuff and just raw ideas that come from the developer team. Once something is excellent enough to get into actual production then the generic public steps in: IRC-Galleria has multiple test-groups which are used as a kind of continuous closed-beta.

New features are being constantly introduced to the test-groups, sometimes all groups get the same version of the feature, sometimes they all get different ones, etc. They all have a chance to participate, comment, test and post ideas about the stuff - also have discussions amongst each other in a special sub-community group within IRC-Galleria that's dedicated for that purpose. Besides the contributions they can directly make they are also being measured and "tracked" on the usage of the new features; this is very much necessary in order to see if it really is a successful new product or not.

Once all testing is done the new product/feature gets released into the service for everyone to enjoy. IRC-Galleria tests features, technical things etc by this process, but they also test revenue models and highly conceptual ideas. Sometimes the idea ends up as far as the test-group trials only to be taken back to the drawing board when it doesn't really quite fly yet. I would say that the users have absolutely enabled the growth, yes.

I did a podcast episode yesterday evening with Tuija Aalto and Sonja Kangas about disruptive innovation, and how organization could make it happen.

Tuija has a full blog entry about that up here.

You can download the podcast as an mp3 (english language spoken) from this link here.

We touch on topics like:

- Using the web is not only about crowdsourcing. Utilize the web inside your organization.
- Organizations online - about dialogue. There are many larger companies that ban their employees from social networks. Brands That Suck on Twitter.
- LinkedIn campaign: Southwest Airlines (link to a story about it)
- Employees online as individuals
- Working with active users: There is strong desire in consumers to be co-creators of value: Example Jamba Juice
Consumer internet companies usually do this with test groups, lead user groups, alpha user groups.
- Eric von Hippel. The more possibilities the better. Little Big Planet
- Rewarding active users: Social status, products, items, credits.
- IP rights: Terms of use establish the rights for the company to use test users' ideas
- Use brokers and bridges: Teams and small groups of people who come from completely different backgrounds. This typically gets done in conferences. Quite rarely done with purpose and with concrete goals. Aula (founded in 2000) was to be a cross-disciplinary network of people
Role play: When organising ideation events, I invite people from different departments, and put people in different roles (marketer to comment as designer and so on)

As a followup note I can only say: I expect the companies I invest in (even the big ones, like Coca-Cola) to embrace disruptive innovation and to strive for it. The reality however is that not many of them do. Lots of opportunities are lost - but then again, is that just more opportunities out there for startups to grasp? One could claim that they are better at disruptive innovation than large corporations.

I you have the patience to sit through 40 minutes of that, please send a comment my way. Thank you!