May 20, 2009 at 10:27Applied S-Planning: Planning a Startup
How can understanding the laws of systems development and the S-shaped development curve in particular help you choose the area in which to start your startup?
Let's say you have an idea for a million, and you want to urgently take it and do it. But how do you know if she will shoot or not? How to secure yourself from senseless waste of time and money?
There is, of course, no 100% way - but something can be done about this.
To begin with, it’s worth determining the place for this idea, what exactly is your unborn startup really:
If, whatever one may say, it turns out point 2, and you "discovered a new Internet", then this technique will not help you. About what to expect in this case, we'll talk some other time.
If you have determined that this is the first option, then it's time to look at what stage of your development the system is within which you are going to build your startup. It is best to use statistics for this for the number of objects of this type: i.e. if we want to create our own social network, then we are looking at the dynamics of growth in the number of social networks (attention: not users, namely the number of networks !) over the past few years.
Unfortunately, such data is not always available. Usually, it’s a little easier with data on the number of users of systems of the type under study, but here we have to keep in mind one important point: you cannot use them in their pure form, otherwise we risk making incorrect conclusions without taking into account the processes occurring in the supersystem, i.e. all over the Internet (or Runet, if we are considering Runet systems).
Let me explain by example:
Based on Yandex reports on the dynamics of the Russian-speaking blogosphere for 2006-2009, we can build the following blog growth graph:
Those. explosive growth is evident and the “Blogs” system according to this schedule should be at the second stage of its development. However, we understand that during the same time, the total number of Runet users has also grown rapidly. Since the final “battlefield” of competing Internet systems (blogs, social networks, forums, online games, etc.) is the total number of Internet users, to determine the real situation in the blogosphere, we need to consider not so much the direct the number of blogs, how much is its relation to the total number of Runet users.
To do this, for example, you can use this data and, dividing the number of blogs by the total number of network users in the same period, build the following graph:
On this graph, we see a turning point in the growth dynamics of the percentage of bloggers in the total number of Internet users, which in a visual form demonstrates the beginning of the process of transition of the "Blogs" system to the third stage of its development.
Why is it important to accurately determine at what stage the system is located within which we want to create our own startup? The fact is that for our startup it is a supersystem, which means that it largely determines the conditions in which it will develop.
Based on knowledge of the laws governing the development of systems, we can determine whether the environment will help a startup grow or hinder its development. The personal qualities of the swimmer are very important, but depending on whether he will have to swim in stagnant water, along the river or against it, the results of the swim will vary greatly.
What can a startup expect at each stage?
Stage I
If the system within which we are going to work is at the first stage, then the startup is in a difficult situation. Honestly, his chances of survival are minimal - he has not yet formed a “nutrient mixture” in the form of a base of potential users, the attention of the press and investors, which can push even not very successful projects into life if they start at a more appropriate time.
But in a small percentage of cases when a startup starts a strong team with a clear vision of what it is doing, as well as resources sufficient to survive and advance its offspring during the entire first stage of the development of a supersystem, a startup has a chance to “shoot”. True, we must bear in mind another big “BUT” - this is possible only if the system itself also grows, and does not lose the “battle for the minds” to more successful or timely systems. You can make a very high-quality project and invest 10 years of your life and 100 million in its promotion, but if you have done it in such an unclaimed sphere, you will not succeed.
Odnoklassniki.ru is an example of a startup that started at the first stage of the system’s development and “shot” later. At the time when Albert Popkov started developing and promoting this project, social networks as a class in RuNet were at the first stage of their development - the general population did not know about them, and no one was eager to go there, although they themselves already existed. Runet ruled by blogs, which were then at the peak of media attention and grew exponentially. Having invested a lot of work and money, Popkov survived a difficult time, forced to promote, along with his project on RuNet, the idea of social networks in principle. Therefore, when social networks moved to the second stage of their development, Odnoklassniki rushed upstairs with them, quickly and unconditionally becoming “social network No. 1”.
There is a difficulty in determining the first stage of the development of the system - at this stage it is difficult to obtain statistical data and understand that you are building your project as part of a first-stage system. They don’t talk about the system in the media, there is catastrophically little data on its development, and it’s so important for us to determine where it is now - the closer it is to the first turning point, after which the second stage begins and rapid growth, the more chances our startup has to make up along with the growth of the system as a whole.
Summary of stage I: it is very difficult to start a startup here - you need resources and a large margin of safety in the team. But if in recent years there has been a steady growth of the “mother” system, which may indicate the proximity of the transition to the second stage, you can take a chance.
II stage
As we already know, the second stage is characterized by rapid growth of the system in a short time. On the chart, it is displayed by an exponential jerk up. What awaits the startup that we are launching in the second stage?
Immediately it is worth noting that this fundamentally depends on which part of the second stage we start with. If this is the first part of the second stage, when the media is just starting to talk about a “new breakthrough”, this is a very good time to start your project under this system: you are guaranteed the attention of the media and investors, and there are already a certain number of potential users around, who are happy to taste your product.
A good example of a successful start at the right time for the Social Networks system is the VKontakte network. She started later than Odnoklassniki, but was able to achieve greater results with lesser efforts and eventually even overtake (according to some sources) Odnoklassniki in reaching the client base.
If the project starts in the second part of the second stage, the situation is slightly worse: the media is saturated with information about the same type of projects, the news is sarcastically ("another social network started today ... where were these guys two years ago?"). Investors have long invested in previously launched projects and are not interested in additional competition with them. A considerable part of potential users has also settled down on competing projects; they may try the alternative you are offering, but whether they want to leave their cozy corners and move to you is a big question.
However, a project with a clear idea that has real, not fictitious, benefits for users, as well as competent management and resources for promotion, still has good chances for successful development. Even in the second part of the second stage, the system is still growing, saturated with money and users, and before the third stage, you can still manage to take its place in the sun.
Summary of stage II: this is the best time to start, especially if you managed to jump on the engine at the very beginning. You can not be the first, the main thing is to be on time. The farther the system moves away from the inflection point, the less chance you have of having an easy successful start. But for professional teams, even the second part of the second stage remains an attractive time to launch their startup.
Stage III
The stage when the system reaches its peak, but ceases to grow significantly. At this stage, competition between existing players is very aggravated - they compete in functionality, budgets and ideas, and it’s very difficult to get into this field with your project.
For example, try today to create a new blogging or forum engine and enter at least the top ten similar projects. The task is daunting, as Vladimir Ilyich would say.
It is worth thinking ten times before starting a startup in a system that is at the third stage of its development. With one exception, the situation changes radically if your startup solves a certain fundamental thing for the system, eliminates a certain contradiction that prevents it from further developing at a rapid pace, as it was very recently, in the second stage. If you see that you can turn the tide of the development of the system with your startup, significantly expand the base of its users, giving them new demanded functionality - go for it!
In the case of blogs, an example of such a startup was Twitter, which not only “shot” itself, but also launched a new subsystem in the blogosphere - microblogging, which this year entered the second stage of its development (transparent hint :))
Summary of stage III:Better not! The chances are small, the prospects are hopeless. But if you are a genius - spit on all these rules and go into battle :)
We don’t consider stage IV as time for launching your startup for obvious reasons - there is no need to build a house on a sinking ship.
If you present all of the above in graphical form, you get something like this:
Summarizing: in this methodology, the most difficult thing is to build a curve of the development of the system within which you are going to build your startup. But if you succeed in doing this, you will see its prospects with a high degree of certainty - perhaps this will allow you to make an informed decision and give additional confidence in the correctness of your business or hedge against the loss of time and money.
And in the end - a small life hack that you can use (and many use it in reality): a fairly well-known fact is that the Runet is behind the global (primarily American) Internet. So, in our development , “our” systems, in the general case, are always half a step behind their foreign counterparts - foreign ones go to the second stage while ours hang out at the first. Hence the algorithm is painfully simple: we look at what is now popular in bourgeois, we make a native analogue with painting under Khokhloma - and voila - just in time for readiness, our startup gets to take off the corresponding S-image in Runet. I think it makes no sense to give examples of such a “global copy-paste” here. Inappropriate? May be. But it can become economically feasible. So everyone chooses for himself.
Disclaimer:
Let's say you have an idea for a million, and you want to urgently take it and do it. But how do you know if she will shoot or not? How to secure yourself from senseless waste of time and money?
There is, of course, no 100% way - but something can be done about this.
To begin with, it’s worth determining the place for this idea, what exactly is your unborn startup really:
- 1. This is a project within the framework of existing systems - for example, a social network for pensioners / pioneers / police officers, or mashups, or some kind of ancillary project such as searching on social networks, etc.
- 2. Something completely new, not fit into existing systems, Next Big Thing Internet
If, whatever one may say, it turns out point 2, and you "discovered a new Internet", then this technique will not help you. About what to expect in this case, we'll talk some other time.
If you have determined that this is the first option, then it's time to look at what stage of your development the system is within which you are going to build your startup. It is best to use statistics for this for the number of objects of this type: i.e. if we want to create our own social network, then we are looking at the dynamics of growth in the number of social networks (attention: not users, namely the number of networks !) over the past few years.
Unfortunately, such data is not always available. Usually, it’s a little easier with data on the number of users of systems of the type under study, but here we have to keep in mind one important point: you cannot use them in their pure form, otherwise we risk making incorrect conclusions without taking into account the processes occurring in the supersystem, i.e. all over the Internet (or Runet, if we are considering Runet systems).
Let me explain by example:
Based on Yandex reports on the dynamics of the Russian-speaking blogosphere for 2006-2009, we can build the following blog growth graph:
Those. explosive growth is evident and the “Blogs” system according to this schedule should be at the second stage of its development. However, we understand that during the same time, the total number of Runet users has also grown rapidly. Since the final “battlefield” of competing Internet systems (blogs, social networks, forums, online games, etc.) is the total number of Internet users, to determine the real situation in the blogosphere, we need to consider not so much the direct the number of blogs, how much is its relation to the total number of Runet users.
To do this, for example, you can use this data and, dividing the number of blogs by the total number of network users in the same period, build the following graph:
On this graph, we see a turning point in the growth dynamics of the percentage of bloggers in the total number of Internet users, which in a visual form demonstrates the beginning of the process of transition of the "Blogs" system to the third stage of its development.
Why is it important to accurately determine at what stage the system is located within which we want to create our own startup? The fact is that for our startup it is a supersystem, which means that it largely determines the conditions in which it will develop.
Based on knowledge of the laws governing the development of systems, we can determine whether the environment will help a startup grow or hinder its development. The personal qualities of the swimmer are very important, but depending on whether he will have to swim in stagnant water, along the river or against it, the results of the swim will vary greatly.
What can a startup expect at each stage?
Stage I
If the system within which we are going to work is at the first stage, then the startup is in a difficult situation. Honestly, his chances of survival are minimal - he has not yet formed a “nutrient mixture” in the form of a base of potential users, the attention of the press and investors, which can push even not very successful projects into life if they start at a more appropriate time.
But in a small percentage of cases when a startup starts a strong team with a clear vision of what it is doing, as well as resources sufficient to survive and advance its offspring during the entire first stage of the development of a supersystem, a startup has a chance to “shoot”. True, we must bear in mind another big “BUT” - this is possible only if the system itself also grows, and does not lose the “battle for the minds” to more successful or timely systems. You can make a very high-quality project and invest 10 years of your life and 100 million in its promotion, but if you have done it in such an unclaimed sphere, you will not succeed.
Odnoklassniki.ru is an example of a startup that started at the first stage of the system’s development and “shot” later. At the time when Albert Popkov started developing and promoting this project, social networks as a class in RuNet were at the first stage of their development - the general population did not know about them, and no one was eager to go there, although they themselves already existed. Runet ruled by blogs, which were then at the peak of media attention and grew exponentially. Having invested a lot of work and money, Popkov survived a difficult time, forced to promote, along with his project on RuNet, the idea of social networks in principle. Therefore, when social networks moved to the second stage of their development, Odnoklassniki rushed upstairs with them, quickly and unconditionally becoming “social network No. 1”.
There is a difficulty in determining the first stage of the development of the system - at this stage it is difficult to obtain statistical data and understand that you are building your project as part of a first-stage system. They don’t talk about the system in the media, there is catastrophically little data on its development, and it’s so important for us to determine where it is now - the closer it is to the first turning point, after which the second stage begins and rapid growth, the more chances our startup has to make up along with the growth of the system as a whole.
Summary of stage I: it is very difficult to start a startup here - you need resources and a large margin of safety in the team. But if in recent years there has been a steady growth of the “mother” system, which may indicate the proximity of the transition to the second stage, you can take a chance.
II stage
As we already know, the second stage is characterized by rapid growth of the system in a short time. On the chart, it is displayed by an exponential jerk up. What awaits the startup that we are launching in the second stage?
Immediately it is worth noting that this fundamentally depends on which part of the second stage we start with. If this is the first part of the second stage, when the media is just starting to talk about a “new breakthrough”, this is a very good time to start your project under this system: you are guaranteed the attention of the media and investors, and there are already a certain number of potential users around, who are happy to taste your product.
A good example of a successful start at the right time for the Social Networks system is the VKontakte network. She started later than Odnoklassniki, but was able to achieve greater results with lesser efforts and eventually even overtake (according to some sources) Odnoklassniki in reaching the client base.
If the project starts in the second part of the second stage, the situation is slightly worse: the media is saturated with information about the same type of projects, the news is sarcastically ("another social network started today ... where were these guys two years ago?"). Investors have long invested in previously launched projects and are not interested in additional competition with them. A considerable part of potential users has also settled down on competing projects; they may try the alternative you are offering, but whether they want to leave their cozy corners and move to you is a big question.
However, a project with a clear idea that has real, not fictitious, benefits for users, as well as competent management and resources for promotion, still has good chances for successful development. Even in the second part of the second stage, the system is still growing, saturated with money and users, and before the third stage, you can still manage to take its place in the sun.
Summary of stage II: this is the best time to start, especially if you managed to jump on the engine at the very beginning. You can not be the first, the main thing is to be on time. The farther the system moves away from the inflection point, the less chance you have of having an easy successful start. But for professional teams, even the second part of the second stage remains an attractive time to launch their startup.
Stage III
The stage when the system reaches its peak, but ceases to grow significantly. At this stage, competition between existing players is very aggravated - they compete in functionality, budgets and ideas, and it’s very difficult to get into this field with your project.
For example, try today to create a new blogging or forum engine and enter at least the top ten similar projects. The task is daunting, as Vladimir Ilyich would say.
It is worth thinking ten times before starting a startup in a system that is at the third stage of its development. With one exception, the situation changes radically if your startup solves a certain fundamental thing for the system, eliminates a certain contradiction that prevents it from further developing at a rapid pace, as it was very recently, in the second stage. If you see that you can turn the tide of the development of the system with your startup, significantly expand the base of its users, giving them new demanded functionality - go for it!
In the case of blogs, an example of such a startup was Twitter, which not only “shot” itself, but also launched a new subsystem in the blogosphere - microblogging, which this year entered the second stage of its development (transparent hint :))
Summary of stage III:Better not! The chances are small, the prospects are hopeless. But if you are a genius - spit on all these rules and go into battle :)
We don’t consider stage IV as time for launching your startup for obvious reasons - there is no need to build a house on a sinking ship.
If you present all of the above in graphical form, you get something like this:
Summarizing: in this methodology, the most difficult thing is to build a curve of the development of the system within which you are going to build your startup. But if you succeed in doing this, you will see its prospects with a high degree of certainty - perhaps this will allow you to make an informed decision and give additional confidence in the correctness of your business or hedge against the loss of time and money.
And in the end - a small life hack that you can use (and many use it in reality): a fairly well-known fact is that the Runet is behind the global (primarily American) Internet. So, in our development , “our” systems, in the general case, are always half a step behind their foreign counterparts - foreign ones go to the second stage while ours hang out at the first. Hence the algorithm is painfully simple: we look at what is now popular in bourgeois, we make a native analogue with painting under Khokhloma - and voila - just in time for readiness, our startup gets to take off the corresponding S-image in Runet. I think it makes no sense to give examples of such a “global copy-paste” here. Inappropriate? May be. But it can become economically feasible. So everyone chooses for himself.