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How Modern Marketplaces Like Uber And Airbnb Build Trust To Achieve Liquidity

How Design Thinking Transformed Airbnb from a Failing Startup to a Billion Dollar Business

In 2009, Airbnb was close to going bust. Like so many startups, they had launched but barely anyone noticed. The company’s revenue was flatlined at $200 per week. Split between three young founders living in San Francisco, this meant near indefinite losses on zero growth. As everyone knows, venture investors look for companies that show hockey stick graphs, and according to co-founder Joe Gebbia, his company had a horizontal drumstick graph. The team was forced to max out their credit cards.


It’s Okay to Do Things That Don’t Scale

At the time, Airbnb was part of Y Combinator. One afternoon, the team was poring over their search results for New York City listings with Paul Graham, trying to figure out what wasn’t working, why they weren’t growing. After spending time on the site using the product, Gebbia had a realization. “We noticed a pattern. There’s some similarity between all these 40 listings. The similarity is that the photos sucked. The photos were not great photos. People were using their camera phones or using their images from classified sites.  It actually wasn’t a surprise that people weren’t booking rooms because you couldn’t even really see what it is that you were paying for.”

Graham tossed out a completely non-scalable and non-technical solution to the problem: travel to New York, rent a camera, spend some time with customers listing properties, and replace the amateur photography with beautiful high-resolution pictures. The three-man team grabbed the next flight to New York and upgraded all the amateur photos to beautiful images. There wasn’t any data to back this decision originally. They just went and did it. A week later, the results were in: improving the pictures doubled the weekly revenue to $400 per week. This was the first financial improvement that the company had seen in over eight months. They knew they were onto something.

This was the turning point for the company. Gebbia shared that the team initially believed that everything they did had to be ‘scalable.’ It was only when they gave themselves permission to experiment with non-scalable changes to the business that they climbed out of what they called the ‘trough of sorrow.’

“We had this Silicon Valley mentality that you had to solve problems in a scalable way because that’s the beauty of code. Right? You can write one line of code that can solve a problem for one customer, 10,000 or 10 million. For the first year of the business, we sat behind our computer screens trying to code our way through problems. We believed this was the dogma of how you’re supposed to solve problems in Silicon Valley. It wasn’t until our first session with Paul Graham at Y Combinator where we basically… the first time someone gave us permission to do things that don’t scale, and it was in that moment, and I’ll never forget it because it changed the trajectory of the business”

Why Designers Need to ‘Become the Patient’ to Build Better Products

Gebbia’s experience with upgrading photographs proved that code alone can’t solve every problem that customers have. While computers are powerful, there’s only so much that software alone can achieve. Silicon Valley entrepreneurs tend to become comfortable in their roles as keyboard jockeys. However, going out to meet customers in the real world is almost always the best way to wrangle their problems and come up with clever solutions.

Gebbia went on to share how an early design school experience also shaped his thinking about customer development, “If we were working on a medical device, we would go out into the world. We would go talk with all of the stakeholders, all of the users of that product, doctors, nurses, patients and then we would have that epiphany moment where we would lay down in the bed in the hospital. We’d have the device applied to us, and we would sit there and feel exactly what it felt like to be the patient, and it was in that moment where you start to go aha, that’s really uncomfortable. There’s probably a better way to do this.” This experience pushed Gebbia to make ‘being a patient’ a core value of their design team.

The desire to always be the patient is immediately felt by all new team members. “Everybody takes a trip in their first or second week in the company and then they document it. We have some structured questions that they answer and then they actually share back to the entire company. It’s incredibly important that everyone in the company knows that we believe in this so much, we’re going to pay for you to go take a trip on your first week.”

Let People Be Pirates

While Airbnb is data driven, they don’t let data push them around. Instead of developing reactively to metrics, the team often starts with a creative hypothesis, implements a change, reviews how it impacts the business and then repeats that process.

Gebbia shares, “I’m not sure how useful data is if you don’t have meaningful scale to test it against. It may be misleading. The way that we do things is that if we have an idea for something, we now kind of build it into the culture of this idea that it is okay to do something that doesn’t scale. You go be a pirate, venture into the world and get a little test nugget, and come back and tell us the story that you found.”

Individual team members at Airbnb make small bets on new features, and then measure if there’s a meaningful return on the bet.  If there’s a payoff, they send more pirates in that direction. This structure encourages employees to take measured, productive risks on behalf of the company that can lead to the development of major new features. It allows Airbnb to move quickly and continually find new opportunities.

“We’re trying to create an environment where people can see a glimmer of something and basically throw dynamite on it and blow it up to become something bigger than anyone could have ever imagined.”

Everyone Learns to Ship On Day One

As part of the onboarding process at Airbnb, the company encourages new employees to ship new features on their first day at the company. It earns them their sea legs and shows that great ideas can come from anywhere. This approach yields results in unexpected ways. For example, one Airbnb designer was assigned what seemed like the small task of reevaluating the “star” function. In the original Airbnb product, users could ‘star’ properties to add them to a wish list — a basic feature. Gebbia recounts the story:

“Our new designer comes back and says I have it. I go what do you mean you have it? You only spent the day on it. He goes, well, I think the stars are the kinds of things you see in utility-driven experiences. He explained our service is so aspirational. Why don’t we tap into that? He goes I’m going to change that to a heart. I go, wow, okay. It’s interesting, and we can ship it so we did. When we ship it, we put code in it so we can track it and see how behavior changed.”

Sure enough, the simple change from a star to a heart increased engagement by over 30%. In short, let people be pirates, ship stuff and try new things.

Parting Words

When you’re building product at a startup you’re always moving a million miles an hour. It’s tough. You need to ship. Gebbia tries to balance this reality with the need to think in new ways by constantly pushing his team to think bigger. He notes, “Anytime somebody comes to me with something, my first instinct when I look at it is to think bigger. That’s my instinctual piece of advice. Think bigger. Whatever it is, blow it out of proportion and see where that takes you. Come back to me when you’ve thought about that times 100. Show me what that looks like.”

 

 

Source: http://firstround.com/article/How-design-thinking-transformed-Airbnb-from-failing-startup-to-billion-dollar-business?curator=MediaREDEF

How I Did It: Aaron Patzer on Creating Mint.com

In 2006, Aaron Patzer started Mint Software, Inc. because he was having trouble managing his own finances. In 2009, his site Mint.com was acquired by Intuit Inc., for $170 million. Here, Patzer talks about some of the challenges he faced while building his business, along with some advice for aspiring young entrepreneurs.

I have always thought of myself as an inventor first and foremost. An engineer. An entrepreneur. In that order. I never thought of myself as an employee. But my first jobs as an adult were as an employee: at IBM, and then at my first start-up.

The start-up life kept me busy and surfaced the problem of not being able to stay on top of my personal finances, which led me to invent Mint.com. I was working 80-hour weeks, and had done enough preliminary work and research to know I had a big idea: To make money management effortless and automated. I began to think about the business nights and weekends. But it’s hard to find the time when you’ve got a very demanding full-time job. One day I decided that if I gave it 100 percent and failed, I could live with that. What I couldn’t live with was going halfway, part-time. So with $100,000 in my savings account, I decided to quit my day job. [time-link title=”(Read about Google’s growing offices in Silicon Valley)” url=http://techland.time.com/2011/05/19/google-expands-its-offices-across-highway-101/]

The first few months were tough, and there are a lot of obstacles people don’t talk about. I was 25 at the time, new to Silicon Valley, and taking on something entirely new.

I oscillated day-to-day between feeling like I had the greatest idea ever and feeling like it would never work. I questioned my worth, wondering who I was to take on Intuit and Microsoft. If this was a good idea, surely someone would have done it before.

It was a very emotional process and people don’t tell you that. Your net worth drains away quickly, you have no idea what’ll happen next, and you sit alone in a room with no help, and no resources. It’s just you, your brain and sheer will power.

Below are some things I learned that might help you optomize your chances of business success.

Find Inspiration Whenever I got down, I listened to Frank Sinatra’s “That’s Life,” or remembered a Shakespeare quote I liked as a kid: “Our doubts are traitors, and make us lose the good we might oft win, by fearing to attempt.”

Persist At the time, I hadn’t done web development in eight years. I knew nothing about Java web services, little about databases and even less about recruiting and building a business.

But I was really good at one thing: algorithms. I’m also really persistent — I worked 14 hours a day, six days a week for six months straight before I got funding from an angel investor.

Overcome Shyness I am an introvert, was new to Silicon Valley, and didn’t know any other engineers or people who could help. After building most of Mint.com’s prototype by myself, I talked to anyone and everyone I knew about Mint. It’s counter-intuitive, because you might fear someone will steal your idea, but it’s the only way to make connections, be sure you’re on the right track, and provide a solution for an audience broader than yourself.

I also joined and attended every relevant group or event I could. I hired my first engineer in the top of a tree on an organized hike. My first round of funding was closed out of the trunk of my car at one of the dozens of events I attended — after being shot down at least 50 times.

Ask for Help I know what I’m good at, and I know where my weaknesses are. I am among the best algorithms engineers, so I sought out and hired other top talents in their respective fields of security, design and communications. When I needed to make a crucial hire or business decision, I leaned heavily on the recommendations and connections of others.

However, at the end of the day, you are the decision maker and you have to have the trust and confidence in whatever decision you make. This isn’t always easy. I had investors, advisors, or board members with 20+ years more of relevant experience that made suggestions I strongly disagreed with. When that happens, you have to trust your vision and your own ability to think things through more thoroughly than anyone else to guide you.

With outside funding, a growing team and userbase, and a product that made a major promise, my decisions quickly affected many lives in a very profound way. For me, that is an honor and a privilege, that I don’t take for granted.

Founded by Scott Gerber, the Young Entrepreneur Council (Y.E.C.) is an invite-only nonprofit organization comprised of the country’s most promising young entrepreneurs.  The Y.E.C promotes entrepreneurship as a solution to youth unemployment and underemployment and provides its members with access to tools, mentorship, and resources that support each stage of a business’s development and growth.

Source: http://business.time.com/2011/06/02/how-i-did-it-aaron-patzer-on-creating-mint-com/

It’s Time for Open, Shared Home Wi-Fi

By Walt Mossberg

Apple co-founder Steve Jobs loved to walk around his neighborhood in Palo Alto, California. And after his pride and joy, the iPhone, was born, he naturally took it along with him on walks. The first iPhone had a lousy, sluggish, cellular-data network, but it also had a much faster data option: Wi-Fi. It even had a feature (still present, but much less touted) that popped up a list of nearby Wi-Fi networks on the screen, so you could always find one in range.

But, he once told me, there was a big problem with that technique, one that he wanted to fix: Most of the Wi-Fi networks that popped up on his screen couldn’t be used, because they were secured with passwords. Jobs said he understood the need for security, but he was determined to figure out a way to make free, safe, Wi-Fi sharing from homes and small local businesses not only possible, but common. He even told me that he planned to get other companies involved, in a sort of consortium, to make this happen.

His idea was to get as many wireless router makers as possible to build in a “guest network” option — essentially a second Wi-Fi network, securely walled off from the rest of the home network, and with its own name. Then, he hoped that the industry would encourage people to share their bandwidth with strangers via these guest networks. That way, a smartphone user could walk around, moving from one Wi-Fi hotspot to another, without logging in — much like people using cellular data move from one cell tower to another.

Users of this second, guest network wouldn’t have any way to access the owner’s main network, or the computers, network drives, printers, or files on the main network. Yet they’d be able to get onto the Internet, while in range.

No such big public consortium for home Wi-Fi sharing ever emerged. But Apple and other wireless router makers did wind up building a guest network option into their products. (I have no idea whether this stemmed from Steve Jobs’s idea or whether it was just a logical move.)

These guest network features aren’t widely publicized or much used by average folks. I asked one big-name home-router manufacturer to estimate how many of its customers had set up a guest network, and the answer was a rough guess of 15 percent to 20 percent.

Some companies, from U.K.-based Fon to cable providers like Comcast*, are moving in the right direction. But there are strings attached that make them less attractive than free, open, Wi-Fi roaming across different routers and broadband providers. The Electronic Frontier Foundation is trying, too, with its Open Wireless Movement, but is making slow progress.

Yet, just because it never took off doesn’t mean that tech companies shouldn’t try harder. There’s got to be a way to make it happen, so people needn’t rely on expensive cellular-data plans all the time, so cellular networks can be less congested, and so people can remain connected when there just isn’t decent cellular reception — even good enough for portable Wi-Fi hotspots. Why should you have to wait to get to your home, or your office, or to the nearest Starbucks, to get a usable Wi-Fi signal?

The obstacles are real. But they’re not insurmountable.

One problem is that tinkering with the settings on routers is, for most people, like figuring out whether to snip the blue wire or the red on a bomb in one of those movie thrillers. You might have a satisfying result, but you might cause a catastrophe (in this case, killing Internet access altogether).

Apple makes it relatively easy in its AirPort brand of routers, with a clearly marked field labeled “Enable Guest Network” in the “Wireless” tab in its AirPort utility app for Macs and iOS devices. But the key word is “relatively.” You still may have to tinker with other settings, and understand some network terminology. For AirPort owners, instructions and explanations are here and here.

This can and should be made dead simple.

There are other problems to be solved before people will share their Internet. One is that folks might reasonably decide that their networks will be hacked. So, even if they do bother to set up a guest network, they slap a password on it, and only make that available to known house guests to whom they wish to offer Internet service without giving out their main password, or allowing access to their files.

Another is that, unlike Mr. Jobs’s vision of iPhone users passing by for a quick check of email or other low-bandwidth services, people know that some of their neighbors will want to simply be free-riders on their pricey bandwidth plans. Few people want to make it easy for neighbors to suck up their bandwidth by, say, watching movies on Netflix day and night.

Nothing is hacker-proof, of course, but the tech industry should be able to make a convincing barrier between the two networks. And it should also be easy to allow home users, in a very clear, simple, way, to set bandwidth or time limits on the guest network.

The good news is that, as noted above, some companies are moving in the direction of shared Wi-Fi. Fon, which has been around for years, lets its members share Wi-Fi bandwidth, but only if they own a Fon-branded router or a third-party router with the company’s technology built in. Also, the service is mainly used in Europe, and has never caught on in the U.S., where there are so few Fon routers installed as to make Fon sharing largely unavailable. Just compare a map of Fon routers in, say, Paris, with one in Chicago.

Comcast is rolling out a guest-network service called Xfinity Wi-Fi Home Hotspot, but it’s meant for Xfinity subscribers, and requires enough setup that the company has a whole Web page devoted to instructions for different operating systems and devices.

(Both Fon and Comcast sell short-term passes to their services for nonmembers or subscribers.)

The Wi-Fi industry is also taking steps to make using public, commercial hotspots easier with a technology called Passpoint, or Hotspot 2.0, which automatically connects and eliminates clumsy login procedures when you’re at, say, a coffee shop or an airport. But you shouldn’t have to head for the nearest cafe when you need Wi-Fi.

Then there’s the Open Wireless Movement. It is swinging for the fences, trying to make truly free, open, cross-device and cross-provider sharing a reality. But it’s largely a geek project today, focused on developing firmware to essentially reinvent routers.

It’s time the big tech companies solved this problem, so that Wi-Fi sharing and roaming become a reality.

* Comcast’s NBCUniversal unit is an investor in Revere Digital, Re/code’s parent company.

Source:http://recode.net/2014/08/05/its-time-for-shared-open-home-wi-fi/

The Colbert Report – Elon Musk Interview – July 24, 2014