A conversation with David J. Bland, Founder & CEO, Precoil, co-author of Testing Business Ideas
As part of our Innovation Series, I recently spoke with David J. Bland, Founder & CEO of Precoil and co-author of Testing Business Ideas. We discussed his experience working with startups and teaching product experimentation and the resulting field guide he created to successfully test business ideas.
David Bland has always had an entrepreneurial spirit. As a child, he financed his video games by selling Charms Blow Pops at school. After college, he joined a financial services startup that was building a business-to-consumer platform. But then they realized that, rather than using the platform, consumers kept going through the financial advisor. The customers were not who they expected, so they realized they needed to switch to a B2B model.
“Thankfully our founder recognized that,” says David. “He really understood the financial space, and understood the background, but he was also very entrepreneurial. He understood that we needed to focus on banks. These people find value in our platform and they’re using it, but they’re using it through this intermediary, and we’re not really getting anything from it. And so, it shifted our focus. That was a big learning moment for me in my career.”
After joining a couple of other startups, which weren’t very successful, David’s big learning experience was that they failed because they kept ignoring things and persevering no matter what. “Much of what I teach now is based on my startup experiences. Pivoting from B2C to B2B. Building things that people care about and removing the parts in which they don’t. Replacing a manual, six-month-long, error-prone paper process with a tech platform that gets it right in about 15 minutes.”
Since about 2010, David has been focused on helping people test their ideas and breaking down their work into testable chunks. “That’s when I stumbled upon Lean Startup and other stuff. And it resonated with me because of my experiences, and that’s when I took off and started advising companies.”
Testing product vs. process
David emphasizes the notion of testing business models and processes versus just focusing on new products. For example, while working on a large-scale company with Eric Ries, there were product teams and process teams, and both had leap-of-faith assumptions for which they had to test. But David says that for a process team, you’re almost better off mapping out your existing process to find where the gaps, the problems, and the blockers are.
“If our goal is to shrink this thing down and still achieve a high-level outcome, how do we do that? What’s the thinnest slice that we can use as an experiment? That’s usually experimenting with the process,” he says. “It’s almost like scientific method applied to process improvement. There are a lot of lean startup techniques you can bring to the table. So, on a principle level, they’re very similar, but at a surface level when you’re looking at just the artifacts created, it does take on a different form, versus just testing out product, or testing out a business idea.”
David finds that a supportive executive team is a key to the success of these initiatives, because those processes that you’re trying to change are already there, probably for a good reason. Or they used to be there for good reason, and the people that created them may not even be there anymore, so nobody really owns them. But people are afraid to change them.
“If it’s something HR-related, you would map out the flow in HR,” says David. “Or if there’s something in learning development, and how you’re onboarding people, what does that flow look like? And then, if it’s not very effective and people are complaining about it, what’s the smallest test you could do to improve it?” Organizations get caught in cycles where they just keep adding to the process over time, and then it becomes almost impossible to do anything quickly or effectively.
According to David, changing a process comes down to a group owning it and having executive support. “And if we’re going to change something, we need to have a process so we can say, here’s our experiment, we’re going to run this for three months. We’re going to include these teams and this process. We’re going to run this many people through it, and here’s our metrics that we’re going to measure, and this is how we’re going to report our success.”
The fetishization of the new
Many companies may rely on launching new products to move forward. But sometimes repurposing things, or just retooling what we have today, is a perfectly fine way to improve business. David believes that this is something we should be mindful of as a community.
Sometimes larger companies can generate more revenue by fixing a broken process than launching yet another new business.
“Because, it’s not sexy to go in and say, “Okay, we’re going to take an old process and make it better, and generate revenue that way, and shorten our cycle time, and not have as much waste in the process,” he says. “But sometimes that will generate so much more revenue for you versus just trying to launch another idea. Rather than launch a new business, if we just acquire this company and we do it in a way where we don’t mess it up, it could actually end up better for us.” Still, many things can backfire, usually because we haven’t considered the risk or communicated things properly.
David learned a lot of things the hard way, and one of them was getting people excited about change. If you have the wrong culture, he says, a failure will mean you’re never going to experiment again. There are many technology options available to toggle things on and off, but if your architecture doesn’t support that, and you’re hacking stuff in, you must be careful about what you do.
“I try to get people to go fast, but also kind of do it responsibly,” says David. “There have certainly been cases where things were launched, and they couldn’t turn them off. People didn’t coordinate with other groups or bring them into the fold early enough, and they didn’t understand what was going on, and that messed up the experiment. There’s a danger of getting people excited and they go off all in different directions, and then there’s a negative impact. I do try to use tools to visually get people to align on things and communicate.”
David recalls working with a large company in San Francisco where they got so excited about launching experiments to production that they never verified they could toggle them on and off quickly. “They rushed to launch a new feature test that was so unsuccessful, it was costing them thousands of dollars by the minute,” he says. “Unfortunately, they had never validated that their feature flags worked, so they had to pull in developers to patch production that evening. That is a high-pressure situation that can be avoided usually by investing in your testing infrastructure. I guess infrastructure isn’t as sexy as moving fast and breaking things though.”
Measuring innovation: two streams
David points out two ways of measuring innovation. There are innovation metrics and funding for certain new products and new businesses, which involves an internal VC funding-like approach. “The metric usually ends up being something like a fund, or something they create internally,” he states. “So, what I’ve been recommending to companies is to set aside the other money. Don’t touch it for other things. Use it to invest.”
But the other stream is more broadly innovative and aims to level up people. “I really like what Adobe is doing, where they’ve democratized it across the company,” says David. “They set aside a bunch of money for that, and they use it to fund the kits that they send out. They also invest in their employees to learn these experiment techniques through programs like Adobe Kickbox. They’ve shifted from physical discs to the cloud and tested their way through it all successfully. They seem to be getting it right, or at least the market is rewarding them for it.”
In both scenarios you must set aside your funding, otherwise, it’s just too easy to dip into it and reroute it to different places. Then, you end up underfunding your innovation efforts. David believes that right now almost all innovation metrics are about new products, but there is more to innovation than new product development.
Innovating on business models can yield big impacts, so can innovating on process.
Both have their own set of metrics. How many new business models have you tested? How many succeeded? How many failed? With regards to process, have you reduced lead time and cycle time on a costly process by innovating? “I think there are times when a company can generate more revenue with an innovative process or business model, than launching new products,” he says.
Innovating in the retail space
One of David’s favorite innovation stories now relates to how we use space. He sees the differences between physical and digital spaces and finds that people often neglect the physical. We’ve learned a lot over the last few decades, in a digital realm, about how to educate people and how to get them into a product and using it right away. But sometimes people just don’t know what to do in a store, or where to go, or what departments exist.
In a sort of ethnographic on-the-ground observational way to conduct research as a retailer, David put on a vest and walked the floor as an employee, conducting interviews and experimenting with how to onboard new retail customers over the holidays. “It’s amazing to me how we neglect things like explaining physical spaces and solutions to people,” he says. “In software, you’d build an onboarding flow and step people through how to use everything. In the physical world, it’s often just a free for all once you’ve paid and must figure it all out on your own. Retail store managers are becoming mindful that people will spend more time and money in their store if they deeply understand the value you provide and how to find it. I mean how many of us have been lost in a store before. Imagine how much revenue is lost as a result.”
And this doesn’t only apply to retail. David says we can look at hospitals and schools, for instance.
“There’s a lot of stuff you could do in the physical space where you could understand shopping behavior a little better, you can segment, you can do all kinds of stuff with analytics now that we know it’s possible. You can apply the same stuff that we learned testing in the digital world.”
As an example, Davis imagines someone using your app for the first time. What would you need to show them so they get real value out of it? Then imagine someone walking into your store for the first time. How would you onboard them and how would you help them explore the store? “There’s all this stuff where we could test it earlier and think of the customer and the people that come through, and try to just meet their demands a little better, versus just not thinking about it or being aware of it, and then designing a thing,” he says.
The Girl Scouts as innovators
Besides wrapping up his book, David has been enjoying teaching these concepts outside of his usual workshops. He recently lectured at Yale’s MBA program and at Berkeley’s School for Entrepreneurship, among other places, as he enjoys being challenged by the students. But one of his toughest and most exciting recent gigs was teaching these business concepts to the Girl Scouts. “I mean they already sell cookies, but you can apply most of these techniques to that process, which is super fun for me,” he says. “There’s no filter, and they ask these obvious questions that you don’t expect, and they’re learning. They’re super curious. So, it was fine, but it’s also very hard.”
“I’m trying to teach them entrepreneurship. I spoke at my kids’ school too. They get it. You start doing a canvas for a lemonade stand, and they get it right away. They’re like, “Oh, well, you know, lemons cost money and here’s what we need to charge,” and all this. Overall, I get excited about the younger generations learning these concepts earlier, rather than convincing adults to care about working this way 30+ years into their careers.”