One of the joys of teaching project based classes in Human Centered Design is encouraging the teams to explore building their product and starting a company to monetize the product.  This fall’s class project assignment was to research, design and prototype a mobile application for a smart phone or tablet device.

All seven of the teams did a terrific job and the research and designs were the best I’ve experienced in my twenty years of teaching graduate students.  At the start of the quarter I challenged the class to not just prototype their application, but to see if they could actually build a working application.  One group built a fully functioning mobile app on an Android phone that communicated and did intermediate processing in the cloud, and returned the results to the smart phone.  Their results were far more than I had expected.

The team that built the fully functioning prototype met a couple of times after the end of the quarter and decided they wanted to take their app from a prototype to a monetizable app.  So they called over New Years weekend 2012 and asked if they could buy me the proverbial dinner.

I agreed and asked them to send me their full, current resumes along with questions they wanted me to answer or suggest answers to.

The kind of questions they sent and that I get from Idea Stage startups are variants of the following:

• What do we do next?
• What’s the best way to move forward in getting this app manifested into a real, genuine app?
• We know we need to do more user research, how much more? When will we know we’ve done enough?
• Should we be focusing on usability now or do we need to do more user research?
• In creating a company for our app, how do we fairly divide up the percentages of ownership?
• What kind of formal corporate structure do we set up – LLC, S corp, or C corp?
• Is it time to create a business plan now?
• We feel strongly about releasing the app on all 3 major mobile smart phones at once (be multi-platform from the start): iPhone, Android and Win8 – is that actually wise, even though our intuition tells me that it is?
• How do we protect our intellectual property?
• One approach we talked about is setting an end-date in the future and backwards engineering a schedule from there – does that seem like a good idea to you?
• We all still have to work full-time (or go to school full-time), but we really want to make this happen and do it right!
• Can we fund this ourselves or should we seek investment?  If we seek investment, should we get it from friends and family, an incubator, angel investors, or venture capitalists?  How much money should we try and raise?
• What should our “go to market” strategy be?
• How do we find a business model that will work?
• Skip, will you be part of our team?  Will you be on our advisory board?  Will you invest some money in us?
• How good do you think our idea is?  Can we really make money with it?

With a smile, my standard answer to all of the above questions is “It depends.”

My challenge is figuring out how to balance sharing everything that I know about what they are about to encounter (hitting them with the fire hose of information) versus sharing what they are almost ready to learn (what are the near term next steps).  Or should I just ask thoughtful questions as a way to guide them to their own answers for their own unique situation?

Before meeting with the team, I remind myself to re-read Scott Peck’s “The Rabbi’s Gift” and repeat to myself several times the mantra “I unconditionally accept where you are, but respect you enough to help you strive for your ideal.”

As a general process when we meet, I try and work through the questions that they came in with and not get taken too far astray with all of the side conversations and information drill down that a good team will want to ask.  Along the way I mention several books that would be good to read at this stage and let them know that I will follow up with the references after the meeting.  Along with the references, I usually have reflections that I share.

Here are a couple of reflections from our meeting last night:

• You need to spend time as a group thinking through the implications of building an app versus building a company (like the Stanford iOS video on iTunes we talked about in class with the partner from Kleiner Perkins iFund, Chi-Hua Chien – Lecture 11).  There is a big difference between the building an app and building a company.  You don’t need a lot of formality to build an app.  Building a company (as a product itself) is a different undertaking.  I am always focused on building a company so I forget to stop and ask this question in a serious way versus assuming that of course everyone wants to start and build a company.
• The comments about starting with Agile techniques are aimed not so much at the technique but building in daily transparency and accountability from the beginning.  With the limited time that you have it is important for everyone to know what is or isn’t going to get done on at least a weekly basis but preferably a daily basis.  The key is accountability and getting at dependencies between each of you, not just information sharing.  These meetings (or emails or skypes) should be separate from working meetings where you are working on some aspect of the business or the app.

The book references in roughly the sequence that I would go through are:

• Visionary Business by Marc Allen – this book in story form helps you sort through what role everyone is interested in playing and what each person wants to get out of the enterprise.  Often times the founders think that everyone else has the same motivation, but rarely do each of us do things for the same reason.  This is one of several things we would do in the 4-6 hour One Page Business Plan workshop.
• The One Page Business Plan for the Creative Entreprenur by Jim Horan – there are several books in this series.  I have most of them and they are basically the same thing.  This one is closest to what you need.  The key thing is to make your business plan a living document that is revised a couple of times a month in your first year.  It is far more valuable than a 40 page business plan.  As a companion to this you need to keep two presentations updated in parallel – one presentation to your customers or partners and one presentation to your potential investors.  What you did for class is a good start for both of these but like the one page business plan as you learn things each week you want to go back and revisit your pitches, your 30 second elevator pitch and your sequence of 4Ps.
• E-Myth Revisited by Michael Gerber – this book also gets at the different roles (individual contributor, manager, and entrepreneur) that are needed to make the business successful.  It is also terrific for its emphasis on systematizing everything so that you are always increasing the valuation of your fledgling company and always able to sell the business to someone else.  And the key message is that you have to devote significant time to working ON the business, not just in the business.
• Demand by Adrian Slywotzky – this book is an excellent look at the six pillars of what it takes to build a successful product.  It is an excellent expansion of the three pillars of viability, capability, desirability that we talked about in class and is covered in Change by Design.  See the section on this book (number 1 rated) in my blog post:
• Change by Design:  How Design Thinking Transforms Organizations and Inspires Innovation by Time Brown (IDEO)  – This is the companion book to Demand.  While Demand is written by the consummate business professor who has discovered human centered design by working backward from spectacular business results, this book is written by the best human centered design product consulting group who thinks in business terms.
• Early Exits by Basil Peters – while it is too early for this book, I include it here as a reminder that once you get rolling and start generating revenue and demand there are some administrative and strategy things you need to be doing so that you are always ready for an exit opportunity to realize the valuation of the company that you’ve created.  At Attenex, we were the counter example of everything he recommends.  As a result of not doing what is in this book, we lost over $35M in valuation at exit.  But that is a story for another time.

If you haven’t taken the chance to read the blog entries on Working in Teams Part 1 and Working in Teams Part 2,  I would read them now.  You will be iterating through the forming, storming, norming, performing a lot during the next couple of months both because you are doing this part time and because you have one member who will be remote.  You will need to get good at always keeping each other up to date and be good about understanding when roles are shifting and be explicit about the role shifts.

In our class this fall, we mostly spent our time on generating insights to lead to a desirable and viable mobile app (courtesy of IDEO and Larry Keeley).  We didn’t spend any time on the feasibility or capability part (the what is possible) because it was clear that each teams proposed application could be built.  However, now that you want to go to the next step, we need to focus some quality time on the “possible” part of the equation.

At this point when mentoring, idea stage startups I suggest a 4-8 hour workshop where we work through the One Page Business Plan components together.  The end result of this effort is generating the vision, mission, objectives, strategy, and tactics to get the company formed and the app built.  And that is a story for a future blog post.