The culture that lead to lean startup, agile, Uber and the digital economy 2/2

The first part (The culture that lead to lean startup) was about how the early culture evolved. This discusses the softening of the command culture and its effect.

Of peers and the sharing economy

The role of individuals was getting recognition in this culture.  Interestingly, the very architecture of the internet may have pushed this along.

The network design brief by the US government was that there should be no single point of failure for fear of a nuclear attack.  The result is the internet designed with a mesh architecture.

But let’s take a step back.  In the 1960’s, the prevalent culture was top down, strongly command-and-control with pyramid-shaped organisations.  Orders came from the top.  Work was within.  Trust was within, less so without. 

Interestingly, networks then (telephone, computer) mirrored such a culture.  They were designed as a central master with cables radiating out to slave devices (telephones, terminals) like a star.  This central node controlled all, the devices were simply talked to.  A device wanting to send a message to another does so via the central node.  Sounds authoritarian?

A mesh is like a fishing net, each knot a node. To withstand nuclear outage, the nodes are peers.  While they operate independently of each other, they cooperate with each other in order for the overall network to work.  There is no central node.  Surrounding nodes ‘discuss’ among themselves to decide where best to route data. If a node wants to send a message to another, it does so directly, peer to peer.  Sounds democratic?

Command-control vs peering

Imagine if the US government asked IBM (then the beacon and dominant player of the IT industry and perhaps an obvious choice) instead to design the internet.  Its staid culture, strongly top-down, would have meant no Facebook today.  How many would pay to use it?  Internet access would be expensive, slow, onerous to use.  We won’t be able to learn as much because content is hoarded to be sold.  No Uber with its peer-to-peer model.  No viral videos, who’s going to pay?

There’s also a culture of free because free has value in the internet economy but I won’t dwell.

But instead academics and researchers were called.  Their being less formal, more open must have had an influence.  And the 1960’s (internet was created in 1969) was a period of counterculture.

All these meant the command culture softening towards a peering one, in an increasingly open environment.  This softening had an impact on our sense of freedom.

And when central powers subside, the environment becomes more participative.

In fact this peer culture and the role of individuals allowed a new form of business model.

Uber et al

The world first heard of peer-to-peer with the arrival of Napster (1999).  Through our internet-connected PC, we download music stored in another, somewhere in the world.  It mirrors the mesh design of the internet ‘If a node wants to send a message to another, it does so directly, peer-to-peer’.

The conventional way would be for the PC to download songs from a centralised music server but in the Napster model, the central server is neutered into a phone directory role.  Songs are instead stored in users’ PCs across the internet.  After getting addresses from the directory, a PC (s) sends the file to the user’s PC directly.  In effect, the PCs cooperate with each other in order for the overall music distribution system to work. 

Napster turns consumers’ spare PC resources (disk, computing power) en masse into a music store.  To download a song, his PC ‘talks’ to other napsterised PCs nearby to identify a suitable one which then delivers the song directly.  Uber works in a similar way.  It parlays consumers’ idling cars into a taxi service.  When a consumer requests a ride, the app locates the nearest car.  The ride is delivered from one consumer to another.

This consumer-to-consumer resource sharing model, taking advantage of a new working culture, lowers prices and in the process created a new sector - the sharing economy. 

Like Uber or Facebook, understanding this culture could be helpful for those embarking on digital efforts.  For it to work, management must have an open mind.

Openness is at the heart of the new business culture

Openness allows a firm, traditionally looking only within, to alternative resources without, like individuals.  They are also open to newer ways to carry out business.  This lead to crowdsourcing, open source and peer-to-peer models that in turn evolved the modern management techniques lean startup and agile.  And the sharing economy.

Tech startups are leading this change today, others will follow.

©Chen Thet Ngian, internetbusinessmodelasia.blogspot.com (2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and internetbusinessmodelasia.blogspot.com with appropriate and specific direction to the original content.

The culture that lead to lean startup, agile, Uber and the digital economy 1/2

Lean startup, crowdsourcing and native advertising are three modern business terms, post internet.

Since culture begets behaviour that begets foundations of a firm, this post is for those who want an idea of the underpinning of a modern digital business.

“’Free and open’ was what made the internet work then, and it’s a critical principle now. I didn’t have to ask permission to build my first websites.  I had unfettered access to material that helped me teach myself how to code. As I learned more, I quickly came to understand that the internet was so much more than a network of cables and wires that connected computers around the world. It was a platform for the purest expression of freedom, openness and possibility that I had experienced in my life” 

– Chad Dickerson, founder of Etsy

Let’s begin with Lean

“The lean startup is about continuously improving an offering.  It favours iterative improvements over elaborate planning.  It involves customer development (as opposed to product development) to get out of the building and find out what people really needs.  Startups start with a ‘minimum viable product’ to gauge the audience’s interest.  They always test their assumptions aiming for ‘validated learning’. And if their strategy doesn’t work, they should ‘pivot’, in essence, throw in the towel and start again with a different product.  Sure, it’s used conventionally but in lean startups, it is used to develop the core business, that is, primary while traditional firms use it on the side.”

Minimum viable product is an attempt to get a core set of features into a device so customers can try it out and help you develop the product further. You don’t want to spend too much time on a version that doesn’t work.

And this is the open source software development process, as old as the internet....

“At its simplest - develop a basic form then release it into the public domain.  If it is any good and this is vital, it has to be useful or interesting, others will continue to develop it.  Iterations, in effect improvements through enhancements, new ideas, feedback, experimentation and testing develop the original form and move it forward.  At each stage results are consolidated and another version released.”

Similar?

Open source, a technique used to develop the underlying software that makes the internet work (from the domain name system to the web) was once derided because its development methodology was not conventional.  I have to say, letting strangers develop a product does sound flaky (alluding to questionable quality) compared to a large firm like Microsoft with thousands of good engineers.  But there you are, today tech firms like Google use mostly open source software in their operations, one that is far more complex than say a bank’s.  And now this methodology has crossed into business.

    Open source business model

How did an obscure internet model crossed into conventional business?

History hints

To many, internet culture is open, collaborative with a sense of freedom.  An event early in the development of the internet may have a hand in fostering this.

Traditionally, committees are formed to make decisions.  Usually closed, outsiders are not allowed.  This was not how early internet organisations work. 

Close vs open

Rather than being a formal committee, the early group formed to develop the internet was a loose association of interested researchers. These meetings were open.  It included anyone who wanted to join and contribute.  Individual experts, even those outside this group may submit designs without support from an institution, unlike traditional bodies.

”Instead of authority-based decision-making, everyone was welcome to propose ideas, and if enough people liked it and used it, the design became a standard.” – Steve Crocker. 

One of them, Stephen Croker, charged with documenting the process came up with the concept of an RFC.  An expert drafts a paper detailing a design, say the domain name system (that resulted in ‘.com’, ‘.org.’) by submitting a Request for Comment document.  They are placed in the public domain and meant to invite comments.  Anyone can download them and suggest improvements. It is not limited to the working group that created it.

In effect, this contrarian way to run a committee, open rather than closed and tapping experts outside the group was one reason for the success of the internet.  It was also the genesis of crowdsourcing.

Ink in water

Over time, thousands were exposed to this new open way of decision making and engagement of the crowd.  This culture was all over the early internet.  If you used newsgroups (online forums) where members interact, say in 1991, you would know what I’m talking about.

Many of these participants later got into startups or worked in the tech industry.  Others used online services that had assimilated the unique mores.  There must have been influence on the new generation of businesses and in turn the culture of the digital economy.  Yours truly was one of them, involved in a small way the formation of APNIC (an internet association where all Asia’s telcos and service providers are members) and internet startups.  It was partly this environment, so different from his places of work that got him thinking that the working of the internet economy differs from the conventional, thus this blog.

“Ultimately, if an engineering team has created a technology that they think is valuable to their community or is valuable to other companies that are operating at our scale, then by default we will consider open sourcing it. It’s a strong part of our culture, it’s a strong part of our identity.” - Facebook

cont’d in the next post....

©Chen Thet Ngian, internetbusinessmodelasia.blogspot.com (2013).  Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chen Thet Ngian and internetbusinessmodelasia.blogspot.com with appropriate and specific direction to the original content.