mustafa degerli - 2017 - technology entrepreneurship and lean startups - aardvark case

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TECHNOLOGY ENTREPRENEURSHIP AND LEAN STARTUPS Mustafa Değerli 2017

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Page 1: Mustafa Degerli - 2017 - Technology Entrepreneurship and Lean Startups - Aardvark Case

TECHNOLOGY ENTREPRENEURSHIP AND LEAN STARTUPS

Mustafa Değerli

2017

Page 2: Mustafa Degerli - 2017 - Technology Entrepreneurship and Lean Startups - Aardvark Case

Mustafa Değerli – Aardvark Case Page 1 of 16

Table of Contents

1. The Business Model Canvas – Aardvark .................................................................................... 2

2. Financial Predictions, Revenue Model, and Profitability – Aardvark ........................................ 3

3. Ideation: Compare and Contrast – Aardvark & Dropbox ........................................................... 5

4. Vision vs. Experimentation – Aardvark...................................................................................... 6

5. Value Innovation – Aardvark...................................................................................................... 8

6. Multi-sided Markets – Aardvark ................................................................................................. 9

7. Lean Startup Methodology: Pros and (possible) Cons – Aardvark .......................................... 10

8. Lean Startup Methodology: Compare and Contrast – Aardvark & Dropbox ........................... 14

9. The Mechanical Turk – Aardvark ............................................................................................. 15

10. Dropbox, Aardvark, and ULAŞIM ......................................................................................... 16

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1. The Business Model Canvas – Aardvark

The Aardvark’s business model canvas that I sketched out for the Aardvark is provided at the link:

https://bmfiddle.com/f/#/Fp6V8

Screenshot of the canvas that I sketched out for the Aardvark is as follows:

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2. Financial Predictions, Revenue Model, and Profitability – Aardvark

The Aardvark’s revenue model is mostly based on generating advertising revenue. The Aardvark

hypothesized that generating leads and inserting affiliate links via high commercial potential

queries will generate enough monetization.

Principally, the Aardvark intended to generate advertising inventory in two main conducts. First,

sponsored links; those can be shown to users when they submitted queries. Latter, the Aardvark

might add links to responses and can receive compensation provided that a user clicked on the link

or purchased an item based on the Aardvark suggestion. Additionally, the Aardvark intended to

depend on third parties on the way to manage advertising inventory in the first year or two, and

then planned to develop its own ad sales team. In late 2009, the Aardvark forecasted revenues of

less than $1 million in 2010, assuming cost-per-thousand impressions advertising rates of $13 and

millions of users by year-end. To become a breakout success, the founders projected that the

Aardvark would have to reach users in the tens of millions with $35 cost-per-thousand impressions

in 2012. At those rates, with 60 million users, they estimated they could reach $5 million of

operating income that year on revenues exceeding $30 million.

With regard to Exhibit 7 and 8 given in the article of “Aardvark” by Thomas Eisenmann, Alison

Berkley Wagonfeld, and Lauren Barley, the Aardvark’s revenue and profit predictions for the

future were quite attainable. However, as of today, there is no financial information available for

the Aardvark on the web and even the Aardvark does not exist anymore. Therefore, we are not

able to exactly know whether the Aardvark is profitable today or not. On the other hand, we might

conclude that as they do not exist anymore, they might have become not profitable. Another

possibility may be that the Aardvark is purchased by an outside organization that lead to their end

as Aardvark. That is, in practice, the Aardvark may exist in the form of a group or unit in a new

organization with a different name.

The viability of the Aardvark’s financial model can be judged as moderately promising and

probable in theory, yet we don’t have real data to analyze the actual case. As I noted already, we

can conclude that regrading financial predictions, revenue model, and profitability, they seem

unsuccessful since they do not exist anymore. If it was not the case that the Aardvark was

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purchased and integrated into a new organization, we can simply say that one probable reason for

the Aardvark’s failure is their failure in financial predictions, revenue model, and profitability. To

me, the assumptions related to financial details given in Exhibit 8 given in the article of “Aardvark”

by Thomas Eisenmann, Alison Berkley Wagonfeld, and Lauren Barley are reasonably reasonable.

On the other hand, it is still another time we appreciate that in theory there is no difference between

the theory and practice, but in practice there is. There are “other” factors and changing dynamics

that may truly shape our realities. Therefore, we need to be “agile” and have plan-b’s for whatever

the case is, including financial scenarios.

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3. Ideation: Compare and Contrast – Aardvark & Dropbox

The ideation process for the Aardvark can be summarized as:

The Aardvark team identified the broad space in which they would search for a product

idea. They wanted to leverage the Internet to help make decisions that required human

judgment.

The Aardvark team wanted to create something that could be tested with users. They also

wanted to evaluate ideas quickly, so they needed concepts that required relatively little

programming before they could test them.

The Aardvark team’s goal for any idea was to have a prototype that could be user tested

within a month. After the Aardvark team saw what users thought, they could make

corrections or discard the idea.

The Aardvark team didn’t want to mine knowledge on the Web. They wanted to mine

knowledge in people’s heads. And how do people get into their heads? Through sentiment;

people are going to participate because people want to help other people.

The team explored many ideas and built five prototypes before coming up with a concept

for a social search engine, which eventually became Aardvark.

The ideation process for the Dropbox can be summarized as:

Houston got the idea for Dropbox while waiting for a bus at Boston’s South Station in

December 2006. He had planned to work on a programming project for Bit9 during the

four-hour ride to Manhattan, but left his USB flash drive at his Cambridge apartment.

Frustrated, he began designing a service to sync and share files between personal

computers over the Internet.

The Dropbox ideation and refinement was also happened in a very continuous fashion.

To me, regarding the details given in the pertinent articles, I conclude that the ideation process for

the Aardvark is more comprehensive and well-elaborated. Furthermore, the product idea for the

Dropbox was stemmed from a need, and the one for the Aardvark was stemmed from an

expectation.

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4. Vision vs. Experimentation – Aardvark

Even though at some points they do have pretty different views, the founders of Aardvark

complemented each other, in general. For instance, Horowitz is 10 years older than Max and they

have very different interests and personalities. Different goals, as well. Max wanted to make a big

splash with the Aardvark. Horowitz wanted to build a product that reflects sensibilities about the

role of technology in the world. Max is plugged into the Silicon Valley culture; knowing everyone

in that world, which start-ups are hot, and how to dazzle investors and the press.

The roles of entrepreneurial vision and experimentation in Aardvark during both the ideation

process and the product development process are apparent. Basic reasons for my such view are

listed below as bulleted items:

They wanted to create something that could be tested with users. They also wanted to

evaluate ideas quickly, so they needed concepts that required relatively little programming

before they could test them.

Their goal for any idea was to have a prototype that could be user tested within a month.

After they saw what users thought, they could make corrections or discard the idea. They

were trying to shoot down ideas quickly, and most of them got shot down before the

prototype stage.

Horowitz Noted, “We didn’t want to mine knowledge on the Web. We wanted to mine

knowledge in people’s heads. And how do we get into their heads? Through sentiment;

people are going to participate because people want to help other people.”

Ventilla recalled, “We used smoke tests to see whether consumers would respond to an

invitation for a product that we hadn’t yet built. If they didn’t click through an invite, there

was no point in building a prototype. We also would fake functionality by substituting

humans for backend systems; these mechanical turks a pretended to be the product. We

would see if our early users—who didn’t know that they were using a turked product—

kept coming back.”

The cofounders established two product design principles. First, they agreed to seek user

validation at every step of the development process. As Spiro explained, “We wanted to be

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user-driven—that is, we wanted to be informed by the interests and needs of people who

were actually using Aardvark.” Second, the team wanted to stay nimble with engineering

by being highly collaborative and adaptive.

Horowitz explained, “We had people in every week. We asked our friends to come in; we

grabbed people off the street; and we put listings on Craigslist offering a $15 Starbucks

card to look at our mock-ups.”

Building on their earlier experience with turk testing, Ventilla and Horowitz made a

commitment to a “Wizard of Oz”b infrastructure to learn about user behavior before the

engineering team built an automated question-and-response service.

The Aardvark team actively cultivated and managed the user community, designating 5%

of their most active members as “Aardvocates” and sending them t-shirts and requests to

vote on features.

Ventilla said, “The goal of our product development process was to ensure eventual

product-market fit.

The cofounders raised venture funding before Aardvark completed its end-to-end system.

Ventilla recalled, “We raised $2 million in seed financing from high-profile angels and

then a $5.1 million A round led by August Capital—all while we still had turks running

our backend.” Given their stage, the founders pursued investment from sources that would

allow the company to evolve gradually. Horowitz added, “This was not the kind of start-

up in which investors closely controlled strategy, personnel, and operating decisions. Both

our early angels and our VC pretty much let us do our own thing—though having them

available for advice at crucial points was invaluable.”

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5. Value Innovation – Aardvark

To me, the Aardvark, at the time of its release, provided real value innovation. They created a

“social search” engine.

The reason for my position is that they created something new and quite niche. That is, thy created

the Aardvark which is effective with questions that required subjective responses, such as “What’s

a good book to read about Romantic poets?” The Aardvark differed itself from the Google and

Bing, traditional search engines, by this means. In addition, the Aardvark created a feeling like

users were engaging in a conversation with someone. Aardvark was not look like a Q&A website

with public information, like Yahoo! Answers. All of these reasons made it possible for the

Aardvark to generate a value innovation

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6. Multi-sided Markets – Aardvark

In my opinion, the Aardvark is a multi-sided market platform. We should remember that

intermediaries are the actual actors that make two-sided markets or two-sided strategies promising.

Furthermore, pricing, openness, innovation, advertising, and quality investment disputes are the

leading strategies and issues that each of key actors of two-sided markets shall rigorously should

take into consideration. Predominantly, the pricing and openness mean a great deal. the network

effects lie simply positive.

My strategies about monetization and growth for the Aardvark:

Get shares for referrals (generating leads and inserting affiliate links via high commercial

potential queries).

Have adds on pages and applications.

Collaborate with expert users to improve the quality of the content.

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7. Lean Startup Methodology: Pros and Cons – Aardvark

Components or

Tools from the

Lean Startup

Methodology

Used by the

Aardvark

(Yes / No)

Helped to the

Aardvark

(Yes / No)

Comments

Actionable metrics

and analytics

Fairly yes Fairly yes The Aardvark employed metrics.

However, metrics should be

actionable and they should be

analyzed for possible correction,

corrective action, and preventive

actions.

The Minimal

Viable Product

(MVP)

Yes Yes The Aardvark employed MVPs.

Alpha/Beta Test Yes Yes The Aardvark employed

Alpha/Beta Test.

Pivots Yes Yes The Aardvark employed pivots.

They actively listened customer

feedback.

Customer

Discovery and

Validation

Yes Yes The Aardvark employed

customer discovery and

validation. From ideation to the

end of product development they

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have included the customers

actively.

Build-Measure-

Learn

Fairly yes Fairly yes Although the Aardvark fairly

employed Build-Measure-Learn

cycle, we don’t have enough

numbers to judge the

effectiveness and efficiency of

the cycle utilized by the

Aardvark.

Validated Learning Fairly yes Fairly yes Although the Aardvark fairly

employed Validated Learning

approach, we don’t have enough

numbers to judge the

effectiveness and efficiency of

the approach utilized by the

Aardvark.

Innovation

Accounting

Fairly yes Fairly yes Numbers related with some of the

constructs are available. But more

numbers (financial data,

predictions) are needed for full

characterization.

Continuous

Deployment

Yes Yes Adequately applied by the

Aardvark. They fine-tuned and

refined as per customer

comments and inputs.

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8. Lean Startup Meth: Compare & Contrast – Aardvark & Dropbox

Components or

Tools from the

Lean Startup

Methodology

Employed by the

Aardvark

(Yes / No)

Employed by the

Dropbox

(Yes / No)

Comments

Actionable metrics

and analytics

Fairly yes Yes The Aardvark employed metrics.

However, metrics should be

actionable and they should be

analyzed for possible correction,

corrective action, and preventive

actions.

The Dropbox employed metrics

and analytics in a more

comprehensive way.

The Minimal

Viable Product

(MVP)

Yes Yes Both (the Aardvark and Dropbox)

used the MVPs effectively.

Alpha/Beta Test Yes Yes Both employed Alpha/Beta tests

meritoriously.

Pivots Yes Yes Both employed pivots. They

actively listened customer

feedback.

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Customer

Discovery and

Validation

Yes Yes Both employed customer

discovery and validation. From

ideation to the end of product

development they have included

the customers actively.

Build-Measure-

Learn

Fairly yes Yes Although the Aardvark fairly

employed Build-Measure-Learn

cycle, we don’t have enough

numbers to judge the

effectiveness and efficiency of

the cycle utilized by the

Aardvark.

On the other hand, the Dropbox

appropriately applied Build-

Measure-Learn cycle. The

Dropbox was better especially for

measure and learn parts.

Validated Learning Fairly yes Yes Although the Aardvark fairly

employed Validated Learning

approach, we don’t have enough

numbers to judge the

effectiveness and efficiency of

the approach utilized by the

Aardvark.

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On the other hand, the Dropbox

appropriately applied validated

learning approach.

Innovation

Accounting

Fairly yes Yes Numbers related with some of the

constructs are available for the

Aardvark. But more numbers

(financial data, predictions) are

needed for full characterization.

Yet, the Dropbox correctly

applied the approach.

Continuous

Deployment

Yes Yes Adequately applied by the both.

They fine-tuned and refined as

per customer comments and

inputs.

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9. The Mechanical Turk – Aardvark

Mechanical turks are mainly used for machines or devices that can professedly do a fully

automated task, but which in reality is done by a hidden person.

Regarding the Aardvark, the Mechanical Turk is the medium to to fake functionality by

substituting humans for backend systems. They are used to see if early users - who didn’t know

that they were using a turked product - kept coming back.

It was moderately useful and it helped the Aardvark. The Aardvark used to the mechanical turk

learn about user behavior before the engineering team built an automated question-and-response

service. Additionally, by this means, they learned things that informed their work on both the user

interface and the backend systems. Moreover, with the help of the mechanical turk (Wizard of Oz),

the Aardvark automated portions of the work of classifying and routing queries, and they gradually

constrained the turks, so they did less and less of the work.

The mechanical turk approach is more useful for business cases which requires substituting

humans for systems. For example, if we would like to produce products or services which will

automate or to a certain extent replace humans, we can benefit from mechanical turk approach for

cost minimization and early feedback.

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10. Dropbox, Aardvark, and ULAŞIM

In my project, I have used or I am to use following tools and components, to a certain extent similar

to ones done in the Aardvark and the Dropbox cases.

Actionable metrics and analytics

The Minimal Viable Product (MVP)

Pivots

Customer Discovery and Validation

Build-Measure-Learn

Validated Learning

Innovation Accounting

Continuous Deployment

After analyzing both the cases of the Aardvark and Dropbox, I see that I need to improve my

canvas and model regarding following dimensions:

Actionable metrics and analytics

Innovation Accounting

What is more, since my revenue stream reasonably matches with the one of the Aardvark (we both

mostly employ advertising for making money), I will analyze the details of the Aardvark to ensure

that I can benefit from these.

In addition, in my opinion, what the both (the Aardvark and the Dropbox) did great are pivots and

validated learning. These are the points that I also gave much importance during my project

development and improvement. Still another thing that I will benefit from the cases of the Aardvark

and the Dropbox is the more tangible and functional MVPs. I do know it is not a “must” for MVPs

to be that tangible and functional; yet, to me as I see in both of the cases, they (more tangible and

functional MVPs) are much more than “nice to have.” Therefore, I should have developed MVPs

a bit more tangible and functional than my sketches that I used for hypothesis testing with my

Category 1 [People using local public transportation facilities (Metro and AnkaRay)] customers.