Tag Archives: lean startup

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How do we get to the customer?? A startup with a great idea, an identified need, a prototype and…

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I was recently cleaning out a storage area and came across one of the prototypes from a startup I co-founded in 1993. It is a prototype battery powered portable digital audio sound processor for the hearing impaired.

Background
High quality audio processor prototype for hearing impaired
At the time my partner and I were working on a joint venture project to pioneer the first generation of all digital hearing aids. The hearing aid project was tough because the enormous constraints of a very small device that will run on very low power continuously for days. In learning about hearing aids we realized that they are not good for listening to music. Hearing aids have a very limited frequency range, so low and high frequencies are not amplified. Listening through hearing aids is sort of like listening to an AM radio, but worse. The limitations of analog technology caused a technical barrier to better quality. The other main limitation was that hearing aid users wore them for long periods so they demanded convenience and small discrete size above all else.

The big idea

We realized that the hearing impaired could hear much more music and have a great listening experience if they had a device that would treat the full spectrum of sound available to their impaired ears. Headphone, Walkmans, and portable CD players were common, so people were willing to carry music devices. We envisioned a portable device that you could take to the concert or use in your home.

Testing our idea
inside the prototype
To be able to test our idea we ran some quick tests using a PC with an audio card. We processed some music with hearing loss algorithms and did A/B testing with a few hearing impaired to see if they notice a difference. We got mildly positive results. However testing in a Lab is quite different than a user using this processing in their own home or wherever they needed it. We also wanted to be able to test different settings and algorithms for compensating hearing loss for music. This meant we had to build a portable prototype that would allow us to program different processing ideas quickly, yet would run for a few hours on a battery. We also needed to do it for the lowest cost in the shortest amount of time, since this was money from our own pockets and time from our evenings and weekends.

Building the prototype

Motorola 56002 Digital Signal Processor Motorola 56002 DSP Evaluation board
PC JTAG interface audio inputs and outputs User interface
We built the prototype using a combination of off the shelf components and custom circuits. The first consideration was could we power the device circuitry using a battery? We discovered we could use a large rechargeable cell phone battery and a switching power supply component to get the power we needed. Around that time Motorola released an evaluation board for their 56002 Digital Signal Processor (DSP). I had been programming this DSP off an on for 4 years and it was excellent for audio processing, so we had our main logic board and processor. Most evaluation systems need some adjusting to your application, and this was the case for us. In additions to adding battery driven power supply, we needed to increase the system’s memory and add flash memory to store the settings and programs. We also needed to add buttons and LEDs for users to control the settings and volume. We also added a high quality digital audio interface to connect headphones, a microphone and line audio inputs for sources such as a CD player.

Testing with users

A number of hearing impaired users volunteered to test the system for us. We set them up with 4 different programs that they could select and a volume control they could adjust. We then sent them off with the device in a waist pack with the goal of using the device whenever they listened to music or went to a show. We also asked them to compare the quality of music and audio to their hearing aids. In the device we could track what programs and volume levels they were using. After a number of field tests, users reported mild improvements in listening to music, and a preference for certain settings in the device. The algorithms I had developed were working, however I knew we could continue to greatly improve the effectiveness of the hearing compensation processing.

The missing link – distribution

We proceeded with marketing and sales discussions with Audiologists. Audiologists are the Medical clinicians who test people’s hearing and prescribe hearing aids. This was the natural channel for our device, since it would need to be customized for the hearing impairment of the user. In learning about Audiologists’ business we discovered hearing aid manufacturers were heavily incentivizing them to sell hearing aids with high margins, discounts and free trips. A good quality hearing aid cost on the order of $800 to $1000 per device. Because Audiologists were focused on selling hearing aids to improve speech perception, there was little interest in offering our product to the hearing impaired. In doing our market research we found a simple device that offered some of our features for amplifying audio without the ability to do custom hearing compensation. Sales for this device were struggling and Audiologists were lukewarm to the device. Hearing aids were so expensive that most customers would only pay for them. The high margins hearing aids provided Audiologists meant they’d rather sell and fit hearing aids then a specialized device for music and audio.

After more conversations and demonstrations we put the business idea and this prototype on the shelf. We saw that while there was a need in the market and the technical solution to meet that need, the realities of the distribution channel meant the device would likely not succeed in reaching the customers. Trying to build an independent marketing and distribution channel through pro-audio retail channels such as stores was explored, but looked overwhelming and risky. The devices required hearing testing for baseline data, hearing compensation and user validation, a process far too complicated for a retail setting.

Our expensive lesson: If you are doing a Startup and using Lean Startup methods, identifying a need in the market and the solution is not enough. We found a need and a solution, we tested it and proved our solution worked. We discovered that you also need to prove you can get your solution into your customer’s hands. Perhaps now, 20 years later, we could do something similar with a smart phone. The challenge of getting the product properly configured for a user’s specific hearing loss remains.

I am ever grateful to my fellow investors/learners in this experiment:
Dr. Abram Gamer and Don LaFont.
– Robin Dymond.

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Doing a startup but not in Silicon Valley? Here are 8 things to consider.

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I returned to Calgary Alberta Canada after 8 years living in Virginia and working with tech companies in the US and Europe. I still work with companies in US and Europe. I was quite involved with Calgary’s nascent startup community from 1996-2004, either with my own ventures or working with others. During that time I founded the TBL Napkin, a tech entrepreneur’s networking group that met for 3 years until the tech crash killed interest in it. At those events we hatched the idea that we eventually turned into the Banff Venture Forum, an investment forum for tech and energy startups in western Canada and it is still going strong.

Starting a company in Calgary has its own pros and cons, and while it is neither the best nor worst place in the world, Calgarians tend to have some blind spots, so here are some key points to keep in mind. I think these lessons apply to any startup that is not located in a technology hub.

1. Too much and too little money.
While Calgary has a huge and very wealthy oil and gas sector, that wealth and the expertise that comes with it doesn’t translate to technology companies. The mindset in oil and gas is completely different, how you start companies is different, and how you grow is different. So after many losses investing in tech, most O&G money stays in O&G where they understand the business. This means chasing investment from O&G people is valuable time wasted. The problem for startups is that all that wealth drives up people costs, and while sweat equity and shares work in the Valley, they simply don’t have the same value here.

2. Cashflow is king
The vast majority successful Calgary startups that grew to successful businesses focused on real cash-flow from real customers (not advertising). Cashflow early has two positive effects, it forces you to really listen to customers, and it provides immediate market based feedback on your idea/plans. Since Calgary sucks for raising tech startup money, real customer cash in the door really reduces the startup pain of debt, credit cards, family loans, stress, etc. This also means that capital intensive or infrastructure type companies (i.e. networking tech, hardware, nano tech etc.) that require lots of capital and/or long sales cycles should be avoided, or take your idea and move to where the customers and the financing are located. Same goes for advertising based companies.

3. Nobody knows your name
Calgary or most other Canadian and European cities are just not in the map in the US. In 8 of years living on the US east coast, it was rare that I would meet someone who had heard of Calgary, let alone know where it is. When I said Calgary, I could have been saying Riga Latvia. When I said Calgary was like Denver, it didn’t help, since they didn’t know where Denver was either. While you can say they are ignorant, consider that in a 6 hour drive you can go from Richmond Virginia through Washington DC, Baltimore, Philadelphia, New Jersey and New York city, not to mention all the smaller cities and suburbs. Drive 6 hours from Calgary and… well one more hour and we’ll get to Saskatoon! From Northern Virginia to Boston, over 50 million people occupy just 2% of the US land mass. People build very large successful businesses that in only exist in that small East coast corridor. Chances are you could be competing with a startup from that area, and they can drive to the customers. So you need to think about how you will differentiate your company while minimizing the potential disadvantage your location.

4. Do other stuff to pay bills
Calgary’s Smart technologies started out distributing and selling conference room equipment, projectors, etc, and did that for many years before and during the development of their smart board technology. Numerous companies have used consulting to pay the bills while they worked on the product or paid others to work on it. The best deal is if you can find a customer to fund your development because they really want what you can provide. Just make sure you retain ownership/marketing rights.

5. Go park yourself
The founder of Calgary’s critical mass parked himself in New York for long periods of time, and went up and down Madison avenue trying to sell Golf instruction CDROMs. That led him to landing a web site design contract for Mercedes Benz. At the time, critical mass didn’t know much about the web. A Calgary based company that built chat services for commerce web sites moved to LA to be physically close to their customers. Two years later Ask Jeeves bought them for XXX hundred million. If you need to sell to companies in Boston, hire a local sales person and go sell there with them until you know the roads and lobbies/offices of those companies by heart. You will then learn if your product is really needed (Golf CDROM? No thanks) or if you should be doing something else.

6. Stay small and manage the burn closely
You need people to make progress, but you also need feedback, answers and real information about the market, which means lots of learning for the founders. Learning is actually more important then building product. Learning progress is understanding what the market really needs and how to deliver it with the least amount of work and (borrowed) money. Find cheap ways of getting noticed, and be relentless about talking with potential customers and experts in your market. Give yourself a point every time you ask a question and subtract two points for every statement you make. The second mouse gets the cheese. All successful businesses have a simple economic equation at their core (even yours!). Know your equation forwards, backwards, and know all the factors that influence it.

7. If you don’t succeed, welcome to the club
Tech startups fail 90% of the time. So treat doing a startup as a learning experience and a chance to do something you have dreamed about doing. If your startup doesn’t succeed, well chances are you learned much more then you thought you would, and you have some scars to show for it. People who know about startups respect the attempt, and will be interested in hearing your stories and sharing theirs.

8. Press replay
A group of Calgary based entrepreneurs have been working the business model of direct media and font sales since the early 90s with Image Club Graphics, (sold to Aldus/Adobe Studios) to Eyewire (sold to Getty) to Veer (sold to Corbis) to iStockphoto (sold to Getty) to Stocksy and Dissolve. While this is neither original or particularly creative, it is effective since entrepreneurs can reuse business assets like contacts and refine the specific knowledge of that business. A similar thing has occurred in security software, where some Calgarians built an expertise in security software products and have continued to start, build and sell companies in that business domain.

Doing a startup takes guts. Doing it in Calgary increases the difficulty, but hey if my friends at Target Process can bootstrap development of an Agile Project Management tool from the very poor dictatorship of Minsk Belarus, why can’t you build your startup here? By the way, Target Process has sold 200+ seat licenses to Calgary’s Smart Technologies.

Cheers,
Robin Dymond.

Robin Dymond, CST is an international trainer and consultant in Scrum, Agile, and Lean methods. He offers certified Scrum Master, Product Owner, Lean and Kanban training, and has trained over 3000 people in Canada, USA and Europe. A speaker and author, he’s presented keynote talks and sessions at conferences including Agile Eastern Europe, Agile 20XX and others. He is President of Innovel International Inc. Dymond has 24 years experience in software and a BScEE from University of Calgary.