Having seen the post “Idea Guy Looking For Developer” pop up on Hacker News, I thought I’d weigh in my opinion as a developer-entrepreneur who has worked with various business and technical co-founders. Many technology founders can’t solve hard technical problems (algorithms, machine learning, scaling) and even more business founders can’t solve complex business problems (distribution, monetization, engagement). It would be very rare for someone to solve all of these problems (which is why we work in teams), but I find that it is easier for a quantitative person to tackle both sides. In this post, my goal is to articulate some of the business responsibilities in developing a product.
In the diagram above, I’ve outlined some pieces that I’ve found to be particularly useful based on the following observations:
- Different traffic sources have different levels of conversion and intent (search traffic has higher monetary value than display ad traffic).
- More accessible/general products have bigger markets and distribution opportunities (think Angry Birds vs. Sodoku).
- It is easier to make a higher quality product with a smaller focus.
- Even the best product with the best engagement metrics/virality will fail without an initial or recurrent distribution strategy.
- A product with a great distribution channel and poor engagement is a short-term business (without the distribution channel, users won’t come back — a potential downside to growth hacking).
- Measuring, optimizing, and planning for conversion is extremely important in creating a viable business (without user sign-ups, there’s no revenue).
You don’t need to know all of this before building a product (since it takes time to “figure it out”), however, I think it is wise to have working models and hypotheses for each of these pieces at any point in your product development cycle. If you are a consumer website, you should have a hunch where you’re going to get your traffic. If your response is SEM, you should know what the cost-per-acquisition (CPA) is and how much volume exists for your vertical. You might also want to figure out your baseline conversion percentage and revenue per user (RPU). If you say SEO, you should plan on building your site links into other websites and improving your page rank. These tasks are tangential to building a product and will not be solved once you build a product. You have to actively figure out and solve these problems. Often times, the product will have to be changed to support these hypotheses.
In summary, a great idea doesn’t just become a great business once an “idea guy” finds his developer to build out the idea — it takes a smart team to problem solve along the way, and even then, you still might not reach a great business.