Wednesday, February 13, 2008

Embracing Uncertainty

I spent this morning with George Kembel, Director of Stanford University's d. school, and a d. school Fellow, Kerry O'Connor.

The Stanford Institute of Design is an inter-disciplinary school that brings together business school students, engineers, and social scientists into an integrative, iterative, and immersive process of discovery.

The process is integrative in that multiple voices of feasibility (engineering), viability (business), and usability (social science) are baked into the process. The process is iterative in that the teams use rapid prototyping and user testing to discover product/need fit. The process is immersive in that the team is placed in the environment of the targeted user to observe and listen.

The core idea is that innovation must be cross-functional, A/B test driven, and that products are shaped gradually over time through a process of feedback rather than declaratively and upfront. The philosophy holds that rather than fight amongst the team about what to do, solve the argument via data-driven tests that are designed to answer key unknowns.

This implies that the only "right" part of a plan that it is "wrong." Moreover, rather than be paralyzed by that fact, the best teams harness the voices of all key departments in the company, let the user guide them, and invest themselves in a process of data-driven, prototype-driven discovery that slowly peels away the "right" answer.

The competitive position of the company is anchored more on whether it is a learning organization - flexible, nimble, user-driven - rather than whether its founders enjoyed a single epiphany of genius.

With respect to venture capital, the implications are interesting. Most teams pitch three-year plans and product roadmaps. Like the book the Black Swan holds, the odds of the forecasts being right are nil - fundamentally, given the forecast error inherent in any plan, the investment decision should not lean heavily on the proposed plan.

Rather, as George and his colleagues would argue, perhaps the investment should be predicated on a defined user/customer target, a process and fluency with A/B testing and prototyping, an integrated team, and an openness to discovery rather than a priori certainty.

3 comments:

  1. The criteria you mention in the last paragraph are right on the money. As the designer (CEO) of a venture capital database - from scratch - I've learned those principles the hard way. Good design is an iterative process that requires great sensitivity to what your users want and how they want it.

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  2. I think your concluding paragraphs are spot on. For me, it's always been about the intellectual framework a person uses to make decisions - that's one of the key factors to success in any field...this is especially true when it comes to investing.

    Buffett, even early in his career, might've had a down year or two, but the man was using a sound framework for making his investing decisions. And ultimately that guided him to superior results over time, those who invested in him in the early days knew this and were comfortable with it - I'm sure the same is true of VC investing.

    So I'd venture to say (no pun intended) that if you invested in founders that employed a sound intellectual framework, as opposed to those pitching a "hot new product", you'd do better than most by investing in that type of person than solely in the product.

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  3. Great post. I've just been exploring the idea of how do we get better "on the frontiers of venturing" (early stage / deep change) and am finding exactly that... venturing is a process in a set of spaces as opposed to a plan with a specific destination. I've posted some more of my thoughts and observations here: http://tinyurl.com/3ycu94.

    Great stuff and I look forward to hearing more about your next thoughts on this.

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