In my early teens, I volunteered to teach, then run, a computer school that was part of the local mosque. It was a good excuse to skip the religious services – a pragmatic escape for an atheist kid.

At first the work was fulfilling, we were helping Afghani refugee families find jobs and get settled in Canada, among other social causes.  The problem was that the volunteer teachers were used to getting social cred in the religious community in exchange for their time teaching, but I was in no position to offer that. Support dwindled and I had to teach  more and more classes myself. It got tiring, and seemed fruitless pretty fast.

But one of my students changed that. He was the Director of IT for a major corporation who wanted to learn HTML. (This was the mid-90s!)  After meeting me, he brought a project plan from work so I could understand “management.”   It opened my eyes to how I could translate my technical knowledge into value for an organisation.

An almost trivial exchange of knowledge for him that kicked off my career. I was 16.

I’ve come to see this as a consistent dynamic in communities, the payoff is usually in knowledge, or in connecting to people with similar goals willing to combine their momentum with yours.

I think a lot of people think of networking as “connections” and deals.  That hasn’t been my experience – selling is something totally separate from investing in the community around you. Sure, the knowledge and friends I gain from volunteering are something that can help me get deals or make money, but when I sell, I do that explicitly.

I volunteer a lot.  Most of my activities don’t generate revenue for me personally, but they help me create an environment that I and others can thrive within. To make this work, I think about what I’m contributing towards in terms of concentric circles.

This allows me to consider how to investing my time, and what I can look out for as payback. I don’t put people in these categories, just my activities, and even then, things get fuzzy between them.  But it still helps me work out how to get value back from my time.

My concentric circles of community

1. Brain Trust –  I make my advice and resources freely and regularly available to a small group of entrepreneurs, and get the same in return. It’s a small, organic group that changes over time. Together, we can progress with a bigger support base and fresh eyes to keep ourselves on the right track.
2. My friends in general - I’ve tended to make money by making other people rich, usually my friends.  Jobs I’ve had, startups I’ve founded – they’ve mostly started by just helping friends where I could. As they succeed, they’re in a better position to help me out too. I help out as needed and if the work gets too demanding, it’s time to cut me in.
3. Organised communities – This is where the computer school and Leancamp fit in. A common goal at Leancamp is that we’re seeking market traction. By design, sharing knowledge within these communities allows for immediate and useful knowledge coming back. Being open helps make new friends with goals I’d love to get behind, or people with similar challenges who can share their experience. The openness is a value-multiplier – everyone who shows up can derive the same benefits, and some pay it forward.
4. The big wide world - I put activities like blogging in this category. You invest some time to share what you hope will be useful to people, just to get some anonymous web stats in return. If I’m lucky! But once in a while, I’ll get an email from someone new with helpful ideas, willing get involved, or with a great opportunity.

It must be said that this just a way I’ve come to see things, in a kind of fuzzy, underlying way. It’s really non-explicit, and writing this post was the first time I’ve tried to articulate it as a whole. I also don’t think these specific circles apply to everyone. I’m sure the circles around you will be different, if you see them as circles at all, but I wonder if you’ve considered them in a similar way to me.

I sometimes wonder if I’m being too naive, but then, people I look up to are always encouraging me, telling me the future is in making this kind of community sustainable. I’d like our experiments with Leancamp will benefit other communities.  I’m certainly hoping what we learn about the Leancamp model can be shared with others, and make knowledge transfer more accessible and more common.

For now, for me, I’d say this is working. In each of those 4 circles, my work seems to be paying off for me and others. I’m really happy with what I do, with the type of environment I’m helping create, and with the people around me. Oh, and I happen to have learned a useful thing or two about Lean, Agile and Design over the last 2 years!

When accountants look at businesses, they spot problems and patterns in a similar way that architects, programmers and user experience designers do. As entrepreneurs, being able to spot the same patterns makes our businesses financially-sustainable and healthy, and I’ve seen it lead to serious innovation too.

If you truly understand something, you can draw it, so with that in mind, I sat down with Mark Twum-Ampofo from Kingston Smith, an accountancy with a specialty in tech startups. We were looking for a visual way to help startups and business owners get their heads around finance – a simple visual language for describing business scenarios.

Sometimes people use ad-hoc visual languages to describe things.  A common language would allow non-finance and finance people to work together more effectively, and allow pattern libraries to help businesses through common problems. If this starts to work for people, this could yield similar benefits to the Business Model Canvas as a standard, accessible language. (The BMC has sparked a lot of techniques and bridges in the business model world.)

What we have created is just a start, and doesn’t yet address more complex dynamics in accounting, but we hope it will already be helpful, and grow to become more useful. So far, we’ve tested it on a few people to help people understand and describe solutions to cashflow problems and investment scenarios like convertible notes.

Getting Started: The basic shapes of finance

Let’s start with 3 basic concepts, from which we can explore a whole range of scenarios:

Equity
Who owns the company?

Balance sheet
What’s the company worth? This is a point in time snapshot comparing your assets and liabilities.

Profit and loss
Are we making money? This compares money you earn and money you have to spend, over a period of time.

So, a simple scenario is one where we make some money, moving from a starting point of no assets or liabilities, to making some money (with about half of it going out in expenses), to where we have cash in the bank.

A line showing no assets or liabilities.	A period of time where revenue was twice as high as expenses.	Now we have some cash in the bank.

Scenario: Getting investment

Now, let’s look at an investment scenario, where you’re offered a small cash investment for 33% of your company.

Scenario: Getting investment with a convertible note

Let’s jump in. This is what a convertible note looks like.

The note is a contract that is structured like a loan, but that loan can convert into an equity investment based on different “triggers.”

Let’s look at this step-by-step.

Like before, we’ll start with a company that has some assets and some liabilities, and you own the whole company.

Then, you get the investment as a convertible notes. Technically, this is the same as loan at this stage – you have the increase in cash which is an asset, but you also have the debt along with it. So you still balance. You’re not really worth more – while the cash is a new asset, it comes with an equal new liability, the debt.

Now, let’s say one of the triggers comes along. This is most likely to be an investment round where you have a higher valuation, but it could be a number of things as written in your contract. In this case, it’s your decision to take an investment round at a higher valuation that triggers the conversion. You can see that the equity circle gets bigger to show the higher valuation. But then the note is converted, meaning that the debt (which is a liability) goes away and is replaced by a chunk of equity in the company.

(This quickly gets more complicated because other investors are involved to create the higher valuation, and there’s usually the implication of valuation caps and other conditions. I can describe visually in another post if you’d like if you ask.)

What we’ve done here is described the technicalities of a typical startup investment scenario without numbers. I’ve shown this to people who have never heard of convertible notes, and people have had convertible notes, and both have had a better understanding having seen the scenario.

Problem Solving: Cashflow

Now, let’s look at a typical problem with bootstrapped startups, cashflow. I’ll show you a company that looks healthy, Enterprise Telephones, which sells telephones to big companies.

It has more assets than liabilities, which is good – accountants call this solvent. In the Profit and Loss over last 3 months, it’s also sold a lot of telephones, at a value more than what they’ve spent in costs. So they’re profitable.

But there’s a problem – in spite of this, there’s just £1,000 in the bank but there are £4,000 in bills that are due! When they say that cashflow kills startups, this is what they mean.

The problem with Enterprise Telephones is that they’ve sold the phones, but haven’t been paid. The sales count on the Profit and Loss, showing as revenue. They also count on the balance sheet because the credit, the money the customer owes Enterprise Telephones, is an asset. But the company hasn’t seen the cash yet! This is the different between profit and cashflow.

Here’s where the finance patterns come in handy. If you find yourself in this situation, there are two immediate ways out:

1. Look at your assets. Are there assets that can be converted to cash?
   
2. Look at your expenses. Are there short-term expenses that can be put off or renegotiated?
   
   And in some cases, you can:
3. Look at your revenues & liabilities. Can you presell anything now to get some cash in the door? (The cash helps now but comes with a liability – you owe the customer the product now!)
   

This visual language could be a start.

This is how accountants “see” the situation, how they use patterns to spot problems and solve them.

Think there are ways to improve on this?  All feedback is welcome so please email me or comment! I’d like to see how you use this, and understand what scenarios you try. I’d also like to know if this helps you understand something better, or if you get stuck or confused somewhere.

Thanks Mark at Kingston-Smith for investing his time to help startups. This also builds on momentum from a number of thought leaders.  Robert Kiyosaki used visuals for financial definitions in his Rich Dad Poor Dad books, which I found very helpful as a young entrepreneur. Alex Osterwalder, Alan Smith and Patrick Van Der Pijl have been a big influence with their work on the business model canvas, a visual language for business models that has opened a range of new tools for business model innovation. And Dave Gray is constantly progressing Visual Thinking as a pragmatic business skill.

Interested in Visual Thinking at Leancamp?

Since you’re interested in visual thinking, we have a special access code for you – grab a ticket to Leancamp London 2 at the Early Adopter price, using the code: vizfinance.

via skitch.com

Thinking about doing some kind of Earlyvangelist t-shirt for swag or fund-raising for Leancamp. What do you think? Worth paying for? Would you wear something like this? (Tell me like it is – I can take the criticism if you think it’s a silly idea!)

Posted via email from I’m Sal

Early-Evangelists:

• Have the problem you think they have
• Knows they have the problem
• Tried to solve the problem themselves
• Looked for a solution themselves
• Put budget behind solving the problem

Issues can happen when an entrepreneur finds someone who fits 3 or 4 of these traits but not all of them. The example Sal gives is when someone has everything except for the budget, you don’t want to invest the time and cost in building a solution if you will end up empty handed.

via ow.ly

When you think a customer group will have a specific problem that’s painful enough that they’re already looking for a solution, you can validate that through Customer Development interviews. When you need prospects to see it to get it, lightweight paper prototypes can help you learn and evolve quickly. But what about the middle ground when the customer problem/pain isn’t super strong, and showing paper prototypes won’t tell you if they’ll really use the thing?

Christian Blunden’s (@christianralph) team at Lean Startup Machine London had an idea for a social network for reconnecting dog owners who meet while walking their dogs. The crucial thing to test was if dog owners would bite. So they put up poster for a website that didn’t exist, to see if people would tear off the contact information to check later.

A great example of working out your MVP – your Minimum Viable Product! This quickly tested the riskiest part of their idea, whether people care enough to even check it out. And it test real customer behaviour – what they do, not what they say they’ll do. Nice one!

Posted via email from I’m Sal

SaintSal in Barcelona - Homage to Desigual!

UPDATE: The Leancamp Barcelona waiting list has opened here: http://register.leanca.mp/leancamp-europe-2011/ Tickets will be available to the waiting list first.

My first few days in Barcelona have been great. I can already see how a very unique Leancamp could take shape here, an event where new approaches across entrepreneurship, design and architecture are born. If this excites you, please get in touch using the contact menu above – I’m in Barcelona until Friday morning and would love to meet you.

I’m looking forward to meeting the people mobile and game development communities, and I’ve had some great introductions in science, design and architecture. And while your mind might jump to all the outputs such collaborations could create, step back and think about the processes and approaches of each discipline too! I’ll go into each in detail below…

What does Leancamp do for the disciplines and communities it includes?

Leancamp is the birthplace of many startup methods and techniques that help you get market traction faster. The first time Eric Ries of Lean Startup and David Heinemeier Hansson of 37 Signals engaged in debate was at Leancamp in London last year. At the same event, several conversations were starting between designers and entrepreneurs, laying the foundations for the Lean UX movement we’re seeing grow today. Leancamp also created the first connections between Business Model Generation and Customer Development – which is why you see “business model canvasses” being used so often as a startup tool today.

So, let’s look at how Leancamp Barcelona could spark the same level of innovation, by bringing together leaders in architecture, tech entrepreneurship, fashion and science.

Startups

So far, my early connections are with mobile and game development startups. We’re starting to see the Lean Startup like approaches take hold in both of these areas, and building on the Leancamp heritage of combining Lean, Lean Startup, Agile and Design.  (To see how and what Leancamp has developed so far, check out the videos of past Leancamps at leanca.mp and to get an idea of the format of Leancamp, check out the Leancamp About page.)

Design

The design community in Spain is a world-wide force, particularly in architecture and fashion, drawing in-part from a healthy alternative scene and impacting the rest of the world with international architecture projects and iconic brands like Zara and Desigual. (Desigual are building a beach-front office for 1,000 of their designers!) The Lean Startup approach is explaining the way many tech startups build market traction so quickly. This approach has much in common with the successes of Spain, but there is also a lot we can learn from one another.

Connections to fashion design

Leancamp Barcelona can not only bridge these disciplines, it can draw on the Leancamp international base, teaching product designers with an entrepreneurial flair how to strike out on their own. For example, by inviting in the likes of Lookk.com from London to explain their progress with Internet business models in fashion, making better use of it as a marketing and customer information channel.

Leading fashion designers make decisions that trickle down through trends, standards, market cannibalisation, commercial feedback and Agile-like, iterative processes. The fashion industry has already matured around these dynamics – what can we learn from it?

1. Fashion is much better at including fast-moving commercial factors in an iterative process. You think tech moves fast? Try womenswear.
2. How do fashion designers push out quick designs with confidence that there will be demand? How can you get a product to market in two weeks, with limited customer feedback, and get it right?
3. How does the fashion business let the market positioning dictate the business model, while tech companies tend to focus on finding a market that suits a pre-determined business model?

And let’s not forget that Spain is the home of Zara, which has taken a dominant position in the global fashion business because of its Lean approach to retail and its supply chain.

Or, the interactive textiles and smart fabrics industries, which are begging for a common language between fashion designers and interaction designers. Lean is already becoming a common language, and with Lean Startup, the shared vocabulary around the customer experience is growing.

Connections to architecture

The connections to architecture are just as valuable. Many of the most useful techniques in computing science, interaction design and engineering come from architecture. Design patterns, for example, are thought of as coming from object-oriented programming, but these were adapted from architecture. The use of prototyping as a design technique to prime your mind to the possibilities and space you’re operating in, has been strongly emphasised by Frank Gehry. This technique is now used to great success in business model innovation and in Customer Development. Learning about this directly from architects will give entrepreneurs a better way to choose the right solutions when faced with limited resources. Architects themselves, many of whom are faced with a glut of their skills in applied architecture, can deliver value in other areas, in a similar way that the interaction design discipline emerged from a glut of young industrial designers a few decades ago.

Connections to Science

The Lean approach is rooted in research and experimentation, so a stronger connection to real scientists will only help improve the discipline. Barcelona has also been bolstered by recent European Union investment in Science. As early copies of Eric Ries’ book, The Lean Startup, proliferate, scientists are taking note. The Lean Startup approach to innovation is providing a stronger connection between scientific research, research & development, and commercial demand. This addresses two problems which seem to have been accepted as givens among scientists and R&D people I speak with:

1. That research projects and their corresponding intellectual property get shelved. Either they can’t be commercialised, or the political support dries up, leaving society unable to benefit from them.
2. That science budgets shrink and grow according to government support, or get controlled by by dominant commercial players.

These problems can be addressed with Lean Thinking, and scientists paying attention to this space are seeing new opportunities. They are seeing a future where science budgets are much healthier and more independant, and even true scientific breakthrough research is supported through more distributed markets in the commercial world.

International Leancamps in 2012

We’re hoping to create a cluster of Leancamps around Europe, so that we might travel between them, learning from each other’s strengths. I would hope to draw on the fashion and design connections to London, involving fashion startups like Lookk and our connections to institutions like UCL and Central St. Martins. In Spain, I’m hoping that interest from friends at Desigual, Zara, Elisava and other places spark the local community and come as ambassadors, students and teachers to the international Leancamp community, which already extends to England, Scotland, Netherlands and Bulgaria.

Please get in touch!

I’m in Barcelona until Friday morning.

The waiting list is now open

The Leancamp Barcelona waiting list has opened here: http://register.leanca.mp/leancamp-europe-2011/ Tickets will be available to the waiting list first, so please sign up if you’re interested.

If you’d like to meet, please get in touch! smile@saintsal.com or @SaintSal

Posted via email from I’m Sal

It answers the question: “Is this doing poorly because the offer is bad or the design is bad?”

My typical questions are:

1. What does this page offer?
2. What can you do on this site?
3. What is the page asking you to do?
4. What are some reasons it gives you to do this?
5. What do you think will happen when you click the button?

You’ll notice that these questions aren’t leading in any way – they give no clues about the design except for the last question, where I tell them there’s a button.

If I don’t get the answers I expect to these questions, I know I need to improve the design. You’d be surprised how differently people think from you.  I iterate on FiveSecondTest until people clearly get the point and can answer those questions to my satisfaction. Only then does the page go live.

Sometimes, this is a frustrating process. People are super lazy and don’t really read stuff or take a proper look at your page, so you really have spoon feed the information. But sometimes, thanks to the fact that FiveSecondTest has a decent number of smart-ass designers on it, I get answers that crack me up. It’s nice when your work makes you laugh out loud.

What are the reasons the page gives you to click the button? A pink arrow. Gee, thanks!

Btw, here’s a later version that consistently got the right answers to those questions:

One more item and bolder text did it! Go figure.

PS. If you’re interested in Leancamp membership, let me know!

Posted via email from I’m Sal

Great weekend watching, not just for content businesses or creative types. Feels a bit like a modern version of The Manual by the KLF.

It also got me thinking about how Lean Startup builds on existing platforms. With the content world moving to mashups and remixes, and the way creative endeavors build incrementally on the past, there’s a lot we could learn from each other. Think there’s a strong enough connection here to ask Kirby to join us at a Leancamp?

Part 4 coming this fall. More info and donations here: http://www.everythingisaremix.info/

Posted via email from I’m Sal

Posted via email from I’m Sal

Posted via email from I’m Sal

Posted via email from I’m Sal

Posted via email from I’m Sal

Unlike a lot of methodologies, Lean Thinking is not actually prescriptive.  It is principle-based and learning-oriented – and recognises that these principles manifest differently in different contexts. In some cases, even oppositely. At its core, it breaks down biases towards any particular methodology because of the focus on learning and improving. Lean Startup is no exception to this – it’s a guide and gives you some basic constructs to help you learn and adapt quickly. But this means you must learn and decide for yourself.

“The heart of Lean is to think for yourself in your context.”
- Satoshi Kuroiwa, a leading Lean and Agile practitioner from Toyota Japan

It’s interesting to go back and look at Tiiachi Ohno who invented many of the ideas used in Toyota. Ohno famously used to make managers stand in chalk circles and watch the work in the factory in order to develop an understanding of what went on.

At one point, Ohno encouraged his people to visit their competitor, Nissan, to learn about their production system. He would tell them not to copy it because then they would only be as good as Nissan. They must learn from it and make things better. But people copied it anyway, so he stopped sending them!

Consider that Lean Thinking has largely emerged from within Japanese culture, which is much more tolerant to paradoxical logic and can seem counter-intuitive at times.  Interesting paradoxes emerge from different areas of Lean practice:

Allowing anyone to stop the production line makes it faster.

Delaying design decisions leads to better designs, faster.

Communicating ambiguously leads to precision.

You might think that this kind of Taoist stuff has no place in the hard and fast world of modern business, but these paradoxes have been proven by leading Lean practitioners to significant competitive advantage and big gains. More concrete examples have been documented by author John Seddon, such as: “If you manage costs, cost go up.” (While managing quality and flow reduces costs.)

The key here is that these paradoxes force you to think about your situation, learn and improve. So keep this concept in mind:

If you copy leading Lean Startup practitioners perfectly, you’re doing it wrong!

Because the copying means you’re not learning yourself. You can start to apply Lean Startup by learning from leading practitioners, but if you’re doing it right, you’ll end up changing the way you work based on what you’ve learned from the process.

Still here? Lean Startup London group – upcoming meetups

At the Lean Startup meetup in March, Benjamin Mitchell will expand on this with his thoughts in a talk called “Failure, Error and Learning for the Lean Startup” which will be followed by a Gaps In Lean Startup workshop that I’ll facilitate, where we can share our current problems with our peers to help us find the right solutions.

Benjamin has been studying and applying Lean Thinking as a software project manager in an investment bank for a few years. He inherited an Agile project which had gone slightly sideways, and used Lean Thinking to rectify the situation. He combines a deep “textbook” knowledge of Lean Thinking with years of real experience successfully applying it in a high-pressure environment. Through this, he has become focused on how these Lean principles can help organisations learn to work better.

He will help introduce us to Lean Thinking, and then we’ll have a structured workshop to connect with each other. Beginners and experts, entrepreneurs, designers, analysts, developers -  we will all have a chance to raise one of our key issues with others who have experience to share.

Leancamp: Lessons Learned Together

Leancamp also isn’t prescriptive – it keeps your learning and your context at the centre. It’s not a conference where a bunch of experts come and give you a 60-minute one-way talk. Leancamp is an unconference – it’s a conversation with experts and with each other. It opens doors to learn from other disciplines, other experts and your peers, and puts you in a position of learning what is most relevant to you and how to apply it in your context. Even the experts and leaders learn from each other!

For example, a lot of web entrepreneurs follow the 37 Signals approach of Scratch Your Own Itch while others follow the opposite approach of Customer Development, which starts with deep investigation into customer needs. At Leancamp 2010, we had the leaders from both methodologies discussing this with each other. Eric Ries of Lean Startup and David Heinemeier Hansson of 37 Signals spoke for about ah hour in front of hundreds of entrepreneurs, and for the first time, we learned how these leaders would choose which practices, and why. So, each Leancamper was better able to decide what would work best for them.

As the Leancamp and the London Lean Startup community develops, this interdisciplinary aspect is something that is very helpful to maintain. And keeping to the values of Lean Thinking is useful because Lean is flexible, interdisciplinary and gives you both the power and responsibility to decide for yourself.

Thanks to Benjamin Mitchell for his help with this post, particularly with specific stories and “textbook” knowledge. :)

Further reading:

http://leanca.mp/
http://blog.benjaminm.net/
http://astah-users.change-vision.com/en/modules/weblog/details.php?blog_id=61
http://www.leanblog.org/2010/08/who-coined-the-term-lean-and-where-is-he-today/
http://www.thesystemsthinkingreview.co.uk/index.php?pg=18&utwkstoryid=309
http://www.gembapantarei.com/2006/05/gemba_keiei_chapter_21_rationalization_is_doing_what_is_rational.html

If you’d like to keep up with me, please follow me on Posterous. The Tumblr downtime last week was a bigger hassle than I expected, so I’ve taken the opportunity to give Posterous a good try.

If you’d like to keep up with me, please follow me on Posterous. The Tumblr downtime last week was a bigger hassle than I expected, so I’ve taken the opportunity to give Posterous a good try.

Agile Retrospectives described in 2 minutes (by Agile Advocate)