NB: This is a guest article by Matt Zito, an online travel business consultant.
Can entrepreneurs and companies build more authentic enterprises, with long-term value, reducing the risk of failure by designing a company or new product socially?
Here is some background. I am personally invested in Facebook. It’s a long-term bet for me 10+ years. In 2025 I hope to back up the truck and shovel in the cash.
Prior to the IPO, I read the following passage in the Facebook offering prospectus written personally by Mark Zuckerberg. He said this:
"We think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services. As people share more, they have access to more opinions from the people they trust about the products and services they use.
"This makes it easier to discover the best products and improve the quality and efficiency of their lives. One result of making it easier to find better products is that businesses will be rewarded for building better products — ones that are personalized and designed around people.
"We have found that products that are 'social by design' tend to be more engaging than their traditional counterparts, and we look forward to seeing more of the world’s products move in this direction. In addition to building better products, a more open world will also encourage businesses to engage with their customers directly and authentically."
I tried to decipher what Social By Design meant to Facebook. The term kept popping in and out of my head. Crowd-sourcing, crowd-funding, co-creating can be said to have been socially derived.
In working with travel startups in the last three years and having been a former travel entrepreneur in my view there are five main things travel startups need to succeed.
- A travel product that travelers need or want.
- A business model that is profitable and sustainable.
- A team of people to execute and run the business.
- Travel supplier partners.
- Cash to finance or operate the startup.
How do you build an authentic enterprise, with consumer value, while reducing the risk of failure? What if we started by designing a company socially?
I am not talking about starting a company, but designing one.
It is worth checking out the self-published Business Model Generation book, which has sold over 100,000 books and was co-created by 470 strategy practitioners. I use it with many of my clients to help map out the business model of the new business or travel product (the business model canvas is free to download).
Author Alex Osterwalder talks about how companies need to think more like designers and design from the beginning vs. just starting to build. The overlying theory is that you design your business model and test your assumptions.
The most important assumptions that you believe are the keys to success or failure need multiple layers of testing. Testing is done to validate your assumptions.
In reality there is no way to truly validate anything. Most start up success is trial and error, iteration and pivoting. How many times have you heard the word pivot in the last 12 months?
Academic thinking is currently around testing quickly (MVP) and trying to figure out how to remove risk from the start up equation. This is where my thinking and what Mark Zuckerberg calls "social by design" comes into the play.
Theory
Design a product, service or company by the people that would actually build, consume and or make money off the product, service or company, thus reduce risk and truly validate the ideas and assumptions by the people that will ultimately make the startup successful in the first place.
If we designed first by all the stakeholders involved can we ultimately build more authentic products? Products that are actually in demand, needed and wanted by people.
Social by Design is a way of creating something designed around and by stakeholders with a social or economic interest in the outcome.
Interesting idea (well maybe a crazy idea), but how do we go about doing that?
All the key stakeholders that would make the startup successful in the first place, design the company, not just the founders, a few employees and an advisor. This is not how we traditionally build startups today.
For example, a successful online travel start up has the following key people:
- Founders – start the company, design it, build it and operate it.
- Employees – help design, build, operate, web developers, designers, sales, accounting, executives, marketing, PR, etc.
- Investors – cash and financing, entrepreneurs, angels, VC’s, advisors, family & friends.
- Travelers – the consumers that use or purchase the travel service or product.
- Suppliers – the connectors and partners that facilitate everything, hotels, airlines, car rentals, etc.
My theory is that you design the company from the ground up with your key stakeholders. You aren’t guessing on what people want or having to constantly test. Your stakeholders are telling one another what they want and need through social networking elements like commenting and creating feedback loop communication systems.
The company is designed from others. I am not talking about executing or launching just designing, like a blueprint. Executing is phase two.
The stakeholders designing the startup become part of a community, contributing to the creation of the design. I believe a large percentage of the people who contribute to the design will have interest in executing and building the startup.
How do you get stakeholders to help design a company?
This is the social and economic component. People are now contributing and sharing online. As we move towards a more creative and freelance economy individuals with specific skills will be looking for opportunities to leverage their knowledge, experience and connections.
The bottom line is that there has to be something of value in it for people whether monetarily or not. Today people are participating and sharing in social projects.
Kickstarter has successfully harnessed the idea of people funding others to start products and projects by donating money in exchange for receiving the product when it gets completed.
Crowd-funding, the next version of Kickstarter, is around the corner as President Obama signed the Jobs act which allows individual to invest up to $5,000 per year if you make less than $100,000 a year and $10,000 if you make more than $100,000 per year into private companies, legally without the company having to register with the US's Securities and Exchange Commission and state levels.
In less than a year a new industry will be born with portals like Kickstarter moving past the donation only model to actual investment online by individuals for equity in companies.
Social By Design startups will be business ideas posted by entrepreneurs looking for individuals to come together around their original idea to design the blueprint for a successful product, service or company.
What will the stakeholders in a social by design travel startup actually design?
We can use the nine building blocks of the Business Model Canvas as the core elements that will be designed as the foundation for the start up as well as other elements that are important to the start up process:
- Assumed Problems – Enterprises and products are derived by two things, solutions to problems or solutions for desires and needs.
- Customer Segments – customers and users. What are the characteristics of the target customers.
- Unique value proposition – Your message to the customer that solves their #1 problem or fills their #1 desire or need.
- Solutions to the problems – the features
- Channels – the paths to reach consumers
- Revenue streams –sources of revenue
- Costs – what are the main costs
- Key metrics – the #’s that tell you how you are doing.
- Unfair advantage – can’t be easily copied or bought.
Where will the stakeholders go? How will they participate and what does this look like?Social by Design startups will be created on platforms similar to Kickstarter or possibly built inside Facebook as an app on a Facebook Fan page.
The initial marketing to attract prospective stakeholders to the platform can be done via social media and a little PR effort. The idea would be so new that the press would be all over it.
I was originally thinking that the entrepreneur and founder for the business idea or product would be the driving force but I can see consumers initially driving this as well.
Incentive to participate is the easy part - the best strategy is to just copy what currently works online right now in crowdsourcing, social sharing and social networking.
I can easily see the investors, and travel suppliers all coming in as their incentive is to make money off the design if the company eventually gets built. They’ll be sitting there already in a position as a key partner.
The consumers and travelers come in because in general they love traveling. Throw in a few travel credits, founder discounts, social badges, gaming, sharing, social networking, and the travelers will line up at the door.
I envision the key stakeholders going through an entire design flow process using the nine business model building blocks as the foundation.
There would be submissions and voting, likes, comments and sharing all the elements currently used in social networking online, driving towards a collective census, creating a blueprint for the design of a company that will be instantly successful upon the building of it.
In short: Social by Design startups are the next evolution in how we go about creating products, services and companies.
NB: This is a guest article by Matt Zito, an online travel business consultant. Read more.
NB2: Business designer image via Shutterstock.