What is a Startup? Steve Blank, a Stanford University professor whose definition is most often quoted, defines a Startup as an organization created to search for a business model that is scalable and sustainable.
The most crucial element in the above definitions is the word "search." Up until the business model is found, every company is a Startup. Once it's found and implemented, it ceases to be one. The search time for a business model is, of course, different in each case.
A number of the spectacular examples of Startups (e.g., Uber, Revolut) ceased to be them relatively quickly.
Today, they are powerful companies constantly refining their business model and are a far cry from the startup's everyday life, which often involves experimenting with different solutions.
In summary, finding a scalable and sustainable business model is the goal, essence, and one of Startups' most important (though not the only) characteristics. However, let's start with the most important ones.
Do we know how to work with Startups? Well, yes! ;-)
Scalability and sustainability of a Startup business model
A Scalable Business Model is about growth, expanding its scope of operations, and increasing revenues and profits without significant investments.
In other words, it's possible to achieve more significant changes (e.g., increasing production, increasing the number of customers, entering new markets) while keeping investments relatively steady.
Some examples of Scalability patterns could be product standardization, outsourcing investments, and finding new distribution channels.
Scalability is a factor that is mainly responsible for the spectacular successes of Startups (e.g., the phenomenon of Unicorns). It also attracts the attention of investors. But that's not all.
Another essential characteristic of Startups is the sustainability of a business model. What does this mean in practice? It means that a company can generate revenue and profit on a recurring, continuous basis. That is, customers don't satisfy a need once but repeatedly.
In their essence, transportation services (the case of Uber) and financial services (the case of Revolut) are repetitive. More or less regularly and with more or less frequency.
We said that the search for a scalable and sustainable business model is a crucial criterion for Startups. Are these their only characteristics? Of course not.
What is a Startup? How is it different from a standard company?
LinkedIn, Instagram, Pinterest, Airbnb, and more. We're all familiar with these names. We've heard of the phenomenon of Unicorns. But not all of us know that the mentioned companies can no longer be called Startups. Why? Because the time searching for a business model is behind them.
However, it can be said that Startups are a constant market phenomenon and have been around forever. The history of companies is also, to a large extent, the history of startups. Innovations, breakthrough inventions, solutions, technologies, ways of competing, managing, organizing production, and service gave rise to great companies.
And they determined their success.
The way of production in Ford factories was innovative, and the method of work organization and customer service in McDonald's chain restaurants was innovative.
Innovation is still an important issue, but an equally important factor is increasingly replacing it. Of course, I'm referring to improving the experience – of a customer, a user – Customer/User Experience.
Let's get back to our question. What else makes a Startup different from a standard company?
Startups are primarily companies:
- offering innovative products or services, or these days, offering to improve the experience of those products and services
- bringing new value to the market
- seeking to meet a need that has not yet been met or has been met in an incomplete manner
- operating in high-risk conditions and uncertainty, with no guarantee of success, but with a statistically confirmed vision of failure
- constantly trying to learn about customer expectations and adapting their product and service to them
- often offering products in the MVP formula (Minimum Viable Product).
In other words, standard companies have a defined business model, operate according to a plan (no experimentation, no MVP testing), they have a fixed and familiar business environment and a well-defined target audience.
To put it bluntly, Startups are so unique that they either have to succeed spectacularly or fail without ever experiencing a taste of success.
Is there a formula, a rule, or a pattern to distinguish a Startup destined to succeed from one doomed to fail? Unfortunately not.
Do any "success factors" exist? Unfortunately not. But there are certain elements that, if neglected, can speed up the fall and push success further away. One of the crucial ones is the User Experience.
Why do Startups need User Experience?
A poor, underdeveloped, or utterly absent UX in Startup projects is one of the top 6 reasons for lack of success.
And it's listed right next to:
- lack of interest, the indifference of customers (product nobody needs, that's misguided)
- exhaustion of funds, the necessary budget to complete a project, or to develop and promote it on the market
- lack of complementary competencies of its creators
- arrogance and ignorance of the competition – resulting in the omission of many important issues, e.g., UX, UI
- unattractive price (product/service far too expensive).
Is innovation the most important thing in Startups?
Contrary to popular belief, innovation is a rare characteristic of Startups, and certainly much rarer than the optimization of experiences I've already mentioned. Having a better, more perfect, more relevant CX (Customer Experience), UX (User Experience), and PX (Patient Experience) is a more important feature than innovation.
Innovation, novelty, and offering something groundbreaking are still possible, of course, but are increasingly difficult to achieve in today's world.
Often it depends not so much on a great idea or the way to meet needs but on expensive, lengthy research.
If the 20th century (in a nutshell) was the age of invention, then the 21st century is the age of improvement. The massive role of Customer, User, and Patient Experience research comes from that.
A product, even the most innovative one, that is not user-friendly is unsatisfactory, arouses emotional reluctance, and evokes negative feelings is a useless product. It's a product that will be replaced by analogs or similar products that have higher usability.
Even the most innovative, high-tech product must, first and foremost, be useful. That being said, innovation isn't an attribute that guarantees market success.
Was Uber an innovative Startup? We can agree with it; we can argue. Undeniably, however, its creators aimed to improve the customer experience of cab companies.
Its creators came up with an idea for an application based on their own needs and frustrations, which weren't individual but shared. Almost all over the world, cab customers have similar problems, which is where Uber's global success came from.
The long waiting periods, the high prices, the operational inefficiency of cab corporations – we all know it. The Uber app solved these problems. Is it innovation? Not necessarily. Instead, it's about understanding the experiences and meeting them.
Another example of a former Startup is Revolut. It's a similar example of starting from the frustrating experience of currency conversion through banking systems and finding a remedy for it.
Is it innovation? We can argue. But again, it's undeniably a solution that mainly improves the User Experience. Access to dozens of foreign currency subaccounts, along with low currency conversion rates, was enough for the company to grow at a rapid pace.
There are, of course, many, many more examples. Although they differ in details, as a general rule, it's almost always about the customer, the user, and their experience.
Today, this is the key to success and one of the factors that increase Startups' chances of finding a business model and turning a prospecting company into an enterprise operating with a familiar, fixed, and proven business model.
What is User Experience for Startups?
It's a tool, goal, investment, and awareness of the role, the effects, and the possibilities. That's how the above question can be answered quickly and in keywords. Let's start with awareness because it determines everything.
In general, the founders of Startups can be divided into three categories based on the criterion of awareness of what UX is and for what it's necessary.
They can be divided into founders that:
- are unaware of the role of User Experience or identify UX with visually appealing graphic design
- are aware of it but disregard it or recognize its usefulness only in later periods of product/service development (most often, they justify their decision in two ways: the need to reduce costs and the need to wait for a specific level of revenue, return on investment – ROI)
- are aware of it and strive to take full advantage of the possibilities that lie in the User Experience.
While understandable in terms of cost and time, the first two approaches mentioned above are the source of many problems. They represent short-term and shortcut thinking that ignores possible risks.
Frequently, the avoidance of CX and UX is motivated by the "philosophy" of building Startups, meaning achieving an MVP variant as soon as possible.
MVP – Minimum Value Product
The pressure of time, cost, and market competitiveness often results in the desire to create a finished product as quickly as possible. A Minimum Value Product is a version that includes all or almost all of the key functionalities that make it possible to use a product according to its primary purpose.
At the same time, it doesn't mean that a product is a trial version, as it must be fully:
- functional (Functionality)
- reliable and tested (Reliability)
- useful (Usability)
- and must follow industry standards (Design).
The MVP version is most often the version used to improve all elements, and it's a big mistake to treat it as synonymous with the product in the MMF (Minimum Marketable Feature) or MMP (Minimum Marketable Product) formula.
The main difference between the MVP variant and the MMF and MMP is related to a function that a given variant is expected to perform. The role of an MVP is to help with development and not to yield profit in contrast to the other models.
Startups, digital products, and User Experience
After a good dose of general knowledge, let's get to the point. How do things stand in the world of digital products?
The price usually paid for quickly getting an MVP version to market is the omission or significant reduction in the role of User Experience.
Including researchers and UX designers in the advanced stages of product development can be much more costly than consciously using their expertise from the first work days.
That is because the changes proposed as a result of conducting UX research, from confronting an almost finished product with users, can result in insanely complex and profound changes at the code level and technologies used to create a product or service.
Ultimately, they waste time and may discourage some users, which could've been avoided.
User Experience makes it possible to detect the most common errors during the prototyping stage (e.g., by using cheap, paper prototypes, so-called low-fidelity wireframes).
It helps identify different segments and user needs to increase the satisfaction of future customers.
It's worth remembering that a statistical user will use a web or mobile application for a minute on average. If the product fails to arouse positive emotions in a user during that time, if using it will be inconvenient, counterintuitive, and frustrating, they will look for an alternative solution.
And this will determine the fate of the Startup.
What are the advantages of incorporating UX into the creation of Startups?
Startups implementing UX from the beginning are superior in terms of functionality, aesthetics, usability, satisfaction, and positive emotions, as well as in terms of the sympathy that they attract.
Including UX specialists in a team also makes it possible to:
- detect errors and possible problems at the design stage
- save time and budget
- respond to unrecognized but discovered through research customer needs
- adapt the product to market changes
- define technical requirements
- identify essential project requirements
- design user interactions with a product
- validate an MVP in terms of UX and UI
- reduce the risk of failure of a project
- reduce costs by identifying problems at earlier stages of digital product development
- understand deeper and broader the needs of users from different customer segments
- create a product in the MVP formula, also in terms of usability
- answer crucial questions: "what kind of tool am I building?" and "what tool do I not want to build?"
- fully integrate activities from the key dimensions of development, design, marketing, and business
- understand the limitations, weaknesses, and strengths of a project
- evaluate ideas (not only their technological and business sense but also related to usability) and reject misguided solutions.
Summary – the role of UX in a Startup
Startups wishing to reduce the risk of failure should include UX Research and UX Design at every stage of their development.
Confronting prototypes, MVP versions that take into account the usability of real users make it possible to understand:
- how can a product be used
- what problems it creates
- how quickly it solves the problems that it was meant to solve.
- makes it possible to test different variants while still in the design stage and eliminate most (about 80%) of typical errors at that stage.
UX activities help gather information, reactions, opinions, attitudes, emotions, and needs. They help answer questions such as why a user wants to use a product, what discourages them, what features they need, how they want to use a product, for what purpose, etc.
Usability, attractiveness, accessibility, and credibility, which can be researched, designed, and optimized, are mainly responsible for a product's impressions on a user.
And positive impressions naturally attract users, build the Startup's reputation, and establish its competitiveness.
Implementing User Experience is an element and tool for Startups, thanks to which they can thrive. They are a way of building a competitive advantage over organizations that don't take such actions or do so unsatisfactorily.
In other words, UX is a competitive tool in the full sense of the word. And at the end of the day, it's also instrumental in searching and finding a business model.
