Statistical Bootstrapping — a Product Development Strategy

I’m pretty convinced that this digital world is all about creating something viral. “Go viral or go home,” as I heard someone say on the Web. But going viral is largely a matter of luck. So, as a business, the luck has to be managed in a statistical manner. In other words, we need to spread the eggs everywhere, instead of putting them all in one basket. This means that every project needs to be low budget (low enough for you to afford many of them). Avoid ideas that cost a lot of money. And, if the market bites any of them, you try to narrow down your choices around it. Once there is a big hit, you take the next logical step to grow/expand it, or use it as a launching pad for other ventures; and this time, you can increase the budget of each project. I would call this statistical bootstrapping. (Maybe there is already a name for this strategy. Let me know if you know it.)

Venture capitalists have been managing their investment risks in much the same way; the only difference is that I’m suggesting that we all adopt it even as an individual. And, when we individuals do it, it must be bootstrapped because of the lack of funding.

Even if something goes viral, if you don’t have a proper plan in place to take advantage of the success, it would just fall flat. Trying to figure out, after the fact, what the next step should be, wouldn’t work. So, even before you take on the project, you have to have a plan for what the next step should be. In other words, forget Plan B, think of Plan A2. (If Plan A doesn’t work, forget Plan B, just discard Plan A altogether.) This sounds like common sense, but I see many stories of success where they had nothing planned for an encore. They went up, exploded spectacularly, and disappeared like fireworks.

Because of the efficiency of the Internet, the cycle of producing, distributing, and analyzing our products is very quick these days (especially for digital products). The number of products being produced every year is astronomical. In this type of environment, it’s not wise to pour money into something that has not gone through this cycle on a smaller scale.

One of my clients just premiered a TV show which was based on a YouTube hit. The network is quite happy with its rating. This is a good example of putting money into something that has gone through the cycle at a smaller scale. I believe this type of approach will be more common in the future. I think pouring money into something just because someone really “believes in” it, is a thing of the past. There is no need to take that kind of risk anymore, when the risk can be managed more statistically. No need to believe it, just test it on a smaller scale.

You might argue that certain things cannot be done on a small scale, but when you haven’t had a track record of success, you shouldn’t be trying to direct a blockbuster Hollywood action movie anyway. Scale should come naturally as you become more successful. At first, we should think big, but do small.

Once we have a successful product on our resume, it should become much easier to raise funds too. We would then be in a privileged position, and this can reduce the amount of competition, and increase the probability of success. Then “bootstrapping” becomes less necessary.

I might be wrong here, but this is my current strategy anyway.

—posted by Dyske   » Follow me on Twitter or on Facebook Page