Cagan argues that startups work terribly inefficiently in spite of limited funding and time. Not only does this inefficiency cost money and time, it may also cause many startups to never reach it to market!!! According to Cagan, this is why many startups fail. They ”simply don’t have the funding to go to two years before they gain traction in the marketplace. So they hire engineers, take their best shot, and see what happens. Ready, fire, aim.”

Here’s the complete scenario as he describes it:

Someone with an idea get some seed funding, and the first thing he does is hire some engineers to start building something. The founder will have definite ideas on what she wants, and she’ll typically act as product manager and often product designer, and the engineering team will then go from there. The companies are typically operating in “stealth mode” so there’s little customer interaction. It takes much longer than originally thought for the engineering team to build something, because the requirements and the design are being figured out on-the-fly.

After six months or so, engineers have things in sort of an alpha or beta state, and that’s when they first show the product around. This first viewing rarely goes well, and the team starts scrambling. The run rate is high because there’s now an engineering team building this thing as fast as they can, so the money is running out and the product isn’t yet there. Maybe the company gets additional funding and a chance to get the product right, but often it doesn’t. Many startups try to get more time by outsourcing engineering to a low-cost offshore firm, but they’re still left with the same process and the same problems.

So as Cagan states, engineers are typically brought into a project at an early stage and they’re running around like chickens with their heads cut off trying to code and test new ideas at the same time. Sometimes weeks of coding are thrown out the window as the company “feels” itself through the unfolding product. For small startups it’s like pouring a house’s foundation and at the same time, deciding where the walls go.

But Marty Cagan isn’t some cranky product manager trying to wreak havoc on the startup community. He continues to describe what a more efficient process might look like:

Here’s a very different approach to new product creation, one that costs dramatically less and is much more likely to yield the results you want: the founder hires a product manager, an interaction designer, and a prototyper. Sometimes the designer can also serve as prototyper, and sometimes the founder can serve as a product manager, but one way or another, you have these three functions lined up—product management, interaction design, and prototyping—and the team starts a process of very rapid product discovery.

Cagan emphasizes that the focus is on product discovery via a high-fidelity prototype that mimics the desired user experience. But this isn’t enough—you must validate the product design with real users that fit your target audience. Without testing real users, you’re still in the dark when it comes to understanding how your users may respond to your product or service.

What then continues is a refinement process that includes several versions of the prototype in order to get closer to a winning product. The end result is that you have:

(a) identified a product that you have validated with the target market, (b) a very rich prototype that serves as a living spec for the engineering team to build from, and (c) a much greater understanding of what you’re getting into, and what you’ll need to do to succeed.

The engineers are then brought on and they’re able to build something based on a clear vision of the product and a stable spec. Not only does this make the engineers’ job much easier, but the company has reduced the risk of shipping a flop and has also saved a lot of time and money on development. The startup is building a successful product “on purpose”.

Cagan finishes his argument by asking:

So why don’t all startup teams do this? Because we’re such an engineering-driven industry that we just naturally start there. But any startup has to realize everything starts with the right product, so the first order of business is to figure out what that is before burning through $500K or more in seed funding.

…Definitely something to think about for your next startup.

Our own financial system in the United States seems to be driven by not only extreme neurotic mood swings that any psychiatrist would deem psychotic, but also in part by newly created complex attributes such as derivatives—highly complex computer-generated financial instruments—which Warren Buffet refers to as “weapons of financial destruction.”

Richard Dooling wrote in a recent article for the New York Times:

“Somehow the genius quants—the best and brightest geeks Wall Street firms could buy—fed $1 trillion in subprime mortgage debt into their supercomputers, added some derivatives, massaged the arrangements with computer algorithms and—poof!—created $62 trillion in imaginary wealth. It’s not much of a stretch to imagine that all of that imaginary wealth is locked up somewhere inside the computers, and that we humans, led by the silverback males of the financial world, Ben Bernanke and Henry Paulson, are frantically beseeching the monolith for answers. Or maybe we are lost in space, with Dave the astronaut pleading, ‘Open the bank vault doors, Hal.’”

Has the system taken over? Our politicians up to now seem to have had a lot of faith in the Market— as in “The Market will correct itself.” What the Market has proven is that, like some other man-made inventions, it’s not necessarily working to our benefit. We have put too much confidence in numbers and computations and somewhere along the road forgot to apply the algorithm for human-ness—as in humans are prone to make errors and are often driven by greed or fear.

From a designer’s point of view, the technologist’s took over and decided to build a bunch of functionality that while very fun to tinker with, doesn’t serve the general good. As Thomas Friedman says “They were engineering money from money.”

Policy makers could learn a few things from the design community when it comes to creating sound policy and regulations. In recent years, design attitudes have changed putting more attention on customer (human) behavior rather than purely, business goals. Companies are slowly realizing that customers can’t be measured by demographics and spreadsheets alone. The attitude is that good design must serve—when was the last time you felt you had been served?

As a country and global community, we need to start a new paradigm that stems from human-centered design and apply it to everything we do. The environmental movement, still in its infancy, has known this for years.

What’s the point if we’re not designing to better our lives and create a more habitable world? Shouldn’t it be obvious that all design stem from a focus on the well-being of human beings?

Cooper, an interaction design agency, describes the following principles in their book “About Face”:

“[Design principles] encourage the design of product behaviors that support the needs and goals of users, and create positive experiences with the products we design”…”At the core of these values is the notion that technology should serve human intelligence and imagination (rather than the opposite), and that people’s experiences with technology should be structured in accordance with their abilities of perception, cognition and movement.”

Now, imagine that applied to our financial systems? Revolutionary!

We know that there is something fundamentally wrong with any design when it promotes the attributes of fear and greed. We also know something is very wrong when the action made by a few negatively affects the many.

According to Cooper, design solutions that aim to serve the needs of humans are:

Ethical (considerate, helpful)
• Do no harm
• Improve human situations

Purposeful (useful, usable)
• Help users (humans) achieve their goals and aspirations
• Accommodate user contexts and capacities

Pragmatic (viable, feasible)
• Help commissioning organizations achieve their goals
• Accommodate business and technical requirements

Elegant (efficient, artful, affective)
• Represent the simplest complete solution
• Appropriately accommodate and stimulate cognition and emotion

Hopefully, the US and the world will learn something from this financial catastrophe that we’re all so intertwined in. There’s a great sense in the US that we need change at many levels—health care, energy, education and now more than ever, our financial systems. What we need most is to get back to ideas that serve humans and our most noble of characteristics.

“Design is not just what it looks like and feels like. Design is how it works.” 
- Steve Jobs

In the case of building a website, all parties are working with design: information architects, interactive designers, engineers and business strategists. Everyone is involved in giving the site meaningful order and appeal—design.

“We [designers] provide a process, a managerial discipline with its alternate phases of analysis and creative exploration, which in itself is an invaluable guide to the company’s strategic future. This process allows management to visualize and test its strategic options. It makes strategies appear real before rollout production decisions are made.” 
- James G. Hansen, Chairman and Co-founder, Source/Inc.

So much for designers not playing a meaningful business role in an organization. Designers make it possible for companies to test the waters before going public. In other words, design reduces the risk of danger! Unfortunately, often as a result of impatience and lack of strategic planning, many companies oversee this important step to their product development and wonder later, why their product hasn’t been received well. Audience studies, competitive analysis, personas, scenarios, user tasks, prototypes and user testing are often seen as gratuitous and ways for designers to make more money from their clients! While it does take more time and money, the result is correcting problems before, not after you’ve spent a ton of money on layered Photoshop files, HTML development and programming. And everyone knows how difficult it is to change things after the beast has launched.

“Many clients are also surprised to learn that the way the company and its products “look” not only influences sales (the consumer), but also, and perhaps even more significant from a strategic point of view, the way in which its own management, sales force, and distributors perceive it.”
- James G. Hansen, Chairman and Co-founder, Source/Inc.

Does it really matter how your employees see your products? Remember those ugly black leather shoes your parents used to make you wear to church? Remember those uniforms they made you wear at your first job when you were 16? Remember playing soccer as a youngster and discovering that the other team had better uniforms?

“…Information only has value when it is successfully communicated. If it cannot be accessed or understood it does not have value.” 
- Dirk Knemeyer, Thread Inc.

OK, so you have some great website features that are going to make Facebook and Flickr look like a Cub Scout project. You built your website with feature-centered design and know that users will be crawling all over it once they find out all the cool things it can do to make their lives easier. You launch your site with the expectation “build it and they will come”. They come (some of them), the problem is they soon leave. What happened? Nobody “gets it”, that’s what happened. A shift in priorities from feature-centered design to customer-centered design would have saved you a lot of strife. Also, a good dose of user testing and iterative design would have helped. For 1-2 weeks more of work you could’ve saved yourself a headache. The value of smart design is crucial to the success of not only your project, but in most cases, your business too.