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Here’s the program.
Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. A shocking thing happened when I pre-interviewed today’s guest, Bryan Zmijewski. He talked openly about some mistakes he made with a product that didn’t go so well. I say it’s shocking because most entrepreneurs only want to brag about what’s gone well, and it’s very rare to find one who’s willing to teach us what he learned from setbacks.
Bryan, of course, isn’t your average entrepreneur. He is the founder of ZURB, which has helped over a hundred start-ups use design and strategy to solve business problems. ZURB has been trusted by clients, including Facebook, Zazzle, eBay, and way more than I can list in this intro. Hopefully, we’ll hear some of the stories behind those experiences in the interview.
My goal in this interview is to learn from the mistakes that he made with he launched that product, and we’ll find out about what it was, to find out how he used what he learned to launch successful products since then. And I want to talk about those hit products that he’s launched since then, and to just learn as much as I can from a leader in the product design and creation industry.
Welcome to Mixergy.
Bryan Zmijewski: Thank you a lot.
Andrew: All right. Why don’t we start up with just telling people a little bit more about what you do? Can you give me one example of what you’ve done with one client so that we can teach people or tell people a little bit about what ZURB is?
Bryan: Right. So, ZURB is an interactive design strategy firm. Our mantra is design for people. So, what we do for clients is basically take either a rough prototype or a product or a rough idea of a concept for a website and help that client refine that so that they’re one, making themselves more presentable and easier to use for their users but also figuring out how to make their product or website more profitable.
So, we balance both the business goals and the user needs in a business. We start everything from as small as, like, a PowerPoint, four slides of “Hey, I’ve got this great idea” to “Hey, we’ve been going for two years, and we need to bump our conversions up a notch. How do we do it?”
Andrew: OK. Do you have one example of a client that you work with that you feel comfortable talking about? I know that a lot of the stuff you do has got to be private, but maybe Facebook or Zazzle or eBay, one of the three companies that I included in the intro?
Bryan: Well, Zazzle is a great example of a client we’ve worked with. Again, a lot of what we do is under wraps, and we don’t talk a whole lot about the specifics. But, in the case of Zazzle they’re mature enough in the things we worked on were probably five years ago it’s pretty much exposed to everyone. So, we can talk about some of those parts.
Andrew: OK. So, tell me, what do they come to you with? What did you create, and then what’s the result?
Bryan: So, Zazzle is an interesting story, and I don’t know how much of your audience actually knows Zazzle. But, it’s a custom product marketplace in which people can upload their art work and their imagery, and people can buy it in the form of a mug, a t-shirt. And they’ve even expanded into things like skateboards and more high end gear.
When they came to us, they basically had some ideas of a new product which now is not so new but stamps. They wanted to know how we could actually help them present this to the U. S. Postal Service. And when we did this, the whole concept was about trying to do some screens and be able to have those screens visible so that the other people in the U. S. Postal Service could look at them.
But, we said, “Hey, let’s go bigger here. Let’s try to do something that inspires people.” So, instead of looking at it as just purely design screens, we pulled back and said, “Hey, let’s do a little picture book or something that explains the value to the customer, why it would be interesting to actually put your photo on a stamp.”
What we did was we went through a couple creative briefs or ideas of what we could do there, and we find a great illustrator, Bill Scott, and worked with him to actually put together some slides that basically said, “Hey, you got a party, a birthday party that Joey wants to invite friends, you want to be cool, with Joey and his dog on a stamp?”
So, we started out the whole project by just focusing on the story line. The neat thing about that is I think the team went with John Door, and they flew to Washington to the U. S. Postal Master, gave these books out. People were really excited and jazzed. There were some interface means in there to project what the actual service would be, but I think the whole idea behind that whole project was getting people rallied behind what the business opportunity was and why customers would actually use this service.
And that’s what we started from, and in that process of actually designing the screens within the picture book, we came up with a couple novel ideas of well, maybe, this could actually work for other products as well, not just stamps. And so, that was the beginning of a product platform in which Zazzle started working all of their products into this platform.
Again, a great team over there, Jeff Beaver, his brother, tremendous amounts of talent over there. We played, what I like to say, a small part of that in helping them with that vision.
Andrew: I see. So, they just wanted some way to present their ideas and their business to the U. S. Postal Service. These books weren’t even meant for users, were they?
Bryan: No, no. They were just a presentation vehicle. A lot of times people put PowerPoints together and want to show their products and stuff. In this case, we pulled back and said, “Hey, this is the U. S. Postal Service. They don’t really care about the specifics of the product yet. They just want to understand what you’re trying to do with it.”
So, we pulled it outside the realm of digital PowerPoints and tried to make it more tangible to something you could flip through.
Andrew: I see. And did the Postal Service go for their plan?
Bryan: They did. They launched, I think, probably six months later. It’s a pretty aggressive time line. They’re beefing up their infrastructure. They raised capital, and they were really trying to scale the business. So, they were actually tackling quite a bit of things as well because they actually had a t-shirt line and some posters, so that they had a number of other products they were doing as well.
Andrew: I see. OK. How about another example, one of a product that you created and the customers and end users interacted with?
Bryan: So, I always like to use ClickTracks. It’s a great example of working smaller entrepreneurs that may be not funded by larger VC firms. John Marshall of ClickTracks came to us probably about five or six years ago. Actually, it’s longer than that, at the beginning of 2002-2003, I think, requesting some help on some icons and wanting to actually make his product better yet. He had a prototype and a vision of what the product would be, but he was looking for someone to help him visualize what icons in the app might look like.
We worked with ClickTracks for about five years and helped them, from the initial icons all the way through to all of their marketing materials, version six of their product. But, we started with just a small goal of trying to make that prototype more accessible and more exciting to users.
Andrew: So, he just came to you looking for icons. He couldn’t go to like a kid or some designer and have them do it?
Bryan: You know, I think he was looking for a diamond in the rough. Surprisingly, back then Craigslist was still a great tool for connecting with people. I think we found him on Craigslist, but he went through the process of probably interviewing five or six people. And we just connected, and we were able to find common ground on what he was trying to do, and we had the experience of doing it. He liked our approach to solving problems.
So, I like to tell entrepreneurs start small, find something that is a little catalyst for growing something great or big, and it could be as little as just icons. It doesn’t have to be a big thing.
Andrew: What did your relationship grow into? What else did you do for him?
Bryan: From there, we started doing interface elements and working on info-graphics, of a web analyst tool back then, web elements were growing and doing some nifty things of … Have you ever seen the overlay of statistics on web pages? I believe they owned the patent at the time on that. And, basically, we were helping them try and figure out ways to make it easier for marketers to understand the analytic.
So, we went through info-graphics. We started doing more development within the application. We were working on their websites trying to take the experience from the website back into the product. And then, we started expanding out to web apps that tie back into the core software product, and we did all of their marketing materials as well. Again, it all started from some 32 x 32 icons and then moved onto a nice relationship in which we helped them with an exit and success.
Andrew: I want to get to the mistakes that you learned, but I’m so curious about your business that I can’t even move past the business into the mistakes. So, let’s spend just a little bit longer, then I promise the audience, I promise you guys, we’ll get to the mistakes because I think those are fascinating and useful.
Andrew: How are you guys different from anyone else who designs interfaces?
Bryan: That’s a question that people ask us all the time. It seems like there’s a lot of people out there, web developers, you know, it’s a big playing field. There’s a lot of need for talented people that can solve interface problems. The way I like to differentiate us in telling people is that our team is really based on understanding craft. So, our designers also know how to front in code.
So, it puts us in this unique position to be able to solve problems holistically as opposed to getting three people together trying to solve who is going to solve what problem. So, our projects typically revolve around a design meeting and a designer, no project managers, direct contact with the team we’re working with.
That usually is a strong differentiator from most firms, like some people have that three-four person firm, manager, and project director to run projects. But, for us it’s important that there’s that direct relationship between the work being produced and the people that are making the decisions. So, that’s probably the biggest differentiator.
Andrew: I see, as opposed to having one designer, one developer, and a third person on the team creating. You have a person who can do it all.
Bryan: Right. And that’s important for start-ups and people that want to get stuff done is that you’re trying to cut out as many middle men as possible. So, you focus on trying to solve problems.
Andrew: But, you have more resources. If it made more sense to separate those two tasks into two individuals, have one designer, one developer, you have the resources to do that. Why don’t you do it? Why not have specialists, people who are incredible designers, people who are incredible developers, people who are incredible at user experience and put the three of them together or, maybe, have one person design and then move it on to the developer and then the user experience guy fixes it?
Bryan It doesn’t work for a start-up that’s trying to create something, or if you’re wanting to get stuff done. Even at a team of three or four people, it add complexity. I don’t want to make it sound like it’s rocket science, but the reality is when you’re doing these decisions, there’s so many decisions have to go into an interface, the more people you add to it the more complex it becomes. So, you have to compromise and try to figure out what the interface needs.
So, when you reduce your team to a small group, it makes it easier to move things forward because you’re assuming that the person working on it understands the specifics of what needs to go into building it. And that’s a key ingredient for a start-up that’s trying to build something quickly that understands, is the product viable? Can we get customer feedback? There’s not the luxury of being able to refine the product over and over and over right away. You have to get something else.
Now that said, I still think our team is exceptionally gifted at visual design and coding. I think you can own both of those and still excel at it.
Andrew: OK. All right. So, then, I talked about the product that you guys launched. It was called Lucky Olivers. What was Lucky Olivers?
Bryan: So, Lucky Olivers started probably about four years ago, and it was our attempt to actually build a product within our organization. Most people are familiar with iStockphoto and crowd sourcing model of people taking photographs and other people buying it. So, we got into the space a little late. We had the idea early on, but it just – in order to materialize and create the business, we spent too long in it. It was two years down the road that we actually embarked on the project.
Andrew: You say that you had this idea, and two years later you started creating it.
Bryan: Right. So, it actually started as a hobby. I started putting photos online and letting people use them. And I started realizing people were asking to use them for different purposes, and I wasn’t trying to make money or anything off of them. By putting the website up there, it actually attracted people and I was getting emails like every week, and it started turning into two a week. And I said, “There’s something here.”
iStockphoto already had their model up. We just took a while to get something that was a viable business. We tried it and tried to build a business around it by differentiating ourselves in a few key ways.
Andrew: How? How were you going to differentiate yourself?
Bryan: We felt that iStockphoto was very much a niche around designers which is kind of pat and really opened it up to a larger pool of people. We wanted to be focused on more of a consumer market and trying to tie in to other services. We didn’t get to that complete vision we were looking for. Just the challenge of trying to do it at the time, we didn’t realize the complexity of maintaining an audience of contributors and keeping them happy and getting them excited. And also, finding the buyers and spending our time on attracting those buyers to customers.
There’s other parts of that business that would allow it to grow further, but iStockphoto was just so dominant, and there’s a few players in the space that really understood it better than we did. There’s a number of reasons why the actual business wasn’t successful.
Andrew: What were they?
Bryan: The thing is we’re 13 years into our business now, and at some point I think everyone has this bug. I want to create a product, right? I want to create something that’s this unique thing, especially in a service oriented organization where you see a lot of products, you’ve helped a lot of people with success.
In our case, I think the success of all the start-ups we’ve had is upwards of 800 million dollars now. You start to say, oh, we’ve done all these parts. We’ve know all these parts. We can do this ourselves. So, the first key thing I think we learned is that we tried to create a product business within a consulting firm, and the challenges there are across the board in a lot of different areas.
And I don’t think we realized how much an impact that would have to our core business as far as morale, keeping people focused on what they needed to do with their business, growing revenues, maintaining a service. These are all things that a service organization doesn’t necessarily have to do because they’re not owning the product or the problem long enough.
So, the first key lesson there was just building a product within a service organization is going to cause a lot of friction, and if you aren’t prepared to handle that, then it can be a problem.
Andrew: What kind of friction?
Bryan: Well, I don’t think the business as a whole… We were interaction design and design strategy, and we used a lot of imagery, but we didn’t use a whole lot of stock photos. So, the point being is that in our services we weren’t using our own service as much as I thought we would building the business. So, we had this disconnect between the product and what we were doing on a daily basis, and that creates a dissonance, like, a focus of what is the core goals of the business.
In this case, it was distracting us from doing what we needed to do on the service side, and when you have that distraction and employees are trying to be the best they can be, awesome at their craft, and you’re putting this digital divide between them, there’s animosity, even if the project you’re working on is really cool and if there’s so much awesomeness happening, you still run into this problem of where do I divert my attention. That becomes the key problem there, and the key word there is divert because it doesn’t sound like they’re in alignment. There’s really a conflict with being creative.
Andrew: Is it a conflict because so many people were employees of one organization and others were employees of another?
Andrew: I see.
Bryan: And the consulting firm was probably spending a lot of time on lost opportunity costs on the product, and so you get kind of an imbalance there of people spending all of their time on the product and some people spending half of their time or even just 10 percent of their time.
Andrew: I see. And the people who are just spending 10 percent of their time, is there a concern that they’re still getting an ownership in the business, or what’s the concern there, that they’re not contributing enough?
Bryan: Everyone had a piece or a slight opportunity, but, again, when the two businesses are not aligned, then you can’t see how your consulting services were overlapped with the product and vice versa. When you’re working on the product, it’s not clear how that’s helping the main business. No matter what people say about building businesses, employees really understand parts of these things. They may not understand the mechanics of it all, but they have a feeling in their morale that it really shapes the relationship that you have with them, especially when you’re trying to do these two businesses.
The strain probably happened after about a year. I mean, there were initial strains, maybe, in the get-go, but they materialize after you start understanding, wow, you’ve got to put a lot of time into building a business. So, I think that’s where you start seeing cracks.
Andrew: OK. And the other thing that you brought up was an issue that I’d seen a lot in marketplace based businesses which is you have to court two different groups of people. You have to, in your case, bring in the contributors, the people who have the photographs. Then, you also have to bring in buyers, and you had to create this marketplace from nothing. What did you learn about doing that?
Bryan: The lesson there is we were really successful in getting a core group of users contributing. I think we had over 5,000 photographers, and the photographers really liked what we were trying to do. The relationship that we had built with them was good, I think. We waited too long to transition over to courting buyers. I think our effort in the photographer side was good.
Let’s just say, when you’re strained for resources and time, to try and make both of those happen… You’re at this point where it’s critical mass on photography. You have enough of the product to be able to sell. How do you attract the buyers? And I think our efforts had been put so strongly on the photographers, that the transition into the buyers wasn’t as smooth or as strong as it could have been.
Andrew: How did you get 5,000 photographers?
Bryan: A lot of hard work. So, in a business like that you have to understand how much time is going to be required. At the time I didn’t know, but I had to spend nine hours on a Saturday going through images and responding to people individually. If that was your core focus, that would make total sense, and that’s how you build a business. You have to have those conversations.
When you’re trying to run another business on top of that, you can start to see how your loyalties can divide because you’re spending so much time to get a business off the ground that people can’t see your focus.
Andrew: I see. But still, even if you’re talking to all those photographers and ending up with 5,000, I’m wondering how are you getting all those photographers that you’re talking to? Where did you get the prospects that you ended up converting into active members at your site?
Bryan: Again, it starts with one photographer, then two photographers, then three photographers. And you sit down and you meet with the top 20 at the beginning, and then it spaces like every other great photographer you meet and sit down, and then you have phone conversations with those that are really passionate.
And then, you start to realize, oh, there’s some key photographers that we’d like to have, but we didn’t go after them. We basically let our audience tell them, “Hey, we’ve got something going on here. You should join this” because the wisdom of the crowd at that point becomes the powerful draw.
We tried to start with something small and tried to own the relationship with those initial people as much as we could, and then slowly but surely that audience starts to grow and recommend people. At the time we started the business, we were still getting tons and tons of photographers.
The other thing I’d say is that we approached how we work with the photographers slightly different than other stock agencies. We took more of a personal approach to the relationship, and it was costly and time consuming, but I think longer term if the business was viable, it would have been the best strategy. And we probably wouldn’t have changed that part at all. We were really happy with the relationships we had built.
Again, for any entrepreneur that’s trying to build a marketplace, don’t expect the people to come because you have a product. It’s not a way of connecting with people. You have to put the time into your relationships. There’s no shortcut. You just have to.
Andrew: So, this is just a lot of one-on-one conversations, a lot of pulling people in individually.
Andrew: Was there one source that brought in a lot of users? Was there an article that you got written about, about the site? Was there an ad that you bought, a marketplace that you were part of or a community you were a part of?
Bryan: In this case, I don’t recommend necessarily everything we did as far as doing it because a lot of entrepreneurs will want to start something and they have no contacts. That’s basically how we started it off. We had no expertise in the industry. We had no contacts into stock photography. So, we started with basically an empty plate. It can be done if you have the time and you have some money to support what you’re actually trying to do.
We just went and started talking to a few people, and in some ways the market… At that point, I stopped taking photos. I already had a large population of photographers. We knew there was a bunch of other photographers that didn’t want to be part of iStockphoto. So, we kind of went out and started talking to people that we saw that were slightly different or didn’t have the same experience that other stock photographers had had.
If we were to do it over again, we’d probably look at building those relationships in a different way that might have scaled it quicker but it’s…
Andrew: Like what?
Bryan: Well, you’ve interviewed Dmitri before. You could see having someone on your team that has that energy and excitement is a draw. We did it without a core marketer or someone that understood how marketing works. So, we started from scratch, from the product, from our relationships, from our passion for photography. So, that was enough to get us to that ramp up place that we needed to, to get up to the 5,000.
Andrew: OK. There are a lot of people in my audience right now who either have a marketplace that they’re trying to build up or had one that they couldn’t build up. They’re hearing 5,000 photographers. They’re thinking, how do I get to that? To them, that’s big progress. That’s a big milestone.
That’s why I want to learn how you got to 5,000. So, I could imagine somebody starting a marketplace of lawyers that would learn how to bring in the customers later on, the business people who hire those lawyers. But, how did they even get the 5,000 lawyers into their marketplace is the question that’s important to them. If you were able to do it, I want to learn as much as much as I can from your trends.
Bryan: No, totally. Again, some of the things that we did, I had beers with people. If there was a chance to have four or five people, we’d have a beer.
Bryan: Like, again, not scalable, very time consuming but you can’t pass those opportunities up. Those are what give your core audience about trying to work with you. The other is we started doing workshops where we brought in photography equipment and some models to help other people with their photography. Whether everyone participated in that, it didn’t matter. It just showed the other photographers that we were willing to go beyond what is practical or even reasonable to try and attract people into our organization.
Again, sometime you have to use things that don’t seem to line up in the columns. Financially, it might not have been that big of a deal, but it was very time consuming. So, from that perspective those are costs that are somewhat intangible but really important to the growth of the business.
Andrew: All right. You know what? That’s actually inspiring that you go out and you’re recruiting people, that you do workshops and train people just so they could be a part of your community or to build your reputation.
Andrew: So, what about on the other side? What could you have done differently on the buyer side to bring in more customers?
Bryan: The key part of any business in being successful is cash flow. Without cash you can’t make any decisions.
Andrew: We might have just lost the connection. Sorry. We just lost the connection for a moment there. You were saying the key is cash flow, and without cash and then we lost you.
Bryan: The key to any business is creating a solid cash flow. Even if you have venture dollars or you’ve raised capital from angels or friends and family, that goes pretty quickly. And it basically is a life line for building a business. Now, VCs will say that you need to scale and go fast. The reality is the cash flow is what helps you scale the business. It’s what gives you visibility and how fast you can move, but if you can’t get your cash flow going, then there’s no way to actually start making more risk or taking more risk to grow the business.
So, in that case I think we got a little lost. Are we a slow growth business and creating long term value for the photographers and the investors, or are we trying to scale this thing up very fast? If you live in that middle ground of trying to use money to scale fast but don’t have your fundamentals under control, then you’re going to get lost in the mix of trying to throw cash at something to get the short time wins in it. Eventually, it’s a painful way to go.
So, the lesson learned there is we probably would have slowed it down and focused on building a long-term business through small business tactics and growing it that way as opposed to spending so much upfront of our marketing dollars and trying to scale the business quickly.
Andrew: OK. Actually, can you give me an example of that, of where you were? Tell me a story of how there wasn’t enough cash flow, or what you would have wanted to do that you weren’t able to because the cash flow wasn’t there? Where the cash flow was going? I want a little more depth. I want to understand this.
Bryan: So, this is going back to the product. I know a lot of service oriented businesses want to create product. In some ways I was funding through the consulting business, the growth of the business. So, in some ways there is this tether that was artificially creating the growth by infusing it with cash and spending it on advertising. But, it doesn’t necessarily mean longer term that that was sustainable.
And so, what happens is that if you don’t have a clear objective on where you’re going with spending the money, then at a certain point you get a year out and you realize, like, I’ve spent all this money and we’ve got growth and it’s going in the right direction. But the margins are almost invisible and to get to something that’s going to be a successful business two years down the road, you can’t see based on your prior year’s experience how that’s actually going to be a successful business. Like, you don’t see it.
So, in that case for the cash flow I recommend early on within the first 30 days of making sure in your start-up that you’ve got a clear understanding of your cash flow, of what you’re trying to do month by month and visualize that every week. What are you doing with your cash to make the business grow?
Andrew: OK. Let’s see if I have anything else here on the list. Maintenance versus product creation. You’re in a business that creates products, and now you had to be in a business of not only creating this site but also maintaining it and going back. How is that? How is that for you, considering where you’re coming from?
Bryan: Right. So, service organizations like ourselves, we specialize in working with teams and understanding their problems and trying to help them build product. But, one thing that you don’t always realize when you get into the product is that creating the initial product is only like 10 percent of the problem.
The 90 percent is growing it through your marketing, understanding the features, tweaking them, making sure servers are up and running, making sure the customers are excited, that they’re getting the customer service that they need and a service business usually isn’t set up to do that.
It’s a different type of structure that needs to be in place to make sure that you’re getting the wins, that you’re getting all the necessary pieces in place to make the business successful.
So, in the case of Lucky Oliver, we had some of those and we’ve learned. But, we were dreadfully unprepared to be able to balance those two between offering services and maintaining the product.
Andrew: OK. All right. Well, you’ve got two new products now and four more that are coming out soon.
Andrew: What did you learn from Lucky Oliver? I called it Lucky Olivers before, but it’s Lucky Oliver.
Andrew: What did you learn from that, that now you’re bringing to Notable and Verify. By the way, I want to give the URL of these two sites to people because I had a hard time finding them earlier. It’s Notableapp.com and Verifyapp.com.
Andrew: OK. Well, first of all, what is Notable and what is Verify?
Bryan: So, Notable is the easiest way for teams to iterate on their online products. So, the example is, if you’re working with a team of developers or designers and everyone is exchanging ideas on the website, you have to have an easy way to exchange ideas. The typical way of doing it is taking screen shots, downloading them, putting them in Photoshop, writing some notes, maybe, putting them in PowerPoint and then going with the higher apps and saying, “We need to do this” or getting the other team members invested. A lot of times founders or CEOs in start-ups are doing this all the time.
So, we wanted to make the process streamlined and allow customers to take a screen shot directly from a browser and start annotating right away and be able to share that information. So, we tried to create an all in one tool that allows for these teams to exchange information.
Verify is a tool that allows you to test screen shots through a number of different setups, like preference, click test. It basically allows a designer or a product person to take a mock-up or something they’ve already come up with and quickly poll their audience to get some quick feedback. And so, we take qualitative information and try to put it into something that’s more quantitative, something that you can act on and make better decisions on.
The Notable is our flagship product. We’ve created it. It’s been around for a year. Verify is in a private release. We’ll be launching soon, and both tools work together. They’re integrated, so any screen shot in Notable you can quickly run a test screen as well.
Andrew: OK. Notable does more than just a screen shot of the page that you’re taking notes on and passing it to other people at your office. I saw Dmitri’s explanation of it on your website. I think he does a screen cast. He said it captures SEO information. It captures CSS information. It allows you to really capture more than just what people see when they hit the site and give feedback on all of those elements.
Verify, I love because you get to show people two different screen shots and say, “Which do you like better?” I think you show one screen shot of your page, make it disappear quickly and then ask the user, “What do you remember?”
Bryan: Right. That’s one of the popular tests. It’s just preference. What do people think about the two screen shots? We have like an emotional one, too which is, basically, what does this mean? How does it make you feel?
So, we’re taking these questions that you would normally probably bring around your office and say, “Hey, what do you think about this?” And putting a little bit more structure around it so that internally you can get great information. But even your customers or people that are fans of your business can give you that feedback.
Now, it’s not going to give you a direction for your product, but it will help you validate that your ideas and your way of thinking is on the right track. It’s a great tactical tool for just getting quick information. In less than 10 minutes you can totally have a new idea of what you need to do, based on the feedback that you were getting.
Andrew: OK. I looked at the reviews online, very positive. You guys are growing the businesses consistently. What’s different this time?
Bryan: I was going to pull that back now. You’re good on this interview stuff.
Andrew: Thank you.
Bryan: The key part of Lucky Oliver was it just wasn’t in alignment with the core values of the business, ZURB. Again, we talked about morale issues, and when you add two things that are going in different directions, you split people’s attention.
So, we went back to the drawing board and said, “Hey, if we want to build product, how do we do it in a way that aligns itself with the core business? What are we going to do?” So, the key part for us is any product that we do we have to use, like, it has to be something we use in our daily work flow.
So, that’s a key part of all the products we use. All our products are going to help people design their own product better. So, that first point is what makes everything else click. Without that, when you’re fighting against what the core business is, your core revenue stream and it’s taking in a different direction.
So, all of the products that we create, we are actually using it on our own. So, Notable, we use every day. Internally we are constantly exchanging ideas based on screen shots and things that people are working on. Again, we wouldn’t be doing what we do on the service side without that exchange of information, and Notable only makes that better by making it easier for us to exchange ideas.
Again, if anyone’s creating product from a service oriented business, it has to be in alignment with the business. That was the first thing we wanted.
Andrew: OK. And that is also that when Notable gets better, everything else at ZURB gets better because everyone’s using Notable. It also means that internally you get to see what’s working and what’s not and complain directly to the developers.
Bryan: There’s subtleties in that. The key message is align more key business objectives. I don’t want to sound too cliquish but business objectives are cool. You need to make sure that both of those are in alignment.
Andrew: I don’t know what that sound was. For anyone who’s listening on my mike, I don’t know what that sound was. I’m in a new office here where they’re doing construction and… I don’t know. The Internet keeps going down, but… I’m so curious about what that sound was.
The only reason I address is I listen to podcasts all the time, and sometimes there’ll be a random sound in the background. And I’m dying to know what just happened. Did somebody just fall? Did they shoot someone? What am I missing here? So, I figure I’d address it myself. All right.
What else? What else are you doing differently now?
Bryan: To align your core business, we’ve done subtle things that really helped with that. So, ZURB is a whole lot about profit sharing. So, a certain percent of our profits are shared among the employees. So, with a product based business, your margins can be extremely high if you find a product that really works.
By working on the product and also working on the service side, people can see the benefits of their work financially. Now, that isn’t a driver for most people, especially designers. They want to create things that people are using, but those secondary points really help in the long term because you can see some reward from the work that we’ve done and we’ve tried to do that. I think that’s a key part.
And we’ve also tried to figure out ways to align people’s individual goals within the business to their own careers, and a lot of people want to spend time on product. So, we figured out what are those ingredients on a personal level that also contribute to the overall business. And knowing how to balance that with product and service is really important.
So, anyone that’s trying to do that needs to make sure that they’ve got those things aligned. Otherwise, it can be the most successful product in the world and it’s going to cause disruption to your organization.
The second is when we created Lucky Oliver we had an idea that we needed to get into the marketplace, and we needed to start pushing in our agenda what we wanted to do. The problem is if we use cash too much on the advertising front and trying to draw people in as opposed to starting with a core market that understands how to actually communicate with the customers.
Now, we did it with the photographers earlier on, and it worked. But, we didn’t translate that back to customers. Customers are a little bit more fickle. They don’t have too much allegiance to you, even if you’ve got a great product. It takes time. So, we tried to use money to get that original group of photographers happy with the customers buying their photos, but their allegiance was slim.
So, with our product line now, Notable and Verify, we slowed it down a little bit. We said, “Hey, we want to be doing this for five years out. We want to be doing this for 10 years out. What do we need to be doing now that helps us prepare?” So, we kept our cost down on the marketing advertising and focused on the fundamentals of the business in looking at what are our costs, what are we making from it, and trying to make sure that that growth is happening at a pace that makes sense for the overall business.
So, if you’re going to create product in a service oriented business, you have to understand that the service buzz is really cash flow based. So, trying to create a product that scales wildly, that isn’t using the same fundamentals of your service business, there’s going to be wild profits. There’s going to be profit. So, we tried to eradicate that right away and tried to align both of those revenue streams in the way that it was manageable and also fiscally responsible.
Andrew: Are you saying that you wanted to tie the expenses back to revenues and make sure that when you spend money it increases revenues fairly quickly, if not instantly?
Bryan: Right. So, the key is that we’re not going to do a big marketing advertising campaign and spend $10,000 just to get new customers because those customers may not be loyal. They may not be really excited about what we’re offering. They’ve just got a problem, and they need a solution.
Now, we want those customers eventually, but right now we need to find evangelists that really care about what we’re doing, give us the feedback that make our product better. We’re only a year in, so the life of a product, we feel like we’re still learning from what’s going on. We’ve tried to manage those expenses as much as possible, and most of that is time, time spent trying to understand what’s going on, not necessarily an investment into marketing and advertising.
Andrew: Now, I thought that in a service business you wanted to have expenses, certain kinds of expenses. In other words, if you had $100,000 in profit in a service business, you pay taxes on $100,000.
Andrew: If you move that money and just invest it in a new product where you spend all $100,000 to build up that product, you don’t have to pay any taxes on it.
Bryan: Yeah, OK.
Andrew: And you have increased your equity in the new product by $100,000. So, I thought it was better to look for projects where you don’t bring in money right away.
Bryan: Yeah. So, great point. In talking about that, yes, there’s an initial start-up cost that requires you to actually invest in that new product. So, from a cash flow standpoint, we’re probably about cash flow positive with our product, but the initial cost bringing on an engineer full time, there’s no revenue coming from that.
So, that’s the most challenging thing for a lot of businesses to know is that to do a really great product, you might have to put a year or two investment into it before you’re going to get any return. So, when I talk, I’m talking in relative scale to Lucky Oliver. Right now, as a business we’re more successful and have a lot more cash, probably a lot more than the average entrepreneur starting from nothing. We’re trying to pace it in a way that makes sense.
An example is, instead of continuing to double down on Notable, what we try to do is open up our platform and create a second product. So, now you’ve got one product that requires a little bit of maintenance and requires changes to it based on customer feedback. And we split that time with a new product. So, ultimately you cut your cost in half in a way by spreading it across two products with two different revenue streams. So, in some ways we’re being crafty like that. It’s not overly invested in product.
Andrew: I’m trying to understand that more because I see that a lot in the entrepreneurs that I interview. A lot of the boot strap entrepreneurs will launch multiple products. Many of them will do well. Some will just kind of sit there and do nothing, but one will eventually take off and that’s the one that they just keep growing and growing and growing and forgetting about the others.
That runs counter to what we learned when we were studying business. When I was growing up, we were taught you find one thing that you wanted to do really well. You invest every bit of yourself just in that one thing, and you never allow yourself to get distracted by other products, at least, until that one project is completely done.
Andrew: Why am I finding, do you think, that your approach is working better, multiple products that are smaller launches instead of one that’s a tight focus?
Bryan: I think the tight focus has to be in the theme of what you’re trying to get accomplished for the customer. So, you will find that a lot of entrepreneurs who create multiple products all in some ways have some core problem that they’re trying to solve, and they’ve approached it from slightly different angles. And, maybe, they found a different use case that comes out of a product.
So, I think the key for us in understanding is why we’re doing lots of products, the overall theme is still very much the same. We’re going to help people design for people. We’re going to create products that allow you to make it easier, to make better products for your customer. And that may make our job of trying to figure out where we spend time on different projects easier because we’re not trying to go do accounting software now or figure out, like, when we did for this rails trick. Let’s go do something for hair stylists. It’s not that spread out.
The reason why it works well in the web world is because the constant development of something now has shrunk so much that if you spend way too much time on an idea that doesn’t make sense, you’re just going to be wasting your time trying to solve problems for people that don’t care about it.
So, you’re better off continuing to pull your customers, and by pulling I mean building features into your products that people are willing to pay for. And if you get that reciprocation of payment, then you know it’s successful and you can keep going down that path. Now, for some entrepreneurs having a single focus and finding that one product that works, you’ll want to stick with it.
With our business, we have grander visions. We want to see what we’re doing reach the masses, and to do that only one tool, we feel, won’t accomplish that. The second thing is by doing multiple tools we’re learning about something in the second tool that influences the first tool, and that helps us with our development.
So, to create a product, here’s an example. Notable took us about a year to build, and that wasn’t because of the time it took to actually do the building. It was like getting through the hassle of who’s doing what and who’s leading that. What do we need to focus on? Then, you finally get to the building part, and you find the right person.
Verify, to get to the same place, took four months which is incredible. Then, we launched a free app which basically was a smaller feature set that probably took about a month of time. So, what you want by doing multiple products is figure out what works and what doesn’t work and skip all the rest. And so, that actually helps you go back and reconfigure the original product in the way that makes it better for your customers. We found that this process actually is making our products better as a whole for all the people it serves.
Andrew: OK. Another thing that seems different is… Actually, let’s go back. Lucky Oliver, can you say during the interview or you told me before the interview, can you say how much money you raised for that?
Bryan: For Lucky Oliver we probably raised about 8K to initially get it off the ground. But I probably ended up spending about $300,000 to $400,000 in cash and then probably upwards of a million dollars in lost opportunity cost.
Andrew: Because your attention was diverted from customers. So, if you had $300,000 today, by the way, I burned through $300,000 on an idea. I talked about it publicly, and it hurt like hell.
Bryan: I call it an expensive MBA.
Andrew: Yeah. It’s more and more than that. Now, my head’s going to what I could have done with the money, but let’s talk about what you know now. If you had $300,000 to invest right now, it sounds like you wouldn’t do it. You would invest in one product. You would do what? What would you do differently there that way with that money?
Bryan: We’re doing it now. We’re spending our time and using the core product as a way to keep creating additional products off of that, similar ideas but solving different problems. So, once you’ve made that initial investment those investments can be much smaller and your invest can be smaller, and you learn something from it.
So, again, having a core product allows you to do that because you have some basis of a product. So, I’d say we’re doing exactly what we need to be doing which is taking smaller gambles and trying to learn from our customers what is working or not working, and getting that feedback and re-applying it to new products.
Andrew: OK. Another thing that seems different is Lucky Oliver was its own company, its own organization, right?
Andrew: This time it’s…
Bryan: It has its own stock options and set up as an incorporated company in Delaware.
Andrew: I see, with its own stock options even.
Andrew: So, employees who had stock options in Lucky Oliver, I mean, some might have had stock options in Lucky Oliver and others may not, right?
Andrew: I see. OK.
Bryan: Everyone did. Everyone had some stock options, and so everyone had a piece of the business.
Andrew: OK. And this time?
Bryan: This time, what we’ve learned and this is just my experience in working in the valley for 13 years, is paper’s nice as a way to draw people in. But, if you’re building a long-term business, if you’re really saying, oh, well, we want you for four years and drop off. It doesn’t even make sense.
Our service oriented business is based on cash. So, we said, “Let’s do profit sharing” and that works. And the success of our products will only contribute to an employee’s pocket as well. We simplified it and said, “Hey, we’re not going to try and keep you here for four years. It’s a quarter by quarter thing, and we appreciate what you’re doing.” And in the longer term we hope those people that stay with us will enjoy the success.
Andrew: OK. How did you get started? How did you get started with ZURB?
Bryan: ZURB, you could say at some point I always realized that I would be doing my thing, even from an early age with a sketch book in hand. You just don’t know what it is or how it’s going to enfold. I can even visualize that, what the business would be, how I’d be walking to work and doing such.
But, I was fortunate enough to go to Stanford in the Product Design Department which encouraged entrepreneurial thinking and kind of thinking about how you solve problems for users. In that process I got an internship with Skyline Products. Brendan Boyle was my boss at the time, and he was also a teacher of mine. Ideal Product Development bought us, and I ended up working with Ideal for about a year.
I got a great experience of working with a business that Skyline Products was a 20 invention fund and learned about taking ideas, selling them, getting people invested in them. And through the process of the acquisition I learned about consulting and services through Ideal and got a taste of what it means to sell innovation to customers.
With the web, it was probably around 2000 or so, ’99 and I realized, what if you did this online because there’s this whole thing of start-ups and the excitement of that. I jumped into it and started and parted with three grand and Cup of Noodles stocked in the cabinets. You know, it wasn’t really overly thought. It was just a natural progression of wanting to do something and take the risk.
Andrew: How long did it take you to find your first customer?
Bryan: I had it from day one. I was profitable in 30 days.
Andrew: How did you get your first client?
Bryan: Again, relationships. It’s all about relationships. You know this as much as anyone. Your success is dependent on them, and I think up until this year in which we hired Dmitri and our lead marketer, it was all based on referrals. So, the business as a whole was 10 plus years of business based on referrals. We weren’t paying for advertising and marketing. It was solving problems for people and talking to them and understanding what their needs were, and we were fortunate enough to have people recommend us.
Andrew: And Skyline was different from a toy manufacturer. It’s not like Mattel that comes up with an idea for a toy, manufactures it and puts it in the stores. Can you tell people how it’s different? What did Skyline do and Ideal after that?
Bryan: So, the good thing about Skyline was it was my first taste of a business and probably the wrong one at that in some ways because I didn’t know how regular business worked. It was a start-up. I was the first employee.
What we did was we came up with a bunch of ideas. So, we’d come in the office. We’d brainstorm a bunch of ideas, and one of my skills was sketching. So, we would help visualize those ideas, and we’d prototype them. So, I thought this was just amazing. You can make a business of this and people pay you to do this?
I didn’t know all the business side of it because I wasn’t invested in it at that point. The key idea there that I take away in that business was people are willing to pay for ideas, that they want things that are going to help them be more successful. And in that model we learned – it was a licensing model. So, we would sell the concept to a toy manufacturer who would then take it and we’d get royalties off of it. So, you get money up front, and then you’d get a royalty.
It’s a tough business to be in, but scaling that was a rarity because most inventors are one person or two people, and they try and sell their ideas. But, we made a process out of it. We were able to take ideas. I would say in my time there I had probably 15-20,000 ideas of which you go down the pattern of how many are viable, how many actually get into prototype stage.
I was finally fortunate to be part of licensing about 40 toys over that period of time. You know, 20,000 ideas narrowed down to 40 ideas that actually make money. It’s probably depressing to a lot of people, but there’s a successful model there. And I learned, what does it take to make something viable? What does it take to make it successful?
Andrew: And the ideas are for new toys that someone else would manufacture and give you a licensing fee.
Bryan: Right. It got to be like the Roby [sp] football. I don’t know if you ever saw the football with wings on it. That was one of the more successful ones.
Andrew: The Nerf ball?
Bryan: No, it wasn’t Nerf. It was Roby, you know, the ring – they got into football. And there was a couple copy cats after that. There’s so many toys there that were mild successes that never made it. You think of the Christmas Top Ten List. I don’t think we ever got into the Christmas Top Ten List. We might have once, but most of the toys were things that were just cool and had a shelf life of one or two years, and then you start all over again with new products.
Andrew: Finger Shooter is the one that I saw. You get to shoot darts off of some kind of finger contraption. It looked cool.
Bryan: Wow, you’re pretty good. I like that. You’re doing your research here. I like this. All right, Finger Blaster. I’ve got a box of them in my garage.
Andrew: Ah, that’s what it was, really.
Bryan: My kids are still using them. They’re dangerous enough to really hurt you, so I guess my kids like them.
Andrew: That’s funny. I would like them. I would like to shoot someone in here, the IT person that’s in charge of my Internet connection. Is that appropriate to say?
Bryan: Yeah, that’s OK.
Andrew: All right. How cool. Well, it’s great meeting you. Thanks for doing this interview. I said this in the pre-interview because we had too much material for this interview. I’d love to have you back. I’ll probably work it out with Dmitri. He’s the guy who’s responsible for publicity and marketing and everything behind your company that relates to getting the word out.
I’ve got a list here of what you’ve learned as you built over – how many start-ups have you worked with now?
Bryan: It’s probably like 125 now, and of those we’ve had probably 800 million in exit [?] businesses. And, again, they’re all team efforts. It takes a lot of people.
Andrew: There’s a whole another interview. I want to do that interview again. I’ve got to know it’s you talking about the size of the team, talking about, you told me how one CEO who was so obsessed with products. You actually talked about him here in this interview that he cared about the icons enough that he was going to interview you and a bunch of other firms to figure out who can take charge of his icons and how that kind of mentality influences a business.
I want to ask about that and about keeping things small, even when you’ve got these big visions. I want to find out what you learned as you’ve helped all these different companies. So, please come back. Let’s do a second interview.
Bryan: Yeah. We can do specifics and talk about the details. Again, in our blog we cover a lot of these ideas. So, if you want to have us back, we’d love to share them.
Andrew: Absolutely. That’ll be the third ZURB interview, but it’s worth it.
Bryan: All right. Thanks so much.
Andrew: Thanks. Oh, where’s the blog? Let people go and follow up.
Bryan: It’s ZURB.com/blog.
Andrew: Awesome. And ZURB’s Z-U-R-B.
Bryan: Thank you, Dmitri, for making this introduction. Bryan, thank you for doing this interview. And guys, thank you all for watching.
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