Discuss about the Report of Models and Theories for Dropbox Inc.
To understand what models and theories that can be applied to a business practicing lean startup, an analysis on a company that has already applied the concept would be ideal. Dropbox Inc., is a company that provides file hosting service through an application called the Dropbox. Dropbox creates a folder on one’s desktop and anything dropped in this folder is available across all the devices used by the user (Ko, 2015). The company has developed a website and also a mobile app for the same. The reason to choose Dropbox Inc., as an ideal scenario is that the concept of lean startup was applied by this company at a very early stage rather than migrating from an existing model.
Lean startup comes up with a concept were you Build-Measure-Learn (Blank, 2013). The concept is that instead of just building a prototype or a concept case and testing it, a much innovative approach is adopted which involves continuous learning. This approach ensures that the startup understands its customers demand and builds the product iteratively rather than investing in a complete product and failing after launch (Ghezzi, 2015).
Lean Startup concept itself has its roots from lean manufacturing where using any resource for any goal other than adding value to the end product is considered as waste (Gündüz, 2015). Eliminating this waste is the core of the lean startup business. The theory of lean manufacturing made sure that production is neither excess nor low but in tune with the current customer needs. The Build – Measure – Learn concept that is the heart of Lean startup. Here an idea is built into a code and a measure is made about the data being manipulated and stored and learning if the code used is correctly functioning (Eisenmann, 2012). Dropbox Inc., has used this theory by implementing the code and releasing it to its early customers to use and help the company understand what the product lacks rather than building a final product and launching it (Drago, 2012).
For a lean startup to be successful the organizational structure of the company is key. The organizational structure of a company determines how various processes are carried out in the organization. Decision making process, the number of approvals required, etc., all depend on the structure of the organization. In case of a lean startup implementation, the organization should be able to make quick decisions and change dynamically with the customer needs. They need to be able to adopt to the new requirements recognized and get rid of the old assumptions made. This kind of an environment requires a strong team structure to realize their goal (Van, 2014). A Holacratic Organization model is the most apt model that can be used by the organization following the lean start up. Also known as “boss-less” organization model the structure allows distributed decision making giving every individual the opportunity to suggest and work to their full capacity (Robertson, 2015). Keeping the concept of micromanagement completely at bay, the holocratic model ensures that the distance between the CEO and the employees is minimum (Robertson, 2015). This model would do wonders in a lean startup with a small workforce where decisions are made department wise rather than based on the power hierarchy (Müller, 2012). Dropbox Inc., has around 100 employees and currently adopt the flat organization structure. Lean startup comes up with a concept were you Build-Measure-Learn. The concept is that instead of just building a prototype or a concept case and testing it, a much innovative approach is adopted which involves continuous learning. The holocracy model can hence be easily implemented to ensure that the lean start up structure is intact.
Lean Canvas is an adoption of the business model canvas by Alexander Osterwalder with a modern twist. As the name itself suggests the lean canvas is closely associated with lean startup and integrates easily into a lean startup business (Maurya, 2012). The model is entrepreneur-focused business plan focusing on the current problem, the solutions for the same, the key metrics to measure and the competitive advantages that the company has to overcome the problem. The lean canvas model concentrates on the way timeline has an effect on the revenue generated by the company which is one the primary goals for any startup (Björk, 2013. Lean canvas makes sure that before developing a product and using up all the financial and technical resources, the organization developing the product understands the need of the product. In simple words, customers would not buy a product they don’t need. The product developed has to add some value to the customer’s life in one way or another or the chances of the product being successful drastically reduces (Yeoman, 2014).
Problem: The problem is crux of the product being developed. Dropbox Inc., used a good amount of time to understand what the new generation of internet users need. The need for large files across different devices has been increasing continuously given the easy integration of devices. Customers need a platform where their files are available where ever they are. With the invention of cloud computing Dropbox Inc., saw that their idea is actually feasible. The problem to be able to have files available across all devices of a customer and the ease with which the same can be shared has become their core.
Solution: Cloud computing has become the center of the solution developed by Dropbox Inc. Rather than saving files on physical servers and making it difficult to move them across several platforms, Dropbox Inc., have come up with a simple solution by storing the files in cloud. The solution was not implemented at a go. As lean startup is used, the company initially developed a beta version that was available to a few early customers who could use this product and let the company know what they like and dislike. The feedback was then taken into consideration, and the flaws were discovered and worked on and then a new version of the product was released for the customers to test. Several cycles of this produced the current day Dropbox.
Key Metrics: it is important to understand the metrics on which the success of the product is decided. It is not the revenue but rather the answer to the simple question Id the product useful to customers? Answering this question through standardize metrics can help the developers know if the product is reaching the goal of innovation and fulfilling the need in the current market. With Dropbox the key metrics where the upload speed, download speed, storage capacity, sync capability and ease of use.
Competitive Advantage: Why would a customer buy a product that has a hundred alternatives at a cheaper price with the same functionality? A product developed has to be either new, or cheap or have advanced functionalities than the rest of the competitors for the customers to choose it. Discovering the competitive advantage can help in developing a product around it (Nobel, 2013). File sharing application were relatively new in 2011. That meant that Dropbox has an amazing idea but also had no predecessor to learn from. Hence the lean startup was implemented.
Lean startup business that follow a lean canvas business model are likely successful as the concentration is shifted to focusing on one issue and finding the solution of the same through iterative product cycles that meet key metrics with the help of the competitive advantage.
The sales of a product does not depend on the decision made by the seller. It depends on the decision made by the customer. The seller has to find a way to help the customer make the decision. For lean startups the iterative product cycle is only successful when the organization is able to identify flaws in their current build and learn from them and then come up with a product that has better functionalities. The best way to do so is to ask the customers what they want, rather than guess what the customers need. Pre-sales marketing and constant customer feedback can help the organization identified what more the customer would need. The theory of customer decision making helps one understand how the customer decides on a product and the analysis can be used as an advantage (Solomon, 2013). This plays a pivotal role in lean startup as the business has to have a clear vision to focus on and the vision can only be derived when you are able to steer the customer decision in the favor of the organization.
The five main steps in the customer decision making are
Problem Recognition: The reason a customer needs a product is when a requirement is not fulfilled. The internet has connected people all over the world giving them access to immense knowledge at fingertips. The concept of sharing knowledge has become a core element of networking. Sharing small bytes of data could be easily done using simple applications such as e-mails but transferring huge amounts of data was tedious. One usually had to be break the data into smaller packets or store the data in devices such as pend drives and CDs and physically take them across. This was a tedious process. The Dropbox Inc., identified this and developed a share folder using cloud computing and have given a beta version to the customers as the process of build in lean startup
Information Search: The customer searched for applications that would resolve these issues. Since cloud computing was new, very few customer opted for this technology. However, Dropbox has been recognized at an early stage itself as they followed lean startup and have introduced a product for a customers to try out
Evaluation of Alternatives: The customers searched for alternatives for cloud computing. Again the major advantage with lean startup is that the organization produces in iterative cycles rather than a finished product. With very few alternatives and the instant availability of a beta Dropbox, Dropbox Inc., has seen an increase in the number of customers using Dropbox
Purchase: In lean startup the customer has to provide a feedback to understand if the metrics have been met. For this the initial product is sold at a cheaper price to help the customer be a part of the feedback team (Owens, 2014).
Post purchase feedback: For a lean startup business post purchase feedback is the key. The customer’s review is the most crucial element as the iterative product cycle starts only after learning what needs to be changed based on these reviews. What the customer wants is identified through the customer feedback and helps the organization understand if the product being developed is on the right track. The measure and learn part of a lean startup product comes into play here. The organization can check based on the reviews how many of the predefined metrics have been achieved by the current product. The negative feedback helps in learning what the product lacks. The next iterative cycle will produce a product that corrects these function and adds the suggestions by customers if any (Hart, 2012). Note that changes suggested have to be feasible. The needs of a customer are never ending. Hence a clear decision has to be made on what feedback has to be chosen and what needs to be left out. The organization structure plays a pivotal role in making these decisions. Dropbox Inc. had 75,000 users who provided high quality feedback on their product through vote boxes highlighting the points they liked and disliked in their minimum viable product.
In a lean startup, feedback from a customer plays the most crucial role in determining the metrics achieved and the things to be learnt. Hence it is apparent that a clear understanding of the feedback is required. Usually most of the companies that take up lean startup involve a set of potential customers for black box testing. The reason to do the same is that the product has to be ultimately used by these customers. Making the end consumers determine the pros and cons of the product is the best way to ensure that the product does not fail after its large scale launch.
Assimilation – Contrast theory is a customer satisfaction theory proposed by Sherman and Fazio on the behavior of customers and how their satisfaction and dissatisfaction with a product can be exaggerated. It is normal that as a human being when a product works exactly as expected or much lesser than expected the reaction of a customer may be exaggerated (Singh, 2015). Say a customer expected a cloud storage space of 300 GB per user and sees that each used is given only 2GB storage space, the customer might report the application as extremely dissatisfactory ad their expectation are higher than the current possible storage. Due to the expectations of the customers it may be difficult to get a perfect feedback from them. Hence the assimilation – contrast theory states that if the performance of a product is within the customer acceptance level with a little discrepancy, the same would be over looked by the customer or if the performance of the product falls below the customer acceptance level contrast prevails and the discrepancy may be exaggerated (Huang, 2015).
Understanding this theory helps a lean startup business in filtering the feedback received (Croll, 2013). Dropbox Inc., has used an extremely intelligent approach after a detailed understanding of this theory. The company initially took in only 5000 customers even before launching the product. They prepared a 90 second video describing the services they intended to provide and why people should pay them. This video provided a look of their minimum viable product along with an explanation of what to expect from the product and how the file sharing need of a customer are fulfilled. This first video have set the expectations of its customers so that an achievable customer acceptance level is set. Also a basic feedback was taken. Making the end consumers determine the pros and cons of the product is the best way to ensure that the product does not fail after its large scale launch.
To understand whether or not to go ahead with the product development and learn the new features that could be added to the product, a second MVP video featuring the additional functionalities has been released to 75000 customers. These customers were asked to view the first MVP video to set their acceptance level. After understanding the second MVP video the customers were asked to drop comments using a vote box. This ensured that every customer dropped a comment on a pre-decided features. Also the customers were given an additional comments field for further inputs. The vote box ensured that the customers have not exaggerated or undermined the performance of the product or has not overlooked the discrepancies, since the vote box consisted of through questionnaire.
Based on the feedback received, additional features have been added, old features have been discarded and basic features were ensured. The iterative process started again with a new high level MVP and so on till the product was ready for a large scale launch. The company still continues with its vote box and have also adopted several online marketing techniques to receive a variety of feedbacks (Gehrich, 2012).
References
Björk, J., Ljungblad, J. and Bosch, J., 2013. Lean Product Development in Early Stage Startups. In [email protected] ICSOB (pp. 19-32).
Blank, S., 2013. Why the lean start-up changes everything. Harvard business review, 91(5), pp.63-72.
Bosch, J., Olsson, H.H., Björk, J. and Ljungblad, J., 2013. The early stage software startup development model: A framework for operationalizing lean principles in software startups. In Lean Enterprise Software and Systems (pp. 1-15). Springer Berlin Heidelberg.
Croll, A. and Yoskovitz, B., 2013. Lean Analytics: Use Data to Build a Better Startup Faster. ” O’Reilly Media, Inc.”.
Drago, I., Mellia, M., M Munafo, M., Sperotto, A., Sadre, R. and Pras, A., 2012, November. Inside dropbox: understanding personal cloud storage services. In Proceedings of the 2012 ACM conference on Internet measurement conference (pp. 481-494). ACM.
Eisenmann, T.R., Ries, E. and Dillard, S., 2012. Hypothesis-driven entrepreneurship: The lean startup. Harvard Business School Entrepreneurial Management Case, (812-095).
Gehrich, G., 2012. Build It Like A Startup: Lean Product Innovation. Greg Gehrich.
Ghezzi, A., Cavallaro, A., Rangone, A. and Balocco, R., 2015. A Comparative Study on the Impact of Business Model Design & Lean Startup Approach versus Traditional Business Plan on Mobile Startups Performance. In ICEIS (3) (pp. 196-203).
Gündüz, M., 2015. Value Stream Performance Measurement in Lean Manufacturing Business. International Business and Management, 10(3), pp.40-47.
Hart, M.A., 2012. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses Eric Ries. New York: Crown Business, 2011. 320 pages. US $26.00.
Huang, Z. and Washington, M., 2015. Assimilation or Contrast? Status Inequality, Judgment of Product Quality, and Product Choices in Markets. Organization Science, 26(6), pp.1752-1768.
Ko, A.C. and Zaw, W.T., 2015. Digital Forensic Investigation of Dropbox Cloud Storage Service. Network Security and Communication Engineering (Ed: Kennis Chan), CRC Press: Ä°ngiltere, pp.147-150.
Maurya, A., 2012. Why Lean Canvas vs Business Model Canvas. Available in: https://practicetrumpstheory. com/why-lean-canvas.
Müller, R.M. and Thoring, K., 2012. Design thinking vs. lean startup: A comparison of two user-driven innovation strategies. Leading Through Design, 151.
Nobel, C., 2013. Teaching a’Lean Startup’Strategy. Harvard Business School.
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Robertson, B.J., 2015. Holacracy: The new management system for a rapidly changing world. Macmillan.
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Singh, J. and Widing II, R.E., 2015. A theoretical model for understanding satisfaction/dissatisfaction outcomes of complaint responses. In Proceedings of the 1990 Academy of Marketing Science (AMS) Annual Conference (pp. 62-66). Springer International Publishing.
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