Austin Startup Week is an inspiring and educational event that celebrates local (and not-so-local) startups, the organizations and meetups that support them, and all of the opportunity brewing in the 512.
This year, I played a role as a panelist on the financial technology (FinTech) track entitled Simplification is the New Disruption, moderated by Trey Robinson, Managing Partner at Theme Communication. Other panelists included:
William Trout, Senior Analyst at Celent
Henry Yoshida, CEO at Rocket Dollar
Andy Ambrose, Co-founder at Live Oak Technologies'
The panel addressed recent startup valuations (some topping $1B!) and explored whether simplification alone justifies these valuations. I brought my experience around what simplification of the user experience means to startups. Here are a few key lessons that came from the panel.
#1: Simplification alone can constitute disruption.
Trey asked the panel whether simplification of the front end user experience alone is enough to classify a company as disruptive.
We know that users like simple, and in an age of information overload, we like it even more. But if the simplification is truly only at the user interface level, anyone else can quickly replicate it. Today, most front-end simplification is made possible by smart back-end logic and big data.
For example, a traditional financial company might employ representatives to serve as translators between customers and complex information or processes. With more and more data available now, automated functions can replace the experience a representative might provide, making it available at any time of day, from anywhere. Creating a simplified experience often means using data to transfer the “work” from human to technology.
#2: Startups should focus on the problem they're really trying to solve.
Simplicity and ease-to-use are table stakes for today’s products, but they aren't “the strategy” for all products. Strategy begins with the problem you aim to solve. If users feel overwhelmed, confused, intimidated, or impatient, then simplification might be the right strategy.
Is your long-term plan to target those who require simplicity, or to earn a slice of the overall market? If you’re aiming for the latter, you may ultimately need the level of detail a traditional provider might offer.
Might your product become an entry-level product onramp to a traditional option, or will it grow with the user?
Consider that you probably know more about your space than users even want to know. So maintain tight feedback cycles to stay clear on what users truly value. Prototype, test, iterate, and repeat.
#3: Both old and new players can benefit from simplification.
Simplification can bring new prospects into a market. The opportunity for established players is often to take inspiration of those simpler concepts, and pair it with decades of insight into how to run the business.
Established players have internal and expectations to manage. Entrenched processes can create inertia. The best companies must recognize the opportunity and be willing to quickly take the steps to get there before the new disruptors take them out.
Case in point, consider young investors who have dabbled with robo-advisors like Betterment or WealthSimple. As their financial needs become more complex, will startups focused on optimizing the simple still meet their needs? Established companies may be able to offer options that are more robust and sophisticated.
#4: Value can come in variety of forms.
Panelists were quick to point out that a startup’s potential can be thought of in many ways.
Startups can create value by eliminating the cost of middlemen, such as brokers, in the chain.
Startups can create new markets for those who don't have time or patience for the complex, traditional experience.
Startups can form entirely new markets. Henry pointed out how Uber created an alternative to cabs which now stands as its’ own category of transportation.
#5: Simplification isn't new, and it isn’t going away.
Simplification has been happening since caveman days. As soon as humans find an easier way to do something, it becomes the default. While the simplest experience may win market share for a period of time, a company has to maintain their position as the simplest to keep their advantage.
How is that done? Winning companies keep a laser focus on what customers are saying, and watch for the workarounds humans create to make use of their product.
High valuations for FinTech startups that focused on simplification are just another example of how user experience prevails as a key factor in today’s business environment. How can you simplify your customer’s experience - before a competitor does?