A thinking framework for a startup evaluation
Systems Thinking approach for effective startup mentorship
Those involved in startups understand that it is a complex and risky business—better described as a rollercoaster—where founders are always searching for new ideas to achieve better results. It's a constant process of managing a significant amount of uncertainty. Every startup is a network of interconnected units and individuals working together to achieve a specific outcome. Operations and processes are always quite messy. Thinking about the business from different perspectives can be challenging, considering stakeholders and requirements, the team dynamics, operational processes, software solutions. It's easy to become trapped in day-to-day operations and lose sight of the big picture.
System Thinking can help navigate this uncertainty and assist startup founders, mentors, and advisors holistically analyze and understand interconnected startup components. It allows to see the bigger picture, identifying potential bottlenecks, dependencies, and leverage points that can greatly impact the startup’s success.
Over a decade of building software, with the latter half spent working with startups as a CTO, tech consultant, advisor, and mentor, I've recognized the critical role of a systematic approach in navigating the complexities of startup development. Drawing from an extensive experience and the application of Systems Engineering practices, I've obtained a mental model that aids in evaluating and managing startups by considering the interplay of various business aspects. This thinking framework, refined over years of practice, is designed to offer clarity and direction, moving beyond intuition to informed decision-making.
Before we begin, I would like to cover some theory so that you'll have a better understanding of the main concept later on.
A bit of a theory
The framework is based on the OMG Essense standard, which takes an academic approach to software development. It encompasses numerous use cases, methods, and practices that are beyond the scope of this article. Don't hesitate to refer to the standard itself after reading this article; you may find it very useful for your daily work.
Understanding of Systems Engineering
Systems Engineering is an interdisciplinary field that focuses on designing, integrating, and managing complex systems over their life cycles. It is utilized in various domains such as:
Technology products.
Information-rich systems like command and control systems and air traffic management.
Aircraft and civil airlines platforms.
Defense and aerospace projects including spacecraft development.
Electronics & communications.
and others
Organizations and companies like NASA, Boeing, SpaceX, Virgin, Lockhead Martin, Siemens and other big corporations utilize Systems Engineering to manage the complexity of their projects, reduce risks, and ensure that their products meet the required standards.
In 2014, the Essence standard was published to guide the creation, use, and improvement of software engineering practices. This standard is maintained and published by the OMG International Open Standards Consortium as a result of the SEMAT initiative. The acronym SEMAT stands for "Software Engineering Method and Theory," which was launched in 2009 with founders Ivar Jacobson, Bertrand Meyer, and Richard Soley.
The Essence Kernel
Let's delve into the heart of the standard and have a look at the Essence Kernel. In the standard, an "Area of Concern" denotes a specific domain or aspect of a software endeavor that demands attention. From the business perspective, these areas are fundamental to the product creation process and serve as building blocks for a successful business:
Customer – contains everything to do with the use and exploitation of the solution to generate value for the customers and users.
Solution – contains everything to do with the specification and development of the solution to meet the needs of the customers.
Endeavor – contains everything to do with the team and the way that they approach their work to deliver the solution to the customer.
The model allows to effectively manage and address the core areas of customer satisfaction, solution development, and team collaboration.
These areas and their associated activity spaces offer a structured approach to tackle the diverse facets of software engineering endeavors, ensuring comprehensive coverage of the key elements involved in the development process.
Each area has its alphas (or Abstract-Level Progress Health Attribute), which can be understood as "things to work with". Alphas are the elements that undergo change in the project, and it is crucial to comprehend, monitor, guide, and manage these changes. Each alpha has a specific state, and observing how these states progress over time offers a means of evaluating the project's progress and health. The standard also outlines "Alpha association," describing the relationship between alphas. The alphas and their related states offer insight into where the project stands, what issues need attention, and enable tracking of progress and overall health status.
Here are the key alphas to consider for gaining a comprehensive view of startup's development process:
Stakeholders - are individuals, groups, or organizations whose actions, behaviors, or decisions can influence the success of the system.
Opportunities - are circumstances that enable the development or refinement of an existing system.
Requirements - are describing the system.
Software System - or system realization, the software itself.
Work - for the project to be successful the team needs to plan and execute the work and monitor the status of that work throughout the project.
Team - are individuals with a specific set of competencies necessary for project implementation, encompassing not only engineering skills but also managerial and other practical abilities.
Way of working - a way of working supported by necessary work products, tools, and the team's efforts in building the system.
The OMG Essence standard uses checklists to track the state of Alphas. It defines Alpha States and Checklist Items that must be achieved to reach a particular state. These checklists enable us to track progress by comparing what has been done with what was intended, as well as in monitoring progress, understanding areas that need attention, and maintaining project balance to prevent catastrophic failures.
Let's pause here and start putting the theory into practice.
From theory to practice
Applying the framework for startup mentorship can be an invaluable tool for guiding and supporting startups on their journey to success. One approach involves using the mental model for interviews and check-ups with startup teams to evaluate the current stage of the business and measure its progress.
For example, when heading to the initial onboarding interview with a startup, it's essential to get all the necessary information to make informed decisions. Failing to do so may lead to misconceptions that could have negative consequences. Employing the Essence Kernel as a guide during interviews can aid in evaluating the system's stage effectively and ensuring all critical areas are taken into account.
Let’s get started and have a look at the Kernel again.
Customer
Starting from the top, our first priority is to investigate the Customer area. Having a clear understanding of the customer persona is crucial. Conducting thorough customer discovery, validating the existence of the problem, and ensuring that the team comprehensively understands and effectively manages all stakeholders are also key considerations. Additionally, it's important to assess the economic potential of the project by considering factors such as cost analysis, market demand, and competitive advantage.
The Opportunity and Stakeholders alphas are the main navigation points to consider here. The Opportunity alpha focuses on understanding the problem that the startup is trying to solve and determining if there is a market for their solution as well as team execution capability. The Stakeholders alpha examines the key players involved in the startup, including customers, partners, and investors. To assess the area, we might to go with these starting questions:
What are the current market drivers for this project? Is there market demand for this initiative?
What is the total number of customer discovery interviews conducted by the team, and what insights were obtained?
Do customers recognize that they have a problem that the startup is addressing?
To what extent does the team understand their target customers' needs and pain points?
Why is the team capable of executing this project successfully?
Who are the project's stakeholders and what are their roles?
Have all essential stakeholders been considered?
How does the team communicate with key stakeholders?
Use these questions as a starting point for the interview, and as the conversation deepens, you might uncover more information and develop additional questions.
Solution
Moving next to the Solution. The Solution area covers system requirements and the software system itself. It evaluates the technical solution and examines whether it aligns with customer needs and expectations. Here we can dive deeper into project documentation, architecture documents, and other system definition documents. Requirements need to be developed based on stakeholders' research and aligned with business opportunities.
To ensure accurate understanding of the area, consider to start with the following questions:
Does the team have a clear understanding of the system requirements and how they are being managed?
How well does the technical solution address the identified problem and how does the team conduct the validation?
Has the team considered alternative solutions and evaluated their feasibility?
How does the software operate?
How does the software fulfil system requirements?
What are the key features and functionalities of the software?
Consider adding more questions to explore this area during the discussion and focusing on specific components.
Endeavor
By this point in the interview, more than half of the components should have been considered and we are now moving on to the final area of concern: Endeavor. It encompasses all the operations required to make the system functional.
Here we investigate deep into the team, the necessary tasks, and how they are carried out. We consider a team as individuals with a specific set of competencies needed for project implementation – not only engineering skills but also managerial and other applied abilities. For the project to succeed, the team must plan and execute their work while continually monitoring its progress. The Way of Working outlines how the team approaches their tasks: encompassing methodologies, frameworks, and technologies. In order to ensure success in this area, consider asking the following questions:
What is the current team structure?
What are team roles and responsibilities?
Is there any expertise that the team currently lacks?
How does the team manage project tasks?
What is the project technology stack?
What project management methodologies and frameworks does the team use?
Are there any difficulties in the operations and processes?
These questions open up vast opportunities for investigating the startup’s processes and operations, guiding further research in this area.
Finally, the concept of connections acts as a navigational compass during the interview, allowing you to traverse the landscape of the startup's ecosystem. They help you see how everything in the startup is linked and affects each other, guiding your questions and understanding.
Conclusion
The OMG Essence standard serves as a valuable tool for evaluating software products and startups. By using the Kernel as a guide during mentoring interviews or technical due diligence processes, we can systematically assess different components of a software product. This approach not only aids in evaluating the current stage and progress of a business but also ensures that critical areas are taken into account for informed decision-making.
Moreover, while the Essence standard provides a strong mental framework for evaluating software products, it's important to note that there are other models, such as lean canvas, value proposition canvas, and business model canvas, which offer valuable insights from a business development perspective. Utilizing these tools in conjunction with the framework can provide a comprehensive evaluation of startups and software products, leading to better-informed strategies.
Try applying the framework in your daily life and observe how it improves the quality of your work.
References
Ivar Jacobson, Pan-Wei Ng, Paul E. McMahon, Ian Spence, Svante Lidman (2012) The Essence of Software Engineering: The SEMAT Kernel.
Available at: https://queue.acm.org/detail.cfm?id=2389616Object Management Group (2018) Essence – Kernel and Language for Software Engineering Methods.
Available at: https://www.omg.org/spec/Essence/1.2/PDFJacobson, I. Essence Explained.
Available at: https://www.ivarjacobson.com/essence-explained-agile-tools
Thank you for sharing, Ilya!