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Take Five: Start-Up Born on the 3rd Platform

August 25, 2015

IDC Adriatics

photo Luka Abrus

IDC interviewed Luka Abrus, CEO of Croatian company Five and Member of the board of startup Shoutem, to learn about his view on entrepreneurship today, understand how he embraces failures to grow his business, and hear his approach to dealing with digital disruption and leveraging new technologies for a competitive edge.

1. Five makes software and develops and design apps for leading mobile platforms. In a nutshell, is that your core business?

Well, we’re actually two companies… Five, which is a mobile design and development agency. We have 80 employees and most of our clients are in the U.S. The second company, ShoutEm, is our product company, which is VC-funded. It’s a mobile app builder, a CMS for mobile… users can build their own native iPhone or Android apps with an online tool.

2. On your website, you state that “when you are good at something, you get clients and when you are great at something, clients get you”. You have built a good base of clients worldwide in the last seven years of existence. When did the turning point occur and clients started to “get YOU”?

We started as a purely development company back in 2007-2008, and since the beginning the business has grown organically, solely due to word of mouth. Our philosophy was to do everything in the best possible way, sometimes at our own expense. About four years ago, we started focusing investment on our design team, building our competence internally. The quality of our designs attracted business, as well as the fact that we are serious about understanding our clients and designing products that help them meet business goals and achieve targets.

3. What are some of the biggest challenges you see in terms of what the IT industry calls a digital disruption? And how does FIVE spot disruptions and evolve to stay competitive?

This is related to our product development process. In terms of meeting our clients’ needs, we can’t just follow but have to lead the way. What’s most important is customer validation, a positive response from the end user. Our process is based around prototyping, user testing, focus groups… all feeding into customer validation. We iterate quickly, from finding the buyer to developing and testing, then taking it to market. Once we find a market fit, we move to production pretty quickly.
This is how we deal with disruption. Constant and meticulous testing. In terms of new products, whether developed internally or externally for clients, anything that we want to invest in, the crucial first step is validation. Rather than holding dear to ideas, we spend significant amount of time prototyping and testing ideas. By quickly iterating and re-iterating based on feedback from the end users, we can be sure the product that leaves the factory will get a positive response. Key points are getting strong user engagement, gamify the experience if possible, and maintain traction with the users making it social.

4. Your process of validating ideas seems very fast and efficient compared to old-school approaches to designing change. Do you see steps such as annual strategy meetings too cumbersome for the fast-paced digital world?

Whether doing something internally or for a client, I always say you have to be out in the market within three to four months.
Clients come to us with huge projects, huge scopes… we always break them down into several smaller phases, especially when someone is trying to build a start-up around the product. But we take it further, since we don’t wait three months for the market to validate our product, we validate each phase of the product, even on a week-by-week basis, either internally or within a small group of test users. This way we’re on the right track to building a good minimum viable product.

5. How do you measure the success of your apps/software?

We have something that’s called the Five Score, it’s an internal measurement of the success of the app. We measure client satisfaction with our service and meeting their goals, we measure how well the product has achieved their business targets, and finally, how we feel about the product – is this something we are really proud of?
Our measurement tools are various, and include the obvious – number of downloads, reviews, PR – but we go beyond that. During initial product development, we spend a lot of time on workshops discussing how we will measure success. Most often, it’s measurable in terms of money, how they’re monetizing the app: e-commerce, number of sales made through the app. For other kinds of apps, we might be looking at indicators of how much time is spent in the app, or did we manage to enlarge the brand's audience.
We typically do snapshots of these measurements one month following the product launch, then after three and six months to compare. If we’re not reaching targets, we have to adjust the product accordingly.

6. How do you monetize success? For example, you may have 10,000 Facebook likes, but how do you ensure that gets translated into revenue?

Once you have asked right questions, then you can make sure that their expectations are realistic and build the app around their business targets. Most of our clients work with mobile apps, which makes their measurements easily trackable. We work heavily with retail, hotels and accommodation, and multimedia industries, and we never had any issues deciding on which revenue measurements to use to make sure the mobile business is viable.

7. Do you believe that a company can instill the culture of innovation through listening to its customers? If so, how should they go about doing that systematically?

We have a pretty large team of designers and developers, so to enable innovation, we always push the culture of “making things right”. Meaning everything we do must be done right, in the best way, or we won’t stand behind it. When we start with that and build around it, it gives each designer and developer an opportunity to raise their voice.
Giving employees the ability to talk directly to clients, to suggest improvements, vocalize ideas… that’s important, because then you have, potentially, 80 smart voices being heard. So our formula for innovation is pretty simple: giving employees time to do research, then giving them the spotlight to present their ideas. Also, we try to make sure that they are not held back by a long approval process, from product managers or whoever.

8. Does Five have any sort of high-level roadmap for digital transformation/staying on top of the game/ensuring competitiveness?

We are always measuring what we do internally, setting the same targets and following same process as we do for our clients. One useful tool we’ve adopted is the OKR (Objectives and Key Results), which helps set the right targets for each individual within the organization. With the input from this, as well as from 1-on-1s and other measurements, we try to innovate from within and from the top.
It’s about asking the right questions internally, giving people the opportunity to work on the important things and making sure we evolve continuously. When we look back at the questions we asked six month ago, we see a huge improvement, and we can continuously compare and learn to be better.
Of course, management is always trying to stay ahead of the game, learning from clients and from the competition… but sometimes the trick is just improving daily work and setting targets for individuals, making sure we’re not just performing tasks [like writing code] but making gains on something valuable.

9. How much time and effort do you invest in hiring and nurturing digital skills? How do you encourage your people to come up with new ideas/be creative?

We treat each employee as the CEO of their own project. It’s a part of company culture to empower them to bring their ideas to the client or to any management team member. We’re not as much about pursuing innovation per se as we are about always trying to do better, and I think innovation spins out of that. Internally, we try to find the right person to bring an idea to the table, but at the same time we’re looking outward, staying in touch with new ideas and meeting interesting people. When you combine all that and extrapolate it to the whole organization, it has helped propel us forward.

10. In IDC, we often speak of the ongoing impact of 3rd Platform technologies – that is, big data, mobility, social business, and the cloud. Do you see any of these technologies representing a key challenge or opportunity in the coming years?

We were basically born on the cloud; internally we have no servers, we host everything. This helps us to be agile. Mobile and social is embedded in everything we do. We try to stay ahead of the game and look at those micro-trends that we can implement in the organization that will help us lead the way. We are actually completely based on the 3rd Platform… it’s something in our DNA, we don’t know any other way.
We need the ability to seamlessly scale on the global level, whether our products or our client's products, and owning servers was never an option. ShoutEm started in 2009 based on cloud, mobile, and social… these were key pillars. We sometimes thought it was too early to focus on that, but still we persisted. Now we’re getting the pay off, seven years later.
I recall a situation in late 2010 when overnight we had spikes of traffic 50x more than we were used to (the funny story is that Justin Bieber's fans decided to use our system for their mobile social network). The cloud saved the day, enabled us to scale quickly. "Beliebers" left our network couple of days later, though. That was just one proof our approach was valid when playing on a global scale and working with growing mobile technologies.

11. Social media. Five is @facebook, @twitter, @instagram, @behance, @dribbble, plus you have a blog where you share tips, articles, pointers about events… sometimes with some quite lively discussions. How do you manage your content across social media?

We have several key talking points that we want to convey in our messaging. These relate to projects, company culture, and the things that we love personally… sports, food, drinks, having fun. We don’t have an in-house PR person, but we have a lot people who are happy to share what they are doing and that then makes up our whole culture.
When it comes to our blog, it’s not just about conveying knowledge, but about how we convey ourselves and how we want to be perceived. If you look at our blog three years ago, it was all about developer topics… which were interesting, but not what we want to be known for. Now we want to be perceived as designers who understand clients and help them build their businesses, achieving metrics and validating the mobile.

12. What do you think is the future of your app product business?

Investing in building the product company ShoutEm, as we see huge potential there. Bigger, larger, more clients, more market. A goal with Five is to be recognized as one of the leading agencies in the USA and to be able to reach huge enterprises there. From there we’ll be well positioned to show that Croatian designers and developers have really something to offer. You have to set ambitious goals [laughs].

13. In your opinion, what are the key ingredients that make a successful startup?

Always being hungry, to learn and never be satisfied. Also, a willingness to accept your own errors and learn from them.

14. Would you share any failures/lessons learned with your current start-up perspective?

There’s always the importance of staff; hiring the wrong talents can significantly slow down the growth of the company. We were always on the lookout for people who are better than us [Luka and his partner]; better in their fields, so we can learn from them. That has always paid off. We approached people who are much better paid and in a much better position than FIVE could offer, but our approach was to win them over with a good story and a perspective. For example, we got a hugely successful regional start-up CEO to become our business developer, an established senior HR lead of an enterprise became our HR lead, or we got a Google guy to join our marketing team. Basically, we approached people who were out of our league at the time, but we show them where we want to be in one or two years, and they were all up for the challenge.
Another lesson learned is about the importance of traveling… to see clients, for business meetings or conferences. Nothing started to happen for us before we left Croatia. You need a personal presence, not communication through videos and emails. We’re focusing on the U.S. market, for reasons I’ve already mentioned, but also because of the cultural closeness we have there. We feel most at home in the States.

15. You are not only technically, but also musically inclined. What are the five instruments you play?

Yes, I almost went to musical academy, but luckily chose electrical engineering and computing sciences. I actually play more than five, but the five that I have played publicly are guitar, bass, drums, piano, and an accordion. When it comes to music, you might say I’m a jack of all trades, but master of none.

16. Is there any technology aspect to your musical endeavors?

Well, math is in everything, it’s a huge part of music, and it provides inspiration for the company as well. In a detailed organization, everything has to fit perfectly; that’s the math part… then we add inspiration and design. There are a lot of parallels between playing with a band and working in the company, a lot of interesting connections.

17. Is your approach to business more like classical orchestra or more like a jazz five-piece in a smoky bar?

I’d say it’s more like jazz… great musicians, masters of their instruments, combined to produce something more than the sum of all parts. That's how we choose people we work with, artists of their trade and give them the spotlight to perform and do their thing.