Aerolab meets USTWO
What we learned from a sit-down with the head of one of the industry’s leading product studios and why it matters to us.
Some weeks ago I went to NYC with my fiancé to buy a suit and dress for our wedding and just chill out for a few days.
Weeks before that, during a meeting at Aerolab, we discussed about this interview with ustwo co-owner Jules Ehrhardt where he talks about the triple threat business model they use to generate revenue: consulting on design, working for startup equity and developing their own products.
We knew USTWO from their past work, we admired their culture and methodologies and were impressed by the huge success they had with Monument Valley.
Together with pre-Facebook Teehan-Lax (who’s co-founder Geoff Teehan we had the pleasure of meeting last year at Epicurrence), USTWO has been one of the studios we’ve looked up to ever since we got into this line of work and who we feel are our big brothers in more than a way.
I met with Jules Ehrhardt at USTWO’s NYC HQ, located in downtown Manhattan, where apparently they hired the Wall St. charging bull to guard the entrance.
I was pleased to find that Jules was just as cool and friendly as I expected. He showed me around their studio pretty quickly and we hit it off instantly when he invited me to play some ping-pong.
When Jules joined USTWO, pretty much everyone in the company was a creative genius and their growth was about to skyrocket. His goal was to contribute to define a clear, effective business model to shape that growth, so I instantly knew we had a lot in common to talk about.
I graduated in Business Economics and worked mostly in product and data analysis for big companies. Two and a half years ago, I met Juani Ruiz Echazú and Alejandro Vizio (Aerolab partners) at a Startup Weekend and worked with them non-stop during 3 days and yes, we won.
After the event, knowing the talent this guys had, I knew I had to meet the rest of the team and see how I could contribute to their project. I found a similar situation that the one that Jules found at USTWO: A room filled with young creatives, hipster designers and hungry developers that offered an awesome service. Basically, a company with a great vision that was already creating something BIG.
In this article, I’m going to transcribe some of the things we talked about and try to relate them to Aerolab’s world.
We talked mostly about people, industry and products.
All the quotes are 100% Jules’
THE PEOPLE: The Fampany Concept
Culture
“When I visit our studio in London, I feel like a stranger. Though I am the one of the heads of the company, not many recognize me.”
USTWO defines itself as a Fampany (Family + Company) formed by over 300 people. Wait, what? Families are usually smaller. They are actually four, families spread around different cities throughout the world (London, Malmö (Sweden), New York and Sydney.
Aerolab has been related to this concept since its conception and we always try to encourage the Aerofamily to keep growing while staying true to our main values. Be Kind, Empower Ideas & Do What You Love. You can see what a handsome bunch we are in this video of our closing party for 2016.
We talked a lot about culture, shared values and vision. He explained how, while the company has a centrally defined culture and values towards people, each office has their own language, customs, dynamics and jokes.
They’ve developed a strong culture that was always implied in the day-to-day, but eventually, as the ‘fampany’ grew, USTWO had to undertake the work of writing those values down to help onboard new people and spread that culture more easily. This is very similar to the Aerolab Handbook we give to each new member when they join the team.
Teams
USTWO has no fixed teams. They are built based on availability, skills and interests. Teams are created Ad Hoc for each new project. Every product needs a different stack, set of skills and knowledge about the industry, so the idea is to match people that complement each other and give them projects they will enjoy working on based on their interests, hobbies, backgrounds, etc.
Invention time
People need to work on things that keep them motivated and happy. If people don’t have anything to do, they get bored. The Product Heads and business teams always keep prioritized backlogs with work ready to be done on new experimental projects or concepts.
People
“USTWO is a pretty flat organization. Team Leads act primarily as coaches and try to steer clear from micromanagement.”
Everyone hired at USTWO is expected to forge their path with a high degree of autonomy. They stand on three key things to retain talent:
- Competitive salaries
- Independence
- Strong work (and play) culture
Everyone in the studio records their working hours and everybody is properly onboarded as to how to track their hours correctly. For full transparency, USTWO shares all project and studio performance data (other than salaries) 100% openly amongst all employees.
At the end of the fiscal year, USTWO splits a percentage of the total profits of the studios between employees as a end-of-year profit share.
SALES: Making Tailored Suits
Pricing Model
“Be exclusive, offer high quality and charge more.”
At Aerolab we have the same approach on being premium and charging for our work. Our premise over time has been to deliver the same quality standards than the best US-based agencies, crafting tailored products for our customers in order to create one-of-a kind user experiences and bold visuals.
In general terms, tailored is better, but it is not for everyone or for anytime. Sometimes we advise clients to start by themselves with a 50 dollar template to validate their business model and launch a really cheap MVP and then come back to us for the next iteration.
Like Aerolab, USTWO is a digital product studio and not a staffing company or software factory. We try to be a product partner for our client and work under a one team policy. The evolution of each project needs different people with different expertise in every part of the journey, so we charge per day, no matter who is working in the project.
“Never do digital product projects with a closed scope.”
USTWO charges per day and week, per person using a blended rate for designers and developers of different levels of expertise and experience.
Digital products are moving things with a life of their own. They grow and change constantly and this implies that the work and the dynamic with the client has to be as flexible as possible.
If the client wants a fixed scope, Jules recommends to never fix the scope and the budget at the same time. “you should only fix one variable”, he says.
USTWO builds the epics and user stories and uses that as a starting point to define the estimates necessary to kickoff the project. Afterwards, the timings and milestones are adjusted during the project to reflect progress and changes.
Clients
“If you do great work, have self-worth and dignity, you will ultimately attract the right partners.”
Jules doesn’t say this because he thinks they are the best, but because they only want to work with the best. Clients should be mature enough companies that understand the implications of creating a memorable digital product.
USTWO believes in applying the one team concept when working with the client (what we at Aerolab call open kitchen) and they maintain a continuous communication flow during projects. From the beginning, possible blockers for the project or technical debt should be shared between teams, making sure the backlog is as authentic, transparent and predictable as possible.
One of the biggest problems we talked about, was digitally inexperienced clients that do not understand how digital products are created. On this, Jules’ advice was the following:
“Aerolab has two possible paths: a) say no to this type of client or b) create a guided process to educate them.”
We went for path B when working with Banco Galicia App, so we had to develop The Ten Commandments of Product Design to help our clients’ team know how to give effective feedback and to focus on the critical parts of each stage.
Sales Process
“I’m technically in sales and new business but I never ‘sell’.”
Jules says that at USTWO they approach sales in a very similar way to what we do at Aerolab.
Nowadays, they are in a good position where nearly all of their sales come from inbound channels (we’re pretty much on the same track). Inbound sales are great to have because of their very low cost and high closing rate.
Jules agrees completely on Aerolab’s approach on consulting like selling.
His take on outbound sales is built around being present in the same spaces and forums as the partners one wishes to work with and in those spaces being an open, honest and passionate advocate. In that context the relationships and opportunities generated are long tail and can come in 3, 6 or 12 months.
“I don’t believe in the invasive car-salesman approach. It sounds a bit hippie, but for me it’s basically ‘attract the universe’. Everything is energy and in turn I find new business and relationships are about resonance.”
I told him that if we continue growing, our organic inbound sales are not going to be enough to be at full capacity. He said I was probably right, but another possibility was to make our organic magnet stronger.
The way in which we try to do this is through Content, Marketing and Branding.
PRODUCTS: Enabling Someone Else
Own Products
“You make a great product, but who will run with it afterwards?”
To give in-house developed product a chance to see the light, one should look for a good opportunity, a market with a gap, create an awesome product and finally, “enable someone else”. Find an “industry veteran” that will live and breathe for that product/service and enable them by developing an awesome product based on a market opportunity
Keeping 10, 25 or 50% of a product you created and passing it to someone else is better than having 100% and see the product die.
At USTWO, they do a budget for these kind of engagements at the beginning of the year and then stick to it. You have to be willing to “lose” 100% of that investment.
Equity for Work
“The VC model I see possible is one where we create a fund that pays the studio a preferred rate to create the products of the companies in their portfolio.”
This way, the fund makes sure that their startups are going to have high quality products delivered in time and the studio doesn’t risk too much money in the making.
This model ensures a partnership for a constant deal-flow and minimizes the risk taken by the studio (you could be paid full or maybe 50% and take risk on only 50% of the cost)
In a company with fifty people, you cannot put five people to work on high-risk engagements.
Companies like Aerolab and USTWO get to see hundreds of ideas in different stages that don’t get to a VC’s desk and we should take advantage of that.
During the next five years, there are going to be a big opportunities, but the moment to get inside this movement is now. Jules sees there is private money around in family offices and high-net worth individuals
“The question now is: How does one raise a 20 or 30 million micro-fund to truly transform the agency mode and seize the opportunity for those who can truly ‘make’.”
FINAL THOUGHTS
At Aerolab, we have an objective to always work hard on education and promotion of the digital product world. We constantly assist different events in the region, we hold workshops and courses (Like the awesome ones on product design we did on Platzi), we also make a habit of getting involved with talks at universities and all kinds of meetups with entrepreneurs and events for startups. We’re constantly learning new stuff and make an effort to share that knowledge with anyone that might be interested.
One of our main sources of inspiration are the companies we look up to as USTWO or Teehan-Lax and, during the last months, we’ve been lucky to meet with them and try to get some insights from people who have been in the industry for some time and have made their mark.
Aerolab founders have always followed their gut feeling and focused on providing a great service. Although there is no recipe for success, one take-away from this sit downs is that we see the same behaviour in the companies that are consistently one step above the rest. This gives us the sense that we are on the right path.
