During the next week of reflection, a non-early adopter, but loyal user of the product called the founder to announce that he would not after all, pay for the product. Not at the proposed price, not at the price they had argued for, not at any price.
So he fired himself as Founder and CEO of his company. And then he fired me. (“I no longer need your services. But in the future…”)
We talked briefly about his future, including possible pivots and leaps, but essentially, the gig was up. I admire his self-awareness and the honesty with which he evaluated his situation.
At long last, here's the video from Steve Blank's presentation last month.
00:00 My Intro
03:17 Why Accountants Don't Run Startups
- Old constraints on startups
- Entrepreneurial explosion
- Startups vs Small Businesses vs Large Businesses
- IBM example of big company disruptive innovation
- What did my income statement say in month 1?
- "You've just washed ashore on an a deserted island with a knife in your mouth and a loincloth."
- Searching for a business model, not a business plan
- Customer Development
58:26 Atoms or Bits (New Material)
- Physical vs Online products
- History of Lean
1:03:26 Sloan vs Durant
1:29:50 My Conclusion
Be sure to come check out entrepreneur turned investor Mark Suster talk to San Diego Tech Founders March 31.
=> Startups RSVP here.
=> Investors, Service Providers, Professionals RSVP here.
Welcome to the maze of complex B2B sales. Did you think B2B sales was going to be straightforward; based solely on rational, business-savvy calculations? Based on the bottom-line? Most everyone recognizes that the B2C sales process requires appealing to consumer’s emotions. But believe it or not, business buyers, influencers and users are human, too, and thus are not-exempt from emotional decision making. Ego, hierarchy, competitiveness, fear, grandstanding, sycophantry join budget, market share, revenue, profits, risk, time, resources in the sale.
The “Status Quo Coefficient” represents that which you must overcome above and beyond the pain your product solves, in order to make a sale.
Pre-Problem-Solution Fit, you concentrate on learning as much as you can about the problem, who are the real customers (user? buyer? boss?), and possible solutions.
Pre-Minimum Viable Product, you concentrate of learning, developing and testing the minimum features and functionality required o solve the problem to a degree the customer will buy.
Pre-Product-Market Fit, you concentrate on learning about funnels, testing messaging and positioning, and likely iterating on product and market segment in search of P-M fit.
Now a couple of days away from the Lean Startup Machine startup weekend, I wanted to get down some initial thoughts on the event. When approached about participating in the event, I was immediately intrigued by the idea, as long as it took the lean startup principles seriously. Much to their credit, organizers Trevor Owens, Ben Fisher and Kyle Kelly were open to any and all ideas to make the event conform to Lean Startup and customer development principles. And much to Eric Ries' credit, he threw his support behind the idea once such conformity was demonstrated. Still, this was an experiment.
The more one adopts these principles, the more one can find ways to adopt them in all areas of life -- they become "meta," as Patrick Vlaskovits would say -- and this event was no exception. It was Lean Startup Machine's Minimum Viable Product.
By all accounts (that I've heard), the event was a rousing success. Here are some more or less random thoughts about the weekend, some of which I hope to cover in more depth soon:
1) I'm blown away by the people who attended: smart, opinionated, creative, dedicated team-players with some really interesting ideas. And they all want to be startup founders. Many will scoff at whether this is a good thing or not, but I think it's great.
2) Customer Development is a great conflict resolution tool. When you reach a loggerhead, formulate opposing opinions as hypotheses and go test them.
3) While there was reluctance among some and a few Engineers stayed inside completely, whole teams hit the streets of NYC to engage customers. It was awesome to see! I can't wait for the video.
4) Clearly enterprise B2B ideas are at a disadvantage when it comes to weekend customer development. But B2C rocked it and B2SMB took advantage of New York's vast number of local businesses.
5) Good team balance was essential. Those teams with naturally social members kicked customer development butt. People were making phone calls to business owners across the country, setting up Craigslist ads, conducting surveys, interviewing by telephone and pounding the pavement for person-to-person discussions. There was more combined customer development in one weekend than most startups do in a year!
6) Customer Development is hard. Several assumptions were crushed over the weekend and for the more brutal failings, there were no easy follow on steps. It's one thing for a market segment to fail, it's another when a core idea is roundly rejected. But it happened. It's easy to become demoralized by negative validation, but the teams pressed on.
7) We saw some amazing pivots, product mockups that reflected the changes, and then customer validation of the pivots! That's pretty amazing for a weekend's work.
8 ) Some people had a tough time understanding the difference between seeking evidence for their idea and testing their assumptions.
9) This event has great potential. There were some rough spots, but no major problems and the learning that went on was tremendous.
10) It will be interesting to hear more feedback, but my general impression is that this was the first real encounter with customer development for most of the participants and that the experience they gained was invaluable. My belief is that to truly grok customer development, you must "get a win;" meaning you need to experience first hand the empowerment that comes from customer validated ideas. I think we had a lot of that!
If there's something in particular you'd like to hear more about the weekend, please let me know in comments.
Brant and I have finally finished our book, The Entrepreneur's Guide to Customer Development: A cheat sheet to The Four Steps to the Epiphany, within which we have included interviews from successful entrepreneurs in order see if their startup experiences mesh well with Brant's and my interpretation of and experiences with Customer Development. (I won't beat around the bush, while our interviewees may not have called it Customer Development per se, they certainly practiced elements of what Steve Blank has codified as Customer Development in almost all but name. And without exception, they applied fierce and relentless skepticism to all aspects of their businesses.)
We've had the pleasure of speaking with Jeff Smith (Smule), Fabrice Grinda (Zyngy, OLX), Ranjith Kumaran (YouSendIt), and Bruce Moeller (DriveCam). We've condensed their experiences into case studies which are featured in the book. However, there was so much great material, we simply could not include all of it. Therefore, I'd like to take this opportunity to share an insight that came out of our interview with Bruce that we found quite edifying, one that goes to the heart of the Customer Development methodologies.
Background: DriveCam uses video technology, expert analysis and driver coaching to reduce claims costs and saves lives by improving the way people drive. From the DriveCam website:
DriveCam's palm-sized, exception based video event recorder is mounted on the windshield behind the rearview mirror and captures sights and sounds inside and outside the vehicle. Exceptional forces such as hard braking, swerving, collision, etc. cause the recorder to save critical seconds of audio and video footage immediately before and after the triggered event.
Bruce shared an interesting story about how assumptions made in the lab, based on data and "sophisticated" math undertaken by "sophisticated" analysts, fared in the real world of cement mixer trucks. Remember, the DriveCam device's core feature is to record audio and video when triggered by exceptional forces such as swerving. When DriveCam went after the cement mixer truck market, they calibrated their devices based on the assumption that cement mixers would flip only if subject to a large sideways g force.
Seems reasonable, right? After all, cement mixers are big, heavy trucks, and not to mention, filled with, well, the eponymous cement.
Turns out, not so reasonable after all.
Bruce recounted that when one of their first customer's cement mixer trucks flipped over, the DriveCam device had failed to record what had occurred and what may have caused the accident -- the customer was irate and Bruce was more than a little embarrassed.
Turns out that (outside of the lab!) cement mixers trucks can flip at very low speeds (1-2 mph) while at normal g forces when encountering things in the chaos of the real world, very ordinary and common things such as soft road shoulders. Bruce's customer knew this and was counting on Bruce and the DriveCam team to know this as well.
"My philosophy is you don't know what you don't know and if you were ever right in a given moment, and if your guesses were ever true it would be serendipitous. You must attack your assumptions at all times. My basic tenet: question yourself, because the world is ever-changing.”
For more insights that speak directly to the Customer Development processes, please purchase The Entrepreneur's Guide to Customer Development: A cheat sheet to The Four Steps to the Epiphany.
Success and Cognitive Bias
One thing that often strikes me about conversations regarding start-up success is the pervasiveness of the narrative fallacy and hindsight bias.
We can go to Wikipedia's entry on Taleb for a definition:
Narrative fallacy: creating a story post-hoc so that an event will seem to have an identifiable cause.
Allow me to illustrate. What caused YouTube to grow at phenomenal rates in 2005/2006, eventually leading to a $1.65 billion acquisition by Google in 2006?
Was the cause:
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