Through the evolution of their start-ups, entrepreneurs will face many inflection points, at which decisions made or not made will determine their future. The painful truth is that a wrong turn may lead to its demise, whereas a right turn leads to another inflection point.
Relevant to ongoing discussions about Blank's "Customer Development," I wish to highlight a few of these "inflection points."
Lewis Mumford (1895-1990) was an American Architecture and Literary critic, as well as Sociologist and Philosopher. I often attribute a particular quote to Mumford, though I can't seem to locate the source. When asked where to put a sidewalk, Mumford responds:
See where the people walk and then pave their path.
How many times have you seen two sidewalks intersecting at 90 degree angles, with worn grass cutting the corners?
There's a fine line between executing on your vision and listening to your customers. Consider Mumford's quote, thinking of the sidewalk as the "vision" and the path as "customer needs."
I have a great opportunity to test out some theories and to follow the principles advocated by the likes of Eric Ries, Andrew Chen, Sean O'Malley, Dave McClure and Sean Ellis. I thought I'd keep a running blog on our progress.
I won't name the company until the time is right, but I'll tell you a little about it:
- Company is self-funded. This is a good thing. Not only is it a bad time to seek funding, it's a great time to prove the business model prior to funding.
- Product is barely started. This is a good thing, as well. This should enable us to run customer development principles in parallel with development. The days of figuring out who your customers are after product completion (often after funding) hopefully will soon be over.
- Team of 3: vision guy, domain expert and business development (CEO); developer; marketing guy (me, FWIW).
- Business plan assumes a Freemium model, with additional revenue from highly targeted advertising, lead selling, and a la carte purchases.
Week 1 Tasks:
- Document Business Hypotheses - market segment, customers, pain, acquisition methods, etc.
- Identify 100 potential users to interview.
- Identify 50 potential partners to interview.
- Create interview process and objectives.
- Create MRD based on "vision."
- Identify key metrics for proving model.
- Prepare blog launch using company domain.
As with most marketing terms, the phrase "market segment" is often tossed about carelessly by entrepreneurs, technologists, and yes, even by some marketers. To my mind, however, segments are a cornerstone of market-driven business plans. Market segments are fundamental to a process-oriented view of taking technology to market and building business plans from the "bottom up."
In 1991, Geoffrey Moore in Crossing the Chasm defined a market segment as:
- a set of actual or potential customers
- for a given set of products or services
- who have a common set of needs or wants, and
- who reference each other when making a buying decision.
Most of this is pretty intuitive. In a nutshell, a market segment is comprised of like buyers who share the same pain. But there's more to it. The reference part trips some people up. The key point to understand is that the customers and potential buyers must be willing AND able to reference each other.
So, for example,
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A CEO of a high-tech start-up recently lamented to me:
I was told I needed marketing, so I hired a PR firm and after 6 months and a lot of money, I got nothing.
Paraphrasing, a local venture capitalist admits:
Most CEOs lack marketing skills. They need marketing help.
Yet his portfolio is dominated by companies without dedicated executive marketers.
According to the uninitiated,
PR = Marketing = Advertising = Branding = Logo + Slogan = Lots of $$ and yet, sales suck.
Both the initiated and the uninitiated think sales suck because so does the web site, and the collateral, and the webinars, and the white papers, and the demo, and there are no leads, and they're attending the wrong trade shows, and there are neither counterpoints to the competition nor answers to buyer objections, and the product is missing this feature -- no that feature -- well, really, both features.
Is this really what's wrong?
In a seminar on venture financing we put on the other night, one of the presenters rightfully stated that the amount of money the entrepreneur is asking for will be important in determining the type of capital investors willing to fund the opportunity. $3M, for example, is often considered to small for many VCs. While true, I'm not sure the entrepreneurs got the point.
Typically, they've already decided they want VC money. So they pick the sum of investment based on the type of money and build their plan around that.
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