The Startup Owner’s Manual—Part 7—The 3rd Deadly Sin

In Steve Blank and Bob Dorf’s The Startup Owner’s Manualthe authors warn fledgling entrepreneurs of the 3rd deadly sin: focusing on launch date.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Having a launch date in mind isn’t the problem, per se. The real problem is that when you focus on/commit to the launch date, you sometimes don’t allow adequate time to work through the Customer Development process, do the tests, prove or disprove the hypotheses, and improve your offering. Instead, you sacrifice what you are producing for the sake of the launch.

Sometimes that’s because there’s an event you want to release your product at to get buzz. Have you seen the 4K TV‘s announced at this year’s CES? Sometimes you want to launch in time for the Christmas rush. But what if your product isn’t ready? Should you still ship it then?

I know there’s a lot of pressure to launch. Founders want to launch, investors want to launch, and colleagues want to launch. The pressure to get out there and start selling something is immense, and the thought of being done with the prelaunch phase of your business may be so tempting that you lunch even when you know you’re not ready. So you rationalize: “Maybe you’re over-thinking this. Maybe the customers won’t notice that you upon it is crap. After all, Google releases bad products, Microsoft releases bad products. Even Apple released an iPhone with a crazy antenna problem. Why can’t I go ahead and launch, then work it out as I go along?

Unfortunately for you, it’s unlikely that you or your company have enough of the customers’ good will to make up for a bad blunder at launch. And stumbling out of the gates can be more than just an inconvenience to you and your customers. It can be fatal to your business.

What’s the answer? Trust the process. The customer development process is designed to help you launch when the time is right, and to lunch well when you do.

Are Business Lies Really Lies?—Sun Tzu’s “The Art of War” and Me

I’m a terrible liar. Despite my best efforts, I suck at it. I am really good at keeping quiet, so if I don’t want to spill the beans I usually just don’t say anything. But if I try to deceive with words, my lies come out all mumbly.

Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

For many reasons, that’s usually a good thing. I would probably be in trouble a lot more often if I were any good at lying.

Is this always a good thing, though? I don’t know. In The Art of War Sun Tzu says “All warfare is based on deception…. When capable, feign incapacity; when active, inactivity.” He goes on from there, but you get the gist. The Art of War is inextricably bound to the Art of Deception.

That’s tough for me. I would probably be richer if I was good at deception. But then maybe I wouldn’t like myself that much. And maybe, in the end, that’s more important to me. Somedays I like to think it is.

What do you think? Does this part of The Art of War resonate with you? Repulse you? It’s easy to say self-righteously, “Of course I wouldn’t deceive anyone.” And I am not arguing that you should deceive the customer. But what about your competitor? What if winning the business is on the line?

The Startup Owner’s Manual—Part 7—Assuming Is Also the 2nd Deadly Sin

The first deadly sin of the new product introduction model is “Assuming ‘I Know What the Customer Wants.'” And, according to Steve Blank and Bob Dorf’s The Startup Owner’s Manual, the second is like it: “The ‘I Know What Features to Build’ Flaw.”

If you “know” what the customer wants, you will naturally (and often erroneously) assume you know what features to build into your product or service. The truth is, however, that “without direct and continuous customer contact, it’s unknown whether the features appeal to the customers” (9).

Fixing things after the fact is expensive and can feel like an annoyance or soul-death, depending on how much you have invested in building the features.

One of my favorite restaurants, Seven Mile Cafe, doesn’t have WiFi (or at least it didn’t the last time I asked). It’s a little inconvenience to me, but it’s a decision they made about what features they wanted to provide for their customers. It’s a small place without a lot of tables, and it would be unfortunate to have tables occupied for hours on end by the sort of people that do that. To accommodate that sort of person, they eventually opened Seven Mile Coffee next door.  But even then, they were selective about the features they chose—the coffee, the tables, and the chairs—based at least in part on conversations with customers.

Coffe Shop

Image courtesy of Pong / FreeDigitalPhotos.net

I was with a colleague of mine once when he asked the director of an assisted living facility about an adjunct service that my home health agency offers and whether it might be helpful to her residents. To me, the obvious answer was “YES!” What she said surprised me, though. She said, “I hate that service. I had a terrible experience with it one time, and I will never try it again!” I wanted to tell her that she hadn’t received that service from us, that we were better. We were better, but she wouldn’t have considered it. So I dropped it. If we had continued to build that feature for her, it would have been hundreds of hours and thousands of dollars down the drain. She liked who we were and what we had to offer, but she hated what I thought was going to be one of our main selling features.

What features are you building into your product or service? Do your customers want them? Are they willing to pay for them? Here’s my challenge for you: ask your customers what they want. Will they always know? Of course not, but it doesn’t hurt to ask. Your customers will feel valued and heard, and you might just learn something.

One last thing: Don’t get caught in the trap of thinking if you talk about your product/service features with your customers, someone is going to steal your idea. Good ideas are everywhere. Business failure is almost always the result of lack of execution, and lack of execution frequently means not following the Customer Development process outlined in Blank and Dorf’s book.

Next, the 3rd Deadly Sin.

The Startup Owner’s Manual—Part 6—Assuming is the 1st Deadly Sin

According to Steve Blank and Bob Dorf’s The Startup Owner’s Manual, the first deadly sin of the new product introduction model is “Assuming ‘I Know What the Customer Wants.'”

Ford Edsel

Ford Edsel

It’s so easy to assume you know. Of course you know. You’re the expert. You wouldn’t be thinking about starting a business if you didn’t think you knew. And yet, what if you don’t? Or at least don’t know well enough?

The very insightful Danny Iny of Firepole Marketing confesses in his podcast about the fact that, early in the life of his company, he (and his business partner at that time) thought they knew what the customer wanted. They invested 2000 hours to build a marketing training system without establishing that the customer actually wanted it. This is not what he teaches people to do now, of course, and he encourages listeners to learn from his experience.

When I was an undergrad at The University of Texas at Austin, I took a marketing class from one of those superstar professors that came from corporate America. Our class mantra was “Find a Hole and Fill It!” We never asked if anyone wanted the hole filled, if they wanted us to fill the hole, or if they were willing to pay us to fill it.

So how can we know what the customer wants? We ask. But how do we ask?

We’ll talk about how to do that in a future post.

The Startup Owner’s Manual—Part 5—The Big Mistake

In Steve Blank and Bob Dorf’s The Startup Owner’s Manual, they discuss the traditional new-product introduction model, and share the diagram below:

two-assumptions

 

They assert this is a reasonable way to introduce a product if:

  • Customers are known
  • Product features are known
  • The market is well-defined
  • The basis of competition is understood

But think about the average start up. Let’s say I want to create an app that helps connect people.

Do I know who my customers are? I think I might have a guess, but I don’t know with any certainty. One of the worst shocks of my life was discovering that not everyone thinks like me. How could they not? I’m so reasonable. If I like something, of course everyone else will. It sounds silly saying it out loud, but how many of us have tried to build a company on this silly thought?

Do I know what product features are necessary? If I want to connect people, should my app interface with Facebook? LinkedIn? Twitter? Instagram? It’s common practice to build more features into a product than most people will ever use. Unfortunately, that drains a business of cash and can kill the business before it has a chance to figure out what features the customers really want.

Do I have a well-defined market? It depends on what product or service is being offered, but the long-tail world we live in makes it increasingly difficult to define.

Do I understand the basis of competition? How will my app compete with other technology that connects people? How will people decide whether to use my product or one that is similar? Or no product at all, as “none of the above” is often the easiest decision.

Tomorrow we’ll start talking about the 9 deadly sins of the new product introduction model. They are thought-provoking and will change the way you think about starting your business.

If you have any questions or need anything, email me.

Don’t forget that most of the links on my website to amazon.com will be affiliate links. I’m ok with that, but if you aren’t just search for those titles on amazon or consult your favorite other bookseller. I won’t recommend something I haven’t read and loved.

The Startup Owner’s Manual—Part 4—Get the Heck Outside

The first step on the Path to Disaster is not getting your startup customer’s input early and often. In Steve Blank and Bob Dorf’s The Startup Owner’s Manual, they write, “The core of Customer Development is blissfully simple: Products developed by founders who get out in front of customers early and often, win…. There are no facts inside your building, so get the heck outside. Getting out of the building means acquiring a deep understanding of customer needs and combining that knowledge with incremental and iterative product development.” (xxix)

Sounds so simple. But is it hard to do?

Talking to Customers

Image courtesy of imagerymajestic / FreeDigitalPhotos.net

John Jantsch of Duct Tape Marketing recently sent an email asking his tribe to take a survey. “In order to build what people want I have a couple questions that I’m hoping you’ll take a minute or two to answer.”

Trent Dyrsmid of BrightIdeas.co just posted to his blog and asked, “I Need Your FeedBack to Help Me Plot the Future of BrightIdeas.co…. I think that I need to get BrightIdeas.co even more focused on a very specific audience and I don’t yet have a clear enough idea of exactly who you are and exactly what you need. I have my suspicions, of course, but who better to tell me than my most loyal readers.

Jantsch and Dyrsmid aren’t asking because they’re dumb. In fact, they’re asking because they’re smart—smart enough to know that they don’t know everything, brave enough to ask their customers what they really want.

How many entrepreneurs have thought, “I know what people want” and proceeded to build it without ever asking the customer what they might actually want and, more importantly, what they would pay for?

I have gotten that question half right and half wrong. Years ago, I got feedback from one of my customers that it would be a great idea if my company developed an additional service line in one of my businesses. I asked other customers if they thought it was a good idea and everyone said, “Yes, absolutely!” Armed with that “market research,” I built out the service line. I hired people. Lots of people. I built a marketing campaign. I rolled it out and sat back, waiting for the money to roll in.

And waited.

And waited.

There is a huge difference between people saying they think something is a good idea and people buying. And the only way to know for sure if you are moving in the right direction is to have people vote with their dollars. Not encouragement. Not pats on the back. Not invitations to join the Chamber of Commerce. When people vote with their dollars (or don’t vote with their dollars), you will know.

Here’s what I learned: Until people vote with their dollars, don’t over-invest in anything. Do the minimum necessary to be able to sell something (the “minimum viable product” is what that is commonly called), then see if people will buy. If they do buy, find out why and do more of that. If they don’t, find out why. Seek your startup customer’s feedback early and often, and you will have a much better chance of avoiding the Path to Disaster.

The Startup Owner’s Manual—Part 3—Winners and Losers

Winners and Losers? Their words, not mine. Still, that’s not very nice.

Winners

Image courtesy of koko-tewan / FreeDigitalPhotos.net

Steve Blank and Bob Dorf’s The Startup Owner’s Manual is a brilliant attempt to help more entrepreneurs become winners and fewer become losers. To do that, they have to share the hard truth. Here it is:

Winners throw out the traditional product management and introduction processes they learned at existing companies. Instead, they combine agile engineering and Customer Development to iteratively build, test and search for a business model, turning unknowns into knowns.

Winners also recognize their startup “vision” as a series of untested hypotheses in need of “customer proof.” They relentlessly test for insights, and they course correct in days or weeks, not months or years, to preserve cash and eliminate time wasted on building features and products that customers don’t want.

Losers blindly execute a rigid product management and introduction methodology. They assumed that the founder’s vision drives the business strategy and product development plans and that all they need to do is to raise funds for execution. (xxiii)

Think about starting a new company (not an established business)—what is your business model? What products or services will you provide? What features will you include? How will you know? Blank and Dorf’s admonition:

Founders, not employees, must search for a business model. The best way to search is for the founders themselves to get out of the building to gain a deep, personal, firsthand understanding of their potential customers’ needs before locking into a specific path and precise product specs. That’s the difference between winners and losers. (xxiii)

So many businesses fail because we think we know what the customer wants (Blackberry Z10), we think we know what features the customer will demand (Facebook’s Poke App). Will your company crank out Edsels or iPhones? Without the Customer Development process, it’s more of a crapshoot than we’d like to admit.

Next, Chapter 1: The Path to Disaster.

 

 

 

 

The Startup Owner’s Manual—Part 2—The Hero’s Journey

The introduction to Steve Blank and Bob Dorf’s The Startup Owner’s Manual, Vol. 1 begins with a discussion of what Joseph Campbell popularized as the “hero’s journey” (for more info you can read Campbell’s The Hero with a Thousand Faces or watch a DVD of Joseph Campbell explaining The Hero’s Journey). Briefly, the hero is called to a quest. The path is uncertain, and the final destination isn’t clear. There are lots of obstacles along the way, some for which we are prepared and some of which seem insurmountable. To reach your destination, you must take risks, use what you’ve got, and be transformed. If you do overcome, you will return with the prize, the elixir, the gift of the goddess.

The Hero's Journey

The Hero’s Journey

Sound familiar? If you’re an entrepreneur, it should, because the hero is you. In fact, Campbell says that there aren’t a thousand different heroes with different stories but one hero with a thousand faces. That guy that opened Jupiter House Coffee in Denton? He’s a hero. Brigid Brammer on Etsy? She’s a hero, too. Even me, with Advanced RehabTrust (my home health agency). I’m the hero of that one.

Founders hear a calling, start a quest. They have to go on a journey. Sometimes that journey is physical (Bill Gates moves to California), but more often it’s psychological/emotional/spiritual (I left the comfort of a relatively secure, salaried position). And no matter how compelling the vision is, there is always “uncertainty, fear and doubt” (xxii). In order to reach their destination successfully, the hero must use all of her or his resources—the “the massive investment of time, energy, and money” that I mentioned in yesterday’s post.

The fascinating thing, Blank and Dorf suggest, is that there really aren’t a myriad ways of starting up a successful business. The path to success, although it looks different in different contexts, is always the same. That may sound like a bold claim, but as we proceed you will understand why they say so. Through The Startup Owner’s Manual, the authors illuminate the Repeatable Path.

Of course, if it were simple, we wouldn’t need MBA’s, SBA’s and books like Blank and Dorf’s. It’s not simple, and it’s not easy, but it is comprehensible and for many it is doable. Unfortunately, there are some who cannot or will not make it. Tomorrow we will talk about characteristics that make up the “winners” and “losers” along the hero’s journey.

Take courage, hero.

The Startup Owner’s Manual—Part 1—Successful, Profitable, Scalable

Steve Blank and Bob Dorf wrote The Startup Owner’s Manual, Vol. 1,  as “a step-by-step how-to guide that details the process for building a successful, profitable, scalable company” (vii).

Authors of The Startup Owner's Manual

Steve Blank and Bob Dorf

Successful. As entrepreneurs, that’s what we are looking for. We want our companies to be successful by whatever measure seems right to us. It may be the freedom or lifestyle it affords us, it may be the social impact, it may be the legacy. For me, I want all three.

Profitable. We want our companies to be profitable, because eking out a living isn’t worth the massive investment of time, energy, and money that are required to build a company. My CPA friend Mark used to always tell me if I am not getting a double digit return for my efforts, I should close up shop and work for someone else.

Scalable. We want our companies to be scalable because that is the best way to ensure their continued growth and prosperity. According to Investopedia, “[i]n the corporate sense, a scalable company is one that can maintain or improve profit margins while sales volume increases.” Of the dozens of startups I have observed or worked with, scalability seems the  most difficult trait to build into a company. If I am the only one who can do the important work in my business, my business isn’t scalable, and it can only grow to the extent that I can manage it. To be honest, the lack of scalability almost killed my first company. And by that, I mean it almost killed me.

Successful. Profitable. Scalable. That’s not all we want, of course, but it’s a good start. If you are considering starting a company, or if you’ve started a company and it just doesn’t seem to be working, you need to read this book.

The Preface—Highlights and Insights

In the preface, Blank and Dorf provide a very brief overview of the history of modern companies, modern education and modern management. For most of the 20th century, entrepreneurs struggled to adapt things learned in MBA programs (strategies and tactics based on what worked for big businesses) and apply them to startup companies. Unfortunately, that’s a recipe for disaster, as you may know if you’ve tried that yourself. I did. I read books by Thomas J. Watson, Jr. (IBM) and Alfred P. Sloan (General Motors) and tried to extrapolate principles to help me build my little 6 figure business. Even when my business grew to 7 figures, it never resembled IBM or GM, and what worked for them wasn’t that helpful for me.

To some extent, I still see this happening today, even though by now we should know better. For example, the Small Business Administration has an article on their website called “10 Steps to Starting a Business.”  The SBA’s first recommendation is to write a business plan.  That’s good advice, but as Blank and Dorf state emphatically, “no startup executes to its business plan” (xiii).  In fact, if you try to execute your business plan as written at the beginning, you are almost certainly doomed to fail.

What works for Ford and McDonald’s will rarely work for your startup. The reason is that “startups are not simply smaller versions of larger companies… Startups operate in ‘search’  mode, seeking a repeatable and profitable business model” (xiv, emphasis mine).  By definition, a startup doesn’t know all the right questions and doesn’t have all the answers, so you cannot apply the standard, established business answers to those questions. You don’t know what your repeatable and profitable business model will be when you write your business plan, and you have to stay flexible enough to prevent your business plan from overwhelming the evidence in front of your face. It sounds obvious, but it isn’t. Many startups stick to their business plan religiously, only to see their businesses go down in flames.

Fortunately for those of us who are startup founders, a new science of entrepreneurial management has arisen, and this new understanding has resulted in a radically different process for launching a new company. One of the pillars of this new management approach is the Customer Development process that Steve Blank described in his book The Four Steps to the Epiphany. We will discuss the specifics of the Customer Development process in future blog posts, but in a nutshell the Customer Development process is a method of searching for the business model that will actually work.

The lack of a robust Customer Development process has resulted in the death of many a startup owner’s dream. We think we know what the customer wants and build a company to meet that want, only to find out they didn’t want it or that our business model couldn’t meet their want in a profitable and scalable way. In the 10 years since Blank introduced the Customer Development process, more entrepreneurial management research and insight has evolved, and the Customer Development process is now combined with agile development, business model design, lean user interface design, etc.  I know that sounds like a lot of business speak, but we will make sense of it all as we go along. And as we make sense of it, you will see how it will all help you build your business more effectively and efficiently than they old ways of building a business ever could.

Tomorrow we will talk about the Hero’s Journey and the search for a repeatable path to finding a business model that works. It gets more fun as we go along.

If you need me, drop me a line.