Our Worst Possible…

american-airlines-us-airways-merger

Seth Godin describes American Airlines as, “our worst possible domestic airline.”

Ouch.

I read that on Seth’s blog more than a week ago, and I can’t stop thinking about it. It resonates more than all of the merger hoopla, all of the rebranding, the pretty plan painting, everything. “The new American” has flooded our television networks, magazines, websites with all their newspeak. And still, they are “our worst possible domestic airline.”

This got me thinking about smaller companies, local startups and companies like mine. If we don’t deliver on our promises of quality, no amount of marketing-speak will change the minds of those we disappoint. We can’t fake it with people that know us, that have taken us up on our promises. So we’d better get it right with them.

If we do get it right, then we can spend our marketing dollars on hoopla to attract new customers. Our current customers will already know us and, if we do it right, maybe even love us. And if they love us, there’s a good chance they’ll talk about us.

Are you keeping your promises? Are you doing it in a remarkable way?

The Startup Owner’s Manual—Part 8—The Deadly Sin of Emphasizing Execution

Emphasizing Execution is a deadly sin? Seriously? One of my favorite business books of all time is Execution by Larry Bossidy and Ram Charan. Nevertheless, in Steve Blank and Bob Dorf’s The Startup Owner’s Manualthe authors assert that the 3rd deadly sin is “Emphasis on Execution Instead of Hypotheses, Testing, Learning, and Iteration” (11).

And there it is again—a startup is not a small version of a big company. In a big company, execution is (almost) everything. In a startup, you are trying to figure out what to execute, so you must develop hypotheses, test them, learn from your tests, and iterate or pivot based on what you’ve learned.

I have a friend who is starting a very promising business (I’ll tell you more about it soon). He’s got a great concept, and it looks like he is going to be able to help a lot of people. But what he has now is a hypothesis, which he is testing, and he is learning/growing as he goes. Instead of building a “go-to-market” solution before introducing it to the world, he is testing, talking to potential customers, finding out what they really want, what they really need, and what they would be willing to pay for. Based on the conversations he is having, the tests he is performing, he is tweaking his offering, dialing it in.

If you’re an entrepreneur, that’s your job. “If you build it, they will come,” makes an awesome movie but it’s a terrible startup strategy. Emphasizing execution in the real world usually looks like building a baseball diamond in the middle of a corn field, then losing your farm.

Field of Dreams

Field of Dreams

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 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 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.