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Archive for August, 2014
I signed up for a free trial of a lean project management tool (I have changed the name of the tool to <LeanTool>). A few days later I got the following nurturing E-Mail.
Subject: Are you afraid to manage your project in a lean way?
We’ve noticed that you haven’t been signing into <LeanTool> for a long time and this is a sign that you are not really committed to being lean. Remember that 96% of innovative projects fail, will your project be one of them? I hope not!
Remember that just having a gym membership is not going to help you get better, if you want to improve you have to do the work!
Log in to <LeanTool> today and start validating your project.
There are a x problems with this:
- it’s not nurturing.
- It assumes the tool is flawless and the problem is one of my motivation. In fact the tool does not work.
- I signed up for a free trial but none of the three primary dashboards in <LeanTool> for hypotheses, experiments, and results actually worked.
So I replied:
I went to add a hypothesis and it said that I need to pay.
I tried to add an experiment and it said I need to pay.
I tried to record a result and it said I need to pay.
Can you please explain your model for free evaluation?
It’s like someone showing you free samples in the supermarket and asking “Would you like to try it?” When you say “Yes” then you hear “that will be a $1”
You advertise a free trial but it seems like it is more like a free product tour, you cannot actually do anything.
Anyway, if what you are doing is working for you don’t stop but it seems weirdly antagonistic and dysfunctional
as an approach to letting me evaluate your software. Do you have any fully worked out examples I can review?
I got the following reply:
Hi Sean, thanks for writing!
We have reviewed the website and realized that there is a mistake: previously, we offered a free trial, and we haven’t updated the text in the startups page.
Sorry for the inconvenience. We really appreciate your feedback and we’d like to offer you a 14-day free trial with all functionality available and a 10% off in our pricing plans.
It seemed a little flaky so I waited a few days and checked their website, it still advertised a free trial.
“Get 1 canvas + 1 user totally FREE (No credit card is required.)”
A day later I got another copy of the original “nurturing” E-Mail.
- Sending the identical e-mail a week later is definitely not a good idea.
- Not fixing the website announcement of a free trial tells me that they are in free fall.
Map the customer buying process, needs, and situation before you invest time sending a detailed proposal. A quick request can mean you are column fodder.
Q: We are still trying to close our first paying customer. We have a website up and have talked to a number of people. More or less out of the blue we got a call from someone in a large firm who had looked at our website. They asked a few questions about our product and then said “Great! Send me a detailed proposal including pricing!”
At last a stranger recognizes the brilliance of your solution in just a few minutes of conversation! How often I tell myself that. How rarely it’s true, especially when you are just starting out with a new product or in a new market. You have to ask yourself:
- Do they really know enough about what we do to be able to start a purchase order?
- Do I know enough about their situation to be able to calculate our likely impact on their business and their return on investment?
- How can I justify the price to value in the proposal?
- Have I addressed the critical implementation and proliferation roadblocks we will face from pilot to production use?
You May Be Column Fodder
More often than not you are actually “column fodder” or a makeweight needed so that they can prove to their boss or the purchasing/finance team that they did a thorough job and solicited three bids. Especially if you don’t know much about their situation and they have not asked for a detailed demo you need to proceed a little more slowly.
Map The Customer Buying Process
Before you submit a proposal I would ask your contact these questions to get a better sense of the situation, in particular you need to learn as much as possible about who will make the decision and how they will make it (the customer buying process).
- Can you describe the process for making a decision after we submit this powerpoint proposal, who else is in involved, what questions are they likely to have?
- Who has to make the final decision to actually sign a contract?
- Can you provide an example of a standard contract so we can understand your typical deal structure and terms and conditions.
- Can you give some examples of other deals that your company has done in the last three years that might serve as a model for how our business relationship would work?
Understand Their Needs and Situation
You want to be easy to do business with but that requires that you have a thorough understanding of their needs. I would not send a powerpoint presentation, but ask for time to present it (if only via Webex/GoToMeeting) so that you can answer any questions that they have in the moment. I would also dry run this presentation with your contact if they are open to it. If they just default to “send me a detailed proposal” it’s probably not a real opportunity.
Busyness won’t build your business, it closes off your creativity and your luck. Anticipate, or at least acknowledge, missed deadlines and commitments: triage or re-negotiate.
I recently wrote a friend to ask if he wanted to do something this week, and he answered that he didn’t have a lot of time but if something was going on to let him know and maybe he could ditch work for a few hours. I wanted to clarify that my question had not been a preliminary heads-up to some future invitation; this was the invitation. But his busyness was like some vast churning noise through which he was shouting out at me, and I gave up trying to shout back over it.
Tim Kreider “The Busy Trap“
It’s a terrible feeling when you are behind in your work. What might have been good if delivered early and adequate if on time is now insufficient. So you have to keep raising the bar the later you get. Understanding what is critical to accomplish means making hard choices, and just as when you won’t admit a loss on a stock because you haven’t sold it, you can console yourself that you are still working on that deliverable and it’s just a little late.
“The feeling of being hurried is not usually the result of living a full life and having no time. It is on the contrary born of a vague fear that we are wasting our life. When we do not do the one thing we ought to do, we have no time for anything else–we are the busiest people in the world.”
Hurry creates tunnel vision. It closes off your ability to notice, create, and act upon chance opportunities. It makes you less lucky. It’s always a good idea to maintain focus and finish the critical tasks that are on your list for today or that you have committed to a customer or a partner. But if your list is longer than about six hours of work and you are like most entrepreneurs I know, many won’t get done and you should at least prioritize.
Mark to Market
I have a very long to do list that contains goals for the day, week, month, quarter, year, and next year. Sometimes I have to mark tasks [d] for dropped instead of [x] for done. The sooner I do that so that I can finish the critical ones the less I have hanging over me. I don’t mean to make this sound easy or even straightforward but consider the following to catch up and be creative again:
- Drop tasks that may have been a good idea at one time. Put them on a “good idea” list you can revisit in six months time.
- Explicitly de-commit or re-negotiate a new deadline if you know you are going to miss one or you have already missed it.
- If it’s possible: do a partial job early, send a draft, send an outline, timebox for 20 minutes or 30 minutes or an hour and get a small chunk done and ask for feedback. The worst outcome is to be late and have an incorrect idea of what’s expected or needed.
Related Blog Posts
Nadia James recently posted a thoughtful article on “Why Entrepreneurs Must Stretch to Reach Their Visions of Success” that included the following daily checklist for aligning efforts with goals for your business.
- What vision did I have for my personal and work life when I decided to launch a business? (Think of this vision for yourself as your intended nirvana)
- How close am I to reaching my entrepreneurial nirvana state?
- What are some key elements of my entrepreneurial nirvana state? How can I break this vision into bite sized milestones?
- How can I better operate my business to achieve my milestones?
- What can I do today to invest in my future vision?
She suggests that you spend at least 30 minutes a day working “on the business” instead of just working “in the business.” I like the checklist and had some thoughts on how to operationalize it.
What Can I Do Today to Invest in My Future Vision?
I would start with this question on a daily basis, consider actually planning for tomorrow at the end of the day so that you can start with a key list of todo’s (“What can I do tomorrow to invest in my future vision). As bootstrappers the primary question is where to invest time and focus and how to delegate to others in a manner that communicates the context you want them to operate in, not just the specific task. Explaining your vision for the business in a way that others can act in it is also worth your time.
How Can I Better Operate My Business to Achieve My Milestones?
I think this question is worth asking at the end of each project milestone you complete or any result you deliver to a customer. Daily may be too frequently unless you are working on very small deliverables. There are two things to think about in building raw material for an after action:
- what did I observe that was surprising (or violated my expectations) and
- what are key metrics I can track so that I don’t rely purely on memory when I do the actual actual lessons learned.
Another trigger for this question could be a regular weekly or monthly review of key metrics that measure “distance traveled” and “distance to goal.”
What Is My Vision For The Business
If you can boil this down to high level goals then you have can construct some decision rules for whether you are moving toward your “True North.” Periodically you may come to understand that key assumptions you made about the world, the market, or yourself were wrong and you need to make adjustments. But I think these adjustments are either in response to clear failures or something that you do more on a quarterly or twice a year basis.
How Can I Break this Vision into Bite Sized Milestones?
I think this is great advice, in particular if you can see how you can build a small viable business that you can scale into your full vision. While the vision is important I think the ability to break it into a sequence of milestones is critical to being able to achieving it. These milestones would typically involve things that are directly under your control:
- number of sales conversations,
- saving money to give you more flexibility,
- completing product features or clearly defining the services that you want to offer.
You also need to define “stopping rules” where you have to reconsider an approach or even your commitment to the business so that you can be objective in the face of setbacks.
What does entrepreneurial success mean to you? What milestones must you hit to get there?
How Close Am I to Reaching My Entrepreneurial Vision?
By definition I think your goals evolve as you achieve key aspects of your vision.
“Ah, but a man’s reach should exceed his grasp,
Or what’s a heaven for?”
Successful entrepreneurs are fueled by a passion to change the world tempered by prudent risk taking. Many risks have to be managed on an ongoing basis cannot be eliminated once and for by careful planning or the achievement of a particular milestone:
- managing cash flow and the risk of a downturn,
- meeting your obligations to your family as well as your business,
- continually developing new skills and connections to cope with evolving customer needs and new competitive threats.
Noam Wasserman had an article yesterday’s Wall Street Journal on “How an Entrepreneur’s Passion Can Destroy a Startup” that focused on entrepreneurial passion and prudent risk taking. He has some excellent advice with regards to a shared risk analysis with your spouse (and a plan how to decided when to quit before you are in the middle of the roller coaster ride) and identifying potential risks and problems with you plan (what Gary Klein has called a “pre-mortem” in other contexts is incredibly useful for a startup team to do periodically, not as a way of hanging crepe but of anticipating and preventing or mitigating foreseeable problems).
Here is a list of risks he identified
Wasserman Tests: Excess Entrepreneurial Passion
|Wasserman Test: Do You …||SKMurphy Commentary|
|Feel like you are on mission to change the world?||This is a good thing.
I think this is probably a good thing. Doesn’t mean you should prepare to run your business. But if align your business with a higher purpose I think you are more likely to persevere.
|Get insulted when someone points out legitimate flaws in your idea or product?||This is a red flag, but it may be as much about personal maturity as anything else.|
|Find it hard to come up with pitfalls you might face or to detail a worst case scenario for your venture?||This is a red flag, but it may be less about passion and more a lack of knowledge about business or your industry. You need to do premortem’s periodically to prepare for problems and mitigate those you can.|
|Raise money from professional investors when your #1 goal is to “work for myself” or “to control my own destiny”?||I think this is a low probability situation.
This can happen but normally entrepreneurs motivated by a desire for autonomy don’t seek professional investment and those that do are typically screened out as part of due diligence.
|Hire friends and family whom you may not be able to fire if they underperform or circumstances change, because you are confident you won’t face those issues?||I think this is a low probability situation.
If the business is not doing well typically friends and family want out, if it’s doing well you can often find people role that fits their talents if they worked with you in the beginning.
|Neglect to run careful tests to assess consumer demand?||This is an ongoing challenge not something you can ever fix or satisfy.
Large business fail at new product launches quite frequently as well, I think this is less a passion problem and more something that is very hard to do.
|Assume you won’t need a financial cushion in case the venture takes longer than anticipated to generate income?||This is an ongoing challenge not something you can ever fix or satisfy.
Sometimes it’s the fact that a team is almost broke that forces them to make the necessary changes to succeed.
|Resist talking honestly with your significant other about the money and the time you expect to commit to your venture, and about the potential pitfalls you face?||This is a real risk. This is a hard conversation but one that has to happen frequently. You have to treat you spouse or significant other as a member of the board of directors. I don’t think this is a passion problem per se, but failure to make a joint decision and keep them informed is a real risk.|
|Figure you don’t need to address the holes in your skills or networks in advance of founding?||This is an ongoing challenge not something you can ever fix or satisfy.
There are always holes in your skills, consumer demand changes require new skills, competitors attack you in unanticipated ways that require new expertise, your network is never broad enough. I don’t think you are ever prepared enough and you have to be learning and connecting on an ongoing basis
I was struck by one paragraph:
For instance, almost 800 founders took a predictive test that evaluated their startup ideas, and then received recommendations about the next steps they ought to take. Thomas Astebro and his colleagues found that a sizable percentage of founders who received a recommendation to halt progress on their startups because the idea wasn’t commercially viable kept going anyway—29% of this group kept spending money, and 51% kept spending time, developing their idea. On average, they doubled their losses before giving up on pursuing their idea.
It Does Not Help To Tell An Entrepreneur Their Idea is Not Viable
It’s not helpful to tell entrepreneurs that their idea is not commercially viable. All new ideas are not commercially viable when judged by “conventional wisdom” until conventional wisdom changes. Entrepreneurs are probably even less inclined to take advice from college professors who have never started a company. If you could reliably predict the economic viability of new idea you would not be selling analytics you would be making investments. Here is Thomas Astebro’s bio from Genesis Analytics
Tom Astebro is currently Associate Professor in Management Sciences at the University of Waterloo. He has seven years of experience in scorecard development. Tom developed the Genesis algorithms and technology as part of research at the University of Waterloo that was sponsored by CIBC and Nortel and earned the distinction as the creator of one of the three “Most Promising Technologies” in a recent Canadian competition.
Tom has published 29 articles, made 49 presentations at conferences, obtained research funding from NSERC, SSHRC, MMO, Carnegie Mellon, Telia, Volvo, Handelsbanken, and the Sweden-America Foundation and won ten international/national research awards. His research has been mentioned in Business Week, the Financial Post, the Globe and Mail and the Ottawa Citizen. He has worked as a management consultant for banks, insurance and manufacturing companies in Canada, Sweden and the Netherlands and has taught at Universities in Canada, the U.S., Sweden and Australia. Tom holds a Ph.D. in Engineering from Carnegie Mellon University and an M.B.A and a M.Sc. from Chalmers University of Technology, Sweden.
Encourage Prudent Risk Taking But Don’t Try To Blunt Passion
What is very helpful is to get entrepreneurs to test their key assumptions–“what else would have to be true for your business to work”–and get them to start testing critical aspects of a plan. When a peer entrepreneur is working on a idea that you don’t think is viable, it doesn’t help to tell them “I don’t think it will work” or even “Here is why I don’t think it would work.”
Instead, think about framing it as
- What risks are you worried about?
- Here are three challenges I think you business has to overcome to be viable. Do you have evidence or results that indicate that this won’t be a problem?
- What could you do to test or explore how to work around these problems before investing time and money in other activities that don’t attack the riskiest areas first.”
What Would Have To Be True For For Startup to Thrive?
This approach to helping an entrepreneur think through their risks and challenges is something we try and do at a Bootstrapper Breakfast when someone says what they are working on and another attendees says something like “that’s a crappy idea or that will never work.”
We try and get them to think through “what would have to be true for it to work? What are the key challenges they have to manage to make it work?” Because entrepreneurs can always tell their friends with “real jobs” about what they are working on and either be told, “that’s not viable” or “that’s great” (meaning please stop talking about this) and not get useful feedback or critique.
Related Blog Posts
- Entrepreneurial Motivation
Tim O’Reilly offers three guidelines on how to work on stuff that matters: work on something that matters to you more than money, create more value than you capture, and take the long view.
- Ben Kaufman on “What Raising Money Means”
- David Foster Wallace: The Only Choice We Get is What to Worship
- Drucker on Profit and Business Purpose
A selection of quotes from Chapter 6 “What is a Business” in “Management: Tasks, Responsibilities, and Practices” by Peter Drucker.
- The Startup Mythology of Silicon Valley
“We are experiencing a generation of entrepreneurs who prioritize the phenomenon of entrepreneurship over its justification; we ought to be concerning ourselves as a community with teaching folks not only how to get into the entrepreneurship game but how to find their purpose as well.” Matt Hendrickson
- Build on Your Passion With a Basic Model and Numbers
- Ben Yoskovitz: Start With a Passion For Solving a Problem
- What’s Your Passion?
- Entrepreneurial Passion and the Science of Startups
For customer interviews we have a rule of thumb that if an hour or research saves a minute early in the conversation it’s a good investment. When you look at the list of questions you have prepared to learn about the prospect’s business and their needs, it’s easy to say to yourself, “I am really busy I can just ask these at the start to ‘set the table.'” But there are significant risks with this approach.
Preparations Cuts Risk Of Customer Interviews Ending Prematurely
While the interview may be nominally scheduled for 15 minutes or a half-hour and may run an hour if it goes well the first six minute or so are critical to communicating that you have done your homework on their situation and their needs. If you start to ask questions that are already published on-line you can appear lazy or unprepared. If you can do research on a prospect in advance, it’s worth spending an hour to save a minute in the conversation. You can even start the conversation by saying “when I prepared for this conversation here is what I learned about your firm” and give a brief summary of what you know about their situation.
It’s OK to say “I see on your website that you have hired four people in the last three months, how has that impacted …” or “I read a profile of your firm in the San Jose Business Journal Book of Lists, have you grown beyond the 12 people listed in February?” This shows that you have done your homework and don’t want to waste their time but need to confirm some of the key facts that may bear on their needs.
Information Sources To Consult Prior To Customer Interviews
- Do a thorough review of the prospect’s website.
- Search for any articles in the last two years at least to see what kind of press coverage they have received.
- Review the Linkedin profiles for the firm, the person you are talking to, and anyone with similar titles or in the same department.
- Review on-line postings in relevant forums for the industry.
- See if they have a blog, a twitter account, a YouTube account, and similar social media sits that are often used for business purposes.
Six Questions That You Normally Have to Ask In The Conversation
- Prospect’s description of the problem in their own words. This is rarely more than a sentence or two and capturing the essence in their own words is key.
- High level description of current work process or work flow in their own words. This forms the basis for any delta comparison or differentiation of your solution.
- Any constraints they mention: if you hear the same ones multiple times you will more than likely have to satisfy them.
- How they will tell that a new solution will leave them better off: this is different from asking them to specify the solution, it’s asking for “future state” or the end result they would like to achieve.
- What else they have tried to do to solve the problem: probe for why they were not satisfactory.
- Key metrics or figures of merit they would use to evaluate a new outcome.
“A month in the laboratory can often save an hour in the library.”
Frank H. Westheimer
Entrepreneurs seem to divide into two camps:
- those who want to have a conversation immediately, and
- those who are quite content to research for months as long as they don’t have to talk to strangers.
Striking a balance is the key to maximizing your learning from a customer interview. Effective research prior to the customer interview allows you to
- Ask better questions
- Provide evidence of your commitment to developing a mutually satisfactory business relationship
- Detect when your prospect is leaving something out or perhaps coloring the situation too much. You are not a stenographer there to capture whatever they say without reflection, but if your only source of information is what they tell you then you risk “garbage in, garbage out” in your product plans and MVP.
- Tips for B2B Customer Interviews
- A Conversation With A Bootstrapper On Customer Interviews
- Six Elements to Extract In Customer Discovery Interview
- We Use a Wiki to Organize Customer Interviews
- 5 Ways To Start Customer Discovery Interviews
- Early Customer Conversations: Use Appreciative Inquiry and Amplify Positive Deviance
- Customer Interviews: Allow Yourself to Be Surprised
- How To Organize Findings
“So let us not talk falsely now, the hour is getting late” Bob Dylan “All along the watchtower“
Sunday nights are difficult times for me. Friday night you can say, well I have another 48 hours to finish what I promised by the end of the week. But by Sunday night the week is over all of your commitments are marked to market. Your chips are down. Whatever bets you have been able to place will have to bear fruit in the coming days to weeks.
Sunday Night Your Commitments Are Marked to Market
“It’s amazing how long it takes to complete something you’re not working on.”
Most of the commitments I miss are not to family or friends or clients or prospect but to myself.
Jeff Leader and I worked together in Leader-Murphy in the mid-90’s (I wish I had held on to that www.l-m.com domain name) he observed to me at the end of a particularly long work day: “You are a geyser of ideas. But we don’t need any more ideas, we need to finish this book we have started.” We never did. It was 1994 and we had a theory that corporations would use websites for internal collaboration, customer support, and real time governance and control. Sometimes you can see the future you just can’t get it down on paper. We did build more than 30 websites for firms and technical conferences in 1994-1996 but very little of what we built directly survives today.
We started SKMurphy, Inc. 11 years ago by helping two technical consulting companies find new clients: PicoCraft and New Idea Engineering. It was nuclear winter in Silicon Vally after the dotcom crash and it was time to see if the could persist long enough to find the next spring. Both firms are still active today and we continue to assist them. It’s not a bad feeling to see companies that you have helped prosper.
Related Blog Posts
In a candid discussion about the challenges of managing your own expectations for a minimum viable product (MVP), Tristan Kromer observed, “It’s psychologically hard to enthusiastically proceed with skepticism.” And that is the challenge, we have to be enthusiastic about our product ideas to persevere to complete them and tell others about them, but we have to be skeptical enough to accept criticism and open to prospect perspectives on needs and constraints on solutions.
Strong Opinions Weakly Held
Bob Sutton blogged about this in 2006 as “Strong Opinions Weakly Held” as one of the differentiators between smart people and wise people. Both have strong opinions, but the wise can more easily allow revisions to theirs:
Perhaps the best description I’ve ever seen of how wise people act comes from the amazing folks at the Institute for the Future. A couple years ago, I was talking the Institute’s Bob Johansen about wisdom, and he explained that – to deal with an uncertain future and still move forward – they advise people to have “strong opinions, which are weakly held.” They’ve been giving this advice for years, and I understand that it was first developed by Institute Director Paul Saffo. Bob explained that weak opinions are problematic because people aren’t inspired to develop the best arguments possible for them, or to put forth the energy required to test them. Bob explained that it was just as important, however, to not be too attached to what you believe because, otherwise, it undermines your ability to “see” and “hear” evidence that clashes with your opinions. This is what psychologists sometimes call the problem of “confirmation bias.”
Early Adopters For Your MVP Are Often Very Normal
I think too many entrepreneurs conflate “early adopter” with “technically sophisticated” or “geek hipster.'”
Normal people are early adopters when they have a strong need for your product.
The first two people to tell me about E-Bay, and who were genuinely excited about it, were two mothers who didn’t know each other but were collectors of different specialty handicraft items (teddy bears and glass angels) and they were shopping regularly there because they were not available in stores.
I ignored their advice, of course, when I should have realized that neither used a computer for any other purpose than visiting E-Bay. They were early adopters. I should have realized that if E-Bay could create markets for these highly specialized products they could create and serve a lot of niche/specialty markets in a way that was winner take all.
Another example: I think Pinterest looks a lot like the way that someone who creates scrapbooks or manages a physical bulletin board would want to author a website.
Related Blog Posts
- Office Hours: Schedule Time to Review Your MVP Readiness
- W. J. King’s “Unwritten Laws of Business”
- Steve Blank on Leaving the Batcave to Learn from Customers
- Customer Development Proceeds in Parallel with Product Development
- Moving from Vision to Engagement with Prospects
- Customer Development and Its Discontents
- Three Equations, Three Unknowns: Customers, Message, Features
The following is a guest post by Max Murphy, a mechanical engineering student who is interested in the implications of 3D printing or positive manufacturing for mechanical design, its synergies with animation, and potential for fostering new opportunities for entrepreneurs. Max is an intern at DreamWorks and returns to his sophomore year in college this fall.
3D Printing: Past, Present, and Future
I attended a great talk by Chris Yonge on “3D Printing: Past, Present, and Future” on Monday August 18 at Sandbox Suites in Sunnyvale that was sponsored by the Silicon Valley Startup: Idea to IPO group. It was a fantastic presentation that communicated a practical understanding of several different types of 3D printing processes with videos that highlighted the theory of operation for each type of printer. Chris also offered a list of useful open source tools for mechanical design, animation, and 3D printing that is available at http://www.studiocruz.com/downloads/studio-cruz-open-source-guide-20130115.pdf
Here is Chris’ bio from the talk (links added):
Chris Yonge is qualified as an architect and a product designer who founded StudioCruz. He has been involved in 3D design and production for twenty years. He holds a number of published patents, the latest being for VariCruz a mechanically-linked continuously variable gear, and uses 3D printing in metal and plastics as part of the development process. Chris is a lecturer at the University of California, Santa Cruz School of Engineering.
Unfortunately a recording was not made of the talk but here are two others he has done that are quite good.
3D Printing Is Fostering Four Quiet Revolutions
Yonge outlines “four quiet revolutions” that 3D printing or positive manufacturing will likely bring about:
- How we make: Machine shop equipment was traditionally subtractive: grinding, cutting, drilling based on linear or rotary motion.
- How we design: Three-dimensional printing is enabling us to go from a three-dimensional model in my mind to recording it and communicating and editing it on a computer and then making it.
- How we communicate: One of the oldest cave drawings known condenses three dimensions plus time (and related emotions) into a flat two dimensional drawing. Our ability to communicate was unchanged for 149 centuries until motion pictures added time, 3D computer models allowed for a third dimension, and now we can make what we visualize with 3D printing.
- How we finance: Open source recipes are going unlock a tremendous amount of creativity. Kickstarter models will enable many new products and companies to be launched via crowdsourcing.
Animation & 3D Printing Add New Dimensions to Creativity
A video with synchronized slides of one his Santa Cruz Engineering lectures is available at
Chris Yonge has a YouTube Channel with more than 50 videos at https://www.youtube.com/user/chrisyonge/videos
Related Blog Posts
- Paul Spaan Offers 3D Printing Show and Tell at Fri-May-24 Bootstrapper Breakfast
- Audio from Paul Spaan’s Briefing on 3D Printing
- 3D Printing, a quick guide to how to get started
- Pictures From Inside 3D Printing Conference
Q: How can I go about calculating Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and other business model parameters for a technology that I will use to attack an entirely new market with no historical data?
While there may be “new markets with no historical data” there are no new markets that cannot be benchmarked against existing markets by asking these two questions:
- What do people stop paying for to pay for you offering?
- What do people stop spending time on to spend time on your offering?
What do the Customer Acquisition Cost (CAC) Customer Lifetime Value (LTV) look like for these substitutes?
Elicit Symptoms From Prospects
Alternatively what symptoms will prospects admit to having? They won’t read articles or click on adwords or watch videos about problems that they don’t know they have or believe they may be affected by. An effective approach in the early market is to interview prospects to find unmet needs, persistent problems, and goals at risk.
We Measure the New By the Familiar
The reason why light bulbs were measured in candlepower and steam engines (and later internal combustion engines and then electric motors) were expressed as horsepower. Henry Ford observed in “My Life and Work“ that, “A horseless carriage was a common idea…ever since the steam engine was invented…” We call a horseless carriage a car.
Things that are genuinely new are mysteries and don’t become news until they can be expressed as part of a familiar context or by analogy to a familiar example. Alan Kay gave a great talk on this last point that was recently highlighted by Jim McGee, “Alan Kay on Invention vs. Innovation.”
What Job Will Your Prospect Hire Your Product For?
- Letter writing and all kinds of dictation without the aid of a stenographer.
- Phonographic books, which will speak to blind people without effort on their part.
- The teaching of elocution.
- Reproduction of music.
- The “Family Record”–a registry of sayings, reminiscences, etc., by members of a family in their own voices, and of the last words of dying persons.
- Music-boxes and toys.
- Clocks that should announce in articulate speech the time for going home, going to meals, etc.
- The preservation of languages by exact reproduction of the manner of pronouncing.
- Educational purposes; such as preserving the explanations made by a teacher, so that the pupil can refer to them at any moment, and spelling or other lessons placed upon the phonograph for convenience in committing to memory.
- Connection with the telephone, so as to make that instrument an auxiliary in the transmission of permanent and invaluable records, instead of being the recipient of momentary and fleeting communication.
Related Blog Posts
I got the following unsolicited E-mail this morning; I think the marketing term for this is “blogger outreach.” I have redacted the name of the sender (“YYY”) and the name of the firm/product (“XXX”) but “[press kit]” and “[review/checkout]” were included verbatim in the original. There was no footer with an unsubscribe option although phone number and address were included after the person’s title.
I like this 2009 video by Grasshopper “Entrepreneurs Can Change The World” that portrays the entrepreneur as a change agent and celebrates the freedom and economic opportunities that America has traditionally offered immigrants.
Here is the transcript from the Grasshopper site with some observations interspersed
Do you remember when you were a kid and you thought you could do anything? You still can. Because a lot of what we consider impossible is easy to overcome. Because in case you haven’t noticed, we live in a place where one individual can make a difference.
Want proof? Just look at the people who built our country: our parents, grandparents, our aunts, uncles. They were immigrants, newcomers ready to make their mark. Maybe they came with very little, or perhaps they didn’t own anything except for a single brilliant idea.
These people were thinkers, doers, innovators until they came up with the name entrepreneurs. They change the way we think about what is possible. They have a clear vision of how life can be better for all of us, even when times are tough.
The ability to look at a situation with “newcomer’s eyes” is a key element to unlocking creativity. So is time pressure and limited resources.
Right now, it’s hard to see when our view is cluttered with obstacles, but turbulence creates opportunities for success, achievement and pushes us to discover new ways of doing things.
So what opportunities will you go after and why?
If you’re an entrepreneur, you know that risk isn’t the reward. No. The rewards are driving innovation, changing people’s lives, creating jobs, fueling growth, and making a better world.
Entrepreneurs are everywhere. They run small businesses that support our economy, design tools to help you stay connected with friends, family, and colleagues around the world, and they’re finding new ways of helping to solve society’s oldest problems.
Successful innovation results when entrepreneurs manage their own shortcomings, find a problem they care about, and approach it from different angles with small safe-to-fail experiments.
Do you know an entrepreneur?
Entrepreneurs can be anyone, even you. So seize the opportunity to create the job you always wanted. Help heal the economy. Make a difference. Take your business to new heights.
But most importantly, remember when you were a kid, when everything was within your reach, and then say to yourself quietly, but with determination: It still is.
I have come to the conclusion that most entrepreneurial careers are involuntary, undertaken by “mavericks, iconoclasts, dropouts, and misfits” to quote Sramana Mitra. The trick is to minimize the amount of wasted effort by doing less with less in a way that builds on existing relationships, knowledge, and successes.
- Innovation Needs Starvation, Pressure, and a New Perspective
- “Highlighting Matt Maroon’s Why Not To Do A Startup“
- “We Don’t Encourage Individuals to Form a Startup“
- “Overnight Success“
- “Entrepreneurs Need Gumption to Succeed“
- “Saras Sarasvathy’s Effectual Reasoning Model for Expert Entrepreneurs“
- “Paul Graham’s Six Principles for Making New Things“
The soundtrack to the video is “Chain Reaction” by Carly Comando; she also composed “Everyday” for Noah Kalina’s “Noah takes a photo of himself every day for 6 years.“
Q: We have been in customer discovery for a few months and have a situation in a negotiation that I am not sure how to deal with. A decision maker at a potential customer says he believes that our product can help but it’s not addressing a burning problem. The wrinkle that I have not encountered before: he says he would like to pursue this idea on his own so he wants us to compensate him for the ideas he is bringing. Any advice on how to look at the situation or how best to handle it?
Some Questions to Consider:
- Who owns the ideas that he gave you?
- Has he disclosed them to his company?
- Are they his ideas or the company’s property?
- Have you signed a non-disclosure either with him personally or with the company?
- Did he give you the ideas freely or did he ask to be paid before he disclosed them?
- Are there patents involved or does he plan to patent them?
If he is asking for a personal payment made to him, and not to the company, but it’s something you plan to sell to his company then you are walking into an ethical minefield. If he plans to pursue them himself it’s probably better to let him go on his way and talk to other folks who are not conflicted.
Act As If Everything You Do Will Become Public
As a rule of thumb it’s best to act as if everything that you do will become fully know to all of the parties involved or affected by your actions. This side payment request does not sound like it would pass that test the way that you have described it.
If his company is not aware of the fact that he has ideas for improving internal processes or workflows and he is trying to sell them to you there are some potential conflicts there.
Normal Negotiation Flow For New Technology
Normally what would happen is that they would disclose to your their needs, specific ideas for functionality and perhaps implementation options, constraints that your solution has to observe, and other relevant factors. You would either develop a custom product that is their property (work for hire) or you would develop a product you could sell to them and to others. The product might be sold at a discount to them to reflect their contribution, they might ask that you not sell it to named competitors for a a period of time (6,12,24 months). In the first case you would be developing a custom implementation, in the second case you would be developing a solution that they would like to become an industry standard–perhaps after enjoying a temporary period of advantage over competitors–and they want to spread the cost of development across many players in the industry.
You Normally Don’t Make Side Payments
You don’t normally make side payments to individuals. One exception might be that the other party wants to leave his current job at your prospect company and come to work directly for you. But you want to be very careful about making payments to employees of firms or government agencies that you are trying to do business with. The employer may view it as a bribe or kickback. This is also true for offers of stock or stock options in your firm and payments to relatives or entities controlled by the employee but not part of the prospect company.
Related Blog Posts
- Honesty In Negotiations
I always assume that at some point in the future the folks I am negotiating will know the full truth of the situation and that very few secrets remain that way for long.
- Building a Business Requires Building Trust
Working with bootstrappers sometimes puts us on teams that are in desperate circumstances. Where they are able to translate time pressure and resource starvation into a bias for action from a change in perspective they often succeed–or at least move beyond the current crisis: success, like the horizon, is an imaginary line you can approach but never seen to cross. But where they use it as an excuse to take shortcuts that abuse prospects trust we sometimes have to part company.
- The Lucky and the Wise
It can be hard to assess whose advice to take about your business. One reason for cultivating at least a kitchen cabinet of informal advisors if not a more formal advisory board is that a diversity of perspectives can normally provide more insights into opportunities, risks, and options for managing them. Advice from a lucky entrepreneur tends to be very specific and suggest a “copy exactly” model, a wise entrepreneur will offer principles and several alternatives with one or two approaches recommended as most likely to succeed or least risky.
- Treat Social Capital With The Same Care as Cash
Trust Doesn’t Scale, It’s Knit by Aligning Actions With Prior Commitments
When I spoke on Thought Leadership at the San Bruno Rotary Club on August 6 this “four way test” was printed on all of the placemats. It was the first time I had encountered it and I found it to be a useful insight for evaluating a course of action.
We Happy Few
A college kid in a dorm room starts assembling and selling person computers.. Two college dropouts–or recent graduates–start building hardware in a garage. A woman starts a software consulting business in her second bedroom, then creates a software product. Four men in a pie shop sketch a design for a personal computer. All startups by definition start small and attract founders who welcome the independence. Perhaps they have failed in a larger firm or they have become disillusioned working in one, perhaps they have never worked a large company and have no idea what’s really involved.
These startups often face competition from established incumbents who have more people, better financial resources, and relationships with customers. Their success in a niche can attract the attention of larger players either intentionally through their messaging or when prospects they have approached turn to existing vendors to provide similar functionality.
Marathon Not a Sprint
First time entrepreneurs often romanticize the speed and power of working in a small team, but experienced entrepreneurs understand that established firms often fight back very effectively: no market of with any value is uncontested and it’s going to be a marathon not a sprint.
“History seems to indicate that breakthroughs are usually the result of a small group of capable people fending off a larger group of equally capable people with a stake in the status quo.”
George Heilmeier in “A Moveable Feast” [PDF] 2005 Kyoto Prize Lecture
The team has to set a sustainable pace from the beginning. This often means not only work/life balance–keeping all of the critical commitments you have made to friends and family in addition to your co-founders–but work/work balance: finding a way to generate revenue, to bootstrap, while you are exploring the market and building the first and sometimes subsequent version of your product. Not every new product is an immediate success.
Startups are incredibly hard work. They require that you maintain good relationships with your family and friends and continue to participate in the communities you are a member of so that you can get support and useful perspective when you need it. Very few real products are built in a (long) weekend or a week or even a month or two. Plan for at least nine to 18 months of hard work where there are a number of “sprints” that are a few days to a week of concentrated work. But the team has to be able to sustain creative problem solving for a period of probably two years before it’s clear you have traction, at which point the game gets much harder as your competitors start to go to school on your success.
Cameron Moll explores the challenges of a team of two or three competing with a team of twenty in “Things Take Time”
The team of twenty has quantity on its side — more hands and specialists to execute the work. With that, of course, comes all the red tape, political baggage, and countless meetings that accompany such teams and the organizations that employ them. Quantity suffers at the hand of seemingly endless structure.
The team of two or three has independence on its side — they call the shots, whenever and however they choose. With that, of course, comes all the requisite components for supporting and maintaining the thing they’re creating. Customer support, billing, advertising, blogging, tweeting, client and customer acquisition, and the like. Time suffers at the hand of a seemingly endless to-do list.
The independent team soon realizes that speed isn’t a luxury; its currency is late nights and long weekends. For those who prefer to keep a semi-regular schedule and who have other things to care for outside of work, we eventually learn to accept that things just take longer than we hope they’d take. Problem solving takes time. Details take time. […]
I’m learning, rather forcibly I suppose, to be okay with things taking time. I’m also learning that often you end up with a better product when you take your time to get all the big and small details just right. It’s time well-spent.
It’s OK to take this time if you are in direct communication with customers who are willing to pay for the product. It’s a mistake to spend all of your time in the workshop if you have not had a number of conversations with prospects and closed some opportunities.
Avoid The Strong Points Of Established Firms
A larger company can work a startup into the ground unless you are careful in your choice of product and niche market: a frontal assault is typically beaten back. Startups have to choose how they will compete very carefully. In the “Bootstrapper Manifesto” Seth Godin lists five key leverage points that many established companies enjoy: distribution, access to capital, brand equity, customer relationships, and great employees. Here is a brief explanation of each and some approaches that a startup can use to counter these advantages.
- Distribution: they are able to get the product in front of the customer.
Counter: Sell directly, or find partners unwilling to work with larger firms
- Access to Capital: they can borrow a lot of money.
Counter: Frugality, be smart about which problems you tackle, leverage existing team expertise.
- Brand Equity: if the prospect already knows about the company and the product it substantially reduces their perception of risk in making a purchase.
Counter: go to firms who are unattractive to larger firms or not well served by them.
- Customer Relationships: especially in B2B with approved vendor lists and existing contracts.
Counter: chase smaller deals, chase deals where you bring enough advantage someone will fight to put you on the list.
- Great Employees: talented people with low tolerance for risk are delighted to work in established firms. Entrepreneurs greatly overestimate most people’s appetite for risk, especially as passengers in their race car.
Counter: provide opportunities for folks with appropriate experience who may be less desirable to larger firms. Examples of this might be older engineers, women who want to work part time because they have small children, people with less experience but more enthusiasm for learning.
More generally you need to configure your business model so that you are either pursuing opportunities that are less attractive to larger firms or your product violates one or more key requirements for their business. This may mean:
- Chasing smaller deals to get traction and establish your brand.
- Not implementing some functionality that your competitors have that your current prospects don’t find valuable, enabling you to get to market faster and at a lower price.
- Providing additional services that a larger firm either doe not have the expertise for.
- Providing additional services that won’t necessarily work at scale but allows you to further differentiate your offering for your target nice.
- Configuring or customizing a version of your product more rapidly or more completely than your competition.
Focus and Perseverance Means Saying No
Fast Company called work/life balance “bunk” a decade ago because “hungry” labor was going to work us into the ground. If you are able to substitute working smarter or working more intimately with customers for working more cheaply you can likely avoid this fate. Successful bootstrappers remain open to possibilities–especially the possibility that they are mistaken in one or more of their business hypotheses–but maintain focus: they explore many options but say yes to only a few.
One of the reasons I am excited about Discovery Kanban as a model for not only larger firms but startups is that entrepreneurs, especially bootstrapping entrepreneurs, have to husband their resources but find a way to explore the market. This means being explicit about the amount of effort that will be invested in developing and exploring options, and being very crisp on commitments. Discovery Kanban offers a framework for managing risks, options, probes, and committed projects from a consistent perspective: we can only focus on a few things at a time, what are they?
- Getting the Band Together to Overthrow the Current Order I see J.R.R. Tolkien’s The Fellowship of the Ring as the story of a small multi-disciplinary team (“The Fellowship”) coming together to challenge and ultimately change the status quo. A status quo supported by a much larger and more powerful set of armies and magic.
- Seth Godin’s Bootstrapper Manifesto
- Ten Mistakes Early Stage Bootstrappers Often Make
- Discovery Kanban Allows You To Balance Delivery and Discovery
- Discovery Kanban Helps You Manage Risks and Options In Your Product Roadmap
In the mind of the entrepreneur the future is obvious and imminent. This “reality distortion field” can be useful for making a better future possible, but it inclines the entrepreneur to minimize adoption risk–people will see the benefits of my product immediately and adopt it–and to be impatient. Customer development techniques allow you to identify expensive false positives for potential markets and to refine your approach.
I have been reviewing the presentations from Startup Lessons Learned 2010 and 2011 again and realized that I had never blogged about 2011 presentation “Lessons Learned Pivoting Votizen” by David Binetti (@dbinetti). His key take-away on the value of a customer development is that is helps the entrepreneur avoid expensive false positives, in particular the kind that can happen when you fall victim to your own reality distortion field and are overoptimistic about market risk.
Clip For The Mind Of the Entrepreneur
This clip starts at the 5 minute 40 second mark in David Binetti’s presentation at Startup Lessons Learned 2011 and gives a little context before “Phrenology of the Entrepreneur” slide shown below.
Slide For Phrenology Of the Entrepreneur
Here is the deck starting at the “Phrenology of the Entrepreneur” slide (19).
- Startup Lesson Learned Conference 2010 Coverage Roundup
- Startup Lesson Learned Conference 2011 Coverage Roundup
- Slides: Votizen Case Study & “When and How to Pivot“
- The full video for Binetti’s 2011 talk is available at http://youtu.be/AFztj9XSw-4
Update Aug-21: Source of the Phrenology Image this blog post from July 29 2008 on BzzAgent blog: Phrenology of the Entrepreneur
Having worked with several entrepreneurs throughout my career, I’ve noticed precisely nine common traits that unite them together and distinguish them from the rest of us. But what’s particularly interesting is this: just as these characteristics unify entrepreneurs into a discrete group, so too do they corral those who work for them into a community of their own. You see, entrepreneurs inadvertently create a culture in which the staff that survive bond over the realization that it is not each of them that is crazy.
Enter Exhibit A: This post. I wrote this post because our entrepreneur/leader constantly complains that too few blog posts are being submitted. I decided to write minimal text, and instead let the image speak for itself. After reviewing the post, our entrepreneur/leader informed me that “we” (another baffling entrepreneurial habit is to use plural pronouns when assigning tasks to an individual) need to add more text to make this post more about “the business” (code for “the entrepreneur,” himself?). So that’s what I am doing. And, in doing so, I have found myself reconsidering the image, itself. Perhaps the size of the rearmost lobe (labeled “self-esteem,” which was polite for “ego”), should be, err, adjusted.
It’s not a mistake to accept venture capital if your business merits and requires it for growth. Don’t get distracted seeking it until then.
“The seductive narrative of Silicon Valley stars a genius-hero who goes on a journey, overcomes myriad obstacles, has a flash of insight and is rewarded by wise and benevolent investors with Series A funding. This narrative is bullshit, but it’s everywhere.
Venture capital is not a rags to riches story. It’s the inspiring tale of redeploying resources from a lower- to a higher-performing asset class. There’s nothing wrong with that – I find it kind of magical – but let’s not pretend we’re doing something else. In particular, let’s not pretend that this is an engine for social justice. You need a separate corporate philanthropy branch for that.”
Rachel Chalmers “Five Reasons Not To Raise Venture Capital”
Here are her five reasons
- You probably won’t get a fair hearing.
- Raising venture capital doesn’t make you a good person.
- Most companies won’t ever generate venture outcomes.
- When you raise venture, you narrow your options.
- Venture math is a harsh mistress.
I think she misses the real top five:
- It’s not saying no to a real term sheet that is a mistake, it’s wasting time seeking investment instead of learning about the market.
- Writing a business plan or business model canvas is not nearly as useful as writing your customer interview questions or a one page sales pitch. Getting feedback on either from customers will tell you more than feedback from a VC on a business plan.
- Asking prospect for money for an MVP tells you much much more about the market than any feedback from a VC.
- What can sound like advice on direction from a VC is actually a no. For example: “this is interesting but we think addressing problem X or Market Y is more promising, think about it and come back and talk to us again.”)
- If you think money will solve your problems, you don’t have a good handle on your problems.
Affluenza victims, regardless of their socioeconomic level, falsely believe that money can solve all their problems.
- Startups Should Focus on Impact and Innovation Before Growth
- “Now What? Your Post Launch Growth Plan” Podcast and Transcript
- Matt Wensing On Making the Transition to Growth
Direct Mail: A Letter With a Stamp Is Not Spam
In advertising it pays to be different. Letters and postcards with real stamps get through.
With everyone getting some much email SPAM, direct mail can be a way to differentiate yourself.
Postcards Work Too
We have used postcards to announce events where clients will be speaking or exhibiting. They have been very useful for raising awareness, increasing attendance at the event, and triggering a few phone calls. They don’t have to be opened to be read and are an inexpensive way to send a color image.
- Consider using unique URLs or phone numbers if you really want to track effectiveness.
- You can rent mailing lists or use your own.
- Because of the cost of this method you need to be careful to debug the message in advance: consider small targeted mailings, e-mail tests, adwords tests, or feedback from a few customers and prospects if time is short.
- We have used Overnight Prints and VistaPrint for printing as well as more than one visit to Fedex/Kinkos when time ran short.
Consider direct mail as an option for the target prospects you are trying to reach.
I interviewed Arun Kumar in 2012 on his experiences bootstrapping Kerika. It’s a long interview but really gives you a sense of his journey as an entrepreneur, his insights into the future of global teams and how they will collaborate, and a candid list of lessons learned. Here are nine key take-aways that he offered in that interview from bootstrapping Kerika since 2002.
Nine Lessons Learned Bootstrapping Kerika
- Don’t spend too much time on market research. After some point, you are not discovering anything new; you are just hearing the same points being rephrased in different ways. Move faster into building your first couple of versions.
- If the feature is really important, it’s not free. Be very careful about what open-source products or libraries you incorporate into your own product.
- Watch users where possible; don’t rely upon them to tell you what they are having difficulties with. People often don’t articulate problems if they think they will look stupid in doing so, and sometimes people don’t even realize what problems they are having. With face-to-face contact and conversation you can find out what people want to achieve, which is often different from what they are complaining about.
- Users will use your product in ways you never considered. That’s a good thing. Even if that particular use case wasn’t the one that you envisioned originally, that’s an opportunity not a problem.
- You can’t push on a string: when you are trying to find your product-market fit, you need to find a use case where someone is pulling on the other end.
- You will almost never fire someone too soon.
- Get all the details right. Concepts are great, but execution is what matters.
- There are no instant successes: every successful company has a revisionist history that makes its founders look unusually brilliant.
- You can fail by misfortune, but are unlikely to succeed by chance.
- Peter Drucker on Why Entrepreneurs Reject Unexpected Success
- Appreciate Why Prospects Say “Your Baby Is Ugly”
- The Best Way to Get Feedback From Early Customers is a Conversation
- Focus On Your Prospect’s Pain Not The Brilliance of Your Product Idea
- Startup Advice in Three Word Doses