Posts filed under 'Customer Development'
January 4th, 2012
We have Fortune 500 clients who are launching new products and who want to take advantage of customer development methodologies (or have come to the conclusion that they need a framework to revisit assumptions that are not working).
There are broadly two types of situations where a large company is launching a new product:
- It’s a new product that they can sell to current customers through established channels and/or a direct sales force
- It’s a new product that they want to sell to new customers and are uncertain if established channels will work (or know that they won’t, don’t want to de-focus their message).
Each comes with different challenges.
In the first you can get a false positive. I spoke to a product manager at a networking company that had introduced a video phone booth. It was after a talk given by Steve Blank and she expressed the opinion that Blank’s model might be useful for startups but was less applicable to established firms with effective sales forces like hers. They had just launched the product and had already collected several hundred orders (for systems that would cost more than 100K each). They had provided special incentives to the field to close evaluation units. Given the size of the total quota or book of business a sales team might be carrying with a major customer I suggested a better test than initial orders would be how many re-orders. She called me a few months later looking for customer development assistance: the special incentive had expired and the field had moved on to selling existing products that customers were requesting and new products that now had special incentives. There had been almost no re-orders or system expansions. No one wanted to admit that they had made a 100K mistake so the systems were in token use, but no one could justify buying any more. When startups hire a “closer” sales person for their new product they run the risk of leveraging pre-existing relationships such that they close the sale but don’t uncover the real needs of their customers or the real problems with their offering.
In the second case you can get a false negative. A few years ago we helped a recently acquired division of a software company whose new parent that had a dominant market position in their primary market. The division was at best fifth in its market but the legal department was forcing them to take negotiating positions on contract terms that were both inappropriate to the product line and unwinnable due to their lack of bargaining power. Their prospects for this new product had many viable options where the parent company’s prospects had few if any viable alternative vendors they could buy from. Launching a new product into a new market requires everyone to revisit what the total product has to be, and this is especially painful when many of their current practices are what have made them profitable–if not loved by their customers–in their primary market. Failure to comprehend that a new type of customer may have different needs–even in ancillary areas–may cause a good product to fail to gain traction.
It’s probably easier to introduce customer development methods either as part of a risk assessment phase, where it’s acceptable to revisit a product team’s optimism, or in a turn around situation where it’s clear that the initial approach has not borne fruit but it’s too early to give up.
November 22nd, 2011
Q: I am having trouble getting people to fill out my customer discovery surveys, how many do I need to be statistically significant.
I think the following approaches burn time and social capital without generating much in the way of insight:
- Using surveys for “customer discovery.”
- Landing pages for signups where little if any information is provided about the team or product but many answers are required of a prospective user to signup.
- Launchrock style landing pages that require your prospects to invest their credibility by tweeting, blogging, or otherwise announcing their interest in your offering to their friends before you give them access to your beta. This is destroying the value of any endorsement you might ever generate.
One conversation is worth between 100 and 10,000 survey responses. Provided you are listening and prepared to be surprised.
A dozen to two dozen conversations with relevant and knowledgeable individuals will put you will be well ahead of any survey based approach.
November 8th, 2011
“If you do not expect the unexpected, you will not find it; for it is hard to be sought out and difficult.”
Heraclitus (Fragment 18)
A few more thoughts on customer interviews and why are preferable to surveys and landing pages when you are doing early exploration in a market.
You can’t have a conversation with a landing page, so while you can validate your assumptions it’s less useful in my experience than actually talking with prospects. You can be surprised in a conversation and improvise additional questions or even your own new answers to unanticipated questions from a prospect.
Surprise means you are learning.
I find that many entrepreneurs with a science or engineering background tend to focus on what’s most efficient–for them–and prize automated or mechanical interaction over conversation. No one likes surprises but if you appreciate what it really means you can become a little more comfortable starting a conversation that may lead into unanticipated areas.
“When someone makes a decision, he is really diving into a strong current that will carry him to places he had never dreamed of when he first made the decision.”
Paulo Coelho in “The Alchemist”
h/t Johnnie Moore’s “Decisions”
Notes
- Roger von Oech wrote a great book “Expect the Unexpected Or You Won’t Find It” that riffs on 30 epigrams from Heraclitus to encourage creative thinking. He blogged about the “expect the unexpected” epigram in “Be Willing to Be Led Astray.” Here are a couple of Herclitus’ more famous quotes to give you a flavor:
- “All is flux, nothing stays still.”
- “A man’s character is his fate.”
- “Nothing endures but change.”
- “You could not step twice into the same river; for other waters are ever flowing on to you.”
- I have written several other posts on customer interviews and customer discovery:
October 22nd, 2011
In a blog post last October entitled “Entrepreneurship as a Science – The Business Model/Customer Development Stack” Steve Blank suggested
Alexander Osterwalder and Yves Pigneur defined a business model as how an organization creates, delivers, and captures value. More importantly they showed how any company’s business model could be defined in 9 boxes. It’s an amazing and powerful tool. It instantly creates a shared visual language while defining a business. Their book “Business Model Generation,” is the definitive text on the subject.
Currently there are a number of templates and tools that help teams build a business model canvas:
Ostterwald’s formulation reminds me of Newton’s dot notation for calculus (fluxions or derivatives). It points out the need for a formal notation but it’s too cumbersome and not usefully extensible. I don’t question the need for meaningful and portable representations of business models, and the canvas may be the best thing we have today, but I think it will represent an evolutionary dead end.
It seems like much of the push for it comes from folks who look at many business models (e.g Angels,incubators, and VCs) and want them to be easily comparable, not from entrepreneurs who want to be able to track what they need to validate next and the evolution of their thinking and hypothesis set over time.
For me the approaches suggested below seem more promising, at least through the Find Your Niche stage.
Our approach for bootstrapping entrepreneurs who target businesses includes:
Update Oct 24: Rob Fitz has blogged that he is “
Phasing out Canvas and Dashboard Tools.“
October 19th, 2011
Giff Constable has written “12 Tips for Early Customer Development Interviews” and “12 Tips for Early Customer Development Interviews (revised)” and I thought I would offer my lessons learned from taking part in interviews where the startup planned to offer a product or service to a business.
- Have Two People Interview: both of you taking notes as you go. The second person can listen more attentively while the first one asks questions. Trade off every few questions so that the conversation stays lively and fresh. Date and number each page (or 3×5 card) of your notes.
Why: this is more time efficient for the person being interviewed.
- Work From an Outline of 3-5 Key Questions: E-mail these in advance and also bring a hardcopy. Their name should be at the top of the paper along with the date of the interview. The interview may last a few minutes or it may last an hour but set expectations up front about what you want to talk about. It’s OK to ask follow up questions but these 3-5 should form the spine of the interview.
Why: you need to focus on the essential questions you are trying to answer.
- Focus on Past Behavior and Actual Situations and Events To Bound the Problem. Don’t focus on hypothetical, potential, or future problems. Or at least don’t explore them until you are confident that there is a clearly defined business need or critical capability that they are looking for today. Walk through actual situations and events to develop a model for the costs and impact of the problem on their current business.
Why: businesses are more likely to pay for problems or needs that are impacting them today.
- Listen. You should be talking perhaps 1/6 to 1/4 of the time. This is not a sales call; this is an opportunity to gather symptoms and a prospective customer’s perspective on their needs with respect to a specific problem or capability.
Why: there is a strong tendency to talk about your solution or theories of the problem. The more you do that the less that you learn: use your eyes and ears.
- Probe for Quantities and Ranges: wherever possible try and get them to put a number or estimate a range on an adjective (e.g. small, large, light, heavy, thin, frequent, rare…). Write down both their adjective and their estimate for the appropriate quantity or range.
Why: you will need to develop specific target prospect selection criteria and some simple ROI or value models for your offering. These are much more useful if you can use numbers or objective criteria.
- Probe for what’s changed: what has happened to make this problem or need more critical? Explore the environment or system(s) that the group or firm is operating in. What is the context they operate in? What trends are at work that are making the problem more serious (and what might happen to make it less serious)? Were they ignorant of the problem (or ignoring it) until a particular situation or event occurred? Have they been managing it and now need it solved?
Why: businesses have many problems. They are more likely to invest in solutions for the critical ones that are likely to get worse if they don’t take action to address them.
- Don’t Talk About Possible Solutions Until You Have Thoroughly Bounded Their Problem or Need. Don’t mix how they describe the problem with the kinds of solutions that they are interested in.
Why: again resist the temptation to talk about your solution until you can talk with very high confidence about their situation, needs, and challenges.
- Don’t Overstay Your Welcome. This allows you to come back. Take two or three minutes to wrap up by thanking them and providing a high level summary of what you heard. Commit to providing them with a more detailed summary within a day or two. Meet that commitment.
Why: unless the person is energized by the conversation you should end it promptly.
- De-Brief That Same Day: walk through the interview notes that same day with your partner, but don’t do a final summary until you have slept on it. Keep your raw notes and the joint summary (a wiki is handy for this as you can create ad hoc links between key points and phrases to issue or definition pages).
Why: there is value in your first impressions, your shared impressions, and your second opinion. Don’t lose the first two and rely on just the third.
- Follow Up By E-Mail. Thank them again. Provide a detailed summary (include their numbers and ranges) of what you heard and let them critique it (this does not mean that you have to share all of your perceptions or plans). Ask if there are other folks that they feel you should talk to, either at their company or other companies, who would be able to provide you with a valuable perspective on the problem.
Why: Introverts are much more willing to share their thoughts in writing once they have had a chance to reflect, give them a chance to do so. Extroverts can have second thoughts and follow on observations, capture them all.
October 17th, 2011
From a Time Magazine December 2009 interview with Malcolm Gladwell
I’ve always been fascinated by the idea that in inner-city schools, the thing they do best is sports. They do really, really well in sports. It’s not correct to say these schools are dysfunctional; they’re highly functional in certain areas. So I’ve always wondered about using the principles of sports in the classroom. Go same sex; do everything in teams; have teams compete with each other. I’d like to try that. I don’t know whether it will work, but it’s certainly worth a shot, and we could learn something really useful.
I have written about Appreciative Inquiry and Amplify Positive Deviance as useful models for entrepreneurs in analyzing both their own experiences and expertise and their customers’ needs and capabilities. I really like that Gladwell suggests starting with the demonstrated strengths of an inner-city school to foster improvements.
Seth Godin offers a critique of most schools in “Back to (the wrong) School”
If you do a job where someone tells you exactly what to do, they will find someone cheaper than you to do it. And yet our schools are churning out kids who are stuck looking for jobs where the boss tells them exactly what to do.
Do you see the disconnect here? Every year, we churn out millions of of workers who are trained to do 1925 labor.
As we get ready for the 93rd year of universal public education, here’s the question every parent and taxpayer needs to wrestle with: Are we going to applaud, push or even permit our schools (including most of the private ones) to continue the safe but ultimately doomed strategy of churning out predictable, testable and mediocre factory-workers?
The post-industrial revolution is here. Do you care enough to teach your kids to take advantage of it?
What’s interesting to me is that Gladwell’s prescription would also address Godin’s concerns. Athletic teams are coached for individual and collective improvisation. Winning teams are creative and collaborative.
Several take-aways for entrepreneurs:
- Your prospects want to understand how your product will help them outperform their competition. This requires more than explaining to them it works.
- If you wait for customers to tell you what to implement you will lose to other firms that ask questions that enable them to appreciate not only current weaknesses but also the strengths that they can build on.
- It’s also important to fully appreciate why your customers call your baby ugly when you ask for feedback on your new product.
October 16th, 2011
Appreciative Inquiry is a mind set that is essential in customer discovery. It encourages you to look for what’s working in an potential customer’s organization and “work with the grain of the wood.” It enables you to build on demonstrated strengths and accomplishments in framing your solution to a critical business problem.
Let me suggest what I think are the two best working definitions for entrepreneurs from a much longer list at the Appreciative Inquiry Commons.
“Appreciative Inquiry focuses us on the positive aspects of our lives and leverages them to correct the negative. It’s the opposite of ‘problem-solving.’”
White, T.H. Working in Interesting Times: Employee morale and business success in the information age. Vital Speeches of the Day, May 15, 1996, Vol XLII, No. 15
Too often an overwhelming focus on pain or “what’s wrong” in a prospect’s organization can cut an otherwise promising customer development interview short. By taking the time to understand what’s working (and what they won’t want broken) you increase the chance of creating a working relationship.
“The traditional approach to change is to look for the problem, do a diagnosis, and find a solution. The primary focus is on what is wrong or broken; since we look for problems, we find them. By paying attention to problems, we emphasize and amplify them. …Appreciative Inquiry suggests that we look for what works in an organization. The tangible result of the inquiry process is a series of statements that describe where the organization wants to be, based on the high moments of where they have been. Because the statements are grounded in real experience and history, people know how to repeat their success.”
Hammond, Sue. Thin Book of Appreciative Inquiry, Thin Book Publishing Company, 1998, pages 6-7.
I mentioned in “Early Customer Conversations: Use Appreciative Inquiry and Amplify Positive Deviance” that I found the “Thin Book of Appreciative Inquiry” to be $8 and two hours well spent. It’s only 63 pages long but I found myself stopping several times and realizing I needed to change what I had been doing.
At a high level Appreciative Inquiry guides you to ask
- “What’s working around here?”
- “What problems are you having?”
in that order. While you need to focus on a prospect’s pain any solution must build on their strengths.
October 15th, 2011
Question from an entrepreneur in the midst of customer discovery for a new product.
Q: We are preparing to launch our first product in a few months. Next week there is a conference sponsored by a professional society that represents one of our potential target markets. We have already done about a dozen customer discovery interviews that lasted a half an hour to an hour, but at the conference it’s unlikely we will be able speak to attendees for more than a few minutes during breaks. How should we take advantage of this opportunity to talk to prospects?
Attending the conference is a great idea. Not only will you have a chance to meet potential customers but the sessions and the hallway conversations will also provide insights into the challenges and issues your prospects are concerned about.
But it’s not much of an opportunity to have a long customer discovery interview. Think about starting conversations that will develop into relationships.
You have 30 to 60 seconds to explain the problem you are trying to solve and see if it’s important to them. If it is ask if you can call them for a few minutes and exchange business cards to setup a time that’s convenient at a later date. Be succinct–rehearsal is key–and you will embody your promise not to waste their time.
If you want a piece of collateral fit your message on a 3×5 card: pain question, two or three sentences and contact info for more info. This form factor can be handed out in casual conversation without feeling awkward (compared to a sheet of paper or even a half-sheet). It’s size will encourage you to consider how little time you have to get to the point. And it will be a good reminder for how little most folks will actually remember from the conversation.
Take care to become a member in good standing of this professional community. Think longer term and win-win. Consider ways that you can sponsor and contribute to the event (even just by volunteering your time) so that you demonstrate your commitment to the group and the professional community’s goals.
Some related blog posts
October 13th, 2011
A common complaint an entrepreneur voices when they first try to explain why a prospect should pay for their product:
“It’s difficult expressing the value proposition in just a few words because there are so many different ways to use it.”
Many an entrepreneur with a new product
Here are some things to try to help focus on an initial value proposition:
- Offer a few examples that are extremely specific.
- Identify the most compelling value propositions. Even if they only appeal to a very narrow population, the more important thing is that they bring a lot of improvement to their current situation.
- Be careful when you can envision many many possibilities as most may come with “some assembly required.”
- Think about offering a new Perl compiler and saying “you can do anything you want with it.” Apple may have suggested that they were offering “a bicycle for the mind” but it was the specific promise of desktop publishing that triggered their compelling value proposition.
- If you have paying customers look at what they have done with it. Specifically. What benefits have they gained?
October 12th, 2011
I am always interested in having a conversation with a prospect. If you are hoping to infer needs from seeing them press a menu button with an icon or one or two words on it I think that’s a poor substitute for a conversation. I know that people cannot always predict what they need or will use but this “rat psychology” approach (see what parts of the command maze a user explores looking for working functionality) strikes me as trust eroding. It’s a reflection of a deeper belief that your customers will have no memory of prior interactions with you where you showed them something that looked functional but was not actually functional. When they discover it was designed to do just that, look functional but not be functional, it may make them question anything you tell them.
I worry that sampling techniques that work when you are talking to a tiny fraction of a large potential customer base (e.g. someone who wants a calculator tool or a reminder service) are counter productive when you are attacking a smaller market (say 1,000 to 10,000 possible companies that might buy) and disastrous when there are only a few hundred possible customers (e.g. semiconductor manufacturers, pharmaceutical research labs, Fortune 500 IT departments that buy outsourced IT services,…).
I think the thing that excites many developers about some of these impersonal/automated techniques is the belief that they can write code and sell applications without ever having to have a conversation with a customer. If you look at established consumer products companies, folks like Proctor and Gamble for example, they spend a lot of time in structured conversations with prospects and customers.
When I play a computer game I can restart many times, I can try a variety of moves to explore and understand a situation. When I start over the Non-Player Characters in the game do not remember what I told them last time. But in real life I need to exercise much greater care. Everyone I meet in a market niche knows and will talk to other prospects– especially if I treat them poorly or act as if I don’t value their time.
I think tools that allow you to generate a dozen different home pages (because you cannot figure out which market segment to start in) may ultimately mark a team as fundamentally unserious in a B2B space. I wonder in a few years if anyone is going to put a real e-mail address into a one page website that has no identifiable people and no physical address mentioned. It’s a little bit like the small ads in the back of a magazine that only list a PO Box and no phone number, you are not really sure if they are real and therefore worth any of your time.
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