Posts filed under 'Customer Development'
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.
July 3rd, 2011
“Sean Murphy adds tremendous value for startups in setting them up “getting out of the building” and how to make sense of the data they’ve gathered. He’s one consultant I personally know (I’m sure there are others) who doesn’t confuse his role with the founders. I think of his consulting firm as a “force-multiplier” for Customer Development.”
Steve Blank in a discussion in the comments for “Consultants Don’t Pivot, Founders Do“
I got the following E-mail from an entrepreneur on Friday
Heard a lot about you and been meaning to connect! Appreciate you taking a look through my blog and your comment was awesome. Is
skmurphy.com your main thing right now? What else are you working on?
What follows is my answer, in case you had the same question.
We do customer development and new product introduction consulting in B2B markets for expertise driven products. Typically companies or consultants who want to turbocharge their practice with technology –we recently worked with a team that had developed a 1.2 mm thick heat pipe made from nanomaterial that can be used for LED, high performance computing, and electric vehicle applications).
I don’t like to travel but we have a global practice with about 2/3 of clients in Silicon Valley (either HQ, for events, and/or deals in Silicon Valley) and 1/3 in North America, Europe, or Asia. We collaborate with remote teams using a variety of technologies including skype, CentralDesktop, and GoToMeeting.
We help with strategy (typically bringing clarity and a priority to a set of problems and/or opportunities), pricing, negotiation, sales presentation preparation, and early market exploration. We have a strong focus on sales because a paying customer is not a market hypothesis but a fact, offering proof that your product and go to market strategy are viable.
I am not very fond of the word pivot, I think most successful startups actually build on “problem/founder fit” and need to zoom in on where they offer the most value to get established. I have taken an entrepreneurial approach to life (punctuated by education a number jobs in large companies) for more than three decades.
We also do
The common thread is small group discussion as a way of facilitating knowledge sharing and learning. The breakfasts normally have 8 to 16 people around a single table, the book club is a panel discussion between 3-5 people with questions from the audience to keep it lively and engaging, and the workshops we normally cap at between 16 and 22 depending upon the subject matter. Private workshops are with one team and their advisors and typically are 3-6 people
July 2nd, 2011
From Section 17 of “Finite and Infinite Games” by James P. Carse
To be prepared against surprise is to be trained.
To be prepared for surprise is to be educated.
Education discovers an increasing richness in the past,
because it sees what is unfinished there.
Training regards the past as finished and the future as to be finished.
Education leads toward a continuing self-discovery;
training leads toward a final self-definition.
Training repeats a completed past in the future.
Education continues an unfinished past into the future.
If you are just starting out I encourage you to be wary of training, of folks offering to sell you a treasure map that outlines how to make money in a particular market. New markets are unpredictable because they don’t exist–yet–so any knowledge of them is fragmentary at best.
Learn how to explore. Ask questions you don’t know the answer to where the answer would have an impact on your ability to assess the risk in your venture or would help define a key aspect of your business.
Markets are made up of people and the conversations between them–whether face to face, over the phone, e-mail, or some other form. The Cluetrain Manifesto said this more than decade ago, here is my cheat sheet:
- Markets are conversations.
- Markets are human.
- Networked markets self-organize.
- De-cloak, get personal.
- Talk with customers.
- Listen to customers.
- Share community concerns.
Conversations are unpredictable because people are unpredictable. If you are a fan of of multiple choice surveys and A/B testing because it seems more efficient of your time, reconsider how much you can really learn if your questions always contain the answer. Instead, prepare to be surprised.
June 27th, 2011
Entrepreneurship is neither a science nor an art. It is a practice.”
Peter Drucker
Taking a scientific approach to your startup by formulating and testing critical hypotheses is a great idea.
But I don’t think in the end no matter how often we compare notes or measure carefully that we will converge on a common “beaten path” or definitive morphology of startups. While I think that failure is always instructive, I don’t think efforts to codify a set of successes into “a science of startups” will yield the right way to do a startup™ that’s been scientifically proven.
Startups are not fighting a natural phenomenon like gravity or seismic activity but a co-evolving set of suppliers and competitors who react to–and even anticipate likely moves by–a new entrant. So while you can design and build a bridge based on scientific laws for gravity and engineering principles to resist and ride out earthquakes, competition is less predictable because it’s made of people and not governed by natural laws.
I think there is a deeper problem: just as you cannot step into the same river twice, technology and market spaces co-evolve and the success of an earlier startup forecloses some paths by occupying a niche in the ecosystem and enables others by creating new opportunities and demands.
Franchise models that document and codify a particular business type, e.g. a restaurant, dry cleaners, or ice cream store, will enable an entrepreneur to start with a proven business in a new area that lacks an equivalent. But even though repeated failures may lead to rules of thumb, these may be broken successfully by an an entrepreneur. For example, Sam Walton observed “I guess in all my years, what I heard more often than anything was: A town of less than 50,000 population cannot support a discount store for very long.” This led him to site WalMarts in smaller towns.
See also
June 15th, 2011
I have been invited to speak at the Global Indian Technical Professional (GITPRO) on “Crucial Customer Development Concepts” this Saturday June 18. I will outline key customer development insights and some rules of thumb for successful innovation in Silicon Valley. I will cover concepts that form the basis for conventional wisdom on customer development in Silicon Valley. These concepts provide the terms, the metaphors, the parables–in short the language–that successful high technology firms use to develop their plans and monitor their execution.
There will also be a talk by B.V. Jagadeesh on “Lessons Learned Starting, Leading, and Succeeding at Multiple Startups.” Mr Jagadeesh co-founded Fouress, co-founded Exodus Communications, was CEO at NetScalar (and stayed on during it’s acquisition by Citrix as a VP/GM), was president and CEO of 3Leaf Systems, and is today president and CEO of Virtela. He is an accomplished entrepreneur (more details on LinkedIn and CrunchBase) and I look forward to his talk
Where: HP Bldg 48 Oak room, 19111 Pruneridge Ave Cupertino, CA
When: Sat-Jun-18 4:45 to 6:45
More Info: http://www.gitpro.org/siliconvalley.html
Cost: Free, but please RSVP at http://www.gitpro.org/membership.htm
GITPRO is the brainchild of Khanderao Kand who was kind enough to invite me to speak. He runs MyBantu and blogs at http://khanderaotech.blogspot.com/ and http://texploration.wordpress.com/
June 14th, 2011
I have had several conversations with other entrepreneurs in the last two weeks where the same realization has been reached: technology changes fast and you need a plan to continually renew your technical skills and those of your team.
On the other hand soft skills, people skills, have a much longer lifetime. A small but continual investment in developing your speaking and presentation ability will pay dividends for a long time. Becoming a more thoughtful and encouraging listener never hurts either–although I find it hard work.
The second implication of fast pace of change for technology is what Clayton Christensen refers to as “overshoot” in the Innovator’s Dilemma. Over time, an existing technology provides more capability and/or performance than traditional customers can take advantage of or are willing to pay for. The challenge becomes finding other markets and new problems for your solution.
I think the next decade or so will be as much about extending current business models and developing new ones to take advantage of what’s already been invented as it will be about radical innovations. Customer development is now as important, if not more important, than product development.
Related posts
June 2nd, 2011
Want a simple way to determine your competition during customer discovery: consider what your prospects would have to give up to buy and use your product or service. The time and money you want prospects to spend on your offering have to come from somewhere: prospects will normally choose to take it from what they are currently doing to meet the need that they anticipate your offering will fulfill.
Always ask “How are you solving the problem now” in customer discovery interviews.
Listen carefully to how prospects mention competitors. A prospect may mention a competitor to encourage you to explain how you are different/better so that they can gain a better understanding of your offering. They may mention a firm that they think is a competitor just to clarify if they understand what you are offering. If they are using a competitor and are not interested in your offering after they have heard your presentation that’s a very different situation.
If a prospect does not have some kind of solution, however unsatisfactory, to the problem or opportunity you are addressing, then it’s very unlikely they will buy from you. There is always competition because there is always a status quo.
Steve Blank offers five tests for an early adopter–what he calls an earlyvangelist–in “Four Steps to the Epiphany.”
- Has a Critical Business Problem
- Know That They Have the Problem
- Actively Looking for a Solution
- Has Tried to Solve the Problem and is Still Unsatisfied
- Has (Or Can Acquire) Budget
Step 4 is key (bold added) but all are important: there is a very big difference between a prospect who wants to solve a problem and has tried many things and a prospect who tells you they want to solve a problem but has done nothing to address it.
You may interview thirty people before you settle on a next step in the customer discovery process. You are looking for people who are interested in the differential benefits that your solution brings. That may be only two or three out of 30, but if they are willing to go forward and work with you I would pay less attention to the fact that another ten out of the 30 are working with someone else. Look for the common characteristics of the people who like your solution and focus your messaging and market exploration activities on them.
The thing to worry about is not whether you have competition, you do, but that you provide differentiated value versus the status quo to a market niche that you can identify and focus on.
Some related posts on identifying and talking with earlyvangelists
- SKMurphy: Other Customer Development Models
I am looking for other books, methodologies, tools that address the early market exploration problem. In particular that address Clayton Christensen’s observation in the Innovator’s Dilemma that “markets that don’t exist cannot be analyzed” by offering techniques for exploring emerging markets.
- Bizelo: Getting Earlyvangelists the Easy Way
What I find most interesting is that there’s very little support for getting earlyvangelists through typical customer acquisition approaches, such as Google Adwords or other Search Engine Marketing, SEO techniques, and other outbound marketing communication. The general consensus is that earlyvangelists need to be found and recruited through a personal connection. That’s the easy way. Everything else is the hard way.
- Gabriel Weinberg (interview for traction book): Sean Murphy on the First Dozen Enterprise Customers
Blank has got this earlyvangelist formulation where they have the problem, they know they have the problem, they’ve tried to solve the problem, they are unhappy with their solution to the problem and they can get budget. That’s a very good checklist.
- Thread from Learn Startup Circle
- Kyle Mathews: My first instinct was to just send them a survey asking essentially, “are you an earlyvangelist?”, at which point the earlyvangelists would obligingly raise their hands identifying themselves and come forward carrying open checkbooks. After thinking over this a bit, I started to worry that this direct approach is naive. Maybe the earlyvangelists don’t know yet that they’re earlyvangelists and I need to do more education such as sending out a product update identifying our progress to this point and the projected launch date.
- Sean Murphy: It’s unlikely that a real earlyvangelist will raise their hand in the absence of a compelling vision for a solution to a burning problem that they have. It’s a term of art in customer development but it’s not useful as a conversational question. Send folks a brief update on what you can do for them when and explain how they can get started with your offering if they want to. Focus on what results you can reliably deliver them in a given time frame. Small benefits in a short time frame trump big benefits in a long time frame. Values of short range from 2 hours to five days.
June 1st, 2011
“Be nice. The world is a small town.”
Austin Kleon
It’s always worth treating prospects politely and professionally but it’s especially the case in B2B markets because you are very likely to run into them again. They many not remember you if you were polite but they are likely to remember you quite well if you wasted their time or were unprofessional.
Most of our clients operate in business to business niche markets where there are between roughly 500 to 10,000 possible customers. Some niches are smaller with perhaps a few hundred. This does not mean that there will only be a few hundred users (there may be hundreds of users just at one company) but it’s an indication of the size of prospect pool.
So I have a problem with some of the more popular startup marketing techniques that involve fake landing pages, surveys that offer no benefit to a prospect, and other techniques that simply waste a potential customer’s time without the possibility of offering them any benefit.
While I am not a fan of cold calling, if you are cold calling with an offer that you believe can help the prospect and that you can deliver on if the prospect expresses interest then this is at least potentially the beginning of a business relationship.
Treating prospects like you will never encounter them again is a poor idea, in particular when selling to businesses.
May 23rd, 2011
I took part in a number of great conversations at today’s Startup Lessons Learned Conference, probably the most common–and most vexing–issue that was discussed was whether to give up in the face of modest success. I had perhaps half a dozen conversations around “We’ve come this far and have paying customers but are not sure we should continue on the path we are on.”
This is a very tough issue to manage. Here is a synthesis of the answers that I gave.
- When you make the decision to commit to a course of action write down what success and failure looks like and estimate how far you should be in a few weeks to a few months (depending upon the scope of the decision). Plan for two or three re-evaluation points. Only evaluate whether you on track on a pre-defined schedule unless something extraordinary happens. This prevents a very painful loop where every few days you are wrestling with whether to continue or not.
- Perhaps every two to four weeks but at least once very three month, assess where you are and what you have learned that you have incorporated into your process and approach. Periodically assessing what you have learned and how you have improved is another way to immunize yourself against doing the same thing over and over again expecting a different result: you should at least be making new mistakes.
- Talk to peers and advisors. One benefit of peer to peer discussions with other entrepreneurs is that they give you a chance to get different perspectives on your situation (often another entrepreneur may bring a valuable emotional distance that navigates the twin risks of giving up too soon and persisting too long).
- Be cautious in throwing away paying customers.
- If you have had success in several areas or with seemingly different customers look for a common thread or underlying connection.
- “Stubborn genius” is a tautology, but “stubborn fool” is as well, alas.
For the most part I see folks giving up too early far more often than persisting well past when they should abandon an idea. As Ringo Starr advises “it don’t come easy” and I see folks expecting a quick viral pop in two or three months giving up much much more often than a team persisting into their fourth year on an idea that’s clearly going nowhere.
But it’s possible that you have “climbed a small hill” and are in a market that is too small to support your firm.
Patrick Vlaskovits blogged about a related topic in
“I See Dead Startups.”
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