Entrepreneurs Blend Passion and Prudent Risk Taking

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, Design of Experiments, skmurphy

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 Asterbo’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 and 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

Janet Iwasa: Animate Your Hypothesis to Explore Its Viability and Implications

Written by Sean Murphy. Posted in Design of Experiments

I found Janet Iwasa‘s Ted Talk on “how animations can help scientists test a hypothesis” to be extremely thought provoking.

Animation enables you to visualize process that are too small to be seen, even with sophisticated instruments, such as the biological phenomena that that Iwasa shares in the talk. But more importantly, it can  allow you to get a hypothesis out of your head in a way that it can be shared with others, reviewed and annotated.

As she observes near the end of her talk (excerpt from transcript of her talk)

Over the years, I found that animations aren’t just useful for communicating an idea, but they’re also really useful for exploring a hypothesis. Biologists for the most part are still using a paper and pencil to visualize the processes they study, and with the data we have now, that’s just not good enough anymore. The process of creating an animation can act as a catalyst that allows researchers to crystalize and refine their own ideas. One researcher I worked with who works on the molecular mechanisms of neurodegenerative diseases came up with experiments that were related directly to the animation that she and I worked on together, and in this way, animation can feed back into the research process.

Implications for Startups

I think we need to develop first diagrams and then modeling languages to allow us to visualize and animate some key aspects of the challenge startups face:

  • The product roadmap, especially modeling it as a collection of options to manage a set of potential and likely prospects. Discovery Kanban may provide some useful metaphors here.
  • The new product introduction problem: selection of a niche market and insertion and scale inside of a prospect’s firm.
  • The likely paths a negotiation may take, in particular how to sequence negotiations across players and within a firms’ buying cycle.
    In particular how to we model the different facets: you typically have one more contracts or agreements that are written as legal documents, a system diagram, a list of requirements, and a timeline for implementation/roll-out/proliferation to name just a few of the critical but often disjoint definitions of a deal.
  • The evolution of the incentives and outcomes from a business relationship over time. This would extend the timeline and overlay product or feature roadmaps with the customer’s perspective on the likely (or even a range of) requirements over time.
  • The evolution of a market structure over time: what will be the axes of competition and what will be standardized (and commoditized).

I think we will need to start with pencil and paper or a whiteboard sketch just as the biologists did. Roam’s “Back of the Napkin” certainly offers some very useful visual metaphors, as do decision tree models, tornado diagrams, and traditional spreadsheets to name just a few more. We are talking to several teams that are exploring different ways to combine numbers, words, and diagrams that are integrated into responsive models that can be explored (e.g. parameters changed, relationships varied).

Request for Information, Comment, and Proposals

If you are working on something that will allow a team to sketch and animate one or more critical aspects of a business we are interested in talking and exploring how to incorporate your capabilities into one or more of our offerings. In particular if it would enable hypotheses to be modeled and explored, and experiments defined to test or refine the hypotheses.

We will also be offering some on-line workshops, starting with key aspects of Discovery Kanban. If you would like to take part, in particular if you have real business issues that you are wrestling with that you are interested in seeing modeled in a small group setting, please contact us.

Startup Stages: Survive, Explore, Focus, Refine, Grow

Written by Sean Murphy. Posted in Customer Development, Design of Experiments, skmurphy, Startup Stages

Survive first. Explore second. Build third.

  1. Survive: It’s good to fail small and fail fast. But also make sure to survive the failure. It’s no good to fail if you can’t get up again.
  2. Explore: True exploration feels like zero progress. Everyone around you will tell you to focus. To stop messing around. To get on with it. The problem is, you need to find it first. This takes time and mistakes. In theory, this is all about fail fast, fail small. In reality, this is slow and painful.
  3. Build: Find a great solution to a small pain point. Then use that to grow bigger.

Tyler Michalski in “The Basic Basics

This reminds me of Rob Saric’s “Solvency First, Consistency Second, Growth Third”

2. Solvency First, Consistency Second, Growth Third
If you don’t have enough money to survive you die. [...] focus on ‘Minimum Viable Cash flow (MVC)’. Once you determine what the MVC is for both you and your team, work towards achieving that by whatever means you can. Consistency allows for predictability and the more predictable your business (‘X inputs results in Y outputs’) the faster you’ll grow.
Rob Saric in “Startups Are Hard

I think they are both right, I have tried to put integrate these two insights into our startup stages mode:

  1. Survive / Stay Solvent: This can involve the work/work balance of services and product development, the important thing is to generate enough cash flow to give your team the time to explore the market to find the right opportunity. This spans the “open for business” and “early customers” stages.
  2. Explore: I think you are looking for a fit with your talents, interest, and experience. Any opportunity has to pass the “why you, why now?” test. What is it that your team brings to the problem that will allow you to differentiate your offering? The fastest iteration cycle is to build as little as possible and simply measure (observe) and learn. Always start from measurement and observation so that you understand the problem and the customer before you worry about your solution. This also involves asking the right questions, talking with many people, and taking time to integrate all that you have learned. This spans the “idea and team formation” and early customer stages.
  3. Focus:  This is the first part of the “finding your niche” stage; selecting a candidate niche to focus on.
  4. Refine (Make Consistent and Predictable):  This is the critical step in finding your niche that allows you to leave exploration mode, or at least substantially reduce your exploration efforts. You have enough knowledge of your teams capabilities to build predictable processes and of the customer’s needs to predict their reactions and identify prospects you should focus sales efforts on early in the engagement process.
  5. Grow: now you enter the scaling up stage because you have useful diagnostics and predictable processes.

Distilling Rules of Thumb From Entrepreneurial Experience

Here are some additional blog posts on distilling rules of thumb from entrepreneurial experience:

More From Rob Saric

More from Rob Saric’s (@RobSaric) blog, his core beliefs linked to relevant articles on his site:

Q: We Already Have a Prototype, Can We Still Do Customer Development?

Written by Sean Murphy. Posted in 3 Early Customer Stage, 4 Finding your Niche, Design of Experiments, skmurphy

Q:  We have already implemented the first prototype of our product, but we need to know that we are either on a good course or need to change.

A: If you long for certainty you should not be doing a startup, pick a regulated utility or government bureaucracy as a career. Lean Startup and Customer Development techniques can help you to reduce risks by identifying them and developing mitigation strategies but it’s not a guarantee. Any real market attracts competitors and you don’t get to write their plans so it’s not just a question of understanding the prospect’s status quo but being able to identify and react to competitive threats. The view that product-market fit is a ratchet that you cannot fall back from neglects the impact of competitive response, new entrants, and continued changes in technology and customer preference.

Q:  Perhaps I overemphasized our desire for certainty; we understand a startup is uncertain. Should we use our current prototype as an MVP?

Yes. I would  start with what you have and use it as a probe to refine your understanding of the market and customer needs.

Make a distinction between the product, your message, and your target customer. You can talk about your product in different ways, adjusting your message to highlight and test key hypotheses. You do not have to make any changes to your product to this. Any product by definition–or at least any short enough for a prospect for prospect to listen to willingly–of necessity highlights some aspects omits others. You can also use different messages on different target customers or present different message to different prospects of the same type as a way of refining your understanding of what they view as important.

It’s critical that you have conversations with prospects and not simply present messages and see what they react to. It’s only in conversation that you can truly be surprised (you have to be listening, it’s not a monolog) and often the most surprising and useful thing a prospect can do in a conversation is to ask you a question you have not considered before (that’s why it’s called a conversation not an interrogation). When you are looking for early customers the value hypothesis is critical. You may reach them using non-scalable methods that don’t address your first real growth hypothesis.

My take on the distinction between hypothesis and assumption, your mileage may vary: A hypothesis is what is being tested explicitly by an experiment. An assumption is tested implicitly. By making your assumptions as well as your hypotheses explicit you increase the clarity of your approach and the chance for learning. The two things that can trip you up most often is an unconscious assumption that masks a problem with your hypothesis or an unconscious bias in whom you are testing the value hypothesis on. In particular you may have defined your target customer by certain selection criteria but your actual choices for whom to speak to (or who will speak with you) are not sampling from the full spectrum of possibilities.

Q: Or should we build another or several other smaller MVPs to  test only the most important  assumptions? Should we build various tests in parallel to test the needs of different types of customers?

I have come around to the approach of testing several hypotheses in parallel, I think you learn faster and are more likely to identify a good opportunity more quickly. After you take your current prototype and use it to have conversations,  I would explore a few different potential customer types in parallel. One good article on this is by David Aycan, “Don’t Let the Minimum Win Over the Viable,” where he offers a comparison between three approaches:

Traditional linear approach:

linear
Standard sequential pivot approach:
pivot
His recommended approach:
recommended

I am also a huge fan of Discovery Kanban  as a way to manage a set of options and experiments in parallel with managing commitments to customers and other execution targets. It actually gets harder as you start to gain some early customers and need to continue to explore the market and refine your understanding in parallel with keeping your current customers satisfied.

Discovery Kanban Allows Firms to Balance Delivery and Discovery

Written by Sean Murphy. Posted in 5 Scaling Up Stage, Design of Experiments, Video

I believe that Patrick Steyaert’s Discovery Kanban offers critical perspective on how large organizations can foster the proliferation of Lean Startup methods beyond isolated spike efforts or innovation colonies.

I think Patrick Steyaert has come up with an approach that builds on what we have learned from customer development and Lean Startup and offers an orchestration mechanism for fostering innovation and operational excellence. I think  this will prove to be a dynamic approach to managing innovation that will be as significant as Saras Sarasvathy’s Effectuation, Christensen Innovator’s Dilemma and Innovator’s DNA, and Ron Adner’s Wide Lens. I believe it’s going to become part of the canon of accepted principles of innovation because it offers not only a way to frame the challenge of balancing discovery and delivery, but a mechanism for planning and managing them in parallel.

Discovery Kanban is a synthesis of a number of distinct threads of entrepreneurial thinking–Lean Startup, Kanban, OODA, PCDA, and Optionality–into an approach that helps firms address the challenge  of executing and refining proven business models in parallel with exploring options for novel business opportunities. The reality is that you have to manage both current execution and the exploration of future options whether you are in a startup that is gaining traction and needs to develop operational excellence (or an innovation colony that now wants to influence the existing enterprise) or and enterprise that needs to avoid the “Monkey Trap” of escalating investment in a business model that is reaching the end of life instead of parallel exploration of a number of options for new business units.

At the extremes startups are viewed as scout vehicles–suitable for exploration to find sustainable business models–and established enterprises are viewed railroads, very good at moving a lot of cargo or passengers along predetermined paths. The reality is that almost all businesses need to manage both excellence in execution while not only keeping a weather eye on new entrants fueled by emerging technologies and disruptive business models but also exploring for adjacent markets that can leverage their established competencies and new competencies required by current customers.The Lean Startup and Customer Development models have fostered a broad understanding of the need for iteration and hypothesis driven product probes. Kanban models have shown the value of making work visible to enable the shared understanding that makes cultural change possible.

We Help You Design Experiments That Move Your Business Forward

Written by Theresa Shafer. Posted in Design of Experiments

While there are many challenges to master in building a new business, technology entrepreneurs have to balance three primary aspects:

  • Team: can you assemble the talent required and keep them together and moving forward?
  • Technology development: can you build a working product?
  • Customer development: can you solve a problem that people will pay for?

There are many more unknowns than these basic ones. A good advisor does not have all the answers but is familiar with the challenges of getting a new company started and a new product launched. A great advisor can help you design experiments to reduce risk and uncertainty and find answers that are “good enough” to keep moving forward.

We help you make sense of the market by correlating what you have observed with stories you have collected and data you have gathered. We help you form hypotheses and design experiments that tinker with your initial product concept so that you can explore the boundaries and depth of a prospect’s problem.

We offer accountability groups and consulting to help you design, test and learn from your experiments.

Interested in checking us out?  Contact us to book a free office hour conversation to get started.

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Related “Office Hours” posts:

A Conversation With A Bootstrapping EdTech Startup On Customer Interviews

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, Customer Development, Design of Experiments, Lean Startup, skmurphy

What follows is a sequence of E-mails with an entrepreneur bootstrapping an EdTech startup around the challenges of doing customer interviews that have been recast as a conversation, with the original content edited for length and clarity.

Entrepreneur (E): I am working with a couple of friends–we all have day jobs–on an idea for helping students improve their completion of on-line courses, for example from coursera.org or udacity.com. We have a persona for our target student, whom we call Hazel. Hazel is in college and very motivated to learn programming techniques that she aims to integrate into her current degree and later employment. She has taken several on-line courses but has had poor completion.

Sean Murphy (SKM): For Hazel to be willing to talk to you–much less try out your offering–she will need to recognize that she has a problem and believe you have a potential solution. What is her perspective on how well she is doing in her courses?

E: Hazel has enrolled in about half a dozen courses in the last nine months (since Spring Quarter of last year, mainly over the summer) but has completed only one. She feel badly about her lack of progress and has tried a few things to improve her consistency but so far nothing has worked.

SKM: Does she believe he has a problem or need to improve? Why?

E: She is painfully aware of her drop out rate, when she talks to her friends she complains about having to study alone compared to study groups she is able to take part in with her regular college courses.

SKM: What key capability is she looking for to improve her performance?

E: She wants the accountability and peer support she enjoys in her regular college classes.

SKM: I understand what you mean by “accountability and peer support” but are there some specific symptoms of poor performance that she would recognize and acknowledge that you can probe for to get an interview?

E: Have you registered for more than three on-line courses and failed to complete them? Do you take part in informal study groups for your college classes?

SKM: Those sound like good probes using the same language that a student would. I worry that since you are bootstrapping you might want to target folks who have more money or motivation than college students. You want your customers to get more value out of on-line courses; I would be tempted to target people who are already employed who are adding to skills to get a promotion or a new job.

E: We have another persona, Edward, who looks like that but we have decided to start with Hazel. We will ultimately interview people who fit both personas.

SKM: What are your challenges trying to find students who match Hazel?

E: Because we are all working it’s hard to schedule interviews with college students; do you think they need to be face to face?

SKM: I think you will learn a lot more in a synchronous conversation: face to face will tell you the most but a phone call or a Skype call also works, even a chat session is often more useful than an exchange of emails. My last choice would be a survey.  How have you been reaching out to folks to interview?

E: We have been posting in the on-line course forums when we see someone post something that looks like they are having trouble completing the course:

“I read your message <Title> on <Forum> at <URL> and I’m very interested your take on <Course> in particular and your experience with on-line learning in general. Do you have 15 minutes for a Skype call to share your opinion on online courses? A few friends and I, after having some problems with a course we took together, started working on something we believe will improve online learning and we’d love to hear your take on it. If you don’t have the time for a call, would you be willing to share your insight over email? We also have this survey <URL> that only takes 3 minutes to complete if you’d prefer.”

SKM: 15 minutes is a big ask for a stranger and you don’t offer any specifics in your e-mail as to how you may be able to help or enable them to do some self-diagnosis to see if your solution may be something that they are looking for. It’s not clear how they will benefit from the conversation.

E: People can be pretty eager to tell you what they think about something they care about so I thought that in itself might be enough of a driver. But we have had a low response rate when we asked just for a Skype call. We have more people either giving us a short reply over e-mail or taking the survey. Would it be better to drop the other options and just suggest a Skype call?

SKM: I would offer Skype and E-mail. An exchange of E-mail can lead to a Skype conversation; I think it’s harder to move from a survey to a conversation.  You might consider blogging about ways to improve your performance/results/learning from an on-line course: outlining methods or techniques that would complement your solution. This would offer some credibility that you can help students and give you something to point to in the offer letter.

E: Blogging sounds like it would take a lot of time, and time is a pretty big constraint for us. How high would you rank blogging compared to other activities related to customer interviews? How about offering a gift card? $20 for a gift card is totally worth an hour of my time to author a decent blog post. I understand a blog post might have less perishable value in the long run.

SKM: You can share the same “decent blog post” with many people who may each value it and who can each share it with friends they think it may help. A gift card is proof that you value their time but does not substantiate any expertise or offer direct assistance in addressing the problem or need your solution is targeting.

Let me suggest another way to look at your question. Would you rather interview?

  1. Ten college students for 5 minutes who read your blog post “10 tips for finishing an on-line course” and are interested in talking to you about their challenges in completing on-line courses
  2. Ten college students for 15 minutes who heard that you were giving away $20 gift cards as a reward for an interview.

I think many in the first group may talk to you for more than five minutes if they don’t feel that the first five was a waste of their time. It may be hard to talk to few in the second group without promising another gift card.  Because I work primarily in B2B niche markets and have to cherish any prospects I come across I don’t look at informational interviews as transactions but the start of a potential business relationship.

There is a trap that some entrepreneurs fall into: they look at prospects they are interviewing as a consumable–somewhat akin to the way a scientist might budget for lab rats–instead of potential customers who will require several conversations of escalating mutual disclosure to establish a business relationship with.

E: I understand your point, but it seems that it may be worth it in some circumstances to shortcut that process. I wouldn’t think that one blog post with some useful tips would be enough to repay the person for the time I’m asking for. Yes, it’s certainly better than nothing, but does it really help to move the needle? I can see that providing great content and supporting Hazel could help me to understand her needs better and led to us doing business. But is trying to close her and get her to become a customer the goal here?

SKM: I work in niche markets and cannot afford to look at any potential relationship as disposable. Try both, pay some people and see if you can write something that offers enough insight that folks feel like giving you five minutes of their time. What you do in that five minutes may encourage them to give you another five minutes. That’s how relationships are built. Not everyone you talk to turns out to be a fit and many of those that are don’t care to continue the conversation. But I like to engage in a way that does not preclude further conversation.

E: I know I don’t have a lot of experience yet doing interviews so I’m looking for guidance. But on paper it would seem worthwhile to try and get some feedback as quickly as possible on the potential validity of the idea and then start to build some more “content” and stronger relationships. Where is the risk in that approach?

SKM: If you are in a hurry it can work against empathy and appreciative inquiry, both of which are critical to forming a deep understanding of a prospect’s situation and needs.

E: One of our values as a business is to be grateful to anyone who tries to help us and to treat them with respect. And even though it can hurt when people decide not to have a conversation, it’s still a useful signal so we respect that decision as well. We don’t treat anyone as a lab rat and try to help him or her as best we can, but this doesn’t seem to preclude the possibility of an initial shallow conversation. Now whether that lack of depth is an issue in building my business or not that I’m not really sure.

SKM: I had two additional thoughts for you:

  1. I don’t think Hazel views her problem as an inability to finish on-line courses. She is signing up for those courses to meet some need or to enable an opportunity. I would dig a little deeper into what she will do once she finishes the course.
  2. An on-line class provider may view their “dropout rate” as a problem and they may be the real customer.

[We adjourned for two weeks and then had a second shorter exchange.]

E: We decided to opt for the “blog post” option. We also managed to go to some evening Meetups and tried to add value for people right there while talking to them. That worked surprisingly well. Hopefully it’ll continue that way. I still feel like there’s a place for the paid interviews, maybe even as an intermediary step between face to face interviews and flat out surveys.

SKM: When you can find a way for your discovery conversations to offer value to a prospect, then they are more likely to share information and more willing to agree to continue the conversation or agree to a second conversation. One test for interest is that it becomes less of an interview (or worse an interrogation where you are asking all of the questions) and more of a dialog where you are both asking questions of each other.

E: As far as your additional thoughts, we now believe that you were correct on both accounts and based on the last few rounds of interviews we have a better idea of Hazel’s reasons for not finishing the course. We are now trying to determine how that intersects with the course provider’s perception of that problem: the course provider is interested in drop out rate but Hazel is not really focused on dropping out.

We are now trying to get a better understanding of Hazel’s goals in taking the course so that we have a shot at helping her succeed. In parallel we are trying to figure out how to have some conversations with the course providers. If we decided that selling to the course providers was the way to monetize this, would you talk to them first? Even if we are not sure we can find a way to help Hazel improve her odds of finishing the course?

SKM: If you plan to sell to course providers I would try and gain a better appreciation for their perspective and their business model: e.g. what are cost and revenue drivers; what do they view as the key risks in launching a new course or making a profit on a course.

One possibility to consider is that they may be less interested in helping Hazel and more interested in how to predict who will complete the course, in particular at or before signup, and how to attract more of those students. In other words: if the course provider is your customer I would figure out if they would pay me to help Hazel complete the course before I invested effort figuring out how to help Hazel complete the course.

If Hazel is the paying customer then you have to determine if she would pay you something to help her complete a “free” course: again I would focus on this question before trying to dig too deeply into how to help her complete the course. Prospects are often more interested in outcomes, costs, and timeframes than the details of your solution. One good book on this is “Great Demo” by Peter Cohan, who suggests that you open very quickly with the “ta da” or final result and see if the prospect wants it before diving into the details.

Innovation Needs Starvation, Pressure, and a New Perspective

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, Design of Experiments, Rules of Thumb, skmurphy, Video

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.

Dave Snowden on Culture and Innovation

Dave Snowden has a thought provoking post on Culture and Innovation where he identified three  necessary, but not sufficient conditions for innovation to take place:

  1. Starvation of familiar resource, forcing you to find new approaches, doing things in a different way;
  2. Pressure that forces you to engage in the problem;
  3. Perspective Shift to allow different patterns and ideas to be brought into play.

Snowden also observes:

Creativity is just one way, and not necessarily the most effective to achieve perspective shift. In fact I am increasingly of the opinion that creativity is not a cause of innovation, but a property of innovation processes, its something that you can use as evidence of innovation, but not to create it.

What Innovation Requires of Bootstrapping Entrepreneurs

  • Successful entrepreneurship is an ongoing self-improvement project, it’s frequently painful as you force yourself to confront your own shortcomings  and leave your comfort zone to try new things (which often don’t work the first time).
  • Find a customer problem that you care about solving and put the pressure on yourself.
  • Don’t assume you can plan your way around failure. Run small experiments with small budgets that  simulate a starvation of resources.
  • Try and “walk around problems” and look at them from different angles.

Some Related Articles and Books on Innovation

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