Ten Mistakes Early Stage Bootstrappers Often Make

Written by Sean Murphy. Posted in 2 Open for Business Stage, 3 Early Customer Stage, Rules of Thumb, Silicon Valley, skmurphy

Over the years I have moderated several hundred Bootstrapper Breakfasts (since starting them in Silicon Valley in 2006). After doing a hundred or so and working with many clients who were bootstrapping I came up with a checklist for common mistakes bootstrappers and bootstrapping teams make in their first year or so.

  1. Leaving Your Assumptions Implicit: Not Writing a Customer Development Plan
  2. Believing that Anyone Will Want Your Product: Not Targeting a Specific Buyer
  3. Confusing the User (or the Audience) with the Buyer/Customer
  4. Believing Your Product Will Sell Itself (Looking for Smarter Prospects)
  5. Developing the Full Product: Not Selling the Smallest Piece Possible at First
  6. Not Focusing on Break-even and Profit
  7. Expecting Too Much Too Soon: Not Planning for “Target Practice”, Iteration, and Improvement
  8. Confusing VC with Customer: Going for (2% of) a Really Big Market
  9. Expecting the Same Control Over Prospects and Team Members as Your Code Base (Single Founder “No Compromise” Mindset)
  10. Treating the Business Like a Hobby (Thank God for Significant Others, Recently Deceased Relatives, and Crappy Day Jobs)

Five additional challenges that also need to be navigated

  1. Managing different aspects of your identity at personal, family, and business level.
  2. Understanding the emotional connection required for a successful business transaction: mission, brand promise, and  logo.
  3. The networking etiquette in Silicon Valley: cards, introductions, how to get acquainted.
  4. Making the transition from selling to friends to selling to a strange
  5. Making the commitment to a business footing: licenses, structure, tracking expenses (and acknowledging that now you can fail).

Adapted from a talk I gave in August 2009 at the San Francisco Bootstrapper Breakfast.

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.

A Simple Checklist for Introducing a Collaboration Application

Written by Sean Murphy. Posted in 2 Open for Business Stage, 3 Early Customer Stage

We work with several teams who have launched or are launching an application that makes a team or group more productive.  Here are a couple of suggestions for things to consider.

Be compatible with the status quo if at all possible

  • Collaboration or workflow applications that require at least two people to adopt in order to realize productivity benefits are very challenging to introduce.
  • It’s certainly been done: fax, email, CRM systems. But the list of failures is much longer.
  • Find a way to provide a single individual with a productivity bonus that is backward compatible with existing workflow (e.g. email, CRM, wiki, website, …).

Use your team as a case study

  • Is your startup using the tool for collaboration? If not, why not?
  • What no longer happens that used to happen before you started relying on the application?
  • What can you now do using your application that you could not do (or only do with great difficulty) before?

Have conversations before putting up a landing page

  • What have you learned from your conversations with prospects?
  • What problems or needs do you probe for?

Use your team as an earlyvangelist

  • What problems or need or recurring situation led your team to develop your application?
  • What alternatives did you try to do before you developed your application?
  • Why were they unsatisfactory? What was missing or still too difficult?

Listen carefully to your early adopters

  • What do your early adopters tell you that they like about using the service?
  • What benefits does it provide them?
  • What do they still see as missing?
  • Ask what three features they would demo either to other similar teams or to others in their company.

Understand why some teams failed to adopt your application

  • Teams that don’t try it may give you reasons, and these are worth listening to.
  • Pay close attention to teams that gave it a fair trial and decided not to go forward. Their rationale is absolutely worth addressing.

If you are working on a collaboration application for business and are having difficulty getting traction, please free to schedule office hours and we can design some experiments to explore your situation, see “We help you design experiments that move your business forward.

 

Q: How To Speed Up Early Trials, Adoption, and Sales

Written by Sean Murphy. Posted in 3 Early Customer Stage, skmurphy

Q: I run a SaaS B2B startup that boosts employee engagement by bringing co-workers together for peer-to-peer knowledge sharing. We have an MVP. We have done some customer development interviews and have half a dozen potential early adopter customers. The next step would be to do a free pilot of our product on a subset of about hundred employees at an early adopter company.  Our contacts are enthusiastic about what we do, we have had a couple meetings with each, we are offering discounted pricing, but it’s now been more than four months and none have them have decided to move forward to a pilot and we don’t have a path to a decision. 

How can we speed this up?

A: You can adjust your message (description of benefits for a particular target customer), your criteria for selecting a target customer, or feature set. Normally the cheapest thing to fix is to change the message, second is to pick a new target, and the most expensive is to add features.

A benefit will normally be one of these if you are selling to a business decision maker:

  • reducing an existing cost stream
  • adding new revenue that’s incremental to their current plan
  • managing or reducing a risk that they are concerned about
  • reducing the cycle time for a business critical task or process
  • reducing the error rate for a business critical task or process

You need to pay particular attention to:

  • How will you measure the before and after?
  • Who signs the check and how do they benefit?
  • There is no such thing as a free trial, there is always opportunity cost for everyone involved.

I am a huge fan of “peer to peer knowledge sharing” but it sounds more like a method or management practice than an application. I suspect you need to connect the dots more directly to a business payoff or the specific business problem you believe that this will help them address. Can you give them a better diagnostic–offer more proof based on data from their operation–on the scope of the problem you are offering to solve for them?

A hundred people is a large number to involve in an early pilot. Can you show results with a small group of four to six? You don’t have to stop there, you can make that the first phase of the pilot, but you can use the small core group to encourage others to adopt within the organization and ultimately get to your target group of a hundred in three or four steps.

There is a temptation to increase the size of the promised benefit if the prospect is wavering, it’s often better to focus on a faster benefit even if it’s smaller. Time to positive impact is a good proxy for a prospect’s estimate of the amount of risk involved in a new tool, process, or methodology. I did a video chalk talk on this at  you may find useful.

Several meetings and no decision to go forward is a polite no.

Q: What if we played hard to get and told our prospects that we have limited resources and with other firms asking to get in we have to decide who to start this month?

I see several problems with this. You reinforce that you have limited resources which may make them question you ability to support them if they decide to go forward.  Also, if you are talking to bona fide early adopters this is can backfire very badly. While this “velvet rope marketing” model seems to employed by some B2C marketing folks, in my experience it does not work well and will turn off the change agents you are trying to reach. They want to be sure that you understand the risk you are asking them to take and will be there to support them to a successful conclusion. A message that you are unable to provide support when you are just getting started will make them very leery of placing a bet on you.

A better message would be based on the impact adopting you offering will have on their business. Make that your forcing function. For example, every month you delay you spend this much on workarounds or errors or forego this much revenue because you are not capitalizing on this capability. What is the cost of leaving things the way they are for another month? Make that a reason to change, not your impending inability to support them.


Related blog posts

Update July 16: This post was highlighted in Foundora Issue 333

Ten Principles for Trust and Integrity from Adventures in Missions

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, Rules of Thumb, skmurphy

I have come to believe that morale or esprit de corps is the critical resource for a bootstrapping team. With it they can persist, blending freelancing, consulting work, customer discovery, product development, sales, and customer support.

The simple view is that you can just focus on one thing at a time–develop a product, market it, refine it, scale up–and that a few iterations will get you there. The reality for most is that it’s much harder and requires perseverance as a team.

The teams that persevere bring complementary skills and shared values to a common effort sustained by trust, shared vision and joint accountability. The first ten principles from  Adventures in Missions focus on trust and integrity,  offering some useful guidelines for building and maintaining trust:

  1. Integrity in an organization is built by developing trust.
  2. Trust is the glue that enables a team to function well.
  3. Trust is built over time through competence, commitment, and care.
  4. Trust is built as we preserve and build the significance of others.
  5. Trust is built through bearing each others’ burdens.
  6. Trust is built through a rapid response to communication.
  7. Trust is built through humility.
  8. Trust is built through personal contact.
  9. Trust is diminished by sarcasm and criticism.
  10. Integrity means making and living up to commitments.

See also “Entrepreneurship is the Launching of Surprises” which explores George Gilder’s essay “Unleash the Mind” and contains this insight that I think I am building on in my focus on morale as the key resource in a startup:

“America’s wealth is not an inventory of goods; it is an organic entity, a fragile pulsing fabric of ideas, expectations, loyalties, moral commitments, visions.”
George Gilder

Bootstrappers Turn Time Into Resources and Possibilities For Customers

Written by Sean Murphy. Posted in 3 Early Customer Stage, 4 Finding your Niche, Rules of Thumb

I am a huge fan of Neil Perkin’s blog  “Only Dead Fish” and his two newsletters: “Your Weekly Dead Fish” (archive) and “Fraggl.” I followed a link from his post on “Complexity and Simplicity” to a thought provoking presentation by Possible Health on “Our For Impact Culture Code.

Here is my take on some key concepts from the deck  (emphasis in original) that would benefit bootstrappers –as well as “non-profits.” I have added my observations in italic:

  1. “Non-profit” is a legal structure, not a way of doing things. And we don’t believe that we should define ourselves in the negative. Instead, we exist to create impact.
    Observation: bootstrappers are often motivated by a desire to make an impact (in addition to a desire for autonomy) and have to focus on impact as a way to prove credibility and establish their firm as a viable alternative worthy of consideration.
  2. We treat efficiency as a moral must.
    Observation: in the non-profit world this avoids the trap of excusing poor and/or inefficient execution because you are working on a “good cause.” For bootstrappers it’s second only to impact for viability.
  3. If building effective healthcare systems for the poor were easy, everyone would do it. We do this work precisely because it is labeled as “impossible” by many.
    Observation: you can substitute “effective healthcare system” for whatever you own Big Hairy Audacious Goal (see “Building Companies to Last” by Jim Collins for more on this term). Bootstrappers have to work in riskier and more challenge environments because established firms are less willing to invest effort when markets with a clearer return are accessible.
  4. When your outcome is impact, time  is a terrible thing to waste.
    Observation: as I have outlined in the Chalk Talk on Technology Introduction, prospects use their estimate of your “time to impact” as the single best indicator of the amount of risk in your solution. Days to weeks beats months to quarters.
  5. When you’re working in the world’s most challenging environments under constant uncertainty, the way to maximize learning is to minimize the time to try things.
    Observation: any environment with high uncertainty is challenging, running smaller experiments minimizes the cost of failure and speeds learning.
  6. It’s everyone’s job to turn time into resources and possibility for our patients.
    Observation: all that bootstrappers have in the beginning is their time; if they cannot create an impact and a sense of possibility in prospects they won’t prosper.

Related Startup Culture posts:


Update June-28-2014: Guillermo Marqueta-Silbert (@guillemarqueta) tweeted a comment to the effect that the exchange rate for entrepreneur hours to impact was a function of entrepreneurial skill. I think this is a great insight and suggests a more nuanced understanding that it’s not just trying anything but trying things that flow from a deep understanding of customer situation and needs, competitive landscape, relevant technology alternatives, and market evolution. In an OODA Loop formulation–Observe-Orient-Decide-Act–the key differentiator that expertise brings is a richer and faster Orientation to the situation.

Q: How Much Attention Should I Pay To Potential Competition?

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

Q: When I introduce the idea for my business a lot of my friends are quick to ask: “are you sure there is no one else doing this?” In today’s fast and disruptive business world, I think it is very hard to come up with a business idea that is 100% unique, and utilizes a completely new set of technology features. I constantly find myself arguing that it doesn’t matter if someone else also has the same startup or business idea, it’s how you go about executing your business idea that matters.

What are your thoughts on competitors and how put off should I be when I find out another company has a similar product and mission to my startup?  

Your friends are trying to help you but you may be asking them to comment on a problem where they have little expertise. Evaluating a new business idea is challenging even for professional investors and firms already in the target market–how many times have new entrants been underestimated or new technologies view as far more promising than they turned out to be. It’s a hard problem.

You are being encouraged to look left and right at potential competition, I would try and walk around the table and look at the situation from your prospect’s perspective.

Perhaps a more important set of of question for  B2B are:

  • What is your prospect doing now to solve the problem?
  • Are they satisfied with their current solution or do they still view this a critical business issue?
  • What other solution options are available to them?
  • Which of these other options have they also evaluated and rejected and why have they done so?
  • Are you providing a capability or solution for what they consider a critical need.

Execution only matters in the context of a particular category of customer with a distinct and identifiable problem or need.

Working to develop new capabilities when it’s not clear who will pay for them may give you the illusion of progress for a while but ultimately won’t let you build a business.

My suggestion is to pay close attention when prospects ask you to explain why your product is superior or at least different in some useful ways from what they are currently using or have available to them.

My question is why are you talking to your friends instead of having serious conversations with prospects? What are your prospects asking for or telling you?

Building a Business Requires Building Trust

Written by Sean Murphy. Posted in 3 Early Customer Stage, 4 Finding your Niche, 5 Scaling Up Stage, Sales, skmurphy

“Don’t take business advice from people with bad personal lives.”
Frank Chimero “Some Lessons I Learned in 2013

One of the hallmarks for success in a business-to-business market is the ability to form personal relationships as well as professional business relationships. I am always dismayed when I read advice that advocates bait and switch or other forms of con games that erode trust and make it difficult for any startup to build relationships.

Anyone who always puts themselves first ends up with bad personal life. Startups that are only clear on their own needs rarely outrun the same fate. It’s the difference between a focus on funding or an “exit” and a focus on building a business.

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. It does not happen very often, and it hasn’t happened in more than a year, but perhaps three or four times in the last decade we have had to walk away from a sales or marketing strategy we didn’t feel was in the long term best interest of the startup or their prospects.

“Fame is something that must be won.
Honor is something that must not be lost.”
Arthur Schopenhauer

Related posts

  • Treat Social Capital With The Same Care as Cash
  • De Tocqueville on Concept of “Self Interest Rightly Understood”
    You meet people who have a clear understanding of their own needs and seem to spend no time on anything else. But the deals that they make seem to based only on fear and threat. To create real opportunities in your own business requires that you explore and understand the needs and aspirations of your current and potential customers. To bring them ideas that will improve their lives and businesses requires that they trust you have their interests at heart when they talk about current problems that may expose their weaknesses and shortcomings
  • Keeping Your Customers’ Trust [Includes a Recap of Weinberg's 11 Laws of Trust]
    I think B2B software is often purchased by firms hoping to achieve–or avoid–some sort of change. Like consulting, software is the promise of an ongoing business relationship.  The two essentials in a mutually satisfactory business relationship are trust and an exchange of value.
  • Sustaining Is More Important Than Starting
  • David Foster Wallace: The Only Choice We Get is What to Worship especially this section from Wallace’s talk:
    But of course there are all different kinds of freedom, and the kind that is most precious you will not hear much talked about in the great outside world of winning and achieving and displaying. The really important kind of freedom involves attention, and awareness, and discipline, and effort, and being able truly to care about other people and to sacrifice for them, over and over, in myriad petty little unsexy ways, every day. That is real freedom. The alternative is unconsciousness, the default-setting, the “rat race” — the constant gnawing sense of having had and lost some infinite thing.
  • Honesty in Negotiations
    One of the key tasks we help early stage teams with preparing for and executing successful negotiations.  There is a belief among some engineers that the best marketing and sales people are the most accomplished liars. In my experience nothing could be further from the truth. Most negotiations have long term consequences and involve interacting with people that you will encounter again and who know others you will encounter in the future.  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. In George Higgins‘ novel “Dreamland” a character remarks “I never forget and I always find out. ” I assume that about anyone that I am negotiating with.

Feeling Lucky Is Not a Strategy

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, skmurphy

“Luck cannot be duplicated.” Richard Kostelanetz

Riffing on a Nov-2-2013 TechCrunch post by Cowboy VenturesAileen Lee (@aileenlee) “Welcome To The Unicorn Club: Learning From Billion-Dollar Startups” Ryan Hoover suggests that you should “Forget What You Know: There is No Right Way to Start Up”[1][2]

“They didn’t talk to people. They didn’t do market research. They didn’t create a landing page to see if people would enter their email. They just built it. For the past year, they invested in the team and technology to prioritize speed of iteration with disregard to traditional methods of customer development and company building.”
Ryan Hoover in “Forget What You Know: There is No Right Way to Start Up”

This is not a methodology, it’s hoping to get lucky. The article cites several startups that may have gotten lucky as proof of…I am not sure, I guess that it’s possible to get lucky.

“Lean methodology and the startup community at large, espouses customer interviews, landing page tests, concierge experiments, and other tactics for testing hypotheses and measuring demand before building a product. In many cases, this is good advice but sometimes it’s a waste of time or worse, directs entrepreneurs away from something truly great.”
Ryan Hoover in “Forget What You Know: There is No Right Way to Start Up”

For every team that gets lucky I wonder how many thousands run through their savings in search of the truly great without talking to customers or testing their hypotheses. Perhaps a more careful and detailed analysis will uncover ways to duplicate the success of some of these startups but I worry that it may be like trying to select the winning lottery ticket: the fact that some people do it does not change the fact that on average it’s a terrible investment strategy.

“Diligence is the mother of good luck.” Benjamin Franklin


Ryan’s essay also appeared on LinkedIn and TheNextWeb:

I don’t think this “Forget What You Know” post is representative of the quality of Ryan’s insights. Here are three blog posts by him that I have found very useful and recommend reading:

 

Video from Lean Innovation 101 Talk at SF Bay ACM Nov-20-2013

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, 4 Finding your Niche, Events, Lean Startup, skmurphy, Video

The video from my “What is Lean–Lean Innovation 101” talk is up:

Here is the description for the talk

“Lean” provides a scientific approach for creating a product and developing new businesses. Teams can iteratively building products or services to meet the needs of early customers by adopting a combination of customer development, business-hypothesis-driven experimentation and iterative product releases. This talk covers:

  • Why more and more companies are using Lean
  • What is Lean, what it is not
  • Key concepts
  • Get Out Of Your BatCave
  • Use an initial product (MVP) as a probe to explore the market
  • Build-Measure-Learn
  • When and how to pivot
  • Rules of thumb for successful lean innovation

I want to thank Alex Sokolsky for his outstanding effort on behalf of SF Bay ACM doing the video capture and editing.

Five Serious Financial Mistakes Bootstrappers Can Avoid

Written by Theresa Shafer. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, First Office, skmurphy

Five  serious but avoidable financial mistakes we hear from time to time at a Bootstrapper Breakfast:

  1. Mistake: using credit cards to finance your startup.
    Fix: Pay cash, trade favors, barter, go without, but don’t let your monthly balance roll over and accumulate.
  2. Mistake: not having a stopping rule for when you need to stop bootstrapping and look for work. This can lead to bankruptcy.
    Fix: set a time limit and an expense limit for getting your new business off the ground. Work part time and work on your business part time to maintain break even cash flow.
  3. Mistake: not keeping your spouse in the loop if they are working and keeping the lights on while you bootstrap.
    Fix: treat your spouse as an investor or a board member: provide ongoing detailed accounting of plans and spending.
  4. Mistake: hiring a full time employee too soon.
    Fix: start with contractors, make sure you can at least break-even on a regular basis with the contribution the employee will make vs. the additional expenses incurred–understand all of the expenses you first full time employee will trigger (e.g. workers compensation, payroll service, fixed salary expense (vs. contractor)).
  5. Mistake:  signing a lease on an office too soon
    Fix: use co-working space, look for an informal sublet, be clear on why you need an office (e.g. just pay for meeting rooms as needed, barter for lab or working space as needed, look at hourly/day rate offices for conference calls or meetings).

#3 got picked up by Entrepreneur Magazine in a roundup of 7 tips: “Funding Your Business on Your Own? Learn From These 7 Entrepreneurs.”  I thought these three from the list were also common and avoidable:

  • “Branding too soon” by Rebecca Tracey of The Uncaged Life
    This is really investing too much in messaging before you know what works. I have made this mistake and I see others do it as a way to make the business seem “more real” or “like an established company.”  Trying things out in conversation gives you the fastest feedback and is the easiest way to iterate if you are deliberate about it.
  • “Idealism about costs” by Tom Alexander of PK4 Media
    This comes in many forms, but the most serious that he touches on is not understanding how long it can take to get paid, especially by a larger firm. 90 to 120 days from invoice has not been uncommon for many of our clients. Small firms tend to pay faster, and getting paid the first time by a large firm can take much longer than subsequently.
  • “Failing to calculate burn rates” by Steve Spalding of Project MONA
    This takes several forms, but one mistake is to pay yourself a salary (incurring State and Federal taxes on the “round trip” from your savings back to your bills instead of putting less money into the business and living off of your savings. It’s also better to provide the bulk of your starting capital as a loan instead of equity, so that early profits can be distributed as loan repayments instead of salary or dividends.

Update Thu-Feb-27 (morning): Elia Freedman offered a common critique of this post, In Getting Good At Making Money by Justin Williams and “How to Get Good at Making Money” by Jason Fried. Writing “The Art of Bootstrapping” he observes

The only thing a bootstrapper needs to know: CASH IS KING. Nothing else matters and every decision needs to be made to maximize cash. The articles refer to revenues, but revenue is not cash. Here’s an example: I do a contract development job today for $10,000. When done I submit an invoice and the company takes 60 days to pay. Yes, I have $10,000 in revenues today but I don’t get the cash for 60 days. How do I pay my bills in the meantime?

I am relentless when it comes to managing cash. I have a spreadsheet that gets duplicated and updated with actuals and projections every month. This allows me to make cash flow decisions months before the negative shortfall actually happens, allowing me at various times in the history of the company to ratchet up spending, lay people off, cut payroll or minimize other expenses. Because of this work, I see the company very very clearly on a month to month basis and can make appropriate choices.

I think it’s a fair criticism. An accrual accounting perspective has too much parallax from bootstrapper’s actual cash position and offers a false sense of security. I tried to sharpen the advice from the Entrepreneur round up on “Idealism about costs” toward this but I would add a sixth mistake to make it clear:

Mistake: Using accrual accounting (ignoring the timing–the real cash impact–of cost and revenue items) will kill you.
Fix: Forecast  and manage the explicit timing of cash in and cash out for your business. Understand that people will cash your checks immediately but be slow to pay your invoices.  Some won’t pay the full amount or even pay at all. Rely on clear understanding and simple plain English agreements, don’t hope that “legal language” in a contract will make a difference to your getting paid (assume any contracts you sign will be enforced against you by larger firms.

I think trust is as important, if not more important than cash. Bootstrappers who focus exclusively on cash without also managing trust and social capital will often fail to prosper as well. Related blog posts:

Update Mar 8: this post was included in the Founder Institute’s “Mar 2 2014: This Week’s Must Read Articles For Entrepreneurs.

Q: Resources For A Lean Approach to Sales, In Particular New Product Introduction

Written by Sean Murphy. Posted in 3 Early Customer Stage, 4 Finding your Niche, Sales, skmurphy, Workshop

Q: We have started selling and are looking for resources for a lean approach to sales, in particular for new product introduction.

Scott Sambucci and I presented a workshop at Lean Startup 2012 on “Engineering Your Sales Process.”
The deck is posted at http://www.slideshare.net/SalesQualia/engineering-your-sales-process

About 70% of the workshop is interaction with attendee on their specific early sales challenges so it’s not something that we video record.

Scott Sambucci has two books out that address early sales issues:

Here are two articles that offer useful overviews of what’s needed to define a sales process:

In addition here are some other books you may find helpful:

Here is a long interview I gave to Gabriel Weinberg on early stage B2B sales that many entrepreneurs have found useful: Sean Murphy on the first six enterprise customers

All of these resources talk about a systematic approach to selling for new products.  I continue to offer “Engineering Your Sales Process”® as a workshop for early stage teams. Please contact me if you would like to arrange for a workshop.

Getting More Customers Workshop on March 25, 2014

Written by Theresa Shafer. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, 4 Finding your Niche, 5 Scaling Up Stage, Events, skmurphy, Workshop

Getting More CustomersLet’s face it, finding customers can be quite a challenge. In this interactive workshop, we will cover a variety of proven marketing techniques for growing your business: attendees will select one or two that fit their style and develop a plan to implement them in their business in the next 90 days.

  • Speaking – small groups, large groups, conferences, …
  • Writing – blogging, newsletters, articles, …
  • What Other People Say About You – referrals, testimonials, case studies, …
  • Getting Found When and Where Prospects are Looking: adwords, Craigslist, trade shows, SEO/SEM, …

March 25, 2014 9am-12:30pm
Sunnyvale, CA
$90 includes lunch

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“This workshop provided great material to bounce off of. SKMurphy created a fertile space for me to think about my business and plan a concrete step forward. Thank you.” Paul Konasewich, President at Connect Leadership

Difference Between a Hypothesis and an Assumption

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage

Q: What are the key hypotheses you need to address first getting your startup off the ground? What is the difference between an assumption and hypothesis?

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 who 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 who to speak to (or who will speak with you) are not sampling from the full spectrum of possibilities.

See also


Update Wed-Jan-29-2014: Tim Allen left a great comment that elaborated on the need to focus on value first even if your methods don’t scale:

There was a bit of a light-bulb moment for me what I read the line:

“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.”

I feel this is so often forgotten, especially in the situation of legacy systems and trying to execute lean product design within larger organizations. One example that I have been involved in, and which I regret not pushing back harder, was a requirement to use some legacy data services.

This meant that we couldn’t initially execute a hand-cranked, non-scalable solution to data storage and retrieval that our product required, which would have been better as it would have enabled us to get to customer quicker and get real learnings about how they are using our product.

At the time it didn’t seem like a big deal, but in the end it was, and continues to be an issue and an impediment in getting to the customer quicker. Likewise, any real growth hypothesis, results will most likely be skewed by the performance of systems that are not in your control.

I want to thank Tim for offering a practical story that elaborates on the principle of confirm the value before worrying about scaling. When I was at Cisco the focus was always on “will it scale,” as in we shouldn’t do something because “it won’t scale.” This sometimes led to us releasing a product that could have been more valuable if we had proceeded a little more thoughtfully and incorporated early feedback before rushing to launch. Techniques that work “in the small” to gather insight have their place even inside of large firms.

The Likely Consequences of Entrepreneurship Require Perseverance

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, 4 Finding your Niche, Rules of Thumb, skmurphy

Justin Kan (@JustinKan) wrote “Startups Don’t Die They Commit Suicide” in 2011″ (mirrored on his blog here)  reflecting on what he had observed and learned as a serial entrepreneur. It was reposted on the Philly Startup Leaders list earlier this week which led me to write the following comments mixed with excerpts from Kan’s post.

Startups die in many ways, but in the past couple of years I’ve noticed that the most common cause of death is [when] founders/management kill the company while it’s still very much breathing.

I think this is right, two key requirements for building a business are team morale–shared vision, enjoyment of working together, hope for the future–and cash flow. And morale can get you through periods of poor cash flow  more than cash flow can compensate for poor morale and team dynamics. I think a lot of teams lose their “gumption” and give up.

Long before startups get to the point of delinquent electricity bills or serious payroll cuts, they implode. The people in them give up and move on to do other things, or they realize that startups are hard and can cause a massive amount of mental and physical exhaustion — or the founders get jobs at other companies, go back to school, or simply move out of the valley and disappear.

I think bootstrappers are in some way at less risk for this because they know it’s going to be hard, although perhaps not how hard.
A lot of times the founders don’t maintain their health and energy and cannot weather a setback or analyze their situation with enough emotional distance: debugging your startup requires peace of mind

Often the root problem can be traced back to a lack of product traction — it’s rare to find people willingly quitting companies with exploding metrics. But one thing that many entrepreneurs don’t realize is that patience and iteration are critical in achieving product market fit.

Keeping a ‘captain’s log’ or other journal can give you a place to vent your frustrations–and let them cool for later analysis–jot down your fragmentary insights for later revision and recombination, and allow you to look back at earlier crises you have managed and problems solved: record to remember, pause to reflect. We have worked with a couple of Finnish teams and they have a great word “sisu” that is the Arctic version of gumption.

Overnight successes might happen fast, but they never actually happen overnight.

I think a lot of the desire for overnight success  is driven by trade press accounts of young millionaires who clean up the real story to make it seem simple and inevitable. I have met a number of entrepreneurs who think that one deal or one relationship will be the point of departure for a rocket trip to the stars. That’s always the way the success narrative is cleaned up and presented, but the reality almost always–barring a few lottery ticket winners–involved a lot more hard work and the slow accumulation of many small insights, decisions, and advantages.

On the other hand, happy people don’t normally start new companies: as Sramana Mitra has observed, startups are founded by mavericks, iconoclasts, dropouts, and misfits.  In fact, I think Barry Moltz is right: you need to be a little crazy.

Still, I think morale at an individual and team level is a key resource, and the teams that persevere seem to be more driven by the thought of proving a new idea right than proving  former co-workers, bosses, or  relatives wrong. While 0roving folks wrong can be the start–bold action coupled with frank expression has inadvertently launched many a deeply felt entrepreneurial career–it’s rarely what sustains an individual much less a team.

“It’s only after you fail once or twice and learn to rely equally on thought, analysis, and anticipation–in addition to speed, talent, and execution–that you can really call yourself an entrepreneur. ”
Barry Moltz in “You Need to Be a Little Crazy

Tom DeMarco on Leadership, Trust, and Training

Written by Sean Murphy. Posted in 3 Early Customer Stage, Rules of Thumb, skmurphy

I re-read Tom DeMarrco‘s “Slack” over the Thanksgiving break and came away with a couple of good ideas worth sharing.  He offers the following definition of slack in the second to last chapter “Working at Breakneck Speed”

Back in the time of sailing ships, going anywhere by ship was a risky business. Going faster increased risk (more sail kept aloft in high winds, more changes taken in unknown and shoal waters, more fatigue and more human error). In such a time, the naval forces would instruct their captains to “proceed with all prudent speed” to arrive in a timely manner at an engagement. Prudent speed is something other than breakneck speed. It’s slower. We have to learn to move our knowledge endeavors “at all prudent speed.” [..]

The difference between the time it takes you to arrive at “all prudent speed’ and the time it would take at “breakneck speed” is your slack. Slack is what helps you arrive quickly but with an unbroken neck.

He offers insights on leadership, trust, and training that I found very applicable to entrepreneurs managing startups.

Leadership: there is no easy formula for real leadership (if there were we would see a lot more of it), but it seems clear that the following elements always need to be present:

  1. Clear articulation of a direction
  2. Frank admission of short-term pain
  3. Follow-up
  4. Follow-up
  5. Follow-up

Deciding what you will sacrifice or forgo to meet your objectives is a key element of developing realistic objectives and actions plans to support them. Adjusting your plan in light of intermediate results is also required. This same model also applies to any installation and bring-up plan you offer to prospects considering your offering.

Trust: always give trust slightly in advance of demonstrated trustworthiness. New leaders acquire trust by giving trust.

I think these rules apply to co-founders, employees, prospective customers, and partners. Trust but verify. Trust is the real currency of early customer relationships.

Training is practice doing a new task much more slowly than an expert would do it.

The concept of a learning curve or experience curve is that an individual or team’s proficiency at task is a function of their relevant experience doing it. You cannot be working at peak efficiency and learning at the same time. And you need to allot more time for rehearsal and reflection. Startups can outperform established firms by refusing to stall at an acceptable level of performance, instead continuing to refine their approach through mindful execution and deliberate practice.

Learning is faster and more effective when there is a facilitator or expert and peers or co-learners. Committing to learn as a team and seeking out or recognizing those with expertise are two elements of more effective training.

These are not the only insights in Slack, which anticipates the value of a flow based focused over resource efficiency and suggestions for change management and risk management.

The key tools of management in the knowledge organization are the tools of change management. Instead of authority and consequence (the management staples of the factory floor), the best knowledge-work managers are known for their powers of persuasion, negotiation, markers to call in, and their large reserves of accumulated trust.

Tom DeMarco has two other books that are definitely worth reading:

Recap From Nov-20-2103 MVP Clinic

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, Audio, Community of Practice, skmurphy

Overview: exploring how to identify some key problems in communities where the presenters members, trying to understand how to research them, and how to contribute to solving those problems.  Two very different people facing analogous situations: one is a researcher looking for action research topics in the KM4Dev community, the other is an entrepreneur who wants to make athletic contests more engaging for contestants and the audience by providing more information that is mobile device friendly.


(You can also download from http://traffic.libsyn.com/skmurphy/MVPClinic131120.mp3)

Next two MVP Clinics


Commonalities between the two cases that were presented on November 20, 2013

  • Challenges in understanding the embedded (often invisible) interests, incentives and assumptions of different groups
  • Assumptions about boundaries of organizations that interact with those communities
  • Change management perspective is necessary but is challenging to apply in a community context — it is more of an organizational term, based on a high degree of control
  • watching a school of fish trying to determine how they decide to change direction
  • both were familiar with communities but may not have appreciated impact of incentives

Panelists for today:

Presenter #1: Phillip Grunewald

  • PhD student researching how knowledge exchanges can be best facilitated in the international development sector.
  • Have been working on this for 1.5 years now and have another 1.5 years  left to conduct studies
  • Before starting this PhD, worked in in various organisations  on Marketing, Corporate Communications, Monitoring and Evaluation and  customer relationship management.
  • Hold a bachelor’s degree in corporate communications and a masters degree in international studies.
  • LinkedIn: http://uk.linkedin.com/pub/philipp-grunewald/6a/4ba/82/
  • Blog: www.thoughtfordevelopment.com / twitter: @thought4dev

Situation: 

  • Attempting to find a mutually beneficial way of facilitating researcher-practitioner interaction.
  • Usually a (social) researcher  (from an external institution) is perceived as an “outsider” that sees  his collaborators as either “means to an end” or as the objects of the  study.
  • This is due to a generally perceived separation between  researchers and practitioners. In this model the practitioners usually  deliver or are themselves the data for analysis.
  • The findings of  research then either stay within the realm of research or are  distributed back via, for example, reports.
  • This not only makes learning  cycles very long but also means that there are things the researcher  “is blind to” by not being closely embedded in the context that is being  studied (this has its advantages and disadvantages).
  • In  the particular the present situation involves a community of practitioners in a collaborative manner.
    • Have  offered 2 hours a week until next May to spend on research projects of  their choice.
    • An initial survey (http://www.allourideas.org/grunewaldtopics/results ) was used to generate and poll ideas. This generated considerable interest and a surprising list of ideas that  the community is interested in.
    • However, since then discussion on the  most popular topic started and participation rates have been low.
    • Part  of the reason might be the internal dynamics of the community, which are hard to completely understand but there are many other potential issues.

Ideal outcomes:

  • High levels of engagement on both sides
  • Mutual learning about content and process
  • Continuous feedback to the research process so that further research can incorporate (reiterative process)
  • Personal development of researcher
  • Basic research – exploration of impact of academic work
  • Experimenting – developing experience for questions that are motivated by practitioners concerns

 Criteria for acceptance of a project

  • Poll the community for popularity
  • Within the KM4Dev concerns (broad thematic area)

Alternative frames:

  • Researcher has to be in both worlds
  • Researcher has to be intimately involved with the research subjects
  • Framed within the KM4Dev topic

Alternative next steps:  

  • Abandon the whole idea as “too difficult”
  • Make questions more specific/have a clearer thematic focus
  • Have more explicit objectives
  • Make people aware that there is a free resource that they are not using
  • Ask people if they question researcher’s ability/capacity to come up with valuable contributions
  • Ask community members if they have no capacities to dedicate to the process (mainly time)
  • Ask why they do not prioritize this activity vis-a-vis their other activities
  • Drive  topics that have been chosen and only have low levels or participation  constrained to specific points in time (rather than ongoing)

NOTES Not much response after the initial survey.  Lots of ideas and votes in the survey, but the social network site (Ning) has had little or no participation Sean: offering service at no charge, letting them set the agenda. . Howard: trying to get an understand what an ideal research project be?  what kind of research design? Philipp: participatory action research.  looks at matter, gathers data, comes up with findings, brings it back. assess changes.  Then the cycle repeats. John: what does research mean to this community, 2-3 hours a week for 6 months may not match their expectations for a project, consider offering a research-related task (as opposed to undifferentiated “research”) e.g. data cleaning so that you avoid the challenge of not matching expectations or running up against problematic ideas of “research.” Sean Is there a concern about asking for credit in results? There IS a problem on the academic side with a self-assessed view of academics that are irrelevant. Sean: making a comparison with Eugene’s case: trying to make things easier, but not changing behavior. Assessing speed. making things go farther. Philipp: KM4Dev is focused on practice; other communities dominated by academics.  Research might be out of the norm; people are oriented toward peer-to-peer exchanges. Using Barb’s question: why should people change?  is there a clear blockage or missing piece that research can address? Originally this was just a probe: “what would the reaction be?”  So far: any outcome is interesting.  but not prepared to give up. Payoff given the challenge of understanding Philipp’s process. How do open source management of volunteers? Is there a pattern for organizing volunteer labor that could be harnessed / re-purposed for KM4Dev? Challenge of figuring out how to leverage 2-3 hours a week may mean focus don’t invest effort in engaging if payoff is small/problematic Howard: in a nonprofit where GIS data described a watershed that was intact in BC.  Tried to engage community around protecting the watershed.  When leaders from the nonprofit traveled there and met with community representatives, they found potential interest, but more interested in issue of teen suicide — a much more immediate threat than the logging companies coming in.  That was a real learning experience for the non-profit.  Shifted the organizations focus to partnering with them through a focus on their issues. [Added post-call: My quick summary of this nonprofit experience glosses over the fact  that, for the nonprofit, the discovery that community members had  completely different priorities represented / might have represented an  enormous challenge for the organization. The nonprofit had no expertise on the issue of teen suicide, and this issue could easily have been seen as beyond the scope of the organization's mission, which was at the time more environmentally oriented. It was the willingness to listen to community needs and to be flexible in responding that enable the organization to move forward.] What does the community view as a key problem ? Where are KM4Dev’s priorities and how does Phillip’s expertise and experience align for best contribution.  Philipp’s  feeling of pain and surprise means he has learned something. Complexity of the KM4Dev ecosystem that Philipp is working with.  same thing for Eugene.  In both cases, people see the offer through very different lenses.  How open up receptivity to alternative ways of working together? The challenge is getting a group of people to change.


Questions from the audience : First question is what’s research in many organizations where KM4Dev members work research is a restricted activity takes a certain status and has some inherent separation from “work in the field.”  So the first suggestion is: how about offering elements of research but not calling it research?  That could include data gathering and analyzing data, or a literature search or many many other bits or pieces that would be useful but are dis-aggregated. Second suggestion is that: KM4Dev members come from many different organizations and they play different roles in those organizations.  Getting them to agree on one research agenda or on one perspective going forward is an impossible feat.  The community will never “agree.” So what’s behind both suggestions is the idea of dissolving as a strategy: to breaks down research tasks into elements on the one hand and to break down the KM4Dev community into sectors with distinct interests.


Presenter #2: Eugene Chuvyrov

  • Have 14  years of  programming experience, with 3.5 of those being an independent   consultant.
  • Built many web-based and several mobile products – love   technology, not just programming, and I can see myself programming robots or wearable devices just as eagerly as I do mobile dev.
  • Ran a Software Architecture group in Florida and I help organize a  cloud  computing group here in the San Francisco Bay area.
  • http://www.we-compete.com/

Situation: 

  • A  year ago, Eugene and two former colleagues from Florida broke  ground on what I wanted to be a new way to engage the competitors and  fans in amateur athletic competitions.
  • As a bodybuilding competitor of 6  years, it always bothered me that:
    •  the process of registering for  competitions was archaic,
    • there was no way to see who was competing beforehand, and that sometimes competition results would not be posted for weeks.
    • I also thought that the competitions were boring for the  audience, since many were not familiar with competition rules or competitors.
  • I wanted to start with the sports I am very familiar with  (strength events) and expand into other sports from there.
  • I showed a  simple prototype of my mobile app to one of the more prominent  competition organizers and he stated they’d use it. (Face palm) that was  all the validation I needed to get going on executing the idea.
  • It took us 6 months to build a website and a mobile app, and I have been promoting it for another 6 months now.
    • I promoted http://we-compete.com  via contacting competition organizers who I knew directly, or via  friends who are also competitors.
    • I also contacted many competition  organizers whom I didn’t know, after noticing that
      • they still had either  .pdf files to download for competitor registrations,
      • or they tried to  integrate EventBrite/other ticketing software into their offering with an iform
    • I established contact with heads of federations that have 50-100  competitions each year and solicited their feedback.
    • I also invested in  Facebook and Google ads, but those generated close to 100% bounce rate.
  • We had half a dozen competitions created on the  platform. Since we waived all fees for the initial batch of users, I  cannot reliably say people would use us  if we had charged them our 2.5%  fee per registration/ticket sold.
  • I expected our offering to go viral  after the initial batch, but that did not happen.

Next Steps:

  • Currently, I resorted to more traditional  marketing.
  • I am organizing a competition myself in June in the East Bay  area, and will use http://www.we-compete.com  exclusively.
  • I am helping a few competition organizers pro bono with  basic web/technology stuff. I sponsored bodybuilding federations,
  • I am  getting more active on social media and doing promotions in e-mail  newsletters/magazines.
  • I am also weighing executing on a consumer play  related to We Compete via creating mobile apps for competitors, and  having those mobile apps feed data into the centralized database (if  competitors choose to share the info, of course).
  • I am also evaluating  partnership with competition content creators (video, photo, general  information) and seeking ways to get on podcasts and YouTube channels.
  • I  am very passionate about this space and would love to continue  executing on my ambitious vision, but not if I have to live under the  bridge while doing that.

NOTES Sean: does the app enrich the experience for an audience.  (business model would have to follow) Eugene: lots of pictures as a form of engagement, no centralized location.  Notice LOTS of mobile devices at any event. The idea is to function like a meetup. Competition is emotional experience… Eugene is connected in the competition space…  direct approach response has been good.  But so far people won’t pay. Business model is like http://eventbright.com

  •     the price/payment is before
  •     the benefit comes afterward

Consider attending a high school re-union to compare behaviors, rituals, and business models for somewhat different kinds of events. The app is really changing some of the dynamics of competition – knowns and unknowns for participants – what is the value of changing that, how to position it going forward and eat own dogfood in organizing a competition – that might be a business How to characterize users / clients

  • heads of established federations and contests – they may not be in much pain (yet?)
  • people considering a new contest for fun or profit – organize a competition “in a box’ similar to how Meetup lowers cost of coordination
  • Notice the monopoly structure of the business… populated by people that are not very tech-oriented

What is the mobile app about:

  • pictures?
  • stats?

Typical event:

  • 90 competitors
  • 500 fans/participants

Barb: I’m also thinking that this needs some change management theories applied to it… I think that Eugene is right in showing the benefit  Why should people change the way they do things, when they work so well so far? Sean: more like meetup than eventbright. Can you provide unique or more curated content?  or just additional content? …so that profiles persist across competitions… Could competitors be encouraged to pay for the profile? What’s the value of a profile to other competitors? Can other sites be integrated?  Do those other sites support the mobile side?  And what are their business models?  and do people look at those other sites during a competition? status quo; organizing iframing eventbrite. in some ways we-compete is a threat, in others a collaborator: complex ecosystem of organizers, athletes, audience Howard: “Create a competition in a box” may be inadvertently taking position of disrupter, so a threat. What you are hearing is that you should continue to explore, more by making offers than writing code


Questions from the audience: ? unique content vs. basic mobile app with pictures ? transition from “probably not a good idea” to “late” Philipp: What about assessing information needs ground up?

Audio and Notes from On-Line MVP Clinic Oct 23-2013 on Social Software

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, Audio

John Smith and I did an MVP Clinic for Social and Community Apps on Oct 23. We took notes live in a PrimaryPad (an EtherPad derivative application). What follows is a cleaned up version of notes that we took and the audience contributed to. You can see MVP Clinic for Social/Community Apps Wed Oct 23 for more background information.


Or download directly from http://traffic.libsyn.com/skmurphy/MVPClinic131023.mp3


Terry Frazier is Principal and Senior Competitive Analyst at Cognovis Group. He has been studying, writing about, and consulting on competitive and industry issues since 1998. His work has been used by both Fortune 1000 businesses and international analyst firms. Today he writes at http://CompetitiveThinking.com. He offered the following as background for the discussion:

  • Situation: I am working on a structured service/educational offering to create lasting competitive advantage and reduce competitive risk for the mid-size enterprise. The offering takes proven principles and techniques that have been used for decades by the Fortune 500 and packages them into what I call the Competitive Management Process which makes them accessible, affordable, and attractive for smaller companies.
  • Challenge: The best source of competitive information any company has is its own middle management and field staff. Yet very few companies have any structure for harnessing and directing this resource, much less channeling it into long-term competitive advantage. In most companies competitive strategy and competitive decision making are deemed to be the sole responsibility of senior (usually C-level) management. There is reluctance, on both sides, to engage lower-level managers and staff in an ongoing collaboration that challenges assumptions and feeds real-world perspective into the process. This barrier to meaningful ongoing exchange is something I need to overcome with almost every prospect.

Notes on Terry’s Discussion Plus Audience Questions

Change within a company required to use competitive tools. Technology as enabler and hindrance to improved competitiveness? Two kinds of tools:

  • technology for data collection, feeds, screen scraping, etc
  • conversation for contextualizing, sense-making (the challenging.part; Human intelligence is lacking. )

Sean: companies see it too much as a data/technology problem, not enough as a conversation, inquiry problem Lack of structure in conversation is a problem so “war games” strategy helps organize thinking. Role-playing in a game forces people to adopt a perspective. Example: Michelin Run Flat tire failure due to channel / ecosystem from “Wide Lens” by Ron Adner Key hypotheses -

  • How can I explain to firms what effective competitive intelligence looks like?
  • What is the smallest possible intervention (a taste of the experience)?

Q: how can you spend time with key personnel (who are the important actors in the marketplace in the company: suppliers, regulators, customers)

Q: What are instances of effective action / positive deviants already in place you could use as acorns or seedlings?

  • Where is this already working?
  • Are there existing meetings or teams you can focus on for insertion?
  • General pattern not available: so start looking at an individual company to pursue the seedlings to learn about the conversations that exist.

Terry has been looking at existing forums: sales managers (line level up to senior VP of sales). Have not located online watering holes where such people meet. No clear titles / water holes – need an existence proof.

Q: this is a key hypothesis to test – where are some aspects of these conversations already taking place? For example industry organizations or executive offsites. 

Q:  Is the question how to find the prospects? Or how to convince them they need field level competitive data? What are the tools for gathering the field managers’ perspective?

  • Yes: find the prospects (previous work based on job titles, which is not quite the criterion Terry wants). prospect needs to be influencer not so much decider.
  • Yes: convince them that they need this.
  • Launching a new product into a new or adjacent market (with a 70% failure rate)

Terry: Fancy tools not needed for this. E-mail and blogs are enough. Finding perspectives and the people who hold them is the challenge.

Q: Find out the response to the explainer videos.

Q: Sounds like the war games process is the situation when Terry gets to harvest understandings from people across the organization? I wonder how this process might become the basis for a more ongoing conversation?

Q: Consider inviting people from outside the organization as participants in the gaming.

John: In consulting knowledge transfer is often the “afterthought” sacrificed at the end of a project. Companies need to internalize the skills to have these conversations.

Q: Is the question how to find the prospects? Or how to convince them they need field level competitive data? What are the tools for gathering the field managers’ perspective?

Q: Have you considered a short “explainer” video?
Terry: Yes, please see http://competitivethinking.com/

Q: Sounds like the war games process is the situation when Terry gets to harvest understandings from people across the organization? I wonder how this process might become the basis for a more ongoing conversation? It seems like there are community-building techniques that might be woven into Terry’s existing process…


Dixie Griffin Good is director of Shambhala Online, a global learning community connected by the meditation teachings of Sakyong Mipham Rinpoche. For 15 years she consulted with local, state and national education organizations on the educational use of technology. She has a masters in Future Studies and enjoys managing and studying change processes.

  • Situation: We’re developing a series of online courses that I’d market beyond the Shambhala to broader communities
    • The Product: Way of Shambhala Online courses, 8 courses; 5 to 6 weeks long
    • Meditation In Everyday Life, Contentment IEL, Joy IEL, Fearlessness IEL, Wisdom IEL
    • Basic Goodness Series (3 courses).
  • Challenge: Marketing beyond our organization — going out.
  • Context: Shambhala and shambhala online. http://shambhalaonline.org/ many centers of various sizes.
    • Undercapitalized–like many startups.
    • Offering live webinars to online courses beyond.
    • 12,000 members 200 centers or groups

Key hypotheses or criteria.

  • ID Most likely courses (what are the door openers)? Dixie: mediation in everyday life
  • experiment: live event free and recording for a price?
  • Local centers offer the same courses live – so almost competitors
  • What’s the synergy between the local centers and Shambhala Online?
    • Online as Gateway to local center?
    • Criterion: “how far from a local center do you live?” establishing more centers and more members as a desired outcome.
  • Goals/impacts for Shambhala Online going forward:
    • income
    • synergy with local centers
    • more interest/ signups for advanced programs
  • Assets:
    • reputation
    • local centers
    • alumni?

Notes on Dixie’s Discussion Plus Audience Questions

John: is Shambhala Online as a “smart pipe” for delivery or does it contribute to content creation?

  • Could it be an asset for teachers / experts / masters ?
  • deliver feedback on audience reaction to talks?

Sean: consider flipped classroom model: basic tools are available, but face-to-face plays its role. What is the relationship with local centers: how do you create as much synergy as possible and minimize competitive overlap?

John: Who is the voice or carrier on Facebook? who looking for? Role of local centers? minimize conflict or maximize collaboration / mutual support. Dixie’s strategies:

  • Newsletter not just for upcoming programs
  • Meeting of center and group leaders (use 10 minutes to inform and enlist support)
  • Adv’t template carries message

Sean: look beyond “spiritual” aspirations to determine real pain/need. Can you discern patterns in who’s attracted, stage of life, other characteristics.

Current demographic skewed toward elders but  target market is younger professional people in their 30′s or earlier.

Centers on college campuses? May need to use intermediate generations. Look at new members in last 2-3 years.

John: mechanism talk re Facebook is important, but the important stuff is prior experience in growing a community with 12,000 members.

Sean: 12-step programs are worth focusing on if they are currently a source of folks interested in mindfulness and meditation today.

Q: maybe instead of “war games” in Dixie’s context, situation , the metaphor might be “scenario planning”

Greg Heffron (Technology Leader, Shambhala Online): We’ve been looking into Facebook marketing. I’m curious if others have used FB marketing to expand into new markets.

Dixie: great idea about understanding the data we already have. I’ll make a point of searching our database for demographic info on recent members.


General debrief from both sessions in MVP Clinic

  • John: time required?
  • Terry: like format, conversational style. useful to hear questions
  • It’s hard because the early MVP phase is very much about sense-making in a fog, so things tend to ramble a little bit
  • Dixie: surprised that these ideas hadn’t occurred to me before. Very different perspectives. appreciating the questions.
  • Dixie: visual thinker: would appreciate faces, diagrams, drawings.
  • Sean: MVP conversation is inherently tentative and entrepreneurs are at a loss for words. Can’t just calculate the derivative of a formula to find the answer.
  • to audience – if you want to take part let us know
  • consider a repeat session with Terry and Dixie: what have you learned in the last 90 days?

My key take-away from the session: when you are in the middle of defining your MVP things are often very confused. It’s not immediately obvious what insights are valuable. Just because you are wandering around trying to map  a new market does not mean you are lost.

You have a lot of conversations that are tentative and exploratory and you often find yourself at a loss for words. And that’s why we tried this format as a way to walk around the issues. There is not a simple formula for moving from point A to point B with a new product. I thought the session captured the process of groping toward insight.

We have planned three more MVP Clinics for Social/Community Applications

Don’t Give Your Investor Pitch To Customers, They Have Different Questions

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, Books, skmurphy

Q: Can you please take a look at this pitch. I have created it as a promo for investors and potential users.

Selling your offering to customers and selling your business to investors requires two different presentations They have fundamentally different questions they need answered before they “buy.”

Customers want to understand how your product will meet their needs. Investors want to know how much their investment will return and why: they may want to understand your customer presentation but only if you cannot offer strong evidence of traction: revenue, signups, etc…They are always interested in what you have learned and what you plan to learn: what hypothesis you need to test using their money.

In B2B markets early business customers may be interested in your investment pitch if they believe you will need investment to be viable but that is rarely the case in a consumer market.

One of the best guides to constructing an investment pitch is “Pitching Hacks” by the Venture Hacks team. Here is there explanation for what needs to go into your elevator pitch:

The major components of an elevator pitch are traction, product, team, and social proof. And investors care about traction over everything else. A story without traction is a work of fiction.

Traction is a measure of your product’s engagement with its market, a.k.a. product/market fit. In order of importance, it is demonstrated through:

  • profit
  • revenue
  • customers
  • pilot customers
  • non-paying users
  • verified hypotheses about customer problems.

And their rates of change.

Pitching Hacks is a slim 83 page book that packs a lot of insight. Many longer books have a good 4-5 page magazine article trapped inside, this book has already been boiled to the essentials.  Definitely worth $20 if you are wiling to follow at least one of the many pieces of advice in the book.

Balancing Engineering Vision vs. Customer Expectation

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 3 Early Customer Stage, skmurphy

I love this ad for the 2012 re-launch of the Dodge Dart.  It captures an engineering team’s desire to build a kick-ass product, unconstrained by financial compromise. We all want to work on a team that’s following Edwin Land‘s motto:

“Don’t do anything that someone else can do. Don’t undertake a project unless it is manifestly important and nearly impossible.”
Edwin Land

Audio Transcript for “How to Change Cars Forever”

Start with a simple idea.
Think.
Think more.
Drink coffee.
Stop thinking, start doing.
Hatch the design.
Kill the design.
More coffee!
Design something totally original.
OK, not that original.
This original.
Now it’s time to make something.
Do it again.
And again.
That’s good.
Kick out the committees.
Call in the engineers.
Call in the car guys.
Call in the nerds.
Not those nerds…those nerds.
Blow off lunch.
Blow off dinner.
Blow off weekends.
Sleep…
OK, that’s enough sleep
More coffee.
Build a prototype: mold it, shape it, hate it, start over.
Build another prototype: mold it, shape it, love it, that’s good.
Kick out the committees, again.
Why? Because they lead to compromise and compromise lead to this.
OK, back to it.
More coffee.
Give it some kick.
Give it more power.
More power!
Never too much power!
Give it 40mpg… no 41mpg.
Give it a smartphone app that can start the engine.
Give it a huge display…bigger…no bigger…good.
Give it a starting price under sixteen grand.
Uh oh the finance guys: “you can’t do that.”
Kick out the finance guys.
Take it to the track.
Tweak tweak tweak tweak stop!
Take it to the car shows.
Call the critics.
Call the marketing team.
Win some awards.
Get a celebrity endorser.
Hmmm…no…no…no…no…yes! He’s perfect.
I am? Yes, you are.
Making a groundbreaking car: it’s that easy.

Fade-out “New Rules”


This ad resonates with my desire to subsume my ego and efforts into a larger project. It’s been a few years since I last stayed up all night working on something, but as Greg Knauss observed, “Man, Do I Miss Those Days.

Once, years ago, I had a morning deadline, a lot of code to write and a two-liter bottle of Mountain Dew. Around 4am, I realized that the window was still open and I was freezing, I hadn’t gone to the bathroom is something like fifteen hours and I was having trouble hitting the keys because my hands were trembling.

Man, do I miss those days.


Subtitles
An interesting counterpoint to the engineering dream are all of the subtitles, like warnings on  yellow anti-litigation tape affixed to steps, ladders, and construction sites. Danger Will Robinson!

  • Do Not Attempt
  • Do Not Attempt. Professional Driver On A Closed Course.
  • Do Not Attempt. Professional Driver On A Closed Course.
  • 2012 Preliminary EPA Est. for Aero Model: 28 City / 41 HSY MPG
    Final EPA Mileage estimation not available at time of publication. Use for comparison purposes only.
  • Late Availability Authentic Dodge Accessory by Mopar
  • Available Optional Feature
  • Starting at Price excludes destination charges of $795 and refers to base model with no optional features.
    Also excludes taxes, title, and registration fees. Actual prices set by retail dealer $24,185 MSRP as Shown
  • Vehicle not available for Purchase
  • Vehicle not available for Purchase
  • Dodge is a registered trademark of Chrysler Group LLC

Aftermath

Consumer Reports reviewed the new Dart in January 2013, concluding

After testing two versions, our take is that the Dart is the first decent compact from Dodge in decades and has some solid positives. But overall it can’t measure up to the best in class. For a car that needed to be an all-star, the Dart is a position player at best.

Writing in BusinessWeek in January 2013 “How Chrysler’s Dodge Dart Missed the Mark” Craig Trudell and Mark Clothier observed:

Nearly a year later, after a disappointing debut that saw Dart sales of just 25,303 in 2012, according to researcher Autodata, chastened Chrysler executives say it will take more time to prove their mettle in small cars.
[..]
The first Darts trickled into dealerships last June, about two months late. When they did reach showrooms, the cars  came with a drive type most Americans don’t want: manual transmissions. Although fewer than 15 percent of U.S. compacts are sold with manuals, estimates Reid Bigland, president of the Dodge brand, at least the first 5,000 Darts shipped to dealers were equipped with sticks because automatic transmissions weren’t available yet. “It was an opportunity to get the vehicles out,” says Bigland, but it also contributed to the brand’s slow start. “We knew they were going to be slower-turning, but we didn’t have enough to meet the dealer demand to begin with.”
[...]
Explains Marchionne: “If there’s a mismatch to consumer expectation, you’re going to pay the price, and we have.”

More recently, Jim Hall observed in July 2013 in “Is the Dodge Dart a Sales Bust?” that:

“Is the Dart a failure? Anything but…Dart is Chrysler’s first serious small car in over half a decade…Dodge needs to put the car in the context of the small car market.”


Net Net

I love the ad for the aspiration that it captures. If you are entering an established market with established and well-respected competitors you may find it very hard to rewrite the rules of the market. Understanding what features are needed as the ante to get in the game, whose inclusion won’t help differentiate you but whose absence will count against you, is critical to success.

It’s also a good idea to temper engineering ambition with careful attention to customer’s revealed preferences as constraints, bearing in mind Rhett George‘s advice, “You can’t believe that a plan is real until you’re vaguely disappointed.”


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