Paul Newman’s portrays of an alcoholic plaintiff’s attorney chasing lawsuits by attending wakes and funerals, he re-discovers his moral core and perseveres in a complex medical malpractice lawsuit. Near the beginning of the film he is offered a settlement to look the other way and he says “If I take the money, I am lost.” It marks the turning point of his recovery.
Two scenes stand out that highlight the challenges of persevering as an engineer:
Gary Sinise as Ken Mattingly, working in the simulator to determine a cold start sequence that will get the capsule operational without exhausting the remaining battery power.
A team of engineers crowd around a large table that has a copy of all of the material available in the capsule. They need to find a way to adapt carbon dioxide filters from the Command Module for use on the Lunar Excursion Module (LEM) where the crew has taken refuge after an accident has disabled the Command Module. Gesturing first with a squat square filter and a longer thinner cylindrical filter, the lead engineer says, “OK people, listen up. The people upstairs have handed us this one and we gotta come through. We gotta find a way to make this fit into the hole for this, using nothing but that.”
This is an extremely funny movie about the team manning the Parkes radio telescope in Australia, the dish is destined to capture the video for the Apollo 11 moonwalk. Many things go wrong (see official version) and a small team learns the value of both checklists and improvisation. Best line “”Failure is never quite so frightening as regret.”
The Indian is a motorcycle driven by Bert Munro that sets a land-speed world record on the Bonneville Salt Flats in 1967. The “World’s Fastest Indian” portrays a series of challenges that Munro had to overcome to set the record, as many related to raising money and battling bureaucracy (e.g. US Customs) as engineering challenges. The real Burt Munro was born in 1899 and 68 when he set the record, Anthony Hopkins goes a great job of portraying a tinkerer and a problem solver who continually modifies a motorcycle originally designed and manufactured in 1920 to achieve a world record.
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The niche market is great for well resourced companies doing innovative stuff. Not so for startups.
Gaining traction with any new product or company is inherently difficult. We ought sell to anyone who’ll buy our stuff. Get the message out to as many people as possible. Take all the revenue we can get and what will transpire is a niche strategy anyway due to natural startup dynamics. We’ll get rejected 9 out of 10 times on average. We’ll end up in a market niche, from which we’ll have to grow and expand from anyway. Starting with a niche in mind, really just limits our probability of success.
The strength of a testimonial is highest with others who can directly identify with the firm or person offering it. A market niche is defined by a set of firms who will be guided by a purchase decision.
The challenge in “targeting everyone” is that different niches may find different uses for your product that have different benefits and therefore need very different messaging. Look at the way aspirin is marketed for headaches, for arthritis, for children/infant pain, and to prevent heart attacks. It’s four different messages.
If you can resist the temptation to tell unanticipated customers “this is not meant for you” or customers finding novel uses “you are doing it wrong” you may very well discover another market.
But I believe that startups have to have a clear theory of value and target customer that informs their product design, messaging, and sales strategy. This way they can create explicit and testable hypotheses (and replace them when they fail). If you are going after everyone what do you change? How do you message? How do you decide to change sales strategy or re-design the product.
A baker’s dozen of common mistakes that I have seen founders make in preparing, delivering, and evaluating a new product presentation/demo.
Don’t keep giving the same presentation if it’s not working. I am surprised when I ask teams who have presented to two or three dozen prospects, “How has the presentation changed since the first time you gave it?” and I am met with blank looks.
If prospects don’t understand your presentation it’s possible that you are talking to the wrong people but just as likely that there are serious problems with your presentation.
Do not keep giving the same presentation if it’s not working. That’s not a typo, it bears repeating. Working means that you are not only getting expressions of interest but your sale is actually advancing. I know that when you talk to experienced sales folks that they will tell you that “sales is a numbers game” and you just have to keep pitching until someone decides to buy. There is one very important qualifier to the “numbers game” approach, and that is that you are using a presentation and sales approach that has actually been proven to work in a repeatable fashion.
Give the demo to people you trust who can act as proxies for your target prospects. Ask them how to improve it. If someone introduces you to a prospect, be sure to reconnect and ask them how the prospect felt and what could be done to improve the presentation. The prospect may be much more willing to be candid with a third party that they trust; most folks don’t want to give bad news to you directly.
A lukewarm response is the worst of all. You can’t get any feedback on what to improve–unless you were introduced by a third party you can ask for help– and the sale is not advancing.
You can tell that the sale is advancing if you are learning more and more about the customer’s problem. The prospect gives you data to run a test. They ask for an evaluation license and can give you a timetable and a list of experiments that they want to run. If these things are not happening your presentation is not working.
Before you give a demo, make sure that you can clearly state the prospect’s view of the problem they are hoping to solve with your software. Confirm this by stating it and asking you have understood their situation correctly. Don’t give a demo if you don’t understand the problem that they are trying to solve. A demo is not an opportunity to train someone on your software; it’s an opportunity to offer either a vision of a solution or proof that your software can solve their problem.
If you have raised some money, perhaps in an angel round, do not take your investment presentation and use that to attempt to close business. I know it can be hard to believe that something that was so useful when talking to investors won’t have a similar powerful effect on prospects. But let me be clear: you need to throw your investment presentation away and start from scratch.
Keep copies of each presentation that you give. Always have two people at a presentation. One to give it, the other to observe. They can trade off but one should always be watching the prospect(s) to determine what’s resonating and what isn’t. Take time after the presentation to de-brief and write your thoughts down. Save a copy of your notes with a copy the slide deck that you used.
On the title page for your presentation you should include: key audience member(s), company name and date of presentation; these should also be burned into the footer of each page. Three benefits:
It gives the impression of personalization and prior custom preparation. Doing this should force you to at least think through what’s needed for this particular audience.
It’s the minimum information you will need to keep you various presentation distinct. This allows you to keep an archive of all of your presentation and watch how it evolves over time.
If you are asked for a soft copy of the slide, provide a PDF version of the talk, instead of PPT, with this info burned into it then the audience is more careful about who they circulate it to.
Include your company name, URL, and copyright on each slide. They may become detached from the deck.
Probe for a date or impending event that may drive a decision. Be cautious of people who tell you that they need something “yesterday” since yesterday will never come.
Always have an engagement checklist and implementation timetable (if only at a high level) ready. Rehearse presenting it but keep it in backup slides. Do not have the prospect ask you “what does it take to get started” and stammer out “I’m not sure, no one has ever asked that before.”
There are no plus-minus stats to measure a player’s ruthlessness, his desire to beat his opponent so badly he’ll need therapy to recover. [...]
Athletic greats squeeze every ounce out of their abilities. That drive and hunger is worth noting, since top athletes are typically not satisfied even when pulling in accolades, championships, and money.
Instead of measuring success relative to the general population, or a peer group, the great ones measure success relative to their potential and abilities. It’s clear this also applies to startups.
I encourage everyone I know to go start something if they’ve at least proven there’s a market need. I bet that the people who will be great are the ones who have a killer instinct to succeed.
If by killer instinct he means the value of focus then I agree.
But I find most startups succeed more on their ability to negotiate win-win outcomes with partners, customers, suppliers and less on “winner take all” models. Most markets look more like stag hunts where teams of cooperating players outperform “go it alone” firms. If a startup team sets high standards of excellence for performance that’s great.
But you face so many competitors, including the status quo, that a focus on winning can lead to you to overlook opportunities for partnering. Especially in the early market. In “What makes entrepreneurial” Saras Sarasvathy writes:
“Expert entrepreneurs […] are actually in the business of creating the future, which entails having to work together with a wide variety of people over long periods of time. [They fill their future] with enduring human relationships that outlive failures and create successes over time”
“This is largely ignored in our entrepreneurship curricula which tend to focus on market research, business planning, new venture financing and legal issues. As far as I know no entrepreneurship programs offer courses in creating and managing lasting relationships or stable stakeholder networks, nor on failure management.”
I think that there are better products, impossible products, and unthinkable products.
Better products follow an established trajectory in an industry. They are “15 minutes ahead” and the easiest to sell…for a while. Examples include:
Faster computers with larger memory
Cars with better gas mileage
Impossible products find a way to relax one or two constraints that designers of better products have taken as fixed. They are harder to sell, not so much because they are hard to understand but difficult to believe, prospects will ask you “What’s the catch?” Examples include:
ATM Machines replacing human tellers to dispense cash
Ethernet over twisted pair
Unthinkable products are typically developed by someone from outside the target industry or are the result of repurposing a product from another industry. Their developers were not handicapped by the mental roadblocks that come from following established practices and patterns in an industry. They can be extremely difficult to get prospects to understand–much less believe in–as they are almost always incompatible with current practices and infrastructure. But they can create an entirely new category of product. Examples include:
IDDQ testing in semiconductors
The Reebok Pump shoe
Henry Ford realizing that a meat packing plant’s “disassembly line” could be run backward to assemble a car.
What follows are some quotes from “What Makes Entrepreneurs Entrepreneurial.”
Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.
Effectual thinkers are like explorers setting out on voyages into uncharted waters.
All entrepreneurs begin with three categories of means
Who they are–their traits, tastes,and abilities;
What they know–their education, training, expertise, and experience
Whom they know–their social and professional networks.
In our “Idea to Revenue” Workshop we talk about three kinds of capital that startups begin with: intellectual, social, and financial. We don’t call out what she refers to as “human capital” or “who they are–their traits, tastes, and abilities” as a resource but instead encourage teams to “begin in phase two.” That is, to build on prior accomplishments and long term interests so that early customers view the startup as a continuation of earlier efforts and focus.
But I like this model of bootstrapping entrepreneurs as foragers: living off the land as hunter-gatherers until they can find a market to homestead. Bootstrappers have to start from where they are and search for opportunities. Pasteur advised that “Chance only favors the prepared mind” so you have to open yourself up to possibilities and be prepared to be surprised (which is another way of saying you have learned something new). Some more quotes from her paper:
Using these means, the entrepreneurs being to imagine and implement possible effects that can be created with them. Most often they start very small with the means that are closest at hand and move almost directly into action without elaborate planning.
Plans are made and unmade and revised and recast through action and interaction with others on a daily basis. Yet at any given moment, there is always a meaningful picture that keeps the team together, a compelling story that brings in more stakeholders and a continuing journey that maps uncharted territories.
Eventually certain of the emerging effects coalesce into clearly achievable and desirable goals–landmarks that point to a discernible path beginning to emerge from the wilderness
Seasons entrepreneurs, however, know that surprises are not deviations from the path. Instead they are the norm, the flora and fauna of the landscape, from which one learns to forge a path through the jungle. The unexpected is the stuff of entrepreneurial experience and transforming the unpredictable into the utterly mundane is the special domain of the expert entrepreneur.
One of the reasons that we run the Bootstrapper Breakfasts as 90 minute unconferences–where folks introduce themselves and put issues on the table they would like to discuss–is that it keeps everyone in an entrepreneurial frame of mind:
When you hear someone describe a challenge that they are facing, it gives you much better insight into their thinking and allows you to evaluate what they might be like to work with.
Often as not they are describing a common problem, or aspects of a common problem. Hearing their perspective just on the problem can give you new insights into how to solve it.
It’s good practice to learn how to ask for advice and insight. Entrepreneurs need to do a lot of that in the early market especially.
Explaining how you managed an issue or situation can deepen your understanding of you solution, it forces you to put it into terms others can use and understand. This is good practice for scaling up (e.g. adding your first employee).
Sarasvathy stresses the cooperative nature of entrepreneurship in the paper, a perspective that I share. Often an entrepreneur is attempting to obsolete an aspect of the status quo, but they have much less competition and much more opportunity for collaboration than is appreciated.
Markets are stable configurations of critical masses of stakeholders, who come together to transform the outputs of human imagination into the forging and fulfillment of human aspirations through economic means.
Effectual reasoning may not necessarily to increase the probability of success of new enterprises, but it reduces the costs of failure by enabling the failure to occur earlier and at lower levels of investment.
Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic, because they think effectually; they believe in a yet-to-be-made future that can substantially be shaped by human action; and they realize that to the extent that this human action can control the future, they need not expend energies trying to predict it. In fact, to the extent that the future is shaped by human action, it is not much use trying to predict it–it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.
She highlights three key differences between effectual reasoning and traditional startup management models:
Risk taking
Traditional: expected return, work the plan to deliver results to your investors (“Ready Aim Fire” can become “Aim–not big enough–Aim–not big-enough–Aim…”).
Effectual: affordable loss, make many small mistakes as early and cheaply as possible to speed learning (“Ready Fire Steer“)
Focus:
Traditional: competition
Effectual: strategic partnership (especially with early customers)
Value Creation
Traditional: rely on pre-existing knowledge to aim for a known market you can dominate and exploit
Effectual: leverage contingencies; create opportunities as you map a new market
She goes into some detail on the “affordable loss principle” and offers extracts from an interview with an expert entrepreneur’s approach to a new market:
While managers are taught to analyze the market and choose target segments with the highest potential return, entrepreneurs tend to find ways to reach the market with minimum expenditure of resources such as time, effort, and money. In the extreme case, the affordable loss principle translates into the zero resources to market principle. Several of the expert entrepreneurs I studied insisted that they would not do any traditional market research, but would take the product to the nearest possible potential customer even before it was built. To quote but one of them, “I think I’d start by just… going… instead of asking all the questions I’d go and say.. try and make some sale. I’d make some… just judgments about where I was going — get me and my buddies — or I would go out and start selling. I’d learn a lot you know..which people.. what were the obstacles.. what were the questions.. which prices work better and just DO it. Just try to take it out and sell it. Even before I have the machine. I’d just go try to sell it. Even before I started production. So my market research would actually be hands on actual selling. Hard work, but I think much better than trying to do market research”.
In finding the first customer within their immediate vicinity, whether within their geographic vicinity, within their social network, or within their area of professional expertise, entrepreneurs do not tie themselves to any theorized or pre-conceived “market” or strategic universe for their idea. Instead, they open themselves to surprises as to which market or markets they will eventually end up building their business in or even which new markets they will end up creating.
This is also an approach that favors older entrepreneurs to the extent that they have larger social networks (based on more shared work experience with more people) and deeper professional expertise. The one caveat is that they have to be open to new possibilities and not be blinded by what they “know” to be true in the face of new information.
This 2001 paper offers another perspective on bootstrapping entrepreneurship that is independently derived and predates “Four Steps to the Epiphany (2003)”, “Blue Ocean Strategy(2005)”, and the “Sales Learning Curve (2004).” But all four are clearly addressing different aspects of the same core paradigm that takes a scientific or hypothesis driven approach to new products and new markets.
I will leave with two final quotes from the paper which highlights the value of establishing enduring relationships.
Expert entrepreneurs [...] are actually in the business of creating the future, which entails having to work together with a wide variety of people over long periods of time. [They fill their future] with enduring human relationships that outlive failures and create successes over time
This is largely ignored in our entrepreneurship curricula which tend to focus on market research, business planning, new venture financing and legal issues. As far as I know no entrepreneurship programs offer courses in creating and managing lasting relationships or stable stakeholder networks, nor on failure management.
Steve Blank had a great post today “Building a Company with Customer Data, Why Metrics Are Not Enough” that highlights the need–even for Web Startups–to get out of the BatCave and talk to strangers who may be potential prospects. Engineers in particular can feel that this is not as productive a use of their time as some form of automated interaction. As Steve recounts, here is a typical reaction when he suggests that surveys in particular are not the best way to start:
“We’re a web startup, all our customers are on the web. Why can’t I just get them to give me the answers I need this way?”
Often founders may try and substitute market research data for “seeing the elephant” or having actual contact with live prospects. Blank warns:
…market research firms are excellent at predicting the past. If they could predict the future, they’d be entrepreneurs.
There were two questions in the comments related to when and how to talk to prospects:
Q: At what point in the process of our startup do we want to start getting interactive feedback from our target market? How much focus should we give to gathering customer preference while we are still in the inception phase of our idea?
As soon as you can clearly articulate your hypotheses about the customer’s problem you should get out of the building and start having serious conversations. Customer Development proceeds in parallel with product development and informs it.
One piece of paper with a prospect’s name and a few questions can communicate that you care about their perspective and have given some thought to making it a productive 10-20 minute conversation (if they want to talk longer you should let them, but you should be able to finish a short conversation in ten minutes or so).
Q: Talking to your customers directly is awesome. But, what is even better is to get a group of your customers to talk to you AND each other.
In the early market this is can cause problems when interviewing prospects: focus on one conversation at a time. Don’t let one prospect’s perspective who speaks first on a topic inadvertently anchor the group somewhere. Instead ask open ended questions and listen, prepared to be surprised.
This week I have been developing content for a client’s website. We are helping them formulate a message that is intended to explain both their knowledge of their customers’ problems and how they are able to help.
Good marketing is really just good content.
It focuses on your customers’ problems and how they will benefit from your offering. It is not about your product features. It answers all of the questions–or at least all of the common questions–a customer will have they have as they consider buying your product or services.
Good marketing material should be useful, interesting, and even funny to your customers. Material should be clear and concise, it should be use the language that your customers normally use to talk about their challenges and their needs.
Here are a couple of examples we have worked with our clients on over the last year:
I recently shut down my first startup ever. I am having a really tough time getting over it and starting all over again. A feeling of extreme weakness and failure has taken all over me, clouding my judgment. Any tips on getting back to normalcy would be highly appreciated.
My answer
“Success is not final, failure is not fatal: it is the courage to continue that counts.” Winston Churchill
Exercise and a break from the computer are both a good idea.
I think you have to reflect on what happened but with some emotional distance.
Remember Thurber’s observation that “humor is emotional chaos remembered in tranquility” and write down your lessons learned once you can laugh about it (at least a little) so that you are not just re-opening wounds.
Some amount of lateral drift (reading books, seeing folks you’ve neglected as your firm was failing, etc..) can also give you perspective on what to do differently next time.
I had a painful failure about a decade ago and concluded “I am through with being an entrepreneur.” After five years at a big company I realized that I had mis-assessed and that I couldn’t help being an entrepreneur.
Failing at a startup doesn’t mean you should give up being an entrepreneur, but you should get some perspective on how to make “new mistakes” the next time out.
“I missed more than 9000 shots in my career.
I have lost almost 300 games.
26 times I have been trusted to take the game winning shot… and missed.
I have failed over and over and over again in my life.
And that is why I succeed.”
Update Nov-24-2009:Reprinted in Silicon Angle with a much nicer set of graphics and the Jordan quote embedded as a YouTube video.