While asking for a letter of intent may seem like a useful shortcut to assessing prospect intent, it normally causes many more problems than it solves.
It will be twenty plus years before there is a 3D printer in most homes due to limitations of the cost of the machine, material, obtaining software and learning how to use the software. Other fundamentally problem that prevent 3D printers being adapted by the public are to understanding of design, physics, and material science and a change of behavior of making things at home.
Entrepreneurs who limit themselves to what they could learn if their prospects lacked the power of speech adopt what I call a veterinary marketing model. It’s not a viable approach to market exploration.
Any innovation effort is a painful struggle punctuated by false starts and dead ends. Your efforts are met with lack of interest even when a basic invention is working and active resistance when it starts to replace the tried and true. Like any childbirth the trick is managing the pain long enough to deliver.
Trust is built over repeated interactions between people. If your business requires long term relationships then you have to make sure that investments in automation are not deployed in a way that undercut your ability to have real conversations. Unfortunately, some uses of email automation tools are pushing sales conversations into the “Uncanny Valley” because they strive to simulate–but miss–a genuine personalized touch.
Q: We have a product for bloggers but I am having a lot of trouble getting leads. I have met bloggers from popular media companies at events, I have cold called them, e-mailed them, and e-mailed to on-line groups that I am a member of. None of this has worked. How do I interest people in my product?
I have a couple of suggestions:
Customer discovery interviews are essential to testing key B2B product hypotheses and understanding your target customers’ needs. Broadly there are five ways that you can reach out to potential customers to have a discovery conversation. All of them assume that you have a clear picture of who your target is and a few key questions that they will be willing and able to answer that will indicate they have a problem or need your solution may address.
Christoph Guetter suggests in “The eye is a window to the brain; but who’s looking?” that the micron scale resolution of optical coherence tomography (OCT) for in vivo cross-sectional imaging of the human retina may allow earlier and more accurate diagnoses of several common neurodegenerative disorders: Multiple Sclerosis (MS), Alzheimer’s disease, Parkinson’s disease, and amyotrophic lateral sclerosis (ALS).
Q: Should I ask prospects if they would use my product? How do I interpret “yes”, “no”, and “maybe.”
Q: I struggle with the value proposition for our product. Either I am too abstract “we offer a positive return on time invested” or too vague “help increase your ability to manage critical challenges.” Do you have any suggestions for how to frame or formulate a value proposition?
Here a few questions that a value proposition normally addresses
These are excerpts from Episode 9 of Outlier on Air: Tristan Kromer, A Lean Approach to Business. They are in the same sequence the took place in the interview but a number of stories and asides have been omitted to focus on what I felt were some extremely valuable insights from Tristan Kromer on clarifying and testing customer and value hypotheses.
Map the customer buying process, needs, and situation before you invest time sending a detailed proposal. A quick request can mean you are column fodder.
Q: We are still trying to close our first paying customer. We have a website up and have talked to a number of people. More or less out of the blue we got a call from someone in a large firm who had looked at our website. They asked a few questions about our product and then said “Great! Send me a detailed proposal including pricing!”
At last a stranger recognizes the brilliance of your solution in just a few minutes of conversation! How often I tell myself that. How rarely it’s true, especially when you are just starting out with a new product or in a new market. You have to ask yourself:
- Do they really know enough about what we do to be able to start a purchase order?
- Do I know enough about their situation to be able to calculate our likely impact on their business and their return on investment?
- How can I justify the price to value in the proposal?
- Have I addressed the critical implementation and proliferation roadblocks we will face from pilot to production use?
You May Be Column Fodder
More often than not you are actually “column fodder” or a makeweight needed so that they can prove to their boss or the purchasing/finance team that they did a thorough job and solicited three bids. Especially if you don’t know much about their situation and they have not asked for a detailed demo you need to proceed a little more slowly.
Map The Customer Buying Process
Before you submit a proposal I would ask your contact these questions to get a better sense of the situation, in particular you need to learn as much as possible about who will make the decision and how they will make it (the customer buying process).
- Can you describe the process for making a decision after we submit this powerpoint proposal, who else is in involved, what questions are they likely to have?
- Who has to make the final decision to actually sign a contract?
- Can you provide an example of a standard contract so we can understand your typical deal structure and terms and conditions.
- Can you give some examples of other deals that your company has done in the last three years that might serve as a model for how our business relationship would work?
Understand Their Needs and Situation
You want to be easy to do business with but that requires that you have a thorough understanding of their needs. I would not send a powerpoint presentation, but ask for time to present it (if only via Webex/GoToMeeting) so that you can answer any questions that they have in the moment. I would also dry run this presentation with your contact if they are open to it. If they just default to “send me a detailed proposal” it’s probably not a real opportunity.
For customer interviews we have a rule of thumb that if an hour or research saves a minute early in the conversation it’s a good investment. When you look at the list of questions you have prepared to learn about the prospect’s business and their needs, it’s easy to say to yourself, “I am really busy I can just ask these at the start to ‘set the table.'” But there are significant risks with this approach.
Preparations Cuts Risk Of Customer Interviews Ending Prematurely
While the interview may be nominally scheduled for 15 minutes or a half-hour and may run an hour if it goes well the first six minute or so are critical to communicating that you have done your homework on their situation and their needs. If you start to ask questions that are already published on-line you can appear lazy or unprepared. If you can do research on a prospect in advance, it’s worth spending an hour to save a minute in the conversation. You can even start the conversation by saying “when I prepared for this conversation here is what I learned about your firm” and give a brief summary of what you know about their situation.
It’s OK to say “I see on your website that you have hired four people in the last three months, how has that impacted …” or “I read a profile of your firm in the San Jose Business Journal Book of Lists, have you grown beyond the 12 people listed in February?” This shows that you have done your homework and don’t want to waste their time but need to confirm some of the key facts that may bear on their needs.
Information Sources To Consult Prior To Customer Interviews
- Do a thorough review of the prospect’s website.
- Search for any articles in the last two years at least to see what kind of press coverage they have received.
- Review the Linkedin profiles for the firm, the person you are talking to, and anyone with similar titles or in the same department.
- Review on-line postings in relevant forums for the industry.
- See if they have a blog, a twitter account, a YouTube account, and similar social media sits that are often used for business purposes.
Six Questions That You Normally Have to Ask In The Conversation
- Prospect’s description of the problem in their own words. This is rarely more than a sentence or two and capturing the essence in their own words is key.
- High level description of current work process or work flow in their own words. This forms the basis for any delta comparison or differentiation of your solution.
- Any constraints they mention: if you hear the same ones multiple times you will more than likely have to satisfy them.
- How they will tell that a new solution will leave them better off: this is different from asking them to specify the solution, it’s asking for “future state” or the end result they would like to achieve.
- What else they have tried to do to solve the problem: probe for why they were not satisfactory.
- Key metrics or figures of merit they would use to evaluate a new outcome.
“A month in the laboratory can often save an hour in the library.”
F. H. Westheimer
Entrepreneurs seem to divide into two camps:
- those who want to have a conversation immediately, and
- those who are quite content to research for months as long as they don’t have to talk to strangers.
Striking a balance is the key to maximizing your learning from a customer interview. Effective research prior to the customer interview allows you to
- Ask better questions
- Provide evidence of your commitment to developing a mutually satisfactory business relationship
- Detect when your prospect is leaving something out or perhaps coloring the situation too much. You are not a stenographer there to capture whatever they say without reflection, but if your only source of information is what they tell you then you risk “garbage in, garbage out” in your product plans and MVP.
In a candid discussion about the challenges of managing your own expectations for a minimum viable product (MVP), Tristan Kromer observed, “It’s psychologically hard to enthusiastically proceed with skepticism.” And that is the challenge, we have to be enthusiastic about our product ideas to persevere to complete them and tell others about them, but we have to be skeptical enough to accept criticism and open to prospect perspectives on needs and constraints on solutions.
Strong Opinions Weakly Held
Bob Sutton blogged about this in 2006 as “Strong Opinions Weakly Held” as one of the differentiators between smart people and wise people. Both have strong opinions, but the wise can more easily allow revisions to theirs:
Perhaps the best description I’ve ever seen of how wise people act comes from the amazing folks at the Institute for the Future. A couple years ago, I was talking the Institute’s Bob Johansen about wisdom, and he explained that – to deal with an uncertain future and still move forward – they advise people to have “strong opinions, which are weakly held.” They’ve been giving this advice for years, and I understand that it was first developed by Institute Director Paul Saffo. Bob explained that weak opinions are problematic because people aren’t inspired to develop the best arguments possible for them, or to put forth the energy required to test them. Bob explained that it was just as important, however, to not be too attached to what you believe because, otherwise, it undermines your ability to “see” and “hear” evidence that clashes with your opinions. This is what psychologists sometimes call the problem of “confirmation bias.”
Early Adopters For Your MVP Are Often Very Normal
I think too many entrepreneurs conflate “early adopter” with “technically sophisticated’ or ‘geek hipster.’ Normal people are early adopters when they have a strong need for your product. The first two people to tell me about E-Bay, and who were genuinely excited about it, were two mothers who didn’t know each other but were collectors of different specialty handicraft items (teddy bears and glass angels) and they were shopping regularly there because they were not available in stores.
They were early adopters. I ignored their advice, of course, when I should have realized that neither used a computer for any other purpose than visiting E-Bay. They were early adopters. I should have realized that if E-Bay could create markets for these highly specialized products they could create and serve a lot of niche/specialty markets in a way that was winner take all.
Another example: I think Pinterest looks a lot like the way that someone who creates scrapbooks or manages a physical bulletin board would want to author a website.
Q: How can I go about calculating Customer Acquisition Cost (CAC), Customer Lifetime Value (LTV), and other business model parameters for a technology that I will use to attack an entirely new market with no historical data?
While there may be “new markets with no historical data” there are no new markets that cannot be benchmarked against existing markets by asking these two questions:
- What do people stop paying for to pay for you offering?
- What do people stop spending time on to spend time on your offering?
What do the Customer Acquisition Cost (CAC) Customer Lifetime Value (LTV) look like for these substitutes?
Elicit Symptoms From Prospects
Alternatively what symptoms will prospects admit to having? They won’t read articles or click on adwords or watch videos about problems that they don’t know they have or believe they may be affected by. An effective approach in the early market is to interview prospects to find unmet needs, persistent problems, and goals at risk.
We Measure the New By the Familiar
The reason why light bulbs were measured in candlepower and steam engines (and later internal combustion engines and then electric motors) were expressed as horsepower. Henry Ford observed in “My Life and Work“ that, “A horseless carriage was a common idea…ever since the steam engine was invented…” We call a horseless carriage a car.
Things that are genuinely new are mysteries and don’t become news until they can be expressed as part of a familiar context or by analogy to a familiar example. Alan Kay gave a great talk on this last point that was recently highlighted by Jim McGee, “Alan Kay on Invention vs. Innovation.”
What Job Will Your Prospect Hire Your Product For?
- Letter writing and all kinds of dictation without the aid of a stenographer.
- Phonographic books, which will speak to blind people without effort on their part.
- The teaching of elocution.
- Reproduction of music.
- The “Family Record”–a registry of sayings, reminiscences, etc., by members of a family in their own voices, and of the last words of dying persons.
- Music-boxes and toys.
- Clocks that should announce in articulate speech the time for going home, going to meals, etc.
- The preservation of languages by exact reproduction of the manner of pronouncing.
- Educational purposes; such as preserving the explanations made by a teacher, so that the pupil can refer to them at any moment, and spelling or other lessons placed upon the phonograph for convenience in committing to memory.
- Connection with the telephone, so as to make that instrument an auxiliary in the transmission of permanent and invaluable records, instead of being the recipient of momentary and fleeting communication.
Related Blog Posts
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.
- Leaving Your Assumptions Implicit: Not Writing a Customer Development Plan
- Believing that Anyone Will Want Your Product: Not Targeting a Specific Buyer
- Confusing the User (or the Audience) with the Buyer/Customer
- Believing Your Product Will Sell Itself (Looking for Smarter Prospects)
- Developing the Full Product: Not Selling the Smallest Piece Possible at First
- Not Focusing on Break-even and Profit
- Expecting Too Much Too Soon: Not Planning for “Target Practice”, Iteration, and Improvement
- Confusing VC with Customer: Going for (2% of) a Really Big Market
- Expecting the Same Control Over Prospects and Team Members as Your Code Base (Single Founder “No Compromise” Mindset)
- 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
- Managing different aspects of your identity at personal, family, and business level.
- Understanding the emotional connection required for a successful business transaction: mission, brand promise, and logo.
- The networking etiquette in Silicon Valley: cards, introductions, how to get acquainted.
- Making the transition from selling to friends to selling to a strange
- 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 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:
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.
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: 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
- Sean Murphy on the first six to twelve enterprise customers an interview with Gabriel Weinberg
- Early Revenue for Enterprise Web Apps a one hour video on finding early revenue for enterprise web apps
Update July 16: This post was highlighted in Foundora Issue 333
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:
- Integrity in an organization is built by developing trust.
- Trust is the glue that enables a team to function well.
- Trust is built over time through competence, commitment, and care.
- Trust is built as we preserve and build the significance of others.
- Trust is built through bearing each others’ burdens.
- Trust is built through a rapid response to communication.
- Trust is built through humility.
- Trust is built through personal contact.
- Trust is diminished by sarcasm and criticism.
- 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.”