Keeping the Ball Rolling With Prospects

Written by Sean Murphy. Posted in 2 Open for Business Stage, 3 Early Customer Stage, 4 Finding your Niche, Consulting Business, Customer Development, skmurphy

Most of our clients offer complex software products, frequently in combination with some amount of consulting services. Their sales are not the results of credit card transactions but a complex orchestrated sales process. Frequently their prospects need to see a custom demonstration or a benchmark that relies on their own data, not just the standard demo our customers routinely perform.

Prospects are often very busy and it can be difficult to determine if they are slacking off or overwhelmed, at least temporarily, with other priorities.

Here are five steps we try to get out customers to include in their sales process to keep the ball rolling with busy prospects.

  1. Get a commitment for when the prospect will send the data or other inputs that they need either for a custom demo or custom proposal. For example “so do you think you can get that to me by next Tuesday?”
  2. Get permission to call them back or follow up: “so if I don’t hear from you is it OK if I call you back on Thursday to make sure this doesn’t fall through the cracks.” Notice that you give the prospect some slack from their committed date.
  3. Understand what the ultimate deadline is that they are working to. That way in the call backs you can mention “I just want to be clear; you indicated you wanted us to finish the evaluation by the end of October to meet your deadlines. If we can’t get your specs and input data  and get started we can’t meet your date.” Be especially wary of “we need this yesterday” as  due date. It may mean that they have been living with the problem for while and have no firm plan to proceed. Worse that that, yesterday is not a day that will ever come.
  4. Always put an expiration date on any quotation or proposal. This gives you two more chances to follow up, once a few days before it’s due to expire to remind them, and once a day or two after it’s expired to give them one last chance to buy and to determine, if possible why they delayed or decided not to buy.
  5. There is a temptation when a prospect slows done to push for near term dates or to try and pull the timetable back in. The prospect is really in charge of the sales timetable so these efforts are often useless or even counter-productive.  Instead you should offer a date that is even farther out and see if they pull it back in. If they tell you that they plan to get back to you in four weeks after you have been “playing ping pong” and iterating rapidly over earlier requests, suggest that you will check in in three months if you don’t hear from them. This pushes the date out even further, if they are serious about buying it’s better to let them pull the date back in instead of pushing for an earlier date if they start to feel overwhelmed.

Lack of response is not the worst outcome for a startup.  The worst outcome is that you first invest time in a detailed customized demo, perhaps followed by  a detailed proposal, and then find that the prospects are maintaining radio silence. Before you invest a lot of your team’s time,make sure that there is a strong business reason that will force them to make a decision.

Good Decision, Bad Outcome

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

You never have complete information, if you do it’s a choice not a decision.

You have to evaluate a decision in the context of the information that was available at the time.

“Good Decision, Bad Outcome”

When I first heard someone use this phrase it took a few weeks to sink in.

Too often we infer the quality of the decision from the results alone. This can lead entrepreneurs in time periods like 1997-2000 and 2004-2007 to think they are better at making decisions than they are and to doubt themselves too much in a downturn.

A course of action or a new initiative is often not just a single decision, but a collection of interacting decisions.

Together these decisions are like the combination to a lock, if any one of them is wrong then the initiative fails or fall far short of the outcomes you were hoping for. If it’s all possible to decompose your plan into separate, individually testable decisions you can learn faster and achieve better outcomes.

Developing a new process capability can be like learning to play a new piece on the piano.  It can be useful to start at the beginning of different passages, otherwise you get very good at the first section, where you are getting the most practice, and your performance deteriorates as you finish the piece.

Something similar can happen in the sales process where a team gets very good at giving a demo and does not practice how to close the deal or secure a reference.

When we are helping  a client rehearse a presentation we always prepare backup slides for the “How do we get started?” question.  One had gotten so good at accepting a lack of interest at the end of a demo that when the client said “this is great, let’s get started!” there was a long silence until one their engineers blurted out “Wow! No one has ever said that before!”

Up until then it had seemed like a waste of time to prepare an engagement plan and to think through all of the details for a potential capability rollout. Now they lost the sale because, while the prospect respected the engineer’s honesty, they were not comfortable proceeding into unknown territory for both sides.

3 Equations & 3 Unkowns: Target Customer is Key Initial Value

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 4 Finding your Niche, Customer Development, Favorites

I mentioned in “3 Equations 3 Unknowns:  Customers, Features, and Message” that we spend a lot of time on the early customer stage. It requires very different sales style than you’ll see later on. It’s a conversational sales style. It’s much more about understanding the problem.

You’re trying to solve three equations, three unknowns:

  1. Are you talking to the right people?
  2. Do you have the right features?
  3. Do those features translate into benefits that are going to be useful to them?

The customer discovery interview process can be tough to master. You are trying to determine if the customer has a problem that they will pay you to solve with your technology: do you have the right features and do those features translate into useful benefits.

But we actually see team often go wrong with the first question: are you talking to the right people. And this error is much harder to recover from. You can do a poor job interviewing the right prospect and get some feedback that allows you to iterate. But a great job interviewing the wrong prospect will tell you very little. Improving targeting, or at least validating you can identify a prospect, has a big impact.

When someone is describing their offering at the a Bootstrappers Breakfast we will often take them through the “Three Question Test” as a group exercise. We will say,

“OK, we have assembled a brain trust for you this morning, you have 12 people around the table who would like to help you. Please give us three questions that have yes, no, or number answers and tell us the combination that would indicate that you could offer the person they are talking to clear value.”

It’s harder than it looks. Most folks start with  something like “Do you want to save money on your car insurance.” This question is worthless. Any question that you can append “, you moron” to the end of is not a good question because it does not disqualify anyone (I suppose if you didn’t own a car you would not want to save money on your car insurance). The next iteration tend to start out much too broadly, ignoring geography, industry, customer firm size (whether measure in headcount, revenue, or some other transaction count), title(s) of buyer, and pain points that are actually symptoms that a potential customer is experiencing.

On this last point you don’t go to your doctor and say “I think I have diabetes” you say “my vision is sometimes blurry and I am getting really thirsty and I feel tired all the time.” Business prospects don’t want “a better website” they want “more leads from their website” or “fewer calls to the hotline–because the website allows customers to solve their own issues.”

Four Movies To Renew Your Gumption

Written by Sean Murphy. Posted in 2 Open for Business Stage, 4 Finding your Niche, 5 Scaling Up Stage, skmurphy

Here are four movies that I watch when I need to refill my gumption or recover my sisu.

The Verdict

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.

Apollo 13

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.”

The Dish

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 World’s Fastest Indian

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.

DreamSimplicity Interviews Sean Murphy

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

I was recently interviewed by Floyd Tucker of DreamSimplicity Marketplace and the interview can be seen below and on DreamSimplicity.com. We talk about how even though each startup team is unique, they have a common set of milestones they have to achieve to move from idea to revenue. We also chat briefly about the Bootstrapper Breakfast.

Headquartered in San Francisco, DreamSimplicity has been conducting video interviews for public and private companies since 2008, producing high-quality executive interviews, customer testimonials and conference coverage videos. DreamSimplicity interviews offer SaaS and Sales 2.0 clients a platform to discuss their recent news announcements, and gather greater social buzz for their corporate story through a number of innovative web video outlets.

DreamSimplicity is an innovative producer of High Definition Web Video for emerging web-based technology organizations: they write, coach, direct and produce as needed.

  • Executive Interviews
  • Conference Events & Expo Hall Booth Coverage
  • Customer Testimonials
  • Thought Leader & Executive Videos
  • Creative Videos
  • Commercials
  • Live Web Shows

Update July 22: A transcript for this interview is now available.

Focus On a Niche Increases Your Chances For Success

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

Steve Sammartino had a thought provoking post on “Niche Marketing & Startups” that opened with this:

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.

Common Mistakes in New Product Introduction Demos

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

A baker’s dozen of common mistakes that I have seen founders make in preparing, delivering, and evaluating a new product presentation/demo.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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:
    1. 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.
    2. 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.
    3. 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.
  11. Include your company name, URL, and copyright  on each slide. They may become detached from the deck.
  12. 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.
  13. 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.”

Killer Instinct Can Blind You to the Value of Partners

Written by Sean Murphy. Posted in 4 Finding your Niche

A “killer instinct” that allows you to focus and prioritize is helpful, but if it blinds you to win-win outcomes you will not succeed as an entrepreneur.

Killer Instinct

In “Killer Instinct” Rafael Corrales writes:

“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.

Win-Win Mindset Beats “Winner Take All” Thinking

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.”

Related Blog Posts

 

Saras Sarasvathy’s Effectual Reasoning Model for Expert Entrepreneurs

Written by Sean Murphy. Posted in 1 Idea Stage, 4 Finding your Niche, Customer Development, skmurphy, Startups

Update Feb-24-2011: Since I first wrote this in 2010 the Effectuation.Org site has been considerably upgraded and contains a lot more information on Saras Sarasvathy’s research.

Recapping ideas, papers, and books that had changed my life yesterday reminded me of Saras Sarasvathy’s Effectual Reasoning Model from her 2001 paper “What Makes Entrepreneurs Entrepreneurial” (There is a reference on the Khosla Ventures site at “What Make Entrepreneurs Entrepreneurial” with an annotated PDF version)

Entrepreneurs Rely on Effectual Reasoning

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

  1. Who they are–their traits, tastes,and abilities;
  2. What they know–their education, training, expertise, and experience
  3. Whom they know–their social and professional networks.

Saras Sarasvathy in “What Makes Entrepreneurs Entrepreneurial.

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.

Saras Sarasvathy in “What Makes Entrepreneurs Entrepreneurial.

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.

Saras Sarasvathy in “What Makes Entrepreneurs Entrepreneurial.

Saras Sarasvathy on 3 Key Differences In Effectual Reasoning

Saras Sarasvathy 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.

Saras Sarasvathy in “What Makes Entrepreneurs Entrepreneurial.

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.

Saras Sarasvathy in “What Makes Entrepreneurs Entrepreneurial.

Related Blog Posts

Customer Development Proceeds in Parallel with Product Development

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

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.

Consider an appreciative inquiry approach to understand the customer’s operating reality.

Customer focus groups are effective for feature planning but more problematic in determining product/market fit in the early market.

Good Marketing is Good Content

Written by Theresa Shafer. Posted in 3 Early Customer Stage, 4 Finding your Niche, 5 Scaling Up Stage, Blogging

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:

Bouncing Back

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

On Hacker News about 18 months ago someone posted a question on “Dealing with Post Startup Depression” that read

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.

Dan Vogel posted a pointer to this YouTube clip of Michael Jordan on Failure where he says the following:

“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.”

The Limits of “I Will Know It When I See It”

Written by Sean Murphy. Posted in 1 Idea Stage, 4 Finding your Niche, Rules of Thumb, skmurphy

Both engineering and entrepreneurship alternate exploration and verification cycles to develop a solution that satisfies a customer’s need. Both of these rely on the scientific method of “observation, hypothesis formation, prediction, and experimentation” to develop and validate testable theories, engineering solutions, and profitable products. Both require that a new configuration or an opportunity be recognized as distinct and worthy of experimentation/validation efforts and that you understand if you have satisfied or failed to satisfy each constraint or requirement.  This is the basis for “I will know it when I see it.”

Hadoop Summit 2009 – Quick Impressions

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

I spent today at the Hadoop Summit 2009 (hadoopsummit09). Although I paid my $100 registration fee in advance I made the mistake of getting there a few minutes after 9am with the first keynote underway and joined a thick knot of hangers on in one of the doorways to the ballroom (don’t tell the fire marshal). Finally at 10:30 they broke the wall down that separated the adjacent salon and expanded the ballroom.

The first keynote I listened to was a long sales pitch from Sun. I don’t know why you would give a room full of hundreds of engineers and scientists a basic sales pitch for cloud computing, but it was a waste of time for both Sun and the audience.

Enough whining, the rest of the conference was very thought provoking, some quick impressions:

  • If Moore’s Law has delivered roughly a million fold improvement in computing performance in the last 40 years, Hadoop, Zookeeper, and similar orchestration layers allow another thousand fold improvement for suitable problems.
    • Amdahl’s Law trumps Moore in many situations but some of the problems now being solved were intractable, at least for a reasonable budget, if not unthinkable five or ten years ago.
    • To put a million fold increase in perspective, that’s a lifetime of calculation (40 hours a week, 50 weeks a year, 40 years working lifetime) compressed into 288 seconds, 12 seconds shy of five minutes.
  • The ability to orchestrate a thousand to ten thousand machines on a problem (admittedly you need a suitable problem) means we are looking at project CPU budgets measured not in CPU years but CPU millennia.
    • This is not entirely new: certainly there were DoD and NSA projects working at that level with specialized hardware two and perhaps three decades ago. Pixar announced in 2006 that their movie Cars took 23 CPU millennia to produce, again with specialized hardware.
    • But Amazon EC2 uses commodity hardware and makes CPU hours available for a dime with a credit card. Admittedly a CPU millennium will set you back roughly $876,000 at current prices.
  • Several requests or comments on the need for fractional hour billing, which I took as at least anecdotal evidence for good parallelization of a lot of the tasks.
  • Amazon reminded us that they are quite skilled at accepting (and shipping back) physical media containing data sets for their Elastic Compute Cloud.
    • “Never underestimate the bandwidth of a station wagon full of tapes hurtling down the highway.” Andrew Tanenbaum
  • The show reminded me a lot of INTEROP 88, the year that Interop transitioned from workshop to trade show with a few dozen vendors at the Santa Clara Convention Center. The vendor ecosystem for Hadoop is not yet as diverse, but the focus was clearly on system administration and technology, with the applications discussed in highly technical language.  The crowd seemed to be researchers and system programmers for the most part, but the potential business impacts are starting to become a lot clearer.

Postscript June 14: Jinesh Varia made a remark during his keynote about “please check out our security whitepaper, some firms are building HIPAA complaint applications” so I did and found this paragraph which clearly telegraphs their strategic intent to move to the heart of enterprise applications:

Certifications and Accreditations
To provide customers with assurance of the security measures implemented, AWS is working with a public accounting firm to ensure continued Sarbanes Oxley (SOX) compliance, and attain certifications and unbiased Audit Statements such as recurring Statement on Auditing Standards No. 70: Service Organizations, Type II (SAS70 Type II). AWS will continue efforts to obtain the strictest of industry certifications in order to verify its commitment to provide a secure, world-class cloud computing environment.  The flexibility and customer control that the AWS platform provides permits the deployment of solutions that meet industry-specific certification requirements. For instance, customers have built HIPAA-compliant healthcare applications on AWS.

If Revenue is Drying Up

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

You are not alone. We talk to firms every day that are challenged by the current economic environment. Let me suggest a couple of things you can do:

  1. Come to a Bootstrappers Breakfast™ and compare notes with other bootstrapping entrepreneurs for the price of your breakfast. We host four a month, the next one is 9AM Friday March 27 at Red Rock Coffee (second floor) in Mountain View at 201 Castro Street. Here is the calendar of events.
  2. Sign-up for our “Getting More Customer” workshop next Tuesday. It’s goes from 8:15 to 1pm and includes lunch, you will leave with a 90 day plan and as part of the workshop we follow up with you four times–at two weeks, four weeks, eight weeks, and 13 weeks–to help you stay on track.
  3. Make a list of thirty people that you have enjoyed working with. Reconnect. Offer to meet for coffee or a meal. Suggest an event that would be of interest to both of you. Write an endorsement on LinkedIn for them to let them know how much you appreciated working with them. See what you can do for them and let them know what kind of firm constitutes a good prospect for your products or services.
  4. Contact firms that fell off of your prospect list and former customers and see how things have worked out for them. Perhaps you can help them informally, perhaps they are interested in becoming a customer (again).
  5. Give me a call or drop me an e-mail (see contact info for coordinates) to schedule a free one hour consult on your current situation. Depending upon where you are we can work through a map of the path from idea to revenue if you haven’t launched or spend some time debugging your sales process if you have and you aren’t where you want to be.

Update Sat-Mar-28 One thing that will help to give the discussion some structure is answering at least one of the following set of questions. I suggest this because these will be the kinds of questions I will be asking to understand where you are:

Don’t assume that there is one thing you need to do that will make all of the difference: it’s more than likely going to require a combination of things applied diligently for months.

Entrepreneurial Motivation

Written by Sean Murphy. Posted in 4 Finding your Niche, Quotes, skmurphy

Tim O’Reilly had a thought provoking post “Work on Stuff that Matters” on January 11. He starts with a clarification of  entrepreneurial motivation and what he means by “the social value of business done right”

First off, though, I want to make clear that “work on stuff that matters” does not mean focusing on non-profit work, “causes, or any other form of “do-goodism.” Non-profit projects often do matter a great deal, and people with tech skills can make important contributions, but it’s essential to get beyond that narrow box. I’m a strong believer in the social value of business done right. We need to build an economy in which the important things are paid for in self-sustaining ways rather than as charities to be funded out of the goodness of our hearts.

and then offers three guidelines

1. Work on Something That Matters to You More Than Money.
The entrepreneurs who first made the market often had much less expectation of easy success, and were instead wrestling, like Jacob with the angel, with a hard problem that they thought they could solve, or at the very least make a dent on. […] The most successful companies treat success as a byproduct of achieving their real goal, which is always something bigger and more important than they are.

By picking the right mission you also enable others to collaborate more effectively with you. Michael Schrage, who has studied collaboration in a variety of settings, has said that one clear rule of thumb has emerged. If you want talented people to collaborate, you have to pick a problem that they care about, and it is so hard that they realize they need to work together to make meaningful progress (for more on this see Shared Minds, No More Teams, or Serious Play)

2. Create More Value Than You Capture.
Most businesses do in fact create value for their community and their customers as well as themselves, and the most successful businesses do so in part by creating a self-reinforcing value loop with their customers.[…] How many people do you employ in fulfilling jobs? How many customers use your products to make their own living?

I think this good advice but very challenging to master. It’s easy to be clear on your own needs, harder to see how to co-evolve with a system of suppliers, partners, and customers in a community. Peter Drucker called “the worship of premium pricing” as first deadly sin of business: “The worship of premium pricing always creates a market for the competitor. And high profit margins do not equal maximum profits. Total profit is profit margin multiplied by turnover.  Maximum profit is thus obtained by the profit margin that yields the largest total profit flow, and that is usually the profit margin that produces optimum market standing.”

3. Take the Long View
It’s hard to see beyond the “small here” and the “short now,” especially if you live in a favored place and time.

Peter Drucker has observed that the second deadly sin of business is “mispricing a new product by charging ‘what the market will bear.’ This, too, creates risk-free opportunity for the competition.” Beyond any entrepreneur’s concerns for successfully establishing their company in a market are the obligations that we all have to our family and our community.

On January 13, Po Bronson’s “What Should I Do With My Life, Now?” was posted on the Fast Company website. He offers a perspective that acknowledges the need to work on stuff that matters but also admits of more practical motivations. He tells a version of the story of the three brick layers (I first heard it as three stone masons) with a different emphasis.

There’s an old parable about the three bricklayers. They’re laying bricks all morning, and when they finally get a break, one guy asks the other two, “Why are you doing this job?”

The first guy says, “I’m doing it for the wages.”

The second guy says, “I’m doing it for my wife and kids.”

The third guy looks up at what they’ve been constructing all morning, which is a church — a place to get in touch with one’s highest self — and says, “I’m helping to build a cathedral.”

Now, most people hear this parable, and they think the third guy has the right answer, and the first two guys have the wrong answer. That’s the simplistic lesson that most people jump to, led their by their mythic notions of calling.

But that is not the lesson of the parable. In fact, all three men have a sense of purpose — have a “cathedral,” if you will. The third guy has the Cathedral of Spirituality. Good for him. But the second guy has his too. The Cathedral of Family. And the third guy has the Cathedral of Self-sufficiency. Those are all good purposes. Those are all right answers.

The real lesson of the parable is, notice what no man answered. Not one of the three said, “I just love laying bricks.” Doing something for the sheer love of it is not what real people mean when they say their work provides a sense of purpose. That is not how the construct a sense of meaning and rightness. Looking for it, in that form, is incredibly illusory.

I think many entrepreneurs are motivated as much by self-sufficiency, either at a personal or family level, as a higher calling. I think you elevate your goals, similar to Maslow’s “Hierarchy of Needs,” as more basic motivations are satisfied. Bronson seems to be rejecting Joseph Campbell’s “follow your bliss” but I think what he is really saying is that  pure doing is not enough–whether it’s writing code, writing books, sculpting, painting, etc.. I have to balance my obligations to myself, my family, and my community. This is at the heart of Tim O’Reilly’s three rules as well.

“If you do not have the capacity for happiness with a little money, great wealth will not bring it to you.” William Feather

Life is too short to work at a job you hate, but everyone has to do something someone else is willing to pay them for.” Sid Emmert

Update Jan-18: Scott Shane, author of  Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By has an inaugural blog post on the US News website, it’s “Why Do People Become Entrepreneurs

Researchers have identified myriad reasons why people start their own businesses, but across all of the surveys, interviews, and other efforts to understand entrepreneurial motivation, one reason stands out above all others: People start businesses because they don’t want to work for someone else.

We Don’t Encourage Individuals to Form a Startup

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

“We are all here to do what we are all here to do.”
The Oracle in “Matrix Reloaded”

I have come to the conclusion that most entrepreneurship is involuntary. Either someone is an entrepreneur from the time they are young, which was my personal experience, or they are thrust into situations where their old career path(s) are foreclosed to them and they have to become entrepreneurial.

I have read a number of posts in the last few months about how a downturn–or now a recession–is a great time to start a company. For the most part they are written by folks who in some way make their living off of entrepreneurs, either preying upon them as investors or service providers.

We certainly provide services to bootstrapping entrepreneurs and I suppose it would be in my personal best interest to encourage more folks to start bootstrapping a startup. I don’t think for the most part it’s a reasoned decision. Successful entrepreneurs are certainly prudent in their approach to starting a new business, and disciplined in how they manage not only technology but also selling, employees, and risks.

But individuals who are motivated by making a lot of money, in particular making a lot of money in a hurry, don’t seem to have the patience and self-discipline to prosper–certainly in a downturn/recession. So I would only end up encouraging the underqualified by appealing to their greed or their desire for autonomy.

Also the people who ask “should I be doing this” more than once or a twice a quarter (the “normal rate of doubts” amongst entrepreneurs in my experience) and look for reassurance in seminars and blog posts about why now is the best time to start a company should think very hard stepping onto the entrepreneurial roller coaster. I personally wouldn’t want be anywhere else, but then that’s just me.

I don’t like to discourage entrepreneurs either. I am always energized by the opportunity to hear bootstrappers’ perspectives on their business and their markets. If you have time, please drop by a Bootstrappers Breakfast in December or January and learn some of the realities of bootstrapping firsthand from entrepreneurs who are doing it.

If you have made the decision to team up with people you trust to form a software startup, you can definitely come to us for advice (free and paid) and we can help you not only avoid problems but pursue sound strategies for establishing your firm in a market and growing it.

Related posts

Update Dec 8: Matt Maroon wrote a good post on this same topic “A Little Better Advice” which I intended to take in a follow up to this post.

Back when I was a B-list professional poker player I got a lot of inquiries from people I didn’t know asking me if they should go pro. A lot of other pros who were asked that question said no every time. And they weren’t really wrong to do so, because if you’re asking someone you don’t even know that question, no is at least 75% likely to be the correct answer.

It’s not a very helpful one though. I realized early that people aren’t really asking you if they should go pro. They’ll make their decision regardless what you tell them, and if they got far enough along in the process to start asking, the smart money was that they were going to do it in the near future. I’d bet that the majority of them did, even though almost all of them were told not to.

So instead of just giving them a flat out no, I asked them a bunch of questions. Do you have kids to support? How much do you need to make each month to make ends meet? Do you have enough saved up to break even for three months (or six if you’re playing live) and still have a bankroll left? What’s your win rate and sample size? […]

A lot of people probably ignored everything I told them anyway, just as they would had I said no (or yes for that matter, since they were going to anyway, though they’d blame me if it went badly for them). But I know I saved a few people from a lot of agony, and ended up encouraging a few who went on to have success with it. By not advising them one way or another, but rather giving them more information, I helped anyone who I could, and I at least didn’t hurt the rest.

Update Dec 12: I realize I addressed some of Matt Maroon’s concerns in “Entrepreneurs Need Gumption to Succeed.” We have 382 posts since October 2006, I will take some time to get a better index organized for cross-index and references.

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