Tag Archive for 'Entrepreneurship'

How to Make Your Investor Pitch Lean

Published on July 22, 2010 in Entrepreneurship, Investment and lean startup. 0 Comments Tags: Angel Investment, Entrepreneurship, Investment, lean startup, venture capital.

Have you ever needed feedback on your investor pitch? Are you in the San Francisco Bay Area?

If you answered yes to both, we’re helping to promote the Lean Deck Clinic being put on by The Lean Coffee Meetup and hosted at the new San Francisco startup incubator Kicklabs. It’s a chance to present your pitch in front of a room of peers, 3 VCs and 3 angel investors like:

Gregarious Narin, Rich Colins, and I will be judging the presentation decks submitted to participate. So learn more and submit your application now. Below is a bit more information from Gregarious’ announcement:

Agenda

6:00pm Welcome

6:15pm Deck Clinic

7:00pm Welcome All / Food / Break

7:30pm Key Performance Metrics Panel

8:15pm Deck Presentations

Key Performance Metrics Panel

Lean Startups are deeply focused on measuring progress as part of the learning process. In a vacuum, metrics can get in the way of seeing the bigger picture. Our panel of clinicians will speak on the various KPIs they look for when evaluating a business and give some background on why these data points have historically proven valuable / predictive.

Deck Clinic

The Deck Clinic will present 18 startups with the opportunity to present their deck and receive immediate feedback. Startups will be grouped into sets of 3 and paired with a clinician (an angel, vc, or seasoned entrepreneur who can provide measured feedback). Each presentation will last for 15 minutes:

10 minutes to present your deck

5 minutes for feedback

Deck Presentations

Following the private presentations, the winning decks from each group will have the opportunity to present to the whole group for additional feedback. Each winner must make adjustments to their deck based on the feedback they received during the clinic.

When / Where

August 2-3 (TBD)
6:00pm – 9:30pm

KickLabs
250 Brannan Street, SF, CA

Here are the key dates to keep in mind for the Deck Clinic:

07/25 – Submissions Deadline

07/30 – Selections Announced

08/02 – Deck Clinic

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Hope is the Enemy – Startup Advice from a Monk

Published on June 15, 2010 in Entrepreneurship, Strategy and lean startup. 2 Comments Tags: Buddhist wisdom, Entrepreneurship, startup.

I was recently reading a book by a Vietnamese Buddhist monk (Yes…I really do read books by Vietnamese Buddhist monks. No, I’m not Buddhist.) when I came across this section that struck me:

When I think deeply about the nature of hope, I see something tragic. Since we cling to our hope in the future, we do not focus our energies and capabilities on the present moment. We use hope to believe something better will happen in the future…Hope becomes a kind of obstacle. – Thich Nhat Hanh

Granted, I’m pretty sure he wasn’t talking about starting a business and this is out of context. None-the-less, I think some “live in the moment” lessons can be applied to this thing we call the startup.

Abandon Hope All Ye Who Start Things Up

Despite the title (I like provocative titles. You should have seen what I was planning to call this post.), I’m not suggesting permanently abandoning all sense of hope and replacing it with a black béret, a cigarette, and a wistful look of ennui. Hope (and faith) in our entrepreneurial vision is what gets us started on our path to build a new company. It’s also what gets us through some of the rough patches.

But as entrepreneurs searching for a business model, hope can be our enemy. It can tell us “it might get better tomorrow” when our metrics are plummeting. It can tell us every month that next month will be the one where we turn the corner. Hope is always for something just beyond our present reach.

Your Business Exists in the Present

Your business exists in the present tense, not the future. Although we plan for hockey stick growth, startups have to act daily to incrementally pull ourselves up with our bootstraps. This requires a phenomenal amount of focus and dedication on getting things done day by day. Our startup might not last until the end of the week, let alone years and years. If we spend all of our time planning for the future, nothing will get done today.

Moreover, we have to look realistically at the data that is coming in and not shy away from it while thinking blissfully about a tomorrow that may never come. We need to talk to our customers every day and sift through all that qualitative and quantitative data to find out how to provide value to our customers. If we get too wrapped up in the future, we might not realize that reality is telling us to pivot.

If we spend too much time dreaming, we might not realize that our customers have a different dream.

Walk the Line

There is a very fine line between a business model pivot and giving up too soon. The one can feel like the other. It’s important for us to walk the fine line between planning for the future and paying mindful attention to the present.

A good pivot doesn’t mean giving up on your dreams and goals, it just means you are going to achieve them in a slightly different way. Perhaps you’ll solve the same problem, but with a different product. Perhaps you’ll solve a different problem, but for the same customer.

Perhaps, even in business, there is some wisdom in listening to Buddha and living in the present.

Cheers,
Tristan

P.S.: The book is “Peace is Every Step” by Thich Nhat Hanh.
P.P.S.: I’m still not Buddhist.

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$3.95? We’re Rich! First Revenue During Alpha Testing

Published on June 1, 2010 in Customer Development, Entrepreneurship, Sales and lean startup. 0 Comments Tags: affiliate marketing, Customer Development, Entrepreneurship, lean startup, revenue.

On Friday, I received this welcome email:

Subject: Sale – Entrepreneurs Guide to CustDev- ID:5777670 Entrepreneur’s Guide to CustDev eBook

You have earned an affiliate fee of 3.95 USD for the sale (ID:5777670-686=
2856) of Entrepreneur’s Guide to CustDev eBook on Thu May 27 2010 23:52:3=
9 MST.

Sincerely,
Entrepreneurs Guide to CustDev

startupSQUARE, having not yet progressed to beta testing, now has revenue! Granted, a very small amount of revenue. Why?

Confirm Every Hypothesis

After enjoying the Startup Lessons Learned Conference, we decided to simplify yet again and try and figure out how we could test every hypothesis, no matter how silly. One of those hypotheses was, “We can earn sufficient revenue from affiliate marketing to offset operational expenses.” (Translation: That we’ll make more money than we spend per customer.)

That hypothesis is too complicated to test right now and we actually hadn’t planned on testing anything until September or later. So we tried to pick something simpler we could test today. We settled on, “Entrepreneurs will click on affiliate marketing links.”

So we picked a couple products that we think are genuinely useful to all entrepreneurs and that we actually use. Then we threw a couple of links into the right hand column of this blog for “Four Steps to the Epiphany” by Steve Blank and “The Entrepreneurs Guide to Customer Development” by Brant Cooper and Patrick Vlaskovits. Result? $3.95

Get Rich Quick

Ok… $3.95 isn’t really a huge success story and I’m certainly not going to retire on it. (In fact, split three ways I was only able to buy a bagel with my share.) I’m just happy it only took two clicks to get a sale. Regardless, it does confirm that it is at least possible to make some money off a very specific target market (entrepreneurs) without charging up front.

We’re a long way off from really confirming that we have a viable business model with a revenue per user higher than our customer acquisition costs. However, it was important to us to develop a business model which helps entrepreneurs start their businesses. Charging entrepreneurs up front for the service seems…well…off.

When you’re trying to start a business, you’re short on time, money, and people. Charging $15-20 or more a month to offer a co-founder dating service is not a lot of money and people have largely indicated that they’d be willing to pay it if it works. Still, we’d like to do one better. We’d like to offer a free service to entrepreneurs and get paid by the people already in business.

Adblocker

Clearly we’re don’t want to run a site plastered with Google ads and certainly we’ll work hard to develop our premium model like everyone else. This was just a small test to recommit ourselves to the customer development and lean startup philosophy.

We’re still alpha testing and we’ll keep testing both our product and our hypotheses until we’ve created something that will sustain itself by helping entrepreneurs build businesses. I’m happy that we were able to take that first step towards real revenue now.

Now…off to earn another bagel.

Cheers,
Tristan

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Customer Development with Network Effects

Published on May 11, 2010 in Customer Development, Entrepreneurship and lean startup. 0 Comments Tags: Customer Development, Entrepreneurship, lean startup, network effects, pivot.

How does customer development differ with regards to products which require a network effect to be useful? Short answer: No one knows.

Companies offering services such as Skype, eBay, Facebook, and others have cannot really test their value proposition without having a critical mass of users. A telephone with only one person on it is pretty useless. Yet these are some of the most lucrative inventions ever. So how do you apply the principles of customer development to these situations?

At the Startup Lessons Learned conference, I asked a panel of people far smarter than myself this question and Sean Ellis‘ response was, “It’s a modified approach that really hasn’t been defined in a structured way as Four Steps to the Epiphany lays out.” He then invited anyone who can figure it out to write a blog post on the subject.

Well, I haven’t figured it out. I will however throw out some suggestions for testing and I’ll let you know if they work later.

Narrow the Market (Sean Ellis)

Sean Ellis did turn around and make at least one good suggestion such as, “The value proposition is a moving target.” He suggests trying to narrow the target market so you can test networking effects with less risk. For example, eBay could have tested auctioning in the pez dispenser market instead of allowing any product to be sold. (His example, not mine) Under Eric Ries‘ terminology, this would be a Zoom-In Pivot and it’s something we’re also trying with startupSQUARE.

We started out letting all sorts of people into our site in alpha state to test it out. However, we found that the level of interaction (people posting ideas and profiles) was very very low. Far lower than our conversion rate and customer interviews would predict. When doing follow up interviews we found that people would look for other users in a very small niche industry (we have an overly large industry list) and find no one there. With no one there, it sent a clear signal that posting a profile wasn’t worth the effort because no one else would read it.

Our solution to this is two fold. First, our industry list is horrendously complicated. Although some users have indicated they would like a more detailed list, we have to start with a simpler list. When the list has broader categories, users will be find more people in each category and thus have a higher level of social proof.

Second, we’re modifying our signup process to collect more information when signing up, including industry interests. This will allow us to let in critical mass groups from each vertical we want to target. We’ll also be able to test the size of the group necessary for the network to have value and better analyze any behavioral difference between users of different industries.

Test Interaction on a Smaller Level (Brant Cooper)

Brant Cooper offered the example of Jeff Smith from Sonicmule who built products to test specific things such as social applications. Behold: the SonicLighter. Without hearing the specifics from Jeff, it’s tough to discuss this. Still, sounds like a great idea. Try to simplify the amount of interaction necessary, potentially in a different context. If anyone has thoughts on this, I’d love to hear them.

Funniest Answer (David Binetti)

David Binetti had the funniest answer. He just shook his head with a grimace when Sean asked if any of the panelists had an answer.

There is Still a Problem

Although no one really has a definitive answer, I would propose that the general customer development thesis can still be tested, even with network effect driven products, for a simple reason: The customer still has a problem.

The telephone allows people to communicate. Ebay allows people to sell things in a marketplace. OkCupid allows people to get laid…err…I mean meet people. All these companies target established customer needs which have clear analogies in the real world. Facebook was based on…well…a facebook of people on campus. In many ways, customer development should have been easier for these companies since the customer problem was really already established. “Who was that hot girl in class today?” (Facebook’s initial customer problem.)

Nothing prevents you from establishing your hypotheses and verifying them with customers outside of the building via a good old fashion customer interview. “Do you have a lot of old junk you want to get rid of? Would you like to sell it? Where have you tried to sell it? What would make it easier to sell it?” Tada! eBay.

Fake It

Another tidbit that I think is valuable is faking data. That sounds bad. Let’s say, “Bootstrapping Data”. When you do your mockups, don’t use “Lorem Ipsum blah blah blah”. But in real names, real text, and real data. Get your friends to post things in your alpha. Post 100 times yourself. Farhad from Atracted.com bootstrapped his first few video personal ads by throwing a party, inviting a lot of cute girls, then sticking them in front of a computer to introduce themselves. Brilliant! Plus he got to have a party with a lot of cute girls!

The Real Video

In case you wanted the full video, here’s the embed starting Cindy Alvarez, Product Manager, KISSMetrics * David Binetti, Founder and CEO, Votizen * Brant Cooper, Principal, Market By Numbers * Matt Johnson, Grockit * Moderator: Sean Ellis. My question appears around 28:00

Watch live video from Startup Lessons Learned on Justin.tv

Cheers,
Tristan

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How to Sell Me (Not), I Dare You to Try

Published on March 16, 2010 in Entrepreneurship and Sales. 1 Comment Tags: consulting, Customer Development, Entrepreneurship, sales pitch, startup.

“Thanks for the meeting, no I don’t want to hire you to consult for my company.”

Having to sit through an increasing number of sales pitches from startup consultants these days, I thought I’d summarize the points that worked in selling me and what just turned me off. At the very least, next time someone tries to pitch me, maybe I’ll just send them a link to this blog before the meeting. At best, I’ll formalize some points to improve on my own sales pitch.

Tip #1: Don’t assume.

I understand that I’m a bit of an idiot. I’m new to this. I didn’t go to Harvard. I don’t have a million dollars. Your fine Italian shoes clearly indicate your business superiority. I am destined to fail without your advice.

Still… please ask me what my situation is before telling me how to correct it. If you’re telling me that my pitch needs improvement, I’d appreciate if you’d listen to my pitch first. If you’re telling me I don’t have the right target market, please make sure you know what my target is first. If you’re telling me I need my teeth whitened, please ask me if I live in LA first.

What I’ve learned: Ask more questions, keep your mouth shut, verify pain points before selling.

Tip #2: Don’t tell me to conserve costs.

Ok… that’s actually really good advice for startups. It’s great advice. But seriously… if you tell me I shouldn’t waste money hiring an attorney to go over tax issues and then tell me I should hire you for $250 an hour to work on my corporate culture, I’m probably not going to hire you.

I have hard problems. Don’t sell me on soft, fuzzy solutions I’m not convinced I have. Perhaps I’m radically mistaken, but unless my corporate culture can fix my tax issues, I’m probably going to hire an attorney before I hire you. Instead, demonstrate some value by telling me how to hire a $100 CPA instead of a $1000 attorney to fix my tax issues and then we’ll talk about your services.

What I’ve learned: Umm… don’t undermine yourself? At least not in the same sentence.

Tip #3: If you can’t shut up, ask questions.

I’ve just said/done something stupid. You’ve caught me in the act. You know how to fix it. Congrats, don’t tell me. Show me. Ask me questions to guide me to the realization that I need help in this area. “Have you tried ______?” “How many customers have you validated that hypothesis with?” “What could you do to get customer feedback earlier in your development?”

You’ll avoid me getting defensive and you’ll impress me with your keen interpersonal skills.

What I’ve learned: Socrates was a bad ass.

Tip #4: I might not be an idiot.

As I mentioned before, I’m a bit of an idiot. But I also might not be

I might be asking you what participating preferred stock is because I don’t know. I also might want to see if you can explain it without being patronizing. I might be changing the topic to see if you bring me back on point. I might be asking you to setup a meeting with an outrageously well placed VC contact to see if you’ll be honest and suggest an alternative within my reach. I might even be picking up the tab to see if you’ll even offer.

As I said twice now, I still might be a bit of an idiot. But if you don’t treat me like one, I’m less likely to assume you suffer from the same defect.

What I’ve learned: I’m a bit manipulative. And again, don’t make assumptions. They’re usually wrong.

Tip #5: Read a book.

Lastly, go read some Dale Carnegie. He’s the king of the soft sell. If you’ve read it and you think it’s all about smiling, remembering names, and learning to lie well enough to stroke some ego then you probably didn’t read it carefully enough. If you can name the ancient Chinese philosopher that Carnegie references (and I think most of the book draws from) then you’re hired. (btw: the answer is here.)

What I’ve learned: I’m a philosophy geek.

Conclusion

There you have it. Now you know how to sell me. I dare you to try.

Cheers,
Tristan

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How to Practice Shutting Up (Customer Development Practice)

Published on March 9, 2010 in Customer Development and Entrepreneurship. 0 Comments Tags: consulting, Customer Development, Entrepreneurship, lean startup, sales pitch, startup.

I’ve discovered a great new method of growing bigger ears. Ready? Wait for it… go listen to sales pitches from startup consultants.

If you’re an entrepreneur, then you probably don’t like being bossed around and you might think your own opinion is pretty damn good. If you didn’t, you probably wouldn’t be starting your own company. (I’ll admit it, I have both of those flaws to varying degrees.)

Given those two features, you may or may not have a tough time (like me) really shutting up and listening to your customers. It’s always tempting to interject your own opinion, and even if you think you’re just asking a clarifying question, you’re probably adding some spin to it to try to nudge your customer’s responses the way you want…the way you expect…the way you know your customers ought to be thinking.

But if you do that, you’re not getting real customer feedback. Instead, you’re just stroking your own ego and validating an opinion rather than validating a hypothesis.

Throw Me the Pitch

If you’re in the middle of starting a company (like me), you’re also probably in the middle of being pitched by a startup consultant, lawyer, accountant, and maybe even a holistic acupuncturist with discounts for hungry entrepreneurs.

You might find this a bit annoying, especially if you didn’t realize you were doing everything wrong and this consultant was going to fix all of your problems for $250 or more an hour. C’est la vie. Make the best of it. Instead of getting frustrated, I suggest taking the opportunity to shut up.

By keeping your mouth shut and a smile on your face you might be able to gain a few advantages:

You might actually be doing something wrong and the consultant might have a good point.
The consultant might stop telling you what to do and start asking questions to clarify your situation and your pain points. (In which case you may have found yourself a genuinely useful consultant.)
You’ll practice listening.

I Still Want Bigger Ears

Listening requires patience and both are like muscles that require exercise to develop. All too often, I feel pressure to never shut up, never allow a gap in the conversation, and sell, sell, sell. Particularly here in Silicon Valley, if you can’t get someone excited about your startup in two sentences and blather on about it for at least 30 minutes without coming up for air, there’s a sense that you’re done for. “You’re not passionate enough.” “You’re not a good salesman.” “You’ll never get investment.”

Maybe all that’s true. I can’t say for certain and I’d certainly agree that the gift of the gab is a great skill that I also need a lot of practice with. Still, while I want to improve my sales pitch, I also want to make sure I am simultaneously developing a fascistic ability to shut up and listen to my customers. Especially when they disagree with me, my product, my unspoken assumptions, and my ego.

I want to be able to listen to a 2 hours diatribe of how much of an idiot I am, continue smiling, neatly summarize the points made, repeat those points back to make sure I understood them, say thank you, and learn from the experience. Until then, I’m going to keep practicing my listening as often as I practice my sales pitch.

Cheers,
Tristan

P.S.: Are you an entrepreneur? Got you help us by taking a quick survey?

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Impending Doom and Early Releases

Published on March 2, 2010 in Customer Development and Entrepreneurship. 0 Comments Tags: alpha testing, Customer Development, Entrepreneurship, lean startup, startup.

This week we’ll be letting a few users into our early release of startupSQUARE.com and we’re rather embarrassed about it. It’s buggy, it’s ugly, and it probably just won’t work. But we’re going to throw it out there anyway for a few select people who can mock us about it to our face so we can get early feedback.

Improvement via Trauma

One of the things we’d like to achieve with this early alpha release is a bit of trauma.

We know what’s wrong with it already and we’re motivated to improve, but we’ll be a lot more motivated after the brutal feedback we’re about to receive. Not only is embarrassment a (good?) motivator, but we hope to receive a list of things that we absolutely must fix before our users would consider using it a second time.

If we’re lucky, this list will be the same list of must haves that we’ve already generated internally. If so, we know we’re on the right track. If not, we’ve made a serious error and getting that feedback now might save us some heartbreak.

Tiny Tiny Dancer

Also, important, we’re still learning and that means taking tiny steps.

Although we’ve got a lot of experience between us, and even run some companies before, this is a brand new ball game and we need the practice. We could go for the gusto and try to run right out of the gate, but we’d likely just fall flat and never be able to recover.

By taking small steps, we know we’ll fall a few times, but they’ll be falls we can live with, recover from, and learn to avoid.

Back to Work

That said. This is a brief post because…well…I’ve got work to do. Have fun with your own startup and get it out there!

Cheers,
Tristan

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I Need Bigger Ears (Customer Development Mistakes)

Published on February 23, 2010 in Customer Development and Entrepreneurship. 4 Comments Tags: Customer Development, Entrepreneurship, lean startup, startup.

I realized today that I have been taking the axiom of “talk to customers” far too literally. While the quality of my feedback has been reasonably good and I’ve gotten a number of good ideas, there’s a big difference between talking to customers and listening to customers. I’ve been having far to much of a two way dialog and not letting my product speak for itself.

Screen-shot Demo

I got a call today from Performable.com which is developing a new A/B testing tool. I signed up for their beta test a few weeks ago and they gave me a call to ask if I would be willing to walk through a demo with them. Within a minute, they had a screen share up and were showing me a live demo. Although I had no control, it was definitely not a walk through in the traditional sense. it wasn’t a guided tour so much as an exploration. They showed me a screen and started peppering me with questions. Some of my favorites:

What do you think this page does?
What do you think will happen if you click this button?
What do you think this wording means?

Within a few minutes they had me dictating every thought running to my head and quantifying exactly what I needed from an A/B test tool. At no point did they resort to telling me what the page was supposed to do. In truth, I don’t really even know if the product worked or if I was just looking at static pages.

That’s exactly the sort of feedback I need.

Big Ears

Getting back to work I decided to immediately get some customers and ask them about my Photoshop mock-up of a user’s profile page. This is the mock-up that I thought was “good enough” and that both my partners, a professional designer, and two customers had already looked over. At least for version 0.1, I thought my customer development was done.

I was wrong.

One of the very first things that the customer asked was, “How do I contact this person?” After spending more time on this than I’d care to admit and four sets of eyes staring at this page multiple times, we had forgotten the most basic functionality of all! There was no space for a contact / connect button. Doh!

Of course, customer development is an ongoing process and there is no “done”, but this was an embarrassing omission and spoke to something more fundamentally wrong in my customer interview technique. The big mistake was that I had previously performed more of a walk through, explaining each section to users and guiding them through. This time I said less, and listened more. I didn’t offer any leading questions until they stopped talking, and then I tried to say very little aside from, “What about this?” “What about this section?”

I won’t go into the rest of the embarrassing elements I missed, but the change in customer interview style was very rewarding. So kudos and thanks to the Performable.com team!

Cheers,
Tristan

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Bad Economies are Great for Business

Published on February 9, 2010 in Entrepreneurship. 0 Comments Tags: Customer Development, Economy, Entrepreneurship, Recession.

Note: We’d like to take a moment to welcome Carmen Neghina, our intern extraordinaire and author of this post, to the startupSQUARE.com team. Yay Carmen! Thanks – Tristan

Why start your own company in a bad economy? Try to ignore the gloomy media picture of the world coming to an end, a crashing economy, high unemployment, business failures and difficulty accessing loans. Yes, I might be asking for a lot, but why not focus on the positive?

The amount of registered US companies does not change drastically from year to year, regardless of the economic climate. Although there is no clear trend towards more companies being launched, the Kaufmann Foundation noticed something interesting: startups initiated in tough times have increased chances of success, with half of 2009’s Forbes 500 companies having been launched in bad economies. The same is true for the world’s fastest growing companies. If you would actually like to see some of the companies that made the best out of recessions, look at Inc.com’s report. Suddenly, a recession doesn’t sound too bad now, does it?

What are the potential reasons behind it? It is quite simple: to succeed in such an economy, you will need talented people, a great business idea, a clear need for your product or service, eager customers interested in your offer and the ability to perfectly manage finances.

Find Your Co-founder

It’s usually difficult to find the right people for the job because they are usually in comfy offices and well-paid jobs working for the dinosaurs running the economy. Now, thanks to round after round of layoffs, talented people are losing their jobs or having their paychecks decimated. This leaves them resenting their current employer and considering a swift departure. What could be better than running your own company, being your own boss, working with equally talented people and escaping the bureaucratic world for one in which you dictate all the rules? Finding the right co-founders gets easier as the number of creative people looking for a change increases.

Unleash Your Creativity

It seems that the entire business world is under scrutiny right now and most flawed business models are likely to show their true colors and be either revised or abandoned. Every industry is being analyzed for possible flaws and improvement areas, so if you think your idea could revolutionize the business world, or at least your industry, now is the time. The tough economy will allow the most creative, resourceful individuals to succeed, not the ones with the most finances; and since the ones that do succeed enjoy long-term success, why not unleash your creativity, get the little black notebook where you jotted down all your crazy ideas, and see which ones could literally transform the world?

Shai Agassi started Better Place after being challenged to find an idea for how he would go about reducing the global dependency on petroleum. Now, his business model could cause a paradigm shift that would result in a massive disruption to the automobile industry through the creation of an infrastructure that would support EV cars.

Pick an industry and think how you would change it for the better, brainstorm it with other people interested in your market, discuss it with your friends and family, and you might be able to generate equally brilliant ideas.

Find Your Niche

The businesses that manage to thrive in harsh economies are the ones whose services or products are truly needed. Why? Because most clients are likely to cut down on unnecessary expenses in order to save money. In all likelihood, if your product seems more of a luxury than a necessity, chances are you will not make it right now and you should maybe shelf the idea for a later time; but if you can deliver a revolutionary product, or service, then your chances of success are higher. If your product is a necessity, weaker competition from larger corporations means more chances to succeed, especially in niche markets which are usually overlooked as they do not meet the investment demands of large firms, but have growth potential and are attractive for startups. Market and technological discontinuities are the basis of market entry triumph; either can generate success and together they are unbeatable. Just find your niche!

Customer Development

There is probably no company out there not trying to cut down costs. Can you use this “spend-less” attitude to your advantage? Avoid the costs of hiring a huge team of testers or developers and use alpha-testers to fine-tune your product; offer it for free to the first customers so that they can test its features and give you valuable tips on how to improve it. The result? Valuable customer feedback that can make your firm customer oriented and focused on delivering customer satisfaction. If your initial testers are happy with the product, they are likely to continue to support your efforts, and they will also provide valuable testimonials and word-of-mouth that will help you promote your business and gain new clients. Offering your product to companies that cannot live without it but cannot afford it either will gain you the status of “life-saving”; not too bad in terms of publicity if you can keep your costs low enough to afford it.

Also, whenever a firm will need a certain service or product, each supplier will be under more scrutiny than ever and managers use extensive information gathering before each purchase decision. So if your product is at least equally good or who knows, even better, your chances of getting key accounts increase.

A Lack of Capital Can Lead to Clear Focus

Small budgets equal smart investments. If you only have a little money to spend, you have to focus on the important aspects of your business by using your funds to develop a better process, increase your product’s quality or provide better customer service. All of which can be transformed into significant competitive advantages and sources of revenue in the long-term. When differentiation is not based on who has the most money to advertise, then startups with a better product have a better chance of success.

Setting up an typical business will only cost you about 25K, and if you followed our previous blog post, then you know we don’t really think significant amounts of capital are absolutely necessary when setting the foundations of your business. Money is no longer the holy grail of setting up a successful business in a weak economy, so take your chances while finances lack importance and ideas get the spotlight.

Stick Together

Cooperation can help your company grow and small firms have to stick together. Partnering up with other small companies that can complement your offering is sure to provide you with an edge. If you are just at the beginning, it is highly unlikely you can cover an entire service area; you need viable partners.

The new economy should be about co-creation and not about destroying competition; if there is a way a different business out there could help yours, why pass on the opportunity? Find the right partners, research what they are doing, understand how they could add value to your own product or service and you might just get the recipe for success. It is up to new companies to set the pace for the future, so you can be one of the innovators that choose to stop regarding every other firm out there as your competitor. Instead, try to implement a new business philosophy that could render a better economic model.

Bonus: You Can Help the Economy Recover!

The world economy could surely benefit from a number of innovative startups implementing better business models, generating creative ideas and executing them, using cooperation to thrive and employing the talent laid off by big corporations. We hope we are helping debunk the myth that you should wait to introduce your business in a better economy. There is no better time to act than NOW. So get your startup started!

Carmen loves everything marketing related, especially linking theory with practice. She is currently getting her Master of Science in Marketing from Radboud University Nijmegen and is busy writing her thesis on communication techniques for brand extensions. She is interested in social media, networking, branding and has recently developed a passion for Terry Pratchett and social design.

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Someone Please Write a Blog Post about Minimum Viable Strategy

Published on January 26, 2010 in Customer Development, Entrepreneurship and Strategy. 2 Comments Tags: Customer Development, Entrepreneurship, lean startup, Minimum Viable Product, Minimum Viable Strategy, startup, Strategy.

Watching Dave McClure‘s presentation today, I started to think about how a lot of the lean startup and customer development folks talk about creating the Minimum Viable Product (MVP), Release Early / Release Often, Product / Market Fit, Pivoting, etc., etc., but there’s very little talk about choosing your market or your product strategically. (At least not that I’ve noticed, feel free to correct me.) I’d like to read that blog post.

A lot of the advice out there ultimately mitigates risks. Here is my horribly unfair summary:

Minimum Viable Product (MVP) – Spend less on creating your product, therefore you are risking less time and money on a bad product.
Release Early / Release Often – Learn in small increments, therefore you are risking less time and money on a bad product.
Product / Market Fit – Either change your product to fit the market or choose a different market for your product before you start spending money on marketing, therefore you are risking less time and money on a bad product.
Pivoting – If you have a bad product, change it to something else.

All of which is great advice which this summary does not do justice to. Still, I’d like to read about how to choose the product that needs iterating. Unfortunately, I can’t claim the knowledge to write that post in detail, but I think it should go something like this:

Before you start executing on plan A, think of plans B-D

Come to think of it, that’s a really short blog post… maybe it should just be a tweet. Here are some other options:

90% of winning the battle is tactics, but winning the war takes strategy.
Stop. Think. Then act.
Just because you create a product in a weekend does not mean you should.

A lot of this is implied in Eric Ries‘ posts on pivoting. Pivoting is a great tactical maneuver that goes back centuries. Put simply, if no one likes your product, what is the smallest possible change that may enable a different use case / selling proposition? Much of the backing for this proposition comes from Eric’s philosophy which reduces the cost of developing a product so radically that to change a product or start a new one is insignificant and essentially zero. Perhaps for web 2.0 entrepreneurs this will work well. However, I don’t feel this is sufficient, especially not for brick and mortar folks. I believe a lot more thought should be put into determining tactical and strategic options before you write a single line of code. That additional thought is certainly not going to impact development costs, and may radically improve your ability to pivot later.

Shortcuts for my Poor Poor Brain

I take much of this from chess. Being far beneath the master level and unable to think out 12 different scenarios 12 moves in advance, I have to take a lot of thinking shortcuts to have any chance of winning. My favorite cheat is, “If I pursue this option, will I have more or less options on the following move?”

At the risk of alienating everyone who hates chess, here’s a chess example. Which side has the better position? White and black have the same number of pieces so that’s not relevant. In this highly unrealistic example (neither side could win if this was a real game) white has the better position. Without even knowing the basics of how the pieces move, you can guess that white has the better position because it’s knight is in the center of the board and it has a lot more options in terms of where it can go next. In terms of possibilities, white’s knight has eight possible moves whereas black’s knight has only two.

Don’t like chess? Ok, here’s a more down to earth example. Would you rather go to a restaurant with 8 items on the menu or just 2? If you happen to know that the restaurant with 2 items is the French Laundry and the other one was a shady looking diner, then yes…you should choose the French Laundry. However, in the absence of additional information, you should probably pick the one with more options. You’re more likely to find at least one thing on the menu you like, especially if you’re a vegetarian.

This basic principle applies to pretty much everything including martial arts, warfare, and yes…product development. If the product you are building has no tactical or strategic development options after you create the Minimum Viable Product, then it is not the right product to build.

Minimum Viable Strategy

Manuel and I first got together with another colleague, Florian Leibert, to create an IT security product which we tentatively called LOK (Leibert, Offenberg, Kromer) which we all thought was a cool idea, but probably unwise to build. Without going too far into details, it was a replacement product for PKI which would allow a cheap, easy to use cryptography platform based on P2P trust networks. In non-geek talk, it was a thing that replaced an expensive thing with a cheap thing. Among many other problems with the concept, the biggest one was probably that if it didn’t work, there was no direction which we could pivot to.

Could we pivot the product to a different market? Unlikely, the product was meant for a very specific set of security conscious, technology literate enterprise customers. Could we pivot the feature set somehow? Perhaps, but it would essentially be like creating an entirely new product from scratch. Could the feature set be somehow reduced to be less risky? Not really, the product required a serious amount of infrastructure just to work in a basic use case. Was the product incredibly cool and do I still want to build it? Hell yes, but I’m not going to.

Manuel and I spent a lot of time shooting down well over a dozen ideas for one reason or another. But a lot of the times the reason turned out to be, “What if it doesn’t work? What are our options then? How many tries will we have to get it right?” Eventually, we settled on startupSQUARE.com because it has a number of interesting options that I won’t go into here. So I’m sticking with this one and I’m still asking, will someone please write about Minimum Viable Strategy?

Cheers,
Tristan

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