What is Validation?

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What constitutes validation is one of the first, essential questions we ask in our work with entrepreneurs using the Business Canvas Model (BMC). We also discuss value proposition, targeting customers, and product/market fit. However, validation for all of the components in the Canvas is never really defined.

Validation is the ultimate goal of the process using the BMC. Through validation we are looking to determine the sufficient number of paying customers that creates a market adequate enough to create a business opportunity.

Entrepreneurs do not have the luxury of knowing how many paying customers they have when beginning to pursue an opportunity. Many teachers of entrepreneurship, including Steve Blank and those at the Innovation Corp program at the National Science Foundation, claim that an entrepreneur needs to talk to at least 100 customers in order to reduce the uncertainty surrounding a startup. In fact, the more confirmation achieved, the less the uncertainty. The specific number of 100 is likely derived from qualitative studies performed by social scientists who claim that a population of 100 in a survey makes for a valid survey. In reality, most entrepreneurs find that after talking to about ten customers, the results tend to be the same. So, what constitutes a sufficient number of interviews?

In the past, I have stated that entrepreneurs should interview as many people as necessary to confirm the valid, the uncertainty of the market to a comfortable level. Of course, that omits the concept of confirmation bias. Entrepreneurs need to be mindful to avoid thinking: “My invention is great, so I’ll do anything to make the numbers believable.” Do not fall prey to your own lies, damn lies and statistics.

In research methodology, validity is the soundness of the design of each test and methodology used. Validity shows that the findings/results truly represent the phenomenon claiming to be measured. We cannot talk about validity without discussing reliability. Can the test be repeated or replicated with another population and obtain similar results? Is the test inherently repeatable?

Entrepreneurial validity means using good methods to test hypothesis obtaining data with observable facts that can be measured and are relevant. In addition, the test results must end up with a binary result. The test either passes or fails. There is no “close enough” response. As Yoda says, “Do or do not. There is no try.”

During hypothesis testing, an entrepreneur must “draw the line in the sand.” Ask whether your metric provides you with a level of success that gives rise to doubling down and taking the next action step? Can you tell the difference between complete failure and overwhelming success? Where does your opportunity fall?

What happens if you land close to the line in the sand but do not pass over? There are two possible scenarios: One would come from the norms of your industry. In other words, understanding how your competitors view this metric would provide the necessary knowledge to take action. The second should come from the business model. How many positive responses are required in order to be successful?

Now that you understand what validity is and why it’s important, make sure that you understand exactly how to test for validity. Testing for validity must correspond to the extent to which a concept, conclusion or measurement is well-founded and corresponds accurately to the real world.

 

Crowdsourcing for Information

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Recently, the Accelerator expanded our program offering from one, 5-month immersive program into three separate components, Iterate, Accelerate, and Launch. Our new, modular programming design allows our clients to better understand their market opportunities and take advantage of the module that offers the next best step for their venture.

Our pre-accelerator program, started last May and refined in November, is called “Iterate.” This successful four-week program is focused on problem/solution fit. In fact, this program is in such high demand that our last program was oversubscribed. We can currently accommodate only 25 teams.

Our second program is a shortened version of our former 5-month program. This new program is called “Accelerate.” Accelerate is a two-month program focused on product/market fit. We use the Business Model Canvas and customer development methodology for this program. Getting the product/market fit right was often the most difficult task for our clients, and thus, a good place to pause and reflect.

Our newest offering is “Launch!” The focus of this program is to create an operational company and develop a repeatable selling mode. In Launch, we focus on the critical left-hand side of the Business Model Canvas. An outline of the program is located on our website under Launch. Links to Iterate and Accelerate are also located there as well.

In developing Launch we turned to our trusted advisors, mentors, alumni and friends to provide input and feedback to assist us in creating this new program. We have many detailed aspects of the program already in mind, but we have asked our advisors to add, delete, and help us find the missing ingredient to better assist our next cohort. This is truly a collaborative effort.

Our goal is to design a groundbreaking program based on the collective wisdom of all of us. In the first round, we requested respondents to use as much detail or as few words as you wish. We indicated that we would be happy to meet or talk with you and learn more about your thoughts. We were not particular about the form of the advice. Email responses work, too. We were focused principally on content.

The first round process is simple. We start with a very broad base of questions. We also provided the opportunity to opt out.

We anticipate a second round of questions that enables us to collate and narrow the groupthink. At some point after this, we will adopt a ranking system. We will ask that respondents categorize items by importance, or make suggestions to drop aspects that while thoughtful, may not be a fit for our goals.

We seek the broad picture. The Launch part of the program is focused on becoming operational. At this point, only companies that have a valid product/market fit, an MVP and some component of a team will be admitted to “Launch!” The program will be conducted over 5 months.

Some of the monthly topics we are tossing around include strategic partnerships; managing growth, burn rates, and proformas. We are also considering administrative functions such as legal and transactional issues, human resources, and accounting and record keeping. We are also deliberating on operations and value chains as suggested topics.

Here are some of the questions that we would like for you to ponder:

  • What general topics should govern those five months? Any ideas on the specific subtopics?
  • What three things do you wish you learned prior to starting your own venture or helping others get started?
  • What three things do you wish you knew while or before scaling this enterprise?
  • What were the biggest unforeseen obstacles or challenges that needed to be overcome?

As I write this, a few responses have arrived. As expected, building teams was a leading response. A few early indications included soft skills such as negotiation and hiring techniques, culture building and selling skills.

There will be more to come as we continue through this process.

Corporate Innovation – Back to The City

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I recently attended a Chief Innovation Officer conference in New York. My goal in attending this event was to learn more about how corporate ventures manage their innovation processes and what tools they currently use to develop and attain innovative processes and new products. I was glad I attended because I learned a few useful pieces of information. However, I felt that there were some concerns I have about managing innovation that were not covered in the conference.

Let me start with what was addressed:

Culture is a key tool to creating an environment of innovation success. Many of the speakers talked about the difficulty in moving that big ship called bureaucracy and focus on innovation.

Many of the speakers felt that not everyone in the company needs to focus on being innovative. I, personally disagree with this. Everyone in any company can always add value to his/her job, department, and processes. Just make it easy to suggest change, and allow employees to play with new ideas and concepts. This should be rewarded not punished in both success and failure.

Open innovation is still daunting to many companies, but it is beginning to gain acceptance. The basic tenet of open innovation is the use of external ideas to advance their technology. A number of issues inhibit open innovation: intellectual property issues, ownership, field of use, and confidentiality issues all play a restraining role. However, I was intrigued with the use of crowdsourcing to help with project work. One of the speakers found success through competitions that are external to the organization that uses gaming techniques to entice experts to compete and help the organization find the best solutions. This helps to provide “A” level talent, including workers that prefer not to work steady hours, to help companies solve problems faster and cheaper than a hiring process might provide.

Failure as a long-term learning strategy was not celebrated, nor discussed much because there still is a strong focus on short-term achievements. In the corporate world, companies are seeking 3-5 year payouts from innovation. This means that incentives and reward structures are geared toward execution on known outcomes rather than a focus on a disruptive or even iterative innovation.

Corporate opportunity recognition is still a struggle. How far innovation can successfully deviate from current strategy into adjacent markets is a difficult decision for many large companies.

One of the more interesting points the concept of focusing on a “quest.” Quests are driving forces for firm’s strategy that allows for innovative ideas and adjacent marketplaces. It is the aspirational mission of the firm. This could even allow for an oddball type of product line. One example provided was Redbull, which is clearly in the refreshment market but also important in arranging airplane racing competitions and other high-powered sporting events, such Formula One racing and other sports ownerships, and partnering with game companies (such as “Call of Duty” and “Destiny”), the HALO jump, and web marketing. The quest is that, “Red Bull helps more of us live our lives to the extreme” uses storytelling combined with action to illustrate their quest. Red Bull’s quest brings their entire product and brand lines together.

There was also a focus on data-driven innovation. This attempts to make use of big data so that intrapreneurs in an organization can become experimental. This was quite the opposite of what I might expect. Strategic innovation doesn’t necessarily have data, but rather ambiguity and uncertainty.

One of the better concepts reminded me of a Kodak moment. Kodak invented the digital camera and its failure to adapt and take on this innovation led to its downfall. The lesson: innovate or die and don’t have that Kodak moment.

The Kodak moment is also about understanding opportunities. That is where the Alex Osterwalder model in lean startups models is key. Even large companies need to try to understand how to better evaluate when an innovation is key to their strategy.

Here is what I would like to see or wished was on the agenda.

For the most part, I was disappointed in how little the large companies appeared to understand how to create an innovative culture. No one talked about learning from failures, and no one really discussed that innovation is a process that must be ingrained into the culture with a reward system for trying.

The goals of many of the Chief Innovation Officers were mostly short-term and revenue driven. I heard ROI on innovation too often. This translates to small incremental wins, no home runs or disruptive innovation and most importantly, the unwillingness to take risks. I personally don’t like the term risk when talking about innovation. I prefer the term “reducing uncertainty.” Risk can be measured and may fit the mindset of a large company, but the real goal is to reduce the uncertainty that cannot be exactly measured. However, uncertainty can methodically be calculated within a statistical range of probability. I concede that there are perils in trying to predict the future. Although we can’t forecast the future, but we can work the means and ways to get to a better future.

Jeff Bezos said, “Advertising is a tax you pay for lack of innovation.”

Opportunities

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Our new program, Accelerate, asks entrepreneurs to be mindful of opportunity recognition in a number of ways. Technology researchers and developers often see many options to pursue. An important goal for very early stage entrepreneurs is to ideate as many possibilities for their technology in order to determine as many potential products or markets as possible. Then, with the use of a few tools and secondary research, they need to narrow their focus to only a few reasonable and potentially profitable choices.

At our Accelerator we start with two tools: One is to examine the technology opportunity and a second to represent the business opportunity. This approach helps provide an opportunity to examine the scope of the opportunity and make better choices. The narrowing of opportunities is usually represented by easier adoption rates, shorter buying cycles, and leverage to a larger market.

With this data in place, we have our interns dig in and research the market and industry both on a macro and micro basis. On a macro level, we assess the market size and industry attractiveness. Markets are composed of groups of buyers so that determining which groups compose the Total Available Market (TAM), Served Available Market (SAM) and Target Market (TM) is important to determine which should be pursued. Also, by definition, an industry is a group of sellers that represent potential completion. As it turns out, some markets and industries may be clearly more attractive for an individual startup to enter than others. On a micro level, industry attractiveness is, in part determined by the competitive response and current benefits offered by competitors. On the market side, we focus on whether the real or perceived benefits a startup offers are better, different, faster or less expensive than the competition. We ask whether a startup can create a perceived differentiation of improved benefits or costs in the minds of their target market?

We examine trends in both the startup’s market and industry. Is the startup ahead of the trend analysis? If it is too far ahead it becomes difficult to sell the value and benefits that are offered and the market will likely not see the need. The dead pool is littered with products and startups that never materialized. Some examples include Webvan, Ask Jeeves, Pets.com. If it is too far behind in the trend analysis, the startup will never catch up. The goal is to ride the wave of each trend with a base of intellectual property that protects the opportunity and stalls or slows the competition. We also investigate the economic and social forces potentially impacting the startup. Is there a political or regulatory change? Is there a technological advance that provides a customer desire? Do you have the window of opportunity? Good entrepreneurs know that timing is everything.

In the early stage, an entrepreneur needs to access an ability to execute on a potential opportunity. However, validation of the opportunity, product market fit and Business Model Canvas must be present while confirming that financial viability is likely.

Restart – Both the Blog and our Program

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I’m back from a break in blogging with renewed optimism and an excellent new staff at the Advantage Accelerator. In reviewing our program over the past two years, I note we’ve had a number of successful ventures, but still find issues relying solely on Lean Launch Pad methodology.

The greatest issue is the time it takes entrepreneurs to acquire a product market fit. Product market fit is vital because it shows customer validation and the discovery of a repeatable sales process. In order to develop a successful fit, the entrepreneur must focus on finding a reasonably sized market for growth.

Our current Accelerator program runs five months and operates as an expanded version of the Lean Launch Pad. Many entrepreneurs successfully complete the Accelerator program in record pace; others struggle with product market fit that may cause a client to struggle. Finding the best response to the iteration or pivot while learning new skills can cause the most seasoned veterans of startup cultures to stumble.

The Lean Launch Pad model requires that product market fit must be validated. If product market fit is false, then the operational side of the startup is invalid. Moving forward into the execution side of the canvas would be wasteful based upon an invalid product market fit.

After considerable thought, we will now be dividing our current five-month accelerator program into two parts: “Accelerate” and “Launch!” These programs will be offered in addition to our existing pre-Accelerator program, “Iterate!”

Iterate is a pre-accelerator program that is focused on problem/solution fit. The program has four, 2-hour workshop sessions with outcomes based upon entrepreneurial thinking, value proposition, an introduction to the Business Model Canvas as a tool, a basic understanding of the customer discovery process, and an introduction to hypothesis testing and validation. These are all necessary tools designed to help understand the hard work in the process of becoming an entrepreneur.

The program homework is optional (hint: but it is a great screening tool for us) and all team members are strongly encouraged to attend all workshops. In order to move into the next phase, Accelerate, and gain acceptance into the Accelerator, there is an expectation of progress, hustle, and “grit.” These qualities are not the only qualifications for acceptance into the Accelerator, but they are helpful considerations in our decision-making.

Accelerate is focused on product/market fit. The objectives of the program are to confirm the entrepreneurial opportunity, define and build a minimal viable product, validate product market fit, complete a first sales call and develop a repeatable sales model, complete building the team, and to be ready to execute and build operations. The program is eight weeks and is backed with significant resources including our intern program, mentors, and first looks by our Executives in Residence and early investors.

Entrepreneurs may repeat the Accelerate program twice if an iteration or pivot is required. A major focus of this program is to reduce the uncertainty of the startup through validation of product/market fit. Successful clients may move forward to the Launch! Program.

Launch is a five-month program focused on taking the company to the build and sell level. There are two major goals: Fulfillment of build and execution on an operation growth plan, and realization of a repeatable sale process. Each month’s program is focused on a specific topic toward a deep dive into a milestone based growth plan. There is work for each week of the program that starts with the introduction of a topic, private coaching sessions, a cohort workshop and roundtable with the last session of each month being a formal Advisory Board session that consists of our senior programming staff, Executives in Residence and any mentor or advisor to the company.

Overall, we feel that separating the completion of product market fit until the concept is validated makes more sense than attempting to move on to build a company with less certainty of success.

Getting Past First Impressions

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My last blog on first impressions matter focused on the Gust platform application process that most angel groups use. After loading information on Gust, you will receive a pre-screening call. With some Angel groups there is a presentation involved in the process. I have previously discussed the components of making a good pitch and here. However, in preparing your pre-screening or screening presentation there are a number of important elements upon which to focus.

Entrepreneurs first need to understand each Angel group’s process. For example, how they make decisions and how much money is provided per round is essential. However, of key importance is discovering your chief advocate in the Angel group. Remember that in most Angel groups, this is a competition with only one or two winners.

When making your presentation, always focus on the whole story of your company, from value proposition to target market and product market fit. Investors will also want to know whether there is a large market and a great, pressing need for your business or innovation and if you have evidence of good progress in establishing your business. There are other things Angels will be looking for:

Does your plan provide an exit and a reasonable return on investment?

Do you understand the industry and how your competitors fit in the marketplace? Do you know their strengths and weaknesses? Who are their customers and why do they buy from your competition? Why will customers buy from you instead? Have you delighted your current customers?

How will you use the funds? Do the funds you seek match your plans to scale the business? What will you do if our group is unable to complete the funding round with sufficient cash? Do you have a sound plan for the future? How do you currently make money?

Is there anything that might raise a red flag? Is there any criminal record or bankruptcies on the senior team? Any pending litigation against the company or key players? Are any of the co-founders in a personal relationship? Disclose early and don’t be afraid that these issues are deal killers. They are not necessarily. Disclosing the warts early only strengthen your position as an honest person and leader. Failure to disclose can and would likely be a deal killer.

While you present investors are watching to see whether you have the moxie to be an effective leader and have the ability to execute on your plan. This usually comes up during the question and answer time. Angels want to see how you respond to questions, how articulate you are in your response to posed questions, and how well you understand the ability to scale your business. Another principal concern Angels may have is whether the rest of your team is flexible and adaptable to changing market conditions. It’s your job to demonstrate that by showing their experience, savvy, and ability to engaged under changing conditions.

Tell your story engaging all of your pitch points. Using a customer’s point of view, talk about your company with a script format. Prepare it like the screenplay for a movie. One colleague of mine used the story arc ABDCE:

  • Set the Action
  • Build the Background – this is the setup
  • Develop
  • Climax – Why you are a winner (in the movies, the end of the second act)
  • Execution

Remember, this is showtime! Show energy and enthusiasm.

First Impressions Matter

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We are in the process of evaluating the applications for Angel funding for our current round. Like most investor groups we use Gust as the platform for entrepreneurs to load their company information. Overall, I must admit I am disappointed in many of these applications. Many of the applications look strong in terms of idea or concept. Some apparently have traction. Some claim to have traction, but don’t support that claim. However, the real problem is that for more than 90% of these applications, it is the first time I am exposed to you. The application is my first impression. And first impressions matter! Here are a number of items that are problems.

Incomplete applications. Gust is a standard format platform. The executive summary, financials section, team composition are all fairly straightforward. Missing items or incomplete items leave a bad first impression on me. If an entrepreneur does not provide all the information by the deadline, then it requires substantial explanation. Leave a note somewhere on the document telling me when the document will be completed, and why you require the additional time. I understand, we are looking at a moving target, but at some point I need to review a snapshot.

Financials Section. On Gust, the financials section is where the entrepreneur asks for funding and offers a summary of projections. It includes a place to upload documents. Upload your documents. I expect to see a spreadsheet with details of the projections.

  • I don’t want to see a pdf file. With pdf I really can’t see the basis of your numbers. Load an Excel spreadsheet with assumptions and a polished look and flow.
  • One tab of sales projections is not enough. In addition to the assumptions tab, there should be at least tabs for a cover summary, a cash flow projection, hiring guide, balance sheet and revenue models. You need a minimum of five and don’t overwhelm me with 20. I don’t need that level of detail…yet.
  • Hidden tabs that include details I need to review are a minor inconvenience. Why should I work harder on your application? Make your data clear and easily accessible.
  • On the positive side, I have seen a few spreadsheets, that have a nice summary up front, a tab with an assumption table linked into the spreadsheet, a hire/HR table and clear, bottom up projections that go over time until past cash flow positive. The revenue projections are important and should not be overlooked.
  • Spreadsheets are a complete topic for another blog. For now, I will admit that spreadsheets are something of a work of fiction, because they are guesses. But the closer the entrepreneur comes to being correct about these numbers, the higher my confidence level in the venture.

Articulating the Value Proposition. Don’t make me guess what your real value is to customers. If you are not perfectly clear in articulating the product to the target market, then how will I know you will be able to effectively sell the product/service?

Proof Points – Gust does not ask for this, but it is important that you be very specific as to the stage of your venture’s development. This will come out in due diligence. But if you have a finished product or channel partners already lined up, that leads to a much better impression for investors.

Know the Rules of the Game. An understanding of how our Angel group operates will benefit the entrepreneur immensely. For example, if our average investment is $400,000 and you are seeking $900,000 then be certain how you can fill out the rest of the round. I don’t particularly like building piers. I want to build a bridge to the next round. If you have funding that supplements ours, then great. However, know that we prefer to lead rounds unless the terms of the other funding is sufficient. So, be careful uploading the other term sheet – know what we like.

Stage of Development. Don’t hide the point that customers aren’t paying or you don’t have any customers yet. Be honest and forthright and just tell us exactly how you will conquer the world. Make me take a bet on you through truth telling.

Traction. Traction is right. Traction works. Traction clarifies, cuts through, and captures the essence of the evolutionary spirit. Traction, in all of its forms …has marked the upward surge of saving the world (thanks to Gordon Gekko for the quote).

Traction is the basis of all that is good in a startup. Traction is the market validation of a value proposition with its target market. Traction shows proof points on its business model. Traction is based in real sales (not a give away product) and has evidence of other proof points – channel partners, a supplier base or existing value chain.

No Faith Based Entrepreneurship. I am really not interested in what you believe. Save that for church. Show me the proof. All that matters are evidence based startups.

Get these right and investors will be your friend.

Disclaimer: These are my own views and not those of any investor group that would have me as a member.

Pitching Dominates

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Pitching Dominates In Baseball & Entrepreneurship

Successfully Pitching to Angels

Last year in baseball was called the year of the pitcher—and good pitching dominated the game. The same is true in entrepreneurship. A startup is always pitching—to investors, strategic partners, channel partners, in an elevator, to potential employees, etc. I previously wrote about pitching form and what makes your pitch stick.

Today we discuss content in the pitch and what will impress an investor. First of all, remember that the goal of any pitch is to get to a second meeting. Just say enough to get investors interested in your business. Enough to want more information.

If you are pitching before angel investors then remember three major points. The first is that you must have proof of concept. This is usually a technical point: The technology works, beyond paper theory, and you have developed a minimal viable product, in the form of a prototype. An even better situation is to have customers lined up willing to test and purchase the product, called traction by investors. The second point is to show proof of market: Does your solution show evidence of a large market? The third major point is you must show evidence that positive cash flow is easily possible within a reasonably certain time span.

Be articulate, short and to the point. Use the KIS (Keep it Simple) method, as you never know for certain who in the audience, and who understands the technical points of your solution. Keep the technology talk to minimum. With regard to technology, a good pitcher only needs to show that their technology works and has protectable intellectual property.

There are a number of other points that will score points in the eyes of investors. Does your current team, not those that will join after you are funded, have the horsepower to execute and scale the company? Investors usually bet on the jockey (team) and not the horse (technology).

Here are a couple of recommended slide decks and don’t forget to put in a title and ending slide along with your contact information.

  1. Problem/solution
  2. Market potential
  3. Team
  4. Channels and got to market strategy
  5. Competition
  6. Financial projections
  7. The ask and use of funds
  8. Always have backup slides (these are slides that answers the first few most likely asked questions)

And here is alternative, similar version:

  1. You address an important problem
  2. Your proof that this solution is complete and a magnitude better than others
  3. There is a large market for the solution
  4. The solution is better than others and why
  5. You have demonstrated good progress
  6. The team can execute on the company
  7. The investment provides a reasonable return to investors

What else might impress a potential investor?

  • You know the rules of the game. For example, you understand how the investor operates, the investor’s average investment, you have completed your due diligence on the investor or group, your average valuations to prior investments, and what excites them about an entrepreneur. In other words, you understand their process.
  • A flexible management team, good potential returns and an idea when an exit might occur
  • Good use of the proceeds from the investment
  • Good and frequent communications
  • Delighting early customers
  • You listen and learn well
  • Good qualitative and quantitative milestones
  • You measure progress religiously

What are some of the pitch or deal killers?

  • Lack of clarity and not being articulate
  • Demonstrating lack of leadership qualities
  • Lack of appreciation for the competition
  • A pitch long on history and technology but lacking an execution plan
  • Generic assumptions
  • Underestimating the barriers to entry, or overestimating those for your competitors
  • Weak marketing and/or sales plan
  • Unrealistic financials
  • Unrealistic view of capital requirements

Pitchers rarely hit it out of the park. But that is your challenge, and your goal.

The Short Rules of Entrepreneurship

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Today I offer you my personal rules for entrepreneurship. This set is by no means complete, but they are hopefully food for thought.

Rule 1: Entrepreneurship is about action – The Captain’s chair is yours.

Rule 2: Some people dream about doing great things. Keep your eyes wide open and your feet on the ground, and then do great things.

Rule 3: A sports metaphor for Rule 2. There is no crying in baseball. There is no sleeping in entrepreneurship.

Rule 4: Focus on customers and building a business that is client centered rather than focused on technology. Make sure your company solves customer pain or creates great results for your customer.

Rule 5: Entrepreneurship is not fair. Neither is angel or venture capital funding.

Rule 6: Treat your 3F (Friends, Family and others (known as Fools) round as if they are professional investors. All 3F angel investors have an investment committee – their spouse. Respect the relationship.

Rule 7: Angel and venture capital is like a series of locked doors. Someone must unlock the door for you. Find the people with keys.

Rule 8: Build your company by building a customer base. Build for one client at a time. Later, build for multiple clients.

Rule 9: You have exactly one minute to make your pitch. Practice making them.

Rule 10: Learn the language of entrepreneurship and tell the truth. (Do not tell the typical lies: “Our market cap will scale up to $27.1 billion in five years” or “our competition is too big and slow to move as fast as us,” unless you are Elon Musk and build spaceships in your spare time.)

Rule 11: Get a champion who will work with you.

Rule 12: Bootstrap. Frugality is a virtue. Put some skin in the game.

Rule 13: You are only as good as your cash.

Rule 14: So what? Why you? What have you accomplished so far?

Rule 15: Build a team. One person cannot do everything.

Rule 16: Be a good listener and a better filter.

Rule 17: Network!

Rule 18: If you build it they will not come. You must sell to them.

Rule 19: Never BS yourself or your team. Always pause to understand the bias in all decision making.

Rule 20: This rulebook is incomplete.

Do you have additional tips for entrepreneurs? Feel free to add to the list.

Customer Development Interviews

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A new book by Cindy Alvarez about customer interviews reminded me that it is often important to review the basics of our tradecraft.

There are a number of important points to consider when reaching out to potential customers. In the Lean Methodology, it is essential to complete customer interviews before building your first minimally viable product. Ongoing interviews with clients also helps you to stay in touch and cement relationships with clients as well.

It is best to interview someone face-to-face. Clearly, that is more time consuming approach, yet more effective than Skype, telephone, or online interviews. A key component of these interviews is the observation of body language. That observation is lost with anything less than face-to-face meeting. Video conversations only capture part of the picture, and the nuances of observation cannot be completely captured.

The second important issue is to help the interviewee get past the politeness factor. No one wants to deliver bad news. Your goal is to make them feel comfortable. There are two ways past the politeness factor. The first is to change the way questions are asked. Asking, “What do you dislike about the product?” makes it difficult to yield honest results. Instead, asking “How would you improve this product?” frames the question as a respectful call for assistance. Everyone wants to help. No one wants to be impolite.

Cindy Alvarez starts just about every interview with four basic questions:

Tell me about how you do __________ today?

Do you use any other tools or have any specific tips or tricks you use to help?

Is there anything specific that you always do before or after you do _______?

If you could have a magic wand and be able to do anything else that you can’t do today, what would it be? (Forget about whether or not it’s possible, just anything.)

These questions are open-ended and allow for understanding customer behavior and activity. It is also crucial that there is not a single mention of your product.

Here are a number of other tips to use during customer interviews:

  • Try to have two people attend
  • Work from an outline of 3 – 5 questions
  • Focus on real behavior not hypothetical
  • Shut up
  • Probe
  • Don’t overstay your welcome
  • Debrief the same day
  • FOLLOW UP!
  • Work to their Schedule
  • Disarm the politeness training
  • Ask open ended questions
  • Don’t influence
  • Ask the Right Questions
  • Frame the Questions Correctly
  • Parrott back
  • Get Psyched to hear things you don’t want to hear
  • Ask for Introductions

The goal of your interviews is to position the interviewee as the expert. A good interview avoids yes/no answers, and gives potential clients an opportunity to tell a story – one that may cause them to think of related problems they’re having, or may trigger more questions for you to ask later.

Remember, your goal is to determine how your customer is currently dealing with specific tasks.  What do they like about their current solution or process? Is there some other approach that they have taken in the past that was better or worse?

Attempt to discover what they wish they could do that currently isn’t possible or practical. How would that make their lives better? Who their organization is directly involved with addressing such approaches? How long does it take to make a decision?

Your interviewees’ feelings and state of mind are also important. How do they feel when they are performing this task?  How busy/hurried/stressed/bored/frustrated? You can learn this by watching their facial expressions and listening to their voice as they answer your questions. What are they doing immediately before and after their current task? How much time or money would they be willing to invest in a solution that made their lives easier?

There is a lot more to being good at customer interviews. Like most anything else, practice is crucial to getting better.