Tag Archives: uncertainity reduction

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.

The UnderTow

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Risk – Part 2

You never know when you will meet someone and how he or she can help you or your business. For example, I met a great mentor riding in an elevator and another on jury duty. All successful entrepreneurs know that attendance at networking events is an essential activity. Remember that networking is a two way street. You need to give something in order to get something in exchange. Information exchange is done through interpersonal networks, a convergent process that takes time and effort to establish.

Looking out over the ocean, we see beauty in the calm waters. In many popular bathing spots, there is an undertow, a strong current that flows out to sea. Undertows are near impossible to fight, but entrepreneurs must find ways to harness that energy. Smart CEO’s have a calm exterior and an inner undertow, a force and energy to push the startup through any wave.

Many entrepreneurs do not think about their channel partners early enough in their building process. Big buyers go through a series of stages from awareness to knowledge to adoption. Today, most entrepreneurs are thinking about their digital channels, and social media to reach their new clients. But, how are you really going to get the attention of your target audience?

Just like a great book, you can never tell what is inside until it is opened. Why will your customers and channel partners open your book and peek inside. What will satisfy their curiosity? And keep them hungry for more? What is the sticky factor?

How will you stand out in the morass of information bombarded at your target customer every single day? Most entrepreneurs believe social media works well, but frankly it is the interpersonal channels that have the best effect. Which of your friends or acquaintances influenced your last major purchase? Was it the distant Facebook friend or a live relationship? How did they help you visualize relatively abstract information into useable data about a product?

There are other basic risks that must be addressed. Is the targeted market big enough to support your growth business? Can you find and retain the appropriate talent? Is your intellectual property sufficiently protected? Can your team execute and deliver? Can you manage accumulated financial losses (the entrepreneur’s bet) until cash flow positive and know all the premises behind your financials, to survive the turbulent start? Do you understand where every dollar of your funds goes and how that spending action adds value?

Understanding the underlying processes, and flow of a company before embarking on the entrepreneurial journey will save significant time and energy (and money) when ready to launch. Knowing these key characteristics are all about reducing the risks and uncertainties inherit in a startup.

Your mentor can help, no matter where you met them. A mentors’ hindsight is your foresight. Go find those special people that can help reduce uncertainty in a start up and those can help the company grow.

Entrepreneurs Are Not Risk Takers

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This is the first of a two part section on entrepreneurial risk.

Risk is not the same as calculated risk:

I often tease my Economics friends that their theories only hold “ceteris paribus”—“all else held equal.” What relevance is this for entrepreneurs? Entrepreneurial activity does not operate in a vacuum. Everything is always in motion. Entrepreneurs have more balls in the air than a circus juggler. In fact, startups can never operate “ceteris paribus.”

As a teacher of entrepreneurship, I always told my students that the market is always your guide. Don’t overly focus on one concept with your eyes in a blinder. Your journey is not a sprint but rather a marathon. Before starting on the entrepreneurial marathon, learn the rules of the game. Know your industry well so that you can play better. Understand the strategies, business models and nuances. Focus on uncertainty reduction. Reduce the risks of a mistake. Most successful entrepreneurs use many sources and concepts to reduce the risk factor.

Startup behavior is really not about taking risks, but systematically thinking about potential losses and pitfalls thus, reducing risk and uncertainty. Startup activity is a calculated risk that includes all possible factors, not excluding variables. The successful entrepreneur decreases uncertainty through a number of ways. The entrepreneur should think then know how much is required to stay alive until becoming cash flow positive. Perseverance is a genuine entrepreneurial trait, but at some time the founder must realize when it is time to stop. Saras Saravathy calls this concept “affordable loss.” Spend only what you can afford to lose. The same concept holds true in negotiation: Your BATNA (Best Alternative to a Negotiated Agreement) is to the negotiation what affordable loss is to entrepreneurs.

There are many ways to reduce risk in a startup.

The first is to get a good mentor. Get two or three mentors. A Mentor is a person whose hindsight becomes your foresight. Use their wisdom.

Get out the door and go network, meet people. Meet the HIPPOs—the Highest Industry’s Paid Persons Opinion. These are the smartest guys and gals in the room. Sometimes money can’t buy these opinions, but if entrepreneurs can offer something really interesting and exciting – like a cutting edge product. A HIPPO may be hungry for this new knowledge and be interested in helping your project. After all, HIPPOs need that information to stay on top of the food chain. Industry knowledge is a key success factor. If your research can offer something to the HIPPO that they did not already know, then you may have your foot in the door to success.

There are other basic risks that must be addressed. Is the targeted market big enough to support your growth business? Can you find and retain the appropriate talent. Is your intellectual property sufficiently protected? Can your team execute and deliver? Can you manage your accumulated financial losses until you are cash flow positive? Do you know all the premises behind your financials, cash position and cash flow to survive the turbulent start? Do you understand where every dollar of your funds goes and how that spending action adds value?

Understanding the underlying processes, and flow of you’re your company before embarking on the entrepreneurial journey will pay off when you are ready to launch. Knowing these key characteristics is all about reducing the risks of a startup.

More in the next post.