Massacre at IBM

Long before there was the Lean Startup, Business Model Canvas or Customer Development there was a guy in Santa Barbara California who had already figured it out.  Frank Robinson of SyncDev has been helping companies figure out their minimum viable product and pivots since 1984, long before I even knew what it meant. They’ve done it for more than 400 companies ranging in size from 200 hundred starts-ups, one of whom was Citrus Systems that became Citrix, to IBM.

Here’s a guest post from Frank.

———-

I want to tell you a story about how a team pivoted and succeeded by synchronizing product and customer development. Though it’s about a large company, it’s applicable to teams in start-ups. It’s vivid with respect to method and outcome.

Massacre at IBM

Intel was angry at their supplier about a third-generation wafer-inspection system. “How dare you,” the fab manager said. “We shut down production to setup your machine.” He blocked new business for two years.

The supplier’s CEO directed his business unit general managers to take a SyncDev workshop. The inspection- system GM decided to use it for his fourth-generation system, an 18-month program.

Though development was already underway, I kicked-off SyncDev in early November. The core team — a cross-functional team who could make all the business and technical decisions within a set envelop ─ consisted of product manager, hardware-engineering manager, software-engineering manager, applications analyst, and software designer. We would travel throughout the US and Asia to test-sell a validation prototype, listening to each customer as a jury listens to each witness.

The first wave of meetings was with five US customers in mid-November. On Monday, in San Jose, near the factory, we met with UltraTech Stepper, a friendly account. We did a quick overview of the product. That earned us the right to ask questions of fact about their department’s mission, goals, operations, volumes, tools, methods, and success metrics. We asked, “Given all that, what problems are you having?” We followed that with an hour-long design review, including disclosure of product limitations. For 30 minutes we did trial closes: Who would use it, how often, how would you justify it, and where does it rank on a list of purchase and to-do priorities.

The customer asked, “Where’s off-line setup?”  The product manager said, “It’s in the release after this.”

That night we flew to Boise. Tuesday, 17 people at Micron asked the same question. We responded the same way.

We took a red-eye to JFK and a commuter to Burlington, VT for a 9:00 AM Wednesday meeting at IBM. At noon the boss said, “You guys have no credibility. We’ve asked for off-line setup for years. No one listened!”

Leaving the parking lot, the engineering managers in the back row of the van argued. The product manager who was driving whispered, “For years that said no one needs off-line setup. Now they’re arguing about how to do it.”

Wednesday night we flew to Orlando for A&T. Thursday, off line set up was not an issue. The same thing happened on Friday in Austin. Off-line set up had disappeared into the team’s rearview mirror.

Thanksgiving had come early that year. We were on the road again by late November to meet IBM in Fishkill, NY. After a 15-minute overview, they asked about off-line set up. After we responded their boss said, “Gentlemen, this meeting is over. We don’t want to hear about your roadmap. Please leave!”

Humiliated and depressed, our ride to the hotel felt more like one in a hearse than a van. The customer’s wants the next day would be no different. The product manager described the metamorphosis:

We gathered that night at the hotel, but we were changed.  Humility had crumbled the walls between marketing and engineering. We had heard the voice of the customer as a team and they were unhappy.  Thank God the whole team was there so we could decide on the spot.

For appetizers we slashed requirements.  For soup we compressed schedule. For the main course we sliced up the configuration into bite-size pieces. For dessert we integrated customers into our testing. For after-dinner drinks we polished the new presentation and said a short prayer.

The next day was sunny. Breakfast was actually jovial. We looked back at yesterday with humor, not to cover our humiliation but because we had pivoted.

The next meetings went far better.  We took wounds, but none like those at Fishkill. We continued with three more meetings. We returned to the factory and presented our new path.

“Are you nuts?” our product board asked. “You can’t change direction midstream!”

Without missing a beat, Engineering quoted the customer. I explained how we’d manage technical risks. We were a team, convinced by a shared experience, that we knew what to do. Better yet, we had switched the burden of proof from us to our skeptics.

In December and January we met with ten customers in Korea, Japan, and China. Changes were minor. Instead of pivoting we built virtual backlog.

In February, we returned to Fishkill. “Congratulations, gentlemen,” IBM said, “We apologize for November. With the train heading our way, we’ll get on now. We’ll take two more old units (multi-million dollar) now and replace all seven with new ones when it ships.”

In 90 days the team pivoted the product, saved a major account, captured a large order, cut schedule from 18 months to nine months, and developed virtual backlog.

Two years after release, product market share was up by 30% to 70%. Twelve of 17 competitors were gone.  The division was the dominant global player.

The team followed these rules:

Cardinal Rules of Synchronous Customer and Product Development

  • Meet Customers as a Core, Cross-Functional Team authorized to act within a defined envelop.
  • Report to a “Board,” to explain and defend your strategy and business case
  • Meet Customers’ Decision Making Teams not just users
  • Meet on Site in the customers’ habitat: Home, office, lab, factory, or playground. See what they do. Meet their colleagues, form relationships, help fix stuff now, and return as required
  • Test Sell a Validation Prototype: Renderings, specs, and props. Don’t sell a vision! False positives result.
  • Ask questions. Take Notes. Ask question of fact, not opinion and shut up. Take notes. Tag data and quotes.
  • Disclose Limitations to surface objections. It enhances your credibility, too.
  • Conduct Trial closes. There are thirty good ones starting on slide one.
  • Meet in Waves to get bonked over the head by patterns, two customers per day, Tuesday to Thursday.
  • Find and Fix Bad News. Bad news early is good news, if you find and fix it early.

Listen to the post here: Download the Podcast here

16 Responses

  1. Hi Steve

    My mentor who was the “CTO” (not yet a title then) of IBM back in the late 60′s has told me how they lost focus.

    IBM use to be a market driven company. The salesforce would bring back all of the ideas from the field. The engineers then had to make it work.

    Somewhere along the way, the started believing their engineers more than the customers and became a tech driven company.

    He said that’s when the whole thing went south.

    When you stop listening to your customers and start building what you think they need, you will stop having customers.

    • Hmmm! isn’t engineer/designer led product development what apple does. It builds products for the consumer based on what it thinks they will want, rather than what consumers say they want. Case in point the brouhaha about the keyless iphone, the discarding of flash on ios etc. Given their march up north it seems to be a case counter to consumer led product development.

      • I think that Apple case (and Ford as well) shows that it’s not bad if you don’t always listen to all of your customer’s needs.

        But Jobs biography shows another important threat: company fails, when sellers starts do decide about entire company strategy, while passionates (like engineers and designers) have nothing to say.

  2. i don’t know if it’s too early, but i had to read this 3 times before i could understand the story.

    In the 1st paragraph, is shutting down production to setup machines not normal? I thought you had to setup for production before you can run, so this doesn’t make sense.

    In the 2nd paragraph GM must mean General Manager, not General Motors?

    In the 4th paragraph, why did you earn the right to ask questions? because Ultra Stepper was a friendly account, or because you gave a quick overview? Because you didn’t bore them to death with details or too much sales talk?

    In the 5th paragraph, is this the first indication that offline setup is important to the customer? but then later other customers say it’s not important? is that why it faded into the rear view mirror? they ignored it?

    In the 8th paragraph this is the typo that confused me “For years that said…” is that supposed to be “they said”? and who is “they” – the customer, or the suppliers internal product development team?

    So I think the story is trying to say the customer wanted offline setup NOW, but the product team had no idea about this, or didn’t believe it was needed, or didn’t know which customers to listen to – the ones who said it wasn’t important, or the ones who said it was important, or the biggest revenue / most important customers?

    and that it’s never to late to pivot and build the product with features your customer tells you they want,

    and you have verified those product feature requests with many different customers until you see a pattern (i.e. you don’t build it because one customer said they wanted it).

  3. Steve,

    Here in New Zealand the lean approach, is an essential part of the start up scene as capital in small nations is hard to find and markets are all overseas. The corporate scene however, could really do with a dose of Synchronous Customer and Product Development, even here in lean New Zealand. I have been in that Van the feeling is hard to take, realization that you have not been talking as a team.
    Multi discipline teams helped. The methodology would have made it even better.

    Its not “who is to blame” but “why we were not all sharing our whispers and worries” in a genuine sense. Our answer, we took all our engineers and trained them for front line sales capability and they joined all client meetings, the communication blocks just fell away!

    Market validation/customer development, product development all in the same Van every day.

    Murray MacRae
    Start up Specialist and Corporate Product Development specialist
    New Zealand

  4. [...] -A great story about how to work with and listen to customers when developing a product. Most importantly, empower the core team visiting the customers. (steveblank.com) [...]

  5. I get your story and realize you were probably trying for an attention- grabbing headline, but IBM experienced several real massacres in the 70′s/80′s when disgruntled ex-employees shot and killed innocent people. I’m surprised your earlier poster didn’t mention that. Out of respect to those families and those in Colorado, could you tone it down for the archives?

  6. [...] will you “out-iterate” the competition? Steve Blank offered a thought on this the other [...]

  7. [...] is what Steve Blank was writing about the other day. Today I saw it happen. [...]

  8. Dear Steve.
    What is it like learning/teaching entrepreneurship in prestigious universities, and how different are the entrepreneurs there from normal folk?
    I hear you will be teaching at columbia this fall, on top of other universities you are already involved in. I’ve graduated from a modest university, with a less than fantastic entrepreneurship/business program. My chances of getting into Standford/Columbia business school are non existent, but I always wondered what it is like. For starters they have excellent teachers such as yourself. Do they have better training, access to funding, superior intellect(they got in, didn’t they?), excellent credit and so on?
    As you have been on the both side of the educational chasm, I would like to hear your opinion on how things are different in prestigious universities.
    Thank you.

    • David,
      Actually the biggest difference I’ve found is from students who take entrepreneurship as a “survey” class versus those who take it because they are passionate about starting something.

      While there may well be a knowledge gap between Stanford students and a community college I’ll bet on the students who are driven, curious, agile, resilient and agile in any school against those who think entrepreneurship is a “job.”

      steve

  9. We are discussing you in canary wharf, London, because your the man ‘who knows what he is talking about’.

    discuss startup guru steve blank

    Wednesday, Aug 29, 2012, 9:00 AM

    all bar one
    canary wharf London, GB

    6 Members Went

    ok, steve blank, he teaches startup at stanford, has been involved in many a great success and goes around lecturing senators in the usa about his methods.he seems to suggest one should ‘talk to potential customers before building the product’ which makes sense to mewhat can we learn from steve blank ?While drinking coffee, and eating breakfast….

    Check out this Meetup →

  10. The content of this article is great and I understood it without too much difficulty. But the article should have been proof-read for grammar. It really detracts from the authority of the writer and his message.

  11. screw the grammar, bring on more nuggets of wisdom, your the man !

    A lot of entrepreneurs are dyslexic, because they think DIFFERENT, up with difference, innovation,lean and being DIFFERENT.

    down with enGlish nerDs

  12. Respected Steve

    I am Priya from Nepal. I searched for your book,” The Start up Owner’s Manual” here in Nepal but could not find it. I would like to know if the low price edition of your book is available for south Asian countries

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