One great way to Google your industry is using Google Alerts, using keywords for your market niche and competitors. This helps you get the latest developments automatically. Just be sure not to spend too much time analyzing your competition. Getting out of the building to learn from your customers should come first.
This is one of the best posts I’ve read in a long long time. Thank you Bob. Would love to see some more examples of companies that made it with a lukewarm problem, and companies that failed with a highly painful problem. Also, what do your venture stats say about exists greater than $50MM? $25MM? How about $10MM and $5MM? Can you solve lukewarm problems and expect a more favorable, albeit lower, exit?
Excellent objective observations. Valley of Death Stats FYI:
1) Thursday WSJ 9/20/2012 reports Harvard Business School’s Shikhar Ghosh > very exstensive study with results
2) Paul Graham blogged recently that the ~$10 Billion in YComb. valued companies came from a handful of huge hits
I like the post a lot. I work a lot with scientific founders (and went through I-Corps taught by Steve). What I find is a tendency among technical founders to want to just go start the business because they are certain they know there’s a need and they are certain that customers will want whatever it is they are offering. At times they have trouble seeing the difference between a large customer sponsoring research with them as professors and buying the same technology from their startup through an arm’s length transaction when scale, delivery, quality, pricing and service become predominant considerations. I’ll use this post to defend my claim that there’s value in customer discovery and validation…
Truer words haven’t been said. I learned the hard way by keeping it under wraps then showing it only to learn it wasn’t a big enough problem. Second go around I learned about customer discovery and it made all the difference, I haven’t committed this deadly sin since. Sometimes life’s toughest lessons are painful but necessary to make you stronger in the end. For this I’m very grateful for your startup insights and lessons.
Well said, Bob! There’s nothing worse to see than optimistic founders hit the launch button and hear virtual crickets as the masses fail to arrive.
Actually, there is something worse: When founders conduct surveys because they feel a need to “validate with some customers”–in other words, they just want to check the box for investors and can’t imagine the data coming back negative.
Those of us who have been there continue to need to educate and build processes that are accessible to founders. Certainly the Startup Owners Manual and overall Customer Development Process is a big step. It’s also the reason we developed the Minimum Viable Concept Test to help startups get a dose of customer feedback at the earliest idea stage.
And instead of learning the hard way from failure, I hope that we can teach founders to learn a better way to start.
[...] Dorf, co-author of Startup Owner’s Manual, has a post on Steve Blank’s blog titled Why Too Many Startups (er) Suck where he cites a stat that between .2% and 2% of all venture-backed startups ever sell for more [...]
Bob, this is a great post. I especially like the seemingly simple advice to google your industry. I run into a lot of startups that have no idea of the competitve landscape. Recently a founder told me of the “global phenomenon” that is WordPress. He was working on the “first” ecommerce plugin for it.
Spending a day googling competitors once is great, but it’s even better to keep tabs on industry on ongoing basis, since new companies could enter the marketplace and stay in a blind spot which can be very dangerous.
This is all sound advice; certainly, a lot of start-ups have failed for not thinking about these issues, and “does anybody care?” is a really important question. But to me, the guidance doesn’t get at two critical issues:
1) How do you even identify “customers” if you don’t have a solution in mind already? Sure, it’d be cool if you could breeze into 50 different meetings and say “We’re really smart, how can we help you?”, but that doesn’t happen in real life. Rather, it seems like there’s a delicate balance between defining just enough about what you might be able to offer so that it’s interesting to customers, and defining it so concretely that it’s too narrow to meet their needs… and that first stage often needs to take the form of a working model, on which significant effort must be spent to make sure it cleanly demonstrates the potential(s) of the idea.
So the question is, what should a start-up do to figure out where that point of “just enough” definition is?
2) The other challenge with customer research is that it carries a risk of disappointing precisely the most valuable customers. When you come in and say “Look at this, it’s really cool”, and the customer agrees, the words you dread to hear are “Great! I’d like 10,000 units next quarter”. So again, it seems like it’s important to do significant up-front work in understanding how to answer that question.
So a similar question: how can start-ups make appropriate decisions about the amount of work needed to be ready for a sale?
Good points. I think the solution is to talk to early evangelists first. These guys see “just enough” and recognize the potential. They are normally not the ones who will buy it in large numbers but play an important role in the customer development process. They recommend and suggest your product to others so that “just enough” is enough to sell the first units. If done correctly you shouldn’t be surprised by a large order.
This is undoubtedly one of the best posts on startup success or failure. I think before even someone embark on a journey, they should thoroughly research on the problem they are trying to solve. More complex the problem is, more impact the solution will make. Customer Discovery happen in two separate, distinct phases: “problem” discovery and, later, “solution” discovery. There’s just no other way but, as Steve Blank has said for a decade, to “get out of the building” and talk to the only folks who matter—your customers. — If, you as a entrepreneur are not doing it, start doing it now.
Thanks for the wonderful sobering post Mr Dorf. I’ve been reading countless articles and blog posts and books on lean startup, customer development, and busiess models, and you message above I think sums what they’re all trying to get across. By the way, I was the first to buy your and blanks recent text at the Stanford bookstore (if you recall I had emailed you about it days prior to the release). What a great text. Thank you both!
In it he gives a lot of great insight. Here are some quotes.
“The customer rarely buys what the company thinks it is selling him”
” The probability that a software product will be successful is somewhere near zero if the concept was developed in a company that has decided what the customer wants.”
“You develop a product and then you find out that they don’t buy it, and so then you have to hire a marketer, and the reason you have to have a marketer is that you are trying to convince the customer that they need to buy the product that you decided they need.”
“If instead you try to understand the job that the customer is trying to do, then you don’t need much marketing, because the customer will pull the product into their lives and tell their friends about it. …. It’s understanding the job that the customer is trying to get done that is in short supply and it is not the ability to make products.”
“The (technical) people working in the labs need to be out in the world watching what people are trying to do and doing it better. Instead what you see is failure after failure.”
“When you develop a product that does a job well, the customers are quite happy to pay a premium price”
“If I try to listen to the customer, it will mislead me. I need to understand the job that he is trying to get done.”
In Clayton Christensen video above at the 39 minute mark he states.
“Is innovation a crapshoot or is it more predictable….. What we decided is that the customer is the wrong unit of analysis when you are trying to develop the new product. And the way we have taught marketing is that you should always listen to your customers, and we have concluded that that is wrong.”
He goes on to say that you need to understand the job that the customer is trying to get done. The customer will hire products (purchase products) that helps them get the job done.
“Understanding the job to be done is really critical in order to succeed with the new product.”
I think it also depends on the level of expectation and what’s the goal with the startup. I recently launched a website. No business plan, I’m the boss, the employee.I’m using my own money because is something I wanted to do and if the website is successful is great. I don’t have high expectation, I don’t have the pressure of having to meet goals when you have people that invested money in your idea(s)
How does one talk to customers when there is no patent protection on a product yet? It’s only natural to want to protect yourself from people who may pursue a similar version themeselves (especially when your customers are businesses). How do I discuss my vision clearly to adequately gather feedback and fine tune my value hypotheses without leaving myself open?
Bob is spot on. At least from my point of view as an Entrepreneur headquartered on Nigeria and serving four countries in Sub-Saharan Africa. I had the honor of meeting Bob at CBS in January 2013, when I was invited to co-instruct at the Lean Launch Pad block week class. A man of few words and great empathy for his students. He is more of a doer than a talker, but his few words, when spoken are golden.