Who’s Doing the Learning?

In a startup instead of paying consultants to tell you what they learned you want to pay them to teach you how to learn.

—-

Roominate, one of my favorite Lean LaunchPad teams came out to the ranch last week for a strategy session. Alice and Bettina had taken an idea they had tested in the class – building toys for young girls to have fun with Science, Technology, Engineering, and Math, and started a company. The Roominate dollhouse building kits are being sold via their own website and soon, retail channels. They’ve shipped over 5,000 to enthusiastic parents and their daughters.

Roominate kit

As soon as they had designed the product, they found a contract manufacturer to build the product in China. Alice and Bettina are hands-on mechanical and electrical engineers, so instead of assuming everything would go smoothly, they wisely got on a plane to Dongguan China and worked with the factory directly. They learned a ton.

But we were meeting to talk about sales and marketing. They outlined their retail channel and PR strategy and told me about the type of consultants they wanted to hire.

Hiring Channel Sales
“So what would the retail channel consultant do?” I asked.  Alice looked at me like I was a bit slow, but went on to describe how this consultant was going to take their product around to buyers inside major retail chains like Target, Toys R Us, Walmart, and others to see if they could get them to buy their product. “That sounds great.” I said, “When are you leaving for the trip?”  They looked confused.  “We’re not going on any of these calls.  Our consultant is going and then he’s going to give us a report of how willing these stores are to carry our product.”  Oh…

I said, “Let me see if I understand this correctly. What if a buyer asks, can you make a custom version of your product? Can your consultant answer that question on the spot? What if a buyer said no? Will your consultant know what questions to ask right then to figure out how to get them to yes?”  I let this sink in and then offered, “Think about it for a minute. You’re going to pay someone else to learn and discover if your product fits this channel, and you’re are not going to do any of the learning yourself?  You didn’t skip the trip learning how to manufacture the product. You got on a plane yourself and went to China. Why doesn’t this sound like the right thing to do for channel sales?”  They thought about it for a moment and said, “Well we feel like we understand how to build things, but sales is something we thought we’d hire an expert to do.”

Hiring PR Agencies
We had an almost identical conversation when the subject turned to hiring a Public Relations agency.  Bettina said, “We want to drive customer demand into our channel.”  That’s smart I thought, a real clear charter for PR.  “What are they going to do for you?” I asked.  “Well all the agencies we interview tell us they can survey our customers and come up with our positioning and then help us target the right blogs, influencers and press.

This felt like déjà vu all over again.

I took a deep breath and said, “Look this is just like the channel consultant conversation. But in this case it’s even clearer.  Didn’t you get started by testing out every iteration with girls and watching firsthand what gets them excited? Don’t you have 5,000 existing customers? And haven’t you been telling me you’ve been talking to them continuously?”  They nodded in agreement.  I suggested, “Why don’t you guys take a first pass and draft a positioning brief with target messages, think through who you think the audiences are, and you take a first pass at who you think the press should be.  The team looked at me incredulously.  “You want us to do this? We don’t know the first thing about press, that’s why we want to hire the experts.”  It was the answer I expected.Roominate project

“Let me be clear,” I explained.  “At this moment you know more about your customers than any PR agency will.  You’ve spent the last six months testing positioning, messages, and talking to the press yourself.  What I want you to do is spend an hour in a conference room and write up all you learned.  What worked, what didn’t, etc.  Then summarize it in a brief – a one, max two-page document that you hand to prospective PR agencies.  And when you hand it to them say, “We know you can do better, but here’s what we’ve learned so far.”” They thought about it for a while and said, “We want to hire a PR agency so we don’t have to do this stuff. We’re too busy focusing on getting the product right.”

I pushed back, reminding them, “Look, half the agencies that see your brief are going to decline to work with you. They make most of their money doing the front-end work you already did.  You do need to hire a PR agency, but I’m suggesting that you start by raising the bar on where they need to start.”

You Need to Do the Learning
Thinking that founders hire domain experts to get them into places and do things they don’t have any clue about is a mistake most founding CEOs make.  It’s wrong. If you plan to be the CEO who runs the company, you need these resources teaching you how to do it, not reporting their results to you.  For Roominate I suggested that Alice and Bettina needed to try to find a channel consultant who would take them along on the sales calls and have the founders meet buyers directly.  Why?  Not to turn them into channel sales people but to hear customer objections unfiltered. To get data that they – and only they, not a consultant – could turn into insight about iterations and pivots about their business model.  And to see how the process works directly.

A year from now when they will be hiring their first VP of Channel Sales, they want the interview to go something like,  “Well we sold the first three channel partners ourselves – what can you do for us?”

The same is true for hiring the PR agency.  The conversation should be, “Here’s what we learned, but we know this is your expertise.  Tell us what we’re missing and how your firm can do better than our first pass.”

As a founder –  when you’re searching for a business model make sure that you’re the ones doing the learning… not the outsourced help.

There’s Not Enough Time
The biggest objections I get when I offer this advice is, “There’s not enough time in the day,” or “I need to be building the product,” or the more modern version is, “I’m focused on product/market fit right now.”

The reality is that they’re all excuses. Of course product and product/market fit are the first critical steps in a startup –  but outsourcing your learning about the other parts of the business model are the reasons why your investors will be hiring an operating executive as your replacement – once you done all the hard work.

Lessons Learned

  • You need to do the learning not your consultants
  • Most consultants will think that’s their secret sauce and not want your business
    • The smart ones will realize that’s how they’ll build a long-term relationship with you
    • Hire them
  • Not understanding the other parts of your business model is a reason investors hire an operating executive

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28 Responses

  1. Steve,
    I wrote you an email about something that actually relates to this post – I need to do a feasibility study for a startup idea I have.

    How on earth do i go to do that? Hire someone for me? Do it myself? I am afraid of the later, as I am a service designer by profession, and math is not my strongest point.

    You mention in your post that we should do the learning – I couldn`t agree with you more, but what you are not the best person for something, concerning the skills that you possess or don`t possess?

    Can you give me a tip, please?

    Thank you!

  2. Steve, I enjoy your perspectives and this one is spot on. Knowing when — and how — to ask for help strikes me as a big challenge for “A” types (who delight in building businesses). Thank you for sharing this particular story. Very helpful!

  3. […] post appeared originally on Steve Blank’s blog and is republished by […]

  4. Hi Steve,

    Thanks for the post. Great advice – and a great product. I’ve got 3 sons – and now a little daughter, she’ll love roominate’s work.

    Jamie @languagenut

  5. Great post!
    Thanks for reminsing us that customer development is all about learning!

  6. […] Serial entrepreneur Steve Blank is the author of Four Steps to the Epiphany. This story originally appeared on his blog. […]

  7. Good advice Steve. Start-ups need to ask “Why” more often. That seems to come naturally to some but not to others.

  8. Thanks very much, I learned a lot from this post. Outsourcing is important, but it’s better let the agent teach you how to learn, not just let them report the result to you.

  9. I think there can be a big danger of this kind of thinking particularly when using a high-service incubator/accelerator…

    It’s quite surprising to me how many accelerators offer you the ability to ignore all this seemingly banal “process” in favor of confronting the “substance” of product, often as their core value proposition.

    Incubators are probably a net positive for most teams who go through them, but I’ve found that most people I talk to (at Stanford at least) haven’t considered that there could be any downside at all worth thinking about.

    PS: Not sure if it’s any better for me because I have the opposite problem: I have to tie myself down in order to execute and develop the product–if I had my druthers, I’d sit around and learn all day and never get any work done, but I don’t think my team will let get away with being the guy who does the learning and only does the learning :)

    • Rick,

      Unfortunately first time entrepreneurs in incubators/accelerators face two challenges in this area.
      First, a number of incubators are actually designed to part founders from equity and cash by renting them space and then selling them consulting services that don’t teach them anything.

      Second, most incubators/accelerators have the founders focus on product and product/market fit to the exclusion of everything else. I think this is simply poor practice. It almost guarantees that even if they do find product/market fit they are going to be the ex CEO – they’ll be ill equipped to understand anything else about the business model and how to run a company.

      This might make for optimizing a great Demo Day and VC theater, but it’s not going to teach them life long skills.

      I’m ok if founders understand that this is a choice, but that’s not how most offer it.

      steve

  10. Steve,

    Great post. I believe that as entrepeneurs we face one problem: we all are afraid of the unknown. So this is why we hire an expert to resolve everything. We need to cross that line and go outside to learn first hand as you have said lot of times.

    Unfortunately, sometimes we do not have enough resources to search, test, rewrite, replan, etc. Furthermore, we don’t easily find mentors like yourself nor even investors nor universities willing to guide us. So that, it is a hard quest to do.

    Thank you

    AJ

  11. Dear Steve,

    I learn a lot from this post and I hope I’ll be able to apply them.

    I have a related question: My start-up’s early stage (and partly my personality) makes it the case that I want to do all these learning myself.

    But the downside that I find is that this style may prolong the learning and growing process. And there is a point where, to scale fast enough, some outside expertise need to be brought in.

    When do you think that time would be? In the post, it’s implicitly suggested that hiring consultants/outside experts can begin before product-market fit.

    Thank you.

  12. A company the entrepreneur wants to exit someday has to be built as a system.

    Manufacture the product, sales, cleaning, book keeping etc. When u leave someone else has to keep all these parts running.

    1. U can explain everything in detail to the next CEO (will most likely fail, or at least fail if the CEO dies or leaves without telling the next one)

    Or

    2. Write down processes on how to handle every aspect of the company, eg. building the system.

    Example of a process for book keeping could be:

    “Secretary responsibilities”

    1. Go through all email and mails for invoices every monday.
    2. Check on file x if the invoices are correct.
    3. Pay the invoices.
    4. Send all invoices to accountant.
    5. Fill out form Y every friday so that manager z knows this part has been handled.

    A small part of the bigger system.

    Number two makes it possible for you to delegate and exit. It also makes it possible to scale, hire and fire easily. The company is the system instead of you or any other key hire.

    Doing a startup is about building that system that can scale and that you can leave. I have found it impossible to hire people to “build company systems” in a scalable way.

    So for now its up to the founder to build the system and that is, as Steve said, best done if the founders learn as much about the market etc as possible to create the best system.

    But, the founders most focus on building the most crucial areas of the system like sales, marketing, product. So to spend time with customers and learn alot in that area has in most cases a high pay off. But at the same time you will have areas of the system where the pay off will be tiny. You need just draft some stuff up there and let it go. Dont over learn how to handle the books, outsource it. Otherwize you will never be able to exit.

    Soem areas of the system are also more forgiving than others as well. You can return to the part of the system that handle leaves, salaries, contracts with landlords etc. Its not going to help u to write perfect systems for those parts at the start.

    In some areas you can focus on the basis and then leave the final 30% to consultants. Like PPC, you can set it up and see if there is a ROI etc. A consultant can polish your ppc bidding strategy etc.

    Build the system. _Right_ learning is what you need to be able build the best system.

  13. I guess I’m a bit slow (to delegate learning), too. I’ve been doing what you recommend all my adult life as an international banker and businessman. I want to learn deeply and first-hand, not just be given bullet-point conclusions by some impatient presenter.

    I guess that makes me “countercultural” in ways that never occurred to me as countercultural when I first went to B-school after Caltech. I thought the “counterculture” was all about music, hair, drugs, and couture, none of which I particularly liked. But another unmentioned but fulfilling counterculture seems to have consisted of remaining genuinely curious and admitting what one didn’t know.

    That is the most productive form of “rebellion” and a foundation for real value-added.

  14. Thanks Steve – great advice and well timed. We’ve talked to a number of incubators and accelerators, who are always very ‘selective’ but are sure we’ll make the ‘cut.’ I know that there is a lot of value in adding start-up expertise, but having started several traditional businesses, I’m convinced that the passion and drive and personal investment make up much of the difference. On this venture we are taking the middle road – doing the ‘learning’ ourselves, but asking for favors and advice from pros – mostly VP’s and directors in bigger companies. That is working well (we think).
    And of course reading blogs like yours to help test the winds…

  15. Steve,

    Long time lurker, first time commenter. This post points out a problem with consulting business models as much as a common miss for startup founders. Most consultants think they get paid for expertise and being impressive. And because firms often draw from top-of-the-class smartest-guys/gals-in-the-room types who often have a bias against the challenge of actually TEACHING vs experting, they look down on teaching. Plus it seems more productive to get your client to be addicted to your great work than to make them self-sufficient and have to go win another gig.

    What they miss is that great consultants who help make their clients successful AND self-sufficient (wherever possible) have plenty of work, it’s just through referrals. There are a lot of people out there who have problems to solve and want to learn along the way. Get known for that and you have a thriving practice.

    Thanks for the great post.

    Ted

  16. From Drew Houston’s commencement address.

    “Dropbox has been mine. As you might expect, building this company has been the most exciting, interesting and satisfying experience of my life. What I haven’t really shared, though, is that it’s also been the most humiliating, frustrating and painful experience too, and I can’t even count the number of things that have gone wrong.”

    http://web.mit.edu/newsoffice/2013/commencement-address-houston-0607.html

  17. Very helpful post, and just in time. I was almost ready to make another mistake. Now, I’ll go do some learning. Thank you

  18. This is what my company does – helps entrepreneurs to learn faster by doing it with them. The interesting thing is that this kind of help doesn’t fit into one of the ready-made categories that people understand.

    “Consultants” comes with so many associations, most of which are that “you’re going to be really clever and tell us what to do…” So we explain that we execute with them because to get the learning, you have to do as well as think. To which, as Steve points out, the response is often “so you’re outsourced then” – i.e. you’ll just go off and do it for us. To which the answer is that no, we have work together with you so that the learning is rapidly integrated into the whole company.

    I’d be really interested to talk to other groups elsewhere in the world who do the same kind of full-time hands-on learning/competence building work with technology entrepreneurs.

    Simon, London UK

  19. I could not agree more with this. I work as a sourcing consultant and I find vendors in China for small companies and start ups. But my message to all my clients, most of whom do not want to go to China, is you HAVE to go over there at some point and meet the people whom you are relying on to build your business. You NEED to understand your product, your production and the challenges your supplier(s) face. Most of my clients seem very resistant to do this at first but in time they come around.

  20. I work for a mobile development shop that works primarily with startups. We consider ourselves an end-to-end, full service shop, however. This means that in addition to helping with product development, we offer consulting services that deal with the customer development process, business model generation, marketing, etc.

    We have made transparency and learning a core part of our business processes with clients. We feel that if clients work with us through their business problems or at the very least have access to our workflow and see how we accomplish each task, they will be better equipped to handle such tasks in the future.

    We have seen this have a positive impact on our business model as this level of transparency and care for the entrepreneur has led to an increase in long-term contracts and repeat business.

    We are currently in the process of approaching incubators, accelerators, Angel/Seed/VC investors to make their processes more sustainable and allow us to become a “teaching” arm that helps entrepreneurs on non-product development tasks.

    As always, great post Steve! Really appreciate all the sound advice you give to the startup community.

  21. What a wonderful, clear example. Thank you, Steve!

    Another great advantage of the learning…

    When you go to hire a full-time person for the position — or perhaps just have the discussion to consider one — you NOW KNOW exactly the work to be done and the type of person/experience that would be ideal for executing…and the standard of performance.

    In a more negative light, you can spot the BS!

    Of course you want someone to be creative and think for themselves, too. But first you want someone who is evidence-based as a foundation.

    Remember, it’s a whole lot easier to manage someone when you know the nuts and bolts of the execution. Even if they want to add value by veering a bit, you can assess the value-added by relating it to your learning, access the quality of their learning, and be more comfortable coming to consensus.

  22. […] Serial entrepreneur Steve Blank is the author of Four Steps to the Epiphany. This story originally appeared on his blog. […]

  23. […] Serial entrepreneur Steve Blank is the author of Four Steps to the Epiphany. This story originally appeared on his blog. […]

  24. […] Serial entrepreneur Steve Blank is the author of Four Steps to the Epiphany. This story originally appeared on his blog. […]

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